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

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FORM 10-K

|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------- | ----------------------------------------------------------------------------------------
|FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
|OR                                         
|o                                           | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|FOR THE TRANSITION PERIOD FROM
 TO         

COMMISSION FILE NUMBER 0-13198

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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. ý

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

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

The
aggregate market value of the common stock held by non-affiliates of the registrant (based upon the last reported sale price on the Nasdaq Small Cap Market) on the last business day
of the registrant's most recently completed second fiscal quarter was approximately $440,000.

As
of March 19, 2003, the aggregate market value of the Class A Common Stock held by non-affiliates was approximately $440,000 and there were 4,460,547 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 2003 are incorporated by reference
into Part III hereof.

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

PART I

Item 1. Business

General Development of Business

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

Since
the date of Merger, we have made four acquisitions in 1998, and one acquisition in 1999. We have had one disposition at the end of 1999, one disposition at the end of 2002 and
currently have one reporting unit being held for sale.

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

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

On
April 15, 1999, we acquired from Worthington Custom Plastics three manufacturing facilities that produce plastic components for industrial original equipment manufacturers. The
Worthington acquisition expanded our plastic product offerings to include appliance parts, electronics housings and other injection

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molded and thermoformed plastic products. These plastics facilities operated as Morton Custom Plastics, LLC (MCP, LLC).

On
November 1, 2002, MCP, LLC, filed for protection as debtor-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the District of Delaware. Before filing, MCP, LLC had negotiated the terms of an agreement for sale of substantially all of its assets to Wilbert, Inc., pursuant to an
Asset Purchase Agreement. Under the agreement, Wilbert, Inc. also assumed the liabilities of MCP, LLC under certain of their contracts and leases. This sales transaction was completed on
December 24, 2002, with the cash consideration applied to the reduction of MCP, LLC's senior secured debt. As a result of the sale, the registrant received no proceeds. The results of the MCP,
LLC operations are reported as discontinued operations.

Subsequent
to this series of transactions, the Company now operates its metal fabrications operations in Illinois, North Carolina and South Carolina. The Company also continues to
operate its injection molding business in Iowa, which is held for sale and reported as a discontinued operation.

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Narrative Description of Business

BUSINESS

Overview

We are a contract manufacturer of highly engineered metal components and subassemblies for industrial, construction, agricultural and recreational vehicle
original equipment manufacturers ("OEM's"). Our metal products include cabs, engine enclosures, panels, platforms, frames and complex weldments used in backhoes, excavators, tractors, motor homes and
similar industrial equipment. Our largest customers include Deere & Co. ("Deere") and Caterpillar Inc. ("Caterpillar"). Our seven manufacturing facilities are located in the Midwestern
and southeastern United States in close proximity to their customers. Our plastics business that is being held for sale manufactures plastic components and subassemblies in one facility for use by
manufacturers of off-road recreational vehicles. We have not yet entered into any agreements or commitments with respect to the sale of the plastics business.

MARKETS

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

Historically,
our largest customers, Deere and Caterpillar, have been supplied by a large number of local suppliers that would each produce a small number of products. As these
OEMs have increased the complexity of their equipment and become more dependent on component and subassembly suppliers,
they have reduced the size of their supplier base and have established close relationships with a smaller number of sophisticated suppliers who can provide a range of services, including design
engineering, prototyping, sophisticated quality systems, and just-in-time delivery. The high levels of service necessary to serve these customers, coupled with significant
tooling investments, have resulted in the sole-sourcing of many products rather than dual or multi-sourcing. Currently, we are the sole-source provider of over 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.

Virtually
all of our customers are located in the United States, and we do not have material sales to foreign customers.

Industrial Equipment

We produce a range of components and subassemblies for equipment used in a variety of industrial applications. Our products are used in store fixtures, power
generators and recreational vehicles. Customers in the industrial equipment area generally serve stable or growth markets, and these customers include Caterpillar, Hallmark and Arctic Cat. Industrial
equipment products account for approximately 20% of our 2002 net sales.

Construction Equipment

The $22 billion U.S construction equipment industry includes construction, earth moving and forestry equipment, as well as some material handling
equipment, lifts, off-highway trucks and a variety of machines for specialized industrial applications. Caterpillar and Deere dominate the U.S. construction equipment industry, and
together accounted for approximately 50% of total unit sales in 2002. We supply metal components and subassemblies, such as engine enclosures, cabs, platforms, frames and complex

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weldments as well as plastic components such as interior cab dash surround panels, air ducts and handles. Our customers use these products in backhoes, excavators, wheel loaders,
skid-steer loaders, lifts and similar construction equipment. Our sales per construction equipment vehicle range from $500 to $2,500. Construction equipment products account for
approximately 58% of our 2002 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 2002. We supply metal components and subassemblies
such as steps, feeder housings, grills, and landing decks as well as plastic components such as fenders, tool boxes, facia and covers used in tractors, combines and other agricultural equipment. Our
sales per agricultural equipment vehicle range from $200 to $4,000. Agricultural equipment products account for approximately 22% of our 2002 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 Plastic Components (Operation held for sale)

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

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capabilities in injection molded processes include a wide range of injection molding machine press sizes and gas assist units.

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.

Prototyping/Tooling

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

Part Decorating and Exterior Finishing

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

Systems and Controls

Consistent with our emphasis on technology, computer systems and controls are an integral part of our operating strategy. We have invested heavily in management
information systems and computer aided design capabilities and control functions, particularly during the last several years. We also use computer systems to provide timely performance measurements of
shop floor quality and activity, daily actual cost

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

Manufacturing/Production

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

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

Injection Molded Plastic Components.Our injection molded plastic capabilities include secondary operations such as
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. As noted above, we are holding our plastics business for sale.

Raw Materials

The primary raw materials that we use are sheet steel, compounded injection molding resins, assembly parts and paint. Prices of these raw materials fluctuate,
although the price of our most significant raw material, steel, had dropped over the past several years, until 2002, when we experienced some increases in pricing. 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

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

Financial Information about Industry Segments

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

Backlog

Our backlog of orders for continuing operations was approximately $95 million at December 31, 2002, and $90 million at December 31,
2001. We anticipate that we will substantially fill all of the December 31, 2002, backlog orders during the current year.

Patents, Trademarks, Licenses, Franchises, and Concessions

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

Working Capital Items

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

Employees

As of March 1, 2003, we employed 977 employees in our continuing operations, of which 798 were hourly and 179 were salaried. None of these employees was
subject to a collective bargaining agreement. We believe our relationship with our employees is good.

Internet

You can find our web page atwww.mortongroup.com. We posted our 2001 Annual Report on Form 10-K
and our Annual Report to Shareholders on our web page, and we intend to post this Annual Report on Form 10-K and the 2002 Annual Report to Shareholders as well. We have not begun
posting quarterly and other SEC filings.

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Item 2. Properties

The following table presents summary information regarding our facilities. The properties are owned except where indicated by the word "leased". Lease terms for
these facilities expire between 2003 and 2008. Our facilities are generally located in close proximity to our customers.

|Location                                |  | Approx. Sq. Ft. |  | Products Manufactured                                                                                                                                               
|--------------------------------------- |  | --------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1021 West Birchwood Street,
Morton, IL  |  | 280,000         |  | Sheet metal enclosures and boxes, sheet metal component packages and store fixtures                                                                                 
|400 Detroit Avenue,
Morton, IL (leased) |  | 155,000         |  | Special weldments, including seat modules, cabs and fabricated steel tanks                                                                                          
|Peoria, IL (leased)                     |  | 140,000         |  | Special weldments, including feeder housings and tractor frames; the operations of the Peoria facility will be transferred to the two Morton facilities during 2003.
|Apex, NC (leased)                       |  | 100,000         |  | Special weldments, sheet metal enclosures and boxes, sheet metal component packages and fabricated steel tanks                                                      
|Honea Path, SC                          |  | 30,000          |  | Store fixtures and sheet metal component packages                                                                                                                   
|Welcome, NC                             |  | 185,000         |  | Sheet metal enclosures and boxes, special weldments, fabricated steel tanks and sheet metal component packages                                                      
|West Des Moines, IA
(held for sale)     |  | 115,000         |  | Off road work and recreational vehicle parts and subassemblies, off road vehicle interiors and furniture components                                                 

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

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

Item 3. Legal Proceedings

Worthington

On May 1, 2000, Worthington Industries, Inc. (Worthington) filed suit (in the United States District Court for the Southern District of Ohio,
Eastern Division) against us and Morton Custom Plastics, LLC ("MCP, LLC") related to MCP, LLC's 1999 acquisition of the non-automotive plastics business from Worthington. Worthington
claimed that it was owed additional amounts under the sale agreement and a related service agreement, and that it was owed dividends on shares of our preferred stock that it received. We believed that
certain warranties and representations made by Worthington at the time of acquisition were breached and that amounts claimed by Worthington were not due. We had filed a counterclaim against
Worthington related to these matters. The case has been stayed because of the bankruptcy of MCP, LLC (discussed immediately below), although it appears that Worthington may attempt to continue the
litigation against us on the dividend matter.

Morton Custom Plastics, LLC

On November 1, 2002, Morton Custom Plastics, LLC (MCP, LLC), Morton Holdings, LLC (Holdings) and Morton Lebanon Kentucky IBRB, LLC (Kentucky), three of our
subsidiaries, filed as debtors-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Before
filing, MCP, LLC and Kentucky had negotiated the terms of an agreement for sale of substantially all of their assets to Wilbert, Inc., pursuant to an Asset

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Purchase Agreement. Under the agreement, Wilbert, Inc. also agreed to assume the liabilities of MCP, LLC and Kentucky under certain of their contracts and leases.

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

Other

On January 30, 2001, Victory Lane Productions, LLC filed suit against MCP, LLC (in the Circuit Court of Rankin County, Mississippi) related to a breach of
contract for failure to deliver ordered product. The plaintiff was seeking compensatory and punitive damages, and MCP, LLC, filed a counterclaim. The case was stayed as a result of the bankruptcy of
MCP, LLC.

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

Item 4. Submission of Matters to Vote of Security Holders

Not applicable

PART II

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

From January 1 through October 19, 2000, our Class A common stock traded on the Nasdaq Small Cap Market under the symbol "MGRP". Effective
October 20, 2000, the Company's Class A common stock began trading on the Nasdaq Small Cap Market under the symbol "MGRPC". Effective April 11, 2001, the Company's ticker symbol
on the Nasdaq Small Cap Market was restored to MGRP. Effective August 1, 2002, trading of the Company's Class A common stock moved to the OTC Bulletin Board from the Nasdaq Small Cap
Market (the Company elected not to appeal a notice from the Nasdaq Listing Qualifications Department to delist the Company's Class A common stock). Subsequent to this change, the Company's
ticker symbol was changed to MGRPE. Effective September 27, 2002, the
trading of the Company's Class A common stock was moved to OTC. Effective with this change, the Company's ticker symbol returned to MGRP.

The
following table sets forth for 2001 and 2002 the quarterly high and low bid prices and, with respect to the OTC market, high and low bid quotations. OTC market quotations reflect
interdealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

|     |                          | High |   | Low  
|---- | ------------------------ | ---- | - | -----
|2002 |                          |      |   |      
|     | October 1 to December 31 |      | $ | 0.350
|     | July 1 to September 30   |      | $ | 0.350
|     | April 1 to June 30       |      | $ | 1.050
|     | January 1 to March 31    |      | $ | 1.200
|2001 |                          |      |   |      
|     | October 1 to December 31 |      | $ | 1.500
|     | July 1 to September 30   |      | $ | 1.500
|     | April 1 to June 30       |      | $ | 2.000
|     | January 1 to March 31    |      | $ | 2.000

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We
obtained the foregoing information from research services made available by Nasdaq for 2001 and the first two quarters of 2002, and by Pink Sheets for the last two quarters of 2002.

As
of March 18, 2003 there were 3,348 holders of record and 1,814 beneficial holders of our Class A Common Stock.

We
did not declare or pay any common stock dividends in our fiscal years ended December 31, 2002 and 2001. Our credit agreements preclude the payment of dividends.

During
the year ended December 31, 2002, we did not issue any shares of capital stock that were unregistered under the Securities Act of 1933.

On
September 20, 2000, the Company issued warrants to purchase 238,548 shares of its Class A common stock to the members of the Harris syndicate pursuant to a credit
agreement amendment. The warrants are exercisable at any time through December 31, 2005 at an exercise price of $.01 per share.

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Item 6. Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA

Set forth below are certain selected historical financial data. This information should be read in conjunction with our financial statements and the related notes
thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein. The financial data for, and as of the end of, the fiscal years ended
December 31, 1998, 1999, 2000, 2001 and 2002 are derived from our audited financial statements.

|                                                                                                       |                                                       | Year Ended December 31, |        
|------------------------------------------------------------------------------------------------------ | ----------------------------------------------------- | ----------------------- | -------
|
|Operating data:                                                                                        |                                                       |                         |        
|Net sales                                                                                              |                                                       | $                       | 116,293
|Cost of sales                                                                                          |                                                       |                         | 99,925 
|Gross profit                                                                                           |                                                       |                         | 16,368 
|Selling and administrative expenses                                                                    |                                                       |                         | 11,313 
|Restructuring charges                                                                                  |                                                       |                         |       
|Operating income (loss)                                                                                |                                                       |                         | 5,055  
|Gain (loss) on sale of business units and other                                                        |                                                       |                         | (176   
|Interest expense, net                                                                                  |                                                       |                         | (3,618 
|Earnings (loss) before income taxes, accounting change and extraordinary charge                        |                                                       |                         | 1,261  
|Income taxes                                                                                           |                                                       |                         | 151    
|Earnings (loss) before discontinued operations and cumulative effect of change in accounting principle |                                                       |                         | 1,110  
|Net income (loss) from operations of discontinued plastics operations                                  |                                                       |                         | 163    
|Earnings (loss) before cumulative effect of accounting change                                          |                                                       |                         | 1,273  
|Cumulative effect of change in accounting principle                                                    |                                                       |                         |       
|Net earnings (loss)                                                                                    |                                                       |                         | 1,273  
|Accretion of discount on preferred shares                                                              |                                                       |                         |       
|Net earnings (loss) available to common shareholders                                                   |                                                       |                         | 1,273  
|Earnings (loss) per sharebasic and diluted:                                                           |                                                       |                         |        
|                                                                                                       | Earnings (loss) from continuing operations.           |                         |        
|                                                                                                       | Earnings (loss) from discontinued operations          |                         |        
|                                                                                                       | Cumulative effect of a change in accounting principle |                         |        
|                                                                                                       | Total earnings (loss) per share                       |                         |        
|Financial position (at end of period):                                                                 |                                                       |                         |        
|Working capital                                                                                        |                                                       | $                       | 8,448  
|Total assets                                                                                           |                                                       |                         | 99,603 
|Total debt                                                                                             |                                                       |                         | 70,292 
|Stockholders' equity (deficit)                                                                         |                                                       | $                       | 6,058  

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

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

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

General

We are a contract manufacturer of highly engineered metal components and subassemblies for construction, agricultural and industrial original equipment
manufacturers. Our largest customers, Caterpillar Inc. and Deere & Co., accounted for approximately 87% of our 2002 net sales.

We
price our fabricated metal products on a cost plus basis. In pricing our products, we consider the volume of the product to be manufactured, required engineering resources and the
complexity of the product.

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

Results of Operations

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

|                                                                                             |  | Year Ended December 31, |  
|-------------------------------------------------------------------------------------------- |  | ----------------------- | -
|
|Statements of Operations Data:                                                               |  |                         |  
|Net sales                                                                                    |  | 100.0                   | %
|Gross profit                                                                                 |  | 13.2                    |  
|Selling and administrative expenses                                                          |  | 8.7                     |  
|Restructuring charges                                                                        |  |                        |  
|Operating income                                                                             |  | 4.4                     |  
|Interest expense, net                                                                        |  | 5.0                     |  
|Loss before income taxes, discontinued operations and cumulative effect of accounting change |  | (.7                     | )

Year Ended December 31, 2002 versus Year Ended December 31, 2001

Net sales for the year ended December 31, 2002 were $116.6 million compared to $127.1 million for the year ended December 31, 2001, a
decrease of $10.5 million or 8.3%. The sales decrease resulted primarily from decreased unit demand by customers, the soft status of the general economy and some continuing modest pricing
pressure from major customers. Based upon forecasts and the addition of new customers, the Company currently anticipates modest revenue growth for 2003.

Sales
to Caterpillar and Deere were approximately 87% and 91% of our net sales for 2002 and 2001, respectively.

Gross
profit for the year ended December 31, 2002 was $15.0 million compared with $15.7 million for the year ended December 31, 2001, a decrease of
$0.7 million or 4.4%. The Company's gross profit percentage increased to 12.9% from 12.4%. The gross profit percentage was reduced by increased raw materials costs, but offset by reduced
manufacturing costs resulting from various manufacturing cost saving initiatives.

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Selling and administrative expenses for the year ended December 31, 2002 amounted to $12.2 million, or 10.4% of sales, compared with $13.1 million, or 10.3% of sales
in the prior year, a decrease of nearly $1.0 million or 7.3%. This decreased expense related primarily to a continuing effort to achieve appropriate employment levels for selling and
administration functions and the elimination of goodwill amortization of $0.4 million due to the implementation of SFAS 142.

Interest
expense in the year ended December 31, 2002 amounted to $4.2 million compared to $6.7 million in 2001. This decrease resulted from both lower average levels
of debt and lower average interest rates.

Other
income for the year ended December 31, 2002 resulted primarily from an unrealized gain of $365,000 on the Company's interest rate swaps. Other expense of $610,000 for the
year ended December 31, 2001, resulted primarily from an unrealized loss on the Company's interest rate swap.

We
recognized an income tax benefit of approximately $0.3 million from continuing operations in 2002, which represents a Federal income tax refund recovered under the carryback
provisions of theJobs Creation and Worker Assistance Act of 2002. We did not provide a tax benefit on the continuing operations loss of
$1.0 million. The impact of the net operating loss carryforward from continuing operations was offset by a change in the valuation allowance. The deferred tax asset valuation allowance was also
increased to reflect lower anticipated utilization of income tax net operating loss carryforwards due to the discontinuation of the plastics operations. The increase in the valuation allowance related
to discontinued operations is offset by Federal income tax refunds of $1.2 million. The utilization of the income tax net operating loss carryforwards, and the realization of deferred tax
assets, is based upon the Company's future ability to generate the estimated taxable income.

The
net income of discontinued operations of approximately $6.8 million includes a gain on disposal of approximately $17.8 million, operating losses of approximately
$8.9 million, an income tax benefit related to Federal income tax refunds of approximately $1.2 million and an income tax charge related to the decrease in deferred income tax asset of
approximately $3.4 million. The operating losses of discontinued operations were comparable to the 2001 total of $8.6 million. The discontinued operations are discussed in more detail in
Note 3 of the accompanying financial statements.

In
accordance with SFAS No. 142, the Company has not amortized goodwill during the year ended December 31, 2002. Had goodwill not been amortized during 2001, net earnings
(loss) available to common stockholders for the year 2001 would have been $(17.4) million, or $(3.78) per share.

Net
loss available to common stockholders decreased from $(17.8) million for the year ended December 31, 2001 to $(3.3) million for the year ended
December 31, 2002. This decreased net loss resulted primarily from improved manufacturing processes on reduced sales, reduced interest costs on lower debt levels, the benefits of a Federal
income tax refund, and a gain recognized on the disposal of discontinued plastics operations, reduced by the cumulative effect of change in an accounting principal of $8.1 million to recognize
impairment of goodwill.

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

Net sales for the year ended December 31, 2001 were $127.1 million compared to $147.4 million for the year ended December 31, 2000, a
decrease of $20.3 million or 13.8%. The sales decrease resulted primarily from a significant project completed in 2000 that did not repeat in 2001, decreased unit demand by customers, the soft
status of the general economy and from some continuing modest pricing pressure from major customers.

Sales
to Caterpillar and Deere were approximately 91% and 89% of our net sales for 2001 and 2000, respectively.

14

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Gross
profit for the year ended December 31, 2001 was $15.7 million compared with $19.4 million for the year ended December 31, 2000, a decrease of
$3.7 million or 18.9%. The Company's gross profit percentage decreased to 12.4% from 13.2%. The gross profit dollar decrease and percentage decrease were reduced primarily by the decrease in
sales and related increased amounts of manufacturing variances.

Selling
and administrative expenses for the year ended December 31, 2001 amounted to $13.1 million, or 10.3% of sales, compared with $12.9 million, or 8.7% of sales
in the prior year, an increase of $0.3 million or 2.0%. The increased percentage related primarily to the decrease in sales.

The
Company recognized a restructuring charge of $1.3 million in the fourth quarter, 2001, associated with the restructuring and consolidation of certain of its Illinois plants.
The restructuring included $510,000 for costs associated with certain leased facilities which will no longer be used, and a $813,000 impairment charge for the abandonment of certain leasehold
improvements.

Interest
expense in the year ended December 31, 2001 amounted to $6.7 million compared to $7.4 million in 2000. This decrease resulted from both lower average levels
of debt and lower average interest rates.

Other
expense for the year ended December 31, 2001 resulted primarily from an unrealized loss of $610,000 on the Company's interest rate swaps. Other expense of $248,000 for the
year ended December 31, 2000, resulted primarily from an unrealized loss on the Company's interest rate swap.

We
recognized income tax expense of approximately $1.2 million from continuing operations in 2001, which represents an increase in our deferred tax asset valuation allowance. The
deferred tax asset valuation allowance was increased to reflect lower anticipated utilization of income tax net operating loss carryforwards than estimated at the preceding year end. An additional
income tax charge is included in discontinued operations. The utilization of the income tax net operating loss carryforwards, and the realization of deferred tax assets, is based upon the Company's
future ability to generate the estimated taxable income.

The
net loss of discontinued operations of approximately $9.5 million includes operating losses of approximately $8.6 million and an income tax charge related to the
decrease in deferred income tax assets of approximately $0.9 million. This loss, compared to operating income in 2000 of $0.5 million from discontinued operations resulted primarily from
a significant decrease in sales volume. The discontinued operations are discussed in more detail in Note 3 of the accompanying financial statements.

Net
loss available to common stockholders increased from $(0.3) million for the year ended December 31, 2000 to $(17.8) million for the year ended
December 31, 2001. This increased net loss resulted primarily from reduced sales, the net loss related to discontinued operations and the reduction of the deferred tax assets, offset by reduced
interest costs on lower debt levels.

Financial Position and Liquidity

Historically, we have funded our business with cash generated from operations and borrowings under revolving credit and term loan facilities. In the years ended
December 31, 2000, 2001 and 2002 we generated cash from operating activities of $2.9 million, $12.4 million and $7.5 million, respectively. Our capital expenditures for the
years ended December 31, 2000, 2001 and 2002 were $6.7 million, $4.4 million and $4.0 million, respectively. These capital expenditures were principally for additions to
improve or maintain our manufacturing capacity and efficiency.

Our
consolidated working capital at December 31, 2002 was a deficit of $2.3 million compared to a working capital deficit of $1.5 million at December 31,
2001. This represents a decrease in working capital of approximately $0.8 million. This working capital decrease results from several factors, including the impacts of discontinued operations.

15

---

In
February 2002, the Company entered into a new secured revolving credit facility with the Harris syndicate. The revolving credit agreement permits the Company to borrow up to a
maximum of $21.0 million. The agreement requires payment of a quarterly commitment fee of .50% per annum of the average daily unused portion of the revolving credit facility. Interest is due
monthly and is based upon bank prime plus 1.5% (effective rate of 5.75% at December 31, 2002). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The amount available
under the revolving credit facility is limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2.5 million of other assets. The revolving credit agreement was
originally set to mature on July 1, 2003. As described below, that date has been extended to April 1, 2004. At December 31, 2002, the Company had $18.6 million outstanding
and $262,000 available under this credit facility.

In
February 2002, the Company also entered into a secured term loan arrangement with the Harris syndicate for a term loan of $32.9 million. The new Harris syndicate term
loan arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement is amortized monthly with principal payments ranging from
$235,000 to $500,000 and the balance of $24.9 million due originally on July 1, 2003 (now extended to April 1, 2004). Interest is due monthly and is based upon bank prime plus
1.5% (effective rate of 5.75% at December 31, 2002). The Company, alternatively, could select a LIBOR plus 4.0% interest rate.

In
connection with these Harris syndicate loans, we have granted the lender a first lien on all of the Company's accounts receivable, inventory, equipment and various other assets. These
Harris syndicate debt agreements contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, asset sales and payments such as dividends or stock
repurchases. No amount was available for payment of dividends at December 31, 2001 and 2002. The agreements also impose various financial covenants, including financial performance ratios.

The
February, 2002 Harris syndicate agreement has been amended three times, most recently on February 28, 2003. Among the key provisions of the amendments: (i) extension of
the maturity date to April 1, 2004; (ii) revisions in the monthly amortization of principal, with $50,000 payable on February 28, 2003, $100,000 payable on March 31, 2003,
$350,000 payable on April 30, 2003, and $500,000 payable each month end thereafter until December 31, 2003, and $250,000 payable each month end thereafter until the April 1, 2004
maturity date, at which time the term loan balance of $22.2 million will be due. Also, effective February 28, 2003 under the revolving credit facility, the limit of eligible inventory
was increased to 60% and the amount of other assets eligible became $3.5 million. The Company intends to obtain loans or funding support from other sources, or extend its existing credit
facility, by the maturity date of the current agreement.

Should
the Mid-Central Plastics, Inc. operations be sold prior to maturity of the Harris syndicate loans, a portion of the net cash proceeds from the sale are required
to be applied against the balance of the revolving line of credit.

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 $2.8 million and a termination date of May 31, 2003. The second agreement has a notional principal amount of $13.9 million and a termination date of June 30, 2003. The
notional principal amount declines over the term of both agreements based upon a defined amortization schedule. The counter party waived its unilateral right to cancel both agreements as of
June 30, 2001. As described in Item 7A below, these agreements are for the purpose of limiting the effects of interest rate increases on half of the Company's floating rate term debt.

Historically,
we have met our near term liquidity requirements for our businesses with cash flow from operations, the Harris line of credit, and management of our working capital to
reflect current levels of operations. The national economic slowdown, which our reduced revenues reflect, has increased pressure on these sources of liquidity. We anticipate that the February, 2002
agreements with the Harris syndicate,

16

---

as amended on February 28, 2003, will assist us in meeting our liquidity requirements through the term of these agreements.

As
part of the financing for the 1999 Morton Custom Plastics, LLC acquisition, we issued 10,000 shares of redeemable preferred stock, which becomes redeemable on
April 15, 2004 at $1,000 per share plus any dividends accrued since April 15, 1999. The $10 million face value preferred stock was recorded at its fair value of
$4.25 million. We are accreting the discount over a five year period using the effective yield method. Dividends are payable in kind at the rate of 8% per annum. Certain provisions of the
agreement with Worthington preclude the payment of dividends, and no dividends have been accrued since 1999. There are legal proceedings related to certain Worthington matters as described in
Part I, Item 3. We plan to continue negotiations with Worthington to resolve all of the issues presented by the preferred stock, within the limitations of our available liquidity in
2004, but there are no assurances that we will be successful in our efforts.

We
incurred $4.0 million of capital expenditures during 2002, primarily for updating and purchases of manufacturing equipment. Of the $4.0 million of capital expenditures,
$2.3 million related to continuing operations.

We
estimate that our capital expenditures for continuing operations in 2003 will total approximately $2.4 million, of which $1.0 million will be for new production
equipment and the remaining $1.4 million will be for normal replacement items.

17

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Selected Quarterly Financial Information (Unaudited)

Selected quarterly financial information for the years ended December 31, 2002 and 2001 is as follows:

|      |                                                                                           | First
quarter                                       |       | Second
quarter |       | Third
quarter |         | Fourth
quarter |       | Total
year |      
|----- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | -------------- | ----- | ------------- | ------- | -------------- | ----- | ---------- | -----
|
|2002: |                                                                                           |                                                     |       |                |       |               |         |                |       |            |      
|      | Sales                                                                                     |                                                     | $     | 29,177         |       | $             | 32,241  |                | $     | 28,981     |      
|      | Gross margin                                                                              |                                                     |       | 4,117          |       |               | 4,850   |                |       | 3,385      |      
|      | Operating income (loss)                                                                   |                                                     |       | 1,160          |       |               | 1,402   |                |       | 647        |      
|      | Earnings (loss) before discontinued operations and cumulative effect of accounting change |                                                     |       | 184            |       |               | (473    | )              |       | (321       | )    
|      | Net earnings (loss) from discontinued operations                                          |                                                     |       | (526           | )     |               | (2,770  | )              |       | (4,326     | )    
|      | Cumulative effect of change in accounting principle                                       |                                                     |       |               |       |               | (8,118  | )              |       |           |      
|      | Net earnings (loss) available to common shareholders                                      |                                                     |       | (621           | )     |               | (11,684 | )              |       | (4,978     | )    
|      | Earnings per share of common stock-basic and diluted:                                     |                                                     |       |                |       |               |         |                |       |            |      
|      |                                                                                           | From continuing operations                          |       |                | (0.02 | )             |         | (0.17          | )     |            | (0.14
|      |                                                                                           | From discontinued operations                        |       |                | (0.12 | )             |         | (0.59          | )     |            | (0.92
|      |                                                                                           | Cumulative effect of change in accounting principle |       |                |      |               |         | (1.75          | )     |            |     
|      |                                                                                           |                                                     | Total |                |       | (0.14         | )       |                | (2.51 | )          |      

|      |                                                                                           | First
quarter                                       |       | Second
quarter |       | Third
quarter |        | Fourth
quarter |       | Total
year |      
|----- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | -------------- | ----- | ------------- | ------ | -------------- | ----- | ---------- | -----
|
|2001: |                                                                                           |                                                     |       |                |       |               |        |                |       |            |      
|      | Sales                                                                                     |                                                     | $     | 41,258         |       | $             | 35,534 |                | $     | 27,508     |      
|      | Gross margin                                                                              |                                                     |       | 5,649          |       |               | 5,410  |                |       | 4,139      |      
|      | Operating income (loss)                                                                   |                                                     |       | 1,737          |       |               | 2,336  |                |       | 844        |      
|      | Earnings (loss) before discontinued operations and cumulative effect of accounting change |                                                     |       | (81            | )     |               | 615    |                |       | (915       | )    
|      | Net earnings (loss) from discontinued operations                                          |                                                     |       | (120           | )     |               | (1,839 | )              |       | (706       | )    
|      | Cumulative effect of change in accounting principle                                       |                                                     |       |               |       |               |       |                |       |           |      
|      | Net earnings (loss) available to common shareholders                                      |                                                     |       | (436           | )     |               | (1,496 | )              |       | (1,901     | )    
|      | Earnings per share of common stock-basic and diluted:                                     |                                                     |       |                |       |               |        |                |       |            |      
|      |                                                                                           | From continuing operations                          |       |                | (0.07 | )             |        | 0.07           |       |            | (0.26
|      |                                                                                           | From discontinued operations                        |       |                | (0.03 | )             |        | (0.40          | )     |            | (0.15
|      |                                                                                           | Cumulative effect of change in accounting principle |       |                |      |               |        |               |       |            |     
|      |                                                                                           |                                                     | Total |                |       | (0.10         | )      |                | (0.33 | )          |      

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

18

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Significant Cash Commitments

The Company has significant future cash commitments, primarily scheduled debt payments and scheduled lease payments. The commitments related to debt payments and
lease payments are fully described in Notes 9 and 10 of the accompanying financial statements.

The
following table summarizes the Company's contractual obligations at December 31, 2002

|                                   |                          | Payments Due by Period
|---------------------------------- | ------------------------ | ----------------------
|
|
|Bank indebtedness                  |                          |                       
|                                   | Term loan                |                       
|                                   | Revolving line of credit |                       
|Other debt obligations             |                          |                       
|Operating leases                   |                          |                       
|                                   |                          |                       
|Total contractual cash obligations |                          | $                     
|                                   |                          |                       

Under its bank credit facility, the Company has $618,000 standby letters of credit outstanding at December 31, 2002 in connection with lease obligations.
Management expects that cash flow from operations and availability under its bank revolving line of credit will assist us in meeting our liquidity requirements through the term of its bank credit
facility. At December 31, 2002, we had $262,000 in unused availability under the bank revolving line of credit.

As
described previously in the Financial Position and Liquidity section of this Form 10-K, the preferred stock issued by the Company becomes redeemable on
April 15, 2004. There are legal proceedings related to certain Worthington matters as described in Part I, Item 3. We plan to continue negotiations with Worthington to resolve all
of the issues presented by the preferred stock, within the limitations of our available liquidity in 2004, but there are no assurances that we will be successful in our efforts.

Seasonality

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

Critical Accounting Policies

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

Allowance for Doubtful Accounts

The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The
Company determines the allowance based on customer credit-worthiness, historical write-off experience and general economic conditions and trends. Account balances are charged off against
the allowance after all means of collection have been exhausted

19

---

and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

Inventories

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

Fixed Asset Impairment

The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 144,Accounting for Impairment
or Disposal of Long-Lived Assets. This Statement requires that long-lived assets and certain identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Recoverability of Deferred Tax Assets

In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences become deductible.
Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment, and the valuation allowance is adjusted as appropriate.

Impact of New Accounting Standards

In June 2002, FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal
Activities.SFAS No. 146 requires companies recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to
an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company does not believe the adoption of this
statement will have a material impact on its financial position, results of operations, or cash flows.

On
December 31, 2002, FASB issued SFAS No. 148,Accounting for Stock-Based CompensationTransition and
Disclosure.SFAS No. 148 amends SFAS No. 123,Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect
of the method used on reported results. The Company does not currently have plans to change to the fair value method of accounting for our stock based compensation. The disclosure requirements are now
effective.

In
November 2002, FASB issued Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others("Interpretation 45"), which addresses the disclosure to be made by a guarantor in its interim and annual financial statements about
its obligations under guarantees. Interpretation 45 also requires the recognition of a liability by a guarantor at the inception of certain guarantees.

20

---

Interpretation 45
requires the guarantor to recognize a liability for the non-contingent component of the guarantee, which is the obligation to stand ready to perform
in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The recognition of the liability is
required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. The
Company has adopted the disclosure requirements of Interpretation 45 and will apply the recognition and measurement provisions for all guarantees entered into or modified after
December 31, 2002.

In
January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest Entities ("Interpretation 46"), which addresses consolidation of certain variable
interest entities and is effective January 31, 2003. The Company does not anticipate that the adoption of Interpretation 46 will have a material impact on its financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to interest rate changes primarily as a result of our lines of credit and long-term debt used for maintaining liquidity, funding
capital expenditures and expanding our operations. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flow and to lower overall borrowing
costs. To achieve our objectives, we entered into a financing agreement with a group of banks. The financing arrangement contains a term loan and a revolving credit facility. Interest is based on our
lead bank'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 $27.8 million term loans under the financing arrangement.

21

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Item 8. Financial Statements and Supplementary Data

22

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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Index

|                                                                                                               |  | Page
|-------------------------------------------------------------------------------------------------------------- |  | ----
|Independent Auditors' Report                                                                                   |  | 24  
|Consolidated Balance Sheets as of December 31, 2001 and 2002                                                   |  | 25  
|Consolidated Statements of Operations for the years ended
December 31, 2000, 2001 and 2002                     |  | 26  
|Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 2000, 2001 and 2002 |  | 27  
|Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 2001 and 2002                     |  | 28  
|Notes to Consolidated Financial Statements                                                                     |  | 29  
|Schedule                                                                                                       |  |     
|Schedule IIValuation and Qualifying Accounts for the years ended
December 31, 2000, 2001 and 2002             |  | 50  

23

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Independent Auditors' Report

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

We
have audited the accompanying consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2001 and 2002, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2002. In connection with our audit of the consolidated financial
statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Morton Industrial Group, Inc. and Subsidiaries as of
December 31, 2001 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As
discussed in note 7 to the consolidated financial statements, effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") 142, Goodwill and Other Intangible
Assets.

| |  | KPMG LLP
| |  | --------

Indianapolis,
Indiana
March 21, 2003

24

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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIESConsolidated Balance Sheets        December 31, 2001 and 2002  (Dollars in thousands, except share data)

|                                                                                                                                                                     |                                                                                                                                                  | 2001                                 |                      | 2002    |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------ | -------------------- | ------- | -------
|Assets                                                                                                                                                               |                                                                                                                                                  |                                      |                      |         |        
|Current assets:                                                                                                                                                      |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     | Trade accounts receivable, less allowance for doubtful accounts of $381 in 2001 and $84 in 2002                                                  |                                      | $                    | 18,989  |        
|                                                                                                                                                                     | Inventories                                                                                                                                      |                                      |                      | 21,901  |        
|                                                                                                                                                                     | Prepaid expenses and other current assets                                                                                                        |                                      |                      | 2,803   |        
|                                                                                                                                                                     | Deferred income taxes                                                                                                                            |                                      |                      | 800     |        
|                                                                                                                                                                     | Assets held for sale                                                                                                                             |                                      |                      |        |        
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  |                                      | Total current assets |         |        
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|Property, plant, and equipment, net                                                                                                                                  |                                                                                                                                                  |                                      | 46,437               |         | 23,364 
|Intangible assets, at cost, less accumulated amortization                                                                                                            |                                                                                                                                                  |                                      | 10,353               |         | 1,336  
|Deferred income taxes                                                                                                                                                |                                                                                                                                                  |                                      | 4,148                |         | 1,351  
|Other assets                                                                                                                                                         |                                                                                                                                                  |                                      | 1,086                |         | 660    
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  | $                                    | 106,517              |         | 56,853 
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|Liabilities and Stockholders' Equity (Deficit)                                                                                                                       |                                                                                                                                                  |                                      |                      |         |        
|Current liabilities:                                                                                                                                                 |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     | Outstanding checks in excess of bank balance                                                                                                     |                                      | $                    | 4,045   |        
|                                                                                                                                                                     | Current installments of long-term debt                                                                                                           |                                      |                      | 5,268   |        
|                                                                                                                                                                     | Accounts payable                                                                                                                                 |                                      |                      | 29,854  |        
|                                                                                                                                                                     | Accrued expenses                                                                                                                                 |                                      |                      | 6,801   |        
|                                                                                                                                                                     | Liabilities held for sale                                                                                                                        |                                      |                      |        |        
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  | Total current liabilities            |                      |         | 45,968 
|Long-term debt, excluding current installments                                                                                                                       |                                                                                                                                                  |                                      | 73,870               |         | 39,771 
|Other liabilities                                                                                                                                                    |                                                                                                                                                  |                                      | 280                  |         | 262    
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  | Total liabilities                    |                      |         | 120,118
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|Redeemable preferred stock. Authorized 10,000 shares; issued and outstanding 10,000 shares in 2001 and 2002 (redemption value $10,567 at December 31, 2001 and 2002) |                                                                                                                                                  |                                      | 7,343                |         | 8,608  
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|Stockholders' equity (deficit):                                                                                                                                      |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     | Class A common stock, $.01 par value. Authorized 20,000,000 shares;
issued and outstanding 4,400,850 shares in 2001 and 4,460,547 shares in 2002 |                                      |                      | 44      |        
|                                                                                                                                                                     | Class B common stock, convertible, $.01 par value. Authorized 200,000 shares;
issued and outstanding 200,000 shares in 2001 and 2002             |                                      |                      | 2       |        
|                                                                                                                                                                     | Additional paid-in capital                                                                                                                       |                                      |                      | 20,883  |        
|                                                                                                                                                                     | Retained deficit                                                                                                                                 |                                      |                      | (41,873 | )      
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  | Total stockholders' equity (deficit) |                      |         | (20,944
|Commitments and contingencies (notes 10 and 20)                                                                                                                      |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        
|                                                                                                                                                                     |                                                                                                                                                  | $                                    | 106,517              |         | 56,853 
|                                                                                                                                                                     |                                                                                                                                                  |                                      |                      |         |        

See
accompanying notes to consolidated financial statements.

25

---

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIESConsolidated Statements of Operations        Years ended December 31, 2000, 2001 and 2002  (Dollars in thousands,
except per share data)

|                                                                      |                                                                                                                 | December 31,                                                                                 |        
|--------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------
|
|Net sales                                                             |                                                                                                                 | $                                                                                            | 147,417
|Cost of sales                                                         |                                                                                                                 |                                                                                              | 128,007
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Gross profit                                                                                 |        
|                                                                      |                                                                                                                 |                                                                                              |        
|Operating expenses:                                                   |                                                                                                                 |                                                                                              |        
|                                                                      | Selling expenses                                                                                                |                                                                                              |        
|                                                                      | Administrative expenses                                                                                         |                                                                                              |        
|                                                                      | Restructuring charges                                                                                           |                                                                                              |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Total operating expenses                                                                     |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Operating income                                                                             |        
|                                                                      |                                                                                                                 |                                                                                              |        
|Other income (expense):                                               |                                                                                                                 |                                                                                              |        
|                                                                      | Interest expense                                                                                                |                                                                                              |        
|                                                                      | Other                                                                                                           |                                                                                              |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Total other income (expense)                                                                 |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Loss before income taxes, discontinued operations and cumulative effect of accounting change |        
|Income taxes                                                          |                                                                                                                 |                                                                                              | (632   
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Loss before discontinued operations and cumulative effect of accounting change               |        
|                                                                      |                                                                                                                 |                                                                                              |        
|Discontinued operations (note 3):                                     |                                                                                                                 |                                                                                              |        
|                                                                      | Net earnings (loss) from operations of discontinued plastics operations (including gain on disposal of $17,784) |                                                                                              |        
|                                                                      | Income taxes                                                                                                    |                                                                                              |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 |                                                                                              | 1,048  
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Earnings (loss) before cumulative effect of accounting change                                |        
|Cumulative effect of change in accounting principle, net of tax of $0 |                                                                                                                 |                                                                                              |       
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Net earnings (loss)                                                                          |        
|Accretion of discount on preferred shares                             |                                                                                                                 |                                                                                              | (898   
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Net loss available to common shareholders                                                    |        
|                                                                      |                                                                                                                 |                                                                                              |        
|Loss per common sharebasic and diluted:                              |                                                                                                                 |                                                                                              |        
|                                                                      | Loss from continuing operations                                                                                 |                                                                                              | $      
|                                                                      | Income (loss) from discontinued operations                                                                      |                                                                                              |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      | Loss available to common shareholders before cumulative effect of a change in accounting principle              |                                                                                              |        
|                                                                      | Cumulative effect of a change in accounting principle                                                           |                                                                                              |        
|                                                                      |                                                                                                                 |                                                                                              |        
|                                                                      |                                                                                                                 | Net loss available to common shareholders                                                    |        
|                                                                      |                                                                                                                 |                                                                                              |        

See
accompanying notes to consolidated financial statements.

26

---



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIESConsolidated Statements of Stockholders' Equity (Deficit)        Years ended December 31, 2000, 2001 and
2002  (Dollars in thousands)

|                           |                                           | Class A
common stock |        | Class B
common stock |    |   |         |   |   |   |  
|-------------------------- | ----------------------------------------- | -------------------- | ------ | -------------------- | -- | - | ------- | - | - | - | -
|
|Balance, December 31, 1999 |                                           | 4,304,116            |        | $                    | 43 |   | 200,000 |   | $ | 2 |  
|                           | Net earnings (loss)                       |                      |       |                      |    |  |         |  |   |   | 
|                           | Stock options exercised                   |                      | 96,734 |                      |    | 1 |         |  |   |   | 
|                           | Issuance of warrants                      |                      |       |                      |    |  |         |  |   |   | 
|                           | Accretion of discount on preferred shares |                      |       |                      |    |  |         |  |   |   | 
|                           |                                           |                      |        |                      |    |   |         |   |   |   |  
|Balance, December 31, 2000 |                                           | 4,400,850            |        |                      | 44 |   | 200,000 |   |   | 2 |  
|                           | Net earnings (loss)                       |                      |       |                      |    |  |         |  |   |   | 
|                           | Accretion of discount on referred shares  |                      |       |                      |    |  |         |  |   |   | 
|                           |                                           |                      |        |                      |    |   |         |   |   |   |  
|Balance, December 31, 2001 |                                           | 4,400,850            |        |                      | 44 |   | 200,000 |   |   | 2 |  
|                           | Net earnings (loss)                       |                      |       |                      |    |  |         |  |   |   | 
|                           | Stock options exercised                   |                      | 59,697 |                      |    | 1 |         |  |   |   | 
|                           | Accretion of discount on preferred shares |                      |       |                      |    |  |         |  |   |   | 
|                           |                                           |                      |        |                      |    |   |         |   |   |   |  
|Balance, December 31, 2002 |                                           | 4,460,547            |        | $                    | 45 |   | 200,000 |   | $ | 2 |  
|                           |                                           |                      |        |                      |    |   |         |   |   |   |  

See accompanying notes to consolidated financial statements.

27

---

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows        Years ended December 31, 2000, 2001 and 2002  (Dollars in
thousands)

|                                                   |                                                                                                      | December 31,                                                                                   |                                                  
|-------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | -------------------------------------------------
|
|Cash flows from operating activities:              |                                                                                                      |                                                                                                |                                                  
|                                                   | Net earnings (loss)                                                                                  |                                                                                                | $                                                
|                                                   | Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |                                                                                                |                                                  
|                                                   |                                                                                                      | Depreciation and amortization of plant and equipment                                           |                                                  
|                                                   |                                                                                                      | Other amortization                                                                             |                                                  
|                                                   |                                                                                                      | Asset impairment                                                                               |                                                  
|                                                   |                                                                                                      | Payments on restructuring charge                                                               |                                                  
|                                                   |                                                                                                      | Cumulative effect of change in accounting principle                                            |                                                  
|                                                   |                                                                                                      | Increase (decrease) in allowance for doubtful accounts                                         |                                                  
|                                                   |                                                                                                      | Deferred income taxes                                                                          |                                                  
|                                                   |                                                                                                      | Gain on sale of property and equipment                                                         |                                                  
|                                                   |                                                                                                      | Gain on sale of businesses                                                                     |                                                  
|                                                   |                                                                                                      | Unrealized loss (gain) on derivative instruments                                               |                                                  
|                                                   |                                                                                                      | Changes in current assets and liabilities, excluding effects of acquisitions and dispositions: |                                                  
|                                                   |                                                                                                      |                                                                                                | Decrease (increase) in accounts receivable       
|                                                   |                                                                                                      |                                                                                                | Decrease (increase) in inventories               
|                                                   |                                                                                                      |                                                                                                | Increase in prepaid expenses                     
|                                                   |                                                                                                      |                                                                                                | Decrease (increase) in other assets              
|                                                   |                                                                                                      |                                                                                                | Decrease in refundable income taxes              
|                                                   |                                                                                                      |                                                                                                | Increase (decrease) in accounts payable          
|                                                   |                                                                                                      |                                                                                                | Increase (decrease) in accrued expenses and other
|                                                   |                                                                                                      |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|Cash flows from investing activities:              |                                                                                                      |                                                                                                |                                                  
|                                                   | Capital expenditures                                                                                 |                                                                                                |                                                  
|                                                   | Proceeds from sale of property and equipment                                                         |                                                                                                |                                                  
|                                                   | Proceeds from sale of businesses                                                                     |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|Cash flows from financing activities:              |                                                                                                      |                                                                                                |                                                  
|                                                   | Increase (decrease) in checks issued in excess of bank balance                                       |                                                                                                |                                                  
|                                                   | Net borrowings (repayments) of line of credit                                                        |                                                                                                |                                                  
|                                                   | Proceeds from issuance of long-term debt                                                             |                                                                                                |                                                  
|                                                   | Principal payments on long-term debt and capital leases                                              |                                                                                                |                                                  
|                                                   | Proceeds from issuance of common stock                                                               |                                                                                                |                                                  
|                                                   | Debt issuance cost                                                                                   |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|                                                   |                                                                                                      |                                                                                                |                                                  
|Net increase (decrease) in cash                    |                                                                                                      |                                                                                                |                                                 
|Cash at beginning of period                        |                                                                                                      |                                                                                                |                                                 
|                                                   |                                                                                                      |                                                                                                |                                                  
|Cash at end of period                              |                                                                                                      | $                                                                                              |                                                 
|                                                   |                                                                                                      |                                                                                                |                                                  
|Supplemental disclosures of cash flow information: |                                                                                                      |                                                                                                |                                                  
|                                                   | Cash paid during the year for:                                                                       |                                                                                                |                                                  
|                                                   |                                                                                                      | Interest                                                                                       |                                                  
|                                                   |                                                                                                      | Income taxes                                                                                   |                                                  

See accompanying notes to consolidated financial statements.

28

---



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements        December 31, 2001 and 2002        (Dollars in thousands,
except per share data)

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



29

---



30

---



2000

2001

2002Net loss available to common shareholders:As reported

$
(306
)
$
(17,787
)
$
(3,293
)Total stock-based employee compensation expense determined under fair value based method for all awards


(1,600
)

(40
)

(216
)Pro forma

$
(1,906
)
$
(17,827
)
$
(3,509
)Basic and diluted loss available to common shareholders per share:As reported

$
(0.07
)
$
(3.87
)
$
(0.71
)Pro forma

$
(0.42
)
$
(3.87
)
$
(0.76
)




31

---



32

---



33

---





(2)    Sale of Businesses

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

(3)    Discontinued Operations

The
financial results from discontinued operations reflect two significant events during 2002: (i) the bankruptcy and subsequent sale of the assets of Morton Custom Plastics, LLC,
and (ii) the Board of Directors' decision to divest the only other remaining plastics operations facility in the Company, Mid-Central Plastics, Inc. The accompanying
consolidated statements of operations for 2000 and 2001 have been reclassified to reflect the results of operations of both Morton Custom Plastics, LLC and Mid-Central
Plastics, Inc. as discontinued operations.

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

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

The
Company is actively seeking a buyer for Mid-Central Plastics, Inc. (Mid-Central) and is in discussions with several potential acquirers. The Company
expects to sell Mid-Central in 2003. The assets of Mid-Central have been reduced to their estimated fair value less costs to sell, resulting in an impairment charge of $325 for
the year ended December 31, 2002.

Summary
financial data of the discontinued operations is presented below:

|                                                         |  | 2000 |         | 2001 |   | 2002    |  
|-------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|Operating revenue                                        |  | $    | 132,394 |      | $ | 110,050 |  
|Operating expense                                        |  |      | 129,819 |      |   | 116,024 |  
|                                                         |  |      |         |      |   |         |  
|Operating income (loss)                                  |  |      | 2,575   |      |   | (5,974  | )
|Interest expense                                         |  |      | (3,425  | )    |   | (2,622  | )
|Other                                                    |  |      | 1,300   |      |   |        |  
|                                                         |  |      |         |      |   |         |  
|Income (loss) from operations of discontinued operations |  |      | 450     |      |   | (8,596  | )
|Gain on disposal of MCP                                  |  |      |        |      |   |        |  
|Income taxes                                             |  |      | 598     |      |   | (858    | )
|                                                         |  |      |         |      |   |         |  
|Net income (loss) from discontinued operations           |  | $    | 1,048   |      |   | (9,454  | )
|                                                         |  |      |         |      |   |         |  

34

---

Amounts held for sale of Mid-Central Plastics, Inc. as of December 31, 2002 consist of the following:

Accounts receivable, net of allowance of $134

$
1,423Inventories


2,241Other current assets


427Property, plant and equipment, net


4,899Assets held for sale

$
8,990Current liabilities

$
2,504Estimated debt required to be repaid upon sale


3,750Liabilities held for sale

$
6,254


(4)    Restructuring Charge

In
connection with a restructuring plan adopted in October of 2001, the Company recorded a $1,323 restructuring charge associated with the restructuring and consolidation of certain of
its Illinois plants. The restructuring included $520 for costs associated with certain leased facilities which will no longer be used and an $803 impairment charge for the abandonment of certain
leasehold improvements and impairment of certain assets under the provisions of SFAS 121. As of December 31, 2001 and 2002, a restructuring reserve of $520 and $145, respectively, is
included in accrued expenses relating to facility
lease payments, utilities, insurance and taxes expected to be incurred through the lease termination date.

(5)    Inventories

A
summary of inventories follows:

December 312001

2002Finished goods

$
9,273

$
4,590Work in process


4,807


6,087Raw materials


7,821


3,645$
21,901

$
14,322


35

---

(6)    Property, Plant, and Equipment

A
summary of property, plant, and equipment, including assets held under capital leases as described in note 10, is as follows:

December 31Depreciable
lives
(in years)2001

2002Land and land improvements

15

$
1,852

$
1,608Buildings and leasehold improvements

15 - 39


15,004


8,604Machinery and vehicles

5 - 12


47,627


26,134Tooling

3


9,927


9,648Office equipment

5 - 10


6,683


5,052Construction in progress




217


51781,310


51,563Less accumulated depreciation




34,873


28,199Property, plant, and equipment, net



$
46,437

$
23,364


(7)    Intangible Assets

A
summary of intangible assets is as follows:

December 312001

2002Goodwill

$
11,063

$
1,587Covenants not to compete


2,591


2,186Debt issuance costs


2,533


1,758Other


435


43516,622


5,966Less accumulated amortization


6,269


4,630Net intangible assets

$
10,353

$
1,336


For
amortizable intangible assets, the total intangible amortization expense for the years ended December 31, 2000, 2001 and 2002 was $508, $462 and $793, respectively. The
estimated amortization expense for each of the next five years ending December 31 is as follows:

Year ending:2003

$
5922004


782005


782006


602007


19


36

---

The Company adopted Financial Accounting Standards Board Statement No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142), effective January 1, 2002, and
recorded a non-cash transition charge of $8,118, or a $1.75 loss per share, for impairment of goodwill. The Company determined the goodwill recorded at January 1, 2002 was primarily
associated with indefinite-lived intangible assets resulting from the acquisitions of certain plastics facilities.

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

The
impact of goodwill amortization on net earnings available to common shareholders in prior years is presented below:

2000

2001Year ended December 31:Net loss available to common shareholders

$
(306
)
$
(17,787
)Add back: goodwill amortization


389


389Adjusted net earnings (loss) available to common shareholders

$
83

$
(17,398
)Basic and dilutive earnings per common share:Net loss available to common shareholders

$
(0.07
)
$
(3.87
)Goodwill amortization


0.09


0.09Adjusted net earnings (loss) available to common shareholders

$
0.02

$
(3.78
)


(8)    Derivative Instruments and Hedging Activities

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

The
Company adopted Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging
Activities(SFAS 133), as amended by SFAS No. 137 and No. 138 on January 1, 2001. SFAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether
it qualifies for hedge accounting. The Company uses

37

---

derivative financial instruments (interest rate swaps) to mitigate its interest rate risk on a related financial instrument. SFAS 133 requires that changes in the fair value of derivatives
that qualify as a cash flow hedge be recognized in other comprehensive income while the ineffective portion of the derivative's change in fair value be recognized immediately in earnings.
SFAS 133 requires that unrealized gains and losses on that portion of derivatives not qualifying for hedge accounting be recognized currently in earnings. The Company recorded other income
(expense) of $(286), $(671) and $418 for its interest rate swap contracts for the years ended December 31, 2000, 2001 and 2002 respectively, as they do not qualify for hedge accounting.

(9)    Long-term Debt and Subsequent Events

A summary of long-term debt follows:

December 312001

2002Revolving credit facility with the Harris syndicate

$
18,400

$
18,600Note payable to the Harris syndicate, with variable rate interest
(5.75% as of December 31, 2001 and 2002).


9,301


27,756Note payable to the Harris syndicate, with variable rate interest
(8.5% as of December 31, 2001).


23,159


Revolving credit facility with GECC


9,424


Note payable to GECC, with variable rate interest (7.0% as of December 31, 2001).


15,997


Subordinated note payable with interest payable at 7.0%, discounted $393 to yield 10.0%, due in quarterly payments with the balance due April 8, 2008.


2,346


2,134Note payable, bank, with interest payable at 8.5%, due in monthly payments with the balance due December 1, 2002.


82


Note payable, electric cooperative, non-interest bearing, due in monthly payments with the balance due November 1, 2006.


219


166Capital lease obligations


210


160Notes payable, miscellaneous





3679,138


48,852Less current installments


5,268


5,331Less amount included in liabilities held for sale





3,750$
73,870

$
39,771


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

38

---

operations and one plastics location. The GECC facility was retired on December 24, 2002 at the time of the sale of the assets of Morton Custom Plastics, LLC.

Subsequent
to the December 24, 2002 sale of the assets of Morton Custom Plastics, LLC, the Company's sole remaining credit facility is with the Harris syndicate, as described
below.

Related to the December 31, 2001 Harris syndicate debt:

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

In
May 1998, the Company also entered into a financing arrangement with the Harris syndicate which originally provided for term loans of up to $55,000. The term loans under this
financing arrangement were amortized quarterly. Interest was payable monthly at rates based upon the lender's prime rate plus an applicable margin. The agreement was secured by a first lien on all of
the Company's accounts receivable, inventory, equipment and various other assets, other than assets of Morton Custom Plastics, LLC. Effective January 30, 2000, the Company was paying this
lender a fee of .125% per month based upon the amount of the revolving credit commitment and the balance of the term loans.

Related to the December 31, 2002 Harris syndicate debt:

In February 2002, the Company entered into a new secured revolving credit facility with the Harris syndicate. The revolving credit agreement permits the
Company to borrow up to a maximum of $21,000. The agreement requires payment of a quarterly commitment fee of .50% per annum of the average daily unused portion of the revolving credit facility.
Interest is due monthly and is based upon the bank prime plus 1.5% (effective rate of 5.75% at December 31, 2002). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The
amount available under the revolving credit facility is limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2,500 of other assets. The revolving credit agreement was
originally set to mature on July 1, 2003. As described below, that date has been extended to April 1, 2004. At December 31, 2002, the Company had $18,600 outstanding and $262
available under this credit facility.

In
February 2002, the Company also entered into a secured term loan arrangement with the Harris syndicate for a term loan of $32,965. The new Harris syndicate term loan
arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement is amortized monthly with principal payments ranging from $235 to
$500 and the balance of $24,930 due originally on July 1, 2003 (now extended to April 1, 2004). Interest is due monthly and is based upon bank prime plus 1.5% (effective rate of 5.75% at
December 31, 2002). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The agreement is secured by a first lien on all of the Company's accounts

39

---

receivable, inventory, equipment and various other assets, other than the assets of Morton Custom Plastics, LLC.

The
February, 2002 Harris syndicate agreement has been amended three times, most recently on February 28, 2003. Among the key provisions of the amendments: (i) extension of
the maturity date to April 1, 2004; (ii) revisions in the monthly amortization of principal, with $50 payable on February 28, 2003, $100 payable on March 31, 2003, $350
payable on April 30, 2003, $500 payable on May 31, 2003 through December 31, 2003, and $250 payable each month end thereafter until the April 1, 2004 maturity date, at
which time the term loan balance of $22,180 will be due. Also, effective February 28, 2003, the limit of eligible inventory under the revolving credit facility is increased to 60% and the
amount of other assets eligible becomes $3,500.

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

Under
the most restrictive covenant in any agreement, no amount was available for payment of dividends at December 31, 2001 and 2002.

The
aggregate amounts of contractual long-term debt maturities and principal payments (based upon the amended credit facilities as of February 28, 2003) for each of
the five years subsequent to December 31, 2002 and thereafter are as follows:

Year ending:2003

$
5,3312004


41,9762005


4612006


4402007


644Thereafter


$
48,852


On
September 20, 2000, the Company issued warrants to a lender, in connection with an amendment to the credit agreement, to purchase 238,548 shares of its Class A common
stock. The 238,548 warrants issued are exercisable at any time through December 31, 2005, at an exercise price of $.01 per share. The warrants were valued at $863 and were recorded as a
discount on the related term loans in the year ended December 31, 2000.

40

---

(10)    Leases

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

2001

2002Machinery

$
228

$
228Less accumulated amortization


18


68$
210

$
160


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

The
present value of future minimum capital lease payments at December 31, 2002 was as follows:

Year ending:2003

$
582004


582005


482006


18Total minimum lease payments


182Less amount representing interest (from 7.1% to 7.9%)


22Present value of net minimum capital lease payments

$
160


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 $7,266,
$7,901, and $6,317 for the years ended December 31, 2000, 2001, and 2002, respectively.

Future
minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2002 are:

Year ending December 31:2003

$
6,5912004


5,8282005


4,6662006


2,6042007


2,181Thereafter


594Total minimum lease payments

$
22,464


41

---

(11)    Income Taxes

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

December 312000

2001

2002Income tax before discontinued operations and cumulative effect of accounting change

$
(632
)
$
1,242

$
(288
)Discontinued operations


(598
)

858


2,157Cumulative effect of accounting change








$
(1,230
)
$
2,100

$
1,869


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

Current

Deferred

TotalYear ended December 31, 2000:Federal

$


$
(547
)
$
(547
)State





(85
)

(85
)$


$
(632
)
$
(632
)Year ended December 31, 2001:Federal

$


$
1,082

$
1,082State





160


160$


$
1,242

$
1,242Year ended December 31, 2002:Federal

$
(288
)
$


$
(288
)State








$
(288
)
$


$
(288
)


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

December 312000

2001

2002Computed "expected" tax expense (benefit)

$
(370
)
$
(2,049
)
$
(336
)State income tax expense (benefit), net of Federal income tax benefit


(56
)

106


Amortization of non-deductible goodwill


149


149


Officer's life insurance


29


20


20Increase (decrease) in valuation allowance allocated to continuing operations


(285
)

3,096


(42
)Other, net


(99
)

(80
)

70$
(632
)
$
1,242

$
(288
)


42

---



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31,
2001 and 2002, are presented below:

December 312001

2002Deferred tax assets attributable to:Net operating loss and credit carryforwards

$
32,098

$
27,561Accrued vacation pay


228


260Compensation expense from issuance of stock options


291


291Reserves and other


879


568Total gross deferred tax assets


33,496


28,680Less valuation allowance


(24,208
)

(23,291
)Net deferred tax assets


9,288


5,389Deferred tax liabilities attributable to:Plant and equipment, principally due to differences in depreciation


(4,166
)

(3,486
)Excess of tax over book amortization of organization costs


(56
)

(49
)Discount on debt for financial reporting purposes


(118
)

(103
)Total deferred tax liabilities


(4,340
)

(3,638
)Net deferred tax asset

$
4,948

$
1,751


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 $4,500 prior to the expiration of the net operating loss carryforwards in 2021. Management believes it is more likely than not
the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2002 based upon anticipated profitability over the period of
years that the temporary differences are expected to become tax deductions. Management believes that sufficient book and taxable income will be generated to realize the benefit of these tax assets.
The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

At
December 31, 2002, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $69,400 which are available to offset future federal
taxable income, if any, through 2022.

43

---

(12)    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 becomes redeemable on April 15, 2004 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 be reduced based upon changes in pricing of certain customer
contracts. The Company has determined that those dividends should be reduced as provided in the agreement, and accordingly, has accrued no dividends
for the years ending December 31, 2000, 2001 and 2002. 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. See also note 3 related to the 2002 sale of assets acquired from Worthington Custom Plastics, Inc and note 20 related to litigation regarding
Worthington Industries, Inc. The Company plans to continue negotiations with Worthington to resolve all of the issues presented by the preferred stock, within the limitation of its available
liquidity in 2004, but there are no assurances that the Company will be successful in its efforts.

(13)    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.

(14)    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, 2001 and 2002, there were 139,600 and 8,100 additional shares available for grant under the Plan.

The
Company had a predecessor 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, 2000, 2001 and 2002, there were 68,956, 68,956 and 9,259 options outstanding under the prior plan.

44

---

Stock
option activity during the periods indicated is as follows:

Number of
shares

Weighted
average
exercise
priceOutstanding at December 31, 1999

1,057,071

$
14.040Issued

164,000


4.610Exercised

(96,734
)

(0.411
)Forfeited

(27,820
)

(11.235
)Outstanding at December 31, 2000

1,096,517


13.904Issued

139,150


1.875Exercised




Forfeited

(139,600
)

(8.447
)Outstanding at December 31, 2001

1,096,067


13.072Issued

131,500


0.325Exercised

(59,697
)

(0.216
)Forfeited




Outstanding at December 31, 2002

1,167,870

$
12.290


The
following is summary information about the Company's stock options outstanding at December 31, 2002:

Number of
shares

Exercise
price

Expiration date

Number of
shares
exercisable131,500

$
0.325

June 17, 2012

9,259


0.900

May 8, 2005

9,259101,650


1.875

February 5, 2011

33,883120,000


4.500

March 10, 2010

80,00010,000


7.375

June 8, 2009

10,00030,000


13.125

September 2, 2008

30,000765,461


17.125

January 20, 2008

765,4611,167,870






928,603


45

---

(15)    Concentration of Sales

Sales to customers in excess of 10% of total net sales for the years ended December 31, 2000, 2001, and 2002 are as follows:

Customer A

Customer BPeriods ended:December 31, 2000

34
%
55
%December 31, 2001

40
%
51
%December 31, 2002

37
%
50
%


Trade
accounts receivable with these customers totaled $8,173 and $4,130 at December 31, 2001 and 2002, respectively.

(16)    Employee Participation Plan

The Company's 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 $274, $240 and $239 for the years ended December 31, 2000, 2001 and 2002, respectively.

46

---

(17)    Earnings (Loss) Per Share

The following reflects the reconciliation of the numerators and denominators of the income (loss) available to common shareholders per share and net income (loss)
available to common shareholders per share assuming dilution computations:

|                                      |                                                                          | 2000                                        |   | 2001      |           | 2002 |          
|------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------- | - | --------- | --------- | ---- | ---------
|Numerator:                            |                                                                          |                                             |   |           |           |      |          
|                                      | Loss from continuing operations                                          |                                             | $ | (1,354    | )         | $    | (8,333   
|                                      | Income (loss) from discontinued operations                               |                                             |   | 1,048     |           |      | (9,454   
|                                      |                                                                          |                                             |   |           |           |      |          
|                                      | Income (loss) before cumulative effect of change in accounting principle |                                             |   | (306      | )         |      | (17,787  
|                                      | Cumulative effect of change in accounting principle                      |                                             |   |          |           |      |         
|                                      |                                                                          |                                             |   |           |           |      |          
|                                      |                                                                          | Net loss available to common shareholders   |   | $         | (306      | )    | $        
|                                      |                                                                          |                                             |   |           |           |      |          
|Denominator:                          |                                                                          |                                             |   |           |           |      |          
|                                      | Weighted average shares outstandingbasic                                |                                             |   | 4,563,958 |           |      | 4,600,850
|                                      | Dilutive potential common sharesstock options                           |                                             |   |          |           |      |         
|                                      |                                                                          |                                             |   |           |           |      |          
|                                      |                                                                          | Weighted average shares outstandingdiluted |   |           | 4,563,958 |      |          
|                                      |                                                                          |                                             |   |           |           |      |          
|Basic and diluted earnings per share: |                                                                          |                                             |   |           |           |      |          
|                                      | Loss from continuing operations                                          |                                             | $ | (0.30     | )         | $    | (1.81    
|                                      | Income (loss) from discontinued operations                               |                                             |   | 0.23      |           |      | (2.06    
|                                      |                                                                          |                                             |   |           |           |      |          
|                                      | Income (loss) before cumulative effect of change in accounting principle |                                             |   | (0.07     | )         |      | (3.87    
|                                      | Cumulative effect of change in accounting principle                      |                                             |   |          |           |      |         
|                                      |                                                                          |                                             |   |           |           |      |          
|                                      |                                                                          | Net loss available to common shareholders   |   | $         | (0.07     | )    | $        
|                                      |                                                                          |                                             |   |           |           |      |          

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

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

Options
to purchase 1,167,870 shares of Class A common stock at an average price of $12.294 per share and warrants to purchase 238,548 shares of Class A common stock at
$.01 per share were outstanding at December 31, 2002, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

47

---

(18)    Segment Reporting

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

(19)    Selected Quarterly Financial Data (Unaudited)

Selected quarterly financial information for the years ended December 31, 2002 and 2001 is as follows:

|      |                                                                                           | First
quarter                                       |       | Second
quarter |       | Third
quarter |         | Fourth
quarter |       | Total
year |      
|----- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | -------------- | ----- | ------------- | ------- | -------------- | ----- | ---------- | -----
|
|2002: |                                                                                           |                                                     |       |                |       |               |         |                |       |            |      
|      | Sales                                                                                     |                                                     | $     | 29,177         |       | $             | 32,241  |                | $     | 28,981     |      
|      | Gross margin                                                                              |                                                     |       | 4,117          |       |               | 4,850   |                |       | 3,385      |      
|      | Operating income (loss)                                                                   |                                                     |       | 1,160          |       |               | 1,402   |                |       | 647        |      
|      | Earnings (loss) before discontinued operations and cumulative effect of accounting change |                                                     |       | 184            |       |               | (473    | )              |       | (321       | )    
|      | Net earnings (loss) from discontinued operations                                          |                                                     |       | (526           | )     |               | (2,770  | )              |       | (4,326     | )    
|      | Cumulative effect of change in accounting principle                                       |                                                     |       |               |       |               | (8,118  | )              |       |           |      
|      | Net earnings (loss) available to common shareholders                                      |                                                     |       | (621           | )     |               | (11,684 | )              |       | (4,978     | )    
|      | Earnings per share of common stock-basic and diluted:                                     |                                                     |       |                |       |               |         |                |       |            |      
|      |                                                                                           | From continuing operations                          |       |                | (0.02 | )             |         | (0.17          | )     |            | (0.14
|      |                                                                                           | From discontinued operations                        |       |                | (0.12 | )             |         | (0.59          | )     |            | (0.92
|      |                                                                                           | Cumulative effect of change in accounting principle |       |                |      |               |         | (1.75          | )     |            |     
|      |                                                                                           |                                                     | Total |                |       | (0.14         | )       |                | (2.51 | )          |      

48

---

|      |                                                                                           | First
quarter                                       |       | Second
quarter |       | Third
quarter |        | Fourth
quarter |       | Total
year |       |       |        
|----- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | ----- | -------------- | ----- | ------------- | ------ | -------------- | ----- | ---------- | ----- | ----- | -------
|
|2001: |                                                                                           |                                                     |       |                |       |               |        |                |       |            |       |       |        
|      | Sales                                                                                     |                                                     | $     | 41,258         |       | $             | 35,534 |                | $     | 27,508     |       | $     | 22,803 
|      | Gross margin                                                                              |                                                     |       | 5,649          |       |               | 5,410  |                |       | 4,139      |       |       | 547    
|      | Operating income (loss)                                                                   |                                                     |       | 1,737          |       |               | 2,336  |                |       | 844        |       |       | (3,626 
|      | Earnings (loss) before discontinued operations and cumulative effect of accounting change |                                                     |       | (81            | )     |               | 615    |                |       | (915       | )     |       | (6,886 
|      | Net earnings (loss) from discontinued operations                                          |                                                     |       | (120           | )     |               | (1,839 | )              |       | (706       | )     |       | (6,789 
|      | Cumulative effect of change in accounting principle                                       |                                                     |       |               |       |               |       |                |       |           |       |       |       
|      | Net earnings (loss) available to common shareholders                                      |                                                     |       | (436           | )     |               | (1,496 | )              |       | (1,901     | )     |       | (13,954
|      | Earnings per share of common stock-basic and diluted:                                     |                                                     |       |                |       |               |        |                |       |            |       |       |        
|      |                                                                                           | From continuing operations                          |       |                | (0.07 | )             |        | 0.07           |       |            | (0.26 | )     |        
|      |                                                                                           | From discontinued operations                        |       |                | (0.03 | )             |        | (0.40          | )     |            | (0.15 | )     |        
|      |                                                                                           | Cumulative effect of change in accounting principle |       |                |      |               |        |               |       |            |      |       |        
|      |                                                                                           |                                                     | Total |                |       | (0.10         | )      |                | (0.33 | )          |       | (0.41 | )      

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

(20)    Litigation

On May 1, 2000, Worthington Industries, Inc. (Worthington) filed suit (in the United States District Court for the Southern District of Ohio,
Eastern Division) against the Company and Morton Custom Plastics, LLC ("MCP, LLC") related to MCP, LLC's 1999 acquisition of the non-automotive plastics business from Worthington.
Worthington claimed that it was owed additional amounts under the sale agreement and a related service agreement, and that it was owed dividends on shares of our preferred stock that it received. The
Company believed that certain warranties and representations made by Worthington at the time of acquisition were breached and that amounts claimed by Worthington were not due. The Company had filed a
counterclaim against Worthington related to these matters. The case has been stayed because of the bankruptcy of MCP, LLC (discussed immediately below), although it appears that Worthington may
attempt to continue the litigation against the Company on the dividend matter.

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

49

---



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

|Description                      |                              | Balance at
beginning of
period |   | Charged to
costs and
expenses |  | Deductions |  | Other  |   | Balance at
end of
period
|-------------------------------- | ---------------------------- | ------------------------------ | - | ----------------------------- |  | ---------- |  | ------ | - | ------------------------
|Allowance for doubtful accounts: |                              |                                |   |                               |  |            |  |        |   |                         
|                                 | Year ended December 31, 2000 |                                | $ | 320                           |  | 1,430      |  | (426   | ) |                        
|                                 |                              |                                |   |                               |  |            |  |        |   |                         
|                                 | Year ended December 31, 2001 |                                | $ | 1,324                         |  | 595        |  | (1,538 | ) |                        
|                                 |                              |                                |   |                               |  |            |  |        |   |                         
|                                 | Year ended December 31, 2002 |                                | $ | 381                           |  | 7          |  | (52    | ) | (252)                   
|                                 |                              |                                |   |                               |  |            |  |        |   |                         

---

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

50

---



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 2003 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, 2002 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 2003 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, 2002 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 2003 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, 2002 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 2003 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, 2002 pursuant to Regulation 14A.

Item 14. Controls and Procedures

Evaluation of disclosure controls and procedures

Within the 90 days prior to the date of this report, the Company carried out an evaluation of the effectiveness of the design and operation of the
Company's "disclosure controls and procedures", as defined in the Securities Exchange Act of 1934 ("Exchange Act") Rules 13a-14(c) and 15d-14(c), under the supervision
and with the participation of the Company's management, including the Company's Chief Executive Officer and its Vice President of Finance. Based upon that evaluation, the Company's Chief Executive
Officer and its Vice President of Finance concluded that our disclosure controls and procedures are effective.

Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management
to allow timely decisions regarding required disclosure.

51

---

Changes in internal controls

We seek to maintain a system of internal accounting controls that are intended to provide reasonable assurances that our books and records accurately reflect our
transactions and that our established
policies and procedures are followed. There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our disclosure controls and
procedures subsequent to the date the Company carried out this evaluation.

PART IV

Item 15. 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 years ended December 31, 2000, 2001 and 2002

|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                                                                         |  |               

52

---

|4.3 and 10.3Credit Agreement Among the Registrant, Metalcraft Co., Morton Metalcraft Co. of North Carolina and Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998                                           |  | Morton 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 Agent, dated January 20, 1998                                                                                             |  | Morton Industrial Group, Inc. Form 10-K for the year ended as 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                 |  | 

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|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, 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    |  | 

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|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 to executed by Mid-Central Plastics, Inc. dated May 28, 1998.                                                                                                                            |  | Exhibit 10.8 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998   |  | 
|10.36First Amendment to Credit Agreement with Harris Trust & Savings Bank.                                                                                                                                                                             |  | Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1998                        |  | 
|10.39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 |  | 

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|10.40Third Amendment to Credit Agreement with Harris Trust & Savings Bank                                                                            |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on February 29, 2000     |  |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- |  | -
|10.41Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent                                                                     |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on April 1, 2002        |  |  
|10.42First Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent                                                  |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003       |  | X
|10.43Second Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent                                                 |  | Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003       |  | X
|10.44Third Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent                                                  |  | Exhibit 99.3 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003       |  | X
|10.45Asset Purchase Agreement between Morton Custom Plastics, LLC and Wilbert, Inc.                                                                  |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on November 4, 2002     |  |  
|10.46Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement among Morton Custom Plastics, LLC and General Electric Capital Corporation |  | Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on November 12, 2002    |  |  
|13Annual Report                                                                                                                                      |  | Exhibit 13.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003       |  | X
|16.2Letter re: change in certifying accountant                                                                                                       |  | Exhibit 16.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on February 18, 1999 |  |  
|21.1Subsidiaries of Registrant                                                                                                                       |  |                                                                                                          |  | X
|23.1Consent of KPMG LLP                                                                                                                              |  |                                                                                                          |  | X
|99.4Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                     |  |                                                                                                          |  | X
|99.5Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                     |  |                                                                                                          |  | X

None

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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 31, 2003 |  | 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.

|Name                                    |  | Title                                                                      |  | Date          
|--------------------------------------- |  | -------------------------------------------------------------------------- |  | --------------
|                                        |  |                                                                            |  |               
|/s/WILLIAM D. MORTONWilliam D. Morton   |  | President, Chief Executive Officer, and Chairman of the Board of Directors |  | March 31, 2003
|/s/RODNEY B. HARRISONRodney B. Harrison |  | Vice President of Finance and Treasurer (Principal Accounting Officer)     |  | March 31, 2003
|/s/FRED W. BROLINGFred W. Broling       |  | Director                                                                   |  | March 31, 2003
|/s/MARK W. MEALYMark W. Mealy           |  | Director                                                                   |  | March 31, 2003

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CERTIFICATIONS

Form of Sarbanes-Oxley Section 302(a) Certification

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





|/s/WILLIAM D. MORTONWilliam D. Morton Chairman and Chief
Executive OfficerMarch 31, 2003 |  | 
|---------------------------------------------------------------------------------------- |  | 

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I,
Rodney B. Harrison, as Vice President of Finance of Morton Industrial Group, Inc., certify that:





|/s/RODNEY B. HARRISONRodney B. Harrison Vice President of
FinanceMarch 31, 2003 |  | 
|------------------------------------------------------------------------------- |  | 

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SHAREHOLDER INFORMATION

CORPORATE OFFICES

Morton
Industrial Group, Inc.
1021 W. Birchwood
Morton, Illinois 61550-0429
Phone: 309-266-7176 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
Carolina Inn, located at
211 Pittsboro Street
Chapel Hill, North Carolina
On Tuesday, June 10, 2003 at 10:00 a.m. (EDT)

FORM 10-K

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

STOCK TRANSFER AGENT AND REGISTRAR

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

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

INDEPENDENT PUBLIC ACCOUNTANTS

KPMG
LLP
Indianapolis, Indiana

STOCK MARKET INFORMATION

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

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BOARD OF DIRECTORS

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

Fred
W. Broling
    Retired President and CEO
    US Precision Glass

Mark
W. Mealy
    Managing Director
    Wachovia Securities

CORPORATE OFFICERS

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

Daryl
R. Lindemann
    Secretary

Rodney
B. Harrison
    Vice President of Finance & Treasurer

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