SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 December 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
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 13,809,413
(Class) (Outstanding at January 31,
1996)
NS GROUP, INC.
INDEX
PART I FINANCIAL INFORMATION
PAGE
Item 1 Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 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 11
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 20
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 30, 1995 AND SEPTEMBER 30, 1995
(Dollars in thousands) (Unaudited)
<TABLE>
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December 30, September 30,
1 9 9 5 1 9 9 5
CURRENT ASSETS
Cash and cash equivalents $ 3,997 $ 4,838
Short-term investments 10,811 6,413
Accounts receivable, less
allowance for doubtful
accounts of $754 and
$1,021, respectively 42,016 45,858
Inventories 54,398 44,716
Other current assets 18,123 21,497
Total current assets 129,345 123,322
PROPERTY, PLANT AND EQUIPMENT 277,532 276,262
Less - accumulated
depreciation (125,369) (120,887)
152,163 155,375
OTHER ASSETS 19,850 19,800
Total assets $301,358 $298,497
CURRENT LIABILITIES
Notes payable $ 254 $ 509
Accounts payable 37,153 32,897
Other current liabilities 26,328 22,167
Current portion of long-term
debt 2,266 1,872
Total current liabilities 66,001 57,445
LONG-TERM DEBT 166,119 166,528
DEFERRED TAXES 4,535 6,414
COMMON SHAREHOLDERS EQUITY
Common stock, no par value,
40,000,000 shares authorized;
13,809,413 shares issued and
outstanding for each period 49,004 49,004
Common stock options and
warrants 2,751 2,737
Unrealized loss on available
for sale securities (930) (713)
Retained earnings 13,878 17,082
Total common shareholders'
equity 64,703 68,110
Total liabilities and
shareholders' equity $301,358 $298,497
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
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December 30, December 31,
1 9 9 5 1 9 9 4
NET SALES $89,295 $93,489
COST AND EXPENSES
Cost of products sold 82,402 81,999
Selling and administrative
expenses 6,286 6,932
Operating income 607 4,558
OTHER INCOME (EXPENSE)
Interest expense (6,055) (5,356)
Interest income 125 532
Other, net 698 389
Income (loss) before
income taxes (4,625) 123
PROVISION (CREDIT) FOR
INCOME TAXES (1,421) 48
Net income (loss) $(3,204) $ 75
NET INCOME (LOSS) PER
COMMON SHARE $(.23) $ .01
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,809 13,809
</TABLE>
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 THREE MONTH PERIODS ENDED
DECEMBER 30, 1995 AND DECEMBER 31, 1994
(Dollars in thousands) (Unaudited)
<TABLE>
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December 30, December 31,
CASH FLOWS FROM OPERATING
ACTIVITIES
1 9 9 5 1 9 9 4
Net income (loss) $(3,204) $ 75
Adjustments to reconcile
net income (loss) to net
cash flows from operating
activities:
Depreciation and
amortization 4,725 4,876
Amortization of debt
discount and finance costs 409 144
Increase (decrease) in
long-term deferred taxes (1,746) 4
Decrease in accounts
receivable, net 3,842 2,985
Increase in inventories (9,682) (9,439)
(Increase) decrease in
other current assets 3,374 (310)
Increase in accounts payable 4,256 5,922
Increase (decrease) in
accrued liabilities 4,161 (1,734)
Net cash flows from
operating activities 6,135 2,523
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in property,
plant and equipment, net (1,844) (2,987)
Increase in other assets (304) (374)
(Increase) decrease in
short-term investments (4,398) 1,504
Net cash flows from
investing activities (6,546) (1,857)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes
payable (255) 2,359
Proceeds from issuance of
long-term debt - -
Repayments on long-term debt (175) (4,962)
Increase in deferred financing
costs - (669)
Net cash flows from financing
activities (430) (3,272)
Net increase (decrease) in
cash and cash equivalents (841) (2,606)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 4,838 4,405
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,997 $ 1,799
Cash paid during the period for:
Interest $ 1,190 $ 7,218
Income taxes, net of
refunds $ (650) $ 700
</TABLE>
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)
Note 1: Principles of Consolidation
The condensed consolidated financial statements include
the accounts of NS Group, Inc. and its wholly-owned
subsidiaries (the Company): Newport Steel Corporation
(Newport), Koppel Steel Corporation (Koppel), Erlanger
Tubular Corporation (Erlanger), Imperial Adhesives, Inc.
(Imperial), Northern Kentucky Management, Inc. and Northern
Kentucky 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 fiscal year ended
September 30, 1995 for additional footnote disclosure,
including a summary of significant accounting policies.
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement No. 121 (Statement 121) on
accounting for the impairment of long-lived assets to be
held and used. Statement 121 also establishes accounting
standards for long-lived assets that are to be disposed.
Statement 121 is required to be applied prospectively for
assets to be held and used. The initial application of
Statement 121 to assets held for disposal is required to be
reported as the cumulative effect of a change in accounting
principle. The Company is required to adopt Statement 121
no later than fiscal 1997. The Company has not yet
determined when it will adopt Statement 121 or the impact,
if any, that the adoption will have on its financial
position or results of operations.
In October 1995, the FASB issued Statement No. 123
(Statement 123) establishing financial accounting and
reporting standards for stock-based employee compensation
plans. Statement 123 encourages the use of the fair valued
based method to measure compensation cost for stock-based
employee compensation plans, however, it also continues to
allow the intrinsic value based method of accounting as
prescribed by APB Opinion No. 25, which is currently used by
the Company. If the intrinsic value based method continues
to be used, Statement 123 requires pro forma disclosures of
net income and earnings per share, as if the fair value
based method of accounting had been applied. The fair value
based method requires compensation cost be measured at the
grant date based upon the value of the award and recognized
over the service period, which is normally the vesting
period. The Company is required to adopt Statement 123 no
later than fiscal 1997. The Company has not yet determined
when it will adopt Statement 123 or the valuation method it
will use.
The Company's fiscal year ends on the last Saturday of
September. The first quarter of fiscal 1996 and 1995 are 13
and 14 week periods, respectively.
Note 2: Inventories
At December 30, 1995 and September 30, 1995,
inventories stated at the lower of LIFO (last-in, first-out)
cost or market represent approximately 41% and 31% of total
inventories before the LIFO reserve, respectively.
Inventories consist of the following components ($000's):
<TABLE>
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December 30, September 30,
1 9 9 5 1 9 9 5
Raw materials $ 7,994 $ 6,591
Semi-finished and
finished goods 48,929 40,570
56,923 47,161
LIFO reserve (2,525) (2,445)
$54,398 $44,716
</TABLE>
Note 3: Income Taxes
Tax benefits recorded in the first quarter of fiscal
1996 and in prior years substantially offset previously
recorded net long-term deferred tax liabilities. As such,
the Company's ability to benefit any future losses would
currently be limited to the refundable amounts of
approximately $1.8 million in previously paid alternative
minimum tax.
Note 4: Commitments and Contingencies
The Company has various commitments for the purchase of
materials, supplies and energy arising in the ordinary
course of business.
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.
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, which 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
requires 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.
Newport's permit for operating a hazardous waste
disposal facility on its property requires that Newport
investigate, test, and analyze for potential releases of
hazardous constituents from its closed loop water
recirculating system. Any contamination documented as a
result of the investigation would require certain cleanup
measures; however, the Company believes that the cost of any
such cleanup measures will not be material.
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 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. As of December 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 and revised environmental regulations and
laws.
As of December 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 December 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.
Note 5: Summarized Financial Information
The Company's Senior Secured Notes are unconditionally
guaranteed in full, jointly and severally, by each of the
Company's subsidiaries (Subsidiary Guarantors), each of
which is wholly-owned. Separate financial statements of the
Subsidiary Guarantors are not presented because they are not
deemed material to investors. The following is summarized
financial information of the Subsidiary Guarantors as of
December 30, 1995 and September 30, 1995 and for the three
month periods ended December 30, 1995 and December 31, 1994.
All significant intercompany accounts and transactions
between the Subsidiary Guarantors have been eliminated.
<TABLE>
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December 30, September 30,
1995 1995
(In thousands)
Current assets $112,987 $111,371
Noncurrent assets $164,915 $167,863
Current liabilities $ 47,020 $ 50,933
Payable to parent $166,297 $169,079
Other noncurrent
liabilities 11,887 9,779
Total noncurrent
liabilities $178,184 $178,858
Fiscal Quarter Ended
December 30, December 31,
1995 1994
(In thousands)
Net sales $ 89,295 $ 93,489
Gross profit $ 6,893 $ 11,490
Net income (loss) $ (2,386) $ 1,058
</TABLE>
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:
specialty steel and industrial adhesives. Within the
specialty steel segment are the operations of Newport, a
manufacturer of welded tubular steel products and hot rolled
coils; Koppel, a manufacturer of seamless tubular steel
products, special bar quality (SBQ) products and
semi-finished steel products; and Erlanger, a tubular steel
product finishing operation. The Company's specialty steel
products consist of: (i) seamless and welded oil country
tubular goods (OCTG) primarily used in oil and natural gas
drilling and production operations; (ii) line pipe used in
the transmission of oil, gas and other fluids; (iii) SBQ
products primarily used in the manufacture of heavy
industrial equipment; and (iv) hot rolled coils which are
sold to service centers and other manufacturers for further
processing. Within the adhesives segment are the operations
of Imperial, a manufacturer of industrial adhesives
products.
Results of Operations
The Company's net sales, cost of products sold and
operating results by industry segment for the three month
periods ended December 30, 1995 and December 31, 1994 are
summarized below. The first quarters of fiscal 1996 and
1995 are 13 and 14 week periods, respectively. As such, the
increases and decreases in operating results for the
quarterly comparative periods, as discussed below, were
partially attributable to the additional week of operations
in the first quarter of fiscal 1995.
Fiscal Quarter Ended December
1995 1994
(In thousands)
<TABLE>
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Net sales
Specialty steel segment $80,382 $84,716
Adhesives segment 8,913 8,773
$89,295 $93,489
Cost of products sold
Specialty steel segment $75,418 $75,210
Adhesives segment 6,984 6,789
$82,402 $81,999
Operating income
Specialty steel segment $ 1,426 $ 5,296
Adhesives segment 132 273
Corporate allocations
and income (951) (1,011)
$ 607 $ 4,558
Sales data for the Company's specialty steel segment for the
three month periods ended December 30, 1995 and December 31,
1994 were as follows:
Fiscal Quarter Ended December
1995 1994
Tons shipped
Welded tubular 74,800 88,900
Seamless tubular 34,100 27,900
SBQ 28,900 42,800
Other 11,000 10,000
148,800 169,600
Net sales ($000's)
Welded tubular $34,176 $39,679
Seamless tubular 28,063 21,786
SBQ 13,980 19,459
Other 4,163 3,792
$80,382 $84,716
</TABLE>
Net sales for the first quarter of fiscal 1996
decreased $4.2 million, or 4.5%, from the first quarter of
fiscal 1995, to $89.3 million. Specialty steel segment net
sales decreased $4.3 million and the adhesives segment net
sales increased $0.1 million. The overall decrease in
specialty steel net sales was primarily the result of a
decrease in shipments as more fully discussed below.
Welded tubular net sales for the first quarter of
fiscal 1996 decreased $5.5 million, or 13.9%, on a volume
decline of 15.9% from the first quarter of fiscal 1995. The
decrease in net sales and shipments was primarily the result
of a 35.3% decline in shipments of welded OCTG products
from the first quarter of fiscal 1995. Shipments of welded
OCTG products were negatively impacted by a 7.2% decline in
U.S. drilling activity from the prior fiscal year first
quarter. Partially offsetting the impact of the decline in
welded OCTG shipments was a 31.4% increase in welded line
pipe shipments over the first quarter of fiscal 1995 as well
as a 2.5% increase in average selling price for all welded
tubular products. Fiscal 1996 first quarter average selling
price for welded OCTG products was $502 per ton, an
increase of 2.4% over the first quarter of fiscal 1995.
Fiscal 1996 first quarter average selling price for welded
line pipe was $492 per ton, an increase of 4.0% over the
first quarter of fiscal 1995.
Seamless tubular net sales for the first quarter of
fiscal 1996 increased $6.3 million, or 28.8%, on a volume
increase of 22.2% from the first quarter of fiscal 1995.
The increase in seamless tubular net sales and shipments was
primarily due to improved seamless OCTG product shipments
and average selling prices which were attributable in part
to a decline in the level of foreign imports. Average
selling prices for the first quarter of fiscal 1996 for all
seamless tubular products increased 5.4% from the first
quarter of fiscal 1995. Fiscal 1996 first quarter average
selling prices for seamless OCTG and line pipe products were
$877 per ton and $642 per ton, respectively, increases of
8.9% and 8.8%, respectively, over the prior fiscal year
first quarter.
The demand for the Company's OCTG products is cyclical
in nature, being primarily 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 average number of oil and natural gas drilling rigs
in operation in the United States (rig count) decreased 7.2%
from 823 in the first quarter of fiscal 1995 to 764 in the
first quarter of fiscal 1996. 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 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. 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.
SBQ product net sales for the first quarter of fiscal
1996 decreased $5.5 million, or 28.2%, on a volume decline
of 32.5% from the first quarter of fiscal 1995. The decline
in volume resulted from both a softening in the markets
served by Koppel's SBQ products as well as excessive
inventory levels in the SBQ marketplace. Fiscal 1996
average selling price for SBQ products increased 6.6% over
the fiscal 1995 first quarter but declined 3.8% from the
fiscal 1995 fourth quarter. Other product shipments and net
sales for the comparable quarters were primarily
attributable to shipments of hot rolled coils.
The demand for the Company's SBQ and hot rolled coil
products is 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.
Gross profit for the first quarter of fiscal 1996
decreased $4.6 million from the first quarter of fiscal 1995
for a gross profit margin of 7.7% in fiscal 1996 compared to
12.3% in the first quarter of fiscal 1995. The specialty
steel segment accounted for substantially all of the decline
in gross profit and margin and was attributable to a
decline in shipments as discussed above as well as lower
operating efficiencies at Newport due partially to reduced
production volume.
The adhesives segment gross profit and margin was
virtually unchanged from the first quarter of fiscal 1995.
Selling and administrative expenses decreased $0.6
million from the first quarter of fiscal 1995 and declined
as a percentage of net sales from 7.4% in the first quarter
of fiscal 1995 to 7.0% in fiscal 1996. The overall decline
in selling and administrative expenses were partially
attributable to decreased production and sales volumes as
well as costs incurred in connection with litigation in the
first quarter of fiscal 1995.
As a result of the above factors, operating income
decreased $4.0 million, from $4.6 million in the first
quarter of fiscal 1995 to $0.6 million in the first quarter
of fiscal 1996. The decline in operating income was
virtually all attributable to the specialty steel segment
and was primarily due to a decline in welded OCTG and SBQ
product shipments as well as a decline in operating
efficiencies at Newport, as discussed above.
Interest expense increased $0.7 million over the first
quarter of fiscal 1995 as a result of higher interest costs
associated with the Company's Senior Secured Notes issued in
the fourth quarter of fiscal 1995.
Interest income decreased $0.4 million primarily as a
result of a decline in invested cash and short-term
investment balances during the respective comparable
periods.
Tax benefits recorded in the first quarter of fiscal
1996 and in prior years substantially offset previously
recorded net long-term deferred tax liabilities. As such,
the Company's ability to benefit any future losses would
currently be limited to the refundable amounts of
approximately $1.8 million in previously paid alternative
minimum tax.
As a result of the above factors, the Company incurred
a net loss of $3.2 million, or a $.23 loss per share, in the
first quarter of fiscal 1996 compared to net income of $0.1
million, or $.01 per share, in the first quarter of fiscal
1995.
Liquidity and Capital Resources
Working capital at December 30, 1995 was $63.3 million
compared to $65.9 million at September 30, 1995. The
current ratio at December 30, 1995 was 1.96 to 1 compared to
2.15 to 1 at September 30, 1995. At December 30, 1995, the
Company had cash and short-term investments totaling $14.8
million, $2.9 million of which was restricted in an
environmental trust account related to a permitted hazardous
waste disposal facility located on the Company's property at
Newport. At December 30, 1995, approximately $13.6 million
of the Company's $45.0 million revolving credit facility was
utilized to collateralize various letters of credit and
$31.4 million was available for borrowing. The letters of
credit were issued primarily in connection with the
purchase of steel slabs at Newport to supplement Newport's
operations.
Net cash flows from operating activities were $6.1
million in the first quarter of fiscal 1996 compared to $2.5
million in the first quarter of fiscal 1995. The Company
incurred a net loss of $3.2 million in the first quarter of
fiscal 1996 compared to net income of $0.1 million in the
first quarter of fiscal 1995. Major uses of cash in
operating activities in the first quarter of fiscal 1996
included a $1.7 million decrease in long-term deferred taxes
as a result of the first quarter loss and a $9.7 million
increase in inventory resulting from the purchase of steel
slabs at Newport. Offsetting these uses were $5.1 million
in non-cash depreciation and amortization charges; a
decrease in accounts receivable resulting from the decline
in sales; a decrease in other current assets resulting
primarily from the collection of previously filed insurance
claims; an increase in accounts payable primarily resulting
from the purchase of steel slabs; and an increase in accrued
liabilities due primarily to the scheduled timing of
interest payments on the Company's Senior Secured Notes
compared to the timing of scheduled interest payments in the
prior year quarter.
Fiscal 1995 net cash flows from operating activities
were primarily impacted by an increase in inventories of
$9.4 million that was primarily the result of unusually low
levels of inventory at fiscal 1994 year end due to scheduled
maintenance outages at Newport. Offsetting this use was
$3.0 million in cash flows resulting from a decrease in
accounts receivable, $5.0 million in non-cash depreciation
charges and $5.9 million resulting from an increase in
accounts payable. Accounts payable increased primarily due
to the increase in inventories and a general increase in
business activity.
The Company incurred $1.8 million in capital
expenditures during the first quarter of fiscal 1996,
primarily related to improvements to and acquisition of
machinery and equipment in the specialty steel segment. The
Company currently estimates that fiscal 1996 capital
spending will approximate $11.0 million and it is
anticipated that capital spending will be funded through
cash flow from operations and available borrowing sources as
well as available cash and short-term investments.
Short-term investments increased $4.4 million in the first
quarter of fiscal 1996 primarily as a result of investment
of excess cash.
Net cash flows from financing activities in the first
quarter of fiscal 1996 included repayments on long-term debt
of $0.2 million, compared to long-term debt repayments of
$5.0 million in the first quarter of fiscal 1995. The
decline is the result of the Company's fiscal 1995 fourth
quarter debt refinancing.
Earnings before interest, taxes, depreciation and
amortization (EBITDA) was $6.2 million in the first quarter
of fiscal 1996 compared to $10.4 million in the first
quarter of fiscal 1995. EBITDA is calculated as net income
(loss) plus interest expense, taxes, depreciation and
amortization.
The Company believes that its current available cash
and short-term investments, its cash flow from operations
and its borrowing sources will be sufficient to meet
anticipated operating cash requirements, including capital
expenditures, for at least the next twelve months.
Inflation
The Company believes that inflation has not had a
material effect on its results of operations to date.
Generally, the Company experiences inflationary increases in
its costs of raw materials, energy, supplies, salaries and
benefits and selling and administrative expenses. Except
with respect to significant increases in steel scrap prices,
the Company has generally been able to pass these
inflationary increases through to its customers.
Other Matters
Legal Matters
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.
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
requires 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.
Newport's permit for operating a hazardous waste
disposal facility on its property requires that Newport
investigate, test, and analyze for potential releases of
hazardous constituents from its closed loop water
recirculating system. Any contamination documented as a
result of the investigation would require certain cleanup
measures; however, the Company believes that the cost of any
such cleanup measures will not be material.
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 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. As of December 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 and revised environmental regulations and
laws.
As of December 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 December 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.
Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement No. 121 (Statement 121) on
accounting for the impairment of long-lived assets to be
held and used. Statement 121 also establishes accounting
standards for long-lived assets that are to be disposed.
Statement 121 is required to be applied prospectively for
assets to be held and used. The initial application of
Statement 121 to assets held for disposal is required to be
reported as the cumulative effect of a change in accounting
principle. The Company is required to adopt Statement 121
no later than fiscal 1997. The Company has not yet
determined when it will adopt Statement 121 or the impact,
if any, that the adoption will have on its financial
position or results of operations.
In October 1995, the FASB issued Statement No. 123
(Statement 123) establishing financial accounting and
reporting standards for stock-based employee compensation
plans. Statement 123 encourages the use of the fair value
based method to measure compensation cost for stock-based
employee compensation plans, however, it also continues to
allow the intrinsic value based method of accounting as
prescribed by APB Opinion No. 25, which is currently used by
the Company. If the intrinsic value based method continues
to be used, Statement 123 requires pro forma disclosures of
net income and earnings per share, as if the fair value
based method of accounting had been applied. The fair value
based method requires compensation cost be measured at the
grant date based upon the value of the award and recognized
over the service period, which is normally the vesting
period. The Company is required to adopt Statement 123 no
later than fiscal 1997. The Company has not yet determined
when it will adopt Statement 123 or the valuation method it
will use.
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.
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: February 5, 1996 By:/s/Clifford R. Borland
Clifford R. Borland
Chairman and Chief Executive
Officer
Date: February 5, 1996 By:/s/John R. Parker
John R. Parker
Vice President and Treasurer
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 as Exhibit 3.2 to Company's Form 10-K
for the fiscal year ended September 30, 1995, File No.
1-9838, and incorporated herein by this reference
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., filed as Exhibit 4.21 to Company's Form
10-Q for the quarterly period ended July 1, 1995, File No
1-9838, and incorporated herein by this reference, and
Amendment No. 1 to Revolving Credit, Guaranty and Security
Agreement dated October 23, 1995 and Amendment No. 2 to
Revolving Credit, Guaranty and Security Agreement dated
December 21, 1995, filed herewith
27 Financial Data Schedule
Exhibit 4.21
AMENDMENT NO. 1
TO
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment") is entered into as
of October 23, 1995, among NEWPORT STEEL CORPORATION, a
corporation organized under the laws of the State of
Kentucky ("Newport"), KOPPEL STEEL CORPORATION, a
corporation organized under the laws of the State of
Pennsylvania ("Koppel"), and IMPERIAL ADHESIVES, INC. a
corporation organized under the laws of the State of Ohio
("Imperial") (each of Newport, Koppel and Imperial a
"Borrower" and, jointly and severally, the "Borrowers"), NS
GROUP, INC., a corporation organized under the laws of the
State of Kentucky ("Holdings"), ERLANGER TUBULAR
CORPORATION, a corporation organized under the laws of the
State of Oklahoma ("Erlanger"), NORTHERN KENTUCKY AIR, INC.,
a corporation organized under the laws of Kentucky ("Air"),
NORTHERN KENTUCKY MANAGEMENT, INC., a corporation organized
under the laws of Kentucky ("Management") (each of Holdings,
Erlanger, Air, and Management, a "Guarantor" and, jointly
and severally, the "Guarantors"), the undersigned financial
institutions and any financial institution that hereafter
becomes a lender hereunder (collectively, the "Lenders"
and individually a "Lender"), THE BANK OF NEW YORK
COMMERCIAL CORPORATION ("BNYCC"), a corporation organized
under the laws of the State of New York, PNC BANK, OHIO,
NATIONAL ASSOCIATION ("PNC"), BNYCC, and PNC as co-agents
for Lenders (BNYCC and PNC in such capacity, the
"Co-Agents") and BNYCC as administrative and collateral
monitoring agent for the Lenders (BNYCC, in such capacity,
the "ACM Agent").
BACKGROUND
Borrowers, Guarantors and Lenders are parties to a
Revolving Credit, Guaranty and Security Agreement dated as
of July 28, 1995 (as amended, supplemented or otherwise
modified from time to time, the "Loan Agreement") pursuant
to which Lenders provided Borrowers with certain financial
accommodations.
Borrowers have requested that Lenders increase the
letter of credit facility from $6,000,000 to $14,500,000
until May 31, 1996 and Lenders are willing to do so on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance
or grant of credit heretofore or hereafter made to or for
the account of Borrowers by Lenders, and for other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the
Loan Agreement.
2. Amendment to Loan Agreement. Subject to
satisfaction of the conditions precedent set forth in
Section 3 below, the second and third sentences of Section
2.8 of the Loan Agreement are hereby amended in their
entirety to provide as follows:
"The maximum amount of outstanding Letters of
Credit shall not exceed (1)$14,500,000 until May 31, 1996
and thereafter $6,000,000 for the benefit of Newport or (2)
$2,000,000 for the benefit of Koppel in the aggregate at any
time. The maximum amount of all outstanding Letters of
Credit shall not exceed $14,500,000 in the aggregrate at any
time on or prior to May 31, 1996 and thereafter shall not
exceed $6,000,000 in the aggregate at any time."
3. Conditions of Effectiveness. This Amendment
shall become effective as of October 23, 1995, when and only
when Agent shall have received five (5) copies of this
Amendment executed by Borrowers and Guarantors and such
other certificates, instruments, documents, agreements and
opinions of counsel as may be required by ACM Agent or its
counsel, each of which shall be in form and substance
satisfactory to ACM Agent and its counsel.
4. Representations and Warranties. Borrowers and
Guarantors hereby represent and warrant as follows:
(a) This Amendment and the Loan Agreement, as amended
hereby, constitute legal, valid and binding obligations of
Borrowers and Guarantors and are enforceable against
Borrowers and Guarantors in accordance with their respective
terms.
(b) Upon the effectiveness of this Amendment,
Borrowers and Guarantors hereby reaffirm all covenants,
representations and warranties made in the Loan Agreement
and agree that all such covenants, representations and
warranties shall be deemed to have been remade as of the
effective date of this Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) Neither any Borrower nor any Guarantor has any
defense, counterclaim or offset with respect to the Loan
Agreement.
5. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof,
each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import
shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the
Loan Agreement, and all other documents, instruments and
agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power
or remedy of Lender, nor constitute a waiver of any
provision of the Loan Agreement, or any other documents,
instruments or agreements executed and/or delivered under or
in connection therewith.
6. Governing Law. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and
their respective successors and assigns and shall be
governed by and construed in accordance with the laws of the
State of New York.
7. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other
purpose.
IN WITNESS WHEREOF, this Amendment No.1 has been duly
executed as of the day and year first written above.
NEWPORT STEEL CORPORATION
KOPPEL STEEL CORPORATION
IMPERIAL ADHESIVES, INC.
NS GROUP, INC.
ERLANGER TUBULAR CORPORATION
NORTHERN KENTUCKY AIR, INC.
NORTHERN KENTUCKY MANAGEMENT, INC.
By: /s/ John R. Parker
John R. Parker
Title: Treasurer of each of the foregoing Corporations
THE BANK OF NEW YORK COMMERCIAL
CORPORATION, as Lender, as Co-Agent
and as ACM Agent
By: /s/ Daniel J. Murray
Name: Daniel J. Murray
Title: Vice President
PNC BANK, OHIO, NATIONAL
ASSOCIATION, as Lender and as Co-Agent
By: /s/ David Melin
Name: David Melin
Title: Assistant Vice President
AMENDMENT NO. 2
TO
REVOLVING CREDIT, GUARANTY AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 ("Amendment") is entered into as
of December 21, 1995, among NEWPORT STEEL CORPORATION, a
corporation organized under the laws of the State of
Kentucky ("Newport"), KOPPEL STEEL CORPORATION, a
corporation organized under the laws of the State of
Pennsylvania ("Koppel"), and IMPERIAL ADHESIVES, INC., a
corporation organized under the laws of the State of Ohio
("Imperial") (each of Newport, Koppel and Imperial a
"Borrower" and, jointly and severally, the "Borrowers"), NS
GROUP, INC., a corporation organized under the laws of the
State of Kentucky ("Holdings"), ERLANGER TUBULAR
CORPORATION, a corporation organized under the laws of the
State of Oklahoma ("Erlanger"), NORTHERN KENTUCKY AIR, INC.,
a corporation organized under the laws of Kentucky ("Air"),
NORTHERN KENTUCKY MANAGEMENT, INC., a corporation organized
under the laws of Kentucky ("Management") (each of Holdings,
Erlanger, Air, and Management, a "Guarantor" and, jointly
and severally, the "Guarantors"), the undersigned financial
institutions and any financial institution that hereafter
becomes a lender under the Loan Agreement (as hereinafter
defined) (collectively, the "Lenders" and individually a
"Lender"), THE BANK OF NEW YORK COMMERCIAL CORPORATION
("BNYCC"), a corporation organized under the laws of the
State of New York, PNC BANK, OHIO, NATIONAL ASSOCIATION
("PNC"), BNYCC, and PNC as co-agents for Lenders (BNYCC and
PNC in such capacity, the "Co-Agents") and BNYCC as
administrative and collateral monitoring agent for the
Lenders (BNYCC, in such capacity, the "ACM Agent").
BACKGROUND
Borrowers, Guarantors and Lenders are parties to a
Revolving Credit, Guaranty and Security Agreement dated as
of July 28, 1995 (as the same has been amended by Amendment
No. 1 thereto and as the same may further be amended,
supplemented or otherwise modified from time to time, the
"Loan Agreement") pursuant to which Lenders provide
Borrowers with certain financial accommodations.
Borrowers have requested that Lenders amend certain of
the financial covenants in the Loan Agreement and Lenders
are willing to do so on the terms and conditions hereafter
set forth.
NOW, THEREFORE, in consideration of any loan or advance
or grant of credit heretofore or hereafter made to or for
the account of Borrowers by Lenders, and for other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the
Loan Agreement.
2. Amendment to Loan Agreement. Subject to
satisfaction of the conditions precedent set forth in
Section 4 below, the Loan Agreement is hereby amended as
follows:
2.1 Section 1.2 of the Loan Agreement is hereby
amended as follows:
(a) the following defined term is hereby amended
in its entirety to provide as follows:
"Net Worth" at a particular date, shall mean
the aggregate amount of all assets of Holdings on a
Consolidated Basis as may properly be classified as such in
accordance with GAAP consistently applied less(i) the
aggregate amount of all Indebtedness of Holdings on a
Consolidated Basis and (ii) any unrealized gain or loss of
Holdings on a Consolidated Basis resulting from the change
in market value of any capital stock of Kentucky Electric
Steel, Inc., a Delaware corporation.
2.2. Section 6.5 of the Loan Agreement is hereby
amended in its entirety to provide as follows:
"Net Worth. Cause to be maintained at the
end of each fiscal quarter of Holdings, a Net Worth in an
amount not less than $62,000,000."
2.3. Section 6.7 of the Loan Agreement is hereby
amended in its entirety to provide as follows:
"6.7 Interest Coverage. Cause to be
maintained on or about the end of each fiscal quarter of
Holdings an Interest Coverage Ratio equal to or greater than
(a) 1.25 to 1.0 on the last day of (i) the fiscal quarter
ended on or about 12/31/95 computed for the fiscal quarters
ended on or about 12/31/95, 6/30/95, 3/31/95 and 12/31/94,
(ii) the fiscal quarter ended on or about 3/31/96 computed
for the fiscal quarters ended on or about 3/31/96, 12/31/95,
6/30/95 and 3/31/95 and (iii) the fiscal quarter ended on or
about 6/30/96 computed for the fiscal quarters ended on or
about 6/30/96, 3/31/96, 12/31/95 and 6/30/95, and (iv) the
fiscal quarter ended on or about 9/30/96 computed for the
fiscal quarters ended on or about 9/30/96, 6/30/96, 3/31/96
and 12/31/95 and (b) 1.5 to 1.0 on or about the last day of
each fiscal quarter thereafter for the last four fiscal
quarters then ended."
3. Amendment Fee. Borrowers shall pay to ACM Agent
for the ratable benefit of Lenders, a $10,000 amendment fee
("Amendment Fee") upon the execution of this Amendment.
4. Conditions of Effectiveness. This Amendment
shall become effective as of December 21, 1995, when and
only when ACM Agent shall have received (i) six (6) copies
of this Amendment executed by Borrowers and Guarantors (ii)
the Amendment Fee and (iii) such other certificates,
instruments, documents, agreements and opinions of counsel
as may be required by ACM Agent or its counsel, each of
which shall be in form and substance satisfactory to ACM
Agent and its counsel.
5. Representations and Warranties. Borrowers and
Guarantors hereby represent and warrant as follows:
(a) This Amendment and the Loan Agreement, amended
hereby, constitute legal, valid and binding obligations of
Borrowers and Guarantors and are enforceable against
Borrowers and Guarantors in accordance with their respective
terms.
(b) Upon the effectiveness of this Amendment,
Borrowers and Guarantors hereby reaffirm all covenants,
representations and warranties made in the Loan Agreement to
the extent the same are not amended hereby and agree that
all such covenants, representations and warranties shall be
deemed to have been remade as of the effective date of this
Amendment.
(c) No Event of Default or Default has occurred and is
continuing or would exist after giving effect to this
Amendment.
(d) Neither any Borrower or any Guarantor has any
defense, counterclaim or offset with respect to the Loan
Agreement.
6. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof,
each reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import
shall mean and be a reference to the Loan Agreement as
amended hereby.
(b) Except as specifically amended herein, the
Loan Agreement, and all other documents, instruments and
agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power
or remedy of ACM Agent or Lenders, nor constitute a waiver
of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or
delivered under or in connection therewith.
7. Governing Law. This Amendment shall be binding
upon and inure to the benefit of the parties hereto and
their respective successors and assigns and shall be
governed by and construed in accordance with the laws of the
State of New York.
8. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other
purpose.
9. Counterparts. This Amendment may be executed by
the parties hereto in one or more counterparts, each of
which shall be deemed an original and all of which taken
together shall be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, this Amendment has been duly
executed as of the day and year first written above.
NEWPORT STEEL CORPORATION
KOPPEL STEEL CORPORATION
IMPERIAL ADHESIVES, INC.
NS GROUP, INC.
ERLANGER TUBULAR CORPORATION
NORTHERN KENTUCKY AIR, INC.
ORTHERN KENTUCKY MANAGEMENT, INC.
By: /s/ John R. Parker
John R. Parker
Title: Treasurer of each of the foregoing Corporations
THE BANK OF NEW YORK COMMERCIAL CORPORATION, as
Lender, as Co-Agent and as ACM Agent
By: /s/ Daniel J. Murray
Name: Daniel J. Murray
Title: Vice President
PNC BANK, OHIO, NATIONAL
ASSOCIATION, as Lender and as Co-Agent
By: /s/ David Melin
Name: David Melin
Title: Assistant Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM NS GROUP, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE
MONTH PERIOD ENDED DECEMBER 30, 1995, INCLUDED IN THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000745026
<NAME> NS GROUP, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-30-1995
<EXCHANGE-RATE> 1
<CASH> 3,997
<SECURITIES> 10,811
<RECEIVABLES> 42,016
<ALLOWANCES> 754
<INVENTORY> 54,398
<CURRENT-ASSETS> 129,345
<PP&E> 277,532
<DEPRECIATION> 125,369
<TOTAL-ASSETS> 301,358
<CURRENT-LIABILITIES> 66,001
<BONDS> 166,119
<COMMON> 51,755
0
0
<OTHER-SE> 12,948
<TOTAL-LIABILITY-AND-EQUITY> 301,358
<SALES> 89,295
<TOTAL-REVENUES> 89,295
<CGS> 82,402
<TOTAL-COSTS> 82,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,055
<INCOME-PRETAX> (4,625)
<INCOME-TAX> (1,421)
<INCOME-CONTINUING> (3,204)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,204)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
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