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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934For the Quarterly Period Ended September 27, 2003ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934


FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-13198

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

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


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

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

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No o

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

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 $850,000.

Outstanding as ofOctober 24, 2003Class A Common Stock, $.01 par value
    
    
    4,560,547Class B Common Stock, $.01 par value
    
    
    100,000




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|                                                     |                                                                    |  |  |  |  |  |  | 
|---------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  |  | 
|                                                     | Condensed Consolidated Balance Sheets                             
|                                                     | Condensed Consolidated Statements of Operations                   
|                                                     | Condensed Consolidated Statements of Cash Flows                   
|                                                     | Condensed Consolidated Statement of Stockholders Equity (Deficit)
|Notes to Condensed Consolidated Financial Statements
|Part II  Other Information                         
|Signatures                                          
|Certification Pursuant to Rule 13a-14(a)            
|Certification Pursuant to Rule 13a-14(a)            
|Section 906 Certification                           
|Section 906 Certification                           



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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
September 27, 2003 and December 31, 2002
(Dollars in thousands)

Assets
    
    September 27, 2003
    
    
    December 31, 2002(Unaudited)Current assets:Trade accounts receivable, less allowance for doubtful accounts
of $166 in 2003 and $82 in 2002
    
    $
    8,967
    
    
    
    5,251Note receivable
    
    
    99
    
    
    
    Inventories
    
    
    12,374
    
    
    
    14,322Prepaid expenses and other current assets
    
    
    1,450
    
    
    
    1,179Deferred income taxes
    
    
    
    
    
    
    400Assets held for sale
    
    
    
    
    
    
    8,990Total current assets
    
    
    22,890
    
    
    
    30,142Property, plant, and equipment, net
    
    
    22,120
    
    
    
    23,364Note receivable
    
    
    1,141Intangible assets, at cost, less accumulated amortization
    
    
    924
    
    
    
    1,336Deferred income taxes
    
    
    1,136
    
    
    
    1,351Other assets
    
    
    557
    
    
    
    660$
    48,768
    
    
    
    56,853Liabilities and Stockholders Equity (Deficit)Current liabilities:Outstanding checks in excess of bank balance
    
    $
    3,066
    
    
    
    1,289Current installments of long-term debt
    
    
    39,155
    
    
    
    5,331Accounts payable
    
    
    14,245
    
    
    
    14,731Accrued expenses
    
    
    4,730
    
    
    
    4,831Liabilities held for sale
    
    
    
    
    
    
    6,254Redeemable preferred stock
    
    
    9,536
    
    
    
    Total current liabilities
    
    
    70,732
    
    
    
    32,436Long-term debt, excluding current installments
    
    
    1,696
    
    
    
    39,771Other liabilities
    
    
    199
    
    
    
    262Total liabilities
    
    
    72,627
    
    
    
    72,469Redeemable preferred stock
    
    
    
    
    
    
    8,608Stockholders equity (deficit):Class A common stock
    
    
    46
    
    
    
    45Class B common stock
    
    
    1
    
    
    
    2Additional paid-in capital
    
    
    20,895
    
    
    
    20,895Retained deficit
    
    
    (44,801
    )
    
    
    (45,166
    )Total stockholders equity (deficit)
    
    
    (23,859
    )
    
    
    (24,224
    )$
    48,768
    
    
    
    56,853


See accompanying notes to condensed consolidated financial statements.





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MORTON INDUSTRIAL GROUP, INC. AND
SUBSIDIARIES

Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 27, 2003 and September 28, 2002
(Dollars in thousands, except per share data)
(Unaudited)

Three Months Ended
    
    
    Nine Months EndedSeptember 27, 2003
    
    
    September 28, 2002
    
    
    September 27, 2003
    
    
    September 28, 2002Net sales
    
    $
    31,452
    
    
    
    28,981
    
    
    
    98,230
    
    
    
    90,399Cost of sales
    
    
    27,389
    
    
    
    25,596
    
    
    
    84,566
    
    
    
    78,047Gross profit
    
    
    4,063
    
    
    
    3,385
    
    
    
    13,664
    
    
    
    12,352Operating expenses:Selling expenses
    
    
    728
    
    
    
    674
    
    
    
    2,141
    
    
    
    2,101Administrative expenses
    
    
    2,449
    
    
    
    2,064
    
    
    
    7,656
    
    
    
    7,042Total operating expenses
    
    
    3,177
    
    
    
    2,738
    
    
    
    9,797
    
    
    
    9,143Operating income
    
    
    886
    
    
    
    647
    
    
    
    3,867
    
    
    
    3,209Other income (expense):Interest expense
    
    
    (612
    )
    
    
    (1,057
    )
    
    
    (2,481
    )
    
    
    (3,286
    )Interest on redeemable preferred stock
    
    
    (213
    )
    
    
    
    
    
    
    (213
    )
    
    
    Other
    
    
    45
    
    
    
    89
    
    
    
    382
    
    
    
    288Total other expense
    
    
    (780
    )
    
    
    (968
    )
    
    
    (2,312
    )
    
    
    (2,998
    )Earnings (loss) before income taxes and
discontinued operations
    
    
    106
    
    
    
    (321
    )
    
    
    1,555
    
    
    
    211Income taxes
    
    
    
    
    
    
    
    
    
    
    560
    
    
    
    Earnings (loss) before discontinued operations
    
    
    106
    
    
    
    (321
    )
    
    
    995
    
    
    
    211Discontinued operations:Net earnings (loss) from operations of discontinued
plastics operations
    
    
    
    
    
    
    (4,326
    )
    
    
    140
    
    
    
    (7,581
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    862
    
    
    
    (4,326
    )
    
    
    85
    
    
    
    (8,443
    )Earnings (loss) before cumulative effect of
accounting change
    
    
    106
    
    
    
    (4,647
    )
    
    
    1,080
    
    
    
    (8,232
    )Cumulative effect of change in accounting principle,
net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,118
    )Net earnings (loss)
    
    
    106
    
    
    
    (4,647
    )
    
    
    1,080
    
    
    
    (16,350
    )Accretion of discount on preferred shares
    
    
    
    
    
    
    (331
    )
    
    
    (715
    )
    
    
    (933
    )Net earnings (loss) available to common shareholders
    
    $
    106
    
    
    
    (4,978
    )
    
    
    365
    
    
    
    (17,283
    )Earnings (loss) available to common shareholders per common share  basic:Earnings (loss) from continuing operations
    
    $
    0.02
    
    
    
    (0.14
    )
    
    
    0.06
    
    
    
    (0.16
    )Earnings (loss) from discontinued operations
    
    
    
    
    
    
    (0.92
    )
    
    
    0.02
    
    
    
    (1.81
    )Net earnings (loss) available to common shareholders before
cumulative effect of a change in accounting principle
    
    
    0.02
    
    
    
    (1.06
    )
    
    
    0.08
    
    
    
    (1.97
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.76
    )Net earnings (loss) available to common shareholders
    
    $
    0.02
    
    
    
    (1.06
    )
    
    
    0.08
    
    
    
    (3.73
    )Earnings (loss) available to common shareholders per common share  diluted:Earnings (loss) from continuing operations
    
    $
    0.02
    
    
    
    (0.14
    )
    
    
    0.05
    
    
    
    (0.16
    )Earnings (loss) from discontinued operations
    
    
    
    
    
    
    (0.92
    )
    
    
    0.02
    
    
    
    (1.81
    )Net earnings (loss) available to common shareholders before
cumulative effect of a change in accounting principle
    
    
    0.02
    
    
    
    (1.06
    )
    
    
    0.07
    
    
    
    (1.97
    )Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.76
    )Net earnings (loss) available to common shareholders
    
    $
    0.02
    
    
    
    (1.06
    )
    
    
    0.07
    
    
    
    (3.73
    )


See accompanying notes to condensed consolidated financial statements.





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MORTON INDUSTRIAL GROUP, INC. AND
SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 27, 2003 and September 28, 2002
(Dollars in thousands)
(Unaudited)

Nine Months EndedSeptember 27, 2003
    
    
    September 28, 2002Net cash provided by operating activities
    
    $
    4,254
    
    
    
    3,585Cash flows from investing activities:Proceeds from sale of machinery and equipment
    
    
    
    
    
    
    257Proceeds from sale of business
    
    
    4,800
    
    
    
    Cash received on notes receivable
    
    
    99
    
    
    
    Capital expenditures
    
    
    (2,629
    )
    
    
    (3,014
    )Net cash provided by (used in) investing activities
    
    
    2,270
    
    
    
    (2,757
    )Cash flows from financing activities:Net borrowings (repayments) under revolving credit facility
    
    
    (4,650
    )
    
    
    4,596Increase (decrease) in checks outstanding in excess of bank balance
    
    
    1,777
    
    
    
    (1,185
    )Increase in financing fees
    
    
    (300
    )
    
    
    (1,412
    )Principal payments on long-term debt and capital leases
    
    
    (3,351
    )
    
    
    (2,840
    )Cash received on exercised options
    
    
    
    
    
    
    13Net cash used in financing activities
    
    
    (6,524
    )
    
    
    (828
    )Net change in cash
    
    
    
    
    
    
    Cash at beginning of period
    
    
    
    
    
    
    Cash at end of period
    
    $
    
    
    
    
    Supplemental disclosures of cash flow information:Cash paid during the period for interest
    
    $
    2,452
    
    
    
    4,732


See accompanying notes to condensed consolidated financial statements.





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MORTON INDUSTRIAL GROUP, INC. AND
SUBSIDIARIES

Condensed Consolidated Statement of Stockholders Equity (Deficit)
For the Nine Months Ended September 27, 2003
(Dollars in thousands)
(Unaudited)

Class A
    
    
    Class Bcommon
stock
    
    
    common
stockAdditional
    
    
    RetainedShares
    
    
    
    
    
    
    Shares
    
    
    
    
    
    
    paid-in
    
    
    earningsissued
    
    
    Amount
    
    
    issued
    
    
    Amount
    
    
    capital
    
    
    (deficit)
    
    
    TotalBalance, December 31, 2002
    
    
    4,460,547
    
    
    $
    45
    
    
    
    200,000
    
    
    $
    2
    
    
    $
    20,895
    
    
    $
    (45,166
    )
    
    $
    (24,224
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,080
    
    
    
    1,080Accretion of discount on
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (715
    )
    
    
    (715
    )Conversion of shares of Class B common
stock into shares of Class A
common stock
    
    
    100,000
    
    
    
    1
    
    
    
    (100,000
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    Balance, September 27, 2003
    
    
    4,560,547
    
    
    $
    46
    
    
    
    100,000
    
    
    $
    1
    
    
    $
    20,895
    
    
    $
    (44,801
    )
    
    $
    (23,859
    )


See accompanying notes to condensed consolidated financial statements.





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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended September 27, 2003 and September 28, 2002
(Unaudited)

(1) Nature of Business

Through our operating subsidiaries, we are a contract manufacturer and
supplier of high-quality fabricated sheet metal components and subassemblies
for industrial, construction and agricultural original equipment manufacturers
located primarily in the Midwestern and Southeastern United States.

(2) Interim Financial Data

The Condensed Consolidated Financial Statements at September 27, 2003, and
for the three and nine months ended September 27, 2003 and September 28, 2002,
are unaudited and reflect all adjustments, consisting of normal recurring
accruals and other adjustments which, in the opinion of our management, are
necessary for a fair presentation of the financial position, operating results,
and cash flows for the interim periods indicated. Our fiscal quarters end on a
Saturday (nearest to a quarter end) except for the fourth quarter which ends on
December 31. For both the quarters ended September 27, 2003 and September 28,
2002 there were 63 shipping days. For both the nine months ended September 27,
2003 and September 28, 2002 there were 189 shipping days. Results of operations
for the interim periods are not necessarily indicative of the results of
operations for the full fiscal year. You should read the condensed consolidated
financial statements in connection with the consolidated financial statements
and notes thereto, together with managements discussion and analysis of
financial condition and results of operations of Morton Industrial Group, Inc.
contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2002, as filed on March 31, 2003.

(3) Discontinued Operations

The results from discontinued operations for the three and nine months
ended September 28, 2002 reflect the results of both Morton Custom Plastics,
LLC, which we sold on December 24, 2002, and Mid-Central Plastics, Inc., which
we sold on June 20, 2003. The results from discontinued operations for the nine
months ended September 27, 2003 reflect only the results of Mid-Central
Plastics, Inc.

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

December 31,2002Accounts 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


As reported on Form 8-K filed on June 23, 2003 and Form 8-K/A filed on July 7,
2003, the Company sold its assets held for sale and the liabilities held for
sale on June 20, 2003. The terms of the transaction were substantially the
same as those anticipated in the preparation of the Annual Report on Form 10-K
filed March 31, 2003. The sales price, subsequent to a working capital
adjustment, was $6.1 million, with $4.8 million received in cash at closing
plus notes receivable from the buyer of $98,500, $97,000 and $1,100,000. The
note receivable of $98,500 bore interest at 6.08% and was paid in September,
2003. The note receivable of $97,000 is due December 20, 2003, and bears
interest at 6.18%. The note receivable of $1,100,000 is due June 20, 2006 and
bears interest at 15% per annum. Interest for the period of June 20, 2003
through June 20, 2004 shall be 15% payment-in-kind, with interest payable in
cash on June 20, 2005, and at the date of maturity, June 20, 2006. The notes
receivable, due from the buyer, are subordinate to required payments due by the
buyer to its senior secured lender. Payments received by the Company are
assigned to the Harris Bank syndicate, the Companys senior secured lender.





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(4) Inventory

The Companys inventory, in thousands of dollars, as of September 27,
2003, and December 31, 2002, is summarized as follows:

September 27,
    
    
    December 31,2003
    
    
    2002Raw materials, purchased parts and manufactured components
    
    $
    3,807
    
    
    $
    3,645Work-in-process
    
    
    5,820
    
    
    
    6,087Finished goods
    
    
    2,747
    
    
    
    4,590$
    12,374
    
    
    $
    14,322


(5) Earnings Per Share

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

Quarter Ended September 27, 2003
    
    
    Quarter Ended September 28, 2002Earnings
    
    
    Shares
    
    
    Per Share
    
    
    (Loss)
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic earnings (loss) available to
common shareholders
    
    $
    106,000
    
    
    
    4,660,547
    
    
    $
    0.02
    
    
    $
    (4,978,000
    )
    
    
    4,660,547
    
    
    $
    (1.06
    )Effect of dilutive securities, stock
options and warrants
    
    
    
    
    
    
    633,981
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) available to
common shareholders
    
    $
    106,000
    
    
    
    5,294,528
    
    
    $
    0.02
    
    
    $
    (4,978,000
    )
    
    
    4,660,547
    
    
    $
    (1.06
    )


Nine Months Ended September 27, 2003
    
    
    Nine Months Ended September 28, 2002Earnings
    
    
    Shares
    
    
    Per Share
    
    
    (Loss)
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic earnings (loss) available to
common shareholders
    
    $
    365,000
    
    
    
    4,660,547
    
    
    $
    0.08
    
    
    $
    (17,283,000
    )
    
    
    4,600,850
    
    
    $
    (3.73
    )Effect of dilutive securities, stock
options and warrants
    
    
    
    
    
    
    458,328
    
    
    
    (0.01
    )
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) available to
common shareholders
    
    $
    365,000
    
    
    
    5,118,875
    
    
    $
    0.07
    
    
    $
    (17,283,000
    )
    
    
    4,600,850
    
    
    $
    (3.73
    )


For the quarters ended September 27, 2003 and September 28, 2002, 304,685
and 1,435,921, respectively, options and warrants were excluded from the
computation of diluted earnings per share due to their anti-dilutive effect.

For the nine month periods ended September 27, 2003 and September 28,
2002, 236,982 and 1,447,430, respectively, options and warrants were excluded
from the computation of diluted earnings per share due to their anti-dilutive
effect.

(6) Segment Reporting

Due to the previously reported sale of Morton Custom Plastics, LLC., and
the June 20, 2003 sale of Mid-Central Plastics, Inc., we have only one
remaining segment  the contract metals fabrication segment.

(7) Debt

In February 2002, we entered into a new secured revolving credit facility
with a syndicate of banks led by Harris Trust and Savings Bank, as Agent (the
Harris syndicate). The revolving credit agreement permitted us 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 on bank prime
plus 1.5% (effective rate of 5.50% at September 27, 2003). Alternatively, we
could select a LIBOR plus 4.0% interest rate. The amount available under the
original provisions of the revolving credit facility was 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, the credit facility has been amended and the
maturity date has been extended to April 1, 2004. At September 27, 2003, we had
$14.0 million outstanding and $568,000 available under this credit facility.





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In February 2002, we entered into an amended and restated secured term
loan arrangement with the Harris syndicate for a term loan of $32.9 million.
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 on bank prime plus 1.5% (effective rate of
5.50% at September 27, 2003). Alternatively, we could select a LIBOR plus 4.0%
interest rate.

The February, 2002 Harris syndicate agreement has been amended four times,
most recently on February 28, 2003, and June 20, 2003. Among the key provisions
of the February 28, 2003 amendment: (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, $500,000 payable each month end from May 31, 2003
through 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 $22.0
million will be due. Also, effective February 28, 2003, the limit of eligible
inventory under the revolving credit facility was increased to 60% and the
amount of other assets eligible became $3.5 million. The Company has begun
discussions to obtain loans or funding support from other sources, or extend
its existing credit facility, by the maturity date of the current agreement,
but there are no assurances that we will be successful in our efforts. Failure
to do so could have a material adverse effect on our operations.

The fourth amendment, dated June 20, 2003 provided consent by the Harris
Bank syndicate to the Mid-Central Plastics, Inc. June 20, 2003 transaction and,
upon completion of that transaction, impacted the revolving credit facility as
follows: (i) $3.5 million of the $4.8 million cash proceeds received at closing
were used to paydown the revolving line-of-credit; (ii) the amount of other
assets eligible under the revolving credit facility was reduced from $3.5
million to $2.1 million; and (iii) the maximum amount that can be borrowed
under the revolving credit facility was reduced from $21.0 million to $18.8
million.

In connection with these Harris syndicate loans, we have granted the
lender a first lien on all of our 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 amounts are available for the payment of dividends at September
27, 2003. The agreements also impose various financial covenants, including
financial performance ratios.

(8) Stock Option Plan

We account for our stock option plan in accordance with the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees,and related interpretations. As such, we would record
compensation expense on the date of grant only if the current market price of
the underlying stock exceeded the exercise price. We issue all of our options
at the current market price on the date of issuance and, accordingly, we have
not recognized any stock-based employee compensation cost for stock options in
our financial statements.

The per share weighted-average fair value of stock options granted during
the first nine months of 2003 and 2002 was $0.15 and $0.29 on the date of grant
based on the Black Scholes option-pricing model with the following
weighted-average assumptions: expected dividend yield of 0%, risk-free interest
rate of 6%, volatility of 91%, and an expected life of 10 years.

Had we determined compensation cost based on the fair value at the grant
date for our stock options under SFAS No. 123, Accounting for Stock-Based
Compensation, our net earnings, in thousands of dollars, would have been
reduced to the pro forma amounts indicated below:

Quarter
    
    
    QuarterEnded
    
    
    EndedSeptember
    
    
    September27, 2003
    
    
    28, 2002Net earnings (loss) available to common shareholders:As reported
    
    $
    106
    
    
    
    (4,978
    )Total stock-based employee compensation expense determined under fair value based method for all awards
    
    
    (20
    )
    
    
    (54
    )Pro forma
    
    $
    86
    
    
    
    (5,032
    )Basic earnings (loss) available to common shareholders per share:As reported
    
    $
    .02
    
    
    
    (1.06
    )Pro forma
    
    $
    .02
    
    
    
    (1.07
    )Diluted earnings (loss) available to common shareholders per share:As reported
    
    $
    .02
    
    
    
    (1.06
    )Pro forma
    
    $
    .02
    
    
    
    (1.07
    )






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##### Table of Contents



Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember
    
    
    September27, 2003
    
    
    28, 2002Net earnings (loss) available to common shareholders:As reported
    
    $
    365
    
    
    
    (17,283
    )Total stock-based employee compensation expense determined under fair value based method for all awards
    
    
    (94
    )
    
    
    (162
    )Pro forma
    
    $
    271
    
    
    
    (17,445
    )Basic earnings (loss) available to common shareholders per share:As reported
    
    $
    .08
    
    
    
    (3.73
    )Pro forma
    
    $
    .06
    
    
    
    (3.79
    )Diluted earnings (loss) available to common shareholders per share:As reported
    
    $
    .07
    
    
    
    (3.73
    )Pro forma
    
    $
    .05
    
    
    
    (3.79
    )


(9) Impact of Recently Issued Accounting Standards

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 stock-based compensation. The disclosure requirements
have been implemented.

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

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. In particular, SFAS No. 149 clarifies under what circumstances a
contract with an initial net investment meets the characteristics of a
derivative and when a derivative contains a financing component that warrants
special reporting in the statement of cash flows. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003 and is not
expected to have a material impact on the Companys financial position or
results of operations.

(10) Redeemable Preferred Stock

As part of the financing for the 1999 Morton Custom Plastics, LLC
acquisition from Worthington Industries, Inc. (Worthington), we issued 10,000
shares of redeemable preferred stock, which becomes redeemable for cash on
April 15, 2004 at $1,000 per share plus any dividends accrued since April 15,
1999. We recorded the $10.0 million face value preferred stock 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. There are legal
proceedings related to certain Worthington matters as described in Part II,
Item 1. We are continuing 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.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within the scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003.





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##### Table of Contents



The Company adopted SFAS No. 150 during the quarter ended September 27,
2003, and that adoption has had the following classification impact on the
Companys Condensed Consolidated Financial Statements:



| | (i) |  | related to the Condensed Consolidated Balance Sheet as of
September 27, 2003, the redeemable preferred stock, previously
reported as neither a liability nor as equity, is classified as a
current liability based on the redemption date of April 15, 2004.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) |  | related to the Condensed Consolidated Statements of Operations
for the three month period ended September 27, 2003, the expense
reported in previous periods as accretion of discount on preferred
shares is classified as interest on redeemable preferred stock;
there was no change in classification for the six months ended June
28, 2003.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The following discussion and analysis describes changes in the Companys
financial condition since December 31, 2002. The analysis of results of
operations compares the quarters and nine months ended September 27, 2003 and
September 28, 2002. Any references to December 31, 2002 relate to data found in
Form 10-K as filed with the Securities and Exchange Commission on March 31,
2003.

RESULTS OF OPERATIONS

THIRD QUARTER, 2003 VERSUS THIRD QUARTER, 2002

Our net revenues for the third quarter, 2003 were $31.5 million compared
to $29.0 million for the third quarter of 2002, an increase of $2.5 million, or
8.5%. The sales increase resulted primarily from increases in unit volume from
existing customers.

Our sales to Deere & Company and Caterpillar Inc., were approximately 85%
of our revenues for both the third quarter of 2003 and the third quarter of
2002. Revenues from these customers increased approximately 9.2% from the same
period in 2002.

Our gross profits for the third quarter, 2003 increased by approximately
$678,000, an increase of 20.0%, versus the same three months in 2002. The
overall gross profit percentage increased to 12.9% for the third quarter of
2003 from 11.7% for the third quarter of 2002. The increase in gross profit
dollars resulted primarily from increased sales. The increase in the gross
profit percentage resulted from continuing manufacturing cost savings
initiatives partially offset by continued pricing pressure from customers.

Our selling and administrative expenses for the third quarter, 2003
amounted to $3.2 million, or 10.1% of net sales compared to $2.7 million, or
9.4% of net sales for the third quarter of 2002. The increase in costs, and the increased percentage of net sales, are
related to the increase in sales and to expenses incurred to strengthen the support of our Southeast locations.

Our interest expense was $612,000 for the third quarter of 2003, compared
with $1.1 million for the third quarter of 2002. While interest rates have
remained steady for comparable quarters, a decrease in the overall debt level
has decreased interest expense for the comparable quarters. Additionally, the
interest rate swap agreements in effect during the third quarter, 2002 expired
June 30, 2003, and accordingly, no swap interest was incurred during the third
quarter, 2003.

As described in Note 10, the Company adopted SFAS No. 150 effective with
the quarter ended September 27, 2003; accordingly, interest on redeemable
preferred stock of $213,000 has been recorded for this three month period.
This expense had been reported in prior periods as accretion of discount on
preferred shares below net earnings to arrive at earnings (loss) available to
common shareholders.

Our other income was $45,000 for the third quarter of 2003, primarily from
interest income on notes receivable, compared with other income of $89,000 for
the third quarter of 2002, primarily due to unrealized gains on the Companys
interest rate swap instruments. These swap agreements expired at the end of
June, 2003.

For the third quarter of 2003, we recorded no tax provision on pre-tax
income of $106,000 from continuing operations. The impact on our net operating
loss carryforward was offset by changes in the valuation allowance with no
impact on the net deferred income tax assets.

There were no discontinued operations to report for the third quarter of
2003. As described in Note 3 above, the third quarter of 2002 reflects
discontinued operations of Mid-Central Plastics, Inc., (sold June 20, 2003) and
also included the operations of Morton Custom Plastics, LLC, which was
sustaining significant losses from its operations.





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##### Table of Contents



FIRST NINE MONTHS, 2003 VERSUS FIRST NINE MONTHS, 2002

Our net revenues for the first nine months of 2003 were $98.2 million
compared to $90.4 million for the first nine months of 2002, an increase of
$7.8 million, or 8.7%. The sales increase resulted primarily from increases in
unit volume from existing customers.

Our sales to Deere & Company and Caterpillar Inc., were approximately 89%
of our revenues for the first nine months of both 2003 and 2002. Revenues from
these customers for the first nine months of 2003 increased approximately 9.5%
from the first nine months of 2002.

Our gross profits for the first nine months of 2003 increased by
approximately $1.3 million, an increase of 10.6%, versus the same nine months
in 2002. The overall gross profit percentage increased to 13.9% for the first
nine months of 2003 from 13.7% for the first nine months of 2002. The increase
in gross profit dollars resulted primarily from increased sales. The modest
increase in the gross profit percentage resulted from continuing manufacturing
cost savings initiatives partially offset by continued pricing pressure from
customers.

Our selling and administrative expenses for the first nine months of 2003
was $9.8 million, or 10.0% of sales, compared to $9.1 million, or 10.1% of
sales for the first nine months of 2002. The increase in costs related to an
increase in sales.

Our interest expense was approximately $2.5 million for the first nine
months of 2003, compared to $3.3 million for the first nine months of 2002.
While interest rates have remained steady for the comparable periods, a
decrease in the overall debt level has decreased interest expense for the
comparable periods. Additionally, the interest rate swap agreements in effect
during the first nince months, 2002 expired June 30, 2003, and accordingly,
swap interest was incurred for only the first six months of 2003.

As described in Note 10, the Company adopted SFAS No. 150 effective with
the quarter ended September 27, 2003; accordingly, interest on redeemable
preferred stock of $213,000 has been recorded for this nine month period.
This expense had been reported in prior periods as accretion of discount on
preferred shares below net earnings to arrive at earnings (loss) available to
common shareholders.

For the first nine months of 2003, we recorded a tax provision of $560,000
on pre-tax income of $1.6 million from continuing operations, and a tax
provision of $55,000 (39%) on pre-tax income of $140,000 from discontinued
operations. We utilized net operating loss carry forwards to the extent of
taxable income, and we recorded a resulting decrease in deferred tax assets to
reflect this utilization. For the third quarter of 2003, we recorded no tax
provision on pre-tax income of $106,000 from continuing operations. The impact
on our net operating loss carryforward was offset by changes in the valuation
allowance with no impact on the net deferred income tax assets.

Related to discontinued operations, during the first nine months of 2002,
the Company recorded a tax benefit of $1,473,000 as it determined that it would
be able to recover taxes paid in previous years under the five-year carryback
provisions of the Jobs Creation and Worker Assistance Act of 2002. The amounts
recovered relate primarily to pre-acquisition taxes paid by acquired
subsidiaries. Additionally, the Company recognized an income tax expense of
$2,294,000 during the nine months ended September 28, 2002, related to an
increase in the valuation allowance for deferred tax assets. Net deferred tax
assets were decreased to reflect lower anticipated utilization of income tax
net operating loss carryforwards.

Discontinued operations reflect pre-tax income of $140,000 for the first
nine months of 2003 compared to a pre-tax loss of $7.6 million in the first
nine months of 2002. As described in Note 3 above, the first nine months of
2003 includes only the operations of Mid-Central Plastics, Inc. (sold June 20,
2003), while the first nine months of 2002 also included the operations of
Morton Custom Plastics, LLC, which was sustaining significant losses from its
operations.

LIQUIDITY AND CAPITAL RESOURCES

Our consolidated working capital at September 27, 2003 was a deficit of
$47.8 million compared to a working capital deficit of $2.3 million at December
31, 2002. This represents a decrease in working capital of approximately $45.5
million. Our credit facility matures on April 1, 2004, and we have accordingly
classified the related term debt and revolving debt as current liabilities.
Also, as described above in Note 10, we have classified as a current liability
the preferred stock that is redeemable on April 15, 2004. As discussed below,
we are currently discussing with both our existing lender, a syndicate of banks
led by Harris Trust and Savings Bank, as Agent (the Harris syndicate), and
other potential lenders, the refinancing of the debt that matures on April 1,
2004. We are also negotiating with the holder of the redeemable preferred
stock, as described below.





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##### Table of Contents



In February 2002, we entered into a new secured revolving credit facility
with the Harris syndicate). The revolving credit agreement permitted us 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 on bank
prime plus 1.5% (effective rate of 5.50% at September 27, 2003). Alternatively,
we could select a LIBOR plus 4.0% interest rate. The amount available under the
original provisions of the revolving credit facility was 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, the credit facility has been amended and the
maturity date has been extended to April 1, 2004. At September 27, 2003, we had
$14.0 million outstanding and $0.6 million available under this credit
facility.

In February 2002, we entered into an amended and restated secured term
loan arrangement with the Harris syndicate for a term loan of $32.9 million.
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 on bank prime plus 1.5% (effective rate of
5.50% at September 27, 2003). Alternatively, we could select a LIBOR plus 4.0%
interest rate.

The February, 2002 Harris syndicate agreement has been amended four times,
most recently on February 28, 2003, and June 20, 2003. Among the key provisions
of the February 28, 2003 amendment: (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, $500,000 payable each month end from May 31, 2003
through 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 $22.0
million will be due. Also, effective February 28, 2003, the limit of eligible
inventory under the revolving credit facility was increased to 60% and the
amount of other assets eligible became $3.5 million. The Company has begun
discussions to obtain loans or funding support from other sources, or extend
its existing credit facility, by the maturity date of the current agreement,
but there are no assurances that we will be successful in our efforts. Failure
to do so could have a material adverse effect on our operations.

The fourth amendment, dated June 20, 2003, provided consent by the Harris
Bank syndicate to the Mid-Central Plastics, Inc. June 20, 2003 transaction and,
upon completion of that transaction, impacted the revolving credit facility as
follows: (i) $3.5 million of the $4.8 million cash proceeds received at closing
were used to paydown the revolving line-of-credit; (ii) the amount of other
assets eligible under the revolving credit facility was reduced from $3.5
million to $2.1 million; and (iii) the maximum amount that can be borrowed
under the revolving credit facility was reduced from $21.0 million to $18.8
million.

In connection with these Harris syndicate loans, we have granted the
lender a first lien on all of our 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 amounts are available for the payment of dividends at September
27, 2003. The agreements also impose various financial covenants, including
financial performance ratios.

In connection with the Harris syndicate financing, we had two fixed
interest rate swap agreements with a commercial bank (the counter party). The
first agreement expired May 31, 2003, and the second agreement expired June 30,
2003.

Historically, we have met our near term liquidity requirements with cash
flow from operations, the Harris syndicate line of credit, and management of
our working capital to reflect current levels of operations. The recent
national economic slowdown increased pressure on these sources of liquidity.
The gradual improvement in the national economy that may be occurring could
help reduce that pressure slightly if it results in the increase of sales
volume and cash flow, but we believe that careful management of our liquidity
will continue to be necessary. The February, 2002 Harris syndicate revolving
credit facility and term loans replaced existing credit facilities and did not
provide additional availability. We anticipate that the February, 2002
agreements with the Harris syndicate, as amended on February 28, 2003 and June
20, 2003, will assist us in meeting our liquidity requirements through the term
of these agreements.

Preferred Stock

As part of the financing for the 1999 Morton Custom Plastics, LLC
acquisition from Worthington Industries, Inc. (Worthington) , we issued 10,000
shares of redeemable preferred stock, which becomes redeemable for cash on
April 15, 2004 at $1,000 per share plus any dividends accrued since April 15,
1999. We recorded the $10.0 million face value preferred stock 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. There are legal
proceedings related to certain Worthington matters as described in Part II,
Item 1. We are continuing 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.





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##### Table of Contents



Capital Expenditures

We incurred $2.6 million of capital expenditures during the first nine
months of 2003, including $2.4 million related to continuing operations,
primarily for the update and purchase of manufacturing equipment.

We estimate that our capital expenditures in 2003 will total approximately
$3.5 million, of which $1.9 million will be for new production equipment and
the remaining $1.6 million will be for normal replacement items.

Significant Cash Commitments

The following table summarizes the Companys contractual obligations at
September 27, 2003:

Payments Due by PeriodLess than
    
    
    1 - 3
    
    
    4 - 5
    
    
    After 5(In Thousands)
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsBank indebtednessTerm loan

    $
    24,753
    
    
    
    24,753
    
    
    
    
    
    
    
    
    
    
    
    Revolving line of credit
    
    
    13,950
    
    
    
    13,950
    
    
    
    
    
    
    
    
    
    
    
    Other debt obligations
    
    
    2,149
    
    
    
    453
    
    
    
    1,349
    
    
    
    347
    
    
    
    Redeemable preferred stock
    
    
    9,536
    
    
    
    9,536
    
    
    
    
    
    
    
    
    
    
    
    Operating leases
    
    
    16,707
    
    
    
    5,423
    
    
    
    9,890
    
    
    
    1,394
    
    
    
    Total contractual cash obligations
    
    $
    67,095
    
    
    
    54,115
    
    
    
    11,239
    
    
    
    1,741
    
    
    
    


Under our bank credit facility, we have $618,000 standby letters of credit
outstanding at September 27, 2003 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 September 27,
2003, we had $568,000 in unused availability under the bank revolving line of
credit. Our credit facility with the Harris Bank syndicate matures on April 1,
2004. The Company has begun discussions to obtain loans or funding support from
other sources, or extend its existing credit facility by the maturity date of
the current agreement, but there are no assurances that we will be successful
in our efforts.

As described previously in the Financial Position and Liquidity section of
this Form 10-Q, 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 II, Item 1. We are continuing 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.

The successful resolution of the preferred stock issues and the
renegotiation or refinancing of our senior indebtedness are significant issues
facing us in early 2004. Our failure to resolve either item could have a
material adverse effect on our operations.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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 stock-based compensation. The disclosure requirements
have been implemented.

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

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. In particular, SFAS No. 149 clarifies under what circumstances a
contract with an initial net investment meets the characteristics of a
derivative and when a derivative contains a financing component that warrants
special reporting in the statement of cash flows. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003 and is not
expected to have a material impact on the Companys financial position or
results of operations.





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##### Table of Contents



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity. SFAS
No. 150 establishes standards for how an issuer classifies and measures in its
statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within the scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
Company adopted SFAS No. 150 during the quarter ended September 27, 2003 as
discussed in Note 10 above.

FORWARD LOOKING STATEMENTS

Safe Harbor Statement Under The Private Securities Litigation Reform Act
Of 1995: This quarterly 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 acquisitions; the orders of
our two major customers; 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 quarterly
report. We disclaim any obligations to update any such factors or publicly
announce the result of any revisions to any of the forward looking statements
contained herein to reflect future events or developments.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE 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 funding the growth of our business. 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 bank syndicate. This
agreement contains a term loan and a revolving credit facility. Interest is
based on our lead banks prime rate plus an applicable variable margin.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Within the 90 days prior to the date of this report, we carried out an
evaluation of the effectiveness of the design and operation of our 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 our management, including our Chief Executive Officer and
Vice President of Finance. Based upon that evaluation, our Chief Executive
Officer and 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 our reports filed under the Securities
and Exchange Act is accumulated and communicated to management to allow timely
decisions regarding required disclosure.

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 we carried out this evaluation.





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##### Table of Contents






PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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 under the
terms of the agreement, none of the amounts claimed by Worthington were owed by
us. As previously reported, the case has been stayed by the bankruptcy of MCP,
LLC in late 2002, and in that proceeding, MCP, LLC sold all of its assets and
used the proceeds to pays its senior secured lender. We are in settlement
discussions with Worthington with respect to this litigation and resolution of
the preferred stock issues, including the April 15, 2004 redemption of these
shares. See the preferred stock discussion in Liquidity and Capital Resources
in Part I, Item 2 above.

ITEM 2. CHANGES IN SECURITIES

On September 20, 2000, the Company issued warrants to purchase 238,548
shares of its Class A Common Stock at an exercise price of $.01 per share.
Under the terms of the February, 2003 amendment with Harris Bank, the warrants
may be exercised at any time through December 31, 2005.

Under the terms of our agreement with our senior secured lender, no
amounts are available for the payment of dividends at September 27, 2003.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) Exhibits

11.
    
    The computation can be determined from this report.31.1
    
    Certification pursuant to Rule 13a-14(a)31.2
    
    Certification pursuant to Rule 13a-14(a)32.1
    
    Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(B) Reports on Form 8-K.

None




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

MORTON INDUSTRIAL GROUP, INC.By:
    /s/ RODNEY B. HARRISONRodney B. HarrisonVice President of FinanceDated: November 12, 2003