EXHIBIT 13


     The following are the excerpted portions of the NS
Group, Inc. Annual Report to Shareholders for the fiscal
year ended September 27,1997 which are expressly
incorporated by reference into Form 10-K.

Management's Discussion and Analysis of Financial Condition
and Results of Operations

     The following analysis of financial condition and
results of operations of the Company should be read in
conjunction with the audited Consolidated Financial
Statements and related Notes of the Company.

     The matters discussed or incorporated by reference in
this report that are forward-looking statements (as defined
in the Private Securities Litigation Reform Act of 1995)
involve risks and uncertainties.  Such risks and
uncertainties include, but are not limited to: (i) the level
of domestic as well as worldwide oil and natural gas
drilling activity; (ii) general economic conditions; (iii)
product demand and industry capacity; (iv) industry pricing;
(v) the presence or absence of governmentally imposed trade
restrictions; (vi) manufacturing efficiencies; (vii)
volatility in raw material costs, particularly steel scrap;
(viii) costs of compliance with environmental regulations;
and (ix) product liability or other claims.  These risks and
uncertainties may cause the actual results or performance of
the Company to differ materially from any future results or
performance expressed or implied by such forward-looking
statements.

General

     The Company operates in two business segments:
specialty steel and industrial adhesives.  Within the
specialty steel segment are the operations of Newport Steel
Corporation (Newport), a manufacturer of welded tubular
steel products and hot rolled coils, and Koppel Steel
Corporation (Koppel), a manufacturer of seamless tubular
steel products, special bar quality (SBQ) products and
semi-finished steel products.  The Company's specialty steel
products consist of: (I) welded and seamless tubular goods
used primarily in oil and natural gas drilling and
production operations (oil country tubular goods, or OCTG);
(ii) line pipe used in the transmission of oil, gas and
other fluids; (iii) SBQ products used primarily 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 Adhesives, Inc.
(Imperial), a manufacturer of industrial adhesives products. 
See Note 12 to the Consolidated Financial Statements
included herein for selected financial information by
business segment.  

Results of Operations

     The Company's net sales, gross profit and operating
results by industry segment for each of the three fiscal
years in the period ended September 27, 1997 are summarized
below.  Fiscal 1997 and 1996 contain fifty-two weeks and
fiscal 1995 contains fifty-three weeks.  As such, the
increases and decreases in operating results for the
comparative periods, as discussed below, were partially
attributable to the additional week of operations in fiscal
1995.


(In thousands)          1997         1996       1995
Net sales:
 Specialty steel segment      
         Newport      $220,581     $173,615  $162,003  
         Koppel        219,648      195,851   173,880  
                       440,229      369,466   335,883  
 Adhesives segment      40,941       39,916    35,469       
                      $481,170     $409,382  $371,352  
Gross profit:
 Specialty steel segment           
         Newport     $  31,121     $  3,966  $  4,171
         Koppel         26,574       26,251    22,266  
                        57,695       30,217    26,437       
 Adhesives segment      10,630        9,580     7,645
                     $  68,325     $ 39,797  $ 34,082  
Operating income (loss):
 Specialty steel segment      
         Newport     $  24,225     $ (4,855) $ (5,708)  
         Koppel         19,535       19,741    16,136  
                        43,760       14,886    10,428  
 Adhesives segment       1,799        1,597     1,248  
 Corporate allocations  (4,591)     ( 4,430)   (3,870)   
                     $  40,968     $ 12,053  $  7,806  


     Shipment and sales data for the Company's specialty
steel segment for each of the three fiscal years in the
period ended September 27, 1997 were as follows:


                                                             
                             1997        1996      1995           
       
Tons shipped:
 Newport
 Welded tubular products    418,300     348,900   322,900   
Hot rolled coils and 
 other products              26,200      43,300    47,600   
 Koppel
Seamless tubular products   172,100     157,400   116,600   
SBQ products                152,400     133,700   169,000   
                            769,000     683,300   656,100
 Net sales ($000's):
    Newport
 Welded tubular products   $210,245    $157,385  $145,330       
 Hot rolled coils and 
  other products             10,336       16,230    16,673   
          
Koppel     
 Seamless tubular products  152,146     133,446    90,926   
 SBQ products                67,502      62,405    82,954   
                           $440,229    $369,466  $335,883
     

Fiscal Year Ended September 27, 1997 compared with Fiscal
Year Ended September 28, 1996

     Net sales in fiscal 1997 increased $71.8 million, or
17.5%, from fiscal 1996.  Specialty steel segment net sales
increased $70.8  million, or 19.2%, and the adhesives
segment net sales increased $1.0 million, or 2.6%, from
fiscal 1996.  The overall increase in specialty steel
segment net sales was primarily attributable to increased
shipments and average selling prices of the Company's
tubular products as more fully discussed below.

      Welded tubular net sales increased $52.9 million, or
33.6%, on a volume increase of 19.9%.  The increase in total
welded tubular net sales was primarily due to an increase in
shipments and average selling price of welded OCTG products. 
The increase in welded OCTG shipments and prices were the
result of increased drilling activity.  Average selling
price for all welded tubular products was $503 per ton, an
11.5% increase from fiscal 1996.

     Seamless tubular net sales increased $18.7 million, or
14.0%, on a volume increase of 9.3%.  The increase in total
seamless tubular net sales was primarily due to increased
shipments of seamless OCTG products, attributable to
increased domestic and international drilling activity,
including off-shore drilling.  Average selling price for all
seamless tubular products was $884 per ton, a 4.2% increase
from fiscal 1996, resulting primarily from changes in
product mix. 

     Demand for the Company's OCTG products is cyclical in
nature, being dependent on the number and depth of oil and
natural gas wells being drilled in the United States and
globally.  The level of drilling activity is largely a
function of the current prices of oil and natural gas and
expectations of future prices.  In addition, shipments by
domestic producers of OCTG products are influenced by the
levels of inventory held by producers, distributors and end
users, as well as the level of foreign imports of OCTG
products.  The average number of oil and natural gas
drilling rigs in operation in the United States (rig count)
was 906 in fiscal 1997, up from 759 in fiscal 1996.

     In July 1995, the United States imposed duties on the
imports of various OCTG products from certain foreign
countries in response to antidumping and countervailing duty
cases filed by several U.S. steel companies.  Several
foreign OCTG producers, as well as certain U.S. producers,
have appealed the determinations to U.S. and international
courts or panels.  The duties are subject to annual and
five-year reviews by the U.S. Department of Commerce.   The
Company believes the imposition of the duties has had a
positive effect on its shipments and the pricing of certain
of its seamless tubular products; however, it cannot predict
the outcome or timing of the appeals or reviews at this
time. 

      SBQ product net sales increased $5.1 million, or 8.2%,
on a volume increase of 14.0%.  Fiscal  1997 average selling
price for SBQ products declined 5.1% from fiscal 1996. 
While shipments of SBQ products are above prior year levels,
market and competitive conditions resulted in lower pricing. 
Other product shipments and sales for fiscal 1997 were
primarily attributable to sales 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. 

     Gross profit for fiscal 1997 increased $28.5 million
from fiscal 1996, for a gross profit margin of 14.2% in
fiscal 1997 compared to 9.7% in fiscal 1996.  The specialty
steel segment gross profit increased $27.5 million, and this
segment had a gross profit margin of 13.1% in fiscal 1997
versus 8.2% in fiscal 1996.  The increase in specialty steel
segment gross profit and margin was attributable to
Newport's welded tubular operations, where gross profit
margins rose from 2.3% in the prior year to 14.1% for the
current year.  The increase was the result of increased
shipments of welded OCTG products, higher average selling
prices for all tubular products, improved operating
efficiencies and cost reduction initiatives.  Koppel's gross
profit margin decreased to 12.1% from 13.4% in fiscal 1996,
primarily due to a decrease in SBQ selling prices.

     The adhesives segment gross profit increased $1.1
million from fiscal 1996 due to slightly lower raw material
costs and the gross profit margin was 26.0% compared to
24.0% in fiscal 1996.
     
     Fiscal 1997 selling and administrative expenses
decreased $0.4 million from 1996 and decreased as a
percentage of sales from 6.8% in fiscal 1996 to 5.7% in
fiscal 1997.  

     As a result of the above factors, operating income
increased $28.9 million, from $12.1 million in 
fiscal 1996 to $41.0 million in fiscal 1997.  The increase
in operating income was almost solely attributable to the
specialty steel segment and was primarily due to increased
shipments and average selling prices for welded OCTG
products and improved operations at Newport.  

     Interest income increased $0.4 million from fiscal 1996
as a result of increased average invested cash and
short-term investment balances during fiscal 1997.  Interest
expense for fiscal 1997 was virtually unchanged from fiscal
1996 at $24.3 million.

     Other income, net was $1.5 million and $0.6 million for
fiscal 1997 and fiscal 1996, respectively.  Fiscal 1997
includes gains from the sale of certain development property
and settlement of insurance claims, while fiscal 1996 also
includes gains from insurance claims, offset by a loss on
the sale of a non-steel segment fixed asset.

     The Company's combined federal and state effective tax
rate for fiscal 1997 was 28.6%.  This rate is lower than the 
combined federal and state statutory rates primarily due to
the utilization of net operating loss carryforwards for
which certain deferred tax valuation allowances had been
previously recorded.  The Company is currently paying
federal taxes at the alternative minimum tax rate of 20%.

     As a result of the above factors, the Company reported
fiscal 1997 net income before extraordinary item of $13.7
million, or $.86 per primary share ($.81 fully diluted),
compared to a net loss of $10.5 million, or a $.76 loss per
primary and fully diluted share, in fiscal 1996.

     In connection with a fiscal 1997 fourth quarter
refinancing, the Company incurred prepayment costs and wrote
off unamortized debt discount and debt issuance costs which
resulted in an extraordinary charge of $9.3 million, net of
applicable income tax benefit of $2.3 million, or $.58 per
primary share and $.55  per fully diluted share.  See
Liquidity and Capital Resources and Note 4 to the
Consolidated Financial Statements.


Fiscal Year Ended September 28, 1996 compared with Fiscal
Year Ended September 30, 1995
          
     Net sales in fiscal 1996 increased $38.0 million, or
10.2%, from fiscal 1995.  Specialty steel segment net sales
increased $33.6  million, or 10.0%, and the adhesives
segment net sales increased $4.4 million, or 12.5%, from
fiscal 1995.  The overall increase in specialty steel
segment net sales was primarily attributable to increased
shipments of the Company's tubular products.

     Welded tubular net sales increased $12.1 million, or
8.3%, on a volume increase of 8.1%.  The increase in welded
tubular net sales was primarily attributable to an increase
in shipments of both welded line pipe products and welded
OCTG products.  Average selling price for all welded tubular
products was essentially unchanged from fiscal 1995. 

     Seamless tubular net sales increased $42.5 million, or
46.8%, on a volume increase of 35.0%. The increases in
seamless tubular net sales and shipments were primarily due
to increases in seamless OCTG product shipments and average
selling prices which were attributable in part to a decline
in the level of foreign imports, increased off-shore
drilling activity, as well as, with respect to pricing,
changes in OCTG product mix. Fiscal 1996 average selling
price for all seamless tubular products increased 8.7% from
fiscal 1995. 

     The average number of oil and natural gas drilling rigs
in operation in the United States was 759 in fiscal 1996, up
from 738 in fiscal 1995.

      SBQ product net sales decreased $20.5 million, or
24.8%, on a volume decline of 20.9%.  Fiscal 1996 average
selling price for SBQ products declined 4.9% from fiscal
1995.  The decline in shipments and selling price of SBQ
products resulted from a softening in the markets served by
Koppel's SBQ products as well as excessive inventory levels
in the SBQ marketplace.  Other product shipments and sales
for fiscal 1996 were primarily attributable to sales of hot
rolled coils.   

     Gross profit for fiscal 1996 increased $5.7 million
from fiscal 1995 for a gross profit margin of 9.7% in fiscal
1996 compared to 9.2% in fiscal 1995.  The specialty steel
segment gross profit increased $3.8 million and this segment
had a gross profit margin of 8.2% in fiscal 1996 versus 7.9%
in fiscal 1995.  The increase in specialty steel segment
gross profit and margin was attributable to Koppel's
seamless tubular operations, where gross profit margins rose
from 12.8% in fiscal 1995 to 13.4% in fiscal 1996. 

     The adhesives segment gross profit increased $1.9
million from fiscal 1995 primarily as a result of an
increase in sales volume.  Gross profit margin for fiscal
1996 was 24.0% compared to 21.6% for fiscal 1995.  The
increase was primarily a result of increased sales of higher
margin products.

     Fiscal 1996 selling and administrative expenses
increased $1.5 million from 1995 but decreased as a
percentage of sales from 7.1% in fiscal 1995 to 6.8% in
fiscal 1996.  The overall increase in selling and
administrative expenses was primarily attributable to
increased production and sales volume.

     As a result of the above factors, operating income
increased $4.3 million, from $7.8 million in fiscal 1995 to
$12.1 million in fiscal 1996.  The increase in operating
income was almost solely attributable to the specialty steel
segment and was due primarily to increased shipments and
average selling prices for Koppel's seamless tubular
products, partially offset by a decrease in SBQ product
shipments and average selling prices.  

     Interest income decreased $0.7 million from fiscal 1995
as a result of a decline in average invested cash and
short-term investment balances during the respective
comparable periods.

     Interest expense increased $3.6 million over 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.

     Other income, net decreased $2.4 million from fiscal
1995.  Fiscal 1996 was impacted by a loss on the sale of a
non-steel segment fixed asset, while fiscal 1995 includes
income from property claims filed with the Company's
insurance company in connection with a motor failure at
Newport.

     As a result of the above factors, the Company incurred
a net loss of $10.5 million, or a $.76 loss per share, in
fiscal 1996 compared to a net loss before extraordinary item
of $5.1 million, or a $.36 loss per share in fiscal 1995. 

     In connection with a fiscal 1995 fourth quarter
refinancing, the Company incurred prepayment costs and wrote
off unamortized debt issuance costs, which resulted in an
extraordinary charge of $5.2 million, net of applicable
income tax benefit of $2.8 million, or $.38 per share.


Liquidity and Capital Resources

     In September 1997, the Company completed a public
offering (Offering) of the Company's common stock.  The
Company sold 6,000,000 shares for net proceeds, after
expenses, of $169.8 million.  In connection with the
Offering, an additional 2,164,705 shares of common stock
were issued upon the conversion of the Company's $28.3
million principal amount 11% Convertible Debentures and the
exercise of certain warrants.  In October 1997, the
underwriters' overallotment was exercised in full, resulting
in the issuance of an additional 540,295 shares of common
stock with net proceeds to the Company of $15.4 million. 
The Company used a portion of the proceeds to retire $9.6
million principal amount of long-term debt and called for
redemption $52.4 million principal amount of its outstanding
13.5% Senior Secured Notes (Notes).  The redemption was made
in October and included a prepayment penalty of $7.1
million, plus accrued interest.  Reference is made to Note 2
and Note 4 to the Consolidated Financial Statements for
further information concerning these transactions.

     Working capital at September 27, 1997 was $226.9
million compared to $80.9 million at September 28, 1996. 
The current ratio at September 27, 1997 was 2.64 to 1
compared to 2.16 to 1 at September 28, 1996.  At September
27, 1997, the Company had cash and short-term investments
totaling $195.3 million, including $59.5 million of funds
held for debt called for redemption.  At September 27, 1997,
the Company had no outstanding advances against its $45.0
million revolving credit facility (Credit Facility);
however, $11.2 million of the Credit Facility secured
various letters of credit issued primarily in connection
with the purchase of steel slabs at Newport. 

     Net cash flows provided by operating activities totaled
$11.0 million in fiscal 1997.  The Company recorded net
income of $4.4 million in fiscal 1997 compared to a loss of
$10.5 million in fiscal 1996.  Major sources of cash from
operating activities in fiscal 1997 included $23.8 million
in non-cash depreciation and amortization charges; a $7.1
million accrual for debt prepayment penalty; a $4.5 million
increase in long-term deferred taxes and a $9.6 million
increase in accounts payable and accrued liabilities due to
increased business activity.  The major uses of cash in
operating activities included increases of $21.0 million and
$11.3 million in inventory and accounts receivable,
respectively, resulting from an increase in business
activity related primarily to improvements in the OCTG
marketplace.  Additional uses of cash in operating
activities include a $7.6 million increase in other current
assets primarily related to increases in the Company's
current deferred tax asset and receivables recorded in
connection with certain insurance claims.


     Net cash flows provided by operating activities totaled
$11.5 million in fiscal 1996.  The Company recorded a net
loss of $10.5 million in fiscal 1996.  Major uses of cash in
operating activities in fiscal 1996 included increases of
$6.0 million and $8.6 million in accounts receivable and
inventories, respectively, resulting from an increase in
business activity.  Offsetting these uses were $20.9 million
in non-cash depreciation and amortization charges; a $2.5
million increase in long-term deferred taxes; a $1.8 million
decrease in refundable income taxes; a $0.8 million decrease
in other current assets resulting primarily from the
collection of previously filed insurance claims; a $9.0
million increase in accounts payable primarily resulting
from the purchase of steel slabs and a general increase in
business activity; and a $2.2 million increase in accrued
liabilities primarily related to accrued interest on the
Company's Notes.  Included in the fiscal 1996 net loss was a
$1.2 million non-cash gain recorded in connection with the
settlement of certain warranty claims made by the Company
related to the acquisition of Koppel.

     Net cash flows used in operating activities totaled
$5.7 million in fiscal 1995.  The Company incurred a loss
before extraordinary charge in fiscal 1995 of $5.1 million. 
Major uses included a $3.2 million increase in accounts
receivable and a $12.4 million increase in inventories
resulting from an increase in business activity and, for the
increase in inventories, unusually low levels at fiscal 1994
year end due to scheduled maintenance at Newport.  Other
major uses include a decrease in long-term deferred taxes
and an increase in refundable income taxes, both resulting
from the fiscal 1995 net loss, including the extraordinary
charge for prepayment costs and a non-cash cost for the
write-off of unamortized debt issuance costs.  Offsetting
these uses were $21.3 million in non-cash depreciation and
amortization charges and increases in accounts payable and
accrued liabilities of $5.6 million and $2.9 million,
respectively.

     The Company invested $7.1 million, $6.5 million and
$12.2 million in capital expenditures during fiscal 1997,
1996 and 1995, respectively.  Such capital expenditures were
primarily related to improvements to and acquisitions of
machinery and equipment in the specialty steel segment. 
Capital spending for fiscal 1997, 1996 and 1995 related to
the Company's environmental control facilities was not
material.  The Company currently estimates that fiscal 1998
capital spending will substantially exceed fiscal 1997
expenditures.  A significant portion of fiscal 1998 capital
expenditures will be used to invest in equipment that will
reduce operating costs and increase tubular product
finishing capabilities.  Sources for funding capital
expenditures include cash flows from operations, available
cash and short-term investments, as well as available
borrowing sources.  

     The Company also generated $4.1 million in cash in
fiscal 1997 from the sale of certain development property.

     Net cash flows from financing activities include $182.9
million from the issuance of Company common stock, including
$169.8 million of net proceeds from the Offering.  The
Company used $12.0 million to repay debt compared to debt
repayments of $1.9 million in fiscal 1996.  In September
1997 the Company called for redemption $52.4 million
principal amount of its 13.5% Senior Secured Notes.  The
redemption, which included a $7.1 million prepayment
penalty, plus accrued interest, was made in October 1997.


     The Company's annual long-term debt maturities are $2.0
million in fiscal 1998, $0.7 million in fiscal 1999, $0.2
million in fiscal 2000, $0.2 million in fiscal 2001 and $0.1
million in fiscal 2002.

     Reference is made to Note 4 to the Consolidated
Financial Statements for further information concerning the
Company's long-term debt and Credit Facility.   
     
     Earnings before interest, taxes, depreciation and
amortization (EBITDA) was $61.1 million for fiscal 1997,
$32.6 million for fiscal 1996 and $31.1 million for fiscal
1995.  EBITDA is calculated as income before extraordinary
items plus interest expense, taxes, depreciation and
amortization.  EBITDA provides additional information for
determining the Company's 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.

     The Company believes that its current available cash
and short-term investments, its cash flow from operations
and borrowing sources will be sufficient to meet its
anticipated operating cash requirements, including capital
expenditures, for at least the next twelve months.

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

     See Note 8 to the Consolidated Financial Statements,
"Commitments and Contingencies".

Recently Issued Accounting Standards

     See Note 1 to the Consolidated Financial Statements,
"Summary of Significant Accounting Policies - Recently
Issued Accounting Standards".



Consolidated Statements of Operations
For the years ended September 27, 1997, September 28, 1996
and September 30, 1995
(Dollars in thousands, except per share amounts)
                                   

                                                             
                         1997          1996          1995    


Net sales               $481,170   $409,382  $371,352  
Cost of products sold    412,845    369,585   337,270
Selling and 
 administrative expenses  27,357     27,744    26,276
Operating income          40,968     12,053     7,806  
Interest income            1,010        637     1,341
Interest expense         (24,261)   (24,375)  (20,796) 
Other income, net          1,465        644     3,053
Income (loss) before
 income taxes and 
 extraordinary items      19,182    (11,041)   (8,596)
Provision (credit)
 for income taxes          5,478       (584)   (3,540)
Income (loss) before
 extraordinary items      13,704    (10,457)   (5,056)
Extraordinary items,
 net of income taxes      (9,256)              (5,200)
Net income (loss)        $ 4,448   $(10,457) $(10,256)

Per common share
 (primary)
Income (loss) before
 extraordinary items        $.86      $(.76)    $(.36)
Extraordinary items,
 net of income taxes        (.58)                (.38)
Net income (loss)           $.28      $(.76)    $(.74)

Per common share
 (fully diluted)
Income (loss) before
 extraordinary items        $.81      $(.76)    $(.36)
Extraordinary items,
 net of income taxes        (.55)                (.38)
Net income (loss)           $.26      $(.76)    $(.74)
Weighted average shares
 outstanding (000's)          
Primary                   15,912     13,809    13,809
Fully diluted             16,858     13,809    13,809




See notes to consolidated financial statements



Consolidated Balance Sheets
September 27, 1997 and September 28, 1996 
(Dollars in thousands)




ASSETS                          1997              1996
Current assets 
Cash                          $  6,998          $ 3,442
Short-term investments         128,828           13,855
Funds held for debt 
 called for redemption          59,517                 
Accounts receivable,
 less allowance for
 doubtful accounts
 of $712 and $757,
 respectively                   63,151           51,824     
Inventories                     73,474           53,317
Operating supplies              15,657           14,449
Deferred tax assets             10,884            5,459
Other current assets             6,412            8,129
Total current assets           364,921          150,475
Property, plant and equipment
 -- at cost
Land and buildings              30,113           29,755
Machinery and equipment        245,362          239,218
Construction in progress         3,304            3,313
Less -- accumulated
 depreciation                 (154,962)        (138,512)
Net property, plant and 
 equipment                     123,817          133,774
Other assets                    11,578           15,785
Total assets                  $500,316         $300,034

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable                 $    722         $    879
Payments due on debt called
 for redemption                 59,517                 
Accounts payable                47,667           41,847
Accrued liabilities             28,126           24,376
Current portion of
 long-term debt                  1,958            2,468
Total current liabilities      137,990           69,570
Long-term debt                  76,424          164,789
Deferred taxes                  13,087            8,559
Common shareholders' equity
 Common stock, no par value,
 40,000,000 shares authorized,
 23,310,297 and 13,809,413
 shares issued and outstanding,
 respectively                  261,368           49,004
Common stock options and
 warrants                        1,612            2,774     
Unrealized loss on available
 for sale securities            (1,238)         (1,287)
Retained earnings               11,073           6,625 
Common shareholders' equity    272,815          57,116
Total liabilities and
 shareholders' equity         $500,316        $300,034





See notes to consolidated financial statements

Consolidated Statements of Cash Flows
For the years ended September 27, 1997, September 28, 1996
and September 30, 1995
(Dollars in thousands)


                                                             
                             1997       1996        1995
Cash flows from
 operating activities:
Net income (loss)          $   4,448  $ (10,457)   $(10,256) 

Adjustments to reconcile
 net income (loss) to net
 cash flows from operating
 activities:   
Depreciation and
 amortization                 17,609    19,260      18,941  
Amortization of debt
 discount and finance costs    6,219     1,642       2,370     
Increase (decrease) in
 long-term deferred taxes      4,488     2,496      (2,970) 
Non-cash gain on settlement
 of claims                              (1,172)           
(Gain) loss on disposal of
 equipment                       206       642        (470) 
Increase in accounts
 receivable                  (11,327)   (5,966)     (3,207) 
Increase in inventories      (20,992)   (8,601)    (12,426) 
(Increase) decrease in
 operating supplies and
 other current assets         (7,641)    2,543      (6,185) 
Accrued prepayment fees
 on debt called for
 redemption                    7,079                      
Increase in accounts payable   5,820     8,950       5,585

Increase in accrued
 liabilities                   3,750     2,209       2,886
Net cash flows from
 operating activities          9,659    11,546      (5,732)
Cash flows from investing
 activities:
Purchases of property,
 plant and equipment          (7,139)   (6,510)    (12,233) 
Proceeds from sale of
 equipment                       382     1,729         494  
(Increase) decrease in
 other assets                   4,053      (474)      1,892  
      
Net cash flows from
 investing activities         (2,704)    (5,255)    (9,847)
Cash flows from financing
 activities:
Increase (decrease) in
 notes payable                  (157)       370    (28,363) 
Proceeds from issuance of
 long-term debt                  340      1,277    122,587  
Repayments on long-term debt (11,994)    (1,892)  (107,950) 
Increase in debt issuance
 costs                             -                (6,331)
Proceeds from issuance of
 warrants                                            2,411
Proceeds from issuance of
 common stock                182,902                      
Net cash flows from
 financing activities        171,091       (245)   (17,646)
Net increase (decrease) in
 cash and short term
 investments                 178,046      6,046    (33,225)
Cash and short term
 investments at beginning
 of year                      17,297     11,251     44,476
Cash and short term
 investments at end of year $195,343   $ 17,297   $ 11,251

Cash paid during the year for:
Interest                   $  23,231   $ 22,179   $ 20,385
Income taxes, net of
 refunds                   $   1,463   $ (4,234)  $    209 


See notes to consolidated financial statements



Consolidated Statements of Common Shareholders' Equity
For the years ended September 27, 1997, September 28, 1996
and September 30, 1995
(Dollars in thousands)

                                  Unrealized
                                   Gain (Loss)               
                         Options  on Available
          Common Stock    and     for Sale    Retained
          Shares Amount  Warrants Securities  Earnings Total


Balance, 
September
 24, 
1994   13,809,413 $48,988  $262     $(124)  $27,338 $76,464
Stock 
option
plans                        64                          64
Issuance
of common
stock warrants            2,411                       2,411
Unrealized 
loss on 
investments                          (589)             (589)
Other                  16                                16
Net loss                                    (10,256)(10,256)

Balance,
September
30,
1995   13,809,413  49,004 2,737      (713)   17,082  68,110
Stock 
option 
plans                        37                          37
Unrealized 
loss on 
investments                          (574)             (574)
Net loss                                    (10,457)(10,457)

Balance, 
September 
28, 
1996   13,809,413  49,004 2,774    (1,287)    6,625  57,116
Issuance 
of common 
stock   6,000,000 169,823                           169,823
Conversion 
of 11% 
subor-
dinated 
deben-
tures   1,664,705  28,300                            28,300
Stock 
option 
plans     645,180   6,327    (12)                     6,315
Exercise 
of common 
stock 
warrants 1,190,999  7,914 (1,150)                      6,764 
Unrealized 
gain on 
investments                             49               49 
Net income                                   4,448     4,448 
Balance, 
September 
27, 
1997   23,310,297 $261,368 $1,612  $(1,238) $11,073 $272,815


See notes to consolidated financial statements



Notes to Consolidated Financial Statements

Note 1:  Summary of Significant Accounting Policies

Principles of Consolidation


     The 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) and Northern
Kentucky Management, Inc.  All significant intercompany
accounts and transactions have been eliminated.

Use of Estimates

      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 consolidated financial
statements and accompanying notes.  Actual results could
differ from those estimates. 

Cash 

     Cash includes currency on hand and demand deposits with
financial institutions. 

Short-Term and Other Investments

     Short-term investments, including funds held for debt
called for redemption, consist primarily of money market
mutual funds and U.S. treasury securities, for which market
value approximates cost.  Certain of the Company's
investments are classified as "available for sale" and are
recorded at current market value with an offsetting
adjustment to common shareholders' equity. 

Inventories

     At September 27, 1997 and September 28, 1996,
inventories stated at the lower of LIFO (last-in, first-out)
cost or market represent approximately 53% and 36% of total
inventories before the LIFO reserve, respectively.  All
other inventories are stated at the lower of average cost or
market, or the lower of FIFO cost or market.  Inventory
costs include labor, material and manufacturing overhead. 
Inventories consist of the following:

(In thousands)                                               
                                       1997         1996  
Raw materials                        $10,300      $  5,948
Semi-finished and finished goods      66,005        50,471
                                      76,305        56,419
LIFO reserve                          (2,831)       (3,102)
Total inventories                    $73,474       $53,317



Property, Plant and Equipment and Depreciation

     For financial reporting purposes, plant and equipment
are depreciated on a straight-line method over the estimated
useful lives of the assets.  Expenditures for maintenance
and repairs are charged to expense as incurred. 
Expenditures for equipment renewals which extend the life or
increase the productivity or capacity of an asset are
capitalized. 

Income Taxes     

     Deferred income tax balances represent the estimated
future tax effects of temporary differences between the
financial reporting basis and the tax basis of certain
assets and liabilities.  

Environmental Remediation and Compliance          

     Environmental remediation costs are accrued, except to
the extent capitalizable, when incurrence of such costs is
probable and the costs can be reasonably estimated. 
Environmental compliance costs include maintenance and
operating costs associated with pollution control
facilities, costs of ongoing monitoring programs, permit
costs and other similar costs.  Such costs are expensed as
incurred.

Recently Issued Accounting Standards    

     In February 1997, the Financial Accounting Standards
Board issued SFAS No. 128 (Statement 128) which establishes
standards for computing and presenting earnings per share
(EPS).  Statement 128 replaces primary EPS and fully diluted
EPS with a dual presentation of basic EPS and diluted EPS,
respectively.   Basic EPS is computed by dividing net
earnings available to common shareholders by the
weighted-average number of common shares outstanding for the
period.  Diluted EPS reflects the potential dilution which
would result from any instrument which could result in
additional common shares being issued.

     The Company must adopt Statement 128 in fiscal 1998. 
For fiscal 1997, as calculated under Statement 128, basic
EPS and diluted EPS before extraordinary item are $.97 and
$.92, respectively.  Basic EPS and diluted EPS for fiscal
1997 are $.31 and $.30, respectively.  For fiscal 1996 and
1995 the reported EPS amounts would not have changed.

Fiscal Year-End

     The Company's fiscal year ends on the last Saturday of
September.  Fiscal 1997 and 1996 contain fifty-two weeks and
fiscal 1995 contains fifty-three weeks.

Earnings Per Share

     Primary earnings per share is based on the
weighted-average number of shares outstanding during the
period, including the dilutive effect of applicable common
stock equivalents.  It excludes the effect of the  Company's
11% Subordinated Convertible Debentures, which were
converted in fiscal 1997.  If such conversion had occurred
at the beginning of fiscal 1997, primary earnings per share
would have been $.91 based on income before extraordinary
items and $.38 based on net income.  Fully diluted earnings
per share is calculated assuming maximum dilution from
dilutive common stock equivalents and convertible
securities.


Note 2:  Common Stock Offering

     In September 1997, the Company completed a public
offering (Offering) of the Company's common stock.  The
Company issued and sold 6,000,000 shares, which resulted in
net proceeds to the Company of $169.8 million after the
underwriters' discount and other Offering expenses.  In
connection with the Offering, an additional 2,164,705 shares
of common stock were issued upon the conversion of the
Company's 11% Convertible Debentures and the exercise of
certain warrants, a substantial portion of which were sold
in the Offering.

     In October 1997, the underwriters' over-allotment
option was exercised in full, resulting in the issuance and
sale of an additional 540,295 shares of common stock by the
Company and net proceeds to the Company of $15.4 million.


Note 3:  Accrued Liabilities

     Accrued liabilities consist of the following:


(In thousands)                       1997      1996
Accrued payroll and payroll taxes  $11,352    $ 8,477
Accrued interest                     3,742      4,696
Accrued environmental remediation    4,394      4,444
Other                                8,638      6,759
                                   $28,126    $24,376


Note 4:  Long-term Debt and Credit Facility

     Long-term debt of the Company consists of the
following: 

(In thousands)                           1997        1996 
  
13.5% Senior Secured Notes due 
July 15, 2003, interest due 
semi-annually, secured by property, 
plant and equipment (net of 
unamortized discount of $4,237 
and $7,754, respectively)            $  74,421     $123,342

13.5% Senior Secured Notes called 
for redemption                          52,438             

11% Subordinated Convertible 
Debentures, converted to
common stock in September 1997                       28,300 

Other                                    3,961       15,615
                                       130,820      167,257
Less: 
  Current portion                       (1,958)      (2,468)
  13.5% Senior Secured Notes called 
  for redemption                       (52,438)            
                                     $  76,424     $164,789


     In September 1997, the Company called for redemption
$52.4 million principal amount of its outstanding 13.5%
Senior Secured Notes due 2003 (Notes).  The redemption was
made in October 1997 from the proceeds of the Offering (see
Note 2) and included a prepayment penalty of $7.1 million,
plus accrued interest.  The remaining Notes may be redeemed
at the option of the Company, at any time, in whole or in
part, beginning in 2000, initially at a price of 103.86%,
declining to 100% in 2002.  

     The Notes are unconditionally guaranteed in full,
jointly and severally, by each of the Company's subsidiaries
and are secured by the property, plant and equipment of the
Company's steel-making operations.  The Indenture relating
to the Notes contains a number of restrictive covenants
including, among other things, limitations on the ability of
the Company to incur additional indebtedness; create liens;
make certain restricted payments, including dividends;
engage in certain transactions with affiliates; engage in
sale and leaseback transactions; dispose of assets; issue or
sell stock of its subsidiaries; enter into agreements that
restrict the ability of its subsidiaries to pay dividends
and make distributions; engage in mergers, consolidations
and transfers of substantially all of the Company's assets;
and make certain investments, loans and advances.  

     In connection with the Offering, the holders of the
Company's 11% Subordinated Convertible Debentures exercised
their right to convert the full principal amount of such
Debentures.  Also in connection with the Offering, the
Company prepaid $9.6 million principal amount of other
long-term debt.

     The conversion of the 11% Subordinated Convertible
Debentures is a non-cash financing transaction and is not
included in the Consolidated Statements of Cash Flows.

     The Company has a $45.0 million revolving credit
facility (Credit Facility), borrowings on which are secured
by inventory and accounts receivable.  Interest on
borrowings accrues at a rate per annum of (a) the sum of the
alternate base rate (which is the higher of the prime rate
or 0.5% over the federal funds rate) plus 1% with respect to
domestic rate loans or (b) the sum of the Eurodollar rate
(based on LIBOR) plus 2.75% with respect to Eurodollar rate
loans.  Borrowings are due on demand and are limited to
defined percentages of eligible inventory and accounts
receivable.  The Credit Facility contains financial
covenants, including maintenance of minimum net worth,
minimum interest coverage ratios, maximum ratios of
indebtedness to net worth, and minimum current ratio and
working capital requirements.  The Credit Facility also
includes restrictions upon dividends, investments, capital
expenditures, indebtedness and the sale of certain assets. 
At September 27, 1997, approximately $11.2 million of the
Credit Facility was utilized to collateralize various
letters of credit and $33.8 million was available for
borrowing.  The Credit Facility expires in fiscal 1998.

     In connection with the retirement of long-term
indebtedness in the fourth quarter of fiscal 1997, the
Company incurred prepayment costs and wrote off unamortized
debt discount and debt issuance costs which resulted in an
extraordinary charge of $9.3 million, net of applicable
income tax benefit of $2.3 million, or $.58 and $.55 per
primary and fully diluted share, respectively.  Similar
charges incurred in the retirement of long-term indebtedness
in fiscal 1995 resulted in an extraordinary charge of $5.2
million, net of applicable income tax benefit of $2.8
million, or $.38 per primary and fully diluted share.
                                   
     Annual long-term debt maturities are $2.0 million in
fiscal 1998, $0.7 million in fiscal 1999, $0.2 million in
fiscal 2000, $0.2 million in fiscal 2001 and $0.1 million in
fiscal 2002.
          
     As of September 27, 1997 and September 28, 1996, the
weighted-average interest rate on outstanding notes payable
was 6.0% and 6.1%, respectively.


Note 5:  Fair Value of Financial Instruments

     The following methods and assumptions were used to
estimate the fair value of financial instruments:
      
     Cash and short-term investments  -   The carrying
amount approximates fair value because of the short maturity
of these instruments.
            
     Other investments  -  Other investments, consisting of
marketable equity securities totaling $2.8 million, are
reported in other assets and carried at market value.
            
     Notes payable  -   The carrying amount approximates
fair value because of the short maturity.
     
     Long-term debt   -   The fair value of the Company's
Senior Secured Notes is based upon their trading price as of
fiscal year-end.  All other long-term debt was estimated by
calculating the present value of the remaining interest and
principal payments on the debt to maturity.  The present
value computation uses a discount rate based upon current
market rates.

     The carrying amount and fair value of the Company's
financial instruments are as follows:


 
                                1997               1996
                         Carrying   Fair    Carrying   Fair 
(In thousands)           Amount    Value     Amount   Value 
Cash and short-term
 investments            $195,343  $195,343   $17,297 $17,297
Other investments          2,800     2,800     2,725   2,725
Notes payable                722       722       879     879
Long-term debt           130,820   153,856   167,257 176,860

Note 6:  Preferred Stock
     
     The Company's authorized stock includes 2,000,000
shares of Class A Preferred Stock, issuable in one or more
series.  The rights, preferences, privileges and
restrictions of any series of Class A Preferred Stock, the
number of shares constituting any such series and the
designation thereof, are subject to determination by the
Board of Directors.

     Four hundred thousand shares of the Class A Preferred
Stock has been designated as Series A  Junior Participating
Preferred Stock, par value $10 per share, in connection with
the Shareholders' Protection Rights Plan (Plan) adopted in
fiscal 1989.  Pursuant to the Plan, one Preferred Stock
Purchase Right (Right) is attached to each outstanding share
of common stock of the Company.

     The Plan includes provisions which are intended to
protect shareholders against certain unfair and abusive
takeover attempts by anyone acquiring or tendering for 30%
or more of the Company's common stock.  The Company may
redeem the Rights for one cent per Right at any time before
a 30% position has been acquired.  The Rights expire in
November 1998.



Note 7:  Stock Options and Warrants

     The Company has various stock option plans under which
the Company may grant incentive and nonqualified stock
options and stock appreciation rights to purchase shares of
the Company's common stock.  All incentive stock options
were granted at the fair market value on the date of grant. 
Incentive stock options generally become exercisable one
year after the grant date and expire after ten years. 
Nonqualified stock options become exercisable according to a
vesting schedule determined at the grant date and expire on
the date set forth in the option agreement.  Nonqualified
stock options were granted at exercise prices approximating
the market price on the date of grant.  For fiscal 1996, the
weighted-average fair value of options granted was $1.20.

     A summary of transactions in the plans follows:

                                                             
                 1997              1996         1995
                   Average          Average         Average
                  Exercise          Exercise        Exercise
          Shares  Price     Shares  Price    Shares Price

Outstanding,
beginning 
of year 1,629,330   $7.22  1,667,055  $7.36  1,524,330 $7.80
Granted                       60,000   2.63    212,400  4.38
Expired   (87,395)   8.01    (97,725)  6.87    (69,675) 7.67
Exercised(645,180)   7.78          -                        
Outstanding, 
end of 
year      896,755    6.73  1,629,330   7.22  1,667,055  7.36
Exercisable, 
end of 
year      489,504    7.73    951,428   8.42    761,355  9.22
Available 
for 
grant   1,153,230          1,093,825         1,086,510      
     
     The Company accounts for these plans in accordance with
the intrinsic value method.  Pro forma compensation cost,
net income (loss) and per share amounts computed as if the
Company had accounted for the 1996 option grant on the fair
value method, would not have been materially different from
reported amounts for 1997 or 1996.
  
     A summary of information about stock options
outstanding at September 27, 1997 follows:


               Options Outstanding       Options Exercisable

Range of             Average    Average             Average
Exercise             Exercise   Remaining           Exercise
Prices        Shares   Price      Life       Shares   Price


$2.63-$5.93   386,754  $4.18     6.76     186,563    $4.20
$6.125-$9.75  404,186   7.37     5.13     197,126     7.91
$13.25-
$14.125       105,815  13.63      .89     105,815    13.63
              896,755   6.73     5.33     489,504     7.73  
     

     At September 27, 1997, the Company has common stock
warrants outstanding, exercisable for approximately 272,000
shares of the Company's common stock at a price of $8.00 per
share and 843,000 shares at a price of $4.00 per share.  The
warrants expire October 4, 2000 and July 15, 2003,
respectively.  


Note 8:  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 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.

     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 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 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 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 has on its property at Newport a permitted
hazardous waste disposal facility.   Newport's permit for
operating the hazardous waste disposal facility required
that it investigate, test, and analyze for potential
releases of hazardous constituents from its closed loop
water recirculating system. Based on the findings of its
investigation, which have been filed with the EPA, the
Company believes that the cost of any remediation, if
required, will not be material.

     In November 1996, Koppel received a Notice of Violation
from the EPA alleging violations of the Clean Air Act and
the Pennsylvania State Implementation Plan.  The violations
allegedly occurred during 1995 and 1996 and pertain to air
emissions from Koppel's electric arc furnace operations. 
The conditions which contributed to the alleged violations
have been corrected and as of January 1, 1997, Koppel has
demonstrated compliance with air emission regulations.  At
this time, the Company is unable to determine if the EPA
will assess civil penalties as a result of the alleged
violations,  or the extent of any such potential penalties.


     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 established a schedule for investigating,
monitoring, testing and analyzing the potential releases.
Initial remediation has been completed and reported to the
EPA; however, additional monitoring and remediation may be
required.  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.  To date the Company has been
fully indemnified against all matters pertaining to the
Consent Order and the Company believes that the indemnity
provisions provide for it to be fully indemnified against
all future matters covered by the Consent Order, including
all associated costs, claims and liabilities.

     In two separate incidents occurring in fiscal 1993 and
1992, radioactive substances were accidentally melted at
Newport, resulting in the contamination of a quantity of
electric arc furnace dust.  The Company is investigating and
evaluating various issues concerning storage, treatment and
disposal of the radiation contaminated electric arc furnace
dust; however, a final determination as to method of
treatment and disposal, cost and further regulatory
requirements cannot be made at this time.  Depending on the
ultimate timing and method of treatment and disposal, which
will require appropriate federal and state regulatory
approval, the actual cost of disposal could substantially
exceed current estimates and the Company's insurance
coverage.  The Company expects to recover and has recorded a
$2.3 million receivable relating to insurance claims for the
recovery of disposal costs which will be filed with the
applicable  insurance carrier at the time such disposal
costs are incurred.  As of September 27, 1997, claims
recorded in connection with disposal costs exhaust available
insurance coverage.  Based on current knowledge, the Company
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.  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 not
expected to be material, however, 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 September 27, 1997, the Company had environmental
remediation reserves of $4.4 million,  which pertain almost
exclusively to accrued disposal costs for radiation
contaminated dust.  As of September 27, 1997, the estimated
range of possible 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 range of possible losses should the Company not be
indemnified on future matters.  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 9:  Profit Sharing Plans

     The Company has established various profit sharing
plans at the operating companies which are based on the
earnings of the respective companies.  Generally, the plans
require mandatory contributions at a specified percentage of
pretax profits (with a guaranteed minimum based on hours
worked) for the bargaining unit employees, and allow for a
discretionary contribution set by the Board of Directors for
salaried employees.  Expense for contributions was
approximately $2.0 million, $1.0 million and $0.9 million in
fiscal years 1997, 1996 and 1995, respectively.


Note 10:  Income Taxes

     The provision (credit) for income taxes, including $2.3
million and $2.8 million allocated to extraordinary items in
fiscal 1997 and fiscal 1995, respectively, consists of the
following:

(In thousands)                    1997      1996      1995
Current                        $  2,780   $(2,112)  $(3,044)
Deferred                           (897)    1,528    (3,296)
Tax benefit of employee stock
 option exercises allocated
 to equity                        1,281                    
Provision (credit) for income
 taxes                         $  3,164   $  (584)  $(6,340)


     The income tax provision (credit) differs from the
amount computed by applying the statutory federal income tax
rate to income (loss), including extraordinary items, before
income taxes for the following reasons:


(In thousands)                    1997      1996      1995

Income tax provision (credit)
 at statutory tax rate of 35%    $2,664   $(3,864)  $(5,808)
Change in taxes resulting from:
   State income taxes, net 
   of federal effect                 95      (926)     (150)     
   Change in valuation allowance    542     4,156          
   Other, net                      (137)       50      (382)
Provision (credit) for
 income taxes                    $3,164   $  (584)  $(6,340)


     The following represents the components of deferred tax
liabilities and assets at September 27, 1997 and September
28, 1996: 


(In thousands)                            1997      1996
Deferred tax liabilities:          
      Property, plant and equipment     $30,517   $29,993
      Other items                           671       141
                                         31,188    30,134
Deferred tax assets:
     Reserves and accruals                6,327     5,343
     Net operating tax loss 
      carryforward                       16,730    20,136
     Alternative minimum tax and 
      other tax credit carryforwards     6,122      3,393
     Deferred financing costs            1,641           
     Other items                         2,863      2,318
                                        33,683     31,190
     Valuation allowance                (4,698)    (4,156)
         Net deferred tax assets        28,985     27,034
Net deferred tax liability            $  2,203    $ 3,100

     

     For federal income tax purposes, the Company has
alternative minimum tax credit carryforwards of
approximately $5.6 million, which are not limited by
expiration dates, and other tax credit carryforwards of
approximately $0.5 million, which expire beginning in 2000. 
The Company also has net operating tax loss carryforwards of
approximately $47.8 million, which expire beginning in 2007. 
The Company has recorded deferred tax assets related to
these carryforwards, net of a deferred tax asset valuation
allowance.  In estimating the amount of the  valuation
allowance required, the Company has considered future
taxable income related to the reversal of temporary
differences in the tax and financial reporting basis of
assets and liabilities.


Note 11:  Related Party Transactions

     One of the Company's directors has a controlling
interest in a company which purchases secondary and limited
service tubular products from Newport.  Sales to this
customer were approximately $15.6 million, $16.8 million and
$16.0 million for fiscal years 1997, 1996 and 1995,
respectively.  Trade receivables from this customer were
$1.0 million and $1.4 million at the end of fiscal 1997 and
1996, respectively.


Note 12:  Business Segment Information

     The Company operates in two 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 and Koppel, a manufacturer of seamless tubular steel
products, special bar quality (SBQ) products and
semi-finished steel products.  The Company's specialty steel
products consist of: (i) welded and seamless tubular goods
used primarily in oil and natural gas drilling and
production operations, (oil country tubular goods, or OCTG);
(ii) line pipe used in the transmission of oil, gas and
other fluids; (iii) SBQ products used primarily 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 and footwear finishes
products.

     The operations of both 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 specialty steel products segment.  In fiscal 1997,
one customer accounted for 10.3% of net sales.  The
following table sets forth selected financial information by
business segment for fiscal 1997, 1996 and 1995.  

(In thousands)                                               
                           Identi-  Depreciation            
        Net    Operating   fiable   and Amor-   Capital
1997    Sales   Income     Assets   tization    Expenditures


Specialty 
steel 
segment $440,229  $43,760  $271,510  $16,954     $ 6,589 
Adhesives 
segment   40,941    1,799    13,505      655         550
Corporate 
assets and
alloca-
tions              (4,591)  215,301                     

Total
consoli-
dated   $481,170  $40,968  $500,316  $17,609     $ 7,139

1996

Specialty 
steel 
segment $369,466  $14,886  $245,642  $18,595     $ 6,279
Adhesives 
segment   39,916    1,597    15,338      665         231    
Corporate 
assets and  
allo-
cations            (4,430)   39,054                     

Total 
consoli-
dated   $409,382  $12,053  $300,034  $19,260     $ 6,510

1995

Specialty 
steel 
segment $335,883  $10,428  $250,711  $18,508      $11,748
Adhesives
segment   35,469    1,248    13,011      433          485
Corporate 
assets and 
allo-
cations            (3,870)   34,775                      

Total 
consoli-
dated   $371,352 $  7,806  $298,497  $18,941      $12,233
  


Note 13:  Quarterly Financial Data (Unaudited)

     Quarterly results of operations for fiscal 1997 and
1996 are as follows:  
       
(In thousands, except per share amounts)             
                     First      Second    Third     Fourth
1997                 Quarter    Quarter   Quarter   Quarter
Net sales           $105,167   $111,110   $132,853  $132,040 
Gross profit          12,343     15,737    19,354    20,891
Income before
 extraordinary 
item                     249      2,169     4,930     6,356
Net income (loss)        249      2,169     4,930    (2,900)
Net income per 
common share   
before extra-
ordinary item  
Primary                  .02        .16       .34       .37
Fully diluted            .02        .16       .32       .37

Net income (loss) 
per common share
Primary                  .02        .16       .34      (.17)
Fully diluted            .02        .16       .32      (.17)

1996
Net sales            $89,295   $104,726  $103,766  $111,595
Gross profit           6,893      9,858    11,400    11,646
Net income (loss)     (3,204)    (1,508)   (1,871)   (3,874)
Net income (loss) 
per common share        (.23)      (.11)     (.14)     (.28)
     


Note 14:  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 September 27, 1997 and September 28, 1996
and for each of the three years in the period ended
September 27, 1997.  All significant intercompany accounts
and transactions between the Subsidiary Guarantors have been
eliminated.
 
(In thousands)         September 27,1997  September 28,1996

Current assets             $168,412          $131,839   
Noncurrent assets           131,526           143,074             


Current liabilities          70,871             61,980       
                          

Payable to parent          $174,495          $162,593   
Other noncurrent 
liabilities                   2,003             9,953
 Total noncurrent 
  liabilities              $176,498          $172,546  


                                                             
                                 Fiscal Year Ended
(In thousands)           1997         1996         1995      
             
Net sales              $481,170     $409,382     $371,352    
Gross profit            68,325       39,797       34,082 
Net income (loss)        8,209       (5,816)      (2,040)


Report of Management

     The accompanying consolidated financial statements have
been prepared by the management of NS Group, Inc., in
conformity with generally accepted accounting principles
and, in the judgment of management, present fairly and
consistently the Company's consolidated financial position
and results of operations.  These statements necessarily
include amounts that are based on management's best
estimates and judgments.  The financial information
contained elsewhere in this report is consistent with that
contained in the consolidated financial statements.

     In fulfilling its responsibilities for the integrity of
financial information, management maintains accounting
systems and related controls.  These controls provide
reasonable assurance, at appropriate costs, that assets are
safeguarded against losses and that financial records are
reliable for use in preparing financial statements.  These
systems are enhanced by written policies, an organizational
structure that provides division of responsibilities and
careful selection and training of qualified people.

     In connection with their annual audit, independent
public accountants perform an examination in accordance with
generally accepted auditing standards, which includes a
review of the system of internal accounting control and an
expression of an opinion that the consolidated financial
statements are fairly presented. 

     The Board of Directors, through its Audit Committee
composed solely of non-employee directors, reviews the
Company's financial reporting and accounting practices.  The
independent public accountants meet regularly with and have
access to this Committee, with or without management
present, to discuss the results of their audit work.




Clifford R. Borland        
Chairman of the Board and
Chief Executive Officer                                      
      




John R. Parker
Vice President, Treasurer and Chief Financial Officer





Report of Independent Public Accountants


To  NS Group, Inc.

     We have audited the accompanying consolidated balance
sheets of NS Group, Inc. (a Kentucky corporation) and
subsidiaries as of September 27, 1997 and September 28,
1996, and the related consolidated statements of operations,
common shareholders' equity and cash flows for each of the
three years in the period ended September 27, 1997.  These
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

     We conducted our audits in accordance with generally
accepted auditing standards.  Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide
a reasonable basis for our opinion.

     In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of NS Group, Inc. and subsidiaries as of
September 27, 1997 and September 28, 1996, and the results
of their operations and their cash flows for each of the
three years in the period ended September 27, 1997 in
conformity with generally accepted accounting principles.





Cincinnati, Ohio,              ARTHUR ANDERSEN  LLP
October 30, 1997                                             
                                   



Consolidated Historical Summary
     
(Dollars in thousands, except per share amounts)
                                                             
                         1997      1996     1995      1994*  
                 
Summary of Operations
Net sales             $481,170 $409,382  $371,352   $303,380
Operating income
 (loss)                 40,968   12,053     7,806        689
Operating income
 margin                   8.5%     2.9%      2.1%        .2%
Net income (loss)
 before extra-
ordinary items          13,704  (10,457)  (5,056)     13,208
Net income (loss)        4,448  (10,457) (10,256)     13,208



Income (loss) per
 share before extra-
 ordinary items            .86     (.76)    (.36)        .96     
Net income (loss)
 per share                 .28     (.76)    (.74)        .96
Dividends per common share                                  
Weighted average shares
 outstanding -
 primary (000's)        15,912   13,809   13,809      13,789     




Other Financial and Statistical Data    

Working capital       $226,931  $80,905 $ 72,854    $ 50,682
Total assets           500,316  300,034  298,497     315,327
Long-term debt          76,424  164,789  166,528     138,110
Common shareholders'
 equity                272,815   57,116   68,110      76,464
Capital expenditures     7,139    6,510   12,233      10,394
Depreciation and
 amortization           23,828   20,902   21,311      18,789
EBITDA                  61,052   32,594   31,141      21,566
Current ratio             2.64     2.16     2.27        1.56
Debt-to-equity ratio       .29     2.93     2.47        2.01
Book value per share     11.70     4.14     4.93        5.54
Steel product shipments
 (tons)
 Tubular products      590,000  506,000  440,000     370,000     
 Special bar quality
 products and other    179,000  177,000  216,000     191,000
Employees                1,948    1,774    1,728       1,568




  1993      1992      1991**    1990      1989      1988     
        
$353,082  $281,242  $212,471  $249,871  $219,414  $239,175
  11,672     1,401   (18,177)   19,370    18,469    36,668
    3.3%       .5%     (8.6)%     7.8%      8.4%     15.3%
  (5,896)  (13,358)  (20,603)   13,047    12,773    20,238
  (6,991)  (15,900)  (20,603)   13,047    12,773    17,493
    (.44)     (.99)    (1.53)      .97       .95      1.73
    (.52)    (1.18)    (1.53)      .97       .95      1.49
               .06       .12       .11       .05          
  13,553    13,483    13,449    13,419    13,387    11,690




   1993       1992     1991**      1990      1989      1988  
     
$ 43,174  $  44,198 $  48,411   $ 64,858  $ 55,714  $ 76,683
 317,242    319,079   329,889    220,856   177,292   153,525
 156,056    164,180   168,822     65,884    24,958    23,328
  62,622     68,574    85,149    107,226    95,490    83,327
   5,488      4,148   112,573     45,011    28,081     3,340
  19,093     18,711     5,725      6,879     6,080     6,585
  30,355     20,515    (1,360)    28,852    27,514    46,059
    1.49       1.60      1.79       2.90      2.30      3.47
    2.64       2.52      2.11        .65       .31       .29
    4.57       5.08      6.33       7.98      7.13      6.23

 385,000    292,000   215,000    285,000   209,000   262,000
 363,000    299,000   212,000    239,000   262,000   255,000
   1,995      1,770     1,705      1,479     1,457     1,336

* Includes the impact of the sale of Kentucky Electric Steel 
  Corporation
**Assets of Koppel Steel Corporation acquired   



Stock Market Information
NS Group, Inc. is listed on the New York Stock Exchange,
trading symbol, NSS.  




Stock Price 

Fiscal 1997         High         Low
     1st  Quarter   $ 4 3/8     $ 3
     2nd Quarter      5 5/8       4 1/8    
     3rd Quarter     11 7/8       4 3/4
     4th Quarter     34 1/4      11 1/2 
          
Fiscal 1996          High         Low
     1st  Quarter   $ 3         $ 1 7/8
     2nd Quarter      3 1/8       2 1/8
     3rd Quarter      3 1/8       2 1/2
     4th Quarter      3 3/4       2 1/2