SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_____________________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 25, 1994
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
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, no par value 13,808,883
(Class) (Outstanding at July 25, 1994)
NS GROUP, INC.
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Condensed Consolidated Balance Sheets . . . . . . . . . 3
Condensed Consolidated Statements of Income . . . . . . 4
Condensed Consolidated Statements of Cash Flows . . . . 5
Notes to Condensed Consolidated Financial Statements. . 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 9
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K . . . . . . . 14
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 25, 1994 AND SEPTEMBER 25, 1993
(Dollars in thousands)
(Unaudited)
June 25, September 25,
1 9 9 4 1 9 9 3
CURRENT ASSETS
Cash and cash equivalents $ 15,566 $ 5,797
Short-term investments 32,473 3,457
Accounts receivable, less allowance
for doubtful accounts of $689 and
$819, respectively 36,774 48,602
Inventories 35,108 41,691
Other current assets 16,158 27,175
Total current assets 136,079 126,722
PROPERTY, PLANT AND EQUIPMENT 263,695 265,093
Less - Accumulated depreciation (101,439) (91,627)
162,256 173,466
OTHER ASSETS 19,566 17,054
TOTAL ASSETS $317,901 $317,242
CURRENT LIABILITIES
Notes payable $ 28,429 $ 26,967
Accounts payable 25,720 28,300
Other current liabilities 23,185 23,263
Current portion of long-term debt 13,033 9,132
Total current liabilities 90,367 87,662
LONG-TERM DEBT 142,398 156,056
DEFERRED TAXES 7,871 10,902
COMMON SHAREHOLDERS' EQUITY
Common stock no par value,
40,000,000 shares authorized;
13,804,213 and 13,696,104 shares
issued and outstanding, respectively 48,967 48,284
Common stock options and warrants 248 208
Unrealized loss on available for
sale securities (248) -
Retained earnings 28,298 14,130
Total common shareholders' equity 77,265 62,622
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $317,901 $317,242
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED
JUNE 25, 1994 AND JUNE 26, 1993
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
NET SALES $ 80,807 $ 95,363 $218,778 $259,877
COST AND EXPENSES
Cost of products sold 73,604 82,889 201,953 229,391
Selling and administrative expenses 5,826 7,570 18,102 23,114
Operating income (loss) 1,377 4,904 (1,277) 7,372
OTHER INCOME (EXPENSE)
Gain on sale of subsidiary - - 35,292 -
Interest expense (4,987) (5,203) (15,066) (15,836)
Interest income 425 67 1,272 209
Other, net 196 248 819 (77)
Income (loss) before income taxes
and cumulative effect of a change
in accounting principle (2,989) 16 21,040 (8,332)
PROVISION (CREDIT) FOR INCOME TAXES (999) 5 8,587 (2,873)
Income (loss) before cumulative effect
of a change in accounting principle (1,990) 11 12,453 (5,459)
CUMULATIVE EFFECT OF A CHANGE IN
THE METHOD OF ACCOUNTING FOR
INCOME TAXES - - 1,715 -
Net income (loss) $ (1,990) $ 11 $ 14,168 $ (5,459)
PER COMMON SHARE
Income (loss) before cumulative effect
of a change in accounting principle $(.14) $ - $ .91 $(.40)
Cumulative effect of a change in the
method of accounting for income taxes - - .12 -
Net income (loss) $(.14) $ - $1.03 $(.40)
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,803,976 13,516,950 13,782,782 13,511,813
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED
JUNE 25, 1994 AND JUNE 26, 1993
(Dollars in thousands)
(Unaudited)
June 25, June 26,
1 9 9 4 1 9 9 3
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 14,168 $ (5,459)
Adjustments to reconcile net income (loss) to
net cash flows from operating activities:
Depreciation and amortization 13,953 14,149
Decrease in deferred taxes (3,031) (2,855)
Gain on sale of subsidiary (35,292) -
Increase in accounts receivable, net (2,044) (10,648)
Increase in inventories (5,986) (163)
Decrease in other current assets 5,944 2,479
Increase in accounts payable 4,190 2,957
Increase in other current liabilities 4,255 1,183
Net cash flows from operating activities (3,843) 1,643
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of subsidiary 50,426 -
Cash dividend from sold subsidiary 6,818 -
Increase in property, plant and equipment, net (8,458) (4,554)
Increase in other assets (3,190) (347)
(Increase) decrease in short-term investments (29,016) 41
Net cash flows from investing activities 16,580 (4,860)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable 1,462 4,295
Proceeds from issuance of long-term debt 431 1,581
Repayments on long-term debt (5,468) (6,863)
Increase in deferred financing costs (76) (14)
Proceeds from issuance of common stock 683 51
Net cash flows from financing activities (2,968) (950)
Net increase (decrease) in cash and cash
equivalents 9,769 (4,167)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 5,797 8,714
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,566 $ 4,547
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 14,297 $ 14,045
Income taxes $ 4,025 $ 385
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
NS GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The condensed consolidated financial statements include the
accounts of NS Group, Inc. and its wholly owned subsidiaries (the
Company): Newport Steel Corporation, Koppel Steel Corporation,
Erlanger Tubular Corporation, NSub I, Inc. (formerly known as
Kentucky Electric Steel Corporation - see Note 2), Imperial
Adhesives, Inc., N.K. Management, Inc. and N.K. Air, Inc. All
significant intercompany balances and transactions have been
eliminated.
The accompanying information reflects, in the opinion of
management, all adjustments (which consist only of normal recurring
adjustments) necessary to present fairly the results for the
interim periods. Reference should be made to NS Group, Inc.'s Form
10-K for the year ended September 25, 1993 for additional footnote
disclosure, including a summary of significant accounting policies.
(2) On October 6, 1993, the Company sold all of the assets and
liabilities of its wholly owned subsidiary, Kentucky Electric Steel
Corporation (KES), to a newly formed public company in exchange for
$45.6 million in cash and 400,000 shares (approximately 8%) of the
new entity, valued at $4.8 million. In addition, the Company
received $6.8 million in cash from the new entity in satisfaction
of a dividend declared by KES prior to the sale. Cash proceeds
from the sale were invested in short-term marketable securities.
The sale of KES resulted in a pre-tax gain of $35.3 million and
increased net income and earnings per common share by $21.5 million
and $1.56, respectively.
Subsequent to the sale, the Company changed the name of KES to NSub
I, Inc., which currently holds the majority of the proceeds from
the sale. The accompanying financial statements include the
financial position, results of operations and changes in cash flows
of KES for the comparative prior periods presented.
(3) At June 25, 1994 approximately $8.3 million in cash and short
term investments were restricted.
(4) At June 25, 1994 and September 25, 1993, inventories stated
at the lower of LIFO (last-in, first-out) cost or market represent
approximately 32% and 23% of total inventories before the LIFO
reserve, respectively. Inventories consist of the following
components ($000's):
JUNE 25, SEPTEMBER 25,
1 9 9 4 1 9 9 3
Raw materials $ 6,433 $ 5,736
Semi-finished and
finished goods 31,110 37,830
37,543 43,566
LIFO reserve (2,435) (1,875)
$35,108 $41,691
(5) Effective September 26, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("Statement 109"). Prior to adoption
of Statement 109, deferred tax expense was based on items of income
and expense that were reported in different years in the financial
statements and tax returns and were measured at the tax rate in
effect in the year the difference originated. Under Statement 109,
deferred tax liabilities and assets are based upon differences in
the basis of assets and liabilities for financial statements and
tax returns and are determined based on the enacted tax rates and
laws that will be in effect when the differences are expected to
reverse. The significant components of the Company's deferred tax
liabilities and assets as of the date of adoption of Statement 109
are as follows ($000's).
Deferred tax liabilities, principally
related to depreciation $29,085
Deferred tax assets:
Reserves and accruals 5,445
Net operating tax loss carryforward 17,773
Alternative minimum tax and other
tax credit carryforwards 2,684
Total deferred tax assets 25,902
Net deferred tax liability $ 3,183
The cumulative effect of the change in accounting increased net
income by $1.7 million, or $.12 per share.
During the first quarter of fiscal 1994, the Company also adopted
the provisions of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" ("Statement 115"). Statement 115 requires the Company
to mark certain of its investments to market either through the
income statement or directly to common shareholders' equity,
depending on the nature of the investment. The impact on the
Company's financial statements from the adoption of Statement 115
was not material.
(6) As previously reported, the Company is investigating and
evaluating various alternatives for treatment and disposal of
radioactive contaminated baghouse dust stored at Newport Steel
Corporation (Newport) stemming from two separate incidents in 1993
and 1992 in which a radioactive substance was accidently melted in
Newport's melt shop operations. A final determination as to
disposal methodology and cost and further regulatory requirements
cannot be made at this time. Depending on the ultimate method of
disposal, which will require appropriate federal and state
regulatory approvals, the actual cost of disposal could
substantially exceed current recorded reserve estimates and the
Company's insurance coverage. Based on current knowledge,
management believes the recorded reserves for disposal costs
pertaining to the 1993 and 1992 incidents of $4.4 million are
adequate and the ultimate outcome will not have a material adverse
effect on the Company's consolidated financial position; however,
the impact on the Company's consolidated results of operations for
a given year could be material.
NS GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company operates in two separate business segments. Within the
specialty steel segment are the operations of Newport Steel
Corporation (Newport), a manufacturer of welded tubular steel
products; Koppel Steel Corporation (Koppel), a manufacturer of
seamless tubular steel, hot-rolled bar and semi-finished steel
products; and Erlanger Tubular Corporation (Erlanger), a pipe
finishing operation. Within the adhesives segment are the
operations of Imperial Adhesives, Inc. (Imperial), a manufacturer
of industrial adhesives products.
Reference is made to Note 2 to the Condensed Consolidated Financial
Statements included herein concerning the Company's sale of
Kentucky Electric Steel Corporation (KES) in early October, 1993.
The following discussion includes the results of operations of KES
for the comparative prior year periods.
Results of Operations
The Company's sales and operating results for the three and nine
month periods ended June 25, 1994 and June 26, 1993 were as follows
($000's):
Three Months Ended Nine Months Ended
June 25, June 26, June 25, June 26,
1 9 9 4 1 9 9 3 1 9 9 4 1 9 9 3
Net sales:
Specialty steel
segment
Excluding KES $72,215 $63,547 $194,324 $172,863
KES - 24,710 - 66,990
72,215 88,257 194,324 239,853
Adhesives segment 8,592 7,106 24,454 20,024
Total $80,807 $95,363 $218,778 $259,877
Operating income
(loss):
Specialty steel
segment
Excluding KES $ 1,723 $ 2,683 $ 130 $ 1,636
KES - 2,697 - 7,146
1,723 5,380 130 8,782
Adhesives segment 388 259 760 633
Corporate allocations
and income (734) (735) (2,167) (2,043)
Total $ 1,377 $ 4,904 $ (1,277) $ 7,372
Fiscal 1994 third quarter specialty steel segment net sales,
excluding KES, increased $8.7 million, or 13.6% from the comparable
fiscal 1993 quarter. For the nine month comparable periods,
specialty steel segment net sales, excluding KES, increased $21.5
million, or 12.4%. Total specialty steel segment net sales
declined $16.0 million, or 18.2% for the comparable three month
periods and $45.5 million, or 19.0% for the comparative nine month
periods, primarily due to the sale of KES in the first quarter of
fiscal 1994.
Sales data for the Company's specialty steel segment for the three
and nine month periods ended June 25, 1994 and June 26, 1993 were
as follows:
Three Months Ended Nine Months Ended
June 25, June 26, June 25, June 26,
1 9 9 4 1 9 9 3 1 9 9 4 1 9 9 3
Tons shipped:
Welded tubular 72,400 76,500 193,700 234,400
Seamless tubular 25,300 22,500 66,000 55,700
Bars, excluding KES 41,000 26,900 111,900 70,300
Bars - KES - 66,100 - 182,000
Other 12,000 8,100 29,000 14,000
Net sales ($000's):
Welded tubular $30,306 $31,658 $ 81,236 $ 94,859
Seamless tubular 19,631 18,495 53,206 45,522
Bars, excluding KES 18,197 10,551 49,010 27,224
Bars - KES - 24,710 - 66,990
Other 4,081 2,843 10,872 5,258
$72,215 $88,257 $194,324 $239,853
Welded tubular net sales for the three month comparative period
declined $1.4 million, or 4.3% on a volume decline of 5.4% while
nine month net sales declined $13.6 million, or 14.4% on a volume
decline of 17.4% from the comparative nine month period.
Approximately $7.9 million of the nine month decline in welded
tubular net sales occurred in the second fiscal quarter due to a
decline in shipments that resulted from customers' resistance to
announced price increases. The Company adjusted its selling prices
in response to the decline and volume recovered in the third
quarter, although shipments were slightly lower compared to the
third quarter of fiscal 1993. For the three and nine month
comparative periods, average selling prices for welded tubular
products increased 1.0% and 3.5%, respectively.
Seamless tubular net sales increased $1.1 million, or 6.1% on a
volume increase of 12.4% for the three month comparative periods.
Seamless tubular net sales increased $7.7 million, or 16.9% on a
volume increase of 18.5% for the nine month comparative periods.
Average selling prices for seamless tubular products declined 5.7%
and 1.3% for the three and nine month comparative periods,
respectively.
Steel bar product net sales, excluding KES, increased $7.6 million,
or 72.5% on a volume increase of 52.4% for the three month
comparative periods. Bar product net sales, excluding KES,
increased $21.8 million, or 80.0% on a volume increase of 59.2% for
the nine month comparative periods. Steel bar product prices
increased 13.3% and 13.2% for the three and nine month periods,
respectively. Steel bar product volume and prices have increased
as a result of stronger market demand over the prior year.
The increase in net sales of "other" products is primarily
attributable to an increase in shipments of hot rolled coiled strip
product by Newport, which resulted from stronger market demand for
this product.
The Company's average steel scrap costs on a per ton basis for the
fiscal 1994 three and nine month periods have increased
approximately 18.3% and 29.9%, respectively, over the comparable
periods of 1993. The Company has recovered a portion of the
increase through higher selling prices for its steel bar products;
however, it has generally not been successful in passing scrap cost
increases through to tubular product customers.
Although the average number of oil and gas drilling rigs in
operation in the United States (rig count) has increased for the
fiscal year from 744 to 785, it has declined in each of the past
two quarters. The level of drilling activity in the United States,
as well as the level of foreign imports of tubular products into
the United States, both of which affect the demand for the
Company's tubular steel products, have resulted in further tubular
product price erosion.
In response to the level of foreign imports of tubular products, in
late June the Company along with six other U.S. steel companies
filed antidumping petitions against imports of oil country tubular
goods (OCTG) from seven foreign nations. The cases ask the U.S.
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. The cases will be handled by the
International Trade Administration of the U.S. Department of
Commerce, which will investigate the existence and extent of
dumping and subsidization, and by the U.S. International Trade
Commission, which will assess whether dumping and subsidization
have caused material injury to the U.S. industry. If affirmative
findings are made by both agencies, duties may be imposed to offset
the amount of subsidization and dumping. The Company cannot
predict the outcome of the cases at this time.
Price increases and improvements in tubular product shipments will
continue to be highly dependent on the level of drilling activity
in the U.S. and abroad as well as the level of activity in the
steel industry and the general state of the economy.
Fiscal 1994 third quarter adhesives segment net sales increased
$1.5 million, or 20.9% from the comparable fiscal 1993 quarter.
For the nine month comparable periods, adhesives segment net sales
increased $4.4 million, or 22.1%. The increase in the adhesives
segment sales over the prior year periods was primarily the result
of the growth and development of product lines acquired in fiscal
1993.
Consolidated operating income decreased $3.5 million from $4.9
million in the third quarter of fiscal 1993 to $1.4 million in the
current quarter. For the nine months, consolidated operating
income decreased $8.7 million, from a profit of $7.4 million in
fiscal 1993 to a loss of $1.3 million in the first nine months of
fiscal 1994. For the three and nine month periods ended June 26,
1993, KES accounted for $2.7 million and $7.1 million,
respectively, of operating income. The decrease in operating
income was primarily attributable to the sale of KES, a decline in
the Company's welded tubular products sales and increases in steel
scrap costs as discussed above.
Newport/Erlanger incurred operating losses of $1.5 million and $7.7
million for the fiscal 1994 three and nine month periods,
respectively, compared to an operating profit of $142,000 and an
operating loss of $174,000 for the comparable periods of a year
ago. The decline in operating margin for the three month
comparative period was primarily attributable to the inability to
recover higher steel scrap costs as discussed above. For the nine
month comparative period, the decline was primarily attributable to
higher scrap costs, a decline in welded tubular shipments as
discussed above and increased maintenance costs due to the severe
winter weather in the second fiscal quarter.
Koppel earned an operating profit of $3.3 million and $7.8 million
for the current quarter and nine month period, respectively,
compared to a profit of $2.5 million and $1.8 million for the
comparative prior year periods. The improvements were primarily
attributable to improved operating efficiencies due to greater
production and sales volumes, particularly steel bar products, as
discussed above. These improvements were partially offset by
increased steel scrap costs and lower seamless tubular average
selling prices from the prior year periods. Koppel's nine month
operating results were also negatively affected by the severe
winter weather of the second quarter.
Imperial earned an operating profit of $388,000 and $760,000 for
the three and nine month periods, respectively, compared to
$259,000 and $633,000 for the comparative periods of a year ago.
Interest expense for the fiscal 1994 three and nine month periods
declined $216,000 and $770,000, respectively, from the comparable
periods of a year ago primarily as a result of a decrease in long-
term debt obligations. Interest income increased $358,000 and $1.1
million from the prior year three and nine month periods,
respectively, primarily due to interest earnings on the proceeds
from the sale of KES.
The sale of KES in the first quarter resulted in a pre-tax gain of
$35.3 million and increased net income and earnings per common
share by $21.5 million and $1.56, respectively. See Note 2 to the
Condensed Consolidated Financial Statements included herein.
In the first quarter of fiscal 1994, the Company recorded an
increase to net income of $1.7 million, or $.12 per share, for the
cumulative effect of the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". See
Note 5 to the Condensed Consolidated Financial Statements included
herein.
Liquidity and Capital Resources
Working capital at June 25, 1994 was $45.7 million compared to
$39.1 million at September 25, 1993. The current ratio was 1.51 to
1 compared to 1.45 to 1 at September 25, 1993. These increases are
primarily due to the Company's improved liquidity resulting from
the sale of KES. At June 25, 1994, the Company had cash and short-
term investments totaling $48.0 million compared to $9.3 million at
September 25, 1993 and the Company had unused aggregate lines of
credit available for borrowing of $7.4 million, of which $5.4
million was restricted for use at Koppel, with the remainder
available for general corporate purposes. At June 25, 1994,
approximately $8.3 million in cash and short-term investments were
restricted.
Cash flow used in operating activities totaled $3.8 million in the
first nine months of fiscal 1994. Major components include a net
loss before the effect of the gain on the sale of KES and the
adoption of Statement 109 of $9.1 million and a $6.0 million
increase in inventories, partially offset by $14.0 million in non-
cash depreciation and amortization charges and an increase in
accounts payable and other current liabilities of $4.2 million and
$4.3 million, respectively.
The increase in inventories and accounts payable was the result of
unusually low levels at fiscal year end, partially due to the
fiscal 1993 fourth quarter shutdown at Newport, as well as the
increase in Koppel's business during fiscal 1994. The increase in
accrued liabilities is primarily attributable to an increase in
accrued income taxes related to the gain on the sale of KES.
Net cash flows from investing activities was $16.6 million for the
first nine months of fiscal 1994. As a result of the sale of KES,
the Company received $45.6 million in cash and $4.8 million in
common stock of the new entity. In addition, the Company received
$6.8 million in cash from the new entity in satisfaction of a
dividend declared by KES prior to the sale. A portion of the cash
proceeds have been utilized to fund the current year's operating
losses. Remaining cash proceeds are invested in short-term
marketable securities.
The Company made payments on long-term debt of $5.5 million during
the first nine months and increased its borrowings under its lines
of credit by $1.5 million since the 1993 fiscal year end. The
Company believes that its current available cash position together
with its cash flow from operations and borrowing sources will be
sufficient to meet its anticipated operating cash requirements,
including capital expenditures, for at least the next twelve
months.
PART II -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a) Exhibits - Reference is made to the Index to Exhibits,
which is incorporated herein by reference.
b) Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements 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: July 29, 1994 By: /s/Clifford R. Borland
Clifford R. Borland
President
Date: July 29, 1994 By: /s/John R. Parker
John R. Parker
Vice President and Treasurer
INDEX TO EXHIBITS
Number
10(d) Rights Agreement dated as of November 17, 1988 between
Registrant and Pittsburgh National Bank, filed as Exhibit
1 to Registrants'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 Transfer Company,
filed herewith.
Exhibit 10(d)
APPOINTMENT AND AMENDMENT AGREEMENT
This Appointment and Amendment Agreement ("Agreement"),
dated July 29, 1994, is entered into between NS GROUP, INC.,
Kentucky corporation (the "Company") and Registrar and Transfer
Company, a New Jersey corporation ("Registrar").
W I T N E S S E T H
WHEREAS, on November 17, 1988 the Company and Pittsburgh
National Bank ("PNB") executed that certain rights agreement
("Rights Agreement"), under which PNB agreed to act as the rights
agent ("Rights Agent") for the Preferred Stock Purchase Rights of
the Company ("Rights");
WHEREAS, PNB no longer desires to act as the Rights Agent;
WHEREAS, the Company desires for Registrar to act, and
Registrar desires to act, as the Rights Agent;
WHEREAS, Section 21 of the Rights Agreement provides for the
change of Rights Agents;
WHEREAS, certain minor amendments to the Rights Agreement
are necessary to reflect such change in Rights Agent;
WHEREAS, the Company desires to make certain other minor
amendments to the Rights Agreement to help eliminate certain
ambiguities therein;
NOW THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
Section 1. Appointment of Rights Agent. The Company hereby
appoints Registrar to act as Rights Agent for the Company and the
holders of the Rights in accordance with the terms and conditions
of the Rights Agreement (who, in accordance with Section 3 of the
Rights Agreement, prior to the Distribution Date, as defined in
the Rights Agreement, shall also be the holders of the common
stock, no par value, of the Company ("Common Stock")), and the
Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or
more Co-Rights Agents, the respective duties of Registrar and any
Co-Rights Agents shall be as the Company shall determine.
As a result of Registrar's acceptance of appointment as
Rights Agent and its execution hereof, Registrar shall be a party
to the Rights Agreement, as amended hereby, in lieu of PNB.
Section 2. Amendment of Rights Agreement. The Rights
Agreement is hereby amended as follows.
(a) Section 1(f) of the Rights Agreement shall be
amended such that the phrase "Pittsburgh, Pennsylvania" shall be
changed to "Cranford, New Jersey" in each of the two places it
appears in such section.
(b) Section 3(c) of the Rights Agreement shall be
amended such that the first sentence of the legend set forth in
such section shall be amended to read in its entirety as follows:
"This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a Rights
Agreement ("Rights Agreement") dated as of November 17, 1988 and
amended July 29, 1994, between NS Group, Inc. (the "Company") and
Registrar and Transfer Company (the "Rights Agent"), the terms of
which are incorporated herein by reference and a copy of which is
on file at the principal executive offices of the Company."
Notwithstanding the foregoing amendment, any certificate of
Common Stock, bearing the legend as previously set forth in the
Rights Agreement, issued prior to the date hereof, shall be valid
in all respects and shall represent the Rights in the same manner
and under the same circumstances as if the proper legend were
inscribed thereon, without any need or requirement for amendment
or change to any such certificate, and any certificate of Common
Stock, bearing the legend as previously set forth in the Rights
Agreement, issued following the date hereof and prior to the time
when certificates of Common Stock bearing the new legend become
available, shall also be valid in all respects and shall
represent the Rights in the same manner and under the same
circumstances as if the proper legend were inscribed thereon,
without any need or requirement for amendment or change to any
such certificate.
(c) Section 5(b) of the Rights Agreement shall be
amended such that the phrase "Pittsburgh, Pennsylvania" shall be
changed to "Cranford, New Jersey" in the one place it appears in
such section.
(d) Section 7(a) of the Rights Agreement shall be
amended such that the phrase "Pittsburgh, Pennsylvania" shall be
changed to "Cranford, New Jersey" in the one place it appears in
such section.
(e) Section 21(a) in its entirety to read as follows
"(a) a corporation organized and doing business under the laws of
the United States or of any state, in good standing, having an
office in the State of Kentucky, Ohio, New Jersey or New York,
which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or
examination by federal or state authority and which at the time
of its appointment as Rights Agent (i) has a combined capital and
surplus of at least $25,000,000 or (ii) is qualified under Rule
496 of the New York Stock Exchange for a Transfer Agent and has
insurance of at least $25,000,000 covering its activities as a
rights agent, or"
(f) Section 26 shall be amended such that the address
of the Rights Agent shall read in its entirety as follows:
"Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Attention: Vice President
Transfer Department"
(g) Exhibit B to the Rights Agreement shall be amended
such that the first sentence shall read in its entirety as
follows:
"This certifies that , or registered
assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to
the terms, provisions and conditions of the Rights Agreement
("Rights Agreement") dated as of November 17, 1988 and amended
July 29, 1994, between NS Group, Inc., a Kentucky corporation
(the "Company"), and Registrar and Transfer Company, a New Jersey
corporation (the "Rights Agent"), to purchase from the Company at
any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M. Cranford, New Jersey
time on November 17, 1998 at the principal office of the Rights
Agent, or its successor as Rights Agent, in Cranford, New Jersey,
one one-hundredth of a fully paid, nonassessable share of the
Series A Junior Participating Preferred Stock, par value $10.00
per share ("Preferred Stock"), of the Company, at a purchase
price of $40.00 per one one-hundredth of a share (the "Purchase
Price") upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed."
(h) Exhibit B to the Rights Agreement shall be amended
such that the signature block thereof shall include a counter-
signature line for Registrar instead of PNB.
Section 3. Representation. Registrar hereby represents and
warrants that it satisfies the conditions for being a Rights
Agent set forth in Section 21 of the Rights Agreement, as hereby
amended.
Section 4. Further Amendment of Rights Agreement. The
Rights Agreement is hereby further amended as follows.
(a) Section 11(b) of the Rights Agreement shall be
amended such that the phrase "multiplied by the then number of
one-one hundredths of a share of Preferred Stock for which a
Right is then exercisable" shall be inserted after the first
place the phrase "Purchase Price" appears in such section.
(b) Section 11(c) of the Rights Agreement shall be
amended such that the phrase "multiplied by the then number of
one-one hundredths of a share of Preferred Stock for which a
Right is then exercisable" shall be inserted after the first
place the phrase "Purchase Price" appears in such section.
(c) Section 13(a) of the Rights Agreement shall be
amended such that the phrase "multiplied by the then number of
one-one hundredths of a share of Preferred Stock for which a
Right is then exercisable (or if a Section 11(b) Event (as
defined below) has occurred prior to the first occurrence of a
Section 13 Event (as defined below), multiplying the number of
such one one-hundredths of a share for which a Right was
exercisable immediately prior to the first occurrence of a
Section 11(b) Event by the Purchase Price in effect immediately
prior to such first occurrence)" shall be inserted after the
first place the phrase "Purchase Price" appears in such section.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, all as of the day and year first
above written.
Attest: NS GROUP, INC.
By John R. Parker By Thomas J. Depenbrock
Name: John R. Parker Name: Thomas J.Depenbrock
Title: V.P. & Treasurer Title: Corporate Controller
Attest: REGISTRAR AND TRANSFER
COMPANY
By Thomas L. Montrone By William P. Tatler
Name: Thomas L. Montrone Name: William P. Tatler
Title: President & Secretary Title: Vice President
