10-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K/A

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2004
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.

www.mortongroup.com

(Exact name of registrant as specified in its charter)

Georgia	38-0811650
(State or other jurisdiction of Incorporation or organization)	(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.     þ

      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.     þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ

      The aggregate market value of the common stock held by non-affiliates of the registrant (based upon the last reported sale price on the Nasdaq Small Cap Market) on the last day business day of the registrant’s most recently completed second fiscal quarter was approximately $6,700,000.

      As of March 4, 2005, the aggregate market value of the Class A Common Stock held by non-affiliates was approximately $12,000,000 and there were 4,842,211 shares of Class A Common Stock and 100,000 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 2005 are incorporated by reference into Part III hereof.

MORTON INDUSTRIAL GROUP, INC.

Item Amended

Part II

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

TEXT OF AMENDMENT

Explanatory Note:

This Form 10-K/ A is filed to include the conformed signature of the registrant’s independent registered public accounting firm that was inadvertently omitted from Form 10-K filed with the Securities and Exchange Commission on March 29, 2005.

      “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; the availability of working capital; 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

Narrative Description of Business

Business

Overview

      We are a contract manufacturer of highly engineered metal components and subassemblies for construction, industrial, and agricultural original equipment manufacturers (“OEM’s”). Our products include engine enclosures, panels, platforms, frames, tanks and other components used in backhoes, excavators, tractors, wheel loaders, power generators, turf care equipment and similar industrial equipment. Our products are typically highly engineered, cosmetically sensitive, require structural strength and contain complex weldments.

      Our largest customers include Deere & Co. (“Deere”) and Caterpillar Inc. (“Caterpillar”) who together generated 87% of our 2004 net sales. Our five manufacturing facilities are located in the Midwestern and Southeastern United States in close proximity to our customers. We have no foreign operations.

Markets

      Customers use our products in construction, industrial, and agricultural 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 and Caterpillar, 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 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 90% 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.

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      Virtually all of our customers are located in the United States, and we do not have material sales to foreign customers. Considering our relatively low volume of parts manufactured, the cosmetic sensitivity of those parts, and the bulk involved in shipping those parts, we believe that our customers prefer to source those parts domestically.

Construction Equipment

      The $18 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 an estimated 50% of total U.S. unit sales in 2004. We supply metal components and subassemblies, such as engine enclosures, platforms, frames and complex weldments. 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 up to $2,500. Construction equipment products account for approximately 65% of our 2004 net sales.

Industrial Equipment

      We produce a range of components and subassemblies for equipment used in a variety of industrial applications, including store fixtures, motor homes, turf care equipment and power generators. Customers in the industrial equipment area generally serve stable or growth markets, and these customers include Caterpillar, Deere, Kubota, Hallmark and Winnebago. Industrial equipment products account for approximately 22% of our 2004 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 an estimated 35% of total U.S. agricultural equipment unit sales in 2004. We supply metal components and subassemblies such as steps, grills, and landing decks. Our sales per agricultural equipment vehicle range from $200 to $3,000. Agricultural equipment products account for approximately 13% of our 2004 net sales.

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.

Sheet Metal Fabrication

      Our sheet metal fabrication capabilities include laser and plasma cutting, forming, 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:

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

•  Special Weldments — seat modules, frames, guards, platforms, step assemblies and cabs used in backhoes, excavators, crawlers, tractors and skid steer loaders.

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

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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.

•  Store Fixtures — back frames, lights and brackets used in store displays and commercial refrigeration units.

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 prototyping, tooling and pre-production 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 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. We also provide deliveries that are specially sequenced to customers’ manufacturing schedules.

Engineering and Design Capabilities

      Engineering capabilities have become increasingly emphasized as suppliers provide design services for new projects. Computer aided design capabilities include Pro/ ENGINEER, Anvil 1000/5000, Apollo, Merry Mechanization and CADKEY. We have focused our computer aided design investment on the Pro/ ENGINEER system during the last several years because Pro/ ENGINEER 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

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them to design new products. Our customers are serviced by account teams led by an account manager and include representatives from our primary functional areas. These areas include engineering 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.

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 parts to more complex metal 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, punching, forming, 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.

Raw Materials

      The primary raw materials that we use are sheet steel, assembly parts and paint. Prices of these raw materials fluctuate, although the price of our most significant raw material, steel, increased dramatically during 2004. The steel supply tightened, due in part to the national economic recovery, China’s growing steel consumption, and reduced domestic steel production capacity. We expect pricing to stabilize during 2005 at relatively high levels. We have been able to negotiate with our customers to have them absorb substantial amounts of the increases in our raw material costs. 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 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 significant price erosion with respect to our products.

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 and have not budgeted any material capital expenditures for environmental control facilities.

Financial Information about Industry Segments

      We have one reportable segment — contract metal fabrication. The contract metal fabrication segment provides full-service fabrication of parts and sub-assemblies for the construction, agricultural and industrial equipment industries.

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Backlog

      Our backlog of orders was approximately $120.0 million at December 31, 2004, and $99.0 million at December 31, 2003. We anticipate that we will substantially fill all of the December 31, 2004, backlog orders during the current year.

Patents, Trademarks, Licenses, Franchises, and Concessions; Research and Development

      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. Our research and development expenditures are not material.

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 and Caterpillar suspend operations for two weeks of vacation time during July and/or August. Production operations of both of these customers also slow down during the last two weeks of December. During these periods, we must rely more heavily on our credit facilities for liquidity. Additional discussion regarding working capital can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Employees

      As of February 26, 2005, we employed 1,330 employees, of whom 1,112 were hourly and 218 were salaried. None of these employees was subject to a collective bargaining agreement. We believe our relationship with our employees is good.

Internet

      You can find our web site at www.mortongroup.com. At this website, click on the “Annual Report” link; you can choose to view the latest Annual Report on file, or you can click “SEC Offsite Filings” to link to the SEC website that provides all of the Company’s SEC filings since 1997.

Significant Past Events of the 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 and other industrial customers.

      On April 15, 1999, we acquired from Worthington Custom Plastics three manufacturing facilities that produced plastic components for industrial original equipment manufacturers. The Worthington acquisition expanded our plastic product offerings to include appliance parts, electronics housings and other injection molded and thermoformed plastic products. These plastics facilities operated as Morton Custom Plastics, LLC (MCP, LLC). On November 1, 2002, MCP, LLC, filed for protection as debtor-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Before filing, MCP, LLC had negotiated the terms of an agreement for sale of substantially all of its assets to Wilbert, Inc., pursuant to an Asset Purchase Agreement. Under the agreement, Wilbert, Inc. was also to assume the liabilities of MCP, LLC under certain of their contracts and leases. This sales transaction closed on December 24, 2002, with the cash consideration applied to the reduction of MCP, LLC’s senior secured debt. The Company also operated an injection molding business in Iowa until that operation was sold in June 2003. These sales allowed the Company to focus on its core competency, manufacturing fabricated sheet metal.

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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 2006 and 2008. Our facilities are generally located in close proximity to our customers.

	Approx.
Location	Sq. Ft.		Products Manufactured
1021 West Birchwood Street, Morton, IL		284,000	Sheet metal enclosures and boxes, sheet metal component packages, store fixtures and tractor frames
400 Detroit Avenue, Morton, IL (leased)		155,000	Special weldments, including seat modules, cabs and fabricated steel tanks
231 Detroit Avenue, Morton, IL (leased)		40,000	Raw materials and components storage
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

      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 future production requirements.

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 (“the Court”)) against us and Morton Custom Plastics, LLC (“MCP, LLC”) related to MCP, LLC’s 1999 acquisition of the non-automotive plastics business from Worthington. Worthington claimed that it was owed additional amounts under the sale agreement and a related service agreement, and that it was owed dividends on shares of our preferred stock that it received. We believed that certain warranties and representations made by Worthington at the time of acquisition were breached and that amounts claimed by Worthington were not due. We had filed a counterclaim against Worthington related to these matters.

      In connection with a preferred stock redemption agreement dated December 23, 2003, the parties settled all litigation between the Company and Worthington. The Court entered an order of dismissal of the Worthington lawsuit on January 20, 2004.

      The preferred stock redemption agreement dated December 23, 2003 provides for 30 monthly redemption payments of $50,000 each (totaling $1.5 million) over a three year period (10 payments each year in 2004, 2005 and 2006) to fully redeem the $10.0 million face value of the redeemable preferred stock. Each $50,000 payment and redemption of 333 (or 334) shares reduces the fully accreted $10.0 million face value of the redeemable preferred stock by $333,000 (or $334,000). As of February 28, 2005, the Company has paid timely 12 of the 30 scheduled redemption payments. The redemption payments in 2004 resulted in a gain on

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redemption of preferred shares of $2,833,000 which is reflected in the accompanying Consolidated Statements of Operations.

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

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.

      The trading of the Company’s Class A common stock is on the OTC Bulletin Board. The Company’s ticker symbol is MGRP.OB.

      The following table sets forth for 2004 and for the fourth quarter of 2003 the quarterly high and low closing bids. OTC closing bids reflect interdealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

		High		Low
2004
	October 1 to December 31	$	5.95	$	4.30
	July 1 to September 30	$	5.10	$	3.55
	April 1 to June 30	$	4.05	$	2.20
	January 1 to March 31	$	1.90	$	0.50
2003
	October 1 to December 31	$	0.71	$	0.01

      The following table sets forth for the first three quarters of 2003 the quarterly high and low closing prices. OTC closing prices reflect interdealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

		High		Low
2003
	July 1 to September 30	$	0.700	$	0.150
	April 1 to June 30	$	0.650	$	0.200
	January 1 to March 31	$	0.550	$	0.100

      We obtained the foregoing information from research services made available by Pink Sheets.

      As of March 9, 2005 there were 3,258 holders of record and 1,609 beneficial holders of our Class A Common Stock.

      We did not declare or pay any common stock dividends in our fiscal years ended December 31, 2004 and 2003. Our credit agreements preclude the payment of dividends.

      During the year ended December 31, 2004, we did not issue any shares of capital stock that were unregistered under the Securities Act of 1933.

      On September 20, 2000, the Company issued warrants to purchase 238,548 shares of its Class A common stock to its bank lenders. The warrants, as amended, were exercisable at any time through December 31, 2006 at an exercise price of $.01 per share. On March 26, 2004, in connection with a refinancing described in Item 7, the holders surrendered these warrants.

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      On March 26, 2004, in connection with the refinancing described in Item 7, we issued to our lenders 545,467 warrants (which expire March 26, 2014) to purchase Class A shares of common stock at an exercise price of $0.02 per share. The number of warrants may decline over the first five years of the related refinancing agreements based on the Company achieving specified EBITDA (earnings before interest, taxes, depreciation and amortization) levels, or achieving certain stated levels of net equity. The Company achieved the specified EBITDA level for 2004, and, accordingly, the maximum number of warrants that can be exercised is 479,859. None of these warrants have been exercised as of March 4, 2005.

      As of December 31, 2004, under our 1997 Stock Option Plan (which was approved by our shareholders), issued and outstanding stock options are as follows:

						Number of
Number of		Exercise				Shares
Shares		Price		Expiration Date		Exercisable
	51,650	$	1.875		February 2011		51,650
	46,668		0.325		June 2012		21,668
	465,001		0.150		February 2013		89,996
	30,000		0.250		April 2013		30,000
	72,500		0.250		August 2013		72,500
	10,000		0.300		November 2013		3,333
	675,819						269,147

      In addition to these options, we have reserved for future grants an additional 327,561 shares.

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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 is derived from our audited financial statements.

		Year Ended December 31,
		2000			2001			2002			2003			2004
Operating data:
Net sales		$	147,417		$	127,103		$	116,567		$	131,431		$	185,469
Cost of sales			128,007			111,358			101,522			113,318			161,910
Gross profit			19,410			15,745			15,045			18,113			23,559
Selling and administrative expenses			12,874			13,131			12,170			13,362			14,797
Restructuring charges			—			1,323			—			—			—
Operating income (loss)			6,536			1,291			2,875			4,751			8,762
Gain (loss) on sale of business units and other			(248	)		(610	)		365			442			172
Interest expense, net			(7,376	)		(6,706	)		(4,228	)		(3,084	)		(4,526	)
Interest on redeemable preferred stock			—			—			—			(427	)		(250	)
Earnings (loss) before income taxes, accounting change and discontinued operations			(1,088	)		(6,025	)		(988	)		1,682			6,991
Income taxes (benefit)			(632	)		1,242			(288	)		426			(5,775	)
Earnings (loss) before discontinued operations and cumulative effect of change in accounting principle			(456	)		(7,267	)		(700	)		1,256			12,766
Net income (loss) from operations of discontinued plastics operations			1,048			(9,454	)		6,790			85			—
Earnings (loss) before cumulative effect of accounting change			592			(16,721	)		6,090			1,341			12,766
Cumulative effect of change in accounting principle			—			—			(8,118	)		—			—
Net earnings (loss)			592			(16,721	)		(2,028	)		1,341			12,766
Accretion of discount on preferred shares			(898	)		(1,066	)		(1,265	)		(715	)		—
Net earnings (loss) available to common shareholders		$	(306	)		(17,787	)		(3,293	)		626			12,766
Earnings (loss) per share — basic:
	Earnings (loss) from continuing operations	$	(0.30	)		(1.81	)		(0.42	)		0.12			2.73
	Earnings (loss) from discontinued operations		0.23			(2.06	)		1.46			0.02			—
Cumulative effect of a change in accounting principle			—			—			(1.75	)		—			—
	Total earnings (loss) per share	$	(0.07	)		(3.87	)		(0.71	)		0.14			2.73
Earnings (loss) per share — diluted:
	Earnings (loss) from continuing operations	$	(0.30	)		(1.81	)		(0.42	)		0.11			2.16
	Earnings (loss) from discontinued operations		0.23			(2.06	)		1.46			0.02			—
Cumulative effect of a change in accounting principle			—			—			(1.75	)		—			—
	Total earnings (loss) per share	$	(0.07	)		(3.87	)		(0.71	)		0.13			2.16
Financial position (at end of year):
Working capital		$	12,774		$	(1,475	)	$	(2,294	)	$	(6,818	)	$	6,428
Total assets			130,533			106,517			56,853			48,822			67,145
Total debt			88,357			79,138			45,102			38,541			43,575
Stockholders’ equity (deficit)		$	(3,157	)	$	(20,944	)	$	(24,224	)	$	(23,598	)		(10,804	)

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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.

General

      We are a contract manufacturer of highly engineered metal components and subassemblies for construction, industrial and agricultural original equipment manufacturers. Our largest customers, Caterpillar and Deere, accounted for approximately 87% and 88% of our net sales in 2004 and 2003, respectively.

      Historically, the Company has been a fabricator of sheet metal products. Subsequent to a merger in January, 1998, when the Company became a publicly-traded entity, the Company acquired six facilities that fabricated either injection molded or thermoformed plastic components. Two of the plastics fabrication facilities were acquired separately in 1998, and four were acquired together in 1999. One of the plastics fabrication facilities acquired in 1998 was sold at the end of 1999. The four plastics fabrication facilities acquired together in 1999 were sold in December, 2002. These four facilities, operating as Morton Custom Plastics, LLC, were incurring significant losses and, in 2002, filed for protection as debtor-in-possession under Chapter 11 of the United States Bankruptcy Code. At the time of the sale of Morton Custom Plastics, LLC, the Company determined that is was appropriate to focus solely on its core competency, sheet metal fabrication, and offered for sale its remaining plastics fabrication facility, which was sold in June, 2003. In the Company’s accompanying financial statements, all of the plastics fabrication results are reported as discontinued operations.

      As a part of the 1999 plastics facilities acquisition, the Company issued $10.0 million of redeemable preferred stock with a maturity date of April 2004. The Company negotiated a settlement in December 2003 with the holder of the preferred stock, and began making redemption payments in January, 2004. If the redemption payments are paid according to the terms of the settlement agreement, the payments will aggregate $1.5 million over a three-year period ending in 2006. Through February 28, 2005, all scheduled payments have been made timely; twelve of the thirty scheduled redemption payments have been made.

      Since June 2003, the Company has focused solely on its core business, sheet metal fabrication (the Company’s continuing operations). The Company recognized earnings from its continuing operations in 2003 and 2004, but had incurred losses from its continuing operations in 2001 and 2002 when demand by the Company’s customers was depressed.

      To take advantage of the potential for growth in 2004 and beyond, and to be able to effectively serve our customers, we needed to be able to ensure an adequate flow of raw materials into our production processes, hire and train additional employees, fund our need for new manufacturing equipment and meet our other working capital needs. Accordingly, the Company entered into a new credit facility in March 2004 that is described below. The new credit facility provided additional availability at the closing of approximately $5.0 million. Management believes that the new credit facility has permitted to date, and will continue to permit, the Company to meet its liquidity requirements which are driven by raw material, manpower and capital expenditure requirements, through the term of the facility, which matures in March 2008.

      As noted above, two customers account for a significant portion of our net sales. Caterpillar and Deere continue to forecast greater orders for fabricated parts supplied by Morton Metalcraft Co. We believe that this demand is being fueled by the improved economic conditions in the United States. The Company has responded by hiring additional manpower, adding capital equipment as necessary and increasing the flow of purchased raw materials in a difficult steel market. The U.S. steel industry has restructured, consolidated and is challenged to meet growing domestic and international demand. The steel industry has been impacted by China’s growing consumption of scrap steel and coke, a raw material used in processing steel. Cosmetically

11

sensitive sheet steel, our core commodity, has seen significant price increases; most steel price increases have been passed through to our customers.

      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.

Results of Operations

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

	Year Ended December 31,
	2002			2003			2004
Statements of Operations Data:
Net sales		100.0	%		100.0	%		100.0	%
Gross profit		12.9			13.8			12.7
Selling and administrative expenses		10.4			10.2			8.0
Operating income		2.5			3.6			4.7
Interest expense, net		3.6			2.3			2.4
Earnings (loss) before income taxes, discontinued operations and cumulative effect of accounting change		(.8	)		1.3			3.8

      The following table presents certain historical information (000’s):

Operating income	$	2,875	4,751	8,762
Depreciation and amortization of plant and equipment and intangible assets		9,420	5,694	5,804
Capital expenditures		4,023	4,119	5,365

Year Ended December 31, 2004 versus Year Ended December 31, 2003

      Net sales for the year ended December 31, 2004 were $185.5 million compared to $131.4 million for the year ended December 31, 2003, an increase of $54.1 million or 41.1%. The volume portion of the sales increase, totaling approximately $35.9 million, resulted primarily from increased unit demand by existing customers of construction-related equipment components and an increase in industrial components to new customers. Our construction-related revenues increased by approximately $25.0 million for the comparable years and accounted for nearly 65% of our 2004 revenue. Industrial related revenues increased by approximately $7.3 million and agricultural-related revenues increased modestly in 2004. In addition, sales for 2004 included steel surcharges passed through to our customers of approximately $18.2 million. Most of the revenue growth came from increased unit sales to our two largest customers, Deere & Co. and Caterpillar Inc. Sales to Caterpillar and Deere were approximately 87% and 88% of our net sales for 2004 and 2003, respectively.

      Based upon customer forecasts, the Company currently anticipates modest revenue growth for calendar year 2005. Our ability to generate sales at these higher levels is subject to a number of factors, including the continuing demand that we now forecast, the availability of raw materials, principally steel, and the availability of working capital to support that growth. Over the past year, steel prices have increased as steel supply has tightened, due in part to the national economic recovery, China’s growing steel consumption, and reduced domestic steel production capacity. We expect that steel prices will become stable in 2005 at relatively high levels. Historically we have been able to negotiate with our customers to have them absorb increases in our raw material costs.

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      Gross profit for the year ended December 31, 2004 was $23.6 million compared with $18.1 million for the year ended December 31, 2003, an increase of $5.5 million or 30.1%. The Company’s gross profit percentage decreased to 12.7% from 13.8%. The gross profit amount increased primarily as a result of the increased sales; while the percentage decreased as a result of costs incurred during a period of significant growth, including overtime, training and material handling. The gross profit percentage was also decreased approximately 1.4% by passing through to customers, at cost with no margin, the increased steel surcharges described above. The Company believes that certain cost efficiencies will be achievable in 2005 that will strengthen the gross margins. The Company also anticipates continued pricing pressure from its customers in 2005 that will offset some of the cost efficiencies. We use internal metrics to measure our success in achieving various productivity, quality, on-time delivery and profitability goals.

      Selling and administrative expenses for the year ended December 31, 2004 amounted to $14.8 million, or 8.0% of sales, compared with $13.4 million, or 10.2% of sales in the prior year. This increased cost, and the reduction in selling and administrative expenses as a percentage of sales relates primarily to the increase in sales.

      Interest expense in 2004 amounted to $4.5 million compared to $3.1 million in 2003. The Company refinanced its debt on March 26, 2004 as described below. The refinancing includes senior subordinated debt with cash interest at 12% and payment-in-kind interest at approximately 4%; interest expense also includes charges related to amortization of debt discount of $341,000 and the increase in the value of the warrants liability of $291,000; both of these charges relate to warrants issued in March 2004.

      Other income of $172,000 in 2004 resulted from interest income on the notes receivable related to the sale of the operations Mid-Central Plastics. Other income in 2003 resulted primarily from an unrealized gain on interest rate swaps of $337,000 and interest income of $105,000 on the notes receivable related to the sale of the operations of Mid-Central Plastics.

      “Interest on redeemable preferred stock” relates to the accretion of the discount on redeemable preferred stock during the first four months of 2004, at which time the stock was fully accreted, and for the six months ended December 31, 2003. This classification in other expense resulted from the implementation of SFAS Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). For the first six months of 2003, the accretion was classified as “accretion of discount on preferred shares”.

      Gain on redemption of preferred stock of $2,833,000 results from the preferred stock redemption described above. This redemption process began in January 2004.

      We recognized an income tax benefit of $5.8 million in 2004; this represents the recognition of deferred Federal and state income tax benefits of $6.5 million, net of provisions of $185,000 for Federal tax and $540,000 for state income taxes. Net deferred tax assets, increased from $1.6 million at December 31, 2003 to $8.1 million at December 31, 2004 as a result of a reduction in the deferred tax asset reduction allowance. Realization of the $8.1 million of deferred tax assets is dependent upon generation of future taxable income of approximately $22.0 million.

      The 2003 income from discontinued operations represents the results of the operations of Mid-Central Plastics, Inc. through the date of sale of those operations in June 2003.

Year Ended December 31, 2003 versus Year Ended December 31, 2002

      Net sales for the year ended December 31, 2003 were $131.4 million compared to $116.6 million for the year ended December 31, 2002, an increase of $14.8 million or 12.8%. The sales increase resulted primarily from increased unit demand by existing customers of construction-related equipment components. Our construction-related revenues increased by over 25% and accounted for nearly two-thirds of our 2003 revenue, while our agricultural-related revenues declined over 35%. Most of the revenue growth came from sales to our two largest customers, Deere and Caterpillar.

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      Sales to Caterpillar and Deere were approximately 88% and 87% of our net sales for 2003 and 2002, respectively.

      Gross profit for the year ended December 31, 2003 was $18.1 million compared with $15.0 million for the year ended December 31, 2002, an increase of $3.1 million or 20.0%. The Company’s gross profit percentage increased to 13.8% from 12.9%. The gross profit amount and percentage increased as a result of our absorbing fixed costs over a larger revenue base, as well as our continuing focus on cost savings programs including 6 Sigma and various lean manufacturing concepts.

      Selling and administrative expenses for the year ended December 31, 2003 amounted to $13.3 million, or 10.2% of sales, compared with $12.2 million, or 10.4% of sales in the prior year. This increased cost relates primarily to a higher sales volume.

      Interest expense in the year ended December 31, 2003 amounted to $3.1 million compared to $4.2 million in 2002. This decrease resulted from lower average levels of debt from year-to-year. The debt decreased as a result of scheduled payments on the Company’s term debt and by a reduction of revolving debt upon the sale of the operations of Mid-Central Plastics in June 2003.

      Other income of $442,000 for the year ended December 31, 2003, resulted primarily from an unrealized gain on interest rate swaps of $337,000 and interest income of $105,000 on the notes receivable related to the sale of the operations Mid-Central Plastics. Other income for the year ended December 31, 2002 resulted primarily from an unrealized gain of $365,000 on the Company’s interest rate swaps.

      “Interest on redeemable preferred stock” relates to the accretion of the discount on redeemable preferred stock for the six months ended December 31, 2003. This classification in other expense resulted from the implementation of FAS 150. For the first six months of 2003, the accretion was classified as “accretion of discount on preferred shares”.

      We recognized total income tax expense of $481,000 in 2003 on the total of pre-tax income from both continuing and discontinued operations; this represents income tax expense of $330,000 for Federal alternative minimum tax and state income taxes. Also included in the tax expense is $151,000 representing an increase in the deferred tax asset valuation allowance. The deferred tax assets represented the estimated utilization of Federal net operating loss carryforwards in 2004.

      The income from discontinued operations represented the results of the operations of Mid-Central Plastics, Inc. until the sale of those operations in June 2003.

Financial Position and Liquidity

      Historically, we have funded our business with cash generated from operations, management of our working capital and borrowings under revolving credit and term loan facilities. In the years ended December 31, 2002 and 2003 we generated cash from operating activities of $7.4 million and $10.3 million, respectively. In 2004, we used $0.2 million of cash in operations. We used cash in 2004 as a result of significant increases in accounts receivable, unbilled receivables and inventories related to the growth in sales from 2004 compared to 2003. Our capital expenditures for the years ended December 31, 2002, 2003 and 2004 were $4.0 million, $4.1 million and $5.4 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, 2004 was $6.4 million compared with a deficit of $6.8 million at December 31, 2003. This represents an increase in working capital of approximately $13.2 million. This working capital increase results primarily from a refinancing of the Company’s credit facilities on March 26, 2004 that is described in detail below.

      In February 2002, the Company entered into a new secured revolving credit facility and a secured term loan with the Harris syndicate. This is the credit facility that was in effect as of December 31, 2003 and through March 25, 2004. The 2002 agreement was amended six times, including the last amendment on March 15, 2004. All of those amendments have been described in previous filings with the Securities and Exchange Commission.

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      The two following paragraphs describe the 2002 agreement, as last amended on March 15, 2004, that was effective through March 25, 2004:

      The revolving credit agreement permitted the Company to borrow up to a maximum of $18.8 million. The agreement required payment of a quarterly commitment fee of .50% per annum of the average daily unused portion of the revolving credit facility. Interest was due monthly and was based upon bank prime plus 1.5% (effective rate of 5.75% at December 31, 2003). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The amount available under the revolving credit facility was limited to 85% of qualified accounts receivable, 60% of eligible inventory, plus $2.1 million of other assets. The revolving credit agreement was to mature April 1, 2005. At December 31, 2003, the Company had $13.3 million outstanding and $1.2 million available under this credit facility.

      The 2002 agreement also included a secured term loan arrangement with the Harris syndicate for a term loan of $33.0 million. The new Harris syndicate term loan arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement was amortized monthly with principal payments ranging from $500,000 on January 2, 2004, $250,000 for the months of January through March, 2004 and $500,000 for the months of April 2004 through March 2005 and the balance of $16.0 million was due on April 1, 2005. Interest was due monthly and was based upon bank prime plus 1.5% (effective rate of 5.75% at December 31, 2003). The Company, alternatively, could select a LIBOR plus 4.0% interest rate.

March 26, 2004 Refinancing

      On March 26, 2004, the Company entered into a Second Amended and Restated Credit Agreement with a syndicate of banks led by Harris Trust and Savings Bank, As Agent, and also on March 26, 2004, entered into a Note and Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. These agreements were effective on March 26, 2004, and provided financing to replace the revolving credit facility and term loan previously due to Harris Trust and Savings Bank, As Agent. In connection with this transaction, 238,584 existing warrants to purchase Class A Common Stock were surrendered by the holders; as described below, new warrants were issued on March 26, 2004.

      On June 23, 2004, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement and also on June 23, 2004, entered into an Amended and Restated Note and Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. The effect of the June 23, 2004 amendments was to increase the amount due to BMO Nesbitt Burns Capital (U.S.) Inc., As Agent, by $2,000,000, reduce the balance outstanding under the four-year secured term loan described below by $1,000,000 and reduce the balance outstanding under the secured revolving credit facility described below by $1,000,000.

      Under the terms of the new agreements as amended, effective as of June 23, 2004, and as of December 31, 2004, the Company has:

      1) A four-year secured term loan in the amount of $21.0 million with variable rate interest; principal payments are due in quarterly installments of $500,000 which began June 30, 2004 and continue through March 31, 2005 and due in quarterly installments of $750,000 beginning June 30, 2005 through December 31, 2007 with the balance of $10,667,500 due on March 31, 2008. A mandatory principal payment of $82,500 related to an asset sale was made in September 2004.

      2) A secured revolving credit facility with a limit of $18.0 million, with variable rate interest, with an initial revolving credit balance of $8.7 million, and with initial availability of $5.4 million as of March 26, 2004. At December 31, 2004, the Company has a revolving credit balance of $11.4 million and availability of $4.7 million. The balance is due March 31, 2008. The amount available under the revolving credit facility is limited to 85% of eligible accounts receivable and 60% of eligible inventories. The facility requires a commitment fee of 0.50% per annum on the unused portion of the facility.

      At the Company’s option, for both the secured term loan and the secured revolving credit facility, interest will be at either a bank base rate plus applicable margin, or an adjusted LIBOR plus a LIBOR

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applicable margin. At inception, the bank rate plus applicable margin was 6.75% and the adjusted LIBOR plus a LIBOR applicable margin was 5.35%. At December 31, 2004, those rates were 7.75% and 6.78%, respectively.

      The Company entered into a swap agreement effective June 30, 2004 on $10.75 million (the original notional amount) of its term debt. Under this agreement, the Company pays a fixed LIBOR rate of 3.72% on the notional amount, which is payable quarterly. In accordance with the term loan agreement, the Company also pays an interest margin which adjusts in steps based on achieved operating and leverage metrics (4.25% during 2004). The notional amount for the period from June 30 through September 30, 2004 was $10.75 million and for the period from October 1 through December 31, 2004 was $10.5 million. The swap agreement expires March 31, 2008. As described below, the swap agreement is for the purpose of limiting the effects of interest rate increases on approximately one-half of the Company’s variable rate term debt.

      The Company reports the swap agreement at fair value. As of December 31, 2004, and for the year then ended, the Company recorded a $40,000 liability to “mark-to-market” the swap agreement at fair value and charged interest expense.

      3) Senior secured subordinated notes totaling $12.0 million with cash interest of 12% and payment-in-kind interest of 2% and 4% with no principal amortization, and the balances due March 26, 2009. This debt is subordinated to the secured term loan and the revolving credit facility with respect to both payment and lien priority.

      Related to the senior secured subordinated note, on March 26, 2004 the Company issued 545,467 warrants to purchase shares of its Class A Common Stock for $0.02 per share; these warrants expire March 26, 2014. The warrant holder may exercise the warrants at any time. The warrants may be put to the Company, at the then fair market value, at the earlier of: a) five years from the date of issue; b) a change of control; c) a default on the senior secured subordinated loan; or d) a prepayment of 75% or more of the original principal balance of the senior secured subordinated loan.

      The Company estimated the fair value of the warrants at the date of issue, and as of December 31, 2004 to be $1,500,000 and $1,791,000, respectively. The $1,791,000 estimate is reported as warrants payable in the accompanying consolidated balance sheets. The fair value at the date of issue was recorded as debt discount, and is being amortized using the effective yield method over 5 years, the term of the related senior secured subordinated note. The Company reports the warrants at fair value and records changes in the fair value as interest expense.

      The stock purchase warrant includes provisions that will reduce the 545,467 warrants that can be put to the Company if a) a change of control occurs prior to 5 years from the date of issue and the Company achieves specified net equity levels; or b) if a change of control has not occurred prior to 5 years from the date of issue and the Company achieves specified EBITDA (earnings before interest, taxes, depreciation and amortization) levels. The number of warrants could be reduced to any one of several levels, but no lower than 290,278. For the year ended December 31, 2004, the Company achieved the EBITDA level that would reduce the maximum number of warrants outstanding. The maximum number of warrants that may be put or exercised has been reduced to 479,859.

      In connection with these loans, the Company has granted the lenders a lien on all of the Company’s accounts receivable, inventories, equipment, land and buildings, and various other assets. These agreements contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, asset sales and payments such as dividends or stock repurchases. These agreements also impose various financial covenants, including financial performance ratios. Fees associated with the March 26, 2004 and June 23, 2004 transactions, including underwriting and legal fees, totaled approximately $1.8 million.

      Historically, we have met our near term liquidity requirements with cash flows from operations, the Harris line of credit, and management of our working capital to reflect current levels of operations. Management expects that cash flows from operations, working capital management and availability under the

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new bank revolving line of credit described above will permit us to meet our liquidity requirements through the term of the new credit facility.

Preferred Stock

      Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc. (“Worthington”), the Company issued 10,000 shares of its preferred stock, without par value, to Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share. The Company and Worthington entered into a stock redemption agreement, dated December 23, 2003, that provides for 30 monthly redemption payments of $50,000 each over a three-year period (10 payments each year in 2004, 2005 and 2006) to fully redeem the preferred stock. Each $50,000 payment and redemption of 333 (or 334) shares reduces the $10.0 million face value of the redeemable preferred stock by $333,000 (or $334,000). Redemption payments made during the year ended December 31, 2004 resulted in the “gain on redemption of redeemable preferred stock” of $2,833,000 which is reported in the accompanying consolidated statements of operations. If shares are not redeemed in accordance with the provisions of this agreement, the redemption price remains at $1,000 per share.

Capital Expenditures

      We incurred $5.4 million of capital expenditures during 2004, including approximately $3.4 million related to expansion activities and approximately $2.0 million for the normal update and replacement of manufacturing equipment.

      We estimate that our capital expenditures in 2005 will total approximately $5.0 million, of which $3.0 will be for expansion activities and the remaining $2.0 million will be for the normal update and replacement of manufacturing equipment.

      Management expects that cash flow from operations, working capital management and availability under the new bank revolving line of credit described below will permit us to meet our liquidity requirements through the term of the new credit facility.

Quarterly Financial Information

      Selected quarterly financial information for the years ended December 31, 2004 and 2003 is as follows:

	First		Second		Third		Fourth		Total
	Quarter		Quarter		Quarter		Quarter		Year
	(In thousands, except per share data)
2004
Sales	$	39,920	$	50,706	$	46,146	$	48,697	$	185,469
Gross profit		5,509		6,145		5,318		6,587		23,559
Operating income		2,069		2,631		1,789		2,273		8,762
Net earnings available to common shareholders		2,126		2,228		965		7,447		12,766
Earnings per share of common stock — basic:	$	0.46		0.48		0.20		1.59		2.73
Earnings per share of common stock — diluted:	$	0.38		0.38		0.15		1.25		2.16

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		First		Second			Third		Fourth		Total
		Quarter		Quarter			Quarter		Quarter		Year
		(In thousands, except per share data)
2003
Sales		$	32,380	$	34,398		$	31,452	$	33,201	$	131,431
Gross profit			4,591		5,010			4,063		4,449		18,113
Operating income			1,283		1,698			886		884		4,751
Net earnings available to common shareholders			119		140			106		261		626
Earnings per share of common stock — basic:
From continuing operations		$	0.00		0.04			0.02		0.06		0.12
From discontinued operations			0.03		(0.01	)		—		—		0.02
	Total	$	0.03		0.03			0.02		0.06		0.14
Earnings per share of common stock — diluted:
From continuing operations		$	0.00		0.03			0.02		0.06		0.11
From discontinued operations			0.03		(0.01	)		—		—		0.02
	Total	$	0.03		0.02			0.02		0.06		0.13

Off-Balance Sheet Arrangements

      The Company has the following significant off-balance sheet arrangements:

      (i) The operating lease obligation amounts are shown in the significant cash commitments table below. The Company enters into operating leases for larger units of manufacturing equipment related to many of its operations, including the laser cutting of sheet metal and the forming of sheet metal. Most parts fabricated by the Company are either laser cut, or formed, or both. The Company has operating leases that are scheduled to expire in 2005-2009; as these leases expire, it is likely that the Company will either extend those operating leases for the same units of manufacturing equipment or enter into new operating lease arrangements for replacement manufacturing units.

      (ii) The Company has had its bank issue letters of credit totaling approximately $1.5 million (as of March 5, 2005) to two creditors. One letter of credit is in support of operating lease payments; this letter of credit is for $618,000 and is scheduled to expire at the end of December 2005; the other letter of credit, in the amount of $870,000 supports future potential payments by the Company related to workers compensation claims. This is an “evergreen” letter of credit that will renew on an annual basis until the need for the letter of credit expires. Based on workers compensation claims experience, the amount of this letter of credit could either increase or decrease on December 31, 2005. The outstanding letters of credit decrease, on a dollar-for-dollar basis, the amount of revolving line of credit available under the Company’s credit facilities.

      (iii) The Company entered into a swap agreement in April 2004 as described above in this Item 7 and also below in Item 7A. The swap agreement is for the purpose of limiting the effects of interest rate increases on approximately one-half of the Company’s variable rate term debt.

      The Company has not given any guarantees for any unconsolidated entities.

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 7 and 8 of the accompanying financial statements.

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      The following table summarizes the Company’s contractual obligations at December 31, 2004:

	Payments Due by Period
			Less than						After
	Total		1 Year		1-3 Years		4-5 Years		5 Years
	(In thousands)
Term loan	$	19,418		2,750		16,668		—		—
Revolving line of credit		11,400		—		11,400		—		—
Senior subordinated debt		12,326		—		—		12,326
Other debt obligations		1,767		545		1,222		—		—
Operating leases		16,527		6,319		9,460		748		—
Preferred stock redemption		1,000		500		500		—		—
Total contractual cash obligations	$	62,438		10,114		39,250		13,074		—

      Under its bank credit facility, the Company had $734,000 standby letters of credit outstanding at December 31, 2004 in connection with lease obligations and its workers compensation program.

      Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc. (“Worthington”), the Company issued 10,000 shares of its preferred stock, without par value, to Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share. The Company and Worthington entered into a preferred stock redemption agreement, dated December 23, 2003, that provides for 30 monthly redemption payments of $50,000 each over a three year period (10 payments each year in 2004, 2005 and 2006) to fully redeem the preferred stock. Each $50,000 payment and redemption of 333 (or 334) shares reduces the fully accreted $10 million face value of the redeemable preferred stock by $333,000 (or $334,000). As of February 28, 2005, the Company has made 12 of the 30 scheduled redemption payments. If shares are not redeemed under the provision of this agreement, the redemption price remains at $1,000 per share. The significant cash commitments table above assumes that payments are made during 2005 and 2006 and that the redeemable preferred stock is retired for an additional $1.0 million.

      Management expects that cash flow from operations, working capital management and availability under its new bank revolving line of credit will permit us to meet our liquidity requirements through the term of the credit facility.

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, accrued group health care costs, valuation of warrants and the recoverability of deferred tax assets.

Allowance for Doubtful Accounts

      The Company provides for an allowance for doubtful accounts based on expected collectability of trade receivables. The allowance for doubtful accounts is determined based on the Company’s analysis of customer credit-worthiness, historical loss experience and general economic conditions and trends.

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Inventories

      Inventories are valued at the lower of cost or market. The Company evaluates its inventories for excess or slow moving items based on sales order activity and expected market changes. If circumstances indicate the cost of inventories exceed their recoverable value, inventory is adjusted to its net realizable value.

Group health care costs

      Reserves for group health care costs are based upon an estimate of benefit claims incurred but not reported, using historical trends as a basis for the estimate.

Valuation of warrants

      The valuation of the warrants issued in March 2004 is based upon management’s’ estimates of the ultimate number of warrants to be put to the Company, which is based upon an estimate of the Company’s ability to achieve certain earnings goals in 2005, 2006 and 2007. Factors also included in the estimate are a future business enterprise valuation factor based upon a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization), future estimates of debt levels and a discount rate used to reduce that future enterprise value to its present value.

Recoverability of Deferred Tax Assets

      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 deferred tax asset valuation allowance is adjusted as appropriate.

Recently Adopted Accounting Standards

      In January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest Entities (Interpretation 46), which addresses consolidation of certain variable interest entities and became effective January 31, 2003. The adoption of Interpretation 46 did not have a material impact on the Company’s financial statements.

      The FASB also recently issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (Statement 150), which established standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires classification of financial instruments within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS 150 applies to financial instruments entered into or modified after May 31, 2003, and otherwise became effective at the beginning of the first interim period beginning after June 15, 2003. FASB Staff Position Financial Accounting Standard 150-3, Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, deferred the effective date of SFAS 150 for certain mandatorily redeemable noncontrolling interests of all entities. The Company adopted SFAS No. 150 as of July 1, 2003, and that adoption has had the following classification impact on the Company’s consolidated financial statements:

      (i) related to the consolidated balance sheet, the redeemable preferred stock, previously reported as temporary equity, is classified as a liability.

      (ii) related to the consolidated statements of operations, the expense reported in previous periods as “accretion of discount on preferred shares” is classified as “interest on redeemable preferred stock” commencing July 1, 2003.

20

      On December 23, 2003, the Company entered into a stock redemption agreement for the redeemable preferred stock. See Item 3 above related to the terms of the redemption agreement.

Recently Issued Accounting Standards

      In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based Payment, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. This Statement is a revision to Statement 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement will require the fair value of all stock option awards issued to employees to be recorded as an expense over the related vesting period. This Statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at July 1, 2005, the date of adoption. The Company has not determined the impact of this Statement.

      In December 2004, the FASB issued SFAS No. 151, Inventory Costs, which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Under this Statement, such items will be recognized as current-period charges. In addition, the Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This Statement is effective for fiscal years beginning after June 15, 2005. The Company has not determined the impact of this Statement.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

      The Company uses both variable-rate debt and fixed rate debt to finance its operations. The variable-rate debt obligations expose the Company to variability in interest payments due to changes in interest rates. The variable-rate debt includes both our revolving credit facility ($11.4 million at December 31, 2004) and our term note payable ($19.4 million at December 31, 2004).

      In order to satisfy a requirement of the term loan, we entered into a swap agreement of approximately one-half of the term loan effective June 30, 2004 on $10,750,000 (the original notional amount) of its term debt. Under this agreement, the Company pays a fixed LIBOR rate of 3.72% on the notional amount, which is payable quarterly. In accordance with the term loan agreement, the Company also pays an applicable margin which adjusts in steps based on achieved operating and leverage metrics (ranging from 4.00% to 4.25% during 2004). The notional amount of the swap for the period from June 30 through September 30, 2004 was $10,750,000, and the notional amount for October 1 through December 31, 2004 was $10,500,000. The “all-in” rate on the notional amount in 2004 ranged from 7.72% to 7.97%. The swap agreement expires March 31, 2008.

      The interest on the other portion of the term loan is currently determined at the applicable margin described above plus a LIBOR rate. The Company has elected to use 3 month and 6 month LIBOR agreements in an effort to reduce the variability of interest payments related to this portion of the term debt. At December 31, 2004 the “all-in” rate including the LIBOR rate and applicable margin related to this portion of the term debt was approximately 6.78%.

      The interest on the revolving credit facility is determined primarily at the applicable margin plus LIBOR rates. The Company has elected, at December 31, 2004, to use 3 and 6 month LIBOR agreements in an effort to reduce the variability of interest payments related to the revolving debt. The LIBOR agreements totaled $11.0 million at December 31, 2004; the corresponding average “all-in” rates including the LIBOR rates and applicable margin related to the revolving debt were approximately 6.6%. The applicable margin plus the bank base rate is paid on the revolving debt in excess of $11.0 million; at December 31, 2004 this rate was 7.75%.

      If market rates of interest on our variable rate had been 100 basis points higher in 2004, our interest expense would have been approximately $200,000 higher.

21

      The interest rates on the senior subordinated debt and the subordinated debt are fixed as described above.

Steel Commodity Risk

      We are also subject to commodity price risk with respect to purchases of steel, which accounts for a significant portion of our cost of sales. In 2004, the costs of steel increased significantly during the year, and those costs have stabilized in 2005 at a relatively high level. We have arrangements to pass through to our largest customers the increased costs of steel, thereby significantly reducing the risks associated with the higher costs of steel. These additional costs are invoiced to those customers on a monthly basis.

22

Item 8. Financial Statements and Supplementary Data

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

INDEX

	Page
Report of Independent Registered Public Accounting Firm		24
Consolidated Balance Sheets as of December 31, 2003 and 2004		25
Consolidated Statements of Operations for the years ended December 31, 2002, 2003 and 2004		26
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2002, 2003 and 2004		27
Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004		28
Notes to Consolidated Financial Statements		30
Schedule
Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2002, 2003 and 2004		47

23

Report of Independent Registered Public Accounting Firm

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, 2003 and 2004, 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, 2004. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits.

      We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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, 2003 and 2004, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related 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 5 to the consolidated financial statements, effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.

/s/ KPMG LLP

Indianapolis, Indiana

March 24, 2005

24

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2003 and 2004

			2003			2004
			(Dollars in thousands,
			except per share data)
ASSETS
Current assets:
	Trade accounts receivable, less allowance for doubtful accounts of $202 in 2003 and $160 in 2004		$	7,253			9,788
	Unbilled receivables			—			2,741
	Note receivable			100			—
	Inventories			13,863			19,218
	Prepaid expenses and other current assets			1,087			1,324
	Deferred income taxes			1,600			2,700
		Total current assets		23,903			35,771
Property, plant, and equipment, net				22,432			22,390
Note receivable				1,183			1,102
Intangible assets, at cost, less accumulated amortization				1,100			2,148
Deferred income taxes				—			5,400
Other assets				204			334
			$	48,822			67,145
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Outstanding checks in excess of bank balance		$	943			2,801
	Current installments of long-term debt			6,210			3,295
	Accounts payable			17,343			17,860
	Accrued expenses			5,450			4,687
	Income taxes payable			275			200
	Redeemable preferred stock			500			500
		Total current liabilities		30,721			29,343
Long-term debt, excluding current installments				32,331			40,280
Other liabilities				118			368
Redeemable preferred stock				9,250			6,167
Warrants payable				—			1,791
		Total liabilities		72,420			77,949
Stockholders’ equity (deficit):
	Class A common stock — $0.01 par value. Authorized 20,000,000 shares; issued and outstanding 4,560,547 shares in 2003 and 4,723,878 shares in 2004			46			47
	Class B common stock — $0.01 par value. Authorized 200,000 shares; issued and outstanding 100,000 in 2003 and 2004			1			1
	Additional paid-in capital			20,895			20,922
	Accumulated deficit			(44,540	)		(31,774	)
		Total stockholders’ equity (deficit)		(23,598	)		(10,804	)
			$	48,822			67,145

See accompanying notes to consolidated financial statements.

25

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Years ended December 31, 2002, 2003, and 2004

				2002			2003			2004
				(Dollars in thousands, except
				per share data)
Net sales				$	116,567			131,431			185,469
Cost of sales					101,522			113,318			161,910
			Gross profit		15,045			18,113			23,559
Operating expenses:
	Selling expenses				2,723			2,948			3,211
	Administrative expenses				9,447			10,414			11,586
			Total operating expenses		12,170			13,362			14,797
			Operating income		2,875			4,751			8,762
Other income (expense):
	Interest expense				(4,228	)		(3,084	)		(4,526	)
	Interest on redeemable preferred stock				—			(427	)		(250	)
	Gain on redemption of preferred stock				—			—			2,833
	Other				365			442			172
			Other expense, net		(3,863	)		(3,069	)		(1,771	)
			Earnings (loss) before income taxes, discontinued operations and cumulative effect of accounting change		(988	)		1,682			6,991
Income taxes					(288	)		426			(5,775	)
			Earnings (loss) before discontinued operations and cumulative effect of accounting change		(700	)		1,256			12,766
Discontinued operations:
	Earnings from discontinued plastics operations, net				8,947			140			—
	Income taxes				2,157			55			—
					6,790			85			—
			Earnings before cumulative effect of accounting change		6,090			1,341			12,766
Cumulative effect of change in accounting principle, net of tax of $0					(8,118	)		—			—
			Net earnings (loss)		(2,028	)		1,341			12,766
Accretion of discount on preferred shares					(1,265	)		(715	)		—
			Net earnings (loss) available to common shareholders	$	(3,293	)		626			12,766
Earnings (loss) available to common shareholders per common share — basic:
		Earnings (loss) from continuing operations		$	(0.42	)		0.12			2.73
		Earnings from discontinued operations			1.46			0.02			—
			Earnings available to common shareholders before cumulative effect of accounting change		1.04			0.14			2.73
		Cumulative effect of a change in accounting principle			(1.75	)		—			—
			Net earnings (loss) available to common shareholders	$	(0.71	)		0.14			2.73
Earnings (loss) available to common shareholders per common share — diluted:
		Earnings (loss) from continuing operations		$	(0.42	)		0.11			2.16
		Earnings from discontinued operations			1.46			0.02			—
			Earnings available to common shareholders before cumulative effect of accounting change		1.04			0.13			2.16
		Cumulative effect of a change in accounting principle			(1.75	)		—			—
			Net earnings (loss) available to common shareholders	$	(0.71	)		0.13			2.16

See accompanying notes to consolidated financial statements.

26

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity (Deficit)

Years ended December 31, 2002, 2003, and 2004

(Dollars in thousands)

		Class A				Class B
		Common Stock				Common Stock
												Additional
		Shares				Shares						Paid-in		Accumulated
		Issued		Amount		Issued			Amount			Capital		Deficit			Total
Balance, December 31, 2001			4,400,850	$	44		200,000		$	2			20,883		(41,873	)		(20,944	)
	Net loss		—		—		—			—			—		(2,028	)		(2,028	)
	Stock options exercised		59,697		1		—			—			12		—			13
	Accretion of discount on preferred shares		—		—		—			—			—		(1,265	)		(1,265	)
Balance, December 31, 2002			4,460,547		45		200,000			2			20,895		(45,166	)		(24,224	)
	Net earnings		—		—		—			—			—		1,341			1,341
	Accretion of discount on preferred shares		—		—		—			—			—		(715	)		(715	)
	Conversion of shares of Class B common stock into shares of Class A common stock		100,000		1		(100,000	)		(1	)		—		—			—
Balance, December 31, 2003			4,560,547		46		100,000			1			20,895		(44,540	)		(23,598	)
	Net earnings												—		12,766			12,766
	Stock options exercised		163,331		1		—			—			27		—			28
Balance, December 31, 2004			4,723,878	$	47		100,000		$	1			20,922		(31,774	)		(10,804	)

See accompanying notes to consolidated financial statements.

27

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, 2002, 2003, and 2004

						2002			2003			2004
						(Dollars in thousands)
Cash flows from operating activities:
	Net earnings (loss)					$	(2,028	)		1,341			12,766
	Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
			Depreciation and amortization of plant and equipment and intangible assets				9,420			5,694			5,804
			Other amortization and accretion				—			427			1,253
			Payments on restructuring charge				(375	)		—			—
			Cumulative effect of change in accounting principle				8,118			—			—
			Provision for bad debts				7			310			145
			Change in deferred income taxes				3,197			151			(6,500	)
			Loss (gain) on sale of property and equipment				(8	)		(12	)		2
			Gain on sale of businesses				(17,784	)		(8	)		—
			Unrealized loss (gain) on derivative instruments				(418	)		—			40
			Gain on redemption of preferred stock				—			—			(2,833	)
			Changes in operating assets and liabilities, excluding effects of sale of businesses:
				Decrease (increase) in trade accounts receivable			3,470			(2,115	)		(2,680	)
				Increase in unbilled receivables			—			—			(2,741	)
				Decrease (increase) in inventories			(162	)		583			(5,355	)
				Decrease (increase) in prepaid expenses and other assets			(201	)		431			(286	)
				Increase (decrease) in income taxes payable			—			275			(75	)
				Increase in accounts payable			1,976			2,856			817
				Increase (decrease) in accrued expenses and other			2,166			327			(553	)
					Net cash provided by (used in) operating activities		7,378			10,260			(196	)
Cash flows from investing activities:
	Capital expenditures						(4,023	)		(4,119	)		(5,365	)
	Proceeds from sale of property and equipment						538			67			54
	Proceeds from sale of businesses						—			4,800			—
	Payment received on note receivable for sale of business						—			99			100
					Net cash provided by (used in) investing activities		(3,485	)		847			(5,211	)
Cash flows from financing activities:
	Increase (decrease) in checks issued in excess of bank balance						(1,869	)		(346	)		1,858
	Net advances (repayments) on revolving debt						(485	)		(5,350	)		5,600
	Principal payments on long-term debt and capital leases						(5,597	)		(4,961	)		(4,246	)
	Retirement of revolving debt in connection with refinancing						—			—			(14,650	)
	Retirement of term debt in connection with refinancing						—			—			(22,153	)
	Proceeds from issuance of revolving debt						—			—			7,200
	Proceeds from issuance of long-term debt						4,907			—			34,071
	Redemption of preferred stock						—			—			(500	)
	Proceeds from issuance of common stock						13			—			28
	Debt issuance costs						(862	)		(450	)		(1,801	)
					Net cash provided by (used in) financing activities		(3,893	)		(11,107	)		5,407
					Net change in cash		—			—			—
Cash at beginning of year							—			—			—
Cash at end of year						$	—			—			—
Supplemental disclosures of cash flow information:
	Cash paid during the year for:
		Interest				$	5,511			3,296			3,481
		Income taxes					26			48			550

See accompanying notes to consolidated financial statements.

28

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2003 and 2004

(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 components and subassemblies for construction, agricultural, industrial and recreational equipment manufacturers located primarily in the Midwestern and Southeastern United States. Sales in 2004 were approximately as follows: construction–65%, agricultural–13% and industrial–22%. 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. and its subsidiaries (together, the Company). 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 U.S. generally accepted accounting principles. Actual results could differ from those estimates.

     (d) Trade Accounts Receivable

      Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on customer credit-worthiness, historical write-off experience and general economic conditions and trends. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

     (e) 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.

     (f) Property, Plant, and Equipment

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

      Depreciation of plant and equipment is recognized over the estimated useful lives of the respective assets using straight-line and accelerated methods. 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.

     (g) Goodwill and Other Intangible Assets

      Goodwill represents the excess of costs over fair value of net assets of businesses acquired. The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other

29

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

Intangible Assets, as of January 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

     (h) 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. A valuation allowance is recorded to reduce the carrying amount of deferred tax assets when it is more likely than not that all or a portion of deferred tax assets will not be realized.

     (i) Stock Option Plan

      The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of SFAS No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As permitted by existing accounting standards, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS 123, as amended.

      The per share weighted average fair value of stock options granted during 2002 and 2003 was $0.29 and $0.15, respectively, 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. No stock options were granted during 2004.

      The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each year.

		2002			2003			2004
Net earnings (loss) available to common shareholders:
	As reported	$	(3,293	)		626			12,766
	Total stock-based employee compensation expense determined under fair-value-based method for all awards		(216	)		(112	)		(49	)
	Pro forma	$	(3,509	)		514			12,717
Basic earnings (loss) available to common shareholders per share:
	As reported	$	(0.71	)		0.14			2.73
	Pro forma		(0.76	)		0.11			2.72
Diluted earnings (loss) available to common shareholders per share:
	As reported		(0.71	)		0.13			2.16
	Pro forma		(0.76	)		0.10			2.15

30

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

     (j) Impairment of Long-lived Assets and Long-lived Assets to Be Disposed Of

      In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are 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 estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

      Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of the reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

     (k) Revenue Recognition

      Generally, revenue from sales is recognized when the goods are shipped and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable and the sales price is fixed or determinable. In certain cases, at the customer’s written request, the Company enters into bill and hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. The Company recognizes revenues associated with the bill and hold arrangements when the product is complete, ready to ship, and hold criteria have been met. No such arrangements existed at December 31, 2003 or 2004.

      During 2004, the Company incurred increased costs for the purchase of raw materials as a result of dynamic changes in the U.S. steel markets. The Company’s supplier agreements with key customers allow surcharges for the passthrough of the additional raw material costs. The Company has recognized as net sales, and also recognized an identical amount as cost of sales, surcharge amounts of approximately $18,239 in 2004. The Company has classified unbilled surcharges in the accompanying consolidated balance sheet as “unbilled receivables.” The surcharges are generally invoiced to the Company’s customers within weeks following the month end in which the related product is sold. As of December 31, 2004, the unpaid amount of billed surcharges included in accounts receivable is $1,292.

     (l) Interest Rate Swaps

      As required by one of its financing arrangements, the Company entered 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 was to limit the LIBOR interest rate component to 5.87% on half of the Company’s $27,930 term loans under the applicable financing arrangement.

31

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      During 2004, the Company entered into a swap agreement, expiring March 2008, with an initial aggregate notional amount of $10,750. Under this agreement, the Company pays a fixed LIBOR rate of 3.72% on the notional amount, which is payable quarterly. In accordance with a term loan agreement, the Company also pays an interest margin, which adjusts in steps based on operating and leverage metrics achieved by the Company (4.00% since June 2004).

     (m) Fair Value of Financial Instruments

      The Company believes the recorded value of notes receivable, notes payable and long-term debt approximates fair value because their respective interest rates fluctuate with market rates or approximate current market rates. The recorded value of redeemable preferred stock of $9,750 and $6,667 at December 31, 2003 and 2004, respectively, exceeds its estimated fair value of $1,251 and $908, respectively (see note 10).

      Interest rate swaps are reported at fair value, which is the estimated amount 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.

     (n) Earnings (Loss) Per Share

      Earnings (loss) per share is computed under the provisions of SFAS No. 128, Earnings Per Share. Amounts reported as earnings (loss) per share reflect the earnings available to common shareholders for the period divided by the weighted average number of Class A and Class B common shares outstanding during the year. Basic per share information is calculated by dividing earnings (loss) by the weighted average number of common shares outstanding. Diluted per share information is calculated by also considering the impact of potential common shares.

     (o)  Recently Issued Accounting Standards

      In December 2004, SFAS No. 123 (revised 2004), Share-Based Payment, was issued. SFAS No. 123 (revised 2004) addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. This Statement is a revision to SFAS No. 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement will require the fair value of all stock option awards issued to employees to be recorded as an expense over the related vesting period. This Statement also requires the recognition of compensation expense for the fair value of any unvested stock option awards outstanding at July 1, 2005, the date of adoption. The Company has not determined the impact of this Statement.

      In December 2004, SFAS No. 151, Inventory Costs, was issued. SFAS No. 151 clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Under this Statement, such items will be recognized as current-period charges. In addition, the Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This Statement is effective for fiscal years beginning after June 15, 2005. The Company has not determined the impact of this Statement.

(2) Discontinued Operations

      The financial results from discontinued operations are so classified as a result of two significant events during 2002: (i) the bankruptcy and subsequent sale of the assets of Morton Custom Plastics, LLC, and (ii) the board of directors’ decision to divest the only other remaining plastics operations facility in the Company, Mid-Central Plastics, Inc. (Mid-Central).

32

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      On November 1, 2002, Morton Custom Plastics LLC (MCP, LLC), Morton Holdings, LLC (Holdings) and Morton Lebanon Kentucky IBRB, LLC (Kentucky) filed as debtors-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Before filing, MCP, LLC and Kentucky had negotiated the terms of an agreement for sale of substantially all of their assets to Wilbert, Inc., pursuant to an Asset Purchase Agreement. Under the agreement, Wilbert, Inc. also agreed to assume the liabilities of MCP, LLC and Kentucky under certain of their contracts and leases. Based on its filing under Chapter 11, the Company did not include Morton Custom Plastics, LLC’s results in its consolidated financial statements subsequent to November 1, 2002.

      The sale of MCP’s, Holding’s and Kentucky’s assets was completed on December 24, 2002, in accordance with Section 363 of the United States Bankruptcy Code. The proceeds from the sale were used to retire a portion of the then-existing debt and pay expenses of the sale. The Company received no proceeds from the sale.

      At December 31, 2002, the assets of Mid-Central were reduced to their estimated fair value less costs to sell, resulting in an impairment charge of $325 in 2002.

      The Company sold the assets of Mid-Central on June 20, 2003. The sales price, subsequent to a working capital adjustment, was $6,100, with $4,800 received in cash at closing plus notes receivable from the buyer of $99, $97, and $1,100.

      The notes receivable of $99 and $97 have been collected. The note receivable of $1,100 is due June 20, 2006 and bears interest at 15% per annum. Interest for the period of June 20, 2003 through June 20, 2004 was 15% payment-in-kind and payable at maturity. Interest after June 20, 2004 is payable in cash on June 20, 2005, and at the date of maturity, June 20, 2006.

      The remaining note receivable, due from the buyer, is subordinate to required payments due by the buyer to its senior secured lender. Payments received by the Company are assigned to the Harris Bank syndicate, the Company’s senior secured lender.

      Summary financial data of the discontinued operations is presented below:

		2002			2003
Operating revenue		$	78,737			9,124
Operating expense			85,469			8,819
	Operating income (loss)		(6,732	)		305
Interest expense			(2,105	)		(165	)
	Earnings (loss) from operations of discontinued operations		(8,837	)		140
Gain on disposal of MCP, LLC			17,784			—
Income taxes			2,157			55
	Net earnings from discontinued operations	$	6,790			85

33

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(3) Inventories

      A summary of inventories follows:

	December 31
	2003		2004
Finished goods	$	5,427		8,361
Work in process		3,521		4,765
Raw materials		4,915		6,092
	$	13,863		19,218

(4) Property, Plant, and Equipment

      A summary of property, plant, and equipment at December 31, including assets held under capital leases as described in note 8, is as follows:

		Depreciable		December 31
		Lives
		(In years)		2003		2004
Land and land improvements			15	$	1,757		1,769
Buildings and leasehold improvements			15 – 39		8,577		8,991
Machinery and vehicles			5 – 12		27,008		29,421
Tooling			3		11,068		12,637
Office equipment			5 – 10		5,724		6,712
Construction in progress			–		462		99
					54,596		59,629
Less accumulated depreciation					32,164		37,239
	Property, plant, and equipment, net			$	22,432		22,390

(5) Intangible Assets

      A summary of intangible assets is as follows:

		December 31
		2003		2004
Goodwill		$	1,200		1,200
Debt issuance costs			2,645		2,124
Other			535		535
			4,380		3,859
Less accumulated amortization			3,280		1,711
	Net intangible assets	$	1,100		2,148

34

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      For amortizable intangible assets, the total amortization expense in 2002, 2003, and 2004 was $793, $836, and $453, respectively. The estimated amortization expense for each of the next five years ending December 31 is as follows:

Year ending:
	2005	$	501
	2006		484
	2007		443
	2008		218
	2009		47

      The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002, and recorded a noncash transition charge of $8,118, or a $1.75 loss per share, for impairment of goodwill during 2002. This goodwill was associated with the acquisitions of certain plastics facilities.

      The charge has been treated as the cumulative effect of a change in accounting principle. On January 1, 2002, the estimated fair value of one of the Company’s reporting units was less than the carrying value of its net assets, including goodwill, which indicated an impairment of goodwill. Under SFAS No. 142, the estimated fair value was allocated to the assets and liabilities of the reporting unit based on the purchase accounting method. This calculation indicated that the full amount of goodwill was impaired at the date of adoption of SFAS No. 142.

(6) 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 has entered 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.

      SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and No. 138, 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 are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company reports its interest rate swap agreements at fair value. The Company reported unrealized gains (losses) on interest rate swaps at December 31, 2003 and 2004 of $337 and $(40), respectively, as they did not qualify for hedge accounting.

35

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(7) Long-term Debt

      A summary of long-term debt follows:

	December 31
	2003		2004
Revolving credit facility with the current Harris syndicate	$	—		11,400
Senior Subordinated Debt, net of debt discount of $1,159		—		11,166
Note payable to the current Harris syndicate, with variable rate interest (6.45% as of December 31, 2004)		—		19,418
Revolving credit facility with the former Harris syndicate		13,250		—
Note payable to the former Harris syndicate, with variable rate interest (5.75% as of December 31, 2003)		23,253		—
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		1,734		1,396
Note payable, electric cooperative, non-interest bearing, due in monthly payments with the balance due November 1, 2006		130		85
Capital lease obligations		113		81
Notes payable, miscellaneous		61		29
		38,541		43,575
Less current installments		6,210		3,295
	$	32,331		40,280

Financing in effect as of December 31, 2003

      In May 1998, the Company entered into both a revolving credit facility and a term loan agreement with a syndicate of banks led by Harris Trust and Savings Bank (referred to as the former Harris syndicate).

      The financing arrangements with the former Harris syndicate, as subsequently amended, were as follows as of December 31, 2003:

      In February 2002, the Company entered into a new secured revolving credit facility with the former Harris syndicate. The revolving credit agreement permitted the Company to borrow up to a maximum of $21,000. The agreement required payments of a quarterly commitment fee of 0.50% per annum of the average daily unused portion of the revolving credit facility. Interest was due monthly and was based upon the bank prime rate plus 1.5% (effective rate of 5.75% at December 31, 2003). The Company, alternatively, could have selected a LIBOR plus 4.0% interest rate. The amount available under the revolving credit facility was limited to 85% of qualified accounts receivable, 60% of eligible inventories, plus $2,121 of other assets. The revolving credit agreement was originally due on July 1, 2003, and as amended, was extended to April 1, 2005. At December 31, 2003, the Company had $13,250 outstanding and $1,211 available under this credit facility.

      In February 2002, the Company also entered into a secured term loan arrangement with the former Harris syndicate for a term loan of $32,965. The former Harris syndicate term loan arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement was amortized monthly with principal payments ranging from $235 to $500 and the balance of $24,930 due originally on July 1, 2003, as amended, was extended to April 1, 2005. Interest was due monthly and was based upon the bank prime rate plus 1.5% (effective rate of 5.75% at December 31, 2003). The Company, alternatively, could have selected a LIBOR plus 4.0% interest rate. The agreement

36

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

was secured by a first lien on all of the Company’s accounts receivable, inventories, equipment and various other assets, other than the assets of Morton Custom Plastics, LLC.

      The February 2002 former Harris syndicate agreement was amended during 2003 as follows:

•  maturity date of the revolving credit facility and remaining balance of the term loan was extended to April 1, 2005

•  a reduction in the revolving credit commitment to $18,800 (from a previous level of $21,000)

•  effective February 28, 2003, increased the limit of eligible inventories under the revolving credit facility from 50% to 60%

•  changed the definition of “other asset value” in the borrowing base to $2,212 (from previous levels of $2,500 and $3,500)

•  established principal payment installments of $500 per month for the months ending April, 2004 through March, 2005

•  provided consent to the June 2003 sale of Mid-Central Plastics Inc.

•  provided consent to enter into a settlement regarding the redeemable preferred stock held by Worthington Industries, Inc.

•  increased the limitation for capital expenditures for 2003

      In addition, under this agreement, 238,584 warrants issued on September 20, 2000 to purchase Class A Common Stock at an exercise price of $0.01 per share remained outstanding.

March 26, 2004 Refinancing and Subsequent Amendments

      On March 26, 2004, the Company entered into a Second Amended and Restated Credit Agreement with a different syndicate of banks led by Harris Trust and Savings Bank, As Agent (referred to as the current Harris syndicate), and also on March 26, 2004, entered into a Note and Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. These agreements were effective on March 26, 2004, and provided financing to replace the revolving credit facility and term note payable due to the former Harris syndicate. In connection with this transaction, the 238,584 warrants to purchase Class A Common Stock were surrendered by the holders; and, as described below, new warrants were issued on March 26, 2004.

      On June 23, 2004, the Company entered into the First Amendment to the Second Amended and Restated Credit Agreement and also on June 23, 2004, entered into an Amended and Restated Note and Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. The effect of the June 23, 2004 amendments was to increase the amount due to BMO Nesbitt Burns Capital (U.S.) Inc., As Agent, by $2,000, reduce the balance outstanding under the four-year secured term loan described below by $1,000 and reduce the balance outstanding under the secured revolving credit facility described below by $1,000.

      Under the terms of the new agreements and amendments, effective as of June 23, 2004, and as of December 31, 2004, the Company has:

      1) A four-year secured term loan in the amount of $21,000 with variable rate interest; principal payments are due in quarterly installments of $500 which began June 30, 2004 and continue through March 31, 2005 and due in quarterly installments of $750 beginning June 30, 2005 through December 31, 2007 with the balance of $10,667.5 due on March 31, 2008. A mandatory principal payment of $82.5 related to an asset sale was made in September 2004.

37

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      2) A secured revolving credit facility with a limit of $18,000, with variable rate interest, with an initial revolving credit balance of $8,700, and with initial availability of $5,400 as of March 26, 2004. At December 31, 2004, the Company has a revolving credit balance of $11,400 and availability of $4,700. The balance is due March 31, 2008. The amount available under the revolving credit facility is limited to 85% of eligible accounts receivable and 60% of eligible inventories. The facility requires a commitment fee of 0.50% per annum on the unused portion of the facility.

      At the Company’s option, for both the secured term loan and the secured revolving credit facility, interest will be at either a bank base rate plus applicable margin, or an adjusted LIBOR plus a LIBOR applicable margin. At inception, the bank rate plus applicable margin was 6.75% and the adjusted LIBOR plus a LIBOR applicable margin was 5.35%. At December 31, 2004, those rates were 7.75% and 6.78%, respectively.

      The Company entered into a swap agreement effective June 30, 2004 on $10,750 (the original notional amount) of its term debt. Under this agreement, the Company pays a fixed LIBOR rate of 3.72% on the notional amount, which is payable quarterly. In accordance with the term loan agreement, the Company also pays an interest margin which adjusts in steps based on achieved operating and leverage metrics (4.25% during 2004). The notional amount for the period from June 30 through September 30, 2004 was $10,750 and for the period from October 1 through December 31, 2004 was $10,500. The swap agreement expires March 31, 2008. The swap agreement is for the purpose of limiting the effects of interest rate increases on approximately one-half of the Company’s variable rate term debt.

      3) Senior secured subordinated notes totaling $12,000 with cash interest of 12% and payment-in-kind interest of 2% and 4% with no principal amortization, and the balances due March 26, 2009. This debt is subordinated to the secured term loan and the revolving credit facility with respect to both payment and lien priority.

      Related to the senior secured subordinated note, on March 26, 2004, the Company issued 545,467 warrants to purchase shares of its Class A Common Stock for $0.02 per share; these warrants expire March 26, 2014. The warrant holder may exercise the warrants at any time. The warrants may be put to the Company, at the then fair market value, at the earlier of: a) five years from the date of issue; b) a change of control; c) a default on the senior secured subordinated loan; or d) a prepayment of 75% or more of the original principal balance of the senior secured subordinated loan.

      The Company estimated the fair value of the warrants at the date of issue, and as of December 31, 2004, to be $1,500 and $1,791, respectively. The $1,791 estimate is reported as warrants payable in the accompanying consolidated balance sheets. The fair value at the date of issue was recorded as debt discount, and is being amortized using the effective yield method over 5 years, the term of the related senior secured subordinated note. The Company reports the warrants at fair value and records changes in the fair value as interest expense.

      The stock purchase warrant includes provisions that will reduce the 545,467 warrants that can be put to the Company if a) a change of control occurs prior to 5 years from the date of issue and the Company achieves specified net equity levels; or b) if a change of control has not occurred prior to 5 years from the date of issue and the Company achieves specified EBITDA (earnings before interest, taxes, depreciation and amortization) levels. The number of warrants could be reduced to any one of several levels, but no lower than 290,278. For the year ended December 31, 2004, the Company achieved the EBITDA level that would reduce the maximum number of warrants outstanding. The maximum number of warrants that may be put or exercised has been reduced to 479,859.

      The Company has provided bank letters of credit totaling approximately $1,500 to two creditors. One letter of credit is in support of operating lease payments; this letter of credit is for $618 and is scheduled to expire at the end of December 2005; the other letter of credit, in the amount of $870 supports future potential

38

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

payments by the Company related to workers’ compensation claims. This letter of credit will renew on an annual basis until the need for the letter of credit expires. Based on workers’ compensation claims experience, the amount of this letter of credit is subject to adjustment on December 31, 2005. The outstanding letters of credit decrease, on a dollar-for-dollar basis, the amount of revolving line of credit available under the secured revolving credit facility.

      In connection with these loans, the Company has granted the lenders a lien on all of the Company’s accounts receivable, inventories, equipment, land and buildings, and various other assets. These agreements contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, and asset sales and prohibit payments such as dividends or stock repurchases. These agreements also contain various financial covenants, including financial performance ratio requirements. Fees associated with the March 26, 2004 and June 23, 2004 transactions, including underwriting and legal fees, totaled approximately $1,801.

      The aggregate amounts of contractual long-term debt maturities and principal payments (based upon the amended credit facilities described above) for each of the five years subsequent to December 31, 2004 are as follows:

Year:
	2005	$	3,295
	2006		3,502
	2007		3,472
	2008		22,140
	2009		11,166
		$	43,575

(8) Leases

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

		2003		2004
Machinery		$	228		299
	Less accumulated amortization		93		136
		$	135		163

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

      The present value of future minimum capital lease payments at December 31, 2004 was as follows:

Year:
	2005		$	67
	2006			18
		Total minimum lease payments		85
Less amount representing interest (from 6.0% to 7.9%)				4
		Present value of net minimum capital lease payments	$	81

39

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      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 $6,317, $6,516, and $6,989 in 2002, 2003, and 2004, respectively.

      Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2004 are:

Year:
	2005		$	6,319
	2006			4,298
	2007			2,883
	2008			2,279
	2009			748
		Total minimum lease payments	$	16,527

(9) Income Taxes

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

	December 31
	2002			2003		2004
Earnings (loss) before discontinued operations and cumulative effect of accounting change	$	(288	)		426		(5,775	)
Discontinued operations		2,157			55		—
	$	1,869			481		(5,775	)

      Income tax expense (benefit) from continuing operations consists of the following:

		Current			Deferred			Total
Year ended December 31, 2002:
	Federal	$	(288	)		—			(288	)
	State		—			—			—
		$	(288	)		—			(288	)
Year ended December 31, 2003:
	Federal	$	80			151			231
	State		195			—			195
		$	275			151			426
Year ended December 31, 2004:
	Federal	$	185			(6,050	)		(5,865	)
	State		540			(450	)		90
		$	725			(6,500	)		(5,775	)

40

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      Total income tax expense (benefit) attributable to earnings from continuing operations differed from the amounts computed by applying the U.S. Federal corporate income tax rate of 34% for all periods to earnings (loss) before income taxes as a result of the following:

	December 31
	2002			2003			2004
Computed “expected” tax expense (benefit)	$	(336	)		572			2,377
State income tax expense, net of Federal income tax benefit		—			129			59
Non-deductible interest on redeemable preferred stock		—			146			85
Non-taxable gain on redemption of preferred stock		—			—			(963	)
Officer’s life insurance		20			20			3
Decrease in valuation allowance allocated to continuing operations		(42	)		(719	)		(7,441	)
Other, net		70			278			105
	$	(288	)		426			(5,775	)

      The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2003 and 2004, are presented below:

			December 31
			2003			2004
Deferred tax assets attributable to:
	Net operating loss and credit carryforwards		$	23,971			22,677
	Accrued vacation pay			314			345
	Reserves and other			853			398
		Total gross deferred tax assets		25,138			23,420
Less valuation allowance				(20,484	)		(13,043	)
		Total deferred tax assets		4,654			10,377
Deferred tax liabilities attributable to:
	Plant and equipment, principally due to differences in depreciation			(2,926	)		(2,174	)
	Excess of tax over book amortization			(41	)		(34	)
	Debt discount			(87	)		(69	)
		Total deferred tax liabilities		(3,054	)		(2,277	)
		Net deferred tax asset	$	1,600			8,100

      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 net deferred tax asset, the Company will need to generate future taxable income of approximately $22,000 prior to the expiration of the net operating loss carryforwards in 2022. 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, 2004, based upon anticipated profitability over the period of years that the temporary differences are expected to become tax deductions. 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.

41

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      At December 31, 2004, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $61,000 which are available to offset future federal taxable income, if any, through 2022. Management anticipates that approximately $12,000 of those net operating loss carryforwards will expire unused. Future recognition of tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2004, of $13,043 will be allocated to consolidated statement of operations $(12,174) and additional paid-in capital $(869).

(10) Redeemable Preferred Stock

      Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc. (Worthington), the Company issued 10,000 shares of its preferred stock, without par value, to Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share. The preferred stock was valued at $4,250 at the time of the acquisition and the discount was accreted over a five-year period using the effective yield method. See also note 18 related to litigation regarding Worthington Industries, Inc.

      The Company and Worthington entered into a stock redemption agreement, dated December 23, 2003, that provides for 30 monthly redemption payments of $50 each over a three-year period (10 payments each year in 2004, 2005, and 2006) to fully redeem the preferred stock. Each payment redeems 333 (or 334) shares of the 10,000 shares outstanding and results in a gain on redemption of $283. Redemption payments made during the year ended December 31, 2004 resulted in a gain on redemption of redeemable preferred stock of $2,833, which is reported in the accompanying consolidated statements of operations. If shares are not redeemed under the provisions of this agreement, the redemption price remains at $1,000 per share. As part of this agreement, all litigation between the Company and Worthington is settled and dismissed.

(11) 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.

(12) 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 both December 31, 2003 and 2004, there were 327,561 additional shares available for grant under the Plan.

42

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

      Stock option activity during the periods indicated is as follows:

				Weighted
				Average
	Number of			Exercise
	Shares			Price
Outstanding at December 31, 2001		1,096,067		$	13.072
Issued		131,500			0.325
Exercised		(59,697	)		(0.216	)
Forfeited		—			—
Outstanding at December 31, 2002		1,167,870			12.290
Issued		712,500			0.166
Exercised		—			—
Forfeited		(1,041,220	)		(13.675	)
Outstanding at December 31, 2003		839,150			0.286
Issued		—			—
Exercised		(163,331	)		(0.180	)
Forfeited		—			—
Outstanding at December 31, 2004		675,819		$	0.311

      The following is summary information about the Company’s stock options outstanding at December 31, 2004:

						Number of
Number of		Exercise				Shares
Shares		Price		Expiration Date		Exercisable
	51,650	$	1.875		February 2011		51,650
	46,668		0.325		June 2012		21,668
	465,001		0.150		February 2013		89,996
	30,000		0.250		April 2013		30,000
	72,500		0.250		August 2013		72,500
	10,000		0.300		November 2013		3,333
	675,819						269,147

(13) Concentration of Sales

      Sales to customers in excess of 10% of total net sales for 2002, 2003, and 2004 are as follows:

		Customer A			Customer B
Years ended:
	December 31, 2002		37	%		50	%
	December 31, 2003		38			50
	December 31, 2004		35			53

      Trade accounts receivable with these customers totaled $4,302 and $5,965 at December 31, 2003 and 2004, respectively.

43

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(14) Employee Participation Plan

      The Company’s Employee Participation Plan allows substantially all employees to defer up to 15% of their income through payroll deduction of pre-tax contributions under section 401(k) of the Internal Revenue Code. The Company matches 25% of the first 6% 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. The expense charged to operations related to defined contribution plans was $239, $230, and $299 in 2002, 2003, and 2004, respectively.

(15) Earnings (Loss) Per Share

      The following reflects the reconciliation of the numerators and denominators of the basic and diluted earnings (loss) available to common shareholders per share computations:

			2002			2003		2004
Numerator:
	Earnings (loss) from continuing operations, including accretion of discount on preferred shares		$	(1,965	)		541		12,766
	Earnings from discontinued operations			6,790			85		—
	Earnings before cumulative effect of accounting change			4,825			626		12,766
	Cumulative effect of change in accounting principle			(8,118	)		—		—
		Net earnings (loss) available to common shareholders	$	(3,293	)		626		12,766
Denominator:
	Weighted average common shares outstanding — basic			4,638,467			4,660,547		4,670,374
	Dilutive potential common shares — stock options and warrants			—			430,300		1,228,647
		Weighted average common stock outstanding — diluted		4,638,467			5,090,847		5,899,021
Basic earnings per share:
	Earnings (loss) from continuing operations		$	(0.42	)		0.12		2.73
	Earnings from discontinued operations			1.46			0.02		—
	Earnings before cumulative effect of accounting change			1.04			0.14		2.73
	Cumulative effect of change in accounting principle			(1.75	)		—		—
		Net earnings (loss) available to common shareholders	$	(0.71	)		0.14		2.73
Diluted earnings per share:
	Earnings (loss) from continuing operations		$	(0.42	)		0.11		2.16
	Earnings from discontinued operations			1.46			0.02		—
	Earnings before cumulative effect of accounting change			1.04			0.13		2.16
	Cumulative effect of change in accounting principle			(1.75	)		—		—
		Net earnings (loss) available to common shareholders	$	(0.71	)		0.13		2.16

      Options to purchase 1,167,870 shares of Class A common stock at an average price of $12.294 per share and warrants to purchase 238,548 shares of Class A common stock at $0.01 per share were outstanding at

44

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

December 31, 2002, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

(16) Segment Reporting

      Subsequent to the previously reported sales of Morton Custom Plastics, LLC and Mid-Central Plastics, Inc., the Company has only one remaining segment – the contract metal fabrication segment.

(17) Selected Quarterly Financial Data (Unaudited)

      Selected quarterly financial information for 2004 and 2003 is as follows:

				First		Second			Third		Fourth		Total
				Quarter		Quarter			Quarter		Quarter		Year
2004:
	Net sales			$	39,920		50,706			46,146		48,697		185,469
	Gross profit				5,509		6,145			5,318		6,587		23,559
	Operating income				2,069		2,631			1,789		2,273		8,762
	Net earnings available to common shareholders				2,126		2,228			965		7,447		12,766
	Earnings per share of common stock — basic:
		From continuing operations			0.46		0.48			0.20		1.59		2.73
		From discontinued operations			—		—			—		—		—
			Total	$	0.46		0.48			0.20		1.59		2.73
	Earnings per share of common stock — diluted:
		From continuing operations			0.38		0.38			0.15		1.25		2.16
		From discontinued operations			—		—			—		—		—
			Total	$	0.38		0.38			0.15		1.25		2.16
2003:
	Net sales			$	32,380		34,398			31,452		33,201		131,431
	Gross profit				4,591		5,010			4,063		4,449		18,113
	Operating income				1,283		1,698			886		884		4,751
	Earnings before discontinued operations and cumulative effect of accounting change				316		573			106		261		1,256
	Net earnings (loss) from discontinued operations				135		(50	)		—		—		85
	Net earnings available to common shareholders				119		140			106		261		626
	Earnings (loss) per share of common stock — basic:
		From continuing operations			0.00		0.04			0.02		0.06		0.12
		From discontinued operations			0.03		(0.01	)		—		—		0.02
			Total	$	0.03		0.03			0.02		0.06		0.14
	Earnings (loss) per share of common stock — diluted:
		From continuing operations			0.00		0.03			0.02		0.06		0.11
		From discontinued operations			0.03		(0.01	)		—		—		0.02
			Total	$	0.03		0.02			0.02		0.06		0.13

45

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

(18) Litigation

      On May 1, 2000, Worthington Industries, Inc. (Worthington) filed suit (in the United States District Court for the Southern District of Ohio, Eastern Division (the Court)) against the Company and Morton Custom Plastics, LLC (MCP, LLC) related to MCP, LLC’s 1999 acquisition of the nonautomotive plastics business from Worthington. In connection with the stock redemption agreement described in note 10 above, all litigation between the Company and Worthington was released. An order of dismissal of the Worthington lawsuit against the Company was entered in the Court on January 20, 2004.

      The Company is also involved in various other claims and legal actions, including environmental issues, in the normal course of business. Management does not believe the resolution of any such matters will have a material adverse effect on the Company’s financial condition or results of operations.

46

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements — (Continued)

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Schedule II — Valuation and Qualifying Accounts

		Balance at		Charged to								Balance at
		Beginning of		Costs and								End of
Description		Period		Expenses		Deductions			Other			Period
Allowance for doubtful accounts:
	Year ended December 31, 2002	$	381		7		(52	)		(252	)*		84
	Year ended December 31, 2003	$	84		310		(192	)		—			202
	Year ended December 31, 2004	$	202		145		(187	)		—			160

*  Represents the December 31, 2001 allowance for doubtful accounts of discontinued operations.

47

Item 9A. Controls and Procedures

      Evaluation of disclosure controls and procedures. The Company’s principal executive officer and principal financial officer have concluded, based on their evaluation, that the Company’s disclosure controls and procedures (as defined in Rule 13a-15(c) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Form 10-K, are effective.

      The Company’s management, including its principal executive officer and principal financial officer, does not expect that the Company’s disclosure controls and procedures or its internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control.

      Changes in internal controls. There have been no significant changes in the Company’s internal controls over financial reporting that occurred in the fourth quarter of 2004 that may have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

      None

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 2005 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, 2004 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 2005 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, 2004 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 2005 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, 2004 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

48

definitive proxy statement for the 2005 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, 2004 pursuant to Regulation 14A.

Item 14. Principal Accountant Fees and Services

      The information required by this Item 14 is incorporated herein by reference to the information set forth under the caption “Ratification of the Selection of Auditors” in our definitive proxy statement for the 2005 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, 2004 pursuant to Regulation 14A.

PART IV

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 Registered Public Accounting Firm

b. Consolidated Balance Sheets as of December 31, 2003 and 2004

c. Consolidated Statements of Operations for the years ended December 31, 2002, 2003 and 2004

d. Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2002, 2003 and 2004

e. Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2003 and 2004

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, 2002, 2003 and 2004

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	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 Exhibit 3 to Morton Industrial Group, Inc.
3.2 and 4.2	—	Articles of Amendment to Articles of Incorporation of the Registrant Effective January 20, 1998	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

49

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
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
10.10	—	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
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
10.26	—	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
10.41	—	Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on April 1, 2002
10.42	—	First Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003

50

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
10.43	—	Second Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003
10.44	—	Third Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.3 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003
10.45	—	Asset Purchase Agreement between Morton Custom Plastics, LLC and Wilbert, Inc.	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on November 4, 2002
10.47	—	Fourth Amendment to Amended and Restated Credit Agreement with Harris Trust & Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on August 11, 2003.
10.48	—	Fifth Amendment to Amended and Restated Credit Agreement with Harris Trust & Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 29, 2003.
10.49	—	Sixth Amendment to Amended and Restated Credit Agreement with Harris Trust & Savings Bank, As Agent	Exhibit 10.49 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 30, 2004
10.50	—	Second Amended and Restated Credit Agreement	Exhibit 10.50 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 30, 2004
10.51	—	Note and Warrant Purchase Agreement	Exhibit 10.51 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 30, 2004
10.52	—	Settlement Agreement	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 29, 2003.
10.53	—	Stock Redemption Agreement	Exhibit 99.3 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 29, 2003.
10.54	—	Agreement with Innovative Injection Technologies, Inc.	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K/A filed with SEC on July 7, 2003.
10.55	—	First Amendment to Agreement with Innovative Injection Technologies, Inc.	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 8-K/A filed with SEC on July 7, 2003.
10.56	—	Investor Rights Agreement	Exhibit 10.56 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 30, 2004
10.57		First Amendment to the Second Amended and Restated Credit Agreement	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on August 6, 2004
10.58		Amended and Restated Note and Warrant Purchase Agreement	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on August 6, 2004
10.59		Amendment to By-Laws	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 14, 2004
10.60		Second Amendment to Second Amended and Restated Credit Agreement			X

51

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
10.61		First Amendment to Amended and Restated Note and Warrant Purchase Agreement			X
13	—	Annual Report			X
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			X
23.1	—	Consent of KPMG LLP			X
31.1	—	Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			X
31.2	—	Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			X
32.1	—	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

      Form 8-K was filed with the SEC on December 14, 2004 related to a change in the Company’s by-laws.

52

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.

By:  /s/WILLIAM D. MORTON

William D. Morton

Chairman, Chief Executive Officer and President

Dated: July 29, 2005

      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	Chairman, Chief Executive Officer and President	July 29, 2005
/s/ DARYL R. LINDEMANN Daryl R. Lindemann	Chief Financial Officer and Secretary	July 29, 2005
/s/ FRED W. BROLING Fred W. Broling	Director	July 29, 2005
/s/ MARK W. MEALY Mark W. Mealy	Director	July 29, 2005

53

SHAREHOLDER INFORMATION

CORPORATE OFFICES

Morton Industrial Group, Inc.

1021 W. Birchwood

Morton, Illinois 61550-0429

Phone: 309-266-7176 Fax: 309-263-1841

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:

Van Negris & Company, Inc.

570 Lexington Avenue — 15th Floor

New York, New York 10022

Telephone: 212-759-0920

E-mail: info@vnegris.com

ANNUAL MEETING

The Annual Meeting of the Shareholders of Morton Industrial Group, Inc. will be held on Tuesday, June 7, 2005 at 10:00 a.m. (EDT) at:

The Siena Hotel

1505 E. Franklin St.

Chapel Hill, NC 27514

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 REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP

Indianapolis, Indiana

STOCK MARKET INFORMATION

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

54

BOARD OF DIRECTORS

William D. Morton

Chairman, Chief Executive Officer and President

Morton Industrial Group, Inc.

Fred W. Broling

Retired President and CEO

US Precision Glass

Mark W. Mealy

Lead Independent Director

Morton Industrial Group, Inc.

CORPORATE OFFICERS

William D. Morton

Chairman, Chief Executive Officer and President

Daryl R. Lindemann

Chief Financial Officer and Secretary

Rodney B. Harrison

Vice President of Finance and Treasurer

55 EX-10.60 2 c96683a1exv10w60.txt SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT EXHIBIT 10.60 SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT This Second Amendment to Second Amended and Restated Credit Agreement (herein, the "Amendment") is made as of February 8, 2005, by and among Morton Industrial Group, Inc., a Georgia corporation (the "Borrower"), the Lenders party to the Credit Agreement hereinafter identified and defined, and Harris Trust and Savings Bank, as Agent for the Lenders (in such capacity, the "Agent"). RECITALS A. The Lenders currently extend credit to the Borrower on the terms and conditions set forth in that certain Second Amended and Restated Credit Agreement dated as of March 26, 2004, as amended, by and among the Borrower, the Guarantors, the Lenders and the Agent (the "Credit Agreement"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. B. The Borrower has requested that the Lenders amend certain provisions of the Borrowing Base and certain financial covenants set forth in the Credit Agreement, and the Lenders are willing to do so on the terms and conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. AMENDMENTS. Subject to the satisfaction of the conditions precedent set forth in, and effective from and after the date specifically set forth in, Section 2 below, the Credit Agreement shall be and hereby is amended as follows: 1.1. The definition of "Borrowing Base" set forth in Section 5.1 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "Borrowing Base" means, as of any time it is to be determined, the sum of: (a) 85% of the then net book value of Eligible Accounts (computed using the method of receivables valuation applied by the Borrower in accordance with GAAP which reflects such value as the net book value of its receivables, except that net book value for such purposes shall not reflect any reserve for accounts more than ninety days past due that have already been excluded from gross accounts in computing such Eligible Accounts) less such other reserves for uncollectibility, location of account debtor, contras and other matters as the Agent or Required Lenders in good faith shall from time to time reasonably deem appropriate to adjust such net book value; plus (b) the lesser of (x) $13,000,000 and (y) 60% of the value (computed at its cost using the method of inventory valuation applied by the Borrower in accordance with GAAP which reflects such cost on the Borrower's books as its net book value, but in any event after reducing such value as so computed by the aggregate amount of all reserves for obsolescence, slow-moving items, shrinkage and all such other matters as the Agent or Required Lenders in good faith shall from time to time reasonably deem appropriate to adjust such net book value) of Eligible Inventory, provided that, in no event shall the amount computed pursuant to this clause (b) exceed 60% of the Borrowing Base; minus (c) a general reserve in the amount of $500,000; provided that (A) the Borrowing Base shall be computed only as against and on so much of the Collateral as is included on the certificates to be furnished from time to time by the Borrower pursuant to Section 8.5(f) hereof and, if required by the Agent pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence required to be furnished to the Agent pursuant hereto or pursuant to any such Collateral Document, and (B) the Agent shall have the right to adjust the advance rates against Eligible Receivables and Eligible Inventory based solely on the commercially reasonable exercise of its credit judgment based on the results of any field audit of any Collateral which reasonably supports any such adjustment and the Agent shall notify the Borrower of any such adjustment to the advance rates promptly following such adjustment. Notwithstanding any other provision of this definition of "Borrowing Base" to the contrary: (i) the amount of Eligible Accounts otherwise included in the Borrowing Base shall be reduced, dollar for dollar, by a reserve equal to the greater of (a) the amount (if any) by which (x) the aggregate amount of accounts payable owing by the Borrower and its Subsidiaries to Deere and Caterpillar together and their respective Affiliates for inventory and supplies purchased (the "Deere/Caterpillar Payables") at any time exceeds (y) $8,000,000 or (b) the sum of (A) the amount (if any) by which (x) the aggregate amount of accounts payable owing by the Borrower and its Subsidiaries to Deere and its Affiliates for inventory and supplies purchased (the "Deere Payables") at any time exceeds (y) $5,000,000 and (B) the amount (if any) by which (x) the aggregate amount of accounts payable owing by the -2- Borrower and its Subsidiaries to Caterpillar and its Affiliates for inventory and supplies purchased (the "Caterpillar Payables") at any time exceeds (y) $4,000,000; (ii) no reserve will be imposed in computing the Borrowing Base as of any time solely in respect of the Deere/Caterpillar Payables, Deere Payables or Caterpillar Payables to the extent the same do not exceed such respective limits; and (iii) the Agent and the Required Lenders shall have the right to impose reserves for other matters arising in connection with receivables owing by Deere and Caterpillar and to otherwise impose reserves in accordance with the Credit Agreement. 1.2. Section 8.10 of the Credit Agreement is hereby amended by (i) deleting the amount "$4,800,000" for fiscal year 2004 and replacing it with the amount "$5,400,000," and (ii) deleting the amount "$5,200,000" for fiscal year 2005 and replacing it with the amount "$5,500,000." 1.3. Section 8.14(b) of the Credit Agreement is hereby amended by deleting the amount "$7,800,000" for the fiscal year 2005 and replacing it with the amount "$8,000,000." 1.4. Exhibit H to the Credit Agreement is hereby amended and restated to read in its entirety as set forth on the revised Exhibit H attached hereto. SECTION 2. CONDITIONS PRECEDENT. Upon the satisfaction of all the following conditions precedent, this Amendment shall be, and is hereby agreed to by the parties hereto to be, effective from and after December 31, 2004: 2.1. The Borrower, the Agent, the Lenders and the Guarantors shall have executed and delivered this Amendment. 2.2. The Agent shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Agent or its counsel may reasonably request. 2.3. Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Agent and its counsel. 2.4. The Agent shall have received a certified copy of an amendment to the Note Purchase Agreement increasing the capital expenditures limitation covenant to an amount not less than $5,400,000 for fiscal year 2004 and which shall be in form and substance acceptable to the Agent. -3- SECTION 3. REPRESENTATIONS. In order to induce the Lenders to execute and deliver this Amendment, the Borrower hereby represents to the Lenders that as of the date hereof, and after giving effect to this Amendment, (a) the representations and warranties set forth in Section 6 of the Credit Agreement are and shall be and remain true and correct in all material respects (except that for purposes of this paragraph the representations contained in Section 6.5 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Lenders) and (b) the Borrower is in full compliance with all of the terms and conditions of the Credit Agreement after giving effect to this Amendment and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment. SECTION 4. MISCELLANEOUS. 4.1. The Borrower and certain of its Subsidiaries have heretofore executed and delivered to the Agent and the Lenders certain of the Collateral Documents. The Borrower hereby acknowledges and agrees that, notwithstanding the execution and delivery of this Amendment, the Collateral Documents remain in full force and effect and the rights and remedies of the Agent and the Lenders thereunder, the obligations of the Borrower and its Subsidiaries thereunder, and the liens and security interests created and provided for thereunder remain in full force and effect and shall not be affected, impaired, or discharged hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Collateral Documents as to the indebtedness which would be secured thereby prior to giving effect to this Amendment. 4.2. Except as specifically amended herein or waived hereby, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby. 4.3. The Borrower agrees to pay all reasonable out-of-pocket costs and expenses incurred by the Agent and the Lenders in connection with the preparation, execution and delivery of this Amendment and the documents and transactions contemplated hereby, including the reasonable fees and expenses of counsel for the Agent with respect to the foregoing. 4.4. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. [SIGNATURE PAGES TO FOLLOW] -4- This Second Amendment to Second Amended and Restated Credit Agreement is entered into by the parties hereto as of the date and year first above written. MORTON INDUSTRIAL GROUP, INC. By /s/ Rodney B. Harrison Name Rodney B. Harrison -------------------------------- Title VP of Finance ------------------------------- Accepted and agreed to: HARRIS TRUST AND SAVINGS BANK By /s/ Lee A. Vandermyde Name Lee A. Vandermyde -------------------------------- Title Managing Director ------------------------------- NATIONAL CITY BANK OF THE MIDWEST By /s/ Michael A. Zeller Name Michael A. Zeller -------------------------------- Title Vice President ------------------------------- JPMORGAN CHASE BANK, N.A. (formerly known as Bank One, N.A.) By /s/ James M. Corkery Name James M. Corkery -------------------------------- Title First VP ------------------------------- -5- GUARANTORS' ACKNOWLEDGEMENT AND CONSENT Each of the undersigned hereby acknowledges and agrees that it is a Guarantor under the terms of Section 11 of the Credit Agreement and, as such, has executed and delivered certain Collateral Documents pursuant to the Credit Agreement. The undersigned hereby consent to the Second Amendment to Second Amended and Restated Credit Agreement as set forth above and agree to the terms thereof, and the undersigned hereby confirm that their guaranties and the Collateral Documents executed by them, and all of the obligations of the undersigned thereunder, remain in full force and effect. The undersigned further agree that the consent of the undersigned to any further amendments to the Credit Agreement shall not be required as a result of this consent having been obtained. The undersigned acknowledge the Lenders are relying on this acknowledgement and consent in entering into the Second Amendment to Second Amended and Restated Credit Agreement with the Borrower. MORTON METALCRAFT CO. By /s/ Daryl R. Lindemann Name Daryl R. Lindemann -------------------------------- Title Vice President ------------------------------- MORTON METALCRAFT CO. OF NORTH CAROLINA By /s/ Daryl R. Lindemann Name Daryl R. Lindemann -------------------------------- Title Vice President ------------------------------- MORTON METALCRAFT CO. OF SOUTH CAROLINA By /s/ Daryl R. Lindemann Name Daryl R. Lindemann -------------------------------- Title Vice President ------------------------------- MID CENTRAL PLASTICS, INC. By /s/ Daryl R. Lindemann Name Daryl R. Lindemann -------------------------------- Title Vice President ------------------------------- B&W METAL FABRICATORS, INC. By /s/ Daryl R. Lindemann Name Daryl R. Lindemann -------------------------------- Title Vice President ------------------------------- -2- EXHIBIT H MORTON INDUSTRIAL GROUP, INC. BORROWING BASE CERTIFICATE To: Harris Trust and Savings Bank, as Agent under, and the Lenders party to, the Credit Agreement described below. Pursuant to the terms of the Credit Agreement dated as of March 26, 2004, among us (as extended, renewed, amended or restated from time to time, the "Credit Agreement"), we submit this Borrowing Base Certificate to you and certify that the information set forth below and on any attachments to this Certificate is true, correct and complete as of the date of this Certificate. A. ACCOUNTS RECEIVABLE IN BORROWING BASE 1. Gross accounts receivable ___________ Less (a) Ineligible sales ___________ (b) Owed by an account debtor who is an ___________ Affiliate (c) Owed by an account debtor who is in an ___________ insolvency or reorganization proceeding (d) Credits/allowances ___________ (e) Unpaid more than 90 days from due date ___________ (f) Ineligible terms (e.g., due date more than ___________ 60 days from invoice date) (g) 25% taint factor ___________ (h) Otherwise ineligible ___________ 2. Total Deductions (sum of lines A1a - A1h) ___________ 3. Eligible accounts receivable (line A1 minus ___________ line A2) 4. Eligible accounts receivable in Borrowing ___________ Base (line A3 x .85) 5. Deere/Caterpillar Reserve Amount ___________ 6. Net Borrowing Base value of accounts ___________ receivable (line A4 minus line A5) B. INVENTORY IN BORROWING BASE 1. Gross inventory of Finished Goods and Raw ___________ Materials 2. Less (a) Finished Goods and Raw Materials not ___________ located at approved locations (b) Obsolete, slow moving, or not ___________ merchantable (c) Otherwise ineligible ___________ 2. Total Deductions (sum of lines B2a - B2c ___________ above) 3. Eligible Inventory (line B1 minus line B2) ___________ 4. Eligible Inventory in Borrowing Base before ___________ cap (line B3 x .60) 5. Inventory cap ($13,000,000) ___________ 6. Eligible Inventory in Borrowing Base (lesser ___________ of line B4 or line B5) C. TOTAL BORROWING BASE 1. Line A6 ___________ 2. Line B6(1) ___________ 3. Sum of Lines C1 and C2 ___________ 4. General reserve ___________ 5. Line C3 minus Line C4 (Borrowing Base) ___________ D. REVOLVING CREDIT ADVANCES 1. Loans ___________ - --------------------- (1) If Line B6 would otherwise exceed 60% of the total Borrowing Base, insert the largest amount which would not exceed 60% of the total Borrowing Base as shown on Line C5 (as recomputed including such smaller amount on Line C2). -2- 2. Letters of Credit ___________ 3. Total Outstandings (line D1 plus D2) ___________ E. AVAILABLE BORROWING BASE COLLATERAL (line C5 minus line D3) ___________ Dated as of this ______ day of __________________. MORTON INDUSTRIAL GROUP, INC. By Name -------------------------------- Title ------------------------------- -3- EX-10.61 3 c96683a1exv10w61.txt FIRST AMENDMENT TO AMENDED AND RESTATED NOTE AND WARRANT PURCHASE AGREEMENT EXHIBIT 10.61 FIRST AMENDMENT TO AMENDED AND RESTATED NOTE AND WARRANT PURCHASE AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED NOTE AND WARRANT PURCHASE AGREEMENT is made and entered into as of February 8, 2005 (this "Amendment"), by and among Harris Nesbitt Capital, Inc. (f/k/a BMO Nesbitt Burns Capital (U.S.), Inc.), a Delaware corporation ("HNC" or, in its capacity as agent, "Agent"), BMO Nesbitt Burns Employee Co-Investment Fund I (U.S.) L.P., a Delaware limited partnership ("U.S. Fund"), BMO Nesbitt Burns Employee Co-Investment Fund Trust, an Ontario trust ("Canada Trust"), JZ Equity Partners PLC, a company formed under the laws of England and Wales, ("Jordan"), Prism Mezzanine Fund SBIC, L.P., a Delaware limited partnership ("Prism" and, together with HNC, U.S. Fund, Canada Trust and Jordan, the "Purchasers"), Morton Industrial Group, Inc., a Georgia corporation (the "Company"), and each of the Subsidiaries of the Company executing a signature page hereto, as a Guarantor. WHEREAS, Agent, the Purchasers and certain other parties entered into that certain Amended and Restated Note and Warrant Purchase Agreement dated as of June 23, 2004 (as amended, modified or restated from time to time, the "Purchase Agreement"); WHEREAS, the Company has requested that the Agent and the Purchasers amend certain provisions of the Purchase Agreement; and WHEREAS, the parties hereto have agreed to so amend the Purchase Agreement in accordance with the terms of this Amendment. NOW, THEREFORE, in consideration of the premises set forth above and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned parties agree as follows: 1. Incorporation of the Agreement. All capitalized terms which are not defined herein shall have the same meanings as set forth in the Purchase Agreement. Except as specifically set forth herein, the Purchase Agreement shall remain in full force and effect and its provisions shall be binding on the parties hereto. All references to "this Agreement" and similar terms in the Purchase Agreement shall mean the Purchase Agreement as amended by this Agreement. 2. Amendment of the Agreement. The Purchase Agreement is hereby amended as follows: (a) The definition of "Borrowing Base" contained in Section 5.1 of the Purchase Agreement is hereby amended and restated to read in its entirety as follows: "BORROWING BASE" shall have the meaning given such term in the Senior Credit Agreement as amended on or about February 8, 2005. (b) Section 8.10 of the Purchase Agreement is hereby amended by deleting the amount "$5,280,000" for Fiscal Year 2004 and replacing it with the amount "$5,400,000". 3. Conditions of Effectiveness. Upon the satisfaction of all of the following conditions precedent, this Amendment shall be, and is hereby agreed to by the parties hereto to be, effective from and after December 31, 2004: (a) the Borrower, the Agent, the Lenders and the Guarantors shall have executed and delivered this Amendment; (b) the Agent shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Agent or its counsel may reasonably request; (c) legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Agent and its counsel; (d) the Agent shall have received a certified copy of an amendment to the Senior Credit Agreement which shall be in form and substance acceptable to the Agent; (e) the representations and warranties of the Company contained in Section 4 of this Amendment shall be true and correct in all material respects as of the date hereof and as of the effective date of this Amendment; and (f) the Company shall have paid the Agent a fee for its account and the account of the Purchasers in the amount of $25,000. 4. Representations, Warranties and Covenants of the Company. The Company hereby represents, warrants and covenants as follows: (a) this Amendment has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed by the Company and constitutes the legal, valid and binding obligation of the Company, and is enforceable against the Company in accordance with its terms; (b) upon the effectiveness of this Amendment, the Company hereby reaffirms that all covenants, representations and warranties made in the Purchase Agreement and the other Operative Documents, to the extent that the same are not amended hereby, are true and complete in all material respects as if remade as of the effective date of this Amendment (except to the extent stated to relate to a specific earlier date, in which case such representations, warranties and covenants are true and correct as of such earlier date); and (c) no Event of Default exists under the Purchase Agreement. 5. Reference to the Effect on the Purchase Agreement. (a) Upon the effectiveness of this Amendment, on and after the date of this Amendment, each reference in the Purchase Agreement to "this Agreement," "hereunder," 2 "hereof," "herein" or words of like import shall mean and be a reference to the Agreement as amended hereby (except that for all purposes, the "date hereof" and words of similar import shall mean June 23, 2004). (b) Except as specifically modified above, the Purchase Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect, and are hereby ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Purchasers, nor constitute a waiver of any provision of the Purchase Agreement or any other documents, instruments or agreements executed and/or delivered in connection therewith (except as expressly set forth herein). Nothing herein shall constitute a waiver by the Agent or the Purchasers of any existing or hereafter arising Event of Default nor shall the Agent's and the Purchasers' execution and delivery of this Amendment establish a course of dealing among the Agent, the Purchasers, the Company or any other obligor or in any other way obligate the Agent or any of the Purchasers to provide hereafter any further consents, waivers or modifications with respect to the Purchase Agreement. 6. Collateral Documents. The Company may have herewith and heretofore executed and delivered to the Agent, on behalf of the Purchasers, certain Operative Documents, and the Company hereby acknowledges and agrees that, notwithstanding the execution and delivery of this Amendment, the Operative Documents remain in full force and effect and the rights and remedies of the Agent and the Purchasers thereunder, the obligations of the Company thereunder and the liens and security interests created and provided for thereunder remain in full force and effect and shall not be affected, impaired or discharged hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for in the Operative Documents as to the indebtedness which would be secured thereby prior to giving effect to this Amendment. 7. Expenses. The Company agrees to pay on demand all costs and expenses of or incurred by the Agent and the Purchasers in connection with the negotiation, preparation, execution and delivery of this Amendment and the other instruments and documents executed and delivered in connection with the transactions described herein (including the filing or recording thereof), including the fees and expenses of counsel for the Agent and the Purchasers. 8. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of law provisions) of the State of Illinois. 9. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 10. Counterparts; Telefacsimile. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery 3 of an executed counterpart of this Amendment by telefacsimile shall be equally as effective as delivery of a manually executed counterpart of this Amendment. Any party delivering an executed counterpart of this Amendment by telefacsimile shall also deliver a manually executed counterpart of this Amendment, but the failure to deliver a manually executed counterpart shall not affect the validity, enforceability, and binding effect of this Amendment. 11. No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Amendment and the Purchase Agreement. In the event an ambiguity or question of intent or interpretation arises, this Amendment and the Purchase Agreement as hereby amended shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Amendment or the Purchase Agreement. 12. Effectuation. The amendments to the Purchase Agreement contemplated by this Amendment shall be deemed effective immediately upon the full execution of this Amendment and without any further action required by the parties hereto. There are no conditions precedent or subsequent to the effectiveness of this Amendment. 13. Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. One or more counterparts of this Amendment may be delivered by facsimile, with the intention that delivery by such means shall have the same effect as delivery of an original counterpart thereof. [SIGNATURE PAGE FOLLOWS] 4 SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED NOTE AND WARRANT PURCHASE AGREEMENT IN WITNESS WHEREOF, the undersigned parties have executed this First Amendment to Amended and Restated Note and Warrant Purchase Agreement as of the day and year first above written. HARRIS NESBITT CAPITAL, INC. (f/k/a BMO NESBITT BURNS CAPITAL (U.S.), INC.), individually and as Agent By: /s/ Douglas P. Sutton ---------------------------------- Name: Douglas P. Sutton ---------------------------------- Its: Managing Director ---------------------------------- BMO NESBITT BURNS EMPLOYEE CO-INVESTMENT FUND I (U.S.) L.P. By: /s/ Douglas P. Sutton ---------------------------------- Name: Douglas P. Sutton ---------------------------------- Its: Managing Director ---------------------------------- BMO NESBITT BURNS EMPLOYEE CO-INVESTMENT FUND TRUST By: /s/ Douglas P. Sutton ---------------------------------- Name: Douglas P. Sutton ---------------------------------- Its: Managing Director ---------------------------------- JZ EQUITY PARTNERS PLC By: /s/ David W. Zalaznick ---------------------------------- Name: David W. Zalaznick ---------------------------------- Its: Investment Advisor ---------------------------------- PRISM MEZZANINE FUND SBIC, L.P. By: /s/ Blaine A. Crissman ---------------------------------- Name: Blaine A. Crissman ---------------------------------- Its: Partner ---------------------------------- MORTON INDUSTRIAL GROUP, INC. By: /s/ Rodney B. Harrison ---------------------------------- Name: Rodney B. Harrison ---------------------------------- Its: VP of Finance ---------------------------------- SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED NOTE AND WARRANT PURCHASE AGREEMENT (CONT'D) MORTON METALCRAFT CO. By: /s/ Daryl R. Lindemann ---------------------------------- Name: Daryl R. Lindemann ---------------------------------- Its: Vice President ---------------------------------- MORTON METALCRAFT CO. OF NORTH CAROLINA By: /s/ Daryl R. Lindemann ---------------------------------- Name: Daryl R. Lindemann ---------------------------------- Its: Vice President ---------------------------------- MORTON METALCRAFT CO. OF SOUTH CAROLINA By: /s/ Daryl R. Lindemann ---------------------------------- Name: Daryl R. Lindemann ---------------------------------- Its: Vice President ---------------------------------- MID CENTRAL PLASTICS, INC. By: /s/ Daryl R. Lindemann ---------------------------------- Name: Daryl R. Lindemann ---------------------------------- Its: Vice President ---------------------------------- B&W METAL FABRICATORS, INC. By: /s/ Daryl R. Lindemann ---------------------------------- Name: Daryl R. Lindemann ---------------------------------- Its: Vice President ---------------------------------- EX-13 4 c96683a1exv13.txt ANNUAL REPORT (MORTON LOGO) 2004 Morton Industrial Group, Inc. Annual Report The Construction, Agricultural, and Commercial capital goods industries served by Morton Metalcraft Co. strengthened significantly in 2004 and are projected to be even stronger in 2005. Our continued internal operating focus, using 6 Sigma methodologies, has allowed us to efficiently add the necessary capacity to respond to our improved customer order board. We celebrate with our customers the positive economic environment and look forward to the benefit they and our shareholders will have as a result of it. CELEBRATE 04 (PHOTOS) 1 Optimistic Economic Outlook MORTON INDUSTRIAL GROUP, INC. OPERATES MORTON METALCRAFT CO., A HIGHLY RESPECTED CONTRACT FABRICATION SUPPLIER WHO HAS SIGNIFICANT RELATIONSHIPS WITH A DIVERSE GROUP OF INDUSTRIAL ORIGINAL EQUIPMENT MANUFACTURERS. 2004 WAS AN IMPROVED YEAR for the U.S. Economy, American Industry and Morton Metalcraft Co. Our prestigious Customers who serve the Construction, Agricultural and Commercial capital goods industries experienced very strong demand throughout 2004 that is continuing into 2005. This dramatic improvement occurred at the end of a long manufacturing constriction which ended abruptly. It resulted, in our judgment, primarily from our nation's quick and responsive reaction to the terrorism acts of 9-11, the stimulus created by the Bush Administration tax cuts and favorable monetary policy by the Federal Reserve. The convergence of these economic events resulted in not just improved demand, but dramatically improved demand. Customer order requirements across the industry were up on the average 25% with some product segments exceeding 50%. We had clearly entered a New Business Environment which created a different set of challenges for us in 2004. KEY CHALLENGES OF 2004 Morton Metalcraft Co. employees spent the first half of 2004 attempting to expand capacity fast enough to meet our Customers' increased assembly line requirements. During this period we added manpower, machines and materials in support of these new production schedules. MANPOWER--We hired and trained nearly 350 new direct and indirect employees. MACHINES--We purchased over 20 major pieces of manufacturing equipment. MATERIALS--We increased the flow of cosmetically sensitive sheet steel from a strained industry. By midyear 2004, we had essentially caught up to our increased customer demand. That effort during Q1 and Q2, however, caused us to carry additional expense, sacrificing short-term earnings to secure longer-term customer satisfaction. A more normal business environment then began to emerge in Q3 and then stabilized in Q4. With sufficient capacity now in place, we expect 2005 to produce improved performance for our Customers and ongoing stable financial results for the Company. Morton Metalcraft Co. remains committed to the use of 6 Sigma methodologies which continues to improve efficiencies throughout the Company. OUTLOOK FOR 2005 Most industry experts suggest that in 2005 the Construction, Agricultural and Commercial capital good industries will remain strong. This strengthened environment and the flexibility provided by our new capital structure positions us well for the future. As a member of American Industry, we must now return to addressing the longer term threat of global competitiveness. We believe there are many challenges facing the Construction, Agricultural and Commercial original equipment manufacturers and the respective members of the supply network that is serving them. But we also know that only a few very prepared companies will be able to respond to these challenges and meet them successfully. We intend to be one of them. What will separate us in the future will be our ability to intensively focus on significantly improving our manufacturing flexibility while achieving even higher Quality performance standards for our industry. TO OUR SHAREHOLDERS, EMPLOYEES, CUSTOMERS AND SUPPLIERS (PHOTO OF WILLIAM D MORTON) William D. Morton Chairman, Chief Executive Officer and President IN CONCLUSION This year validated again that the undying resolve of our valued Employees, in seeking to meet our Customers' changing needs, is what makes us a very special Company. And that is why we feel we are well positioned to respond to the emerging opportunities which appear to be available to us now and in the years to come. Thank you all for your efforts in 2004 and your continued commitment to Morton Metalcraft Co. during 2005 and beyond. /s/ WILLIAM D. MORTON MORTON METALCRAFT CO. is a manufacturer of highly engineered components and sub-assemblies for industrial original equipment manufacturers. Our products include metal fabrications and assemblies for a broad range of industry segments, which include the Construction, Agricultural and Commercial capital goods industries. OUR superior competitive strengths have resulted in strong, focused relationships with our prestigious customer base. Our five manufacturing facilities are strategically located in the Midwestern and Southeastern United States in close proximity to our customers' manufacturing and assembly facilities. Our principal customers include Carrier Corporation, Caterpillar Inc., Deere & Co., Hallmark Cards, Kubota Corporation and Winnebago Industries, Inc. STRATEGIC 3 Locations Midwest Operations (PHOTO OF 1021 W. BIRCHWOOD (PHOTO OF 400 DETROIT (ILLINOIS MAP) STREET LOCATION) AVENUE LOCATION) 1021 W. Birchwood Street 400 Detroit Avenue Morton, Illinois 61550 Morton, Illinois 61550 309.266.7176 309.263.3299 Fax: 309.263.1866 Fax: 309.263.1854 534 Corbin Road 835 Salem Road 2080 E. Williams Street Honea Path, South Carolina 29654 Welcome, North Carolina 27374 Apex, North Carolina 27502 SOUTHEAST OPERATIONS 864.369.1800 336.731.5700 919.363.1630 (NORTH CAROLINA MAP) Fax: 864.369.9022 Fax 336.731.8005 Fax 919.363.1103 (PHOTO OF 534 CORBIN ROAD LOCATION) (PHOTO OF 835 SALEM ROAD (PHOTO OF 2080 E. WILLIAMS LOCATION) STREET LOCATION) BOARD OF DIRECTORS William D. Morton 57, serves as Chairman, Chief Executive Officer and President of Morton Industrial Group, Inc. and Morton Metalcraft Co. Mr. Morton became a director of Morton Metalcraft Co. in 1989 and upon conclusion of its merger into Morton Industrial Group, Inc. in 1998, a Morton Industrial Group, Inc. director. Fred W. Broling 69, retired as Chairman of the Board and Chief Executive Officer of US Precision Glass Company in 2002. Mr. Broling became a director of Morton Metalcraft Co. in 1989, and upon conclusion of its merger into Morton Industrial Group, Inc. in 1998, a Morton Industrial Group, Inc. director. He is a member of the Compensation and Stock Option Committee and of the Audit Committee of the Board. Mark W. Mealy 47, is a private investor and serves as the Lead Independent Director for Morton Industrial Group, Inc. Mr. Mealy was formerly Managing Director and Group Head of Mergers and Acquisitions at Wachovia Securities. Mr. Mealy became a director of Morton Metalcraft Co. in 1995 and upon conclusion of its merger into Morton Industrial Group, Inc. in 1998, a Morton Industrial Group, Inc. director. He is a member of the Compensation and Stock Option Committee and of the Audit Committee of the Board. EXPERIENCE 5 Board of Directors and Management Team MANAGEMENT TEAM Brian R. Doolittle Brian L. Geiger Rodney B. Harrison Senior Vice President, Senior Vice President, Vice President, Sales & Engineering Operations Finance Morton Metalcraft Co. Morton Metalcraft Co. Treasurer Morton Industrial Group, Inc. Daryl R. Lindemann William D. Morton Senior Vice President, Chairman, Finance Chief Executive Officer, Morton Metalcraft Co. President Chief Financial Officer Morton Metalcraft Co. and Secretary Morton Industrial Group, Inc. Morton Industrial Group, Inc. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES REFORM LITIGATION 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 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; THE AVAILABILITY OF WORKING CAPITAL; 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. CORPORATE OFFICES INVESTOR RELATIONS All of the Company Morton Industrial Group, Inc. Shareholders and prospective SEC Filings can 1021 W. Birchwood Street investors are welcome to call be viewed from the Morton, Illinois 61550 or write with questions or Company's website Phone: 309.266.7176 requests for additional www.mortongroup.com Fax: 309.263.1866 information. Please direct and "clicking" SEC inquiries to: Offsite Filings. STOCK LISTING The common stock of Morton Van Negris & Company Industrial Group, Inc. is 570 Lexington Ave. quoted on the OTC Market 15th Floor (OTC:MGRP). New York, New York 10022 Phone: 212.759.0290 ANNUAL MEETING Fax: 212.759.9184 The Annual Meeting of the Email: info@vnegris.com Shareholders of Morton Industrial Group, Inc. will be INDEPENDENT REGISTERED held at The Siena Hotel PUBLIC ACCOUNTING FIRM located at 1505 E. Franklin KPMG LLP Street, Chapel Hill, NC on Indianapolis, Indiana Tuesday, June 7, 2005 at 10:00 a.m. (EDT). COUNSEL Shareholder Husch & Eppenberger LLC Information STOCK TRANSFER AGENT Peoria, Illinois AND REGISTRAR For inquiries about stock ANNUAL REPORT ON transfers or address changes, FORM 10-K Shareholders may contact: Additional copies of this Annual Report and the American Stock Annual Report on Form 10-K Transfer & Trust Co. may be obtained without 59 Maiden Lane charge by writing to the New York, New York 10007 Company at the address Phone: 800.937.5449 listed above. These reports are also available to the public on request as required by the Securities and Exchange Commission (SEC). These statements have not been reviewed or confirmed for accuracy or relevance by the SEC. (MORTON LOGO) www.mortongroup.com 1021 W. Birchwood Street Morton, Illinois 61550 Phone: 309.266.7176 Fax: 309.263.1866 (C) 2005 Morton Industrial Group, Inc. EX-21.1 5 c96683a1exv21w1.htm SUBSIDIARIES OF REGISTRANT

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

At December 31, 2004, the Company had five directly wholly owned subsidiaries:

Morton Metalcraft Co., an Illinois corporation
Morton Metalcraft Co., of North Carolina, a North Carolina corporation
B & W Metal Fabricators, Inc., a North Carolina corporation
Mid-Central Plastics, Inc., an Iowa corporation (operations sold June, 2003)
Morton Metalcraft Co. of South Carolina, a South Carolina corporation

EX-10.60

                                                                   EXHIBIT 10.60


        SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

         This Second Amendment to Second Amended and Restated Credit Agreement
(herein, the "Amendment") is made as of February 8, 2005, by and among Morton
Industrial Group, Inc., a Georgia corporation (the "Borrower"), the Lenders
party to the Credit Agreement hereinafter identified and defined, and Harris
Trust and Savings Bank, as Agent for the Lenders (in such capacity, the
"Agent").


                                    RECITALS

         A. The Lenders currently extend credit to the Borrower on the terms and
conditions set forth in that certain Second Amended and Restated Credit
Agreement dated as of March 26, 2004, as amended, by and among the Borrower, the
Guarantors, the Lenders and the Agent (the "Credit Agreement"). All capitalized
terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.

         B. The Borrower has requested that the Lenders amend certain provisions
of the Borrowing Base and certain financial covenants set forth in the Credit
Agreement, and the Lenders are willing to do so on the terms and conditions set
forth in this Agreement.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.     AMENDMENTS.

         Subject to the satisfaction of the conditions precedent set forth in,
and effective from and after the date specifically set forth in, Section 2
below, the Credit Agreement shall be and hereby is amended as follows:

         1.1. The definition of "Borrowing Base" set forth in Section 5.1 of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

                    "Borrowing Base" means, as of any time it is to be
              determined, the sum of:

                    (a) 85% of the then net book value of Eligible Accounts
              (computed using the method of receivables valuation applied by the
              Borrower in accordance with GAAP which reflects such value as the
              net book value of its receivables, except that net book value for
              such purposes shall not reflect any reserve for accounts more than
              ninety days past due that have already been excluded from gross
              accounts in computing such Eligible Accounts) less such other
              reserves for uncollectibility, location of account debtor, contras
              and other matters as the Agent or Required Lenders in good




              faith shall from time to time reasonably deem appropriate to
              adjust such net book value; plus

                    (b) the lesser of (x) $13,000,000 and (y) 60% of the value
              (computed at its cost using the method of inventory valuation
              applied by the Borrower in accordance with GAAP which reflects
              such cost on the Borrower's books as its net book value, but in
              any event after reducing such value as so computed by the
              aggregate amount of all reserves for obsolescence, slow-moving
              items, shrinkage and all such other matters as the Agent or
              Required Lenders in good faith shall from time to time reasonably
              deem appropriate to adjust such net book value) of Eligible
              Inventory, provided that, in no event shall the amount computed
              pursuant to this clause (b) exceed 60% of the Borrowing Base;
              minus

                    (c) a general reserve in the amount of $500,000;

              provided that (A) the Borrowing Base shall be computed only as
              against and on so much of the Collateral as is included on the
              certificates to be furnished from time to time by the Borrower
              pursuant to Section 8.5(f) hereof and, if required by the Agent
              pursuant to any of the terms hereof or any Collateral Document, as
              verified by such other evidence required to be furnished to the
              Agent pursuant hereto or pursuant to any such Collateral Document,
              and (B) the Agent shall have the right to adjust the advance rates
              against Eligible Receivables and Eligible Inventory based solely
              on the commercially reasonable exercise of its credit judgment
              based on the results of any field audit of any Collateral which
              reasonably supports any such adjustment and the Agent shall notify
              the Borrower of any such adjustment to the advance rates promptly
              following such adjustment.

              Notwithstanding any other provision of this definition of
              "Borrowing Base" to the contrary: (i) the amount of Eligible
              Accounts otherwise included in the Borrowing Base shall be
              reduced, dollar for dollar, by a reserve equal to the greater of
              (a) the amount (if any) by which (x) the aggregate amount of
              accounts payable owing by the Borrower and its Subsidiaries to
              Deere and Caterpillar together and their respective Affiliates for
              inventory and supplies purchased (the "Deere/Caterpillar
              Payables") at any time exceeds (y) $8,000,000 or (b) the sum of
              (A) the amount (if any) by which (x) the aggregate amount of
              accounts payable owing by the Borrower and its Subsidiaries to
              Deere and its Affiliates for inventory and supplies purchased (the
              "Deere Payables") at any time exceeds (y) $5,000,000 and (B) the
              amount (if any) by which (x) the aggregate amount of accounts
              payable owing by the


                                      -2-


              Borrower and its Subsidiaries to Caterpillar and its Affiliates
              for inventory and supplies purchased (the "Caterpillar Payables")
              at any time exceeds (y) $4,000,000; (ii) no reserve will be
              imposed in computing the Borrowing Base as of any time solely in
              respect of the Deere/Caterpillar Payables, Deere Payables or
              Caterpillar Payables to the extent the same do not exceed such
              respective limits; and (iii) the Agent and the Required Lenders
              shall have the right to impose reserves for other matters arising
              in connection with receivables owing by Deere and Caterpillar and
              to otherwise impose reserves in accordance with the Credit
              Agreement.

         1.2. Section 8.10 of the Credit Agreement is hereby amended by (i)
deleting the amount "$4,800,000" for fiscal year 2004 and replacing it with the
amount "$5,400,000," and (ii) deleting the amount "$5,200,000" for fiscal year
2005 and replacing it with the amount "$5,500,000."

         1.3. Section 8.14(b) of the Credit Agreement is hereby amended by
deleting the amount "$7,800,000" for the fiscal year 2005 and replacing it with
the amount "$8,000,000."

         1.4. Exhibit H to the Credit Agreement is hereby amended and restated
to read in its entirety as set forth on the revised Exhibit H attached hereto.

SECTION 2.     CONDITIONS PRECEDENT.

         Upon the satisfaction of all the following conditions precedent, this
Amendment shall be, and is hereby agreed to by the parties hereto to be,
effective from and after December 31, 2004:

         2.1. The Borrower, the Agent, the Lenders and the Guarantors shall have
executed and delivered this Amendment.

         2.2. The Agent shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in connection
with the execution and delivery of this Amendment to the extent the Agent or its
counsel may reasonably request.

         2.3. Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Agent and its counsel.

         2.4. The Agent shall have received a certified copy of an amendment to
the Note Purchase Agreement increasing the capital expenditures limitation
covenant to an amount not less than $5,400,000 for fiscal year 2004 and which
shall be in form and substance acceptable to the Agent.


                                      -3-


SECTION 3.     REPRESENTATIONS.

         In order to induce the Lenders to execute and deliver this Amendment,
the Borrower hereby represents to the Lenders that as of the date hereof, and
after giving effect to this Amendment, (a) the representations and warranties
set forth in Section 6 of the Credit Agreement are and shall be and remain true
and correct in all material respects (except that for purposes of this paragraph
the representations contained in Section 6.5 shall be deemed to refer to the
most recent financial statements of the Borrower delivered to the Lenders) and
(b) the Borrower is in full compliance with all of the terms and conditions of
the Credit Agreement after giving effect to this Amendment and no Default or
Event of Default has occurred and is continuing under the Credit Agreement or
shall result after giving effect to this Amendment.

SECTION 4.     MISCELLANEOUS.

         4.1. The Borrower and certain of its Subsidiaries have heretofore
executed and delivered to the Agent and the Lenders certain of the Collateral
Documents. The Borrower hereby acknowledges and agrees that, notwithstanding the
execution and delivery of this Amendment, the Collateral Documents remain in
full force and effect and the rights and remedies of the Agent and the Lenders
thereunder, the obligations of the Borrower and its Subsidiaries thereunder, and
the liens and security interests created and provided for thereunder remain in
full force and effect and shall not be affected, impaired, or discharged hereby.
Nothing herein contained shall in any manner affect or impair the priority of
the liens and security interests created and provided for by the Collateral
Documents as to the indebtedness which would be secured thereby prior to giving
effect to this Amendment.

         4.2. Except as specifically amended herein or waived hereby, the Credit
Agreement shall continue in full force and effect in accordance with its
original terms. Reference to this specific Amendment need not be made in the
Credit Agreement, the Notes, or any other instrument or document executed in
connection therewith, or in any certificate, letter or communication issued or
made pursuant to or with respect to the Credit Agreement, any reference in any
of such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.

         4.3. The Borrower agrees to pay all reasonable out-of-pocket costs and
expenses incurred by the Agent and the Lenders in connection with the
preparation, execution and delivery of this Amendment and the documents and
transactions contemplated hereby, including the reasonable fees and expenses of
counsel for the Agent with respect to the foregoing.

         4.4. This Amendment may be executed in any number of counterparts, and
by the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.


                           [SIGNATURE PAGES TO FOLLOW]



                                      -4-



         This Second Amendment to Second Amended and Restated Credit Agreement
is entered into by the parties hereto as of the date and year first above
written.

                                        MORTON INDUSTRIAL GROUP, INC.


                                        By /s/ Rodney B. Harrison
                                           Name   Rodney B. Harrison
                                                --------------------------------
                                           Title  VP of Finance
                                                 -------------------------------

                                        Accepted and agreed to:

                                        HARRIS TRUST AND SAVINGS BANK


                                        By  /s/ Lee A. Vandermyde
                                           Name   Lee A. Vandermyde
                                                --------------------------------
                                           Title  Managing Director
                                                 -------------------------------

                                        NATIONAL CITY BANK OF THE MIDWEST


                                        By  /s/ Michael A. Zeller
                                           Name   Michael A. Zeller
                                                --------------------------------
                                           Title  Vice President
                                                 -------------------------------

                                        JPMORGAN CHASE BANK, N.A. (formerly
                                          known as Bank One, N.A.)


                                        By  /s/ James M. Corkery
                                           Name   James M. Corkery
                                                --------------------------------
                                           Title  First VP
                                                 -------------------------------




                                      -5-



                     GUARANTORS' ACKNOWLEDGEMENT AND CONSENT

         Each of the undersigned hereby acknowledges and agrees that it is a
Guarantor under the terms of Section 11 of the Credit Agreement and, as such,
has executed and delivered certain Collateral Documents pursuant to the Credit
Agreement. The undersigned hereby consent to the Second Amendment to Second
Amended and Restated Credit Agreement as set forth above and agree to the terms
thereof, and the undersigned hereby confirm that their guaranties and the
Collateral Documents executed by them, and all of the obligations of the
undersigned thereunder, remain in full force and effect. The undersigned further
agree that the consent of the undersigned to any further amendments to the
Credit Agreement shall not be required as a result of this consent having been
obtained. The undersigned acknowledge the Lenders are relying on this
acknowledgement and consent in entering into the Second Amendment to Second
Amended and Restated Credit Agreement with the Borrower.

                                        MORTON METALCRAFT CO.


                                        By  /s/ Daryl R. Lindemann
                                           Name   Daryl R. Lindemann
                                                --------------------------------
                                           Title  Vice President
                                                 -------------------------------

                                        MORTON METALCRAFT CO. OF NORTH CAROLINA


                                        By  /s/ Daryl R. Lindemann
                                           Name   Daryl R. Lindemann
                                                --------------------------------
                                           Title  Vice President
                                                 -------------------------------


                                        MORTON METALCRAFT CO. OF SOUTH CAROLINA


                                        By  /s/ Daryl R. Lindemann
                                           Name   Daryl R. Lindemann
                                                --------------------------------
                                           Title  Vice President
                                                 -------------------------------

                                        MID CENTRAL PLASTICS, INC.


                                        By  /s/ Daryl R. Lindemann
                                           Name   Daryl R. Lindemann
                                                --------------------------------
                                           Title  Vice President
                                                 -------------------------------






                                        B&W METAL FABRICATORS, INC.

                                        By  /s/ Daryl R. Lindemann
                                           Name   Daryl R. Lindemann
                                                --------------------------------
                                           Title  Vice President
                                                 -------------------------------



                                      -2-



                                    EXHIBIT H


                          MORTON INDUSTRIAL GROUP, INC.


                           BORROWING BASE CERTIFICATE


To:  Harris Trust and Savings Bank, as
     Agent under, and the Lenders party
     to, the Credit Agreement described
     below.

     Pursuant to the terms of the Credit Agreement dated as of March 26, 2004,
among us (as extended, renewed, amended or restated from time to time, the
"Credit Agreement"), we submit this Borrowing Base Certificate to you and
certify that the information set forth below and on any attachments to this
Certificate is true, correct and complete as of the date of this Certificate.

A.   ACCOUNTS RECEIVABLE IN BORROWING BASE

     1.  Gross accounts receivable                                   ___________

         Less

         (a) Ineligible sales                           ___________

         (b) Owed by an account debtor who is an        ___________
             Affiliate

         (c) Owed by an account debtor who is in an     ___________
             insolvency or reorganization proceeding

         (d) Credits/allowances                         ___________

         (e) Unpaid more than 90 days from due date     ___________

         (f) Ineligible terms (e.g., due date more than ___________
             60 days from invoice date)

         (g) 25% taint factor                           ___________

         (h) Otherwise ineligible                       ___________

     2.  Total Deductions (sum of lines A1a - A1h)                   ___________

     3.  Eligible accounts receivable (line A1 minus                 ___________
         line A2)

     4.  Eligible accounts receivable in Borrowing                   ___________
         Base (line A3 x .85)

     5.  Deere/Caterpillar Reserve Amount                            ___________




     6.  Net Borrowing Base value of accounts                        ___________
         receivable (line A4 minus line A5)

B.   INVENTORY IN BORROWING BASE

     1.  Gross inventory of Finished Goods and Raw                   ___________
         Materials

     2.  Less

         (a) Finished Goods and Raw Materials not       ___________
             located at approved locations

         (b) Obsolete, slow moving, or not              ___________
             merchantable

         (c) Otherwise ineligible                       ___________

     2.  Total Deductions (sum of lines B2a - B2c                    ___________
         above)

     3.  Eligible Inventory (line B1 minus line B2)                  ___________

     4.  Eligible Inventory in Borrowing Base before                 ___________
         cap (line B3 x .60)

     5.  Inventory cap ($13,000,000)                                 ___________

     6.  Eligible Inventory in Borrowing Base (lesser                ___________
         of line B4 or line B5)

C.   TOTAL BORROWING BASE

     1.  Line A6                                        ___________

     2.  Line B6(1)                                     ___________

     3.  Sum of Lines C1 and C2                         ___________

     4.  General reserve                                ___________

     5.  Line C3 minus Line C4 (Borrowing Base)         ___________

D.   REVOLVING CREDIT ADVANCES

     1.  Loans                                          ___________


- ---------------------
(1)  If Line B6 would otherwise exceed 60% of the total Borrowing Base, insert
          the largest amount which would not exceed 60% of the total Borrowing
          Base as shown on Line C5 (as recomputed including such smaller amount
          on Line C2).


                                       -2-




     2.  Letters of Credit                              ___________

     3.  Total Outstandings (line D1 plus D2)                        ___________

E.   AVAILABLE BORROWING BASE COLLATERAL

         (line C5 minus line D3)                                     ___________

     Dated as of this ______ day of __________________.

                                        MORTON INDUSTRIAL GROUP, INC.


                                        By
                                           Name
                                                --------------------------------
                                           Title
                                                 -------------------------------


                                       -3-

EX-10.61

                                                                   EXHIBIT 10.61


                     FIRST AMENDMENT TO AMENDED AND RESTATED
                       NOTE AND WARRANT PURCHASE AGREEMENT


         THIS FIRST AMENDMENT TO AMENDED AND RESTATED NOTE AND WARRANT PURCHASE
AGREEMENT is made and entered into as of February 8, 2005 (this "Amendment"), by
and among Harris Nesbitt Capital, Inc. (f/k/a BMO Nesbitt Burns Capital (U.S.),
Inc.), a Delaware corporation ("HNC" or, in its capacity as agent, "Agent"), BMO
Nesbitt Burns Employee Co-Investment Fund I (U.S.) L.P., a Delaware limited
partnership ("U.S. Fund"), BMO Nesbitt Burns Employee Co-Investment Fund Trust,
an Ontario trust ("Canada Trust"), JZ Equity Partners PLC, a company formed
under the laws of England and Wales, ("Jordan"), Prism Mezzanine Fund SBIC,
L.P., a Delaware limited partnership ("Prism" and, together with HNC, U.S. Fund,
Canada Trust and Jordan, the "Purchasers"), Morton Industrial Group, Inc., a
Georgia corporation (the "Company"), and each of the Subsidiaries of the Company
executing a signature page hereto, as a Guarantor.

         WHEREAS, Agent, the Purchasers and certain other parties entered into
that certain Amended and Restated Note and Warrant Purchase Agreement dated as
of June 23, 2004 (as amended, modified or restated from time to time, the
"Purchase Agreement");

         WHEREAS, the Company has requested that the Agent and the Purchasers
amend certain provisions of the Purchase Agreement; and

         WHEREAS, the parties hereto have agreed to so amend the Purchase
Agreement in accordance with the terms of this Amendment.

         NOW, THEREFORE, in consideration of the premises set forth above and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the undersigned parties agree as follows:

     1.  Incorporation of the Agreement. All capitalized terms which are not
defined herein shall have the same meanings as set forth in the Purchase
Agreement. Except as specifically set forth herein, the Purchase Agreement shall
remain in full force and effect and its provisions shall be binding on the
parties hereto. All references to "this Agreement" and similar terms in the
Purchase Agreement shall mean the Purchase Agreement as amended by this
Agreement.

     2.  Amendment of the Agreement. The Purchase Agreement is hereby amended as
follows:

         (a)  The definition of "Borrowing Base" contained in Section 5.1 of the
Purchase Agreement is hereby amended and restated to read in its entirety as
follows:

              "BORROWING BASE" shall have the meaning given such term
         in the Senior Credit Agreement as amended on or about
         February 8, 2005.



         (b)  Section 8.10 of the Purchase Agreement is hereby amended by
deleting the amount "$5,280,000" for Fiscal Year 2004 and replacing it with the
amount "$5,400,000".

     3.  Conditions of Effectiveness. Upon the satisfaction of all of the
following conditions precedent, this Amendment shall be, and is hereby agreed to
by the parties hereto to be, effective from and after December 31, 2004:

         (a)  the Borrower, the Agent, the Lenders and the Guarantors shall have
executed and delivered this Amendment;

         (b)  the Agent shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in connection
with the execution and delivery of this Amendment to the extent the Agent or its
counsel may reasonably request;

         (c)  legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Agent and its counsel;

         (d)  the Agent shall have received a certified copy of an amendment to
the Senior Credit Agreement which shall be in form and substance acceptable to
the Agent;

         (e)  the representations and warranties of the Company contained in
Section 4 of this Amendment shall be true and correct in all material respects
as of the date hereof and as of the effective date of this Amendment; and

         (f)  the Company shall have paid the Agent a fee for its account and
the account of the Purchasers in the amount of $25,000.

     4.  Representations, Warranties and Covenants of the Company. The Company
hereby represents, warrants and covenants as follows:

         (a)  this Amendment has been duly authorized by all necessary corporate
action on the part of the Company, has been duly executed by the Company and
constitutes the legal, valid and binding obligation of the Company, and is
enforceable against the Company in accordance with its terms;

         (b)  upon the effectiveness of this Amendment, the Company hereby
reaffirms that all covenants, representations and warranties made in the
Purchase Agreement and the other Operative Documents, to the extent that the
same are not amended hereby, are true and complete in all material respects as
if remade as of the effective date of this Amendment (except to the extent
stated to relate to a specific earlier date, in which case such representations,
warranties and covenants are true and correct as of such earlier date); and

         (c)  no Event of Default exists under the Purchase Agreement.

     5.  Reference to the Effect on the Purchase Agreement.

         (a)  Upon the effectiveness of this Amendment, on and after the date of
this Amendment, each reference in the Purchase Agreement to "this Agreement,"
"hereunder,"


                                        2



"hereof," "herein" or words of like import shall mean and be a reference to the
Agreement as amended hereby (except that for all purposes, the "date hereof" and
words of similar import shall mean June 23, 2004).

         (b)  Except as specifically modified above, the Purchase Agreement and
all other documents, instruments and agreements executed and/or delivered in
connection therewith shall remain in full force and effect, and are hereby
ratified and confirmed.

         (c)  The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of the Agent or the
Purchasers, nor constitute a waiver of any provision of the Purchase Agreement
or any other documents, instruments or agreements executed and/or delivered in
connection therewith (except as expressly set forth herein). Nothing herein
shall constitute a waiver by the Agent or the Purchasers of any existing or
hereafter arising Event of Default nor shall the Agent's and the Purchasers'
execution and delivery of this Amendment establish a course of dealing among the
Agent, the Purchasers, the Company or any other obligor or in any other way
obligate the Agent or any of the Purchasers to provide hereafter any further
consents, waivers or modifications with respect to the Purchase Agreement.

     6.  Collateral Documents. The Company may have herewith and heretofore
executed and delivered to the Agent, on behalf of the Purchasers, certain
Operative Documents, and the Company hereby acknowledges and agrees that,
notwithstanding the execution and delivery of this Amendment, the Operative
Documents remain in full force and effect and the rights and remedies of the
Agent and the Purchasers thereunder, the obligations of the Company thereunder
and the liens and security interests created and provided for thereunder remain
in full force and effect and shall not be affected, impaired or discharged
hereby. Nothing herein contained shall in any manner affect or impair the
priority of the liens and security interests created and provided for in the
Operative Documents as to the indebtedness which would be secured thereby prior
to giving effect to this Amendment.

     7.  Expenses. The Company agrees to pay on demand all costs and expenses of
or incurred by the Agent and the Purchasers in connection with the negotiation,
preparation, execution and delivery of this Amendment and the other instruments
and documents executed and delivered in connection with the transactions
described herein (including the filing or recording thereof), including the fees
and expenses of counsel for the Agent and the Purchasers.

     8.  Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (as opposed to the conflict of law provisions)
of the State of Illinois.

     9.  Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

     10. Counterparts; Telefacsimile. This Amendment may be executed by one or
more of the parties to the Amendment on any number of separate counterparts, and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument. Delivery


                                       3


of an executed counterpart of this Amendment by telefacsimile shall be equally
as effective as delivery of a manually executed counterpart of this Amendment.
Any party delivering an executed counterpart of this Amendment by telefacsimile
shall also deliver a manually executed counterpart of this Amendment, but the
failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment.

     11. No Strict Construction. The parties hereto have participated jointly in
the negotiation and drafting of this Amendment and the Purchase Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Amendment and the Purchase Agreement as hereby amended shall be construed as if
drafted jointly by the parties hereto, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Amendment or the Purchase Agreement.

     12. Effectuation. The amendments to the Purchase Agreement contemplated by
this Amendment shall be deemed effective immediately upon the full execution of
this Amendment and without any further action required by the parties hereto.
There are no conditions precedent or subsequent to the effectiveness of this
Amendment.

     13. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. One or more counterparts
of this Amendment may be delivered by facsimile, with the intention that
delivery by such means shall have the same effect as delivery of an original
counterpart thereof.

                            [SIGNATURE PAGE FOLLOWS]




                                       4


            SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED
                       NOTE AND WARRANT PURCHASE AGREEMENT


         IN WITNESS WHEREOF, the undersigned parties have executed this First
Amendment to Amended and Restated Note and Warrant Purchase Agreement as of the
day and year first above written.

                                        HARRIS NESBITT CAPITAL, INC. (f/k/a BMO
                                        NESBITT BURNS CAPITAL (U.S.), INC.),
                                        individually and as Agent

                                        By:    /s/ Douglas P. Sutton
                                              ----------------------------------
                                        Name: Douglas P. Sutton
                                              ----------------------------------
                                        Its:  Managing Director
                                              ----------------------------------

                                        BMO NESBITT BURNS EMPLOYEE CO-INVESTMENT
                                        FUND I (U.S.) L.P.

                                        By:    /s/ Douglas P. Sutton
                                              ----------------------------------
                                        Name: Douglas P. Sutton
                                              ----------------------------------
                                        Its:  Managing Director
                                              ----------------------------------

                                        BMO NESBITT BURNS EMPLOYEE CO-INVESTMENT
                                        FUND TRUST

                                        By:    /s/ Douglas P. Sutton
                                              ----------------------------------
                                        Name: Douglas P. Sutton
                                              ----------------------------------
                                        Its:  Managing Director
                                              ----------------------------------

                                        JZ EQUITY PARTNERS PLC

                                        By:    /s/ David W. Zalaznick
                                              ----------------------------------
                                        Name: David W. Zalaznick
                                              ----------------------------------
                                        Its:  Investment Advisor
                                              ----------------------------------

                                        PRISM MEZZANINE FUND SBIC, L.P.

                                        By:    /s/ Blaine A. Crissman
                                              ----------------------------------
                                        Name: Blaine A. Crissman
                                              ----------------------------------
                                        Its:  Partner
                                              ----------------------------------

                                        MORTON INDUSTRIAL GROUP, INC.


                                        By:   /s/ Rodney B. Harrison
                                              ----------------------------------
                                        Name: Rodney B. Harrison
                                              ----------------------------------
                                        Its:  VP of Finance
                                              ----------------------------------





            SIGNATURE PAGE TO FIRST AMENDMENT TO AMENDED AND RESTATED
                       NOTE AND WARRANT PURCHASE AGREEMENT
                                    (CONT'D)

                                        MORTON METALCRAFT CO.

                                        By:   /s/ Daryl R. Lindemann
                                              ----------------------------------
                                        Name: Daryl R. Lindemann
                                              ----------------------------------
                                        Its:  Vice President
                                              ----------------------------------

                                        MORTON METALCRAFT CO. OF NORTH CAROLINA

                                        By:   /s/ Daryl R. Lindemann
                                              ----------------------------------
                                        Name: Daryl R. Lindemann
                                              ----------------------------------
                                        Its:  Vice President
                                              ----------------------------------


                                        MORTON METALCRAFT CO. OF SOUTH CAROLINA

                                        By:   /s/ Daryl R. Lindemann
                                              ----------------------------------
                                        Name: Daryl R. Lindemann
                                              ----------------------------------
                                        Its:  Vice President
                                              ----------------------------------

                                        MID CENTRAL PLASTICS, INC.

                                        By:   /s/ Daryl R. Lindemann
                                              ----------------------------------
                                        Name: Daryl R. Lindemann
                                              ----------------------------------
                                        Its:  Vice President
                                              ----------------------------------

                                        B&W METAL FABRICATORS, INC.

                                        By:   /s/ Daryl R. Lindemann
                                              ----------------------------------
                                        Name: Daryl R. Lindemann
                                              ----------------------------------
                                        Its:  Vice President
                                              ----------------------------------

EX-13

(MORTON LOGO)

                                      2004


Morton Industrial Group, Inc.
Annual Report







The Construction, Agricultural, and Commercial capital goods industries served
by Morton Metalcraft Co. strengthened significantly in 2004 and are projected to
be even stronger in 2005. Our continued internal operating focus, using 6 Sigma
methodologies, has allowed us to efficiently add the necessary capacity to
respond to our improved customer order board. We celebrate with our customers
the positive economic environment and look forward to the benefit they and our
shareholders will have as a result of it.

                                  CELEBRATE 04
                                   (PHOTOS)

1 Optimistic Economic Outlook

MORTON INDUSTRIAL GROUP, INC. OPERATES MORTON
METALCRAFT CO., A HIGHLY RESPECTED CONTRACT
FABRICATION SUPPLIER WHO HAS SIGNIFICANT
RELATIONSHIPS WITH A DIVERSE GROUP OF INDUSTRIAL
ORIGINAL EQUIPMENT MANUFACTURERS.





2004 WAS AN IMPROVED YEAR for the U.S. Economy, American Industry and Morton
Metalcraft Co. Our prestigious Customers who serve the Construction,
Agricultural and Commercial capital goods industries experienced very strong
demand throughout 2004 that is continuing into 2005. This dramatic improvement
occurred at the end of a long manufacturing constriction which ended abruptly.
It resulted, in our judgment, primarily from our nation's quick and responsive
reaction to the terrorism acts of 9-11, the stimulus created by the Bush
Administration tax cuts and favorable monetary policy by the Federal Reserve.

The convergence of these economic events resulted in not just improved demand,
but dramatically improved demand. Customer order requirements across the
industry were up on the average 25% with some product segments exceeding 50%. We
had clearly entered a New Business Environment which created a different set of
challenges for us in 2004.

KEY CHALLENGES OF 2004

Morton Metalcraft Co. employees spent the first half of 2004 attempting to
expand capacity fast enough to meet our Customers' increased assembly line
requirements. During this period we added manpower, machines and materials in
support of these new production schedules.

MANPOWER--We hired and trained nearly 350 new direct and indirect employees.

MACHINES--We purchased over 20 major pieces of manufacturing equipment.

MATERIALS--We increased the flow of cosmetically sensitive sheet steel from a
strained industry.

By midyear 2004, we had essentially caught up to our increased customer demand.
That effort during Q1 and Q2, however, caused us to carry additional expense,
sacrificing short-term earnings to secure longer-term customer satisfaction. A
more normal business environment then began to emerge in Q3 and then stabilized
in Q4. With sufficient capacity now in place, we expect 2005 to produce improved
performance for our Customers and ongoing stable financial results for the
Company. Morton Metalcraft Co. remains committed to the use of 6 Sigma
methodologies which continues to improve efficiencies throughout the Company.

OUTLOOK FOR 2005

Most industry experts suggest that in 2005 the Construction, Agricultural and
Commercial capital good industries will remain strong. This strengthened
environment and the flexibility provided by our new capital structure positions
us well for the future. As a member of American Industry, we must now return to
addressing the longer term threat of global competitiveness.

We believe there are many challenges facing the Construction, Agricultural and
Commercial original equipment manufacturers and the respective members of the
supply network that is serving them. But we also know that only a few very
prepared companies will be able to respond to these challenges and meet them
successfully. We intend to be one of them. What will separate us in the future
will be our ability to intensively focus on significantly improving our
manufacturing flexibility while achieving even higher Quality performance
standards for our industry.


TO OUR SHAREHOLDERS, EMPLOYEES, CUSTOMERS AND SUPPLIERS

                          (PHOTO OF WILLIAM D MORTON)

                          William D. Morton
                          Chairman,
                          Chief Executive Officer and
                          President


IN CONCLUSION

This year validated again that the undying resolve of our valued Employees, in
seeking to meet our Customers' changing needs, is what makes us a very special
Company. And that is why we feel we are well positioned to respond to the
emerging opportunities which appear to be available to us now and in the years
to come. Thank you all for your efforts in 2004 and your continued commitment to
Morton Metalcraft Co. during 2005 and beyond.


/s/ WILLIAM D. MORTON


MORTON METALCRAFT CO. is a manufacturer of highly engineered components and
sub-assemblies for industrial original equipment manufacturers. Our products
include metal fabrications and assemblies for a broad range of industry
segments, which include the Construction, Agricultural and Commercial capital
goods industries.

OUR superior competitive strengths have resulted in strong, focused
relationships with our prestigious customer base. Our five manufacturing
facilities are strategically located in the Midwestern and Southeastern United
States in close proximity to our customers' manufacturing and assembly
facilities. Our principal customers include Carrier Corporation, Caterpillar
Inc., Deere & Co., Hallmark Cards, Kubota Corporation and Winnebago Industries,
Inc.

                                   STRATEGIC


3 Locations                                                   Midwest Operations

(PHOTO OF 1021 W. BIRCHWOOD        (PHOTO OF 400 DETROIT      (ILLINOIS MAP)
STREET LOCATION)                   AVENUE LOCATION)
1021 W. Birchwood Street           400 Detroit Avenue
Morton, Illinois 61550             Morton, Illinois 61550
309.266.7176                       309.263.3299
Fax: 309.263.1866                  Fax: 309.263.1854







                                                                                                    
534 Corbin Road                              835 Salem Road                    2080 E. Williams Street
Honea Path, South Carolina 29654             Welcome, North Carolina 27374     Apex, North Carolina 27502    SOUTHEAST OPERATIONS
864.369.1800                                 336.731.5700                      919.363.1630                  (NORTH CAROLINA MAP)
Fax: 864.369.9022                            Fax 336.731.8005                  Fax 919.363.1103
(PHOTO OF 534 CORBIN ROAD LOCATION)          (PHOTO OF 835 SALEM ROAD          (PHOTO OF 2080 E. WILLIAMS
                                             LOCATION)                         STREET LOCATION)







BOARD OF DIRECTORS

William D. Morton 57, serves as Chairman, Chief Executive Officer and President
of Morton Industrial Group, Inc. and Morton Metalcraft Co. Mr. Morton became a
director of Morton Metalcraft Co. in 1989 and upon conclusion of its merger into
Morton Industrial Group, Inc. in 1998, a Morton Industrial Group, Inc. director.

Fred W. Broling 69, retired as Chairman of the Board and Chief Executive Officer
of US Precision Glass Company in 2002. Mr. Broling became a director of Morton
Metalcraft Co. in 1989, and upon conclusion of its merger into Morton Industrial
Group, Inc. in 1998, a Morton Industrial Group, Inc. director. He is a member of
the Compensation and Stock Option Committee and of the Audit Committee of the
Board.

Mark W. Mealy 47, is a private investor and serves as the Lead Independent
Director for Morton Industrial Group, Inc. Mr. Mealy was formerly Managing
Director and Group Head of Mergers and Acquisitions at Wachovia Securities. Mr.
Mealy became a director of Morton Metalcraft Co. in 1995 and upon conclusion of
its merger into Morton Industrial Group, Inc. in 1998, a Morton Industrial
Group, Inc. director. He is a member of the Compensation and Stock Option
Committee and of the Audit Committee of the Board.

                                   EXPERIENCE


5 Board of Directors and Management Team

                                                                 
MANAGEMENT TEAM

Brian R. Doolittle                  Brian L. Geiger                    Rodney B. Harrison
Senior Vice President,              Senior Vice President,             Vice President,
Sales & Engineering                 Operations                         Finance
Morton Metalcraft Co.               Morton Metalcraft Co.              Treasurer
                                                                       Morton Industrial Group, Inc.
Daryl R. Lindemann                  William D. Morton
Senior Vice President,              Chairman,
Finance                             Chief Executive Officer,
Morton Metalcraft Co.               President
Chief Financial Officer             Morton Metalcraft Co. and
Secretary                           Morton Industrial Group, Inc.
Morton Industrial Group, Inc.





"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES REFORM LITIGATION 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 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; THE AVAILABILITY OF WORKING CAPITAL; 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.





                                                                
CORPORATE OFFICES                   INVESTOR RELATIONS                All of the Company
Morton Industrial Group, Inc.       Shareholders and prospective      SEC Filings can
1021 W. Birchwood Street            investors are welcome to call     be viewed from the
Morton, Illinois 61550              or write with questions or        Company's website
Phone:  309.266.7176                requests for additional           www.mortongroup.com
Fax:  309.263.1866                  information. Please direct        and "clicking" SEC
                                    inquiries to:                     Offsite Filings.
STOCK LISTING
The common stock of Morton          Van Negris & Company
Industrial Group, Inc. is           570 Lexington Ave.
quoted on the OTC Market            15th Floor
(OTC:MGRP).                         New York, New York 10022
                                    Phone:  212.759.0290
ANNUAL MEETING                      Fax:  212.759.9184
The Annual Meeting of the           Email:  info@vnegris.com
Shareholders of Morton
Industrial Group, Inc. will be      INDEPENDENT REGISTERED
held at The Siena Hotel             PUBLIC ACCOUNTING FIRM
located at 1505 E. Franklin         KPMG LLP
Street, Chapel Hill, NC on          Indianapolis, Indiana
Tuesday, June 7, 2005 at
10:00 a.m. (EDT).                   COUNSEL                           Shareholder
                                    Husch & Eppenberger LLC           Information
STOCK TRANSFER AGENT                Peoria, Illinois
AND REGISTRAR
For inquiries about stock           ANNUAL REPORT ON
transfers or address changes,       FORM 10-K
Shareholders may contact:           Additional copies of this
                                    Annual Report and the
American Stock                      Annual Report on Form 10-K
Transfer & Trust Co.                may be obtained without
59 Maiden Lane                      charge by writing to the
New York, New York 10007            Company at the address
Phone:  800.937.5449                listed above. These reports
                                    are also available to the
                                    public on request as
                                    required by the Securities
                                    and Exchange Commission
                                    (SEC). These statements have
                                    not been reviewed or
                                    confirmed for accuracy or
                                    relevance by the SEC.







(MORTON LOGO)

www.mortongroup.com
1021 W. Birchwood Street
Morton, Illinois 61550
Phone:  309.266.7176
Fax:  309.263.1866


(C) 2005 Morton Industrial Group, Inc.

EX-21.1

exv21w1

EX-23.1

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 24, 2005 relating to the consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2003 and 2004, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows and the financial statement schedule for each of the years in the three-year period ended December 31, 2004, which report appears in the December 31, 2004, annual report on Form 10-K of Morton Industrial Group, Inc. Our report refers to a change in accounting for goodwill amortization and impairment in 2002.

Indianapolis, Indiana
March 25, 2004

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER REQUIRED PURSUANT TO

RULE 15d-14(a) of the SECURITIES AND EXCHANGE ACT OF 1934

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

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

      2. Based on my knowledge, this 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 report;

      3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15 (d)-15(e)) for the registrant and have:

      a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

      a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ William D. Morton

William D. Morton

Chairman, Chief Executive Officer and President

July 29, 2005

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER REQUIRED PURSUANT TO

RULE 15d-14(a) of the SECURITIES AND EXCHANGE ACT OF 1934

I, Daryl R. Lindemann, as Chief Financial Officer and Secretary of Morton Industrial Group, Inc., certify that:

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

      2. Based on my knowledge, this 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 report;

      3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15 (d)-15(e)) for the registrant and have:

      a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

      a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Daryl R. Lindemann

Daryl R. Lindemann

Chief Financial Officer and Secretary

July 29, 2005

EX-32.1

Exhibit 32.1

CERTIFICATIONS 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 for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William D. Morton, Chairman, Chief Executive Officer and President of the Company, and I, Daryl R. Lindemann, Chief Financial Officer and Secretary certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:

      (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, Chief Executive Officer and President

July 29, 2005

/s/ Daryl R. Lindemann

Chief Financial Officer and Secretary

July 29, 2005

      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.