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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
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
x SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to
_______________
Commission file number 1-9838
NS GROUP, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0985936
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Ninth and Lowell Streets, Newport, Kentucky 41072
(Address of principal executive offices)
Registrant's telephone number, including area code (606)
292-6809
Securities registered pursuant to Section 12(b) of the
Act:
Name of each exchange
Title of each class on which registered
Common Stock, no par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and
(2) has been subject to such filing requirements for
the past 90 days. YES X NO ___
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
[Cover page 1 of 2 pages]
Based on the closing sales price of December 1, 1995, as
reported in The Wall Street Journal, the aggregate market
value of the voting stock held by non-affiliates of the
registrant was approximately $22.0 million.
The number of shares outstanding of the registrant's
Common Stock, no par value, was 13,809,413 at December
1, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and III incorporate certain information by
reference from the Annual Report to Shareholders for
the fiscal year ended September 30, 1995 ("1995 Annual
Report To Shareholders"). Part III also incorporates
certain information by reference from the Company's
Proxy Statement dated December 27, 1995 for the Annual
Meeting of Shareholders on February 15, 1996.
[Cover page 2 of 2 pages]
PART I
ITEM 1. BUSINESS
General
The Company was incorporated in Kentucky in 1980
as Newport Steel Corporation for the purpose of
purchasing the operating assets of the Newport Steel
Works from Interlake, Inc. (Interlake). The Company
changed its name to NS Group, Inc. in 1987 and
transferred its tubular manufacturing operations to a
subsidiary renamed Newport Steel Corporation. As used
herein, the terms "Company" and "NS Group" refer to NS
Group, Inc. and its subsidiaries, unless otherwise
required by the context.
In October 1990, the Company, through a newly-
formed wholly-owned subsidiary, acquired certain assets
now comprising Koppel Steel Corporation ("Koppel"), a
steel mini-mill located in western Pennsylvania.
Koppel manufactures seamless tubular products, special
bar quality (SBQ) products and semi-finished steel
products. Koppel operates melting and casting
facilities and a bar mill in Koppel, Pennsylvania as
well as a seamless tube-making facility approximately
20 miles from Koppel in Ambridge, Pennsylvania.
Koppel's seamless tubular products are used in oil and
natural gas drilling and production operations and in
the transmission of oil, natural gas and other fluids.
SBQ products are primarily used by forgers and original
equipment manufacturers of heavy equipment and off-road
vehicles.
In October, 1993, the Company sold its wholly-
owned subsidiary, Kentucky Electric Steel Corporation,
to a newly formed public company in exchange for $45.6
million in cash and 400,000 shares (approximately 8%)
of the new public company, then valued at $4.8 million.
Kentucky Electric Steel Corporation was sold in order
to enhance the Company's financial flexibility.
Incorporated herein by reference from the 1995 Annual
Report to Shareholders is "Note 2: Sale of
Subsidiary", which contains additional information
pertaining to this transaction.
NS Group conducts business in two industry
segments.
Specialty Steel -- includes three wholly-owned
subsidiaries: Newport Steel Corporation (Newport), a
mini-mill manufacturer of welded tubular steel products
and hot rolled coils, located near Newport, Kentucky;
Erlanger Tubular Corporation (Erlanger), a tubular
steel finishing operation acquired in late fiscal 1986,
located near Tulsa, Oklahoma; and Koppel Steel
Corporation (Koppel), a mini-mill manufacturer of
seamless tubular steel products, special bar quality
products and semi-finished steel products, acquired in
October, 1990, located in western Pennsylvania.
Adhesives -- includes the wholly-owned
subsidiary, Imperial Adhesives, Inc. (Imperial), a
manufacturer of industrial adhesives products, located
in Cincinnati, Ohio.
Incorporated herein by reference from the 1995
Annual Report to Shareholders is "Note 13: Business
Segment Information", for additional information
pertaining to industry segment data.
Specialty Steel Segment
The Company's specialty steel products consist of:
(i) seamless and welded tubular goods primarily used in
oil and natural gas drilling and production operations
(oil country tubular goods, or OCTG); (ii) line pipe
used in the transmission of oil, natural gas and other
fluids; (iii) SBQ products primarily used in the
manufacture of heavy industrial equipment, trucks and
off-road vehicles; and (iv) hot rolled coils which are
sold to service centers and other manufacturers for
further processing. The Company manufactures these
specialty steel products at its two mini-mills, located
in Koppel, Pennsylvania and near Newport, Kentucky.
The term mini-mill connotes a smaller, relatively low-
cost mill that typically uses scrap steel as its basic
raw material and offers a relatively limited range of
products.
Products
Seamless OCTG Products. The Company's seamless
OCTG products are used as drill pipe, casing and
production tubing. Drill pipe is used and may be
reused to drill several wells. Casing forms the
structural wall of oil and natural gas wells to provide
support and prevent caving during drilling operations
and is generally not removed after it has been
installed in a well. Production tubing is placed
within the casing and is used to convey oil and natural
gas to the surface. The Company's seamless OCTG
products are sold as a finished threaded and coupled
product in both carbon and alloy grades. Compared to
similar welded products, seamless production tubing and
casing are better suited for use in hostile drilling
environments such as off-shore drilling or deeper wells
because of their greater strength and durability. The
production of seamless tubular products with these
properties requires a more costly and specialized
manufacturing process than does the production of
welded tubular products.
Welded OCTG Products. The Company's welded OCTG
products are used primarily as casing in oil and
natural gas wells during drilling operations. Welded
OCTG products are generally used when higher strength
is not required, typically in wells less than 10,000
feet in depth. The Company sells its welded OCTG
products as both a plain end and as a finished tubular
product in both carbon and alloy grades.
Line Pipe Products. The Company's line pipe
products are primarily used in gathering lines for the
transportation of oil and natural gas at the drilling
site and in transmission lines by both gas utility and
transmission companies. The Company's seamless and
welded line pipe products are shipped as a plain end
product and welded together on site. The majority of
the Company's line pipe sales are welded products.
Special Bar Quality Products. The Company
manufactures SBQ products in a specialized market niche
of products ranging in size from 2.875 to 6.0 inches.
The Company produces its SBQ products from continuous
cast blooms that enables substantial size reduction in
the bloom during processing and provides heavier
strength-to-weight ratios. These SBQ products are
primarily used in critical weight-bearing applications
such as suspension systems, gear blanks, drive axles
for tractors and off-road vehicles, heavy machinery
components and hydraulic and pneumatic cylinders.
Hot Rolled Coils. The Company produces commercial
quality grade hot rolled coils, from 28 to 50 inches in
width, between 0.125 and 0.500 inches in gauge, and in
15 ton coil weights. These products are sold to
service centers and to others for use in high-strength
applications.
Other Products. The Company's OCTG products are
inspected and tested to ensure that they meet API
specifications. Products that do not meet
specification are classified as secondary or limited
service products and are sold at substantially reduced
prices.
Finishing Facilities. The Company processes and
finishes a portion of its own welded and seamless
tubular products, and to a lesser extent, those of
other tubular producers, at Erlanger and at its Koppel-
owned facility in Baytown, Texas (Baytown). The
finishing processes at Erlanger include upsetting,
which is a forging process that thickens tube ends;
heat treating, which is a furnace operation designed to
strengthen the steel; straightening; coating for rust
prevention; and threading. Currently, Baytown is
capable of upsetting, coating and threading. After
finishing, products are either immediately reshipped to
customers or stored as inventory to enable the Company
to respond quickly to customer needs.
The demand for the Company's OCTG products is
cyclical in nature, being dependent on the number and
depth of oil and natural gas wells being drilled in the
United States. The level of drilling activity is
largely a function of the current prices of oil and
natural gas and the industry's future price
expectations. Demand for OCTG products is also
influenced by the levels of inventory held by
producers, distributors and end users. In addition,
the demand for OCTG products produced domestically is
also significantly impacted by the level of foreign
imports of OCTG products. The level of OCTG imports is
affected by: (i) the value of the U.S. dollar versus
other key currencies; (ii) overall world demand for
OCTG products; (iii) the production cost
competitiveness of domestic producers; (iv) trade
practices of, and government subsidies to, foreign
producers; and (v) the presence or absence of
governmentally imposed trade restrictions in the United
States. The demand for line pipe is only partially
dependent on oil and gas drilling activities. Line
pipe demand is also dependent on factors such as the
level of pipeline construction activity, line pipe
replacement requirements, new residential construction
and gas utility purchasing programs. The demand for
the Company's SBQ and hot rolled coil products is also
cyclical in nature and is sensitive to general economic
conditions. The demand for and the pricing of the
Company's SBQ and hot rolled coil products is also
affected by economic trends in areas such as commercial
and residential construction, automobile production and
industrial investment in new plants and facilities.
Markets and Distribution
The Company sells its specialty steel products to
its customers through an in-house sales force which is
supplemented by a number of independent sales
representatives. The primary end markets for the
Company's seamless tubular products has been the
southwest United States and certain foreign markets.
Nearly all of the Company's OCTG products are sold to
domestic distributors, some of whom subsequently sell
the Company's products into the international
marketplace. The Company has historically marketed its
welded tubular products in the east, central and
southwest regions of the United States, in areas where
shallow oil and gas drilling and exploration activity
utilize welded tubular products. The Company sells its
SBQ products to customers located generally within 400
miles of the Koppel facilities.
All of the Company's steel-making and finishing
facilities are located on or near major rivers or
waterways, enabling the Company to transport its
tubular products into the southwest by barge. The
Company ships substantially all of its seamless and
welded OCTG products destined for the southwest region
by barge.
Customers
The Company has approximately 300 specialty steel
product customers. The Company's OCTG and line pipe
products are used by major and independent oil and
natural gas exploration and production companies in
drilling and production applications in the United
States, Canada, Mexico and overseas. Line pipe
products are also used by gas utility and transmission
companies. The majority of the Company's OCTG and line
pipe products are sold to domestic distributors and
directly to end users. The Company sells its SBQ
products to service centers, cold finishers, forgers
and original equipment manufacturers, and primarily
sells its hot rolled coils to service centers and other
manufacturers for further processing. The Company has
long-standing relationships with many of its larger
customers; however, the Company believes that it is not
dependent on any customer and that it could, over time,
replace lost sales attributable to any one customer.
Competition
The markets for the Company's specialty steel
products are highly competitive and cyclical. The
Company's principal competitors in its primary markets
include integrated producers, mini-mills, welded
tubular product processing companies as well as foreign
steel producers. The Company believes that the
principal competitive factors affecting its business
are price, quality and customer service.
The Company competes with a number of domestic as
well as foreign producers in the welded tubular market,
which includes both OCTG and line pipe products. In
the seamless OCTG market, the Company competes
principally with one domestic producer as well as a
number of foreign producers. With respect to its SBQ
products, the Company competes with numerous other
domestic steel manufacturers.
Trade Cases. In response to the rising level of
foreign imports of OCTG products, on June 30, 1994, the
Company and six other U.S. steel companies filed
antidumping petitions against imports of OCTG products
from seven foreign nations (the Trade Cases). The
Trade Cases asked the United States government to take
action to offset injury to the domestic OCTG industry
from unfairly traded imports. The antidumping
petitions were filed against OCTG imports from
Argentina, Austria, Italy, Japan, Korea, Mexico and
Spain. The Company also joined in filing
countervailing duty cases charging subsidization of
OCTG imports from Austria and Italy. In July 1995,
following evaluation of determinations made by the
International Trade Administration of the United States
Department of Commerce, the International Trade
Commission (ITC) announced final affirmative
determinations, resulting in the collection of duties
by the Customs Service on imports of OCTG and drill
pipe products from Argentina, Japan and Mexico, and
OCTG products (other than drill pipe) from Italy and
Korea. No duties were imposed on OCTG and drill pipe
imports from Austria and Spain because the ITC issued
negative determinations. Several foreign OCTG
producers, as well as certain U.S. producers, have
appealed the determinations to international courts or
panels. The Company cannot predict the outcome or
timing of these appeals at this time.
Raw Materials and Supplies
The Company's major raw material is steel scrap,
which is generated principally from industrial,
automotive, demolition, railroad and other steel scrap
sources. Steel scrap is purchased by the Company
either through scrap brokers or directly in the open
market. The long-term demand for steel scrap and its
importance to the domestic steel industry may be
expected to increase as steel-makers continue to expand
steel scrap-based electric arc furnace and thin slab
casting capacities. For the foreseeable future,
however, the Company believes that supplies of steel
scrap will continue to be available in sufficient
quantities at competitive prices. In addition, a
number of technologies exist for the processing of iron
ore into forms which may be substituted for steel scrap
in electric arc furnace-based steel-making operations.
Such forms include direct-reduced iron, iron carbide
and hot-briquette iron. While such forms may not be
cost competitive with steel scrap at present, a
sustained increase in the price of steel scrap could
result in increased implementation of these alternative
technologies.
The Company's steel manufacturing facilities
consume large amounts of electricity. The Company
purchases its electricity from utilities near its
steel-making facilities pursuant to contracts that
expire in 1996 for Koppel and 2001 for Newport. The
contracts contain provisions that provide for lower
priced demand charges during off-peak hours and known
maximums in higher cost firm demand power. Also, the
Company receives discounted demand rates in return for
the utilities' right to periodically curtail service
during periods of peak demand. These curtailments are
generally limited to a few hours and historically have
had a negligible impact on the Company's operations.
The Company also consumes smaller quantities of
additives, alloys and flux which are purchased from a
number of suppliers.
Adhesives Segment
Imperial is a manufacturer of industrial adhesives
products. Imperial maintains over 1,000 active
formulas for the manufacture of water-borne, solvent-
borne, and hot-melt adhesives, which are used in
product assembly applications, including footwear, foam
bonding, marine and recreational vehicles, and consumer
packaging. Raw materials are available from multiple
sources and consist primarily of petrochemical-based
materials. Pricing generally follows trends in the
petrochemical markets.
Imperial produces adhesives products at
manufacturing plants located in Ohio, Tennessee and
Virginia. Imperial markets its adhesives products
throughout the United States and Caribbean basin
through an in-house sales force as well as numerous
independent sales representatives. Products are
distributed from three manufacturing sites and a number
of public warehouses across the United States and in
Puerto Rico.
Competition in the industrial adhesives products
market is highly-fragmented. The Company believes that
it competes in this market on the basis of price,
product performance and customer service. Imperial
competes with numerous small or comparably-sized
companies, as well as major adhesives producers.
Environmental Matters
The Company is subject to federal, state and local
environmental laws and regulations, including, among
others, the Resource Conservation and Recovery Act
(RCRA), the Clean Air Act, the 1990 Amendments to the
Clean Air Act (the 1990 Amendments), the Clean Water
Act and all regulations promulgated in connection
therewith, including, among others, those concerning
the discharge of contaminants as air emissions or waste
water effluents and the disposal of solid and/or
hazardous wastes such as electric arc furnace dust. As
such, the Company is from time to time involved in
administrative and judicial proceedings and
administrative inquiries related to environmental
matters.
As with other similar mills in the industry, the
Company's steel mini-mills produce dust which contains
lead, cadmium and chromium, and is classified as a
hazardous waste. The Company currently collects the
dust resulting from its electric arc furnace operations
through emission control systems and contracts with a
company for treatment and disposal of the dust at an
EPA-approved facility. The Company also has on its
property at Newport a permitted hazardous waste
disposal facility.
In March 1995, Koppel and the EPA signed a Consent
Order relating to an April 1990 RCRA facility
assessment (the Assessment) completed by the EPA and
the Pennsylvania Department of Environmental Resources.
The Assessment was performed in connection with a
permit application pertaining to a landfill that is
adjacent to the Koppel facilities. The Assessment
identified potential releases of hazardous constituents
at or adjacent to the Koppel facilities prior to the
Company's acquisition of the Koppel facilities. The
Consent Order establishes a schedule for investigating,
monitoring, testing and analyzing the potential
releases. Contamination documented as a result of the
investigation will require cleanup measures and certain
remediation has begun. Pursuant to various indemnity
provisions in agreements entered into at the time of
the Company s acquisition of the Koppel facilities,
certain parties have agreed to indemnify the Company
against various known and unknown environmental
matters. While such parties have not at this time
acknowledged full responsibility for potential costs
under the Consent Order, the Company believes that the
indemnity provisions provide for it to be fully
indemnified against all matters covered by the Consent
Order, including all associated costs, claims and
liabilities.
In two separate incidents occurring in fiscal 1993
and 1992, radioactive substances were accidentally
melted at Newport, resulting in the contamination of
the melt shop s electric arc furnace emission control
facility, or baghouse facility . The occurrences of
the accidental melting of radioactive materials have
not resulted in any notice of violations from federal
or state environmental regulatory agencies. The losses
and costs incurred in 1993, net of insurance claims,
resulted in an extraordinary charge of $1.1 million,
net of applicable income tax benefit of $0.7 million,
or an $.08 loss per share. The Company is
investigating and evaluating various issues concerning
storage, treatment and disposal of the radiation
contaminated baghouse dust; however a final
determination as to method of treatment and disposal,
cost and further regulatory requirements cannot be made
at this time. Depending on the ultimate timing and
method of treatment and disposal, which will require
appropriate federal and state regulatory approval, the
actual cost of disposal could substantially exceed
current estimates and the Company s insurance coverage.
The Company expects to recover and has recorded a $2.3
million receivable relating to insurance claims for the
recovery of disposal costs which will be filed with the
Company s insurance company at the time such disposal
costs are incurred. As of September 30, 1995, claims
recorded in connection with disposal costs exhaust
available insurance coverage. Based on current
knowledge, management believes the recorded gross
reserves of $4.4 million for disposal costs pertaining
to these incidents are adequate.
Subject to the uncertainties concerning the
Consent Order and the storage and disposal of the
radiation contaminated dust, the Company believes that
it is currently in compliance in all material respects
with all applicable environmental regulations.
Regulations under the 1990 Amendments to the Clean
Air Act that will pertain to the Company s operations
are currently not expected to be promulgated until 1997
or later. The Company cannot predict the level of
required capital expenditures or operating costs
resulting from future environmental regulations such as
those forthcoming as a result of the 1990 Amendments.
However, the Company believes that while the 1990
Amendments may require additional expenditures, such
expenditures will not have a material impact on the
Company s business or consolidated financial position
for the foreseeable future.
Capital expenditures for the next twelve months
relating to environmental control facilities are not
expected to be material, however, such expenditures
could be influenced by new or revised environmental
regulations and laws.
As of September 30, 1995, the Company had
environmental remediation reserves of $4.5 million, of
which $4.4 million pertain to accrued disposal costs
for radiation contaminated baghouse dust. As of
September 30, 1995, the possible range of estimated
losses related to the environmental contingency matters
discussed above in excess of those accrued by the
Company is $0 to $3.0 million; however, with respect to
the Consent Order, the Company cannot estimate the
possible range of losses should the Company ultimately
not be indemnified. Based upon its evaluation of
available information, management does not believe that
any of the environmental contingency matters discussed
above are likely, individually or in the aggregate, to
have a material adverse effect upon the Company s
consolidated financial position, results of operations
or cash flows. However, the Company cannot predict
with certainty that new information or developments
with respect to the Consent Order or its other
environmental contingency matters, individually or in
the aggregate, will not have a material adverse effect
on the Company's consolidated financial position,
results of operations or cash flows.
Employees
As of September 30, 1995, the Company had 1,728
employees, of whom 405 were salaried and 1,323 were
hourly. Substantially all of the Company's hourly
employees are represented by the United Steelworkers of
America under contracts expiring in 1997 for Erlanger;
1999 for Newport and Koppel; and 1998 for Imperial.
ITEM 2. PROPERTIES
The Company's principal operating properties are
listed in the table below. The Company believes its
facilities are adequate and suitable for its present
level of operations.
Location and Properties
Specialty Steel Segment:
Newport, Kentucky - The Company owns approximately 250
acres of real estate upon which are located a melt
shop, hot strip mill, two welded pipe mills, machine
and fabricating shops and storage and repair facilities
aggregating approximately 636,000 square feet, as well
as the Company's administrative offices.
Koppel, Pennsylvania - The Company owns approximately
227 acres of real estate upon which are located a melt
shop, bar mill, blooming mill, pickling facility,
machine and fabricating shops, storage and repair
facilities and administrative offices aggregating
approximately 900,000 square feet.
Ambridge, Pennsylvania - The Company owns approximately
45 acres of real estate upon which are located a
seamless tube making facility and seamless tube
finishing facilities aggregating approximately 659,000
square feet.
Tulsa, Oklahoma - The Company leases approximately 36
acres of real estate upon which are located a tubular
processing facility. The facility is located at the
Tulsa Port of Catoosa where barge facilities are in
close proximity. Located on this property are six
buildings aggregating approximately 119,000 square feet
which house the various finishing operations.
Baytown, Texas - The Company owns approximately 55
acres of real estate upon which is located a tubular
processing facility and barge facilities. Located on
the property are eight buildings aggregating
approximately 65,000 square feet which house the
various finishing operations.
Adhesives Segment:
Cincinnati, Ohio; Lynchburg, Virginia; Nashville,
Tennessee - The Company owns approximately seven acres
of property in Cincinnati, Ohio, and 1.5 acres of
property in Lynchburg, Virginia for use in its
adhesives operations. The Cincinnati properties
contain five buildings aggregating approximately
150,000 square feet and the Lynchburg property consists
of one 10,000 square foot building. The Company also
leases approximately 3.1 acres in Nashville, Tennessee
for use in its adhesives operations, including one
building aggregating approximately 60,000 square feet.
Other:
Newport, Kentucky - The Company owns approximately 37
acres of partially developed land near Newport,
Kentucky, acquired in fiscal 1989, which is held as
investment property and is listed for sale. The
Company also owns approximately 85 acres of additional
real estate which is currently not used in operations.
Information regarding encumbrances on the
Company's properties, included in Note 5 to the
Consolidated Financial Statements of the 1995 Annual
Report to Shareholders, is incorporated herein by
reference.
Capacity Utilization
The Company's capacity utilization for fiscal 1995 was
as follows:
Rated Capacity
Facility (in tons) Capacity
Utilization
Koppel facilities
Melt shop ............... 400,000 88.4%
Bar mill ................ 200,000 98.5%
Seamless tube mill ...... 200,000 69.0%
Newport facilities
Melt shop ............... 700,000 59.4%
Hot strip rolling mill .. 750,000 51.1%
Welded pipe mills ....... 580,000 55.8%
ITEM 3. LEGAL PROCEEDINGS
See "Environmental Matters" regarding the Consent
Order entered into by Koppel and the EPA.
The Company is subject to various claims, lawsuits
and administrative proceedings arising in the ordinary
course of business with respect to commercial, product
liability and other matters which seek remedies or
damages. Based upon its evaluation of available
information, management does not believe that any such
matters are likely, individually or in the aggregate,
to have a material adverse effect upon the Company's
consolidated financial position, results of operations
or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Incorporated herein by reference from the 1995
Annual Report to Shareholders, "Stock Market
Information" and "Stock Price" and Note 5 to the
Consolidated Financial Statements.
As of December 1, 1995, there were approximately
338 record holders of Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated herein by reference from the 1995
Annual Report to Shareholders, "Consolidated Historical
Summary" and Note 2 to the Consolidated Financial
Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated herein by reference from the 1995
Annual Report to Shareholders, "Management's Discussion
and Analysis of Financial Condition and Results of
Operations".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated herein by reference from the 1995
Annual Report to Shareholders, "Consolidated Statements
of Operations"; "Consolidated Balance Sheets";
"Consolidated Statements of Cash Flows"; Consolidated
Statements of Common Shareholders' Equity"; "Notes to
Consolidated Financial Statements"; "Report of
Management"; and "Report of Independent Public
Accountants".
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
Incorporated herein by reference from the
Company's Proxy Statement dated December 27, 1995 for
the Annual Meeting of Shareholders on February 15,
1996, under the caption "Election of Directors -
Nominees for Election as Directors"; "Information
Regarding Meetings and Committees of the Board of
Directors - Committees of the Board"; "Executive
Compensation"; and "Compliance With Section of 16(a) of
the Exchange Act".
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the
Company's Proxy Statement dated December 27, 1995 for
the Annual Meeting of Shareholders on February 15,
1996, under the caption "Information Regarding Meetings
and Committees of the Board of Directors - Director
Compensation"; "Executive Compensation"; and
"Compensation Committee Interlocks and Insider
Participation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Incorporated herein by reference from the
Company's Proxy Statement dated December 27, 1995 for
the Annual Meeting of Shareholders on February 15,
1996, "Share Ownership of Certain Beneficial Owners and
Management".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
Incorporated herein by reference from the
Company's Proxy Statement dated December 27, 1995 for
the Annual Meeting of Shareholders on February 15,
1996, under the caption "Compensation Committee
Interlocks and Insider Participation" and "Certain
Transactions".
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements - The
following Consolidated Financial Statements
included in the 1995 Annual Report to Shareholders
for the fiscal year ended September 30, 1995, are
incorporated by reference in Item 8:
- Consolidated Statements of Operations
- Consolidated Balance Sheets
- Consolidated Statements of Cash Flows
- Consolidated Statements of Common Shareholders'
Equity
- Notes to Consolidated Financial Statements
- Report of Independent Public Accountants
(a) 2. Consolidated Financial Statement Schedule -
The following schedule is included herein:
- Report of Independent Public Accountants on
Financial Statement Schedule
- Schedule II - Valuation and Qualifying
Accounts
(a) 3. Exhibits
Reference is made to the Index to Exhibits, which is
incorporated herein by reference.
(b) Reports on Form 8-K
Current Report on Form 8-K dated September 29, 1995 and
filed October 10, 1995, reporting under Item 5 the
Company's earnings expectations for the fourth fiscal
quarter ending September 30, 1995; and under Item 7(c),
the Company's press release dated September 29, 1995.
Current Report on Form 8-K dated October 24, 1995 and
filed November 3, 1995, reporting under Item 5 the
Company's estimate for earnings for the fourth fiscal
quarter ending September 30, 1995; and under Item 7(c),
the Company's press release dated October 24, 1995.
Current Report on Form 8-K dated November 10, 1995 and
filed November 15, 1995, reporting under Item 5 the
Company's results for its fiscal year and fourth
quarter ending September 30, 1995; and under Item 7(c),
the Company's press release dated November 10, 1995
Current Report on Form 8-K dated December 4, 1995 and
filed December 7, 1995, reporting under Item 5 certain
management changes; and under Item 7(c), the Company's
press release dated December 5, 1995.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To NS Group, Inc.:
We have audited in accordance with generally
accepted auditing standards the consolidated financial
statements included in NS Group, Inc. and subsidiaries
annual report to shareholders incorporated by reference
in this Form 10-K, and have issued our report thereon
dated November 6, 1995. Our audit was made for the
purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in
Item 14(a) 2 is the responsibility of the Company's
management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material
respects the financial data required to be set forth
therein in relation to the basic financial statements
taken as a whole.
Cincinnati, Ohio ARTHUR ANDERSEN LLP
November 6, 1995
SCHEDULE II
NS GROUP, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
Reserves Deducted from
Assets in Balance Sheets
Allowance
for Allowance
Doubtful for Cash
Accounts(1) Discounts(1)
BALANCE,
September 26, 1992.. $ 1,307 $ 208
Additions:
Charged to costs
and expenses.. 572 2,338
Deductions:
Net charges of nature
for which reserves
were created... (1,060) (2,293)
BALANCE,
September 25,
1993....... $ 819 $ 253
Additions:
Charged to
costs and
expenses.. 343 2,298
Deductions:
Sale of
subsidiary.. (305) -
Net charges
of nature
for which
reserves were
created... (220) (2,245)
BALANCE,
September 24,
1994....... $ 637 $ 306
Additions:
Charged to
costs and
expenses.. 586 4,005
Deductions:
Net charges of
nature for which
reserves were
created.... (202) (3,330)
BALANCE,
September 30,
1995....... $ 1,021 $ 981
(1) Deducted from accounts receivable
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.
NS GROUP, INC.
Date: December 15, 1995 By: /s/John R. Parker
John R. Parker,
Vice President,
Treasurer and Chief
Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person
whose signature appears below constitutes and appoints
Clifford R. Borland and John R. Parker, and each of
them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for
him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this
Annual Report on Form 10-K and any other documents and
instruments incidental thereto, and to file the same,
with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to
do and perform each and every act and thing requisite
or necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents and/or any of them,
or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
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 dates indicated.
Date: December 15, 1995 By: /s/Clifford R.Borland
Clifford R. Borland,
Chief Executive
Officer and Director
Date: December 15, 1995 By: /s/Paul C. Borland
Paul C. Borland,
President and Chief
Operating Officer
Date: December 15, 1995 /s/John R. Parker
John R. Parker, Vice
President,
Treasurer and Chief
Financial Officer
(Principal Financial
Officer)
Date: December 15, 1995 /s/Thomas J. Depenbrock
Thomas J. Depenbrock
Vice President and
Corporate Controller
Date: December 15, 1995 /s/Ronald R. Noel
Ronald R. Noel,
Director
Date: December 15, 1995 /s/John B. Lally
John B. Lally,
Director
Date: December 15, 1995 /s/Patrick J. B. Donnelly
Patrick J. B. Donnelly,
Director
Date: December 15, 1995 /s/R. Glen Mayfield
R. Glen Mayfield,
Director
INDEX TO EXHIBITS
Number Description
3.1 Amended and Restated Articles of
Incorporation of Registrant, filed as Exhibit
3.1 to Amendment No. 1 to Registrants' Form
S-1 dated January 17, 1995, File No. 33-
56637, and incorporated herein by this
reference
3.2 Amended and restated By-Laws of Registrant,
dated December 4, 1995, filed herewith
Exhibits 4.1 through 4.22 were filed under their
respective Exhibit numbers to Registrant's Form 10-Q
for the quarterly period ended July 1, 1995, File No.
1-9838, and are incorporated herein by this reference
4.1 Indenture (including form of Senior Secured
Note) between the Company and The Huntington
National Bank, as trustee (the "Trustee")
4.2 Leasehold and Fee Mortgage, Assignment of
Rents and Leases and Security Agreement from
Newport to the Trustee (Kentucky)
4.3 Mortgage, Assignment of Rents and leases and
Security Agreement from Koppel to the Trustee
(Pennsylvania)
4.4 Deed of Trust, Assignment of Rents and Leases
and Security Agreement from Koppel to the
Trustee (Texas)
4.5 Leasehold Mortgage, Assignment of Rents and
Leases and Security Agreement from Erlanger
to the Trustee (Oklahoma)
4.6 Junior Leasehold and Fee Mortgage, Assignment
of Rents and Leases and Security Agreement
from Newport to the Company (Kentucky)
4.7 Junior Mortgage, Assignment of Rents and
Leases and Security Agreement from Koppel to
the Company (Pennsylvania)
4.8 Junior Deed of Trust, Assignment of Rents and
Leases and Security Agreement from Koppel to
the Company (Texas)
4.9 Junior Leasehold Mortgage, Assignment of
Rents and Leases and Security Agreement from
Erlanger to the Company (Oklahoma)
4.10 Subsidiary Security Agreement between Newport
and the Trustee
4.11 Subsidiary Security Agreement between Koppel
and the Trustee
4.12 Subsidiary Security Agreement between
Erlanger and the Trustee
4.13 ICN Security Agreement between Newport and
the Company
4.14 ICN Security Agreement between Koppel and the
Company
4.15 ICN Security Agreement between Erlanger and
the Company
4.16 Pledge and Security Agreement between the
Company and the Trustee
4.17 Subsidiary Guarantee
4.18 Intercreditor Agreement between the Trustee
and the Bank of New York Commercial
Corporation, as agent under the Credit
Facility
4.19 Agreement between the Trustee, Koppel and the
Commonwealth of Pennsylvania, Department of
Commerce
4.20 Subordination Agreement between the Trustee
and the City of Dayton, Kentucky
4.21 Revolving Credit, Guaranty and Security
Agreement among Bank of New York Commercial
Corporation, PNC Bank Ohio, N.A., Newport,
Koppel, Imperial, the Company, Erlanger,
Northern Kentucky Air, Inc. and Northern
Kentucky Management, Inc.
4.22 Warrant Agreement between the Company and The
Huntington National Bank, as warrant agent
10.1 Company's Amended Employee Incentive Stock
Option Plan, filed as Exhibit 10(a) to
Company's Form 10-K for the fiscal year ended
September 30, 1989, File No. 1-9838, and
incorporated herein by this reference
10.2 Company's Executive Bonus Plan, filed as
Schedule B to Exhibit 10.4 to Company's
Registration Statement on Form S-18, File No.
2-90643, and incorporated herein by this
reference
10.3 Company's Non-Qualified Stock Option and
Stock Appreciation Rights Plan of 1988, filed
as Exhibit 1 to Company's Proxy Statement
dated January 13, 1989, File No. 1-9838, and
incorporated herein by this reference
10.4 Rights Agreement dated as of November 17,
1988 between Company and Pittsburgh National
Bank, filed as Exhibit 1 to Company's Form 8-
K dated November 17, 1988, File No. 1-9838,
and incorporated herein by this reference,
and Appointment and Amendment Agreement dated
July 29, 1994 between Registrant and
Registrar and Transfer Company, filed as
Exhibit 10(d) to Company's Form 10-Q dated
May 29, 1994, File No. 1-9838, and
incorporated herein by this reference
10.5 Company's 1993 Incentive Stock Option Plan,
filed as Exhibit 1 to Company's Proxy
Statement dated December 22, 1992, File No.
1-9838, and incorporated herein by this
reference
10.6 Transfer Agreement, dated September 29, 1993,
filed on September 28, 1993 as Exhibit 10.2
to the Amendment No. 2 to the Registration
Statement on Form S-1 of Kentucky Electric
Steel, Inc., File No. 33-67140, and
incorporated herein by this reference
10.7 Tax Agreement, dated October 6, 1993, by and
among NS Group,Inc., Kentucky Electric Steel,
Inc. and NSub I, Inc. (formerly Kentucky
Electric Steel Corporation), filed as Exhibit
10(h) to Company's Form 10-K for the fiscal
year ended September 25, 1993, File No. 1-
9383, and incorporated herein by this
reference
10.8 Registration Rights Agreement dated October
6, 1993 among Kentucky Electric Steel, Inc.,
NS Group, Inc. and NSub I, Inc. (formerly
Kentucky Electric Steel Corporation), filed
as Exhibit 10(i) to Company's Form 10-K for
fiscal year ended September 25, 1993, File
No. 1-9383, and incorporated herein by this
reference
10.9 Form of 11% Subordinated Convertible
Debenture due 2005, filed as Exhibit 4.1 to
Company's Form 8-K dated October 18, 1990,
File No. 1-9838, and incorporated herein by
this reference
10.10 Form of Warrant dated October 4, 1990, filed
as Exhibit 4.2 to Company's Form 8-K dated
October 18, 1990, File No. 1-9838, and
incorporated herein by reference; and First
Amendment to Warrant dated September 26,
1992, filed as Exhibit 4(c) to Company's Form
10-K for the fiscal year ended September 26,
1992, File No. 1-9838, and incorporated
herein by this reference
13 1995 Annual Report to Shareholders (not
deemed "filed" except for portions which are
expressly incorporated by reference), filed
herewith
21 Subsidiaries of Registrant
23 Consent of Independent Public Accountants
24 Power of Attorney (contained on Signature
Page)
27 Financial Data Schedule