<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                     ------------------------------------
                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 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 [FEE REQUIRED]

For the fiscal year ended December 31, 1996
                                      OR
[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
       SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _______________ to ___________________

                                     Commission File No. 0-26568

                             USA DETERGENTS, INC.
            (Exact name of registrant as specified in its charter)

            Delaware                            11-2935430
       ---------------------------           ------------------
      (State or other jurisdiction of        (I.R.S. Employer
      incorporation or organization)         Identification No.)

         1735 Jersey Avenue
       North Brunswick, New Jersey                 08902
       ---------------------------            -----------------
        (Address of principal                    (Zip Code)
          executive offices)

Registrant's telephone number, including area code:  (908) 828-1800
<TABLE>
<CAPTION>
<S>                                                             <C>
Securities registered pursuant to Section 12(b) of the Act:     Name of each exchange
     Title of each class                                         on which registered
     --------------------------------------------------------------------------------

         None                                                        Not Applicable
     ---------------                                              -------------------
</TABLE>

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

      Common Stock, $.01 par value
      ----------------------------
           (Title of Class)

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

The number of shares outstanding of the Registrant's Common Stock, as of March
14, 1997, was 13,790,717 shares. The aggregate market value of the
Registrant's Common Stock held by non-affiliates of the Registrant (based upon
the closing price of such stock on the Nasdaq National Market on March 14,
1997 and the assumption for this computation only that all directors and
executive officers are affiliates) was $163,457,730.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement for the Annual Meeting
of Stockholders scheduled to be held on May 20, 1997, to be filed pursuant to
Regulation 14A of the Securities Exchange Act of 1934 with the Securities and
Exchange Commission, are incorporated by reference into this Annual Report
(Part III).



<PAGE>



     Unless otherwise indicated, all information in this Form 10-K has been
adjusted to reflect (i) a reorganization of the company into a Delaware
corporation effected in August 1995, (ii) the issuance of approximately 88,167
shares of Common Stock for each share of Common Stock of the Company's
predecessor in connection with the reorganization and (iii) a 3-for-2 stock
split effected in the form of a 50% stock dividend paid on February 9, 1996
(the "Stock Split"). Unless the context otherwise requires, the "Company" or
"USA Detergents" shall mean USA Detergents, Inc., its wholly-owned
subsidiaries and its predecessor to the reorganization.

     When used in this report, the words "believes," "anticipates," "expects,"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially from those projected. In addition to
seasonal fluctuations, the Company's operating results are affected by a wide
variety of other factors that could materially and adversely affect actual
results, including competition; difficulties associated with rapid growth;
dependence on certain customers, key products or limited sources of supply;
and reliance on certain manufacturing facilities. As a result of these and
other factors, the Company may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect its business, financial condition, operating results, and
stock price. These forward-looking statements speak only as of the date
hereof. The Company undertakes no obligation to publicly release the results
of any revisions to these forward-looking statements which may be made to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.


                                    PART I

ITEM 1. BUSINESS

GENERAL

     USA Detergents is a leading manufacturer and marketer of quality
nationally distributed value brand laundry and household cleaning products.
The Company currently markets its products in eight laundry and household
product categories and features twelve distinct value brands. Two of the
Company's brands, XTRA(R) and Nice'n FLUFFY(R), currently rank among the ten
largest brands in their respective product categories in terms of total retail
sales in the United States. XTRA(R) and Nice'n FLUFFY(R) represented 60% and
21%, respectively, of the Company's net sales in 1996. The Company sells its
products to large and small retailers throughout the United States including
supermarkets, mass merchandisers, variety and dollar stores, drug stores and
small grocery stores, such as Wal-Mart, Consolidated Stores, K-Mart,
Walgreens, Super Value and Waldbaum's.


                                     -1-



<PAGE>



HOUSEHOLD PRODUCTS MARKET OVERVIEW

     The Company believes the market for laundry and household cleaning
products ("Household Products") in which it competes or intends to compete
consists of the following eleven product categories: liquid laundry detergent,
powder laundry detergent, liquid fabric softener, fabric softener sheets,
household cleaners, dish detergent, personal soap products, air fresheners,
bleaches, rug and upholstery cleaners and floor cleaners.

     While the leading supplier varies among different Household Products
categories, the overall market for Household Products is dominated by two
principal suppliers: Procter & Gamble Co. and Unilever N.V. The Company
believes these two premium-priced brand suppliers accounted for approximately
54%, in the aggregate, of retail sales of Household Products in 1996.

     The Company views the market for Household Products as being segmented
into four types of brands: value brands, store brands, mid-priced brands and
premium-priced brands. The Company believes that consumer purchases of laundry
and household cleaning products are determined, in large part, by price, with
certain consumers willing to pay a premium for leading national brand names
and the latest packaging and technology and other consumers demanding
value-priced brands incorporating certain features found in premium-priced
products. The Company believes the primary characteristics of each of these
types of brands are as follows:

     Value Brands. Value brands are sold to retailers and consumers at prices
significantly below most other brands of Household Products. Value brands
generally incorporate packaging features and product quality comparable to
premium-priced and mid-priced brands and typically are offered with only the
most popular product features and in only the most popular sizes. Value brands
are not advertised or promoted directly to the consumer by the value brand
supplier.

     Store Brands. Store brands are marketed through various retail outlets
under retailer-affiliated (private) labels and are typically manufactured to
the specifications of individual retailers. Store brands typically are
supported by limited retailer advertising, do not incorporate state-of-the-art
packaging and are priced below mid-priced brands.

     Mid-Priced Brands. Mid-priced brands generally attempt to capitalize on
their existing or historical brand equity, are supported by limited consumer
advertising and are positioned as comparable but less expensive alternatives
to premium-priced brands.

     Premium-Priced Brands. Premium-priced brands focus on promoting brand
loyalty and consumer awareness of product features through significant
national advertising. Premium-priced brands are supported by extensive
research and development to design state-of-the-art packaging and product
features and to develop new products.


                                      -2-



<PAGE>




BUSINESS STRATEGY

     The Company's objective is to be the leading supplier of value brand
Household Products. The Company's business strategy is to enable retailers to
increase sales and realize attractive profit margins on the Company's products
while providing value to consumers. There can be no assurance that the Company
will be successful in meeting its objectives or in successfully pursuing its
strategies. The key elements of the Company's business strategy are described
below:

Value to Retailers

     The Company focuses on assisting the retailer to profitably optimize its
retail space in traditionally low margin Household Products categories. The
Company provides retailers with merchandising support relating to product mix,
shelf display and pricing strategies, and promotional programs which are
designed to increase sales of the Company's products. The Company's emphasis
on being a low-cost supplier allows it to sell its Household Products to
retailers at prices which enable these retailers to offer a lower price to
consumers while realizing relatively attractive margins. The Company also
seeks to build strong relationships with retailers by providing them with a
high level of customized service including direct shipments, electronic data
interchange, mixed product pallets and flexible, prompt delivery.

Value to Consumers

     The Company offers consumers attractively packaged, quality brand name
products at prices significantly below most other brands. This combination of
high product quality and low prices offers consumers an attractive alternative
to other brands. The Company emphasizes cost reduction and has historically
passed substantially all of its savings on to retailers and consumers. The
Company maintains a low-cost structure by eliminating consumer advertising and
coupon programs, employing efficient manufacturing and packaging techniques
and limiting corporate overhead.

Brand and Corporate Identification

     The Company seeks to develop strong brand and corporate name recognition
among retailers and strong brand recognition and brand loyalty among
consumers. The Company believes that colorful and graphic packaging combined
with recognizable product names and the Company's commitment to quality and
low price, contribute to strong brand awareness and purchaser confidence at
the consumer level, and generate increased product sales. The Company further
believes that development of corporate and brand name recognition of the
Company and its products among retailers enables the Company to introduce new
products more effectively.



                                      -3-



<PAGE>



Further Market Penetration

     The Company focuses its sales efforts on supermarkets, mass
merchandisers, variety and dollar stores, drug stores and small grocery
stores, particularly those whose retailing philosophy closely corresponds to
the Company's high value, low cost marketing philosophy. The Company intends
to continue increasing its market penetration by distributing its products
through additional supermarkets, as well as other retail outlets. For 1996,
Information Resources, Inc. Retail Review data indicates that the Company's
XTRA(R) liquid laundry detergent and Nice'n FLUFFY(R) liquid fabric softener
were sold to retailers representing 63.6% and 64.0%, respectively, of all
commodity volume ("ACV") distribution within the food, drug and mass merchants
sector, up from 46.0% and 44.6%, respectively, in 1995. ACV distribution for a
product represents the percentage of food, drug and mass merchant retail
outlets (as measured by aggregate retail sales) which sold that product during
a specified time period in the United States. The Company intends to use the
access to retailers it has gained through the success of its XTRA(R) and
Nice'n FLUFFY(R) brands to increase the penetration of its other products
through these existing retail outlets.

Expand Product Line

     The Company introduced 15 new products in 1995 and 38 new products in
1996, including re-formulations and alternate sizes. Net sales of products
introduced in 1996 were $37 million or 21% of net sales for the year ended
December 31, 1996.

PRODUCTS

     The Company currently sells its products, representing approximately 500
stock keeping units ("SKUs"), in eight Household Product categories under
twelve distinct brand names. The Company also sells a line of automotive care
products, first introduced in 1995. The Company's products include the
following:

<TABLE>
<CAPTION>

PRODUCT CATEGORY            Primary Company Brands
----------------            ----------------------
<S>                         <C>
Liquid Laundry Detergent    XTRA(R)
Powder Laundry Detergent    XTRA(R)
Liquid Fabric Softener      Nice'n FLUFFY(R)
Fabric Softener Sheets      Nice'n FLUFFY(R)
Household Cleaners          Captain Shine(R),Touch of Glass(R), Swiss Pine(R),
                              Tile Action(TM), Fabulous(TM), Plumber's Aid(TM)

Dish Detergent              XTRA(R) Plus, Crystal Shine(R)
Personal Soap Products      Fine Care(R)

Air Fresheners              Country Air(TM)
Automotive Products         Speedway(R)


</TABLE>


                                      -4-



<PAGE>



     The Company's laundry detergents and fabric softeners accounted for an
aggregate of approximately 81% and 85% of the Company's net sales in 1995 and
1996, respectively, with XTRA(R) liquid laundry detergent accounting for 52%
and 47% of net sales in these periods, respectively. The Company's financial
results and condition are substantially dependent on the continued success and
growth of sales of these products. A number of factors could limit sales by
the Company of these products, or the profitability of such sales, including
competitive efforts by other manufacturers of similar products, shifts in
consumer preferences or introduction and acceptance of alternative product
offerings.

PRODUCT DESIGN AND DEVELOPMENT

     The Company consistently seeks to enhance the value of its products by
either improving their performance and packaging or lowering their cost and
has historically passed substantially all cost savings on to the retailer. The
Company places considerable emphasis on package quality and uses premium
quality materials and appealing, colorful graphic designs with the objective
of providing its products with the same or better shelf appeal than premium
and mid-priced brands.

     Most of the important product enhancements in the Household Products
industry during the past several years have been developed by the research and
development departments of the premium-priced brand companies and the chemical
companies that supply the Household Products industry. Rather than maintain a
large research and development department, the Company works closely with its
suppliers, distributors and other industry participants to identify, and in
some cases anticipate, technological and design innovations which may be
incorporated into the Company's products. Generally, the Company adopts
product and packaging features after they have gained general market
acceptance and believes that it has typically been one of the first value
brand suppliers to incorporate features comparable to the successful
innovations of these larger competitors. The Company only incorporates
features which it believes are valued by its consumer base. The Company
believes that its approach to product design and development minimizes costs
associated with significant research and development, limits the introduction
of unproven innovations and features, and reduces the need to spend heavily to
advertise new product developments or to educate consumers.

MARKETING AND DISTRIBUTION

     The Company sells its products to large and small retailers throughout
the United States. The Company's various branded products have historically
been sold primarily to supermarkets, mass merchandisers, variety and dollar
stores, drug stores and small grocery stores. Significant customers of the
Company include Wal-Mart, Consolidated Stores, K-Mart, Walgreens, Super Value
and Waldbaum's. The following table sets forth the Company's net sales for
fiscal 1994, 1995 and 1996 by retail distribution channel:



                                      -5-



<PAGE>



<TABLE>
<CAPTION>


                                       Percentage of Net Sales
 Distribution Channel              1994           1995            1996
 --------------------              ----           ----            ----
<S>                               <C>            <C>             <C>
 Supermarkets                      25.4%          32.1%            40.6%
 Mass Merchandisers                20.8           29.0             27.5
 Variety and Dollar Stores         34.2           24.5             16.8
 Drug Stores                       10.5            8.8              9.8
 Small Grocery and Other            9.1            5.6              5.3
                                  -----          -----            -----
     Total                        100.0%         100.0%           100.0%
                                  =====          =====            =====

</TABLE>


     The Company's largest customer, Wal-Mart, accounted for approximately 17%
of net sales in 1995 and 1996. No other customer of the Company accounted for
more than 5% of the Company's net sales during 1995 or 1996. As is customary
in the Household Products industry, the Company does not have long-term
contracts with its customers. A significant reduction of purchases by any of
the Company's largest customers could have a material adverse effect on the
Company's business and results of operations.

     As of December 31, 1996, the Company sold its products through its own 62
person national sales department, which included seven regional offices,
supported by a network of 104 independent brokers and sales representatives.
In fiscal 1996, approximately 55% of the Company's net sales were generated by
its internal sales force with independent broker assistance, with the
remaining 45% of net sales generated without broker assistance. Each
salesperson is compensated by salary and commissions.

     The Company seeks to provide retailers with high levels of sales and
merchandising support and delivery services. The Company's sales and
merchandising support and delivery services are designed to assist retailers
in increasing sales of the Company's products through development of improved
packaging, product mix, shelving and pricing strategies, and effective
promotional programs. To provide better delivery service to its customers, the
Company is flexible as to the amounts and combinations of products it will
deliver and generally strives to deliver products within one to seven business
days of receiving an order. With certain retailers, the Company uses
electronic data interchange ("EDI") systems that interface directly with the
customer's product ordering process. EDI, combined with the Company's internal
computerized management information and control system, improves inventory and
cost management and facilitates rapid delivery to retailers.

     Substantially all product distribution is centralized at the Company's
facilities in New Jersey and in Missouri, with the exception of subcontracted
products which are usually distributed directly to retailers from the
subcontractors by freight companies selected by the Company. Products are
generally delivered to a retailer's distribution center, although the Company
distributes products representing a limited amount of


                                      -6-



<PAGE>



net sales directly to retail outlets. Substantially all of the Company's
products are delivered by independent trucking companies, with the remainder
delivered by nine trucks and 25 trailers leased by the Company. The Company is
currently exploring opportunities to move inter-plant transfers via rail.

     Beginning in the latter part of the third quarter of 1996, the Company
experienced distribution difficulties and late customer deliveries primarily
attributable to the Company's continuing rapid growth in sales and the
assimilation of three new manufacturing and distribution facilities. The
effect of these factors was to increase the costs associated with plant
integration, distribution and customer returns and allowances, and had
a material adverse effect on the results of the Company's operations for
fiscal 1996. While the Company is working with its customers to establish and
assure efficient distribution, there can be no assurance that such efforts
will be successful or that similar or new problems with distribution will not
occur in the future.

MANUFACTURING AND SUPPLY

     During 1996, the Company manufactured substantially all of its liquid
products at its facility in North Brunswick, New Jersey. The manufacturing
process at the Company's facility consists of blending liquid chemicals and
fragrance, which the Company purchases from independent suppliers, and
packaging such blends to create finished products. Blending is done according
to or by modifying formulas provided by the Company's chemical suppliers. The
Company conducts quality control tests on raw materials on a regular basis and
also conducts stringent quality control tests on its products during and after
the manufacturing process. The Company believes that as it generally
manufactures one primary brand in each of its product categories, it is able
to lengthen manufacturing runs, reduce manufacturing costs and sell products
to retailers at prices which enable retailers to sell products to consumers at
lower prices and/or achieve higher profit margins. Any extended interruption
of operations at the Company's manufacturing facilities could have a material
adverse effect on the Company's business and results of operations.

     For the year ended December 31, 1996, the Company purchased approximately
52% of its liquid chemicals from two suppliers, Stepan Company and Henkel
Corporation, and purchased 27% of its powder detergent from Cap City Products
Company, Inc. The balance of the Company's powder detergent was produced at a
facility in Chicago with respect to which the Company has entered into a
management agreement pursuant to which the Company maintains manufacturing
control, and a supply agreement pursuant to which the Company has the right to
purchase all of the supplier's output. Under the Company's supply and
management agreements, the Company, by its purchases of products, funds
operations of the supplier's facility. See Note 5 to "Notes to Consolidated
Financial Statements."

     Substantially all of the bottles used by the Company during 1996 at its
manufacturing facility were purchased from Owens-Illinois Closure Inc.
("Owens-Illinois"). The Owens-Illinois plant used in connection with the
manufacture of such


                                      -7-



<PAGE>



bottles is located near the Company's manufacturing facility and the majority
of the Owens-Illinois plant's production is dedicated to the Company. The
Company has entered into a supply agreement expiring January 31, 2001 with
Owens-Illinois pursuant to which the Company has agreed to purchase
substantially all of its plastic bottle packaging requirements from
Owens-Illinois in return for Owens-Illinois' agreement to dedicate certain of
its machinery to meet the Company's packaging requirements and provide
additional machinery if necessary. Owens-Illinois has also agreed to use its
best efforts to expand its capacity to meet the Company's continued growth in
exchange for the Company's continuing commitment to purchase bottles from
Owens-Illinois. Certain molds used to manufacture the Company's packaging are
not owned by the Company.

     In January 1996, the Company entered into a lease for a facility located
contiguous to Owens-Illinois' facility in Edison, New Jersey. The Company uses
this facility for the manufacture of its scented candle air freshener products
and additional warehouse and distribution capacity. In addition, the Company
recently entered into a contract to purchase a new facility adjacent to its
existing North Brunswick, New Jersey facility to consolidate its East Coast
warehousing operations. See Item 2. "Properties."

     The Company also has certain products manufactured to the Company's
specifications by independent contractors and intends to expand its capacity
to produce non-liquid products by continuing to outsource manufacturing. The
Company subcontracts the manufacture of products based on cost-effectiveness,
manufacturing capacity and a desire to avoid large capital commitments
associated with manufacturing before the Company can determine the long-term
success of such products. The Company remains actively involved with each of
its principal subcontractors and seeks to promote efficiencies and
cost-savings at the subcontractor level by offering continuing technical,
manufacturing and managerial advice. The Company's purchases from
subcontractors are generally made pursuant to purchase orders.

     To support anticipated demand for its products, the Company expects to
expand its manufacturing capacity by continuing to improve manufacturing
efficiency, installing new manufacturing equipment during 1997, and
selectively outsourcing production. The Company anticipates that it will spend
between $19 million and $22 million in 1997 to fulfill its current expansion
plans. See Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity."

     The Company's reliance on a sole supplier or limited group of suppliers
and subcontractors involves several risks, including increased risk of
inability to obtain adequate supplies, and reduced control over pricing and
timely delivery. Although the timeliness, quality and pricing of deliveries
from the Company's suppliers have been acceptable to date and the Company
believes that additional sources of supply are generally available, there can
be no assurance that supplies will be available on an acceptable basis or that
delays in obtaining new suppliers, particularly of plastic bottles, will not
have an adverse effect on the Company. The Company's inability to obtain


                                      -8-



<PAGE>



adequate supplies of chemicals, packaging materials, manufacturing equipment
or finished products at acceptable prices could have a material adverse effect
on the Company's business.

INVENTORY PRACTICE AND ORDER BACKLOG

     The Household Products industry is generally characterized by prompt
delivery of products by suppliers. The Company strives to maintain the time
between the Company's receipt of a customer's order and shipment to the
customer at one to seven business days. The Company generally maintains
between two and ten days of finished product inventory. As a result of the
short lead time between the order and delivery of its products, the Company
does not maintain a significant backlog. The Company recently experienced
distribution difficulties attributable to the Company's continuing rapid
growth in sales. See "-- Marketing and Distribution."

INTELLECTUAL PROPERTY

     Brand identification is an important element in marketing the Company's
products and the Company recognizes the importance of its trademarks to the
success of its business. The Company obtains trademarks for certain of its
brands and has registered or has applications pending to register certain
trademarks with the United States Patent and Trademark Office. In addition,
the Company has registered or applied for registration of certain of its
trademarks in a number of foreign countries. Due to the importance of package
design, labels, trademarks and trade dress to its business, the Company has
taken, and expects to continue to take, vigorous action to protect against
infringement of its trademarks and copyrights.

     Although the Company considers certain of its packaging, labels,
trademarks and designs to be proprietary, certain of such packaging, labels,
trademarks and designs are not protected by copyright or trademark
registration. In addition, the Company from time to time has received, and may
receive in the future, communications from third parties asserting and
challenging intellectual property rights relating to the Company's products,
labels, trademarks and packaging. There can be no assurance that third parties
will not successfully assert claims against the Company with respect to
existing or future products or packaging. Should the Company be found to
infringe upon the intellectual property rights of others, the Company could be
required to cease use of certain products, trademarks, labels or packaging or
pay damages to the affected parties, either of which could have a material
adverse effect on the business and operations of the Company. Substantial
costs also may be incurred by the Company in redesigning its labels or
packaging, in selecting and clearing a new trademark or in defending any legal
action taken against it. Packaging, labels, trademarks and designs are
generally reviewed by the Company's intellectual property counsel prior to
their general adoption and usage.

     Manufacturers normally seek United States and foreign patent protection
for the chemical formulations that they develop and numerous third party
patents that relate


                                      -9-



<PAGE>



to laundry and household cleaning products are on file with the United States
Patent and Trademark Office. Formulations of the products produced by the
Company are generally provided by the Company's third party chemical suppliers
who are responsible for the intellectual property, if any, in such
formulations. The Company believes it has been able to introduce products
comparable to those introduced by most of its competitors by using
manufacturing methods or materials that are not protected by patents or by
acquiring patented formulations.

COMPETITION

     The Company experiences substantial competition from a number of
suppliers of laundry and household cleaning products, including larger
premium-priced, mid-priced and private label suppliers. Many of these
suppliers have substantially greater financial, technical, marketing,
distribution and other resources than the Company. In addition, there are
several value brand suppliers which compete directly with the Company. The
Company believes its products compete primarily on the basis of price and
customer service and the Company does not intend to compete on the basis of
premium-priced brand product features.

     The Company estimates, based on Information Resources, Inc. Retail Review
data for the year ended December 31, 1996, that the two largest suppliers in
the laundry and household cleaning products industry held approximately 54%,
in the aggregate, of the domestic market for such products. These two
suppliers, Procter & Gamble Co. and Unilever N.V., accounted for an aggregate
of approximately 72% and 85% of 1996 domestic retail sales of liquid laundry
detergents and liquid fabric softeners, respectively. These two product
categories accounted for 47% and 21%, respectively, of the Company's net sales
in 1996.

     The laundry and household cleaning products industry is characterized by
substantial price competition which is effected through changes in price,
product size and promotions. The Company believes it typically is not affected
by price changes initiated by larger premium-priced or mid-priced suppliers
whose pricing is substantially higher than the Company's pricing. Some
suppliers of value brands or store brands compete directly with the Company as
low price suppliers. Competitors may attempt to gain market share by offering
products at prices at or below those typically offered by the Company. Such
competitive pricing has in certain cases necessitated and may continue to
necessitate price reductions by the Company and has and may continue to result
in lost orders. Although the Company has not suffered significantly as a
result of competitive pricing, there can be no assurance that future price or
product changes by the Company's competitors will not have a material adverse
effect on the Company or that the Company will be able to react with price or
product changes of its own to maintain its current market position.



                                     -10-



<PAGE>



EMPLOYEES

     As of December 31, 1996, the Company had 562 full-time employees, of whom
40 worked in executive, administrative or clerical capacities, 352 worked in
design and manufacturing, 108 worked in warehouse facilities and 62 worked in
sales. The Company believes that its relations with its employees are good.
The Company has never experienced any interruption of any of its operations
due to a labor disagreement with its employees.

ENVIRONMENTAL REGULATION

     The Company is subject to various federal, state and local environmental
laws and regulations, including those relating to wastewater discharge, air
quality and the storage, handling and disposal of a variety of substances.
Some of the chemicals used by the Company and stored at its manufacturing
facility are materials regulated by federal or state environmental protection
agencies. While the Company has not had to make significant capital
expenditures for environmental compliance, the Company cannot predict with any
certainty its future capital expenditure requirements for environmental
compliance because of continually changing compliance standards and
technology. Consequently, unforeseen expenditures required to comply with such
laws and regulations, including unforeseen environmental liabilities, could
have a material adverse effect on the Company's business. The Company
maintains $6.0 million of insurance coverage for environmental liabilities.

EXECUTIVE OFFICERS OF THE REGISTRANT

     The following table sets forth certain information with respect to the
executive officers and significant employees of the Company:

<TABLE>
<CAPTION>

NAME                   AGE POSITION
----                   --- --------
<S>                    <C>  <C>
Uri Evan               60  Chairman of the Board; Chief Executive Officer
Joseph S. Cohen        46  Vice Chairman of the Board
Frederick J. Horowitz  32  Executive Vice President; Chief Administrative
                           Officer; Director
Frank Corella          52  Vice President of Sales and Marketing
Harold J. Macsata      53  Vice President of Finance; Chief Financial Officer;
                           Treasurer
Daniel Bergman         39  Vice President; Director of New York Metro Sales;
                           Secretary; Director
Mark Antebi            43  Vice President; Director of International Sales;
                             Director

</TABLE>


     URI EVAN has been Chairman of the Board of the Company since 1989 and
Chief Executive Officer since 1993. Since 1993, Mr. Evan has been Vice
Chairman and Chief


                                     -11-



<PAGE>



Executive Officer of American Value Brands Inc., a food marketing company of
which he was a co-founder. From 1991 to 1992, he served as Chairman and Chief
Executive Officer of I. Rokeach & Sons Inc., a kosher food manufacturing and
marketing company. From 1988 to 1990, Mr. Evan was Chairman and Chief
Executive Officer of Newrock Development Inc., a real estate development
company. From 1969 to 1986, Mr. Evan was President and Chief Executive Officer
of Engineering Services Group, a Tel Aviv-based international engineering,
printing and publishing conglomerate of which he was a co-founder. From 1970
to 1982, he served as Chairman of Organization and Management Sciences
Consultants Ltd., an Israeli management and computer sciences firm of which he
was a co-founder.

     JOSEPH S. COHEN was a founder of the Company and has been Vice Chairman
of the Board of the Company since 1988. From 1981 to 1988, Mr. Cohen was
President of Michael Brooke Accessory, a jewelry accessory company, of which
he was the founder. From 1976 to 1981, Mr. Cohen was President and Chief
Executive Officer of Pam Lauren, a jewelry retailer, of which he was the
founder.

     FREDERICK J. HOROWITZ has been Executive Vice President and Chief
Administrative Officer of the Company since June 1995, having served as
Managing Director of the Company since January 1995 and a director of the
Company since 1989. From 1991 through 1994, Mr. Horowitz was President and
Chief Operating Officer of the Company. From 1990 to 1991, he served as Vice
President of Operations. From 1988 to 1991, Mr. Horowitz was a Senior Vice
President of Newrock Development Inc., a real estate development company. Mr.
Horowitz is the son of Dinah Evan, who is married to Uri Evan.

     FRANK CORELLA has been Vice President of Sales and Marketing of the
Company since 1991. From 1990 to 1991, he was President and Principal of
Paperoni, Inc., a party supply company. From 1988 to 1990, he served as
President of US1 Auto Parts. From 1984 to 1988, Mr. Corella served as
President of American Discount Auto Parts, a division of Rite Aid. From 1962
to 1984, he held various positions at SupeRx Drugs, a division of Kroger
Foods, including Vice President of Marketing.

     HAROLD J. MACSATA has been Vice President of Finance and Chief Financial
Officer of the Company since January 1994 and Treasurer since June 1995. From
1987 to 1993, he served as Vice President of Finance and Chief Financial
Officer for Roller Bearing Company of America, a roller bearing company. From
1966 to 1987, he served in various management positions at Torrington Company,
a roller bearing company.

     DANIEL BERGMAN was a founder of the Company, has been a Vice President of
the Company since June 1995 and has been Director of New York Metro Sales,
Secretary and a director of the Company since 1988. Between 1987 and 1991, Mr.
Bergman was President of Carnegie International Inc., a retail and export
electronics company, and between 1984 and 1987, Mr. Bergman was a Vice
President of Nikora International Inc., a retail and export electronics
company.



                                     -12-



<PAGE>



     MARK ANTEBI was a founder of the Company, has been a Vice President of
the Company since June 1995 and has been Director of International Sales of
the Company and a director of the Company since 1988. Between 1987 and 1991,
Mr. Antebi was Vice President of Carnegie International Inc., a retail and
export electronics company, and between 1985 and 1988, Mr. Antebi was
President of Nikora International Inc., a retail and export electronics
company.


ITEM 2. PROPERTIES

     The Company currently conducts its operations from a 360,000 square foot
facility located in North Brunswick, New Jersey. The Company's executive
offices and its manufacturing, office support, and receiving and shipping
departments are all located in that facility. The lease relating to such
facility expires in 2004, subject to two five-year extensions. For the fiscal
year ended December 31, 1996, the Company recorded rent expense of
approximately $1.3 million. In January 1996, the Company entered into a lease
for a 175,000 square foot facility located in Edison, New Jersey. The Company
uses this facility for the manufacture of its scented candle air freshener
products and for additional warehouse and distribution capacity. The lease
relating to such facility expires in 2001, subject to one five-year extension,
and provides for an annual rental of $568,750. In August 1996, the Company
purchased a 360,000 square foot facility located near Kansas City, Missouri
for the production of additional liquid laundry products and distribution. The
Company also leases seven additional sales offices throughout the United
States. In addition, on January 22, 1997, the Company entered into a contract
to purchase a 650,000 square foot facility in North Brunswick, New Jersey,
adjacent to the Company's existing facility for a purchase price of $7.2
million. The Company expects to consolidate its entire East Coast warehousing
and distribution operation at this new facility. The purchase is expected to
occur in the near future and to be funded by an increase in the Company's
credit facility. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The property is currently the subject of an Administrative
Consent Order issued by the New Jersey Department of Environmental
Protection (the "NJDEP") relating to the remediation of certain
hazardous wastes which were discharged onto the property by the seller.
The seller has undertaken substantial remediation efforts to date to
clear the property of these hazardous wastes and has posted a bond
with the NJDEP to secure the costs to continue such clean up activities.
In addition, at the time the Company acquires this property, the seller
will provide the Company with an undertaking to complete the clean up of
the property to the standards required by the NJDEP and will provide the
Company with a complete indemnity against any claims or obligations to
clean up the property which may be asserted against the Company and which
arise from any hazardous wastes that existed on the property on the date
the Company acquires the property. While the Company believes it has taken
adequate steps to protect its interests, there can be no assurance that the
Company will not incur costs in connection with environmental matters
concerning the property.

ITEM 3. LEGAL PROCEEDINGS

     The Company is not a party to any legal proceeding other than such
proceedings which it believes will not have a material adverse effect on the
Company.


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

     None



                                     -13-



<PAGE>

                                   PART II



ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's shares of common stock (the "Common Stock") are quoted on
The Nasdaq National Market under the symbol "USAD." The Common Stock was
initially offered to the public on August 7, 1995 at $9.67 per share (the
"1995 IPO"). The following table sets forth for the periods indicated the high
and low reported last sale prices per share for the Common Stock as reported
by The Nasdaq National Market. All last sale prices for periods prior to
February 9, 1996 have been divided by 1.5, the assumed effect of the Stock
Split.


<TABLE>
<CAPTION>

                                                     HIGH        LOW
                                                     ----        ---
<S>                                                 <C>         <C>
Fiscal 1995
Third Quarter (commencing August 7)                 $14.75     $11.50
Fourth Quarter                                       18.17      13.67

Fiscal 1996
First Quarter                                       $38.00     $22.00
Second Quarter                                       48.00      30.25
Third Quarter                                        42.25      25.00
Fourth Quarter                                       42.25      30.50

Fiscal 1997
First Quarter (through March 14)                    $45.25     $20.38

</TABLE>


     The number of stockholders of record of Common Stock on March 14, 1997
was 87. On March 14, 1997, the last reported sale price of the Common Stock as
reported by The Nasdaq National Market was $24.13 per share.


                                     -14-



<PAGE>



ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
        (IN THOUSANDS EXCEPT PER SHARE DATA)

     The following selected financial data are derived from the audited
consolidated financial statements of the Company. The consolidated financial
statements for the years ended December 31, 1994, 1995 and 1996 have been
audited by Deloitte & Touche LLP, and their report dated February 17, 1997
(March 3, 1997 and March 24, 1997 as to Note 4) appears elsewhere herein. The
selected financial data for the years ended December 31, 1992 and 1993 was
derived from financial statements audited by Goldstein Golub Kessler &
Company, P.C. and the balance sheet data for the year ended December 31, 1994
were derived from financial statements audited by Deloitte & Touche LLP. The
report of Goldstein Golub Kessler & Company for 1993 and 1992 does not appear
in this Annual Report. No cash dividends, other than S corporation
distributions, were paid for any years presented.



<TABLE>
<CAPTION>

                                                           YEAR ENDED DECEMBER 31,
                                              1992      1993       1994       1995     1996
                                              ----      ----       ----       ----     ----
<S>                                          <C>        <C>       <C>        <C>     <C>
INCOME STATEMENT DATA:
Net sales                                    $21,860   $46,939    $68,663   $104,878  $174,031
Cost of goods sold                            16,941    36,896     51,588     72,921   115,338
                                             -------   -------    -------   --------  --------
Gross profit                                   4,919    10,043     17,075     31,957    58,693
Selling, general and administrative expenses   3,893     8,445     12,182     22,232    43,046
Non-recurring expenses(1)                        398       893         --         --        --
                                             -------   -------    -------   --------  --------
Income from operations                           628       705      4,893      9,725    15,647
Interest expense-net                             192       383        543        544       868
                                             -------   -------    -------   --------  --------
Earnings before income tax                       436       322      4,350      9,181    14,779
Income tax provision                              --        22         83      2,156     5,912
                                             -------   -------    -------   --------  --------
Net income                                   $   436   $   300    $ 4,267   $  7,025  $  8,867
                                             ========  =======    =======   ========  ========
Net income per share                                                                  $    .65
                                                                                      ========
Weighted average number of shares outstanding                                           13,589
                                                                                      ========

PRO FORMA INCOME STATEMENT DATA(2):
Earnings before income tax as reported                            $ 4,350   $  9,181
Pro forma income tax provision                                      1,689      3,756
                                                                  -------   --------
Pro forma net income                                              $ 2,661   $  5,425
                                                                  =======   ========
Pro forma net income per share                                    $   .22   $    .43
                                                                  =======   ========
Weighted average number of shares outstanding                      11,915     12,494
                                                                  =======   ========

                                                               DECEMBER 31,
                                              1992      1993       1994       1995     1996
                                              ----      ----       ----       ----     ----
Working capital (deficit)                    $ 1,192   $   (30)   $ 5,154   $ 11,132  $ 40,562
Total assets                                   9,308    19,718     24,449     40,590    98,904
Short-term debt                                1,893     4,425      3,860      7,320     4,318
Long-term debt                                 2,142     4,563      6,180      1,830    30,812
Stockholders' equity                           1,050     1,850      5,880     20,292    41,259

</TABLE>

-------------
(1)  Consists of loss on theft of inventory of $398,000 in 1992, and plant
relocation expense of $474,000 and loss on theft of inventory of $419,000 in
1993.
(2)  Pro forma net income represents net income less a provision for income
taxes that would have been required had the Company been taxed as a C
corporation during the entire period presented. The Company elected to be
treated as a Subchapter S corporation until August 10, 1995 (one day prior to
the closing of the 1995 IPO), and, as a result, was not subject to federal and
certain state income taxes prior to that time. No pro forma adjustments have
been made for additional compensation expense paid to the existing
stockholders of the Company who are officers of the Company associated with
the termination of the Company's S corporation status in connection with the
1995 IPO or for a reduction in interest expense relating to the assumed pay
down of borrowings under the Company's then existing working capital line of
credit with the net proceeds of the 1995 IPO, because the net effect of such
adjustments is not material. See Note 1 of "Notes to Consolidated Financial
Statements" for the years ended December 31, 1994, 1995 and 1996.


                                     -15-



<PAGE>



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

GENERAL

     The Company's net sales in the year ended December 31, 1996 totalled
174.0 million, representing an increase of 66.0% over net sales of $104.9
million in the year ended December 31, 1995. The Company's growth has been
achieved primarily through increases in market penetration of the Company's
products, particularly laundry detergents and liquid fabric softeners, and the
introduction of new products, including re-formulations and alternate sizes.
Net sales of the Company's liquid laundry detergent and liquid fabric
softeners totaled $151.9 million or 84.1% of net sales in the year ended
December 31, 1996, and $75.6 million or 72.1% of net sales in the year ended
December 31, 1995. Net sales of products introduced in 1996 were $37.4 million
or 20.9% of net sales for the year ended December 31, 1996. Since 1993, gross
margins have improved due to (i) sales increases of laundry products which
generally have higher gross margins than the Company's other products, (ii)
the relocation by the Company of its manufacturing operations to its current,
more efficient North Brunswick, New Jersey facility in 1993 and (iii)
efficiencies in purchasing packaging supplies and raw materials. As the
Company has increased sales through supermarkets, it has increased payments of
"slotting fees" (fees which are generally required to be paid in advance to
supermarkets in order to obtain shelf space and are accounted for by the
Company as selling, general and administrative expenses). The Company intends
to continue increasing sales to supermarkets. The growth of the Company has
been, and will continue to be, dependent upon a number of factors, including
the ability of the Company to successfully introduce new products, to increase
sales to existing retail customers, to sell its products to new retail
customers and to manage its growth. If products introduced by the Company are
discontinued or encounter production or formulation problems, or the Company
experiences difficulties with distribution or late customer deliveries such as
occurred during the last half of 1996, the Company's results of operations
could be materially, adversely affected. There can be no assurance that the
Company will be able to maintain its present rate of growth.

     From its organization through August 9, 1995, the Company operated as an
S corporation and, as a result, liability for the Company's net income for
federal and certain state income tax purposes was borne directly by the
Company's stockholders. The Company paid or accrued 75.8% ($6.9 million) of
its earnings before income taxes from inception through August 9, 1995 in the
form of S corporation distributions to stockholders. One day prior to the
closing of the 1995 IPO, the Company became a taxable C corporation for income
tax reporting purposes. The Company has incurred increased salary expenses of
approximately $375,000 for certain members of senior management in connection
with the termination of its S corporation status.


                                     -16-



<PAGE>



RESULTS OF OPERATIONS

     The following table sets forth for the periods indicated certain income
statement data expressed as a percentage of net sales. Certain column totals
set forth may not add due to rounding.


<TABLE>
<CAPTION>

                                                   YEAR ENDED DECEMBER 31,
                                                  1994       1995       1996
                                                  ----       ----       ----
<S>                                              <C>        <C>       <C>
Net sales                                        100.0%     100.0%     100.0%
Cost of goods sold                                75.1       69.5       66.3
                                                 -----      -----      -----

Gross profit                                      24.9       30.5       33.7
Selling, general and administrative expenses      17.7       21.2       24.7
Non-recurring expenses                              --         --         --
                                                 -----      -----      -----
Income from operations                             7.1        9.3        9.0
Interest expense-net                               0.8        0.5        0.5
                                                 -----      -----      -----
Earnings before income taxes                       6.3        8.8        8.5
Income tax provision                               0.1        2.1        3.4
                                                 -----      -----      -----
Net income                                         6.2%       6.7%       5.1%
                                                 =====      =====      =====

</TABLE>

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

     Net sales in the year ended December 31, 1996 increased 65.9% to $174.0
million from $104.9 million in the year ended December 31, 1995. The increase
was primarily the result of an increase in unit sales of laundry products and,
to a lesser extent, the introduction of new products and additional product
sizes.

     Gross profit increased 83.4% to $58.7 million in the year ended December
31, 1996 from $32.0 million in the prior year. Gross profit increased as a
percentage of net sales to 33.7% in 1996 from 30.5% in the prior year,
primarily as a result of continued improvement in labor efficiencies and
purchasing improvements, and an increase as a percentage of net sales in unit
sales of higher margin laundry products, offset in part by higher costs
associated with integrating the Company's Chicago, Kansas City and Edison, New
Jersey facilities.

     Selling, general and administrative expenses increased 93.7% to $43.0
million in the year ended December 31, 1996 from $22.2 million in the prior
year. As a percentage of net sales, selling, general and administrative
expenses increased to 24.7% in 1996 from 21.2% in the prior year. The increase
as a percentage of net sales was due primarily to a 1.6% increase in freight
costs arising out of distribution inefficiencies, an increase of 1.5% in
slotting fees resulting from increased penetration into supermarkets, and, an
increase of 0.4% in write-offs from customer charge-backs caused by
distribution inefficiencies. For a description of the problems experienced by
the


                                     -17-



<PAGE>



Company with respect to distribution, see Item 1. "Business--Marketing and
Distribution."

     Income from operations increased 60.9% to $15.6 million in the year ended
December 31, 1996 from $9.7 million in the prior year. As a percentage of net
sales, income from operations decreased to 9.0% in 1996 from 9.3% in the prior
year as a result of higher selling, general and administrative expenses,
offset in part by improved gross profit as a percentage of sales.

     Interest expense-net increased to $868,000 in the year ended December 31,
1996 from $544,000 in the prior year due to increased borrowings to fund
higher levels of inventories and accounts receivable resulting from increased
sales. As a percentage of sales, interest expense-net was unchanged at 0.5%.

     Earnings before income taxes increased to $14.8 million in the year ended
December 31, 1996 from $9.2 million in the prior year. As a percentage of net
sales, earnings before income taxes decreased to 8.5% in 1996 from 8.8% in the
prior year.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

     Net sales in the year ended December 31, 1995 increased 52.7% to $104.9
million from $68.7 million in the year ended December 31, 1994. The increase
was primarily the result of an increase in unit sales of laundry products,
reflecting the addition of new customers and sales of additional products to
existing customers. The increase in net sales was facilitated by an increase
in the number of salespersons who joined the Company in the fourth quarter of
1994.

     Gross profit increased 87.2% to $32.0 million in the year ended December
31, 1995 from $17.1 million in the prior year. Gross profit increased as a
percentage of net sales to 30.5% in the year ended December 31, 1995 from
24.9% in the prior year. The increase as a percentage of net sales was
primarily attributable to the installation, in January 1995, of improved
manufacturing equipment, which had a positive impact on labor efficiency and
reduced product over-fills, and an increase as a percentage of net sales in
unit sales of higher margin laundry products.

     Selling, general and administrative expenses increased 82.5% to $22.2
million in the year ended December 31, 1995 from $12.2 million in the prior
year. As a percentage of net sales, these expenses increased to 21.2% in the
year ended December 31, 1995 from 17.7% in the prior year. The increase as a
percentage of net sales was primarily due to increases as a percentage of net
sales of 2.2% in merchandising allowances and co-op advertising, 0.4% in
selling commissions, 0.2% in slotting fees resulting from increased
penetration into supermarkets and 0.2% in bad debt expenses.



                                     -18-



<PAGE>



     Income from operations increased 98.8% to $9.7 million in the year ended
December 31, 1995 from $4.9 million in the prior year. As a percentage of net
sales, income from operations increased to 9.3% in the year ended December 31,
1995 from 7.1% in the prior year.

     Interest expense-net increased to $544,000 in the year ended December 31,
1995 from $543,000 in the prior year.

     Earnings before income taxes increased 111.1% to $9.2 million in the year
ended December 31, 1995 from $4.4 million in the prior year. As a percentage
of net sales, earnings before income taxes increased to 8.8% in the year ended
December 31, 1995 from 6.3% in the prior year.

Seasonality

     The Company has experienced, and may experience in the future,
quarter-to-quarter fluctuations in its operating results. The Company's
financial performance has been somewhat weaker in the fourth quarter than in
other fiscal quarters, primarily as a result of promotion-oriented retailers
providing reduced or less desirable display space for the Company's products
during the holiday shopping season. The Company expects that this trend will
be somewhat mitigated as anticipated sales from supermarkets, which are less
promotion- oriented during the holiday shopping season, increase as a
percentage of total net sales. The timing and introduction of new products and
other factors may also cause quarterly fluctuations in the Company's results
of operations.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 1996, the Company's working capital increased to $40.6
million from $11.1 million at December 31, 1995. The primary reasons for the
increase include higher levels of inventory and accounts receivable, as
discussed below, and the Company no longer being subject to an asset-based
lending facility which required the automatic payment of all cash to
outstanding borrowings. At December 31, 1996 accounts receivable was $28.2
million, an increase of $12.9 million from December 31, 1995 primarily
attributable to increased sales volume in 1996. At December 31, 1996 inventory
was $27.0 million, an increase of $18.6 from December 31, 1995, primarily
attributable to increased sales volume and inventory imbalances caused by
problems in distribution. As a result of the change to the lending facility,
cash at December 31, 1996 was $2.4 million, an increase of $2.3 million from
the prior year. These changes were partially offset by an increase in accounts
payable and accrued expenses to $20.1 million at December 31, 1996 from $8.8
million at December 31, 1995. Net cash used in operating activities in 1996
and 1995 was ($15.3) million and ($412,000), respectively. Decreases in cash
provided by operating activities in 1996 relate primarily to the increase in
inventory and accounts receivable. The decrease in cash provided by operating
activities in 1995 was primarily due to an increase in accounts receivable.



                                     -19-



<PAGE>



     The Company's 1995 IPO provided net proceeds to the Company of
approximately $12.7 million. Approximately $8.3 million was used by the
Company to repay amounts outstanding under its then existing line of credit.
The Company consummated a sale of 300,000 shares of Common Stock in June 1996,
providing net proceeds to the Company of $11.7 million. The net proceeds from
the June 1996 offering were used to pay down the Company's then existing line
of credit. Historically, the Company has financed its operations from capital
provided by existing stockholders, funds generated by operations, bank lines
of credit, the proceeds of the Company's loan from the New Jersey Economic
Development Authority (the "EDA Loan") and capitalized lease obligations. The
Company has used cash provided by operating activities to fund capital
expenditures, operations and S corporation distributions.

     Net cash used in investing activities in 1996 and 1995 was $20.5 million
and $6.1 million, respectively. Cash used in investing activities in 1996
relates to purchases of property and equipment. Cash used in investing
activities in 1995 relates primarily to purchases of production equipment and
a loan of approximately $2.3 million to an unaffiliated third party supplier
of powder laundry detergent. The Company has an option to purchase the
supplier's facility for the outstanding principal amount of the loan. See Item
1. "Business--Manufacturing and Supply" and Note 5 of "Notes to Consolidated
Financial Statements."

     Net cash provided by financing activities in 1996 and 1995 was $38.0
million and $6.5 million, respectively. Cash provided by financing activities
in 1996 was primarily proceeds from sales of Common Stock and a bank line of
credit. Cash provided by financing activities in 1995 was primarily proceeds
from sales of Common Stock, the bank lines of credit and the EDA Loan, offset
primarily by S corporation distributions to stockholders. At December 31,
1996, the Company had short-term debt of $4.3 million and long-term debt of
$30.8 million as compared to short-term debt of $7.3 million and long-term
debt of $1.8 million at December 31, 1995. The increase in overall debt was
primarily attributable to increases in inventory and accounts receivable
levels.. Short-term debt consisted of borrowings under the Line of Credit,
current portions of long-term debt and current portions of capitalized lease
obligations. Long-term debt consisted of the long-term portion of bank lines
of credit, borrowings under the EDA Loan and capitalized lease obligations.

The Line of Credit

     In December 1996, the Company entered a credit facility with PNC Bank,
N.A. ("PNC") replacing the Company's then existing line of credit. The new
credit facility consists of a $20 million capital expenditure facility for the
purchase of capital assets and/or leasehold improvements and a $10 million
traditional revolving facility. Borrowings under the credit facility bear
interest at LIBOR plus .50% to 1.5% (6.08% as of December 31, 1996) or one
percent below the prime rate of PNC, at the Company's election. All amounts
outstanding as of December 31, 1996 were subject to the 6.08% LIBOR-based
interest rate. Unused portions of the revolving facility are subject to a
commitment fee of .25% on such unused amounts. All amounts


                                     -20-



<PAGE>



outstanding under the capital expenditure facility at September 30, 1998 will
be converted to a five year term note. The revolving facility becomes due and
payable at April 30, 2000, subject to one-year extensions at the option of
PNC. PNC also provides the Company with a $3 million letter of credit
facility. Amounts drawn on the letter of credit facility are subject to an
annual fee of 0.5% of the face amount of each standby letter of credit. Each
standby letter of credit issued will have a stated term of no more than one
year. The credit facility contains various restrictions which include, among
other things, limiting the incurrence of additional indebtedness and requiring
specified debt to equity and current ratios and a minimum consolidated
tangible net worth. At December 31, 1996, the Company did not meet the debt to
equity level required pursuant to the credit facility. On March 24, 1997, the
Company received a waiver of the violation and the Company and PNC have agreed
to amend the facility, as discussed below. On December 31, 1996, the Company
also obtained a 60-day $4 million bridge loan, bearing interest at one percent
below the lender's prime rate (7.25%). As of December 31, 1996, approximately
$33.3 million was outstanding under the credit facility and the bridge loan
facility. On March 3, 1997, the Company repaid the bridge loan facility with
funds generated from working capital.

     On March 24, 1997, the Company obtained a commitment from PNC and a
second lender to amend the Company's existing credit facility with PNC (the
"New Facility"). The New Facility, as outlined in the commitment letter, is
expected to provide for, among other things, an increase in the revolving
credit facility from $10 million to $20 million, an increase in the capital
expenditure facility from $20 million to $35 million and a $10 million bridge
loan which will be repaid at the closing of the New Facility from the proceeds
of the capital expenditure facility. The revolving credit facility expires
three years from the closing of the New Facility and the capital expenditure
facility matures on May 31, 1999, at which time the then outstanding balance,
if any, will be converted to a five-year term loan. Borrowings under the New
Facility bear interest at rates which approximate the existing credit facility
with PNC. The commitment provides that all of the assets of the Company will
be pledged as collateral for the New Facility. The New Facility is conditional
upon, among other things, the finalization of a loan agreement acceptable to
PNC.

The EDA Loan

     The following is a description of the material terms of the EDA Loan of
$2.75 million received by the Company in 1993 from the New Jersey Economic
Development Authority. As of December 31, 1996, the Company had used
approximately $2.5 million of the EDA Loan for purchases of machinery and
equipment and improvements to the Company's manufacturing facility. The
remainder is restricted for the duration of the EDA Loan. The EDA Loan is
payable in monthly installments of approximately $26,000 through November 1,
2002. Interest on the EDA Loan is payable at a variable rate (4.2% at December
31, 1996). The EDA Loan is collateralized by all assets purchased with the
proceeds of the EDA Loan. The EDA Loan contains various restrictions on the
Company which preclude the Company, without first obtaining consent, from
taking certain actions including making capital expenditures in excess of


                                     -21-



<PAGE>



$7.25 million, transferring or making other dispositions of any material
property of the Company, engaging in any business not incidental to the
Company's present business, incurring additional indebtedness, paying
dividends, making changes in the management of the Company or merging or
consolidating with another entity. In connection with the EDA Loan, the
Company also executed a Reimbursement Agreement with Banque Nationale de
Paris, Houston Agency ("Banque Nationale"), pursuant to which Banque Nationale
agreed to issue a letter of credit to ensure payment when due of the bonds
issued in connection with the EDA Loan. The Company also entered into a
Security Agreement with Banque Nationale pursuant to which Banque Nationale
and the New Jersey Economic Development Authority were granted a security
interest in all assets of the Company.

Capital Expenditures

     Capital expenditures were $20.5 million in 1996 and $3.9 million in 1995.
Historically, capital expenditures have related principally to increasing
manufacturing capacity. The Company anticipates that capital expenditures in
1997 will be between $19 million and $22 million, which includes expenditures
for a new distribution facility, a high speed trigger line, and a new computer
system, as well as expenditures associated with expanding the Company's
manufacturing and distribution capabilities. The Company is in the process of
expanding its credit facility to fund such capital expenditures. See "--The
Credit Line." The Company believes its existing sources of liquidity, cash
provided by operations and the anticipated increase in its credit facility
with PNC will satisfy the Company's anticipated working capital and capital
expenditure requirements for the foreseeable future.

EFFECTS OF INFLATION

     The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant impact on the Company's results
of operations.


                                     -22-



<PAGE>



ITEM 8. FINANCIAL STATEMENTS

     See financial statements and supplementary data required pursuant to this
Item beginning on page F-1 of this Report on Form 10-K.

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

     None


                                     -23-



<PAGE>



                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information contained under the heading "Proposal No. 1 - Election of
Directors" in the Company's definitive Proxy Statement (the "Proxy Statement")
relating to the Company's Annual Meeting of Stockholders scheduled to be held
on May 13, 1997, to be filed pursuant to Regulation 14A of the Securities
Exchange Act of 1934 with the Securities and Exchange Commission, is
incorporated herein by reference. For information concerning the executive
officers and other significant employees of the Company, see
"Business--Executive Officers of the Registrant" in Item 1 above of this
Report.

ITEM 11. EXECUTIVE COMPENSATION

     The information contained under the heading "Executive Compensation" in
the Company's Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information contained under the heading "Beneficial Ownership of
Common Stock" in the Company's Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information contained under the headings entitled "Executive
Compensation--Compensation Committee Interlocks and Insider Participation"
and "Certain Transactions" in the Company's Proxy Statement is incorporated
herein by reference.




                                     -24-



<PAGE>



                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. Financial Statements.

       The Financial Statements and Financial Statement Schedules are
       listed in the accompanying index to financial statements beginning
       on page F-1 of this report.

    2. Financial Statement Schedule.

       Schedule II - Valuation and Qualifying Accounts


<TABLE>
<CAPTION>

EXHIBIT
NUMBER                  DESCRIPTION OF EXHIBIT
-------                 ----------------------
<S>         <C>
   3.1   Certificate of Incorporation.1

   3.2   Form of By-Laws of the Registrant.1

   4.1   See Exhibits 3.1 and 3.2 for provisions of the Certificate of
         Incorporation and By-Laws of the Registrant defining the rights of
         holders of Common Stock of the Registrant.1

   4.2   Specimen Common Stock Certificate.1

   4.3   Form of Registration Rights Agreements between the Registrant,
         Frederick R. Adler and Blair Effron.1

  10.1   Lease Agreement dated January 15, 1993 between Maurice M. Weill,
         Trustee for GEEMAC Property, and Registrant.1

  10.2   Supply Agreement dated November 29, 1994 between Owens-Illinois
         Plastic Products Inc., Owens-Illinois Closure Inc. and Registrant.1

  10.3   Amendment No. 1 dated December 1995 to Supply Agreement,
         dated November 29, 1994, between Owens-Illinois Plastic Products
         Inc., Owens-Illinois Plastic Products Inc., Owens-Illinois Closure
         Inc. and Registrant.2  (confidentiality note)*

  10.4   Amended and Restated Employment Agreement with Uri Evan
         dated January 1996.2**

  10.5   Employment Agreement for each of Joseph Cohen, Frederick J.
         Horowitz, Daniel Bergman, and Mark Antebi.1**

  10.6   Forms of Employment Agreement for each of Frank Corella and
         Harold J. Macsata.1**

</TABLE>


                                -25-



<PAGE>



<TABLE>
<CAPTION>

EXHIBIT
NUMBER                  DESCRIPTION OF EXHIBIT
-------                 ----------------------
<S>         <C>
 10.7   Loan Agreement dated April 15, 1993 between the New Jersey
        Economic Development Authority and Registrant.1

 10.8   Reimbursement Agreement dated April 15, 1993 between Banque
        Nationale de Paris, Houston Agency and the Registrant.1

 10.9   Security Agreement dated April 15, 1993 between the New Jersey
        Economic Development Authority and the Registrant.1

 10.10  Loan Agreement dated December 17, 1996 between PNC Bank, N.A.
        and the Registrant.

 10.11  1995 Stock Option Plan.1**

 10.12  Stock Option Plan for Non-Employee Directors.1**

 10.13  Form of Directors and Officers Indemnity Agreement.1

 10.14  Lease Agreement dated January 26, 1996 between M&E Co. and the
        Company.2

 10.15  Purchase and Sale Agreement dated January 22, 1997 between The
        Okonite Company, Inc. and the Company.

 21     Subsidiaries of the Company.2

 23     Consent of Deloitte & Touche LLP.

 27     Financial Data Schedule.


</TABLE>

(b) Reports on Form 8-K:

     None.


--------------------------
*    Confidentiality Requested, confidential portions have been omitted and
     filed separately with the Commission, as required by Rule 406(b) of the
     Securities Act of 1933.

**   Management contract, or compensatory plan or arrangement.

1.   Previously filed as an exhibit to the Company's Registration Statement
     on Form S-1 (No. 33-93488), which exhibit is incorporated herein by
     reference.

2.   Previously filed as an exhibit to the Company's Registration Statement
     on Form S-1 (No. 333-1386), which exhibit is incorporated herein by
     reference.


                                     -26-



<PAGE>



                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>

                                                                         PAGE
                                                                         ----
<S>                                                                      <C>
Independent Auditors' Reports                                             F-2
Consolidated Balance Sheets at December 31, 1995                          F-3
and 1996
Consolidated Statements of Income for the years                           F-4
ended December 31, 1994, 1995 and 1996
Consolidated Statements of Cash Flows for the                             F-5
years ended December 31, 1994, 1995 and 1996
Consolidated Statements of Stockholders' Equity                           F-6
for the years ended December 31, 1994, 1995 and 1996
Notes to Consolidated Financial Statements for the                        F-7
years ended December 31, 1994, 1995 and 1996

</TABLE>


                                      F-1



<PAGE>



                         INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
USA Detergents, Inc.:

     We have audited the accompanying consolidated balance sheets of USA
Detergents, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, retained earnings and cash
flows for the three years then ended. Our audits also included the financial
statement schedule listed in the index at Item 14(a)(2). These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of USA Detergents, Inc. and
subsidiaries at December 31, 1995 and 1996, and the results of its operations
and its cash flows for the three years then ended in conformity with generally
accepted accounting principles. Also, in our opinion, the 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.



/s/ Deloitte & Touche LLP

New York, New York
February 17, 1997
(March 3, 1997 and March 24, 1997 as to Note 4)


                                      F-2



<PAGE>






                     USA DETERGENTS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                          DECEMBER 31, 1995 AND 1996
                       (IN THOUSANDS, EXCEPT SHARE DATA)

                                    ASSETS

<TABLE>
<CAPTION>
                                                         1995          1996
                                                         ----          ----
<S>                                                    <C>            <C>
Current assets:
Cash ................................................   $    61       $ 2,373
Accounts receivable, net of allowance for doubtful ..    15,278        28,196
accounts of $276 and $1,349, respectively
Inventories .........................................     8,448        26,989
Prepaid expenses and other current assets ...........     2,989         5,668
Income taxes receivable .............................        --           752
Deferred income taxes receivable ....................       630           998
                                                        -------       -------
    Total current assets ............................    27,406        64,976
Property and equipment--net .........................    10,404        28,603
Restricted funds ....................................       275           275
Other assets ........................................       255         2,800
Note receivable .....................................     2,250         2,250
                                                        -------       -------
    Total assets ....................................   $40,590       $98,904
                                                        =======       =======

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Note payable bank ...................................   $    --       $ 4,000
Accounts payable ....................................     4,830        13,725
Accrued expenses ....................................     3,942         6,371
Current portion of long-term debt ...................     7,320           318
  Income taxes payable ..............................       182            --
                                                        -------       -------
    Total current liabilities .......................    16,274        24,414
Long-term debt--net of current portion ..............     1,830        30,812
Deferred rent payable ...............................     1,204         1,284
Deferred income taxes payable .......................       990         1,135
                                                        -------       -------
    Total liabilities ...............................    20,298        57,645

Commitments and Contingencies

Stockholders' equity:
Preferred Stock--no par value; authorized ...........        --            --
1,000,000 shares, none issued
Common stock--$.01 par value; authorized ............       134           138
30,000,000 shares, issued and  outstanding
13,392,390 and 13,752,570 shares, respectively
Additional paid-in capital ..........................    15,499        27,595
Retained earnings ...................................     4,659        13,526
                                                        -------       -------
    Total stockholders' equity ......................    20,292        41,259
                                                        -------       -------
    Total liabilities and stockholders' equity ......   $40,590       $98,904
                                                        =======       =======

</TABLE>


                See Notes to Consolidated Financial Statements.

                                      F-3



<PAGE>



                     USA DETERGENTS, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)


<TABLE>
<CAPTION>

                                           1994        1995           1996
                                           ----        ----           ----
<S>                                      <C>         <C>            <C>
Net sales...........................     $68,663     $104,878       $174,031
Cost of goods sold..................      51,588       72,921        115,338
                                          ------      -------       --------

Gross profit........................      17,075       31,957         58,693

Selling, general and
administrative......................      12,182       22,232         43,046
                                          ------     --------       --------

Income from operations..............       4,893        9,725         15,647
Interest expense - net..............         543          544            868
                                           -----     --------       --------
Income before income                       4,350        9,181         14,779
tax provision.......................
Income tax provision................          83        2,156          5,912
                                          ------     --------       --------

Net income..........................     $ 4,267     $  7,025       $  8,867
                                         =======     ========       ========
Net income per share................                                $    .65
                                                                    ========
Weighted average number of
 common shares outstanding..........                                  13,589
                                                                    ========

Pro Forma Income Statement
Data:
Earnings before income tax
provision, as reported..............     $ 4,350     $  9,181
Pro forma income tax
provision...........................       1,689        3,756
                                         -------     --------
 Pro forma net income...............     $ 2,661     $  5,425
                                         =======     ========
 Pro forma net income per
 share..............................     $   .22     $    .43
                                         =======     ========
Weighted average number of
common shares outstanding
used in the pro forma per
share calculation...................      11,915      12,494
                                         =======     =======

</TABLE>

                See Notes to Consolidated Financial Statements.

                                      F-4



<PAGE>



                     USA DETERGENTS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                     1994     1995      1996
                                                     ----     ----      ----
<S>                              <C><C><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                         $ 4,267  $ 7,025  $  8,867
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization                          762    1,006     2,302
Change in the provision for bad debts and sales
allowances                                             157      192     1,073
Increase/(decrease) in deferred rent                   416       (3)       80
Changes in operating assets and liabilities:
   (Increase) in accounts receivable                  (384)  (8,806)  (13,991)
   (Increase) in inventories                        (2,346)    (549)  (18,541)
   (Increase) in prepaid expenses
   and other current assets                         (1,250)  (1,293)   (2,679)
   (Increase)/decrease in other assets                 (34)      22    (2,545)
   Decrease/(increase) in accounts payable          (2,962)     966     8,895
   Increase in accrued expenses                      2,158      543     2,429
   Decrease in restricted funds                        141       --        --
   (Increase) in income taxes receivable                --       --      (752)
   Increase/(decrease) in deferred income taxes         --      360      (223)
   payable
   Increase/(decrease) in income taxes payable          38      125      (182)
                                                   -------  -------  --------
   Net cash provided by (used in) operating
   activities:                                         963     (412)  (15,267)
                                                   -------  -------  --------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                 (1,651)  (3,851)  (20,501)
 Increase in note receivable                            --   (2,250)       --
                                                   -------  -------  --------
 Net cash used in investing activities:             (1,651)  (6,101)  (20,501)
                                                   -------  -------  --------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Stockholder distributions                          (1,612)  (5,331)       --
 Repayment of stockholders loans                       (82)      --        --
 Proceeds from common stock subscription             1,375       --        --
 Repayment of EDA debt                                (334)    (305)     (305)
 Net proceeds from initial public offering              --   12,718        --
 Net proceeds from sale of common stock                 --       --    11,736
 Net proceeds from exercise of options                  --       --       364
 Increase in note payable bank                          --       --     4,000
 Increase/(decrease) in revolving credit line-net    1,394     (517)   22,322
 Capitalized lease repayments                          (22)     (68)      (37)
                                                   -------  -------  --------
 Net cash provided by financing activities             719    6,497    38,080
                                                   -------  -------  --------
 Net increase/(decrease) in cash                        31      (16)    2,312
 Cash, January 1,                                       46       77        61
                                                   -------  -------  --------
 Cash, December 31,                                $    77  $    61  $  2,373
                                                   =======  =======  ========

SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
  Cash paid during the year for:                   $   520  $   539  $    834
                                                   =======  =======  ========
   Interest
   Income taxes                                    $    45  $ 1,671  $  7,059
                                                   =======  =======  ========

</TABLE>


                See Notes to Consolidated Financial Statements.

                                      F-5



<PAGE>



                     USA DETERGENTS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                       (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                PREFERRED STOCK        COMMON STOCK    ADDITIONAL                         STOCK         TOTAL
                                ---------------     ----------------    PAID-IN    RETAINED           SUBSCRIPTIONS STOCKHOLDERS'
                                SHARES   AMOUNT     SHARES    AMOUNT    CAPITAL    EARNINGS    TOTAL    RECEIVABLE     EQUITY
                                ------   ------     ------    ------    -------    --------    -----    ----------     ------
<S>                             <C>      <C>       <C>        <C>       <C>        <C>        <C>       <C>            <C>
BALANCE, December 31, 1993....     --    $  --     7,943,000   $ 79     $ 2,836    $   310    $ 3,225    $(1,375)      $ 1,850
 Net income...................                                                       4,267      4,267                    4,267
 Stockholder distributions....                                                      (1,612)    (1,612)                  (1,612)
 Collection of common stock
  subscription receivable.....                                                                             1,375         1,375
                                ------   ------   ----------   ----     -------    -------    -------    -------       -------
BALANCE, December 31, 1994....     --       --     7,943,000     79       2.836      2,965      5,880         --         5,880
 Net income...................                                                       7,025      7,025                    7,025
 Stockholder distributions....                                                      (5,331)    (5,331)                  (5,331)
 Net proceeds from initial
  public offering.............                       985,260     10      12,708                12,718                   12,718
Three-for-two stock split.....     --       --     4,464,130     45         (45)        --         --         --            --
                                ------   ------   ----------   ----     -------    -------    -------    -------       -------
BALANCE, December 31, 1995....     --       --    13,392,390    134      15,499      4,659     20,292         --        20,292
 Net income...................                                                       8,867      8,867                    8,867
 Stock options exercised......                        60,180      1         363                   364                      364
 Net proceeds from sale of
 common stock.................     --       --       300,000      3      11,733                11,736                   11,736
                                ------   ------   ----------   ----     -------    -------    -------    -------       -------
BALANCE, December 31, 1996....     --    $  --    13,752,570   $138     $27,595    $13,526    $41,259    $    --       $41,259
                                ======   ======   ==========   ====     =======    =======    =======    =======       =======

</TABLE>


                See Notes to Consolidated Financial Statements.


                                      F-6



<PAGE>


                     USA DETERGENTS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996


1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     USA Detergents, Inc. (the "Company") manufactures and markets nationally
distributed value brand laundry and household cleaning products.

     Basis of Presentation--The accompanying Financial Statements include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated in consolidation.

     Inventories--Inventories are stated at the lower of cost, determined by
using the first-in, first-out and average methods, or market. The Company
periodically reviews inventory for slow moving or obsolete items. Such items
are written down to net realizable value and have not been material for any
period presented.

     Slotting fees--The Company incurs certain costs in connection with
placing its products. These costs are known in the trade as "slotting fees."
The Company is amortizing these fees over a one year period from the date
incurred. Deferred slotting fees are included in prepaid expenses and other
current assets.

     Long-Lived Assets--In March 1995, the Financial Accounting Standards
Board issued Statement Number 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
is effective for fiscal years beginning after December 15, 1995. The Company
has adopted this statement and the impact has not been significant.

     Depreciation and Amortization--Depreciation of property and equipment
is provided for by using the straight-line method over the estimated useful
lives of the respective assets. Amortization of leasehold improvements is
provided for by the straight-line method over the lease term.

     Trademark and Deferred Loan Costs--Other assets include trademark
costs, which are being amortized using the straight-line method over a period
of 10 years, and loan closing costs, which are being amortized over the life
of the loan.

     Income Taxes--Prior to August 10, 1995 (one day prior to the completion
of the Company's initial public offering), the Company elected to be treated
as an S corporation ("S corporation") under the applicable sections of the
Internal Revenue Code. Accordingly, during the "S Corporation Period" there
was no provision for federal income taxes as such earnings of the Company
flowed through directly to the stockholders. The Company was subject to state
and local taxes in certain states during the S Corporation Period.



                                      F-7



<PAGE>




     Deferred taxes on income are provided to reflect the tax effect of
temporary differences between financial statement income and taxable income.
The principal items giving rise to deferred taxes are the use of accelerated
depreciation methods for tax purposes, straight-lining of step rental
increases and differences in the timing of the deductibility of certain
expenses between income tax and financial reporting.

     Fair Value of Financial Instruments--The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments". The estimated fair
values of financial instruments have been determined by the Company using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.

     The carrying amounts and estimated fair values of financial instruments
at the end of the respective years are summarized as follows (in thousands):


<TABLE>
<CAPTION>

                                   December 31, 1995       December 31, 1996
                                   -----------------       -----------------
                                 Carrying     Estimated   Carrying  Estimated
                                  Amount      Fair Value   Amount   Fair Value
                                 --------     ----------  --------  ----------
<S>                             <C>          <C>          <C>       <C>
Assets:
    Cash......................   $    61       $    61     $ 2,373       $ 2,373
Trade accounts receivable.....    15,554        15,554      29,545        29,545
Note receivable...............     2,250         2,250       2,250         2,250
Liabilities:
    Accounts payable,
    accrued expenses
    and taxes.................     8,954         8,954      20,096        20,096

Revolving line of
    credit....................     6,983         6,983      33,305        33,305
Capitalized lease
    obligations...............        56            56          19            19
Economic Development
    Authority loan............     2,111         1,946       1,806         1,712


</TABLE>


                                     F-8



<PAGE>



The following methods and assumptions were used to estimate the fair value of
the financial instruments presented above:

Cash -- The carrying amount is a reasonable approximation of fair value.

Trade accounts receivable, note receivable, accounts payable, accrued expenses
and taxes. The fair value of receivables and payables are assumed to equal
their carrying value because of their short maturities.

Revolving Credit Line -- Fair value is estimated by discounting the future
stream of payments using the incremental borrowing rate of the Company, which
represents its primary source of recourse financing.

Economic Development Authority Loan -- Interest rates that are currently
available to the Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt issues for which no market
quotes are available.

     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 disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

     Revenue Recognition -- Revenue is recognized at the time the merchandise
is shipped.

     Stock-Based Compensation -- Stock-based compensation is recognized using
the intrinsic value method. For disclosure purposes, pro forma net income and
pro forma net income per share are provided as if the fair value method was
applied.

     Pro forma Earnings Per Share and Pro forma Information -- Pro forma net
income per share is computed by dividing pro forma net income by the weighted
average number of shares outstanding. The dilutive effect of stock options
have not been included as the impact is not material. Shares outstanding have
been retroactively adjusted for the recapitalization.

     Pro forma net income has been adjusted to reflect a tax provision which
reflects the actual taxes that would have been paid had the Company been a C
corporation for all of 1995 and 1994.

     Reclassifications -- Certain reclassifications have been made to prior
year amounts to conform with the presentation for the current year.

New Accounting Standard --

    In October, 1996, the Accounting Standards Executive Committee issued
Statement of Position 96-1, "Environmental Remediation Liabilities." The
statement provides guidance on accounting for environmental remediation
liabilities and is effective for fiscal years beginning after December 15,
1996. Adoption of this statement is not expected to have any significant
impact on the Company.
                                      F-9



<PAGE>



2. INVENTORIES

     Inventories consist of the following:


<TABLE>
<CAPTION>

                                          DECEMBER 31,
                                         1995      1996
                                         ----      ----
                                         (in thousands)
<S>                                     <C>       <C>
Raw material.........................   $ 3,816   $ 9,972
Finished goods.......................     4,632    17,017
                                        -------   -------
                                        $ 8,448   $26,989
                                        =======   =======

</TABLE>


3. PROPERTY AND EQUIPMENT

     Property and equipment, at cost, consists of the following:

<TABLE>
<CAPTION>

                                          DECEMBER 31,           ESTIMATED
                                         1995      1996         USEFUL LIFE
                                         ----      ----         -----------
                                         (in thousands)
<S>                                     <C>       <C>          <C>
Machinery and equipment...............  $ 7,672   $22,855      6 to 10 years
Furniture and fixtures................    1,382     2,608      5 to 7 years
Leasehold improvements................    2,563     3,381      Term of lease
Construction in progress..............    1,423     1,601
Land..................................       --     1,376
Building..............................       --     1,652        25 years
                                        -------   -------
                                         13,040    33,473

Less accumulated depreciation and
amortization..........................    2,636     4,870
                                        -------   -------
                                        $10,404   $28,603
                                        =======   =======

</TABLE>


                                     F-10



<PAGE>




4. LONG TERM DEBT

<TABLE>
<CAPTION>

                                                     1995        1996
                                                     ----        ----
<S>                                                 <C>         <C>
Revolving credit facility (i).....................  $6,983      $33,305
New Jersey EDA loan (ii)..........................   2,111        1,806
Capitalized lease obligations (iii)...............      56           19
                                                     -----      -------
                                                     9,150       35,130
   Less amount due in one year....................   7,320        4,318
                                                     -----      -------
                                                    $1,830      $30,812
                                                    ======      =======

</TABLE>

     Annual maturities of bank and other long-term debt, including capitalized
leases, are as follows:


<TABLE>
<CAPTION>

                    <S>                           <C>
                          1997                    $ 4,318
                          1998                        311
                          1999                        305
                          2000                     10,305
                          2001                        310
                    Thereafter                     19,581
                                                  -------
                                                  $35,130
                                                  =======
</TABLE>

(i) The Line of Credit

     In December 1996, the Company entered into a credit facility with PNC
Bank, N.A. ("PNC") replacing the Company's old line of credit. The new credit
facility consists of a $20,000,000 capital expenditure facility for the
purchase of capital assets and/or leasehold improvements and a $10,000,000
traditional revolving facility. Borrowings under the credit facility bear
interest at LIBOR plus .50% to 1.5% (6.08% as of December 31, 1996) or one
percent below the prime rate of PNC, at the Company's election. All amounts
outstanding as of December 31, 1996 were subject to the 6.08% LIBOR-based
interest rate. Unused portions of the revolving facility are subject to a
commitment fee of .25% on such unused amounts. All amounts outstanding under
the capital expenditure facility at September 30, 1998 will be converted to a
five year term note. The revolving facility becomes due and payable at April
30, 2000, subject to one-year extensions at the option of PNC. PNC also
provides the Company with a $3,000,000 letter of credit facility. Amounts
drawn on the letter of credit facility are subject to an annual fee of .5% of
the face amount of each standby letter of credit. Each standby letter of
credit issued will have a stated term of no more than one year. The credit
facility contains various restrictions which include, among other things,
limiting the incurrence of additional indebtedness and requiring specified
debt to equity and current ratios and a minimum consolidated tangible net
worth. At December 31, 1996, the Company did not meet the debt to equity level
required

                                     F-11



<PAGE>



pursuant to the credit facility. On March 24, 1997, the Company received a
waiver of the violation and the Company and PNC have agreed to amend the
facility. On December 31, 1996, the Company also obtained a 60-day $4,000,000
bridge loan, bearing interest at one percent below the lender's prime rate
(7.25%). As of December 31, 1996, approximately $33,300,000 was outstanding
under the credit facility and the bridge loan facility. On March 3, 1997, the
Company repaid the bridge loan facility with funds generated from working
capital.

     On March 24, 1997, the Company obtained a commitment from PNC and a
second lender to amend the Company's existing credit facility with PNC (the
"New Facility"). The New Facility, as outlined in the commitment letter, is
expected to provide for, among other things, an increase in the revolving
credit facility from $10,000,000 to $20,000,000, an increase in the capital
expenditure facility from $20,000,000 to $35,000,000 and a $10,000,000 bridge
loan which will be repaid at the closing of the New Facility from the proceeds
of the capital expenditure facility. The revolving credit facility expires
three years from the closing of the New Facility and the capital expenditure
facility matures on May 31, 1999, at which time the then outstanding balance,
if any, will be converted to a five-year term loan. Borrowings under the New
Facility bear interest at rates which approximate the existing credit facility
with PNC. The commitment provides that all of the assets of the Company will
be pledged as collateral for the New Facility. The New Facility is conditional
upon, among other things, the finalization of a loan agreement acceptable to
PNC.

(ii) During 1993, the Company received a loan of $2,750,000 from the New
Jersey Economic Development Authority ("EDA"). Proceeds from this loan were to
be used solely for machinery and equipment and improvements to the Company's
manufacturing facility in North Brunswick, New Jersey. As of December 31,
1995, the Company had used $2,474,775. From the remaining $275,225 classified
as restricted funds, $275,000 must remain restricted through the duration of
the loan. The loan is payable in monthly installments of $25,416 from January
1, 1995 through November 1, 2001 and $25,833 from December 1, 2001 through
November 1, 2002. Interest on the loan is payable at a variable rate (4.2% at
December 31, 1996).

     The agreement contains, among other items, restrictions relating to the
payment of dividends.

     The loan is collateralized by all assets purchased with the proceeds of
the loan.

(iii) The Company has acquired equipment under leases that have been accounted
for as capital leases.


                                     F-12



<PAGE>



     Aggregate future minimum lease payments are as follows (in thousands):


<TABLE>
<CAPTION>

                  YEAR ENDING
                  DECEMBER 31,
                  ------------
                   <S>                                           <C>
                  1997.....................................        25
                  1998.....................................         6
                                                                  ---
                                                                   31
                  Less amount representing
                  interest.................................        12
                                                                  ---
                  Present value of minimum
                  lease payments...........................        19
                  Current portion..........................        13
                                                                  ---
                  Long-term portion........................       $ 6
                                                                  ===

</TABLE>


5. COMMITMENTS AND CONTINGENCIES

Note Receivable

     In December 1995, the Company loaned approximately $2.3 million to an
unaffiliated third party in connection with such third party's acquisition of
a powder detergent manufacturing facility. Amounts outstanding under such loan
bear interest at 10.0% per annum and are payable on demand. The loan is
secured exclusively by the stock and assets of the borrower. The Company has
an option to purchase the manufacturing facility for the amount of the loan.

Leases

     The Company is committed under various operating leases which expire at
varying dates through the year 2004. Aggregate minimum future lease payments,
exclusive of payments for real estate taxes and operating costs, are as
follows (in thousands):

<TABLE>
<CAPTION>

                  YEAR ENDING
                  DECEMBER 31,
                  ------------
                  <S>                                          <C>
                  1997.....................................     2,527
                  1998.....................................     2,477
                  1999.....................................     2,059
                  2000.....................................     1,745
                  2001.....................................     1,269
                  Thereafter...............................     2,250
                                                              -------
                                                              $12,327
                                                              =======

</TABLE>


                                     F-13



<PAGE>




     Rent expense charged to operations amounted to $1,099,000, $1,043,000 and
$1,702,000 for the years ended December 31, 1994, 1995 and 1996, respectively,
including real estate taxes and operating escalations.

     Rent expense recognized annually differs from actual rent paid as a
result of free rent periods and escalations in base rent provided in the
leases. Accordingly, the Company has recorded deferred rent of $1,284,000 at
December 31, 1996. This amount is being amortized by the straight-line method
over the life of the lease.

Servicing Agreement

     The Company entered into an exclusive use agreement with a vendor whereby
the vendor has committed the use of certain machines for the production of
packaging materials for the Company. The monthly payment is $965,666, subject
to maximum annual increases of 2%, through January 31, 2001, which will be
applied against the purchase price of the packaging materials.

Profit Sharing Plan

     The Company has a profit sharing plan based on the amount by which the
Company's operating gross margin (the "OGM"), as defined, exceeds ten percent.
If the Company's OGM exceeds ten percent, a percentage of that excess is
placed in a bonus pool based on a predetermined formula provided that the
total amount available for distribution shall not be based on annual gross
sales in excess of $200 million. Fifty-two percent of the bonus pool is
allocated for distribution to senior executives. Of the remainder of the bonus
pool, no participant can currently receive a distribution greater than 50% of
his or her base salary. Amounts not allocated for distribution under the bonus
pool will not be distributed. The Company did not make payments under the plan
through December 31, 1994, as amounts would have been immaterial and were
waived. For the years ended December 31, 1995 and 1996, approximately $231,000
and $410,000, respectively, was distributed under the plan.

Employment Agreements

     The Company is obligated under various employment agreements expiring in
1999. The minimum future annual amounts payable under these agreements are as
follows (in thousands):

<TABLE>
<CAPTION>

            <S>                                        <C>
             1997.....................................     1,000
             1998.....................................     1,000
             1999.....................................       200
                                                          ------
                                                          $2,200
                                                          ======

</TABLE>

                                     F-14



<PAGE>



Environmental Regulation

     The Company is subject to various federal, state and local environmental
laws and regulations, including those relating to wastewater discharge, air
quality and the storage, handling and disposal of a variety of substances.
Some of the chemicals used by the Company and stored at its manufacturing
facility are materials regulated by federal or state environmental protection
agencies. The Company maintains $6,000,000 of insurance coverage for
environmental liabilities.

New Facility

     On January 22, 1997, the Company entered into a contract to purchase a
650,000 square foot facility in North Brunswick, New Jersey, adjacent to the
Company's existing facility for a purchase price of $7,200,000. The Company
expects to consolidate its entire East Coast warehousing and distribution
operation at this new facility. The purchase is expected to be funded by an
increase in the Company's credit facility.

6. INCOME TAXES

     Components of income taxes are as follows:

<TABLE>
<CAPTION>

                                                YEAR ENDED DECEMBER 31,
                                               1994      1995      1996
                                               ----      ----      ----
                                                    (IN THOUSANDS)
<S>                                           <C>       <C>       <C>
Current:
  Federal................................       $--     $1,403    $5,143
  State and local........................        83        393       992
  Deferred...............................        --        360      (223)
                                                ---     ------    ------
                                                $83     $2,156    $5,912
                                                ===     ======    ======


     Temporary differences which give rise to net deferred tax liabilities at
December 31, 1995 and 1996 are as follows:


</TABLE>
<TABLE>
<CAPTION>

                                                    1995        1996
                                                    ----        ----
                                                      (IN THOUSANDS)
<S>                                                <C>        <C>
Deferred tax liabilities
   Depreciation..................................   $990       $1,135
                                                    ----       ------
Deferred tax assets
   Straight-lining of step rental increases......    466          502
   Allowance for bad debts.......................    107          527
   Inventory capitalization......................     37           15
   Miscellaneous.................................     20          (46)
                                                    ----       ------
                                                     630          998
                                                    ----       ------

Net deferred tax liabilities.....................   $360       $  137
                                                    ====       ======

</TABLE>


                                     F-15



<PAGE>



     A reconciliation of income taxes at the Federal statutory rate to amounts
provided is as follows:


<TABLE>
<CAPTION>
                                                              1995       1996
                                                              ----       ----
                                                               (IN THOUSANDS)
<S>                                                           <C>        <C>
Tax provision computed at statutory rate....................  $3,122    $5,073
State and local income taxes................................     264       652
Non taxable earnings during period prior to conversion to
   C corporation status.....................................  (1,522)       --
Recognition of deferred taxes upon conversion
   to C corporation status..................................     227        --
Other--net..................................................      65       187
                                                              ------    ------
                                                              $2,156    $5,912
                                                              ======    ======

</TABLE>

     Prior to August 10, 1995, the Company was taxed as an S corporation.
Accordingly, no reconciliation for 1994 has been provided as taxes on earnings
of the Company were the responsibility of the stockholders.

7. SIGNIFICANT CUSTOMERS AND SUPPLIERS

     The Company's largest customer, Wal-Mart, accounted for 10.0%, 17.2% and
16.8% of sales, respectively, in 1994, 1995 and 1996. No other customer of the
Company accounted for more than 10.0% of the Company's net sales. As is
customary in the industry, the Company does not have long-term contracts with
its customers.

     Certain chemical plastic bottles, packaging materials and manufacturing
equipment used in connection with the manufacture of the Company's products as
well as certain finished products sold by the Company are obtained from a sole
or a limited group of suppliers and subcontractors. The Company's reliance on
a sole supplier or limited groups of suppliers and subcontractors involves
several risks, including increased risk of inability to obtain adequate
supplies, and reduced control over pricing and timely delivery. Although the
timeliness, quality and pricing of deliveries from the Company's suppliers
have been acceptable to date and the Company believes that additional sources
of supply are generally available, there can be no assurance that supplies
will be available on an acceptable basis or that delays in obtaining new
suppliers, particularly of plastic bottles, will not have an adverse effect on
the Company.

8. STOCKHOLDERS' EQUITY

     Organization, Recapitalization and Sale of Common Stock -- The Company
was organized in New Jersey and commenced operations effective October 25,
1988. On August 2, 1995, the Company was reincorporated in Delaware. In
connection with the



                                     F-16



<PAGE>



reincorporation, the Company became authorized to issue up to 30,000,000
shares of Common Stock, $.01 par value per share, and up to 1,000,000 shares
of Preferred Stock, no par value. As part of the reincorporation each share of
the predecessor corporation's common stock was converted into 88,167 shares of
Common Stock of the Company. All applicable share data have been retroactively
adjusted to reflect the reincorporation and share conversion.

     In August 1995, the Company completed an initial public offering of
3,622,500 shares of Common Stock, including 1,477,890 shares of Common Stock
sold by the Company (the remainder being sold by certain stockholders of the
Company) which provided net proceeds to the Company of approximately
$12,718,000.

     On January 18, 1996, the Company declared a three-for-two stock split
effected in the form of a 50% stock dividend to holders of record of the
Company's Common Stock at the close of business on January 30, 1996 and paid
February 9, 1996. Shares outstanding and per share amounts have been
retroactively adjusted to reflect the three-for-two stock split.

     In June 1996, the Company completed an additional public offering of
300,000 shares of Common Stock which provided net proceeds to the Company of
approximately $11,736,000.

     1995 Stock Option Plan. Effective in August 1995, the Company adopted the
USA Detergents, Inc. 1995 Stock Option Plan (the "1995 Plan"), pursuant to
which options to acquire an aggregate of 388,935 shares of Common Stock may be
granted to key employees and consultants of the Company or any of its
subsidiaries. The 1995 Plan authorizes the Board to issue incentive stock
options ("ISO's"), as defined in Section 422A(b) of the Internal Revenue Code
(the "Code"), and stock options that do not conform to the requirements of
that Code section ("Non-ISO's"). The exercise price of each ISO may not be
less than 100% of the fair market value of the Common Stock at the time of
grant, except that in the case of a grant to an employee who owns 10% or more
of the outstanding stock of the Company or any subsidiary ("10% Stockholder"),
the exercise price shall not be less than 110% of such fair market value. The
exercise price of each Non-ISO may not be less than the par value of the
Common Stock. Generally, options will vest over a three to five year period
and may not be exercised after the tenth anniversary (fifth anniversary in the
case of an ISO granted to a 10% Shareholder) of their grant. Options may not
be transferred during the lifetime of an optionholder. No stock options may be
granted under the 1995 Plan after 2005.

     Non-Employee Directors' Plan. Effective in August 1995, the Company
adopted a Stock Option Plan for Non-Employee Directors (the "Directors'
Plan"), pursuant to which options to acquire an aggregate of 75,000 shares of
Common Stock may be granted to non-employee directors. The Directors' Plan
provides for the automatic grant to each of the Company's non-employee
directors of (1) an option to purchase 4,500 shares of Common Stock on the
later of the date of such director's initial election or appointment to the
Board of Directors or the date of adoption of the Directors' Plan,



                                     F-17



<PAGE>



and (2) an option to purchase 4,500 shares of Common Stock on each annual
anniversary of such election or appointment, provided that such individual is
on that anniversary date a non-employee director.  The options will have an
exercise price of 100% of the fair market value of the Common Stock on the
date of grant, have a ten-year term and become exercisable in four equal
quarterly installments commencing on the date which is three months after the
date of the grant thereof, subject to acceleration in the event of a change of
control (as defined in the Directors' Plan).  The options may be exercised by
payment in cash, check or shares of Common Stock.

     Activity in the 1995 Plan and the Directors' Plan since inception is as
follows:


<TABLE>
<CAPTION>

                                              NUMBER OF      EXERCISE PRICE
                                                OPTIONS           RANGE
                                               ---------    ------------------
<S>                                            <C>          <C>         <C>
Granted in 1995...........................     154,650      $ 9.67      $12.67
Canceled..................................      (7,500)       9.67       12.67
                                               -------
Options outstanding, December 31, 1995....     147,150        9.67       12.67
Granted in 1996...........................     140,250       15.75       37.00
Cancelled.................................      (1,125)       9.67        9.67
                                               -------
Options outstanding, December 31, 1996....     272,775        9.67       37.00
                                               =======

</TABLE>


     As of December 31, 1996, there were 191,160 options available for future
grant under the Plans and 16,500 outstanding options were exercisable.

     In December 1993, the Company granted an option to an executive covering
119,145 shares of common stock exercisable in four annual installments
beginning December 31, 1995. This option is exercisable at $2.00 per share.
Through December 31, 1996, 29,786 shares have been purchased pursuant to the
exercise of this option.

     The Company applies the provisions of APB Opinion 25 and related
interpretations in accounting for its stock options. Accordingly, no
compensation cost has been recognized for the foregoing options. The excess,
if any, of the fair market value of shares on the measurement date over the
exercise price is charged to operations each year as the options become
exercisable. Had compensation cost for these options been determined using the
Black-Scholes option-pricing model described in FASB Statement 123, the
Company would have recorded aggregate compensation expense of approximately
$1,272,865 which would be expensed at the rate of 33% per annum over the
option's vesting period. The assumptions used in the option-pricing model
include a risk-free interest rate of 5.2%-6.1%, expected life of 3 years and
expected volatility of 49.45%-73.07%. The pro forma impact of following the
provisions of FASB Statement No. 123 on the Company's net income and income
per share would be as follows:


                                     F-18



<PAGE>


<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                                ------------------------------
                                                     1996             1995
                                                  (in thousands, except per
                                                          share data)
<S>                                               <C>               <C>
Net income (1995 reflects pro
forma net income)             -   as reported       $ 8,867          $ 5,425
                                                    =======          =======

                              -   pro forma         $ 8,398          $ 5,350
                                                    =======          =======

Net income per common share
(1995 reflects pro forma net
income per common share)      -   as reported       $   .65          $   .43

                              -   pro forma         $   .62          $   .43

</TABLE>



     Net income per share has been calculated using the weighted average
shares outstanding during the periods.


                                     F-19



<PAGE>



9. SELECTED QUARTERLY DATA (UNAUDITED)

     The following table sets forth selected quarterly financial information
     for the fiscal years 1996 and 1995 (in thousands of dollars, except per
     share amounts):


<TABLE>
<CAPTION>

                                                       Net Income
                         Net           Gross                      Per
Quarter Ended           Sales          Profit       Amount       Share
-------------          -------        --------     --------     --------
<S>                      <C>            <C>         <C>          <C>
    3/31/96            $ 34,067        $11,542      $2,088        $.16
    6/30/96              42,915         14,564       2,703         .20
    9/30/96              48,105         16,387       3,152         .23
   12/31/96              48,944         16,200         924         .07
                       --------        -------      ------        ----
       Year            $174,031        $58,693      $8,867        $.65
                       ========        =======      ======        ====

</TABLE>


<TABLE>
<CAPTION>

                                                   Pro-forma Net Income
                         Net           Gross                      Per
Quarter Ended           Sales          Profit       Amount       Share
-------------          -------        --------     --------     --------
<S>                      <C>            <C>         <C>          <C>

  3/31/95              23,255          6,426          968         .08
  6/30/95              25,652          7,277        1,192         .10
  9/30/95              27,120          8,770        1,616         .13
 12/31/95              28,851          9,484        1,649         .12
                     --------        -------       ------        ----
     Year            $104,878        $31,957       $5,425        $.43
                     ========        =======       ======        ====

</TABLE>

     Beginning in the latter part of the third quarter through the end of
1996, the Company experienced distribution difficulties and late customer
deliveries attributable primarily to the Company's continued rapid growth in
sales and the assimilation of three new manufacturing and distribution
facilities. The effect of these factors was to increase the costs associated
with plant integration, distribution and customer returns and allowances.
Aggregate costs absorbed in the fourth quarter of 1996 associated with
these inefficiencies approximated $2,000,000.



                                     F-20



<PAGE>



                                       SIGNATURES


                  Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.


                                        USA DETERGENTS, INC.

Dated:  March 28, 1997                  By: /s/ Uri Evan
                                           -----------------------------
                                        Name: Uri Evan
                                        Title:   Chief Executive Officer


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

Signature                     Title                            Date
---------                     -----                            ----

/s/ Uri Evan                  Chief Executive Officer and      March 28, 1997
--------------------------    Chairman of the Board of
    Uri Evan                  Directors

/s/ Harold J. Macsata         Chief Financial Officer          March 28, 1997
--------------------------    (Principal Financial Officer
    Harold J. Macsata         and Principal Accounting
                              Officer)

/s/ Joseph S. Cohen           Director                         March 28, 1997
-------------------------
    Joseph S. Cohen

/s/ Frederick J. Horowitz     Director                         March 28, 1997
-------------------------
    Frederick J. Horowitz

/s/ Daniel Bergman            Director                         March 28, 1997
-------------------------
    Daniel Bergman

/s/ Mark Antebi               Director                         March 28, 1997
-------------------------
    Mark Antebi

/s/ Frederick R. Adler        Director                         March 28, 1997
------------------------
    Frederick R. Adler

/s/ Richard A. Mandell        Director                         March 28, 1997
------------------------
    Richard A. Mandell

/s/ Dr. Shlomo Kalish         Director                         March 28, 1997
------------------------
    Dr. Shlomo Kalish





<PAGE>




                     USA DETERGENTS, INC. AND SUBSIDIARIES

           SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (000'S)


<TABLE>
<CAPTION>

                                            ADDITIONS  DEDUCTIONS
                                            ---------  ----------
                               BALANCE AT    CHARGED                  BALANCE
                               BEGINNING    TO PROFIT                AT END OF
        DESCRIPTION            OF PERIOD     AND LOSS     (A)          PERIOD
        -----------            ---------     --------     ---          ------
<S>                           <C>            <C>         <C>          <C>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS:

Year ended December 31, 1994    $ 84         $  130      $130         $   84

Year ended December 31, 1995    $ 84         $  421      $229         $  276

Year ended December 31, 1996    $276         $1,421      $348         $1,349


</TABLE>

(A) Represents write-offs of uncollectible accounts receivable.





<PAGE>

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                     DESCRIPTION OF EXHIBIT
-------                    ----------------------
<S>       <C>
3.1       Certificate of Incorporation.(1)

3.2       Form of By-Laws of the Registrant.(1)

4.1       See Exhibits 3.1 and 3.2 for provisions of the Certificate of
          Incorporation and ByLaws of the Registrant defining the
          rights of holders of Common Stock of the Registrant.(1)

4.2       Specimen Common Stock Certificate.(1)

4.3       Form of Registration Rights Agreements between the Registrant,
          Frederick R. Adler and Blair Effron.(1)

10.1      Lease Agreement dated January 15, 1993 between Maurice M. Weill,
          Trustee for GEEMAC Property, and Registrant.(1)

10.2      Supply Agreement dated November 29, 1994 between Owens-Illinois
          Plastic Products Inc., Owens-Illinois Closure Inc. and Registrant.(1)

10.3      Amendment No. 1 dated December 1995 to Supply Agreement, dated
          November 29, 1994, between Owens-Illinois Plastic Products Inc.,
          Owens-Illinois Plastic Products Inc., Owens-Illinois Closure Inc.
          and Registrant.(2) (confidentiality note)(*)

10.4      Amended and Restated Employment Agreement with Uri Evan dated
          January 1996.(2)(**)

10.5      Employment Agreement for each of Joseph Cohen, Frederick J. Horowitz,
          Daniel Bergman, and Mark Antebi.(1)(**)

10.6      Forms of Employment Agreement for each of Frank Corella and
          Harold J. Macsata.(1)(**)

10.7      Loan Agreement dated April 15, 1993 between the New Jersey Economic
          Development Authority and Registrant.(1)

10.8      Reimbursement Agreement dated April 15, 1993 between Banque
          Nationale de Paris, Houston Agency and the Registrant.(1)

10.9      Security Agreement dated April 15, 1993 between the New Jersey
          Economic Development Authority and the Registrant.(1)

10.10     Loan Agreement dated December 17, 1996 between PNC Bank and the
          Registrant.

10.11     1995 Stock Option Plan.(1**)

10.12     Stock Option Plan for Non-Employee Directors.(1**)

10.13     Form of Directors and Officers Indemnity Agreement.(1)

10.14     Lease Agreement dated January 26, 1996 between M&E Co. and the
          Company.(2)

10.15     Purchase and Sale Agreement dated January 22, 1997 between The
          Okonite Company, Inc. and the Company.

21        Subsidiaries of the Company.(2)

23        Consent of Deloitte & Touche LLP

27        Financial Data Schedule


</TABLE>

--------------------------
(*)    Confidentiality Requested, confidential portions have been omitted
       and filed separately with the Commission, as required by Rule 406(b)
       of the Securities Act of 1933.

(**)   Management contract, or compensatory plan or arrangement.

(1)    Previously filed as an exhibit to the Company's Registration Statement
       on Form S-1 (No. 33-93488), which exhibit is incorporated herein by
       reference.

(2)    Previously filed as an exhibit to the Company's Registration Statement
       on Form S-1 (No. 333-1386), which exhibit is incorporated herein by
       reference.