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 January 1, 2000
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 & 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 21,512,049
(Class) (Outstanding at
February 4, 2000)
NS GROUP, INC.
INDEX
PART I FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 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
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk 17
PART II OTHER INFORMATION
Item 1- Legal Proceedings 18
Item 6 - Exhibits and Reports on Form 8-K 18
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
JANUARY 1, 2000 AND DECEMBER 26, 1998
(In thousands, except per share amounts)
(Unaudited)
January 1, December 26,
2 0 0 0 1 9 9 8
NET SALES $ 86,626 $ 54,269
COST AND EXPENSES
Cost of products sold 90,912 59,407
Selling and administrative
Expenses 7,021 6,832
Operating income (loss) (11,307) (11,970)
OTHER INCOME (EXPENSE)
Investment income 1,372 1,715
Interest expense (3,138) (2,923)
Other, net 176 160
Income (loss) before
income taxes and
extraordinary item (12,897) (13,018)
PROVISION (CREDIT) FOR
INCOME TAXES 37 (2,600)
Income (loss) before
extraordinary item (12,934) (10,418)
EXTRAORDINARY ITEM - (437)
Net income (loss) (12,934) $(10,855)
PER COMMON SHARE
(BASIC and DILUTED)
Income (loss) before
extraordinary item $(.60) $(.46)
Extraordinary item - (.02)
Net income (loss) $(.60) $(.48)
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic and diluted 21,470 22,709
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
NS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 1, 2000 AND SEPTEMBER 25, 1999
(Dollars in thousands) (Unaudited)
January 1, September 25,
CURRENT ASSETS 2 0 0 0 1 9 9 9
Cash $ 1,601 $ 1,073
Short-term investments 19,371 30,032
Accounts receivable,
less allowance for doubtful
accounts of $952 and $837,
respectively 40,775 40,924
Inventories 65,194 56,659
Other current assets 25,499 26,093
Total current assets 152,440 154,781
PROPERTY, PLANT AND EQUIPMENT 333,183 330,477
Less - accumulated
Depreciation (192,974) (187,330)
140,209 143,147
LONG-TERM INVESTMENTS 53,505 54,560
OTHER ASSETS 7,192 7,307
Total assets $353,346 $359,795
CURRENT LIABILITIES
Accounts and notes payable $ 37,097 $ 28,923
Accrued liabilities 26,769 28,087
Current portion of
long-term debt 202 198
Total current liabilities 64,068 57,208
LONG-TERM DEBT 72,955 72,833
DEFERRED TAXES 8,602 8,602
COMMON SHAREHOLDERS' EQUITY
Common stock, no par value 280,358 280,051
Treasury stock (23,676) (23,676)
Common stock options and
Warrants 886 896
Accumulated other
comprehensive income (loss) (4,578) (3,784)
Accumulated earnings (deficit) (45,269) (32,335)
Total common shareholders'
Equity 207,721 221,152
Total liabilities
and shareholders'
equity $353,346 $359,795
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
JANUARY 1, 2000 AND DECEMBER 26, 1998
(Dollars in thousands) (Unaudited)
January 1, December 26,
2 0 0 0 1 9 9 8
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $(12,934) $(10,855)
Adjustments to reconcile
net income (loss)
to net cash flows from
operating activities:
Depreciation and amortization 5,837 4,783
Amortization of debt discount
and finance costs 303 501
Decrease in long-term deferred taxes - (2,935)
Loss on sales of investments 149 217
Decrease in accounts receivable, net 149 7,699
Increase in inventories (8,535) (3,930)
Decrease in other current assets 594 4,429
Increase (decrease) in accounts
payable 8,568 (6,192)
Decrease in accrued liabilities (1,390) (2,210)
Net cash flows from operating
Activities (7,259) (8,493)
CASH FLOWS FROM FINANCING ACTIVITIES
Purchases of property, plant and
equipment, net (2,761) (12,629)
Net (purchases) sales of long-term
Investments 75 (12,622)
Increase in other assets (39) (91)
Net cash flows from investing
Activities (2,725) (25,342)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in notes payable (394) (80)
Repayments on long-term debt (62) (4,531)
Proceeds from issuance of common stock 307 31
Purchases of treasury stock - (4,165)
Net cash flows from financing
Activities (149) (8,745)
Net decrease in cash and
short-term investments (10,133) (42,580)
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR 31,105 66,472
CASH AND SHORT-TERM INVESTMENTS
AT END OF PERIOD $ 20,972 $ 23,892
Cash paid during the period for:
Interest $26 $ 181
Income taxes, net of refunds $33 $(3,265)
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: Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statement 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) and Northern Kentucky
Management, Inc. All significant intercompany balances and
transactions have been eliminated.
The accompanying information reflects, in the opinion of
management, all adjustments (which consist of only normal
recurring adjustments) necessary to present fairly the results for
the interim periods. The preparation of financial statements in
conformity with generally accepted accounting principles requires
that management make certain estimates and assumptions that affect
the amounts reported in the condensed consolidated financial
statements and accompanying notes. Actual results could differ
from those estimates. Reference should be made to NS Group,
Inc.'s Form 10-K for the fiscal year ended September 25, 1999 for
additional footnote disclosure, including a summary of significant
accounting policies.
Earnings Per Share
Basic earnings per share is computed by dividing net income
(loss) by the weighted-average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential
dilution from securities that could result in additional common
shares being issued which, for the Company, are comprised of stock
options and warrants only.
Securities that could potentially result in dilution of basic
EPS through the issuance of 2.4 million shares of the Company's
common stock were not included in the computation of diluted EPS
in the first quarter of fiscal 2000 because they were
antidilutive.
Fiscal Year-End
The Company's fiscal year ends on the last Saturday of
September. The first quarter of fiscal 2000 and 1999 are 14 and
13 week periods, respectively.
Note 2: Comprehensive Income
The Company's other comprehensive income currently consists
solely of unrealized gains/losses on available for sale
securities. Comprehensive income was as follows (000's):
Three Months Ended
January 1, December 26,
2000 1998
Net income (loss) $(12,934) $(10,855)
Unrealized gains (losses)
on available for sale
securities (794) 556
Comprehensive income
(loss) $(13,728) $(10,299)
Note 3: Business Segment Information
The Company has three reportable segments. The Company's
energy products segment consists primarily of (i) welded and
seamless tubular goods used primarily in oil and natural gas
drilling and production operations (oil country tubular goods, or
OCTG); and (ii) line pipe used in the transmission of oil, natural
gas and other fluids. The energy products segment reflects the
aggregation of two business units which have similar products and
services, manufacturing processes, customers and distribution
channels and is consistent with both internal management reporting
and resource and budgetary allocations. The Company's industrial
products segment for special bar quality (SBQ) products consists
of SBQ products used primarily in the manufacture of heavy
industrial equipment. The Company's industrial products segment
for adhesives products consists of industrial adhesives products
used in various product assembly applications.
The Company evaluates performance and allocates resources on
operating income before interest and income taxes. The accounting
policies of the reportable segments are the same as those of the
Company. Corporate assets include primarily cash, investments and
income tax assets. Corporate allocations include primarily
corporate general and administrative overhead costs.
The operations of all segments are conducted principally in
the United States. The Company grants trade credit to customers,
the most significant of which are distributors serving the oil and
natural gas exploration and production industries which purchase
tubular steel products from the energy products segment. The
following table sets forth selected financial information by
reportable business segment.
(In thousands)
Three Months Ended
January 1, 2000
Operating Depreciation
Net Income Total and Capital
Sales (Loss) Assets Amortization Expenditures
Energy
products
segment $60,903 $(8,753) $208,458 $4,622 $ 2,500
Industrial
products
segment-SBQ 14,439 (1,730) 39,426 1,067 467
Industrial
products
segment -
Adhesives 11,284 295 15,207 148 5
Corporate
assets and
allocations - (1,119) 90,255 - -
Total
Consolidated $86,626 $(11,307) $353,346 $5,837 $ 2,972
Three Months Ended
December 26, 1998
Energy
products
segment $30,204 $(9,799) $203,914 $3,699 $11,805
Industrial
products
segment-SBQ 13,035 (1,820) 42,071 930 779
Industrial
products
segment -
Adhesives 11,030 519 14,544 154 45
Corporate
assets and
allocations - (870) 128,078 - -
Total
Consolidated $54,269 $(11,970) $388,607 $4,783 $12,629
Note 4: Inventories
Inventories are stated at the lower of FIFO (first-in, first-
out) cost or market, or the lower of average cost or market. At
January 1, 2000 and September 25, 1999, inventories consisted of
the following components ($000's):
January 1, September 25,
2 0 0 0 1 9 9 9
Raw materials $11,011 $ 9,707
Semi-finished and finished goods 54,183 46,952
$65,194 $56,659
Note 5: Commitments and Contingencies
The Company has various commitments for the purchase of
materials, supplies and energy arising in the ordinary course of
business.
Legal Matters
The Company is subject to various claims, lawsuits and
administrative proceedings arising in the ordinary course of
business with respect to workers' compensation, health care and
product liability coverages (each of which is self-insured to
certain levels), as well as commercial and other matters. The
Company accrues for the cost of such matters when the incurrence
of such costs is probable and can be reasonably estimated. 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 and the Clean Water act,
and all regulations promulgated in connection therewith. Such
laws and regulations include 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 steel 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 produced by 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.
In two separate incidents occurring in fiscal 1993 and 1992,
radioactive substances were accidentally melted at our Newport
facilities, resulting in the contamination of a quantity of
electric arc furnace dust. The Company has contracted with a
company to dispose of the dust at an EPA-approved facility.
The Company believes that it is currently in compliance in
all material respects with all applicable environmental
regulations. The Company cannot predict the level of required
capital expenditures or operating costs that may result from
future environmental regulations.
Capital expenditures for the next twelve months relating to
environmental control facilities are expected to be approximately
$0.8 million. Such expenditures could be influenced by new or
revised environmental regulations and laws or new information or
developments with respect to the Company's operating facilities.
As of January 1, 2000, the Company had environmental
remediation reserves of $3.5 million attributable primarily to
accrued disposal costs for radiation contaminated dust. 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 its 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 6: 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. All significant intercompany
accounts and transactions between the Subsidiary Guarantors have
been eliminated.
January 1, September 25,
2 0 0 0 1 9 9 9
(In thousands)
Current assets $123,145 $115,172
Non-current assets 145,272 148,858
Current liabilities 54,744 50,357
Payable to parent $203,242 $192,090
Other non-current liabilities 1,118 1,184
Total non-current liabilities $204,360 $193,274
Three Months Ended
January 1, December 26,
2 0 0 0 1 9 9 8
(In thousands)
Net sales $ 86,626 $ 54,269
Gross profit (loss) $ (4,286) $ (5,138)
Net income (loss) $(14,409) $(11,165)
NS GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
We make forward-looking statements in this report which
represent our expectations or beliefs about future events and
financial performance. You can identify these statements by
forward-looking words such as "expect", "believe", "anticipate",
"goal", "plan", "intend", "estimate", "may", "will", or similar
words. Forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions, including:
- Oil and gas price volatility
- The level and cyclicality of domestic and worldwide oil
and natural gas drilling
- Industry-wide inventory levels and their fluctuations
- The level of imports
- Steel scrap price volatility
- General economic conditions
- Those discussed in Exhibit 99.1 of the Company's Annual
Report on Form 10-K for its fiscal year ended September
25, 1999.
The forward-looking events discussed in this report might not
occur and actual results could differ materially from those
suggested by the forward-looking statements. Accordingly, you
should not place undue reliance on these statements. We undertake
no obligation to publicly update or revise any forward-looking
statements, whether the result of new information, future events
or otherwise.
For a more complete understanding of our business activities
and financial results, you should read the following analysis of
financial condition and results of operations together with the
unaudited condensed consolidated financial statements included in
this report.
General
We conduct our business within three business segments:
- The energy products segment
- The industrial products segment - special bar quality(SBQ)
- The industrial products segment - adhesives products
Our energy products include welded and seamless tubular
goods, primarily used in oil and natural gas drilling and
production operations, referred to as oil country tubular goods,
or OCTG. We also produce welded and seamless line pipe products
used in the transmission of oil, natural gas and other fluids. We
also produce a limited amount of other tubular products and hot
rolled coils.
Our industrial products segment - special bar quality, or
SBQ, includes products used in a variety of industrial
applications such as farm equipment, heavy machinery, construction
and off-road vehicles.
Our adhesives products are used in a variety of industrial
product assembly applications and footwear finishes.
You should read Note 3 to the unaudited condensed
consolidated financial statements included in this report for
selected financial information by business segment.
Results of Operations
Demand for our OCTG products is cyclical in nature and is
dependent on the number and depth of oil and natural gas wells
being drilled in the United States and globally. The level of
drilling activity is, among other things, dependent on the current
and anticipated prices for oil and natural gas. Also, shipments
by domestic producers of OCTG products may be positively or
negatively affected by the amount of inventory held by producers,
distributors and end users, as well as the amount of foreign
imports of OCTG products.
Demand for our OCTG products began to rise in the first
quarter of fiscal 2000 as increasing oil and natural gas prices
led to an increase in domestic drilling activity. The average
number of oil and natural gas drilling rigs in operation in the
United States, which is referred to as "rig count", rose to 772 in
the first quarter of fiscal 2000, compared to 692 in the first
quarter of fiscal 1999 and 602 for all of fiscal 1999. The
increased drilling activity has also had a positive impact on the
excessive industry-wide tubular inventory situation which
developed during fiscal 1999. While market conditions have
improved and remain positive, we incurred operating losses in the
first quarter of fiscal 2000 due to a slow recovery in pricing for
OCTG products and operating inefficiencies related to our new
electric arc furnace. We expect continued improvement in OCTG
pricing and operating efficiencies, resulting in improved
operating results, particularly in the second half of fiscal 2000.
NS Group's net sales, gross profit (loss), operating income
(loss) and tons shipped by business segment for the three months
ended January 1, 2000 and December 26, 1998 are summarized in the
following table. The first quarters of fiscal 2000 and 1999 are
14 and 13 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 2000.
Three Months Ended
January 1, December 26,
2 0 0 0 1 9 9 8
(Dollars in thousands)
Net sales
Energy products segment $ 60,903 $ 30,204
Industrial products segment - SBQ 14,439 13,035
Industrial products segment - Adhesives 11,284 11,030
$ 86,626 $ 54,269
Gross profit (loss)
Energy products segment $ (6,277) $ (7,469)
Industrial products segment - SBQ (1,041) (845)
Industrial products segment - Adhesives 3,032 3,176
$ (4,286) $ (5,138)
Operating income (loss)
Energy products segment $ (8,753) $ (9,799)
Industrial products segment - SBQ (1,730 (1,820)
Industrial products segment - Adhesives 295 519
(10,188 (11,100)
Corporate allocations (1,119) (870)
$(11,307) $(11,970)
Tons shipped
Energy products segment:
Welded tubular products 100,300 44,100
Seamless tubular products 32,400 13,300
Other 400 1,200
Industrial products segment - SBQ 36,300 29,500
169,400 88,100
Net sales in the first quarter of fiscal 2000 were $86.6
million, an increase of 59.6% from the first quarter of fiscal
1999. Virtually all of the increase was attributable to our
energy products segment.
Energy product segment sales were $60.9 million, an increase
of 101.6% from the first quarter of fiscal 1999. Shipments of
energy products were 133,100 tons, an increase of 127.5% from the
comparable prior year period. The increase was substantially the
result of increased OCTG shipments as rig count steadily increased
during the first quarter of fiscal 2000. The average selling
price for our welded and seamless tubular products was $382 and
$689 per ton, respectively, a decrease of 12.2% and 12.7%,
respectively, from the comparable quarter of a year ago. Based on
our backlog, average selling prices for the second quarter of
fiscal 2000 will not rise as rapidly as shipment volumes would
indicate. However, with continued strength in the energy markets,
we expect selling prices to improve significantly in the second
half of fiscal 2000.
Since 1995, the U.S. government has been imposing duties on
imports of various OCTG products from certain foreign countries in
response to antidumping and countervailing duty cases filed by
several U.S. steel companies. The duties primarily pertain to the
import of seamless OCTG products and are subject to annual review
by the U.S. Department of Commerce through 2000. Also, in fiscal
1999, we joined with certain other line pipe producers to file
petitions with the U.S. government to seek relief from imports of
welded and seamless line pipe products. While these duties and
actions have reduced such imports, we can not predict the U.S.
government's actions regarding these petitions or any other future
actions regarding import duties or other trade restrictions on
imports of OCTG and line pipe products.
Industrial products segments - SBQ products sales were $14.4
million, an increase of 10.8% from the first quarter of fiscal
1999. SBQ product shipments of 36,300 tons increased 23.1% from
the comparable prior year period. The average selling price for
SBQ product was $398 per ton, a decline of 10.0% from the
comparable period in fiscal 1999. The decrease was primarily
attributable to a very competitive marketplace for SBQ products.
Industrial products segment - Adhesives product sales were
$11.3 million, a 2.3% increase from the fiscal 1999 first quarter
on a similar increase in sales volume.
The energy products segment recorded a gross loss and
operating loss of $6.3 million and $8.8 million, respectively,
compared to a gross loss of $7.5 million and an operating loss of
$9.8 million in the first quarter of fiscal 1999. Although sales
and production volumes increased significantly from the prior
fiscal year first quarter, our gross loss and operating loss
improved by only $1.2 million and $1.0 million, respectively, due
primarily to lower average selling prices and higher steel scrap
costs versus the prior fiscal year first quarter. Our combined
pipe mill capacity utilization was 85% in the current period
compared to 33% in the first quarter of fiscal 1999.
Selling, general and administrative expense for the energy
products segment increased slightly from the first quarter of
fiscal 1999, but due to the significant increase in sales it
decreased to 5.3% of sales from 9.5% of sales in the comparable
fiscal 1999 period.
Our new electric arc furnace at our Newport operations
performed at 53% of rated capacity in the fiscal 2000 first
quarter, well below our expectations. We expect its performance
to improve significantly in the second quarter of fiscal 2000.
Capacity utilization was over 61% for the month of January.
The industrial products segment - SBQ products had a gross
loss of $1.0 million and an operating loss of $1.7 million in the
first quarter of fiscal 2000 compared to a gross loss and
operating loss of $0.8 million and $1.8 million, respectively, for
the comparable prior year period. For the first quarter of fiscal
2000, the results reflect a decline in average selling price and
an increase in shipments over the prior year comparable period.
Selling general and administrative expense for the SBQ products
business decreased as a percent of sales from 9.2% in the first
quarter of fiscal 1999 to 6.1% in the current quarter due to the
increase in sales.
The industrial products segment - adhesives products gross
profit decreased $0.1 million and operating income decreased $0.2
million as competitive pricing pressures resulted in lower
margins. Selling, general and administrative expense increased as
a percent of sales to 26.0% compared to 24.9% in the comparable
prior year period.
Investment income decreased $0.3 million from the first
quarter of fiscal 1999 due primarily to a decrease in average
invested cash and investment balances. Interest expense increased
$0.2 million due primarily to the 14 week period in fiscal 2000
compared to a 13 week period in the first quarter of fiscal 1999.
We exhausted our federal income tax refund capability in
fiscal 1999, and as such, tax benefits from any operating losses
are offset by valuation allowances resulting in no net federal tax
benefit being recorded for losses. All recorded amounts for
income taxes in fiscal 2000 represent state and local income
taxes.
As a result of the above factors, we reported a net loss of
$12.9 million, or a $0.60 loss per basic and diluted share, in the
first quarter of fiscal 2000 compared to the first quarter of
fiscal 1999 net loss of $10.9 million, or a $0.48 loss per basic
and diluted share.
Liquidity and Capital Resources
Working capital at January 1, 2000 was $88.4 million compared
to $97.6 million at September 25, 1999. The decline in working
capital was primarily the result of a reduction in short-term
investments which were used primarily to fund operating losses.
The current ratio was 2.4 to 1 at January 1, 2000 compared to 2.7
to 1 at September 25, 1999. At January 1, 2000, we had cash and
investments totaling $74.5 million and had no advances against our
$50 million revolving credit facility.
Net cash flows from operating activities were a net use of
$7.3 million in the first quarter of fiscal 2000. We recorded a
net loss of $12.9 million in the first quarter of fiscal 2000
compared to a net loss of $10.9 million in the comparable fiscal
1999 period. Major sources of cash from operating activities in
the first quarter of fiscal 2000 included $5.8 million in non-cash
depreciation and amortization charges and an $8.6 million increase
in accounts payable due to an increase in business activity. The
major uses of cash in operating activities included an $8.5
million increase in inventories due to the increase in business
activity and a $1.3 million decrease in accrued liabilities
primarily due to payment of accrued costs associated with
environmental liabilities.
Major sources of cash from operating activities in the first
quarter of fiscal 1999 included $5.3 million in non-cash
depreciation and amortization charges; a $7.7 million decrease in
accounts receivable resulting from the decline in business
activity; and a $4.4 million decrease in other current assets
which resulted primarily from the receipt of refundable federal
income taxes. During the fiscal 1999 first quarter, inventories
increased $3.9 million as steel scrap inventories were increased
to take advantage of favorable market prices. Accounts payable
decreased $6.2 million as a result of the decline in business
activity.
We made capital investments totaling $3.0 million in the
first quarter of fiscal 2000, primarily in the energy products
segment. We currently estimate that capital spending for the
remaining nine months of fiscal 2000 will be approximately $13.6
million.
Our fiscal 2000 first quarter financing activities included
the use of $0.5 million to repay notes payable and long-term debt
and the receipt of $0.3 million from the issuance of common stock.
Earnings before net interest expense, taxes, depreciation and
amortization (EBITDA) were a negative $5.3 million in the first
quarter of fiscal 2000 compared to a negative $7.0 million for the
first quarter of fiscal 1999. EBITDA is calculated as income
before extraordinary items plus net interest expense, taxes,
depreciation and amortization. EBITDA provides additional
information for determining our ability to meet debt service
requirements. EBITDA does not represent and should not be
considered as an alternative to net income, any other measure of
performance as determined by generally accepted accounting
principles, as an indicator of operating performance, as an
alternative to cash flows from operating, investing or financing
activities or as a measure of liquidity.
We believe that our current available cash and investments,
our cash flow from operations and our borrowing sources will be
sufficient to meet anticipated operating cash requirements,
including capital expenditures, for at least the next twelve
months.
Year 2000 Readiness Disclosure
Total costs associated with the successful completion of our
Year 2000 readiness efforts approximated $3.8 million. Although
we believe we successfully avoided any significant disruptions
from the Year 2000 issue relating to the century rollover, we will
continue to monitor all critical systems for any delayed
complications, problems relating to the leap year and problems
arising from our suppliers, customers, and other third parties.
Other Matters
You should read Note 5 to the notes to condensed consolidated
financial statements for information pertaining to commitments and
contingencies.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our long-term investments and long-term debt, all of which
are for other than trading purposes, are subject to interest rate
risk. We utilize professional investment advisors and consider
our net interest rate risk when selecting the type and maturity of
securities to purchase for our portfolio. Other factors
considered include, but are not limited to, the timing of the
expected need for the funds invested and the repricing and credit
risks of the securities.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is subject to various claims, lawsuits and
administrative proceedings arising in the ordinary course of
business with respect to workers compensation, health care and
product liability coverages (each of which is self-insured to
certain levels), as well as commercial and other matters. Based
upon its evaluation of available information, management does not
believe that any such matters are likely, individually or in the
aggregate, to have a material adverse effect upon the Company's
consolidated financial position, results of operations or cash
flows.
ITEM 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: February 7, 2000 By: /s/Rene J. Robichaud
Rene J. Robichaud
President
Date: February 7, 2000 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
Registrant's 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
November 4, 1999, filed herewith
27 Financial Data Schedule
3
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS OF
NS GROUP, INC.
Effective: November 4, 1999
ARTICLE I. OFFICES
The principal office of the Corporation in the
Commonwealth of Kentucky shall be located in the City of
Newport, County of Campbell. The Corporation may have such
other offices, either within or without the Commonwealth of
Kentucky, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
ARTICLE II. SHAREHOLDERS
SECTION 1. Annual Meeting.
The annual meeting of the shareholders shall be held
not later than the last Thursday in the month of May in each
year, at 10:00 a.m., as determined by the Board of
Directors. The purpose of such meetings shall be the
election of Directors and the transaction of such other
business as may come before the meeting. If the election of
Directors shall not be held an the date designated herein
for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the
election to be held at a special meeting of the shareholders
as soon thereafter as is practicable.
SECTION 2. Special Meetings.
Special meetings of the shareholders, for any purpose
or purposes, unless otherwise prescribed by statute, may be
called by the Chairman or President or by the Board of
Directors, and shall be called by the Chairman or President
if the holders of at least fifty (50%) percent of all the
votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and
deliver to the Corporation's secretary one (1) or more
written demands for the meeting describing the purpose or
purposes for which it will be held.
SECTION 3. Place of Meeting.
The Board of Directors may designate any place, either
within or without the Commonwealth of Kentucky unless
otherwise prescribed by statute, as the place of meeting for
any annual meeting or for any special meeting called by the
Board of Directors. A waiver of notice signed by all
shareholders entitled to vote at a meeting may designate any
place, either within or without the Commonwealth of
Kentucky, unless otherwise prescribed by statute, as the
place for the holding of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place
of meeting shall be the principal office of the Corporation
in the Commonwealth of Kentucky.
SECTION 4. Notice of Meeting.
Written notice stating the place, day, and hour of the
meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is called, shall, unless
otherwise prescribed by statute, be delivered not less than
ten (10) nor more than sixty (60) days before the date of
the meeting, either personally or by mail, by or at the
direction of the Chairman or President or the Secretary, or
the persons calling the meeting, to each shareholder of
record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock
transfer books of the Corporation, with postage thereon
prepaid.
If an annual or a special shareholders', meeting is
adjourned to a different date, time, or place, notice shall
not be required to be given of the new date, time, or place
if the new date, time, or place is announced at the meeting
before adjournment. A determination of shareholders entitled
to notice of or to vote at a shareholders' meeting shall be
effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it shall
do if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the
original meeting. If a new record date for the adjourned
meeting is or must be fixed pursuant to the Kentucky
Business Corporation Act, notice of the adjourned meeting
shall be given to persons who are shareholders as of the new
record date.
SECTION 5. Closing of Transfer Books and Fixing of
Record.
For the purpose of determining shareholders entitled
to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or shareholders entitled to receive
payment of any distribution, or in order to make a
determination of shareholders for any other proper purpose,
the Board of Directors of the Corporation may provide that
the stock transfer books shall be closed for a stated
period, but not to exceed in any case seventy (70) days
before the meeting or action requiring a determination of
shareholders. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such
date in any case to be not more than seventy (70) days prior
to such determination. If the stock transfer books are not
closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment
of a distribution, the date on which notice of the meeting
is mailed or the date on which the resolution of the Board
of Directors declaring such distribution is adopted, as the
case may be, shall be the record date for such determination
of shareholders.
SECTION 6. Voting List.
The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make a
complete list of the shareholders entitled to vote at each
meeting of shareholders or any adjournment thereof, arranged
in alphabetical order, with the address of and the number of
shares held by each. Such list shall be produced and kept
open at the time and place of the meeting and shall be
subject to the inspection of any shareholder beginning five
(5) business days before the meeting for which the list was
prepared and continuing through the meeting.
SECTION 7. Quorum.
A majority of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If a
quorum of shareholders is present, the affirmative vote of a
majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of
the shareholders, unless the vote of a greater number is
required by the Kentucky Business Corporation Act or by the
Articles of Incorporation or these By-Laws. If less than-a
majority of the outstanding shares is represented at a
meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. The
shareholders present at a duly organized meeting may
continue to transact business until adjournment'
notwithstanding the withdrawal of enough shareholders to
leave less than a quorum.
SECTION 8. Proxies.
At all meetings of shareholders, a shareholder may vote
in person or by proxy executed in writing by such
shareholder or by his duly authorized attorney in fact. A
telegram or cablegram appearing to have been transmitted by
the proper person or a photographic, photostatic, telefaxed
or equivalent reproduction of a writing appointing a proxy
shall be deemed a sufficient, signed appointment form. Such
appointment of proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No
appointment of proxy shall be valid after eleven (11) months
from the date of its execution, unless a longer period is
expressly provided for. An appointment of proxy shall be
revocable by the shareholder unless the appointment form
conspicuously states that is irrevocable and the appointment
is coupled with an interest. In the latter case, the
appointment of proxy shall be revocable when the interest
with which it is coupled is extinguished and the Secretary
of the Corporation receives the written notice of
revocation.
SECTION 9. Voting of Shares.
Subject to the provisions of Section 12 of this
Article, each outstanding share of common stock authorized
by the Corporation's Articles of Incorporation to have
voting power, shall be entitled to one vote upon each matter
submitted to a vote at a meeting of shareholders. The voting
rights, if any, of classes of shares other than voting
common stocks shall be as set forth in the Corporation's
Articles of Incorporation or by appropriate legal action of
the Board of Directors.
SECTION 10. Voting of Shares of Certain Holders.
Shares standing in the name of another corporation may
be voted by such officer, agent, or proxy as the By-Laws of
such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may
determine.
Shares held by an administrator, executor, guardian,
or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name.
Shares standing in the name of a trustee may be voted by
him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of
such shares into his name.
Shares standing in the name of a receiver may be voted
by such receiver, and shares held by or under the control of
a receiver may be voted by such receiver without the
transfer thereto into his name if authority so to do be
contained in an appropriate order of the court by which such
receiver was appointed.
A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been
transferred into the name of the pledgee, and thereafter the
pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation
shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of
outstanding shares at any given time.
SECTION 11. Informal Action by Shareholders.
Unless otherwise provided by law, any action required
to be taken at a meeting of the shareholders, or any other
action which may be taken at a meeting of the shareholders,
may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of
the shareholders entitled to vote with respect to the
subject matter thereof and delivered to the Corporation.
SECTION 12. Cumulative Voting.
Unless otherwise provided by law, at each election for
Directors every shareholder entitled to vote at such
election shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons
as there are Directors to be elected and for whose election
he has a right to Vote, or to cumulate his votes by giving
one candidate as many votes as the number of such Directors
multiplied by the number of his shares shall equal, or by
distributing such votes on the same principle among any
number of candidates.
SECTION 13. Notice of Shareholder Business at
Meetings.
At any meeting of shareholders, only such business
shall be conducted as shall have been properly brought
before the meeting. In addition to any other requirements
imposed by or pursuant to law, the Articles or these
By-Laws, each item of business to be properly brought before
a meeting must:
(a) be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the
Board of Directors or the persons calling the meeting
pursuant to these By-Laws;
(b) be otherwise properly brought before the meeting
by or at the direction of the Board of Directors; or
(c) be otherwise properly brought before the meeting
by a shareholder. For business to be brought properly before
a meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal
executive offices of the Corporation not less than ninety
(90) days nor more than one hundred twenty (120) days prior
to the meeting; provided, however, that in the event less
than one hundred (100) days notice or prior public
disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the
tenth day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was
made. A shareholder's notice to the Secretary shall set
forth as to each matter he proposes to bring before the
meeting:
(d) a brief description of the business desired to be
brought before the meeting and the reasons for conducting
such business at the meeting;
(e) the name and address, as they appear on the
Corporation's books, of the shareholder(s) proposing such
business;
(f) the class and number of shares of the Corporation
which are beneficially owned by the proposing
shareholder(s); and
(g) any material interest of the proposing
shareholder(s) in such business. Notwithstanding anything in
these By-Laws to the contrary, no business shall be
conducted at a meeting except in accordance with the
procedures set forth in this Section 13. The Chairman of a
meeting shall, if the facts warrant, determine and declare
to the meeting that business was not properly brought before
the meeting in accordance with the provisions of this
Section 13; if he should so determine, he shall so declare
to the meeting and any such business not properly brought
before the meeting shall not be transacted. The Chairman of
a meeting shall have absolute authority to decide questions
of compliance with the foregoing procedures, and his ruling
thereon shall be final and conclusive.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers.
The business and affairs of the Corporation shall be
managed by its Board of Director.
SECTION 2. Number, Tenure.
The number of Directors of the Corporation shall be
fixed by resolution of the Board of Directors in accordance
with the Kentucky Business Corporation Act and the Articles
of Incorporation of the Corporation. The Board of Directors
is specifically authorized to divide the Board into classes
as authorized by the laws of the Commonwealth of Kentucky
and the Articles of Incorporation of the Corporation.
SECTION 3. Nomination of Directors.
To be qualified for election as a Director, persons
must be nominated in accordance with the following
procedure.
Nomination of persons for election to the Board of
Directors of the Corporation may be made at a meeting of
shareholders by or at the direction of the Board of
Directors or by any shareholder of the Corporation entitled
to vote for the election of Directors at the meeting who
complies with the procedures set forth in this Section 3. In
order for persons nominated to the Board of Directors, other
than those persons nominated by or at the direction of the
Board of Directors, to be qualified to serve on the Board of
Directors, such nominations shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice shall be delivered to or
mailed and received by the Secretary of the Corporation not
less than ninety (90) days nor more than one hundred twenty
(120) days prior to the meeting; provided, however, that in
the event less than one hundred (100) days notice or prior
public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely
must be so received not later than the close of business on
the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was
made. Such shareholder's notice shall set forth:
(a) as to each person whom the shareholder
proposed to nominate for election or re-election as a
Director;
(i) the name, age, business address and residence
address of such person;
(ii) the principal occupation or employment of
such person; (C) the class and number of shares of the
Corporation which are beneficially owned by such
person;
(iii) any other information relating to such
person that is required to be disclosed in
solicitations of proxies for election of Directors, or
is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such
person's written consent to being named in the proxy
statement as a nominee and to serving as a Director if
elected); and
(iv) if the shareholder(s) making the
nomination is a person, other than the Corporation or
any of its subsidiaries, who is the beneficial owner,
directly or indirectly, of ten percent (10%) or more of
the voting power of the outstanding voting took of the
Corporation, or is an affiliate of the Corporation and
at any time within the two-year period immediately
prior to the date in question was the beneficial owner,
directly or indirectly, often percent (10%) or more of
the voting power of the then outstanding voting stock
of the Corporation, details of any relationship,
agreement or understanding between the shareholder(s)
and the nominee; and
(v) as to the shareholder(s) making the
nomination; (A) the name and address, as they appear on
the Corporation's books, of such shareholder(s); and
(B) the class and number of shares of the Corporation
which are beneficially owned by such shareholder(s).
At the request of the Board of Directors, any person
nominated by the Board Of Directors for election as a
Director shall furnish to the Secretary of the Corporation
that information required to be set forth in a shareholder's
notice of nomination which pertains to the nominee. No
person shall be qualified for election as a Director of the
Corporation unless nominated in accordance with the
procedures set forth in this Section 3. The Chairman of a
meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance
with the procedures prescribed by the By-Laws, and if he
should so determine, he shall so declare to the meeting, and
the defective nomination shall be disregarded. The Chairman
of a meeting shall have absolute authority to decide
questions of compliance with the foregoing procedures, and
his ruling thereon shall be final and conclusive.
SECTION 4. Regular Meetings.
A regular meeting of the Board of Directors shall be
held without other notice than this By-Law immediately
after, and at the same place as the annual meeting of
shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
SECTION 5. Special Meetings.
Special meetings of the Board of Directors may be
called by or at the request of the Chairman or President or
any two Directors. The person or persons authorized to call
special meetings of the Board of Directors may fix the place
for holding any special meeting of the Board of Directors
called by them.
SECTION 6. Notice.
Notice of any special meeting shall be given at least
five (5) days previously thereto by written notice delivered
by person or sent by telefax, by mail or by telegram to each
Director at his business address. If sent by telefax, such
notice shall he deemed to be delivered on the day it was
transmitted. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given
by telegram, such notice shall be deemed to be delivered
when the telegram is delivered to the telegraph company. Any
Director may waive notice of any meeting. The attendance of
a Director at a meeting shall constitute a waiver of notice
of such meeting, except when a Director attends a meeting
for the express purpose of objecting to the transaction of
any business because the meeting is not lawfully called or
convened.
SECTION 7. Quorum.
A majority of the number of Directors fixed by Section
2 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of
Directors, but if less than such majority is present at a
meeting, a majority of the Directors present may adjourn the
meeting from time to time without further notice.
SECTION 8. Manner of Acting.
The act of the majority of the Directors present
at a meeting at which a quorum is present shall be the act
of the Board of Directors.
SECTION 9. Action Without a Meeting.
Any action that may be taken by the Board of Directors
at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so to be taken, shall be
signed before such action by all of the Directors.
Members of the Board of Directors and its committees
may participate in meetings by means of conference telephone
or similar communications equipment whereby all persons
participating in the meeting can hear each other, and such
participation shall constitute presence at the meeting.
SECTION 10. Vacancies.
Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the
remaining Directors though less than a quorum of the Board
of Directors, unless otherwise provided by law. A Director
elected to fill a vacancy shall be elected for the unexpired
term of his predecessor in office. Any Directorship to be
filled by reason of an increase in the number of Directors
may be filled by election by the Board of Directors for a
term of office continuing only until the next election of
Directors by the shareholders.
SECTION 11. Compensation.
By resolution of the Board of Directors, each Director
may be paid his expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a stated
salary as Director or a fixed sum for attendance at each
meeting of the Board of Directors or both. No such payment
shall preclude any Director from serving the Corporation in
any other capacity and receiving compensation therefor.
SECTION 12. Presumption of Assent.
A Director of the Corporation who is present at a
meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented
to the action taken unless his dissent or abstention from
the action taken shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such
action with the person acting as the presiding officer of
the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a Director
who voted in favor of such action.
SECTION 13. Committees.
The Board of Directors may, from time to time, appoint
certain members to act in the intervals between meetings of
the Board of Directors as a committee and may delegate to
such committee powers and/or duties of the Board of
Directors. In particular, the Board of Directors may create
from its membership and define the powers and duties of an
Executive Committee of not less than two (2) members. The
Executive Committee, to the extent provided by resolution of
the Board of Directors and the Kentucky Business Corporation
Act, shall possess and may exercise all the powers of the
Board of Directors. In every case, the affirmative vote of
the majority or written consent of all the members of the
Executive Committee shall be necessary for the approval of
any action, but action may be taken by the Executive
Committee without a formal meeting. The Executive Committee
shall meet at the call of any members thereof and shall keep
a written record of all actions taken by it.
ARTICLE IV. OFFICERS
SECTION 1. Number.
The officers of the Corporation shall be a Chairman,
President, as many vice Presidents as the Board of Directors
deems appropriate, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. Such other
officers and assistant officers, as may be deemed necessary,
may be elected or appointed by the Board of Directors. No
person shall be designated as an officer of the Corporation
nor be entitled to hold himself or herself out to third
parties as an officer of the Corporation unless such person
has been elected by the Board of Directors to an office
which, pursuant to the By-Laws or a resolution of the Board
of Directors, is to be held only by an officer of the
Corporation.
SECTION 2. Election and Term of Office.
The officers of the Corporation to be elected by the
Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors
held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as is practicable.
Each officer shall hold office until his successor shall
have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in
the manner hereinafter provided.
SECTION 3. Removal.
Any officer or agent may be removed by the Board of
Directors whenever, in its judgment, the best interests of
the Corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any,
of the person so removed. Election or appointment of an
officer or agent shall not of itself create
contract rights.
SECTION 4. Vacancies.
A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 5. Chairman of the Board of Directors
(Chairman).
The Chairman shall preside at all meetings of the
Shareholders and Board of Directors and shall have
responsibility for the preparation of all minutes of
Directors and Shareholders meetings. Unless the Board of
Directors determines otherwise, he shall perform the duties
of Chief Executive Officer and, subject to the control of
the Board of Directors, shall generally supervise and
control all the business and affairs of the Corporation. He
shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. He may sign,
with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, certificates
for shares of the Corporation, any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors
has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated
by the Board of Directors or by these By-Laws to some other
officer or agent of the Corporation, or shall be required by
law to be otherwise signed or executed, and in general shall
perform all duties incident to the office of Chairman and
such other duties as may be prescribed by the Board of
Directors from time to time.
SECTION 6. President.
In the absence of the Chairman, or if no Chairman is
elected, or in the event of his death, inability or refusal
to act, the President shall perform all the duties of the
Chairman and, when so acting, shall have all the powers and
be subject to all the restrictions placed upon the Chairman,
except that if the President is not also a Director, he
shall not preside at meetings of the shareholders and
Directors, nor be responsible for the preparation of all
minutes of such meetings unless specifically directed to do
so by the Board of Directors. Unless the Board of Directors
determines otherwise, he shall perform, subject to the
general supervision of the Chairman, the duties of Chief
Operating Officer, including the general supervision and
control of all day-to-day business and affairs of the
Corporation.
SECTION 7. Vice President.
Each Vice President shall perform such duties as, from
time to time, may be assigned to him by the Chairman, the
President, or by the Board of Directors.
SECTION 8. Secretary.
The Secretary shall:
(a) keep the minutes of the proceedings of the
shareholders and of the Board of Directors in one or
more books provided for that purpose;
(b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by
law;
(c) be custodian of the corporate records and of the
seal of the Corporation and see that the seal of the
Corporation is affixed to all documents, the execution
of which on behalf of the Corporation under its seal is
duly authorized;
(d) keep a register of the post office address of
each shareholder which shall be furnished to the
Secretary by such shareholder;
(e) sign with the Chairman or President certificates
for shares of the Corporation, the issuance of which
shall have been authorized by resolution of the Board
of Directors;
(f) have general charge cm the stock transfer book of
the Corporation; and
(g) in general perform all duties incident to the
office of Secretary and such other duties as from time
to time may be assigned to him by the Chairman or
President or by the Board of Directors.
SECTION 9. Treasurer.
The Treasurer shall:
(a) have charge and custody of and be responsible for
all funds and securities of the Corporation;
(b) receive and give receipts for moneys due and
payable to the Corporation from any source whatsoever
and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with
the provisions of Article V of these By-Laws; and
(c) in general perform all of the duties incident to
the office of Treasurer and such other duties as from
time to time may be assigned to him by the Chairman or
President or by the Board of Directors.
If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board of
Directors shall determine.
SECTION 10. Assistant Treasurers and Assistant
Secretaries.
(a) The Assistant Treasurer, if that office be
created and filled, shall, if required by the Board of
Directors, give bond for the faithful discharge of his
duty in such sum and with such surety as the Board of
Directors shall determine;
(b) The Assistant Secretary, if that office be
created and filled, and if authorized by the Board of
Directors, may sign, with the Chairman or President or
Vice President, certificates for shares of the
Corporation; and
(c) The Assistant Treasurers and Assistant
Secretaries, in general, shall perform such additional
duties as shall be assigned to them by the Treasurer or
the Secretary, respectively, or by the Chairman of the
Board, the President or the Board of Directors.
SECTION 11. Salaries.
The salaries of the officers shall be fixed from time to
time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact
that he is also a Director of the corporation.
SECTION 12. Chief Executive Officer "C.E.O.", Chief
Operating Officer "C.O.O.", Chief Financial Officer
"C.F.O.", Chief Accounting Officer "C.A.O.", and Chief
Compliance Officer "C.C.O."
The duties of C.E.O., C.O.O., C.F.O., CA.O., and C.C.O.
may be assigned at the discretion of the Board of Directors
to appropriate Officers of the Corporation; however the
terms C.E.O., C.O.O., C.F.O., C.A.O., and C.C.O. shall
constitute a description of duties and shall not constitute
a corporate office.
ARTICLE V. CONTRACT, LOANS, CHECKS AND DEPOSITS
SECTION 1. Contracts.
The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or
execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general
or confined to specific instances.
SECTION 2. Loans.
No loans shall be contracted on behalf of the
Corporation and no evidence of indebtedness shall be issued
in its name unless authorized by a resolution of the Board
of Directors. Such authority may be general or confined to
specific instances.
SECTION 3. Checks, drafts, etc.
All checks, drafts or other orders for the payment of
money, notes or other evidence of indebtedness issued in the
name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such
manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. Deposits.
All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies, or other
depositaries as the Board of Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares.
Certificates representing shares of the Corporation
shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the Chairman
or President and by the Secretary or by such other officers
authorized by law and by the Board of Directors so to do,
and sealed with the corporate seal or its facsimile. All
certificates for shares shall be consecutively numbered or
otherwise identified, shall state, the name of the person to
whom the certificate is issued and shall identify the class
of shares and the designation of the series, if any, the
certificate represents. The signatures of such officers upon
such certificate may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or registrar
for the Corporation. The name and address of the person to
whom the shares represented thereby are issued with the
number of shares and date of issue, shall be entered on the
stock transfer books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be
canceled, and no new certificate shall be issued until the
former certificate for a like number of shares shall have
been surrendered and canceled, except that in case of a
lost, destroyed or mutilated certificate, a new one may be
issued therefor upon such terms and indemnity to the
Corporation as the Board of Directors may prescribe.
SECTION 2. Transfer of Shares.
Transfer of shares of the Corporation shall be made
only on the stock transfer books of the Corporation by the
holder of record thereof or by his legal representative, who
shall furnish proper evidence of authority to transfer, or
by his attorney thereunto authorized by Power of Attorney
duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the
certificate for such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
SECTION 3. Shares without Certificates.
The Board of Directors may, in accordance with the
Kentucky Business Corporation Act, authorize the issuance of
some of all of the shares of any or all of the Corporation's
classes or series of stock without certificates.
ARTICLE VII. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation shall, to the fullest extent permitted
by, and in accordance with the provisions of, the Kentucky
Business Corporation Act, indemnify each director or officer
of the Corporation against expenses (including attorneys
fees), judgments, taxes, fines and amounts paid in
settlement, incurred by him in connection with, and shall
advance expenses (including attorneys' fees) incurred by him
in defending, any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative,
or investigative) to which he is, or is threatened to be
made, a party by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director, officer,
partner, employee or agent of another domestic or foreign
corporation, partnership, joint venture, trust or other
enterprise. After a determination that the facts then known
to those making such determination would not reclude
indemnification, and upon receipt of a written affirmation
by the person seeking indemnification of his good faith
belief that he has met the applicable standard of conduct,
under the Kentucky Business Corporation Act, advancement of
expenses shall be made upon receipt of a written
undertaking, with such security, if any, as the Board of
Directors or shareholders may reasonably require, by or on
behalf of such person, to repay amounts advanced if it shall
ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized herein.
The indemnification provided for by this Article VII
shall not be deemed exclusive of any other rights to which
directors or officers of the Corporation may be entitled
under any statute, agreement, by-law or action of the Board
of Directors or shareholders of the Corporation, or
otherwise, and shall continue as to a person who has ceased
to be a director or officer of the corporation, and shall
inure to the benefit of the heirs, executors and
administrators of such a person.
The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer,
partner, employee, or agent of another domestic or foreign
corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and
incurred by him in such capacity or arising out of his
status as such, whether or not the Corporation would have
the power or be obligated to indemnify him against such
liability under the provisions of this Article VII or the
Kentucky Business corporation Act.
ARTICLE VIII. INDEMNIFICATION OF EMPLOYE BENEFIT PIAN
FIDUCIARIES
The Corporation shall indemnify each director,
officer, or employee of the Corporation who is, or is
threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding whether civil,
criminal, administrative or investigative, including actions
by or in the right of the Corporation, by reason of the fact
that such director, officer or employee is or was serving at
the request of the Corporation as a fiduciary" (as defined
by Section 3 (21) (A) of the Employee Retirement Income
Security Act of 1974 ("ERISA")) with regard to any employee
benefit plan adopted by the Corporation, against expenses
(including attorneys' fees), claims, fines, judgments,
taxes, causes of action or liability and amounts paid in
settlement, actually and reasonably incurred by him in
connection with such action, or proceeding, unless such
expense, claim, fine, judgment, taxes, cause of action,
liability, or amount arose from his gross negligence, fraud
or willful breach of his fiduciary responsibilities under
ERISA, except, that with respect to any action by or in the
right of the Corporation, indemnification shall be made only
against expenses (including attorneys' fees).
The Corporation shall advance all expenses (including
attorneys' fees) incurred by any director, officer or
employee in defending any such civil, criminal,
administrative or investigative action, suit or proceeding
pending the final disposition of such action, suit or
proceeding, unless (a) the Board of Directors, by a majority
vote of a quorum consisting of directors who were not or are
not parties to the action, suit or proceeding concerned or
(b) the shareholders determine that under the circumstances
the person, by his conduct, is not entitled to
indemnification because of his gross negligence, fraud or
willful breach of his fiduciary responsibilities under
ERISA. Advancement of expenses shall be made upon receipt of
an undertaking, with such security, if any, as the Board of
Directors or shareholders may reasonably require, by or on
behalf of the director, officer or employee to repay such
amounts unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized
herein.
To the extent that any director, officer or employee
has been successful on the merits or otherwise in the
defense of any action, suit or proceeding, or in defense of
any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith and if he
was advanced expenses by the Corporation, his undertaking
shall be cancelled by the Corporation. If any action, suit
or proceeding shall terminate by judgment or order adverse
to the director, officer or employee, or settlement,
conviction or upon a plea of nolo contendere or its
equivalent, the Board of Directors, by a majority vote of a
quorum consisting of directors who were not or are not
parties to such action, suit or proceeding, or the
shareholders, shall (unless ordered by a court to make
indemnification) make a determination whether
indemnification of the director, officer or employee is not
proper in the circumstances because he has been guilty of
gross negligence, fraud, or willful breach of his fiduciary
responsibilities under ERISA. If the Board of Directors or
shareholders shall determine that the person is entitled to
indemnification, then he shall be indemnified against
expenses (including attorneys' fees), claims, fines,
judgments, taxes, causes of action or liability and amounts
paid in settlement, actually and reasonably incurred by him
in connection with such action, suit or proceeding and, if
he was advanced expenses by the Corporation, his undertaking
shall be cancelled. The termination of any action or
proceeding by adverse judgment or order, conviction,
settlement or plea of nolo contendere or the equivalent,
shall not, of itself, create a presumption that the
director, officer or employee was guilty of gross
negligence, fraud or willful breach of his fiduciary
responsibilities under ERISA.
ARTICLE IX. FISCAL YEAR
The fiscal year of the Corporation shall be determined
by the Board of Directors.
ARTICLE X. DISTRIBUTION
The Board of Directors may from time to time declare,
and the Corporation may pay, distributions on its
outstanding shares in the manner and upon the terms and
conditions provided by law and its Articles of
Incorporation.
ARTICLE XI. CORPORATE SEAL
The Board of Directors shall provide - corporate seal
which shall be circular in form and shall have inscribed
thereon the name of the Corporation and the state of
incorporation and the words "Corporate Seal."
ARTICLE XII. WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice
is required to be given to any shareholder or Director of
the Corporation under the provisions of these By-Laws, or
under the provisions of the Articles of Incorporation or
under the provisions of the Kentucky Business Corporation
Act, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the
giving of such notice.
ARTICLE XIII. AMENDMENTS
The Board of Directors shall have the power and
authority to alter, amend or repeal these By-Laws and to
adopt new By-Laws, subject always to repeal or change by a
two-thirds majority vote of all the shareholders entitled to
vote thereon.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from NS Group, Inc.'s
condensed consolidated financial statements as of and for the three month period
ended January 1, 2000, 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-30-2000
<PERIOD-START> SEP-26-1999
<PERIOD-END> JAN-01-2000
<EXCHANGE-RATE> 1
<CASH> 1,601
<SECURITIES> 19,371
<RECEIVABLES> 41,727
<ALLOWANCES> 952
<INVENTORY> 65,194
<CURRENT-ASSETS> 152,440
<PP&E> 333,183
<DEPRECIATION> 192,974
<TOTAL-ASSETS> 353,346
<CURRENT-LIABILITIES> 64,068
<BONDS> 72,955
0
0
<COMMON> 257,568
<OTHER-SE> (49,847)
<TOTAL-LIABILITY-AND-EQUITY> 353,346
<SALES> 86,626
<TOTAL-REVENUES> 86,626
<CGS> 90,912
<TOTAL-COSTS> 90,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,138
<INCOME-PRETAX> (12,897)
<INCOME-TAX> 37
<INCOME-CONTINUING> (12,934)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,934)
<EPS-BASIC> (.60)
<EPS-DILUTED> (.60)
</TABLE>
