<TABLE>
<CAPTION>

Consolidated Statements of Earnings
Alberto-Culver Company and Subsidiaries
                                                                                                Year Ended September 30,
(In thousands, except per share data)                                                     1998            1997           1996


<S>                                                                                   <C>             <C>            <C>            
Net sales                                                                             $1,834,711      1,775,258       1,590,409
Costs and expenses:
  Cost of products sold                                                                  902,095        880,416         805,080
  Advertising, promotion, selling and administrative                                     791,631        766,117         673,247
   Interest expense, net of interest income of $3,563 in 1998, $3,588 in 1997
     and $3,837 in 1996                                                                    8,607          8,238          12,068
  Non-recurring gain (note 8)                                                                 --        (15,634)             --
                                                                                          ------         ------          ------
     Total costs and expenses                                                          1,702,333      1,639,137       1,490,395
Earnings before provision for income taxes                                               132,378        136,121         100,014
Provision for income taxes (note 6)                                                       49,311         50,704          37,270
                                 -                                                        ------         ------          ------
Net earnings                                                                             $83,067         85,417          62,744
                                                                                         =======         ======          ======

Net earnings per share:
  Basic                                                                                    $1.46           1.53            1.13
                                                                                           =====           ====            ====
  Diluted                                                                                  $1.37           1.41            1.06
                                                                                           =====           ====            ====


See accompanying notes to consolidated financial statements.
</TABLE>







<PAGE>


<TABLE>
<CAPTION>

Consolidated Balance Sheets
Alberto-Culver Company and Subsidiaries

(In thousands, except per share data)                                                               September 30,
<S>                                                                                     <C>                     <C>    
Assets                                                                                       1998                    1997

Current assets:
   Cash and cash equivalents                                                               $72,395                  76,040
   Short-term investments                                                                      910                  11,560
   Receivables, less allowance for doubtful accounts of $10,868 in 1998
      and $9,042 in 1997 (note 3)                                                          129,063                 120,774
   Inventories:
      Raw materials                                                                         37,316                  44,175
      Work-in-process                                                                        6,119                   7,252
      Finished goods                                                                       325,769                 292,441
                                                                                           -------                 -------
         Total inventories                                                                 369,204                 343,868
   Prepaid expenses                                                                         19,993                  28,017
                                                                                            ------                  ------
         Total current assets                                                              591,565                 580,259
Property, plant and equipment (note 7):
   Land                                                                                     11,328                 10,357
   Buildings and leasehold improvements                                                    139,622                124,920
   Machinery and equipment                                                                 257,458                214,876
                                                                                           -------                -------
      Total property, plant and equipment                                                  408,408                350,153
   Accumulated depreciation                                                                184,932                159,155
                                                                                           -------                -------
      Property, plant and equipment, net                                                   223,476                190,998
Goodwill, net                                                                              137,599                114,245
Trade names, net                                                                            67,158                 70,155
Other assets                                                                                48,386                 44,402
                                                                                            ------                 ------
                                                                                        $1,068,184              1,000,059
                                                                                        ==========              =========


Liabilities and Stockholders' Equity

Current liabilities:
   Short-term borrowings                                                                    $2,279                  3,582
   Current maturities of long-term debt                                                        959                  1,361
   Accounts payable                                                                        177,564                174,322
   Accrued expenses (note 2)                                                               112,015                118,447
   Income taxes                                                                             20,808                 13,540
                                                                                            ------                 ------
      Total current liabilities                                                            313,625                311,252
Long-term debt (note 3)                                                                    171,760                149,441
Deferred income taxes                                                                       28,260                 25,490
Other liabilities                                                                           20,548                 16,872
Stockholders' equity (note 4): Common stock, par value $.22 per share:
      Class A authorized 75,000,000 shares; 30,612,798 shares
        and 24,442,931 shares issued at September 30, 1998 and 1997, respectively           6,735                   5,378
      Class B authorized 75,000,000 shares; 37,710,655 shares
        and 37,710,664 shares issued at September 30, 1998 and 1997, respectively           8,296                   8,296
   Additional paid-in capital                                                             192,610                  91,222
   Retained earnings                                                                      528,733                 458,886
   Cumulative translation adjustments (note 1)                                            (28,131)                (22,555)
                                                                                          -------                 ------- 
                                                                                          708,243                 541,227
   Less treasury stock, at cost (Class A common stock: 1998 -6,549,947 shares
      and 1997 - 1,833,315 shares; Class B common stock: 1998 - 4,563,184
      shares and 1997 -  4,178,184 shares)  (note 4)                                     (174,252)                (44,223)
                                                                                         --------                 ------- 
      Total stockholders' equity                                                          533,991                 497,004
                                                                                          -------                 -------
                                                                                       $1,068,184               1,000,059
                                                                                       ==========               =========

See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Cash Flows
Alberto-Culver Company and Subsidiaries

(In thousands)                                                                                   Year ended September 30,
<S>                                                                                   <C>               <C>             <C>    

                                                                                          1998             1997             1996

Cash Flows from Operating Activities:
Net earnings                                                                           $83,067           85,417           62,744
Adjustments to reconcile net earnings to net cash provided by operating activities:
     Depreciation                                                                       29,054           28,169           26,159
     Amortization of goodwill, trade names and other assets                              9,051            8,760            6,757
     Non-recurring gain                                                                     --          (15,634)              --
     Deferred income taxes                                                               9,924            7,420           (1,858)
     Other, net                                                                         (4,724)          (1,462)          (1,527)
   Cash effects of changes in (exclusive of acquisitions):
      Receivables, net                                                                  (4,185)             296           (2,955)
      Inventories                                                                      (15,973)         (51,881)         (12,287)
      Prepaid expenses                                                                   3,689           (1,196)             302
      Accounts payable and accrued expenses                                             (6,726)          17,665           17,930
      Income taxes                                                                       7,175            2,174           (2,520)
                                                                                         -----            -----           ------ 
      Net cash provided by operating activities                                        110,352           79,728           92,745
                                                                                       -------           ------           ------
Cash Flows from Investing Activities:
Short-term investments                                                                  10,650           (6,214)            (946)
Capital expenditures                                                                   (55,934)         (58,196)         (40,894)
Other assets                                                                            (3,253)          (7,585)          (7,313)
Proceeds from sale of business                                                              --               --           12,448
Payments for purchased businesses, net of acquired companies' cash                     (33,889)         (15,628)        (130,981)
Proceeds from insurance settlement                                                          --           28,000               --
Proceeds from disposals of assets                                                        1,664            2,044            1,599
                                                                                         -----            -----            -----
     Net cash used by investing activities                                             (80,762)         (57,579)        (166,087)
                                                                                       -------          -------         -------- 
Cash Flows from Financing Activities:
Short-term borrowings                                                                   (5,478)           1,436             (315)
Proceeds from issuance of long-term debt                                               125,851              550            5,475
Debt issuance costs                                                                     (2,352)              --               --
Repayments of long-term debt                                                            (4,009)          (6,116)         (29,118)
Proceeds from sale of receivables                                                           --               --           30,000
Proceeds from exercise of stock options                                                 11,303            5,560            1,717
Cash dividends paid                                                                    (13,220)         (10,909)          (9,724)
Stock purchased for treasury                                                          (145,526)          (1,138)            (759)
                                                                                      --------           ------             ---- 
     Net cash used by financing activities                                             (33,431)         (10,617)          (2,724)
                                                                                       -------          -------           ------ 
Effect of foreign exchange rate changes on cash                                            196           (1,703)            (308)
                                                                                           ---           ------             ---- 
Net increase (decrease) in cash and cash equivalents                                    (3,645)           9,829          (76,374)
Cash and cash equivalents at beginning of year                                          76,040           66,211          142,585
                                                                                        ------           ------          -------
Cash and cash equivalents at end of year                                               $72,395           76,040           66,211
                                                                                       =======           ======           ======


Supplemental Cash Flow Information:
Cash paid for:
   Interest                                                                            $10,709           11,478           16,333
   Income taxes                                                                        $30,791           42,299           42,589
Non-cash investing and financing activities:
   Conversion of subordinated debentures into Class A common shares                    $99,875               --               --
   Issuance of Class A common shares for acquisition                                    $4,414               --               --


See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Stockholders' Equity
Alberto-Culver Company and Subsidiaries


                                            Number of Shares                      Dollars
                                                                                        Additional             Cumulative
                                  Common Stock       Treasury Stock      Common Stock     Paid-in   Retained   Translation  Treasury
(In thousands)                   Class A  Class B   Class A  Class B   Class A  Class B   Capital   Earnings   Adjustments    Stock
<S>                               <C>     <C>      <C>       <C>       <C>      <C>       <C>        <C>        <C>       <C>

Balance at September 30, 1995     13,263  20,944   (2,300)   (4,178)   $2,918   $4,608    $87,896    $337,506    $(12,966) $(49,059)

Net earnings                                                                                           62,744
Cash dividends                                                                                         (9,724)
Stock options exercised                                84                                     688                             1,029
Stock issued pursuant to
   employee incentive plans                            25                                     371                               306
Stock purchased for treasury                          (23)                                                                     (759)
Foreign currency translation loss                                                                                    (462)
                                  _________________________________________________________________________________________________
Balance at September 30, 1996     13,263  20,944   (2,214)   (4,178)    2,918   4,608      88,955     390,526     (13,428)  (48,483)

Net earnings                                                                                           85,417
Cash dividends                                                                                        (10,909)
Stock dividend                    11,180  16,767                        2,460   3,688                  (6,148)
Stock options exercised                               359                                   1,663                             4,389
Stock issued pursuant to
   employee incentive plans                            78                                     604                             1,009
Stock purchased for treasury                          (56)                                                                   (1,138)
Foreign currency translation loss                                                                                  (9,127)
                                  _________________________________________________________________________________________________
Balance at September 30, 1997     24,443  37,711   (1,833)   (4,178)    5,378   8,296       91,222    458,886     (22,555)  (44,223)

Net earnings                                                                                           83,067
Cash dividends                                                                                        (13,220)
Stock options exercised                               918                                    1,606                           12,628
Stock issued pursuant to
   employee incentive plans                            56                                    1,108                              692
Stock issued for acquisition                          171                                    2,237                            2,177
Stock issued upon conversion
   of subordinated debentures      6,170                                1,357               96,437
Stock purchased for treasury                       (5,862)    (385)                                                        (145,526)
Foreign currency translation loss                                                                                 (5,576)
                                  _________________________________________________________________________________________________
Balance at September 30, 1998     30,613  37,711   (6,550)   (4,563)   $6,735  $8,296     $192,610   $528,733   $(28,131) $(174,252)
                                  ======  ======   ======    ======    ======  ======     ========   ========    ======== ========= 


See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>



Notes to Consolidated Financial Statements

(1) Summary of Significant Accounting Policies

PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include 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 generally  accepted
accounting principles 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 is equal to market  value at
September 30, 1998 and 1997.

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 approximates its recorded value.

INVENTORIES
Inventories  are  stated at the lower of cost  (first-in,  first-out  method) or
market (net realizable value).

PROPERTY, PLANT AND EQUIPMENT
Property,  plant and  equipment  are carried at cost.  Depreciation  is provided
primarily on the  straight-line  method based on the  estimated  useful lives of
assets. Expenditures for maintenance and repairs are expensed as incurred.

GOODWILL AND TRADE NAMES
The cost of goodwill and trade names is amortized on a straight-line  basis over
periods  ranging  from ten to forty  years.  Management  periodically  considers
whether there has been a permanent impairment to the value of goodwill and trade
names by evaluating various factors including current operating results,  market
and  economic   conditions  and  anticipated  future  results  and  cash  flows.
Accumulated  amortization  at September  30, 1998 and 1997 was $30.6 million and
$23.8 million, respectively.

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

Realized  gains and losses from foreign  currency  transactions  included in the
consolidated statements of earnings resulted in losses of $855,000, $1.2 million
and $17,000 in 1998, 1997 and 1996, respectively.

ADVERTISING, PROMOTION AND MARKET RESEARCH
Advertising,  promotion and market  research  costs are expensed as incurred and
amounted to $257.7 million,  $255.3 million and $208.4 million in 1998, 1997 and
1996, respectively.

INCOME TAXES
Deferred   income  taxes  are  recognized   for  the  future  tax   consequences
attributable to differences  between the financial statement carrying amounts of
existing  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.

CALCULATION OF EARNINGS PER SHARE
Basic earnings per share are based on the weighted average shares outstanding of
56,845,000 in 1998, 55,967,000 in 1997 and 55,571,000  in 1996.

Diluted earnings per share are determined by dividing net earnings plus interest
expense (net of tax benefit) on the convertible  subordinated  debentures by the
weighted average shares outstanding,  after giving effect to common shares to be
issued assuming conversion of the convertible  subordinated debentures to common
shares and other common  equivalent  shares.  Diluted  weighted  average  shares
outstanding were 62,420,000 in 1998, 63,377,000 in 1997 and 62,776,000 in 1996.







<PAGE>



The following table provides a reconciliation  of basic and diluted earnings per
share:


(In thousands)                             1998        1997        1996

Net earnings                            $83,067      85,417      62,744
Interest expense on convertible
   subordinated debentures,
   net of tax benefit                     2,730       3,640       3,640
                                          -----       -----       -----
Diluted net earnings                    $85,797      89,057      66,384
                                        =======      ======      ======

Weighted average shares
   outstanding - basic                   56,845      55,967      55,571
Effect of dilutive securities:
   Assumed conversion of
      subordinated debentures             4,633       6,178       6,178
   Assumed exercise of stock options        917       1,232       1,027
   Other                                     25          --          --
Weighted average shares
   outstanding - diluted                 62,420      63,377      62,776


STOCK-BASED COMPENSATION
Statement of Financial  Accounting  Standards  (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 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".  Pro- forma  disclosures  assuming  the fair value
method prescribed by SFAS No. 123 had been used to measure  compensation expense
are provided in note 5.


(2) Accrued Expenses

Accrued expenses consist of the following:

(In thousands)                                 1998             1997

Compensation and benefits                   $48,854           51,549
Advertising and promotions                   26,250           29,312
Other                                        36,911           37,586
                                             ------           ------
                                           $112,015          118,447
                                           ========          =======

(3) Long-Term Debt and Other Financing Arrangements

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

(In thousands)                                 1998                 1997

6.375% debentures due June, 2028           $120,000                   --
5.5% convertible subordinated
   debentures due June, 2005                     --              100,000
6.2% term note due
   September, 2000                           20,000               20,000
Revolving Swedish krona credit
   agreements due April, 2000
   at 4.4% to 11.7%                          30,163               27,736
Other, principally foreign borrowings
   and capitalized leases, at weighted
   average interest rates of 7.4% in
   1998 and 7.6% in 1997                      1,597                1,705
                                              -----                -----
                                           $171,760              149,441
                                           ========              =======

Maturities of debt for the next five years are as follows (in thousands)
1999 - $959; 2000 - $50,657; 2001 - $442; 2002 - $298;  2003 - $81; 2004
and later $120,282.

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.


<PAGE>



In July, 1998, the 5.5% convertible  subordinated debentures were converted into
6.2 million  Class A common  shares at a  conversion  rate of 61.776  shares per
$1,000  principal  amount of  debentures  (equivalent  to a conversion  price of
approximately $16.19).

The  company has a $200  million  revolving  credit  facility  which  expires in
September,  2002.  The facility,  which is unused at September 30, 1998,  can be
increased  to $300 million  under  certain  conditions  and may be drawn in U.S.
dollars or certain foreign currencies.

In January, 1998, the company renewed an agreement to sell, without recourse, up
to $30  million  of  designated  trade  receivables  on an  ongoing  basis.  The
agreement expires in one year and is renewable  annually upon the mutual consent
of both parties.  At September 30, 1998, the facility was fully utilized.  Costs
related to this agreement are included in administrative expenses.

The $200 million  revolving credit facility,  the term note due September,  2000
and the receivables  agreement impose  restrictions on such items as total debt,
working  capital,  dividend  payments,  treasury  stock  purchases  and interest
expense.  At  September  30,  1998,  the  company was in  compliance  with these
arrangements  and  $220  million  of  consolidated  retained  earnings  was  not
restricted as to the payment of dividends.


(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 into Class A on a share-for-share basis at the option
of the holders.

Cash dividends for Class B common stock in 1998, 1997 and 1996 were $7.6 million
or $.23 per share, $6.5 million or $.195 per share and $5.9 million or $.175 per
share,  respectively.  Cash dividends for Class A common stock in 1998, 1997 and
1996 were $5.6  million or $.23 per share,  $4.4  million or $.195 per share and
$3.9 million or $.175 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.

At the  company's  annual  meeting in January,  1997,  stockholders  approved an
increase in both Class A and Class B authorized shares from 25,000,000 shares to
75,000,000 shares.

In January,  1997, the Board of Directors declared a 100% stock dividend on both
the Class A and Class B outstanding shares effective  February,  1997. The stock
dividend was  distributed  only on outstanding  shares and not on shares held in
the treasury. An amount equal to the twenty-two cents per share par value of the
additional  shares was transferred  from retained  earnings to common stock. All
share and per share  information in this report,  except for treasury shares and
the twenty-two  cents per share par value, has been restated to reflect the 100%
stock dividend.

During fiscal 1998, the Board of Directors authorized the company to purchase up
to 6.0 million shares of its Class A common stock. As of September 30, 1998, the
company had  purchased  5,554,600  Class A common shares under this program at a
total cost of $126.1  million.  In  addition,  during  fiscal  1998 the Board of
Directors  authorized  the  purchase  of 385,000  Class B common  shares  from a
related party at a total cost of $11.2  million,  which was equal to fair market
value on the date of purchase.


(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 date of grant. Options under the
plans  expire  five or ten years  from 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 10.6 million shares have been  authorized to be issued
under the plans.

The company accounts for its stock option plans under the intrinsic value method
and,  accordingly,  no compensation cost has been recognized in the consolidated
statements of earnings. Had compensation expense for these plans been determined
based upon the fair value of stock options on the dates of grant and  recognized
over the four-year  vesting period  consistent  with SFAS No. 123, the company's
pro-forma net earnings and earnings per share for the years ended  September 30,
1998,  1997 and 1996 would have been as follows (in thousands,  except per share
amounts):


                                      1998          1997           1996

Net earnings:
   As reported                     $83,067        85,417         62,744
   Pro-forma                       $80,090        83,572         61,688
Basic earning per share:
   As reported                       $1.46          1.53           1.13
   Pro-forma                         $1.41          1.49           1.11
Diluted earnings per share:
   As reported                       $1.37          1.41           1.06
   Pro-forma                         $1.33          1.38           1.04


<PAGE>



The weighted  average  fair value of options at the date of grant in 1998,  1997
and 1996 was $7.37, $5.72 and $3.67 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:

                                    1998          1997             1996

Expected life                     5 years        5 year          5 years
Volatility                          19.5%         18.7%            18.7%
Risk-free interest rate         5.5%-5.9%     6.7%-6.8%        6.0%-6.9%
Dividend yield                  0.8%-1.0%     0.8%-0.9%        1.1%-1.2%

Summarized  information on the company's  outstanding stock options at September
30, 1998 is as follows (options in thousands): 
                                                              Options
                     Options Outstanding                    Exercisable

                              Average        Weighted                   Weighted
Range of            Number    Remaining      Average      Number        Average
Exercise               of     Contractual    Option          of         Option
Prices              Options   Life           Price        Options       Price

$6.63-$9.94            215    3.6 years     $  9.57         215         $  9.57
$10.73-$13.38        1,243    6.3 years      $12.51         645          $12.19
$16.25-$21.72          721    8.1 years      $19.69         139          $19.50
$25.09-$26.63          876    9.0 years      $26.19         214          $26.19

Stock  option  activity  under the plans is  summarized  as follows  (options in
thousands):
                                         Number            Weighted
                                           of               Average
                                        Options          Option Price

Outstanding at September 30, 1995         2,230             $11.06
 Granted                                  1,031              13.59
 Exercised                                 (167)             10.30
 Canceled                                  (105)             12.24

Outstanding at September 30, 1996         2,989              11.93
 Granted                                    888              19.80
 Exercised                                 (490)             11.35
 Canceled                                  (132)             15.33

Outstanding at September 30, 1997         3,255              14.03

Granted                                     927              26.19
Exercised                                  (918)             12.32
Canceled                                   (209)             18.61
Outstanding at September 30, 1998         3,055             $17.92
Exercisable at September 30:
 1996                                     1,054             $10.80
 1997                                     1,296             $11.38
 1998                                     1,213             $15.04


The company is also  authorized to grant up to 500,000  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.  During 1998,  employees were granted 73,000 restricted
shares at a  weighted  average  fair  value of  $26.18  per share on the date of
grant. At September 30, 1998, there were 194,500 restricted shares outstanding.




<PAGE>



(6) Income Taxes


The provisions for income taxes consist of the following:

(In thousands)             1998         1997          1996

Current:
  Federal               $28,176       31,553        27,651
  Foreign                 6,089        5,716         5,566
  State                   5,122        6,015         5,911
                          -----        -----         -----
                         39,387       43,284        39,128
                         ------       ------        ------
Deferred:
  Federal                 6,928        4,849       (2,349)
  Foreign                 2,716        2,549        1,268
  State                     280           22         (777)
                            ---           --         ---- 
                          9,924        7,420       (1,858)
                          -----        -----       ------ 
                        $49,311       50,704       37,270
                        =======       ======       ======

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

                                         1998       1997         1996

Statutory tax rate                       35.0%      35.0%        35.0%
Effect of foreign
  income tax rates                        (.8)      (1.3)        (1.5)
State income taxes, net
  of federal tax benefit                  2.7        2.9          3.3
Other, net                                 .4         .7           .5
                                           --         --           --
Effective tax rate                       37.3%      37.3%        37.3%
                                         ====       ====         ==== 

Significant  components of the company's  deferred tax assets and liabilities at
September 30, 1998 and 1997 are as follows:

(In thousands)                                    1998           1997

 Deferred tax assets attributable to:
    Accrued expenses                            $11,713        16,456
    Inventory adjustments                            --           996
    Other                                           380         2,352
                                                    ---         -----
Total deferred tax assets                        12,093        19,804
                                                 ------        ------
Deferred tax liabilities attributable to:
    Depreciation and amortization                28,021        27,503
    Inventory adjustments                         1,600            --
    State income taxes                              619           339
                                                    ---           ---
Total deferred tax liabilities                   30,240        27,842
                                                 ------        ------
Net deferred tax liabilities                   ($18,147)       (8,038)
                                               ========        ====== 

Prepaid  expenses at September 30, 1998 and 1997 include $10.1 million and $17.5
million, respectively, of net deferred tax assets.

Domestic  earnings  before  income  taxes were $105.0  million,  $110.9  million
(including  the  non-recurring  gain) and $77.9 million in 1998,  1997 and 1996,
respectively.  Foreign  operations  had  earnings  before  income taxes of $27.4
million, $25.2 million and $22.1 million in 1998, 1997 and 1996, respectively.

Undistributed  earnings of the company's foreign operations  amounting to $134.9
million 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, 1998. Should such earnings be distributed, the credits
for foreign income taxes paid would substantially  offset applicable U.S. income
taxes.




<PAGE>



(7) 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,  data processing  equipment and automobiles.  At September 30, 1998,
future minimum payments under noncancelable leases are as follows:

                                   Operating            Capital
(In thousands)                      Leases               Leases

1999                                $46,813               402
2000                                 38,773               235
2001                                 30,044               131
2002                                 21,295                62
2003                                 11,597                 8
2004 and later                        7,863                --
----                                  -----                  
Total minimum lease payments       $156,385               838
                                   ========               ===

Total rental expense for operating leases amounted to $63.1 million in 1998, 
$59.6 million in 1997 and $53.0 million in 1996.  Certain leases require
the company to pay real estate taxes, insurance, maintenance and special
assessments.

(8) Non-Recurring Gain


In the first quarter of 1997,  the company  received a $28.0  million  insurance
settlement from the loss of its corporate airplane.  The effect on the company's
earnings was a  non-recurring  pre-tax gain of $15.6  million and an increase in
net earnings of $9.8 million.  Accordingly,  basic earnings per share  increased
$.18 and diluted earnings per share increased $.16.

The following table provides pro-forma  information  excluding the non-recurring
gain (in thousands, except per share data):

                                            1998                   1997

Pre-tax earnings                         $132,378                120,487
Net earnings                              $83,067                 75,606
Net earnings per share:
   Basic                                    $1.46                   1.35
   Diluted                                  $1.37                   1.25

(9) Business Segments and Geographic Area Information

The  "consumer  products"  business  segment  principally  includes  developing,
manufacturing,  distributing and marketing branded consumer  products  worldwide
and includes the company's  Alberto-Culver USA and Alberto-Culver  International
business  units.  This segment also  includes  products  intended for end use by
institutions  and industries and the  manufacturing of custom label products for
other companies.  The "specialty distribution - Sally" business segment consists
of  Sally  Beauty  Company,  a  specialty  distributor  of  professional  beauty
supplies.




<PAGE>



Notes Continued

<TABLE>
<CAPTION>

(9) Business Segments and Geographic Area Information (continued)


Segment  data  for the  years  ended  September  30,  1998,  1997 and 1996 is as
follows:

Business Segments Information (In thousands)                                                1998              1997           1996
<S>                                                                                  <C>                 <C>              <C>    

Net sales:
   Consumer products:
      Alberto-Culver USA                                                             $   418,190           444,204          377,468
      Alberto-Culver International                                                       460,507           466,530          452,030
                                                                                         -------           -------          -------
      Total consumer products                                                            878,697           910,734          829,498
   Specialty distribution - Sally                                                        972,792           879,209          771,868
   Eliminations                                                                          (16,778)          (14,685)         (10,957)
                                                                                         -------           -------          ------- 
                                                                                      $1,834,711         1,775,258        1,590,409
                                                                                      ==========         =========        =========
Earnings before provision for income taxes:
   Consumer products:
      Alberto-Culver USA                                                               $  25,539            29,243           21,445
      Alberto-Culver International                                                        27,194            24,680           21,737
                                                                                          ------            ------           ------
      Total consumer products                                                             52,733            53,923           43,182
   Specialty distribution - Sally                                                        100,716            89,456           78,871
                                                                                         -------            ------           ------
     Operating profit                                                                    153,449           143,379          122,053
   Non-recurring gain (note 8)                                                               --             15,634               --
   Unallocated expenses, net*                                                            (12,464)          (14,654)          (9,971)
   Interest expense, net of interest income                                               (8,607)           (8,238)         (12,068)
                                                                                          ------            ------          ------- 
                                                                                        $132,378           136,121          100,014
                                                                                        ========           =======          =======
Identifiable assets:
   Consumer products:
      Alberto-Culver USA                                                             $   186,729           205,804          197,478
      Alberto-Culver International                                                       341,943           329,887          333,738
                                                                                         -------           -------          -------
      Total consumer products                                                            528,672           535,691          531,216
   Specialty distribution - Sally                                                        421,050           373,111          308,869
   Corporate**                                                                           118,462            91,257           69,181
                                                                                         -------            ------           ------
                                                                                      $1,068,184         1,000,059          909,266
                                                                                      ==========         =========          =======
Depreciation and amortization expense:
   Consumer products:
      Alberto-Culver USA                                                                $  9,949            10,008            7,601
      Alberto-Culver International                                                        10,904            11,454           11,376
                                                                                          ------            ------           ------
      Total consumer products                                                             20,853            21,462           18,977
   Specialty distribution - Sally                                                         16,202            14,001           11,780
   Corporate                                                                               1,050             1,466            2,159
                                                                                           -----             -----            -----
                                                                                         $38,105            36,929           32,916
                                                                                         =======            ======           ======
Capital expenditures:
   Consumer products:
      Alberto-Culver USA                                                                 $14,594             7,434           11,419
      Alberto-Culver International                                                        10,397            16,694            8,885
                                                                                          ------            ------            -----
      Total consumer products                                                             24,991            24,128           20,304
   Specialty distribution - Sally                                                         15,158            18,608           20,872
   Corporate                                                                              16,000            15,700               --
                                                                                          ------            ------           ------
                                                                                          56,149            58,436           41,176
                                                                                         =======            ======           ======
* "Unallocated expenses, net" principally consists of general corporate expenses
and foreign  exchange  gains and  losses.  **Corporate  identifiable  assets are
primarily cash, cash equivalents, short-term investments and equipment.

Geographic  data for the years ended  September  30,  1998,  1997 and 1996 is as
follows:

Geographic Area Information (In thousands)                                                  1998              1997            1996

Net sales:
   United States                                                                      $1,344,592         1,309,016        1,148,268
   Foreign                                                                               505,319           484,978          453,709
   Eliminations                                                                          (15,200)          (18,736)         (11,568)
                                                                                         -------           -------          ------- 
                                                                                      $1,834,711         1,775,258        1,590,409
                                                                                      ==========         =========        =========
Operating profit:
   United States                                                                        $119,879           113,402           98,288
   Foreign                                                                                33,570            29,977           23,765
                                                                                          ------            ------           ------
                                                                                        $153,449           143,379          122,053
                                                                                        ========           =======          =======
Identifiable assets:
   United States                                                                      $   568,627          565,578          507,545
   Foreign                                                                                381,095          343,224          332,540
   Corporate*                                                                             118,462           91,257           69,181
                                                                                          -------           ------           ------
                                                                                       $1,068,184        1,000,059          909,266
                                                                                       ==========        =========          =======
* Corporate identifiable assets are primarily cash, cash equivalents, short-term
investments and equipment.
</TABLE>


<PAGE>



Notes Continued

(10) Quarterly Financial Data

Unaudited quarterly consolidated statement of earnings information for the years
ended September 30, 1998 and 1997 is summarized below (in thousands,  except per
share amounts):
                                    1st        2nd       3rd         4th
                                 Quarter     Quarter    Quarter    Quarter

1998:
Net sales                         $445,400   455,195    467,480    466,636
Cost of products sold             $218,040   225,770    227,104    231,181
Net earnings                       $19,692    19,583     21,155     22,637
Earnings per share:
     Basic                            $.35       .34        .38        .39
     Diluted                          $.32       .32        .35        .38


1997 As Reported:
Net sales                         $426,105   439,577    456,210    453,366
Cost of products sold             $215,388   218,057    226,734    220,237
Net earnings                     $  26,588    17,781     19,210    21,838
Earnings per share:
     Basic                            $.48       .32        .34       .39
     Diluted                          $.44       .29        .32      . 36


1997 Pro Forma:
Net earnings before
   non-recurring gain             $16,777*    17,781     19,210     21,838
Earnings per share before
   non-recurring gain:
     Basic                          $.30*        .32        .34       .39
     Diluted                        $.28*        .29        .32      . 36

 *   Excludes a non-recurring gain of $9.8 million or $.18 basic earnings per 
     share and $.16 diluted earnings per share (note 8).

 (11) Acquisitions and Divestiture

In February, 1996, the company acquired St. Ives Laboratories, Inc. ("St. Ives")
for approximately $110 million.  St. Ives develops, manufactures and
markets personal care products under its St. Ives Swiss Formula brand and
manufactures custom label products for other companies.

The  purchase of St. Ives was funded with the net  proceeds  available  from the
July, 1995 issuance of $100 million of 5.5% convertible  subordinated debentures
and from the sale of certain trade accounts receivable in January, 1996.

The acquisition was accounted for as a purchase and, accordingly,  the operating
results of St. Ives have been included in the company's  consolidated  financial
statements since the date of acquisition.  The excess of the aggregate  purchase
price over the fair market  value of net assets  acquired of  approximately  $51
million is being amortized over 40 years.

The company also made several other acquisitions  during fiscal years 1998, 1997
and 1996,  primarily  related to Sally Beauty  Company's  operations,  that were
insignificant to the consolidated financial statements.

In July,  1996,  Alberto-Culver  USA sold its  Milani,  DiaFoods,  Thick-It  and
Smithers   institutional   food  lines  and  granted  the   purchaser  a  master
distribution  license to sell the company's other  institutional  food products.
The transaction resulted in an immaterial gain.





<PAGE>



Independent Auditors' Report

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, 1998 and 1997,  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,  1998.  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  generally   accepted  auditing
standards.  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, 1998 and 1997, and the results of
their  operations  and their cash flows for each of the years in the  three-year
period  ended  September  30,  1998,  in  conformity  with  generally   accepted
accounting principles.

Chicago, Illinois
October 22, 1998                                        KPMG Peat Marwick LLP


<PAGE>



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

Alberto-Culver Company and Subsidiaries

RESULTS OF OPERATIONS

Fiscal year 1998 marked the company's  seventh  consecutive year of record sales
and record operating  earnings.  Net sales for the year ended September 30, 1998
were $1.83 billion,  an increase of 3.3% over prior year sales of $1.78 billion.
Net sales in 1996 were $1.59 billion.

Record  net  earnings  of $83.1  million  in 1998  increased  9.9% from 1997 net
earnings  of $75.6  million  before a  non-recurring  gain.  Excluding  the 1997
non-recurring  gain,  basic  earnings  per share of $1.46  were 11 cents or 8.1%
higher than 1997 and diluted  earnings  per share were $1.37,  an increase of 12
cents or 9.6% from 1997. Net earnings in 1996 were $62.7  million,  representing
basic earnings per share of $1.13 and diluted earnings per share of $1.06.

As described in "note 8" to the consolidated financial statements, during fiscal
1997 the company received a $28.0 million insurance  settlement from the loss of
its corporate  airplane.  As a result,  the company  recognized a  non-recurring
pre-tax gain of $15.6  million and an increase in net earnings of $9.8  million.
Accordingly,  basic  earnings  per share in 1997  increased 18 cents and diluted
earnings  per share  increased 16 cents as a result of the  non-recurring  gain.
Fiscal 1998 net earnings  decreased $2.4 million or 2.8% compared to fiscal 1997
net earnings including the non-recurring gain.

Sales of  Alberto-Culver  USA consumer  products in 1998 were $418.2 million,  a
decrease  of 5.9% from  prior year sales of $444.2  million.  The 1998  decrease
primarily  resulted  from lower sales for custom label filling  operations,  St.
Ives Swiss Formula facial products and Alberto VO5 shampoo and  conditioner.  In
1997,  sales increased 17.7% over 1996 sales of $377.5 million  primarily due to
higher sales of St. Ives  products in addition to sales  increases for TRESemme,
TCB, Mrs. Dash, Alberto VO5 Hot Oil and the introduction of new products.

Alberto-Culver International consumer products sales were $460.5 million in 1998
compared to $466.5  million in 1997 and $452.0  million in 1996. The fiscal 1998
results were negatively  impacted by the effect of foreign  exchange rates.  Had
foreign  exchange  rates this year been the same as fiscal 1997,  Alberto-Culver
International  sales  would have  increased  4.3%.  The sales  increase  in 1997
primarily resulted from higher sales of St. Ives products.

Sales of the "Specialty  distribution  - Sally"  business  segment  increased to
$972.8 million in 1998 compared to $879.2 million and $771.9 million in 1997 and
1996, respectively.  The sales increases of 10.6% in 1998 and 13.9% in 1997 were
attributable to sales gains for established  Sally Beauty Company  outlets,  the
addition of stores during the year and the expansion of Sally's full service and
foreign operations through acquisitions and internal growth. The number of Sally
stores increased 33.7% during the last three fiscal years to a total of 1,998 at
the end of fiscal 1998  compared to 1,833 and 1,656 at the end of 1997 and 1996,
respectively.

Cost of  products  sold as a  percentage  of sales was 49.2% in fiscal year 1998
compared  to 49.6% in 1997 and 50.6% in 1996.  The lower cost of  products  sold
percentages  in 1998 and 1997 were  primarily due to cost savings and changes in
product mix  favoring  higher  margin  products,  offset in part by Sally Beauty
Company's relatively higher cost of goods sold percentage.

Advertising,  promotion,  selling and administrative  expenses increased 3.3% in
1998 and 13.8% in 1997. The increase in 1998 primarily  resulted from the higher
selling and administration  costs associated with the growth of the Sally Beauty
business.  The higher 1997 expenses were also  attributable to Sally's growth as
well as the acquisition of St. Ives and higher advertising, promotion and market
research expenses for Alberto-Culver USA.

Advertising,  promotion and market  research  expenditures  were $257.7 million,
$255.3  million and $208.4  million in 1998,  1997 and 1996,  respectively.  The
higher expenses in 1998 were mainly  attributable  to increased  advertising and
promotion  expenditures for Alberto-Culver  International.  The increase in 1997
expenses  mainly  resulted  from  the  acquisition  of St.  Ives  and  increased
marketing expenditures for Alberto-Culver USA, including the introduction of new
products.

Interest  expense,  net of interest income,  was $8.6 million,  $8.2 million and
$12.1 million in 1998, 1997 and 1996,  respectively.  Interest expense was $12.2
million in 1998  versus  $11.8  million in 1997 and $15.9  million in 1996.  The
decrease in interest  expense in 1997 was  attributable to the prepayment of $20
million  of 9.73%  term notes in August,  1996 and a  reduction  in  outstanding
revolving Swedish krona debt, including the impact of foreign exchange rates.

The provision  for income taxes as a percentage of earnings  before income taxes
was 37.3% in 1998,  1997 and 1996.  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, 1998 was $277.9  million,  an increase of $8.9
million from the prior year's working capital of $269.0  million.  The resulting
current  ratio was 1.89 to 1.00 at September  30, 1998  compared to 1.86 to 1.00
last year.

Accounts receivable increased 6.9% to $129.1 million from $120.8 million last
year.  The increase was principally due to the growth of Sally's full
service operations.


<PAGE>



Inventories  were $369.2  million at  September  30, 1998,  up 7.3%  compared to
$343.9 million last year.  The increase was primarily due to higher  inventories
needed to support the growth of the Sally Beauty business.

Net property,  plant and equipment  increased $32.4 million to $223.5 million at
September  30, 1998.  The increase  resulted  primarily  from  additional  Sally
stores, warehouse and office expenditures,  outlays for machinery, equipment and
information  systems  and the  purchase  of a  replacement  corporate  airplane,
partially offset by depreciation during fiscal 1998.

Goodwill  and  trade  names,  net of  amortization,  was  $204.8  million  as of
September  30, 1998,  up $20.4  million from 1997.  The increase in goodwill and
trade names was due to  additional  goodwill from  acquisitions  by Sally Beauty
Company and  Alberto-Culver  International  partially offset by amortization and
the effects of foreign exchange rates.

Long-term debt increased  $22.3 million  principally due to the issuance of $120
million  of  6.375%  debentures  in  June,  1998,  substantially  offset  by the
conversion of the $100 of million  subordinated  debentures  into Class A common
shares in July, 1998.

Total  stockholders'  equity  increased  $37.0  million  to  $534.0  million  at
September  30,  1998.  The increase  was  primarily  due to net earnings for the
fiscal  year and the  conversion  of the  subordinated  debentures  into Class A
common  shares,  substantially  offset by the  repurchase of 5.9 million Class A
common shares and 385,000 Class B common shares and 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,  the issuance of $120 million of 6.375%
debentures  in June,  1998 and the 1996 sale of $30  million  of trade  accounts
receivable.  Operating activities provided cash of $110.4 million, $79.7 million
and $92.7 million in 1998, 1997 and 1996, respectively.

The company has obtained long-term  financing as needed to fund acquisitions and
other  growth  opportunities.  Funds are  occasionally  obtained  prior to their
actual need in order to take advantage of opportunities in the debt markets.  In
June, 1998, the company issued $120 million of 6.375% debentures due June, 2028.
As a result,  the company has $230 million  remaining on its $350 million  shelf
registration  of debt securities that was filed with the Securities and Exchange
Commission in April, 1998. In September, 1997, the company obtained a five-year,
$200  million  revolving  credit  facility.  The  facility,  which is  unused at
September 30, 1998,  can be increased to $300 million  under certain  conditions
and may be drawn in U.S.  dollars or in certain foreign  currencies.  Under debt
covenants, the company has the ability to incur up to $646 million of additional
debt.

The primary uses of cash during the three-year  period ending September 30, 1998
have been acquisitions of $180.5 million,  purchases of treasury stock of $147.4
million,  capital  expenditures  of $155.0  million and cash  dividends of $33.9
million.

Compared to 1995,  cash dividends per share  increased 48.4% over the three-year
period ended  September  30, 1998.  Cash  dividends  paid on Class A and Class B
common stock were $.230 per share in 1998, $.195 per share in 1997 and $.175 per
share in 1996.

The company  anticipates  that cash flows from  operations and available  credit
will be  sufficient to fund  operational  requirements  in future years.  During
1999, the company  expects that cash will continue to be used for  acquisitions,
capital expenditures, new product development,  market expansion,  retirement of
debt and dividend  payments.  The company may also purchase shares of its common
stock depending on market conditions. During fiscal 1998, the Board of Directors
authorized  the  company to  purchase  up to 6.0  million  shares of its Class A
common stock. As of September 30, 1998,  445,400 shares  remained  available for
purchase  under this  authorization.  In October,  1998,  the Board of Directors
authorized the purchase of an additional 3.0 million Class A shares.

YEAR 2000 READINESS DISCLOSURES

Many computer  systems use only two digits to represent the year and they may be
unable to process accurately  information that contains dates before,  during or
after the year 2000. As a result,  organizations that depend on computers are at
risk for possible date-based  computation errors which could result in erroneous
information or system failures that may disrupt their business operations.  This
is commonly known as the Year 2000 ("Y2K") problem.

Most of the  software  purchased  by the  company  within the last five years is
either Y2K  compliant or the vendor has certified  that Y2K  compliant  upgrades
will be available  sufficiently  in advance of December 31, 1999.  In late 1995,
the company  inventoried and assessed key financial and operational  information
systems  and  prepared  a  prioritized  plan for Y2K  systems  modifications  or
replacements.  The plan is revised periodically and progress against the plan is
monitored and periodically reported to management and the Audit Committee of the
Board of Directors. Implementation of required changes to the company's critical
systems is currently scheduled to be completed by August, 1999. Certification of
critical  systems,  which  includes  testing by  technicians  and key users,  is
expected to be completed  before December 31, 1999. The company's  assessment of
non-information  technology systems (e.g.,  manufacturing equipment) is expected
to be completed by February,  1999, and an action plan will be prepared based on
the results.



<PAGE>



As part of the Y2K readiness  plan, the company's  most important  suppliers and
customers have been queried (e.g., by questionnaires) about their Y2K readiness.
Additional  steps  will  be  taken  to  reassess  their  Y2K  readiness  through
additional  questionnaires,  interviews,  on-site  visits and other  means.  The
company  expects to have a better  understanding  of the Y2K  readiness of these
third parties over the next several months.

Because of the number of computer systems used by the company, the number of key
suppliers  and  customers and the  company's  operations  around the world,  the
company  presently  believes  that it could  experience  some  disruption in its
business due to the Y2K problem.  The company  could be  materially  affected if
utilities,  governmental entities,  suppliers,  customers or other third parties
with which it does  business  or that  provide  essential  services  are not Y2K
compliant.  The company currently  believes that the greatest risk of disruption
in its  businesses  may exist outside the United States with  suppliers or other
third-parties that are not Y2K compliant.  In addition,  both the assessment and
mitigation of Y2K exposure  outside the US may be  complicated  by any unrelated
foreign entities'  unwillingness to provide information about their state of Y2K
readiness.  The possible consequences of the company, key suppliers or customers
not being  Y2K  complaint  by  January  1, 2000  include,  among  other  things,
temporary  plant  closings,  delays in the delivery of  products,  delays in the
receipt of  supplies,  and  invoice and  collection  errors.  Consequently,  the
business and results of operations  of the company could be materially  affected
by the inability of the company to conduct its businesses in an ordinary  course
for a period of time after January 1, 2000.  However,  the company believes that
its Y2K readiness plan,  including the  contingency  planning  discussed  below,
should significantly reduce the adverse effect any such disruptions may have.

The company is  developing a  contingency  plan to be followed in the event of a
Y2K-related failure of a business-critical  system. This plan should be complete
by June,  1999 and is  expected  to  include,  for  example,  identification  of
alternate  suppliers and possible  increases in inventory levels,  including raw
materials and  packaging.  Once  developed,  contingency  plans and related cost
estimates will be refined as additional information becomes available.

Incremental costs, which include contractor costs to modify existing systems and
costs of internal resources  dedicated to achieving Y2K compliance,  are charged
to  expense  as  incurred.   These  costs  are   currently   expected  to  total
approximately $2.3 million,  of which  approximately 40% has been spent to date.
Incremental  costs are presently  being funded through  operating cash flow. The
amounts  do  not  include  any  costs  associated  with  the  implementation  of
contingency  plans,  which are in the process of being  developed,  as discussed
above. The costs associated with replacement of computerized  systems,  hardware
and related equipment  (currently  estimated to be approximately  $6.2 million),
substantially  all of which will be  capitalized,  are not included in the above
estimates.

The  company's  Y2K  readiness  program  is an  evolving  and  ongoing  process.
Accordingly,  our  current  conclusions  as to  what  constitutes  areas  of the
company's greatest Y2K exposure and the estimates of costs and completion dates,
as described above, are subject to change.  The Y2K problem has many aspects and
potential consequences,  some of which are not reasonably foreseeable, and there
can be no assurance that unforeseen consequences will not arise.

IMPACT OF NEW ACCOUNTING STANDARDS

In June, 1997, the FASB issued SFAS No. 130, "Reporting  Comprehensive  Income,"
which requires the prominent display of comprehensive  income and its components
in the financial statements. The company is required to comply with SFAS No. 130
in fiscal year 1999 and currently believes its adoption will not have a material
effect on the consolidated financial statements.

In June, 1997, the FASB issued SFAS No. 131,  "Disclosures  About Segments of an
Enterprise  and Related  Information."  SFAS No. 131  establishes  standards for
reporting  information  about operating  segments in financial  statements.  The
company is required to comply with SFAS No. 131 in fiscal year 1999 and does not
expect its  adoption  to have a material  effect on the  consolidated  financial
statements.

In March,  1998, the American  Institute of Certified Public  Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed  or  Obtained  for  Internal  Use." SOP 98-1  revises  the  accounting
treatment of software  development costs and requires  capitalization of certain
costs which the company has  historically  expensed as incurred.  The company is
required to comply with SOP 98-1 in fiscal year 2000 and currently  believes its
adoption  will  not  have  a  material  effect  on  the  consolidated  financial
statements.

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,  interest rates and government actions.  The company
uses a variety of  practices  to manage  these  market  risks,  including,  when
considered  appropriate,  derivative  financial  instruments.  The company  uses
derivative financial  instruments only for risk management and does not use them
for trading or speculative purposes.

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,  the British  pound  sterling,  the
Canadian dollar, the Australian dollar and the Mexican peso.


<PAGE>



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,  royalty payments, 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, 1998, the company had an outstanding  foreign
currency  contract to sell the  equivalent  of $1.3  million of Japanese  yen to
hedge a third-party royalty agreement.  The fair value of this agreement results
in an immaterial unrecognized gain at September 30, 1998.

Interest rate risk is managed  through a combination  of fixed rate and variable
rate  debt with  varying  maturities.  At  September  30,  1998,  variable  rate
long-term debt was $11.0 million or 6.4% of total long-term debt.

The company  periodically  uses 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,
1998,  the company had one  interest  rate swap  outstanding,  which  expires in
November  1998,  in a notional  amount of $5.0  million.  The fair value of this
agreement results in an immaterial unrecognized loss at September 30, 1998.

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  securities  with high  credit  ratings  and
investing through major financial institutions 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 large number of customers comprising
the company's  customer base. The company  currently  believes its allowance for
doubtful accounts is sufficient to cover customer credit risks.


<PAGE>


<TABLE>
<CAPTION>

Selected Financial Data
Alberto-Culver Company and Subsidiaries


                                                                                     Year ended September 30,
(In thousands, except per share data)                               1998         1997          1996         1995          1994
<S>                                                             <C>          <C>           <C>           <C>          <C>    

Operating Results:
Net sales                                                        $1,834,711   1,775,258     1,590,409    1,358,219     1,216,119
Cost of products sold                                               902,095     880,416       805,080      682,589       602,749
Interest expense                                                     12,170      11,826        15,905        9,946         8,630
Earnings before non-recurring gain and income taxes (1)             132,378     120,487       100,014       84,242        71,078
Provision for income taxes (1)                                       49,311      44,881        37,270       31,591        27,010
Net earnings before non-recurring gain (1)                           83,067      75,606        62,744       52,651        44,068
Net earnings per share before non-recurring gain (1) (2):
   Basic                                                               1.46        1.35           1.13         .95           .79
   Diluted                                                             1.37        1.25           1.06         .94           .79
Weighted average shares outstanding: (2)
   Basic                                                             56,845       55,967        55,571       55,430       56,063
   Diluted                                                           62,420       63,377        62,776       57,053       56,083
Shares outstanding at year end: (2)
   Class A                                                           24,063       22,610        22,229       22,143       22,093
   Class B                                                           33,148       33,533        33,533       33,533       33,534
Financial Condition:
Current ratio                                                     1.89 to 1   1.86 to 1      1.79 to 1    2.28 to 1    1.86 to 1
Working capital                                                 $   277,940     269,007        226,123      301,706      185,747
Cash, cash equivalents and  short-term investments                   73,305      87,600         71,557      146,985       50,362
Property, plant and equipment, net                                  223,476     190,998        175,920      157,791      132,881
Total assets                                                      1,068,184   1,000,059        909,266      815,086      610,208
Long-term debt including debentures                                 171,760     149,441        161,548      183,094      142,976
Stockholders' equity                                                533,991     497,004        425,096      370,903      326,970
Cash dividends                                                       13,220      10,909          9,724        8,590        7,708
Cash dividends per share (3)                                           .230        .195           .175         .155        .1375
</TABLE>

(1)  1997 excludes a  non-recurring  gain from an insurance  settlement  for the
     loss  of the  company's  corporate  airplane  (note  8).  Pre-tax  earnings
     including  the  non-recurring  gain  were  $136.1  million.   Net  earnings
     including  the gain were $85.4  million,  after  deducting  income taxes of
     $50.7 million,  resulting in basic per share of $1.53 and diluted  earnings
     per share of $1.41.

(2)  Net earnings per share and shares outstanding have been restated to reflect
     the 100% stock dividend on the company's Class A and Class B
     outstanding shares in February, 1997.

(3)  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.








Annual 10-K Report
Stockholders may obtain a copy of the company's 1998 Form 10-K Report filed with
the  Securities  and  Exchange  Commission  without  charge  by  writing  to the
Corporate Secretary, Alberto-Culver Company, 2525 Armitage Avenue, Melrose Park,
Illinois 60160.


<PAGE>



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 1998 and 1997 are as follows:
<TABLE>
                                                                                                     Cash
                                        Market Price Range                                         Dividends
                                       1998                           1997                         Per Share
                                High            Low            High            Low               1998      1997
<S>                             <C>             <C>           <C>             <C>             <C>         <C>

Class A (NYSE Symbol ACVA):
   First Quarter                $27-7/8         24-1/2        21-3/8          18-3/8          $ .05       .045
   Second Quarter               $27-3/4         25            24              20                .06       .050
   Third Quarter                $28-1/2         25            25-5/8          21                .06       .050
   Fourth Quarter               $25-7/8         17-15/16      26-11/16        21-13/16          .06       .050
                                                                                               $.23       .195


Class B (NYSE Symbol ACV):
   First Quarter                $32-9/16        27-9/16       25              21-3/8           $.05       .045
   Second Quarter               $32-7/16        29            28-5/8          23-9/16           .06       .050
   Third Quarter                $32-5/16        28-1/4        30              25                .06       .050
   Fourth Quarter               $29-3/8         19-3/4        31-9/16         26-1/16           .06       .050
                                                                                               $.23       .195

</TABLE>

As of November 20, 1998, stockholders of record totaled 1,084 for Class A shares
and 1,097 for Class B shares.