<PAGE>
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549
                                    FORM 10-K
 
                       FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
(MARK ONE)
 
/X/           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                   For the Fiscal Year Ended December 31, 1998
 
                                       OR
 
/ /         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                 For the Transition Period From       to
                         Commission File Number 1-5439
                                                ------
                             DEL LABORATORIES, INC.
                             ----------------------
             (Exact name of registrant as specified in its charter)
<TABLE>
<S>                                              <C>
                   Delaware                                        13-1953103
        (State or other jurisdiction of                   (I.R.S. Employer I.D. Number)
        incorporation or organization)
 
         178 EAB PLAZA, UNIONDALE, NY                                 11556
   (Address of principal executive offices)                        (Zip Code)
</TABLE>
 
Registrant's telephone number, including area code (516) 844-2020
                                                   --------------
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
                    Title of Each Class                               Name of Each Exchange on Which Registered
-----------------------------------------------------------  -----------------------------------------------------------
<S>                                                          <C>
                Common Stock, $1 par value                                     American Stock Exchange
</TABLE>
 
          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 X       No
 
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 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.          [X]
 
The aggregate market value of the Common Stock held by non-affiliates of the 
Registrant on March 26, 1999 was $85,406,480. On such date, the average bid 
and asked price for the Common Stock was $19.31 per share.
 
The number of shares of Common Stock outstanding as of March 26, 1999 was 
7,403,124 shares.
 
                      DOCUMENTS INCORPORATED BY REFERENCE:
<TABLE>
<CAPTION>
DOCUMENT                                                            Part of the Form 10-K Into Which the Document is Incorporated
--------                                                            -------------------------------------------------------------
<S>                                                          <C>
Definitive Proxy Statement for 1999 Annual                   Part III, Items 10, 11, 12 and 13
Meeting of Stockholders
</TABLE>
<PAGE>
Part I
------
Item 1--Business
----------------

Del Laboratories, Inc. (the "Company") manufactures, markets and distributes
cosmetics and proprietary over-the-counter pharmaceuticals. The Company's
principal cosmetics products are nail care products, nail color, color
cosmetics, beauty implements, bleach and depilatories, personal care products,
and other related cosmetic items. The Company's cosmetics products are marketed
under such well-known brand names as Sally Hansen Hard as Nails and Sally Hansen
Professional Nail (nail care and nail color products), Corn Silk (face make-up),
Naturistics (color cosmetics and bath and body care) and LaCross (beauty
implements). The Company's proprietary pharmaceutical products include oral
analgesics, acne treatment products, first aid products and eye/ear medications.
The Company's pharmaceutical products are marketed under such well-known brand
names as Orajel and Tanac (oral analgesics), Propa pH (acne treatment), Pronto
(pediculicides), Arthricare (topical arthritis treatment), Stye (opthalmic
ointment) and Auro-Dri (ear remedy). The Company's products are sold principally
in the United States and Canada to wholesalers and independent and chain drug,
mass merchandisers and food stores.
 
The Company seeks to increase sales by aggressively marketing its products
under established brand names. The Company targets the mass market, which
accounts for a major portion of the decorative color cosmetics market and the
majority of the over-the-counter pharmaceuticals market. The Company's customers
in the mass market channel include Walgreens, Rite Aid, CVS, and Eckerd, major
drug store chains; Wal-Mart, K-Mart and Target, major national chain mass
merchandisers; and numerous regional chain drug stores and mass merchandisers.
The Company also distributes its pharmaceutical products to drug wholesalers,
including McKesson Drug and Bergen Brunswig and national food chains, including
Kroger and Albertson's. Other than Wal-Mart Stores, Inc., which accounted for
21.5%, 22.7% and 21.7% of the Company's total net sales for 1998, 1997 and 1996,
respectively, and Walgreens which accounted for 10.3% of the Company's total net
sales in 1998, no single customer accounted for more than 10% of the Company's
total net sales.
 
The Company advertises its products on television and radio and in
magazines. In-store displays and promotional activities are also utilized to
attract consumer attention and to inform them of the products available under
the Company's various brands. Cooperative advertising programs with retailers
are also employed to further enhance consumer awareness of the Company's
products and brands. Advertising expenditures were $30.9 million in 1998, or
11.2% as a percentage of total net sales.
 
The Company utilizes two in-house national sales organizations, one for its
cosmetics product lines and one for its pharmaceutical product lines. The
Company also employs independent manufacturers' representatives in selected
geographic areas where a full-time sales employee would not be economically
justified.
 
Certain financial information regarding the Company's industry segments is
set forth in the table below:
 
                               Industry Segments (In thousands of dollars)
                           
 
<TABLE>
<CAPTION>
                                                                         1998        1997        1996
                                                                      ----------  ----------  ----------
<S>                                                                  <C>         <C>         <C>
Net Sales to unaffiliated customers:
    Cosmetics                                                         $  213,714  $  207,260  $  179,031
    Pharmaceuticals                                                       61,148      55,750      53,920
Operating income:                                                  
    Cosmetics                                                             10,381      15,424       8,885
    Pharmaceuticals                                                       12,513       9,828      10,120
Identifiable assets:                                               
    Cosmetics                                                            120,664      87,449      71,362
    Pharmaceuticals                                                       20,205      16,635      15,841
    Corporate (unallocated assets)                                        36,605      45,230      35,179
</TABLE>
 
The Company was incorporated in Delaware in 1961. The Company's cosmetics
business is conducted primarily by the Company and its wholly-owned subsidiary,
Del Laboratories (Canada) Inc., which sells the Company's cosmetics products to
the Canadian market. The Company's pharmaceuticals business is conducted
primarily by the Company's wholly-owned subsidiary, Del Pharmaceuticals, Inc.,
and its indirect wholly-owned subsidiary, Del Pharmaceutics (Canada) Inc., which
sell the Company's pharmaceutical products to the Canadian market.

                                         2
<PAGE>

The Company's products are sold in a limited number of foreign countries.
Export net sales (which exclude sales in Canada and Puerto Rico) have
historically not exceeded 5.0% of total net sales in any year. In 1998, export
net sales represented approximately 2.0% of the Company's total net sales. The
Company has formed a limited number of subsidiaries to conduct its business in
certain foreign countries. In certain other foreign countries, the Company
licenses local representatives and appoints local distributors to sell the
Company's products.
 
The Company sells standard packaged cosmetic and over-the-counter
pharmaceutical products. The Company's customers expect quick response on
standard merchandise orders. The Company does not have a material amount of
order backlog. Consistent with the packaged goods industry, the Company accepts
authorized returns of unmerchantable, defective or discontinued products.
 
The Company purchases raw materials used in its manufacturing processes from
various other manufacturers, paperboard suppliers and bottle distributors. The
Company has not experienced any difficulty obtaining raw materials and believes
that such materials are readily available.
 
The Company expended approximately $4,927,000, $5,038,000 and $4,559,000 in
1998, 1997 and 1996, respectively, on research activities relating to the
development of new products, clinical and regulatory affairs and quality
control, all of which activities are conducted internally by the Company.
 
Competition in both the cosmetics and over-the-counter pharmaceuticals
markets is intense. Many of the principal competitors in each of the Company's
industry segments are well-established firms with greater financial and
marketing resources. Frequent new product introductions and attendant
advertising characterize both industry segments in which the Company operates.
Consumer brand preferences in the Company's industry segments are generally
influenced by advertising, promotional support and price. The cosmetics industry
is sensitive to consumer purchasing power. The Company's competitors in the
cosmetics market include Revlon, Inc., Procter and Gamble (Cover Girl), Cosmair
(Maybelline) and L'Oreal and in the over-the-counter pharmaceuticals market,
include, Whitehall-Robbins Division of American Home Products Corp.,
Warner-Lambert Company, Pfizer, Block Drug, Thompson Medical, Procter and Gamble
Co., SmithKline Beecham, Bristol Myers Squibb, Colgate Palmolive and Johnson and
Johnson.
 
The Company has registered its principal trademarks in each segment of its
business both in the United States and in many countries throughout the world.
The Company considers its trademarks to be material assets, and the registration
and protection of its trademarks in the aggregate to be important to its
business, in that the success of certain of the products is due at least in part
to the goodwill associated with the Company's primary brand names. The Company
has also been issued several United States patents, expiring at various times
through 2010, and has licensed certain intellectual property from third parties.
While the Company believes its patents and licenses to be important, it does not
consider its business as a whole to be dependent on such licenses or patent
protection.
 
The Company currently has approximately 1,560 employees. Approximately 450
of the Company's employees are represented by two labor unions. The Company has
not experienced any work stoppages and considers its employee and labor
relations to be satisfactory.

Item 2--Properties
------------------

The Company's corporate offices are located in 44,000 square feet of leased
space in Uniondale, New York.
 
The Company's principal manufacturing facilities for both the cosmetics and
pharmaceutical segments are located in two buildings at 565 Broad Hollow Road,
Farmingdale, New York. One building is a brick faced concrete block structure
containing approximately 120,000 square feet of floor space. The other is a
steel beamed and brick faced concrete block building, adjacent to the
Farmingdale facility described above, containing approximately 20,000 square
feet of floor space. Both buildings are owned by the Company.
 
The Company also owns certain property used for manufacturing facilities for
its cosmetics segment in Newark, New Jersey. The Newark buildings are brick
faced concrete block and contain approximately 90,000 square feet of floor
space.
 
The Company owned, at December 31, 1998, property at 163 East Bethpage Road,
Plainview, New York. This steel beamed and brick faced concrete block building
contains approximately 63,000 square feet of floor space. This property was sold
in February, 1999.
 
The Company owns property located in Canajoharie, New York, consisting of a
two-story brick and steel building with approximately 50,000 square feet of
floor space. This building is used by the cosmetics segment.
 
The Company owns property located in the City of Barrie, Province of
Ontario, Canada, consisting of a building with approximately 39,000 square feet
of floor space. The facility is used for manufacturing and shipping and contains
the administrative offices of its Canadian subsidiaries.

                                         3
<PAGE>

The Company also owns property located in the City of Little Falls, New
York, consisting of a building with approximately 63,000 square feet of floor
space. The facility is used for production and warehousing. The Company owns a
second building located in close proximity to the Little Falls facility
described above. This 100,000 square foot facility is a one-story steel and
masonry industrial plant built in 1974 and is used for production and
warehousing.
 
The Company's distribution center is located in two owned buildings
containing approximately 225,000 square feet, in Rocky Point, North Carolina.
Both buildings are of insulated metal construction. The buildings and land are
subject to a first mortgage. The distribution center services both the cosmetics
and pharmaceutical segments.
 
The Company also has short-term leases for space in public warehouses. The
space is primarily used for the cosmetics segment.
 
The Company believes that its facilities are adequate to meet the needs of
the Company, operating at reasonable levels of production.
 
Item 3--Legal Proceedings
-------------------------

The Company is not a party to any material pending legal proceedings, other
than ordinary routine litigation incidental to its business.
 
Item 4--Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
 
    Not applicable.
 
Part II
-------
 
Item 5--Market for Company's Common Equity and Related Stockholder Matters
--------------------------------------------------------------------------
 
The Company's common stock is traded on the American Stock Exchange under
the symbol "DLI". The range of high and low sales prices as reported in the
consolidated transaction reporting system of such exchange for each quarterly
period during the past two years is as follows:
 
<TABLE>
<CAPTION>
                                                                                 1998                  1997
                                                                         --------------------  --------------------
<S>                                                                      <C>        <C>        <C>        <C>
                                                                           HIGH        LOW       HIGH        LOW
                                                                         ---------  ---------  ---------  ---------
First Quarter                                                            $   44.25  $   29.63  $   16.69  $   15.38
Second Quarter                                                           $   32.75  $   21.75  $   26.63  $   15.56
Third Quarter                                                            $   28.50  $   19.50  $   30.00  $   24.94
Fourth Quarter                                                           $   26.38  $   16.00  $   30.75  $   25.50
</TABLE>

There were 496 holders of record of the Company's common stock at December
31, 1998. This does not include beneficial holders whose shares are held of
record by nominees. The Company paid regular quarterly dividends of $.026 from
January 1997 through December 1997 and $.035 from January 1998 through December
1998. The Company has paid uninterrupted dividends for the past twenty-five
years. The Company expects to pay comparable cash dividends for the foreseeable
future. The per share information set forth above has been adjusted for a
4-for-3 stock split on February 20, 1998, effected in the form of a stock
dividend.

The terms of the Company's various borrowing agreements provide, among other
things, for restrictions on the payment of cash dividends and certain other
expenditures. At December 31, 1998, amounts available for dividends and the
repurchase of treasury stock amounted to approximately $4,276,000.

                                       4
<PAGE>
Item 6--Selected Financial Data
-------------------------------
 
(Amounts in Thousands Except Per Share and Employee Data)
 
<TABLE>
<CAPTION>
                                                      1998        1997        1996        1995        1994
                                                   ----------  ----------  ----------  ----------  ----------
<S>                                                <C>         <C>         <C>         <C>         <C>
Operating data:
Net sales                                          $  274,862  $  263,010  $  232,951  $  212,048  $  190,102
Net earnings                                           11,077      13,127       9,278       7,025       5,681
 
Earnings per common share: (a)
  Basic                                                  1.46        1.73        1.25         .94         .76
  Diluted                                                1.36        1.59        1.14         .86         .71
Cash dividends per share (a)                              .14        .105        .079        .079        .074
 
Weighted average common shares
  outstanding: (a)
  Basic                                                 7,581       7,593       7,449       7,465       7,516
  Diluted                                               8,126       8,250       8,157       8,165       8,033
 
Balance sheet data:
  Total assets                                     $  177,474  $  149,314  $  122,382  $  114,717  $  104,957
  Long-term debt                                       59,400      43,879      40,000      40,000      40,070
  Working capital                                      62,728      53,576      51,266      42,034      38,813
  Shareholders' equity                                 59,097      54,530      44,842      38,021      34,203
 
Other data:
  Capital additions                                $    7,224  $   15,230  $    5,327  $    7,569  $    5,827
  Approximate # of employees                            1,560       1,390       1,329       1,243       1,175
</TABLE>


    (a) Adjusted to reflect 4-for-3 stock splits effective February 20, 1998 and
       November 8, 1996, a 2-for-1 stock split effective June 16, 1995 and a
       4-for-3 stock split effective June 15, 1994.
 
                                       5
<PAGE>
Item 7--Management's Discussion and Analysis of Financial Condition And Results
-------------------------------------------------------------------------------
of Operations
-------------

Results of Operations
---------------------
 
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
---------------------------------------------------------------------
 
Net Sales.  Net sales were $274.9 million and $263.0 million for 1998 and
1997, respectively, an increase of $11.9 million or 4.5%. Cosmetics net sales
were $213.7 million and $207.3 million for 1998 and 1997, respectively, an
increase of $6.4 million or 3.1%. The increase in cosmetics net sales resulted
primarily from volume growth in existing products and new product introductions
in the Sally Hansen, LaCross and Corn Silk brands. The cosmetics net sales
increase in 1998 was partially offset in the fourth quarter by incremental sales
returns of approximately $4.0 million associated with the acceleration of a
program to reposition and repackage the Naturistics cosmetics line.
 
Net pharmaceutical sales were $61.2 million and $55.8 million for 1998 and
1997, respectively, an increase of $5.4 million or 9.5%. The increase in net
pharmaceutical sales resulted primarily from volume growth in the Orajel family
of products and the Pronto line of pediculicides.
 
Cost of Sales.  Cost of sales were $115.8 million, or 42.1% of net sales in
1998, compared to $101.1 million, or 38.4% of net sales in 1997, an increase of
$14.7 million, or 14.6%. The increase in cost of sales, as a percentage of net
sales, is primarily due to higher product returns, inventory write-downs of the
Naturistics cosmetics and bath & body care line of $1.5 million in the fourth
quarter of 1998, higher manufacturing costs and a change in the mix of business
compared to prior year.
 
Selling and Administrative Expenses.  Selling and administrative expenses
were $136.2 million in 1998 compared to $136.7 million in 1997, a decrease of
$.5 million. The increase in net sales together with a reduction in advertising
and promotional expenditures are the primary reasons for the decrease in selling
and administrative expenses as a percentage of net sales to 49.5% in 1998 from
52.0% in 1997.
 
Operating Income.  As a result of the above, operating income decreased by
9.3% to $22.9 million or 8.3% of net sales in 1998 compared to $25.3 million or
9.6% of net sales in 1997.
 
Net Interest Expense.  Net interest expense was $4.4 million in 1998
compared to $3.4 million in 1997. Interest expense increased $657,000 to $4.7
million in 1998 from $4.0 million in 1997 due primarily to borrowings related to
the acquisition of intellectual property rights and other assets of the Corn
Silk brand of facial make-up in May 1998 and to imputed interest (non-cash
expense) related to the purchase of land and buildings in North Carolina in May
1997.
 
Income Taxes.  The Company's effective tax rate was 40% in both 1998 and
1997. In the fourth quarter of 1998, the Company revised its 1998 projected
effective tax rate from 41% to 40% resulting in an additional tax benefit of
$180,000.
 
Net Earnings.  As a result of the above, net earnings decreased to $11.1
million or 4.0% of net sales compared to $13.1 million or 5.0% of net sales in
1997.
 
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
---------------------------------------------------------------------
 
Net Sales.  Net sales were $263.0 million and $233.0 million for 1997 and 
1996, respectively, an increase of $30.0 million or 12.9%. Net cosmetics 
sales were $207.3 million and $179.0 million for 1997 and 1996, respectively, 
an increase of $28.3 million or 15.8%. The increase in net cosmetics sales 
resulted primarily from volume growth in existing products and new product 
introductions in the Sally Hansen, Sally Hansen Professional Nails, LaCross 
and Naturistics brands and increased advertising and promotional support. Net 
pharmaceutical sales were $55.8 million and $53.9 million for 1997 and 1996, 
respectively, an increase of $1.9 million or 3.5%. The increase in net 
pharmaceutical sales resulted primarily from volume growth in the Orajel 
family of products and the Pronto line of pediculicides. Pharmaceutical net 
sales were negatively impacted during 1997 by consolidations within the drug 
wholesaler market segment and the increasing importance of competing private 
label products in categories in which the Company enjoys a leadership 
position.
 
Cost of Sales.  As a percentage of net sales, cost of sales was 38.4% for
1997 compared to 41.9% for 1996. In 1996, the Company recorded an additional
charge to cost of sales of $2.5 million for excess fashion oriented color
cosmetics and natural based beauty products inventory. No such charge was
included in 1997. Absent the charge in 1996, cost of sales would have improved
from 40.8% in 1996 to 38.4% in 1997, primarily due to improved product mix
within certain brands and the benefits of improved overhead absorption resulting
from higher production volumes.

                                       6
<PAGE>

Selling and Administrative Expenses.  As a percentage of sales, selling and
administrative expenses were 52.0% for 1997 and 50.0% for 1996. The Company
increased advertising, promotions, and research and development in 1997 compared
to 1996 to support growth in existing products and new product launches as well
as incurred a higher level of expenses related to the purchase of promotional
and merchandise displays. Advertising expenses increased by 22.2% to $33.0
million or 12.5% of net sales compared to $27.0 million or 11.6% of net sales in
1996.
 
Operating Income.  As a result of the above, operating income increased by
32.9% to $25.3 million or 9.6% of net sales compared to $19.0 million or 8.2% of
net sales in 1996.
 
Net Interest Expense.  Net interest expense was $3.4 million in 1997,
compared with $3.3 million in 1996. Interest expense increased $195,000 to $4.0
million in 1997 from $3.8 million in 1996 due to imputed interest (non-cash
expense) related to the Company's purchase of land and buildings in North
Carolina. Partially offsetting this increase were higher levels of interest
income.
 
Income Taxes.  The Company's effective tax rate was 40.0% in 1997 compared
to 41.0% in 1996.

Net Earnings.  Net earnings increased by 41.5% to $13.1 million or 5.0% of
net sales compared to $9.3 million or 4.0% of net sales in 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
 
At December 31, 1998, the Company had cash and cash equivalents of $3.7
million as compared to $15.0 million at December 31, 1997.
 
Net cash used by operating activities was $2.5 million for the year ended
December 31, 1998. Net cash provided by operating activities was $17.9 million
and $16.2 million for the years ended December 31, 1997 and 1996, respectively.
The decrease of $20.4 million in net cash provided by operating activities for
1998 compared to 1997 resulted primarily from an increase in accounts
receivable, an increase in inventories and lower earnings. The increase in
accounts receivable of $16.4 was due to a concentration of sales in the latter
part of the fourth quarter. The Company's inventories increased $6.7 million
over 1997 as a result of new cosmetic product launches and growth in existing
product sales.
 
Cash used for the purchase of intangibles and other assets related to the
Corn Silk brand of facial make-up was $12.0 million in 1998. Cash used for
property, plant and equipment additions was $7.2 million, $10.8 million and $5.3
million for 1998, 1997 and 1996, respectively. Capital expenditures for 1998 and
1997 were primarily for manufacturing machinery and equipment. Cash used for
capital expenditures in 1997 included $2.0 million of equipment for the
Company's new distribution facility. In 1997, the Company exchanged a
non-interest bearing purchase money promissory note discounted to $4.4 million
for land and buildings in North Carolina to be used for a new distribution
facility.

Net cash provided by (used in) financing activities was $10.5 million, ($6.6 
million) and ($4.9 million) for 1998, 1997 and 1996, respectively. In 1998, 
cash was primarily provided by proceeds received under a four year credit 
agreement with a bank and short-term borrowings under lines of credit with 
banks. Cash was used primarily for acquisition of shares of the Company's 
common stock aggregating $7.3 million, $5.9 million and $4.3 million in 1998, 
1997 and 1996, respectively, and dividend payments of $1.0 million, $0.7 
million and $0.6 million in 1998, 1997 and 1996, respectively. From time to 
time, the Company has acquired shares of its common stock pursuant to a plan 
approved by the Board of Directors in 1987. The Company will generally 
undertake such purchases if management believes that the prevailing market 
price for its common stock does not adequately reflect the intrinsic value of 
the Company's business. All shares purchased in 1998, 1997 and 1996, were 
placed in treasury. The shares purchased were predominantly from employees 
who held shares issued pursuant to the Company's stock option plans, with the 
balance through open market purchases. As of December 31, 1998, the Company 
was authorized to purchase up to 51,771 additional shares based on the 
existing Board authorization.

Estimated cash flow from operations and available working capital lines of
credit along with leasing transactions, are expected to be adequate to fund the
Company's anticipated working capital requirements, spending for property, plant
and equipment, dividend payments and common share repurchases in the foreseeable
future.
 
The Company believes that general inflation has had no significant impact on
its income from operations during the last three years.


                                       7
<PAGE>

Year 2000 Conversion
--------------------
 
The Company is addressing the issue of many existing computer programs using
only the last two digits to refer to a year. Therefore, these computer programs
do not properly recognize a year that begins with "20" instead of the familiar
"19". If not corrected, many computer applications could fail or create
erroneous results. A committee specifically created to resolve Year 2000 issues,
led by a member of the Board of Directors and comprised of senior corporate
executives and an outside expert, as well as sub-committees and task forces meet
regularly.
 
The Company's efforts to identify and address issues relating to its
readiness for Year 2000 have included the following: the identification phase
(100% complete) consisting of computer based systems, software, third party
programs and all hardware including embedded microprocessors. The assessment
phase (approximately 90% complete) has focused on those applications most
critical to the business including examination of all coding used for date
calculations. The remediation phase (approximately 75% complete) consists of
systems changes, where necessary, by replacement, modification or upgrade. The
testing phase (approximately 35% complete) includes full system tests planned
during the second quarter of 1999 at which time systems dates will be rolled
forward on test machines to check performance and computational accuracy. All
significant suppliers, customers and financial institutions, as well as all
customers doing business electronically with the Company, have been contacted in
order to identify potential areas of concern. It is anticipated that all of the
above phases will be substantially completed by mid 1999.
 
The Company currently estimates that remediation costs will not exceed
$1,000,000 for replacement systems, discovery tools and expenses necessary to
achieve Year 2000 compliance.
 
Improper or inadequate remediation of Year 2000 problems by parties with
whom the Company does business could adversely affect the Company's supply chain
and subsequently the ability to effectively manage production and distribution
activities. In addition, administrative functions essential to the day to day
operations of the business could be impaired if Year 2000 remediation is not
completed in a timely manner. Due to the general uncertainty inherent in the
Year 2000 problem, resulting primarily from the uncertainty of the Year 2000
readiness of parties with whom the Company does business, the Company is unable
to determine at this time whether the consequences of Year 2000 failures will
have a material impact on the Company's results of operations, liquidity or
financial condition.
 
The Company is currently identifying and documenting potential business 
disruptions and continuity planning procedures. The focus of this activity is 
on potential failures of internal and external systems required to carry out 
normal business operations, including services provided by the public 
infrastructure such as electric power, transportation and telecommunications. 
The Company expects this activity to be an on-going process well into the 
third quarter of 1999.
 
The above comments on the Year 2000 issue contain forward-looking statements
relating to the Company's plans, strategies, objectives, intentions, and
resources that should be read in conjunction with the following disclosure on
Forward-Looking Statements.
 
Forward-looking Statements
--------------------------
 
Management's Discussion and Analysis of the Results of Operations and
Financial Condition and other sections of this Annual Report include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 (the
"Exchange Act"). All statements other than statements of historical information
provided herein are forward-looking statements and may contain information about
financial results, economic conditions, trends and known uncertainties. The
forward-looking statements contained herein are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, delays in introducing new products
or failure of consumers to accept new products, actions by competitors which may
result in mergers, technology improvement or new product introductions, the
dependence on certain national chain drug stores, food stores and mass
merchandiser relationships due to the concentration of sales generated by such
chains, changes in fashion oriented color cosmetics trends, and trends in the
general economy.
 
Readers are cautioned not to place undo reliance on these forward-looking
statements, which reflect management's analysis, judgment, belief or expectation
only as of the date hereof. The Company undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances that
arise after the date hereof. In addition to the disclosure contained herein,
readers should carefully review any disclosure of risks and uncertainties
contained in other documents the Company files or has filed from time to time
with the Securities and Exchange Commission pursuant to the Exchange Act.


                                       8
<PAGE>

New Accounting Pronouncements
-----------------------------
 
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133), which is effective for fiscal years beginning after
June 15, 1999. SFAS No. 133 provides guidance for accounting for all derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The management of the Company does not
believe that the implementation of SFAS No. 133 will have a significant impact
on its financial position or results of operations.
 
Item 7A--Market Risk Sensitive Instruments
------------------------------------------
 
The market risk inherent in the Company's market risk sensitive instruments
is the potential loss arising from adverse changes in interest rates and foreign
currency exchange rates.
 
Interest Rate Risk
------------------

The Company's borrowings under the revolving credit agreement and short-term
credit lines expose earnings to changes in short-term interest rates since
interest rates on the underlying obligations are either variable or fixed for
such a short period of time as to effectively become variable. The Company
believes that a hypothetical 10% change in interest rates would not have a
material effect on earnings.

Foreign Exchange Risk
---------------------
 
The Company is subject to risk from changes in the foreign exchange rate for
its foreign subsidiaries which use a foreign currency as their functional
currency and is translated into U.S. dollars. Such changes result in cumulative
translation adjustments which are included in shareholders' equity and in the
determination of other comprehensive income. Intercompany transactions between
the Company and its foreign subsidiaries are recorded by the foreign
subsidiaries in their functional currency. The potential loss resulting from a
hypothetical 10% adverse change in the quoted foreign currency exchange rate
amounts to approximately $0.6 million. Actual results may differ.
 
Item 8--Financial Statements and Supplementary Data
---------------------------------------------------

See Consolidated Financial Statements and Schedule included separately
herein.
 
Item 9--Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure
--------------------
 
None.
 
Part III
--------
 
Item 10--Directors and Executive Officers of the Company
--------------------------------------------------------
 
(a) The information required with respect to Directors is set forth under
    the caption "Election of Directors--Information Concerning Directors" in
    Company's definitive Proxy Statement for the 1999 Annual Meeting of
    Stockholders to be filed pursuant to Regulation 14A and incorporated
    herein by reference.

                                       9
<PAGE>

(b) The executive officers of the Company, the positions held by them, their
    ages and the years in which they began to serve in the position or office
    held as of December 31, 1998 are as follows:
 
<TABLE>
<CAPTION>
                                                                                                          YEAR IN
                                                                                                        WHICH BEGAN
                                                                                                        TO SERVE IN
                                                                                                      POSITION OR AS
NAME                                                   POSITION                            AGE       EXECUTIVE OFFICER
----                                                   --------                            ---       -----------------
<S>                               <C>                                                  <C>          <C>
Dan K. Wassong                    Chairman, President and Chief Executive Officer,
                                  Director                                                     68             1969
 
Charles J. Hinkaty                Vice President, President of Del Pharmaceuticals,
                                  Inc., Director                                               49             1985
 
Enzo J. Vialardi                  Executive Vice President, Chief Financial Officer            62             1998
 
William H. McMenemy               Executive Vice President of Marketing, Cosmetics
                                  Division, North America                                      52             1980
 
Harvey P. Alstodt                 Executive Vice President of Sales, Cosmetics
                                  Division, North America                                      59             1988
 
James F. Lawrence                 Group Vice President--Operations                             64             1993
 
Joseph Kanapka                    Senior Vice President--Scientific Affairs                    53             1996
 
Shawn A. Smith                    Vice President--General Counsel and Secretary                40             1996
 
Thomas Redder                     Vice President--Chief Information Officer                    51             1996
</TABLE>

There is no arrangement or understanding between any executive officer and
any other person pursuant to which he/she was selected as an officer. The
executive officers of the Company are elected annually at the meeting of the
Board of Directors immediately following the Annual Meeting of the
Stockholders. No family relationship exists among any of the executive officers
and directors of the Company.
 
During the past five years, the principal occupation and employment of each
of the Company's executive officers has been his/her service in the respective
position shown for him/her in the above table, except as follows:
 
Enzo J. Vialardi has been Executive Vice President and Chief Financial
Officer of the Company since August 1998. Prior to that time, he served as an
independent consultant from January 1995 to August 1998, Chief Operating Officer
of Nice-Pak Products, Inc. from April 1993 to December 1994 and Senior Vice
President at Del Laboratories, Inc. from September 1991 to March 1993.
 
James F. Lawrence has been Group Vice President-Operations of the Company
since April 1993. Prior to that time, Mr. Lawrence served as an independent
consultant from September 1992 to April 1993, Vice President, Operations of
Artmatic Cosmetics, Inc. from April 1991 to September 1992, Senior Vice
President, Sales and Marketing of Kolmar Laboratories, Inc., a contract
manufacturer, from April 1990 to April 1991 and President of Hazel Bishop, a
cosmetics manufacturer, from December 1987 to April 1990.

                                       10
<PAGE>

Dr. Joseph Kanapka has been Senior Vice President-Scientific Affairs of the
Company since February 1996. From 1989 to 1996, he was employed by Unilever,
where his most recent position was Senior Principal Scientist and Head of Dental
Development for the Unilever Personal Products Group, Italy.
 
Shawn A. Smith has been Vice President-General Counsel of the Company since
August 1996 and Secretary of the Company since March 1998. From 1988 through
1995, she served as Secretary and Corporate Counsel of Data Switch Corporation.
 
Thomas Redder has served as Vice President-Chief Information Officer of the
Company since February 1996. From 1986 through 1995, he was employed by Newsday
as Vice President, Information Systems.
 
Item 11--Executive Compensation
-------------------------------
 
The information required is set forth under the caption "Executive
Compensation" in the Company's definitive Proxy Statement for the 1999 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A and is
incorporated herein by reference.
 
Item 12--Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
 
The information required is set forth under the captions "Securities
Ownership of Certain Beneficial Owners" and "Election of Directors--Information
Concerning Directors" in the Company's definitive Proxy Statement for the 1999
Annual Meeting of Stockholders to be filed pursuant to Regulation 14A and is
incorporated herein by reference.
 
Item 13--Certain Relationships and Related Transactions
-------------------------------------------------------
 
The information required is set forth under the caption "Executive
Compensation" in the Company's definitive Proxy Statement for the 1999 Annual
Meeting of Stockholders to be filed pursuant to Regulation 14A and is
incorporated herein by reference.
 
Part IV
-------
 
Item 14--Exhibits, Financial Statement Schedules and Reports on Form 8-K
------------------------------------------------------------------------
 
a)  Documents filed as part of this report:
 
      (1) and (2) See Consolidated Financial Statements and Schedule included
      herein.
 
      (3) Exhibit Index
 
                                       11
<PAGE>

<TABLE>
<CAPTION>

Item No.  Item Title   Exhibit No.                       Description
--------  ----------   -----------                       -----------
<S>       <C>          <C>           <C>
3    Articles of       3.1(a)      Restated Certificate of Incorporation as filed with the Delaware Secretary of State 
     Incorporation                 on March 29, 1996.
     and By-Laws

                       3.2(b)      Certificate of Amendment filed with the Delaware Secretary of State on June 4, 1996.
 
                       3.3(c)      By-Laws as amended through December 14, 1995.
 
10   Material         10.1(c)      Employee Pension Plan, effective January 1, 1989 (amended and restated).*
     Contracts

                      10.2(d)      Employee's Stock Ownership Plan, effective January 1, 1989.*
 
                      10.3(e)      Amendment No. 1 to Employee's Stock Ownership Plan.*
 
                      10.4(c)      Amendment No. 2 to Employee's Stock Ownership Plan.*
 
                      10.5(e)      1984 Stock Option Plan, as amended to date.*
 
                      10.6(f)      1994 Stock Plan.*
 
                      10.7(f)      Annual Incentive Plan.*
 
                      10.8(e)      Loan Agreement with Dan K. Wassong, dated as of August 22, 1984 and related promissory notes.
 
                      10.9(c)      Loan Agreement with Dan K. Wassong, dated as of April 9, 1988.
 
                      10.10(g)     Loan Agreement with Dan K. Wassong, dated as of November 14, 1990.
 
                      10.11(c)     401(k) Plan effective January 1, 1989(amended and restated).*
 
                      10.12(c)     Supplemental Executive Retirement Plan(amended and restated).*
 
                      10.13(o)     Amendment effective January 1, 1997 to Supplemental Executive Retirement Plan.*
 
                      10.14(h)     Employment Agreement with Dan K. Wassong, dated as of November 13, 1992.*
 
                      10.15(c)     Amendment to Employment Agreement with Dan K. Wassong, dated March 21, 1994.*
 
                      10.16        Amendment No. 2 to Employment Agreement with Dan K. Wassong, dated March 31, 1997.*
 
                      10.17(i)     Loan Agreement dated as of May 26, 1993 with Jackson National Life Insurance Company and
                                   Jackson National Life Insurance Company of Michigan.

</TABLE>

*   Constitutes a "management contract or compensatory plan or arrangement"
    required to be filed pursuant to Item 14 (c) of the Form 10-K.


                                         12

<PAGE>
<TABLE>
<CAPTION>

Item No.  Item Title   Exhibit No.                       Description
--------  ----------   -----------                       -----------
<S>       <C>          <C>           <C>
                      10.18(e)     Employment Agreement with Charles J. Hinkaty, as amended.*
 
                      10.19(l)     Amendment to Employment Agreement with Charles J. Hinkaty, dated April 22, 1996.*
 
                      10.20(e)     Employment Agreement with Harvey P. Alstodt, as amended.*
 
                      10.21(m)     Amendment to Employment Agreement with Harvey P. Alstodt, dated April 22, 1996.*
 
                      10.22        Amendment to Employment Agreement with Harvey P. Alstodt dated December 30, 1997.*
 
                      10.23(e)     Employment Agreement with William H. McMenemy, as amended.*
 
                      10.24(n)     Amendment to Employment Agreement with William H. McMenemy, dated April 22, 1996.*

                      10.25(e)     Life Insurance Agreement with Robert H. Haines, as trustee, dated as of February 18, 1993.*
 
                      10.26(k)     Lease between Registrant and Coliseum Towers Associates.
 
                      10.27(k)     Purchase Money Promissory Note with Carver Boat Corporation.
 
                      10.28        Amendment to Loan Agreement, dated March 31, 1997, to the Loan Agreement, dated May 26, 1993
                                   with Jackson National Life Insurance Company and Jackson National Life Insurance Company of
                                   Michigan.

                      10.29        Employment Agreement with Enzo Vialardi, dated December 30, 1998.*
 
                      10.30        Employment Agreement with James Lawrence, dated March 1993.*
 
                      10.31        Amendment to Employment Agreement with James Lawrence, dated July 12, 1995.*
 
                      10.31        Second Amendment and Employment Agreement with James Lawrence, dated March 31, 1998.*
 
                      10.32        Amendment No. 3 to Supplemental Executive Retirement Plan.*
 
                      10.33        Loan Agreement with Chase Manhattan Bank.
 
21   Subsidiaries     21.1(j)      Listing of Subsidiaries.
     of Registrant

23   Consents of      23.1         Consent of KPMG LLP dated March 26, 1999.
     Experts and 
     Counsel

</TABLE>


(a) These exhibits were filed on April 1, 1996 as exhibits to the Registrant's
    Form 10-K for the year ended December 31, 1995 (File No. 1-5439) and are
    incorporated herein by reference. The exhibit numbers in such Form 10-K are
    as follows: Restated Certificate, Exhibit 1; and By-Laws, Exhibit 2.

                                       13

<PAGE>

(b) This exhibit was filed on August 14, 1996 as an exhibit to the Registrant's
    Form 10-Q for the quarter ended June 30, 1996 (File No. 1-5439) and is
    incorporated herein by reference. The exhibit number in such Form 10-Q is
    Exhibit 1.
 
(c) These exhibits were filed on March 31, 1995 as exhibits to the Registrant's
    Form 10-K for the year ended December 31, 1994 (File No. 1-5439) and are
    incorporated herein by reference. The exhibit numbers in such Form 10-K are
    as follows: Employee Pension Plan, Exhibit 2; Amendment No. 2 to Employee's
    Stock Ownership Plan, Exhibit 3; Loan Agreement with Dan K. Wassong, Exhibit
    4; 401 (k) Plan, Exhibit 5; Supplemental Executive Retirement Plan, Exhibit
    6; Amendment to Employment Agreement with Dan K. Wassong, Exhibit 7.
 
(d) This exhibit was filed on April 2, 1990 as an exhibit to the Registrant's
    Form 10-K for the year ended December 31, 1989 (File No. 1-5439) and is
    incorporated herein by reference. The exhibit number in such Form 10-K is
    Exhibit 2.
 
(e) These exhibits were filed on March 31, 1994, as exhibits to the Registrant's
    Form 10-K for the year ended December 31, 1993 (File No. 1-5439) and are
    incorporated herein by reference. The exhibit numbers in such Form 10-K are
    as follows: Amendment No. 1 to Employee's Stock Ownership Plan, Exhibit 2;
    1984 Stock Option Plan, Exhibit 3; Loan Agreement with Dan K. Wassong dated
    August 22, 1984, Exhibit 4; Employment Agreement with Charles J. Hinkaty,
    Exhibit 5; Employment Agreement with Harvey P. Alstodt, Exhibit 6;
    Employment Agreement with William H. McMenemy, Exhibit 7; Life Insurance
    Agreement with Robert H. Haines, as trustee, Exhibit 9.

(f) These exhibits were filed on or about April 25, 1994, as exhibits to the
    Registrant's Definitive Proxy dated April 25, 1994, relating to the
    Registrant's 1994 Annual Meeting of Stockholders (File No. 1-5439) and are
    incorporated herein by reference. The exhibit numbers in such Proxy
    Statement are as follows: 1994 Stock Plan, Annex A; Annual Incentive Plan,
    Annex B.
 
(g) This exhibit was filed on April 1, 1991, as an exhibit to the Registrant's
    Form 10-K for the year ended December 31, 1990 (File No. 1-5439) and is
    incorporated herein by reference. The exhibit number in such Form 10-K is
    Exhibit 2.
 
(h) This exhibit was filed on March 31, 1993, as an exhibit to the Registrant's
    Form 10-K for the year ended December 31, 1992 (File No. 1-5439) and is
    incorporated herein by reference. The exhibit number in such Form 10-K is
    Exhibit 1.
 
(i) This exhibit was filed on July 1, 1993, as an exhibit to the Registrant's
    Current Report on Form 8-K dated June 29, 1993 (File No. 1-5439) and is
    incorporated herein by reference. The exhibit number in such Form 8-K is
    Exhibit 1.
 
(j) This exhibit was filed on March 30, 1992, as an exhibit to the Registrant's
    Form 10-K for the year ended December 31, 1991 (File No. 1-5439) and is
    incorporated herein by reference. The exhibit number in such Form 10-K is
    Exhibit 4.
 
(k) These exhibits were filed on November 14, 1997 as exhibits to the
    Registrant's Form 10-Q for the quarter ended September 30, 1997 (File No.
    1-5439) and are incorporated herein by reference. The exhibit numbers in
    such Form 10-Q are as follows: Lease between Registrant and Coliseum Towers
    Associates, Exhibit 10.1; Purchase Money Promissory Note with Carver Boat
    Corporation, Exhibit 10.2.
 
(l) This exhibit was filed on March 28, 1997, as exhibit 2 to the Registrant's
    Form 10-K for the year ended December 31, 1996.
 
(m) This exhibit was filed on March 28, 1997, as exhibit 3 to the Registrant's
    Form 10-K for the year ended December 31, 1996.
 
(n) This exhibit was filed on March 28, 1997, as exhibit 4 to the Registrant's
    Form 10-K for the year ended December 31, 1996.
 
(o) This exhibit was filed on March 28, 1997, as exhibit 1 to the Registrant's
    Form 10-K for the year ended December 31, 1996.
 
                                       14
<PAGE>
                                   Signatures
 
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 


DEL LABORATORIES, INC.
(Registrant)

By    /s/ Dan K. Wassong                                         March 26, 1999
      ----------------------------------------------
      Dan K. Wassong, Chairman, President & Chief Executive Officer


 
    Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
in the capacities and on the dates indicated.


                                 
By       /s/ Dan K. Wassong      
      -------------------------                                March 26, 1999
           Dan K. Wassong, Chairman, President & Chief Executive 
                           Officer (Principal Executive Officer)
 
By       /s/ Charles Hinkaty
      -------------------------                                March 26, 1999
           Charles Hinkaty, Director, Vice President
 
By      /s/ Martin E. Revson
      -------------------------                                March 26, 1999
          Martin E. Revson, Director
 
By       /s/ Jack Futterman
      -------------------------                                March 26, 1999
           Jack Futterman, Director
 
By      /s/ Robert A. Kavesh
      -------------------------                                March 26, 1999
          Robert A. Kavesh, Director
 
By        /s/ Steven Kotler
      -------------------------                                March 26, 1999
            Steven Kotler, Director
 
By      /s/ George Lindemann
      -------------------------                                March 26, 1999
          George Lindemann, Director
 
By      /s/ Marcella Maxwell
      -------------------------                                March 26, 1999
          Marcella Maxwell, Director
 
By      /s/ Enzo J. Vialardi
      -------------------------                                March 26, 1999
          Enzo J. Vialardi, Executive Vice President,
                            Chief Financial Officer


                                       15

<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES

            Index to Consolidated Financial Statements and Schedule

<TABLE>
<S>                                                                                 <C>
Independent Auditors' Report                                                              F-2

Financial Statements:

  Consolidated Balance Sheets as of December 31, 1998 and 1997                            F-3

  Consolidated Statements of Earnings for the years ended December 31, 1998, 1997
    and 1996                                                                              F-4

  Consolidated Statements of Cash Flows for the years ended December 31, 1998,
    1997 and 1996                                                                         F-5

  Consolidated Statements of Shareholders' Equity for the years ended December 31,
    1998, 1997 and 1996                                                                   F-6

  Notes to Consolidated Financial Statements                                              F-7

Schedule:

II  Valuation and Qualifying Accounts for the years ended December 31, 1998, 1997
    and 1996                                                                             F-29
</TABLE>

All other schedules are omitted as the required information is inapplicable or 
the information is presented in the consolidated financial statements or 
related notes.

                                      F-1
<PAGE>
                          Independent Auditors' Report
 
The Board of Directors and Shareholders
Del Laboratories, Inc.:
 
We have audited the accompanying consolidated financial statements of Del
Laboratories, Inc. and subsidiaries (the Company) as listed in the accompanying
index. In connection with our audits of the consolidated financial statements,
we also have audited the financial statement schedule as listed in the
accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
 
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Del
Laboratories, Inc. and subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
 
                                           KPMG LLP
 
Melville, New York
February 19, 1999
 
                                      F-2
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                           December 31, 1998 and 1997
 
<TABLE>
<CAPTION>
                                     ASSETS                                               1998           1997
                                     ------                                           -------------  -------------
<S>                                                                                   <C>            <C>
Current assets:
  Cash and cash equivalents                                                           $   3,730,557  $  14,978,616
  Accounts receivable, less allowance for doubtful accounts of $1,300,000 in 1998
    and 1997                                                                             47,115,818     30,708,083
  Inventories                                                                            55,619,832     47,687,154
  Deferred income taxes, net                                                              3,649,565      2,126,565
  Prepaid expenses and other current assets                                               2,975,378      1,858,368
                                                                                      -------------  -------------
        Total current assets                                                            113,091,150     97,358,786
                                                                                      -------------  -------------
Property, plant and equipment, at cost                                                   57,178,427     54,489,263
Less accumulated depreciation and amortization                                          (19,263,190)   (18,097,510)
                                                                                      -------------  -------------
  Net property, plant and equipment                                                      37,915,237     36,391,753
Intangibles arising from acquisitions, net                                               18,449,664      8,143,875
Other assets                                                                              8,017,854      7,419,272
                                                                                      -------------  -------------
        Total assets                                                                  $ 177,473,905  $ 149,313,686
                                                                                      -------------  -------------
                                                                                      -------------  -------------
 
                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
Current liabilities:
  Notes payable to bank                                                               $   3,500,000  $     -
  Current portion of long-term debt                                                         485,610        496,313
  Accounts payable                                                                       35,781,224     28,501,167
  Accrued liabilities                                                                    10,023,943     13,967,459
  Income taxes payable                                                                      572,109        817,753
                                                                                      -------------  -------------
        Total current liabilities                                                        50,362,886     43,782,692
Long-term pension liability, less current portion                                         7,895,044      5,801,308
Deferred income taxes, net                                                                  718,500      1,320,500
Long-term debt, less current portion                                                     59,400,401     43,879,464
                                                                                      -------------  -------------
        Total liabilities                                                               118,376,831     94,783,964
                                                                                      -------------  -------------
                                                                                      -------------  -------------
 
Shareholders' equity:
  Preferred stock $.01 par value, authorized 1,000,000 shares; no shares issued             -              -
  Common stock $1 par value, authorized 10,000,000 shares; issued 10,000,000
    shares                                                                               10,000,000     10,000,000
  Additional paid-in capital                                                              1,850,617        699,000
  Accumulated other comprehensive income                                                 (1,465,750)      (819,146)
  Retained earnings                                                                      81,203,670     71,187,777
                                                                                      -------------  -------------
                                                                                         91,588,537     81,067,631
  Less: Treasury stock at cost, 2,490,823 shares in 1998 and 2,378,063 shares in
    1997                                                                                (31,097,213)   (24,990,659)
  Receivables for stock options exercised                                                (1,394,250)    (1,547,250)
                                                                                      -------------  -------------
        Total shareholders' equity                                                       59,097,074     54,529,722
                                                                                      -------------  -------------
        Total liabilities and shareholders' equity                                    $ 177,473,905  $ 149,313,686
                                                                                      -------------  -------------
                                                                                      -------------  -------------

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

</TABLE>

                                      F-3
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF EARNINGS
                  Years Ended December 31, 1998, 1997 and 1996
 
<TABLE>
<CAPTION>
                                                                       1998            1997            1996
                                                                  --------------  --------------  --------------
<S>                                                               <C>             <C>             <C>
Net sales                                                         $  274,861,637  $  263,010,452  $  232,951,382
Cost of goods sold                                                   115,809,582     101,089,472      97,520,017
Selling and administrative expenses                                  136,158,135     136,668,570     116,426,276
                                                                  --------------  --------------  --------------
  Operating income                                                    22,893,920      25,252,410      19,005,089

Interest expense                                                       4,655,016       3,998,057       3,803,218
Interest income                                                         (222,040)       (623,287)       (521,067)
                                                                  --------------  --------------  --------------
Interest expense, net                                                  4,432,976       3,374,770       3,282,151
                                                                  --------------  --------------  --------------
Earnings before income taxes                                          18,460,944      21,877,640      15,722,938
Income taxes                                                           7,384,000       8,751,000       6,445,000
                                                                  --------------  --------------  --------------
  Net earnings                                                    $   11,076,944  $   13,126,640  $    9,277,938
                                                                  --------------  --------------  --------------
                                                                  --------------  --------------  --------------
Earnings per common share:
  Basic                                                           $         1.46  $         1.73  $         1.25
                                                                  --------------  --------------  --------------
                                                                  --------------  --------------  --------------
  Diluted                                                         $         1.36  $         1.59  $         1.14
                                                                  --------------  --------------  --------------
                                                                  --------------  --------------  --------------
Weighted average common shares outstanding:
  Basic                                                                7,581,000       7,593,000       7,449,000
                                                                  --------------  --------------  --------------
                                                                  --------------  --------------  --------------
  Diluted                                                              8,126,000       8,250,000       8,157,000
                                                                  --------------  --------------  --------------
                                                                  --------------  --------------  --------------
 
The accompanying notes are an integral part of the consolidated financial statements.

</TABLE>

                                      F-4
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
                                                                          1998           1997           1996
                                                                      -------------  -------------  -------------
<S>                                                                   <C>            <C>            <C>
Cash flows from operating activities:
Net earnings                                                          $  11,076,944  $  13,126,640  $   9,277,938
Adjustments to reconcile net earnings to net cash provided by
  operating activities:
Depreciation and amortization                                             6,393,597      5,819,437      6,301,831
Deferred income taxes                                                    (2,062,000)       269,125     (1,437,053)
Provision for doubtful accounts                                             174,000         65,000         40,000
Other non-cash operating items                                             (131,975)        67,679         85,661
Changes in operating assets and liabilities:
  Accounts receivable                                                   (16,581,735)         8,511     (6,195,412)
  Inventories                                                            (6,718,080)   (13,899,407)     3,290,162
  Prepaid expenses and other current assets                              (1,117,010)       (54,611)      (557,536)
  Other assets and other liabilities                                      1,326,292     (1,992,349)     2,216,167
  Accounts payable                                                        6,966,581     11,109,182      2,190,641
  Accrued liabilities                                                    (3,943,516)      (927,171)       399,906
  Income taxes payable                                                    2,088,944      4,259,815        617,136
                                                                      -------------  -------------  -------------
    Net cash (used) provided by operating activities                     (2,527,958)    17,851,851     16,229,441
                                                                      -------------  -------------  -------------
Cash flows used in investing activities:
  Purchase of intangibles and other assets                              (11,964,598)       -              -
  Property, plant and equipment additions                                (7,223,537)   (10,827,246)    (5,327,085)
                                                                      -------------  -------------  -------------
    Net cash used in investing activities                               (19,188,135)   (10,827,246)    (5,327,085)
                                                                      -------------  -------------  -------------
Cash flows provided by (used in) financing activities:
  Proceeds from borrowings                                               19,250,000        -              -
  Principal payments of long-term debt                                     (487,076)      (219,572)       (70,395)
  Exercise of stock options                                                  38,203        264,507          4,393
  Decrease in receivables for stock options exercised                        13,000         15,672         18,344
  Acquisition of treasury stock                                          (7,323,295)    (5,875,068)    (4,313,371)
  Dividends paid                                                           (996,911)      (740,308)      (584,054)
  Other financing activities                                                 (4,434)       -               (4,500)
                                                                      -------------  -------------  -------------
    Net cash provided by (used in) financing activities                  10,489,487     (6,554,769)    (4,949,583)
                                                                      -------------  -------------  -------------
Effect of exchange rate changes on cash                                     (21,453)        (7,167)          (201)
                                                                      -------------  -------------  -------------
Net increase (decrease) in cash and cash equivalents                    (11,248,059)       462,669      5,952,572
Cash and cash equivalents at beginning of year                           14,978,616     14,515,947      8,563,375
                                                                      -------------  -------------  -------------
Cash and cash equivalents at end of year                              $   3,730,557  $  14,978,616  $  14,515,947
                                                                      -------------  -------------  -------------
                                                                      -------------  -------------  -------------

The accompanying notes are an integral part of the consolidated financial statements.
 
</TABLE>
 
                                      F-5
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                  Years Ended December 31, 1998, 1997 and 1996
 
<TABLE>
<CAPTION>
                                      ADDITIONAL  ACCUMULATED OTHER                              RECEIVABLES FOR
                           COMMON      PAID-IN      COMPREHENSIVE      RETAINED      TREASURY     STOCK OPTIONS    SHAREHOLDERS'
                            STOCK      CAPITAL         INCOME          EARNINGS       STOCK         EXERCISED         EQUITY
                         -----------  ----------  -----------------   -----------  ------------  ---------------   -------------
<S>                      <C>          <C>         <C>                 <C>          <C>           <C>               <C>
Balances at December
  31, 1995               $ 8,784,514  $2,831,970     $  (492,831)     $52,659,920  $(23,867,674)   $(1,894,664)    $ 38,021,235
Issuance of treasury
  stock upon exercise
  of stock options
  (385,575 shares)            -        (842,938 )        -                 -          3,118,273        -              2,275,335
Purchase of treasury
  stock (313,452
  shares)                     -           -              -                 -         (6,584,313)       -             (6,584,313)
Income tax benefit
  arising from stock
  options exercised           -       2,336,599          -                 -             -             -              2,336,599
Repayment of
  receivables                 -           -              -                 -             -             158,344          158,344
Dividends declared
  ($.105 per share)           -           -              -               (584,400)       -             -               (584,400)
Net earnings                  -           -              -              9,277,938        -             -                -
Foreign currency
  translation
  adjustment                  -           -              (54,197)          -             -             -                -
  Total comprehensive
    income                    -           -              -                 -             -             -              9,223,741
Cash paid for
  fractional shares           -          (4,500 )                          -             -             -                 (4,500)
                         -----------  ----------  -----------------   -----------  ------------  ---------------   -------------
Balances at December
  31, 1996                 8,784,514  4,321,131         (547,028)      61,353,458   (27,333,714)    (1,736,320)      44,842,041
Issuance of treasury
  stock upon exercise
  of stock options
  (347,633 shares)            -        (592,898 )        -                 -          3,282,807        -              2,689,909
Purchase of treasury
  stock (276,638
  shares)                     -           -              -                 -         (8,370,111)       -             (8,370,111)
Income tax benefit
  arising from stock
  options exercised           -       3,118,206          -                 -             -             -              3,118,206
Repayment of
  receivables                 -           -              -                 -             -             189,070          189,070
Dividends declared
  ($.14 per share)            -           -              -               (793,915)       -             -               (793,915)
Four-for-three stock
  split (note 1(k))        1,215,486  (6,147,439)        -             (2,498,406)    7,430,359        -                -
Net earnings                  -           -              -             13,126,640        -             -                -
Foreign currency
  translation
  adjustment                  -           -             (272,118)          -             -             -                -
  Total comprehensive
    income                    -           -              -                 -             -             -             12,854,522
                         -----------  ----------  -----------------   -----------  ------------  ---------------   -------------
Balances at December
  31, 1997                10,000,000    699,000         (819,146)      71,187,777   (24,990,659)    (1,547,250)      54,529,722
Issuance of treasury
  stock upon exercise
  of stock options
  (242,168 shares)            -       (1,178,537)        -                 -          2,686,943        -              1,508,406
Purchase of treasury
  stock (354,928
  shares)                     -           -              -                 -         (8,793,497)       -             (8,793,497)
Income tax benefit
  arising from stock
  options exercised           -       2,334,588          -                 -             -             -              2,334,588
Repayment of
  receivables                 -           -              -                 -             -             153,000          153,000
Dividends declared
  ($.14 per share)            -           -              -             (1,061,051)       -             -             (1,061,051)
Four-for-three stock
  split-cash in lieu of
  fractional shares           -          (4,434 )        -                 -             -             -                 (4,434)
Net earnings                  -           -              -             11,076,944        -             -                -
Foreign currency
  translation
  adjustment                  -           -             (540,742)          -             -             -                -
Minimum pension
  liability
  adjustment                  -           -             (105,862)          -             -             -                -
  Total comprehensive
    income                    -           -              -                 -             -             -             10,430,340
                         -----------  ----------  -----------------   -----------  ------------  ---------------   -------------
Balances at December
  31, 1998               $10,000,000  $1,850,617     $(1,465,750)     $81,203,670  $(31,097,213)   $(1,394,250)    $ 59,097,074
                         -----------  ----------  -----------------   -----------  ------------  ---------------   -------------
                         -----------  ----------  -----------------   -----------  ------------  ---------------   -------------

The accompanying notes are an integral part of the consolidated financial statements.
 
</TABLE>
 
                                      F-6




<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
 
(1) Summary of Accounting Policies
    ------------------------------

    (a) Description of Business
        -----------------------

Del Laboratories, Inc. and subsidiaries (the Company) is a manufacturer and
distributor of cosmetics and proprietary pharmaceuticals. The principal products
in the cosmetics segment are nail care, nail color, color cosmetics, beauty
implements, personal care products and other related cosmetic items. The
principal products in the pharmaceutical segment are of a proprietary nature and
range from oral analgesics to acne treatment products and first aid products.

    (b) Principles of Consolidation
        ---------------------------

The consolidated financial statements of the Company include the accounts of
all wholly-owned domestic and foreign subsidiaries. The net assets and results
of foreign operations are not significant to the consolidated financial
statements. The accounts of foreign subsidiaries are translated in accordance
with the provisions of Statement of Financial Accounting Standards (SFAS) No.
52, "Foreign Currency Translation." As such, balance sheet accounts are
translated at the exchange rate as of December 31, of each year and income
statement accounts are translated at average exchange rates during the period.
The resulting translation adjustments are recorded as a component of
shareholders' equity. Gains or losses resulting from foreign currency
transactions are included in other income. All intercompany accounts and
transactions have been eliminated in consolidation.
 
    (c) Cash and Cash Equivalents
        -------------------------
 
Cash and cash equivalents include deposits in banks, short term commercial
paper, United States Treasury bills and money market funds with an initial term
of less than three months. Cash equivalents were $695,000 and $14,181,000 as of
December 31, 1998 and 1997, respectively. For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.

    (d) Revenue Recognition
        -------------------

The Company sells its products to chain drug stores, mass volume retailers,
supermarkets and wholesalers. Sales of such products are principally denominated
in U.S. dollars. The Company's accounts receivable reflect the granting of
credit to these customers. Revenues are recognized and product discounts are
recorded when merchandise is shipped. Net sales are comprised of gross revenues
less returns, trade discounts and customer allowances. Merchandise returns are
accrued at the earlier of customer deduction or receipt of goods. The Company
generally grants credit based upon analysis of the customer's financial position
and previously established buying and selling patterns.

    (e) Inventories
        -----------

Inventories are valued at the lower of cost (principally first-in/first-out)
or market value. The components of inventories are as follows:
 
<TABLE>
<CAPTION>
                                                                     1998           1997
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Raw materials                                                    $  26,911,795  $  22,563,304
Work in process                                                      6,247,489      4,325,842
Finished goods                                                      22,460,548     20,798,008
                                                                 -------------  -------------
                                                                 $  55,619,832  $  47,687,154
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>
 
                                      F-7
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

    (f) Property, Plant and Equipment
        -----------------------------
 
The Company provides for depreciation on the straight-line method over the
estimated useful lives of the assets. The range of estimated lives applicable to
the assets are as follows:
 
<TABLE>
<S>                                                           <C>
Building and building improvements                            10 to 50 years
Machinery and equipment                                        3 to 15 years
Furniture and fixtures                                         3 to 10 years
</TABLE>

<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    (g) Income Taxes
        ------------
 
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
 
    (h) Research and Development
        ------------------------
 
The Company has expended $4,927,000, $5,038,000 and $4,559,000 during 1998,
1997 and 1996, respectively, for research and development relating to the
development of new products, clinical and regulatory affairs, and quality
control/assurance of the Company's product lines. All costs associated with
research and development are expensed as incurred and included in selling and
administrative expenses in the accompanying consolidated statements of earnings.
 
    (i) Advertising Costs
        -----------------

Advertising costs are expensed as incurred. Advertising expenses were
approximately $31,000,000, $33,000,000 and $27,000,000 in 1998, 1997 and 1996,
respectively.
 
    (j) Earnings Per Share
        ------------------
 
Earnings per share is computed in accordance with the provisions of SFAS No.
128, "Earnings per Share," which was effective for the Company as of December
31, 1997. As required by SFAS No. 128, earnings per share for all prior periods
presented have been restated. Basic earnings per share is computed by dividing
income available to common shareholders (which for the Company equals its
recorded net income) by the weighted average number of common shares outstanding
during the period. For the years ended December 31, 1998, 1997 and 1996, the
weighted average number of common shares outstanding was 7,581,000, 7,593,000
and 7,449,000, respectively. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock, such as stock options, were exercised, converted into common stock or
otherwise resulted in the issuance of common stock. For the years ended December
31, 1998, 1997 and 1996, the weighted average number of shares of diluted common
stock outstanding was 8,126,000, 8,250,000 and 8,157,000, respectively.
 
    (k) Stock Splits
        ------------
 
On February 6, 1998, the Company's Board of Directors approved a 
four-for-three common stock split to be distributed in the form of a stock 
dividend. As a result, 1,908,377 shares were issued on March 10, 1998 to 
shareholders of record on February 20, 1998, of which 692,891 shares 
represented treasury stock of the Company. Accordingly, the effect of the 
four-for-three stock split has been reflected on the consolidated balance 
sheet and consolidated statement of shareholders' equity as of December 31, 
1997. In addition, all references to number of shares, per share amounts and 
stock option data, excluding share and per share amounts reflected on the 
consolidated statement of shareholders' equity for the years ended December 
31, 1997 and 1996, have been restated. In connection with the stock dividend, 
treasury stock was reduced by $7,430,359, with a corresponding reduction in 
retained earnings of $2,498,406 and a reduction in additional paid-in-capital 
of $6,147,439 as of December 31, 1997.

On October 29, 1996, the Company's Board of Directors approved a 
four-for-three split of the Company's common stock which was effective 
November 8, 1996 in the form of a stock dividend. All share, per share and 
conversion amounts relating to common stock and stock options included in the 
accompanying consolidated financial statements and footnotes have been 
restated to reflect the stock split.

                                      F-8
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    (l) Stock Option Plan
        -----------------

The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations, in accounting for
its fixed plan stock options. As such, compensation expense would be recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price.
 
    (m) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
        -----------------------------------------------------------------------

The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amounts of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of SFAS No. 121 on January 1, 1996 gave rise to a charge
to income of $2,775,000 (note 4) in the year ended December 31, 1996.
 
    (n) Reclassifications
        -----------------
 
Certain reclassifications were made to prior year amounts to conform with
the 1998 presentation.
 
    (o) Use of Estimates
        ----------------
 
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.

(2) Supplemental Cash Flow Information
    ----------------------------------

The following is supplemental information relating to the consolidated 
statements of cash flows:
 
<TABLE>
<CAPTION>
                                                                 1998          1997          1996
                                                             ------------  ------------  ------------
<S>                                                          <C>           <C>           <C>
Cash transactions:
Interest                                                     $  4,591,000  $  3,805,000  $  3,804,000
                                                             ------------  ------------  ------------
                                                             ------------  ------------  ------------
Income taxes                                                 $  7,630,000  $  4,171,000  $  7,173,000
                                                             ------------  ------------  ------------
                                                             ------------  ------------  ------------
Non-cash transactions:
Income tax benefit arising from stock options exercised      $  2,335,000  $  3,118,000  $  2,337,000
                                                             ------------  ------------  ------------
                                                             ------------  ------------  ------------
Purchase of North Carolina property                                -       $  4,403,000        -
                                                             ------------  ------------  ------------
                                                             ------------  ------------  ------------
Shares tendered to exercise stock options                    $  1,470,000  $  2,495,000  $  2,271,000
                                                             ------------  ------------  ------------
                                                             ------------  ------------  ------------
</TABLE>
 
                                      F-9
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued
 
(3) Property, Plant and Equipment
    -----------------------------

The components of property, plant and equipment, at cost, are as follows:

<TABLE>
<CAPTION>
                                                                                      1998           1997
                                                                                  -------------  -------------
<S>                                                                               <C>            <C>
Land                                                                              $   2,829,295  $   2,790,479
Building & building improvements                                                     17,175,319     16,982,845
Machinery & equipment                                                                30,031,476     29,569,208
Furniture & fixtures                                                                  7,142,337      5,146,731
                                                                                  -------------  -------------
                                                                                  $  57,178,427  $  54,489,263
                                                                                  -------------  -------------
                                                                                  -------------  -------------
</TABLE>

Depreciation expense for the years ended December 31, 1998, 1997 and 1996 was 
$5,700,053, $5,466,462 and $5,539,631, respectively.

In 1997, the Company purchased for $4,678,000 land and buildings in North 
Carolina to be used as a warehouse and distribution center, which replaced 
the Company's leased facility in Huntington, New York.
 
(4) Impairment of Long-Lived Assets
    -------------------------------
 
In the fourth quarter of 1996 the Company concluded that the recoverability 
of the carrying value of long-lived assets associated with its Naturistics 
brand of bath & body care and its Propa pH brand, was impaired. The initial 
non-cash charge upon the adoption of SFAS No. 121 was $2,775,000 ($1,842,000 
after tax or $.25 basic earnings per common share and $.23 diluted earnings 
per common share), which included $2,275,000 of tools, dies, molds and 
displays associated with the Naturistics brand of bath & body care and 
$500,000 of goodwill associated with Propa pH. Of the $2,775,000 non-cash 
charges, $902,000 was charged to cost of sales, while $1,873,000 was charged 
to selling and administrative expenses. During 1998 and 1997, purchases for 
Naturistics bath & body care, tools, dies, molds and displays of $732,000 and 
$725,000, respectively, were charged to cost of sales, and $710,000 and 
$2,861,000, respectively, were charged to selling and administrative expenses.
 
This initial charge resulted from the Company grouping assets at a lower 
level than under its previous accounting policy for evaluating and measuring 
impairment. Under the Company's previous policy, each of the segment's 
long-lived assets to be held and used by the segment were evaluated as a 
group for impairment. Because of the strong operating performance and 
prospects for each segment, no impairment evaluation had been required in the 
past under the Company's previous accounting policy. This initial charge 
represented a reduction of the carrying amounts of the impaired assets (as 
defined in note 1) to their estimated fair value, as determined by using 
discounted estimated cash flows. Considerable management judgment is 
necessary to estimate discounted future cash flows. Accordingly, actual 
results could vary significantly from such estimates.
 
(5) Intangibles Arising from Acquisitions
    -------------------------------------
 
Intangibles represent the excess of the purchase prices paid for companies 
and product lines over amounts assigned to net tangible assets. Total 
intangibles related to acquisitions prior to 1971 amount to $6,660,000, of 
which $378,000 was written off in 1995 due to a diminution in value. The 
remaining $6,282,000 has been determined to be recoverable under the 
provisions of SFAS No. 121, therefore, no amortization has been provided for 
this amount. The portion of intangibles, $3,350,000, acquired in 1980, 
attributable to Propa pH, had been amortized using the straight-line method 
over 30 years. In 1996, the Company reduced the carrying value of goodwill 
associated with the Propa pH brand by $500,000, which is included in 
amortization expense, and accelerated amortization of the remaining net book 
value ($1,015,000 at December 31, 1996) over a five-year period. The 
trademarks acquired in 1984, $3,000,000, are being amortized using the 
straight-line method over 20 years. In 1998, the Company acquired the 
intellectual property rights and other assets of the Corn Silk brand of 
facial make-up for approximately $10.9 million and $1.0 million in cash, 
respectively. The intellectual property rights are being amortized over 20 
years.

Accumulated amortization amounted to $5,559,773, $4,866,229 and $4,513,254 at 
December 31, 1998, 1997 and 1996, respectively. Amortization expense amounted 
to $693,544, $352,975 and $762,200 for the years ended December 31, 1998, 
1997 and 1996, respectively.


                                      F-10
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

(6) Income Taxes
    ------------
    The components of income tax expense (benefit) are as follows:
 
<TABLE>
<CAPTION>
1998                                                          Federal        State        Foreign       Total
----                                                        ------------  ------------  -----------  ------------
<S>                                                         <C>           <C>           <C>          <C>
Current tax                                                 $  8,107,000  $  1,011,000  $   328,000  $  9,446,000
Deferred tax                                                  (1,780,000)     (282,000)      -         (2,062,000)
                                                            ------------  ------------  -----------  ------------
                                                            $  6,327,000  $    729,000  $   328,000  $  7,384,000
                                                            ------------  ------------  -----------  ------------
                                                            ------------  ------------  -----------  ------------
1997
----
Current tax                                                 $  7,206,000  $    988,000  $   288,000  $  8,482,000
Deferred tax                                                     241,000        28,000       -            269,000
                                                            ------------  ------------  -----------  ------------
                                                            $  7,447,000  $  1,016,000  $   288,000  $  8,751,000
                                                            ------------  ------------  -----------  ------------
                                                            ------------  ------------  -----------  ------------
1996
----
Current tax                                                 $  7,102,000  $    706,000  $    74,000  $  7,882,000
Deferred tax                                                  (1,295,000)     (142,000)      -         (1,437,000)
                                                            ------------  ------------  -----------  ------------
                                                            $  5,807,000  $    564,000  $    74,000  $  6,445,000
                                                            ------------  ------------  -----------  ------------
                                                            ------------  ------------  -----------  ------------
</TABLE>
 
In the fourth quarter of 1998, the Company revised its 1998 projected 
effective tax rate from 41% to 40% resulting in an additional tax benefit of 
$180,000. Total income tax expense differed from the statutory United States 
Federal income tax rate of 35% for the years ended December 31, 1998 and 1997 
and 34% for the year ended December 31, 1996 of earnings before income taxes 
as a result of the following items:
 
<TABLE>
<CAPTION>
                                                                              1998          1997          1996
                                                                          ------------  ------------  ------------
<S>                                                                       <C>           <C>           <C>
Tax provision at statutory rate                                           $  6,461,000  $  7,658,000  $  5,425,000
Increases in taxes resulting from:
State income taxes, net of Federal income tax benefit                          474,000       661,000       373,000
Amortization of intangibles                                                    225,000       225,000       208,000
Other, net                                                                     224,000       207,000       439,000
                                                                          ------------  ------------  ------------
Actual provision for income taxes                                         $  7,384,000  $  8,751,000  $  6,445,000
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------
</TABLE>


                                      F-11
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. For presentation
purposes, certain of such tax assets and liabilities are shown net on the
accompanying balance sheets. Significant components of the Company's deferred
tax assets and liabilities as of December 31, are as follows:

<TABLE>
<CAPTION>
                                                                                          1998           1997
                                                                                      -------------  -------------
<S>                                                                                   <C>            <C>
Deferred tax assets:
  Accounts receivable, principally due to allowance for doubtful accounts             $     470,000  $     470,000
  Supplemental Executive Retirement Plan (SERP) expense, principally due to 
    accrual for financial statement purposes                                              1,291,000        988,000
  Inventory, principally due to reserves                                                  2,442,000      1,294,000
  Pension accrual for financial reporting purposes                                        1,233,000        763,000
  Sales discounts and returns, coupon redemptions and other                               1,043,000        684,000
                                                                                      -------------  -------------
Total gross deferred tax assets                                                           6,479,000      4,199,000
Less valuation allowance                                                                    -              -
                                                                                      -------------  -------------
Net deferred tax assets                                                                   6,479,000      4,199,000
                                                                                      -------------  -------------
Deferred tax liabilities:
  Property, plant and equipment, principally due to differences in depreciation
    methods                                                                              (3,243,000)    (2,923,000)
  Other                                                                                    (305,000)      (470,000)
                                                                                      -------------  -------------
Total gross deferred tax liabilities                                                     (3,548,000)    (3,393,000)
                                                                                      -------------  -------------
Net deferred tax asset                                                                $   2,931,000  $     806,000
                                                                                      -------------  -------------
                                                                                      -------------  -------------
</TABLE>

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes it is
more likely than not the Company will realize the benefits of these deductible
differences.


                                      F-12
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

(7) Debt
    ----

<TABLE>
<CAPTION>
                                                                     1998           1997
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Maturing within one year
------------------------
Current portion of long-term debt                                $     485,610  $     496,313
Notes payable under lines of credit                                  3,500,000        -
                                                                 -------------  -------------
                                                                 $   3,985,610  $     496,313
                                                                 -------------  -------------
                                                                 -------------  -------------

Long-term debt
--------------
9.5% senior notes                                                $  40,000,000  $  40,000,000
Notes payable under revolving credit agreement                      15,750,000        -
Purchase money promissory note                                       4,136,011      4,375,777
                                                                 -------------  -------------
                                                                 $  59,886,011  $  44,375,777
Less current portion                                                   485,610        496,313
                                                                 -------------  -------------
                                                                 $  59,400,401  $  43,879,464
                                                                 -------------  -------------
                                                                 -------------  -------------
</TABLE>

The senior notes, as amended, require annual principal repayments of
$8,000,000 beginning May 31, 2001 through May 31, 2005. The terms of the
agreement include covenants which provide, among other things, for the
maintenance of certain financial covenants and ratios relating to consolidated
net worth and working capital, as well as restrictions on cash dividends and
certain other expenditures. During 1997, this agreement was amended, which
increased the limit on amounts available for dividends and the repurchase of
treasury stock. At December 31, 1998, amounts available for dividends and the
repurchase of treasury stock was approximately $4,276,000. The Company was in
compliance with all covenants at December 31, 1998.

In conjunction with the 1997 purchase of land and buildings in North
Carolina (note 3), the Company issued a non-interest bearing purchase money
promissory note to the seller of the property for $5,225,000 which is
collateralized by the land and buildings in North Carolina. The Company recorded
the note payable at its present value using an interest rate of 7.3% which
approximated the Company's incremental borrowing rate. Interest expense is being
recognized over the term of the note based upon the effective yield method. The
repayment terms of the note include $1,375,000 to be repaid over three years
($225,000 in 1997, $525,000 in 1998, $500,000 in 1999 and $125,000 in 2000) and
a single lump sum payment of $3,850,000 due on May 15, 2000.

In December 1998, the Company entered into a four year credit agreement with
a bank providing a $20,000,000 revolving credit facility which expires in 2002.
Under the terms of the agreement, interest rates on borrowings are based on, at
the Company's option, LIBOR, prime or federal funds rates. The terms of the
agreement include a commitment fee based on unutilized amounts, and covenants
which provide, among other things, for the maintenance of financial covenants
and ratios relating to consolidated net worth, as well as restrictions on cash
dividends and certain other expenditures. No compensating balances are required.
The Company was in compliance with all covenants at December 31, 1998. The
weighted-average interest rate at December 31, 1998 was 6.5%.

The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1998, including amounts outstanding under the
revolving credit agreement, are as follows: 1999, $500,000; 2000, $3,975,000;
2001, $8,000,000; 2002, $23,750,000; and 2003, $8,000,000.

(8) Financing Arrangements
    ----------------------

At December 31, 1998, the Company had arrangements with banks providing
$17,500,000 of lines of credit. These lines, which are renewable annually, are
currently in force and are expected to be renewed at their respective expiration
dates. Borrowings under these lines at December 31, 1998 were $3,500,000 and
were refinanced in January 1999 under the four year revolving credit facility.
There were no borrowings under these lines during the years ended December 31,
1997 and 1996. No compensating balances are required for these lines or for
drawings thereunder and there are no restrictive covenants.


                                      F-13
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


(9) Employee Retirement Plans
    -------------------------

    (a) Pension Plans
        -------------

The Company maintains two non-contributory defined benefit pension plans
covering all U.S. eligible employees. The Del Non-Union Plan formula is based on
years of service and the employee's compensation during the five years before
retirement. The Del LaCross Union Plan formula is based on years of service. The
Company made contributions to these plans of $519,000, $606,000 and $586,000 for
the years 1998, 1997 and 1996. Assets held by these plans consist of cash and
cash equivalents, fixed income securities, consisting of U.S. government and
corporate bonds, and common stocks. The Company also has a defined benefit
supplemental executive retirement plan (SERP) for certain of its executives. The
SERP is a non-qualified plan under the Internal Revenue Code. The plan assets of
the SERP, which were approximately $2,105,000 and $1,710,000 as of December 31,
1998 and 1997, are considered assets of the Company and, as such, are included
in other assets on the accompanying consolidated balance sheets. The assets of
the SERP, which consist of cash and cash equivalents and U.S. government bonds,
are held-to-maturity securities and, as such, are carried at cost plus accrued
interest. The Company made contributions to the SERP of $265,000 and $750,000 in
1998 and 1997, respectively.

Total pension expense for the years ended December 31, 1998, 1997 and 1996 
amounted to approximately $1,736,000, $1,826,000 and $1,587,000, 
respectively. The change in benefit obligation, change in plan assets and 
funded status as of December 31, 1998 and 1997 and components of net periodic 
cost for the years ended December 31, 1998, 1997 and 1996 of the Company's 
domestic plans are set forth in the following tables:

<TABLE>
<CAPTION>
                                                                                          1998
                                                                       ------------------------------------------
<S>                                                                    <C>            <C>           <C>
                                                                         Del Non-     Del LaCross
                                                                        Union Plan     Union Plan       SERP
                                                                       -------------  ------------  -------------
Change in benefit obligation:                                        
  Benefit obligation at the beginning of the year                      $  14,271,480  $  1,044,667  $   3,475,818
  Service cost                                                               963,336        21,418         49,694
  Interest cost                                                              996,031        71,603        316,291
  Plan amendments                                                            -               9,786        938,546
  Actuarial loss                                                             729,738        21,816        275,327
  Benefits paid                                                             (565,854)      (59,633)        (7,790)
                                                                       -------------  ------------  -------------
  Benefit obligation at the end of the year                               16,394,731     1,109,657      5,047,886
                                                                       -------------  ------------  -------------
                                                                     
Change in plan assets:                                               
  Fair value of assets at the beginning of the year                    $  12,190,109  $    508,921        -
  Actual return on plan assets                                             2,478,540        19,748        -
  Employer contributions                                                     468,750        50,000        -
  Benefits paid                                                             (565,854)      (59,633)       -
                                                                       -------------  ------------  -------------
  Fair value of assets at the end of the year                             14,571,545       519,036        -
                                                                       -------------  ------------  -------------
  Funded status                                                        $  (1,823,186) $   (590,621) $  (5,047,886)
  Unrecognized transition (assets) obligation                               (252,241)       74,329        -
  Unamortized prior service cost                                             429,727        53,233      1,826,539
  Unrecognized net actuarial (gain) loss                                    (908,745)      168,862        119,813
                                                                       -------------  ------------  -------------
  Net amount recognized                                                $  (2,554,445) $   (294,197) $  (3,101,534)
                                                                       -------------  ------------  -------------
                                                                       -------------  ------------  -------------
Amounts recognized in the balance sheet consist of:                  
  Accrued benefit liability                                            $  (2,554,445) $   (590,621) $  (4,912,188)
  Intangible assets                                                          -             127,562      1,810,654
  Accumulated other comprehensive income                                     -             168,862        -
                                                                       -------------  ------------  -------------
  Net amount recognized                                                $  (2,554,445) $   (294,197) $  (3,101,534)
                                                                       -------------  ------------  -------------
                                                                       -------------  ------------  -------------
</TABLE>


                                      F-14

<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

<TABLE>
<CAPTION>
                                                                                          1997
                                                                      --------------------------------------------
                                                                         Del Non-      Del LaCross
                                                                        Union Plan     Union Plan        SERP
                                                                      --------------  -------------  -------------
<S>                                                                   <C>             <C>            <C>
Change in benefit obligation:                                        
  Benefit obligation at the beginning of the year                     $   14,843,169  $   1,068,293  $   2,558,003
  Service cost                                                             1,020,529         22,419         46,209
  Interest cost                                                              888,092         70,859        224,367
  Plan amendments                                                            -               23,040        905,706
  Actuarial (gain)                                                        (2,000,858)       (86,454)      (258,467)
  Benefits paid                                                             (479,452)       (53,490)       -
                                                                      --------------  -------------  -------------
  Benefit obligation at the end of the year                               14,271,480      1,044,667      3,475,818
                                                                      --------------  -------------  -------------
                                                                     
Change in plan assets:                                               
  Fair value of assets at the beginning of the year                   $   10,316,157  $     507,359        -
  Actual return on plan assets                                             1,784,654         18,052        -
  Employer contributions                                                     568,750         37,000        -
  Benefits paid                                                             (479,452)       (53,490)       -
                                                                      --------------  -------------  -------------
  Fair value of assets at the end of the year                             12,190,109        508,921        -
                                                                      --------------  -------------  -------------
                                                                     
  Funded status                                                       $   (2,081,371) $    (535,746) $  (3,475,818)
  Unrecognized transition (assets) obligation                               (314,817)        99,106        -
  Unamortized prior service cost                                             485,883         53,632      1,153,098
  Unrecognized net actuarial (gain) loss                                    (128,832)       128,616       (124,480)
                                                                      --------------  -------------  -------------
  Net amount recognized                                               $   (2,039,137) $    (254,392) $  (2,447,200)
                                                                      --------------  -------------  -------------
                                                                      --------------  -------------  -------------
                                                                     
  Amounts recognized in the balance sheet consist of:                
  Accrued benefit obligation                                          $   (2,039,137) $    (739,072) $  (3,556,849)
  Intangible assets                                                          -              484,680      1,109,649
                                                                      --------------  -------------  -------------
  Net amount recognized                                               $   (2,039,137) $    (254,392) $  (2,447,200)
                                                                      --------------  -------------  -------------
                                                                      --------------  -------------  -------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                          1998
                                                                      --------------------------------------------
                                                                         Del Non-      Del LaCross
                                                                        Union Plan     Union Plan        SERP
                                                                      --------------  -------------  -------------
<S>                                                                   <C>             <C>            <C>
Components of net periodic cost:
  Service cost                                                        $      963,336  $      21,418  $      48,767
  Interest cost                                                              996,031         71,603        327,482
  Expected return on plan assets                                            (968,889)       (39,994)       -
  Amortization of unrecognized transition (assets) obligations               (62,576)        24,776        -
  Recognized prior service cost                                               56,156         10,185        265,106
  Recognized net losses                                                      -                1,817         20,769
                                                                      --------------  -------------  -------------
  Net periodic cost                                                   $      984,058  $      89,805  $     662,124
                                                                      --------------  -------------  -------------
                                                                      --------------  -------------  -------------
</TABLE>

                                      F-15
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued
 
 
<TABLE>
<CAPTION>
                                                                                            1997
                                                                            -------------------------------------
                                                                              Del Non-    Del LaCross
                                                                             Union Plan   Union Plan      SERP
                                                                            ------------  -----------  ----------
<S>                                                                         <C>           <C>          <C>
Components of net periodic cost:
  Service cost                                                              $  1,020,529   $  22,419   $   53,381
  Interest cost                                                                  888,092      70,859      207,823
  Expected return on plan assets                                                (828,793)    (40,069)       -
  Amortization of unrecognized transition (assets) obligations                   (62,576)     24,776        -
  Recognized prior service cost                                                   56,156       9,206      171,251
  Recognized net losses                                                          191,386      20,789       20,769
                                                                            ------------  -----------  ----------
  Net periodic cost                                                         $  1,264,794   $ 107,980   $  453,224
                                                                            ------------  -----------  ----------
                                                                            ------------  -----------  ----------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                            1996
                                                                            -------------------------------------
                                                                              Del Non-    Del LaCross
                                                                             Union Plan   Union Plan      SERP
                                                                            ------------  -----------  ----------
<S>                                                                         <C>           <C>          <C>
Components of net periodic cost:
  Service cost                                                              $    902,914   $  22,892   $   29,339
  Interest cost                                                                  802,656      60,209      143,132
  Expected return on plan assets                                                (734,832)    (37,880)       -
  Amortization of unrecognized transition (assets) obligations                   (62,576)     24,776        -
  Recognized prior service cost                                                   56,156       6,902       88,020
  Recognized net losses                                                          252,304      12,007       21,286
                                                                            ------------  -----------  ----------
  Net periodic cost                                                         $  1,216,622   $  88,906   $  281,777
                                                                            ------------  -----------  ----------
                                                                            ------------  -----------  ----------
</TABLE>
 
The weighted-average actuarial assumptions used as of December 31, 1998,
1997 and 1996 were:
 
<TABLE>
<CAPTION>
                                                                   1998       1997       1996
                                                                 ---------  ---------  ---------
<S>                                                              <C>        <C>        <C>
Discount rates                                                        6.75%      7.00%      6.00%
Rate of compensation increase                                         5.50%      5.50%      5.50%
Expected long-term rate of return on plan assets                      9.00%      8.00%      8.00%
</TABLE>
 
The Company contributes to a multi-employer pension plan for the benefit of
its union employees not covered by the above plans. This plan is a defined
benefit plan based on years of service. The costs recognized for the years ended
December 31, 1998, 1997 and 1996 were approximately $430,000, $447,000 and
$394,000, respectively.
 
Effective January 1, 1991, the Company established a defined contribution
plan for the benefit of its Canadian employees not covered by the above plans.
The costs recognized for the years ended December 31, 1998, 1997 and 1996 were
approximately $60,000, $57,000 and $54,000 in U.S. dollars, respectively.
 
                                      F-16

<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

    (b) Employee Stock Ownership Plan
        -----------------------------

The Company has an employee stock ownership plan and related trust, covering
substantially all full-time non-union employees. Under the terms of the plan,
the Company may make contributions to the trust in cash, shares of Company stock
or other property in amounts as may be determined by the Board of Directors. The
Board of Directors authorized contributions of $525,000 and $800,000 for the
years ended December 31, 1997 and 1996, respectively. At December 31, 1998 the
trust held 488,000 shares of Company common stock.
 
    (c) Employee 401(k) Savings Plan
        ----------------------------
 
The Company maintains an Employee 401(k) Savings Plan. The plan is a defined
contribution plan which is administered by the Company. All regular, full-time
employees are eligible for voluntary participation upon completing six months of
service and having attained the age of twenty-one. The plan provides for growth
in savings through contributions and income from investments. It is subject to
the provisions of the Employee Retirement Income Security Act of 1974 (ERISA),
as amended. Plan participants are allowed to contribute a specified percentage
of their base salary. However, the Company retains the right to make optional
contributions for any plan year. No such optional contributions were made for
the years ended December 31, 1998, 1997 and 1996.
 
(10) Shareholders' Equity
     --------------------

    (a) Stock Option Plans
        ------------------

The 1994 Stock Plan (the 1994 Plan) provides for the granting of incentive
and non-incentive options and other stock-based awards. A total of 1,521,978
shares have been authorized for issuance under the 1994 Plan. At December 31,
1998, non-incentive options have been the only awards issued under the 1994
Plan. The exercise price of options granted under the 1994 Plan shall not be
less than the fair market value of the common stock at the date of the grant.
The Compensation Committee of the Board of Directors (the Committee) determines
the persons to whom options will be granted, the prices at which options may be
exercised, the vesting period and whether the options will be incentive or
non-incentive. Incentive options, if granted, are exercisable for a period of up
to ten years from the date of the grant. The exercise price of the shares to be
purchased shall be paid either in cash, delivery (i.e., surrender) of shares of
common stock owned by the optionee at the time of exercise of the option, in
installments payable in cash if permitted by the Committee or in any combination
of the foregoing.

Shares received by an optionee upon exercise of a non-incentive option may
not be sold or otherwise disposed of for a period (restricted period) determined
by the Committee upon grant of the option, which shall be not less than six
months or more than three years from the date of the exercise, during which
period the Company is entitled, in the event the employment of the optionee with
the Company terminates, to repurchase the shares at the exercise price.
Following the restricted period, the Company shall have a right of first refusal
to purchase the shares at fair market value. Shares issuable upon exercise of
options granted to date under the 1994 Plan are subject to a six month
restricted period. At December 31, 1998, 783,139 of the 1,223,239 options
outstanding were exercisable under the 1994 Plan, at a weighted-average exercise
price of $13.47.
 
The 1984 Stock Option Plan, as amended (the 1984 Plan), provided for the
granting of incentive and non-incentive options to purchase shares of the
Company's common stock at prices which are not less than the fair market value
of the common stock at the dates of grant. Options are exercisable as determined
by
 
                                      F-17
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued
 
the Committee for a period up to ten years and one day from the date of grant.
Incentive options granted to a 10% stockholder must be granted at 110% of fair
market value and may be exercised up to five years from the date of grant.
Payment of the exercise price of options may be made in the same manner as
provided by the 1994 Plan, and shares issued upon exercise are subject to a
restricted period similar to that provided under the 1994 Plan. At December 31,
1998, all 487,837 options outstanding under the 1984 Plan were exercisable at a
weighted-average exercise price of $5.09. No further options will be granted
under the 1984 Plan.

Limited stock appreciation rights also may be granted under the 1994 Plan
and 1984 Plan, which will be effective only upon a change in control of the
Company (as defined). These plans also accelerate the exercisability of all
unexercised options or stock appreciation rights immediately in the event of a
change in control of the Company.

Shares outstanding, option prices and option transactions during the last
three years, are summarized below:
 
<TABLE>
<CAPTION>
                                                                                            1994 Stock Plan
                                                                                     -----------------------------
<S>                                                                                  <C>         <C>
                                                                                                 Weighted-average
                                                                                       Shares     exercise price
                                                                                     ----------  -----------------
Outstanding December 31, 1995                                                           634,668      $   11.02
  Granted                                                                               319,243          15.76
  Exercised                                                                              (2,180)         10.73
  Forfeited                                                                              (4,469)         11.97
                                                                                     ----------
 Outstanding December 31, 1996                                                          947,262          12.61
  Granted                                                                               303,667          23.77
  Exercised                                                                             (80,311)          9.81
  Forfeited                                                                             (86,842)         18.40
                                                                                     ----------
 Outstanding December 31, 1997                                                        1,083,776          15.48
  Granted                                                                               195,055          26.06
  Exercised                                                                             (28,265)         14.05
  Forfeited                                                                             (27,327)         26.49
                                                                                     ----------
 Outstanding December 31, 1998                                                        1,223,239      $   16.71
                                                                                     ----------
                                                                                     ----------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                        1984 Stock Option Plan
                                                                                     -----------------------------
<S>                                                                                  <C>         <C>
                                                                                                 Weighted-average
                                                                                       Shares     exercise price
                                                                                     ----------  -----------------
Outstanding December 31, 1995                                                         1,596,863      $  4.85
  Granted                                                                                 -              -
  Exercised                                                                            (511,920)        4.40
  Forfeited                                                                               -              -
                                                                                     ----------
Outstanding December 31, 1996                                                         1,084,943         5.06
  Granted                                                                                 -              -
  Exercised                                                                            (383,200)        4.96
  Forfeited                                                                               -              -
                                                                                     ----------
Outstanding December 31, 1997                                                           701,743         5.12
  Granted                                                                                 -              -
  Exercised                                                                            (213,903)        5.20
  Forfeited                                                                                  (3)        4.67
                                                                                     ----------
Outstanding December 31, 1998                                                           487,837      $  5.09
                                                                                     ----------
                                                                                     ----------
</TABLE>
 
At December 31, 1998, a total of 1,711,076 shares of common stock were
subject to outstanding options under all stock option plans.


                                      F-18
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

The Company applies APB Opinion No. 25 and interpretations in accounting for
stock option plans. Accordingly, no compensation cost has been recognized. Had
compensation cost for the stock option plans been determined based on the fair
value at the grant dates for awards under the plans, consistent with the
alternative method set forth under SFAS No. 123, "Accounting for Stock-Based
Compensation", the Company's net earnings and net earnings per share would have
been reduced. The pro forma amounts are indicated below:
 
<TABLE>
<CAPTION>
Year Ended December 31                                                     1998           1997           1996
---------------------------------------------------------------------  -------------  -------------  ------------
<S>                                                                    <C>            <C>            <C>
Net earnings
  As reported                                                          $  11,077,000  $  13,127,000  $  9,278,000
  Pro forma                                                            $  10,076,000  $  12,488,000  $  8,283,000
Basic net earnings per share
  As reported                                                          $        1.46  $        1.73  $       1.25
  Pro forma                                                            $        1.33  $        1.64  $       1.11
Diluted net earnings per share
  As reported                                                          $        1.36  $        1.59  $       1.14
  Pro forma                                                            $        1.24  $        1.51  $       1.02
</TABLE>
 
The fair value of each option grant was estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions for 1998, 1997 and 1996, respectively: dividend yields .58%, .46%,
and .50%; expected lives of 5.5, 5.3 and 5.1 years; risk-free interest rates of
5.02%, 6.40% and 6.08%; and expected volatility of 39.0%, 26.6% and 25.5%. The
weighted-average fair value of options granted during 1998, 1997 and 1996 were
$10.21, $8.60 and $5.33, respectively.
 
The following table summarizes information about stock options at December
31, 1998:
 
<TABLE>
<CAPTION>
                                                                         Exercisable stock
                               Outstanding stock options                      options
                    ------------------------------------------------  -----------------------
<S>                 <C>         <C>                <C>                <C>         <C>
                                                                                   Weighted-
                                    Weighted-      Weighted-average                 average
     Range of                       remaining          exercise                    exercise
 exercise prices      Shares    contractual life         price          Shares       price
------------------  ----------  -----------------  -----------------  ----------  -----------
$ 0.01 to $ 4.00     135,626           2.21          $    3.05         135,626   $    3.05
$ 4.01 to $ 8.00     457,983           2.70          $    6.21         457,983   $    6.21
$ 8.01 to $12.00     168,968           3.88          $   11.41         168,305   $   11.41
$12.01 to $16.00     499,313           4.72          $   14.09         418,003   $   13.79
$16.01 to $20.00      89,745           5.40          $   18.50          29,416   $   17.83
$20.01 to $24.00     148,109           5.73          $   21.94          35,426   $   22.13
$24.01 to $28.00     115,024           8.05          $   25.20           2,473   $   26.71
$28.01 to $32.00      96,308           6.97          $   29.90          23,744   $   30.15
                  ------------------------------------------------------------------------
$ 0.01 to $32.00   1,711,076           4.37          $   13.39       1,270,976   $   10.25
                  ------------------------------------------------------------------------
                  ------------------------------------------------------------------------
</TABLE>


                                      F-19
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued


    (b) Receivables for Stock Options Exercised
        ---------------------------------------

In 1984, the Company loaned an officer $367,000 in connection with the 
payment of taxes arising from the exercise of stock options (the 1984 Loan). 
The Company also loaned the officer $1,065,313 in 1988 (the 1988 Loan) and 
$1,100,000 in 1990 (the 1990 Loan), each in connection with the exercise of 
stock options and the tax liability arising therefrom. These loans were 
payable in annual installments. In addition, the 1988 Loan and the 1990 Loan 
agreements provided that, if the officer was employed by the Company at the 
time any interest or debt payments were due, such payment would be forgiven.
 
Pursuant to an amendment to this officer's employment agreement, the 1984
Loan, the 1988 Loan and the 1990 Loan were consolidated, effective as of January
1, 1994, with the aggregate principal balance to be repaid, with interest at the
rate of 6.0% per annum, in annual amounts of $140,000 for each year during the
period from 1995 through 2005 and a final payment of $362,250 on January 20,
2006, provided that each payment of interest and principal will be forgiven when
due so long as the officer is then employed by, or then serves as a consultant
to the Company and, provided further, that the Company may (but is not required
to) forgive, during any year until 2005, in excess of $140,000 of principal, so
long as the aggregate of principal and interest forgiven by the Company in any
such year shall not exceed $360,000. This loan must be secured by collateral
with a fair value of 110% of the unpaid principal. The loan balance at December
31, 1998 was $1,342,250 and was collateralized by 77,331 shares of the Company's
common stock.
 
During 1992, the Company loaned another officer $130,000 to enable him to
exercise an option for 9,719 shares. The loan bears interest at the prime rate
and is payable in quarterly installments. The loan balance at December 31, 1998
was $52,000 and was secured by a pledge of 8,500 shares of the Company's common
stock.
 
The balance of all loans made to officers and employees is reflected as a
reduction of shareholders' equity in the accompanying consolidated financial
statements.
 
(11) Accrued Liabilities
     -------------------
 
Accrued liabilities at December 31, 1998 and 1997 consisted of the
following:
 
<TABLE>
<CAPTION>
                                                                                         1998           1997
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
Salaries, wages, commissions & employee benefits                                     $   2,432,968  $   3,618,762
Interest                                                                                   381,036        316,667
Advertising and promotion costs                                                          3,994,744      7,113,385
Other                                                                                    3,215,195      2,918,645
                                                                                     -------------  -------------
                                                                                     $  10,023,943  $  13,967,459
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>
 
                                      F-20
<PAGE>
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued
 
(12) Earnings Per Share
     ------------------
 
A reconciliation between the numerators and denominators of the basic and
diluted income per common share is as follows:
 
<TABLE>
<CAPTION>
                                                                                     (Amounts in thousands, except
                                                                                            per share data)
                                                                                    -------------------------------
<S>                                                                                 <C>        <C>        <C>
                                                                                      1998       1997       1996
                                                                                    ---------  ---------  ---------
Net earnings (numerator)                                                            $  11,077  $  13,127  $   9,278
                                                                                    ---------  ---------  ---------
 
Weighted-average common shares (denominator for basic earnings per share)               7,581      7,593      7,449
 
Effect of dilutive securities:
 
Employee stock options                                                                    545        657        708
 
Weighted-average common and potential common shares outstanding (denominator for
  diluted earnings per share)                                                           8,126      8,250      8,157
                                                                                    ---------  ---------  ---------
 
Basic earnings per share                                                            $    1.46  $    1.73  $    1.25
                                                                                    ---------  ---------  ---------
 
Diluted earnings per share                                                          $    1.36  $    1.59  $    1.14
                                                                                    ---------  ---------  ---------

</TABLE>
 
Employee stock options for 124,000, 107,000 and 261,000 shares for the years
ended December 31, 1998, 1997 and 1996, respectively, were not included in the
net earnings per share because their effect would have been anti-dilutive.


                                      F-21
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

(13) Commitments and Contingencies
     -----------------------------

In June 1997, the Company entered into a settlement agreement with respect
to a shareholders' derivative action against members of the Company's Board of
Directors in which, among other things, the Company's insurance carrier agreed
to pay $400,000 to the Company on behalf of the individual defendants, and the
Company paid $150,000 in connection with plaintiff's attorney's fees. The
stipulation of settlement expressly acknowledges that the settlement does not
constitute an admission by the defendants of any liability or wrongdoing by
them, but was entered into by the defendants to avoid the burden and costs of
further litigation.
 
The Company is involved in various other claims and legal actions arising in
the ordinary course of business, including environmental matters. In the opinion
of management, the ultimate disposition of these matters will not have a
material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
 
The Company leases executive office space, furniture, data processing 
equipment, transportation equipment and warehouse space under terms of leases 
expiring through 2004. Rentals under these operating leases aggregated 
approximately $2,439,000, $2,491,000 and $1,993,000 in the years ended 
December 31, 1998, 1997 and 1996, respectively. The Company's obligations 
under non-cancelable leases are summarized as follows:

<TABLE>
<S>                                    <C>
1999                                  $ 2,467,274
2000                                    2,272,969
2001                                    2,119,433
2002                                    1,951,389
2003                                    1,467,479
Thereafter                              1,328,896
                                      -----------
                                      $11,607,440
                                      -----------
                                      -----------
</TABLE>
 
(14) Financial Instruments
     ---------------------

The carrying value of all financial instruments classified as a current
asset or current liability are deemed to approximate fair value because of the
short maturity of these instruments.
 
The difference between the fair value of long-term debt and its carrying
value at December 31, 1998 is approximately $5,000,000. The fair value of
long-term debt is based upon discounted cash flows using rates available to the
Company for debt with similar terms and maturities. The Company continually
evaluates the benefits of refinancing versus the related prepayment penalties.
Because considerable judgement is required in interpreting market data to
develop estimates of fair value, the estimates are not necessarily indicative of
the amounts that could be realized or would be paid in a current market
exchange. The effect of using different market assumptions or estimation
methodologies may be material to the estimated fair value amount.


                                      F-22
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

(15) Comprehensive Income (Loss)
     ---------------------------
 
Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting 
Comprehensive Income". This Statement requires that all items recognized 
under accounting standards as components of comprehensive income be reported 
in a financial statement that is displayed with the same prominence as other 
financial statements. Other comprehensive income may include foreign currency 
translation adjustments, minimum pension liability adjustments and unrealized 
gains and losses on marketable securities classified as available for sale. 
The Company's items of other comprehensive income (loss) include foreign 
currency translation adjustments and minimum pension liability adjustments. 
The components of other comprehensive loss for the years ended December 31, 
1998, 1997 and 1996 are as follows:

<TABLE>
<CAPTION>
                                                                Accumulated Other Comprehensive Income (Loss)
                                                           -------------------------------------------------------
<S>                                                        <C>                    <C>                <C>
                                                             Foreign Currency
                                                                Translation        Minimum Pension
                                                                Adjustment            Liability          Total
                                                           ---------------------  -----------------  -------------
Balance at 12/31/95                                            $    (492,831)       $     -          $    (492,831)
 
Foreign currency translation adjustment                              (54,197)             -                (54,197)
                                                                 -----------      -----------------  -------------
 
Balance at 12/31/96                                                 (547,028)             -               (547,028)
 
Foreign currency translation adjustment                             (272,118)             -               (272,118)
                                                                 -----------      -----------------  -------------
 
Balance at 12/31/97                                                 (819,146)             -               (819,146)
 
Foreign currency translation adjustment                             (540,742)             -               (540,742)
 
Minimum pension liability, net of taxes of $63,000                   -                   (105,862)        (105,862)
                                                                 -----------      -----------------  -------------
 
Balance at 12/31/98                                            $  (1,359,888)       $    (105,862)   $  (1,465,750)
                                                                 -----------      -----------------  -------------
                                                                 -----------      -----------------  -------------
</TABLE>
 
                                      F-23
<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

(16) Segment Information
     -------------------
 
At December 31, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". This statement established
standards for reporting information about operating segments and related
disclosure about products and services and geographic areas. The Company
operates in two segments, Cosmetics and Pharmaceutical, that have been organized
by the products and services they offer. The Cosmetics segment's principal
products are nail care, nail color, color cosmetics, beauty implements, bleaches
and depilatories, personal care products and other related cosmetic items. The
Pharmaceutical segment's principal products are proprietary oral analgesics,
acne treatment products and first aid products. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. The Company evaluates the performance of its operating
segments based on operating income. Certain assets, including property, plant
and equipment and deferred tax assets, are not allocated to the identifiable
segments. However, depreciation and amortization of unallocated assets are
charged to each segment.
 
<TABLE>
<CAPTION>
                                                                                  1998        1997        1996
                                                                               ----------  ----------  ----------
<S>                                                                            <C>         <C>         <C>
Net sales
  Cosmetics                                                                    $  213,714  $  207,260  $  179,031
  Pharmaceutical                                                                   61,148      55,750      53,920
                                                                               ----------  ----------  ----------
  Consolidated                                                                 $  274,862  $  263,010  $  232,951
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
 
Operating income
  Cosmetics                                                                    $   10,381  $   15,424  $    8,885
  Pharmaceutical                                                                   12,513       9,828      10,120
                                                                               ----------  ----------  ----------
  Consolidated                                                                 $   22,894  $   25,252  $   19,005
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
 
Interest expense, net                                                          $    4,433  $    3,375  $    3,282
                                                                               ----------  ----------  ----------
Earnings before taxes                                                          $   18,461  $   21,878  $   15,723
                                                                               ----------  ----------  ----------
 
Identifiable assets
  Cosmetics                                                                    $  120,664  $   87,449  $   71,362
  Pharmaceutical                                                                   20,205      16,635      15,841
  Corporate (unallocated assets)                                                   36,605      45,230      35,179
                                                                               ----------  ----------  ----------
  Consolidated                                                                 $  177,474  $  149,314  $  122,382
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
 
Depreciation and amortization
  Cosmetics                                                                    $    5,966  $    5,418  $    5,506
  Pharmaceutical                                                                      428         401         796
                                                                               ----------  ----------  ----------
  Consolidated                                                                 $    6,394  $    5,819  $    6,302
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
 
Expenditures for property, plant and equipment and long-lived assets
  Cosmetics                                                                    $   14,167  $    2,282  $    2,082
  Pharmaceutical                                                                      320         253         154
  Corporate (unallocated assets)                                                    4,702      12,695       3,091
                                                                               ----------  ----------  ----------
  Consolidated                                                                 $   19,189  $   15,230  $    5,327
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>

Sales to one customer by the cosmetics and pharmaceutical segments combined
were 21.5%, 22.7% and 21.7% of consolidated net sales for 1998, 1997 and 1996,
respectively and combined sales to another customer were 10.3% of consolidated
net sales in 1998.
 
Two customers accounted for 35.4% and 37.4% of the Company's net accounts
receivables at December 31, 1998 and 1997, respectively.

                                      F-24

<PAGE>

                    DEL LABORATORIES, INC. AND SUBSIDIARIES
             Notes to Consolidated Financial Statements, Continued

(17) Subsequent Event
     ----------------

In February 1999, the Company sold a warehouse facility in Plainview, New
York for $2,700,000. At December 31, 1998, this facility was included in
property, plant and equipment, with a net book value of approximately $804,000,
and was accounted for as a held for sale asset.
 
(18) Unaudited Quarterly Financial Data
     ----------------------------------

The following is a summary of quarterly operating results (in thousands of
dollars except per share amounts):
 
<TABLE>
<CAPTION>
                                                                               Year Ended December 31, 1998
                                                                        ------------------------------------------
<S>                                                                     <C>        <C>        <C>        <C>
                                                                          First     Second      Third     Fourth
                                                                         Quarter    Quarter    Quarter    Quarter
                                                                        ---------  ---------  ---------  ---------
Net sales                                                               $  65,416  $  73,971  $  70,663  $  64,812
Cost of goods sold                                                         25,438     29,420     30,527     30,425
Net earnings (loss)                                                         3,251      4,405      3,784       (363)
Earnings (loss) per common share:
  Basic                                                                 $     .43  $     .58  $     .50  $    (.05)
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
  Diluted                                                               $     .39  $     .54  $     .47  $    (.05)
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                               Year Ended December 31, 1997
                                                                        ------------------------------------------
<S>                                                                     <C>        <C>        <C>        <C>
                                                                          First     Second      Third     Fourth
                                                                         Quarter    Quarter    Quarter    Quarter
                                                                        ---------  ---------  ---------  ---------
Net sales                                                               $  54,215  $  75,093  $  68,865  $  64,837
Cost of goods sold                                                         21,386     29,142     26,541     24,020
Net earnings                                                                1,061      5,427      3,675      2,964
Earnings per common share:
  Basic                                                                 $     .14  $     .72  $     .49  $     .39
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
  Diluted                                                               $     .13  $     .66  $     .44  $     .36
                                                                        ---------  ---------  ---------  ---------
                                                                        ---------  ---------  ---------  ---------
</TABLE>
 
Earnings per share calculations for each of the quarters are based on
weighted-average number of shares outstanding in each period. Therefore, the sum
of the quarters in a year does not necessarily equal the year's earnings per
share.
 
                                      F-25
<PAGE>
                                  SCHEDULE II
 
                    DEL LABORATORIES, INC. AND SUBSIDIARIES
 
                       Valuation and Qualifying Accounts
 
                  Years Ended December 31, 1998, 1997 and 1996
 
<TABLE>
<CAPTION>
                                                                          Additions
                                                             Balance at   Charged to                  Balance at
                                                             Beginning    Costs and                      End
DESCRIPTION                                                  of Period     Expenses   Deductions(1)   of Period
-----------                                                 ------------  ----------  -------------  ------------
<S>                                                         <C>           <C>         <C>            <C>
Year ended December 31, 1996 allowances for doubtful
  accounts                                                  $  1,700,000  $   40,000   $   240,000   $  1,500,000
                                                            ------------  ----------  -------------  ------------
                                                            ------------  ----------  -------------  ------------
Year ended December 31, 1997 allowances for doubtful
  accounts                                                  $  1,500,000  $   65,000   $   265,000   $  1,300,000
                                                            ------------  ----------  -------------  ------------
                                                            ------------  ----------  -------------  ------------
Year ended December 31, 1998 allowances for doubtful
  accounts                                                  $  1,300,000  $  174,000   $   174,000   $  1,300,000
                                                            ------------  ----------  -------------  ------------
                                                            ------------  ----------  -------------  ------------
</TABLE>
 
 
(1) Uncollectible accounts written off, net of recoveries.
 
                                      F-26