##### 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 October 1, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROMTO
 COMMISSION FILE NUMBER 0-13198
 MORTON INDUSTRIAL GROUP, INC.
  Georgia
    
    38-0811650(State or other jurisdiction of
    
    (IRS EmployerIncorporation or organization)
    
    Identification No.)
 1021 W. Birchwood, Morton, Illinois 61550
 (309) 266-7176
 þ o
 o þ
 o þ
  Outstanding as ofNovember 4, 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
 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 CertificationCertificationCertificationSection 906 Certification
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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 Nine Months Ended October 1, 2005 and September 25, 2004
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedOctober 1, 2005
    
    
    September 25, 2004
    
    
    October 1, 2005
    
    
    September 25, 2004Net sales
    
    $
    43,339
    
    
    
    46,146
    
    
    
    151,020
    
    
    
    136,772Cost of sales
    
    
    37,909
    
    
    
    40,828
    
    
    
    130,867
    
    
    
    119,800Gross profit
    
    
    5,430
    
    
    
    5,318
    
    
    
    20,153
    
    
    
    16,972Operating expenses:Selling expenses
    
    
    757
    
    
    
    802
    
    
    
    2,335
    
    
    
    2,389Administrative expenses
    
    
    3,028
    
    
    
    2,727
    
    
    
    8,893
    
    
    
    8,094Total operating expenses
    
    
    3,785
    
    
    
    3,529
    
    
    
    11,228
    
    
    
    10,483Operating income
    
    
    1,645
    
    
    
    1,789
    
    
    
    8,925
    
    
    
    6,489Other income (expense):Interest expense
    
    
    (1,393
    )
    
    
    (1,405
    )
    
    
    (4,200
    )
    
    
    (3,135
    )Interest on redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (249
    )Gain on redemption of preferred stock
    
    
    566
    
    
    
    566
    
    
    
    2,266
    
    
    
    2,266Other
    
    
    
    
    
    
    40
    
    
    
    62
    
    
    
    123Total other income (expense)
    
    
    (827
    )
    
    
    (799
    )
    
    
    (1,872
    )
    
    
    (995
    )Earnings before income taxes
    
    
    818
    
    
    
    990
    
    
    
    7,053
    
    
    
    5,494Income taxes
    
    
    80
    
    
    
    25
    
    
    
    600
    
    
    
    175Net earnings
    
    $
    738
    
    
    
    965
    
    
    
    6,453
    
    
    
    5,319Earnings per common share  basic
    
    $
    0.15
    
    
    
    0.20
    
    
    
    1.31
    
    
    
    1.14Earnings per common share  diluted
    
    $
    0.13
    
    
    
    0.15
    
    
    
    1.09
    
    
    
    0.91
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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 Condensed Consolidated Balance Sheets
October 1, 2005 and December 31, 2004
(Dollars, except par values, in thousands)
 October 1, 2005
    
    
    December 31, 2004(Unaudited)AssetsCurrent assets:Trade accounts receivable, less allowances for doubtful accounts
and returns of $168 in 2005 and $160 in 2004
    
    $
    13,047
    
    
    
    9,788Unbilled receivables
    
    
    1,653
    
    
    
    2,741Inventories
    
    
    18,786
    
    
    
    19,218Prepaid expenses and other current assets
    
    
    2,118
    
    
    
    1,324Deferred income taxes
    
    
    2,700
    
    
    
    2,700Total current assets
    
    
    38,304
    
    
    
    35,771Property, plant, and equipment, net
    
    
    22,409
    
    
    
    22,390Note receivable
    
    
    
    
    
    
    1,102Intangible assets, at cost, less accumulated amortization
    
    
    600
    
    
    
    649Deferred income taxes
    
    
    5,400
    
    
    
    5,400Other assets
    
    
    1,415
    
    
    
    1,833$
    68,128
    
    
    
    67,145Liabilities and Stockholders Equity (Deficit)Current liabilities:Outstanding checks in excess of bank balance
    
    $
    2,578
    
    
    
    2,801Current installments of long-term debt
    
    
    5,959
    
    
    
    3,295Accounts payable
    
    
    18,412
    
    
    
    17,860Accrued expenses
    
    
    3,719
    
    
    
    4,687Income taxes payable
    
    
    188
    
    
    
    200Redeemable preferred stock
    
    
    500
    
    
    
    500Total current liabilities
    
    
    31,356
    
    
    
    29,343Long-term debt, excluding current installments
    
    
    35,004
    
    
    
    40,280Other liabilities
    
    
    368
    
    
    
    368Redeemable preferred stock
    
    
    3,501
    
    
    
    6,167Warrants payable
    
    
    2,223
    
    
    
    1,791Total liabilities
    
    
    72,452
    
    
    
    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
    
    
    (25,321
    )
    
    
    (31,774
    )Total stockholders equity (deficit)
    
    
    (4,324
    )
    
    
    (10,804
    )$
    68,128
    
    
    
    67,145
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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 
 October 1,
    
    
    September 25,2005
    
    
    2004Cash flows from operating activities:Net earnings
    
    $
    6,453
    
    
    
    5,319Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:Depreciation and amortization of property, plant and equipment
and intangible assets
    
    
    3,996
    
    
    
    4,238Other amortization and accretion
    
    
    1,082
    
    
    
    769Provision for bad debts and returns
    
    
    35
    
    
    
    38Unrealized gain on derivative instruments
    
    
    (85
    )
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    2Gain on redemption of preferred stock
    
    
    (2,266
    )
    
    
    (2,266
    )Changes in operating assets and liabilities:Increase in accounts receivable
    
    
    (3,294
    )
    
    
    (5,415
    )Decrease (increase) in unbilled receivables
    
    
    1,088
    
    
    
    (2,778
    )Increase in accrued interest receivable
    
    
    
    
    
    
    81Decrease (increase) in inventories
    
    
    432
    
    
    
    (5,174
    )Increase in prepaid expenses
    
    
    (858
    )
    
    
    (1,092
    )Decrease in other assets
    
    
    557
    
    
    
    130Increase in accounts payable
    
    
    552
    
    
    
    4,575Decrease in income taxes payable
    
    
    (12
    )
    
    
    (250
    )Decrease in accrued expenses and other liabilities
    
    
    (883
    )
    
    
    (338
    )Net cash provided by (used in) operating activities
    
    
    6,797
    
    
    
    (2,161
    )Cash flows from investing activities:Capital expenditures
    
    
    (4,049
    )
    
    
    (4,217
    )Proceeds from sale of property, plant and equipment
    
    
    20
    
    
    
    30Payments received on notes receivable for sale of business
    
    
    1,102
    
    
    
    100Net cash used in investing activities
    
    
    (2,927
    )
    
    
    (4,087
    )Cash flows from financing activities:Increase (decrease) in checks issued in excess of bank balance
    
    
    (223
    )
    
    
    663Net advances (repayments) on revolving debt
    
    
    (300
    )
    
    
    6,418Principal payments on long-term debt and capital leases
    
    
    (2,962
    )
    
    
    (3,033
    )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
    
    
    (400
    )
    
    
    (400
    )Proceeds from issuance of common stock
    
    
    27
    
    
    
    Debt issuance costs
    
    
    (12
    )
    
    
    (1,797
    )Net cash provided by (used in) financing activities
    
    
    (3,870
    )
    
    
    6,248Net 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
    
    $
    2,951
    
    
    
    1,447Income taxes
    
    $
    612
    
    
    
    387
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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,453
    
    
    
    6,453Stock options exercised
    
    
    157,000
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    27Balance, October 1, 2005
    
    
    4,880,878
    
    
    $
    49
    
    
    
    100,000
    
    
    $
    1
    
    
    $
    20,947
    
    
    $
    (25,321)
    
    
    $
    (4,324
    )
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##### Table of Contents



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended October 1, 2005 and September 25, 2004
(Unaudited)
 (1) Nature of Business
  (2) Interim Financial Data
   (3) Inventories
  October 1,
    
    
    December 31,2005
    
    
    2004Finished goods
    
    $
    7,914
    
    
    $
    8,361Work-in-process
    
    
    4,374
    
    
    
    4,765Raw materials
    
    
    6,498
    
    
    
    6,092$
    18,786
    
    
    $
    19,218
 (4) Earnings Per Share
  Quarter Ended October 1, 2005
    
    
    Quarter Ended September 25, 2004Earnings
    
    
    Shares
    
    
    Per Share
    
    
    Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic
    
    $
    738,000
    
    
    
    4,980,878
    
    
    $
    0.15
    
    
    $
    965,000
    
    
    
    4,660,547
    
    
    $
    0.20Effect of dilutive
securities, stock
options and
warrants
    
    
    
    
    
    
    969,377
    
    
    
    (0.02
    )
    
    
    
    
    
    
    1,321,752
    
    
    
    (0.05
    )Diluted
    
    $
    738,000
    
    
    
    5,950,255
    
    
    $
    0.13
    
    
    $
    965,000
    
    
    
    5,982,299
    
    
    $
    0.15
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Nine Months Ended October 1, 2005
    
    
    Nine Months September 25, 2004Earnings
    
    
    Shares
    
    
    Per Share
    
    
    Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic
    
    $
    6,453,000
    
    
    
    4,940,835
    
    
    $
    1.31
    
    
    $
    5,319,000
    
    
    
    4,660,547
    
    
    $
    1.14Effect of dilutive
securities, stock
options and
warrants
    
    
    
    
    
    
    999,025
    
    
    
    (0.22
    )
    
    
    
    
    
    
    1,191,165
    
    
    
    (0.23
    )Diluted
    
    $
    6,453,000
    
    
    
    5,939,860
    
    
    $
    1.09
    
    
    $
    5,319,000
    
    
    
    5,851,712
    
    
    $
    0.91
  (5) Segment Reporting
  (6) Debt and Warrants
 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 (75% of the estimated excess,
as defined) has been classified as current installments of
long-term debt as of October 1, 2005 for the estimated mandatory principal payment due by
March 30, 2006. The unpaid term debt as of October 1, 2005 is $16,867,500.
 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 October 1, 2005, the Company has a revolving credit
balance of $11,100,000 and availability of $5,412,000. 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.
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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
October 1, 2005, those rates were approximately 8.50% and 7.30%, 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 reduced to
3.50%). The notional amount for the period from July 3 through October 1, 2005 was $9,625,000.
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 was 7.22% for the third quarter of 2005. 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, including accumulated payment-in-kind interest as of October 1, 2005 is
$12,657,300.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 October 1, 2005, to be $1,500,000 and $2,223,000 respectively. The $2,223,000 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.
   (7) Stock Option Plan
 Accounting for Stock Issued to Employees,
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Accounting for
Stock-Based Compensation
 Quarter Ended
    
    
    Quarter EndedDollars in thousands, except per share data
    
    October 1, 2005
    
    
    September 25, 2004Net earnings as reported
    
    $
    738
    
    
    
    965Total stock-based employee
compensation expense determined
under fair value based method for
all awards
    
    
    (9
    )
    
    
    (12
    )Pro forma
    
    $
    729
    
    
    
    953Basic earnings per share:As reported
    
    $
    0.15
    
    
    
    0.20Pro forma
    
    $
    0.15
    
    
    
    0.20Diluted earnings per share:As reported
    
    $
    0.13
    
    
    
    0.15Pro forma
    
    $
    0.13
    
    
    
    0.15
 Nine Months Ended
    
    
    Nine Months EndedDollars in thousands, except per share data
    
    October 1, 2005
    
    
    September 25, 2004Net earnings as reported
    
    $
    6,453
    
    
    
    5,319Total stock-based employee
compensation expense determined
under fair value based method
for all awards
    
    
    (28
    )
    
    
    (36
    )Pro forma
    
    $
    6,425
    
    
    
    (5,283
    )Basic earnings per share:As reported
    
    $
    1.31
    
    
    
    1.14Pro forma
    
    $
    1.30
    
    
    
    1.13Diluted earnings per share:As reported
    
    $
    1.09
    
    
    
    0.91Pro forma
    
    $
    1.08
    
    
    
    0.90
 (8) Impact of Recently Issued Accounting Standards
 Share-Based Payment Accounting for Stock Issued to Employees,
 Inventory Costs
 Accounting Changes and Error Corrections
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(9) Redeemable Preferred Stock
   (10) Unbilled Receivables
   (11) Reclassifications
   
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  GENERAL
  11




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RESULTS OF OPERATIONS
 Third quarter, 2005 versus third quarter, 2004
  12




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First nine months, 2005 versus first nine months, 2004
  13




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LIQUIDITY AND CAPITAL RESOURCES
   14




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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 (75% of the estimated excess,
as defined) has been classified as current installments of
long-term debt as of October 1, 2005 for the estimated mandatory principal payment due by
March 30, 2006. The unpaid term debt as of October 1, 2005 is $16,867,500.2)
    
    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 October 1, 2005, the Company has a revolving credit
balance of $11,100,000 and availability of $5,412,000. 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 October 1, 2005, those
rates were approximately 8.50% and 7.30%, 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 reduced to
3.50%). The notional amount for the period from July 3 through October 1, 2005 was $9,625,000.
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 was 7.22% for the third quarter of 2005. 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, including accumulated payment-in-kind interest as of October 1, 2005 is
$12,657,300.
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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 October 1, 2005, to be $1,500,000 and $2,223,000 respectively. The $2,223,000 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.
    Redeemable Preferred Stock
  Capital Expenditures
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Significant Cash Commitments
   Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(In thousands)Bank indebtednessTerm loan
    
    $
    16,868
    
    
    
    5,500
    
    
    
    11,368
    
    
    
    
    
    
    
    Revolving line of credit
    
    
    11,100
    
    
    
    
    
    
    
    11,100
    
    
    
    
    
    
    
    Senior subordinated debt
    
    
    12,657
    
    
    
    
    
    
    
    
    
    
    
    12,657
    
    
    
    Other debt obligations
    
    
    1,355
    
    
    
    513
    
    
    
    842
    
    
    
    
    
    
    
    Interest
 estimated
    
    
    10,700
    
    
    
    3,500
    
    
    
    7,200
    
    
    
    
    
    
    
    Operating leases
    
    
    14,581
    
    
    
    5,650
    
    
    
    7,393
    
    
    
    1,538
    
    
    
    Preferred stock redemption
    
    
    600
    
    
    
    500
    
    
    
    100
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    67,861
    
    
    
    15,663
    
    
    
    38,003
    
    
    
    14,195
    
    
       

    FORWARD LOOKING STATEMENTS
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 Interest Rate Risk
       Steel Commodity Risk
   
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of disclosure controls and procedures.
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Changes in internal controls.
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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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.
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SIGNATURES
  MORTON INDUSTRIAL GROUP, INC.By: /s/ Daryl R. LindemannDaryl R. LindemannChief Financial Officer and SecretaryDated: November 15, 2005
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