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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 April 2, 2005 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934FOR 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
(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
þ 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 þ The aggregate market value of the common stock held by non-affiliates of the registrant (based
upon the last reported sale price on the OTC Market) on the last business day of the registrants
most recently completed second fiscal quarter was approximately $6,700,000. Outstanding as ofApril 15, 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 STATEMENTITEM 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 Certification    Table of Contents  
 ITEM 1 . FINANCIAL
STATEMENTS MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations
For the Three Months Ended April 2, 2005 and March 27, 2004
(Dollars in thousands, except per share data)
(Unaudited) Three Months EndedApril 2, 2005
    
    
    March 27, 2004Net sales
    
    $
    54,123
    
    
    
    39,920Cost of sales
    
    
    46,989
    
    
    
    34,411Gross profit
    
    
    7,134
    
    
    
    5,509Operating expenses:Selling expenses
    
    
    783
    
    
    
    802Administrative expenses
    
    
    2,868
    
    
    
    2,638Total operating expenses
    
    
    3,651
    
    
    
    3,440Operating income
    
    
    3,483
    
    
    
    2,069Other income (expense):Interest expense
    
    
    (1,172
    )
    
    
    (571
    )Interest on redeemable preferred stock
    
    
    
    
    
    
    (213
    )Gain on redemption of redeemable preferred stock
    
    
    850
    
    
    
    850Other
    
    
    40
    
    
    
    41Total other income (expense)
    
    
    (282
    )
    
    
    107Earnings before income taxes
    
    
    3,201
    
    
    
    2,176Income taxes
    
    
    200
    
    
    
    50Net earnings
    
    $
    3,001
    
    
    
    2,126Earnings per common share  basic
    
    $
    0.62
    
    
    
    0.46Earnings per common share  diluted
    
    $
    0.50
    
    
    
    0.38
 See accompanying notes to condensed consolidated financial statements. 2




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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets
April 2, 2005 And December 31, 2004
(Dollars in thousands) April 2, 2005
    
    
    December 31, 2004(Unaudited)AssetsCurrent assets:Trade
accounts receivable, less allowances for doubtful accounts
 and returns of $342 in 2005 and $160 in 2004
    
    $
    16,673
    
    
    
    9,788Unbilled receivables
    
    
    4,705
    
    
    
    2,741Inventories
    
    
    19,642
    
    
    
    19,218Prepaid expenses and other current assets
    
    
    1,766
    
    
    
    1,324Deferred income taxes
    
    
    2,700
    
    
    
    2,700Total current assets
    
    
    45,486
    
    
    
    35,771Property, plant, and equipment, net
    
    
    22,033
    
    
    
    22,390Note receivable
    
    
    1,001
    
    
    
    1,102Intangible assets, at cost, less accumulated amortization
    
    
    2,053
    
    
    
    2,148Deferred income taxes
    
    
    5,400
    
    
    
    5,400Other assets
    
    
    334
    
    
    
    334$
    76,307
    
    
    
    67,145Liabilities and Stockholders Equity (Deficit)Current liabilities:Outstanding checks in excess of bank balance
    
    $
    3,060
    
    
    
    2,801Current installments of long-term debt
    
    
    5,972
    
    
    
    3,295Accounts payable
    
    
    22,734
    
    
    
    17,860Accrued expenses
    
    
    4,645
    
    
    
    4,687Income taxes payable
    
    
    340
    
    
    
    200Redeemable preferred stock
    
    
    500
    
    
    
    500Total current liabilities
    
    
    37,251
    
    
    
    29,343Long-term debt, excluding current installments
    
    
    39,367
    
    
    
    40,280Other liabilities
    
    
    368
    
    
    
    368Redeemable preferred stock
    
    
    5,167
    
    
    
    6,167Warrants payable
    
    
    1,935
    
    
    
    1,791Total liabilities
    
    
    84,088
    
    
    
    77,949Stockholders equity (deficit):Class A common stock  $0.01 par value. Authorized 20,000,000 shares; issued
and outstanding 4,723,878 shares in 2004 and 4,854,212 in 2005
    
    
    48
    
    
    
    47Class B common stock  $0.01 par value. Authorized 200,000 shares; issued
and outstanding 100,000 shares in 2004 and 2005
    
    
    1
    
    
    
    1Additional paid-in capital
    
    
    20,943
    
    
    
    20,922Accumulated deficit
    
    
    (28,773
    )
    
    
    (31,774
    )Total stockholders equity (deficit)
    
    
    (7,781
    )
    
    
    (10,804
    )$
    76,307
    
    
    
    67,145
 See accompanying notes to condensed consolidated financial statements. 3




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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For The Three Months Ended April 2, 2005 and March 27, 2004
(Dollars in thousands)
(Unaudited) April 2,
    
    
    March 27,2005
    
    
    2004Cash flows from operating activities:Net earnings
    
    $
    3,001
    
    
    
    2,126Adjustments to reconcile net earnings to net cash
used in operating activities:Depreciation and amortization of plant and equipment
and intangible assets
    
    
    1,519
    
    
    
    1,381Other amortization and accretion
    
    
    380
    
    
    
    214Provision for bad debts
    
    
    40
    
    
    
    28Unrealized gain on derivative instruments
    
    
    (156
    )
    
    
    Gain on redemption of preferred stock
    
    
    (850
    )
    
    
    (850
    )Changes in operating assets and liabilities:Increase in trade accounts receivable
    
    
    (6,925
    )
    
    
    (3,083
    )Increase in unbilled receivables
    
    
    (1,964
    )
    
    
    (968
    )Increase in accrued interest receivable
    
    
    
    
    
    
    (41
    )Increase in inventories
    
    
    (424
    )
    
    
    (1,935
    )Increase in prepaid expenses and other assets
    
    
    (367
    )
    
    
    (828
    )Increase in accounts payable
    
    
    4,874
    
    
    
    3,388Increase (decrease) in income taxes payable
    
    
    140
    
    
    
    (136
    )Increase in accrued expenses and other liabilities
    
    
    115
    
    
    
    Net cash used in operating activities
    
    
    (617
    )
    
    
    (704
    )Cash flows from investing activities:Capital expenditures
    
    
    (1,144
    )
    
    
    (1,441
    )Proceeds from sale of property and equipment
    
    
    20
    
    
    
    Payment received on note receivable for sale of business
    
    
    101
    
    
    
    100Net cash used in investing activities
    
    
    (1,023
    )
    
    
    (1,341
    )Cash flows from financing activities:Increase in checks issued in excess of bank balance
    
    
    259
    
    
    
    1,173Net advances on revolving debt
    
    
    2,250
    
    
    
    1,400Principal payments on long-term debt and capital leases
    
    
    (703
    )
    
    
    (1,209
    )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
    
    
    
    
    
    
    32,000Redemption of preferred stock
    
    
    (150
    )
    
    
    (150
    )Proceeds from issuance of common stock
    
    
    22
    
    
    
    Debt issuance costs
    
    
    (38
    )
    
    
    (1,566
    )Net cash provided by financing activities
    
    
    1,640
    
    
    
    2,045Net 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
    
    $
    1,018
    
    
    
    565Income taxes
    
    
    61
    
    
    
    186
 See accompanying notes to condensed consolidated financial statements. 4




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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES Condensed Consolidated Statement of Stockholders Equity (Deficit)
For the Three Months Ended April 2, 2005
(Dollars in thousands)
(Unaudited) 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,001
    
    
    
    3,001Stock options exercised
    
    
    130,334
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    22Balance, April 2, 2005
    
    
    4,854,212
    
    
    $
    48
    
    
    
    100,000
    
    
    $
    1
    
    
    $
    20,943
    
    
    $
    (28,773
    )
    
    $
    (7,781
    )
 See accompanying notes to condensed consolidated financial statements. 5




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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended April 2, 2005 and March 27, 2004
(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 construction, industrial and
agricultural original equipment manufacturers located primarily in the Midwestern and Southeastern
United States. (2) Interim Financial Data The Condensed Consolidated Financial Statements at April 2, 2005, and for the three months
ended April 2, 2005 and March 27, 2004, 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 the quarter ended April 2, 2005 there
were 65 shipping days, with average daily net sales of $832,600, and for the quarter ended March
27, 2004 there were 60 shipping days, with average daily net sales of $665,300. Results of
operations for 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, 2004, as
filed on March 29, 2005. (3) Inventories The Companys inventories, in thousands of dollars, at April 2, 2005, and December 31, 2004,
are summarized as follows: April 2,
    
    
    December 31,2005
    
    
    2004Finished goods
    
    $
    8,009
    
    
    $
    8,361Work-in-process
    
    
    4,552
    
    
    
    4,765Raw materials
    
    
    7,081
    
    
    
    6,092$
    19,642
    
    
    $
    19,218
 6




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(4) Earnings Per Share The following reflects the reconciliation of the components of the basic and diluted earnings
per common share computations: Quarter Ended April 2, 2005
    
    
    Quarter Ended March 27, 2004Earnings
    
    
    Shares
    
    
    Per Share
    
    
    Earnings
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    AmountBasic
    
    $
    3,001,000
    
    
    
    4,865,968
    
    
    $
    0.62
    
    
    $
    2,126,000
    
    
    
    4,660,547
    
    
    $
    0.46Effect of dilutive
securities, stock
options and
warrants
    
    
    
    
    
    
    1,078,896
    
    
    
    (0.12
    )
    
    
    
    
    
    
    866,175
    
    
    
    (0.08
    )Diluted
    
    $
    3,001,000
    
    
    
    5,944,864
    
    
    $
    0.50
    
    
    $
    2,126,000
    
    
    
    5,526,722
    
    
    $
    0.38
 For the quarter ended March 27, 2004, 51,650 options were excluded from the computation of
diluted earnings per share due to their anti-dilutive effect. No options or warrants were excluded
from the computation of diluted earnings for the quarter ended April 2, 2005. (5) Segment Reporting We have only one segment  the contract metals fabrication segment. (6) Debt and Warrants March 26, 2004 Refinancing and Subsequent Amendments On March 26, 2004, the Company entered into a Second Amended and Restated Credit Agreement
with a syndicate of banks led by Harris Trust and Savings Bank, As Agent (referred to as the Harris
syndicate), and also on March 26, 2004, entered into a Note and Warrant Purchase Agreement with BMO
Nesbitt Burns Capital (U.S.) Inc., As Agent. These agreements were effective on March 26, 2004. On June 23, 2004, the Company entered into the First Amendment to the Second Amended and
Restated Credit Agreement and also on June 23, 2004, entered into an Amended and Restated Note and
Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. The effect of the
June 23, 2004 amendments was to increase the amount due to BMO Nesbitt Burns Capital (U.S.) Inc.,
As Agent, by $2,000, reduce the balance outstanding under the four-year secured term loan described
below by $1,000 and reduce the balance outstanding under the secured revolving credit facility

described below by $1,000. On February 8, 2005, the Company entered into the Second Amendment to Second Amended and
Restated Credit Agreement and also on February 8, 2005, entered into the First Amendment to Amended
and Restated Note and Warrant Purchase Agreement. The effect of the February 8, 2005 amendment was
to redefine borrowing base to allow the Company greater flexibility in its steel procurement
processes and increase the capital expenditures limit for 2005. Under the terms of the agreements and amendments, effective as of December 31, 2004, and as of
April 2, 2005, the Company has:  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
$10,617,000 due on March 31, 2008. Mandatory principal payments totaling $133,000 related
to an asset sale were made in September 2004 and March 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. 7




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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 April 2, 2005, the Company has a
revolving credit balance of $13,649,500 and availability of $2,860,000. 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 April
2, 2005, those rates were approximately 7.75% and 6.88%, 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 January 1
through April 2, 2005 was $10,250,000. The swap agreement expires March 31, 2008. 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.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.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; these
warrants expire March 26, 2014. The warrant holder may exercise the warrants at any time.
The warrants may be put 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 April 2, 2005, to be $1,500,000 and $1,935,000 respectively. The $1,935,000
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 would reduce the maximum number of warrants outstanding. The maximum number of
warrants that may be put or exercised has been reduced to 479,589. The Company has provided bank letters of credit totaling $1,488,000 to two creditors. One
letter of credit is in support of operating lease payments; this letter of credit is for $618,000
and is scheduled to expire at the end of December 2005; the other letter of credit, in the amount
of $870,000 supports future potential payments by the Company related to workers compensation
claims. This letter of credit will renew on an annual basis until the need for the letter of credit
expires. Based on workers compensation claims experience, the amount of this letter of credit is
subject to adjustment on December 31, 2005. The outstanding letters of credit decrease, on a
dollar-for-dollar basis, the amount of revolving line of credit available under the secured
revolving credit facility. In connection with these loans, the Company has granted the lenders a lien on all of the
Companys accounts receivable, inventories, equipment, land and buildings, and various other
assets. These agreements contain restrictions on capital expenditures, additional debt or liens,
investments, mergers and acquisitions, and asset sales and prohibit payments such as dividends or
stock repurchases. These agreements also contain financial covenants, including a total funded
debt/EBITDA ratio, a total senior funded

debt EBITDA ratio, a minimum EBITDA ratio, and a fixed charge coverage ratio. As of April 2,
2005, we were in compliance with all debt covenants. 8




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(7) Stock Option Plan The Company accounts for its stock option plan in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,and related
interpretations. As such, the Company records compensation expense on the date of grant only if the
current market price of the underlying stock exceeds the exercise price. The Company issues options
at the current market price on the date of issuance and, accordingly, has not recognized any
stock-based employee compensation cost for stock options in the financial statements. No options were granted in 2004 or during the first three months of 2005. Had we determined compensation cost based on the fair value at the grant date for our stock
options under Financial Accounting Standards Board (FASB) Statement 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 Ended
    
    
    Quarter EndedDollars in thousands, except per share data
    
    April 2, 2005
    
    
    March 27, 2004Net earnings as reported
    
    $
    3,001
    
    
    
    2,126Total stock-based employee compensation
expense determined
under fair value based method for all awards
    
    
    (10
    )
    
    
    (13
    )Pro forma
    
    $
    2,991
    
    
    
    2,113Basic earnings per share:As reported
    
    $
    0.62
    
    
    
    0.46Pro forma
    
    $
    0.62
    
    
    
    0.45Diluted earnings per share:As reported
    
    $
    0.50
    
    
    
    0.38Pro forma
    
    $
    0.50
    
    
    
    0.37
 (8) Impact of Recently Issued Accounting Standards In December 2004, Statement of Financial Accounting Standards (SFAS) Statement No. 123R
(revised 2004), Share-Based Paymentwas issued. SFAS No. 123R addresses the accounting for
transactions in which an entity exchanges its equity instruments for goods or services, with a
primary focus on transactions in which an entity obtains employee services in share-based payment
transactions. This Statement is a revision to Statement 123 and supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees,and its related implementation guidance. This Statement
will require the fair value of all stock option awards issued to employees to be recorded as
compensation expense over the related vesting period. This Statement also requires the recognition
of compensation expense for the fair value of any unvested stock option awards outstanding at
January 1, 2006, the date of adoption. The Company is in the process of determining the impact of
this Statement. The date of adoption was previously July 1, 2005, but has been delayed based on
recent rules adopted by the Securities and Exchange Commission to January 1, 2006. In December 2004, SFAS No. 151, Inventory Costswas issued. SFAS No. 151 clarifies the
accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage). Under this Statement, such items will be recognized as current-period charges.
In addition, the Statement requires that allocation of fixed production overheads to the costs of
conversion be based on the normal capacity of the production facilities. This Statement is
effective for fiscal years beginning after June 15, 2005. The Company has not determined the impact
of this Statement. 9




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(9) Redeemable Preferred Stock Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc.
(Worthington), the Company issued 10,000 shares of its preferred stock, without par value, to
Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share.
The preferred stock was valued at $4,250,000 at the time of the acquisition and the discount was
being accreted over a five-year period using the effective yield method. The period of accretion
was completed in April 2004. The Company and Worthington entered into a stock redemption agreement, dated December 23,
2003, that provides for 30 monthly redemption payments of $50,000 each over a three-year period (10
payments each year in 2004, 2005 and 2006) to redeem all of the preferred stock. Each payment
redeems 333 (or 334) shares of the 10,000 shares outstanding and will result in a gain on
redemption of $283,000 (or $284,000). Redemption payments made each month during the three month
periods ended April 2, 2005 and March 27, 2004 resulted in the gain on redemption of redeemable
preferred stock of $850,000 which is reported in the accompanying condensed consolidated
statements of operations. If shares are not redeemed in accordance with the provisions of this
agreement, the redemption price remains at $1,000 per share. As part of this agreement, all
litigation between the Company and Worthington was settled and dismissed. (10) Unbilled Receivables During both the three-month periods ended April 2, 2005 and March 27, 2004, the Company
incurred increased costs for the purchase of raw materials as a result of dynamic changes in the
U.S. steel markets. The Companys supplier agreements with key customers allow surcharges for the
pass-through of the additional raw material costs. The Company has recognized as net sales, and
also recognized an identical amount as cost of sales, surcharge amounts of approximately $9.6
million and $1.0 million for the three- month periods ended April 2, 2005 and March 27, 2004,
respectively. The Company has classified unbilled surcharges in the accompanying condensed
consolidated balance sheet as unbilled receivables. The surcharges are generally invoiced to the
Companys customers within weeks following the month end in which the related product is sold. As
of April 2, 2005, the unpaid amount of billed surcharges included in accounts receivable is $3.9
million. 
 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, 2004. The analysis of results of operations compares the quarters ended April 2,
2005 and March 27, 2004. Any references to December 31, 2004 relate to data found in Form 10-K as
filed with the Securities and Exchange Commission on March 29, 2005. GENERAL We are a contract manufacturer of highly engineered metal components and subassemblies for
construction, industrial and agricultural original equipment manufacturers. Our largest customers,
Caterpillar Inc. and Deere & Co., accounted for approximately 89% of our net sales for the
three-month period ended April 2, 2005, and accounted for approximately 87% and 88% of our net
sales in 2004 and 2003, respectively. Historically, the Company has been a fabricator of sheet metal products. Subsequent to a
merger in January 1998, when the Company became a publicly-traded entity, the Company acquired six
facilities that fabricated either injection molded or thermoformed plastic components. These
facilities operated as Morton Custom Plastics, LLC. The Company subsequently determined that is
was appropriate to focus solely on its core competency, sheet metal fabrication, and offered for
sale its plastics fabrication facilities, the latest of which was sold in June, 2003. As a part of a 1999 plastics facilities acquisition, the Company issued $10 million of
redeemable preferred stock with a maturity date of April 2004. The Company negotiated a settlement
in December 2003 with the holder of the preferred stock, and began making redemption payments in
January 2004. If the redemption payments are paid according to the terms of the settlement
agreement, the payments will aggregate $1.5 million over a three-year period ending in 2006. 10




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Since June 2003, the Company has focused solely on its core business, sheet metal fabrication
(the Companys continuing operations). The Company recognized earnings of over $12.8 million and
$1.2 million from its continuing operations in 2004 and 2003, respectively, but had incurred losses
from its continuing operations in 2001 and 2002 when demand by the Companys customers was
depressed. These losses from continuing operations as well as the acquisition and subsequent
disposition of certain plastics facilities created pressure on our liquidity. The $12.8 million of
net earnings in 2004 included gain on the redemption of preferred stock of $2.8 million and an
income tax benefit of $5.8 million. To take advantage of the potential for growth in 2004 and beyond, and to be able to
effectively serve our customers, we had to be able to ensure an adequate flow of raw materials into
our production processes, be able to hire and train additional employees and be able to fund our
need for new manufacturing equipment and meet our other working capital needs. Accordingly, the
Company entered into a new credit facility in March 2004, and amendments to that facility in June
2004 and February 2005 that are described below. The new credit facility (March 2004) provided
additional availability at the closing of approximately $5 million, while the June 2004 amendment
provided $1 million of additional availability. Management believes that the new credit facility
will permit the Company to meet its liquidity requirements driven by raw material, manpower and
capital expenditure requirements through the term of the facility, which matures in March 2008. As noted above, two customers account for a significant portion of our net sales. Caterpillar
Inc. and Deere & Co. are both forecasting greater orders for fabricated parts supplied by Morton
Industrial Group, Inc. for 2005. We believe that this demand is being fueled by the improved
economic conditions in the United States. The Company has responded by hiring additional manpower,
adding capital equipment as necessary and increasing the flow of purchased raw materials in a
difficult steel market. The U.S. steel industry has restructured, consolidated and is challenged to
meet growing domestic and international demand. The steel industry has been impacted by Chinas
growing consumption of scrap steel and coke, a raw material used in processing steel. Cosmetically
sensitive sheet steel, our core commodity, has correspondingly seen inflationary pricing; however,
most inflationary steel pricing becomes the responsibility of the Companys customers. In pricing our products, we consider the volume of the product to be manufactured, required
engineering resources and the complexity of the product. Our customers typically expect us to
offset any manufacturing cost increases with improvements in production flow, efficiency,
productivity or engineering redesigns. As a part of their supplier development programs, our
primary customers initiate cost improvement efforts on a regular basis. RESULTS OF OPERATIONS First quarter, 2005 versus first quarter, 2004 Net sales for the quarter ended April 2, 2005 were $54.1 million compared to $39.9 million for
the quarter ended March 27, 2004, an increase of $14.2 million or 35.6%. The volume portion of the
sales increase, totaling approximately $4.6 million, resulted primarily from increased unit demand
by existing customers (original equipment manufacturers) of construction-related equipment
components and an increase in industrial components to new customers. Our construction-related
revenues increased by approximately $2.0 million for the comparable quarters and accounted for over
60% of our first quarter revenue. Industrial related revenues remained flat and
agricultural-related revenues increased by approximately $3.0 for the comparable quarters. In
addition, sales for the quarter ended April 2, 2005 included surcharges passed through to our
customers of approximately $9.6 million, compared to $1.0 million for the quarter ended March 27,
2004. Most of the revenue growth came from increased unit sales to our two largest customers, Deere
& Co. and Caterpillar Inc. Based upon customer forecasts and the addition of new customers, the
Company currently anticipates unit demand for calendar year 2005 that could modestly exceed
calendar year 2004. Our ability to increase revenues at that rate is subject to a number of
factors, including the continuing demand that we now forecast, the availability of raw materials,
principally steel, and the availability of working capital to support that growth. Over the past
five quarters, steel prices have increased as steel supply has tightened, due in part to the
national economic recovery, Chinas growing steel consumption, and reduced domestic steel
production capacity. We believe that these prices have stabilized at relatively high levels; there
could be periods when steel is not available on demand. We are working with our steel suppliers to
attempt to address these issues. Historically we have been able to negotiate with our customers to
have them absorb increases in our raw material costs, and, as indicated in Note 10 above, we have
billed certain cost increases to our customers. Sales to Caterpillar Inc. and Deere & Co. aggregated approximately 88% and 85% of our net
sales for the first quarters of 2005 and 2004, respectively. Gross profit for the quarter ended April 2, 2005 was $7.1 million compared with $5.5 million
for the quarter ended March 27, 2004, an increase of $1.6 million or 29.5%. The Companys gross
profit percentage decreased to 13.2% from 13.8%; however, the 11




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gross profit percentage for the quarter ended April 2, 2005 is negatively impacted
approximately 2.8% by passing through to customers, at cost with no margin, the increased steel
costs described in Note 10 above. Recognizing the impact of passing these costs through to
customers at no margin, the gross profit percentage would have increased to 16.0% and 14.1% for the
first quarters of 2005 and 2004, respectively. The increase in margins is a result of the Companys
continuing focus on cost savings programs including 6 Sigma and various lean manufacturing
concepts. We use internal metrics to measure our success in achieving various productivity,
quality, on-time delivery and profitability goals. Selling and administrative expenses for the quarter ended April 2, 2005 amounted to $3.7
million, or 6.7% of sales, compared with $3.4 million, or 8.6% of sales in the same quarter a year
ago. This decreased expense percentage relates primarily to a higher sales volume, and relatively
flat selling and administrative expenses. Interest expense for the quarter ended April 2, 2005 amounted to $1.2 million compared to $0.6
million in the comparable quarter a year ago. This increase resulted from higher average levels of
debt in 2005, as well as higher interest rates in the first quarter of 2005 vs. the first quarter
of 2004. The debt increase results from the new credit facility which has provided necessary
working capital for the Companys operations, as well as higher interest rates associated with the
new credit facility compared to the credit facility in place in the comparable period in 2004.
Interest expense for the quarter ended April 2, 2005 also includes $93,800 of debt discount
amortization and a $144,000 adjustment related to the valuation of the warrants liability,
partially offset by a favorable mark-to-market adjustment of $156,000 on its interest rate swap
agreements described above. Interest on redeemable preferred stock relates to the accretion of the discount on
redeemable preferred stock for the quarter ended March 27, 2004. The redeemable preferred stock
was fully accreted in April 2004. As a result of a preferred stock settlement agreement, the Company made three preferred stock
redemption payments during both the three-month period ended April 2, 2005 and March 27, 2004,
which resulted in the gain on redemption of redeemable preferred stock of $850,000 in the
accompanying condensed consolidated statements of operations. For the three months ended April 2, 2005 and March 27, 2004, we recognized income tax expense
of $200,000 and $50,000 related to state income taxes and the Federal alternative minimum tax. For
Federal income taxes, we have utilized net operating loss carry forwards to the extent of taxable
income, and decreased the valuation allowance accordingly. LIQUIDITY AND CAPITAL RESOURCES Historically, we have funded our business with cash flows from operations, management of our
working capital and borrowings under revolving credit and term loan facilities. Our
consolidated working capital at April 2, 2005 was $8.2 million compared to $6.4 million at
December 31, 2004. This represents an increase in working
capital of approximately $1.8 million.
This working capital increase results primarily from increased accounts receivable related to
increased sales in the first quarter of 2005 compared to the fourth quarter of 2004. Working
capital needs have also been increased by the process of passing-through to customers the increased
costs of steel as described in Note 10 above. The increased current asset is financed by the
revolving line of credit which is classified as long-term debt. March 26, 2004 Refinancing and Subsequent Amendments On March 26, 2004, the Company entered into a Second Amended and Restated Credit Agreement
with a syndicate of banks led by Harris Trust and Savings Bank, As Agent (referred to as the Harris
syndicate), and also on March 26, 2004, entered into a Note and Warrant Purchase Agreement with BMO
Nesbitt Burns Capital (U.S.) Inc., As Agent. These agreements were effective on March 26, 2004. On June 23, 2004, the Company entered into the First Amendment to the Second Amended and
Restated Credit Agreement and also on June 23, 2004, entered into an Amended and Restated Note and
Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. The effect of the
June 23, 2004 amendments was to increase the amount due to BMO Nesbitt Burns Capital (U.S.) Inc.,
As Agent, by $2,000, reduce the balance outstanding under the four-year secured term loan described
below by $1,000 and reduce the balance outstanding under the secured revolving credit facility
described below by $1,000. On February 8, 2005, the Company entered into the Second Amendment to Second Amended and
Restated Credit Agreement and also on February 8, 2005, entered into the First Amendment to
Amended and Restated Note and Warrant Purchase 12




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Agreement. The effect of the February 8, 2005 amendment was to redefine borrowing base
to allow the Company greater flexibility in its steel procurement processes and increase the
capital expenditures limit for 2005. Under the terms of the agreements and amendments, effective as of December 31, 2004, and
as of April 2, 2005, the Company has:  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
$10,617,000 due on March 31, 2008. Mandatory principal payments totaling $133,000 related
to an asset sale were made in September 2004 and March 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, 2006.2)
    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 April 2, 2005, the Company has a
revolving credit balance of $13,649,500 and availability of $2,860,000. 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 April
2, 2005, those rates were approximately 7.75% and 6.88%, 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 January 1
through April 2, 2005 was $10,250,000. The swap agreement expires March 31, 2008. 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.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.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; these
warrants expire March 26, 2014. The warrant holder may exercise the warrants at any time.
The warrants may be put 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 April 2, 2005, to be $1,500,000 and $1,935,000 respectively. The $1,935,000
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 would reduce the maximum number of warrants outstanding. The maximum number of
warrants that may be put or exercised has been reduced to 479,589. 13




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The Company has provided bank letters of credit totaling $1,488,000 to two creditors. One
letter of credit is in support of operating lease payments; this letter of credit is for $618,000
and is scheduled to expire at the end of December 2005; the other letter of credit, in the amount
of $870,000 supports future potential payments by the Company related to workers compensation
claims. This letter of credit will renew on an annual basis until the need for the letter of credit
expires. Based on workers compensation claims experience, the amount of this letter of credit is
subject to adjustment on December 31, 2005. The outstanding letters of credit decrease, on a
dollar-for-dollar basis, the amount of revolving line of credit available under the secured
revolving credit facility. In connection with these loans, the Company has granted the lenders a lien on all of the
Companys accounts receivable, inventories, equipment, land and buildings, and various other
assets. These agreements contain restrictions on capital expenditures, additional debt or liens,
investments, mergers and acquisitions, and asset sales and prohibit payments such as dividends or
stock repurchases. These agreements also contain financial covenants, including a total funded
debt/EBITDA ratio, a total senior funded debt EBITDA ratio, a minimum EBITDA ratio, and a fixed
charge coverage ratio. As of April 2, 2005, we were in compliance with all debt covenants. Historically, we have met our near term liquidity requirements with cash flows from
operations, the Harris revolving credit facility, and management of our working capital to reflect
current levels of operations. Management expects that cash flows from operations, working capital
management and availability under the new bank revolving credit facility described above will
permit us to meet our liquidity requirements through the term of the new credit facility. Preferred Stock Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc.
(Worthington), the Company issued 10,000 shares of its preferred stock, without par value, to
Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share.
The Company and Worthington have entered into a stock redemption agreement, dated December 23,
2003, that provides for 30 monthly redemption payments of $50,000 each over a three-year period (10
payments each year in 2004, 2005 and 2006) to fully redeem the preferred stock. Each $50,000
payment and redemption of 333 (or 334) shares reduces the $10 million face value of the redeemable
preferred stock by $333,000 (or $334,000). If shares are not redeemed in accordance with the
provisions of this agreement, the redemption price remains at $1,000 per share. Capital Expenditures We incurred $1.1 million of capital expenditures during the first three months of 2005,
including approximately $0.6 million related to expansion activities and approximately $0.5 million
for the normal update and replacement of manufacturing equipment. We estimate that our capital expenditures in 2005 will total approximately $5.5 million, of
which $3.1 million will be for expansion activities and the remaining $2.4 million will be for the
normal update and replacement of manufacturing equipment. Significant Cash Commitments The Company has significant future cash commitments, primarily scheduled debt payments and
scheduled lease payments. The following table estimates the Companys contractual obligations at April 2, 2005: Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    5 Years(In thousands)Bank indebtednessTerm loan
    
    $
    18,867
    
    
    $
    5,500
    
    
    $
    13,367
    
    
    $
    
    
    
    $
    Revolving line of credit
    
    
    13,650
    
    
    
    
    
    
    
    13,650
    
    
    
    
    
    
    
    Senior subordinated debt
    
    
    12,434
    
    
    
    
    
    
    
    
    
    
    
    12,434
    
    
    
    Other debt obligations
    
    
    1,616
    
    
    
    473
    
    
    
    1,143
    
    
    
    
    
    
    
    Operating leases
    
    
    15,498
    
    
    
    6,114
    
    
    
    8,773
    
    
    
    611
    
    
    
    Preferred stock redemption
    
    
    850
    
    
    
    500
    
    
    
    350
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    62,915
    
    
    $
    12,587
    
    
    $
    37,283
    
    
    $
    13,045
    
    
    $
    
 Under its bank credit facility, the Company had $1,488,000 of standby letters of credit
outstanding at April 2, 2005 in connection with lease obligations and its workers compensation
program. 14




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Management expects that cash flows from operations, working capital management and
availability under its new bank revolving line of credit will permit us to meet our liquidity
requirements through the term of the credit facility. Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc.
(Worthington), the Company issued 10,000 shares of its preferred stock, without par value, to
Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share.
The Company and Worthington have entered into a preferred stock redemption agreement, dated
December 23, 2003, that provides for 30 monthly redemption payments of $50,000 each over a
three-year period (10 payments each year in 2004, 2005 and 2006) to fully redeem the preferred
stock. Each $50,000 payment and redemption of 333 (or 334) shares reduces the $10 million face
value of the redeemable preferred stock by $333,000 (or $334,000). If shares are not redeemed under
the provision of this agreement, the redemption price remains at $1,000 per share. The significant
cash commitments table above assumes that payments are made over the next three years and that the
redeemable preferred stock is retired for $1.5 million. Thirteen of the 30 redemption payments
have been paid as of April 2, 2005. 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; the availability of working capital; 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 Interest Rate Risk The Company uses both variable-rate debt and fixed rate debt to finance its operations. The
variable-rate debt obligations expose the Company to variability in interest payments due to
changes in interest rates. The variable-rate debt includes both our revolving credit facility
($13.6 million at April 2, 2005) and our term note payable ($18.9 million at April 2, 2005). In order to satisfy a requirement of the term loan, we entered into a swap agreement effective
June 30, 2004 on $10,750,000 (the original notional amount) of our 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 applicable margin
which adjusts in steps based on achieved operating and leverage metrics (primarily at 4.00% during
the first three months of 2005, and which decreases to 3.50% thereafter). The notional amount of
the swap for the period from January 1 through April 2, 2005 was $10,250,000. The all-in rate on
the notional amount in the first three months of 2005 was 7.72%. The swap agreement expires March
31, 2008. The interest on the other portion of the term loan is currently determined at the applicable
margin described above plus a LIBOR rate. The Company has elected to use 3 month and 6 month LIBOR
agreements in an effort to reduce the variability of interest payments related to this portion of
the term debt. At April 2, 2005 the all-in rate including the LIBOR rate and applicable margin
related to this portion of the term debt was approximately 6.88%. The interest on the revolving credit facility is determined primarily at the applicable margin
plus LIBOR rates. The Company has elected, at April 2, 2005 to use 3 and 6 month LIBOR agreements
in an effort to reduce the variability of interest payments related to the revolving debt. The
LIBOR agreements totaled $11.0 million at April 2, 2005; the corresponding average all-in rates
including the LIBOR rates and applicable margin related to the revolving debt were approximately
6.88%. The applicable margin plus the bank base rate is paid on the revolving debt in excess of
$11.0 million; at April 2, 2005 this rate was 7.75%. 15




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If market rates of interest on our variable rate had been 100 basis points higher based on
balances outstanding during the first three months of 2005, our interest expense, on an annual
basis, would be approximately $350,000 higher. The interest rates on the senior subordinated debt and the subordinated debt are fixed as
described above. Steel Commodity Risk We are also subject to commodity price risk with respect to purchases of steel, which accounts
for a significant portion of our cost of sales. In 2004, the costs of steel increased
significantly during the year, and those costs appear to have stabilized in 2005 at a relatively
high level. We have arrangements to pass through to our largest customers the increased costs of
steel, thereby significantly reducing the risks associated with the higher costs of steel. These
additional costs are invoiced to those customers on a monthly basis. 
 ITEM 4. CONTROLS AND PROCEDURES Evaluation of disclosure controls and procedures.The Companys principal executive officer
and principal financial officer have concluded, based on their evaluation, that the Companys
disclosure controls and procedures (as defined in Rule 13a-15(c) under the Securities Exchange Act
of 1934, as amended), based on their evaluation of these controls and procedures as of the end of
the period covered by this Form 10-Q, are effective. The Companys management, including its principal executive officer and principal financial
officer, does not expect that the Companys disclosure controls and procedures or its internal
controls will prevent all error and all fraud. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within the Company have
been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more
people or by management override of the control. Changes in internal controls.There have been no significant changes in the Companys
internal controls over financial reporting that occurred in the first quarter of 2005 that may have
materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting. 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. 
 PART II  OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS The Company is involved in routine litigation. Management does not believe any legal
proceedings would have a material adverse effect on the Companys financial condition or results of
operations. 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Under the terms of our agreement with our senior secured lender, no amounts are available for
the payment of dividends at April 2, 2005. 16




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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. (B) Reports on Form 8-K. Form 8-K dated March 29, 2005 reporting results of operations for the year ended December 31,
2004. 
 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/ Daryl R. LindemannDaryl R. LindemannChief Financial Officer and SecretaryDated: May 17, 2005
 17