##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended July 2, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 COMMISSION FILE NUMBER 0-13198
 MORTON INDUSTRIAL GROUP, INC.
  Georgia
(State or other jurisdiction of
Incorporation or organization)
    
    38-0811650
(IRS Employer
Identification No.)
 1021 W. Birchwood, Morton, Illinois 61550
 (309) 266-7176
 þ  ̈
  ̈ þ
  Outstanding as ofJuly 29, 2005Class A Common Stock, $.01 par value
    
    
    4,880,878Class B Common Stock, $.01 par value
    
    
    100,000




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##### Table of Contents



TABLE OF CONTENTS
 ITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGSITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSIGNATURESCertificationCertificationSection 906 CertificationCertificationCertificationCertification




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS
 MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 Condensed Consolidated Statements of Operations
For the Three and Six Months Ended July 2, 2005 and June 26, 2004
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    Six Months EndedJuly 2, 2005
    
    June 26, 2004
    
    July 2, 2005
    
    June 26, 2004Net sales
    
    $
    53,558
    
    
    
    50,706
    
    
    
    107,681
    
    
    
    90,626Cost of sales
    
    
    45,969
    
    
    
    44,561
    
    
    
    92,958
    
    
    
    78,972Gross profit
    
    
    7,589
    
    
    
    6,145
    
    
    
    14,723
    
    
    
    11,654Operating expenses:Selling expenses
    
    
    795
    
    
    
    785
    
    
    
    1,578
    
    
    
    1,587Administrative expenses
    
    
    3,109
    
    
    
    2,647
    
    
    
    5,865
    
    
    
    5,204Total operating expenses
    
    
    3,904
    
    
    
    3,432
    
    
    
    7,443
    
    
    
    6,791Operating income
    
    
    3,685
    
    
    
    2,713
    
    
    
    7,280
    
    
    
    4,863Other income (expense):Interest expense
    
    
    (1,523
    )
    
    
    (1,241
    )
    
    
    (2,807
    )
    
    
    (1,893
    )Interest on redeemable preferred stock
    
    
    
    
    
    
    (36
    )
    
    
    
    
    
    
    (249
    )Gain on redemption of preferred stock
    
    
    850
    
    
    
    850
    
    
    
    1,700
    
    
    
    1,700Other
    
    
    22
    
    
    
    42
    
    
    
    62
    
    
    
    83Total other income (expense)
    
    
    (651
    )
    
    
    (385
    )
    
    
    (1,045
    )
    
    
    (359
    )Earnings before income taxes
    
    
    3,034
    
    
    
    2,328
    
    
    
    6,235
    
    
    
    4,504Income taxes
    
    
    320
    
    
    
    100
    
    
    
    520
    
    
    
    150Net earnings
    
    $
    2,714
    
    
    
    2,228
    
    
    
    5,715
    
    
    
    4,354Earnings per common share  basic
    
    $
    0.54
    
    
    
    0.48
    
    
    
    1.16
    
    
    
    0.94Earnings per common share  diluted
    
    $
    0.46
    
    
    
    0.38
    
    
    
    0.96
    
    
    
    0.76
  2




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##### Table of Contents



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 Condensed Consolidated Balance Sheets
July 2, 2005 and December 31, 2004
(Dollars, except par values, in thousands)
 July 2, 2005
    
    December 31, 2004(Unaudited)AssetsCurrent assets:Trade accounts receivable, less allowances for doubtful accounts
and returns of $195 in 2005 and $160 in 2004
    
    $
    15,910
    
    
    
    9,788Unbilled receivables
    
    
    1,817
    
    
    
    2,741Inventories
    
    
    18,826
    
    
    
    19,218Prepaid expenses and other current assets
    
    
    1,884
    
    
    
    1,324Deferred income taxes
    
    
    2,700
    
    
    
    2,700Total current assets
    
    
    41,137
    
    
    
    35,771Property, plant, and equipment, net
    
    
    22,161
    
    
    
    22,390Note receivable
    
    
    
    
    
    
    1,102Intangible assets, at cost, less accumulated amortization
    
    
    620
    
    
    
    649Deferred income taxes
    
    
    5,400
    
    
    
    5,400Other assets
    
    
    1,657
    
    
    
    1,833$
    70,975
    
    
    
    67,145Liabilities and Stockholders Equity (Deficit)Current liabilities:Outstanding checks in excess of bank balance
    
    $
    2,228
    
    
    
    2,801Current installments of long-term debt
    
    
    6,013
    
    
    
    3,295Accounts payable
    
    
    18,317
    
    
    
    17,860Accrued expenses
    
    
    4,017
    
    
    
    4,687Income taxes payable
    
    
    135
    
    
    
    200Redeemable preferred stock
    
    
    500
    
    
    
    500Total current liabilities
    
    
    31,210
    
    
    
    29,343Long-term debt, excluding current installments
    
    
    38,213
    
    
    
    40,280Other liabilities
    
    
    368
    
    
    
    368Redeemable preferred stock
    
    
    4,167
    
    
    
    6,167Warrants payable
    
    
    2,079
    
    
    
    1,791Total liabilities
    
    
    76,037
    
    
    
    77,949Stockholders equity (deficit):Class A common stock  $0.01 par value. Authorized 20,000,000 shares; issued
and outstanding 4,880,878 in 2005 and 4,723,878 shares in 2004
    
    
    49
    
    
    
    47Class B common stock  $0.01 par value. Authorized 200,000 shares; issued
and outstanding 100,000 shares in 2005 and 2004
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    20,947
    
    
    
    20,922Accumulated deficit
    
    
    (26,059
    )
    
    
    (31,774
    )Total stockholders equity (deficit)
    
    
    (5,062
    )
    
    
    (10,804
    )$
    70,975
    
    
    
    67,145
  3
    Table of Contents   MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 
 July 2,
    
    June 26,2005
    
    2004Cash flows from operating activities:Net earnings
    
    $
    5,715
    
    
    
    4,354Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:Depreciation and amortization of property, plant and equipment
and intangible assets
    
    
    2,740
    
    
    
    2,609Other amortization and accretion
    
    
    724
    
    
    
    622Provision for bad debts and returns
    
    
    35
    
    
    
    (27
    )Unrealized gain on derivative instruments
    
    
    (85
    )
    
    
    Gain on redemption of preferred stock
    
    
    (1,700
    )
    
    
    (1,700
    )Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (6,157
    )
    
    
    (9,192
    )Decrease (increase) in unbilled receivables
    
    
    924
    
    
    
    (2,196
    )Increase in accrued interest receivable
    
    
    
    
    
    
    (82
    )Decrease (increase) in inventories
    
    
    392
    
    
    
    (3,412
    )Increase in prepaid expenses
    
    
    (485
    )
    
    
    (1,445
    )Decrease in other assets
    
    
    176
    
    
    
    87Increase in accounts payable
    
    
    457
    
    
    
    4,816Decrease in income taxes payable
    
    
    (65
    )
    
    
    (252
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    (973
    )
    
    
    251Net cash provided by (used in) operating activities
    
    
    1,698
    
    
    
    (5,567
    )Cash flows from investing activities:Capital expenditures
    
    
    (2,565
    )
    
    
    (3,008
    )Proceeds from sale of property, plant and equipment
    
    
    20
    
    
    
    Payments received on notes receivable for sale of business
    
    
    1,102
    
    
    
    100Net cash used in investing activities
    
    
    (1,443
    )
    
    
    (2,908
    )Cash flows from financing activities:Increase (decrease) in checks issued in excess of bank balance
    
    
    (185
    )
    
    
    303Net advances on revolving debt
    
    
    2,300
    
    
    
    8,100Principal payments on long-term debt and capital leases
    
    
    (2,085
    )
    
    
    (2,265
    )Retirement of revolving debt in connection with refinancing
    
    
    
    
    
    
    (14,650
    )Retirement of term debt in connection with refinancing
    
    
    
    
    
    
    (22,153
    )Proceeds from issuance of revolving debt
    
    
    
    
    
    
    7,200Proceeds from issuance of long-term debt
    
    
    
    
    
    
    34,000Redemption of preferred stock
    
    
    (300
    )
    
    
    (300
    )Proceeds from issuance of common stock
    
    
    27
    
    
    
    Debt issuance costs
    
    
    (12
    )
    
    
    (1,760
    )Net cash provided by (used in) financing activities
    
    
    (255
    )
    
    
    8,475Net 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
    
    $
    1,945
    
    
    
    793Income taxes
    
    $
    585
    
    
    
    314
 4
    Table of Contents  MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
  
 Class A
    
    Class Bcommon stock
    
    common stock
    
    AdditionalShares
    
    
    
    
    
    Shares
    
    
    
    
    
    paid-in
    
    Accumulatedissued
    
    Amount
    
    issued
    
    Amount
    
    capital
    
    deficit
    
    TotalBalance, December 31, 2004
    
    
    4,723,878
    
    
    $
    47
    
    
    
    100,000
    
    
    $
    1
    
    
    $
    20,922
    
    
    $
    (31,774
    )
    
    $
    (10,804
    )Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,715
    
    
    
    5,715Stock options exercised
    
    
    157,000
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    27Balance, July 2, 2005
    
    
    4,880,878
    
    
    $
    49
    
    
    
    100,000
    
    
    $
    1
    
    
    $
    20,947
    
    
    $
    (26,059
    )
    
    $
    (5,062
    )
  5
    Table of Contents  MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended July 2, 2005 and June 26, 2004
(Unaudited)
 (1) Nature of Business
  (2) Interim Financial Data
   (3) Inventories
  July 2,
    
    December 31,2005
    
    2004Finished goods
    
    $
    7,135
    
    
    $
    8,361Work-in-process
    
    
    4,211
    
    
    
    4,765Raw materials
    
    
    7,480
    
    
    
    6,092$
    18,826
    
    
    $
    19,218
 6
    Table of Contents  (4) Earnings Per Share
  Quarter Ended July 2, 2005
    
    Quarter Ended June 26, 2004Earnings
    
    Shares
    
    Per Share
    
    Earnings
    
    Shares
    
    Per Share(Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic
    
    $
    2,714,000
    
    
    
    4,977,069
    
    
    $
    0.54
    
    
    $
    2,228,000
    
    
    
    4,660,547
    
    
    $
    0.48Effect of dilutive
securities, stock
options and
warrants
    
    
    
    
    
    
    960,870
    
    
    
    (0.08
    )
    
    
    
    
    
    
    1,300,571
    
    
    
    (0.10
    )Diluted
    
    $
    2,714,000
    
    
    
    5,937,939
    
    
    $
    0.46
    
    
    $
    2,228,000
    
    
    
    5,961,118
    
    
    $
    0.38
 Six Months Ended July 2, 2005
    
    Six Months June 26, 2004Earnings
    
    Shares
    
    Per Share
    
    Earnings
    
    Shares
    
    Per Share(Numerator)
    
    (Denominator)
    
    Amount
    
    (Numerator)
    
    (Denominator)
    
    AmountBasic
    
    $
    5,715,000
    
    
    
    4,920,923
    
    
    $
    1.16
    
    
    $
    4,354,000
    
    
    
    4,660,547
    
    
    $
    0.94Effect of dilutive
securities, stock
options and
warrants
    
    
    
    
    
    
    1,019,734
    
    
    
    (0.20
    )
    
    
    
    
    
    
    1,106,696
    
    
    
    (0.18
    )Diluted
    
    $
    5,715,000
    
    
    
    5,940,657
    
    
    $
    0.96
    
    
    $
    4,354,000
    
    
    
    5,767,243
    
    
    $
    0.76
  (5) Segment Reporting
 3⁄4
 (6) Debt and Warrants
 March 26, 2004 Refinancing and Subsequent Amendments
    7
    Table of Contents  1)
    
    A four-year secured term loan in the amount of $21,000,000 with variable rate interest;
principal payments are due in quarterly installments of $500,000 which began June 30, 2004 and
continued through March 31, 2005 and due in quarterly installments of $750,000 beginning June
30, 2005 through December 31, 2007 with the balance of $10,117,500 due on March 31, 2008.
Mandatory principal payments totaling $632,500 related to an asset sale were made in September
2004, March 2005 and May 2005. Annually, an additional mandatory principal payment will become
due on the term loan 90 days subsequent to year end if the Companys EBITDA for the calendar
year exceeds the sum of its cash payments for principal, interest, income taxes and capital
expenditures, as defined. For classification purposes in the accompanying Condensed
Consolidated Balance Sheets, $2,500,000 has been classified as current installments of
long-term debt for the estimated mandatory principal payment due by March 30, 2006. The
unpaid term debt as of July 2, 2005 is $17,617,500.
 2)
    
    A secured revolving credit facility with a limit of $18,000,000 with variable rate interest,
with an initial revolving credit balance of $8,700,000 and with initial availability of
$5,400,000 as of March 26, 2004. At July 2, 2005, the Company has a revolving credit balance
of $13,700,000 and availability of $2,810,000. The balance is due March 31, 2008. The amount
available under the revolving credit facility is limited to 85% of eligible accounts
receivable and 60% of eligible inventories. The facility requires a commitment fee of 0.50%
per annum on the unused portion of the facility.At the Companys option, for both the secured term loan and the secured revolving credit
facility, interest will be at either a bank base rate plus applicable margin, or an adjusted
LIBOR plus a LIBOR applicable margin. At inception, the bank rate plus applicable margin was
6.75% and the adjusted LIBOR plus a LIBOR applicable margin was 5.35%. At July 2, 2005, those
rates were approximately 8.25% and 6.28%, respectively.The Company entered into a swap agreement effective June 30, 2004 on $10,750,000 (the original
notional amount) of its term debt. Under this agreement, the Company pays a fixed LIBOR rate of
3.72% on the notional amount, which is payable quarterly. In accordance with the term loan
agreement, the Company also pays an interest margin which adjusts in steps based on achieved
operating and leverage metrics (4.00% during the first three months of 2005, and then reducing
to 3.50%). The notional amount for the period from April 3 through July 2, 2005 was $10,000,000.
The swap agreement is for the purpose of limiting the effects of interest rate increases on
approximately one-half of the Companys variable rate term debt. The all-in rate on the
notional amount in the first quarter of 2005 was 7.72% and during the second quarter of 2005 was
7.22%. The swap agreement expires March 31, 2008.
 3)
    
    Senior secured subordinated notes totaling $12,000,000 with cash interest of 12% and
payment-in-kind interest of 2% and 4% with no principal amortization, and the balances due
March 26, 2009. This debt is subordinated to the secured term loan and the revolving credit
facility with respect to both payment and lien priority. The unpaid senior secured
subordinated debt as of July 2, 2005 is $12,544,400.Related to the senior secured subordinated note, on March 26, 2004, the Company issued 545,467
warrants to purchase shares of its Class A Common Stock for $0.02 per share to the senior
subordinated debt lenders; these warrants expire March 26, 2014. The warrant holder may exercise
the warrants at any time. The holders may put the warrants to the Company, at the then fair
market value, at the earlier of: a) five years from the date of issue; b) a change of control;
c) a default on the senior secured subordinated loan; or d) a prepayment of 75% or more of the
original principal balance of the senior secured subordinated loan.The Company estimated the fair value of the warrants at the date of issue, March 26, 2004, and
as of July 2, 2005, to be $1,500,000 and $2,079,000 respectively. The $2,079,000 estimate is
reported as warrants payable in the accompanying consolidated balance sheets. The fair value at
the date of issue was recorded as debt discount, and is being amortized using the effective
yield method over 5 years, the term of the related senior secured subordinated note. The Company
reports the warrants at fair value and records changes in the fair value as interest expense.
 8
    Table of Contents  The stock purchase warrant includes provisions that will reduce the 545,467 warrants that can be
exercised or put to the Company if: a) a change of control occurs prior to 5 years from the date
of issue and the Company achieves specified net equity levels; or b) if a change of control has
not occurred prior to 5 years from the date of issue and the Company achieves specified EBITDA
(earnings before interest, taxes, depreciation and amortization) levels. The number of warrants
could be reduced to any one of several levels, but no lower than 290,278. For the year ended
December 31, 2004, the Company achieved the EBITDA level that reduced the maximum number of
warrants that may be put or exercised to 479,589.
   (7) Stock Option Plan
 Accounting for Stock Issued to Employees,
  Accounting for
Stock-Based Compensation
 Quarter Ended
    
    Quarter EndedDollars in thousands, except per share data
    
    July 2, 2005
    
    June 26, 2004Net earnings as reported
    
    $
    2,714
    
    
    
    2,228Total stock-based employee compensation
expense determined under fair value based
method for all awards
    
    
    (9
    )
    
    
    (12
    )Pro forma
    
    $
    2,705
    
    
    
    2,216Basic earnings per share:As reported
    
    $
    0.54
    
    
    
    0.48Pro forma
    
    $
    0.54
    
    
    
    0.48Diluted earnings per share:As reported
    
    $
    0.46
    
    
    
    0.38Pro forma
    
    $
    0.46
    
    
    
    0.38
 9
    Table of Contents  Six Months Ended
    
    Six Months EndedDollars in thousands, except per share data
    
    July 2, 2005
    
    June 26, 2004Net earnings as reported
    
    $
    5,715
    
    
    
    4,354Total stock-based employee compensation
expense determined under fair value based
method for all awards
    
    
    (19
    )
    
    
    (25
    )Pro forma
    
    $
    5,696
    
    
    
    4,329Basic earnings per share:As reported
    
    $
    1.16
    
    
    
    0.94Pro forma
    
    $
    1.16
    
    
    
    0.93Diluted earnings per share:As reported
    
    $
    0.96
    
    
    
    0.76Pro forma
    
    $
    0.96
    
    
    
    0.75
 (8) Impact of Recently Issued Accounting Standards
 Share-Based Payment Accounting for Stock Issued to Employees,
 Inventory Costs
 Accounting Changes and Error Corrections
 (9) Redeemable Preferred Stock
   10
    Table of Contents  (10) Unbilled Receivables
   (11) Reclassifications
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  GENERAL
    11
    Table of Contents  RESULTS OF OPERATIONS
 Second quarter, 2005 versus second quarter, 2004
  12
    Table of Contents  First six months, 2005 versus first six months, 2004
  13
    Table of Contents  14
    Table of Contents  LIQUIDITY AND CAPITAL RESOURCES
   March 26, 2004 Refinancing and Subsequent Amendments
     1)
    
    A four-year secured term loan in the amount of $21,000,000 with variable rate interest;
principal payments are due in quarterly installments of $500,000 which began June 30, 2004 and
continued through March 31, 2005 and due in quarterly installments of $750,000 beginning June
30, 2005 through December 31, 2007 with the balance of $10,117,500 due on March 31, 2008.
Mandatory principal payments totaling $632,500 related to an asset sale were made in September
2004, March 2005 and May 2005. Annually, an additional mandatory principal payment will become
due on the term loan 90 days subsequent to year end if the Companys EBITDA for the calendar
year exceeds the sum of its cash payments for principal, interest, income taxes and capital
expenditures, as defined. For classification purposes in the accompanying Condensed
Consolidated Balance Sheets, $2,500,000 has been classified as current installments of
long-term debt for the estimated mandatory principal payment due by March 30, 2006. . The
unpaid term debt as of July 2, 2005 is $17,617,500.
 2)
    
    A secured revolving credit facility with a limit of $18,000,000 with variable rate interest,
with an initial revolving credit balance of $8,700,000 and with initial availability of
$5,400,000 as of March 26, 2004. At July 2, 2005, the Company has a revolving credit balance
of $13,700,000 and availability of $2,810,000. The balance is due March 31, 2008. The amount
available under the revolving credit facility is limited to 85% of eligible accounts
receivable and 60% of eligible inventories. The facility requires a commitment fee of 0.50%
per annum on the unused portion of the facility.At the Companys option, for both the secured term loan and the secured revolving credit
facility, interest will be at either a bank base rate plus applicable margin, or an adjusted
LIBOR plus a LIBOR applicable margin. At inception, the bank rate plus applicable margin was
6.75% and the adjusted LIBOR plus a LIBOR applicable margin was 5.35%. At July 2, 2005, those
rates were approximately 8.25% and 6.28%, respectively.
 15
    Table of Contents  The Company entered into a swap agreement effective June 30, 2004 on $10,750,000 (the original
notional amount) of its term debt. Under this agreement, the Company pays a fixed LIBOR rate of
3.72% on the notional amount, which is payable quarterly. In accordance with the term loan
agreement, the Company also pays an interest margin which adjusts in steps based on achieved
operating and leverage metrics (4.00% during the first three months of 2005, and then reducing
to 3.50%). The notional amount for the period from April 3 through July 2, 2005 was $10,000,000.
The swap agreement is for the purpose of limiting the effects of interest rate increases on
approximately one-half of the Companys variable rate term debt. The all-in rate on the
notional amount in the first quarter of 2005 was 7.72% and during the second quarter of 2005 was
7.22%. The swap agreement expires March 31, 2008.
 3)
    
    Senior secured subordinated notes totaling $12,000,000 with cash interest of 12% and
payment-in-kind interest of 2% and 4% with no principal amortization, and the balances due
March 26, 2009. This debt is subordinated to the secured term loan and the revolving credit
facility with respect to both payment and lien priority. The unpaid senior secured
subordinated debt as of July 2, 2005 is $12,544,400.Related to the senior secured subordinated note, on March 26, 2004, the Company issued 545,467
warrants to purchase shares of its Class A Common Stock for $0.02 per share to the senior
subordinated debt lenders; these warrants expire March 26, 2014. The warrant holder may exercise
the warrants at any time. The holders may put the warrants to the Company, at the then fair
market value, at the earlier of: a) five years from the date of issue; b) a change of control;
c) a default on the senior secured subordinated loan; or d) a prepayment of 75% or more of the
original principal balance of the senior secured subordinated loan.The Company estimated the fair value of the warrants at the date of issue, March 26, 2004, and
as of July 2, 2005, to be $1,500,000 and $2,079,000 respectively. The $2,079,000 estimate is
reported as warrants payable in the accompanying consolidated balance sheets. The fair value at
the date of issue was recorded as debt discount, and is being amortized using the effective
yield method over 5 years, the term of the related senior secured subordinated note. The Company
reports the warrants at fair value and records changes in the fair value as interest expense.
 The stock purchase warrant includes provisions that will reduce the 545,467 warrants that can be
exercised or put to the Company if: a) a change of control occurs prior to 5 years from the date
of issue and the Company achieves specified net equity levels; or b) if a change of control has
not occurred prior to 5 years from the date of issue and the Company achieves specified EBITDA
(earnings before interest, taxes, depreciation and amortization) levels. The number of warrants
could be reduced to any one of several levels, but no lower than 290,278. For the year ended
December 31, 2004, the Company achieved the EBITDA level that reduced the maximum number of
warrants that may be put or exercised to 479,589.
    16
    Table of Contents  Redeemable Preferred Stock
  Capital Expenditures
   Significant Cash Commitments
   Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 Years(In thousands)Bank indebtednessTerm loan
    
    $
    17,618
    
    
    $
    5,500
    
    
    $
    12,118
    
    
    $
    
    
    
    $
    Revolving line of credit
    
    
    13,700
    
    
    
    
    
    
    
    13,700
    
    
    
    
    
    
    
    Senior subordinated debt
    
    
    12,544
    
    
    
    
    
    
    
    
    
    
    
    12,544
    
    
    
    Other debt obligations
    
    
    1,488
    
    
    
    523
    
    
    
    965
    
    
    
    
    
    
    
    Interest  estimated
    
    
    10,200
    
    
    
    3,500
    
    
    
    6,700
    
    
    
    
    
    
    
    Operating leases
    
    
    15,815
    
    
    
    5,815
    
    
    
    8,870
    
    
    
    1,130
    
    
    
    Preferred stock redemption
    
    
    700
    
    
    
    500
    
    
    
    200
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    72,065
    
    
    $
    15,838
    
    
    $
    42,553
    
    
    $
    13,674
    
    
    $
    
   17
    Table of Contents  FORWARD LOOKING STATEMENTS
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Interest Rate Risk
     18
    Table of Contents  Steel Commodity Risk
   
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures.
  Changes in internal controls.
  19
    Table of Contents  PART II 3⁄4 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  1.
    
    Elect three directors to serve for one-year terms until the Annual Meeting of Shareholders in
2006.
 2.
    
    Consider and act upon a proposal to ratify the selection of KPMG, LLP as independent auditors
of the Company for 2005.The results of the shareholders votes on each of these matters appear in the following
tables.Election of Directors:
 For
    
    Against
    
    Abstained
    
    TotalWilliam D. Morton
    
    
    5,104,628
    
    
    
    24,987
    
    
    
    
    
    
    
    5,129,615Fred W. Broling
    
    
    5,118,059
    
    
    
    11,556
    
    
    
    
    
    
    
    5,129,615Mark W. Mealy
    
    
    5,118,059
    
    
    
    11,556
    
    
    
    
    
    
    
    5,129,615
 Ratification of Selection of Independent Auditor:
 For
    
    Against
    
    Abstained
    
    TotalKPMG LLP
    
    
    5,128,303
    
    
    
    413
    
    
    
    899
    
    
    
    5,129,615
 ITEM 5. OTHER INFORMATION
  20
    Table of Contents   
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
  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.
    21




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##### Table of Contents



SIGNATURES
   
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