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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

for the fiscal year ended September 30, 2004.

OR

for the transition period from                               to                              

Commission file number 001-31788

NBTY, INC.
(Exact name of registrant as specified in charter)

(631) 567-9500
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

        The aggregate market value of the voting stock held by non-affiliates of the Registrant on March 31, 2004, was approximately $1,945,802,175. For purposes of the foregoing calculation only, all directors and executive officers of the Registrant have been deemed affiliates. The number of shares of Common Stock of the Registrant outstanding at March 31, 2004 was approximately 66,734,000. The number of shares of Common Stock of the Registrant outstanding at December 13, 2004 was approximately 67,060,000.

        DOCUMENTS INCORPORATED BY REFERENCE: Proxy Statement for 2005 Annual Meeting of Stockholders

NBTY, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS

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PART I

Forward Looking Statements

        This Annual Report on Form 10-K (the "Report") contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations and business of NBTY, Inc. and its subsidiaries (collectively, the "Company"). Discussions containing such forward-looking statements may be found in Items 1, 2, 3, 7, 7A and 9A hereof, as well as within this Report generally. In addition, when used in this Report, the words "subject to," "believe," "expect," "plan," "project," "estimate," "intend," "may," "will," "should," "can," or "anticipate," or the negative thereof, or variations thereon, or similar expressions are intended to identify forward-looking statements, which are inherently uncertain. Similarly, discussions of strategy, although believed to be reasonable, are also forward-looking statements and are inherently uncertain. All forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from projected results. Factors which may materially affect such forward-looking statements include: (i) slow or negative growth in the nutritional supplement industry; (ii) interruption of business or negative impact on sales and earnings due to acts of war, terrorism, bio-terrorism, civil unrest or disruption of mail service; (iii) adverse publicity regarding nutritional supplements; (iv) inability to retain customers of companies (or mailing lists) recently acquired; (v) increased competition; (vi) increased costs; (vii) loss or retirement of key members of management; (viii) increases in the cost of borrowings and/or unavailability of additional debt or equity capital; (ix) unavailability of, or inability to consummate, advantageous acquisitions in the future, including those that may be subject to bankruptcy approval or the inability of the Company to integrate acquisitions into the mainstream of its business; (x) changes in general worldwide economic and political conditions in the markets in which the Company may compete from time to time; (xi) the inability of the Company to gain and/or hold market share of its wholesale and/or retail customers anywhere in the world; (xii) unavailability of electricity in certain geographical areas; (xiii) the inability of the Company to obtain and/or renew insurance and/or the costs of same; (xiv) exposure to and expense of defending and resolving, product liability claims and other litigation; (xv) the ability of the Company to successfully implement its business strategy; (xvi) the inability of Company to manage its retail, wholesale, manufacturing and other operations efficiently; (xvii) consumer acceptance of the Company's products; (xviii) the inability of the Company to renew leases for its retail locations; (xix) inability of the Company's retail stores to attain or maintain profitability; (xx) the absence of clinical trials for many of the Company's products; (xxi) sales and earnings volatility and/or trends; (xxii) the efficacy of the Company's Internet and on-line sales and marketing strategies; (xxiii) fluctuations in foreign currencies, including the British Pound and the Euro; (xxiv) import-export controls on sales to foreign countries; (xxv) the inability of the Company to secure favorable new sites for, and delays in opening, new retail locations; (xxvi) introduction of new federal, state, local or foreign legislation or regulation or adverse determinations by regulators anywhere in the world (including the banning of products) and more particularly proposed Good Manufacturing Practices in the United States and the Food Supplements Directive and Traditional Herbal Medicinal Products Directive in Europe; (xxvii) the mix of the Company's products and the profit margins thereon; (xxviii) the availability and pricing of raw materials; (xxix) risk factors discussed in the Company's filings with the U.S. Securities and Exchange Commission; (xxx) adverse effects on the Company as a result of increased gasoline prices and potentially reduced traffic flow to the Company's retail locations; and (xxxi) other factors beyond the Company's control.

        Consequently, such forward-looking statements should be regarded solely as the Company's current plans, estimates and beliefs. Readers are cautioned not to place undue reliance on forward-looking statements. The Company cannot guarantee future results, events, and levels of activity, performance or achievements. The Company does not undertake and specifically declines any obligation to update, republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

        Industry data used throughout this Report was obtained from industry publications and internal Company estimates. While the Company believes such information to be reliable, its accuracy has not been independently verified and cannot be guaranteed.

Item 1.    BUSINESS

General

        NBTY, Inc. (together with its subsidiaries, the "Company," "NBTY," "we" or "us") is a leading vertically integrated manufacturer, marketer and retailer of a broad line of high quality, value-priced nutritional supplements in the United States, the United Kingdom, Ireland, the Netherlands and worldwide. Under a number of the Company's and third-party brands, the Company offers over 19,000 products, including vitamins, minerals, herbs, sports nutrition products, diet aids and other nutritional supplements. The Company is vertically integrated in that it purchases raw materials, formulates and manufactures its products and then markets its products through its four channels of distribution: (i) wholesale distribution to mass merchandisers, drug store chains, supermarkets, independent pharmacies and health food stores under various brand names, including the Nature's Bounty® and Rexall Sundown portfolio of brands; (ii) Direct response/Puritan's Pride, the leading U.S. nutritional supplement e-commerce/direct response business segment, under the Puritan's Pride® brand in catalogs and through the Internet; (iii) 557 Vitamin World® and Nutrition Warehouse® retail stores, as of September 30, 2004, operating throughout the U.S. in 45 states, Guam, Puerto Rico and the Virgin Islands; and (iv) European retail operations, consisting of 535 Holland & Barrett®, GNC (UK)® and Nature's Way® retail stores, as of September 30, 2004, operating throughout the United Kingdom and Ireland, and 67 De Tuinen® retail stores, operating in the Netherlands. At September 30, 2004, the Company manufactured over 90% of the nutritional supplements it sold.

        The Company was incorporated in Delaware in 1979 under the name Nature's Bounty, Inc. On March 26, 1995, the Company changed its name to NBTY, Inc. The Company's principal executive offices are located at 90 Orville Drive, Bohemia, New York 11716, and its telephone number is (631) 567-9500. The Company's Internet address is www.nbty.com. The Company's United Kingdom subsidiary, Holland & Barrett Europe Limited, has its principal executive offices in Nuneaton, United Kingdom. The Company's Dutch subsidiary, De Tuinen, B.V., has its principal executive offices in Beverwijk, Holland.

        The Company makes available, free of charge, on its web site, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such reports are available as soon as is reasonably practicable after the Company electronically files such materials with the Securities and Exchange Commission (the "SEC").

Business Strategy

        The Company targets the growing value-conscious consumer segment by offering high-quality products at a value price. The Company's objectives are to increase sales, improve manufacturing efficiencies, increase profitability and strengthen its market position through the following key strategies:

        Expand Existing Channels of Distribution.    The Company plans to continue expanding and improving its existing channels of distribution through aggressive marketing and synergistic acquisitions in order to increase sales and profitability and enhance overall market share. Specific plans to expand channels of distribution include:

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Increase Wholesale Sales in the U.S. and in Foreign Markets.    The Company expects to strengthen its wholesale business by continuing to increase its sales in food, drug and mass merchandising channels by (i) increasing revenues derived from existing customers through strong promotional activities and the aggressive introduction of new and innovative products; (ii) increasing shelf space in major retailers; (iii) leveraging the advertising and promotion of its major specialty

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brands, such as Osteo-Bi-Flex®, Carb Solutions®, Flex-a-min® and Knox®; and (iv) continuing to grow its private label revenue with new customers and timely product introductions. In addition, the Company continues to form new distribution alliances throughout the world for its products.

•

Increase Puritan's Pride Direct Response Sales.    The Company expects to continue to strengthen its leading position in the e-commerce/direct response business by: (i) improving automated picking and packing to fulfill sales order requests with greater speed and accuracy; (ii) increasing manufacturing capability to quickly introduce and deliver new products in response to customer demand; (iii) testing new and more frequent promotions to further improve response rates; and (iv) promoting its Internet web sites. The Company also intends to continue its strategy of acquiring the customer lists, brand names and inventory of other mail order companies which have similar or complementary products which the Company believes can be efficiently integrated into its own operations without adding substantial overhead expenses.



•

Increase Retail Sales in the U.S.    Over the last several years, the Company's strategy has focused on the development of a nationwide chain of retail stores in the United States. To that end, at September 30, 2004, the Company operated 557 Vitamin World® and Nutrition Warehouse® retail stores located in regional and outlet malls. The Company has added approximately 67 retail stores in the past three fiscal years, or approximately 12% of the total number of stores in operation at September 30, 2004. New stores historically do not have the same high customer traffic as more mature stores. During the fiscal year ended September 30, 2004 ("fiscal 2004"), the Company operated 24 more Vitamin World stores than in the fiscal year ended September 30, 2003. The Company plans, from time to time, to open new stores in the next fiscal year. In June 2000, the Company successfully introduced its Savings Passport Card, a customer loyalty program, which increases customer traffic and provides incentives to purchase at Vitamin World. It is an additional tool for the Company to track customer preferences and purchasing trends. At the end of fiscal 2004, there were approximately 5 million Savings Passport Card members.



•

Increase Retail Sales in the U.K., Ireland and Europe.    The Company continues its strategy of selectively expanding the number of its Holland & Barrett stores located throughout the U.K. At September 30, 2004, there were 484 Holland & Barrett® and 13 Nature's Way® stores operating in the U.K. and Ireland. In fiscal 2004, Nature's Way opened 1 new store and Holland & Barrett opened 10 new stores and converted 13 GNC retail stores to Holland & Barrett stores in the U.K. and Ireland. The Company projects that, during the next fiscal year, it will open 24 new retail stores in the U.K. and Ireland.

                                      At September 30, 2004, the Company operated 38 GNC retail stores in the U.K. and 67 De Tuinen retail stores in the Netherlands. The Company continues to evaluate opportunities to open additional GNC (UK) stores in the U.K. and De Tuinen stores in Europe.

        Introduce New Products.    The Company has consistently been among the first in the industry to introduce innovative products in response to new studies, research and consumer preferences. Given the changing nature of consumer demand for new products and the continued publicity about the importance of vitamins, minerals and nutritional supplements in the promotion of general health as well as the growing number of overweight consumers, management believes that NBTY will continue to maintain its core customer base and attract new customers based upon its ability to rapidly respond to consumer demand with high quality, value-oriented products.

        Enhance Vertical Integration.    The Company believes that its vertical integration gives it a significant competitive advantage by allowing it to: (i) maintain higher quality standards while lowering product costs, which can be passed on to the customer as lower prices; (ii) more quickly respond to scientific and popular reports and consumer buying trends; (iii) more effectively meet customer delivery schedules; (iv) reduce dependence upon outside suppliers; and (v) improve overall operating margins.

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The Company continually evaluates ways to further enhance its vertical integration by leveraging manufacturing, distribution, purchasing and marketing capabilities, and otherwise improving the efficiency of its operations.

        Build Infrastructure to Support Growth.    NBTY has technologically advanced, state-of-the-art manufacturing and production facilities, with total production capacity of approximately 36 billion tablets, capsules and softgels per year. During fiscal 2004, the Company decided to build a new distribution facility in Hazelton, Pennsylvania at a cost of approximately $21 million and began expansion of its softgel facility in Bayport, New York at a cost of approximately $23 million. The Company regularly evaluates its operations and makes investments in building infrastructure, as necessary, to support its continuing growth.

        Strategic Acquisitions.    In the normal course of its business, the Company seeks acquisition opportunities, both in the U.S. and internationally, of companies which complement or extend the Company's existing product lines, increase its market presence, expand its distribution channels, and/or are compatible with its business philosophy. In fiscal 2004, the Company investigated a number of acquisition opportunities throughout the world; however, these acquisition opportunities did not fit the Company's strategic plans and were therefore not consummated. Management continues to evaluate acquisition opportunities across the industry and around the world.

        Experienced Management Team.    The Company's management team has extensive experience in the nutritional supplement industry and has developed long-standing relationships with its suppliers and its customers. The executive officers of the Company have an average of approximately 21 years with the Company.

Operating Segments

        NBTY and its subsidiaries operate in the nutritional supplement industry, focusing their products and services on four segments of this industry: Wholesale, Direct Response, U.S. Retail and European Retail.

        The following table sets forth the percentage of net sales for each of the Company's operating segments:

        Further information about the financial results of each of these segments is found in Note 19 of the Notes to the Consolidated Financial Statements in this Report.

        Wholesale/Mass Marketing.    The Company markets its products under various brand names to many channels of distribution, including leading drug store chains and supermarkets, independent pharmacies, health food stores, health food store wholesalers and other retailers such as mass merchandisers. The Nature's Bounty® and Sundown® brands are sold to drug store chains, drug wholesalers, supermarket chains and wholesalers, as well as mass merchandisers. The Company also sells a full line of products to supermarket chains and wholesalers under the brand name Natural Wealth® at prices designed for the "price conscious" consumer. The Company also sells directly to

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health food stores under the brand name Good 'N Natural® and sells products, including a specialty line of vitamins, to health food wholesalers under the brand name American Health®. In addition, the Company operates Food Supplement Company ("FSC"), a wholesale distributor in Manchester, England. The Company has expanded sales of various products to many countries throughout Europe, Asia and Latin America.

        Direct Response.    The Company offers, through mail order and Internet e-commerce, a full line of vitamins and other nutritional supplement products as well as selected personal care items under its Puritan's Pride® brand names at prices which are generally at a discount from those of similar products sold in retail stores.

        Through its Puritan's Pride® brand, NBTY is the leader in the U.S. direct response nutritional supplement industry with more than 4 million customers on our customer list, and response rates which management believes to be above the industry average. NBTY intends to attract new customers in its direct response operation through aggressive marketing techniques both in the U.S. and the U.K., and through selective acquisitions.

        In order to maximize sales per catalog and reduce mailing and printing costs, the Company regularly updates its mail order list to include new customers and to eliminate those who have not placed an order within a designated period of time. In addition, in order to add new customers to its mailing lists and web sites and to increase average order sizes, the Company places advertisements in newspaper supplements and conducts insert programs with other mail order companies. The Company's use of state-of-the-art equipment in its direct response operations, such as computerized mailing, bar-coded addresses and automated picking and packing systems enables the Company to fill each order typically within 24 hours of its receipt. This equipment and expertise allows the Company to lower its per customer distribution costs, thereby enhancing margins and enabling the Company to offer its products at lower prices than its competitors.

        The Company's www.puritan.com and www.vitamins.com web sites provide a practical and convenient method for consumers wishing to purchase products that promote healthy living. Through these web sites, consumers have access to the full line of more than 1,500 products which are offered through the Company's Puritan's Pride® mail order catalog. Consumer orders are processed with the speed, economy and efficiency of the Company's automated picking and packing system.

        U.S. Retail.    At the end of fiscal 2004, the Company operated 557 retail stores located in 45 states, Guam, Puerto Rico and the Virgin Islands under the Vitamin World® and Nutrition Warehouse® names. Each location carries a full line of the Company's products under the Company's brand names as well as products manufactured by others. Through direct interaction between the Company's personnel and the public at these retail locations, the Company is able to identify buying trends, customer preferences or dislikes, acceptances of new products and price trends in various regions of the country. This information is useful in initiating sales programs and new product introductions for all divisions of the Company.

        In addition to www.puritan.com and www.vitamins.com, the Company also maintains another web site, www.vitaminworld.com, to accommodate customers who wish to purchase nutritional supplements on the Internet, or to find a conveniently located store to make purchases in person. This web site provides the consumer with information concerning the products offered in the Company's retail stores and an easy and effective way to purchase Vitamin World products through our e-commerce portal.

        European Retail.    The Company's European Retail sales are generated by Holland & Barrett and GNC in the U.K., Nature's Way in Ireland and De Tuinen in the Netherlands. Holland & Barrett is one of the leading nutritional supplement retailers in the U.K., with 484 locations in the U.K. at September 30, 2004. Holland & Barrett markets a broad line of nutritional supplement products, including vitamins, minerals and other nutritional supplements, as well as food products, including fruits

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and nuts, confectionery and other items. GNC (UK) operated 38 locations in the U.K. at September 30, 2004, specializing in the sale of vitamins, minerals and sports nutrition products. At September 30, 2004 there were 13 Nature's Way locations in Ireland selling a range of products similar to those offered by Holland & Barrett. With 67 locations in the Netherlands at September 30, 2004, De Tuinen is a leading retailer of health food products, selected confectionery, and lifestyle giftware. Nutritional supplement products manufactured by NBTY accounted for approximately 50% of European Retail's total sales in fiscal 2004.

        For additional information regarding financial information about the geographic areas in which the Company and its subsidiaries conduct their business, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to the Company's Consolidated Financial Statements contained in this Report.

Employees and Advertising

        As of September 30, 2004, the Company employed approximately 10,000 persons, including:

(i)

2,339 sales associates located throughout the U.S. in its Vitamin World® and Nutrition Warehouse® retail stores;



(ii)

2,515 manufacturing, shipping and packaging associates throughout the U.S.;



(iii)

861 associates in administration throughout the U.S.;



(iv)

206 associates who sell to NBTY's wholesale distributors and customers;



(v)

74 in-house advertising associates;



(vi)

3,323 associates in its Holland & Barrett operations, including:



(A)

2,903 retail associates,



(B)

249 associates in distribution, and



(C)

171 associates in administration;



(vii)

322 associates in its De Tuinen operations, including:



(A)

287 retail associates, and



(B)

35 associates in administration and warehousing;



(viii)

235 associates in GNC (UK) retail stores;



(ix)

72 associates in Nature's Way retail stores; and



(x)

24 associates in FSC wholesale administration, production and warehousing.

In addition, NBTY sells its products through commissioned sales representative organizations. The Company believes it has satisfactory employee and labor relations.

        For the fiscal years ended September 30, 2002, 2003 and 2004, NBTY spent approximately $48 million, $66 million and $85 million, respectively, on advertising and promotions, including print, media and cooperative advertising. A significant portion of the increased advertising relates to additional promotions at the Rexall Sundown, Inc. ("Rexall") operations, acquired by the Company in July 2003. NBTY creates its own advertising materials through its in-house staff of associates. In the U.K. and Ireland, both Holland & Barrett and Nature's Way have run advertisements on television and in national newspapers, and conducted sales promotions. GNC (UK) and De Tuinen also advertise in newspapers and conduct sales promotions. In addition, Holland & Barrett and De Tuinen each publish their own magazines with articles and promotional materials.

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Manufacturing, Distribution and Quality Control

        At September 30, 2004 the Company employed approximately 2,515 manufacturing, shipping and packaging associates throughout the United States. The Company's manufacturing activities are conducted in New York, California, Florida and New Jersey. All of the Company's manufacturing operations are subject to good manufacturing practice regulations ("GMPs") promulgated by the United States Food and Drug Administration ("FDA") and other applicable regulatory standards. The Company manufactures products for its four operating segments as well as for third parties. The Company believes that, generally, the capacity of its manufacturing and distribution facilities is adequate to meet the requirements of its current business and will be adequate to meet the requirements of anticipated increases in sales.

        The Company places special emphasis on quality control. All raw materials used in production are assigned a unique lot number and are initially held in quarantine, during which time the Company's laboratory chemists assay the raw materials for compliance with established specifications. Once released, samples are retained and the material is processed according to approved formulas by mixing, granulating, compressing, encapsulating and sometimes coating operations. After the tablet or capsule is manufactured, laboratory technicians test its weight, purity, potency, disintegration and dissolution. Generally, when products such as vitamin tablets are ready for bottling, the Company's automated equipment counts the tablets, inserts them into bottles, adds a tamper-resistant cap with an inner safety seal and affixes a label. The Company uses computer-generated documentation for picking and packing for order fulfillment.

        The Company's manufacturing operations are designed to allow low cost production of a wide variety of products of different quantities, sizes and packaging while maintaining a high level of customer service and quality. Flexible production line changeover capabilities and reduced cycle times allow the Company to respond quickly to changes in manufacturing schedules.

        Inventory Control.    The Company has installed inventory control systems at its facilities that enable it to track each product as it is received from its supply sources through manufacturing and shipment to its customers. To facilitate this tracking, a significant number of products sold by the Company are bar coded. The Company's inventory control systems report shipping, sales and individual SKU level inventory information. The Company manages the retail sales process by monitoring customer sales and inventory levels by product category. The Company believes that its distribution capabilities enable it to more flexibly respond to the delivery requirements of its customers.

        Information from the Company's point-of-sale computer system is regularly reviewed and analyzed by the purchasing staff to assist in making merchandise allocation and markdown decisions. The Company uses an automated reorder system to maintain in-stock positions on key items. These systems provide management with the information needed to determine the proper timing and quantity of reorders.

        Financial Reporting.    The Company's financial reporting systems provide management with detailed financial reporting to support management's operating decisions and cost control efforts. These systems provide functions such as scheduling of payments, receiving of payments, general ledger interface, vendor tracking and flexible reporting options.

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Research and Development

        In the last three fiscal years, the Company did not expend material amounts for research and development of new products.

Competition; Customers

        The market for nutritional supplement products is highly competitive. Competition is based primarily on price, quality and assortment of products, customer service, marketing support, and availability of new products. The Company believes it competes favorably in all of these areas.

        The Company's direct competition consists primarily of publicly and privately owned companies, which tend to be highly fragmented in terms of both geographical market coverage and product categories. The Company also competes with companies which may have broader product lines and/or larger sales volumes. The Company's products also compete with nationally advertised brand name products. Most of the national brand companies have resources greater than those of the Company.

        There are numerous companies in the vitamin and nutritional supplement industry selling products to retailers, including mass merchandisers, drug store chains, independent drug stores, supermarkets and health food stores. Many companies within the industry are privately held. Therefore, the Company is unable to precisely assess the size of all of its competitors or where the Company ranks in comparison to such privately held competitors with respect to sales to retailers.

        Two customers of the wholesale division represented, individually, more than 10% of this division's sales in fiscal 2004, and one of these customers accounted for 12% of the Company's accounts receivable at September 30, 2004. Another customer accounted for 11% of the Company's accounts receivable at September 30, 2004. Management believes that the loss of one or more of these customers could have a material adverse effect on the Company's consolidated financial position or results of operations if the Company is unable to replace such customer(s).

Government Regulation

        United States.    The formulation, manufacturing, packaging, labeling, advertising, distribution and sale of NBTY's products are subject to regulation by federal agencies, including the FDA, the Federal Trade Commission ("FTC"), the Postal Service, the Consumer Product Safety Commission, the Department of Agriculture, the Environmental Protection Agency, and also by various agencies of the states, localities and foreign countries in which NBTY's products are sold. In particular, the FDA, pursuant to the Federal Food, Drug, and Cosmetic Act ("FDCA"), regulates the formulation, manufacturing, packaging, labeling, distribution and sale of dietary supplements, including vitamins, minerals and herbs, and of over-the-counter ("OTC") drugs, while the FTC regulates the advertising of these products, and the Postal Service regulates advertising claims with respect to such products sold by mail order.

        The FDCA has been amended several times with respect to dietary supplements, in particular by the Dietary Supplement Health and Education Act of 1994 ("DSHEA"). DSHEA established a new framework governing the composition and labeling of dietary supplements. With respect to composition, DSHEA defined "dietary supplements" as vitamins, minerals, herbs, other botanicals, amino acids and other dietary substances for human use to supplement the diet, as well as concentrates, constituents, extracts or combinations of such dietary ingredients. Generally, under DSHEA, dietary ingredients that were on the market before October 15, 1994 may be used in dietary supplements without notifying the FDA. However, a "new" dietary ingredient (i.e., a dietary ingredient that was "not marketed in the United States before October 15, 1994") must be the subject of a new dietary ingredient notification submitted to the FDA unless the ingredient has been "present in the food supply as an article used for food" without being "chemically altered." A new dietary ingredient

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notification must provide the FDA evidence of a "history of use or other evidence of safety" establishing that use of the dietary ingredient "will reasonably be expected to be safe." A new dietary ingredient notification must be submitted to the FDA at least 75 days before the initial marketing of the new dietary ingredient. There can be no assurance that the FDA will accept the evidence of safety for any new dietary ingredients that the Company may want to market, and the FDA's refusal to accept such evidence could prevent the marketing of such dietary ingredients.

        DSHEA permits "statements of nutritional support" to be included in labeling for dietary supplements without FDA pre-approval. Such statements may describe how a particular dietary ingredient affects the structure, function or general well-being of the body, or the mechanism of action by which a dietary ingredient may affect body structure, function or well-being (but may not state that a dietary supplement will diagnose, cure, mitigate, treat, or prevent a disease unless such claim has been reviewed and approved by the FDA). A company that uses a statement of nutritional support in labeling must possess evidence substantiating that the statement is truthful and not misleading. In some circumstances, it is necessary to disclose on the label that the FDA has not "evaluated" the statement, to disclose the product is not intended for use for a disease, and to notify the FDA about the Company's use of the statement within 30 days of marketing the product. However, there can be no assurance that the FDA will not determine that a particular statement of nutritional support that a company wants to use is an unacceptable claim or an unauthorized version of a "health claim." Such a determination might prevent a company from using the claim.

        In addition, DSHEA provides that certain so-called "third party literature," e.g., a reprint of a peer-reviewed scientific publication linking a particular dietary ingredient with health benefits, may be used "in connection with the sale of a dietary supplement to consumers" without the literature being subject to regulation as labeling. Such literature must not be false or misleading; the literature may not "promote" a particular manufacturer or brand of dietary supplement; and a balanced view of the available scientific information on the subject matter must be presented. There can be no assurance, however, that all third party literature that NBTY would like to disseminate in connection with its products will satisfy each of these requirements, and failure to satisfy all requirements could prevent use of the literature or subject the product involved to regulation as an unapproved drug.

        As authorized by DSHEA, the FDA recently proposed GMPs specifically for dietary supplements. These new GMP regulations, if finalized, would be more detailed than the GMPs that currently apply to dietary supplements and may, among other things, require dietary supplements to be prepared, packaged and held in compliance with certain rules, and might require quality control provisions similar to those in the GMP regulations for drugs. There can be no assurance that, if the FDA adopts GMP regulations for dietary supplements, NBTY will be able to comply with the new rules without incurring substantial expense.

        The FDA generally prohibits the use in labeling for a dietary supplement of any "health claim" (that is not authorized as a "statement of nutritional support" permitted by DSHEA) unless the claim is pre-approved by the FDA. There can be no assurance that some of the labeling statements that NBTY would like to use will not be deemed by the FDA to be "unauthorized health or disease claims" that are not permitted to be used.

        Although the regulation of dietary supplements is in some respects less restrictive than the regulation of drugs, there can be no assurance that dietary supplements will continue to be subject to less restrictive regulation. The FDA regulates the formulation, manufacturing, packaging, labeling and distribution of over-the-counter ("OTC") drug products pursuant to a "monograph" system that specifies active drug ingredients that are generally recognized as safe and effective for particular uses. If an OTC drug is not in compliance with the applicable FDA monograph, the product generally cannot be sold without first obtaining the FDA approval of a new drug application, a long and expensive procedure. There can be no assurance that, if more stringent statutes are enacted for dietary

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supplements, or if more stringent regulations are promulgated, NBTY will be able to comply with such statutes or regulations without incurring substantial expense.

        The FDA has broad authority to enforce the provisions of the FDCA applicable to dietary supplements and OTC drugs, including powers to issue a public "warning letter" to a company, to publicize information about illegal products, to request a voluntary recall of illegal products from the market, and to request the Department of Justice to initiate a seizure action, an injunction action, or a criminal prosecution in the United States courts.

        The FTC exercises jurisdiction over the advertising of dietary supplements. In recent years, the FTC has instituted numerous enforcement actions against dietary supplement companies for failure to adequately substantiate claims made in advertising or for the use of false or misleading advertising claims. These enforcement actions have often resulted in consent decrees and the payment of civil penalties and/or restitution by the companies involved. Each of NBTY and Rexall are currently subject to FTC consent decrees resulting from past advertising claims for certain of their respective products. As a result, we are required to maintain compliance with these decrees and are subject to an injunction and substantial civil monetary penalties if there should be any failure to comply. Further, the U.S. Postal Service has issued cease and desist orders against certain mail order advertising claims made by dietary supplement manufacturers including NBTY, and NBTY is required to maintain compliance with the order applicable to it, subject to civil monetary penalties for any noncompliance. Violations of these orders could result in substantial monetary penalties. Civil penalty actions could have a material adverse effect on NBTY's consolidated financial position or results of operations.

        In June 2003, the Company received a letter of inquiry from the FTC concerning the Company's marketing of a certain weight loss product, as well as the marketing of Royal Tongan Limu dietary supplement by a subsidiary of the Company, Dynamic Essentials (DE), Inc. ("DEI"). Subsequent to the receipt of this letter, the Company voluntarily stopped all sales and promotions of the weight loss product in question and of Royal Tongan Limu. The Company also ceased all DEI operations and terminated all DEI employees. The Company has had follow-up meetings and correspondence with the FTC with respect to these products. In November 2004, FTC Staff indicated that they were likely to recommend to the FTC Commissioners that a civil penalty action should be brought. At this time, it is not possible to determine what the final outcome or amount of any claim that the FTC might file would be. Therefore, the materiality of this inquiry cannot be accurately ascertained at this time.

        In March 2003 the Company ceased selling products that contain ephedra. Though the Company continues to believe that the ephedra products it sold are safe to use as directed, the adverse publicity surrounding ephedra products and the regulatory environment in the U.S. led management to the decision to cease selling ephedra products, in the best interests of the Company and its shareholders. Overall, sales of ephedra products represented an insignificant portion of the Company's business. Subsequent to the decision to cease selling ephedra products, the Company was named as a defendant or a third-party defendant in several actions, alleging liability (under various theories, including negligence, false advertising, strict liability in tort and failure to warn) as well as personal injury with respect to the Company's sales, manufacturing and distribution of products containing ephedra. The Company has notified its insurance carriers and third party vendors with regard to each suit and vigorously contests the allegations in these actions. The Company did not acquire any ephedra assets, liabilities or operations in connection with its purchase of Rexall. All such operations were retained by Royal Numico N.V., the prior owner of Rexall. The FDA issued a final regulation on February 11, 2004 prohibiting the sale of ephedra based on the FDA's safety concerns. This final regulation has been challenged in two separate third party lawsuits, which are pending at this time.

        NBTY is also subject to regulation under various state, local, and international laws that include provisions governing, among other things, the formulation, manufacturing, packaging, labeling, advertising and distribution of dietary supplements and OTC drugs. Government regulations in foreign

10

countries may prevent or delay the introduction, or require the reformulation, of certain of NBTY's products. Compliance with such foreign governmental regulations is generally the responsibility of NBTY's distributors in those countries. These distributors are independent contractors whom the Company does not control.

        In addition, from time to time in the future, NBTY may become subject to additional laws or regulations administered by the FDA or by other federal, state, local or foreign regulatory authorities, to the repeal of laws or regulations that the Company considers favorable, such as DSHEA, or to more stringent interpretations of current laws or regulations. The Company is not able to predict the nature of such future laws, regulations, repeals or interpretations, and it cannot predict what effect additional governmental regulation, when and if it occurs, would have on its business in the future. Such developments could, however, require reformulation of certain products to meet new standards, recalls or discontinuance of certain products not able to be reformulated, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling, additional scientific substantiation, additional personnel, or other new requirements. Any such developments could have a material adverse effect on NBTY.

        United Kingdom.    In the United Kingdom, the two main pieces of legislation that affect the operations of Holland & Barrett and GNC (UK) are the Medicines Act 1968, which regulates the licensing and sale of medicines, and the Food Safety Act 1990, which provides for the safety of food products. A large volume of secondary legislation in the form of Statutory Instruments adds detail to the main provisions of the above Acts.

        In the U.K. regulatory system, a product intended to be taken orally will fall within either the category of food or the category of medicine. There is currently no special category of dietary supplement as provided for in the U.S. by DSHEA. Some products which are intended to be applied externally, for example creams and ointments, may be classified as medicines and others as cosmetics.

        The Medicines and Healthcare products Regulatory Agency ("MHRA") now has responsibility for the implementation and enforcement of the Medicines Act, and is the licensing authority for medicinal products. The MHRA directly employs enforcement officers from a wide range of backgrounds, including the police, and with a wide range of skills, including information technology. The MHRA is an Executive Agency of the Department of Health. The MHRA decides whether a product is a medicine or not and, if so, considers whether it can be licensed. It determines the status of a product by considering whether it is medicinal by "presentation" or by "function". Many, though not all, herbal remedies are considered "medicinal" by virtue of these two tests.

        The Food Standards Agency ("FSA") deals with legislation, policy and oversight of food products, with enforcement action in most situations being handled by local authority Trading Standards Officers. The FSA answers primarily to Ministers at the Department of Health and the Department of Environment Food and Rural Affairs. Most vitamin and mineral supplements, and some products with herbal ingredients, are considered to be food supplements and fall under general food law which requires them to be safe.

        In July 2002, the European Union ("EU") published in its Official Journal the final text of a Food Supplements Directive which became effective in the EU on that date, and which sets out a process and timetable by which the Member States of Europe must bring their domestic legislation in line with its provisions. It seeks to harmonize the regulation of the composition, labeling and marketing of food supplements (at this stage only vitamins and minerals) throughout the EU. It does this by specifying what nutrients and nutrient sources may be used (and by interpretation the rest which may not), the level at which those nutrients may be present in a supplement, and the labeling and other information which must be provided on packaging.

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        By harmonizing the legislation, the Food Supplements Directive should provide opportunities for businesses to market one product or a range of products to a larger number of potential customers without having to reformulate or repackage it. This development may lead to some liberalizing of the more restrictive regimes in France and Germany, providing new business opportunities. Conversely, however, it may substantially limit the range of nutrients and nutrient sources, and the potencies at which some nutrients may be marketed by the Company in the more liberal countries, such as the U.K., which may lead to some reformulation costs and loss of some specialty products.

        The provisions of the Food Supplements Directive were incorporated into U.K. domestic law by Statutory Instrument in July 2003. The first phase of compliance relates to the composition of food supplements and must be attained by August 2005. While the Company currently believes that it will timely comply with this Directive, there can be no assurances that it will be able to do so without incurring substantial expense.

        On April 30, 2004 the EU published the Traditional Herbal Medicinal Products Directive ("THMPD") which requires traditional herbal medicine to be registered in each Member State in which they are intended to be marketed. A registration will require a product to be manufactured to pharmaceutical GMP standards, however there is no need to demonstrate efficacy, provided that the product is safe, is manufactured to high standards, and has been on the market for 30 years. The THMPD is intended to provide a safe home in EU law for a number of categories of herbal remedies, which may otherwise be found to fall outside EU law. It does not, however, provide a mechanism for new product development, and would entail some compliance costs in registering the many herbal products already on the market. Member States have to put into place the provisions for national compliance by October 2005. This is the anticipated date at which Traditional Herbal Medicinal products can be registered. A transitional period of seven years has been granted to allow all relevant products to be registered. Full compliance is required by April 2011. While the Company currently believes that it will timely comply with this Directive, there can be no assurances that it will be able to do so without incurring substantial expense.

        Additional EU legislation is being developed for sports nutrition products, fortified foods and to permit, but closely regulate, nutrition and health claims. There are also anticipated changes to existing legislation to further regulate medicines, which will apply to Traditional Herbal Medicinal products and for the composition, labeling and marketing of food products.

        The EU has established a European Food Safety Authority, which will have an important role to play in focusing attention on food standards in Europe. Its Executive Director is Mr. Geoffrey Podger, who until 2003 was the Chief Executive of the U.K.'s Food Standards Agency.

        Ireland.    The legislative and regulatory situation in the Republic of Ireland is similar, but not identical to that in the U.K.

        The Irish Medicines Board has a similar role to that of the U.K.'s MHRA and the Food Safety Authority of Ireland is analogous to the U.K.'s FSA.

        Like the U.K., Ireland will be required to bring its domestic legislation into line with the provisions of the Food Supplements Directive and the THMPD when the latter is finalized, and, indeed, with the other forthcoming EU legislation mentioned above. Thus the market prospects for Ireland are, in general, similar to those outlined in the U.K.

        Holland.    The regulatory environment in Holland is similar to the U.K. in terms of availability of products. Holland currently has the same liberal market, with no restrictions on potency of nutrients. Licensed herbal medicines are available. However, there are some herbal medicines which are sold freely as in the U.K. without the need to be licensed, depending on the claims made for them. Holland is also more liberal regarding certain substances, for which unlicensed sales are allowed. The Government department dealing with this sector is the Ministry for Health, Welfare and Sport.

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        Responsibility for food safety falls to the Keuringsdienst van Waren (Inspectorate for Health Protection and Veterinary Public Health). This authority deals with all nutritional products. The Medicines Evaluation Board, which is the equivalent of the U.K.'s MHRA, is charged with the responsibility for the safety of medicines which are regulated under the Supply of Medicines Act.

        The overall market prospects for Holland are, in general, similar to those outlined for the U.K. above.

International Operations

        In addition to the U.K., Ireland and Holland, the Company markets its nutritional supplement products through distributors, retailers and direct mail in more than 85 countries throughout Europe, North America, South America, Asia, the Pacific Rim countries, Africa and the Caribbean Islands.

        The Company's international operations are conducted in a manner to conform to local variations, economic realities, market customs, consumer habits and regulatory environments. The Company's products (including labeling of such products) and the distribution and marketing programs of the Company are modified in response to local and foreign legal requirements and customer preferences.

        The Company's international operations are subject to many of the same risks faced by the Company's domestic operations. These include competition and the strength of the relevant economy. In addition, international operations are subject to certain risks inherent in conducting business abroad, including foreign regulatory restrictions, fluctuations in monetary exchange rates, import-export controls and the economic and political policies of foreign governments. The importance of these risks increases as the Company's international operations grow and expand. Virtually all of the Company's international operations are affected by foreign currency fluctuations, and, more particularly, changes in the value of the British Pound and the Euro as compared to the U.S. Dollar.

        For additional information regarding financial information about the geographic areas in which the Company and its subsidiaries conduct their business, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to the Company's Consolidated Financial Statements contained in this Report.

Trademarks

        U.S.    The Company and its subsidiaries have applied for or registered more than 2,100 trademarks with the United States Patent and Trademark Office and many other major jurisdictions throughout the world for its Nature's Bounty®, Holland & Barrett®, Good 'N Natural®, American Health®, Puritan's Pride®, Vitamin World®, Natural Wealth®, Nutrition Headquarters®, Rexall®, Sundown®, MET-Rx®, Worldwide Sport Nutrition® and Nutrition Warehouse® trademarks, among others, and has rights to use other names essential to its business. Federally registered trademarks have a perpetual life, as long as they are maintained and renewed on a timely basis and used properly as trademarks, subject to the rights of third parties to seek cancellation of the trademarks if they claim priority or confusion of usage. The Company regards its trademarks and other proprietary rights as valuable assets and believes they have significant value in the marketing of its products. The Company vigorously protects its trademarks against infringement.

        U.K./Ireland.    Holland & Barrett owns trademarks registered in the United Kingdom and/or throughout the European Community for its Holland & Barrett and Nature's Way trademarks and has rights to use other names essential to its business. Holland & Barrett is the exclusive licensee of the trademarks essential to the GNC (UK) business in the U.K.

        Holland.    De Tuinen owns trademarks registered in Holland and/or throughout the European Community for its DeTuinen trademarks and has rights to use other names essential to its business.

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Raw Materials

        In fiscal 2004, the Company spent approximately $400 million on raw materials. The principal raw materials required in the Company's operations are vitamins, minerals, herbs, gel caps, and bottling materials. The Company purchases the majority of its vitamins, minerals and herbs from bulk manufacturers and distributors in the United States, Japan, China and Europe. The Company believes that there are adequate sources of supply for all of its principal raw materials. The Company also believes that its strong relationships with its suppliers yield improved quality, pricing and overall service to its customers. Although there can be no assurance that the Company's sources of supply for its principal raw materials will be adequate in all circumstances, in the event that such sources are not adequate, the Company believes that alternate sources can be developed in a timely and cost effective manner. During fiscal 2004, no one supplier accounted for more than 10% of the Company's raw material purchases. The Company does not believe that the loss of any single supplier would have a material adverse effect on the Company's consolidated financial condition or results of operations.

Seasonality

        Although the Company believes that its business is not seasonal in nature, historically, the Company has experienced, and expects to continue to experience, a substantial variation in its net sales and operating results from quarter to quarter. The Company believes that the factors which influence this variability of quarterly results include general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements, the timing of the Company's introduction of new products, the level of consumer acceptance of each new product, the seasonality of the markets in which the Company participates, and actions of competitors. Accordingly, a comparison of the Company's results of operations from consecutive periods is not necessarily meaningful, and the Company's results of operations for any period are not necessarily indicative of future performance. Additionally, the Company may experience higher net sales in a quarter depending upon when it has engaged in significant promotional activities.

Item 2.    PROPERTIES

        U.S.    At September 30, 2004, the Company owned a total of approximately 1.9 million square feet of plant and administrative facilities. The Company also leased approximately 1.3 million square feet of administrative, manufacturing, warehouse and distribution space in various locations at the end of fiscal 2004. At September 30, 2004, the Company leased and operated approximately 557 retail locations under the names Vitamin World® and Nutrition Warehouse® in 45 states in the U.S., Guam, Puerto Rico and the Virgin Islands. Generally, the Company leases the properties for three to ten years at varying annual base rents and percentage rents in the event sales exceed a specified amount. The Vitamin World and Nutrition Warehouse retail stores have an average selling area of approximately 930 square feet.

        U.K./Ireland.    Holland & Barrett owns a 281,000 square foot administrative, manufacturing and distribution facility (which includes a 65,000 square foot mezzanine) in Burton. Holland & Barrett leases all but four of its 532 Holland & Barrett, GNC (UK), and Nature's Way retail stores for terms varying between 10 and 35 years at varying annual base rents. Nine Holland & Barrett stores are subject to percentage rents in the event sales exceed a specified amount. Holland & Barrett stores each have an average selling area of approximately 945 square feet; Nature's Way Stores each have an average selling area of approximately 510 square feet; and the GNC (UK) stores have an average selling area of approximately 970 square feet.

        Holland.    In 2003, De Tuinen leased a 71,400 square foot administrative and distribution facility in Beverwijk. De Tuinen leases locations for 67 retail stores on renewable 5 year terms at varying annual

14

base rents. Of these, 44 are operated as company stores; the remaining 23 are sub-leased to, and operated by, franchisees. None of De Tuinen's stores are subject to percentage rents.

        The following is a listing of all material properties (excluding retail locations and de minimis sales office locations) owned or leased by the Company, which are used in all four of the Company's business segments:

15

(1)

The property is subject to a first mortgage. For additional information regarding the mortgage, see the Company's Consolidated Financial Statements contained in this Report.

Warehousing and Distribution

        The Company has dedicated approximately 3 million square feet to warehousing and distribution in its Long Island, NY; Carbondale, IL; Reno, NV; Anaheim, CA; Thornton, CO; South Plainfield, NJ; Boca Raton, FL; Sparks, NV; Harrisburg, PA; Burton and Radcliffe, U.K.; and Beverwijk, Holland facilities.

        The Company's warehouse and distribution centers are integrated with the Company's order entry systems to enable the Company to ship out mail orders typically within 24 hours of their receipt. Once a customer's telephone, mail or Internet order is completed, the Company's computer system forwards the order to its distribution center, where all necessary distribution and shipping documents are printed to facilitate processing. Thereafter, the orders are prepared, picked, packed and shipped continually throughout the day. The Company operates a proprietary, state-of-the-art, automated picking and packing system for frequently shipped items. The Company is capable of fulfilling 15,000 orders daily. A system of conveyors automatically routes boxes carrying merchandise throughout the distribution center for fulfillment of orders. Completed orders are bar-coded and scanned and the merchandise and ship date are verified and entered automatically into the customer order file for access by sales associates prior to being shipped. The Company currently ships its U.S. orders primarily through the United Parcel Service, Inc. (UPS), serving domestic and international markets. Holland & Barrett and GNC (UK) use Parcelforce and ANC for deliveries in the U.K., and Nature's Way uses the Irish postal service for deliveries in Ireland.

        The Company currently distributes its products from its distribution centers through Company-owned trucks, as well as contract and common carriers in the U.S. and the Netherlands and by Company-owned trucks in the U.K. Deliveries are made directly to the Vitamin World® and Nutrition Warehouse® stores once per week. In addition, the Company ships products overseas by container loads. The Company also operates additional distribution centers in Burton, U.K. and Beverwijk, Holland. Deliveries are made directly to Company owned and operated Holland & Barrett, GNC (UK), Nature's Way, and De Tuinen stores once or twice per week, depending on each store's inventory requirements.

        All of the Company's properties are covered by all-risk and liability insurance, which the Company believes is customary for the industry.

        Management believes that these properties, taken as a whole, are generally well-maintained, and are adequate for current and reasonably foreseeable business needs. Management also believes that substantially all of the Company's properties are being utilized to a significant degree.

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Item 3.    LEGAL PROCEEDINGS

Pseudoephedrine Products

        The Company reached an agreement in July 2004 with the U.S. Drug Enforcement Administration to settle issues related to alleged record keeping and reporting violations of the Controlled Substances Act in sales (now discontinued) of over-the-counter antihistamine and decongestant products containing pseudoephedrine. The Company agreed to pay $950,000 to the United States without any admission of wrongdoing.

Prohormone Products

New York Action

        On July 25, 2002, a putative class action lawsuit was filed against Vitamin World, Inc., alleging that Vitamin World engaged in deceptive trade practices and false advertising with respect to the sale of certain prohormone supplements and that plaintiffs were therefore entitled to equitable and monetary relief pursuant to the New York General Business Law. Similar complaints were filed against other companies in the vitamin and nutritional supplement industry. The Court has not yet certified a class and the matter is currently in discovery. The Company has defended vigorously this action. Because this matter is still in the early stages of discovery, no determination can be made at this time as to its final outcome, nor can its materiality be accurately ascertained.

California Action

        On July 25, 2002, a putative consumer class action was filed in California state court against Met-Rx Substrate Technology, Inc., a subsidiary of Rexall, claiming that the advertising and marketing of certain prohormone supplements were false and misleading, or alternatively, that the prohormone products contained ingredients that were controlled substances under California law. Plaintiffs seek equitable and monetary relief. On June 18, 2004, this case was coordinated with several other cases brought against other companies relating to the sale of products containing androstenediol, one of the prohormones contained in the Met-Rx products. The coordinated proceedings have recently been assigned to a coordination judge for further proceedings. No trial date has been set, and the Court has not yet certified a class. The Company has defended vigorously against the claims asserted. Because this action is in its early stages, no determination can be made at this time as to its final outcome, nor can its materiality be accurately ascertained.

New Jersey Action

        In March 2004, a putative class action lawsuit was filed in New Jersey against Met-Rx Substrate Technology, Inc., claiming that the advertising and marketing of certain prohormone supplements were false and misleading and that plaintiff and the putative class of New Jersey purchasers of these products were entitled to damages and injunctive relief. Because these allegations are virtually identical to allegations made in a putative nationwide class action previously filed in California, the Company moved to dismiss or stay the New Jersey action pending the outcome of the California action. The motion was granted, and the New Jersey action is stayed at this time.

Florida Action

        In July 2002, a putative class action lawsuit was filed in Florida against MET-Rx USA, Inc., a subsidiary of Rexall, claiming that the advertising and marketing of certain prohormone supplements were false and misleading, that the products were ineffective, and alternatively, that the products were anabolic steroids whose sale violated Florida law. The Company has moved to dismiss the complaint for failure to state a cause of action. This case has been largely inactive since its filing. Plaintiff seeks equitable and monetary relief. Because this action is in its early stages, no determination can be made at this time as to its final outcome, nor can its materiality be accurately ascertained.

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Nutrition Bars

        Rexall and certain of its subsidiaries are defendants in a class-action lawsuit brought in 2002 on behalf of all California consumers who bought various nutrition bars. Plaintiffs allege misbranding of nutrition bars and violations of California unfair competition statues, misleading advertising and other similar causes of action. Plaintiffs seek restitution, legal fees and injunctive relief.

        The Company has defended vigorously this action. The case is currently set for trial on January 25, 2005. Based upon the information available at this time, the Company believes that its accrual is adequate for the exposure in the nutrition bar litigation. However, no determination can be made at this time as to the final outcome of this case, nor can its materiality be accurately ascertained.

Shareholder Litigation

        During the period from June 24, 2004 through September 3, 2004, six separate shareholder class actions were filed against the Company and certain of its officers and directors in the U.S. District Court for the Eastern District of New York, ("Eastern District") on behalf of shareholders who purchased shares of the Company's common stock between February 9, 2004 and July 22, 2004 (the potential "Class Period"). The actions allege that the Company failed to disclose material facts during the Class Period that resulted in a decline in the price of the Company's stock after June 16, 2004 and July 22, 2004, respectively. These actions are stayed pending the Court's decision on the unopposed motions, filed in August 2004, to consolidate the six class actions and to appoint lead plaintiffs and lead counsel for the plaintiffs. The Company, officers and directors intend to file a motion to dismiss the actions once consolidated.

        In addition to the shareholder class actions, two shareholder derivative actions were filed in the Eastern District, on July 9, 2004 and August 26, 2004, respectively, against certain officers and directors of the Company, with the Company named as a nominal defendant. The two derivative actions, which have been consolidated, are predicated upon the allegations set forth in the shareholder class actions and allege improper sales of Company shares by certain officers and directors. A motion to dismiss, or alternatively, to stay the derivative actions, was filed on October 18, 2004 and is pending.

        An additional shareholder derivative action was filed on October 7, 2004 in the Supreme Court of the State of New York, Suffolk County, alleging breaches of fiduciary duties by individual directors and officers of the Company, with the Company named as a nominal defendant. The derivative claims are predicated upon the same allegations as in the Eastern District consolidated derivative action and upon claims arising from the acquisition by the Company of Rexall in July 2003. The Company, and its named officers and directors intend to file a motion to dismiss or stay the New York derivative action.

        Also, a purported shareholder of the Company recently delivered a demand that the Board of Directors of the Company commence a civil action against certain officers and directors of the Company based on certain of the allegations described above.

        Because these matters are in their early stages of development, it is too early to predict the likely outcome of the proceedings. The Company and the named officers and directors intend to defend vigorously these actions. Given the early stages of the proceedings, however, no determination can be made at this time as to the final outcome. The Company maintains policies of directors' and officers' professional liability insurance.

        In addition to the foregoing, other regulatory inquiries, claims, suits and complaints (including product liability claims) arise in the ordinary course of the Company's business. See Item 1, "Government Regulation" for a discussion of these matters, including a discussion of a potential civil action that the FTC staff may recommend to the FTC Commissioners relating to a weight loss product and to the marketing of Royal Tongan Limu by one of the Company's subsidiaries. The Company believes that such other inquiries, claims, suits and complaints would not have a material adverse effect on the Company's consolidated financial condition or results of operations, if adversely determined against the Company.

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

        None.

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PART II

Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

DIVIDEND POLICY

        Since its incorporation in 1979, the Company has not paid any cash dividends on its Common Stock. On April 24, 1992, the Company effected a two-for-one stock split in the form of a 100% stock dividend to stockholders of record on May 8, 1992. On September 25, 1992, the Company effected a three-for-one stock split in the form of a 200% stock dividend to stockholders of record on November 2, 1992. On August 3, 1993, the Company effected a two-for-one stock split in the form of a 100% stock dividend to stockholders of record on August 13, 1993. In addition, in March 1998, the Company effected a three-for-one stock split in the form of a 200% stock dividend.

        Future determination as to the payment of cash or stock dividends will depend upon the Company's results of operations, financial condition, capital requirements, restrictions contained in the Company's Credit Agreement and Guarantee and Collateral Agreement (collectively, the "CGA"), limitations contained in the indenture governing the 8⁵/8% Senior Subordinated Notes due 2007 of the Company, and such other factors as the Company's Board of Directors considers appropriate.

        The CGA prohibits the Company from paying dividends or making any other distributions (other than dividends payable solely in shares of the Company's common stock) to its stockholders. The Company's Indenture governing its 8⁵/8% Senior Subordinated Notes due 2007 similarly prohibits the Company from paying dividends or making any other distributions to its stockholders. In addition, except as specifically permitted in the CGA, the CGA does not allow the Company's subsidiaries to advance or loan money to, or make a capital contribution to or invest in, the Company. Furthermore, except as expressly permitted in the Indenture, the Company's subsidiaries are not permitted to invest in the Company. However, the CGA and the Indenture do permit the Company's subsidiaries to pay dividends to the Company.

        For additional information regarding these lending arrangements and securities, see Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and the Notes to the Consolidated Financial Statements contained in this Report.

PRICE RANGE OF COMMON STOCK

        Since September 19, 2003, the Common Stock has traded on the New York Stock Exchange (the "NYSE") under the trading symbol "NTY". Prior to that date, the Common Stock was included for quotation on the National Association of Securities Dealers National Market System ("NASDAQ/NMS") under the trading symbol "NBTY". The following table sets forth, for the periods indicated, the high and low sale prices for the Common Stock, as reported on NASDAQ/NMS until September 19, 2003 and thereafter on the NYSE.

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        On November 30, 2004, there were approximately 634 record holders of Common Stock. The Company believes that there were approximately 31,375 beneficial holders of Common Stock as of November 30, 2004.

        As required by applicable NYSE listing rules, on May 12, 2004, following the Company's 2004 Annual Meeting of Stockholders, the Company's Chairman and Chief Executive Officer submitted to the New York Stock Exchange a certification that he was not aware of any violation by the Company of NYSE corporate governance listing standards.

        For additional information regarding the Company's securities authorized for issuance under the Company's equity compensation plans, see Item 12, "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" in this Report.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY
COMPENSATION PLANS

        The following table summarizes the Company's equity compensation plans as of September 30, 2004.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATED PURCHASERS

        During fiscal 2004, the Company did not repurchase any of its shares, directly or through an affiliated purchaser (as that term is defined in Exchange Act Rule 10b-18).

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Item 6.    SELECTED FINANCIAL DATA

        The following table sets forth the selected financial data derived from the audited financial statements of the Company. For additional information, see the consolidated financial statements of the Company and the notes thereto. The selected historical financial data of the Company should also be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Report.

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

        Readers are cautioned that certain statements contained herein are forward-looking statements and should be read in conjunction with the Company's disclosures under the heading "Forward Looking Statements" on page 1. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. This discussion should also be read in conjunction with the Notes to the Company's Consolidated Financial Statements contained in this Report. Dollar amounts are in thousands, unless otherwise noted.

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Background

        NBTY is a leading vertically integrated U.S. manufacturer and distributor of a broad line of high-quality, value-priced nutritional supplements in the United States and throughout the world. Under a number of the Company's and third party brands, the Company offers over 19,000 products, including vitamins, minerals, herbs, sport nutrition products, diet aids and other nutritional supplements. The Company's well recognized brands include Nature's Bounty®, Vitamin World®, Puritan's Pride®, Holland & Barrett®, Rexall®, Sundown®, Carb Solutions®, MET-Rx®, WORLDWIDE Sport Nutrition®, GNC (UK)®, DeTuinen®, CarbWise™ and American Health®. The Company has continued to grow through its marketing practices and through a series of strategic acquisitions. Since 1986, the Company has acquired and integrated approximately 34 companies and/or businesses engaged in the manufacturing, retail and direct response sale of nutritional supplements, including:

•

Fiscal 1997: Holland & Barrett;



•

Fiscal 1998: Nutrition Headquarters Group;



•

Fiscal 2000: Nutrition Warehouse Group;



•

Fiscal 2001: Global Health Sciences (the "Global Group"), NatureSmart and Nature's Way;



•

Fiscal 2002: Healthcentral.com, Knox NutraJoint®, and Synergy Plus® product lines/operations; and



•

Fiscal 2003: Rexall Sundown Inc., Health and Diet Group Ltd. ("GNC (UK)") and FSC Wholesale, and the DeTuinen chain of retail stores.

        NBTY markets its products through four distribution channels: (i) Wholesale: wholesale distribution to drug store chains, supermarkets, mass market retailers, independent pharmacies, and health food stores, (ii) U.S. Retail: Vitamin World and Nutrition Warehouse retail stores in the U.S., (iii) European Retail: Holland & Barrett, Nature's Way, GNC (UK), and DeTuinen retail stores in the U.K., Ireland, and the Netherlands, and (iv) Direct Response: Puritan's Pride sales via catalogs and Internet. During the fiscal year ended September 30, 2004, Vitamin World opened 34 new stores, closed 10 stores and at September 30, 2004 operated 557 stores. During the same period, the Company's European retail division opened 19 new stores, closed 6 stores and at September 30, 2004, 602 stores in the UK, Ireland and the Netherlands were in operation.

        The Company's net sales from wholesale operations, U.S. Retail, European Retail, and Direct Response, as a percentage of consolidated net sales, were approximately 44%, 13%, 30% and 13%, respectively, for the fiscal year ended September 30, 2004. Cost of sales includes the cost of raw materials and all labor and overhead associated with the manufacturing and packaging of the products. Gross margins are affected by, among other things, changes in the relative sales mix among the Company's four distribution channels, as well as gross margins of acquired entities. Historically, gross margins from the Company's direct response/e-commerce and retail sales have typically been higher than gross margins from wholesale sales.

Critical Accounting Policies and Estimates:

        Complete descriptions of significant accounting policies are outlined in Note 1 of the Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Report.

        The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the

22

reporting period. These estimates and assumptions are affected by management's application of accounting policies. The most significant estimates include:

•

revenue recognition;



•

estimating sales returns and allowances;



•

estimating allowance for doubtful accounts;



•

inventory valuation and obsolescence;



•

valuation and recoverability of long-lived and intangible assets, assets held for sale and goodwill, including the values assigned to acquired intangible assets;



•

income taxes;



•

foreign currency; and



•

estimating accruals for, and the probability of, the outcome of current litigation.

        In general, estimates are based on historical experience, on information from third party professionals and on various other sources and assumptions that are believed to be reasonable under the facts and circumstances at the time such estimates are made. On an on-going basis, management evaluates the estimates and assumptions based upon historical experience and various other factors and circumstances. Actual results may vary from these estimates and assumptions under different and/or future circumstances. Management considers an accounting estimate to be critical if:

•

it requires assumptions to be made that were uncertain at the time the estimate was made; and



•

changes in the estimate, or the use of different estimating methods that could have been selected, which could have a material impact on the Company's consolidated results of operations or financial condition.

        The following critical accounting policies have been identified that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. The following critical accounting policies are not intended to be a comprehensive list of all of the Company's accounting policies or estimates.

Revenue Recognition:

        The Company recognizes revenue in accordance with the Securities and Exchange Commission's Staff Accounting Bulletin 104. The Company recognizes product sales revenue when title and risk of loss have transferred to the customer, when estimated provisions for product returns, rebates, chargebacks and other sales allowances are reasonably determinable, and when collectibility is reasonably assured. Accruals for these items are presented in the consolidated financial statements as reductions to sales. With respect to its own retail store operations, the Company recognizes revenue upon the sale of its products. The Company's net sales represent gross sales invoiced to customers, less certain related charges, for discounts, returns, rebates, chargebacks and other allowances.

Sales Returns and Allowances:

        At the time of sale, the Company simultaneously records estimates for various costs, which reduce product sales. These costs include estimates for price adjustments, product returns, chargebacks, rebates, and other sales allowances. Estimates for sales allowances such as product returns, rebates and chargebacks are based on a variety of factors including actual return experience of that product or similar products and rebate arrangements for each product. Actual experience associated with any of these items may be different than the Company's estimates. The Company regularly reviews the factors that influence its estimates and, if necessary, makes

23

adjustments when it believes that actual product returns, credits and other allowances may differ from established reserves.

Accounts Receivable:

        The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the review of their current credit information. Collections and payments from customers are continuously monitored. The Company maintains an allowance for doubtful accounts, which is based upon historical experience as well as specific customer collection issues that have been identified. While such bad debt expenses have historically been within expectations and allowances established, the Company cannot guarantee that it will continue to experience the same credit loss rates that it has in the past. If the financial condition of customers were to deteriorate resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories:

        Inventories are stated at the lower of cost or market. The cost elements of inventory include materials, labor and overhead. The Company uses standard costs for labor and overhead and periodically adjusts those standards. The Company establishes reserves for its inventory to reflect situations in which the cost of the inventory is not expected to be recovered. The Company regularly reviews its inventory, including when product is close to expiration and is not expected to be sold, when product has reached its expiration date, or when product is not expected to be saleable based on the Company's quality assurance and controls standards. The reserves for these products is equal to all or a portion of the cost of the related inventory based on specific facts and circumstances. In evaluating whether inventory is stated at the lower of cost or market, management considers such factors as the amount of inventory on hand, estimated time required to sell such inventory, remaining shelf life and current and expected market conditions, including levels of competition. The Company has evaluated the current level of inventories considering historical sales and other factors and, based on this evaluation, has recorded adjustments to cost of goods sold to adjust inventory to net realizable value. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer demand or competition differ from expectations.

Long-lived assets:

        The Company periodically reviews the values assigned to long-lived assets, such as property, plant and equipment, intangibles, assets held for sale and goodwill. The associated depreciation and amortization periods are reviewed on an annual basis.

        The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement requires evaluation of the need for an impairment charge relating to long-lived assets whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. During fiscal 2004, 2003 and 2002, the Company recognized impairment losses of $2,603, $1,117 and $700, respectively, on assets to be held and used. The impairment losses related primarily to leasehold improvements and furniture and fixtures for U.S. Retail operations and were recorded in selling, general and administrative expense.

        Goodwill and indefinite-lived intangibles are tested for impairment annually or more frequently if impairment indicators arise in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets". Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. These

24

evaluations require the use of judgment as to the effects of external factors and market conditions on the Company's conduct of its operations, and they require the use of estimates in projecting future operating results. If actual external conditions or future operating results differ from the Company's judgments, impairment charges may be necessary to reduce the carrying value of the subject assets. The fair value of an asset could vary, depending upon the different estimating methods employed, as well as assumptions made. This may result in a possible impairment of the intangible assets and/or goodwill, or alternatively an acceleration in amortization expense. An impairment charge would reduce operating income in the period it was determined that the charge was needed. As a result of the September 30, 2004 impairment testing, no impairment adjustments were deemed necessary.

        The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or loss of key contracts acquired in an acquisition relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of the acquired assets or in the Company's overall strategy with respect to the manner or use of the acquired assets or changes in the Company's overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company's stock price for a sustained period of time; and (vi) regulatory changes.

        The Company periodically evaluates acquired businesses for potential impairment indicators. Judgment regarding the existence of impairment indicators is based on market conditions and operational performance of the acquired businesses. Future events could cause the Company to conclude that impairment indicators exist, and therefore that goodwill and other intangible assets associated with its acquired businesses are impaired.

Purchase Price Allocation:

        On July 25, 2003, NBTY acquired all of the issued and outstanding capital stock of Rexall Sundown, Inc. ("Rexall") for $250,000 in cash (subject to adjustment based upon finalization of working capital balances at date of closing) from Numico USA, Inc., an indirect subsidiary of Royal Numico N.V., through the acquisition of certain partnership and limited liability company interests. The acquisition was financed by a new senior credit facility (see "Liquidity and Capital Resources" section contained in this Report). The Company also incurred approximately $7,000 of direct transaction costs for a total purchase price of approximately $257,000. Additionally, related financing costs of approximately $7,500 were paid to secure the financing for this acquisition which will be amortized until its maturity. The total purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair value. The excess of the purchase price over the fair value was recorded as goodwill. The fair value assigned to the tangible and intangible assets acquired and liabilities assumed was based upon estimates and assumptions developed by management and other information compiled by management, including a valuation, prepared by an independent valuation specialist that utilized established valuation techniques appropriate for the industry.

Although management believes that the current allocation of the estimated purchase price is reasonable, the final allocation (resulting from the finalization of working capital balances) may differ significantly from the amounts reflected in the accompanying consolidated financial statements.

Income taxes:

        The Company records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as tax credit carrybacks and carryforwards. The Company periodically reviews the

25

recoverability of tax assets recorded on the balance sheet and provides valuation allowances as management deems necessary. Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management's opinion, adequate provisions for income taxes have been made for all years. If actual future taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

Foreign Currency:

        Foreign subsidiaries accounted for approximately 31% of net sales 27% of assets and 15% of total liabilities as of September 30, 2004. Foreign subsidiaries accounted for approximately 31% of net sales 27% of assets and 11% of total liabilities as of September 30, 2003.

        In preparing the consolidated financial statements, the financial statements of the foreign subsidiaries are translated from the currency in which they keep their accounting records, generally the local currency, into U.S. Dollars. This process results in exchange gains and losses, which, under the relevant accounting guidance, are either included within the statement of operations or as a separate component of stockholders' equity under the caption "Accumulated other comprehensive income."

        Under the relevant accounting guidance, the treatment of these translation gains or losses is dependent upon management's determination of the functional currency of each subsidiary. The functional currency is determined based on management's judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary's operations must also be considered.

        If a subsidiary's functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary's financial statements is included in accumulated other comprehensive income. However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the translation of these financial statements would be included within the statement of operations. If the Company disposes of subsidiaries, then any cumulative translation gains or losses would be recorded into the statement of operations. If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the statement of operations.

        Based on an assessment of the factors discussed above, the Company considers the relevant subsidiary's local currency to be the functional currency for each of its foreign subsidiaries. During the fiscal years of 2004, 2003 and 2002, translation gains of $7,547, $9,980 and $17,603, respectively, were included in determining other comprehensive income. Accordingly, cumulative translation gains of approximately $22,152 and $14,605 were included as part of accumulated other comprehensive income within the consolidated balance sheet at September 30, 2004 and September 30, 2003, respectively. Had the Company determined that the functional currency of its subsidiaries was the U.S. Dollar, these gains would have increased net income for each of the periods presented.

        The magnitude of these gains or losses is dependent upon movements in the exchange rates of the foreign currencies against the U.S. Dollar. These currencies include the Euro and the British Pound Sterling. Any future translation gains or losses could be significantly higher than those noted in each of these years. In addition, if a change in the functional currency of a foreign subsidiary has occurred at any point in time, then the Company would be required to include any translation gains or losses from the date of such change in the statement of operations.

26

Contingencies:

        As discussed in Note 18 of the Notes to the Consolidated Financial Statements, NBTY is unable to make a reasonable estimate of the liabilities that may result from the final resolution of certain contingencies disclosed. Assessments of each potential liability will be made as additional information becomes available. NBTY currently does not believe that these matters will have a material adverse affect on its consolidated financial position or results of operations.

General

        Operating results in all periods presented reflect the impact of acquisitions. The timing of those acquisitions and the changing mix of businesses as acquired companies are integrated into the Company may affect the comparability of results from one period to another.

Results of Operations

        The following table sets forth income statement data of the Company as a percentage of net sales for the periods indicated:

27

Fiscal Year Ended September 30, 2004 Compared to Fiscal Year Ended September 30, 2003

        Net Sales.    Net sales for fiscal 2004 were $1,652,031, an increase of $459,483, or 38.5%, compared with net sales of $1,192,548 in fiscal 2003. The $459,483 increase is comprised of the following:

        The US Nutrition wholesale division, which operates Nature's Bounty and Rexall brands, increased its net sales primarily due to the acquisition of the Rexall product lines ($220,726). The Company continues to adjust shelf space allocation between the Nature's Bounty brand and Rexall brands to provide the best overall product mix. These efforts have strengthened US Nutrition's position in the mass market. Additionally, the remaining wholesale net sales increases primarily resulted from increased promotional programs offered to the mass market, drug chains and supermarkets. Through the Company's well-known brands, NBTY continues to strengthen its leading market position. Consumer sales information obtained from the Company's Vitamin World retail stores and Puritan's Pride direct-response/e-commerce operations are used to provide its mass-market customers with timely and vital data and analyses to drive mass market sales. The Company continues to respond to consumer preferences and to monitor the market for trends and ideas, and these efforts have translated into increased sales. Two customers of the wholesale division represented, individually, more than 10% of the wholesale segment's net sales for the fiscal year ended September 30, 2004 and for the prior comparable period. One of these customers is primarily a supplier to the other customer, therefore changes in the Company's business relationship with either customer(s) would likely result in the loss of most of the net sales to both customers. While no one customer represented, individually, more than 10% of the Company's consolidated net sales, the loss of either of these two customers could have a material adverse effect on the wholesale segment if the Company is unable to replace such customer(s).

        U.S. Retail net sales increased due to the success of the Savings Passport Program, a customer loyalty program. The number of customers in the Savings Passport Program increased approximately 1.1 million to 4.9 million customers as compared to 3.8 million customers at the end of the comparable prior period. Same store sales for stores open more than one year increased 0.7% or $1,355. Additionally, increases in net sales were attributable to new Vitamin World stores opened during the fiscal year ended September 30, 2004 which contributed $4,242 to net sales, partially offset by store closures of $1,564. During the last few months, U.S. retail net sales have been decreasing due to a general sales slow down across the entire specialty market. In addition, as the US Nutrition wholesale operation introduces more new products directly to the mass market due to market trends, therefore, the specialty retail ability to capitalize on these market trends and new products is not as effective. The Company expects this trend to continue in the near future. During the fiscal year ended September 30, 2004, Vitamin World opened 34 new stores, closed 10 stores and at the end of the year operated 557 stores. The Company operated 533 stores in the U.S. as of September 30, 2003.

        European Retail net sales increases were directly attributable to (1) the fiscal 2003 acquisitions of GNC (UK) (increase of $16,371) and De Tuinen (increase of $25,034); 38 GNC stores in the U.K. and 67 DeTuinen stores in the Netherlands were in operation at September 30, 2004; (2) an increase in same store sales for Holland and Barrett stores open more than one year of 25.1% (or $81,419); and (3) new Holland and Barrett stores opened during the fiscal year ended September 30, 2004 which contributed $6,357 to net sales. These European retail net sales results include the positive effect of a strong British Pound ($43,284 or 11.9%). Without foreign exchange, the increase in same store sales

28

(for sales open more than one year) was 13.0%. During the fiscal year ended September 30, 2004, the Company's European retail division opened 19 new stores, closed 6 stores and at the end of the fiscal year 602 stores in the U.K., Ireland and the Netherlands were in operation. At September 30, 2003, 589 stores in the U.K., Ireland and the Netherlands were in operation.

        Direct Response/Puritan's Pride net sales increased as a result of the change in the timing of promotional catalog mailings, enhanced appearance of the Company's catalogs, and the Company's continued efforts to target market its customer base to maximize sales. Internet orders continue to increase as compared to prior like periods. Puritan's Pride on-line net sales increased 24.7% for the current fiscal year and comprised 20.5% of the Direct Response's segment net sales. The Company continues to increase the number of products available via its catalog and websites.

        Cost of Sales/Discontinued product charge.    Cost of sales for fiscal 2004 was $822,412, or 50% as a percentage of net sales, compared to $559,304 (including a discontinued product charge of $4,500) or 47% for fiscal 2003. Overall, gross profit, as a percentage of net sales, decreased 3% to 50% during the fiscal year ended September 30, 2004 as compared to 53% for the prior comparable period. Gross profit as a percentage of net sales by segment is as follows:

        The US Nutrition wholesale segment's gross profit for fiscal 2004 decreased 4% to 36% from 40%, as a percentage of net sales, for fiscal 2003. This was primarily due to the effect of Rexall's sales returns ($34,215) resulting from current business decisions to accept returns for certain non-performing Rexall brands and replacing them with faster selling Nature's Bounty product as well as lower gross profit contributions from Rexall's product lines (35%). The gross profit was also affected by changes in product mix and an increase in sales incentives and promotion costs which are classified as reductions in gross sales. The U.S. Retail gross profit for fiscal 2004 decreased 1% to 59% from 60%, as a percentage of net sales, for fiscal 2003 primarily due to product mix. The European Retail gross profit increased 1% to 62% from 61%, as a percentage of net sales, primarily due to different promotional programs in effect this period as compared to the prior comparable period and as a result of the recent acquisitions of GNC (UK) and De Tuinen, which had improved margins this period as compared to the prior comparable period. These operations reported gross profit of 48% compared to 41% during the prior comparable fiscal year. Without these newly acquired operations, gross profit would have increased 2% to 65% from 63%, as a percentage of net sales, for the prior comparable period. Direct Response/Puritan's Pride's gross profit was 62%, as a percentage of net sales, for fiscal 2004 and fiscal 2003. The Company's overall strategy is to improve margins by introducing new products which traditionally have a higher gross profit margin and by continuing to increase in-house manufacturing.

        Catalog Printing, Postage and Promotion.    Catalog printing, postage, and promotion expenses were $85,238 for fiscal 2004, compared with $66,455 for fiscal 2003, an increase of $18,783. Such advertising expenses as a percentage of net sales were 5.2% during fiscal 2004 and 5.6% for the prior comparable period. Of the $18,783 increase, $17,667 was attributable to the increase in promotions for products, mainly via television, magazines, newspapers and mailing programs, and $1,116 was attributable to the

29

increase in catalog printing costs. The wholesale segment advertising increased $18,097 primarily due to an increase in advertising expenses for Rexall related products ($17,032) and other increases in advertising of US Nutrition related products ($1,065). Other segments' advertising variances are as follows: European retail promotion and media increased $2,734 offset by decreases in advertising expenses for U.S. retail $1,011 and Puritan's Pride/Direct Response $1,037. Investments in additional advertising and sales promotions are part of the Company's strategic effort to increase long-term growth.

        Selling, General and Administrative.    Selling, general and administrative expenses were $554,838 during fiscal 2004, an increase of $119,090, as compared with $435,748 for the prior comparable period. As a percentage of net sales, selling, general and administrative expenses were 33.6% and 36.5% in fiscal 2004 and fiscal 2003, respectively. Of the $119,090 increase, $43,068 was attributable to increased payroll costs mainly associated with new business acquisitions and general salary increases, $18,783 to increased rent expense and additional U.S. Retail and European Retail stores, $12,338 to increased freight costs mainly resulting from the Company's efforts to generate faster product delivery to customers, $9,295 to increased insurance costs mainly associated with an increase in general insurance rates, $9,786 was attributable to increased depreciation and amortization expense as a result of acquisitions and an increase in capital expenditures, and $5,309 to increased professional and legal fees (including related accruals and settlements). The increase in the selling, general and administrative expenses by segment are as follows: Wholesale $44,795, European retail $47,909 (of which $15,693 is attributed to foreign exchange translation), U.S. retail $1,303, Puritan's Pride/Direct Response $2,275 and an increase in unallocated corporate expenses of $22,808.

        Interest Expense.    The major components of interest expense are interest on Senior Subordinated Notes, and interest on the Credit and Guarantee Agreement ("CGA") used for acquisitions, capital expenditures and other working capital needs. Interest expense was $24,663 in fiscal 2004, an increase of $7,279, compared with interest expense of $17,384 in fiscal 2003. Interest expense increased due to increased borrowings under a new credit agreement entered into by the Company in conjunction with the Rexall acquisition. On July 25, 2003, the Company entered into a new CGA comprised of $375,000 Senior Secured Credit Facilities. This CGA consisted of a $100,000 Revolving Credit Facility, a $50,000 Term Loan A and a $225,000 Term Loan B. Terms of the new CGA were in many instances similar to the previous credit agreement. On December 19, 2003, the Company refinanced $224,000 of Term B loans outstanding under its July 2003 credit agreement with a new class of Term C loans on more favorable terms of LIBOR plus 2%. Costs of approximately $500 were paid on December 19, 2003, in connection with this debt refinancing, which will be amortized until Term C's maturity of approximately six years. By March 31, 2004, the Company had fully repaid Term Loan A and at September 30, 2004, only borrowings of $155,531 under Term Loan C were outstanding. A stand-by letter of credit of $18 was outstanding under the revolving credit facility at September 30, 2004. Interest rates charged on borrowings can vary depending on the interest rate option utilized. Options for the rate can either be the Alternate Base Rate or LIBOR plus applicable margin. Interest rates charged on borrowings can vary depending on the interest rate option utilized. Options for the rate can either be the Alternate Base Rate or LIBOR plus applicable margin. At September 30, 2004 the annual borrowing rate for Term Loan C approximated 3.75%.

        Bond Investment Write Down.    During fiscal 2003 other-than-temporary impairment write downs of $4,084 was charged against income and related to the Company's investment in high yield, less than investment grade corporate debt securities. On September 4, 2003, the bond issuer declared bankruptcy; as a result, the Company determined that the decline in fair value was permanent. The Company sold all of its investment in bonds during the 2004 fiscal first quarter at no further gain or loss.

        Miscellaneous, net.    Miscellaneous, net was $4,125 and $5,424 for fiscal 2004 and fiscal 2003, respectively. The $1,299 decrease was primarily attributable to increases in net losses on sale of

30

property plant and equipment ($1,862) and a decrease in investment income ($1,301) offset by increases due to exchange rate fluctuations ($915) and other miscellaneous increases ($949).

        Income Taxes.    The Company's income tax expense is impacted by a number of factors, including federal taxes, its international tax structure, state tax rates in the jurisdictions where the Company conducts business, and the Company's ability to utilize state tax credits that will begin to expire in 2013. The effective income tax rate for fiscal 2004 was 33.8%, compared to 29.1% for fiscal 2003. The prior year effective income tax rate was lower than the current year principally due to the Company recording an $8,275 after-tax benefit to record foreign tax credits. The effective income tax rates were less than the U.S. federal statutory tax rate primarily due to the enhanced tax structure of foreign subsidiaries. This tax structure should also continue to impact future fiscal years. Therefore the Company's overall effective income tax rate should vary.

        In November 2004, the FASB staff proposed FASB Staff Position No. FAS 109-b ("FSP 109-b"), "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" (the "Act"). The Act (signed into law on October 22, 2004) introduces a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer, provided certain criteria are met. FSP 109-b provides guidance on the accounting for the effects of the Act for the repatriation provision. FSP 109-b also requires certain disclosures regarding the effects of the Act on the Company's plan for reinvestment or repatriation of foreign earnings for the purposes of applying Statement 109. FSP 109-b is to be effective upon issuance (which is expected to be December 2004). Currently, the Company has not completed an assessment of FSP 109-b.

        Net Income.    After income taxes, the Company had net income for fiscal 2004 of $111,849 (or basic and diluted earnings per share of $1.67 and $1.62, respectively), compared with $81,585 (or basic and diluted earnings per share of $1.23 and $1.19, respectively), an increase of $30,264. Net income during the fiscal year ended September 30, 2003 included the discontinued product charge of $3,191 and the bond investment write down of $2,896, after tax, or $0.05 and $0.04 basic and diluted earnings per share, respectively.

Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30, 2002

        Net Sales.    Net sales for fiscal 2003 were $1,192,548, an increase of $228,465 or 23.7% compared with net sales of $964,083 in fiscal 2002. The $228,465 increase is comprised of the following:

        Wholesale sales were $416,627, compared to $291,287, an increase of $125,340, or 43%. Such increase in the wholesale segment's net sales was primarily due to the acquisition of Rexall ($72,815), an increase in sales to the mass market, drug chains and supermarkets ($46,646), and net sales contributed by the FSC acquisition ($5,879). U.S. Retail sales were $212,380, compared to $198,602, an increase of $13,778, or 6.9%. Such increase was a direct result of the Savings Passport Program, a customer loyalty program. Same store sales for stores open more than one year increased 5.4% or $10,192. European Retail sales were $363,597, compared to $290,881, an increase of $72,716, or 25%. Such increase was attributable to an increase in same store sales for stores open more than one year of 11.8% (or $34,018) and net sales contributed by the GNC (UK) and De Tuinen acquisitions ($21,589

31

and $13,245, respectively). These results include the positive effect of a strong British Pound ($25,887 or 8.9%). The Company operated 533 stores in the U.S. and 589 stores in Europe as of September 30, 2003, compared to 544 stores in the U.S. and 468 in the U.K./Ireland as of September 30, 2002. Direct Response/Puritan's Pride sales were $199,944, compared to $183,313, an increase of $16,631, or 9.1%. Such increase was a result of the Company's catalog promotion strategy, enhancement of the appearance of the catalog, and improved customer service.

        Cost of Sales/Discontinued product charge.    Cost of sales (including the $4,500 discontinued product charge) for fiscal 2003 was $559,304, an increase of $125,693, compared with the cost of sales of $433,611 for fiscal 2002. Overall, gross profit, as a percentage of net sales, decreased 2% to 53% during the fiscal year ended September 30, 2003 as compared to 55% for the prior comparable period. The discontinued product charge (or 0.4% as a percentage of net sales) was for the Company's voluntary discontinuance of sales of products containing ephedra. Without this charge, as a percentage of net sales, gross profit would have decreased 1% to 54% during the fiscal year ended September 30, 2003 as compared to 55% for the prior comparable period. Gross profit as a percentage of net sales by segment is as follows:

        The Wholesale segment's gross profit, as a percentage of net sales, for fiscal 2003 was 40% as compared to 41% for fiscal 2002. Such gross profit was impacted by the product sales mix of existing product lines, such as the increase in Private Label sales (at a 34% gross margin level), and lower gross margins contributed by the FSC (European wholesale) acquisition, these factors were partially offset by higher gross margins on new product introductions and improvements in manufacturing efficiencies. The U.S. Retail gross profit, as a percentage of net sales, for fiscal 2003 was 60% as compared to 59% for fiscal 2002. Margin improvement was primarily due to the Company's introduction of new higher gross margin items in such segment. The European Retail gross profit decreased 2%, as a percentage of net sales, 61% from 63% primarily as a result of the recent acquisitions of GNC (UK) and De Tuinen. These operations reported gross profit of 43% and 38%, respectively, thereby affecting the total European Retail gross profit margin during fiscal 2003. Without these newly acquired operations, gross profit as a percentage of net sales would have remained unchanged from the prior period. Direct Response/Puritan's Pride's gross profit, as a percentage of net sales, was 62% for fiscal 2003 as compared to 61% for fiscal 2002. The gross profit was affected by varied catalog pricing promotions the Company ran during fiscal 2003. The Company's overall strategy is to improve margins by introducing new products which traditionally have a higher gross profit and by continuing to increase in-house manufacturing.

        Catalog Printing, Postage and Promotion.    Catalog printing, postage, and promotion expenses were $66,455 for fiscal 2003, compared with $47,846 for fiscal 2002, an increase of $18,609. Such advertising expenses as a percentage of net sales were 5.6% during fiscal 2003 and 5% for the prior comparable period. Of the $18,609 increase, $19,367 was attributable to the increase in promotions for products, mainly via television, magazines, newspapers and mailing programs, offset by a decrease in catalog printing costs of $758. Direct Response/Puritan's Pride's promotion and media expenses increased

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$6,263; Wholesale's advertising expenses increased $10,919 (of which $6,438 related to Rexall product related advertising); and European Retail promotion and media increased $2,156, offset by a $729 decrease in the U.S. Retail's advertising costs. Increased advertising costs primarily related to promoting new products recently introduced as well as existing core products. Investments in additional advertising and sales promotions are part of the Company's strategic effort to increase long-term growth.

        Selling, General and Administrative.    Selling, general and administrative expenses were $435,748 during fiscal 2003, an increase of $87,414, as compared with $348,334 for the prior comparable period. As a percentage of net sales, selling, general and administrative expenses were 36.5% and 36.1% in fiscal 2003 and fiscal 2002, respectively. Of the $87,414 increase, $36,671 was attributable to increased payroll costs mainly associated with new business acquisitions and general salary increases, $16,639 to increased rent expense and additional U.S. Retail and European Retail stores, $8,876 to increased freight costs mainly resulting from the Company's efforts to generate faster product delivery to customers, $5,961 to increased insurance costs mainly associated with an increase in general insurance rates, $3,603 was attributable to increased depreciation and amortization expense as a result of acquisitions and an increase in capital expenditures, $2,520 to broker commissions, which was directly associated with the increase in wholesale sales, and $2,517 to increased professional fees for the implementation and integration of new software purchased. Of the $87,414 increase in selling, general and administrative cost, $8,859 is attributed to the foreign exchange translation of the British Pound.

        Litigation Recovery of Raw Materials Costs.    In fiscal 2002, the Company received $21,354 for the settlement of price fixing litigation brought by the Company against certain raw material vitamin suppliers.

        Interest Expense.    The major components of interest expense are interest on Senior Subordinated Notes, and interest on the Credit and Guarantee Agreement used for acquisitions, capital expenditures, and other working capital needs. Interest expense was $17,384 in fiscal 2003, a decrease of $1,115, compared with interest expense of $18,499 in fiscal 2002. Interest expense decreased due to the Company's continued repayment of bank debt, offset in part by interest rate increases associated with the new financing completed by the Company on July 25, 2003. On July 25, 2003, the Company entered into a new Credit and Guarantee Agreement ("CGA") comprised of $375,000 Senior Secured Credit Facilities. The new CGA consists of a $100,000 Revolving Credit Facility, a $50,000 Term Loan A and a $225,000 Term Loan B. Terms of the new CGA are generally similar to the previous one. Interest rates charged on borrowings can vary depending on the interest rate option utilized. Options for the rate can either be the Alternate Base Rate or LIBOR plus applicable margin.

        Bond Investment Write Down.    During fiscal 2003 other-than-temporary impairment write downs of $4,084 was charged against income and related to the Company's investment in high yield, less than investment grade corporate debt securities. On September 4, 2003, the bond issuer declared bankruptcy; as a result, and the Company determined that the decline in fair value was permanent.

        Miscellaneous, net.    Miscellaneous, net was $5,424 and $1,560 for fiscal 2003 and fiscal 2002, respectively. The $3,864 increase was primarily attributable to exchange rate fluctuations ($1,889), increases in investment income ($1,418), increases in net gains on sale of property plant and equipment ($885), offset by other miscellaneous decreases ($328).

        Income Taxes.    The Company's income tax expense is impacted by a number of factors, including the amount of taxable earnings derived in foreign jurisdictions with tax rates that are lower than the U.S. federal statutory rate, state tax rates in the jurisdictions where the Company conducts business, and the Company's ability to utilize various tax credits and foreign tax credits. The effective income tax rate for fiscal 2003 was 29.1%, compared to 30.9% for fiscal 2002. The change in the effective rate was principally due to Company recording $8,275 in fiscal 2003 for after-tax benefits related to foreign tax credits as compared to the Company recording $7,800 in fiscal 2002. Such benefits resulted from

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certain tax saving strategies implemented in fiscal 2002. The effective income tax rates were less than the U.S. federal statutory tax rate primarily due to the enhanced tax structure of foreign subsidiaries. This tax structure should also continue to impact future fiscal years. Therefore the Company's overall effective income tax rate should vary.

        Net Income.    Net income for fiscal 2003 was $81,585 (or basic and diluted earnings per share of $1.23 and $1.19, respectively), compared with $95,791,(or basic and diluted earnings per share of $1.45 and $1.41, respectively), a decrease of $14,206.

        Net income for fiscal 2003 included the discontinued product charge of $3,191 and the bond investment write down of $2,896, after tax, or $0.05 and $0.04 basic and diluted earnings per share, respectively. Net income for fiscal 2002 included the litigation recovery of raw material costs payment received (resulting from price fixing litigation noted above), of $14,756, net of tax, or $0.22 per diluted share.

Seasonality

        Although the Company believes that its business is not seasonal in nature, historically, the Company has experienced, and expects to continue to experience, a substantial variation in its net sales and operating results from quarter to quarter. The Company believes that the factors which influence this variability of quarterly results include general economic and industry conditions that affect consumer spending, changing consumer demands and current news on nutritional supplements, the timing of the Company's introduction of new products, the level of consumer acceptance of each new product, the seasonality of the markets in which the Company participates, and actions of competitors. Accordingly, a comparison of the Company's results of operations from consecutive periods is not necessarily meaningful, and the Company's results of operations for any period are not necessarily indicative of future performance. Additionally, the Company may experience higher net sales in a quarter depending upon when it has engaged in significant promotional activities.

Liquidity and Capital Resources

        The Company's primary sources of liquidity and capital resources are cash generated from operations. The Company also has a $100,000 Revolving Credit Facility maintained by the Company under its Credit & Guarantee Agreement ("CGA"). Please see below for further discussion regarding the Company's CGA. No borrowings were outstanding under the Revolving Credit Facility at September 30, 2004. The Company's principal uses of cash have been to finance working capital, facility expansions, capital expenditures and debt service requirements. The Company anticipates these uses will continue to be its principal uses of cash in the future.

        The following table sets forth, for the years indicated, the Company's net cash flows provided by (used in) operating, investing and financing activities, its period-end cash and cash equivalents and other operating measures:

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        As of September 30, 2004, working capital was $359,847, compared with $311,865 as of September 30, 2003, an increase of $47,982. The increase in working capital was primarily due to increases in current assets including accounts receivable, inventories and other current assets. Accounts receivable increased due to increased sales. The number of average days' sales outstanding (on wholesale net sales) at September 30, 2004, was 42 days, compared with 49 days at September 30, 2003. The inventory turnover rate was approximately 2.39 times during fiscal 2004 compared with 2.25 times during fiscal 2003. Inventory levels have increased as a result of modifications to the Company's product procurement process. As the Company continues to grow, it needs to maintain larger quantities of product through verbal commitments with its vendors. Generally, these verbal arrangements with the Company's vendors are terminable by either party without notice or upon short notice. Inventory levels were increased to prepare for expected increases in orders as a result of anticipated consumer demand and ensure quick delivery of product to the Company's customers. Other current assets increased as a result of the reclassification from property, plant and equipment of the net book value of $10,508 for the former Rexall corporate headquarters held for sale, as well as an increase in insurance premiums which resulted in an increased prepaid insurance balance at September 30, 2004 as compared to the prior comparable period.

        The Company monitors current and anticipated future levels of cash and cash equivalents in relation to anticipated operating, financing and investing requirements. Cash and cash equivalents totaled $21,751 and $49,349 at September 30, 2004 and 2003, respectively. At September 30, 2004, approximately $15,491 of the Company's cash and cash equivalents were held by its foreign subsidiaries and is subject to U.S. income taxation on repatriation to the U.S. The Company is currently assessing the impact of the one-time favorable foreign dividend provisions recently enacted as part of the American Jobs Creation Act of 2004. The Company currently repatriates all earnings from its foreign subsidiaries. The Company generated cash from operating activities of $119,936, $111,532 and $105,087 in fiscal 2004, 2003 and 2002, respectively. The overall increase in cash from operating activities during fiscal 2004 was mainly attributable to increased net income and non-cash charges, partially offset by changes in other operating assets and liabilities.

        Cash used in investing activities was $37,477, $323,285, and $31,776 in fiscal 2004, 2003 and 2002, respectively. Fiscal 2004 cash used in investing activities consisted primarily of purchases of property, plant and equipment ($42,700), partially offset by proceeds from the sale of property, plant and equipment ($1,065) and proceeds from the sale of investment in bonds ($4,158).

        Fiscal 2003 cash used in investing activities consisted primarily of net cash paid for the Rexall, De Tuinen, FSC and GNC (UK) businesses ($289,676), as well as the purchase of property, plant and equipment ($37,510), partially offset by proceeds from the sale of property, plant and equipment ($1,498), and cash received that was previously held in escrow from the fiscal 2001 acquisitions of Global Health Sciences ($1,850) and NatureSmart ($553).

        Fiscal 2002 cash used in investing activities consisted primarily of the purchase of property, plant and equipment ($21,489) and cash paid for asset acquisitions ($7,702), partially offset by cash received that was previously held in escrow for the acquisition of Global Health Sciences ($4,600), and proceeds from the sale of property, plant and equipment ($1,057). In addition, the Company made a strategic investment in high yield, less than investment grade corporate bonds ($8,242).

        Net cash (used in) provided by financing activities was ($115,719), $233,435, and ($83,454) in fiscal 2004, 2003 and 2002, respectively. Fiscal 2004 net cash flows used in financing activities included principal payments under long-term debt agreements ($117,100) and payments related to financing fees ($500), partially offset by proceeds from the exercise of stock options ($1,881).

        Fiscal 2003 net cash flows provided by financing activities included proceeds from borrowing under long-term debt agreements ($275,000) and proceeds from the exercise of stock options ($1,146),

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partially offset by principal payments under long-term debt agreements ($35,211), and payments related to financing fees ($7,500).

        Fiscal 2002 net cash flows used in financing activities included principal payments under long-term debt agreements ($85,353), partially offset by proceeds from the exercise of stock options ($1,899).

        The Company believes its existing balances of cash and cash equivalents, internally-generated funds from operations, and amounts available under the CGA will be sufficient to satisfy its working capital needs, capital expenditures incurred in the normal course of business, outstanding commitments, and other liquidity requirements associated with its existing operations over the next 12 months.

EBITDA:

        The Company defines EBITDA, which is a non-GAAP financial measure, as earnings before interest, taxes, depreciation and amortization. This non-GAAP financial measure is not prepared in accordance with generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Non-GAAP financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. Management believes the presentation of EBITDA is relevant and useful because EBITDA is a measurement industry analysts utilize when evaluating the Company's operating performance. Management also believes EBITDA enhances an investor's understanding of the Company's results of operations because it measures the Company's operating performance exclusive of interest and non-cash charges for depreciation and amortization. Management also provides this non-GAAP measurement as a way to help investors better understand its core operating performance, enhance comparisons of the Company's core operating performance from period to period and to allow better comparisons of the Company's operating performance to those of its competitors. EBITDA also reflects a non-GAAP financial measure of the Company's liquidity. Management believes EBITDA is a useful tool for certain investors and creditors for measuring the Company's ability to meet debt service requirements. Additionally, management uses EBITDA for purposes of reviewing the results of operations on a more comparable basis. EBITDA does not represent cash flow from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered an alternative to net income under GAAP for purposes of evaluating the results of operations. For the fiscal year ended September 30, 2004, the Company's EBITDA was $255,348 compared with $179,265 for the prior comparable period, an increase of $76,083. EBITDA was calculated as follows:

Reconciliation of GAAP Measures to Non-GAAP Measures
(Unaudited)

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Reconciliation of GAAP Measures to Non-GAAP Measures
(Unaudited)

Debt Agreements:

        On July 25, 2003, the Company entered into new $375,000 Senior Secured Credit Facilities. This CGA consisted of a $100,000 Revolving Credit Facility, a $50,000 Term Loan A and a $225,000 Term Loan B. Terms of the new CGA were in many instances similar to the previous credit agreement. The proceeds were used to fund the Rexall acquisition, to refinance the prior credit facility, and to pay fees, commissions, and expenses associated therewith. Following the closing date, the proceeds of loans borrowed under the new Revolving Facility are to be used for general corporate purposes including capital expenditures, and other acquisitions. On December 19, 2003, the Company refinanced approximately $224,000 of Term B loans outstanding under its July 2003 credit agreement with a new class of Term C loans on more favorable terms of LIBOR plus 2%. Costs of approximately $500 were paid on December 19, 2003 in connection with this debt refinancing, which will be amortized until Term C's maturity of approximately six years. By March 31, 2004, the Company had fully repaid Term Loan A. At September 30, 2004, only borrowings of $155,531 under the Term Loan C were outstanding. Repayments permanently reduce availability of term loans. A stand-by letter of credit of $18 was outstanding under the revolving credit facility at September 30, 2004. Interest rates charged on borrowings can vary depending on the interest rate option utilized. Options for the rate can either be the Alternate Base Rate or LIBOR plus applicable margin. The revolving credit facility and Term Loan C are scheduled to mature on the earlier of (i) fifth anniversary of the closing date for the Revolving Credit Facility and the sixth anniversary date for Term Loan C; or (ii) March 15, 2007 if the Company's 8⁵/8% senior subordinated Notes due September 15, 2007 are still outstanding. Virtually all of the Company's assets are collateralized under the new CGA. Under the CGA, the Company is obligated to maintain various financial ratios and covenants that are typical for such facilities.

        Interest rates charged on borrowings can vary depending on the interest rate option utilized. Options for the rate can either be the Alternate Base Rate or LIBOR plus applicable margin. At September 30, 2004, the borrowing rate for Term Loan C approximated 3.75%. The Company is required to make quarterly principal installments under Term Loan C of approximately $392. The Term Loan C also requires the last four quarterly principal installments to be balloon payments of approximately $37,124 beginning September 30, 2008. The current portion of Term Loan C at September 30, 2004 was $1,567.

        In 1997, the Company issued $150,000 of 8⁵/8% senior subordinated notes ("Notes") due in 2007. The Notes are unsecured and subordinated in right of payment for all existing and future indebtedness of the Company including the CGA.

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        The Company's credit arrangements, generally the indenture governing the Notes ("Indenture") and the new CGA, impose certain restrictions on the Company and its subsidiaries regarding capital expenditures and limit the Company's ability to do any of the following: incur additional indebtedness, dispose of assets, make repayments of indebtedness or amendments of debt instruments, pay distributions, create liens on assets and enter into sale and leaseback transactions, investments, loans or advances and acquisitions. Such restrictions are subject to certain limitations and exclusions.

        In addition, a default under certain covenants in the Indenture and the CGA, respectively, could result in the acceleration of the Company's payment obligations under the CGA and the Indenture, as the case may be, and, under certain circumstances, in cross-defaults under other debt obligations. These defaults may have a negative effect on the Company's liquidity.

A summary of contractual cash obligations as of September 30, 2004 is as follows:

(a)

Such amounts exclude interest payments

        The Company conducts retail operations under operating leases, which expire at various dates through 2029. Some of the leases contain renewal options and provide for contingent rent based upon sales plus certain tax and maintenance costs. Future minimum rental payments (excluding real estate tax and maintenance costs) for retail locations and other leases that have initial or noncancelable lease terms in excess of one year at September 30, 2004 are noted in the above table.

        The Company was committed to make future purchases for inventory related items, such as raw materials and finished goods, under various purchase arrangements with fixed price provisions aggregating approximately $75,828 at September 30, 2004. During the fiscal year ended September 30, 2004, no one supplier individually represented greater than 10% of the Company's raw material purchases. The Company does not believe that the loss of any single supplier would have a material adverse effect on the Company's consolidated financial condition or results of operations.

        The Company had approximately $2,287 in open capital commitments at September 30, 2004, primarily related to manufacturing equipment as well as to computer hardware and software. Also, the Company has a $15,560 commitment to build a new distribution facility and a $14,572 commitment for an expansion of the softgel facility, both of which are expected to be completed within one year.

        The Company has employment agreements with two of its executive officers. The agreements, initially entered into in October 2002, have a term of 5 years and are automatically renewed each year thereafter unless either party notifies the other to the contrary. These agreements provide for minimum salary levels and contain provisions regarding severance and changes in control of the Company. The annual commitment for salaries to these two officers as of September 30, 2004 was approximately $1,170. In addition, five members of Holland & Barrett's senior executive staff have service contracts terminable by the Company upon twelve months notice. The annual aggregate commitment for such H&B executive staff as of September 30, 2004 was approximately $1,284.

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        The Company maintains a consulting agreement with Rudolph Management Associates, Inc. for the services of Arthur Rudolph, a director of the Company. The consulting fee (which is paid monthly) is fixed by the Board of Directors of the Company, provided that in no event will the consulting fee be at a rate lower than $450 per year. In addition, Mr. Arthur Rudolph receives certain fringe benefits accorded to other executives of the Company.

        The Company has grown through acquisitions, and expects to continue seeking to acquire entities in similar or complementary businesses. Such acquisitions are likely to require the incurrence and/or assumption of indebtedness and/or obligations, the issuance of equity securities or some combination thereof. In addition, the Company may from time to time determine to sell or otherwise dispose of certain of its existing assets or businesses; the Company cannot predict if any such transactions will be consummated, nor the terms or forms of consideration which might be required in any such transactions.

Related Party Transactions

        The Company has had, and in the future may continue to have, business transactions with individuals and firms affiliated with certain of the Company's directors and officers. Each such transaction has been in the ordinary course of the Company's business.

During the fiscal 2004, the following transactions occurred:

A.

Gail Radvin, Inc., a corporation wholly-owned by Gail Radvin, received commissions from the Company totaling $732 on account of sales in certain foreign countries and had trade receivable balances of approximately $3,772 as of September 30, 2004. Gail Radvin is the sister of Arthur Rudolph (a director of the Company) and the aunt of Scott Rudolph (Chairman and Chief Executive Officer).



B.

The Company paid $450 to Rudolph Management Associates, Inc., pursuant to the Consulting Agreement between the Company and Rudolph Management Associates, Inc. Mr. Arthur Rudolph, a director of the Company and father of Scott Rudolph (Chairman and Chief Executive Officer), is the President of Rudolph Management Associates, Inc. In addition, Mr. Arthur Rudolph received certain fringe benefits accorded to other executives of the Company.



C.

Certain members of the immediate families (as defined in Rule 404 of Regulation S-K) of Arthur Rudolph, Scott Rudolph and Michael Slade (each a director of the Company) are employed by the Company. During fiscal 2004, these immediate family members received aggregate compensation and fringes from the Company totaling approximately $1,199 for services rendered by them as employees of the Company.

Inflation

        Inflation affects the cost of raw materials, goods and services used by the Company. In recent years, inflation has been modest. The competitive environment somewhat limits the ability of the Company to recover higher costs resulting from inflation by raising prices. Overall, product prices have generally been stable. The Company seeks to mitigate the adverse effects of inflation primarily through improved productivity and cost containment programs. The Company does not believe that inflation has had a material impact on its results of operations for the periods presented, except with respect to payroll-related costs, insurance premiums, and other costs arising from or related to government imposed regulations.

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Financial Covenants and Credit Rating

        The Company's credit arrangements impose certain restrictions on the Company regarding capital expenditures and limit the Company's ability to: incur additional indebtedness, dispose of assets, make repayments of indebtedness or amendments of debt instruments, pay distributions, create liens on assets and enter into sale and leaseback transactions, investments, loans or advances and acquisitions. Such restrictions could limit the Company's ability to respond to market conditions, to provide for unanticipated capital investments or to take advantage of business or acquisition opportunities.

        At September 30, 2004, credit ratings were as follows:

New Accounting Developments

        In November 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costs" an amendment of Accounting Research Bulletin ("ARB") No. 43, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal". In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. Companies are required to adopt the provisions of this Statement for fiscal years beginning after June 15, 2005. The Company does not believe there will be a material effect on its consolidated financial position or results of operations from the adoption of this standard.

        In November 2004, the FASB staff proposed FASB Staff Position No. FAS 109-b ("FSP 109-b"), "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004" (the "Act"). The Act (signed into law on October 22, 2004) introduces a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer, provided certain criteria are met. FSP 109-b provides guidance on the accounting for the effects of the Act for the repatriation provision. FSP 109-b also requires certain disclosures regarding the effects of the Act on the Company's plan for reinvestment or repatriation of foreign earnings for the purposes of applying Statement 109. FSP 109-b is to be effective upon issuance (which is expected to be December 2004). ). Currently, the Company has not completed an assessment of FSP 109-b.

        In December 2003, the SEC issued Staff Accounting Bulletin ("SAB") No. 104, "Revenue Recognition." SAB 104, which was effective upon issuance, updates portions of the interpretive guidance included in Topic 13 of the codification of Staff Accounting Bulletins and revises or rescinds portions of the interpretative guidance included in SAB 101 in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The principal revisions relate to the incorporation of certain sections of the staff's Frequently Asked Question ("FAQ") document on revenue recognition into Topic 13. SAB 101, "Revenue Recognition in Financial Statements," which was issued in December 1999, provides guidance to SEC registrants on the recognition, presentation and disclosure of revenues in the financial statements. Since the Company has already adopted all such standards upon issuance, the application of this revised guidance did not impact its consolidated financial position, results of operations, or disclosure requirements.

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        In January 2003, the FASB issued Financial Interpretation Notice ("FIN") No. 46, "Consolidation of Variable Interest Entities." FIN No. 46 provides guidance for identifying a controlling interest in a variable interest entity ("VIE") established by means other than voting interests. FIN No. 46 also requires consolidation of a VIE by an enterprise that holds such a controlling interest. On December 24, 2003, the FASB completed deliberations of the proposed modifications to FIN No. 46 ("Revised Interpretation"); the decisions reached include:

(1)

Deferral of the effective date;



(2)

Provisions for additional scope exceptions for certain other variable interests; and



(3)

Clarification of the impact of troubled debt restructurings on the requirement with respect to VIEs.

        The Company adopted the revised interpretations of FIN No. 46 during the quarter ended March 31, 2004. The Company did not have to consolidate any entities as a result of adopting this revised Interpretation. Therefore, the adoption of this Interpretation did not impact its consolidated financial position, results of operations, or disclosure requirements.

Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company is subject to currency fluctuations, primarily with respect to the British Pound and the Euro, and interest rate risks that arise from normal business operations. The Company regularly assesses these risks. As of September 30, 2004, the Company had not entered into any hedging transactions.

        To manage the potential loss arising from changing interest rates and its impact on long-term debt, the Company's policy is to manage interest rate risks by maintaining a combination of fixed and variable rate financial instruments.

        The Company is exposed to changes in interest rates on its floating rate CGA and fixed rate Notes. At September 30, 2004 and 2003, based on a hypothetical 10% decrease in interest rates related to the Company's fixed rate Notes, the Company estimates that the fair value of its fixed rate debt would have increased by approximately $2,800 and $3,500, respectively. At September 30, 2004 and 2003, the Company had $155,531 and $271,938, respectively, of borrowings outstanding under its CGA. A hypothetical 10% change in interest rates would not have a material effect on the Company's pretax income or cash flow.

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following consolidated financial statements, notes thereto, supplementary schedule, and the related Reports of Independent Registered Public Accounting Firms contained on pages F-1 and F-2 to NBTY's consolidated financial statements, are herein incorporated:

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets—As of September 30, 2004 and 2003

Consolidated Statements of Income—Fiscal years ended September 30, 2004, 2003 and 2002

Consolidated Statements of Stockholders' Equity and Comprehensive Income—Fiscal years ended September 30, 2004, 2003 and 2002.

Consolidated Statements of Cash Flows—Fiscal years ended September 30, 2004, 2003 and 2002.

Notes to Consolidated Financial Statements.

Schedule II, Valuation and Qualifying Accounts

        All other schedules have been omitted as not required or not applicable or because the information required to be presented are included in the consolidated financial statements and related notes.

        For more information, see Part IV, Item 15, Exhibits, below.

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Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Deloitte & Touche LLP ("Deloitte") has served the Company and it subsidiaries as independent auditors since March 19, 2004. Effective March 19, 2004, the Company dismissed PricewaterhouseCoopers LLP ("PwC") as its independent accountants. The reports of PwC on the Company's financial statements for the fiscal years ended September 30, 2002 and 2003 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended September 30, 2002 and 2003, and through March 19, 2004, there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to the satisfaction of PwC, would have caused PwC to make reference to the subject matter of the disagreement(s) in its reports on the financial statements for such years, nor were there any reportable events (as defined in Item 304(a)(1) of Regulation S-K).

        Effective March 19, 2004, the Company engaged Deloitte as its new independent accountants. The Company had not consulted Deloitte during the fiscal years ending September 30, 2003 and 2002, or through March 19, 2004, with regard to either the application of accounting principles to a completed or proposed specified transaction or the type of audit opinion that might be rendered on the Company's financial statements, or any matter that was either the subject of a disagreement or a reportable event (each as defined in Item 304(a)(1) of Regulation S-K).

        The Audit Committee of the Board of Directors approved the decision to change independent accountants.

Item 9A.    CONTROLS AND PROCEDURES

        The Company's chief executive officer and chief financial officer have concluded, based on their respective evaluations at the end of the period covered by this Report, that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective for recording, processing, summarizing and reporting, within the time periods specified in the SEC's rules and forms, the information required to be disclosed in the reports filed by the Company under the Exchange Act. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of the previously mentioned evaluation.

        The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls or internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Item 9B.    OTHER INFORMATION

        None

PART III

Item 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Information about our Directors may be found under the caption "Proposal 1. Election of Directors" of our Proxy Statement for the Annual Meeting of Shareholders to be held February 7, 2005 (the "Proxy Statement"). That information is incorporated herein by reference.

        Mr. Nathan Rosenblatt resigned from the Board of Directors, effective December 9, 2004. Due to the timing of Mr. Rosenblatt's resignation, the Nominating/Corporate Governance Committee of the Board decided to make an exception to the mandatory retirement age provision of the Company's Corporate Governance Guidelines and allow Mr. Murray Daly to stand for election as a Class II Director. The full Board of Directors approved the Nominating/Corporate Governance Committee's decision in the interest of compliance with applicable NYSE regulations.

        The information in the Proxy Statement set forth under the captions "Section 16(a) Beneficial Ownership Reporting Compliance", "Audit Committee Financial Expert" and "Code of Ethics for Senior Financial Officers" is incorporated herein by reference.

Item 11.    EXECUTIVE COMPENSATION

        The information in the Proxy Statement set forth under the captions "Executive Compensation", "Compensation Committee Interlocks and Insider Participation" and "Compensation of Directors" is incorporated herein by reference.

Item 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information in the Proxy Statement set forth under the caption "Principal Stockholders and Security Ownership of Management" is incorporated herein by reference.

Item 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information set forth under the captions "Certain Relationships and Related Transactions" of the Proxy Statement is incorporated herein by reference.

Item 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        Information concerning principal accountant fees and services appears in the Proxy Statement under the heading "Report of the Audit Committee—Audit Fees" and is incorporated herein by reference.

PART IV

Item 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)    Financial Statements.    Reference is made to the financial statements listed in Section 1 of the Index to Consolidated Financial Statements and Schedules in this Report.

(a)(2)    Financial Statement Schedule.    Reference is made to the financial statement schedule listed in Section 2 of the Index to Consolidated Financial Statements and Schedules in this Report. All other schedules have been omitted as not required, not applicable or because the information required to be presented is included in the financial statements and related notes.

(a)(3)    Exhibits.    The following exhibits are filed as a part of this Report or incorporated by reference and will be furnished to any security holder upon request for such exhibit and payment of any reasonable expenses incurred by the Company. A security holder should send requests for any of the

43

exhibits set forth below to the Company, 90 Orville Drive, Bohemia, New York, 11716; Attention: General Counsel.

*

Filed herewith

(Footnotes continued on next page)

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(Continued from prior page)

(1)

Incorporated by reference to NBTY, Inc.'s Registration Statement on Form S-4, filed on November 5, 1997 (Registration No. 333-39527).

(2)

Incorporated by reference to NBTY, Inc.'s Form 10-K for the fiscal year ended September 30, 2003 filed on December 16, 2003 (File #0-10666)

(3)

Incorporated by reference to NBTY, Inc.'s Form 10-K for the fiscal year ended September 30, 2002 filed on December 20, 2002 (File #0-10666).

(4)

Incorporated by reference to NBTY, Inc.'s Form S-8, filed on September 20, 2000 (File #333-46188).

(5)

Incorporated by reference to NBTY, Inc.'s Proxy Statement, dated March 25, 2002 (File #0-10666).

(6)

Incorporated by reference to NBTY, Inc.'s Form 8-K filed on August 5, 2003 (File #001-31788).

(7)

Incorporated by reference to NBTY, Inc.'s Form 8-K filed on December 23, 2003 (File #001-31788).

(b)    The exhibits required by Item 601 of Regulation S-K to be filed as part of this Report or incorporated herein by reference are listed in Item 15(a)(3) above.

(c)    See Item 15(a)(2) of this Report.

45

NBTY, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

46

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
NBTY, Inc.
Bohemia, New York

        We have audited the accompanying consolidated balance sheet of NBTY, Inc. and subsidiaries (the "Company") as of September 30, 2004, and the related consolidated statements of income, stockholders' equity and comprehensive income, and of cash flows for the year ended September 30, 2004. Our audit also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule for the year ended September 30, 2004 are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of NBTY, Inc. and subsidiaries at September 30, 2004, and the results of their operations and their cash flows for the year ended September 30, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, for the year ended September 30, 2004, when considered in relation to the basic 2004 consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/  DELOITTE & TOUCHE LLP      

Jericho, New York
December 14, 2004

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
NBTY, Inc. and Subsidiaries:

        In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of NBTY, Inc. and its subsidiaries at September 30, 2003, and the results of their operations and their cash flows for each of the two years in the period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 1, the Company changed the manner in which it accounts for goodwill and other intangible assets upon adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", on October 1, 2001.

/s/ PricewaterhouseCoopers LLP

New York, New York

November 11, 2003

F-2

NBTY, Inc. and Subsidiaries

Consolidated Balance Sheets

September 30, 2004 and 2003