10-K/A

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

OR

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

FOR THE TRANSITION PERIOD FROM                              TO                             

COMMISSION FILE NUMBER 0-13198

MORTON INDUSTRIAL GROUP, INC.
(Exact name of registrant as specified in its charter)

Georgia
(State or other jurisdiction of
Incorporation or organization) 38-0811650
(I.R.S. Employer Identification No.)

1021 W. Birchwood, Morton, Illinois 61550
(Address of principal executive offices)

(309) 266-7176
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
(Title of class)

        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.    ý

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

        As of March 5, 2002, the aggregate market value of the Class A Common Stock held by non-affiliates was approximately $1,500,000 and there were 4,400,850 shares of Class A Common Stock and 200,000 shares of Class B Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the definitive Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held in June, 2002 are incorporated by reference into Part III hereof.

MORTON INDUSTRIAL GROUP, INC.
List of Items Amended

Part I
	Item 1.	Business—Recent Development of the Business
Part II
	Item 6.	Selected Historical Financial Information
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Item 8.	Financial Statements and Supplementary Date
Part III
	Item 14.	Controls and Procedures(1)

Report of KPMG LLP, Independent Auditors

Consolidated Balance Sheets as of December 31, 2000 and 2001

Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001

Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999, 2000 and 2001

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001

Notes to Consolidated Financial Statements

(1)

Newly added pursuant to the Sarbanes-Oxley Act and Item 307(b) of Regulation S-K.

TEXT OF AMENDMENT

Explanatory Note:

        As previously described in Form 12b-25 filed on August 14, 2002, the registrant's Audit Committee planned to conduct a formal inquiry into accounting practices at a subsidiary of the registrant. The Audit Committee subsequently retained independent counsel and auditors to conduct the inquiry. During the course of the inquiry, the registrant determined that certain accounting errors had occurred at the subsidiary and it is appropriate to restate the financial results for the year ended December 31, 2001 and the quarter ended March 30, 2002. On the same date of the filing of this Form 10-K/A, the registrant is filing a Form 10-Q/A for the three months ended March 30, 2002, and its Form 10-Q for the quarter ended June 29, 2002, to which reference is made for additional information and developments after March 30, 2002.

        The impact on the year ended December 31, 2001, related to the matter described above, is to decrease net sales $220,000, increase cost of sales $390,000, increase administrative expenses $494,000, and reduce interest expense $125,000—this results in a combined decrease in operating income of $1,104,000 and a decrease in earnings (loss) before income taxes and cumulative effect of accounting change of $979,000 from the results previously reported.

        Separately, related to accounting for the Company's interest rate swap instruments, a restatement has been made that had the effect of increasing other expense $671,000 and $286,000 for the years ended December 31, 2001 and 2000, respectively, and increasing other income by $1,012,000 for the year ended December 31, 1999.

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        "Safe Harbor" Statement Under The Private Securities Litigation Reform Act Of 1995: This annual report contains "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements containing the words "anticipates," "believes," "intends," "estimates," "expects," "projects" and similar words. The forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied by such forward looking statements. Such factors include, among others, the following: the loss of certain significant customers; the cyclicality of our construction and agricultural sales; risks associated with our acquisition strategy; general economic and business conditions, both nationally and in the markets in which we operate or will operate; competition; and other factors referenced in the Company's reports and registration statements filed with the Securities and Exchange Commission. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward looking statements. The forward looking statements contained herein speak only of the Company's expectation as of the date of this annual report. We disclaim any obligations to update any such factors or publicly announce the result of any revisions to any of the forward looking statements contained herein to reflect future events or developments.

PART I

Item 1.    Business

Restatement

        In August, 2002, the Company announced that it had become aware of possible inappropriate accounting at one of its operating subsidiaries (Morton Custom Plastics, LLC). A formal inquiry was conducted by the Audit Committee of the Company's Board of Directors, with the assistance of independent counsel and auditors retained by the Audit Committee. While the inquiry was underway, the Company determined that certain accounting errors had occurred at the subsidiary. The errors resulted primarily from the employment of inappropriate methods of recognizing revenues, the preparation of inaccurate estimates of inventory obsolescence, and failure to recognize costs in a timely manner, all of which resulted in an overstatement of revenues and an understatement of cost of sales. Although the Company understands that the Audit Committee's counsel and auditors have delivered reports to the Audit Committee, the Company has not received copies. The Company expects to receive a summary of the findings and recommendations from the Audit Committee in the near future. The effect of the correction of the errors was to increase the previously reported net loss by $979,000 for 2001. Separately, related to accounting for the Company's interest rate swap instruments, a restatement has been made that had the effect of increasing other expense $671,000 and $286,000 for the years ended December 31, 2001 and 2000, respectively, and increasing other income $1,012,000 for the year ended December 31, 1999. The consolidated balance sheets as of December 31, 2001 and 2000, the consolidated statements of operations and cash flows for the years ended December 31, 1999, 2000 and 2001, and the notes thereto have been restated to include the effects of the corrections of these errors. The impact of the corrections of these errors is presented in Note 2 to the consolidated financial statements included in this Form 10-K/A.

General Development of Business

        On January 20, 1998, Morton Metalcraft Holding Co. and its subsidiaries ("Morton") merged (the "Merger") with MLX Corp. ("MLX"), with MLX being the surviving corporation. As a result of the Merger, Morton ceased to exist as a separate corporate entity and MLX amended its Articles of Incorporation to change the corporate name of MLX to Morton Industrial Group, Inc. (the Company). Morton was engaged in the business of manufacturing fabricated metal components for construction and agricultural original equipment manufacturers.

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        Since the date of Merger, we have made four acquisitions in 1998, one acquisition in 1999 and one disposition at the end of 1999.

        We established our Morton Custom Plastics Division in March 1998 through the acquisition of Carroll George Inc., located in Northwood, Iowa, a manufacturer of thermoformed acoustic products for construction and agricultural original equipment manufacturers. We expanded our plastic manufacturing capabilities and capacity with the acquisition of Mid-Central Plastics in May, 1998. Operating out of West Des Moines, Iowa, this facility specializes in manufacturing injection molded plastic products for construction and agricultural original equipment manufacturers as well as other industrial customers. We sold the assets of Carroll George Inc. on December 31, 1999.

        In April 1998, we acquired B&W Metal Fabricators, a sheet metal fabricator with a facility in Welcome, North Carolina. Through the acquisition of B&W Metal Fabricators, we expanded our presence in the southeastern United States, allowing us to better serve our existing customers. We also acquired certain assets of SMP Steel Corporation in 1998, including its sheet metal fabrication facility in Honea Path, South Carolina. The acquisition of these assets added metal fabrication capacity for our growing business in the southeastern United States.

        On April 15, 1999, we acquired from Worthington Custom Plastics three manufacturing facilities that produce plastic components for industrial original equipment manufacturers. The Worthington acquisition expanded our plastic product offerings to include washing machine parts, electronics housings and other injection molded and thermoformed plastic products. The Worthington acquisition provided us critical mass in the plastics business and added new original equipment manufacturers to our customer base.

Narrative Description of Business

BUSINESS

Overview

        We are a contract manufacturer of highly engineered metal and plastic components and subassemblies for industrial, construction, agricultural and recreational vehicle original equipment manufacturers ("OEM's"). Our metal products include cabs, engine enclosures, panels, platforms, frames and complex weldments used in backhoes, excavators, tractors, motor homes and similar industrial equipment. Our plastic products include parts used in off-road recreational vehicles, home appliances, aircraft interiors, electronic equipment enclosures and covers, marine engines and commercial lighting products. Our largest customers include Deere & Co. ("Deere"), Caterpillar Inc. ("Caterpillar"), GE Appliances, B/E Aerospace, Compaq and Honda. Our twelve manufacturing facilities are located in the midwestern and southeastern United States in close proximity to their customers.

MARKETS

        Customers use our products in industrial, construction, agricultural and recreational vehicle equipment. As OEM's in these industries have intensified their focus on core competencies, they have increasingly outsourced more of their production parts to reduce costs. To effectively manufacture products for OEMs, suppliers must invest in technologically advanced equipment, develop in-house design capabilities, and coordinate manufacturing and product delivery with their customers.

        Historically, our largest customers, Deere, Caterpillar, GE Appliances, B/E Aerospace, Compaq and Honda, have been supplied by a large number of local suppliers that would each produce a small number of products. As these OEMs have increased the complexity of their equipment and become more dependent on component and subassembly suppliers, they have reduced the size of their supplier

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base and have established close relationships with a smaller number of sophisticated suppliers who can provide a range of services, including design engineering, prototyping, sophisticated quality systems, and just-in-time delivery. The high levels of service necessary to serve these customers, coupled with significant tooling investments, have resulted in the sole-sourcing of many products rather than dual or multi-sourcing. Currently, we are the sole-source provider of over 85% of the products that we supply to our customers. As these customers continue to reduce the size of their supplier base and outsource a growing percentage of their product needs, we expect to become the sole-source provider on an increasing number of products.

Industrial Equipment

        We produce a range of components and subassemblies for equipment used in a variety of industrial applications. Our products are used in home appliances, computer equipment, aircraft interiors and commercial lighting products. Customers in the industrial equipment area generally serve stable or growth markets, and these customers include GE Appliances, Compaq, B/E Aerospace, Caterpillar and Lithonia Lighting. Industrial equipment products account for approximately 40% of our 2001 net sales.

Construction Equipment

        The $22 billion U.S construction equipment industry includes construction, earth moving and forestry equipment, as well as some material handling equipment, lifts, off-highway trucks and a variety of machines for specialized industrial applications. Caterpillar and Deere dominate the U.S. construction equipment industry, and together accounted for approximately 50% of total unit sales in 2001. We supply metal components and subassemblies, such as engine enclosures, cabs, platforms, frames and complex weldments as well as plastic components such as interior cab dash surround panels, air ducts and handles. Our customers use these products in backhoes, excavators, wheel loaders, skid steer loaders, lifts and similar construction equipment. Our sales per construction equipment vehicle range from $500 to $2,500. Construction equipment products account for approximately 33% of our 2001 net sales.

Agricultural Equipment

        The $15 billion U.S. agricultural equipment industry includes large, relatively expensive products such as tractors, combines and other farming equipment. Deere and Caterpillar accounted for approximately 35% of total agricultural equipment unit sales in 2001. We supply metal components and subassemblies such as steps, fenders, feeder housings, grills, and landing decks as well as plastic components such as fenders, tool boxes, facia and covers used in tractors, combines and other agricultural equipment. Our sales per agricultural equipment vehicle range from $200 to $4,000. Agricultural equipment products account for approximately 17% of our 2001 net sales.

Recreational Equipment

        We serve the rapidly growing recreational equipment market with a variety of plastic and metal components and subassemblies. Honda, Arctic Cat, Yamaha and Winnebago make up a growing base for our market that accounted for 10% of our 2001 net sales.

PRODUCTS AND SERVICES

Products

        Our investments in modern equipment and systems have allowed us to produce a broad line of highly engineered components and subassemblies. We strive to meet customers' needs for design engineering, prototyping, product fabrication and just-in-time delivery.

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Sheet Metal Fabrication

        Our sheet metal fabrication capabilities include laser cutting, forming, press punching, welding, painting and assembly processes. Our sheet metal fabrication processes operate on information created by CAD/CAM software, utilize optic laser cutting machines to cut parts at high speeds and use robotic welders to complement manual welding operations. Our painting operations are capable of producing the wide variety of paint finishes required by customers.

        Fabricated Sheet Metal Products Include:

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Sheet Metal Enclosures and Boxes—generator set enclosures, electrical and battery boxes, panels, doors, hoods and covers used in backhoes, excavators and tractors.



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Special Weldments—lift arms, seat modules, frames, guards, platforms, step assemblies and cabs used in backhoes, excavators, crawlers, tractors and skid steer loaders; components for refuse haulers and recreational vehicles



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Fabricated Steel Tanks—fuel and hydraulic fluid reservations used in motor graders, trucks, crawlers, wheel loaders and excavators.



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Feeder Housings—feeder housings and other combine components manufactured for agricultural equipment.



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Sheet Metal Component Packages—laser cut and formed parts that are used in higher level assemblies at customer locations. These products include brackets, plates and frame components that are used in a wide variety of customer end products.



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Store Fixtures—backframes, lights and brackets used in store displays.

Injection Molded and Thermoformed Plastic Components

        Our injection molded plastic capabilities include such secondary and assembly processes as ultrasonic and hot plate welding, adhesive and solvent bonding, insert staking, snapfit and fastener assembly. Our capabilities in injection molded processes include a wide range of injection molding machine press sizes and gas assist units. Both manual and robotic painting capability exists at a number of plastics facilities. Our thermoformed plastic capabilities include vacuum and pressure thermoforming, robotic router trimming, and adhesive and ultrasonic bonding. In addition, we have extensive capability in plastic machining including specialized equipment to handle plastic gears.

        Plastic Components include:

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Electronics Enclosures and Components—doors, racks, bezels, card holders, back plan connectors and other products that are required on computer servers, memory storage units, monitors and other electronic equipment.



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Appliance Parts and Components—agitators, tub covers and balance rings for clothes washers, control panels and silverware baskets for dishwashers and door handles for refrigerators.



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Off-Road Work and Recreational Vehicle Parts and Subassemblies—fenders, covers, enclosures and functional components such as brackets and hoppers that are used on tractors and farm equipment. This product category also includes body panels, racks, bumpers, roofs, windshield support assemblies and seat bases for golf carts, snowmobiles, personal watercraft and off-road all terrain vehicles.



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Off-Road Vehicle Interiors—consoles, control panels and subassemblies, such as ventilation, lighting and entertainment systems, that are installed in construction, agricultural and specialty equipment.

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Other Plastic Components and Subassemblies—plastic enclosures for lighting and reflectors used in commercial buildings and plastic assemblies used in aircraft seating.

SERVICES

        We offer our customers a number of services described below:

Product Design and Development

        This service category includes design, development, analysis and costing for our products. We prefer to and often work with customers in the early stages of designing their products.

Prototyping/Tooling

        This service category includes prototype, tooling and preproduction steps in the manufacturing process. Our dedicated prototype and tooling departments work with customers throughout development efforts, allowing for a smooth introduction of new products.

Part Decorating and Exterior Finishing

        This service category includes a number of decorating operations such as pad printing, hot stamping, liquid and powder coat painting and decal application.

Just-In-Time Delivery

        This service category includes providing customers the ability to order products in low lot sizes with minimal lead time enabling them to reduce their overall order cycle time. Morton also provides deliveries that are specially sequenced to customers' manufacturing schedules.

Engineering and Design Capabilities

        Engineering capabilities have become increasingly emphasized as suppliers design services for new projects. Computer aided design capabilities include Pro-Engineering, Anvil 1000/5000, Apollo, Merry Mechanization and CADKEY. We have focused our computer aided design investment on the Pro-Engineering system during the last several years because Pro-Engineering is the preferred system of the majority of our customers. Computer aided design allows us to download completed and approved designs directly to production equipment in most plants. The resulting direct interaction between customers' designers and our engineers facilitates joint development of new components and redesigns of old parts.

Systems and Controls

        Consistent with our emphasis on technology, computer systems and controls are an integral part of our operating strategy. We have invested heavily in management information systems and computer aided design capabilities and control functions, particularly during the last several years. We also use computer systems to provide timely performance measurements of shop floor quality and activity, daily actual cost information for each factory, electronic data interchange with major customers, real-time dispatching of work orders, integration of purchasing information with production scheduling, capacity management and inventory information.

Sales and Marketing

        To better serve our customers, we have combined our sales and engineering organizations. The sales and engineering group has primary responsibility for managing relationships with customers and working with them to design new products. Our customers are serviced by account teams led by an

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account manager and including representatives from our primary functional areas. These areas include engineering, quality assurance and customer service. Account teams work with the customer to design products and produce prototypes, schedule production and monitor quality and customer satisfaction. Our account managers also lead the new business development process, working with customers to obtain details of new outsourcing programs, new products currently being designed and existing products which will be redesigned. We believe that the structure of our sales and marketing organization helps to ensure cooperation in product design and helps us to gain repeat and new business from our customers. In 2001, a corporate "new business team" was established to drive customer diversification.

Manufacturing/Production

        We use a range of manufacturing processes to serve the needs of our customers. Using these processes, we can manufacture products ranging from simple metal and plastic parts to more complex metal and plastic subassemblies. Our design and engineering capabilities provide us with a competitive edge in obtaining and maintaining preferred supplier status with our customers.

        Sheet Metal Fabrication.    Our sheet metal fabrication capabilities include laser cutting, forming, press punching, folding, welding, painting and assembly processes. Our sheet metal fabrication processes, operating on information created by Pro Engineering software, use optic laser cutting machines to cut parts at high speeds. We use robotic welders to complement our manual welding operations. Our painting operations are capable of producing the wide variety of paint finishes required by our customers.

        Injection Molded and Thermoforming Plastic Components.    Our injection molded plastic capabilities include ultrasonic and hot plate welding, adhesive and solvent bonding, insert staking, snapfit and fastener assembly. Our injection molded processes use injection molding machine presses and gas assist units. Our thermoformed plastic capabilities include vacuum and pressure thermoforming, robotic trimming, and adhesive and ultrasonic bonding. These processes are performed on thermoform units and automated robotic trim stations.

Raw Materials

        The primary raw materials that we use are sheet steel, compounded injection molding resins, fabrications, thermoplastic sheeting, sheeted foam, assembly parts, paint and vinyl sheeting. Prices of these raw materials fluctuate, although the price of our most significant raw material, steel, has dropped over the past several years. Historically we have been able to negotiate with our customers to have them absorb increases in our raw material costs. In addition, we have generally passed on reductions in our raw material costs to our customers. We also participate in the steel purchase programs of certain major customers which lowers our cost for steel. Generally, we purchase our raw materials from multiple suppliers, and we believe that the prices we obtain are competitive.

Competition

        The manufacturing and supplying of highly engineered metal and plastic products to original equipment manufacturers is a fragmented and highly competitive business, with no single supplier having significant market share. We believe suppliers with a strong management team, a range of capabilities, modernized facilities and technologically sophisticated equipment like us are more likely to benefit from original equipment manufacturers' increased outsourcing of production than other participants in the industry lacking such assets. However, competitive pressures or other factors could cause us to lose market share or could result in a significant price erosion with respect to our products.

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Regulatory/Environmental Matters

        Our operations are subject to numerous federal, state and local environmental and worker health and safety laws and regulations. We believe that we are in substantial compliance with such laws and regulations.

Financial Information about Industry Segments

        Morton Industrial Group, Inc. has two reportable segments, contract metal fabrication and contract plastic fabrication. The contract metal fabrication segment provides full-service fabrication of parts and sub-assemblies for the construction, agricultural, and industrial equipment industry. The contract plastic fabrication segment provides full-service vacuum formed and injection-molded parts and sub-assemblies for the construction, agricultural, recreational, and industrial equipment industry.

        Additional information regarding segments can be found in footnote 19 of the accompanying Notes to Consolidated Financial Statements of the Company.

Backlog

        Our backlog of orders was approximately $121.0 million at December 31, 2001, and $150.0 million at December 31, 2000. We anticipate that we will substantially fill all of the backlog orders as of December 31, 2001 during the current year.

Patents, Trademarks, Licenses, Franchises, and Concessions

        We hold no material patents, trademarks, franchises, or concessions. We are the licensee under a number of software licenses that we use in our design, production, and other business operations. All of these licenses have customary terms and conditions.

Working Capital Items

        Our working capital requirements reflect several business factors. Our working capital requirements are typically greater during the second half of the calendar year because both Deere & Co. and Caterpillar, Inc. suspend operations for two weeks of vacation time during July and/or August. Production operations of both of these customers also slow during the last two weeks of December. During these periods, we must rely more heavily on our credit facilities for liquidity.

Employees

        As of March 1, 2002, we employed 1,783 employees, of which 1,410 were hourly and 373 were salaried. None of these employees was subject to a collective bargaining agreement. We believe our relationship with our employees is good.

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Item 2.    Properties

        The following table presents summary information regarding our facilities. The properties are owned except where indicated by the word "leased". Lease terms for these facilities expire between 2003 and 2010. Our facilities are generally located in close proximity to our customers.

Location	Approx. Sq. Ft.	Products Manufactured
844 (leased) and 1021 West Birchwood Street, Morton, IL	310,000	Sheet metal enclosures and boxes, sheet metal component packages and store fixtures
400 Detroit Avenue, Morton, IL (leased)	155,000	Special weldments, including seat modules, cabs and fabricated steel tanks
Peoria, IL (leased)	160,000	Special weldments, including feeder housings and tractor frames
Apex, NC (leased)	100,000	Special weldments, sheet metal enclosures and boxes, sheet metal component packages and fabricated steel tanks
Honea Path, SC	30,000	Store fixtures and sheet metal component packages
Welcome, NC	185,000	Sheet metal enclosures and boxes, special weldments, fabricated steel tanks and sheet metal component packages
West Des Moines, IA	115,000	Off road work and recreational vehicle parts and subassemblies, off road vehicle interiors and appliance parts and components
7301 Caldwell Road Harrisburg, NC	110,000	Electronics enclosures and components and other plastic components and subassemblies
5685 Hwy 49 South Harrisburg, NC (leased)	127,000	Plastic components and subassemblies
Concord, NC (leased)	76,000	Plastics components and subassemblies
Lebanon, KY	176,000	Appliance parts and components, off road work and recreational vehicle parts and subassemblies and other plastic components and subassemblies
St. Matthews, SC	135,000	Off road work and recreational vehicle parts and subassemblies and other plastic components and subassemblies

        In addition to manufacturing operations, our 1021 W. Birchwood Street complex in Morton, Illinois, houses the senior management of the Company.

        While we own much of the equipment used in our operations, we also use customer-owned tooling and equipment as well as equipment under operating leases. We believe our facilities are adequate to satisfy current and reasonably anticipated production requirements.

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Item 3.    Legal Proceedings

Worthington

        On May 1, 2000, Worthington Industries, Inc. (Worthington) filed suit (in the United States District Court for the Southern District of Ohio, Eastern Division) related to our 1999 acquisition of the non-automotive plastics business from Worthington. Worthington claims that it is owed additional amounts under the sales agreement and a related service agreement, and that it is owed dividends on the preferred stock that it received. We believe that certain warranties and representations made by Worthington at the time of acquisition have been breached and that amounts claimed by Worthington are not due. We have filed a counterclaim against Worthington related to these matters. Management believes that we will prevail in this litigation and does not anticipate any material impact on our financial condition or results of operations.

        On January 30, 2001, Victory Lane Productions, LLC filed suit against Plastics (in the Circuit Court of Rankin County, Mississippi) related to a breach of contract for failure to deliver ordered product. The Plaintiff is seeking compensatory and punitive damages. Plastics has filed a counterclaim.

Other

        We are also involved in routine litigation. We are not currently a party to any legal proceedings that we believe would have a material adverse effect on our financial condition or results of operations.

Item 4.    Submission of Matters to Vote of Security Holders

        Not applicable

PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters.

        From January 1 through October 19, 2000, our Class A common stock traded on the Nasdaq Small Cap Market under the symbol "MGRP". Effective October 20, 2000, the Company's Class A common stock began trading on the Nasdaq Small Cap Market under the symbol "MGRPC". Effective April 11, 2001, the Company's ticker symbol on the Nasdaq Small Cap Market was restored to MGRP.

        The following table sets forth the quarterly high and low close prices during 2001 and 2000 as reported by the Nasdaq Stock Market.

		High		Low
2001
	October 1 to December 31	$	1.500	$	1.010
	July 1 to September 30	$	1.500	$	1.030
	April 1 to June 30	$	2.000	$	1.220
	January 1 to March 31	$	1.875	$	1.500
2000
	October 1 to December 31	$	3.438	$	1.125
	July 1 to September 30	$	4.750	$	3.125
	April 1 to June 30	$	6.000	$	3.000
	January 1 to March 31	$	6.375	$	3.125

        As of March 5, 2002 there were 3,387 holders of record and 1,861 beneficial holders of our Class A Common Stock.

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        We did not declare or pay any common stock dividends in our fiscal years ended December 31, 2001 and 2000. Our credit agreements preclude the payment of dividends.

        On September 20, 2000, the Company issued warrants to purchase 238,548 shares of its Class A common stock. The warrants are exercisable at any time through December 31, 2003 at an exercise price of $.01 per share.

Item 6.    Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA

        Set forth below are certain selected historical financial data. This information should be read in conjunction with our financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein. The financial data for, and as of the end of, the fiscal year ended June 30, 1997, the six months ended December 31, 1997 and the fiscal years ended December 31, 1998, 1999, 2000 and 2001 are derived from our audited financial statements. The financial data for, and as of the end of, the six months ended December 31, 1996 and the year ended December 31, 1997 are derived from our unaudited financial statements.

				Six Months Ended December 31,
	Year Ended June 30, 1997									Year Ended December 31,
				1996			1997			1997			1998			1999			2000			2001
	(in thousands)
													(Restated)			(Restated)			(Restated)			(Restated)
Operating data:
Net sales	$	80,762		$	32,958		$	46,598		$	94,402		$	151,196		$	219,323		$	278,828		$	236,170
Cost of sales		70,541			29,206			41,932			83,267			129,740			194,434			242,721			212,963
Gross profit		10,221			3,752			4,666			11,135			21,456			24,889			36,107			23,207
Selling and administrative expenses		7,003			2,578			4,591			9,016			14,499			24,067			26,996			26,567
Merger related charges(1)		—			—			6,069			6,069			—			—			—			—
Restructuring charges		—			—			—			—			—			—			—			1,323
Operating income (loss)		3,218			1,174			(5,994	)		(3,950	)		6,957			822			9,111			(4,683	)
Gain (loss) on sale of business units and other		—			—			—			—			(490	)		(1,451	)		1,052			(610	)
Interest expense, net		(3,206	)		(1,597	)		(1,682	)		(3,291	)		(4,779	)		(8,193	)		(10,801	)		(9,328	)
Earnings (loss) before income taxes, accounting change and extraordinary charge		12			(423	)		(7,676	)		(7,241	)		1,688			(8,822	)		(638	)		(14,621	)
Income taxes		(5	)		141			3,031			2,885			(415	)		1,165			1,230			(2,100	)
Earnings (loss) before accounting change and extraordinary charge	$	7		$	(282	)	$	(4,645	)	$	(4,356	)	$	1,273		$	(7,657	)		592			(16,721	)
Earnings (loss) per share before accounting change and extraordinary charge:
Basic		—			(.15	)		(2.39	)		(2.24	)		.32			(1.80	)		.13			(3.63	)
Diluted		—			(.15	)		(2.39	)		(2.24	)		.28			(1.80	)		.13			(3.63	)
Financial position (at end of period):
Working capital	$	2,147		$	3,869		$	(4,575	)	$	(4,575	)	$	8,448		$	10,011		$	12,774		$	(1,475	)
Total assets		34,362			29,142			39,388			39,388			99,603			125,908			130,533			106,517
Total debt		27,608			27,328			32,494			32,494			70,292			90,956			88,357			79,138
Stockholders' equity (deficit)	$	(9,099	)	$	(9,388	)	$	(13,552	)	$	(13,552	)	$	6,058		$	(3,754	)	$	(3,157	)	$	(20,944	)

(1)

Merger related charges includes $4,000 for one-time bonuses paid to members of management and other employees, $1,324 of professional fees and $745 in compensation expense from issuance of stock options, all of which were incurred by Morton in connection with the merger with MLX.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report.

Restatement

        In August 2002, we announced that we had become aware of possible inappropriate accounting practices at one of our operating subsidiaries (Morton Custom Plastics, LLC). A formal inquiry was conducted by the Audit Committee of our Board of Directors, during which the Company determined that certain errors had occurred. The errors resulted primarily from employing inappropriate methods of recognizing revenues, preparing inaccurate estimates of inventory obsolescence, and not timely recognizing costs, which resulted in an overstatement of revenues and an understatement of cost of sales. Additionally, we have determined that our interest rate swaps do not qualify for hedge accounting. The effect of the correction of the errors was to increase the previously reported net loss by $1,650,000 for 2001. The consolidated balance sheets as of December 31, 2000 and 2001, the consolidated statements of operations and cash flows for the years ended December 31, 1999, 2000 and 2001, the notes thereto and this discussion have been restated to include the effects of the corrections of these errors. The impact of the corrections of these errors is presented in Note 2 to the consolidated financial statements included in this Form 10-K/A.

General

        We are a contract manufacturer of highly engineered metal and plastic components and subassemblies for construction, agricultural, recreational and industrial original equipment manufacturers. Our largest customers, Caterpillar Inc. and Deere & Co., accounted for approximately 57% of our 2001 net sales.

        We price our fabricated metal and thermoformed plastic products on a cost plus basis and use an industry standard to price our injection molded plastic products. In pricing our products, we consider the volume of the product to be manufactured, required engineering resources and the complexity of the product.

        Our customers typically expect us to offset any manufacturing cost increases with improvements in production flow, efficiency, productivity or engineering redesigns. As a part of their supplier development programs, our primary customers initiate cost improvement efforts on a regular basis. At the conclusion of any such effort, when savings can be documented, we share the savings with our customer.

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Results of Operations

        The following table presents certain historical financial information expressed as a percentage of our net sales.

	Year Ended December 31,
	1999		2000		2001
	(Restated)		(Restated)		(Restated)
Statements of Operations Data:
Net sales	100.0	%	100.0	%	100.0	%
Gross profit	11.3		13.0		9.8
Selling and administrative expenses	11.0		9.7		11.2
Restructuring charges	—		—		.6
Operating income (loss)	0.3		3.3		(2.0	)
Gain (loss) on sales of business units and other	(.7	)	.4		(.3	)
Interest expense, net	3.7		3.9		4.0
Earnings (loss) before income taxes and cumulative effect of accounting change	(4.1	)	(.2	)	(6.3	)

Year Ended December 31, 2001 versus Year Ended December 31, 2000

        Net sales for the year ended December 31, 2001 were $236.2 million compared to $278.8 million for the year ended December 31, 2000, a decrease of $42.6 million or 15.3%. Sales decreased approximately $22.1 million in the Harris Credit Facility segment of the business. This decrease resulted primarily from a significant project completed in 2000 that did not repeat in 2001 and other decreases related to the slowdown in the general economy, and also from continuing pricing pressure from major customers. Sales for the GECC Credit Facility segment of the business decreased by approximately $20.5 million for 2001 compared to 2000 or 20.4%, due primarily to decreased demand by existing customers.

        Based upon forecasted customer demand, the Company is not currently anticipating revenue growth for 2002.

        Sales to Caterpillar and Deere were approximately 57% and 53% of our net sales for 2001 and 2000, respectively.

        Gross profit for the year ended December 31, 2001 was $23.2 million compared with $36.1 million for the year ended December 31, 2000, a decrease of $12.9 million or 35.7%. The Company's gross profit percentage decreased to 9.8% from 13.0%. Gross profit for the Harris Credit Facility segment of the business decreased $6.3 million, or 27.3%. The overall gross profit percentage for this segment decreased to 10.7% from 13.0%, primarily as a result of fixed costs absorbed by reduced sales levels. Gross profit for the GECC Credit Facility segment decreased $6.6 million, or 50.3%. The overall gross profit percentage for this segment decreased to 8.1% from 13.0% primarily as a result of fixed costs absorbed by reduced sales levels.

        Selling and administrative expenses for the year ended December 31, 2001 amounted to $26.6 million, or 11.2% of sales, compared with $27.0 million, or 9.7% of sales, in the prior year, a decrease of $0.4 million or 1.5%. This decreased expense related primarily to a continuing effort to achieve appropriate employment levels for selling and administration functions. The increased percentage results from the reduced sales levels.

        The Company recognized a restructuring charge of $1,323 in the fourth quarter, 2001, associated with the restructuring and consolidation of certain of its Illinois plants. The restructuring included $510 for costs associated with certain leased facilities which will no longer be used, and a $813 impairment charge for the abandonment of certain leasehold improvements.

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        Interest expense in the year ended December 31, 2001 amounted to $9.3 million compared to $10.8 million in 2000. This decrease resulted from both lower average levels of debt and lower interest rates.

        Other expense for the year ended December 31, 2001 resulted primarily from an unrealized loss of $755 on the Company's interest rate swaps. Other income of $732 for the year ended December 31, 2000, resulted primarily from $1.3 million of gains on separate sales of land and a product line from our Harrisburg, NC operations net of an unrealized loss of $286 on the Company's interest rate swap.

        We recognized an income tax expense of $2.1 million related to a decrease in our deferred tax assets. Deferred tax assets were decreased to reflect lower anticipated utilization of income tax net operating loss carryforwards than estimated at the preceeding year end. The utilization of the income tax net operating loss carryforwards, and the realization of deferred tax assets, is based upon the Company's future ability to generate the estimated taxable income.

        Net earnings (loss) available to common stockholders increased from $(306) for the year ended December 31, 2000 to $(17,787) for the year ended December 31, 2001. This increased net earnings (loss) resulted primarily from reduced sales, fixed costs absorbed by those reduced sales and the reduction in the deferred tax assets.

Year Ended December 31, 2000 versus Year Ended December 31, 1999

        Net sales for the year ended December 31, 2000 were $278.8 million compared to $219.3 million for the year ended December 31, 1999, an increase of $59.5 million or 27.1%. Sales increased over $32.6 million in the Harris Credit Facility segment of the business. This increase resulted primarily from existing customers' selection of us to manufacture components for new construction and agricultural products. Sales for the GECC Credit Facility segment of the business increased by $26.9 million for 2000 compared to 1999, due primarily to a full year of operations for Morton Custom Plastics, acquired in April, 1999; sales decreased, however, on a pro forma basis approximately $9 million for 2000 compared to 1999. This approximately 6% decrease resulted from lower sales of computer-related products.

        Sales to Caterpillar and Deere were approximately 53% and 49% of our net sales for 2000 and 1999, respectively.

        Gross profit for the year ended December 31, 2000 was $36.1 million compared with $24.9 million for the year ended December 31, 1999, an increase of $11.2 million or 45.1%. Gross profit for the Harris Credit Facility segment of the business increased $5.8 million, or 32.5%. The overall gross profit percentage for this segment increased to 13.0% from 11.8%, primarily as a result of costs incurred related to new projects. Gross profit for the GECC Credit Facility segment increased $5.4 million, or 70.0%, due primarily to a full year of operations for Morton Custom Plastics, acquired in April, 1999. The combined gross profit percentage increased to 13.0% from 10.4%, primarily as a result of cost savings efforts introduced at the facilities acquired in 1999.

        Selling and administrative expenses for the year ended December 31, 2000 amounted to $27.0 million compared with $24.1 million in the prior year, an increase of $2.9 million or 12.2%. This increase relates primarily to costs incurred by the operations acquired in 1999. During 2000, we owned those facilities for a full year, compared to less than 9 months in 1999.

        Other income of $732 for the year ended December 31, 2000, resulted primarily from $1.3 million of gains on separate sales of land and a product line from our Harrisburg, NC operations, net of an unrealized loss of $286 on the Company's interest rate swaps. Other income of $1.0 million in 1999 resulted from an unrealized gain on the Company's interest rate swaps.

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        Interest expense in the year ended December 31, 2000 amounted to $10.8 million compared to $8.2 million in 1999. This increase resulted primarily from additional interest costs incurred related to the 1999 acquisitions (a full year in 2000 compared to less than 9 months in 1999), an increased interest rate and other costs related to our financing agreements.

        We recognized an income tax benefit of $1.2 million when our deferred tax assets were increased to reflect future anticipated utilization of income tax net operating loss carryforwards. The utilization of the income tax net operating loss carryforwards is based upon the Company's future ability to generate taxable income.

        Net earnings (loss) available to common stockholders decreased from $(10,872) for the year ended December 31, 1999 to $(20) for the year ended December 31, 2000. This decreased net earnings (loss) resulted primarily from increased sales and the lack of one-time costs, such as the loss on the sale of a business and the cumulative effect of an accounting change experienced in the year ended December 31, 1999.

Financial Position and Liquidity

        Historically, we have funded our business with cash generated from operations and borrowings under revolving credit and term loan facilities. In the years ended December 31, 1999, 2000 and 2001, we generated cash from operating activities of $2.8 million, $2.9 million and $12.4 million respectively. A significant portion of the cash generated during 2001 related to a reduction in accounts receivable and inventory levels. Our capital expenditures for the years ended December 31, 1999, 2000 and 2001, were $5.0 million, $6.7 million and $4.4 million respectively. These capital expenditures were principally for additions to improve or maintain our manufacturing capacity and efficiency.

        Our consolidated working capital at December 31, 2001 was a deficit of $1.5 million compared to positive working capital of $12.9 million at December 31, 2000. This represents a decrease in working capital of approximately $14.4 million. The 2001 results of operations created significant pressure on our liquidity. As previously reported in Form 10-Q for the period ended September 29, 2001, the Company was seeking additional loans or funding support. Subsequent to December 31, 2001, the Company entered into separate new amended and restated agreements with both of its existing lenders.

        In February, 2002, the Company entered into an amended and restated secured revolving credit facility with Harris Trust and Savings Bank, as Agent (Harris). The revolving credit agreement permits the Company to borrow up to a maximum of $21,000. The agreement requires payment of a quarterly commitment fee of .50% per annum of the average daily unused portion of the revolving credit facility. Interest is due monthly and is based on LIBOR plus 4.0% (totalling 6.25% at March 26, 2002). We, alternatively, could select an interest rate of bank prime plus 1.5%. The amount available under the revolving credit facility is limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2,500 of other assets. The revolving credit agreement expires July 1, 2003. At December 31, 2001, the Company had $18,400 outstanding and $1,110 available under its Harris revolving credit facility.

        In February, 2002, the Company entered into an amended and restated secured term loan arrangement with Harris for a term loan of $32,965. This term loan is amortized monthly with principal payments ranging from $235 to $500 and the balance of $24,930 due July 1, 2003. Interest is due monthly and is based upon LIBOR plus 4.0% (totalling 6.25% at March 26, 2002). We, alternatively, could select an interest rate of bank prime plus 1.5%. These Harris debt agreements have maturity dates of July 1, 2003. The Company intends to obtain loans to refinance the debt from other sources by the end of the term of this arrangement, which may not be available on acceptable terms and conditions. Failure to do so could have a material adverse effect on the Company's operations.

        In connection with these Harris loans, we have granted the lender a first lien on all of the Company's accounts receivable, inventory, equipment and various other assets, except for the assets of

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Morton Custom Plastics, LLC. These Harris debt agreements, which finance the contract metal fabrication segment and one of the contract plastic fabrication segment locations, contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, asset sales and payments such as dividends or stock repurchases. The agreements also impose various financial covenants.

        In connection with the Harris financing, we have two fixed interest rate swap agreements with a commercial bank (the "counter party"). The first agreement has a notional principal amount of $5.6 million and a termination date of May 31, 2003. The second agreement has a notional principal amount of $14.2 million and a termination date of June 30, 2003. The notional principal amount declines over the term of both agreements based upon a defined amortization schedule. The counter party waived its unilateral right to cancel both agreements as of June 30, 2001. As described in Item 7A below, these agreements are for the purpose of limiting the effects of interest rate increases on half of the Company's floating rate term debt.

        Historically, we have met our near term liquidity requirements for our businesses financed by Harris with cash flow from operations, the Harris line of credit, and management of our working capital to reflect current levels of operations. The national economic slowdown, which our reduced revenues reflect, has increased pressure on these sources of liquidity. The new Harris revolving credit facility and term loans replaced existing credit facilities and did not provide additional availability. However, the repayment and fee terms were modified, and the short-term principal payments and fees were reduced. We anticipate that the amended and restated agreements with Harris will assist us in meeting our liquidity requirements through the term of these agreements.

        In March, 2002, to restructure the financing related to the Morton Custom Plastics, LLC operations, the Company entered into an amended and restated revolving credit facility and a new senior credit facility with its existing lender, General Electric Capital Corp. (GECC).

        The new revolving credit facility allows for borrowings up to a maximum of $10,000. Of the amount available under the revolver, $1,000 is held back as a reserve for discretionary use approved by the lender. The amount available under the revolving credit facility is generally limited to 85% of qualified accounts receivable and 60% of eligible inventory. The revolving credit agreement expires August 30, 2006. At December 31, 2001, the Company had $9,435 and $1,618, outstanding and available, respectively, under its GECC revolving credit facility.

        The new senior credit facility includes three term loans with initial balances of $10 million (Term A), $7 million (Term B) and $5 million (Term C), respectively.    The maturity date on the new senior credit facility is August 30, 2006.

        The loans are secured by a first priority security interest in all of the Morton Custom Plastics, LLC assets, including, but not limited to, accounts receivable, inventories, leaseholds, fixed assets, intangible assets and tradenames.

        The interest on the revolving credit facility, Term A and Term B is LIBOR plus 450 basis points, with a LIBOR floor of 3%. The Company, alternatively, could select an Index rate. Interest is to be paid monthly on these loans. The interest on Term C is 13% payment-in-kind. Unpaid interest on Term C is due at maturity.

        The principal on Term A and Term B amortizes quarterly in various amounts beginning on September 30, 2002 for Term A and June 30, 2002 for Term B. Final installments for Term A and Term B are due at maturity, which is August 30, 2006. The principal on the revolving credit facility and Term C are due at maturity, which is August 30, 2006.

        In conjunction with the new credit facility, the Company issued common stock warrants to purchase 70% ("Warrant Ownership Percentage") of the outstanding ownership interests (on a fully

17

diluted basis) of Morton Custom Plastics LLC. The Warrant Ownership Percentage can be reduced to 35% if the loan is repaid in full before March 25, 2004. If adjusted EBITDA for the year ending December 31, 2003, as defined in the agreement, is at least $8,000 and the Warrant Ownership Percentage has not already been reduced, the Warrant Ownership Percentage will be reduced to 51%. The warrants will be recorded at fair value as a discount on the related debt.

        At any time on or after the occurrence of (i) the scheduled maturity date, (ii) an event of default, or (iii) the date of indefeasible prepayment in full of the loans and cancellation of letters of credit and permanent reduction of revolving loan commitment to zero ("Trigger Events"), each holder has the right to require the Company to purchase all or any part of the warrants ("Put Feature"). The Company also has the right to repurchase all, but not less than all, of the outstanding warrant and equity interests of the holders subsequent to a Trigger Event ("Call Feature"). The Put Feature and Call Feature each have a purchase price equal to the greater of the applicable floor price and the fair market value as determined in good faith by the board and subject to approval by the holders. The initial floor price is $500.

        Under the terms of any of these credit agreements, no amount would have been available for payment of dividends at December 31, 2000 and 2001.

        Historically, we have met our near term liquidity requirements for our businesses financed by GECC with cash flow from operations, the GECC line of credit, and management of our working capital to reflect current levels of operations. The national economic slowdown, which the Morton Custom Plastics, LLC's reduced revenues reflect, has increased pressure on these sources of liquidity. The new GECC revolving credit facility and term loans total $32 million and replaced a similar facility which totaled approximately $28 million, providing additional availability. Additionally, repayment terms were modified and short-term principal payments were reduced. We anticipate that the amended and restated agreements with GECC will assist the Company in meeting its near term liquidity requirements.

        As part of the financing for the 1999 Morton Custom Plastics, LLC acquisition, we issued 10,000 shares of redeemable preferred stock, which we must redeem in April, 2004 at $1,000 per share plus any dividends accrued since April 15, 1999. The $10 million face value preferred stock was recorded at its fair value of $4.25 million. We are accreting the discount over a five year period using the effective yield method. Dividends are payable in kind at the rate of 8% per annum. We believe that certain provisions of the agreement with Worthington preclude the payment of dividends, and no dividends have been accrued in 2000 or 2001. There are current legal proceedings related to certain Worthington matters as described in Part I, Item 3.

        On November 3, 2000, the Company entered into an agreement with First Union Securities, Inc. ("FUSI"), under which FUSI acted as the Company's exclusive financial advisor with respect to possible debt or equity financings or recapitalizations from November 3, 2000 until March 12, 2002. Mark Mealy, a director of the Company, is Head of the Commercial and Industrial Corporate Finance and Mergers and Acquisition Group at Wachovia Securities, Inc. (formerly FUSI).

        We incurred $4.4 million of capital expenditures during 2001, primarily for the update and purchases of manufacturing equipment.

        We estimate that our capital expenditures in 2002 will total approximately $4.2 million, of which $1.2 million will be for new production equipment and the remaining $3.0 million will be for normal replacement items.

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Significant Cash Commitments

        The Company has significant future cash commitments, primarily scheduled debt payments and scheduled lease payments. The commitments related to debt payments and lease payments are fully described in Notes 10 and 11 of the accompanying financial statements.

Seasonality

        Our operating results vary significantly from quarter to quarter due to, among other things, the purchasing schedules of our key customers. Our sales and profits historically have been higher in the first half of the calendar year due to our largest customers' preparation in the first two quarters for increased demand during the warmer months of the year.

Critical Accounting Policies

        In the preparation of the financial statements in accordance with generally accepted accounting principles, management must often make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Some of these estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Such estimates and assumptions affect the Company's most critical accounting policies: the allowance for doubtful accounts, inventory valuation and the recoverability of deferred tax assets.

        In determining the allowance for doubtful accounts, management specifically analyzes customer credit worthiness, historic bad debts and changes in economic conditions and records allowances for bad debts as appropriate. Inventories are valued at lower of cost or market. When, in management's judgment, circumstances indicate the cost of certain inventories exceed their recoverable value, reserves for inventory obsolescence are recorded. In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment, and the valuation allowance is adjusted as appropriate.

Impact of New Accounting Standards

        In July 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

        The Company is required to adopt the provisions of Statement 141 immediately and will adopt Statement 142 effective January 1, 2002. Furthermore, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001, but before Statement 142 is adopted in full will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will

19

continue to be amortized and tested for impairment in accordance with the appropriate pre-Statement 142 accounting requirements prior to the adoption of Statement 142.

        Statement 141 will require upon adoption of Statement 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of Statement 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of Statement 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

        In connection with Statement 142's transitional goodwill impairment evaluation, the Statement will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with Statement 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption.

        As of December 31, 2001, the Company had unamortized goodwill in the amount of $8.3 million which is subject to the transition provisions of Statements 141 and 142. Because of the extensive effort needed to comply with adopting Statements 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this report, including whether it will be required to recognize any transitional impairment losses as the cumulative effect of a change in accounting principle.

        In August 2001, the Financial Accounting Standards Board issued FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (Statement 144), which supersedes both FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of (Statement 121) and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30), for the disposal of a segment of a business (as previously defined in that Opinion). Statement 144 retains the fundamental provisions in Statement 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with Statement 121. For example, Statement 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. Statement 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike Statement 121, an impairment assessment under Statement 144 will never result in a

20

write-down of goodwill. Rather, goodwill is evaluated for impairment under Statement No. 142, Goodwill and Other Intangible Assets.

        The Company is required to adopt Statement 144 effective January 1, 2002. Management does not expect the adoption of Statement 144 for long-lived assets held for use to have a material impact on the Company's financial statements because the impairment assessment under Statement 144 is largely unchanged from Statement 121. The provisions of the Statement for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities. Therefore, management cannot determine the potential effects that adoption of Statement 144 will have on the Company's financial statements.

Item 7A.    Quantitative and Qualitative Disclosures about Market Risk

        We are exposed to interest rate changes primarily as a result of our lines of credit and long-term debt used for maintaining liquidity, funding capital expenditures and expanding our operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower overall borrowing costs. To achieve our objectives, we entered into two separate financing agreements with a group of banks and another lender. Both financing arrangements contain term loans and revolving credit facilities. Interest is based on our lead bank's or lender's prime rate plus an applicable variable margin. We have also entered into two interest rate swap agreements, as required by our bank financing arrangement, to limit the effect of increases in the interest rates on half of our floating rate term debt. We do not enter into interest rate transactions for speculative purposes. Under the swap agreements, which expire May 31, 2003 to June 30, 2003, the interest rate component of the interest rate is limited to 5.875% on half of our $32,965 term loans under that certain financing arrangement.

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Item 8.    Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Report of KPMG LLP, Independent Auditors	23
Consolidated Balance Sheets as of December 31, 2000 and 2001 (Restated)	24
Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001 (Restated)	25
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999, 2000 and 2001 (Restated)	26
Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001 (Restated)	27
Notes to Consolidated Financial Statements	28
Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 1999, 2000 and 2001	51

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Independent Auditors' Report

The Board of Directors and Stockholders
Morton Industrial Group, Inc.:

We have audited the accompanying consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2000 and 2001, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2001. In connection with our audit of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2000 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the accompanying consolidated balance sheets as of December 31, 2000 and 2001 and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 31, 1999, 2000 and 2001 have been restated.

As discussed in Note 9 to the consolidated financial statements, effective January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities.

KPMG LLP

Indianapolis, Indiana
March 25, 2002, except for Note 2 which is as of November 1, 2002

23

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2000 and 2001
(Dollars in thousands, except share data)

			2000			2001
			(Restated)			(Restated)
Assets
Current assets:
	Trade accounts receivable, less allowance for doubtful accounts of $1,324 in 2000 and $381 in 2001		$	28,198		18,989
	Inventories			29,429		21,901
	Prepaid expenses			2,474		2,803
	Deferred income taxes			1,650		800
		Total current assets		61,751		44,493
	Property, plant, and equipment, net			51,555		46,437
	Intangible assets, at cost, less accumulated amortization			11,186		10,353
	Deferred income taxes			5,398		4,148
	Other assets			643		1,086
			$	130,533		106,517
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
	Outstanding checks in excess of bank balance		$	2,792		4,045
	Current installments of long-term debt			10,201		5,268
	Accounts payable			30,735		29,854
	Accrued expenses			5,249		6,801
		Total current liabilities		48,977		45,968
	Long-term debt, excluding current installments			78,156		73,870
	Other liabilities			280		280
		Total liabilities		127,413		120,118
Redeemable preferred stock. Authorized 10,000 shares; issued and outstanding 10,000 shares in 2000 and 2001 (redemption value $10,567 at December 31, 2000 and 2001)				6,277		7,343
Stockholders' equity (deficit):
	Class A common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 4,400,850 shares in 2000 and 2001			44		44
	Class B common stock, convertible, $.01 par value. Authorized 200,000 shares; issued and outstanding 200,000 shares in 2000 and 2001			2		2
	Additional paid-in capital			20,883		20,883
	Retained deficit			(24,086	)	(41,873	)
		Total stockholders' equity (deficit)		(3,157	)	(20,944	)
Commitments and contingencies (notes 11 and 21)			$	130,533		106,517

        See accompanying notes to consolidated financial statements.

24

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 1999, 2000 and 2001

(Dollars in thousands, except per share data)

			December 31,
			1999			2000		2001
			(Restated)			(Restated)		(Restated)
Net sales			$	219,323		278,828		236,170
Cost of sales				194,434		242,721		212,963
		Gross profit		24,889		36,107		23,207
Operating expenses:
	Selling expenses			6,005		6,679		5,599
	Administrative expenses			18,062		20,317		20,968
	Restructuring charges (Note 5)			—		—		1,323
		Total operating expenses		24,067		26,996		27,890
		Operating income (loss)		822		9,111		(4,683	)
Other income (expense):
	Gain (loss) on sale of businesses			(2,463	)	320		—
	Interest income			15		—		—
	Interest expense			(8,208	)	(10,801	)	(9,328	)
	Other			1,012		732		(610	)
		Total other income (expense)		(9,644	)	(9,749	)	(9,938	)
		Earnings (loss) before income taxes and cumulative effect of accounting change		(8,822	)	(638	)	(14,621	)
Income taxes				(1,165	)	(1,230	)	2,100
		Earnings (loss) before cumulative effect of accounting change		(7,657	)	592		(16,721	)
Cumulative effect of accounting change, net of income tax benefit of $69				(1,074	)	—		—
		Net earnings (loss)		(8,731	)	592		(16,721	)
Dividends and accretion of discount on preferred shares				(1,129	)	(898	)	(1,066	)
		Net earnings (loss) available to common stockholders	$	(9,860	)	(306	)	(17,787	)
Earnings (loss) available to common stockholders per share-basic			$	(2.32	)	(0.07	)	(3.87	)
Earnings (loss) available to common stockholders per share-diluted			$	(2.32	)	(0.07	)	(3.87	)

        See accompanying notes to consolidated financial statements.

25

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)

Years ended December 31, 1999, 2000 and 2001
(Dollars in thousands)

		Class A common stock			Class B common stock
		Shares issued	Amount		Shares issued	Amount		Additional paid-in capital		Retained earnings (deficit)			Total
Balance, December 31, 1998		3,866,944	$	39	200,000	$	2	$	19,937	$	(13,920	)	$	6,058
	Net loss (Restated)	—		—	—		—		—		(8,731	)		(8,731	)
	Stock options exercised	437,172		4	—		—		44		—			48
	Dividends and accretion of discount on preferred shares	—		—	—		—		—		(1,129	)		(1,129	)
Balance, December 31, 1999		4,304,116		43	200,000		2		19,981		(23,780	)		(3,754	)
	Net earnings (Restated)	—		—	—		—		—		592			592
	Stock options exercised	96,734		1	—		—		39		—			40
	Issuance of warrants	—		—	—		—		863		—			863
	Accretion of discount on preferred shares	—		—	—		—		—		(898	)		(898	)
Balance, December 31, 2000		4,400,850		44	200,000		2		20,883		(24,086	)		(3,157	)
	Net loss (Restated)	—		—	—		—		—		(16,721	)		(16,721	)
	Accretion of discount on preferred shares	—		—	—		—		—		(1,066	)		(1,066	)
Balance, December 31, 2001		4,400,850	$	44	200,000	$	2	$	20,883	$	(41,873	)	$	(20,944	)

        See accompanying notes to consolidated financial statements.

26

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 1999, 2000 and 2001
(Dollars in thousands)

					December 31,
					1999			2000		2001
					(Restated)			(Restated)		(Restated)
Cash flows from operating activities:
	Net earnings (loss)				$	(8,731	)	592		(16,721	)
	Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization of plant and equipment				7,886		8,143		8,672
		Other amortization				1,307		1,479		1,338
		Asset impairment (note 4)				—		—		803
		Write-off of intangible assets				1,125		—		—
		Increase (decrease) in allowance for doubtful accounts				(251	)	1,004		(943	)
		Deferred income taxes				—		(1,230	)	2,100
		Gain on sale of property and equipment				(93	)	(927	)	—
		Unrealized (gain) loss on derivative instruments				(1,012	)	286		671
		(Gain) loss on sale of businesses				2,463		(320	)	—
		Changes in current assets and liabilities, excluding effects of acquisitions and dispositions:
			Decrease (increase) in accounts receivable			3,275		(1,867	)	10,152
			Decrease (increase) in inventories			149		(8,024	)	7,528
			Decrease (increase) in prepaid expenses			319		(1,212	)	(329	)
			(Increase) in other assets			—		(643	)	(825	)
			Decrease in refundable income taxes			977		63		—
			Increase (decrease) in accounts payable			5,588		6,592		(881	)
			Increase (decrease) in accrued expenses and other			(10,189	)	(996	)	881
				Net cash provided by operating activities		2,813		2,940		12,446
Cash flows from investing activities:
	Capital expenditures					(4,963	)	(6,651	)	(4,357	)
	Proceeds from sale of property and equipment					105		1,261		—
	Acquisitions, net of cash acquired					(30,287	)	—		—
	Proceeds from sale of businesses					7,500		2,915		—
	Decrease in tax escrow					1,605		—		—
				Net cash used in investing activities		(26,040	)	(2,475	)	(4,357	)
Cash flows from financing activities:
	Net borrowings (repayments) of notes payable					9,859		9,976		(3,710	)
	Increase (decrease) in checks issued in excess of bank balance					(455	)	1,669		1,253
	Proceeds from issuance of long-term debt					26,000		—		—
	Principal payments on long-term debt and capital leases					(15,222	)	(11,831	)	(5,509	)
	Proceeds from issuance of common stock					48		40		—
	Proceeds from issuance of preferred stock					4,250		—		—
	Debt issuance cost					(1,253	)	(319	)	(123	)
				Net cash provided by (used in) financing activities		23,227		(465	)	(8,089	)
Net increase (decrease) in cash						—		—		—
Cash at beginning of period						—		—		—
Cash at end of period					$	—		—		—
Supplemental disclosures of cash flow information:
	Cash paid during the year for:
		Interest			$	8,519		10,355		9,653
		Income taxes			$	63		1		24

        See accompanying notes to consolidated financial statements.

27

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2000 and 2001
(Dollars in thousands, except per share data)

(1)    Description of Business and Summary of Significant Accounting Policies

(a)  Description of Business

Morton Industrial Group, Inc. and subsidiaries is a contract manufacturer and supplier of high-quality fabricated sheet metal and plastic components and subassemblies for construction, agricultural, industrial equipment and recreational equipment manufacturers located primarily in the Midwestern and Southeastern United States. Sales for the year ended December 31, 2001, were approximately as follows: construction—33%, agricultural—17%, industrial—40% and recreational equipment—10%. The Company's raw materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers.

(b)  Principles of Consolidation

The consolidated financial statements include the financial statements of Morton Industrial Group, Inc. (the Company) and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

(c)  Use of Estimates in Preparing Financial Statements

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

(d)  Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for all inventories.

(e)  Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation. Equipment under capital leases is stated at the lower of the net present value of the minimum lease payments at the beginning of the lease term or fair value at the inception of the lease.

Depreciation of plant and equipment is calculated over the estimated useful lives of the respective assets using straight-line and accelerated methods. The equipment held under capital leases is amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

(f)    Intangible Assets

Intangible assets are recorded at cost and include goodwill, amortized over periods ranging from 18 to 25 years; covenants not to compete, amortized over their contractual periods which range from 3 to 10 years; and debt issuance costs, amortized over the term of the related loans.

In April 1998, the Accounting Standards Executive Committee of the AICPA issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities" which requires costs

28

of start-up activities and organization costs to be expensed as incurred. SOP 98-5 was effective for fiscal years beginning after December 15, 1998, with initial application reported as the cumulative effect of a change in accounting principle. Accordingly, adoption of the statement resulted in a cumulative effect charge of $1,074, net of income tax benefits, in the first quarter of 1999. The cumulative effect of the change in accounting principle increased 1999 basic and diluted loss available to common shareholders per share by $.25.

(g)  Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(h)  Stock Option Plan

The Company accounts for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.

(i)    Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

(j)    Revenue Recognition

Revenue from sales is recognized when the goods are shipped to the customer.

29

(k)  Interest Rate Swaps

As required by one of its financing arrangements, the Company enters into interest rate swap agreements to limit the effect of increases in the interest rates on certain floating rate debt. The difference between the floating rate on the Company's debt and the rate on the swap agreements is accrued as interest rates change and is recorded in interest expense. During 1998, the Company entered into two swap agreements, expiring May 31, 2003 to June 30, 2003, with an initial aggregate notional amount of $27,500. The effect of these agreements is to limit the LIBOR interest rate component to 5.87% on half of the Company's $32,459 term loans under the applicable financing arrangement. As a result of these swap agreements, interest expense was decreased by $161 in 2000 and increased by $291 in 2001.

(l)    Fair Value of Financial Instruments

The Company believes the recorded value of cash, accounts receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of these financial instruments. The Company believes the recorded value of notes payable and long-term debt approximates fair value because their respective interest rates fluctuate with market rates or approximate current market rates.

The fair value of interest rate swaps are the estimated amounts that the Company would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the counterparties. At December 31, 2000 and 2001, the Company estimates it would have paid $84 and $755 to terminate the agreements, respectively.

(m)  Earnings (Loss) Per Share

Earnings (loss) per share is computed under the provisions of Statement of Financial Accounting Standards No. 128, Earnings Per Share. Amounts reported as earnings (loss) per share reflect the earnings available to common stockholders for the year divided by the weighted average number of Class A and Class B common shares outstanding during the year.

(n)  Design and Development Costs

The Company capitalizes design and development costs for molds, dies and other tools owned by customers when the Company has the noncancelable right to use the molds, dies and other tools during a long-term supply arrangement. Included in other assets at December 31, 2000 and 2001 are $530 and $1,077 of such capitalized costs, net of amortization of $79 and $286, respectively.

(o)  Impact of Recently Issued Accounting Standards

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS 141 also

30

specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

The Company is required to adopt the provisions of SFAS 141 immediately and will adopt SFAS 142 effective January 1, 2002. Furthermore, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination completed after June 30, 2001, but before SFAS 142 is adopted in full will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-SFAS 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized and tested for impairment in accordance with the appropriate pre-SFAS 142 accounting requirements prior to the adoption of SFAS 142.

SFAS 141 will require upon adoption of SFAS 142, that the Company evaluate its existing intangible assets and goodwill that were acquired in prior purchase business combinations, and to make any necessary reclassifications in order to conform with the new criteria in SFAS 141 for recognition apart from goodwill. Upon adoption of SFAS 142, the Company will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

In connection with SFAS 142's transitional goodwill impairment evaluation, the Statement will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of

31

adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of operations.

As of December 31, 2001, the Company has unamortized goodwill in the amount of $8.3 million which is subject to the transition provisions of SFAS 141 and 142. Because of the extensive effort needed to comply with adopting SFAS 141 and 142, it is not practicable to reasonably estimate the impact of adopting these Statements on the Company's financial statements at the date of this report, including whether it will be required to recognize any transitional impairment losses as the cumulative effect of a change in accounting principle.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes both SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (Opinion 30), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 retains the fundamental provisions in SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS 121. For example, SFAS 144 provides guidance on how a long-lived asset that is used as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. SFAS 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). Unlike SFAS 121, an impairment assessment under SFAS 144 will never result in a write-down of goodwill. Rather, goodwill is evaluated for impairment under SFAS No. 142.

The Company is required to adopt SFAS 144 on January 1, 2002. Management does not expect the adoption of SFAS 144 for long-lived assets held for use to have a material impact on the Company's financial statements because the impairment assessment under SFAS 144 is largely unchanged from SFAS 121. The provisions of the Statement for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities. Therefore, management cannot determine the potential effects that adoption of SFAS 144 will have on the Company's financial statements.

(2)    Restatement

        In August 2002, the Company announced that it had become aware of possible inappropriate accounting practices at one of its operating subsidiaries (Morton Custom Plastics, LLC). A formal inquiry was conducted by the Audit Committee of the Company's Board of Directors, during which the Company determined that certain errors had occurred. The errors resulted primarily from employing inappropriate methods of recognizing revenues, preparing inaccurate estimates of inventory obsolescence, and not timely recognizing costs, which resulted in an overstatement of revenues and an understatement of cost of sales. The effect of the correction of these errors was to increase the

32

previously reported net loss by $979 for the year ended December 31, 2001. Additionally, based on a review of our accounting policies, we have determined that our interest rate swaps did not qualify for hedge accounting. Related to accounting for the Company's interest rate swap instruments, a restatement has been made that had the effect of increasing other expense $671 and $286 for the years ended December 31, 2001 and 2000, respectively, and increasing other income by $1,012 for the year ended December 31, 1999. The consolidated financial statements as of December 31, 2000 and 2001 and for the years ended December 31, 1999, 2000 and 2001 and notes thereto included in this annual report on Form 10-K/A have been restated to include the effects of the corrections of these errors, as follows:

		2001 As previously reported			2001 Restated
Consolidated Balance Sheet
	Accounts Receivable	$	19,519		$	18,989
	Inventories		22,570			21,901
	Prepaid expenses		2,816			2,803
	Total current assets		45,705			44,493
	Property, plant and equipment, net		46,462			46,437
	Total assets		107,754			106,517
	Outstanding checks issued in excess of bank balance		4,021			4,045
	Accounts payable		30,133			29,854
	Accrued expenses		6,804			6,801
	Total current liabilities		46,226			45,968
	Total liabilities		120,376			120,118
	Total redeemable preferred stock		7,343			7,343
	Total stockholders' equity (deficit)		(19,965	)		(20,944	)
Consolidated Statement of Operations
	Net sales	$	236,390		$	236,170
	Cost of sales		212,573			212,963
	Gross profit		23,817			23,207
	Administrative expenses		20,474			20,968
	Total operating expenses		27,396			27,890
	Operating loss		(3,579	)		(4,683	)
	Interest expense		(9,453	)		(9,328	)
	Other income (expense)		61			(610	)
	Total other income (expense)		(9,392	)		(9,938	)
	Earnings (loss) before income taxes and cumulative effect of accounting change		(12,971	)		(14,621	)
	Net earnings (loss)		(15,071	)		(16,721	)
	Loss available to common stockholders per share—basic		(3.51	)		(3.87	)
	Loss available to common stockholders per share—diluted		(3.51	)		(3.87	)
Consolidated Statement of Cash Flows
	Cash provided by operating activities	$	12,495		$	12,446
	Cash used in investing activities		(4,382	)		(4,357	)
	Cash used in financing activities		(8,113	)		(8,089	)

33

		2000 As previously reported			2000 Restated
Consolidated Balance Sheet
	Accrued expenses	$	5,165		$	5,249
	Total current liabilities		48,893			48,977
	Total liabilities		127,329			127,413
	Total stockholders' equity (deficit)		(3,073	)		(3,157	)
Consolidated Statement of Operations
	Other income (expense)		1,018			732
	Total other income (expense)		(9,463	)		(9,749	)
	Earnings (loss) before income taxes and cumulative effect of accounting change		(352	)		(638	)
	Net earnings (loss)		878			592
	Loss available to common stockholders per share—basic		0.00			(0.07	)
	Loss available to common stockholders per share—diluted		0.00			(0.07	)

		1999 As previously reported		1999 Restated
Consolidated Statement of Operations
	Other income (expense)	—		1,012
	Total other income (expense)	(10,656	)	(9,644	)
	Earnings (loss) before income taxes and cumulative effect of accounting change	(9,834	)	(8,822	)
	Net earnings (loss)	(9,743	)	(8,731	)
	Loss available to common stockholders per share—basic	(2.55	)	(2.32	)
	Loss available to common stockholders per share—diluted	(2.55	)	(2.32	)

(3)    Acquisition of the Assets of Worthington Non-Automotive Plastics Group of Worthington Custom Plastics, Inc.

        On April 15, 1999, Morton Custom Plastics, LLC acquired substantially all of the assets of the Non-Automotive Plastics Group of Worthington Custom Plastics, Inc. ("Worthington"), a manufacturer of plastic components for construction and industrial equipment manufacturers with locations in Harrisburg, North Carolina; St. Matthews, South Carolina; and Lebanon, Kentucky. The Company paid $25,000 in cash, subject to a working capital adjustment, issued 10,000 shares of preferred stock, and provided for a contingent payment to Worthington Custom Plastics, Inc. The contingent payment will be 15% of the fair market value of the acquired business as of December 31, 2004. The acquisition was accounted for as a purchase and the entire cost was allocated to the net assets acquired. During 2000, the estimated working capital adjustment was reduced by $2,313 and the cost allocated to property, plant and equipment was reduced accordingly.

        Morton Custom Plastics, LLC, is wholly owned by Morton Holdings, LLC. Morton Holdings, LLC is 49% owned by Morton Industrial Group, Inc. and 51% owned by Quilvest Custom Plastics, an affiliate of a significant shareholder of the Company. However, the LLC agreement specifies that

34

Morton Industrial Group, Inc. will receive 100% of the net income or loss as well as the proceeds from any sale of Morton Customs Plastics, LLC. Additionally, Quilvest Custom Plastics has granted Morton Industrial Group, Inc. an irrevocable option to purchase its interest in Morton Holdings, LLC at any time for $1. Accordingly, the results of Morton Holdings, LLC and subsidiaries have been consolidated in the accompanying financial statements.

        The results of operations of the above acquired company are included in the accompanying financial statements since the date of the acquisition.

        The following unaudited pro forma summary presents the Company's consolidated results of operations for the year ended December 31, 1999 as if the acquisition had occurred at the beginning of the year:

	December 31, 1999
Net sales	$	246,187
Net earnings (loss) available to common shareholders	$	(11,679	)
Net earnings (loss) available to common shareholders per share—basic	$	(2.75	)
Net earnings (loss) available to common shareholders per share—diluted	$	(2.75	)

(4)    Sale of Businesses

        On December 31, 1999, the Company sold substantially all of the assets and certain liabilities of one of its plastics subsidiaries, Carroll George, Inc. The Company received $7,500 of cash for net assets with a book value at the date of sale of $9,963, resulting in a loss on the sale of subsidiary of $2,463.

        During 2000, the Company sold the assets and certain liabilities of a product line and a machining division from the contract plastics fabrication segment. The Company received $2,915 of cash for net assets with a book value at the dates of sale of $2,595, resulting in a gain on the sales of $320.

(5)    Restructuring Charge

        In connection with a restructuring plan adopted in October of 2001, the Company recorded a $1,323 restructuring charge associated with the restructuring and consolidation of certain of its Illinois plants. The restructuring included $520 for costs associated with certain leased facilities which will no longer be used and an $803 impairment charge for the abandonment of certain leasehold improvements and impairment of certain assets under the provisions of SFAS 121. The restructuring activities will be substantially completed by the end of the third quarter 2002. As of December 31, 2001, a restructuring reserve of $520 is included in accrued expenses relating to facility lease payments, utilities, insurance and taxes expected to be incurred through the lease termination date.

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(6)    Inventories

        A summary of inventories follows:

	December 31,
	2000		2001
			(restated)
Finished goods	$	9,555	$	9,273
Work in process		7,121		4,807
Raw materials		12,753		7,821
	$	29,429	$	21,901

(7)    Property, Plant, and Equipment

        A summary of property, plant, and equipment, including assets held under capital leases as described in note 11 is as follows:

		December 31,
	Depreciable Lives (in years)
		2000		2001
Land and land improvements	15	$	1,837	$	1,852
Buildings and leasehold improvements	15 - 39		15,003		15,004
Machinery and vehicles	5 - 12		46,642		47,627
Tooling	3		8,676		9,927
Office equipment	5 - 10		6,160		6,683
Construction in progress	—		1,574		217
			79,892		81,310
Less accumulated depreciation			28,337		34,873
Property, plant and equipment, net		$	51,555	$	46,437

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(8)    Intangible Assets

        A summary of intangible assets is as follows:

	December 31,
	2000		2001
Goodwill	$	11,063	$	11,063
Covenants not to compete		2,591		2,591
Debt issuance costs		2,629		2,533
Other		435		435
		16,718		16,622
Less accumulated amortization		5,532		6,269
Net intangible assets	$	11,186	$	10,353

(9)    Derivative Instruments and Hedging Activities

        The Company uses variable-rate debt to finance its operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent of fixed rate debt.

        The Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities(SFAS 133), as amended by SFAS No. 137 and No. 138 on January 1, 2001. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company uses derivative financial instruments (interest rate swaps) to mitigate its interest rate risk on a related financial instrument. SFAS 133 requires that changes in the fair value of derivatives that qualify as a cash flow hedge be recognized in other comprehensive income while the ineffective portion of the derivative's change in fair value be recognized immediately in earnings. SFAS 133 requires that unrealized gains and losses on that portion of derivatives not qualifying for hedge accounting be recognized currently in earnings. The Company recorded other income (expense) of $1,012, $(286) and $(671) for its interest rate swap contracts for the years ended December 31, 1999, 2000 and 2001, respectively, as they do not qualify for hedge accounting.

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(10)    Long-term Debt

        A summary of long-term debt follows:

	December 31,
	2000		2001
Revolving credit facility with the Harris syndicate	$	17,700	$	18,400
Note payable to the Harris syndicate, with variable rate interest (10.5% and 5.75% as of December 31, 2000 and 2001, respectively)		12,747		9,301
Note payable to the Harris syndicate, with variable rate interest (13.25% and 8.5% as of December 31, 2000 and 2001, respectively)		23,175		23,159
Revolving credit facility with GECC		13,835		9,424
Note payable to GECC, with variable rate interest (10.5% to 11.5% and 6.25% to 7.0% as of December 31, 2000 and 2001, respectively)		17,747		15,997
Subordinated note payable with interest payable at 7.0%, discounted $393 to yield 10.0%, due in quarterly payments with the balance due April 8, 2008		2,624		2,346
Note payable, bank, with interest payable at 8.5%, due in monthly payments with the balance due December 1, 2002		185		82
Note payable, bank, with interest payable at 7.85%, due in monthly payments with the balance due May 1, 2001		47		—
Note payable, electric cooperative, non-interest bearing, due in monthly payments with the balance due November 1, 2006		263		219
Capital lease obligations		34		210
		88,357		79,138
Less current installments		10,201		5,268
	$	78,156	$	73,870

        The Company has two significant credit facilities: one facility with General Electric Capital Corporation ("GECC") to finance the operations of Morton Custom Plastics LLC acquired from Worthington Custom Plastics, Inc. and another facility with a syndicate of banks led by Harris Trust and Savings Bank ("the Harris syndicate") to finance the operations of the Company's steel fabrication operations and one plastics location.

        In May 1998, the Company entered into a revolving credit facility with the Harris syndicate. The revolving credit agreement, as amended, permitted the Company to borrow up to a maximum of $23,000. The agreement required payment of a quarterly commitment fee of .25% of the average daily unused portion of the revolving credit facility. Interest was due monthly and was based on the Bank's prime rate plus an applicable margin (10.5% and 5.75% at December 31, 2000 and 2001, respectively). The amount available under the revolving credit facility was limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2,000 of other assets. At December 31, 2000, the Company had $17,700 outstanding and $2,492 available under this revolving credit facility. At December 31, 2001, the Company had $18,400 outstanding and $1,110 available under this revolving credit facility.

        In May 1998, the Company also entered into a financing arrangement with the Harris syndicate which originally provided for term loans of up to $55,000. The term loans under this financing arrangement were amortized quarterly. Interest was payable monthly at rates based upon the lender's prime rate plus an applicable margin. The agreement was secured by a first lien on all of the Company's accounts receivable, inventory, equipment and various other assets, other than assets of Morton Custom Plastics LLC. Effective January 30, 2000, the Company was paying this lender a fee of

38

..125% per month based upon the amount of the revolving credit commitment and the balance of the term loans.

        The Harris syndicate agreed to defer principal payments totaling $2,400 due in installments of $1,200 each on September 30 and December 31, 2001 and amendment fee payments of $450 due on December 15, 2001.

        This debt agreement contained restrictions on capital expenditures, incurring additional debt or liens, making investments, mergers and acquisitions, selling assets or making payments such as dividends or stock repurchases. The credit agreements also contained various financial covenants.

        The GECC revolving credit facility allowed for borrowings up to a maximum of $24,000. Interest was due monthly and was based on the prime rate as published in the Wall Street Journal plus an applicable margin (10.5% at December 31, 2000 and 6.5% at December 31, 2001). The Company also incurred a fee based upon the unused revolving credit facility. The amount available under the revolving credit facility was generally limited to 85% of qualified accounts receivable and 60% of eligible inventory. At December 31, 2000 and 2001, the Company had $13,835 and $9,424, respectively, outstanding and $360 and $1,618, respectively, available under the GECC revolving credit facility.

        The GECC term loan facility allowed for maximum borrowings of $26,000. Interest was due monthly and was based on the prime rate as published in the Wall Street Journal plus an applicable margin which varied depending on certain financial ratios achieved by the Company. The term loan facility amortized quarterly throughout its term. The Company was also required to prepay certain amounts from the sale of assets, the issuance of new equity capital and from excess cash flow as defined by the agreement.

        GECC agreed to defer principal payments totaling $2,000 due in installments of $1,000 each on September 30 and December 31, 2001.

        Subsequent to December 31, 2001, the Company's credit facilities were revised as described in the following paragraphs:

        In February 2002, the Company entered into a new secured revolving credit facility with the Harris syndicate. The revolving credit agreement permits the Company to borrow up to a maximum of $21,000. The agreement requires payment of a quarterly commitment fee of .50% per annum of the average daily unused portion of the revolving credit facility. Interest is due monthly and is based on LIBOR plus 4.0% (effective rate of 5.883% at December 31, 2001). The Company, alternatively, could select a domestic interest rate. The amount available under the revolving credit facility is limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2,500 of other assets. The revolving credit agreement expires July 1, 2003.

        In February 2002, the Company entered into a secured term loan arrangement with the Harris syndicate for a term loan of $32,965. The new Harris term loan arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement is amortized monthly with principal payments ranging from $235 to $500 and the balance of $24,930 due July 1, 2003. Interest is due monthly and is based upon LIBOR plus 4.0% (effective rate of 5.883% at December 31, 2001). The Company, alternatively, could select a domestic interest rate. The agreement is secured by a first lien on all of the Company's accounts receivable, inventory, equipment and various other assets, other than the assets of Morton Custom Plastics LLC. The Company intends to obtain additional loans or funding support from other sources by the end of the term of this arrangement, which may not be available on acceptable terms and conditions. Failure to do so could have a material adverse effect on the operations.

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        These debt agreements contain restrictions on capital expenditures, incurring additional debt or liens, making investments, mergers and acquisitions, selling assets or making payments such as dividends or stock repurchases, as well as containing various financial covenants.

        In March 2002, Morton Custom Plastics LLC entered into a new revolving credit facility and a new senior credit facility with GECC.

        The new GECC revolving credit facility allows for borrowings up to a maximum of $10,000. Of the amount available under the revolver, $1,000 is held back as reserve for discretionary use approved by the lender. The Company also incurs a fee based upon the unused revolving credit facility. The amount available under the revolving credit facility is generally limited to 85% of qualified accounts receivable and 60% of eligible inventory. The revolving credit agreement expires August 30, 2006.

        The new GECC senior credit facility includes three term loans with initial balances of $10,000 (Term A), $7,000 (Term B) and $5,000 (Term C), respectively. The maturity date on the new senior credit facility is August 30, 2006.

        The new GECC revolving credit facility and term loans total $32,000 and replaced a similar facility which totaled $28,000, providing additional availability.

        The GECC loans are secured by a first priority security interest in all of the Morton Custom Plastics LLC assets, including, but not limited to, accounts receivable, inventories, leaseholds, fixed assets, intangible assets and trade names.

        The interest on the GECC revolving credit facility, Term A and Term B is at LIBOR plus 450 basis points, with a LIBOR floor of 3% (effective rate of 6.383% at December 31, 2001). The Company, alternatively, could select an index rate. Interest is to be paid monthly on these loans. The interest on Term C is 13% payment-in-kind. Unpaid interest on Term C is due at maturity.

        The principal on Term A and Term B amortizes quarterly in various amounts beginning on September 30, 2002 for Term A and June 30, 2002 for Term B. Final installments for Term A and Term B are due at maturity, which is August 30, 2006. The principal on the revolving credit facility and Term C are due at maturity, which is August 30, 2006.

        In conjunction with the new credit facility, the Company issued to GECC common stock warrants to purchase 70% ("Warrant Ownership Percentage") of the outstanding ownership interests (on a fully diluted basis) of Morton Custom Plastics LLC. The Warrant Ownership Percentage can be reduced to 35% if the loan is repaid in full before March 25, 2004. If adjusted EBITDA for the year ending December 31, 2003, as defined in the agreement, is at least $8,000 and the Warrant Ownership Percentage has not already been reduced, the Warrant Ownership Percentage will be reduced to 51%. The warrants will be recorded at fair value as a discount on the related debt.

        At any time on or after the occurrence of (i) the scheduled maturity date, (ii) an event of default, or (iii) the date of indefeasible prepayment in full of the loans and cancellation of letters of credit and permanent reduction of revolving loan commitment to zero ("Trigger Events"), each holder has the right to require the Company to purchase all or any part of the warrants ("Put Feature"). The Company also has the right to repurchase all, but not less than all, of the outstanding warrant and equity interests of the holders subsequent to a Trigger Event ("Call Feature"). The Put Feature and Call Feature each have a purchase price equal to the greater of the applicable floor price and the fair market value as determined in good faith by the board and subject to approval by the holders. The initial floor price is $500.

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        Under the most restrictive covenant in any agreement, no amount was available for payment of dividends at December 31, 2000 and 2001.

        The aggregate amounts of long-term debt maturities and principal payments, based upon the new credit facilities for each of the five years subsequent to December 31, 2001 and thereafter are as follows:

Fiscal year ending:
2002	$	5,268
2003		48,783
2004		3,660
2005		4,114
2006		16,669
Thereafter		644
	$	79,138

        On September 20, 2000, the Company issued warrants to a lender, in connection with an amendment to the credit agreement, to purchase 238,548 shares of its Class A common stock. The 238,548 warrants issued are exercisable at any time through December 31, 2003, at an exercise price of $.01 per share. The warrants were valued at $863 and were recorded as a discount on the related term loans in the year ended December 31, 2000.

(11)    Leases

        The Company is obligated under various capital leases for certain machinery. At December 31, 2001, the gross amount of equipment and related amortization recorded under capital leases was as follows:

Machinery	$	228
Less accumulated amortization		18
	$	210

        Assets under capital leases are included in property, plant and equipment and amortization of assets held under capital leases is included with depreciation expense.

        The present value of future minimum capital lease payments at December 31, 2001 was as follows:

Year ending December 31:
	2002		$	58
	2003			58
	2004			58
	2005			49
	2006			21
		Total minimum lease payments		244
	Less amount representing interest (from 7.1% to 7.9%)			34
		Present value of net minimum capital lease payments	$	210

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        The Company also has operating leases for several of its plants, certain warehouse space, and manufacturing and computer equipment. Rental expense for operating leases was $6,733, $7,266 and $7,901 for the years ended December 31, 1999, 2000 and 2001, respectively.

        Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2001 are:

Year ending December 31:
	2002	$	7,710
	2003		7,216
	2004		6,471
	2005		4,936
	2006		2,521
	Thereafter		5,451
	Total minimum lease payments	$	34,305

(12)    Income Taxes

        Total income tax expense (benefit) for the periods presented was allocated as follows:

	December 31,
	1999			2000			2001
Income tax before cumulative effect of accounting change	$	(1,165	)	$	(1,230	)	$	2,100
Cumulative effect of accounting change		(69	)		—			—
	$	(1,234	)	$	(1,230	)	$	2,100

        Income tax expense (benefit) consists of the following:

		Current			Deferred			Total
Year ended December 31, 1999:
	Federal	$	—		$	—		$	—
	State		(1,165	)		—			(1,165	)
		$	(1,165	)	$	—		$	(1,165	)
Year ended December 31, 2000:
	Federal	$	—		$	(1,072	)	$	(1,072	)
	State		—			(158	)		(158	)
		$	—		$	(1,230	)	$	(1,230	)
Year ended December 31, 2001:
Federal		$	—		$	1,830		$	1,830
	State		—			270			270
		$	—		$	2,100		$	2,100

        Total income tax expense (benefit) attributable to income before extraordinary item and cumulative effect of accounting change differed from the amounts computed by applying the U.S. Federal

42

corporate income tax rate of 34% for all periods to loss before income taxes as a result of the following:

		December 31,
		1999			2000			2001
		(Restated)			(Restated)			(Restated)
Computed "expected" tax benefit		$	(3,000	)	$	(216	)	$	(5,000	)
	State income tax benefit, net of Federal income tax benefit		—			(104	)		(326	)
	Amortization of goodwill		152			149			149
	Officer's life insurance		23			29			20
	Increase (decrease) in valuation allowance		2,760			(989	)		7,337
	Resolution of tax contingency		(1,165	)		—			—
	Other, net		65			(99	)		(80	)
		$	(1,165	)	$	(1,230	)	$	2,100

        The state tax benefit for the year ended December 31, 1999 primarily results from the resolution of a tax contingency related to the Company's 1998 merger with MLX Corp.

        The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 and 2001, are presented below:

			December 31,
			2000			2001
						(Restated)
Deferred tax assets attributable to:
	Net operating loss and credit carryforwards		$	28,043		$	32,448
	Accrued vacation pay			314			228
	Compensation expense from issuance of stock options			291			291
	Reserves and other			818			1,119
		Total gross deferred tax assets		29,466			34,086
	Less valuation allowance			(17,461	)		(24,798	)
		Net deferred tax assets		12,005			9,288
Deferred tax liabilities attributable to:
	Plant and equipment, principally due to differences in depreciation			(4,723	)		(4,166	)
	Recapture of inventory LIFO valuation for tax purposes			(39	)		—
	Excess of tax over book amortization of organization costs			(63	)		(56	)
	Discount on debt for financial reporting purposes			(132	)		(118	)
		Total deferred tax liabilities		(4,957	)		(4,340	)
		Net deferred tax asset	$	7,048		$	4,948

        In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $12,800 prior to the expiration of the net operating

43

loss carryforwards in 2021. Management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2001 based upon anticipated profitability over the period of years that the temporary differences are expected to become tax deductions. Management believes that sufficient book and taxable income will be generated to realize the benefit of these tax assets. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

        During 2001, net operating loss carryforwards of approximately $45 expired unused. At December 31, 2001, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $82,300 which are available to offset future federal taxable income, if any, through 2021.

(13)    Redeemable Preferred Stock

        Pursuant to the agreement to purchase certain assets of Worthington Custom Plastics, Inc., the Company issued 10,000 shares of preferred stock, without par value, of Morton Industrial Group, Inc. to Worthington. The preferred stock is mandatorily redeemable five years from its issuance date at $1,000 per share, and will pay or accrue annual dividends at a rate of 8%. The Company may pay such dividends in cash or in additional shares of preferred stock. The agreement provides that the dividend rate may be reduced based upon changes in pricing of certain customer contracts. The Company has determined that those dividends should be reduced as provided in the agreement, and accordingly, has accrued no dividends for the years ending December 31, 2000 and 2001. The preferred stock was valued at $4,250 at the time of the acquisition and the discount is being accreted over a five-year period using the effective yield method.

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(14)    Stockholders' Equity

        The Company's capital stock consists of Class A and Class B common stock. The Class A and Class B shares have the same rights and preferences, except that the Class B shares guarantee the holders certain special voting rights. The holders of the Class B common stock are ensured that the total votes available to be cast by the holders, when combined with Class A common stock held, will be at least 24% of the votes available to be cast by all holders of common stock.

        The Board of Directors is also authorized to issue one or more series of preferred stock, with the number of shares, dividend rate, voting rights, redemption features and other rights to be determined by the Board of Directors.

(15)    Stock Option Plans

        In 1998, the Company adopted a stock option plan (the "Plan") pursuant to which the Company's Board of Directors may grant stock options to officers and key employees. The Plan authorizes grants of options to purchase up to 1,166,896 shares of authorized but unissued Class A common stock. Stock options are granted with an exercise price equal to the stock's fair market value at the date of grant. All stock options under the Plan have ten-year terms and vest and become fully exercisable after three years from the date of grant. At December 31, 1999, 2000 and 2001, there were 275,330, 139,150 and 139,600 additional shares available for grant under the Plan.

        Prior to the Merger, the Company had a stock option plan under which key officers and employees were granted options at prices equal to fair market value of the stock on the date of grant. At December 31, 1999, 2000 and 2001, there were 165,690, 68,956 and 68,956 options outstanding under the prior plan.

        The per share weighted-average fair value of stock options granted during 1999, 2000 and 2001 was $3.37, $3.70 and $1.67 on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield of 0%, risk-free interest rate of 6%, volatility of 91%, and an expected life of 10 years.

        The Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts indicated below:

		1999			2000			2001
		(Restated)			(Restated)			(Restated)
Net earnings (loss) available to common shareholders:
	As reported	$	(9,860	)	$	(306	)	$	(17,787	)
	Pro forma		(11,322	)		(1,908	)		(17,827	)
Diluted earnings (loss) available to common shareholders per share:
	As reported		(2.32	)		(.07	)		(3.87	)
	Pro forma		(2.66	)		(.42	)		(3.88	)

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        Stock option activity during the periods indicated is as follows:

	Number of shares		Weighted average exercise price
Outstanding at December 31, 1998	1,466,143		$	10.057
Issued	56,100			7.109
Exercised	(437,172	)		0.111
Forfeited	(28,000	)		(6.660	)
Outstanding at December 31, 1999	1,057,071			14.040
Issued	164,000			4.610
Exercised	(96,734	)		0.411
Forfeited	(27,820	)		(11.235	)
Outstanding at December 31, 2000	1,096,517			13.904
Issued	139,150			1.875
Exercised	—			—
Forfeited	(139,600	)		(8.447	)
Outstanding at December 31, 2001	1,096,067		$	13.072

        The following is summary information about the Company's stock options outstanding at December 31, 2001:

Number of shares	Exercise price		Expiration date	Number of shares exercisable
59,697	$	0.216	July 13, 2002	59,697
9,259		0.900	May 8, 2005	9,259
101,650		1.875	February 5, 2011	—
120,000		4.500	March 10, 2010	40,000
10,000		7.375	June 8, 2009	6,667
30,000		13.125	September 2, 2008	30,000
765,461		17.125	January 20, 2008	765,461
1,096,067				911,084

(16)    Concentration of Sales

        Sales to customers in excess of 10% of total net sales for the years ended December 31, 1999, 2000 and 2001 are as follows:

		Customer A		Customer B
Periods ended:
	December 31, 1999	20	%	29	%
	December 31, 2000	18	%	35	%
	December 31, 2001	22	%	35	%

        Trade accounts receivable with these customers totaled $9,100 and $8,173 at December 31, 2000 and 2001, respectively.

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(17)    Employee Participation Plan

        The Morton Metalcraft Co. Employee Participation Plan allows substantially all employees to defer up to 15 percent of their income through payroll deduction of pre-tax contributions under section 401(k) of the Internal Revenue Code. The Company matches 25 percent of the first 6 percent of pre-tax income contributed by each employee. Employees may also make contributions of after-tax income. Additionally, the Company may make discretionary contributions to the plan for the benefit of participating employees. Certain of the acquired subsidiaries also had defined contribution plans which allow for employee pre-tax contributions and employer matching and discretionary contributions. The expense charged to operations related to defined contribution plans was $365, $490 and $423 for the years ended December 31, 1999, 2000 and 2001, respectively.

(18)    Earnings (Loss) Per Share

        The following reflects the reconciliation of the numerators and denominators of the earnings (loss) per share and net earnings (loss) per share (restated) assuming dilution computations:

		Year ended December 31, 1999
		Income (numerator)			Shares (denominator)	Per share amount
Basic loss per share available to common stockholders		$	(9,860	)	4,253,763	$	(2,32	)
Effect of dilutive securities			—		—
	Diluted loss per share available to common stockholders	$	(9,860	)	4,253,763	$	(2.32	)

		Year ended December 31, 2000
		Income (numerator)			Shares (denominator)	Per share amount
Basic loss per share available to common stockholders		$	(306	)	4,563,958	$	(.07	)
Effect of dilutive securities			—		—
	Diluted earnings per share available to common stockholders	$	(306	)	4,563,958	$	(.07	)

		Year ended December 31, 2001
		Income (numerator)			Shares (denominator)	Per share amount
Basic loss per share available to common stockholders		$	(17,787	)	4,600,850	$	(3.87	)
Effect of dilutive securities			—		—
	Diluted earnings per share available to common stockholders	$	(17,787	)	4,600,850	$	(3.87	)

        Options to purchase 1,057,071 shares of Class A common stock at an average purchase price of $14.040 were outstanding at December 31, 1999, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

        Options to purchase 1,096,517 shares of Class A common stock at an average price of $13.904 per share and warrants to purchase 238,548 shares of Class A common stock at $.01 per share were outstanding at December 31, 2000, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

47

        Options to purchase 1,096,067 shares of Class A common stock at an average price of $13.072 per share and warrants to purchase 238,548 shares of Class A common stock at $.01 per share were outstanding at December 31, 2001, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

(19)    Related Party Transactions

        During the year ended December 31, 1999, the Company paid $64 for merger and acquisition advisory services to two firms affiliated with members of the Company's board of directors.

        On November 3, 2000, the Company entered into an agreement with First Union Securities, Inc. ("FUSI"), under which FUSI acted as the Company's exclusive financial advisor with respect to possible debt or equity financings or recapitalizations from November 3, 2000 until March 12, 2002. A director of Morton Industrial Group, Inc. is head of the Commercial and Industrial Corporate Finance and Mergers and Acquisitions Group at Wachovia Securities, Inc. (formerly FUSI).

(20)    Segment Reporting

        Prior to 2001, the Company presented two reportable segments, contract metal fabrication and contract plastic fabrication. The contract metal fabrication segment provides full service fabrication of parts and sub-assemblies for the industrial, construction, agricultural and recreational vehicle equipment industry. The contract plastic fabrication segment provides full-service vacuum formed and injected-molded parts and sub-assemblies for the construction, agricultural and industrial equipment industry.

        Due to the need to closely monitor liquidity and compliance with debt covenants, the Company has changed its internal financial reports. Accordingly, effective with the year end December 31, 2001, the Company is presenting segment data based upon the results of operations by applicable credit facility. The Company's two separate credit facilities are described in more detail in these footnotes and in the Liquidity and Capital Resources section of Management's Discussion and Analysis of Financial Condition and Results of Operations.

        The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

48

        Morton Industrial Group, Inc. accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices, although these intersegment sales were insignificant in 2000 and 2001.

	1999 (Restated)
	Harris Trust & Savings Bank Credit Facility			General Electric Capital Corp. Credit Facility			Non Segment			Total
Revenues from external customers	$	145,286		$	74,037		$	—		$	219,323
Intersegment revenues		—			314			—			314
Depreciation and amortization		7,556			1,637			—			9,193
Segment operating profit		2,075			(1,253	)		—			822
Interest income		—			15			—			15
Interest expense		6,301			1,907			—			8,208
Other income (expense)		1,012			—			(2,463	)		(1,451	)
Loss before income taxes and cumulative effect of accounting change		(3,214	)		(3,145	)		(2,463	)		(8,822	)
Segment assets including intangible assets		65,832			60,076			—			125,908
Expenditures for segment fixed assets		4,182			781			—			4,963

	2000 (Restated)
	Harris Trust & Savings Bank Credit Facility			General Electric Capital Corp. Credit Facility			Non Segment		Total
Revenues from external customers	$	177,088		$	101,740		$	—	$	278,828
Intersegment revenues		—			596			—		596
Depreciation and amortization		7,092			2,530			—		9,622
Segment operating profit		9,341			(230	)		—		9,111
Interest expense		7,376			3,425			—		10,801
Other income (expense)		(286	)		—			1,338		1,052
Loss before income taxes and cumulative effect of accounting change		1,679			(3,655	)		1,338		(638	)
Segment assets including intangible assets		71,586			58,947			—		130,533
Expenditures for segment fixed assets		4,707			1,944			—		6,651

	2001 (Restated)
	Harris Trust & Savings Bank Credit Facility			General Electric Capital Corp. Credit Facility			Non Segment		Total
Revenues from external customers	$	154,827		$	81,343		$	—	$	236,170
Intersegment revenues		—			237			—		237
Depreciation and amortization		7,152			2,858			—		10,010
Segment operating profit		1,663			(6,346	)		—		(4,683	)
Interest expense		6,838			2,490			—		9,328
Other income (expense)		(671	)		—			61		(610	)
Loss before income taxes and cumulative effect of accounting change		(5,846	)		(8,836	)		61		14,621
Segment assets including intangible assets		62,628			43,889			—		106,517
Expenditures for segment fixed assets		3,222			1,135			—		4,357

49

(21)    Selected Quarterly Financial Data (Unaudited)

        Selected quarterly financial information for the years ended December 31, 2001 and 2000 is as follows:

		(In thousands, except per share data)
		First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total Year
2001 (Restated)
Sales		$	74,404		$	61,718		$	52,373		$	47,675		$	236,170
Gross margin			9,577			6,957			6,529			144			23,207
Operating income (loss)			2,596			1,243			1,100			(9,622	)		(4,683	)
Net earnings (loss) available to common stockholders			(436	)		(1,496	)		(1,901	)		(13,954	)		(17,787	)
Earnings per share of common stock
	Basic		(.10	)		(0.33	)		(0.41	)		(3.03	)		(3.87	)
	Diluted		(.10	)		(0.33	)		(0.41	)		(3.03	)		(3.87	)

		(In thousands, except per share data)
		First Quarter		Second Quarter		Third Quarter			Fourth Quarter			Total Year
2000 (Restated)
Sales		$	73,094	$	71,887	$	67,575		$	66,272		$	278,828
Gross margin			10,769		10,218		7,773			7,347			36,107
Operating income			4,290		2,931		1,860			30			9,111
Net earnings (loss) available to common stockholders			782		20		(793	)		(315	)		(306	)
Earnings per share of common stock
	Basic		.17		.00		(.18	)		(.06	)		(.07	)
	Diluted		.16		.00		(.18	)		(.05	)		(.07	)

        The fourth quarter, 2001 includes a restructuring charge of $1,323 and reflects lower sales volume and the related unfavorable manufacturing variances.

(22)    Litigation

        On May 1, 2000, Worthington Industries, Inc. filed suit (in the United States District Court for the Southern District of Ohio, Eastern Division) related to the Company's 1999 acquisition of the non-automotive plastics business from Worthington. Worthington claims that it is owed additional amounts under the sales agreement and a related service agreement, and that it is owed dividends on the preferred stock that it received. The Company believes that certain warranties and representations made by Worthington at the time of acquisition have been breached and that amounts claimed by Worthington are not due. The Company has filed a counterclaim against Worthington related to these matters. Management believes that the Company will prevail in this litigation and does not anticipate any material impact on earnings or financial position.

        On January 30, 2001, Victory Lane Productions, LLC filed suit against Plastics (in the Circuit Court of Rankin County, Mississippi) related to a breach of contract for failure to deliver ordered product. The Plaintiff is seeking compensatory and punitive damages. Plastics has filed a counterclaim.

        The Company is also involved in routine litigation. Management does not believe that any legal proceedings would have a material adverse effect on the Company's financial condition or results of operations.

50

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Schedule II—Valuation and Qualifying Accounts

Additions
Description		Balance at beginning of period		Charged to costs and expenses	Charged to other accounts		Deductions	Balance at end of period
Allowance for doubtful accounts:
	Year ended December 31, 1999	$	314	64	370	*	428	320
	Year ended December 31, 2000	$	320	1,430	—		426	1,324
	Year ended December 31, 2001	$	1,324	595	—		1,538	381

*

Represents the acquisition date allowance for doubtful accounts of businesses acquired.

PART III

Item 10.    Directors and Executive Officers of the Registrant.

        The information required by this Item 10 about the executive officers and Directors of the Company is incorporated herein by reference to the information set forth under the caption "Election of Directors" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A. Item 11. Executive Compensation. The information required by this Item 11 is incorporated herein by reference to the information set forth under the caption "Executive Compensation" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information required by this Item 12 is incorporated herein by reference to the information set forth under the caption "Principal Shareholders of the Company" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A. Item 13. Certain Relationships and Related Transactions. The information required by this Item 13 is incorporated herein by reference to the information set forth under the caption "Executive Compensation—Certain Relationships and Related Transactions" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A.

Item 11.    Executive Compensation.

        The information required by this Item 11 is incorporated herein by reference to the information set forth under the caption "Executive Compensation" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A.

51

Item 12.    Security Ownership of Certain Beneficial Owners and Management.

        The information required by this Item 12 is incorporated herein by reference to the information set forth under the caption "Principal Shareholders of the Company" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A.

Item 13.    Certain Relationships and Related Transactions.

        The information required by this Item 13 is incorporated herein by reference to the information set forth under the caption "Executive Compensation—Certain Relationships and Related Transactions" in our definitive proxy statement for the 2002 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2001 pursuant to Regulation 14A.

52

PART IV

Item 14.    Controls and Procedures

        For a discussion of any changes in the Company's internal controls or in other factors that could significantly affect those controls, see Item 4 of the Company's Form 10-Q for the quarter ended June 29, 2002, filed with the Securities and Exchange Commission concurrently with this Form 10-K/A.

Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)

The following documents are filed as a part of this report:

1.

Financial Statements.

        The following financial statements of the Company are included in Item 8:

a.

Report of KPMG LLP, Independent Auditors

b.

Consolidated Balance Sheets as of December 31, 2000 and 2001

c.

Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001

d.

Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999, 2000 and 2001

e.

Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001

f.

Notes to Consolidated Financial Statements

2.

Financial Statement Schedules

        The following financial statement schedule of the Company is included in Item 8:

        Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 1999, 2000 and 2001

Exhibit Number and Document Title	Incorporated by Reference to	Filed Herewith
2.1 and 10.1—Agreement and Plan of Merger Between MLX Corp. and Morton Metalcraft Holding Co., dated as of October 20, 1997	Annex B to the Definitive Proxy Statement on Schedule 14A filed by MLX Corp. with the Securities and Exchange Commission ("SEC") on January 6, 1998.
2.2 and 10.2—Securities Purchase Agreement Among MLX Corp. and Security Holders of Morton Metalcraft Holding Co., dated as of October 20, 1997	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
3.1 and 4.1—Articles of Incorporation of the registrant as Amended prior to January 20, 1998	MLX Corp. Form 10-Q for the quarter ended June 30, 1993
3.2 and 4.2—Articles of Amendment to Articles of Incorporation of the Registrant Effective January 20, 1998	Exhibit 3 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on February 4, 1998
3.2 and 4.2—Bylaws of the Registrant, as Amended	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.3 and 10.3—Credit Agreement Among the Registrant, Metalcraft Co., Morton Metalcraft Co. of North Carolina and Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997

52

4.4 and 10.4—Security Agreement executed by Morton Industrial Group, Inc., Morton Metalcraft Co., and Morton Metalcraft Co. of North Carolina in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.5 and 10.5—Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co. in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.6 and 10.6—Pledge Agreement executed by Registrant in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.7—Limited Indemnification Agreement dated as of October 20, 1997, among MLX Corp., William D. Morton, and Other Morton Metalcraft Shareholders and Option Holders	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.8—Industrial Building Lease between Morton Welding Co., Inc., and Morton Metalcraft Co. dated September 1, 1994	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.9—Lease between Caterpillar, Inc., and Morton Metalcraft Co., Inc. dated June 9, 1995	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.10—Lease between Agracel, Inc., and Morton Metalcraft Co. dated November 6, 1996.	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.11—Employment Agreement dated as of January 20, 1998, between the Registrant and William D. Morton	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.12—Employment Agreement dated as of January 20, 1998, between the Registrant and Daryl R. Lindemann	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.13—MLX Corp. 1997 Stock Option Plan	Appendix C to the Definitive Proxy Statement on Schedule 14A filed by MLX Corp. with the SEC on January 6. 1998.
10.14—MLX Corp. 1995 Stock Option Plan	MLX Corp. Definitive Proxy Statement on Schedule 14A for the 1995 Annual Meeting of Stockholders
10.15—Master Lease Agreement between Morton Metalcraft Co. and General Electric Capital Corporation dated August 7, 1996	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.16—Guaranty of Master Lease Agreement by Morton Metalcraft Holding Co., dated August 7, 1996	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997

53

10.17—Split Dollar Insurance Agreement between Morton Metalcraft Co. and William D. Morton dated February 3, 1995.	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.18—Split Dollar Assignment between William D. Morton and Morton Metalcraft Co. dated February 3, 1995	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.19—Split Dollar Insurance Agreement between Morton Metalcraft Co. and William D. Morton dated October 10, 1993	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.20—Split Dollar Assignment between William D. Morton and Morton Metalcraft Co., dated October 10, 1993	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.21—Split Dollar Insurance Agreement between Morton Metalcraft Co. and Daryl R. Lindemann dated October 10, 1993	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.22—Split Dollar Assignment between Daryl R. Lindemann and Morton Metalcraft Co., dated October 10, 1993	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.23—Death Benefit Agreement between Morton Metalcraft Co. and William D. Morton	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.24—Salary Continuation Agreement between Morton Metalcraft Co. and William D. Morton dated February 26, 1996.	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.25—Stock Purchase Agreement among the Company and Gary L. George and Gloria J. George, dated March 2, 1998.	Exhibit 10.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.26—Stock Purchase Agreement among the Company, Joseph T. Buie, Jr., and Ernest J. Butler, dated April 8, 1998.	Exhibit 10.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.27—Non-negotiable Promissory Note (subordinated) of the Company, Joseph T. Buie, Jr., dated April 8, 1998.	Exhibit 10.3 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.28—Non-negotiable Promissory Note (subordinated) of the Company to Ernest. J. Butler, dated April 8, 1998.	Exhibit 10.4 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.29—Stock Purchase Agreement among the Company and Richard L. Goreham, Delores A. Staples and William B. Goreham, dated April 27, 1998.	Exhibit 10.1 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.30—Credit Agreement dated May 28, 1998 among the Company, Harris Trust and Savings Bank, and the lenders signatory thereto.	Exhibit 10.2 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.31—Mortgage and Security Agreement with Assignment of Rents executed by Carroll George Inc. dated May 28, 1998.	Exhibit 10.3 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998

54

10.32—Deed of Trust and Security Agreement with Assignment of Rents executed by B&W Metal Fabricators, Inc.	Exhibit 10.4 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.33—Amended and Restated Security Agreement executed by the Company, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George Inc. and B&W Metal Fabricators, Inc. dated May 28, 1998.	Exhibit 10.5 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.34—Amended and Restated Pledge Agreement executed by the Company, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George Inc. and B&W Metal Fabricators, Inc. dated May 28, 1998.	Exhibit 10.6 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.35—Amended and Restated Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co., dated May 28, 1998.	Exhibit 10.7 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.35—Mortgage and Security Agreement with Assignment of Rents to executed by Mid-Central Plastics, Inc. dated May 28, 1998.	Exhibit 10.8 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.36—First Amendment to Credit Agreement with Harris Trust & Savings Bank.	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1998
10.37—Asset Purchase Agreement among the Company, Morton Custom Plastics, LLC, and Worthington Custom Plastics, Inc. dated February 26, 1999 and First Amendment to Asset Purchase Agreement, dated as of April 15, 1999, among the Company, Morton Custom Plastics, LLC and Worthington Custom Plastics, Inc.	Exhibits 10.1 and 10.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 29, 1999
10.38—Credit Agreement dated as of April 15, 1999, among Morton Custom Plastics, LLC, Morton Holding, LLC and General Electric Capital Corporation	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 29,1999
10.39—Agreement dated December 31, 1999 by and among Carroll George Inc., Morton Industrial Group, Inc. and Advanced Component Technologies, Inc.	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on January 18, 2000
10.40—Third Amendment to Credit Agreement with Harris Trust & Savings Bank	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on February 29, 2000
10.41—Amended and Restated Agreement with Harris Trust and Savings Bank	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on April 1, 2002

55

10.42—Amended and Restated Agreement with General Electric Capital Corporation	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on April 1, 2002
13—Annual Report	Exhibit 13.1 to Morton Industrial Group, Inc. Report on Form X 10-K filed with SEC on April 1, 2002
16.2—Letter re: change in certifying accountant	Exhibit 16.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on February 18, 1999
21.1—Subsidiaries of Registrant
23.1—Consent of KPMG LLP		X
99.1—Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		X
99.2—Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.		X

(b)

Reports on Form 8-K

        None

56

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.

	MORTON INDUSTRIAL GROUP, INC.
Dated: November 4, 2002	By:	/s/  WILLIAM D. MORTON William D. Morton President, Chief Executive Officer, and Chairman of the Board of Directors

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name	Title	Date
/s/  WILLIAM D. MORTON William D. Morton	President, Chief Executive Officer, and Chairman of the Board of Directors	November 4, 2002
/s/  THOMAS D. LAUERMAN Thomas D. Lauerman	Vice President of Finance and Treasurer (Principal Accounting Officer)	November 4, 2002
/s/  FRED W. BROLING Fred W. Broling	Director	November 4, 2002
/s/  MARK W. MEALY Mark W. Mealy	Director	November 4, 2002

57

I, William D. Morton, as Chairman and Chief Executive Officer of Morton Industrial Group, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K/A of Morton Industrial Group, Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

/ s / William D. Morton

William D. Morton
Chairman and Chief Executive Officer
November 4, 2002

I, Thomas D. Lauerman, as Vice President of Finance of Morton Industrial Group, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K/A of Morton Industrial Group, Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report.

/ s / Thomas D. Lauerman

Thomas D. Lauerman
Vice President of Finance
November 4, 2002

SHAREHOLDER INFORMATION

CORPORATE OFFICES

Morton Industrial Group, Inc.
1021 W. Birchwood
Morton, Illinois 61550-0429
Phone: 309-263-3300 Fax: 309-263-3216

INVESTOR INFORMATION

        Shareholders and prospective investors are welcome to call or write with questions or requests for additional information. Please direct inquiries to Van Negris at:

Kehoe, White, Van Negris & Company, Inc.
766 Madison Avenue

58

New York, NY 10021
Phone: 212-396-0606 Fax: 212-396-9025

ANNUAL MEETING

        The Annual Meeting of the Shareholders of Morton Industrial Group, Inc. will be held at:

Bertha Frank Performaing Arts Center
350 N. Illinois Avenue
Morton, Illinois 61550
Tuesday, June 11, 2002 at 10:00 a.m. (CDT)

FORM 10-K

        A copy of form 10-K, the Annual Report which the Company is required to file with the Securities and Exchange Commission, is available without charge upon request to the Company at the above address.

STOCK TRANSFER AGENT AND REGISTRAR

        For inquiries about stock transfers or address changes, shareholders may contact:

American Stock Transfer & Trust Co.
59 Maiden Lane
New York, NY 10038
Phone: 800-937-5449

INDEPENDENT PUBLIC ACCOUNTANTS

KPMG LLP
Indianapolis, Indiana

STOCK MARKET INFORMATION

        The common stock of Morton Industrial Group, Inc. is traded on the Nasdaq SmallCap Market under the ticker symbol MGRP.

BOARD OF DIRECTORS

William D. Morton
  Chairman of the Board, President and CEO
  Morton Industrial Group, Inc.

Fred W. Broling
  President and CEO
  US Precision Glass

Mark W. Mealy
  Head of the Commercial
  and Industrial Corporate Finance
  and Mergers and Acquisition Group
  Wachovia Securities, Inc.

59

CORPORATE OFFICERS

William D. Morton
  Chairman of the Board, President and CEO

Daryl R. Lindemann
  Secretary

Thomas D. Lauerman
  Vice President of Finance & Treasurer

60

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MORTON INDUSTRIAL GROUP, INC. List of Items Amended
PART I

Item 1. Business

BUSINESS

Item 2. Properties

Item 3. Legal Proceedings
Item 4. Submission of Matters to Vote of Security Holders

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Item 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets December 31, 2000 and 2001 (Dollars in thousands, except share data)
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1999, 2000 and 2001 (Dollars in thousands, except per share data)
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Deficit) Years ended December 31, 1999, 2000 and 2001 (Dollars in thousands)
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1999, 2000 and 2001 (Dollars in thousands)
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 2000 and 2001 (Dollars in thousands, except per share data)
MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
PART III

Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.

PART IV

Item 14. Controls and Procedures
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

SIGNATURES

EX-23.1

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EXHIBIT 23.1

The Board of Directors and Stockholders
Morton Industrial Group, Inc.:

        We consent to incorporation by reference in the registration statements (Nos. 333-68927 and 333-69575) on Form S-8 of Morton Industrial Group, Inc. of our report dated March 25, 2002, except as to note 2 which is as of November 1, 2002, relating to the consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows and the consolidated financial statement schedule for each of the years in the three-year period ended December 31, 2001, which report appears in the December 31, 2001, annual report on Form 10-K of Morton Industrial Group, Inc. Our report refers to a change in the accounting for derivatives and hedging activities.

KPMG LLP

Indianapolis, Indiana

March 25, 2002, except as to note 2 which is as of November 1, 2002

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EXHIBIT 23.1

EX-99.1

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Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Morton Industrial Group, Inc. (the "Company") on Form 10-K/A for the period ended December 31, 2001 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William D. Morton, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/ s / William D. Morton

William D. Morton
Chairman and Chief Executive Officer
November 4, 2002

        This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Exhibit 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-99.2

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Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Morton Industrial Group, Inc. (the "Company") on Form 10-K/A for the period ended December 31, 2001 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas D. Lauerman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/ s / Thomas D. Lauerman

Thomas D. Lauerman
Vice President of Finance
November 4, 2002

        This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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Exhibit 99.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002