<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 JUNE 30, 2004

                          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, including zip code, 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 July 30, 2004, there were 21,005,818 shares outstanding of the Company's
common stock.

<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...........................................      26

Item 4.  Controls and Procedures................................      27

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings......................................      27

Item 4.  Submission of Matters to a Vote of Security Holders....      27

Item 6.  Exhibits and Reports on Form 8-K.......................      28
</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      Six Months Ended
                                               June 30,               June 30,
                                          2004         2003        2004         2003
                                        ---------    --------    ---------    ---------
<S>                                     <C>          <C>         <C>          <C>
Net sales                               $ 109,433    $ 65,909    $ 193,950    $ 116,384

Cost of products sold                      83,807      68,062      156,609      123,835
                                        ---------    --------    ---------    ---------
  Gross profit (loss)                      25,626      (2,153)      37,341       (7,451)

Selling, general and administrative         3,990       3,805        8,344        8,283
Restructuring charges                           -           -        1,897            -
                                        ---------    --------    ---------    ---------
  Operating income (loss)                  21,636      (5,958)      27,100      (15,734)

Investment income (loss)                       19         (47)          55         (163)
Interest expense                             (353)     (1,434)        (671)      (2,795)
Other income (expense), net                    20          69          (18)         107
                                        ---------    --------    ---------    ---------
  Income (loss) before income taxes        21,322      (7,370)      26,466      (18,585)
Provision for income taxes                    718           -          821            -
                                        ---------    --------    ---------    ---------
   Net income (loss)                    $  20,604    $ (7,370)   $  25,645    $ (18,585)
                                        =========    ========    =========    =========

Net income (loss) per common share -
   Basic                                $    0.98    $  (0.36)   $    1.23    $   (0.90)
                                        =========    ========    =========    =========
   Diluted                              $    0.96    $  (0.36)   $    1.20    $   (0.90)
                                        =========    ========    =========    =========

Weighted average shares outstanding -
   Basic                                   20,941      20,684       20,925       20,671
   Diluted                                 21,463      20,684       21,333       20,671
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         June 30,     December 31,
                                                                           2004             2003
                                                                       -----------    ------------
<S>                                                                    <C>            <C>
ASSETS                                                                 (Unaudited)
Current assets
 Cash and equivalents                                                    $   1,116    $   2,628
 Accounts receivable, net                                                   43,972       27,261
 Inventories                                                                90,903       66,568
 Operating supplies and other                                                9,638        9,734
 Assets held for sale                                                            -        7,000
                                                                         ---------    ---------
  Total current assets                                                     145,629      113,191
                                                                         ---------    ---------
 Property, plant and equipment, at cost                                    199,535      198,713
  Less accumulated depreciation                                           (155,435)    (152,759)
                                                                         ---------    ---------
                                                                            44,100       45,954
                                                                         ---------    ---------
 Other assets                                                                4,909        4,981
 Assets held for sale                                                        1,799        1,734
                                                                         ---------    ---------
  Total assets                                                           $ 196,437    $ 165,860
                                                                         =========    =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable                                                       $  31,461    $  24,507
  Accrued expenses and other liabilities                                    21,863       16,861
  Deferred revenue                                                          15,341        8,012
  Revolving credit facility                                                  2,226       14,936
  Other notes payable                                                          867          106
  Current portion of restructuring liabilities                                 488        3,653
  Current portion of long-term debt                                             40           40
                                                                         ---------    ---------
    Total current liabilities                                               72,286       68,115

Long-term debt                                                                 441          461
Deferred income taxes                                                          424          424
Postretirement benefits                                                      6,625        6,343
Restructuring liabilities                                                    2,068        1,909
                                                                         ---------    ---------
  Total liabilities                                                         81,844       77,252
                                                                         ---------    ---------

Shareholders' equity
  Preferred stock, no par value, 2,000 shares authorized                         -            -
  Common stock, no par value, 40,000 shares authorized,
   20,953 and 20,719, shares issued                                        285,239      284,787
  Treasury stock, at cost, 4,155 and 4,200 shares                          (35,112)     (35,420)
  Unearned compensation                                                       (370)         (50)
  Accumulated other comprehensive income                                        64           97
  Accumulated deficit                                                     (135,228)    (160,806)
                                                                         ---------    ---------
   Shareholders' equity                                                    114,593       88,608
                                                                         ---------    ---------
    Total liabilities and shareholders' equity                           $ 196,437    $ 165,860
                                                                         =========    =========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                                 NS GROUP, INC.
                  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                               Six Months Ended
                                                                     June 30,
                                                               2004          2003
                                                             --------    --------
<S>                                                          <C>         <C>
CASH FLOWS - OPERATING ACTIVITIES
  Net income (loss)                                          $ 25,645    $(18,585)
  Adjustments to reconcile net income (loss) to cash flows
  provided (used) by operating activities:
        Depreciation and amortization                           2,676       3,926
        Amortization of debt discount and finance costs           138         459
        Loss on sales of securities                                 -         453
        Restructuring charges                                   1,897           -
  Changes in operating assets and liabilities:
        Accounts receivable, net                              (16,711)    (19,514)
        Inventories                                           (24,335)     (2,942)
        Other current assets                                      963         (16)
        Accounts payable                                        6,133      14,937
        Accrued liabilities                                    12,330       5,680
        Income taxes payable                                      821           -
        Restructuring liabilities                              (4,903)        119
        Other, net                                                374         212
                                                             --------    --------
         Cash provided (used) by operating activities           5,028     (15,271)
                                                             --------    --------

CASH FLOWS - INVESTING ACTIVITIES
  Purchases of property, plant and equipment                     (822)       (438)
  Proceeds from sales of assets held for sale                   6,914           -
  Proceeds from investment sales                                    -       3,693
  Other                                                             -       2,406
                                                             --------    --------
        Cash provided by investing activities                   6,092       5,661
                                                             --------    --------

CASH FLOWS - FINANCING ACTIVITIES
  Repayments of long-term debt                                    (20)    (33,787)
  Net borrowing (repayments) under credit facility            (12,710)     17,890
  Increase (decrease) in other notes payable                     (106)        838
  Proceeds from exercise of stock options                         315         271
  Deferred financing costs                                       (111)       (367)
  Additions to cost of treasury shares                              -         (28)
                                                             --------    --------
        Cash used by financing activities                     (12,632)    (15,183)
                                                             --------    --------

Decrease in cash and equivalents                               (1,512)    (24,793)
Cash and equivalents at beginning of period                     2,628      29,357
                                                             --------    --------
Cash and equivalents at end of period                        $  1,116    $  4,564
                                                             ========    ========
Supplemental disclosure of cash flow information -
  Cash paid during the period for interest                   $    369    $  3,983
  Cash recovered during the period for income taxes          $      -    $    560
  Note issued for payment of insurance premium               $    973    $      -
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                                 NS GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED 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"). The significant subsidiaries are Newport Steel Corporation
("Newport") and Koppel Steel Corporation ("Koppel"). All significant
intercompany balances and transactions have been eliminated.

      The accompanying condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America for interim financial information and with the rules
and regulations of the Securities and Exchange Commission ("SEC"). Accordingly,
they do not include all of the information and footnotes for complete financial
statements as required by accounting principles generally accepted in the United
States of America. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have
been included in the financial statements. Operating results for an interim
period are not necessarily indicative of the results that may be expected for a
full year. Reference should be made to NS Group, Inc.'s Annual Report on Form
10-K for the year ended December 31, 2003 for additional footnote disclosure,
including a summary of significant accounting policies. Certain
reclassifications have been made to prior period balances in order to conform to
the current period presentation.

      USE OF ESTIMATES

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, 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 recorded estimates.

      EARNINGS AND LOSS PER SHARE

      Basic earnings and loss per share is computed by dividing net income or
loss 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 restricted stock units in 2004
and stock options and warrants in 2003.

                                       6
<PAGE>

      The following is a reconciliation of the average shares outstanding used
to compute basic and diluted earnings per share for the three and six months
ended June 30, 2004:

<TABLE>
<CAPTION>
                                                                    Three Months           Six Months
                                                                    Ended June 30,       Ended June 30,
                                                                    --------------       --------------
(in thousands)                                                          2004                 2004
                                                                    --------------       --------------
<S>                                                                 <C>                  <C>
Basic weighted average common shares outstanding                       20,941               20,925
Effect of dilutive securities - stock options and
 restricted stock units                                                   522                  408
                                                                       ------               ------

Diluted weighted average common shares outstanding                     21,463               21,333
                                                                       ======               ======
</TABLE>

      For the quarter and six months ended June 30, 2004, 0.7 million of stock
options were not included in the computation of diluted earnings per share
because the options' exercise price was greater than the average market price of
the common shares for the period and, therefore, the effect would be
antidilutive. Securities that could potentially result in dilution of basic loss
per share, through the issuance of 2.0 million of the Company's common shares
for the quarter and six months ended June 30, 2003, were not included in the
computation of diluted loss per share because to do so would be antidilutive.

      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
options granted in all periods shown 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. There were 89,500 and 152,000 stock options granted in the
first six months of 2004 and 2003, respectively. 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.

      In May 2004, the Company awarded 31,500 restricted stock units ("RSU") to
certain officers of the Company under the NS Group, Inc. Equity Plan. The units
vest in annual increments over three years. The market value of the RSUs on the
date of grant was $380,000 and is being amortized on a straight-line basis to
expense over the vesting period. The unamortized balance of unearned
compensation is included as a separate component of shareholders' equity.

                                       7
<PAGE>

      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 income (loss) and diluted net
income (loss) per common share would have been as follows:

<TABLE>
<CAPTION>
                                                    Three Months Ended      Six Months Ended
                                                         June 30,                June 30,
                                                    -------------------    --------------------
(in thousands, except per share amounts)              2004        2003       2004        2003
                                                    --------    -------    --------    --------
<S>                                                 <C>         <C>        <C>         <C>
Net income (loss) - as reported                     $ 20,604    $(7,370)   $ 25,645    $(18,585)

Add: Stock-based employee compensation
     included in reported net income (loss)               30         32          61          63
Deduct: Stock-based employee compensation
     expense determined under the fair value
     method for all awards, net of related tax
     effects                                            (367)      (624)       (766)     (1,447)
                                                    --------    -------    --------    --------

Net income (loss) - pro forma                       $ 20,267    $(7,962)   $ 24,940    $(19,969)
                                                    ========    =======    ========    ========

Diluted net income (loss) per common
     share - as reported                            $   0.96    $ (0.36)   $   1.20    $  (0.90)

Effect of stock-based employee
     compensation expense determined under
     the fair value method for all awards, net of
     related tax effects                               (0.02)     (0.02)      (0.04)      (0.07)
                                                    --------    -------    --------    --------
Diluted net income (loss) per common
     share - pro forma                              $   0.94    $ (0.38)   $   1.16    $  (0.97)
                                                    ========    =======    ========    ========
</TABLE>

NOTE 2: RESTRUCTURING LIABILITIES AND ASSETS HELD FOR SALE

      Restructuring Liabilities

      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 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 $42.8 million of
asset impairment losses and $12.8 million of accruals for estimated employee
related costs and facilities closing costs.

                                       8
<PAGE>

      Following is a summary of accrued restructuring liabilities and activity
for the six months ended June 30, 2004:

<TABLE>
<CAPTION>
(in thousands)               Current    Noncurrent      Total
                            --------    ----------     -------
<S>                         <C>         <C>            <C>
Balance, December 31, 2003   $ 3,653    $ 1,909        $ 5,562
  Cash payments               (4,903)         -         (4,903)
  Accruals                     1,687        210          1,897
  Reclassifications               51        (51)             -
                             -------    -------        -------
Balance, June 30, 2004       $   488    $ 2,068        $ 2,556
                             =======    =======        =======
</TABLE>


      In the first quarter of 2004, the Company recorded $1.9 million in
additional restructuring charges primarily related to the settlement of an
operating contract dispute. The restructuring liabilities were significantly
reduced in April 2004 as a result of the Company's $4.7 million payment in
accordance with the above-mentioned settlement. The current restructuring
liabilities at June 30, 2004 represent the estimated costs for environmental
remediation and monitoring costs and an operating contract. The non-current
restructuring liabilities are primarily related to estimated post-closure
maintenance and monitoring costs of the landfill over the next thirty years. At
June 30, 2004, the Company had $1.7 million of investments being held in a trust
account to fund the estimated costs of the closed landfill.

      Assets Held for Sale

      Assets of the closed operations, consisting of machinery and equipment,
spare parts and supply inventories, are classified as Assets Held for Sale in
the Company's consolidated balance sheet. The assets include the Company's best
estimates of the amounts expected to be realized on the sale of the assets.
While the estimates are based on an analysis of the facilities, including
valuations by independent appraisers, the amounts the Company will ultimately
realize could differ materially from the amounts assumed in reviewing for
impairment. The assets have been and are currently being actively marketed by an
outside broker.

      In October 2003, the Company entered into a contract to sell the majority
of its assets held for sale related to its welded tubular operations. The $7.0
million net sales price for the assets approximated the recorded book value of
the assets and was reclassified to current Assets Held for Sale in the December
31, 2003 consolidated balance sheet. In accordance with the contract, the
Company received the proceeds during the first six months of 2004.

                                       9
<PAGE>

NOTE 3: COMPREHENSIVE INCOME (LOSS)

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

<TABLE>
<CAPTION>
                                Three Months Ended        Six Months Ended
                                      June 30,                June 30,
                                -------------------    ----------------------
(in thousands)                    2004       2003        2004        2003
                                --------    -------    --------    ----------
<S>                             <C>         <C>        <C>         <C>
Net income (loss)               $ 20,604    $(7,370)   $ 25,645    $(18,585)
Net unrealized gains (losses)        (33)       198         (33)        670
                                --------    -------    --------    --------
Comprehensive income (loss)     $ 20,571    $(7,172)   $ 25,612    $(17,915)
                                ========    =======    ========    ========
</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 as they have similar economic characteristics such as products
and services, manufacturing processes, customers and distribution channels, and
is consistent with both internal management reporting and resource and budgetary
allocations.

      Three customers accounted for 30%, 11% and 10%, respectively, of the
Energy Products segment's sales for the six months ended June 30, 2004 and the
same three customers accounted for 19%, 14% and 11%, respectively, of sales for
the six months ended June 30, 2003.

<TABLE>
<CAPTION>
                                                Three Months Ended                  Six Months Ended
(in thousands)                                        June 30,                            June 30,
                                           -----------------------------        ----------------------------
                                                2004              2003              2004             2003
                                           ------------      -----------        -----------      -----------
<S>                                        <C>               <C>                <C>              <C>
Net sales
  Welded tubular products                  $     44,544      $    30,238        $    83,953      $    53,346
  Seamless tubular products                      64,889           35,671            109,997           63,038
                                           ------------      -----------        -----------      -----------
                                           $    109,433      $    65,909        $   193,950      $   116,384
                                           ============      ===========        ===========      ===========
</TABLE>

<TABLE>
<CAPTION>
                                              June 30,       December 31,
                                               2004              2003
                                           ------------      ------------
<S>                                        <C>               <C>
Assets
  Energy Products                          $    187,866      $   150,385
  Corporate                                       8,571           15,475
                                           ------------      -----------
                                           $    196,437      $   165,860
                                           ============      ===========
</TABLE>

                                       10
<PAGE>

      All corporate selling, general and administrative expenses are fully
allocated to the Energy Products segment. Corporate assets consist primarily of
cash, real estate, and assets held for sale.

NOTE 5: INVENTORIES

      Inventories consist of the following:

<TABLE>
<CAPTION>
                                          June 30,          December 31,
(in thousands)                               2004              2003
                                         ----------        --------------
<S>                                      <C>               <C>
Raw materials                            $   26,291        $    20,514
Semi-finished and
  finished products                          64,612             46,054
                                         ----------        -----------
                                         $   90,903        $    66,568
                                         ==========        ===========
</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 high number of claims could alter the Company's exposure and
the related reserves.

      The following table identifies  changes in warranty  reserves for 2004 and
2003:

<TABLE>
<CAPTION>
                                              Three Months Ended     Six Months Ended
                                                  June 30,              June 30,
                                              ------------------    -------------------
(in thousands)                                 2004       2003       2004        2003
                                              -------    -------    -------     -------
<S>                                           <C>        <C>        <C>         <C>
Balance, beginning of period                  $ 3,268    $ 2,562    $ 3,057     $ 1,842
  Accruals for warranties during the period       364        354        762         680
  Accruals (reversals) related to changes
   in estimates                                  (395)       220       (395)        862
  Settlements made during the period           (1,164)      (230)    (1,351)       (478)
                                              -------    -------    -------     -------
Balance, end of period                        $ 2,073    $ 2,906    $ 2,073     $ 2,906
                                              =======    =======    =======     =======
</TABLE>

NOTE 7: PENSION AND OTHER POSTRETIREMENT BENEFITS

                                       11
<PAGE>

      The components of periodic benefit costs for pension and postretirement
benefit expense are as follows:

<TABLE>
<CAPTION>
                                               Three Months Ended                 Six Months Ended
(in thousands)                                       June 30,                         June 30,
                                          -----------------------------      --------------------------
                                              2004             2003             2004           2003
                                          ------------       ----------      ---------       ----------
<S>                                       <C>                <C>             <C>             <C>
Pension
Service cost                              $         88       $    72         $     175       $    143
Interest cost                                       32            26                65             53
                                          ------------       -------         ---------       --------
                                          $        120       $    98         $     240       $    196
                                          ============       ======          =========       ========
</TABLE>

<TABLE>
<CAPTION>
                                               Three Months Ended                 Six Months Ended
(in thousands)                                       June 30,                         June 30,
                                          -----------------------------      --------------------------
                                               2004           2003              2004           2003
                                          ------------       ----------      ---------       ----------
<S>                                       <C>                <C>             <C>             <C>
Postretirement Benefits
Service cost                              $          4       $     4         $       9       $      6
Interest cost                                        6             6                11             12
Amortization of
 transition obligation                               7             7                14             14
                                          ------------       -------         ---------       --------
                                          $         17       $    17         $      34       $     32
                                          ============       =======         =========       =========
</TABLE>

NOTE 8: DEBT AND REVOLVING CREDIT FACILITY

      In the second quarter of 2003, the Company redeemed the remaining $33.8
million of its outstanding notes. The notes were redeemed at par plus accrued
interest, and were funded from existing cash balances and borrowings under the
Company's credit facility.

      The Company has a revolving credit facility that provides up to $50
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. At June 30, 2004, the Company was in compliance with these
covenants. The credit facility expires in March 2007.

                                       12
<PAGE>

      At June 30, 2004, the Company had $2.2 million in loans and $6.6 million
of letters of credit outstanding under the credit facility and approximately
$41.1 million in additional borrowing availability. The letters of credit were
issued against the credit facility as collateral for the Company's self-insured
workers compensation program. The weighted average interest rate on the credit
facility borrowings at June 30, 2004 was 5.0% compared to 3.78% at December 31,
2003. 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.

NOTE 9: 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.

NOTE 10:  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 available information, management does not believe
that any such matters will have, individually or in the aggregate, a material
adverse effect upon 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"). In connection with a suit in 2001 brought by Air Products
against Newport for breach of contract, the Company agreed in March 2004 to a
settlement and mutual release of all claims and paid $4.7 million to Air
Products in April 2004.

                                       13
<PAGE>

      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

      The Company has a hazardous waste landfill on its property in Wilder,
Kentucky that is being monitored according to a post-closure plan that was
approved by Kentucky Division of Waste Management. The Company has accrued the
estimated costs for the post-closure care of the landfill.

      In late 2001, the U.S. Environmental Protection Agency ("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 ongoing. Consequently, it is too early to determine the
Company's liability exposure.

      The Company had accrued liabilities of $3.4 million and $3.9 million at
June 30, 2004 and December 31, 2003, 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
upon the Company's consolidated financial position, results of operations or
cash flows. However, the Company cannot predict with certainty that new
information or developments with respect to its environmental contingency
matters, individually or in the aggregate, will not have a material adverse
effect on the Company's consolidated financial position, results of operations
or cash flows.

                                       14
<PAGE>

                                 NS GROUP, INC.

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

      We make forward-looking statements in this report, which represent our
expectations or beliefs about future events and financial performance. You can
identify these statements by forward-looking words such as "expect," "believe,"
"anticipate," "goal," "plan," "intend," "estimate," "may," "will" or similar
words. Forward-looking statements are subject to known and unknown risks,
uncertainties and assumptions, including:

      -     worldwide and domestic supplies of and demand for natural gas and
            oil;

      -     fluctuations in industry-wide tubular inventory levels;

      -     domestic competitive pressures;

      -     the level and pricing 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 under "Risk Factors"
            included in Exhibit 99.1 of our Annual Report on Form 10-K for the
            year ended December 31, 2003.

      In light of these risks, uncertainties and assumptions, the future 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 analysis of financial condition and results of
operations together with the unaudited condensed consolidated financial
statements included in this report.

                                       15
<PAGE>

OVERVIEW

      OUR PRODUCTS AND FACILITIES

      We are a domestic producer of seamless and welded tubular steel products
serving the energy industry. We conduct our business within a single reportable
business segment, which we refer to as the Energy Products segment. Our tubular
products, commonly referred to as oil country tubular goods ("OCTG"), are used
primarily in oil and natural gas drilling exploration and production operations.
We also manufacture line pipe, which is used as gathering lines for the
transmission of petrochemicals and hydrocarbons.

      Our products are manufactured and sold under two brands. Our Koppel brand
is our seamless tubular product manufactured at our facility located near
Koppel, Pennsylvania. Our Newport brand is our welded tubular product
manufactured at our tubular facilities located near Newport, Kentucky. The
primary geographic market for our products is the southwestern and Appalachian
regions of the United States and western regions of Canada. We also operate
tubular finishing facilities in the southwest United States, where we can
provide further finishing processes to our product.

      You should read Note 4 to the condensed consolidated financial statements
included in this report for additional information pertaining to segment data,
including concentrations.

ECONOMIC AND INDUSTRY-WIDE FACTORS THAT AFFECT OUR BUSINESS

      DEMAND FOR OUR PRODUCTS

      Approximately 90% of our revenues are derived from the sale of OCTG.
Therefore, our revenue is directly dependent on the demand for OCTG, which is
highly cyclical in nature. There are a number of factors that we monitor to
assist us in estimating the future demand for our OCTG product. Demand for our
OCTG products is dependent on the number and depth of oil and natural gas wells
being drilled in the United States and globally. The level of drilling activity
is, among other things, dependent on the current and anticipated 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.

                                       16
<PAGE>

      The average number of oil and natural gas drilling rigs in operation in
the United States is referred to as "rig count". For the periods presented, on
average, approximately 85% of the rigs were drilling for natural gas. The
average rig count for the periods below are as follows:

<TABLE>
<CAPTION>
                                                                 Change
                     Average Rig Count for Period             2004 vs 2003
                     -----------------------------      ------------------
Period                2004                 2003           Amount       %
--------             ------              ---------      --------   ------
<S>                  <C>                 <C>            <C>        <C>
1Q                    1,118                 897            221       24.6
2Q                    1,165               1,028            137       13.3
3Q                                        1,088
4Q                                        1,109
Year                                      1,029
</TABLE>

(Source: Baker Hughes)

      Natural gas prices rose steadily in the second half of 2002 and into 2003
due to low drilling levels during 2002 and increased demand for natural gas,
driven primarily by the winter weather of 2002/2003. These factors, together
with an improving U.S. economy, particularly in the second half of 2003 and
continuing into the first half of 2004, have resulted in strong drilling
activity. The rig count as of July 30, 2004 was 1,229. Based upon current
settlement prices for natural gas futures, we expect the current high level of
drilling activity will continue through the second half of 2004.

      Levels of OCTG inventories in the marketplace are also an indicator of
future demand for our products. U.S. end-users obtain OCTG from domestic and
foreign tubular producers and from drawdowns of inventory held by the end-user,
distributor or tubular producers. Based on published inventory reports, while
inventory levels increased in the first six months of 2004, the current level of
inventory per rig remains near historically low levels.

      IMPORTS

      Imports command a significant portion of the domestic OCTG market. We
believe import levels are affected by, among other things:

      -     currency exchange rates;

      -     overall world demand for OCTG;

      -     the trade practices of foreign governments and producers; and

      -     the presence or absence of antidumping, countervailing duty or other
            U.S. government orders that raise the cost or impose limits on
            imports.

      We estimate imports of OCTG products for the first six months of 2004
comprised approximately 26% of the total domestic market, compared to 23% in the
comparable period in 2003.

      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.

                                       17
<PAGE>

      We cannot predict the U.S. government's future actions regarding duties
and tariffs or any other future actions regarding import duties or other trade
restrictions on imports of OCTG and line pipe products. We expect to continue to
experience high levels of competition from imports.

      COSTS OF OUR PRODUCTS

      As a manufacturer of tubular steel products, the costs of our products
includes steel raw material costs, direct and indirect labor, energy costs and
other direct and indirect manufacturing costs. The primary raw material used in
our seamless operations is purchased steel scrap, which represented
approximately 20% of cost of goods sold for our seamless products in the first
six months of 2004. At our welded facility, purchased steel coil is the primary
raw material, which represented approximately 70% of cost of goods sold for our
welded products in the first six months of 2004. The steel industry, which is
highly cyclical and volatile in nature, can affect our costs both positively and
negatively. Various factors, most of which are beyond our control, affect the
price of steel scrap and coils. These factors include:

      -     steel supply and demand factors, both domestic and global;

      -     freight costs and transportation availability;

      -     steel inventory levels of brokers and distributors;

      -     the level of steel imports and exports; and

      -     general economic conditions.

      A number of the above-mentioned economic factors have combined to result
in significant increases in the cost of steel scrap and hot-rolled coils
beginning late in the fourth quarter of 2003 and continuing into 2004. The
following table illustrates the rise in our purchased steel scrap costs per ton
for the periods presented.

<TABLE>
<CAPTION>
             2004                                     2003
---------------------------    -------------------------------------------
1Q                   2Q          1Q          2Q             3Q         4Q
-----               ----       -----        ----           ----       ----
<S>                 <C>        <C>          <C>            <C>        <C>
$222                $180       $111         $115           $120        $138
</TABLE>

      The cost of purchased steel scrap declined in the second quarter of 2004
as compared to the first quarter of 2004 due to several supply-related factors.
We currently estimate that our cost of purchased steel scrap in the third
quarter of 2004 will approximate $254 per ton and would be an all-time high for
our seamless business.

      The increase in steel scrap costs has contributed to an increase in
hot-rolled coil costs used in the manufacture of our welded tubular products.
Also, steel coils are in high demand as a result of strong global economic
growth. U.S. supply has also been reduced due to the relatively low level of
imports, which has occurred for several reasons, including the low value of the
U.S. dollar relative to certain foreign currencies, and the high cost of ocean
freight. In addition, there are industry specific factors affecting steel coil
supply such as a tight supply of raw materials for integrated steel companies
and selected manufacturing outages within the steel industry. These factors have
resulted in the imposition of surcharges and base price increases from steel
suppliers to all steel consuming industries, including our industry.


                                       18
<PAGE>

      As a result of these factors, our second quarter 2004 purchased steel coil
costs were approximately $173 per ton and $257 per ton greater than the first
quarter of 2004 and the second quarter of 2003, respectively. We believe that
our purchased steel coil costs for the third quarter of 2004 will be
approximately $104 per ton greater than our 2004 second quarter purchased steel
coil cost.

      In addition to significantly higher steel prices, buyers of steel
products, including the OCTG industry, are experiencing extended lead times on
delivery of products and instances of cancellation of steel purchase orders. In
order to ensure a portion of our expected steel coil needs for the second half
of 2004, we have entered into a supply agreement at fixed volumes and base
prices with one of our major suppliers. The total amount of this commitment is
approximately $40 million.

      Since January 2004 the OCTG industry has been passing these increases in
steel costs through to its customers in the form of base price increases as well
as surcharges. These surcharges have essentially matched surcharges imposed by
steel coil producers, as they attempt to recover increases in their steel raw
material costs. We imposed surcharges on our shipments in January through April
2004 in the amounts of $20, $60, $115 and $140 per ton, respectively. Effective
with May 2004 shipments, our invoices for shipments have reflected one price,
inclusive of any surcharge.

      Our second quarter average revenue per ton for our welded and seamless
products increased $294 per ton and $162 per ton, respectively, over the first
quarter of 2004. Based on our expectation of customer demand for our products,
we estimate that our average revenue per ton for our welded and seamless
products in the third quarter of 2004 will increase by over $50 and $200 per
ton, respectively, over the amounts reported for the second quarter of 2004.
While our customers are currently placing orders at higher prices, there can be
no assurance that they will continue to pay higher prices for our tubular
products or that raw material supply will be consistently available to meet
demand. A decline in demand for our product could result in lower selling prices
which could result in an inability to fully recover our investment in inventory.

      OTHER

      We ship the majority of our tubular products to the southwest region of
the United States. Substantially all of these products are shipped via barge.
During the third quarter of 2004, the U.S. Army Corps of Engineers has scheduled
repairs on a lock that our products must pass through on the Ohio River at
Louisville, Kentucky. The scheduled repairs will close barge traffic for an
estimated two-week period. We do not believe that our shipments will be
negatively affected in the third quarter of 2004 by this event due to
contingency plans in place; however, there can be no assurance that our
shipments will not be negatively affected in the event that the planned closure
is longer than two weeks.

                                       19
<PAGE>

                              RESULTS OF OPERATIONS

      Our financial results and other data for the three and six months ended
June 30, 2004 and 2003 are summarized in the following table. Dollars are in
thousands except for per share amounts and revenue per ton.

<TABLE>
<CAPTION>
                          Three Months Ended           Change             Six Months Ended           Change
                               June 30,             2004 vs 2003               June 30,           2004 vs 2003
                         --------------------   ---------------------   --------------------   --------------------
                           2004        2003         $           %         2004       2003         $           %
                         ---------  ---------   ---------   ---------   ---------  ---------   ---------  ---------
<S>                      <C>        <C>         <C>         <C>         <C>        <C>         <C>        <C>
Net sales
    Welded products      $  44,544  $  30,238   $  14,306        47.3   $  83,953  $  53,346   $  30,607       57.4
    Seamless products       64,889     35,671      29,218        81.9     109,997     63,038      46,959       74.5
                         ---------  ---------   ---------   ---------   ---------  ---------   ---------  ---------
                         $ 109,433  $  65,909   $  43,524        66.0   $ 193,950  $ 116,384   $  77,566       66.6
                         ---------  ---------   ---------   ---------   ---------  ---------   ---------  ---------
Gross profit (loss)      $  25,626  $  (2,153)  $  27,779     1,290.2   $  37,341  $  (7,451)  $  44,792      601.2

Selling, general and
    administrative       $   3,990  $   3,805   $     185         4.9   $   8,344  $   8,283   $      61        0.7

Operating income (loss)  $  21,636  $  (5,958)  $  27,594       463.1   $  27,100  $ (15,734)  $  42,834      272.2

Net income (loss)        $  20,604  $  (7,370)  $  27,974       379.6   $  25,645  $ (18,585)  $  44,230      238.0

Net income (loss) per
    diluted share        $    0.96  $   (0.36)  $    1.32       366.7   $    1.20  $   (0.90)  $    2.10      233.3

Revenue per ton
    Welded products      $     862  $     449   $     413        92.0   $     693  $     441   $     252       57.1
    Seamless products    $   1,052  $     784   $     268        34.2   $     979  $     779   $     200       25.7

Tons shipped
    Welded products         51,700     67,400     (15,700)      (23.3)    121,100    121,000         100        0.1
    Seamless products       61,700     45,500      16,200        35.6     112,400     80,900      31,500       38.9
                         ---------  ---------   ---------   ---------   ---------  ---------   ---------  ---------
                           113,400    112,900         500         0.4     233,500    201,900      31,600       15.7
                         ---------  ---------   ---------   ---------   ---------  ---------   ---------  ---------

Average rig count            1,165      1,028         137        13.3       1,144        959         185       19.3
</TABLE>

NET SALES

      The increase in net sales for the three-month comparable period was
attributable to the significant increase in revenue per ton for both our welded
and seamless products, as well as a change in product mix toward higher-priced
seamless products. Net sales for the comparable six month periods increased for
the same reasons, as well as an increase in shipments. The increase in shipments
was caused by higher consumption of OCTG products in light of increased drilling
activity during the first six months of 2004 as compared to the first six months
of 2003. The increase in the average revenue per ton was primarily due to price
increases resulting from the increase in demand for tubular products as well as
the pass through of increased steel costs in the form of surcharges and base
price increases. The change in mix to a higher level of seamless product
shipments is partially the result of a

                                       20
<PAGE>

product shift from our welded manufacturing facility to our seamless
manufacturing facility, as well as a decline in demand for our welded products,
which we believe resulted, in part, from the significant increase in selling
prices.

GROSS PROFIT (LOSS)

      Our gross margins for the three and six months ended June 30, 2004
improved by $27.8 million and $44.8 million, respectively, from the comparable
periods of 2003 due to a number of factors. The three and six month periods
benefited from lower-priced inventory on hand at the beginning of the periods
relative to current replacement cost which, coupled with significantly higher
selling prices, resulted in higher than normal margins. We expect gross margins
for our welded operations to decline in the second half of 2004 as higher-priced
inventory costs are charged to cost of goods sold. Also, the periods benefited
from higher absorption of fixed costs due to the higher operating levels in 2004
and, for the six-month comparable periods, a $1.2 million decrease in
depreciation expense as the result of our initial investment in machinery and
equipment of our seamless operations becoming fully depreciated in the second
quarter of 2003.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

      Selling, general and administrative expenses for the three and six months
ended June 30, 2004 were relatively unchanged from the comparable periods in
2003, but represented 3.6% and 5.8% of 2004 and 2003 second quarter sales,
respectively, and 4.3% and 7.1% of 2004 and 2003 six month sales, respectively.
Decreases experienced in discretionary spending, product claims and wages from
the first half of 2003 were offset by $1.5 million of accruals for profit
sharing and incentive plans in the first six months of 2004.

RESTRUCTURING CHARGES

      We recorded additional restructuring charges of $1.9 million in the first
quarter of 2004 related primarily to an increase in the accrued liability for
the settlement of an operating contract that was cancelled in 2001 in connection
with the restructuring of our operations.

INVESTMENT INCOME, INTEREST EXPENSE AND INCOME TAXES

      Investment income was negligible in 2004 as we have had minimal
interest-bearing investments. The net investment loss for the six months ended
June 30, 2003 includes $0.5 million of realized losses on sales of investments.

      Interest expense for the three and six months ended June 30, 2004, was
$1.1 million and $2.1 million lower, respectively, than the comparable periods
in 2003 because of the redemption of the remaining $33.8 million in principal of
our 13 -1/2% senior secured notes in July 2003.

                                       21

<PAGE>

      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.
Income tax expense for the first six months of 2004 is computed at an estimated
combined federal and state effective tax rate for 2004 of approximately 3% and
assumes utilization of regular and alternative minimum tax net operating loss
carryforwards. See Other under Liquidity and Capital Resources, for further
discussion regarding our net operating loss carryfowards.

                         LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

      Our principal sources of liquidity have historically included cash flow
from operating activities, our revolving credit facilities and other sources of
financing through the capital markets. Our business is highly cyclical in
nature, and therefore our cash flows from operating activities can vary
significantly. We consider working capital items such as accounts receivable,
inventory, accounts payable and accrued liabilities as critical components to
managing our liquidity. We are currently dependent on cash flows from operations
and our credit facility to fund our working capital needs.

      As of June 30, 2004, we had $2.2 million in loans and $6.6 million of
letters of credit outstanding under our $50.0 million revolving credit facility
and approximately $41.1 million in additional borrowing availability. The
facility expires in March 2007. See Note 8 to the condensed consolidated
financial statements for additional information.

      We are 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 (each of which
is self-insured to certain levels) as well as commercial and other matters. We
accrue for the cost of such matters when the incurrence of such costs is
probable and can be reasonably estimated. See Note 6 to the condensed
consolidated financial statements for further discussion of product warranty
claims. While the ultimate amount and timing of payment for loss contingencies
can be difficult to determine, we do not believe that such amounts and the
timing of payment will result in a material adverse affect on our cash flows.

      In the first quarter of 2004, we reached a settlement agreement pertaining
to a dispute over an operating contract cancelled in connection with our
restructuring in 2001. This settlement agreement was satisfied with our payment
of $4.7 million in April 2004. See Notes 2 and 10 to the condensed consolidated
financial statements for further discussion.

      In 2003, we entered into a contract to sell a significant portion of our
assets held for sale. In accordance with the contract, through June 30, 2004, we
have received proceeds of $7.0 million for these assets.

                                       22

<PAGE>

      Based upon our current outlook, we believe cash flows from operations,
together with our credit facility and other sources, including the capital
markets, will be sufficient to meet our anticipated working capital and capital
expenditure requirements for at least the next twelve months.

WORKING CAPITAL

      Working capital at June 30, 2004 was $73.3 million compared to $45.1
million at December 31, 2003, and the ratio of current assets to current
liabilities at June 30, 2004 was 2.0 to 1 compared to 1.7 to 1 at December 31,
2003. The increase in working capital was primarily due to increases in accounts
receivable and inventories in excess of increases in accounts payable and
accrued liabilities, resulting from a substantial increase in business activity
and shipment volumes. At June 30, 2004 we had cash totaling $1.1 million and
borrowings against our credit facility were $2.2 million, down from $14.9
million at December 31, 2003.

OPERATING CASH FLOWS

      Cash provided by operating activities in the first six months of 2004 was
$5.0 million. We had an operating profit of $27.1 million for the period, which
included depreciation and amortization charges of $2.7 million. Operating
earnings were used to support a net increase of $25.3 million for the first six
months of 2004 in our operating assets and liabilities. Major components of the
changes in our operating assets and liabilities included a $16.7 million
increase in accounts receivable and a $24.3 million increase in inventories,
partially offset by increases of $6.1 million and $12.3 million in accounts
payable and accrued liabilities, respectively. The increase in our accounts
receivable balance was primarily the result of increased pricing, as well as an
increase in shipment levels. Our inventory balance increased because of higher
quantities of our seamless products on hand to meet increased shipment levels as
well as an overall increase in the steel raw material costs component of
inventory, particularly in our welded operations. Steel raw material costs also
contributed to the increase in our accounts payable. Accrued liabilities
increased principally as the result of a $7.3 million increase in deferred
revenue resulting from significantly increased selling prices, as well as the
higher level of business activity. Accrued liabilities also increased as a
result of an increase in accruals for profit sharing and incentive plans of $2.9
million. The majority of the Company's profit sharing and incentive plans are
based on annual results, and therefore, will not be paid until the first quarter
of 2005.

                                       23

<PAGE>

      Cash used by operating activities in the first six months of 2003 was
$15.3 million. This use of cash was primarily the result of an operating loss of
$15.7 million, which included depreciation and amortization charges of $3.9
million. In addition, changes in our operating assets and liabilities resulted
in a use of cash of $1.6 million in the first six months of 2003. Major
components of these changes were a $19.5 million increase in accounts
receivable, a $2.9 million increase in inventories, partially offset by
increases of $14.9 million and $5.7 million in accounts payable and accrued
liabilities, respectively. Accounts receivable balances increased as the result
of increased sales in the second quarter of 2003 as compared to the low levels
at the end of 2002. We added to our finished goods inventory levels in the first
six months of 2003 to meet anticipated increased customer demand. Accounts
payable increased as the result of higher production levels during the period.
Accrued liabilities increased principally as the result of a $5.2 million
increase in deferred revenue, partially offset by a lower balance of accrued
interest.

INVESTING CASH FLOWS

      Cash flows from investing activities in the first six months of 2004
provided $6.1 million as a result of receiving $6.9 million in net proceeds from
the sale of assets held for sale. For the first six months of 2003, investing
cash flows provided $5.7 million primarily as a result of sales of investments.
Capital investments were $0.8 million and $0.4 million for the first six months
of 2004 and 2003, respectively, and we currently estimate capital spending for
2004 to be approximately $5.0 million, primarily for cost improvement projects
and maintenance capital.

FINANCING CASH FLOWS

      We have a $50.0 million revolving credit facility that expires in March
2007. The facility has 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
facility 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 our subsidiaries to declare and pay
dividends. At June 30, 2004, we were in compliance with these covenants. The
facility is secured by a first priority lien on substantially all of our
inventories, accounts receivable, property, plant and equipment and related
intangibles. We made net repayments against our revolving credit facility of
$12.7 million in the first six months of 2004 and had $2.2 million in
outstanding loans under the facility as of June 30, 2004. As of June 30, 2004,
we had approximately $41.1 million in borrowing availability under the
agreement, based on eligible receivable and inventory balances and net of $6.6
million of outstanding letters of credit on such date.

                                       24

<PAGE>

OTHER

      Our ability to utilize net operating loss carryforwards ("NOL's") to fully
offset our taxable income is impacted by Section 382 of the U.S. Internal
Revenue Code ("Code"). Under the Code, NOL utilization is limited after a
"change in ownership," as defined, occurs. Trading activity by greater than 5%
owners of the Company's stock can cause the definition of a "change in
ownership" under the Code to be met. Based upon ownership reports currently
filed with the SEC, while we do not expect that a "change in ownership" under
the Code will occur in the near future, we cannot determine with certainty if,
or when, such a change may occur. If such a "change in ownership" occurs, the
utilization of our NOL's could become limited in future periods, which would
impact the recognition of our income tax provision and payments.

      In the second quarter of 2003, we redeemed the remaining $33.8 million of
our outstanding 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 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.

                   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, long-lived assets, income
taxes, customer claims, product liability, postretirement benefits,
restructuring liabilities, assets held for sale, 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 that 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, 2003, and have not changed materially since
that time.

                                       25

<PAGE>

                                  OTHER MATTERS

      You should read Note 10 to the notes to condensed consolidated financial
statements for information pertaining to commitments and contingencies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      We have not used derivative financial instruments for any purpose during
the periods shown, 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. Reference is made to "Overview - Economic and Industry-Wide
Factors that Affect our Business - Costs of Our Products" in Item 2 for
additional comments regarding steel costs.

      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 June 30, 2004, the increase in our interest expense would be less than
$0.1 million on an annualized basis.

      We purchase natural gas and electricity for our operations and, therefore,
have a 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.

                                       26

<PAGE>

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 June 30, 2004, 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.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      Refer to "Legal Matters" in Note 10 to our condensed consolidated
financial statements included in Part I, Item 1 for a discussion of recent
developments related to our legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The annual meeting of shareholders was held on May 12, 2004. In connection
with the meeting, proxies were solicited pursuant to the Securities Exchange Act
of 1934. The following actions were taken:

      The shareholders elected Mr. Clifford R. Borland, Mr. Patrick J. B.
Donnelly and Mr. Rene J. Robichaud as Class III Directors, to serve until the
May 2007 annual meeting. All Class I and II Directors continued in office after
the meeting. Mr. C. R. Borland, Mr. Donnelly and Mr. Robichaud were elected by a
vote of 19,372,436 shares, 19,401,036 shares and 19,400,436 shares,
respectively, and 195,135 shares, 166,535 shares and 166,635 shares,
respectively, withheld authority to vote.

      A proposal by the Board of Directors to ratify the appointment of Deloitte
& Touche LLP as the Company's independent auditors to conduct the annual audit
of the financial statements of the Company and its subsidiaries for the year
ending December 31, 2004, was approved by the shareholders. The shareholders
cast 18,598,349 votes in favor of this proposal and 951,203 votes against. There
were 18,019 abstentions.

      A proposal by the Board of Directors to adopt the NS Group, Inc. Equity
Plan was approved by the shareholders. The shareholders cast 12,427,087 votes in
favor of this proposal and 2,111,469 votes against. There were 71,048
abstentions and 4,957,967 broker non-votes.

                                       27
<PAGE>

      A proposal by the Board of Directors to adopt the NS Group, Inc.
Non-Employee Equity Plan was approved by the shareholders. The shareholders cast
12,604,888 votes in favor of this proposal and 1,931,223 votes against. There
were 73,493 abstentions and 4,957,967 broker non-votes.

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 April 6, 2004 furnishing under Item
            9 the Company's press release regarding the dates and times of NS
            Group, Inc.'s conference call reporting the results for the quarter
            ended March 31, 2004.

            Current Report on Form 8-K dated April 26, 2004 furnishing under
            Item 12 the Company's earnings press release for the quarter ended
            March 31, 2004.

            Current Report on Form 8-K dated June 28, 2004 furnishing under Item
            9 the Company's materials in the form of a slide show presentation
            and/or printed charts to various individual and institutional
            investors commencing June 28, 2004.

                                       28
<PAGE>

                                   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:  August 4, 2004                      By: /s/ Rene J. Robichaud
                                           -------------------------------------
                                           Rene J. Robichaud
                                           President and Chief Executive Officer

Date:  August 4, 2004                      By: /s/ Thomas J. Depenbrock
                                           -------------------------------------
                                           Thomas J. Depenbrock
                                           Vice President - Finance,
                                           Treasurer and Chief Financial Officer
                                           (Principal Financial Officer)

Date:  August 4, 2004                      By: /s/ Gerard J. Brinkman
                                           ---------------------------
                                           Gerard J. Brinkman
                                           Corporate Controller
                                           (Principal Accounting Officer)

                                       29
<PAGE>

                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Number                                  Description
------    ----------------------------------------------------------------------
<S>       <C>
3.1(a)    Amended and Restated Articles of Incorporation of the Company, filed
          as Exhibit 3.1 to Amendment No. 1 to the Company'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 the Company, dated July 30, 2003,
          filed as Exhibit 3.2 to the Company's Form 10-Q for the fiscal 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>