<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

                          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 No.)

                 530 WEST NINTH STREET, NEWPORT, KENTUCKY 41071
                    (Address of principal executive offices)

        Registrant's telephone number, including area code (859) 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X]  No [ ]

At November 3, 2003, there were 20,886,284 shares outstanding of the Company's
common stock.

                                       1
<PAGE>

                                 NS GROUP, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                             Page No.
                                                                             --------
<S>                                                                          <C>
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...................          15

Item 3.        Quantitative and Qualitative Disclosures About
                Market Risk...........................................          25

Item 4.        Controls and Procedures................................          25

PART II        OTHER INFORMATION

Item 1.        Legal Proceedings......................................          26

Item 6.        Exhibits and Reports on Form 8-K.......................          26
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                 NS GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
              (In thousands, except per share amounts) (Unaudited)

<TABLE>
<CAPTION>
                                              Three Months Ended              Nine Months Ended
                                                 September 30,                   September 30,
                                              2003            2002            2003            2002
                                          -----------     -----------     -----------     -----------
<S>                                       <C>             <C>             <C>             <C>
Net sales                                 $    73,577     $    57,297     $   189,961     $   150,996

Cost of products sold                          72,367          57,615         196,202         157,294
                                          -----------     -----------     -----------     -----------
   Gross profit (loss)                          1,210            (318)         (6,241)         (6,298)

Selling, general and administrative             3,233           5,189          11,516          13,383
                                          -----------     -----------     -----------     -----------
   Operating loss                              (2,023)         (5,507)        (17,757)        (19,681)

Investment income (loss)                           41              69            (122)          1,190
Interest expense                                 (280)         (1,565)         (3,075)         (6,819)
Other income, net                                  52            (455)            159            (374)
                                          -----------     -----------     -----------     -----------
   Loss before income taxes                    (2,210)         (7,458)        (20,795)        (25,684)
Provision for income taxes                          -               -               -               -
                                          -----------     -----------     -----------     -----------
   Net loss                               $    (2,210)    $    (7,458)    $   (20,795)    $   (25,684)
                                          ===========     ===========     ===========     ===========

Net loss per common share -
   Basic and diluted                      $     (0.11)    $     (0.36)    $     (1.00)    $     (1.24)
                                          ===========     ===========     ===========     ===========

Weighted average shares outstanding -
   Basic and diluted                           20,859          20,647          20,735          20,647
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                                 NS GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                              (Unaudited)
                                                             September 30,      December 31,
                                                                  2003              2002
                                                             -------------     -------------
<S>                                                          <C>               <C>
ASSETS
Current assets
   Cash and equivalents                                      $       3,784     $      29,357
   Accounts receivable, net                                         28,841            12,653
   Inventories                                                      62,219            55,874
   Operating supplies and other                                     11,195            12,082
                                                             -------------     -------------
          Total current assets                                     106,039           109,966
                                                             -------------     -------------
Property, plant and equipment                                      198,360           197,751
   Less accumulated depreciation                                  (151,373)         (146,100)
                                                             -------------     -------------
                                                                    46,987            51,651
                                                             -------------     -------------
Long-term investments                                                    -             3,848
Other assets                                                         3,620             5,416
Assets held for sale                                                 8,934             9,413
                                                             -------------     -------------
          Total assets                                       $     165,580     $     180,294
                                                             =============     =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
   Accounts payable                                          $      28,370     $       8,600
   Accrued liabilities and other                                    25,783            20,162
   Revolving credit facility                                        12,504                 -
   Other notes payable                                                 423                 -
   Current portion of restructuring liabilities                      4,018             4,656
   Current portion of long-term debt                                    35            33,555
                                                             -------------     -------------
          Total current liabilities                                 71,133            66,973
                                                             -------------     -------------
Long-term debt                                                         456               482
Deferred income taxes                                                  332               332
Other long-term liabilities                                          8,453             8,124
                                                             -------------     -------------
                                                                     9,241             8,938
                                                             -------------     -------------
Common shareholders' equity
   Common stock, no par value, 40,000 shares authorized,
    20,886 and 20,647, issued                                      284,117           282,935
   Treasury stock, at cost, 4,197 and 4,213 shares                 (35,460)          (35,572)
   Common stock options and warrants                                   545               759
   Accumulated other comprehensive income (loss)                       272              (328)
   Accumulated deficit                                            (164,268)         (143,411)
                                                             -------------     -------------
          Common shareholders' equity                               85,206           104,383
                                                             -------------     -------------

          Total liabilities and shareholders' equity         $     165,580     $     180,294
                                                             =============     =============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                                 NS GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands) (Unaudited)

<TABLE>
<CAPTION>

                                                                   Nine Months Ended
                                                                     September 30,
                                                                  2003           2002
                                                               ----------     ----------
<S>                                                            <C>            <C>
CASH FLOWS - OPERATING ACTIVITIES
  Net loss                                                     $  (20,795)    $  (25,684)
  Adjustments to reconcile net loss to cash flows
  used by operating activities:
     Depreciation and amortization                                  5,299          8,430
     Amortization of debt discount and finance costs                  531            818
     Loss on sales of securities                                      453            372
     Charges related to early debt extinguishment                       -            615
  Changes in operating assets and liabilities:
     Accounts receivable, net                                     (16,188)        (1,163)
     Inventories                                                   (6,345)       (19,074)
     Other current assets                                           1,219            282
     Accounts payable                                              19,770          3,416
     Accrued liabilities                                            5,621          1,156
     Restructuring liabilities                                       (878)          (392)
     Other, net                                                       644            433
                                                               ----------     ----------
       Cash used by operating activities                          (10,669)       (30,791)
                                                               ----------     ----------

CASH FLOWS - INVESTING ACTIVITIES
  Purchases of property, plant and equipment                         (728)        (1,737)
  Proceeds from investment sales                                    3,693         10,157
  Net proceeds from sale of assets held for sale                      479            733
  Other                                                             1,947           (150)
                                                               ----------     ----------
       Cash provided by investing activities                        5,391          9,003
                                                               ----------     ----------

CASH FLOWS - FINANCING ACTIVITIES
  Repayments of long-term debt                                    (33,793)       (35,025)
  Net borrowings under revolving credit facility                   12,504              -
  Increase in other notes payable                                     424              -
  Proceeds from exercise of options and warrants                      949             11
  Additions to cost of treasury shares                                (28)             -
  Payment of financing costs                                         (351)          (761)
                                                               ----------     ----------
       Cash used by financing activities                          (20,295)       (35,775)
                                                               ----------     ----------

Decrease in cash and equivalents                                  (25,573)       (57,563)
Cash and equivalents at beginning of period                        29,357         72,383
                                                               ----------     ----------

Cash and equivalents at end of period                          $    3,784     $   14,820
                                                               ==========     ==========

Supplemental disclosure of cash flow information -
  Cash paid during the period for interest                     $    4,137     $    9,292
  Cash paid (recovered) during the period for income taxes     $     (560)    $        -
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                                 NS GROUP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

         The condensed consolidated financial statements include the accounts of
NS Group, Inc. and its wholly owned subsidiaries (collectively referred to as
"the Company"): Newport Steel Corporation ("Newport"), Koppel Steel Corporation
("Koppel"), Erlanger Tubular Corporation ("Erlanger"), and Northern Kentucky
Management, Inc. All significant intercompany balances and transactions have
been eliminated.

         In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting of normal,
recurring adjustments) necessary to present fairly the financial position and
the cash flows and the results of operations for the periods shown. The results
of operations for the interim periods presented may not be indicative of total
results for the full year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations promulgated by the
United States Securities and Exchange Commission. However, management believes
that the disclosures contained herein are adequate to make the information
presented not misleading. Certain reclassifications of prior period amounts have
been made to conform to the current period presentation. The unaudited financial
statements should be read in conjunction with the audited financial statements
and accompanying notes, including a summary of significant accounting policies,
in NS Group, Inc.'s Annual Report on Form 10-K for the year ended December 31,
2002.

         USE OF ESTIMATES

         Estimates and assumptions are used by the Company in the preparation of
the financial statements. The estimates and assumptions are based on historical
experience and business knowledge and are revised as circumstances change.
Actual results could differ from the estimates.

         EARNINGS AND LOSS PER SHARE

         Basic earnings or loss per share is computed by dividing the net income
or loss for the period by the weighted-average number of common shares
outstanding for the period. Diluted earnings or loss 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.

                                       6
<PAGE>

         The Company had a net loss for all periods presented; therefore, the
effect of including dilutive securities in the calculation of earnings per share
would have been anti-dilutive. At September 30, 2003 and 2002, options and
warrants to purchase 1.8 million and 2.2 million common shares, respectively,
were excluded from the calculation of diluted earnings per share.

         STOCK-BASED COMPENSATION

         The Company accounts for stock-based compensation using the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Stock
option grants for all periods were exercisable at prices equal to the fair
market value of the Company's common stock on the dates the options were
granted; accordingly, no compensation expense has been recognized for the stock
options granted. The fair values of the granted options are determined using the
Black-Scholes option-pricing model using assumptions that are evaluated and
revised, as necessary, to reflect market conditions and experience.

         If the Company accounted for stock-based compensation using the fair
value recognition provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation", net loss and diluted loss per
share would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                           Three Months Ended                     Nine Months Ended
                                                              September 30,                         September 30,
(in thousands, except per share amounts)                 2003              2002                2003               2002
                                                    --------------    --------------     ---------------     --------------
<S>                                                 <C>               <C>                <C>                 <C>
Net loss - as reported                              $       (2,210)   $       (7,458)    $       (20,795)    $      (25,684)

Deduct: Stock-based employee compensation
   expense determined under the fair value
   method for all awards, net of related tax
   effects                                                    (455)             (582)             (1,839)            (2,417)
                                                    --------------    --------------     ---------------     --------------
Net loss - pro forma                                $       (2,665)   $       (8,040)    $       (22,634)    $      (28,101)
                                                    ==============    ==============     ===============     ==============

Diluted loss per share - as reported                $        (0.11)   $        (0.36)    $         (1.00)    $        (1.24)

Effect of stock-based employee
   compensation expense determined under
   the fair value method for all awards, net of
   related tax effects                                       (0.02)            (0.03)              (0.09)             (0.12)
                                                    --------------    --------------     ---------------     --------------
Diluted loss per share - pro forma                  $        (0.13)   $        (0.39)    $         (1.09)    $        (1.36)
                                                    ==============    ==============     ===============     ==============
</TABLE>

                                       7
<PAGE>

NOTE 2: RESTRUCTURING LIABILITIES AND ASSETS HELD FOR SALE

         In 2001, the Company completed certain restructuring initiatives
involving certain operations of its businesses. The Company discontinued the
manufacturing of hot-rolled coils at its welded tubular facilities in Wilder,
Kentucky and exited the special bar quality ("SBQ") business that was operated
from its Koppel, Pennsylvania facility. As a result of these actions, in March
2001, the Company recorded restructuring charges of $56.2 million, including
$43.4 million of asset impairment losses and $12.8 million of accruals for
estimated employee related costs and facilities closing costs.

         Following is a summary of the accrued restructuring liabilities and
activity for the nine months ended September 30, 2003:

<TABLE>
<CAPTION>
(in thousands)                   Current    Noncurrent      Total
                                --------    ----------     --------
<S>                             <C>         <C>           <C>
Balance, December 31, 2002      $  4,656     $  2,013     $  6,669
Cash payments                       (878)           -         (878)
Reclassifications                    240         (240)           -
                                --------     --------     --------
Balance, September 30, 2003     $  4,018     $  1,773     $  5,791
                                ========     ========     ========
</TABLE>

         The remaining liabilities are for the estimated costs to settle
operating contracts and payments for environmental remediation and landfill
closure costs. The cash payments in 2003 are primarily related to the closure of
the landfill formerly used by the Company's welded operations in Kentucky. The
remaining current restructuring liabilities are expected to be paid within the
next twelve months, but the timing of any payments depends on the results of
contract settlements and the progress of the landfill closure work. Based on
information currently available, the Company believes that the restructuring
reserves at September 30, 2003 are adequate. The non-current liabilities are
primarily related to post-closure maintenance and monitoring costs of the
landfill over the next thirty years, and are included in Other Long-term
Liabilities in the condensed consolidated balance sheet.

         The idled machinery and equipment and related inventories of spare
parts and supplies of the restructured operations are classified as Assets Held
for Sale on the Company's condensed consolidated balance sheet. An independent
broker is actively marketing the assets and sales amounted to $0.5 million
during the nine months ended September 30, 2003. See Note 10: Subsequent Event
for additional information related to the assets held for sale.

                                       8
<PAGE>

NOTE 3: COMPREHENSIVE INCOME (LOSS)

         The Company's other comprehensive income (loss) consists of unrealized
gains and losses on available-for-sale securities. Comprehensive losses for the
periods were as follows:

<TABLE>
<CAPTION>
                                      Three Months Ended            Nine Months Ended
                                         September 30,                 September 30,
(in thousands)                       2003           2002           2003           2002
                                  ----------     ----------     ----------     ----------
<S>                               <C>            <C>            <C>            <C>
Net loss                          $   (2,210)    $   (7,458)    $  (20,795)    $  (25,684)
Net unrealized gains (losses)            (70)          (380)           600           (687)
                                  ----------     ----------     ----------     ----------
Comprehensive loss                $   (2,280)    $   (7,838)    $  (20,195)    $  (26,371)
                                  ==========     ==========     ==========     ==========
</TABLE>

NOTE 4: BUSINESS SEGMENT INFORMATION

         The Company reports its operations in one reportable segment - the
Energy Products segment. The Energy Products segment consists primarily of
welded and seamless tubular products used in oil and natural gas drilling and
production operations (oil country tubular goods, or OCTG) and welded and
seamless line pipe used in the transmission of oil, natural gas and other
fluids. The Energy Products segment reflects the aggregation of the Company's
welded and seamless business units, which have similar products and services,
manufacturing processes, customers and distribution channels, and which is
consistent with both internal management reporting and resource and budgetary
allocations.

         Four customers accounted for 19%, 12%, 11% and 10% respectively, of the
Energy Products segment's sales for the nine months ended September 30, 2003,
and two of these same customers accounted for 17% and 12% of the segment's sales
for the nine months ended September 30, 2002.

<TABLE>
<CAPTION>
                            Three Months Ended              Nine Months Ended
                               September 30,                  September 30,
(in thousands)              2003           2002           2003           2002
                         ----------     ----------     ----------     ----------
<S>                      <C>            <C>            <C>            <C>
Net sales
   Welded products       $   34,314     $   24,500     $   87,660     $   68,842
   Seamless products         39,263         32,797        102,301         82,154
                         ----------     ----------     ----------     ----------
                         $   73,577     $   57,297     $  189,961     $  150,996
                         ==========     ==========     ==========     ==========
</TABLE>

<TABLE>
<CAPTION>
                         September 30,    December 31,
                             2003             2002
                         -------------    ------------
<S>                      <C>              <C>
Assets
   Energy Products       $     147,495    $    128,739
   Corporate                    18,085          51,555
                         -------------    ------------
                         $     165,580    $    180,294
                         =============    ============
</TABLE>

         Corporate assets consist primarily of cash, real estate and assets held
for sale.

                                       9
<PAGE>

NOTE 5: INVENTORIES

         Inventories consist of the following:

<TABLE>
<CAPTION>
                      September 30,      December 31,
(in thousands)             2003              2002
                      -------------     -------------
<S>                   <C>               <C>
Raw materials         $      17,292     $      20,108
Semi-finished and
  finished products          44,927            35,766
                      -------------     -------------
                      $      62,219     $      55,874
                      =============     =============
</TABLE>

NOTE 6: PRODUCT WARRANTIES

         The Company's products are used in applications which are subject to
inherent risks including well failures, performance deficiencies, line pipe
leaks, personal injury, property damage, environmental contamination or loss of
production. The Company warrants its products to meet certain specifications and
actual or claimed deficiencies from these specifications may give rise to
claims. The Company maintains reserves for asserted and unasserted warranty
claims. The warranty claim exposure is evaluated using historical claim trends
and information available on specifically known claims. The Company also
maintains product and excess liability insurance subject to certain deductibles
that may limit the exposure to these claims. The Company considers the extent of
insurance coverage in its estimate of the reserve. The incurrence of an
unusually large or number of claims could alter the Company's exposure and the
related reserves.

         The following table identifies changes in warranty reserves from
December 31, 2002 to September 30, 2003:

<TABLE>
<CAPTION>
(in thousands)
<S>                                           <C>
Balance, December 31, 2002                    $   1,842
   Accruals for warranties during the period        833
   Accruals related to changes in estimates         863
   Settlements made during the period              (687)
                                              ---------
Balance, September 30, 2003                   $   2,851
                                              =========
</TABLE>

                                       10
<PAGE>

NOTE 7: CREDIT FACILITY AND LONG-TERM DEBT

         In the second quarter of 2003, the Company redeemed the remaining $33.8
million of its 13 1/2% senior secured notes that were due on July 15, 2003. The
notes were redeemed at par plus accrued interest, and the redemption was funded
from existing cash balances and borrowings under the Company's credit facility.

         In connection with the note redemption, the Company amended its
revolving credit facility. The facility provides up to $45.0 million under a
borrowing formula that is based upon eligible inventory and accounts receivable,
subject to certain reserves and satisfaction of certain conditions to each draw
under the facility. Interest rates on the facility vary according to the amount
of loans outstanding and range from the prime rate plus 1.00% to prime plus
1.75% with respect to domestic rate loans, and from the LIBOR rate plus 2.50% to
LIBOR plus 3.25% with respect to LIBOR rate loans. The credit agreement contains
financial and other covenants, including a minimum level of earnings, as defined
in the agreement, and limitations on certain types of transactions, including
the ability of the Company's subsidiaries to declare and pay dividends. The
failure to meet finance covenants related to earnings could reduce the amount
available for borrowing. At September 30, 2003, the Company believes it was in
material compliance with these covenants. The facility is secured by a first
priority lien on substantially all of the Company's inventories, accounts
receivable, property, plant and equipment and related intangibles.

         As of September 30, 2003, the Company had outstanding loans of $12.5
million under the credit facility with an average weighted interest rate of
3.6%. In addition, $5.0 million of letters of credit were issued against the
credit facility as collateral on self-insured workers compensation claims. The
Company had approximately $25.6 million in additional borrowing availability
under the facility as of September 30, 2003.

NOTE 8: SHELF REGISTRATION

         In July 2002, the Company filed a universal shelf registration
statement with the SEC for the issuance and the sale from time to time to the
public of up to $100 million in securities, including debt, preferred stock,
common stock and warrants. The SEC declared the registration statement effective
in September 2002. The Company may sell the securities in one or more separate
offerings in amounts, at prices and on terms to be determined at the time of
sale. No securities have been sold pursuant to the shelf registration. If and
when the Company offers any securities under this registration statement, the
Company will prepare and make available a prospectus supplement that includes
the specific terms of the securities being offered.

                                       11
<PAGE>

NOTE 9: 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
environmental matters, 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 currently available information, management does
not believe that any such matters will have, individually or in the aggregate, a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

         In March 2001, in connection with its restructuring, Newport closed its
electric arc furnace operation and as such, ceased using oxygen and argon that
was provided under a supply agreement with Air Products and Chemicals, Inc.
("Air Products"). On December 31, 2001, Air Products filed a civil action
against Newport and NS Group, Inc. in the United States District Court for the
Eastern District of Pennsylvania, Civil Action No. 01-7227, seeking damages for
breach of contract. Based upon its analysis of current available information,
the Company believes that the resolution of this matter will not have a material
adverse effect on 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.

         The Company operates a steel mini-mill at its Koppel, Pennsylvania
facility that produces dust that contains lead, cadmium and chromium, and is
classified as a hazardous waste. Dust produced by its electric arc furnace is
collected through emission control systems and recycled at EPA-approved
facilities.

                                       12
<PAGE>

         In October 2002, the United States Environmental Protection Agency
("EPA") issued a Notice of Violation ("NOV") to Newport for certain alleged
violations dating from 1998 to April 2000 of its Clean Air Act emission permit
for Newport's electric arc furnace that was installed in 1999 and shuttered in
early 2001. The NOV alleges that the permit issued to Newport in June 1998 was
based upon an incorrect analysis as to potential emissions, and thus represented
a violation of the Clean Air Act. In addition, the EPA has alleged certain
violations of the Clean Water Act occurred at Newport's Wilder facility in 1998.
Newport and the EPA have reached a tentative settlement for all these issues,
subject to finalizing the required Agreed Order. The proposed resolution of
these claims in accordance with the tentative settlement will not have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

         The Company has a hazardous waste landfill on its property in Wilder,
Kentucky, which it no longer uses. In connection with the March 2001
restructuring actions, in which the Company closed Newport's melt shop and hot
strip mill operations, the Company accrued the estimated costs for closure and
post-closure care of the landfill. These costs were included in restructuring
charges in the first quarter of 2001. In March 2003, the Kentucky Division of
Waste Management issued a RCRA Part B permit modification to Newport that
incorporated the Company's closure plan for the facility. Work has begun on the
closure of the landfill and the Company expects the work to be completed by the
end of 2003.

         In late 2001, the EPA designated Imperial Adhesives, Inc., a former
subsidiary of the Company, as one of a number of potentially responsible parties
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") at an environmental remediation site. The EPA has contended that any
company linked to a CERCLA site is potentially liable for costs under the legal
doctrine of joint and several liability. This environmental remediation site
involves a municipal waste disposal facility owned and operated by an
independent operator. A preliminary study of the site is in its early stages.
Consequently, it is too early to determine the Company's liability exposure. The
Company believes, however, that the reasonably foreseeable resolution of this
matter will not have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.

         At September 30, 2003 and December 31, 2002, the Company had accrued
$4.4 million and $5.2 million, respectively, for environmental remediation
obligations. 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
on 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.

                                       13
<PAGE>

NOTE 10: SUBSEQUENT EVENT

         In October 2003, the Company entered into a contract to sell a majority
of its assets classified as Assets Held for Sale in its September 30, 2003
condensed consolidated balance sheet. The net sale price for the assets
approximates their recorded book value. Pursuant to the terms of the contract,
the Company will receive cash payments over the period the assets are removed,
which is expected to last until mid-year 2004. The sale is conditioned upon
finalizing a definitive letter of credit with the buyer.

                                       14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         We make forward-looking statements in this report that 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:

         -   world-wide and domestic supplies of and demand for natural gas and
             oil;

         -   fluctuations in industry-wide tubular inventory levels;

         -   domestic and foreign competitive pressures;

         -   the level of imports and the presence or absence of governmentally
             imposed trade restrictions;

         -   steel coil and steel scrap price volatility;

         -   manufacturing efficiencies;

         -   costs of compliance with environmental regulations;

         -   asserted and unasserted claims;

         -   general economic conditions; and

         -   other risks and uncertainties described in various sections of the
             Company's recent filings with the Securities and Exchange
             Commission ("SEC") under the Securities Act of 1933 and the
             Securities Act of 1934, including those set forth in Exhibit 99.1
             "Risk Factors" to the Company's Annual Report on Form 10-K for the
             year ended December 31, 2002.

         In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur. In addition,
actual results could differ materially from those suggested by the
forward-looking statements. Accordingly, you should not place undue reliance on
the forward-looking statements, which speak only as of the date on which they
are made. We may not update these forward-looking statements, even though our
situation may change in the future, unless we are obligated under federal
securities laws to update and disclose material developments related to
previously disclosed information. We qualify all of our forward-looking
statements by these cautionary statements.

         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.

                                       15
<PAGE>

                              RESULTS OF OPERATIONS

OVERVIEW / OUTLOOK

         Our tubular products, commonly referred to as oil country tubular goods
("OCTG"), are primarily used in oil and natural gas drilling and production
operations. The demand for OCTG 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, among other things, dependent
on the current and anticipated supply and demand for oil and natural gas. Oil
and natural gas prices are volatile and can have a substantial effect upon
drilling levels and resulting demand for our energy related products. In
addition, 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 by imports of OCTG products.

         The number of oil and natural gas drilling rigs in operation in the
United States is referred to as "rig count". In response to strong oil and
natural gas prices, rig count has risen throughout the first nine months of
2003, reaching 1,107 on October 31, 2003. The average rig count for the three
months and nine months ended September 30, 2003 was 1,088 and 1,001,
respectively, up 27.5% and 20.6%, respectively, from the average rig count for
the comparable periods in 2002. Based upon current settlement prices for natural
gas futures, we expect the current levels of drilling activity to continue
through 2004.

         In November 2001, the United States International Trade Commission
("ITC"), reported injury from various imported steel products under Section 201
of the 1974 Trade Act and recommended to the President of the United States a
wide-scale program of quotas and duties. However, the ITC recommendation for
quotas and duties did not include imports of oil country tubular goods and, as a
result, we expect to continue to experience high levels of competition from
imports. According to published industry reports and our estimates, imports of
OCTG products accounted for 24% and 22%, respectively, of the total domestic
market during the first nine months of 2003 and 2002.

         On March 5, 2002, the President of the United States announced his
remedy decision in response to the ITC's Section 201 investigation on steel
imports. Under the remedy decision, effective March 21, 2002, tariff rates of
30%, 24% and 18% will be applied to imports of hot-rolled coil for the next
three years, respectively. Imports from Canada, Mexico, and certain other
countries are exempt from the tariffs. The tariffs have had the effect of
increasing the cost of imported hot-rolled coils, which, in turn, increases the
cost of domestic hot-rolled coils. Increases in our steel costs have adversely
affected, and will continue to adversely affect, our financial results if we are
not able to successfully raise the price of our products to compensate for the
increased costs.

         Since 1995, the U.S. government has been imposing duties on imports of
various OCTG products from Argentina, Italy, Japan, Korea and Mexico in response
to antidumping and countervailing duty cases filed by several U.S. companies. In
June 2001, the ITC voted to continue these duties for five more years; various
appeals have been filed and are pending.

                                       16
<PAGE>

         We cannot predict the U.S. government's future actions regarding duties
and tariffs on imports or other trade restrictions on imports of OCTG and line
pipe products.

         Since June 2001, when we completed restructuring initiatives involving
certain operations of our businesses, we have operated two business units that
are aggregated into one reportable segment - the Energy Products segment. Our
Energy Products segment includes tubular steel products that are used in the
energy industry. These products include welded and seamless tubular goods,
primarily used in oil and natural gas drilling and production operations. We
also produce welded and seamless line pipe products, which are used in the
transmission of oil and natural gas, as well as a limited amount of other
tubular products.

         You should read Note 4 to the unaudited condensed consolidated
financial statements included in this report for additional business segment
financial information.

THIRD QUARTER AND NINE MONTHS OF 2003 COMPARED TO THIRD QUARTER AND NINE MONTHS
OF 2002.

         The Company's net sales, gross profit (loss), operating loss and tons
shipped for the three and nine months ended September 30, 2003 and 2002 are
summarized in the following table:

<TABLE>
<CAPTION>
                           Three Months Ended         Change           Nine Months Ended           Change
(dollars in thousands)        September 30,        2003 vs 2002          September 30,          2003 vs 2002
                          --------------------    ---------------    ----------------------    ---------------
                            2003        2002         $        %        2003         2002         $         %
                          --------    --------    -------   -----    ---------    ---------    ------    -----
<S>                       <C>         <C>         <C>       <C>      <C>          <C>          <C>       <C>
Net sales
   Welded products        $ 34,314    $ 24,500     9,814     40.1    $  87,660    $  68,842    18,818     27.3
   Seamless products        39,263      32,797     6,466     19.7      102,301       82,154    20,147     24.5
                          ------------------------------------------------------------------------------------
                          $ 73,577    $ 57,297    16,280     28.4    $ 189,961    $ 150,996    38,965     25.8
                          ====================================================================================

Gross profit (loss)       $  1,210    $   (318)    1,528    480.5    $  (6,241)   $  (6,298)       57      0.9

Selling, general and
 administrative           $  3,233    $  5,189    (1,956)   (37.7)   $  11,516    $  13,383    (1,867)   (14.0)

Operating loss            $ (2,023)   $ (5,507)    3,484     63.3    $ (17,757)   $ (19,681)    1,924      9.8

Tons shipped
   Welded products          73,400      54,000    19,400     35.9      194,400      158,300    36,100     22.8
   Seamless products        46,900      41,200     5,700     13.8      127,800       98,700    29,100     29.5
                          ------------------------------------------------------------------------------------
                           120,300      95,200    25,100     26.4      322,200      257,000    65,200     25.4
                          ====================================================================================
Revenue per ton
   Welded products        $    467    $    454        13      2.9    $     451    $     435        16      3.7
   Seamless products      $    837    $    795        42      5.3    $     800    $     831       (31)    (3.7)

Average rig count            1,088         853       235     27.5        1,001          830       171     20.6
</TABLE>

                                       17
<PAGE>

NET SALES

         The increases in net sales for both the three and nine months of 2003
as compared to the comparable periods of 2002 were attributable to the higher
volume of shipments of both welded and seamless products. The increases in net
sales were also attributable to an increase in average revenue per ton, with the
exception for the nine month comparable period, where we experienced a decrease
in average revenue per ton for our seamless products that resulted in part from
a change in product mix toward lower priced products.

         The increases in shipments in both our welded and seamless energy
products were caused by a higher consumption of OCTG products in light of
increased drilling activity during the first nine months of 2003 as compared to
the same period of 2002.

GROSS PROFIT AND LOSSES AND OPERATING LOSSES

         We reported a gross profit of $1.2 million and a gross loss of $6.2
million, respectively, for the three and nine months ended September 30, 2003,
compared to gross losses of $0.3 million and $6.3 million in the comparable
periods in 2002. Operating losses were $2.0 million and $17.8 million,
respectively, for the three and nine months ended September 30, 2003 and were
$5.5 million and $19.7 million, respectively, for the comparable periods in
2002.

         Our gross margins improved for the comparable three-month periods as a
result of higher absorption of fixed costs due to higher operating levels in
2003 compared to the same period of 2002. Also, higher average revenue per ton
contributed to the improvement. These factors were partially offset by higher
purchased steel scrap and coil costs in the three and nine month periods of 2003
versus the comparable periods of a year ago.

         Depreciation expense was lower by $1.4 million and $3.1 million,
respectively, for the three and nine months ended September 30, 2003 than for
the comparable periods in 2002. The lower depreciation expense is the result of
the machinery and equipment placed in service in 1991 for the opening of our
seamless operations becoming fully depreciated.

         As a result of recent steel coil price announcements by our suppliers,
we expect our purchased coil costs to increase in the fourth quarter of 2003 and
at least the first quarter of 2004 over our purchase costs incurred in the third
quarter of 2003. There can be no assurance that we will be able to successfully
raise the price of our welded tubular products to compensate for any increased
costs in steel coils.

                                       18
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses were lower by $2.0 million
and $1.9 million, respectively, for the three and nine months ended September
30, 2003 when compared to the comparable periods in 2002. The decrease for both
periods is primarily the result of our recognizing in the third quarter of 2002
reorganization costs and professional fees incurred in connection with reviews
for improvements in our business processes. In addition, reductions in personnel
and associated costs also contributed to the decreases in expenses.

INTEREST EXPENSE

         Interest expense for the three and nine months ended September 30, 2003
was $1.3 million and $3.7 million lower, respectively, than the comparable
periods in 2002. The reductions in expense are the result of a $35.0 million
repayment of our 13 1/2% senior secured notes in July 2002, and a $33.8 million
reduction of the notes in June 2003. As a result of the retirement of our senior
secured notes in June 2003, and the lower interest rates available under our
revolving credit facility, we expect interest expense to be lower for the
remainder of 2003 when compared to 2002 expense amounts.

INVESTMENT INCOME (LOSS)

         Net investment income decreased $1.3 million for the nine months ended
September 30, 2003, as compared to the comparable period of 2002. The net
investment loss for the first nine months of 2003 includes $0.5 million of
realized losses on investments compared to $0.4 million of realized losses in
the first nine months of 2002. Investment income in 2003 is also lower than 2002
amounts because of using our investments to pay off our senior secured notes in
2002 and 2003.

OTHER INCOME, NET

         In the three months ended September 30, 2002, we recognized $0.6
million of charges related to the early extinguishment of debt and reported the
charges as extraordinary charges. Statement of Financial Accounting Standards
No. 145, "Rescission of SFAS No. 4, 44, and 64, Amendment of SFAS No.13, and
Technical Corrections", became effective for us on January 1, 2003, and
accordingly, we have reclassified the extraordinary charges to other income in
accordance with the pronouncement.

INCOME TAXES

         We exhausted our federal income tax refund capability in 1999, and
accordingly, tax benefits from operating losses are offset by valuation
allowances, resulting in no net federal tax benefit being recorded for losses.

                                       19
<PAGE>

NET LOSS

         We reported a net loss of $2.2 million, or an $0.11 loss per diluted
share, for the three months ended September 30, 2003, compared to a net loss of
$7.5 million, or a $0.36 loss per diluted share, for the three months ended
September 30, 2002. For the nine months ended September 30, 2003, we reported a
net loss of $20.8 million, or a $1.00 loss per diluted share, compared to a net
loss for the nine months ended September 30, 2002 of $25.7 million, or a $1.24
loss per diluted share.

                         LIQUIDITY AND CAPITAL RESOURCES

         Working capital at September 30, 2003 was $34.9 million compared to
$43.0 million at December 31, 2002. The working capital decrease was primarily
due to our use of cash to repay our 13 1/2% senior secured notes and to fund
operating losses for the period. Our current ratio was 1.5 to 1 at September 30,
2003 compared to 1.6 to 1 at December 31, 2002.

OPERATING CASH FLOWS

         Cash used by operating activities for the nine months ended September
30, 2003 was $10.7 million and resulted from a $16.2 million increase in
accounts receivable and a $6.3 million increase in inventories, offset by
increases of $19.8 million and $5.6 million in accounts payable and accrued
liabilities, respectively. The increase in our accounts receivable balance is
the result of higher sales in the third quarter of 2003 as compared to sales in
the fourth quarter of 2002. The increase in inventories was to meet increases in
customer demand. The increase in accounts payable is directly related to the
higher production levels experienced in third quarter of 2003. Accrued
liabilities increased principally as the result of a $5.5 million increase in
deferred revenue, partially offset by a lower balance of accrued interest due to
the payoff of our senior secured notes in the second quarter of 2003.

         Cash used by operating activities for the nine months ended September
30, 2002 was $30.8 million and resulted from a $19.1 million increase in
inventories, partially offset by increases of $3.4 million and $1.2 million in
accounts payable and accrued liabilities, respectively. We added to our
inventory levels in the first half of 2002 to minimize expected higher coil
costs and to meet anticipated increased customer demand in the second half of
2002. Accrued liabilities increased principally as the result of an increase in
deferred revenue, partially offset by a lower balance of accrued interest
because of a reduced balance of debt and differing interest accrual periods.

INVESTING CASH FLOWS

         Cash flows from investing activities were $5.4 million and $9.0 million
for the nine months ended September 30, 2003 and 2002, respectively. Proceeds
from the sales of long-term investments in both years were used for general
corporate purposes. Other, net in 2003 includes $1.9 million from the
cancellation of corporate owned life insurance policies. We made capital
investments of $0.7 million and $1.7 million in the first nine months of 2003
and 2002, respectively, primarily for maintenance capital. We currently estimate
total capital spending for 2003 will be $1.2 million.

                                       20
<PAGE>

FINANCING CASH FLOWS

         In the second quarter of 2003, we redeemed the remaining $33.8 million
of our 13 1/2% senior secured notes that were due on July 15, 2003. The notes
were redeemed at par plus accrued interest and were funded from existing cash
balances and borrowings under our credit facility.

         In connection with the note redemption, we amended our revolving credit
facility. The facility provides up to $45.0 million under a borrowing formula
that is based upon eligible inventory and accounts receivable, subject to
certain reserves and satisfaction of certain conditions to each draw under the
facility. Interest rates on the facility vary according to the amount of loans
outstanding and range from the prime rate plus 1.00% to prime plus 1.75% with
respect to domestic rate loans, and from the LIBOR rate plus 2.50% to LIBOR plus
3.25% with respect to LIBOR rate loans. The credit agreement contains financial
and other covenants, including a minimum level of earnings, as defined in the
agreement, and limitations on certain types of transactions, including the
ability of the Company's subsidiaries to declare and pay dividends. The failure
to meet these the financial covenants related to earnings could reduce the
amount available for borrowing. At September 30, 2003, we were in compliance
with these covenants. The facility is secured by a first priority lien on
substantially all our inventories, accounts receivable, property, plant and
equipment and related intangibles.

         As of September 30, 2003, we had outstanding loans of $12.5 million
under the credit facility. In addition, $5.0 million of letters of credit were
issued against the credit facility as collateral on self-insured workers
compensation claims. In addition, we had approximately $25.6 million in
additional borrowing availability under the facility as of September 30, 2003.

         Included in the proceeds from issuance of common stock for the nine
months of 2003 is $0.7 million resulting from the exercise of common stock
warrants and the issuance of 187,184 of our common shares.

         In October 2003, we entered into a contract to sell a majority of our
assets classified as Assets Held for Sale in our September 30, 2003 condensed
consolidated balance sheet. The net sale price for the assets approximates their
recorded book value. Pursuant to the terms of the contract, we will receive cash
payments over the period the assets are removed, which is expected to last until
mid-year 2004. The sale is conditioned upon finalizing a definitive letter of
credit with the buyer.

         We believe that existing resources, including our revolving credit
facility, together with cash flow from operations and other borrowing sources,
will be sufficient to meet anticipated cash flow requirements for at least the
next twelve months, even in the event that availability under our revolving
credit facility is reduced as a result of failure to meet a covenant.

                                       21
<PAGE>

         In July 2002 we filed a universal shelf registration statement for the
issuance and sale from time to time to the public of up to $100 million in
securities, including debt, preferred stock, common stock and warrants. The SEC
declared the shelf registration effective in September 2002. No securities have
been sold under this registration statement. We believe that the shelf
registration statement will assist in providing us with flexibility in raising
debt and/or equity financing in order to implement our strategic plan.

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The preparation of consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to allowance for bad debts, inventories, investments, long-lived
assets, income taxes, customer claims, product liability, restructuring
liabilities, environmental contingencies and litigation. We base our estimates
on historical experience and on various other assumptions that we believe are
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The critical accounting
policies we believe affect our more significant judgments and estimates used in
the preparation of our consolidated financial statements are included in Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's Form 10-K for the year ended December 31, 2002, and
have not changed materially since that time.

                      RECENTLY ISSUED ACCOUNTING STANDARDS

         Effective January 1, 2003, we adopted Statement of Financial Accounting
Standards No. 145, "Rescission of SFAS No. 4, 44, and 64, Amendment of SFAS
No.13, and Technical Corrections" ("SFAS No. 145"). SFAS No. 145 requires gains
and losses on early extinguishment of debt to not be classified as extraordinary
items as previously required under SFAS No. 4. SFAS No. 145 further requires any
gain or loss on extinguishment of debt that was classified as an extraordinary
item in prior periods presented to be reclassified. Previously recorded losses
on the early extinguishment of debt that were classified as an extraordinary
item in prior periods have been reclassified to Other Income, net. The adoption
of SFAS No. 145 had no effect on our consolidated financial position,
consolidated results of operations, or cash flows.

                                       22
<PAGE>

         In December 2002, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," ("SFAS No. 148"). SFAS No. 148 amends SFAS No. 123 to provide
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation.
SFAS No. 148 also amends the disclosure provisions of SFAS No. 123 to require
disclosure about the effects on reported net income of an entity's stock-based
employee compensation in interim financial statements. We adopted SFAS No. 148
on January 1, 2003. We did not change to the fair value based method of
accounting for stock-based employee compensation. Accordingly, the adoption of
SFAS No. 148 would only affect our financial condition or results of operations
if we elect to change to the fair value method specified in SFAS No. 123. The
adoption of SFAS No. 148 required us to disclose the effects of our stock-based
employee compensation in interim financial statements beginning with the first
quarter of 2003 (see Note 1).

         In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No.
149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. The amendments set forth in SFAS No. 149 improve
financial reporting by requiring that contracts with comparable characteristics
be accounted for similarly. SFAS No. 149 is generally effective for contracts
entered into or modified after June 30, 2003 and for hedging relationships
designated after June 30, 2003. The adoption of SFAS No. 149 had no effect on
our consolidated financial position, consolidated results of operations, or cash
flows.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity"
("SFAS No. 150"). SFAS No. 150 requires certain financial instruments that
embody obligations of the issuer and have characteristics of both liabilities
and equity to be classified as liabilities. The provisions of SFAS No. 150 are
effective for financial instruments entered into or modified after May 31, 2003
and to all other instruments that exist as of the beginning of the first interim
financial reporting period beginning after June 15, 2003. We have issued no
financial instruments that meet the provisions of SFAS No. 150; therefore,
adopting the provisions of SFAS No. 150 had no effect on our consolidated
financial position, consolidated results of operations, or cash flows.

                                       23
<PAGE>

         Effective January 1, 2003, we adopted FASB Interpretation No.
45,"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB
Statements No. 5, 57, and 107 and Rescission of FASB Interpretation No. 34"
("FIN No. 45"). The interpretation requires that upon issuance of a guarantee,
the entity must recognize a liability for the fair value of the obligation it
assumes under that guarantee. In addition, FIN No. 45 requires disclosures about
the guarantees that an entity has issued, including a roll forward of the
entity's product warranty liabilities. This interpretation is intended to
improve the comparability of financial reporting by requiring identical
accounting for guarantees issued with separately identified consideration and
guarantees issued without separately identified consideration. Adoption of this
Interpretation had no effect on our consolidated financial position,
consolidated results of operations, or cash flows.

         In January 2003, the FASB issued FASB Interpretation No. 46,
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
("FIN No. 46"). The interpretation requires certain variable interest entities
to be consolidated by the primary beneficiary of the entity if the equity
investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. FIN No. 46 is effective for all new variable interest entities
created or acquired after January 31, 2003. We have not utilized such entities
and therefore the adoption of FIN No. 46 had no effect on our consolidated
financial position, consolidated results of operations, or cash flows.

         In November 2002, the FASB reached a consensus on EITF Issue No. 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables." This issue
addresses how to account for arrangements that may involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
final consensus of this issue is applicable to agreements entered into in fiscal
periods beginning after June 15, 2003. Additionally, companies will be permitted
to apply the consensus guidance in this issue to all existing arrangements as
the cumulative effect of a change in accounting principle in accordance with APB
Opinion No. 20, "Accounting Changes." The adoption of this issue had no effect
on our consolidated financial position, consolidated results of operations, or
cash flows.

                                  OTHER MATTERS

OTHER

         You should read Note 9 to the notes to condensed consolidated financial
statements for information pertaining to commitments and contingencies.

                                       24
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We have not used derivative financial instruments for any purpose
during the three and nine months ended September 30, 2003 and 2002, including
trading or speculating on changes in interest rates or commodity prices of
materials.

         Purchased steel, in the form of hot-rolled coils and steel scrap,
represents the largest portion of our cost of goods sold. The price and
availability of steel coils and scrap that we use in our manufacturing processes
are highly competitive and volatile. Various factors, most of which are beyond
our control, affect the supply and price of steel coils and scrap. We believe
that changes in steel coil and scrap costs have had a significant impact on our
earnings, and we expect that future changes will continue to significantly
impact our earnings.

         We are exposed to market risk for changes in interest rates for
borrowings under our revolving credit facility. Borrowings under the credit
facility bear interest at variable rates, and the fair value of the borrowings
are not significantly affected by changes in market interest rates. If the
interest rates on our credit facility were to increase by 1%, assuming our
borrowings level at September 30, 2003, the increase in our interest expense
would be less than $0.2 million on an annualized basis.

         We purchase natural gas and electricity for our operations and,
therefore, have a limited market risk related to gas and electricity purchases
in the open market at spot prices. The prices of such purchases and futures
positions are subject to wide fluctuations due to unpredictable factors such as
weather, government policies and demand for natural gas and competitive fuels.
As a result, our earnings could be affected by changes in the price and
availability of gas and electricity. As market conditions dictate, we from time
to time will lock in future gas and electricity prices using fixed price
contracts.

ITEM 4. CONTROLS AND PROCEDURES

         Our management, with the participation of our Chief Executive Officer
and Chief Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated
under the Securities Exchange Act of 1934) as of the end of the period covered
by this Form 10-Q. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures
are effective for gathering, analyzing and disclosing the information we are
required to disclose in the reports we file under the Securities Exchange Act of
1934, within the time periods specified in the SEC's rules and forms. During the
quarter ended September 30, 2003, there was no change in our internal controls
over financial reporting that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.

                                       25
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Refer to "Legal Matters" in Note 9 to our condensed consolidated
financial statements included in Part I, Item 1 for a discussion of recent
developments related to our legal proceedings.

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

         Current Report on Form 8-K dated July 15, 2003, furnishing under Item 9
         the Company's press release announcing the dates and times of the
         Company's conference call reporting the results for the quarter ended
         June 30, 2003.

         Current Report on Form 8-K dated July 22, 2003, furnishing under Item 9
         the Company's earnings press release for the quarter ended June 30,
         2003.

                                   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: November 4, 2003                     By:  /s/ Rene J. Robichaud
                                           --------------------------
                                           Rene J. Robichaud
                                           President and Chief Executive Officer

Date: November 4, 2003                     By:  /s/ Thomas J. Depenbrock
                                           -----------------------------
                                           Thomas J. Depenbrock
                                           Vice President, Treasurer and
                                           Chief Financial Officer

                                       26
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Number                                                            Description
------                                                            -----------
<S>               <C>
3.1(a)            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.

3.1(b)            Articles of Amendment to the Amended and Restated Articles of Incorporation, dated November 4, 1998, filed
                  as Exhibit 3.1 to the Company's Form 10-Q for the quarter ended September 30, 2001, File No. 1-9838, and
                  incorporated herein by this reference.

3.2               Amended and Restated By-Laws of Registrant, dated July 30, 2003, filed as Exhibit 3.2 to the Company's
                  Form 10-Q for the quarter ended June 30, 2003, File No. 1-9838, and incorporated herein by this reference.

12.1              Computation of Ratio of Earnings to Fixed Charges, filed herewith.

31.1              Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a), filed herewith.

31.2              Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a), filed herewith.

32.1              Certification Pursuant to 18 U.S.C. Section 1350 and Exchange Act Rule 13a-14(b), filed herewith.

32.2              Certification Pursuant to 18 U.S.C. Section 1350 and Exchange Act Rule 13a-14(b), filed herewith.
</TABLE>

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