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U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

OR

|/ / | 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

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

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

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

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

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

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

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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.   /x/

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.   /x/

As
of March 10, 2000, the aggregate market value of the Class A Common Stock held by non-affiliates was approximately $7,547,000 and there were 4,304,745
shares of Class A Common Stock and 200,000 shares of Class B Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held in June, 2000 are incorporated by reference into
Part III hereof.

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PART I

Item 1. Business

General Development of the Business

On January 20, 1998, Morton Metalcraft Holding Co. and 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.

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

We
established our Contract Plastics Division in March 1998 through the acquisition of Carroll George Inc., located in Northwood, Iowa, a manufacturer of thermoformed
plastic products for construction and agricultural original equipment manufacturers. We expanded our plastic manufacturing capabilities and capacity with the acquisition of Mid-Central
Plastics in May, 1998. Operating out of its facility in West Des Moines, Iowa, Mid-Central Plastics specializes in manufacturing injection molded plastic products for construction and
agricultural original equipment manufacturers as well as other industrial customers. We sold the assets of Carroll George Inc. on December 31, 1999 for $7.5 million in cash and
incurred a loss of approximately $2.5 million.

In
April, 1998, we acquired B&W Metal Fabricators, a sheet metal fabricator with a facility in Welcome, North Carolina. Through the acquisition of B&W Metal Fabricators, we expanded
our presence in the southeastern United States, allowing us to better serve our existing customers. We also acquired certain assets of SMP Steel Corporation in 1998, including its sheet metal
fabrication facility in Honea Path, South Carolina for $2.2 million in cash. The acquisition of these assets added metal fabrication capacity for our growing business in the southeastern United
States.

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

Pursuant
to our agreement to purchase the Worthington businesses, we (i) paid Worthington Custom Plastics, Inc. $25.0 million in cash, subject to a working
capital adjustment, net of certain assumed liabilities; (ii) issued 10,000 shares of preferred stock, without par value, of Morton Industrial Group, Inc. to Worthington Custom
Plastics, Inc. and (iii) provided for a contingent payment to Worthington Custom Plastics Inc. The preferred stock is mandatorily redeemable five years from its issuance date at
$1,000 per share, and will pay or accrue annual dividends at a rate of 8%. We may pay such dividends in cash or in additional shares of preferred stock. The dividend rate may be reduced upon certain
changes in a Worthington Custom Plastics, Inc. customer contract. The contingent payment will be 15% of the fair market value of the acquired business as of December 31, 2004.



Narrative Description of Business

BUSINESS

Overview

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

MARKETS

Customers use our products in industrial, construction 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, Caterpillar, GE Appliance, IBM, B/E Aerospace, DEC/Compaq and Polaris Industries, 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 85% of the products that
we supply to our customers. As these customers continue to reduce the size of their supplier base and outsource a growing percentage of their product needs, we expect to become the
sole-source provider on an increasing number of products.

Industrial Equipment

We produce a range of components and subassemblies for equipment used in a variety of industrial applications. Our products are used in off-road
recreational vehicles, motor homes, home appliances, computer equipment, aircraft interiors and commercial lighting products. Customers in the industrial equipment area generally serve stable or
growth markets, and these customers include GE Appliance, IBM, DEC/Compaq, B/E Aerospace, Honda, Yamaha, Winnebago, Polaris, Arctic Cat, and Lithonia Lighting. Industrial equipment products account
for approximately 50% of our 1999 pro forma net sales.

Construction Equipment

The $22 billion U.S construction equipment industry includes construction, earth moving and forestry equipment, as well as some material handling
equipment, lifts, off-highway trucks and a variety of machines for specialized industrial applications. Caterpillar and Deere dominate the U.S. construction
equipment industry, and together accounted for approximately 55% of our total unit sales in 1999. We supply metal components and subassemblies, such as engine enclosures, panels, platforms, frames and
complex weldments as well as plastic components such as interior cab dash surround panels, air ducts and handles. Our customers use products in backhoes, excavators, wheel loaders, skid steer loaders,
lifts and



similar
construction equipment. Our sales per construction equipment vehicle range from $500 to $2,500. Construction equipment products account for approximately 30% of our 1999 pro forma net sales.

Agricultural Equipment

The $15 billion U.S. agricultural equipment industry includes large, relatively expensive products such as tractors, combines and other farming
equipment. Deere and Caterpillar accounted for approximately 35% of total agricultural equipment unit sales in 1999. We supply metal components and subassemblies such as steps, fenders, feeder
housings, grills, and landing decks as well as plastic components such as fender, tool boxes, facia and covers used in tractors, combines and other agricultural equipment. Our sales per agricultural
equipment vehicle range from $200 to $4,000. Agricultural equipment products account for approximately 20% of our 1999 pro forma net sales.

PRODUCTS AND SERVICES

Products

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

Sheet Metal Fabrication

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

Fabricated
Sheet Metal Products Include:



Injection Molded and Thermoformed Plastic Components

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



Plastic
Components include:



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.

Prototype Tooling

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

Part Decorating and Exterior Finishing

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

Just-In-Time Delivery

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

Engineering and Design Capabilities

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



Systems and Controls

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

Sales and Marketing

To better serve our customers, we have combined our sales and engineering organizations. The sales and engineering group has primary responsibility for
managing relationships with customers and working with them to design new products. Our customers are serviced by account teams led by an account manager and including representatives from our primary
functional areas.These areas include engineering, quality assurance and customer service. Account teams work with the customer to design products and
produce prototypes, schedule production and monitor quality and customer satisfaction. Our account managers also lead the new business development process, working with customers to obtain details of
new outsourcing programs, new products currently being designed and existing products which will be redesigned. We believe that the structure of our sales and marketing organization helps to ensure
cooperation in product design and helps us to gain repeat and new business from our customers.

Manufacturing/Production

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

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

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

Engineering and Design Capabilities.Engineering capabilities have become increasingly important in our industry as
original equipment manufacturers have increasingly emphasized a supplier's design services for new projects. Our computer aided design capabilities include Pro Engineering, Anvil 1000/5000, Apollo,
and Merry Mechanization. We have focused our computer aided design investment on the Pro Engineering system during the last several years because Pro Engineering is the preferred system of Caterpillar
and Deere. Pro Engineering allows us to download completed and approved designs directly to production equipment in most areas of our plants. The resulting direct interaction between our 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 our management information systems, 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 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.

Raw Materials

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

Competition

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

Regulatory/Environmental Matters

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

Financial Information about Industry Segments

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

Additional
information regarding segments can be found in footnote 18 of the accompanying Notes to Consolidated Financial Statements of the Company.

Backlog

Our backlog of orders was approximately $135.0 million at December 31, 1999, and $93.4 million at December 31, 1998. We anticipate
that we will substantially fill all of the backlog orders as of December 31, 1999 during the current year.



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Patents, Trademarks, Licenses, Franchises, and Concessions

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

Working Capital Items

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

Employees

As of March 1, 2000, we employed 2,182 employees, of which 1,836 were hourly and 346 were salaried. None of these employees was subject to a collective
bargaining agreement. We believe our relationship with our employees is good.

Item 2. Properties

The following table presents summary information regarding our facilities. We lease our facilities in Peoria, Illinois, Apex, North Carolina, and our Detroit
Avenue facility in Morton, Illinois and three of the buildings included in the Harrisburg, North Carolina operations, and own the remainder of our properties. Lease terms for these facilities expire
between 2001 and 2008. Our facilities are generally located in close proximity to our customers.

|Location                               |  | Approx.
Sq. Ft. |  | Products Manufactured                                                                                                                        
|-------------------------------------- |  | --------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|1021 West Birchwood Street, Morton, IL |  | 270,000         |  | Sheet metal enclosures and boxes, sheet metal component packages and store fixtures                                                          
|400 Detroit Avenue,
Morton, IL         |  | 155,000         |  | Special weldments and fabricated steel tanks                                                                                                 
|Peoria, IL                             |  | 135,000         |  | Feeder housings                                                                                                                              
|Apex, NC                               |  | 100,000         |  | Special weldments, sheet metal enclosures and boxes, sheet metal component packages and fabricated steel tanks                               
|Honea Path, SC                         |  | 30,000          |  | Store fixtures and sheet metal component packages                                                                                            
|Welcome, NC                            |  | 185,000         |  | Sheet metal enclosures and boxes, special weldments, fabricated steel tanks and sheet metal component packages                               
|West Des Moines, IA                    |  | 115,000         |  | Off road work and recreational vehicle parts and subassemblies, off road vehicle interiors and appliance parts and components                
|Harrisburg, NC                         |  | 421,000         |  | Electronics enclosures and components and other plastic components and subassemblies                                                         
|Lebanon, KY                            |  | 176,000         |  | Appliance parts and components, off road work and recreational vehicle parts and subassemblies and other plastic components and subassemblies
|St. Matthews, SC                       |  | 135,000         |  | Off road work and recreational vehicle parts and subassemblies and other plastic components and subassemblies                                

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



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

Item 3. Legal Proceedings

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

Item 4. Submission of Matters to Vote of Security Holders

Not applicable

PART II

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

Prior to the conclusion of the Merger, when our name was MLX Corp., our common stock traded on the over-the-counter market under the
symbol "MLXR" and was quoted on the OTC Bulletin Board of the National Association of Security Dealers, Inc. Following the Merger, and through September 9, 1998, our Class A
Common Stock traded on the over-the-counter market under the symbol "MGRP" and was quoted on the OTC Bulletin Board. On September 10, 1998, our Class A common
stock began trading on the Nasdaq Small Cap Market under the symbol "MGRP". The following table sets forth the quarterly high and low close prices during 1999 and 1998 as reported by the Nasdaq Stock
Market.

|                         |  | High |        | Low
|------------------------ |  | ---- | ------ | ---
|1999                     |  |      |        |    
|October 1 to December 31 |  | $    | 5.125  |    
|July 1 to September 30   |  | $    | 7.375  |    
|April 1 to June 30       |  | $    | 9.000  |    
|January 1 to March 31    |  | $    | 14.000 |    
|1998                     |  |      |        |    
|October 1 to December 31 |  | $    | 14.375 |    
|July 1 to September 30   |  | $    | 17.250 |    
|April 1 to June 30       |  | $    | 19.875 |    
|January 1 to March 31    |  | $    | 19.125 |    

As
of March 10, 2000 there were 3,729 holders of record and 2,017 beneficial holders of our Class A Common Stock.

We
did not declare or pay any dividends in our fiscal years ended December 31, 1999 and 1998. Our credit agreements preclude the payment of dividends.



## 

Item 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA

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

|                                                                                |  | Year Ended
June 30, |        | Six Months Ended
December 31, |   | Year Ended
December 31, |  
|------------------------------------------------------------------------------- |  | ------------------- | ------ | ----------------------------- | - | ----------------------- | -
|
|
|Operating data:                                                                 |  |                     |        |                               |   |                         |  
|Net sales                                                                       |  | $                   | 48,568 |                               | $ | 59,006                  |  
|Cost of sales                                                                   |  |                     | 40,730 |                               |   | 50,049                  |  
|                                                                                |  |                     |        |                               |   |                         |  
|Gross profit                                                                    |  |                     | 7,838  |                               |   | 8,957                   |  
|Selling and administrative expenses                                             |  |                     | 3,951  |                               |   | 4,900                   |  
|Merger related charges (1)                                                      |  |                     |       |                               |   |                        |  
|                                                                                |  |                     |        |                               |   |                         |  
|Operating income (loss)                                                         |  |                     | 3,887  |                               |   | 4,057                   |  
|Loss on sale of subsidiary                                                      |  |                     |       |                               |   |                        |  
|Interest and other expense                                                      |  |                     | 2,803  |                               |   | 3,096                   |  
|                                                                                |  |                     |        |                               |   |                         |  
|Earnings (loss) before income taxes, accounting change and extraordinary charge |  |                     | 1,084  |                               |   | 961                     |  
|Income taxes                                                                    |  |                     | (522   | )                             |   | (424                    | )
|                                                                                |  |                     |        |                               |   |                         |  
|Earnings (loss) before accounting change and extraordinary charge               |  | $                   | 562    |                               | $ | 537                     |  
|Earnings (loss) before accounting change and extraordinary charge per share:    |  |                     |        |                               |   |                         |  
|Basic                                                                           |  |                     | .16    |                               |   | .28                     |  
|Diluted                                                                         |  |                     | .16    |                               |   | .16                     |  
|Financial position (at end of period):                                          |  |                     |        |                               |   |                         |  
|Working capital                                                                 |  | $                   | 4,548  |                               | $ | 4,078                   |  
|Total assets                                                                    |  |                     | 27,550 |                               |   | 29,576                  |  
|Total debt                                                                      |  |                     | 17,240 |                               |   | 26,994                  |  
|Stockholders' equity (deficit)                                                  |  | $                   | (9,644 | )                             | $ | (9,106                  | )

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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 and plastic components and subassemblies for construction, agricultural and industrial original
equipment manufacturers. Our largest customers, Caterpillar Inc. and Deere & Co., accounted for approximately 49% of our 1999 net sales.

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

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

We
have historically grown net sales and increased profitability through increased penetration of our key customers. We have increased the number of customer equipment models that
include our products and have increased the number of our products on each of our customers' equipment models. We have also grown our net sales by expanding into the southeastern United States. In
addition, we have increased our product offerings to our customers through acquisitions. These acquisitions allow us to better serve our customers growing outsourcing needs.

Results of Operations

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

|                                                                                                     |  | Year Ended June 30, |   | Six Months
Ended December 31, |   | Year Ended December 31, |  
|---------------------------------------------------------------------------------------------------- |  | ------------------- | - | ----------------------------- | - | ----------------------- | -
|
|Statements of Operations Data:                                                                       |  |                     |   |                               |   |                         |  
|Net sales                                                                                            |  | 100.0               | % | 100.0                         | % | 100.0                   | %
|Gross profit                                                                                         |  | 16.1                |   | 15.2                          |   | 12.7                    |  
|Selling and administrative expenses                                                                  |  | 8.1                 |   | 8.3                           |   | 8.7                     |  
|Merger related charges                                                                               |  |                    |   |                              |   |                        |  
|Operating income (loss)                                                                              |  | 8.0                 |   | 6.9                           |   | 4.0                     |  
|Loss on sale of subsidiary                                                                           |  |                    |   |                              |   |                        |  
|Interest and other expense                                                                           |  | 5.8                 |   | 5.3                           |   | 4.0                     |  
|Earnings (loss) before income taxes, cumulative effect of accounting change and extraordinary charge |  | 2.2                 |   | 1.6                           |   | 0 .0                    |  



Year Ended December 31, 1999 versus Year Ended December 31, 1998

Net sales for the year ended December 31, 1999 were $219.3 million compared to $151.2 million for the year ended December 31, 1998,
an increase of $68.1 million or 45.0%. The Worthington Custom Plastics acquisitions made during 1999 provided incremental net sales of approximately $73.9 million. Sales decreased by
$5.8 million in the operations owned in both 1998 and 1999, primarily from decreased sales of components and subassemblies used in agricultural machinery. This decrease relates to a softening
in demand for agricultural products that began in the fourth quarter of 1998 and is continuing.

Sales
to Caterpillar and Deere were approximately 49% and 79% of our net sales for 1999 and 1998, respectively.

We
were selected to manufacture a number of additional components for new construction and industrial products for Caterpillar and Deere in 1999. Sales of these additional components
partially offset the loss of agricultural sales.

Gross
profit for the year ended December 31, 1999 was $24.9 million compared with $21.5 million for the year ended December 31, 1998, an increase of
$3.4 million or 15.8%. The Worthington Custom Plastics acquisition provided $7.1 million of incremental gross profit. A gross margin decrease of $3.7 million was incurred by the
operations owned in both 1998 and 1999, which resulted from the lower sales referenced above and product mix changes.

Selling
and administrative expenses for the year ended December 31, 1999 amounted to $24.1 million compared with $14.5 million in the prior year, an increase of
$9.6 million or 66%. This increase relates primarily to costs incurred by the operations acquired in 1999, a full year of selling and administrative costs related to the 1998 acquisitions,
approximately $575,000 of costs written-off in the first quarter, 1999, consisting of costs associated with a suspended high-yield financing, and $400,000 associated with fees
related to amendments in the Company's credit facilities.

We
sold the assets of Carroll George Inc. on December 31, 1999 for $7.5 million and incurred a loss of approximately $2.5 million.

Interest
expense in the year ended December 31, 1999 amounted to $8.2 million compared to $4.7 million in 1998. This increase resulted primarily from additional
interest costs incurred related to the 1999 acquisitions and a full year of interest related to the 1998 acquisitions.

We
incurred a charge of $1.1 million, net of a state income tax benefit, for the cumulative effect of adopting AICPA Statement of Position 98-5 "Reporting on the
Costs of Start-Up Activities" which requires costs of start-up activities and organization costs to be expensed as incurred.

An
income tax benefit of $1.2 million was recognized as a previously established state income tax reserve was no longer required.

Year Ended December 31, 1998 versus Year Ended December 31, 1997

Net sales for the year ended December 31, 1998 were $151.2 million compared to $94.4 million for the year ended December 31, 1997,
an increase of $56.8 million or 60.2%. Four acquisitions made during 1998 provided incremental net sales of approximately $44.7 million. The additional $12.1 million resulted
primarily from increased sales of components and subassemblies used in construction and industrial machinery. Our Apex, North Carolina facility was operational during all of 1998, compared with only
minimal sales made during its start-up stages in late 1997.

Sales
to Caterpillar and Deere were approximately 79% and 87% of our net sales for 1998 and 1997, respectively.

Sales
to agricultural original equipment manufacturers were 31% of our 1998 net sales. During 1998, certain of our agricultural customers made announcements about a softening in
demand for their agricultural products. As a result, our net sales from agricultural products dropped 33% in the fourth quarter of 1998 (excluding sales from our 1998 acquisitions) compared to the
fourth quarter of 1997.



Gross
profit for the year ended December 31, 1998 was $21.5 million compared with $11.1 million for the year ended December 31, 1997, an increase of
$10.4 million or 93.7%. The four acquisitions made during 1998 provided $6.2 million of the incremental gross profit. The additional increase of approximately $4.2 million
resulted primarily from additional sales of components and subassemblies used in construction and industrial machinery, net of the preproduction costs at Apex, North Carolina. The gross margin for the
year ended December 31, 1998 was 14.2%, compared to 11.8% for the prior year. The increase was the result of increased productivity at our Morton and Peoria, Illinois plants, improved labor
efficiency and material use stemming from investments in production technology, including laser-cutting technology, as well as product mix. The improvements at the Illinois plants were partially
offset by preproduction costs experienced at our Apex, North Carolina plant.

Selling
and administrative expenses for the year ended December 31, 1998 amounted to $14.5 million compared with $15.1 million in the prior year, a decrease of
$0.6 million or 4.1%. This decrease represents the effects of non-recurring costs related to our merger with MLX of approximately $6.7 million, net of $3.4 million of
incremental costs related to the four 1998 acquisitions, as well as additional 1998 expenses related to increased revenue of approximately $2.5 million. Excluding these
non-recurring costs, selling and administrative expenses, as a per cent of sales, were 9.6% in 1998 and 8.9% in 1997.

Interest
expense in the year ended December 31, 1998 amounted to $4.7 million compared to $3.4 million in 1997. This increase resulted primarily from additional
interest costs incurred during the last three quarters of the year from increased debt related to our 1998 acquisitions.

Income
taxes of approximately $0.4 million were provided for the year ended December 31, 1998, compared with an income tax benefit of $2.9 million for the twelve
months ended December 31, 1997. For 1998, the use of a net operating loss carryforward reduced the average income tax rate to 16.6%. For 1997, the benefit reflects a 40.0% effective tax rate.

An
extraordinary charge for debt expense related to the early retirement of debt of $419,000 ($676,000 net of an income tax benefit of $257,000) was recognized during the calendar
year ended December 31,
1998. An extraordinary charge for banking costs related to the early retirement of debt of $553,000 ($892,000 net of an income tax benefit of $359,000) was recognized during the calendar year ended
December 31, 1997.

Financial Position and Liquidity

Historically, we have funded our business with cash generated from operations and borrowings under revolving credit and term loan facilities. In the year ended
and June 30, 1997, the six months ended December 31, 1997, and the years ended December 31, 1998 and December 31, 1999, we generated (used) cash from (in) operating
activities of $5.1 million, $1.3 million, $(.7) million and $2.8 million respectively. Our capital expenditures for the year ended June 30, 1997, the six months
ended December 31, 1997, and the years ended December 31, 1998 and December 31, 1999 were $5.7 million, $5.6 million, $10.3 million and $5.3 million
respectively. These capital expenditures were principally for additions to improve or maintain our manufacturing capacity and efficiency.

In
the most significant 1999 cash transactions, we acquired three manufacturing facilities from Worthington Custom Plastics as described above, for $25.0 million and we sold
the assets of Carroll George Inc. for $7.5 million.

Our
consolidated working capital at December 31, 1999 was $(11.8) million compared to $(2.4) million at December 31, 1998. This represents a decrease in working capital
of approximately $9.4 million. This change was related primarily to the new working capital credit facility related to the Worthington Custom Plastics acquisition and to the net loss for the
year.

We
have two separate credit facilities. The first facility is with Harris Trust and Savings Bank (Harris), and serves the company's operations other than the operations acquired from
Worthington Custom Plastics, Inc. (Worthington). The second facility, with General Electric Capital Corporation (GECC), serves the operations acquired from Worthington during the second
quarter, 1999. These facilities are separate and provide financing for the named operations. The two credit facilities are separately secured.



On
May, 28, 1998, we entered into a credit agreement with Harris, as Agent. The credit agreement was a $90 million facility with the following components; (i) a
$35 million secured revolving credit facility with a $10 million sub limit for letters of credit; (ii) a $25 million secured term loan that matures 5 years from the
date of the credit agreement closing; and (iii) a $30 million secured term loan that matures 7 years from the date of the credit agreement closing. Both term loans fully amortize
over their respective terms with quarterly payments. The interest rates on the loans, vary from 1% to 3.75% above the lender's prime rate. The proceeds under the facility were used to refinance the
then existing indebtedness, to finance the acquisitions, and general corporate purposes.

We
have entered into three amendments to the original credit agreement. The third amendment, dated January 30, 2000, provides for a maximum amount of borrowing under the
secured revolving credit facility of $19,000,000. The amount of availability is calculated using a borrowing base of qualified accounts receivable and inventory. As of December 31, 1999, we had
additional availability of approximately $1.6 million. Effective January 3, 2000, we are paying this lender a fee of .125% per month based upon the amount of the revolving credit
commitment and the balance of the term loans. Under the terms of the third amendment, the Company shall issue to the lender warrants for Class A common stock equivalent up to no more than 4.99%
of its outstanding Class A and Class B common stock as of January 30, 2000, if its credit facility with that lender is not retired by September 20, 2000.

In
connection with the Harris financing, we have two fixed interest rate swap agreements with a commercial bank (the "counter party"). The first agreement has a notional principal
amount of $10.5 million and a termination date of May 31, 2003. The second agreement has a notional principal
amount of $14.7 million and a termination date of June 30, 2003. The notional principal amount declines over the term of both agreements based upon a defined amortization schedule. The
counter party has the unilateral right to cancel both agreements as of June 30, 2001.

On
April 15, 1999, we retired $4.25 million of the Harris Trust and Savings Bank term debt in connection with the financing of the Worthington facilities acquisition. On
December 31, 1999, the Company retired $4.75 million of term debt and $1.7 million of the revolving credit facility from the proceeds of the sale of the assets of Carroll
George Inc.

Sources
of funds to meet near term liquidity requirements for the businesses will be the cash flows from operations, the Harris line of credit, and management of working capital to
reflect current levels of operations.

The
separate financing arrangements for the operations of the four manufacturing facilities acquired from Worthington Custom Plastics, Inc. are described below.

On
April 15, 1999, we entered into a financing agreement with General Electric Capital Corporation (GECC). The agreement contains a 41/2 year secured revolving
credit facility with maximum availability of $24 million and a $26 million secured term loan with a 41/2 year term. The amount of availability is based upon a borrowing
base of qualified accounts receivable and inventory. Both of the facilities bear interest at variable interest rates based on the prime rate, plus variable margins. We also incur a fee based upon a
certain percentage of the unused revolving credit facility. The term loan facility amortizes quarterly throughout its term. We must also prepay certain amounts from the sale of assets, the issuance of
new equity capital and from "excess cash flow", as defined in the agreement.

As
of December 31, 1999, we had additional availability of $6.6 million, under the GECC credit facility. We believe that the agreement with GECC will provide the
necessary long-term and revolving financing, and along with cash flows from operations, will provide the necessary levels of liquidity for the operations acquired from Worthington Custom
Plastics, Inc.

As
part of the financing for the Worthington acquisition, we issued 10,000 shares of redeemable preferred stock. That preferred stock is redeemable in April, 2004 at $1,000 per share
plus any accrued dividends. The $10 million face value preferred stock was recorded at its fair value of $4.25 million. The discount is being accreted over a five year period using the
effective yield method.



We
have initiated a plan to adjust the Company's capital structure to better reflect its current business organization. Actions may include the issuance of subordinated debt, the
issuance of preferred stock and the consolidation of our two senior credit facilities.

We
incurred $5.0 million of capital expenditures during 1999, primarily for purchases of manufacturing equipment.

We
estimate that our capital expenditures in 2000 will total approximately $6.0 million of which $2.5 million will be for production equipment and the remaining
$3.5 million will be for normal maintenance items.

Year 2000 Readiness

We completed our preparation in 1999 for the Year 2000 date change. Our plan addressed all hardware, software and microprocessor embedded technologies. We also
surveyed our customers' and suppliers' Year 2000 readiness. We noted no significant disruptions in service and we were able to fully utilize our core business unit systems, including order entry,
inventory management, purchasing, payroll, invoicing, accounts payable, accounts receivable and general ledger.

We
expended approximately $235,000 in our Year 2000 readiness effort.

We
will continue to monitor our systems and customer and supplier readiness throughout 2000 to address unanticipated problems (which may include problems associated with
non-Year 2000 issues and disruptions to the economy in general) and ensure that all processes continue to function properly.

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.

Impact of New Accounting Standards

In April 1998, the Accounting Standards Executive Committee of the AICPA issued Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities" which requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning
after December 15, 1998, with initial application reported as the cumulative effect of a change in accounting principle. Our adoption of this statement resulted in a cumulative effect charge of
$1.1 million, net of state income tax benefits, in the first quarter of 1999.

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



Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate changes primarily as a result of our lines of credit and long-term debt used for maintaining liquidity, funding
capital expenditures and expanding our operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower overall borrowing
costs. To achieve our objectives, we entered into two separate financing agreements with a group of banks and another lender. Both financing arrangements contain term loans and revolving credit
facilities. Interest is based on our lead bank's or lender's prime rate plus an applicable variable margin. We have also entered into two interest rate swap agreements, as required by our bank
financing arrangement, to limit the effect of increases in the interest rates on half of our floating rate term debt. We do not enter into interest rate transactions for speculative purposes. Under
the swap agreements, which expire May 31, 2003 to June 30, 2003, the interest rate component of the interest rate is limited to 5.875% on half of our $40,366 term loans under that
certain financing arrangement.



## 

Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL STATEMENTS

|MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES                                                                                                                                    |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | 
|Report of KPMG LLP, Independent Auditors                                                                                                                                          |  | 
|Report of Clifton Gunderson L.L.C., Independent Auditors                                                                                                                          |  | 
|Consolidated Balance Sheets as of December 31, 1998 and 1999                                                                                                                      |  | 
|Consolidated Statements of Operations for the year ended June 30, 1997, the six months ended December 31, 1997 and the years ended December 31, 1998 and 1999                     |  | 
|Consolidated Statements of Stockholders' Equity (Deficit) for the year ended June 30, 1997, the six months ended December 31, 1997 and the years ended December 31, 1998 and 1999 |  | 
|Consolidated Statements of Cash Flows for the year ended June 30, 1997, the six months ended December 31, 1997 and the years ended December 31, 1998 and 1999                     |  | 
|Notes to Consolidated Financial Statements                                                                                                                                        |  | 
|Schedule IIValuation and Qualifying Accounts for the year ended June 30, 1997, the six months ended December 31, 1997 and the years ended December 31, 1998 and 1999             |  | 



## 

Independent Auditors' Report

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

We
have audited the accompanying consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. In connection with our audit of the consolidated financial statements, we also have
audited the 1998 and 1999 financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In
our opinion, the 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, 1998 and 1999, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
Also in our opinion, the related 1998 and 1999 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.



Indianapolis,
Indiana
March 10, 2000



## 

Independent Auditors' Report

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

We
have audited the accompanying consolidated statements of operations, stockholders' equity (deficit), and cash flows of Morton Industrial Group, Inc. and Subsidiaries
(formerly Morton Metalcraft Holding Co. and Subsidiaries) for the year ended June 30, 1997, and the six months ended December 31, 1997. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedule for the year ended June 30, 1997, and the six months ended December 31, 1997 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 generally accepted auditing standards. Those standards require that we plan and perform the audits 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 results of operations and cash flows of Morton Industrial
Group, Inc. and Subsidiaries for the year ended June 30, 1997, and for the six months ended December 31, 1997, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule for the year ended June 30, 1997, and the six months ended December 31, 1997, 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.



Peoria,
Illinois
February 4, 1998



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 1998 and 1999

(Dollars in thousands, except share data)

|                                                                                                                                                 |  | 1998 |         | 1999 |        
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | ---- | -------
|Assets                                                                                                                                           | 
|Current assets:                                                                                                                                  |  |      |         |      |        
|Cash                                                                                                                                             |  | $    |        |      |       
|Trade accounts receivable, less allowance for doubtful accounts of $314 in 1998 and $320 in 1999                                                 |  |      | 15,890  |      | 28,347 
|Inventories                                                                                                                                      |  |      | 14,483  |      | 22,420 
|Prepaid expenses                                                                                                                                 |  |      | 1,263   |      | 898    
|Refundable income taxes                                                                                                                          |  |      | 1,040   |      | 63     
|Deferred income taxes                                                                                                                            |  |      | 1,900   |      | 1,320  
|                                                                                                                                                 |  |      |         |      |        
|Total current assets                                                                                                                             |  |      | 34,576  |      | 53,048 
|                                                                                                                                                 |  |      |         |      |        
|Tax escrow funds                                                                                                                                 |  |      | 1,605   |      |       
|Property, plant, and equipment, net                                                                                                              |  |      | 45,644  |      | 56,333 
|Intangible assets, at cost, less accumulated amortization                                                                                        |  |      | 13,132  |      | 11,827 
|Deferred income taxes                                                                                                                            |  |      | 4,646   |      | 4,646  
|                                                                                                                                                 |  |      |         |      |        
|                                                                                                                                                 |  | $    | 99,603  |      | 125,854
|                                                                                                                                                 |  |      |         |      |        
|Liabilities and Stockholders' Equity (Deficit)                                                                                                   | 
|Current liabilities:                                                                                                                             |  |      |         |      |        
|Outstanding checks in excess of bank balance                                                                                                     |  | $    | 1,578   |      | 1,123  
|Notes payable to banks                                                                                                                           |  |      | 11,700  |      | 21,559 
|Current installments of long-term debt                                                                                                           |  |      | 5,311   |      | 10,076 
|Accounts payable                                                                                                                                 |  |      | 14,292  |      | 26,471 
|Accrued expenses                                                                                                                                 |  |      | 3,977   |      | 5,569  
|Income taxes payable                                                                                                                             |  |      | 160     |      |       
|                                                                                                                                                 |  |      |         |      |        
|Total current liabilities                                                                                                                        |  |      | 37,018  |      | 64,798 
|Long-term debt, excluding current installments                                                                                                   |  |      | 53,281  |      | 59,321 
|Other liabilities                                                                                                                                |  |      | 2,436   |      | 312    
|                                                                                                                                                 |  |      |         |      |        
|Total liabilities                                                                                                                                |  |      | 92,735  |      | 124,431
|                                                                                                                                                 |  |      |         |      |        
|Redeemable preferred stock. Authorized 10,000 shares; issued and outstanding 10,000 shares in 1999                                               |  |      |        |      | 5,379  
|                                                                                                                                                 |  |      |         |      |        
|Stockholders' equity (deficit):                                                                                                                  |  |      |         |      |        
|Class A common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 3,866,944 shares in 1998 and 4,304,116 shares in 1999 |  |      | 39      |      | 43     
|Class B common stock, convertible, $.01 par value. Authorized 200,000 shares; issued and outstanding 200,000 shares in 1998 and 1999             |  |      | 2       |      | 2      
|Additional paid-in capital                                                                                                                       |  |      | 19,937  |      | 19,981 
|Retained deficit                                                                                                                                 |  |      | (13,110 | )    | (23,982
|                                                                                                                                                 |  |      |         |      |        
|Total stockholders' equity (deficit)                                                                                                             |  |      | 6,868   |      | (3,956 
|Commitments and contingencies (note 9)                                                                                                           |  |      |         |      |        
|                                                                                                                                                 |  |      |         |      |        
|                                                                                                                                                 |  | $    | 99,603  |      | 125,854
|                                                                                                                                                 |  |      |         |      |        

See
accompanying notes to consolidated financial statements.



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Year ended June 30, 1997, six months ended December 31, 1997,
and years ended December 31, 1998 and 1999

(Dollars in thousands, except per share data)

|                                                                                                    |  |   |        | December 31, |       
|--------------------------------------------------------------------------------------------------- |  | - | ------ | ------------ | ------
|
|
|Net sales                                                                                           |  | $ | 80,762 |              | 46,598
|Cost of sales                                                                                       |  |   | 70,541 |              | 41,932
|                                                                                                    |  |   |        |              |       
|Gross profit                                                                                        |  |   | 10,221 |              | 4,666 
|                                                                                                    |  |   |        |              |       
|Operating expenses:                                                                                 |  |   |        |              |       
|Selling expenses                                                                                    |  |   | 1,832  |              | 1,202 
|Administrative expenses                                                                             |  |   | 5,171  |              | 9,458 
|                                                                                                    |  |   |        |              |       
|Total operating expenses                                                                            |  |   | 7,003  |              | 10,660
|                                                                                                    |  |   |        |              |       
|Operating income (loss)                                                                             |  |   | 3,218  |              | (5,994
|                                                                                                    |  |   |        |              |       
|Other income (expense):                                                                             |  |   |        |              |       
|Loss on sale of subsidiary                                                                          |  |   |       |              |      
|Interest income                                                                                     |  |   | 15     |              | 9     
|Interest expense                                                                                    |  |   | (3,266 | )            | (1,737
|Other                                                                                               |  |   | 45     |              | 46    
|                                                                                                    |  |   |        |              |       
|Total other income (expense)                                                                        |  |   | (3,206 | )            | (1,682
|                                                                                                    |  |   |        |              |       
|Earnings (loss) before income taxes, cumulative effect of accounting change, and extraordinary item |  |   | 12     |              | (7,676
|Income taxes                                                                                        |  |   | 5      |              | (3,031
|                                                                                                    |  |   |        |              |       
|Earnings (loss) before cumulative effect of accounting change and extraordinary item                |  |   | 7      |              | (4,645
|Cumulative effect of accounting change, net of income tax benefit of $69                            |  |   |       |              |      
|                                                                                                    |  |   |        |              |       
|Earnings (loss) before extraordinary item                                                           |  |   | 7      |              | (4,645
|Extraordinary charge for early retirement of debt, net of
income tax benefit of $339 and $257       |  |   |       |              | 553   
|                                                                                                    |  |   |        |              |       
|Net earnings (loss)                                                                                 |  |   | 7      |              | (5,198
|Dividends and accretion of discount on preferred shares                                             |  |   |       |              |      
|                                                                                                    |  |   |        |              |       
|Net earnings (loss) available to common shareholders                                                |  | $ | 7      |              | (5,198
|                                                                                                    |  |   |        |              |       
|Earnings (loss) available to common shareholders per sharebasic                                    |  | $ |       |              | (2.67 
|                                                                                                    |  |   |        |              |       
|Earnings (loss) available to common shareholders per sharediluted                                  |  | $ |       |              | (2.67 
|                                                                                                    |  |   |        |              |       

See
accompanying notes to consolidated financial statements.



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit)

Year ended June 30, 1997, six months ended December 31, 1997,
and years ended December 31, 1998 and 1999

(Dollars in thousands)

|                                                        |  | Class A
common stock |   | Class B
common stock |     |   |         |  |   |   |  |   |       
|------------------------------------------------------- |  | -------------------- | - | -------------------- | --- | - | ------- |  | - | - |  | - | ------
|
|Balance, June 30, 1996                                  |  | 5,066,665            |   | $                    | 51  |   | 100,000 |  | $ | 1 |  | $ | 458   
|Net earnings                                            |  |                     |   |                      |    |   |        |  |   |  |  |   |      
|                                                        |  |                      |   |                      |     |   |         |  |   |   |  |   |       
|Balance, June 30, 1997                                  |  | 5,066,665            |   |                      | 51  |   | 100,000 |  |   | 1 |  |   | 458   
|Net loss                                                |  |                     |   |                      |    |   |        |  |   |  |  |   |      
|Issuance of stock options                               |  |                     |   |                      |    |   |        |  |   |  |  |   | 745   
|                                                        |  |                      |   |                      |     |   |         |  |   |   |  |   |       
|Balance, December 31, 1997                              |  | 5,066,665            |   |                      | 51  |   | 100,000 |  |   | 1 |  |   | 1,203 
|Cancellation of treasury shares                         |  | (3,222,221           | ) |                      | (33 | ) |        |  |   |  |  |   |      
|MLX Corp. merger                                        |  | 1,907,500            |   |                      | 19  |   | 100,000 |  |   | 1 |  |   | 17,849
|Net earnings                                            |  |                     |   |                      |    |   |        |  |   |  |  |   |      
|Stock options exercised                                 |  | 115,000              |   |                      | 2   |   |        |  |   |  |  |   | 885   
|                                                        |  |                      |   |                      |     |   |         |  |   |   |  |   |       
|Balance, December 31, 1998                              |  | 3,866,944            |   |                      | 39  |   | 200,000 |  | $ | 2 |  |   | 19,937
|Net loss                                                |  |                     |   |                      |    |   |        |  |   |  |  |   |      
|Stock options exercised                                 |  | 437,172              |   |                      | 4   |   |        |  |   |  |  |   | 44    
|Dividends and accretion of discount on preferred shares |  |                     |   |                      |    |   |        |  |   |  |  |   |      
|                                                        |  |                      |   |                      |     |   |         |  |   |   |  |   |       
|Balance, December 31, 1999                              |  | 4,304,116            |   | $                    | 43  |   | 200,000 |  | $ | 2 |  | $ | 19,981
|                                                        |  |                      |   |                      |     |   |         |  |   |   |  |   |       

See accompanying notes to consolidated financial statements.



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Year ended June 30, 1997, six months ended December 31, 1997
and years ended December 31, 1998 and 1999
(Dollars in thousands)

|                                                                                                     |  |   |        | December 31, |       
|---------------------------------------------------------------------------------------------------- |  | - | ------ | ------------ | ------
|
|
|Cash flows from operating activities:                                                                |  |   |        |              |       
|Net earnings (loss)                                                                                  |  | $ | 7      |              | (5,198
|Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |  |   |        |              |       
|Depreciation and amortization of plant and equipment                                                 |  |   | 1,541  |              | 1,094 
|Other amortization                                                                                   |  |   | 370    |              | 185   
|Write-off of intangible assets                                                                       |  |   | 1,854  |              | 552   
|Compensation expense from issuance of stock options                                                  |  |   |       |              | 745   
|Increase (decrease) in allowance for doubtful accounts                                               |  |   | 30     |              | 60    
|Deferred income taxes                                                                                |  |   | 312    |              | (2,530
|(Gain) loss on sale of equipment                                                                     |  |   | (18    | )            |      
|Loss on sale of subsidiary                                                                           |  |   |       |              |      
|Changes in current assets and liabilities, excluding effects of acquisitions:                        |  |   |        |              |       
|Decrease (increase) in accounts receivable                                                           |  |   | (2,907 | )            | 77    
|Decrease (increase) in inventories                                                                   |  |   | 874    |              | 495   
|Decrease in prepaid expenses                                                                         |  |   | 154    |              | 6     
|Decrease (increase) in refundable income taxes                                                       |  |   | (912   | )            | (1,148
|Increase (decrease) in accounts payable                                                              |  |   | 3,167  |              | 1,458 
|Increase (decrease) in accrued expenses and other                                                    |  |   | 671    |              | 5,481 
|                                                                                                     |  |   |        |              |       
|Net cash provided by (used in) operating activities                                                  |  |   | 5,143  |              | 1,277 
|                                                                                                     |  |   |        |              |       
|Cash flows from investing activities:                                                                |  |   |        |              |       
|Capital expenditures                                                                                 |  |   | (5,707 | )            | (5,571
|Proceeds from sale of equipment                                                                      |  |   | 135    |              |      
|Merger with MLX Corp.                                                                                |  |   |       |              |      
|Acquisitions, net of cash acquired                                                                   |  |   |       |              |      
|Increase in intangible assets                                                                        |  |   |       |              |      
|Proceeds from sale of subsidiary                                                                     |  |   |       |              |      
|Decrease (increase) in tax escrow                                                                    |  |   |       |              |      
|Repayment of note receivablestockholder                                                             |  |   |       |              | 18    
|                                                                                                     |  |   |        |              |       
|Net cash used in investing activities                                                                |  |   | (5,572 | )            | (5,553
|                                                                                                     |  |   |        |              |       
|Cash flows from financing activities:                                                                |  |   |        |              |       
|Net borrowings (repayments) of notes payable                                                         |  |   | 661    |              | 5,074 
|Increase (decrease) in checks issued in excess of bank balance                                       |  |   |       |              |      
|Proceeds from issuance of long-term debt                                                             |  |   |       |              |      
|Principal payments on long-term debt and capital leases                                              |  |   | (332   | )            | (188  
|Proceeds from issuance of common stock                                                               |  |   |       |              |      
|Proceeds from issuance of preferred stock                                                            |  |   |       |              |      
|Debt issuance cost                                                                                   |  |   |       |              | (676  
|                                                                                                     |  |   |        |              |       
|Net cash provided by financing activities                                                            |  |   | 329    |              | 4,210 
|                                                                                                     |  |   |        |              |       
|Net increase (decrease) in cash                                                                      |  |   | (100   | )            | (66   
|Cash at beginning of period                                                                          |  |   | 304    |              | 204   
|                                                                                                     |  |   |        |              |       
|Cash at end of period                                                                                |  | $ | 204    |              | 138   
|                                                                                                     |  |   |        |              |       
|Supplemental disclosures of cash flow information:                                                   |  |   |        |              |       
|Cash paid during the year for:                                                                       |  |   |        |              |       
|Interest                                                                                             |  | $ | 3,284  |              | 1,737 
|                                                                                                     |  |   |        |              |       
|Income taxes                                                                                         |  | $ | 687    |              | 308   
|                                                                                                     |  |   |        |              |       
|Noncash financing and investing activities:                                                          |  |   |        |              |       
|Capital lease obligations incurred for machinery and equipment                                       |  | $ | 285    |              |      
|                                                                                                     |  |   |        |              |       

See accompanying notes to consolidated financial statements.



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 1998 and 1999

(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, formerly Morton Metalcraft Holding Co. and subsidiaries ("MMC"), is a contract manufacturer and supplier
of high-quality fabricated sheet metal and plastic components and subassemblies for construction, agricultural, and industrial equipment manufacturers located primarily in the Midwestern
and Southeastern United States. Sales for the year ended December 31, 1999, were approximately as follows: construction30%, agricultural20%, and
industrial50%. The Company's raw materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers.

(b) Principles of Consolidation

The consolidated financial statements include the financial statements of Morton Industrial Group, Inc. (the Company) and its subsidiaries. All
significant intercompany transactions and balances have been eliminated in consolidation. The Company changed its fiscal year end from June 30 to December 31 effective
December 31, 1997.

(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 and the disclosure of contingent
assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates.

(d) Inventories

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

(e) Property, Plant, and Equipment

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

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

(f) Intangible Assets

Intangible assets are recorded at cost and include goodwill, amortized over 25 years; covenants not to compete, amortized over their contractual periods
which range from 3 to 10 years; debt issuance costs, amortized over the term of the related loans; organizational costs, amortized over 20 years; and preproduction costs (prior to
January 1, 1999). Preproduction costs represent costs incurred prior to the production of significant new products and include labor and overhead relating to developing production lines. These
costs were then amortized over a three-year period.



In
April 1998, the Accounting Standards Executive Committee of the AICPA issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities" which requires costs of start-up activities and organization costs to be expensed as incurred. SOP 98-5 was effective for fiscal years beginning after
December 15, 1998, with initial application reported as the cumulative effect of a change in accounting principle. Accordingly, adoption of the statement resulted in a cumulative effect charge
of $1,074, net of income tax benefits, in the first quarter of 1999. The cumulative effect of the change in accounting principle increased 1999 basic and diluted loss available to common shareholders
per share by $.25.

(g) Outstanding Checks in Excess of Bank Balance

The Company utilizes a cash management system which incorporates a zero balance disbursement account funded as checks are presented for payment.

(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.

(i) Stock Option Plan

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

(j) Revenue Recognition

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

(k) Interest Rate Swaps

As required by one of its financing arrangements, the Company enters into interest rate swap agreements to limit the effect of increases in the interest rates
on certain floating rate debt. The difference between the floating rate on the Company's debt and the rate on the swap agreements is accrued as interest rates change and is recorded in interest
expense. During 1998, the Company entered into two swap agreements, expiring May 31, 2003 to June 30, 2003, with an initial aggregate notional amount of $27,500. The effect of these
agreements is to limit the LIBOR interest rate component to 5.87% on half of the Company's $40,366 term loans under the applicable financing arrangement. As a result of these swap agreements interest
expense was increased by $49 in 1998 and $145 in 1999.



(l) Fair Value of Financial Instruments

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

The
fair value of interest rate swaps are the estimated amounts that the Company would receive or pay to terminate the agreements at the reporting date, taking into account current
interest rates and the
current creditworthiness of the counterparties. At December 31, 1998 and 1999, the Company estimates it would have paid $810 and received $202 to terminate the agreements, respectively.

(m) Earnings (Loss) Per Share

Earnings (loss) per share is computed under the provisions of Statement of Financial Accounting Standards No. 128,Earnings Per
Share, which was adopted retroactively by the Company at December 31, 1997. Amounts reported as earnings (loss) per share for the years ended December 31, 1998
and 1999, the six months ended December 31, 1997, and for the year ended June 30, 1997, reflect the earnings available to stockholders for the year divided by the weighted average number
of Class A and Class B common shares outstanding during the year.

(n) Reclassifications

Certain amounts in the 1998 financial statements have been reclassified to conform with the 1999 presentation.

(2) Mergers and Acquisitions

(a) Merger with MLX Corp.

On January 20, 1998, Morton Metalcraft Holding Co. merged (the "Merger") with MLX Corp. ("MLX") with MLX being the surviving corporation. MLX amended
its Articles of Incorporation to change the corporate name of MLX to Morton Industrial Group, Inc.

The
Merger, for financial accounting and reporting purposes, was treated as a reverse merger with a shell company in accordance with generally accepted accounting principles. The
Merger was accounted for as though the Company acquired MLX because (i) the Chairman and CEO of MMC maintained voting control in the surviving corporation; (ii) the Chairman of the Board
of Directors, CEO, and directors of the surviving corporation will consist of individuals appointed by the Chairman and CEO of MMC; (iii) the revenues, net earnings, and current market value of
MMC exceeded those of MLX; and (iv) the market value of the consideration received by the former shareholders of MMC and former holders of options and warrants for MMC common stock, including
MLX common stock, MLX options, and cash exceeded the market value of the securities to be retained by the shareholders of MLX common stock.

The
historical financial statements of MMC, after the date of the merger, became the historical financial statements of Morton Industrial Group, Inc. as the result of the
reverse merger.



The
Merger was accounted for as a capital transaction by the Company. Accordingly, the equity of MLX, including recognized tax benefits, net of the repurchase of shares from certain
MMC shareholders, was recorded as follows:

|Equity of MLX Corp.                        |  | $ | 34,789  |  
|------------------------------------------ |  | - | ------- | -
|Recognition of tax benefit                 |  |   | 3,071   |  
|Repurchase of shares, options and warrants |  |   | (19,991 | )
|                                           |  |   |        
|Effect of merger                           |  | $ | 17,869  |  
|                                           |  |   |        

(b) Acquisition of Carroll George, Inc.

On March 30, 1998, the Company acquired all of the outstanding shares of common stock of Carroll George, Inc. a manufacturer of plastic
components located in Northwood, Iowa. The Company paid a total purchase price of $8,100, including payment of all of Carroll George, Inc.'s revolving credit and term loan debt. This
acquisition was accounted for as a purchase and the total cost in excess of net assets acquired of $200 is being amortized on a straight-line basis over 25 years. See note 3.

(c) Acquisition of B & W Metal Fabricators, Inc.

On April 8, 1998, the Company acquired all of the outstanding shares of common stock of B & W Metal Fabricators, Inc., a manufacturer of
fabricated sheet metal located in Welcome, North Carolina, for $8,500, including the retirement of B & W indebtedness. The purchase consideration included cash payments of $4,900 and the
balance in the form of unsecured subordinated notes. The subordinated notes bear interest at 7.0% per annum, discounted to yield 10.0%, and are payable in 40 equal quarterly installments beginning
July 8, 1998. The acquisition was accounted for as a purchase and the entire cost was allocated to net assets acquired.

(d) Acquisition of Mid-Central Plastics, Inc.

On May 29, 1998, the Company acquired all of the outstanding shares of common stock of Mid-Central Plastics, Inc., a manufacturer of
plastic components located in West Des Moines, Iowa. The Company paid a total purchase price of $23,800, including payment of all of Mid-Central Plastics, Inc.'s revolving credit
and term loan debt. The acquisition was accounted for as a purchase and the total cost in excess of net assets acquired of $9,500 is being amortized on a straight line basis over 25 years.

(e) Acquisition of SMP Steel Corporation

On June 1, 1998, the Company acquired substantially all of the assets of SMP Steel Corporation, a manufacturer of fabricated sheet metal located in
Honea Path, South Carolina. The total purchase
price was $2,200. The acquisition was accounted for as a purchase and the entire cost was allocated to the net assets acquired.

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

On April 15, 1999, Morton Custom Plastics, LLC acquired substantially all of the assets of the Non-Automotive Plastics Group of Worthington
Custom Plastics, Inc. ("Worthington"), a manufacturer of



plastic
components for construction and industrial equipment manufacturers with locations in Harrisburg, North Carolina; St. Matthews, South Carolina; and Lebanon, Kentucky. The Company paid $25,000
in cash, subject to a working capital adjustment, issued 10,000 shares of preferred stock, and provided for a contingent payment to Worthington Custom Plastics, Inc. The contingent payment will
be 15% of the fair market value of the acquired business as of December 31, 2004. The acquisition was accounted for as a purchase and the entire cost was allocated to the net assets acquired.

Morton
Custom Plastics, LLC, is wholly owned by Morton Holdings, LLC. Morton Holdings, LLC is 49% owned by Morton Industrial Group, Inc. and 51% owned by Quilvest Custom
Plastics, an affiliate of a significant shareholder of the Company. However, the LLC agreement specifies that Morton Industrial Group, Inc. will receive 100% of the net income or loss as well
as the proceeds from any sale of Morton Customs Plastics, LLC. Additionally, Quilvest Custom Plastics has granted Morton Industrial Group, Inc. an irrevocable option to purchase its interest in
Morton Holdings, LLC at any time for $1. Accordingly, the results of Morton Holdings, LLC and subsidiaries have been consolidated in the accompanying financial statements.

The
results of operations of the above merged and acquired companies are included in the accompanying financial statements since the date of the respective merger or acquisition.

The
following unaudited pro forma summary presents the Company's consolidated results of operations for the years ended December 31, 1998 and 1999, as if the merger and
acquisitions had occurred at the beginning of each respective year:

|                                                                       |  | December 31, |        
|---------------------------------------------------------------------- |  | ------------ | -------
|
|Net sales                                                              |  | $            | 280,841
|                                                                       |  |              |        
|Net earnings (loss) available to common shareholders                   |  | $            | 3,226  
|                                                                       |  |              |        
|Net earnings (loss) available to common shareholders
per sharebasic   |  | $            | .80    
|                                                                       |  |              |        
|Net earnings (loss) available to common shareholders
per sharediluted |  | $            | .71    
|                                                                       |  |              |        

(3) Sale of Subsidiary

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



(4) Inventories

A summary of inventories follows:

|                                |  | December 31,
|------------------------------- |  | ------------
|
|Finished goods                  |  | $           
|Work in process                 |  |             
|Raw materials                   |  |             
|                                |  |             
|                                |  |             
|Less allowance for obsolescence |  |             
|                                |  |             
|Total inventories               |  | $           
|                                |  |             

(5) Property, Plant, and Equipment

A summary of property, plant, and equipment, including assets held under capital leases as described in note 9 is as follows:

|                                     |  |       |  | December 31,
|------------------------------------ |  | ----- |  | ------------
|
|
|Land and land improvements           |  | 15    |  | $           
|Buildings and leasehold improvements |  | 15-39 |  |             
|Machinery and vehicles               |  | 5-12  |  |             
|Tooling                              |  | 3     |  |             
|Office equipment                     |  | 5-10  |  |             
|Construction in progress             |  |      |  |             
|                                     |  |       |  |             
|                                     |  |       |  |             
|Less accumulated depreciation        |  |       |  |             
|                                     |  |       |  |             
|Property, plant and equipment, net   |  |       |  | $           
|                                     |  |       |  |             

(6) Intangible Assets

A summary of intangible assets is as follows:

|                              |  | December 31,
|----------------------------- |  | ------------
|
|Goodwill                      |  | $           
|Organization costs            |  |             
|Covenants not to compete      |  |             
|Preproduction costs           |  |             
|Debt issuance costs           |  |             
|                              |  |             
|                              |  |             
|Less accumulated amortization |  |             
|                              |  |             
|Net intangible assets         |  | $           
|                              |  |             



During
the year ended June 30, 1997 and the six months ended December 31, 1997, intangible assets with a net value of approximately $1,854 and $552, respectively, were
written off due to the determination that these intangible assets no longer had value.

(7) Notes Payable

In May 1998, the Company entered into a new revolving credit facility with a group of banks. The revolving credit agreement, as amended, permits the
Company to borrow up to a maximum of $19,000. The agreement requires payment of a quarterly commitment fee of .25% of the average daily unused portion of the revolving credit facility. Interest is due
monthly and is based on the Bank's prime rate plus an applicable margin (7.54% and 9.5% at December 31, 1998 and 1999, respectively). The amount available under the revolving credit facility is
limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2,000 of other assets.

To
finance the acquisition of certain assets of Worthington Custom Plastics, Inc., the Company entered into a revolving credit facility which allows for borrowings up to a
maximum of $24,000. Interest is due monthly and is based on the prime rate as published in theWall Street Journalplus an applicable margin (9.0% at
December 31, 1999). The Company also incurs a fee based upon the unused revolving credit facility. The amount available under the revolving credit facility is generally limited to 85% of
qualified accounts receivable and 60% of eligible inventory.

At
December 31, 1998 and 1999, the Company had $11,700 and $21,559, respectively, outstanding and $3,053 and $8,193, respectively, available under its revolving credit
facilities.



(8) Long-term Debt

A summary of long-term debt follows:

|                                                                                                                                                                                         |  | December 31,
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|
|Note payable, bank, with variable rate interest (7.47% and 9.50% as of December 31, 1998 and 1999, respectively), due in various quarterly payments with the balance due May 30, 2003.   |  | $           
|Note payable, bank, with variable rate interest (7.97% and 12.25% as of December 31, 1998 and 1999, respectively), due in various quarterly payments with the balance due June 30, 2005. |  |             
|Note payable, bank, with variable rate interest (9.0% to 10.5% as of December 31, 1999) due in various quarterly payments with the balance due October 15, 2003.                         |  |             
|Subordinated note payable with interest payable at 7.00%, discounted $393 to yield 10.00%, due in quarterly payments with balance due April 8, 2008.                                     |  |             
|Note payable, bank, with interest payable at 8.5%, due in monthly payments with the balance due December 1, 2002.                                                                        |  |             
|Note payable, bank, with interest payable at 7.85%, due in monthly payments with the balance due May 1, 2001.                                                                            |  |             
|Note payable, electric cooperative, non-interest bearing, due in monthly payments with the balance due November 1, 2006.                                                                 |  |             
|Other                                                                                                                                                                                    |  |             
|Capital lease obligations                                                                                                                                                                |  |             
|                                                                                                                                                                                         |  |             
|Total                                                                                                                                                                                    |  |             
|Less current installments                                                                                                                                                                |  |             
|                                                                                                                                                                                         |  |             
|Long-term debt, less current installments                                                                                                                                                |  | $           
|                                                                                                                                                                                         |  |             

In
May 1998, the Company entered into a financing arrangement with a group of banks which originally provided for term loans of up to $55,000. The term loans under this
financing arrangement are amortized quarterly with the balances due May 30, 2003 and June 30, 2005. Interest is payable monthly at
rates based upon the lender's prime rate plus an applicable margin. The agreement is secured by a first lien on all of the Company's accounts receivable, inventory, equipment and various other assets.

This
debt agreement contains restrictions on capital expenditures, incurring additional debt or liens, making investments, mergers and acquisitions, selling assets or making payments
such as dividends or stock repurchases. The revolving credit agreement also contains various financial covenants. Under the terms of the third amendment, the Company shall issue to the lender
warrants, to purchase at $.01 per share, Class A common stock up to 4.99% of its outstanding Class A and Class B common stock as of January 30, 2000, if its credit facility
with that lender is not retired by September 20, 2000. Effective January 30, 2000,



the
Company is paying this lender a fee of .125% per month based upon the amount of the revolving credit commitment and the balance of the term loans.

In
connection with the acquisition of certain assets of Worthington Custom Plastics, Inc. in April 1999, the Company obtained a term loan facility which allows for
maximum borrowings of $26,000 and expires on October 15, 2003. Interest is due monthly and is based on the prime rate as published by theWall Street Journalplus an applicable margin which will vary
depending on certain financial ratios achieved by the Company (9.0% to 10.5% at December 31, 1999). The term loan facility
amortizes quarterly throughout its term. The Company must also prepay certain amounts from the sale of assets, the issuance of new equity capital and from excess cash flow as defined by the agreement.

Under
the most restrictive covenant in any agreement, no amount was available for payment of dividends at December 31, 1998 and 1999.

The
aggregate amounts of long-term debt maturities and principal payments for each of the five years subsequent to December 31, 1999 and thereafter are as follows:

|Fiscal year ending: |  |   |       
|------------------- |  | - | ------
|2000                |  | $ | 10,076
|2001                |  |   | 9,178 
|2002                |  |   | 11,748
|2003                |  |   | 20,171
|2004                |  |   | 12,718
|Thereafter          |  |   | 5,506 
|                    |  |  
|                    |  | $ | 69,397
|                    |  |  

In
connection with replacement of its debt arrangements, the Company wrote off debt issuance costs of $552 and $676 during the six months ended December 31, 1997 and the year
ended December 31, 1998, respectively. Additionally, the Company incurred debt termination fees of $340 during the six months ended December 31, 1997. These early terminations of the
Company's debt agreements resulted in extraordinary charges of $553 and $419, after income tax benefit, for the six months ended December 31, 1997, and year ended December 31, 1998,
respectively. The extraordinary charges were equal to ($.28) and ($.11) per share for basic earnings per share and ($.28) and ($.09) per share for diluted earnings per share for the six months ended
December 31, 1997 and year ended December 31, 1998, respectively.

(9) Leases

The Company is obligated under various capital leases for certain machinery. At December 31, 1999, the gross amount of equipment and related
amortization recorded under capital leases was as follows:

|Machinery                     |  | $ | 487
|----------------------------- |  | - | ---
|Less accumulated amortization |  |   | 166
|                              |  |  
|                              |  | $ | 321
|                              |  |  

Amortization
of assets held under capital leases is included with depreciation expense.



The
present value of future minimum capital lease payments at December 31, 1999 was as follows:

|Year ending December 31:                                         |  |   |    
|---------------------------------------------------------------- |  | - | ---
|2000                                                             |  | $ | 82 
|2001                                                             |  |   | 35 
|                                                                 |  |  
|Total minimum lease payments                                     |  |   | 117
|Less amount representing interest (from 9.5 to 10.2%)            |  |   | 8  
|                                                                 |  |  
|Present value of net minimum capital lease payments              |  |   | 109
|Less current installments of obligations under capital leases    |  |   | 74 
|                                                                 |  |  
|Obligations under capital leases, excluding current installments |  | $ | 35 
|                                                                 |  |  

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 $2,061,
$1,452, $4,254 and $6,733 for the years ended June 30, 1997, six months ended December 31, 1997, and years ended December 31, 1998 and 1999, respectively.

Future
minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 1999 are:

|Year ending December 31:     |  |   |       
|---------------------------- |  | - | ------
|2000                         |  | $ | 6,223 
|2001                         |  |   | 5,799 
|2002                         |  |   | 4,988 
|2003                         |  |   | 4,688 
|2004                         |  |   | 4,010 
|Thereafter                   |  |   | 6,821 
|                             |  |  
|Total minimum lease payments |  | $ | 32,529
|                             |  |  

(10) Income Taxes

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

|                                                                                                                                 |  |   |   | December 31, |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | - | - | ------------ | -
|
|
|Income before extraordinary item                                                                                                 |  | $ | 5 |              | $
|Extraordinary item                                                                                                               |  |   |  |              |  
|Cumulative effect of accounting change                                                                                           |  |   |  |              |  
|Stockholders' equity, for compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes |  |   |  |              |  
|                                                                                                                                 |  |   |   |              |  
|                                                                                                                                 |  | $ | 5 |              | $
|                                                                                                                                 |  |   |   |              |  



Income
tax expense (benefit) consists of the following:

|                                    |  | Current |        | Deferred |   | Total  |  
|----------------------------------- |  | ------- | ------ | -------- | - | ------ | -
|Year ended June 30, 1997:           |  |         |        |          |   |        |  
|Federal                             |  | $       | (250   | )        | $ | 254    |  
|State                               |  |         | (57    | )        |   | 58     |  
|                                    |  |         |        |          |   |        |  
|                                    |  | $       | (307   | )        | $ | 312    |  
|                                    |  |         |        |          |   |        |  
|Six months ended December 31, 1997: |  |         |        |          |   |        |  
|Federal                             |  | $       | (508   | )        | $ | (2,021 | )
|State                               |  |         | 7      |          |   | (509   | )
|                                    |  |         |        |          |   |        |  
|                                    |  | $       | (501   | )        | $ | (2,530 | )
|                                    |  |         |        |          |   |        |  
|Year ended December 31, 1998:       |  |         |        |          |   |        |  
|Federal                             |  | $       |       |          | $ |       |  
|State                               |  |         | 415    |          |   |       |  
|                                    |  |         |        |          |   |        |  
|                                    |  | $       | 415    |          | $ |       |  
|                                    |  |         |        |          |   |        |  
|Year ended December 31, 1999:       |  |         |        |          |   |        |  
|Federal                             |  | $       |       |          | $ |       |  
|State                               |  |         | (1,165 | )        |   |       |  
|                                    |  |         |        |          |   |        |  
|                                    |  | $       | (1,165 | )        | $ |       |  
|                                    |  |         |        |          |   |        |  

Total
income tax expense (benefit) attributable to income before extraordinary item 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, |  
|------------------------------------------------------------------------- |  | - | --- | ------------ | -
|
|
|Computed "expected" tax expense (benefit)                                 |  | $ | 4   |              | $
|State income taxes (benefit), net of Federal income tax benefit (expense) |  |   | 1   |              |  
|Amortization of goodwill                                                  |  |   | 20  |              |  
|Officer's life insurance                                                  |  |   | 16  |              |  
|Increase (decrease) in valuation allowance                                |  |   |    |              |  
|Resolution of tax contingency                                             |  |   |    |              |  
|Other, net                                                                |  |   | (36 | )            |  
|                                                                          |  |   |     |              |  
|                                                                          |  | $ | 5   |              | $
|                                                                          |  |   |     |              |  

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



The
tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1998 and 1999, are
presented below:

|                                                                    |  | December 31, |        
|------------------------------------------------------------------- |  | ------------ | -------
|
|Deferred tax assets attributable to:                                |  |              |        
|Net operating loss and credit carry-forwards                        |  | $            | 50,898 
|Accrued vacation pay                                                |  |              | 301    
|Compensation expense from issuance of stock options                 |  |              | 291    
|Reserves and other                                                  |  |              | 1,305  
|                                                                    |  |              |        
|Total gross deferred tax assets                                     |  |              | 52,795 
|Less valuation allowance                                            |  |              | (39,765
|                                                                    |  |              |        
|Net deferred tax assets                                             |  |              | 13,030 
|                                                                    |  |              |        
|Deferred tax liabilities attributable to:                           |  |              |        
|Plant and equipment, principally due to differences in depreciation |  |              | (6,132 
|Recapture of inventory LIFO valuation for tax purposes              |  |              | (117   
|Excess of tax over book amortization of organization costs          |  |              | (82    
|Discount on debt for financial reporting purposes                   |  |              | (153   
|                                                                    |  |              |        
|Total deferred tax liabilities                                      |  |              | (6,484 
|                                                                    |  |              |        
|Net deferred tax asset (liability)                                  |  | $            | 6,546  
|                                                                    |  |              |        

In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred
tax asset, the Company will need to generate future taxable income of approximately $15,000 prior to the expiration of the net operating loss carryforwards in 2020. Based upon the level of historical
taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, 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, 1999. The amount of the deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

During
1999, net operating loss carryforwards of approximately $74,000 expired unused. Accordingly, deferred tax assets and the related valuation allowance were reduced by $25,000. At
December 31, 1999, the Company has net operating loss carryforwards for Federal income tax purposes of $74,876 which are available to offset future federal taxable income, if any, through 2020.



(11) Redeemable Preferred Stock

Pursuant to the agreement to purchase certain assets of Worthington Custom Plastics, Inc., the Company issued 10,000 shares of preferred stock, without
par value, of Morton Industrial Group, Inc. to Worthington. The preferred stock is mandatorily redeemable five years from its issuance date at $1,000 per share, and will pay or accrue annual
dividends at a rate of 8%. The Company may pay such dividends in cash or in additional shares of preferred stock. The agreement provides that the dividend rate may be reduced based upon changes in
pricing of certain customer contracts. The preferred stock was valued at $4,250 at the time of the acquisition and the discount is being accreted over a five year period using the effective yield
method.

(12) 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.

(13) Stock Option Plans

In 1998, the Company adopted a stock option plan (the "Plan") pursuant to which the Company's Board of Directors may grant stock options to officers and key
employees. The Plan authorizes grants of options to purchase up to 1,166,896 shares of authorized but unissued Class A common stock. Stock options are granted with an exercise price equal to
the stock's fair market value at the date of grant. All stock options under the Plan have ten-year terms and vest and become fully exercisable after three years from the date of grant. At
December 31, 1998 and 1999, there were 303,430 and 247,330 additional shares available for grant under the Plan.

Prior
to the Merger, the Company had a stock option plan under which key officers and employees were granted options at prices equal to fair market value of the stock on the date of
grant. At December 31, 1998 and 1999, there were 602,862 and 165,690 options outstanding under the prior plan.

The
per share weighted-average fair value of stock options granted during 1998 and 1999 was $7.56 and $3.37 on the date of grant using the Black Scholes option-pricing model
(excluding a volatility assumption) with the following weighted-average assumptions: expected dividend yield 0%, risk-free interest rate of 6%, and an expected life of 10 years.

The
Company applies APB Opinion No. 25 in accounting for its Plan and, accordingly, no compensation cost has been recognized for its stock options in the financial statements.
Had the Company



determined
compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net earnings would have been reduced to the pro forma amounts
indicated below:

|                                                                    |  | 1998 |       | 1999 |  
|------------------------------------------------------------------- |  | ---- | ----- | ---- | -
|Net earnings (loss) available to common shareholders:               |  |      |       |      |  
|As reported                                                         |  | $    | 1,664 |      | $
|Pro forma                                                           |  |      | 371   |      |  
|Diluted earnings (loss) available to common shareholders per share: |  |      |       |      |  
|As reported                                                         |  |      | .36   |      |  
|Pro forma                                                           |  |      | .08   |      |  

Stock
option activity during the periods indicated is as follows:

|                                      |  | Number of
shares |   | Weighted
average
exercise
price |       
|------------------------------------- |  | ---------------- | - | ------------------------------- | ------
|Outstanding at June 30, 1996 and 1997 |  | 722,221          |   | $                               | .120  
|Granted                               |  | 46,296           |   |                                 | .900  
|Forfeited                             |  | (100,840         | ) |                                 | (.152 
|Outstanding at December 31, 1997      |  | 667,677          |   |                                 | .174  
|Merger with MLX Corp.                 |  | 50,000           |   |                                 | 7.190 
|Issued                                |  | 863,466          |   |                                 | 16.953
|Exercised                             |  | (115,000         | ) |                                 | (3.220
|                                      |  |                  |   |                                 |       
|Outstanding at December 31, 1998      |  | 1,466,143        |   |                                 | 10.057
|Issued                                |  | 56,100           |   |                                 | 7.109 
|Exercised                             |  | (437,172         | ) |                                 | .111  
|Forfeited                             |  | (28,000          | ) |                                 | (6.60 
|                                      |  |                  |   |                                 |       
|Outstanding at December 31, 1999      |  | 1,057,071        |   | $                               | 14.104
|                                      |  |                  |   |                                 |       

The
following is summary information about the Company's stock options outstanding at December 31, 1999:

|Number of shares |  | Exercise price |        | Expiration date
|---------------- |  | -------------- | ------ | ---------------
|59,697           |  | $              | .108   |                
|59,697           |  |                | .216   |                
|46,296           |  |                | .900   |                
|783,281          |  |                | 17.125 |                
|50,000           |  |                | 16.563 |                
|30,000           |  |                | 13.125 |                
|8,100            |  |                | 8.000  |                
|20,000           |  |                | 7.375  |                
|                 |  |                |        |                
|1,057,071        |  |                |        |                
|                 |  |                |        |                



At
December 31, 1998 and 1999, the number of options exercisable was 584,344 and 456,877, respectively, and the weighted-average exercise price of those options was $.159 and
$10.74, respectively.

On
October 8, 1997, the Company granted options to purchase 46,298 shares of the Company's Class A common stock to an officer of the Company at an option price of $.90
per share. During the six months ended December 31, 1997, the Company recognized compensation expense of $745 in connection with this transaction. In addition, 46,298 of previously outstanding
options to purchase the Company's Class A common stock were canceled.

(14) Concentration of Sales

Sales to customers in excess of 10% of total net sales for the year ended June 30, 1997, six months ended December 31, 1997, and for the years
ended December 31, 1998 and 1999 are as follows:

|                  |  | Customer A |  | Customer B
|----------------- |  | ---------- |  | ----------
|Periods ended:    |  |            |  |           
|June 30, 1997     |  | 39%        |  | 46%       
|December 31, 1997 |  | 34%        |  | 53%       
|December 31, 1998 |  | 28%        |  | 51%       
|December 31, 1999 |  | 20%        |  | 29%       

Trade
accounts receivable with these customers totaled $9,997 and $9,800 at December 31, 1998 and 1999, respectively.

(15) Employee Participation Plan

The Morton Metalcraft Co. Employee Participation Plan allows substantially all employees to defer up to 15 percent of their income through payroll
deduction of pre-tax contributions under section 401(k) of the Internal Revenue Code. The Company matches 25 percent of the first 6 percent of pre-tax
income contributed by each employee. Employees may also make contributions of after-tax income. Additionally, the Company may make discretionary contributions to the plan for the benefit
of participating employees. Certain of the acquired subsidiaries also had defined contribution plans which allow for employee pre-tax contributions and employer matching and discretionary
contributions. The expense charged to operations related to defined contribution plans was $116, $70, $458 and $365 for the year ended June 30, 1997, six months ended December 31, 1997,
and the years ended December 31, 1998 and 1999, respectively



(16) Earnings (Loss) Per Share

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

|                               |  | Year Ended June 30, 1997
|------------------------------ |  | ------------------------
|
|Basic earnings per share       |  | $                       
|                               |  |                         
|Effect of dilutive securities: |  |                         
|Stock options                  |  |                         
|Warrants                       |  |                         
|                               |  |                         
|Diluted earnings per share     |  | $                       
|                               |  |                         

|                              |  | Six Months Ended December 31, 1997 |       
|----------------------------- |  | ---------------------------------- | ------
|
|Basic loss per share          |  | $                                  | (5,198
|                              |  |                                    |       
|Effect of dilutive securities |  |                                    |      
|                              |  |                                    |       
|Diluted loss per share        |  | $                                  | (5,198
|                              |  |                                    |       

|                              |  | Year Ended December 31, 1998
|----------------------------- |  | ----------------------------
|
|Basic earnings per share      |  | $                           
|                              |  |                             
|Effect of dilutive securities |  |                             
|                              |  |                             
|Diluted earnings per share    |  | $                           
|                              |  |                             

|                                                        |  | Year Ended December 31, 1999 |        
|------------------------------------------------------- |  | ---------------------------- | -------
|
|Basic loss per share available to common shareholders   |  | $                            | (10,872
|                                                        |  |                              |        
|Effect of dilutive securities                           |  |                              |       
|                                                        |  |                              |        
|Diluted loss per share available to common shareholders |  | $                            | (10,872
|                                                        |  |                              |        

Options
to purchase 1,057,071 shares of Class A common stock at an average purchase price of $14.142 were outstanding at December 31, 1999, but were not included in the
computation of earnings per share because they were anti-dilutive.

Options
to purchase 722,222 shares of Class A common stock at an average price of $.17 per share and warrants to purchase 666,667 shares of Class A common stock at $.002
per share were outstanding at December 31, 1997, but were not included in the computation of diluted earnings per share because they were anti-dilutive.



(17) Related Party Transactions

During the year ended December 31, 1998 and 1999, respectively, the Company paid $1,117 and $64, respectively, for merger and acquisition advisory
services to two firms affiliated with members of the Company's board of directors.

(18) Segment Reporting

Morton Industrial Group, Inc. has two reportable segments, contract metal fabrication and contract plastic fabrication. The contract metal fabrication
segment provides full-service fabrication of parts and sub-assemblies for the construction, agricultural, and industrial equipment industry. The contract plastic fabrication
segment provides full-service vacuum formed and injection-molded parts and sub-assemblies for the construction, agricultural, and industrial equipment industry. Prior to
March 30, 1998, the Company operated in only one reportable segment, contract metal fabrication.

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

Morton
Industrial Group, Inc. accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices, although
these intersegment sales were insignificant in 1998 and 1999.

Morton
Industrial Group, Inc.'s reportable segments are strategic business units that offer different products and services. They are managed separately because each business
requires different technology and production methods. Most of the businesses were acquired as a unit, and most of the management at the time was retained.

|                                           |  | 1999
|------------------------------------------ |  | ----
|
|Revenues from external customers           |  | $   
|Intersegment revenues                      |  |     
|Interest income                            |  |     
|Interest expense                           |  |     
|Depreciation and amortization              |  |     
|Segment operating profit                   |  |     
|Segment assets including intangible assets |  |     
|Expenditures for segment fixed assets      |  |     



|                                           |  | 1998
|------------------------------------------ |  | ----
|
|Revenues from external customers           |  | $   
|Intersegment revenues                      |  |     
|Interest income                            |  |     
|Interest expense                           |  |     
|Depreciation and amortization              |  |     
|Segment operating profit                   |  |     
|Segment assets including intangible assets |  |     
|Expenditures for segment fixed assets      |  |     



## 

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES   Schedule IIValuation and Qualifying Accounts

|                                   |  | Additions
|---------------------------------- |  | ---------
|
|Allowance for doubtful accounts:   |  |          
|Year ended June 30, 1997           |  | $        
|                                   |  |          
|Six months ended December 31, 1997 |  | $        
|                                   |  |          
|Year ended December 31, 1998       |  | $        
|                                   |  |          
|Year ended December 31, 1999       |  | $        
|                                   |  |          

---





Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Information About the Selection of Our Auditors

Selection of KPMG LLP (February 17, 1999)

On February 17, 1999, the Company's Board of Directors, acting upon the recommendation of the Audit Committee of the Board, selected KPMG LLP ("KPMG")
to serve as the Company's independent accountants for the fiscal year ended December 31, 1998, and the fiscal year ending December 31, 1999, and dismissed Clifton Gunderson L.L.C.
("Clifton Gunderson") as independent accountants for the Company. Clifton Gunderson had served as the independent accountants for Morton Metalcraft Holding Co. (Holding) (which merged with the Company
on January 20, 1998) for the six months ended December 31, 1997, and the fiscal years ended June 30, 1997 and 1996. On April 14, 1998, as reported on
Form 8-K dated April 16, 1998, and Form 8-K/A dated April 22, 1998, our Board of Directors, acting upon the recommendation of its Audit Committee
selected Clifton Gunderson to serve as the Company's independent accountants. The action of the Board of Directors on February 17, 1999, dismissing Clifton Gunderson and appointing KPMG
reflected the Board's determination that our recent and anticipated growth merited our selection of a recognized national accounting firm rather than a smaller, regional firm.

During
the period from April 14, 1998, to and including February 17, 1999, with respect to the Company, and prior thereto with respect to Morton, including the period
from January 1, 1998, to April 14, 1998, the six months ended December 31, 1997, and the fiscal years ended June 30, 1997 and 1996, Clifton Gunderson's reports on the
financial statements of Holding did not contain an adverse opinion or disclaimer of opinion, nor were they qualified in any way, and no reports of Clifton Gunderson were qualified as to uncertainty,
audit scope, or accounting principles. (Clifton Gunderson issued no reports on the financial statements of the Company during the period that began April 14, 1998, and ended February 17,
1999.) During the same periods, neither the Company nor Holding had any disagreements with Clifton Gunderson on any matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. During the period from April 14, 1998, to and including February 17, 1999, with respect to us, and prior thereto with respect to Holding, including the
period from January 1, 1998, to April 14, 1998, the six months ended December 31, 1997, and the fiscal years ended June 30, 1997 and 1996, Clifton Gunderson did not advise
us or Holding that:



During
the period from April 14, 1998, to and including February 17, 1999, with respect to us, and prior thereto with respect to Holding, including the period from
January 1, 1998 to April 14, 1998, the six months ended December 31, 1997, and the fiscal years ended June 30, 1997, and 1996, neither we nor Holding consulted KPMG about
either (a) the application of accounting principles to a specified transaction, either completed or proposed, or (b) the type of audit opinion that might be rendered on our or Holding's
financial statements, or (b) any matter that was a subject of a disagreement between us or



Holding
and Clifton Gunderson or that was a reportable event of the kind described in four listed items in the immediately preceding paragraph. Selection of Clifton Gunderson (April 14, 1998)

Selection of Clifton Gunderson (April 14, 1998)

On April 14, 1998, our Board of Directors, acting upon the recommendation of the Audit Committee of the Board, selected Clifton Gunderson to serve as
our independent accountants for the fiscal year ending December 31, 1998. For the fiscal year ended December 31, 1997, Ernst & Young LLP ("Ernst & Young") served as the
independent auditors for us, and for the fiscal year ended June 30, 1997, and the six months ended December 31, 1997, Clifton Gunderson served as Morton's independent auditors. Following
the Merger, we retained both firms to complete our and Morton's respective audits for the periods ended December 31, 1997.

During
the 1997 and 1996 fiscal years, Ernst & Young's reports on our financial statements did not contain an adverse opinion or disclaimer of opinion, nor were they qualified
in any way. During the same period, we had no disagreements with Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or
procedure. During the 1997 and 1996 fiscal years and during 1998, Ernst & Young did not advise us:



During
the 1997 and 1996 fiscal years of the Company and during any subsequent interim period of either ourselves or Holding, neither we nor Holding consulted Clifton Gunderson about
either (a) the application of accounting principles to a specified transaction, either completed or proposed, or (b) the type of audit opinion that might be rendered on our financial
statements, or (b) any matter that was a subject of a disagreement between us and Ernst & Young or that was a reportable event of the kind described in the four listed items in the
immediately preceding paragraph.



## 

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 2000 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, 1999 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 2000 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, 1999 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 2000 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, 1999 pursuant to Regulation 14A.

Item 13. Certain Relationships and Related Transactions.

The information required by this Item 13 is incorporated herein by reference to the information set forth under the caption "Executive
CompensationCertain Relationships and Related Transactions" in our definitive proxy statement for the 2000 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, 1999 pursuant to Regulation 14A.

PART IV

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

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

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

Schedule
IIValuation and Qualifying Accounts for the year ended June 30, 1997, the six months ended
  December 31, 1997 and the years ended December 31, 1998 and 1999



|Exhibit Number and Document Title                                                                                                                                                                                                        |  | Incorporated by Reference to                                                                                                                         |  | Filed Herewith
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|                                                                                                                                                                                                                                         |  |                                                                                                                                                      |  |               
|2.1 and 10.1Agreement and Plan of Merger Between MLX Corp. and Morton Metalcraft Holding Co., dated as of October 20, 1997                                                                                                              |  | Annex B to the Definitive Proxy Statement on Schedule 14A filed by MLX Corp. with the Securities and Exchange Commission ("SEC") on January 6, 1998. |  |               
|2.2 and 10.2Securities Purchase Agreement Among MLX Corp. and Security Holders of Morton Metalcraft Holding Co., dated as of October 20, 1997                                                                                           |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|3.1 and 4.1Articles of Incorporation of the registrant as Amended prior to January 20, 1998                                                                                                                                             |  | MLX Corp. Form 10-Q for the quarter ended June 30, 1993                                                                                              |  |               
|3.2 and 4.2Articles of Amendment to Articles of Incorporation of the Registrant Effective January 20, 1998                                                                                                                              |  | Exhibit 3 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on February 4, 1998                                                 |  |               
|3.2 and 4.2Bylaws of the Registrant, as Amended                                                                                                                                                                                         |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|4.3 and 10.3Credit Agreement Among the Registrant, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina and Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998                                    |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|4.4 and 10.4Security Agreement executed by Morton Industrial Group, Inc., Morton Metalcraft Co., and Morton Metalcraft Co. of North Carolina in favor of Harris Trust & Savings Bank, individually and as Agent,
dated January 20, 1998 |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|4.5 and 10.5Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co. in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998                                       |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|4.6 and 10.6Pledge Agreement executed by Registrant in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998                                                                                          |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|10.7Limited Indemnification Agreement dated as of October 20, 1997, among MLX Corp., William D. Morton, and Other Morton Metalcraft Shareholders and Option Holders                                                                     |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               
|10.8Industrial Building Lease between Morton Welding Co., Inc., and Morton Metalcraft Co. dated September 1, 1994                                                                                                                       |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                                                         |  |               



|10.9Lease between Caterpillar, Inc., and Morton Metalcraft Co., Inc. dated June 9, 1995                                 |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------- |  | 
|10.10Lease between Agracel, Inc., and Morton Metalcraft Co. dated November 6, 1996.                                     |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.11Employment Agreement dated as of January 20, 1998, between the Registrant and William D. Morton                    |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.12Employment Agreement dated as of January 20, 1998, between the Registrant and Daryl R. Lindemann                   |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.13MLX Corp. 1997 Stock Option Plan                                                                                   |  | Appendix C to the Definitive Proxy Statement on Schedule 14A filed by MLX Corp. with the SEC on January 6. 1998. |  | 
|10.14MLX Corp. 1995 Stock Option Plan                                                                                   |  | MLX Corp. Definitive Proxy Statement on Schedule 14A for the 1995 Annual Meeting of Stockholders                 |  | 
|10.15Master Lease Agreement between Morton Metalcraft Co. and General Electric Capital Corporation dated August 7, 1996 |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.16Guaranty of Master Lease Agreement by Morton Metalcraft Holding Co., dated August 7, 1996                          |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.17Split Dollar Insurance Agreement between Morton Metalcraft Co. and William D. Morton dated February 3, 1995.       |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.18Split Dollar Assignment between William D. Morton and Morton Metalcraft Co. dated February 3, 1995                 |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.19Split Dollar Insurance Agreement between Morton Metalcraft Co. and William D. Morton dated October 10, 1993        |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.20Split Dollar Assignment between William D. Morton and Morton Metalcraft Co., dated October 10, 1993                |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.21Split Dollar Insurance Agreement between Morton Metalcraft Co. and Daryl R. Lindemann dated October 10, 1993       |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 
|10.22Split Dollar Assignment between Daryl R. Lindemann and Morton Metalcraft Co., dated October 10, 1993               |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                                     |  | 



|10.23Death Benefit Agreement between Morton Metalcraft Co. and William D. Morton                                                                                                                                                                       |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                          |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | 
|10.24Salary Continuation Agreement between Morton Metalcraft Co. and William D. Morton dated February 26, 1996.                                                                                                                                        |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997                          |  | 
|10.25Stock Purchase Agreement among the Company and Gary L. George and Gloria J. George, dated March 2, 1998.                                                                                                                                          |  | Exhibit 10.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998 |  | 
|10.26Stock Purchase Agreement among the Company, Joseph T. Buie, Jr., and Ernest J. Butler, dated April 8, 1998.                                                                                                                                       |  | Exhibit 10.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998 |  | 
|10.27Non-negotiable Promissory Note (subordinated) of the Company to Joseph T. Buie, Jr., dated April 8, 1998.                                                                                                                                         |  | Exhibit 10.3 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998    |  | 
|10.28Non-negotiable Promissory Note (subordinated) of the Company to Ernest. J. Butler, dated April 8, 1998.                                                                                                                                           |  | Exhibit 10.4 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998    |  | 
|10.29Stock Purchase Agreement among the Company and Richard L. Goreham, Delores A. Staples and William B. Goreham, dated April 27, 1998.                                                                                                               |  | Exhibit 10.1 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998     |  | 
|10.30Credit Agreement dated May 28, 1998 among the Company, Harris Trust and Savings Bank, and the lenders signatory thereto.                                                                                                                          |  | Exhibit 10.2 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998     |  | 
|10.31Mortgage and Security Agreement with Assignment of Rents executed by Carroll George Inc. dated May 28, 1998.                                                                                                                                      |  | Exhibit 10.3 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998     |  | 
|10.32Deed of Trust and Security Agreement with Assignment of Rents executed by B&W Metal Fabricators, Inc.                                                                                                                                             |  | Exhibit 10.4 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998     |  | 
|10.33Amended and Restated Security Agreement executed by the Company, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George Inc. and B&W Metal
Fabricators, Inc. dated May 28, 1998. |  | Exhibit 10.5 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998     |  | 
|10.34Amended and Restated Pledge Agreement executed by the Company, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George Inc. and B&W Metal
Fabricators, Inc. dated May 28, 1998.   |  | Exhibit 10.6 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998     |  | 



|10.35Amended and Restated Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co., dated May 28, 1998.                                                                                                                                                                      |  | Exhibit 10.7 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998               |  |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | -
|10.35Mortgage and Security Agreement with Assignment of Rents executed by Mid-Central Plastics, Inc. dated May 28, 1998.                                                                                                                                                                                       |  | Exhibit 10.8 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998            |  |  
|10.36First Amendment to Credit Agreement with Harris Trust & Savings Bank.                                                                                                                                                                                                                                     |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1998                                    |  |  
|10.37Asset Purchase Agreement among the Company, Morton Custom Plastics, LLC, and Worthington Custom Plastics, Inc. dated February 26, 1999 and First Amendment to Asset Purchase Agreement, dated as of April 15, 1999,
 among the Company, Morton Custom Plastics, LLC and Worthington Custom Plastics, Inc. |  | Exhibits 10.1 and 10.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 29, 1999 |  |  
|10.38Credit Agreement dated as of April 15, 1999, among Morton Custom Plastics, LLC, Morton Holding, LLC and General Electric Capital Corporation                                                                                                                                                              |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 29,1999            |  |  
|10.39Agreement dated December 31, 1999 by and among Carroll George Inc., Morton Industrial Group, Inc. and Advanced Component Technologies, Inc.                                                                                                                                                               |  | Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on January 18, 2000             |  |  
|10.40Third Amendment to Credit Agreement with Harris Trust & Savings Bank                                                                                                                                                                                                                                      |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on February 29, 2000            |  |  
|13Annual Report                                                                                                                                                                                                                                                                                                |  | Exhibit 13.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 30, 2000              |  |  
|16.1Letter re: change in certifying accountant                                                                                                                                                                                                                                                                 |  | Exhibit 16.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 16, 1998           |  |  
|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
|23.2Consent of Clifton Gunderson, L.L.C.                                                                                                                                                                                                                                                                       |  |                                                                                                                 |  | X
|27.1Financial Data ScheduleMorton Industrial Group, Inc.                                                                                                                                                                                                                                                      |  |                                                                                                                 |  | X

Filed
Form 8-K on January 18,2000 containing the agreement re: the sale of the assets of Carroll George Inc.

Filed
Form 8-K on February 29, 2000 reporting an amendment to its financing arrangements.



## 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

|                      |  | MORTON INDUSTRIAL GROUP, INC.
|--------------------- |  | -----------------------------
|                      |  |                              
|Dated: March 30, 2000 |  | By:                          

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.

|Signatures                                  |  | Title                                                                      |  | Date          
|------------------------------------------- |  | -------------------------------------------------------------------------- |  | --------------
|                                            |  |                                                                            |  |               
|/s/WILLIAM D. MORTONWilliam D. Morton       |  | President, Chief Executive Officer, and Chairman of the Board of Directors |  | March 30, 2000
|/s/THOMAS D. LAUERMANThomas D. Lauerman     |  | Vice President of Finance and Treasurer (Principal Accounting Officer)     |  | March 30, 2000
|/s/FRED. W. BROLINGFred. W. Broling         |  | Director                                                                   |  | March 30, 2000
|/s/ALFRED R. GLANCY IIIAlfred R. Glancy III |  | Director                                                                   |  | March 30, 2000
|/s/MARK W. MEALYMark W. Mealy               |  | Director                                                                   |  | March 30, 2000
|/s/WILLEM F.P. DE VOGELWillem F.P. de Vogel |  | Director                                                                   |  | March 30, 2000



## 

SHAREHOLDER INFORMATION

CORPORATE OFFICES

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

INVESTOR INFORMATION

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

Kehoe,
White, Van Negris & Company, Inc.
766 Madison Avenue
New York, NY 10021
Phone: 212-396-0606 Fax: 212-396-9025

ANNUAL MEETING

The
Annual Meeting of the Shareholders of Morton Industrial Group, Inc. will be held at the Bertha Frank Performing Arts Center located at:

350
N. Illinois Avenue
Morton, IL 61550
Tuesday, June 13, 2000 at 11:00 a.m. (CDT)

FORM 10-K

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

STOCK TRANSFER AGENT AND REGISTRAR

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

American
Stock Transfer & Trust Co.
40 Wall Street
46th Floor
New York, NY 10005
Phone: 800-937-5449

INDEPENDENT PUBLIC ACCOUNTANTS

KPMG
LLP

STOCK MARKET INFORMATION

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

BOARD OF DIRECTORS

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



Fred
W. Broling
  President and CEO
  US Precision Glass

Willem
F.P. de Vogel
  President
  Three Cities Research, Inc.

Alfred
R. Glancy III
  Chairman and CEO
  MCN Energy Group, Inc.

Mark
W. Mealy
  Managing Director
  Bowles Hollowell Conner & Co.

CORPORATE OFFICERS

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

Daryl
R. Lindemann
  Vice President & Secretary

Thomas
D. Lauerman
  Vice President of Finance & Treasurer



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