<PAGE>   1


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
                                                           -----------------

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FROM      TO


Commission File Number 333-3689

                                 WAXMAN USA INC.
                                 ---------------
             (Exact Name of Registrant as Specified in its Charter)

                 DELAWARE                              34-1761514
                 --------                              ----------
        (State of Incorporation)         (I.R.S. Employer Identification Number)

           24460 AURORA ROAD
         BEDFORD HEIGHTS, OHIO                           44146
         ---------------------                           -----
(Address of Principal Executive Offices)               (Zip Code)

                                 (440) 439-1830
                                 --------------
               (Registrant's Telephone Number Including Area Code)

                                 NOT APPLICABLE
                                 --------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


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 ninety (90) days.

                                Yes  X     No
                                    ---       ---

100 shares of Common Stock, $.01 par value, were outstanding as of February 10,
1999.


                                       1


<PAGE>   2
<TABLE>
<CAPTION>

                        WAXMAN USA INC. AND SUBSIDIARIES
                        --------------------------------

                               INDEX TO FORM 10-Q
                               ------------------

                                                                                                          PAGE
                                                                                                          ----

PART I.  FINANCIAL INFORMATION
------------------------------

<S>                                                                                                      <C>
Item 1.  Financial Statements (Unaudited)

            Condensed Consolidated Statements of Operations for the Six and Three Months
                  Ended December 31, 1998 and 1997.......................................................    3

            Condensed Consolidated Balance Sheets -
                  December 31, 1998 and June 30, 1998....................................................  4-5

            Condensed Consolidated Statements of Cash Flows -
                     For the Six Months Ended December 31, 1998 and 1997 ................................    6

            Notes to Condensed Consolidated Financial Statements......................................... 7-11

Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations....................................................................11-16


PART II. OTHER INFORMATION
--------------------------

Item 5.  Other Information...............................................................................   17

Item 6.  Exhibits and Reports on Form 8-K   .............................................................   17


SIGNATURES
----------

EXHIBIT INDEX
-------------
</TABLE>


                                       2


<PAGE>   3
<TABLE>
<CAPTION>

PART I.  FINANCIAL INFORMATION
         ---------------------
ITEM 1.  FINANCIAL STATEMENTS
         --------------------


                        WAXMAN USA INC. AND SUBSIDIARIES
                        --------------------------------

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                                   (UNAUDITED)

          FOR THE SIX AND THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                 (IN THOUSANDS)


                                                              Six Months                Three Months
                                                       -----------------------     -----------------------
<S>                                                    <C>           <C>           <C>           <C>      
                                                         1998           1997          1998          1997
                                                       ---------     ---------     ---------     ---------

Net sales                                              $  57,427     $  54,965     $  29,198     $  26,808

Cost of sales                                             39,678        36,100        20,537        17,444
                                                       ---------     ---------     ---------     ---------

Gross profit                                              17,749        18,865         8,661         9,364

Selling, general and administrative expenses              14,839        13,190         7,518         6,654

Restructuring and non-recurring charges                    1,350           133            --            --

Corporate charge                                           1,657         1,665           787           838
                                                       ---------     ---------     ---------     ---------
Operating (loss)income                                       (97)        3,877           356         1,872

Equity earnings of Barnett                                 3,331         3,168         1,804         1,704

Interest expense, net                                      3,047         2,684         1,547         1,343
                                                       ---------     ---------     ---------     ---------

Income before income taxes and extraordinary loss            187         4,361           613         2,233

Provision for income taxes                                    71         1,665           233           850
                                                       ---------     ---------     ---------     ---------

Income before extraordinary loss                             116         2,696           380         1,383

Extraordinary loss, net of tax                                --           115            --            --
                                                       ---------     ---------     ---------     ---------

Net income                                             $     116     $   2,581     $     380     $   1,383
                                                       =========     =========     =========     =========

COMPREHENSIVE INCOME:
Net income before comprehensive income                 $     116     $   2,581     $     380     $   1,383
Foreign currency translation adjustment                      418          (615)          392          (529)
                                                       ---------     ---------     ---------     ---------
Comprehensive income                                   $     534     $   1,966     $     772     $     854
                                                       =========     =========     =========     =========
</TABLE>


      The accompanying Notes to Condensed Consolidated Financial Statements
                   are an integral part of these statements.


                                       3


<PAGE>   4
<TABLE>
<CAPTION>

                        WAXMAN USA INC. AND SUBSIDIARIES
                        --------------------------------

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------

                       DECEMBER 31, 1998 AND JUNE 30, 1998

                                 (IN THOUSANDS)

                                     ASSETS


                                                                  December 31,                  June 30,
                                                                      1998                       1998
                                                                  (Unaudited)                  (Audited)
                                                                  -----------                 -----------
<S>                                                                 <C>                          <C>    
CURRENT ASSETS:
  Cash                                                              $    118                     $    73
  Trade receivables, net                                              14,348                      15,503
  Other receivables                                                    2,883                       3,055
  Inventories                                                         19,621                      26,162
  Prepaid expenses                                                     3,580                       3,026
  Net assets held for sale                                             8,252                          --
                                                                    --------                   ---------  
  Total current assets                                                48,802                      47,819
                                                                    --------                   ---------  

INVESTMENT IN BARNETT                                                 32,972                      29,641
                                                                    --------                   ---------  

PROPERTY AND EQUIPMENT:
  Land                                                                   435                         413
  Buildings                                                            2,966                       4,111
  Equipment                                                           10,785                      12,348
                                                                    --------                   ---------  
                                                                      14,186                      16,872
  Less accumulated depreciation and amortization                      (5,230)                     (7,106)
                                                                    --------                   ---------  
  Property and equipment, net                                          8,956                       9,766
                                                                    --------                   ---------  

COST OF BUSINESSES IN EXCESS OF NET ASSETS ACQUIRED, NET               8,054                       8,189
UNAMORTIZED DEBT ISSUANCE COSTS, NET                                     417                         564
OTHER ASSETS                                                           1,943                         753
                                                                    --------                   ---------  
                                                                    $101,144                     $96,732
                                                                    ========                   =========  
</TABLE>


      The accompanying Notes to Condensed Consolidated Financial Statements
                    are an integral part of these statements.


                                        4


<PAGE>   5
<TABLE>
<CAPTION>

                        WAXMAN USA INC. AND SUBSIDIARIES
                        --------------------------------

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      -------------------------------------

                       DECEMBER 31, 1998 AND JUNE 30, 1998

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                         December 31,                  June 30,
                                                                            1998                        1998
                                                                         (Unaudited)                  (Audited)
                                                                         -----------                 -----------

<S>                                                                       <C>                        <C>      
CURRENT LIABILITIES:
  Current portion of long-term debt                                       $   22,141                 $  15,750
  Accounts payable                                                             8,564                     7,932
  Accrued liabilities                                                          3,282                     5,203
  Accrued income taxes payable                                                   260                       250
  Accrued interest                                                             1,337                     1,339
                                                                         -----------                 ---------  
      Total current liabilities                                               35,584                    30,474
                                                                         -----------                 ---------  

OTHER LONG-TERM DEBT, NET OF CURRENT PORTION                                     603                       589

SENIOR NOTES                                                                  35,855                    35,855



STOCKHOLDER'S EQUITY:
  Preferred stock, $.01 par value per share:
    Authorized and unissued 1,000 shares                                          --                        --
  Common Stock, $.01 par value per share:
    Authorized 9,000 shares; 100 shares issued and outstanding                    --                        --
  Advances to Waxman Industries, Inc.                                        (12,637)                  (11,391)
  Paid-in capital                                                             21,462                    21,462
  Retained earnings                                                           21,022                    20,906
                                                                         -----------                 ---------  
                                                                              29,847                    30,977
  Cumulative currency translation adjustment                                    (745)                   (1,163)
                                                                         -----------                 ---------  

      Total stockholders' equity                                              29,102                    29,814
                                                                         -----------                 ---------  
                                                                          $  101,144                 $  96,732
                                                                         ===========                 =========  
</TABLE>

      The accompanying Notes to Condensed Consolidated Financial Statements
                   are an integral part of these statements.


                                       5


<PAGE>   6
<TABLE>
<CAPTION>


                        WAXMAN USA INC. AND SUBSIDIARIES
                        --------------------------------

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                   (UNAUDITED)

               FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
                                 (IN THOUSANDS)


                                                                               1998               1997
                                                                            ---------          ---------
<S>                                                                         <C>                <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                $     116          $   2,581
  Adjustments to reconcile net income to net
    cash used in operating activities:
      Extraordinary loss - deferred financing cost write-off                       --                115
      Equity earnings of Barnett                                               (3,331)            (3,168)
      Depreciation and amortization                                             1,063              1,259
  Changes in assets and liabilities:
    Trade receivables, net                                                     (1,323)            (2,324)
    Other receivables                                                              90                385
    Inventories                                                                   887             (1,539)
    Prepaid expenses and other assets                                          (2,458)               249
    Accounts payable                                                            2,222              2,298
    Accrued liabilities                                                        (1,578)            (1,975)
    Accrued income taxes                                                           10                668
    Accrued interest                                                               (2)              (467)
    Other, net                                                                    418               (615)
                                                                            ---------          ---------
      Net Cash Used in Operating Activities                                    (3,886)            (2,533)
                                                                            ---------          ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net cash proceeds from sale of business                                          --              3,203
  Capital expenditures, net                                                    (1,228)              (884)
                                                                            ---------          ---------
      Net Cash (Used in) Provided by Investing Activities                      (1,228)             2,319
                                                                            ---------          ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under credit agreements                                           47,985             56,091
  Payments under credit agreements                                            (41,589)           (53,157)
  Repurchase of Senior Notes                                                       --            (12,000)
  Borrowings(Repayments) of long-term debt                                          9                (19)
  Advances (to) from parent                                                    (1,246)               904
                                                                            ---------          ---------
      Net Cash Provided by (Used in) Financing Activities                       5,159             (8,181)
                                                                            ---------          ---------

NET INCREASE (DECREASE) IN CASH                                                    45             (8,395)

BALANCE, BEGINNING OF PERIOD                                                       73              9,326
                                                                            ---------          ---------

BALANCE, END OF PERIOD                                                      $     118          $     931
                                                                            =========          =========
</TABLE>


      The accompanying Notes to Condensed Consolidated Financial Statements
                    are an integral part of these statements.


                                       6


<PAGE>   7


                        WAXMAN USA INC. AND SUBSIDIARIES
                        --------------------------------

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------
                                   (UNAUDITED)

                                DECEMBER 31, 1998


NOTE 1 - BASIS OF PRESENTATION
         ---------------------

         The condensed consolidated financial statements include the accounts of
Waxman USA Inc. ("Waxman USA") and its wholly-owned subsidiaries (collectively,
the "Company"). As of December 31, 1998, Waxman USA owned 44.3% of the common
stock of Barnett Inc. ("Barnett Common Stock") and accounts for Barnett Inc.
("Barnett") under the equity method of accounting. The condensed consolidated
statements of operations for the six months and three months ended December 31,
1998 and 1997, the condensed balance sheet as of December 31, 1998 and the
condensed consolidated statements of cash flows for the six months ended
December 31, 1998 and 1997 have been prepared by the Company without audit,
while the condensed consolidated balance sheet as of June 30, 1998 was derived
from audited financial statements. In the opinion of management, these financial
statements include all adjustments, all of which are normal and recurring in
nature, necessary to present fairly the financial position, results of
operations and cash flows of the Company as of December 31, 1998 and for all
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that
the disclosures included herein are adequate and provide a fair presentation of
interim period results. Interim financial statements are not necessarily
indicative of financial position or operating results for an entire year. It is
suggested that these condensed interim financial statements be read in
conjunction with the audited financial statements and the notes thereto,
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1998, filed with the Securities and Exchange Commission.

         The Company's Senior Subordinated Notes mature on June 1, 1999 and the
Company's credit facility with BankAmerica Business Credit (the "Credit
Agreement") will expire on July 15, 1999. In addition, the Company's parent,
Waxman Industries, Inc. ("Waxman Industries"), is required to pay semi-annual
cash interest payments on its Senior Secured Deferred Coupon Notes beginning on
December 1, 1999. Management continues to develop and implement plans to enable
the Company to continue to meet its obligations as they become due. As part of
that process, on January 7, 1999, the Company completed the sale of certain
assets and liabilities of a wholly-owned operation, U.S. Lock, for approximately
$33.0 million (the "U.S. Lock Sale"). The Company believes that the U.S. Lock
Sale provides the capital necessary to address its near term liquidity
requirements. The Company also believes that a replacement facility or
modification of its existing Credit Agreement will be arranged prior to July 15,
1999. Waxman Industries also intends to refinance all or a part of the Deferred
Coupon Notes at or prior to maturity and/or to pursue a sale of assets or other
capital raising transaction to satisfy such cash requirement. However, there can
be no assurance that any such refinancing or capital raising transaction will be
consummated. Accordingly, the accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern and, as
such, adjustments, if any, that may be required for presentation on another
basis have not been considered.


NOTE 2 - BUSINESS
         --------

         The Company is a direct, wholly-owned subsidiary of Waxman Industries.
The common stock of Waxman Industries trades on the New York Stock Exchange
under the symbol "WAX." The Company is a supplier of specialty plumbing and
other products to the repair and remodeling market in the United States. The
Company distributes its products to a wide variety of large national and
regional retailers and independent retail customers. U.S. Lock, which was sold
by the Company effective January 1, 1999, is a distributor of security hardware
to locksmiths and security hardware installers.

         The Company conducts its business primarily through its wholly-owned
subsidiaries, Waxman Consumer Products Group Inc. ("Consumer Products"), WOC
Inc. ("WOC") and TWI International, Inc. ("TWI"). Prior to January 1, 1999, WOC
was comprised of two divisions, U.S. Lock ("U.S. Lock"), a distributor of a full
line of security hardware products (see "U.S. Lock Sale" above), and Medal
Distributing, a supplier of hardware products.


                                       7


<PAGE>   8


TWI includes the Company's foreign sourcing operations, including manufacturing,
packaging and sourcing operations in China and Taiwan, and an operation in
Mexico that threads galvanized, black, brass, and chrome pipe nipples and
imports malleable fittings. Consumer Products, WOC and Barnett utilize the
Company's and non-affiliated foreign sourcing suppliers.

         The Company currently owns 7.2 million shares, or 44.3%, of Barnett, a
direct marketer and distributor of an extensive line of plumbing, electrical and
hardware products to approximately 65,000 active customers throughout the United
States. Barnett offers and promotes approximately 11,900 name brand and private
label products through its industry- recognized Barnett(R) catalogs and
telesales operations. Barnett markets its products through five distinct,
comprehensive catalogs that target professional contractors, independent
hardware stores, maintenance managers and liquid propane gas dealers. For of the
three months and six months ended December 31, 1998 and 1997, the Company
recognized $1.8 million and $3.3 million in equity income from this investment,
respectively, as compared to $1.7 million and $3.2 million for the same periods
last year.

         In April 1996, the Company completed an initial public offering of the
Barnett Common Stock at $14.00 per share, reducing its interest in the former
wholly-owned subsidiary to 49.9% of the outstanding Barnett Common Stock and,
together with certain convertible non-voting preferred stock owned,
approximately a 54% economic interest (the "Barnett Initial Public Offering").
In April 1997, the Company completed a secondary offering of 1.3 million shares
of Barnett Common Stock at $17.50 per share, reducing its voting and economic
interest to 44.5% (the "Barnett Secondary Offering") and, accordingly, began to
account for its interest in Barnett under the equity method of accounting. In
July 1997, as a result of the sale to Barnett of a substantial portion of the
business of LeRan Gas Products, one of WOC's operations, the Company received
cash and an additional 24,730 shares of Barnett Common Stock. In January 1999,
the Company completed the U.S. Lock Sale to Barnett (see Note 12). The Barnett
Common Stock trades on the Nasdaq National Market under the symbol "BNTT."


NOTE 3 - INCOME TAXES
         ------------

         The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes". SFAS No. 109 utilizes an asset and liability approach and
deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities given the provisions of the enacted tax laws.

         The Company participates in the consolidated tax group of which Waxman
Industries is the common parent. Commencing July 1, 1994, the Company began
participating in a new tax sharing agreement with Waxman Industries. Under this
agreement, the Company's federal tax liability is equal to the lesser of (i) the
federal tax liability calculated on a stand-alone basis or (ii) Waxman
Industries' federal tax liability. Waxman Industries had approximately $52.7
million of available domestic net operating loss carryforwards for income tax
purposes at June 30, 1998, which expire 2008 through 2013. The Company's
liability for taxes at December 31, 1998 includes various state and foreign
taxes. The Company files separate income tax returns in certain states based on
the results of operations within the applicable states. In January 1999, the
Company will recognize a tax gain on the U.S. Lock Sale of approximately $18.3
million. A portion of that gain will be deferred for book purposes. Waxman
Industries will utilize a portion of its net operating loss carryforward to
offset the tax liability due from the U.S. Lock Sale.

         Deferred taxes and amounts payable to Waxman Industries are included in
Advances to Waxman Industries, Inc. in the accompanying condensed consolidated
balance sheets.


NOTE 4 - BARNETT
         -------

         The Company owns 7,186,530 shares, or 44.3%, of the Barnett Common
Stock as of December 31, 1998, which is accounted for under the equity method of
accounting. In April 1996, the Company completed the Barnett Initial Public
Offering, receiving net proceeds of $92.6 million, after the underwriters'
discount, and recorded a $65.9 million pre-tax gain. In April 1997, the Company
completed the Barnett Secondary Offering, receiving net proceeds of $21.6
million, after the underwriters' discount and recorded a $16.7 million pre-tax
gain. In April 1997, the Company converted the remaining convertible non-voting
preferred stock of Barnett it owned to Barnett Common Stock. In July 1997, the
Company received 24,730 shares of Barnett as a result of the sale of the gas


                                       8


<PAGE>   9


products business of LeRan Gas Products ("LeRan") to Barnett (see Note 5). In
January 1999, the Company completed the U.S. Lock Sale to Barnett (see Note 12).

         The following table presents unaudited summary financial data for
Barnett at December 31, 1998 and for the six months then ended (in thousands of
dollars):

<TABLE>
<CAPTION>
Statement of income data:                         Balance sheet data:

<S>                       <C>                     <C>                     <C>
Net sales                 $ 110,511               Working capital         $  58,102
Operating income             12,276               Total assets              113,247
Net income                    7,506               Stockholders' equity       83,689
</TABLE>


NOTE 5 - SALE OF  DIVISION
         -----------------

         Effective July 1, 1997, the Company sold the gas products business of
LeRan to Barnett for $3.2 million in cash and 24,730 shares of Barnett Common
Stock, with a value of $0.6 million at the time of the transaction. In the first
quarter of fiscal 1998, the Company recorded an estimated loss on the sale of
LeRan of $133,000, including certain costs associated with disposing of assets
not included in the transaction and the sale and closing of certain warehouses.
The estimated loss was adjusted in the fourth quarter of fiscal 1998 to an
actual loss of $24,000.


NOTE 6 - SENIOR NOTE PURCHASE OFFER
         --------------------------

         In May 1997, the Company commenced an offer to purchase $12.0 million
principal amount of its 11 1/8% Senior Notes due September 1, 2001 (the "Senior
Notes") at par (the "Purchase Offer"). The offer expired on July 2, 1997 with
$2.5 million of the notes being purchased. On July 3, 1997, the Company called
for redemption the $9.5 million of Senior Notes that had not been tendered in
the Purchase Offer, and on August 4, 1997, the Company completed the note
redemption. The Company used a portion of the net proceeds from the Barnett
Secondary Offering to purchase the Senior Notes. The Company recorded an
extraordinary charge of $0.1 million, net of applicable tax benefit of $0.1
million, in the quarter ended September 30, 1997 related to the write-off of
unamortized deferred financing costs associated with the purchase and redemption
of these Senior Notes.


NOTE 7 - NON-RECURRING CHARGE
         --------------------

         In the first quarter of fiscal 1999, Consumer Products recorded a
non-recurring charge of $1.35 million relating to the move of its Bedford
Heights, Ohio warehouse to Groveport, Ohio. Included in the charge are severance
benefits for personnel and the loss on the write-off of tangible assets at the
Bedford Heights warehouse. The cash costs of this move has been paid as of
December 31, 1998. The Company believes that the relocation to a more modern and
efficient facility, which was completed in November 1998, will allow Consumer
Products to provide more sophisticated distribution services to its customers
and help it remain competitive through significant annual savings.


NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
         ----------------------------------

         Cash payments during the three months ended December 31, 1998 and 1997
included interest of $0.5 million and $0.3 million, respectively. For the six
months ended December 31, 1998 and 1997, cash interest payments were $2.9
million and $3.1 million, respectively. The Company paid no federal income taxes
in the three-month or six-month periods ended December 31, 1998 and 1997. Waxman
USA's cash flow, within certain restrictions, is upstreamed to Waxman Industries
to service interest payments and administrative costs.


NOTE 9 - EARNINGS PER SHARE
         ------------------


                                       9


<PAGE>   10


         Earnings per share data is not presented and is not meaningful, as the
Company is a wholly-owned subsidiary of Waxman Industries.


NOTE 10 - SEGMENT INFORMATION
          -------------------

         The Company classifies its businesses into two business segments: (i)
distribution of plumbing, security hardware (see Note 12 with respect to the
U.S. Lock Sale) and other products, which includes the operations of Consumer
Products and WOC; and (ii) foreign sourcing operations, which includes the
Company's sourcing and packaging operations in Taiwan and China, and Western
American Manufacturing, Inc. ("WAMI"), an operation in Mexico that provides
galvanized, black, brass and chrome pipe nipples and malleable fittings. These
products are sold primarily to D-I-Y home centers and retailers in the United
States. Sales outside of the United States are insignificant. In addition,
nearly all of the products from the foreign sourcing operations are sold to the
Company's wholly-owned operations and Barnett. Set forth below is certain
financial data relating to the Company's business segments (in thousands of
dollars).


<TABLE>
<CAPTION>

Three and six months ended                               Foreign
December 31, 1998 and 1997             Distribution      Sourcing            Other         Elimination         Total
---------------------------            ------------     ----------          -------        -----------       ---------

<S>                                    <C>              <C>                 <C>            <C>               <C>
Reported net sales:
Fiscal 1999 three months               $   19,643       $  13,402                --        $    (3,847)      $  29,198
Fiscal 1998 three months                   21,165          11,198                               (5,555)         26,808
                                                                                 --
Fiscal 1999 six months                     41,397          23,319                               (7,289)         57,427
Fiscal 1998 six months                     43,070          21,966                --            (10,071)         54,965
                                                                                 --

Operating income (loss):
Fiscal 1999 three months               $      990       $     154           $  (788)                --       $     356
Fiscal 1998 three months                    1,598           1,112              (838)                --           1,872

Fiscal 1999 six months                      1,036             525            (1,658)                --             (97)
Fiscal 1998 six months                      3,702           1,840            (1,665)                --           3,877


Identifiable assets:
December 31, 1998                      $   46,730       $  20,740           $33,674                 --       $ 101,144
June 30, 1998                              48,489          18,042            30,201                 --          96,732
</TABLE>


NOTE 11 - COMPREHENSIVE INCOME
          --------------------

         In June 1997, The FASB issued SFAS No. 130, "Reporting Comprehensive
Income" to be effective for financial statements issued for fiscal years
beginning after December 15, 1997. SFAS No. 130 requires companies to report
components of comprehensive income in the financial statement as prominently as
the other financial statements. Comprehensive income is defined as the change in
equity of a business during a period from transactions and other events and
circumstances that are not included in net income. Accordingly, the Company has
identified its foreign currency translation adjustments as a component of
comprehensive income on the face of the consolidated statements of operations.


                                       10


<PAGE>   11


NOTE 12 - SUBSEQUENT EVENT - SALE OF  U.S. LOCK
          -------------------------------------

         In December 1998, the Company announced it had entered into an
agreement to sell certain of the assets and liabilities of U.S. Lock, a division
of WOC, to Barnett for approximately $33.0 million in cash, less certain post
closing adjustments. The U.S. Lock Sale was completed effective January 1, 1999,
resulting in an estimated net pretax gain of $18.3 million, of which
approximately $8.1 million will be reported as a deferred gain due to the
Company's continued ownership of 44.3% of Barnett, the acquirer of U.S. Lock.
Waxman Industries will utilize a portion of its net operating loss carryforwards
to offset the tax on the net gain from the U.S. Lock Sale.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         -------------------------------------------------
            CONDITION AND RESULTS OF OPERATIONS
            -----------------------------------

         This Quarterly Report contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 that
are based on the beliefs of the Company and its management. When used in this
document, the words "anticipate," "believe," "continue," "estimate," "expect,"
"intend," "may," "should," and similar expressions are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company with respect to future events and are subject to certain risks,
uncertainities and assumptions, including, but not limited to, the risk that the
Company may not be able to implement its deleveraging strategy and the
refinancing of its bank credit facility in the intended manner, risks associated
with currently unforeseen competitive pressures and risks affecting the
Company's industry, such as decreased consumer spending, customer concentration
issues and the effects of general economic conditions. In addition, the
Company's business, operations and financial condition are subject to the risks,
uncertainities and assumptions which are described in the Company's reports and
statements filed from time to time with the Securities and Exchange Commission,
including this Report. Should one or more of those risks or uncertainities
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein.


A.       RESULTS OF OPERATIONS
         ---------------------

FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
-----------------------------------------------------

Net Sales
---------

         Net sales for the fiscal 1999 second quarter ended December 31, 1998
totaled $29.2 million, as compared to $26.8 million for the second quarter in
fiscal 1998. U.S. Lock reported an increase in net sales of $1.3 million, or
23.5%, in comparison to the same period last year. U.S. Lock's increase in net
sales is attributable to the continued expansion of its customer base through
monthly promotional flyers and the expansion in the number of its professional
telesales representatives. Net sales for the Asian operations increased by $3.9
million, primarily due to an increase in sales to Barnett and to the direct
import programs managed by Consumer Products. Approximately $1.1 million of the
net sales increase for the Company's Asian operations are the result of direct
import sales that are being managed by Consumer Products. Consumer Products
reported a net sales decrease of approximately $2.8 million, or 19.2%, primarily
due to a $1.8 million reduction in sales to Hechinger / Builders Square. The
reduction in Consumer Products' net sales is the result of a reduction in the
number of Builders Square stores and their aggressive inventory management
program as our packaged plumbing sales program with them ends. As previously
disclosed by the Company, Consumer Products was informed that the Hechinger /
Builders Square operations were consolidating their supplier relationships and
Consumer Products would retain only the bulk plumbing business of approximately
$2.3 million annually beginning in January 1999. For the quarter ended December
31, 1998, total sales to Hechinger / Builders Square were approximately $1.1
million, including $0.8 million of packaged plumbing products.


Gross Profit
------------

         Gross profit margin decreased to 29.7% from 34.9% and gross profit
decreased to $8.7 million from $9.4 million for the three months ended December
31, 1998, as compared to the corresponding quarter in the prior fiscal year. The
decrease in the gross margin is primarily attributable to a higher proportion of
sales from the lower


                                       11

<PAGE>   12


gross margin direct import sales program, however, gross profit for the Asian
operations improved due to the additional sales volume. The gross profit
reduction was primarily due to lower sales at Consumer Products. For the three
months ended December 31, 1998, the gross profit from the Mexican pipe nipple
operations was lower by $0.6 million in comparison to the same period last year,
due to the competitive pricing pressure of other overseas suppliers.


Selling, General and Administrative Expenses
--------------------------------------------

         Selling, general and administrative expenses ("SG&A expenses")
increased from $6.7 million for the quarter ended December 31, 1997 to $7.5
million for the quarter ended December 31, 1998. As a percentage of net sales,
SG&A expenses increased from 24.8% for the fiscal 1998 second quarter to 25.7%
for the fiscal 1999 second quarter. The increase in SG&A expense is primarily
attributable to foreign exchange losses of $0.3 million being reported in the
quarter ended December 31, 1998, as compared to exchange gains of $0.5 million
being reported for the same period last year. Consumer Products reported a $0.1
million reduction in costs for the three months ended December 31, 1998 as
compared to the prior year. SG&A expenses at Consumer Products increased as a
percentage of net sales due to the decrease in the sales base. U.S. Lock
reported an increase of $0.2 million in SG&A expenses but had a reduction in
SG&A expenses as a percentage of net sales from 21.4% in the second quarter of
fiscal 1998 to 20.3% in the fiscal 1999 second quarter.


Equity Earnings of Barnett
--------------------------

         The Company recorded equity earnings from its ownership interest in
Barnett of $1.8 million for the quarter ended December 31, 1998, as compared to
$1.7 million for the same quarter in fiscal 1998.


Interest Expense
----------------

         For the quarter ended December 31, 1998, interest expense totaled $1.5
million, an increase of $0.2 million, from the $1.3 million in the comparable
quarter last year. The increase is due to an increase in the borrowings by the
Company under the Credit Agreement. Average borrowings for the current year's
quarter amounted to $55.1 million, with a weighted average interest rate of
10.5%, as compared to $45.9 million in the same quarter last year, with a
weighted average interest rate of 10.7%.


Provision for Income Taxes
--------------------------

         The provision for income taxes amounted to $0.2 million for the second
quarter of fiscal 1999, as compared to $0.85 million for the same quarter last
year. The provision for the second quarter of fiscal 1999 primarily represents
Waxman USA's tax provision on a stand-alone basis, including various state and
foreign taxes of the Company's wholly-owned operations. The difference between
the effective and statutory tax rates is primarily due to goodwill amortization
and state and foreign taxes.


Net Income
----------

         The Company's net income for the quarter ended December 31, 1998
amounted to $0.4 million, as compared to net income of $1.4 million in the
fiscal 1998 second quarter.


FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 AND 1997
---------------------------------------------------

Net Sales
---------

         Net sales for the six months ended December 31, 1998 totaled $57.4
million, an increase of $2.4 million from the $55.0 million for the comparable
period in fiscal 1998. U.S. Lock and the Company's foreign sourcing and
manufacturing operations recorded net sales increases for the six month period
in fiscal 1999, in comparison to the same period last year, of 23.3% and 36.9%,
respectively. Sales made by the foreign sourcing operations to


                                       12

<PAGE>   13


Barnett account for nearly all of their reported sales and have increased due to
the growth of Barnett. U.S. Lock's increase in net sales is attributable to an
increase in the number of monthly promotional flyers mailed and the expansion in
the number of its professional telesales representatives. During the same
comparable periods, Consumer Products Group's net sales decreased by
approximately $3.9 million, or 13.3%, principally due to the $3.5 million
decrease in sales to Hechinger / Builders Square. Net sales to Hechinger /
Builders Square have been reduced due to the reduction in the number of Builders
Square stores, their aggressive inventory management program and the termination
of our package plumbing sales program late in the fiscal 1999 second quarter
with Builders Square. In addition, approximately $1.1 million of the increase in
the Company's Asian operations net sales are the result of direct import sales
that are being managed by Consumer Products.


Gross Profit
------------

         The gross profit margin for the six months ended December 31, 1998
decreased to 30.9% from 34.3% for the six months ended December 31, 1997. The
reduction in the gross margin is attributable to a higher proportion of sales
from the lower gross margin direct import sales program at Consumer Products and
competitive pricing pressures and certain fixed costs at our Mexican pipe nipple
operation. Gross profit decreased to $17.7 million for the current six month
period as compared to $18.9 million for the six months ended December 31, 1997.
The decrease in gross profit is attributable to the reduction in sales volume at
Consumer Products that covers certain fixed costs and a higher gross margin in
the prior year on the initial rollout of certain product lines to customers.
U.S. Lock reported a $0.8 million improvement in gross profit during the current
year six month period. The foreign operations reported a reduction of $0.3
million in their gross profit margin, primarily due to the competitive pricing
issues associated with the Mexican pipe nipple operation.


Selling, General and Administrative Expenses
--------------------------------------------

         SG&A expenses increased from $13.2 million for the six months ended
December 31, 1997 to $14.8 million for the six month period ended December 31,
1998. As a percentage of net sales, SG&A expenses increased from 24.0% for the
six month period in fiscal 1998 to 25.8% for the six months ended December 31,
1998. The increase in expenses and the ratio was due to lower sales and higher
expenses at Consumer Products and foreign exchange losses of $0.4 million being
reported in the six month period ended December 31, 1998, as compared to $0.7
million in foreign exchange income being reported for the same period last year.


Restructuring and Non-Recurring Charges
---------------------------------------

         In the fiscal 1999 first quarter ended September 30, 1998, Consumer
Products recorded a non-recurring charge of $1.35 million relating to the move
of its Bedford Heights, Ohio warehouse to Groveport, Ohio. Included in the
charge are severance benefits for personnel and the loss on the write-off of
tangible assets at the Bedford Heights warehouse. The Company believes that the
relocation to a more modern and efficient facility, which was completed in
November 1998, will allow Consumer Products to provide more sophisticated
distribution services to its customers and help it remain competitive through
significant annual savings.


Equity Earnings of Barnett
--------------------------

         The Company recorded equity earnings from its 44.3% ownership interest
in Barnett of $3.3 million for the six months ended December 31, 1998. For the
comparable period in fiscal 1998, the Company recorded equity earnings of $3.2
million.


Interest Expense
----------------

         For the six months ended December 31, 1998, interest expense totaled
$3.0 million, an increase of $0.3 million from the $2.7 million in the
comparable period last year. The increase is due to an increase in borrowings
under the Credit Agreement.. Average borrowings for the six months ended
December 31, 1998 amounted to $54.3 million, with a weighted average interest
rate of 10.4%, as compared to $47.2 million in the same period last year, with a
weighted average interest rate of 10.8%.


                                       13

<PAGE>   14


Provision for Income Taxes
--------------------------

         The provision for income taxes amounted to $0.1 million and $1.7
million for the six months ended December 31, 1998 and 1997, respectively. The
provision for the current period represents Waxman USA's tax provision on a
stand-alone basis, including various state and foreign taxes of the Company's
wholly-owned operations. The difference between the effective and statutory tax
rates is primarily due to goodwill amortization and state and foreign taxes


Extraordinary Loss
------------------

         In the six months ended December 31, 1997, the Company incurred an
extraordinary charge of $0.1 million, net of applicable tax benefit of $0.1
million, associated with the write-off of deferred financing costs from the
repurchase of $12.0 million of Senior Notes in July and August 1997. (See Note
6)


Net Income
----------

         The Company's net income for the six months ended December 31, 1998
amounted to $0.1 million as compared to net income of $2.6 million in the same
period last year. Included in the fiscal 1998 results is an extraordinary charge
of $0.1 million, net of applicable tax benefit of $0.1 million, from the
write-off of deferred financing costs as discussed above. The fiscal 1999 six
month results include a non-recurring charge of $1.35 million for the relocation
of the Consumer Products' warehouse from Bedford Hts., Ohio to Groveport, Ohio.


Year 2000
---------

         The Company utilizes management information systems and software
technology that may be affected by Year 2000 issues throughout its businesses.
During fiscal 1998, the Company began to implement plans at certain of its
operations to ensure those systems continue to meet its internal and external
requirements. During fiscal 1998, the Company's largest division, Consumer
Products, completed the modifications and testing of its information systems and
is Year 2000 compliant. Consumer Products utilizes an IBM AS400 system, along
with the latest version of Year 2000 compliant J.D. Edwards software. The
Company's parent is in the process of converting to this J.D. Edwards package
and should complete the conversion in the third quarter of fiscal 1999. In
August 1998, WAMI's PC-based Year 2000 software upgrade was installed and is
being tested. Based on information from software vendors, the PC-based
information systems at TWI and CWI will require the installation of minor
upgrades to be Year 2000 compliant. These modifications are expected to be
completed in fiscal 1999 and financed through working capital with minimal cost.
Until the U.S. Lock Sale, U.S. Lock contracted with Barnett for its information
system, accounting and certain other administrative functions, although it had
been developing a Year 2000 compliant system. The Company's operations have
developed questionnaires and contacted key suppliers and customers regarding
their Year 2000 compliance to determine any impact on its operations. In
general, the suppliers and customers have developed or are in the process of
developing plans to address Year 2000 issues. The Company will continue to
monitor and evaluate the progress of its suppliers and customers on this
critical matter. The Company is also reviewing its non-information technology
systems to determine the extent of any changes that may be necessary and
believes that there will be minimal changes necessary for compliance.

         Based on the progress the Company has made in addressing its Year 2000
issues and the Company's plan and timeline to complete its compliance program,
the Company does not foresee significant risks associated with its Year 2000
compliance at this time. As the Company's plan is to address its significant
Year 2000 issues prior to being affected by them, it has not developed a
comprehensive contingency plan. However, if the Company identifies significant
risks related to its Year 2000 compliance or its progress deviates from the
anticipated timeline, the Company will develop contingency plans as deemed
necessary at that time.


                                       14

<PAGE>   15


Strategic Review of Operations
------------------------------

         With the completion of the U.S. Lock Sale in January 1999, the Company
will be initiating a strategic review of its operations. The Company expects to
complete this review before the end of fiscal 1999.


B.       LIQUIDITY AND CAPITAL RESOURCES
         -------------------------------

         The Company's business strategy includes the reduction of its interest
expense and its leverage by the sale of selected assets and the refinancing of
its remaining indebtedness whenever possible. To that end, the Company completed
the U.S. Lock Sale for approximately $33.0 million in January 1999. The Company
believes that the U.S. Lock Sale provides the capital necessary to address its
near term liquidity requirements. Those liquidity requirements include the
maturity of the Credit Agreement on July 15, 1999 (unless such Credit Agreement
is extended or replaced) and Waxman Industries' first semi-annual cash interest
payment of approximately $6 million under the Deferred Coupon Notes on December
1, 1999. The Company believes that a replacement facility or modification of the
Credit Agreement will be arranged prior to July 15, 1999. In addition, Waxman
Industries intends to refinance all or a part of the Deferred Coupon Notes at or
prior to maturity and/or to pursue a sale of assets or other capital raising
transaction to satisfy such cash requirement. However, there can be no assurance
that any such refinancing or capital raising transaction will be consummated.

         In June 1996, the Company entered into the Credit Agreement with
BankAmerica Business Credit, Inc. The Credit Agreement provides for, among other
things, revolving credit advances of up to $30.0 million and term loans of up to
$5.0 million (the "Term Loans"). As of December 31, 1998, the Company had $14.1
million in borrowings under the revolving credit line of the credit facility and
had approximately $0.3 million available under such facility. At December 31,
1998, there were $5.0 million of Term Loans outstanding. The Credit Agreement
expires on July 15, 1999. The Company is discussing the Credit Agreement with
its bank and other credit institutions with the view of extending the term and
increasing the availability of capital under its credit facilities.

         The Credit Agreement provides for revolving credit advances of (a) up
to 85.0% of the amount of eligible accounts receivable and (b) up to the lesser
of (i) $16.0 million or (ii) 60% of the amount of eligible raw and finished
goods inventory. Revolving credit advances bear interest at a rate equal to (a)
BankAmerica's reference rate plus 1.0% or (b) LIBOR plus 2.75%. The Credit
Agreement includes a letter of credit subfacility of $2.0 million, of which $0.3
million was outstanding at December 31, 1998. The Term Loans bear interest at a
rate per annum equal to .25% over the interest rate applicable to revolving
credit advances under the Credit Agreement. Borrowings under the Credit
Agreement are secured by the accounts receivable, inventories, certain general
intangibles and unencumbered fixed assets of Consumer Products and WOC (the
"Borrowers"). In addition, the Term Loans are also secured by a pledge of
500,000 shares of Barnett Common Stock owned by the Company (constituting
approximately 3.1% of all outstanding Barnett Common Stock). The Credit
Agreement requires the Borrowers to maintain cash collateral accounts into which
all available funds are deposited and applied to service the facility on a daily
basis. The Credit Agreement prevents dividends and distributions by the
Borrowers except in certain limited instances including, so long as there is no
default or event of default and the Borrowers are in compliance with certain
financial covenants, the payment of interest on the Senior Subordinated Notes
and Waxman Industries, Inc. 12 3/4% Senior Secured Deferred Coupon Notes due
2004 (the "Deferred Coupon Notes"), and contains customary negative, affirmative
and financial covenants and conditions. The Company was in compliance with or
had obtained a waiver for all loan covenants at December 31, 1998.

         Since the consummation of the Barnett Initial Public Offering, the cash
flow generated by Barnett is no longer available to the Company. The Company
relies primarily on Consumer Products and, prior to January 1, 1999, U.S. Lock
for cash flow. Consumer Products' customers include D-I-Y warehouse home
centers, home improvement centers, mass merchandisers and hardware stores. The
sale of U.S. Lock further increases the Company's dependence on the Consumer
Products' business. Consumer Products may be adversely affected by prolonged
economic downturns or significant declines in consumer spending. There can be no
assurance that any such prolonged economic downturn or significant decline in
consumer spending will not have a material adverse


                                       15

<PAGE>   16


impact on the Consumer Products' business and its ability to generate cash flow.
Furthermore, Consumer Products has a high proportion of its sales with a
concentrated number of customers. One of Consumer Products' largest customers,
Kmart, accounted for approximately 18.2% of net sales for Consumer Products in
fiscal 1998. The combined operations of Hechinger / Builders Square was Consumer
Products' largest customer, accounting for approximately $11.7 million, or
21.1%, of its net sales in fiscal 1998. Net sales to the combined operations
declined during fiscal 1998, with $5.1 million being sold in the last six months
of fiscal 1998. In August 1998, Consumer Products was informed that the
Hechinger / Builders Square operations were consolidating their supplier
relationships and Consumer Products would retain only the bulk plumbing business
of approximately $2.3 million annually. For the quarter ended December 31, 1998,
total sales to Hechinger / Builders Square were approximately $1.1 million,
including $0.8 million of packaged plumbing products. The packaged plumbing
supply relationship ended late in the second quarter of fiscal 1999 and, sales
to Builders Square were significantly lower during the past several quarters due
to a reduction in the number of Builders Square stores and their aggressive
inventory management program. Due to the loss of this revenue base, Consumer
Products has developed plans to reduce its cost structure to be more in line
with its revenue base. The Company expects the impact to operating income to be
approximately $0.8 million lower in fiscal 1999, in comparison to fiscal 1998.
In the event Consumer Products were to lose any additional large retail accounts
as a customer or one of its largest accounts were to significantly curtail its
purchases from Consumer Products, there would be additional material short-term
adverse effects until the Company could further modify Consumer Products' cost
structure to be more in line with its anticipated revenue base. Consumer
Products would likely incur significant charges if additional materially adverse
changes in its customer relationships were to occur.

         The Company paid no Federal taxes in the first quarter of fiscal 1999.

         The Company does not have any commitments to make substantial capital
expenditures; however, it plans to spend approximately $1.8 million in capital
expenditures in fiscal 1999. The Company utilizes management information systems
and software technology that may be affected by Year 2000 issues throughout its
businesses. During fiscal 1998, the Company began to implement plans at certain
of its operations to ensure those systems continue to meet its internal and
external requirements. During fiscal 1998, the Company's largest division,
Consumer Products, completed the modifications and testing of its information
systems and is Year 2000 compliant. Consumer Products utilizes an IBM AS400
system, along with the latest version of Year 2000 compliant J.D. Edwards
software. The Company's parent is in the process of converting to this J.D.
Edwards package and should complete the conversion in the fiscal 1999 third
quarter. In August 1998, WAMI's PC-based Year 2000 software upgrade was
installed and is being tested. Based on information from software vendors, the
PC-based information systems at TWI and CWI will require the installation of a
minor upgrade to be Year 2000 compliant. These modifications are expected to be
completed in fiscal 1999 and financed through working capital with minimal cost.

         Fiscal 1999 capital expenditures for Consumer Products include
expenditures to improve the efficiencies of its operations, provide new data
technology and to move to a more efficient and modern facility. Also included in
the capital expenditure budget are certain expansion plans for the Company's
foreign operations.

         At December 31, 1998, the Company had working capital of $13.2 million
and a current ratio of 1.4 to 1.


DISCUSSION OF CASH FLOWS
------------------------
         Net cash used for operations was $3.9 million in the six months ended
December 31, 1998 principally due to an increase in trade receivables and other
assets and a decrease in accrued liabilities, offset by a decrease in
inventories and an increase in accounts payable. Also affecting net cash used
for operations was $3.3 million in equity earnings of Barnett. Excluding this
item, the net cash used in operations was $0.6 million. Cash flow used in
investments totaled $1.2 million, primarily attributable to capital
expenditures. Cash flow provided by financing activities, and net borrowings
under the Company's credit facilities totaled $5.2 million.


                                       16

<PAGE>   17


PART II. OTHER INFORMATION
         -----------------


ITEM 5.  OTHER INFORMATION
         -----------------


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------

                  a) See Exhibit 27.

                  b) Form 8-K

                           None


         All other items in Part II are either inapplicable to the Company
during the quarter ended December 31, 1998 or the answer is negative or a
response has been previously reported and an additional report of the
information need not be made, pursuant to the instructions to Part II.




                                   SIGNATURES
                                   ----------

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                                WAXMAN USA INC.
                                                ---------------
                                                REGISTRANT






DATE:    FEBRUARY 10, 1999                      BY: /S/ MARK W. WESTER
                                                        MARK W. WESTER
                                                        CHIEF FINANCIAL OFFICER
                                                       (PRINCIPAL FINANCIAL AND
                                                        ACCOUNTING OFFICER)


                                       17


<PAGE>   18


                                  EXHIBIT INDEX
                                  -------------




<TABLE>
<CAPTION>

EXHIBIT                                                                         PAPER (P) OR
-------                                                                         --------------
NUMBER                              DESCRIPTION                                 ELECTRONIC (E)
-------                             -----------                                 --------------

<S>                                 <C>                                         <C>
(27)                                Financial Data Schedule                     E
                                    (submitted to the Securities
                                    and Exchange Commission in
                                    Electronic Format)
</TABLE>


                                       18