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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 28, 2003

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM      TO

COMMISSION FILE NUMBER 0-13198

MORTON INDUSTRIAL GROUP, INC.

(Exact name of registrant as specified in its charter)


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

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

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

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

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

The aggregate market value of the common stock held by non-affiliates of
the registrant (based upon the last reported sale price on the Nasdaq Small Cap
Market) on the last business day of the registrants most recently completed
second fiscal quarter was approximately $850,000.

|                                     |  |                   |           | 
|------------------------------------ |  | ----------------- | --------- | 
|                                     |  | Outstanding as of
|                                     |  | July 31, 2003    
|                                     |  |                  
|Class A Common Stock, $.01 par value |  |                   | 4,460,547 | 
|Class B Common Stock, $.01 par value |  |                   | 200,000   | 



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TABLE OF CONTENTS



|                                                |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                         
|ITEM 1. FINANCIAL STATEMENTS                   
|                                                | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK                            
|                                                | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II  OTHER INFORMATION                    
|                                                | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                                | ITEM 2. CHANGES IN SECURITIES                                                                
|                                                | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                     
|Certification                                  
|Certification                                  
|Section 906 Certification                      
|Section 906 Certification                      
|4th Amendment to Amended & Restated Credit Agmt



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PART I  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIESCondensed Consolidated Statements of Operations
For the Three and Six Months Ended June 28, 2003 and June 29, 2002
(Dollars in thousands, except per share data)
(Unaudited)

|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |        |       |         |  
|--------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ----- | ------------------ | ----- | ---------------- | ------ | ------------- | ------ | ------------- | ------ | ---- | ------ | ------ | ------ | ----- | ------- | -
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       | Three Months Ended |       | Six Months Ended
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                 
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       | June 28, 2003      |       | June 29, 2002    |        | June 28, 2003 |        | June 29, 2002
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |              
|Net sales                                                             |                                                                                                                   | $                                                    | 34,398                                                                                           |       |                    |       | 32,241           |        |               |        | 66,778        |        |      |        | 61,418 |       
|Cost of sales                                                         |                                                                                                                   |                                                      | 29,388                                                                                           |       |                    |       | 27,391           |        |               |        | 57,177        |        |      |        | 52,451 |       
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Gross profit                                                                                     |       |                    | 5,010 |                  |        |               | 4,850  |               |        |      | 9,601  |        |        |       | 8,967   |  
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|Operating expenses:                                                   |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Selling expenses                                                                                                  |                                                      |                                                                                                  | 712   |                    |       |                  | 721    |               |        |               | 1,413  |      |        |        | 1,427  |      
|                                                                      | Administrative expenses                                                                                           |                                                      |                                                                                                  | 2,600 |                    |       |                  | 2,727  |               |        |               | 5,207  |      |        |        | 4,978  |      
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Total operating expenses                                                                         |       |                    | 3,312 |                  |        |               | 3,448  |               |        |      | 6,620  |        |        |       | 6,405   |  
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Operating income                                                                                 |       |                    | 1,698 |                  |        |               | 1,402  |               |        |      | 2,981  |        |        |       | 2,562   |  
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|Other income (expense):                                               |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Interest expense                                                                                                  |                                                      |                                                                                                  | (936  | )                  |       |                  | (1,016 | )             |        |               | (1,869 | )    |        |        | (2,229 | )    
|                                                                      | Other                                                                                                             |                                                      |                                                                                                  | 171   |                    |       |                  | (38    | )             |        |               | 337    |      |        |        | 199    |      
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Total other income (expense)                                                                     |       |                    | (765  | )                |        |               | (1,054 | )             |        |      | (1,532 | )      |        |       | (2,030  | )
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Earnings
before income taxes, discontinued operations and cumulative effect of
accounting change |       |                    | 933   |                  |        |               | 348    |               |        |      | 1,449  |        |        |       | 532     |  
|Income taxes                                                          |                                                                                                                   |                                                      | 360                                                                                              |       |                    |       |                 |        |               |        | 560           |        |      |        |       |       
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Earnings before discontinued operations and cumulative effect of accounting change               |       |                    | 573   |                  |        |               | 348    |               |        |      | 889    |        |        |       | 532     |  
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|Discontinued operations:                                              |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Net earnings (loss) from operations of discontinued
plastics operations                                           |                                                      |                                                                                                  | (85   | )                  |       |                  | (2,770 | )             |        |               | 140    |      |        |        | (3,255 | )    
|                                                                      | Income taxes                                                                                                      |                                                      |                                                                                                  | (35   | )                  |       |                  | 821    |               |        |               | 55     |      |        |        | 862    |      
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | (50                                                                                              | )     |                    |       | (3,591           | )      |               |        | 85            |        |      |        | (4,117 | )     
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Earnings (loss) before cumulative effect of
accounting change                                    |       |                    | 523   |                  |        |               | (3,243 | )             |        |      | 974    |        |        |       | (3,585  | )
|Cumulative effect of change in accounting principle,
net of tax of $0 |                                                                                                                   |                                                      |                                                                                                 |       |                    |       |                 |        |               |        |              |        |      |        | (8,118 | )     
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Net earnings (loss)                                                                              |       |                    | 523   |                  |        |               | (3,243 | )             |        |      | 974    |        |        |       | (11,703 | )
|Accretion of discount on preferred shares                             |                                                                                                                   | $                                                    | (383                                                                                             | )     |                    |       | (323             | )      |               |        | (715          | )      |      |        | (602   | )     
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   |                                                      | Net earnings (loss) available to common shareholders                                             |       |                    | 140   |                  |        |               | (3,566 | )             |        |      | 259    |        |        |       | (12,305 | )
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|Earnings (loss) per common share  basic:                             |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Earnings (loss) from continuing operations                                                                        |                                                      | $                                                                                                | 0.04  |                    |       |                  | 0.01   |               |        |               | 0.04   |      |        |        | (0.02  | )    
|                                                                      | Earnings (loss) from discontinued operations                                                                      |                                                      |                                                                                                  | (0.01 | )                  |       |                  | (0.78  | )             |        |               | 0.02   |      |        |        | (0.89  | )    
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Net earnings (loss) available to common shareholders before
cumulative effect of a change in accounting principle |                                                      |                                                                                                  | 0.03  |                    |       |                  | (0.77  | )             |        |               | 0.06   |      |        |        | (0.91  | )    
|                                                                      | Cumulative effect of a change in accounting principle                                                             |                                                      |                                                                                                  |      |                    |       |                  |       |               |        |               |       |      |        |        | (1.76  | )    
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   | Net earnings (loss) available to common shareholders |                                                                                                  | $     | 0.03               |       |                  |        | (0.77         | )      |               |        | 0.06 |        |        |        | (2.67 | )      
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|Earnings (loss) per common share  diluted:                           |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Earnings (loss) from continuing operations                                                                        |                                                      | $                                                                                                | 0.03  |                    |       |                  | 0.01   |               |        |               | 0.03   |      |        |        | (0.02  | )    
|                                                                      | Earnings (loss) from discontinued operations                                                                      |                                                      |                                                                                                  | (0.01 | )                  |       |                  | (0.78  | )             |        |               | 0.02   |      |        |        | (0.89  | )    
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      | Net earnings (loss) available to common shareholders before
cumulative effect of a change in accounting principle |                                                      |                                                                                                  | 0.02  |                    |       |                  | (0.77  | )             |        |               | 0.05   |      |        |        | (0.91  | )    
|                                                                      | Cumulative effect of a change in accounting principle                                                             |                                                      |                                                                                                  |      |                    |       |                  |       |               |        |               |       |      |        |        | (1.76  | )    
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       
|                                                                      |                                                                                                                   | Net earnings (loss) available to common shareholders |                                                                                                  | $     | 0.02               |       |                  |        | (0.77         | )      |               |        | 0.05 |        |        |        | (2.67 | )      
|                                                                      |                                                                                                                   |                                                      |                                                                                                  |       |                    |       |                  |        |               |        |               |        |      |        |        |       

See accompanying notes to condensed consolidated financial statements.

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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
June 28, 2003 and December 31, 2002
(Dollars in thousands)

|                                                          |                                                                                                 |                                      |        |               |         |                   |        |         |         |  
|--------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------ | ------ | ------------- | ------- | ----------------- | ------ | ------- | ------- | -
|                                                          |                                                                                                 |                                      |        | June 28, 2003 |         | December 31, 2002
|                                                          |                                                                                                 |                                      |        |               |         |                  
|                                                          |                                                                                                 |                                      |        | (Unaudited)   |         |                   |        |        
|Assets                                                   
|Current assets:                                           |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          | Trade accounts receivable, less allowance for doubtful accounts
of $174 in 2003 and $82 in 2002 |                                      | $      | 10,257        |         |                   |        | 5,251   |        
|                                                          | Notes receivable                                                                                |                                      |        | 196           |         |                   |        |        |        
|                                                          | Inventories                                                                                     |                                      |        | 12,356        |         |                   |        | 14,322  |        
|                                                          | Prepaid expenses and other current assets                                                       |                                      |        | 1,516         |         |                   |        | 1,179   |        
|                                                          | Deferred income taxes                                                                           |                                      |        |              |         |                   |        | 400     |        
|                                                          | Assets held for sale                                                                            |                                      |        |              |         |                   |        | 8,990   |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          |                                                                                                 | Total current assets                 |        |               | 24,325  |                   |        |         | 30,142  |  
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|Property, plant, and equipment, net                       |                                                                                                 |                                      | 22,599 |               |         |                   | 23,364 |        
|Note receivable                                           |                                                                                                 |                                      | 1,100  |               |         |                   |       |        
|Intangible assets, at cost, less accumulated amortization |                                                                                                 |                                      | 1,009  |               |         |                   | 1,336  |        
|Deferred income taxes                                     |                                                                                                 |                                      | 1,136  |               |         |                   | 1,351  |        
|Other assets                                              |                                                                                                 |                                      | 581    |               |         |                   | 660    |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          |                                                                                                 | $                                    | 50,750 |               |         |                   | 56,853 |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|Liabilities and Stockholders Equity (Deficit)           
|Current liabilities:                                      |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          | Outstanding checks in excess of bank balance                                                    |                                      | $      | 2,628         |         |                   |        | 1,289   |        
|                                                          | Current installments of long-term debt                                                          |                                      |        | 41,198        |         |                   |        | 5,331   |        
|                                                          | Accounts payable                                                                                |                                      |        | 13,652        |         |                   |        | 14,731  |        
|                                                          | Accrued expenses                                                                                |                                      |        | 5,827         |         |                   |        | 4,831   |        
|                                                          | Liabilities held for sale                                                                       |                                      |        |              |         |                   |        | 6,254   |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          |                                                                                                 | Total current liabilities            |        |               | 63,305  |                   |        |         | 32,436  |  
|Long-term debt, excluding current installments            |                                                                                                 |                                      | 1,812  |               |         |                   | 39,771 |        
|Other liabilities                                         |                                                                                                 |                                      | 275    |               |         |                   | 262    |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          |                                                                                                 | Total liabilities                    |        |               | 65,392  |                   |        |         | 72,469  |  
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|Redeemable preferred stock                                |                                                                                                 |                                      | 9,323  |               |         |                   | 8,608  |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|Stockholders equity (deficit):                           |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          | Class A common stock                                                                            |                                      |        | 45            |         |                   |        | 45      |        
|                                                          | Class B common stock                                                                            |                                      |        | 2             |         |                   |        | 2       |        
|                                                          | Additional paid-in capital                                                                      |                                      |        | 20,895        |         |                   |        | 20,895  |        
|                                                          | Retained deficit                                                                                |                                      |        | (44,907       | )       |                   |        | (45,166 | )      
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          |                                                                                                 | Total stockholders
equity (deficit) |        |               | (23,965 | )                 |        |         | (24,224 | )
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        
|                                                          |                                                                                                 | $                                    | 50,750 |               |         |                   | 56,853 |        
|                                                          |                                                                                                 |                                      |        |               |         |                   |        |        

See accompanying notes to condensed consolidated financial statements.

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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Condensed Consolidated Statement of Stockholders Equity (Deficit)

For the Six Months Ended June 28, 2003
(Dollars in thousands)
(Unaudited)

|                           |                                           |  |              |   |              |   |            |   |          |  |         |   |           |   |         |   |          |   |        |   |  |   |         |      |   |   |         |      |  
|-------------------------- | ----------------------------------------- |  | ------------ | - | ------------ | - | ---------- | - | -------- |  | ------- | - | --------- | - | ------- | - | -------- | - | ------ | - |  | - | ------- | ---- | - | - | ------- | ---- | -
|                           |                                           |  | Class A      |   | Class B      |   |            |   |          |  |         |   |           |   |         |   |         
|                           |                                           |  | common stock |   | common stock |   |            |   |          |  |         |   |           |   |         |   |         
|                           |                                           |  |              |   |              |   | Additional |   | Retained |  |         |   |          
|                           |                                           |  | Shares       |   |              |   |            |   | Shares   |  |         |   |           |   | paid-in |   | earnings |   |        |   | 
|                           |                                           |  | issued       |   | Amount       |   | issued     |   | Amount   |  | capital |   | (deficit) |   | Total  
|                           |                                           |  |              |   |              |   |            |   |          |  |         |   |           |   |        
|Balance, December 31, 2002 |                                           |  | 4,460,547    |   |              | $ | 45         |   |          |  | 200,000 |   |           | $ | 2       |   |          | $ | 20,895 |   |  | $ | (45,166 | )    |   | $ | (24,224 | )   
|                           | Net earnings                              |  |              |  |              |   |            |  |          |  |         |  |           |   |         |  |          |   |        |  |  |   |         | 974  |   |   |         | 974  |  
|                           | Accretion of discount on
preferred shares |  |              |  |              |   |            |  |          |  |         |  |           |   |         |  |          |   |        |  |  |   |         | (715 | ) |   |         | (715 | )
|                           |                                           |  |              |   |              |   |            |   |          |  |         |   |           |   |         |   |          |   |        |   |  |   |         |      |   |   |        
|Balance, June 28, 2003     |                                           |  | 4,460,547    |   |              | $ | 45         |   |          |  | 200,000 |   |           | $ | 2       |   |          | $ | 20,895 |   |  | $ | (44,907 | )    |   | $ | (23,965 | )   
|                           |                                           |  |              |   |              |   |            |   |          |  |         |   |           |   |         |   |          |   |        |   |  |   |         |      |   |   |         |     

See accompanying notes to condensed consolidated financial statements.

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MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 28, 2003 and June 29, 2002
(Dollars in thousands)
(Unaudited)

|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |               |        |   |       | 
|-------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------- | -------------------------------- | ------------ | ------ | ---------------- | ----- | ------------- | ------ | - | ----- | 
|                                                   |                                                                     |                                                     |                                  |              |        | Six Months Ended
|                                                   |                                                                     |                                                     |                                  |              |        |                 
|                                                   |                                                                     |                                                     |                                  |              |        | June 28, 2003    |       | June 29, 2002
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|Net cash provided by operating activities          |                                                                     | $                                                   | 1,932                            |              |        |                  | 1,567 |              
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|Cash flows from investing activities:              |                                                                     |                                                     |                                  |              |        |                  |       |              
|                                                   | Proceeds from sale of machinery and equipment                       |                                                     |                                  |             |        |                  |       | 257           |       
|                                                   | Proceeds from sale of business                                      |                                                     |                                  | 4,800        |        |                  |       |              |       
|                                                   | Capital expenditures                                                |                                                     |                                  | (1,929       | )      |                  |       | (1,749        | )     
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|                                                   |                                                                     | Net cash provided by (used in) investing activities |                                  |              | 2,871  |                  |       |               | (1,492 | )
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|Cash flows from financing activities:              |                                                                     |                                                     |                                  |              |        |                  |       |              
|                                                   | Net borrowings (repayments) under revolving credit facility         |                                                     |                                  | (4,200       | )      |                  |       | 3,681         |       
|                                                   | Increase (decrease) in checks outstanding in excess of bank balance |                                                     |                                  | 1,339        |        |                  |       | (1,156        | )     
|                                                   | Increase in financing fees                                          |                                                     |                                  | (300         | )      |                  |       | (1,112        | )     
|                                                   | Principal payments on long-term debt and capital leases             |                                                     |                                  | (1,642       | )      |                  |       | (1,501        | )     
|                                                   | Cash received on exercised options                                  |                                                     |                                  |             |        |                  |       | 13            |       
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|                                                   |                                                                     | Net cash used in financing activities               |                                  |              | (4,803 | )                |       |               | (75    | )
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|Net change in cash                                 |                                                                     |                                                     |                                 |              |        |                  |      |              
|Cash at beginning of period                        |                                                                     |                                                     |                                 |              |        |                  |      |              
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|Cash at end of period                              |                                                                     | $                                                   |                                 |              |        |                  |      |              
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|Supplemental disclosures of cash flow information: |                                                                     |                                                     |                                  |              |        |                  |       |              
|                                                   |                                                                     |                                                     | Cash paid during the period for: |              |        |                  |       |               |        |   |      
|                                                   |                                                                     |                                                     |                                  | Interest     |        | $                | 1,373 |               |        |   | 3,144 | 
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              
|                                                   |                                                                     |                                                     |                                  | Income taxes |        | $                |      |               |        |   |      | 
|                                                   |                                                                     |                                                     |                                  |              |        |                  |       |              

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents



MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 28, 2003 and June 29, 2002
(Unaudited)

(1) Nature of Business

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

(2) Interim Financial Data

The Condensed Consolidated Financial Statements at June 28, 2003, and for
the three and six months ended June 28, 2003 and June 29, 2002, are unaudited
and reflect all adjustments, consisting of normal recurring accruals and other
adjustments which, in the opinion of our management, are necessary for a fair
presentation of the financial position, operating results, and cash flows for
the interim periods indicated. Our fiscal quarters end on a Saturday (nearest
to a quarter end) except for the fourth quarter which ends on December 31. For
both the quarters ended June 28, 2003 and June 29, 2002 there were 64 shipping
days. For the six months ended June 28, 2003, there were 126 shipping days,
and for the six months ended June 29, 2002, there were 127 shipping days.
Results of operations for the interim periods are not necessarily indicative of
the results of operations for the full fiscal year. You should read the
condensed consolidated financial statements in connection with the consolidated
financial statements and notes thereto, together with managements discussion
and analysis of financial condition and results of operations of Morton
Industrial Group, Inc. contained in the Companys Annual Report on Form 10-K
for the year ended December 31, 2002, as filed on March 31, 2003.

(3) Discontinued Operations

The results from discontinued operations for the three and six months
ended June 29, 2002 reflect the results of both Morton Custom Plastics, LLC,
which we sold on December 24, 2002, and Mid-Central Plastics, Inc., which we
sold on June 20, 2003. The results from discontinued operations for the three
and six months ended June 28, 2003 reflect only the results of Mid-Central
Plastics, Inc.

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

|                                               |                           |   |              |       | 
|---------------------------------------------- | ------------------------- | - | ------------ | ----- | 
|                                               |                           |   | December 31,
|                                               |                           |   | 2002        
|                                               |                           |   |             
|Accounts receivable, net of allowance of $134  |                           | $ | 1,423        |      
|Inventories                                    |                           |   | 2,241        |      
|Other current assets                           |                           |   | 427          |      
|Property, plant and equipment, net             |                           |   | 4,899        |      
|                                               |                           |   |              |      
|                                               | Assets held for sale      |   | $            | 8,990 | 
|                                               |                           |   |              |      
|Current liabilities                            |                           | $ | 2,504        |      
|Estimated debt required to be repaid upon sale |                           |   | 3,750        |      
|                                               |                           |   |              |      
|                                               | Liabilities held for sale |   | $            | 6,254 | 
|                                               |                           |   |              |      



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

6



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##### Table of Contents



(4) Inventory

The Companys inventory, in thousands of dollars, as of June 28, 2003, and
December 31, 2002, is summarized as follows:

|                                                           |  |               |        |      |  |              |        | 
|---------------------------------------------------------- |  | ------------- | ------ | ---- |  | ------------ | ------ | 
|                                                           |  |               |        |      |  | December 31,
|                                                           |  | June 28, 2003 |        | 2002
|                                                           |  |               |        |     
|Raw materials, purchased parts and manufactured components |  | $             | 3,132  |      |  | $            | 3,645  | 
|Work-in-process                                            |  |               | 6,190  |      |  |              | 6,087  | 
|Finished goods                                             |  |               | 3,034  |      |  |              | 4,590  | 
|                                                           |  |               |        |      |  |              |        | 
|                                                           |  | $             | 12,356 |      |  | $            | 14,322 | 
|                                                           |  |               |        |      |  |              |        | 

(5) Earnings Per Share

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

|                                                          |  |                             |         |                             |  |           |           |             |  |               |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|--------------------------------------------------------- |  | --------------------------- | ------- | --------------------------- |  | --------- | --------- | ----------- |  | ------------- | ----- | --------- |  | - | ---------- | - |  |  | --------- |  |  | - | ----- | -
|                                                          |  | Quarter Ended June 28, 2003 |         | Quarter Ended June 29, 2002
|                                                          |  |                             |         |                            
|                                                          |  | Earnings                    |         | Shares                      |  | Per Share |           | (Loss)      |  | Shares        |       | Per Share
|                                                          |  | (Numerator)                 |         | (Denominator)               |  | Amount    |           | (Numerator) |  | (Denominator) |       | Amount   
|                                                          |  |                             |         |                             |  |           |           |             |  |               |       |          
|Basic earnings
(loss) available to
common shareholders    |  | $                           | 140,000 |                             |  |           | 4,660,547 |             |  | $             | 0.03  |           |  | $ | (3,566,000 | ) |  |  | 4,630,370 |  |  | $ | (0.77 | )
|Effect of dilutive
securities, stock
options and
warrants |  |                             |         |                             |  |           | 230,739   |             |  |               | (0.01 | )         |  |   |            |   |  |  |          |  |  |   |      |  
|                                                          |  |                             |         |                             |  |           |           |             |  |               |       |           |  |   |            |   |  |  |           |  |  |   |       |  
|Diluted earnings
(loss) available to
common shareholders  |  | $                           | 140,000 |                             |  |           | 4,891,286 |             |  | $             | 0.02  |           |  | $ | (3,566,000 | ) |  |  | 4,630,370 |  |  | $ | (0.77 | )
|                                                          |  |                             |         |                             |  |           |           |             |  |               |       |           |  |   |            |   |  |  |           |  |  |   |       |  

|                                                          |  |                                |         |                                |  |           |           |             |  |               |       |           |  |   |             |   |  |  |           |  |  |   |       |  
|--------------------------------------------------------- |  | ------------------------------ | ------- | ------------------------------ |  | --------- | --------- | ----------- |  | ------------- | ----- | --------- |  | - | ----------- | - |  |  | --------- |  |  | - | ----- | -
|                                                          |  | Six Months Ended June 28, 2003 |         | Six Months Ended June 29, 2002
|                                                          |  |                                |         |                               
|                                                          |  | Earnings                       |         | Shares                         |  | Per Share |           | (Loss)      |  | Shares        |       | Per Share
|                                                          |  | (Numerator)                    |         | (Denominator)                  |  | Amount    |           | (Numerator) |  | (Denominator) |       | Amount   
|                                                          |  |                                |         |                                |  |           |           |             |  |               |       |          
|Basic earnings
(loss) available to
common shareholders    |  | $                              | 259,000 |                                |  |           | 4,660,547 |             |  | $             | 0.06  |           |  | $ | (12,305,000 | ) |  |  | 4,615,774 |  |  | $ | (2.67 | )
|Effect of dilutive
securities, stock
options and
warrants |  |                                |         |                                |  |           | 228,563   |             |  |               | (0.01 | )         |  |   |             |   |  |  |          |  |  |   |      |  
|                                                          |  |                                |         |                                |  |           |           |             |  |               |       |           |  |   |             |   |  |  |           |  |  |   |       |  
|Diluted earnings
(loss) available to
common shareholders  |  | $                              | 259,000 |                                |  |           | 4,889,110 |             |  | $             | 0.05  |           |  | $ | (12,305,000 | ) |  |  | 4,615,774 |  |  | $ | (2.67 | )
|                                                          |  |                                |         |                                |  |           |           |             |  |               |       |           |  |   |             |   |  |  |           |  |  |   |       |  

For the quarters ended June 28, 2003 and June 29, 2002, 1,053,915 and
1,435,921, respectively, options and warrants were excluded from the
computation of diluted earnings per share due to their anti-dilutive effect.

For the six month periods ended June 28, 2003 and June 29, 2002, 1,058,634
and 1,447,430, respectively, options and warrants were excluded from the
computation of diluted earnings per share due to their anti-dilutive effect.

(6) Segment Reporting

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

7



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##### Table of Contents



(7) Debt

In February 2002, we entered into a new secured revolving credit facility
with a syndicate of banks led by Harris Trust and Savings Bank, as Agent (the
Harris syndicate). The revolving credit agreement permitted us to borrow up to
a maximum of $21.0 million. The agreement requires payment of a quarterly
commitment fee of .50% per annum of the average daily unused portion of the
revolving credit facility. Interest is due monthly and is based on bank prime
plus 1.5% (effective rate of 5.50% at June 28, 2003). Alternatively, we could
select a LIBOR plus 4.0% interest rate. The amount available under the original
provisions of the revolving credit facility was limited to 85% of qualified
accounts receivable, 50% of eligible inventory, plus $2.5 million of other
assets. The revolving credit agreement was originally set to mature on July 1,
2003. As described below, the credit facility has been amended and the maturity
date has been extended to April 1, 2004. At June 28, 2003, we had $14.4
million outstanding and $1.4 million available under this credit facility.

In February 2002, we entered into an amended and restated secured term
loan arrangement with the Harris syndicate for a term loan of $32.9 million.
The term loan under this financing arrangement is amortized monthly with
principal payments ranging from $235,000 to $500,000 and the balance of $24.9
million due originally on July 1, 2003 (now extended to April 1, 2004).
Interest is due monthly and is based on bank prime plus 1.5% (effective rate of
5.50% at June 28, 2003). Alternatively, we could select a LIBOR plus 4.0%
interest rate.

The February, 2002 Harris syndicate agreement has been amended four times,
most recently on February 28, 2003, and June 20, 2003. Among the key provisions
of the February 28, 2003 amendment: (i) extension of the maturity date to
April 1, 2004; (ii) revisions in the monthly amortization of principal, with
$50,000 payable on February 28, 2003, $100,000 payable on March 31, 2003,
$350,000 payable on April 30, 2003, $500,000 payable each month end from May
31, 2003 through December 31, 2003, and $250,000 payable each month end
thereafter until the April 1, 2004 maturity date, at which time the term loan
balance of $22.2 million will be due. Also, effective February 28, 2003, the
limit of eligible inventory under the revolving credit facility was increased
to 60% and the amount of other assets eligible became $3.5 million. The
Company has begun discussions to obtain loans or funding support from other sources, or
extend its existing credit facility, by the maturity date of the current
agreement, but there are no assurances that we will be successful in our
efforts. Failure to do so could have a material adverse effect on our
operations.

The fourth amendment, dated June 20, 2003, and filed as an exhibit to this
Form 10-Q, provided consent by the Harris Bank syndicate to the Mid-Central
Plastics, Inc. June 20, 2003 transaction and, upon completion of that
transaction, impacted the revolving credit facility as follows: (i) $3.5
million of the $4.8 million cash proceeds received at closing were used to
paydown the revolving line-of-credit; (ii) the amount of other assets eligible
under the revolving credit facility were reduced from $3.5 million to $2.1
million; and (iii) the maximum amount that can be borrowed under the revolving
credit facility was reduced from $21.0 million to $18.8 million.

In connection with these Harris syndicate loans, we have granted the
lender a first lien on all of our accounts receivable, inventory, equipment and
various other assets. These Harris syndicate debt agreements contain
restrictions on capital expenditures, additional debt or liens, investments,
mergers and acquisitions, asset sales and payments such as dividends or stock
repurchases. No amounts are available for the payment of dividends at June 28,
2003. The agreements also impose various financial covenants, including
financial performance ratios.

(8) Stock Option Plan

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

The per share weighted-average fair value of stock options granted during
the first six months of 2003 and 2002 was $0.13 and $0.29 on the date of grant
based on the Black Scholes option-pricing model with the following
weighted-average assumptions: expected dividend yield of 0%, risk-free interest
rate of 6%, volatility of 91%, and an expected life of 10 years.

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

8



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##### Table of Contents



|                                                                   |                                                                                                         |  |            |     |               |  |  |        |  
|------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------- |  | ---------- | --- | ------------- |  |  | ------ | -
|                                                                   |                                                                                                         |  | Quarter    |     | Quarter      
|                                                                   |                                                                                                         |  | Ended June |     | Ended        
|                                                                   |                                                                                                         |  | 28, 2003   |     | June 29, 2002
|                                                                   |                                                                                                         |  |            |     |              
|Net earnings (loss) available to common shareholders:              |                                                                                                         |  |            |     |               |  |  |       
|                                                                   | As reported                                                                                             |  | $          | 140 |               |  |  | (3,566 | )
|                                                                   | Total stock-based employee compensation
expense determined under fair value based
method for all awards |  |            | (38 | )             |  |  | (54    | )
|                                                                   |                                                                                                         |  |            |     |               |  |  |       
|                                                                   | Pro forma                                                                                               |  | $          | 102 |               |  |  | (3,620 | )
|                                                                   |                                                                                                         |  |            |     |               |  |  |       
|Basic earnings (loss) available to
common shareholders per share:  |                                                                                                         |  |            |     |               |  |  |       
|                                                                   | As reported                                                                                             |  | $          | .03 |               |  |  | (.77   | )
|                                                                   | Pro forma                                                                                               |  | $          | .02 |               |  |  | (.78   | )
|Diluted
earnings (loss) available to common shareholders per share |                                                                                                         |  |            |     |               |  |  |       
|                                                                   | As reported                                                                                             |  | $          | .02 |               |  |  | (.77   | )
|                                                                   | Pro
forma                                                                                               |  | $          | .02 |               |  |  | (.78   | )

|                                                                    |                                                                                                         |  |            |     |            |  |  |         |  
|------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  | ---------- | --- | ---------- |  |  | ------- | -
|                                                                    |                                                                                                         |  | Six Months |     | Six Months
|                                                                    |                                                                                                         |  | Ended June |     | Ended June
|                                                                    |                                                                                                         |  | 28, 2003   |     | 29, 2002  
|                                                                    |                                                                                                         |  |            |     |           
|Net earnings (loss) available to common shareholders:               |                                                                                                         |  |            |     |            |  |  |        
|                                                                    | As reported                                                                                             |  | $          | 259 |            |  |  | (12,305 | )
|                                                                    | Total stock-based employee compensation expense determined under fair value based
method for all awards |  |            | (74 | )          |  |  | (108    | )
|                                                                    |                                                                                                         |  |            |     |            |  |  |        
|                                                                    | Pro forma                                                                                               |  | $          | 185 |            |  |  | (12,413 | )
|                                                                    |                                                                                                         |  |            |     |            |  |  |        
|Basic earnings (loss) available to common shareholders
per share:   |                                                                                                         |  |            |     |            |  |  |        
|                                                                    | As reported                                                                                             |  | $          | .06 |            |  |  | (2.67   | )
|                                                                    | Pro forma                                                                                               |  | $          | .04 |            |  |  | (2.69   | )
|Diluted earnings (loss) available to common shareholders
per share: |                                                                                                         |  |            |     |            |  |  |        
|                                                                    | As reported                                                                                             |  | $          | .05 |            |  |  | (2.67   | )
|                                                                    | Pro forma                                                                                               |  | $          | .04 |            |  |  | (2.69   | )

(9) Impact of Recently Issued Accounting Standards

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

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

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

9



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##### Table of Contents



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures in
its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within the scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15,
2003. As of the date of this report, the impact of SFAS No. 150 on
the balance sheet classification of redeemable preferred stock has
not been determined.




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

The following discussion and analysis describes changes in the Companys
financial condition since December 31, 2002. The analysis of results of
operations compares the quarter and six months ended June 28, 2003 and June 29,
2002. Any references to December 31, 2002 relate to data found in Form 10-K as
filed with the Securities and Exchange Commission on March 31, 2003.

RESULTS OF OPERATIONS

SECOND QUARTER, 2003 VERSUS SECOND QUARTER, 2002

Our net revenues for the second quarter, 2003 were $34.4 million compared
to $32.2 million for the second quarter of 2002, an increase of $2.2 million,
or 6.7%. The sales increase resulted primarily from increases in unit volume
from existing customers.

Our sales to Deere & Company and Caterpillar Inc., were approximately 92%
of our revenues for the second quarter of 2003 and 90% for the second quarter
of 2002. Revenues from these customers increased approximately 9% from the
same period in 2002.

Our gross profits for the second quarter, 2003 increased by approximately
$160,000, an increase of 3.3%, versus the same three months in 2002. The
overall gross profit percentage decreased to 14.6% for the second quarter of
2003 from 15.0% for the second quarter of 2002. The increase in gross profit
dollars resulted primarily from increased sales. The modest decrease in the
gross profit percentage resulted from continued pricing pressure from customers
offset by various continuing manufacturing cost savings initiatives.

Our selling and administrative expenses for the second quarter, 2003
amounted to $3.3 million, or 9.6% of net sales compared to $3.4 million, or
10.7% of net sales for the second quarter of 2002. The reduced percentage of
selling and administrative expense relates primarily to corporate cost savings subsequent to the sales of discontinued operations.

Our interest expense was $936,000 for the second quarter of 2003,
compared with $1.0 million for the second quarter of 2002. While interest
rates have remained steady for comparable quarters, a decrease in the overall
debt level has decreased interest expense for the comparable quarters.

Our other income was $171,000 for the second quarter of 2003, compared
with other expense of $38,000 for the second quarter of 2002, primarily due to
unrealized gains, or losses, on the Companys interest rate swap instruments.
These swap agreements expired at the end of June, 2003.

For the second quarter of 2003, we recorded a tax provision of $360,000
(approximately 39%) on pre-tax income of $933,000 from continuing operations,
and a tax benefit of $35,000 (41%) on a pre-tax loss of $85,000 from
discontinued operations. We will utilize net operating loss carry
forwards to the extent of
taxable income, and we have recorded a resulting decrease in deferred tax
assets to reflect this utilization.

Related to discontinued operations, during the second quarter, 2002, the
Company recorded a tax benefit of $1,473,000 as it determined that it would be able
to recover taxes paid in previous years under the five-year carryback
provisions of the Jobs Creation and Worker Assistance Act of 2002. The amounts
recovered relate primarily to pre-acquisition taxes paid by acquired
subsidiaries. Additionally, the Company recognized an income tax expense of
$2,294,000 during the three months ended June 29, 2002, related to an increase in
the valuation allowance for our deferred tax assets. Net deferred tax assets
were decreased to reflect lower anticipated utilization of income tax net
operating loss carryforwards.

10



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##### Table of Contents



Discontinued operations reflect a pre-tax loss of $85,000 for the second
quarter of 2003 compared to a pre-tax loss of $2.8 million in the second
quarter of 2002. As described in Note 3 above, the second quarter of 2003
includes only the operations of Mid-Central Plastics, Inc., while the second
quarter of 2002 also included the operations of Morton Custom Plastics, LLC,
which was sustaining significant losses from its operations.

FIRST SIX MONTHS, 2003 VERSUS FIRST SIX MONTHS, 2002

Our net revenues for the first six months of 2003 were $66.8 million
compared to $61.4 million for the first six months of 2002, an increase of $5.4
million, or 8.7%. The sales increase resulted primarily from increases in unit
volume from existing customers.

Our sales to Deere & Company and Caterpillar Inc., were approximately 91%
of our revenues for the first six months of both 2003 and 2002. Revenues from
these customers for the first six months of 2003 increased approximately 9%
from the first six months of 2002.

Our gross profits for the first six months of 2003 increased by
approximately $600,000, an increase of 7.1%, versus the same six months in
2002. The overall gross profit percentage decreased to 14.4% for the first six
months of 2003 from 14.6% for the first six months of 2002. The increase in
gross profit dollars resulted primarily from increased sales. The modest
decrease in the gross profit percentage resulted from continued pricing
pressure from customers offset by various continuing manufacturing cost savings
initiatives.

Our selling and administrative expenses for the first six months of 2003
was $6.6 million, or 9.9% of sales, compared to $6.4 million, or 10.6% of sales
for the first six months of 2002. The reduced percentage of selling and
administrative expense relates primarily to corporate cost savings subsequent to the sales of discontinued operations.

Our interest expense was approximately $1.9 million for the first six
months of 2003, compared to $2.2 million for the first six months of 2002.
While interest rates have remained steady for the comparable periods, a
decrease in the overall debt level has decreased interest expense for the
comparable periods.

For the first six months of 2003, we recorded a tax provision of $560,000
(approximately 39%) on pre-tax income of $1.4 million from continuing
operations, and a tax provision of $55,000 (39%) on pre-tax income of $140,000
from discontinued operations. We will utilize net operating loss
carry forwards to the
extent of taxable income, and we have recorded a resulting decrease in deferred
tax assets to reflect this utilization.

Related to discontinued operations. during the first six months of 2002,
the Company recorded a tax benefit of $1,473,000 as it determined that it would be
able to recover taxes paid in previous years under the five-year carryback
provisions of the Jobs Creation and Worker Assistance Act of 2002. The amounts
recovered relate primarily to pre-acquisition taxes paid by acquired
subsidiaries. Additionally, the Company recognized an income tax expense of
$2,294,000 during the six months ended June 29, 2002, related to an increase in the
valuation allowance for deferred tax assets. Net deferred tax assets were
decreased to reflect lower anticipated utilization of income tax net operating
loss carryforwards.

Discontinued operations reflect pre-tax income of $140,000 for the first
six months of 2003 compared to a pre-tax loss of $3.3 million in the first six
months of 2002. As described in Note 3 above, the first six months of 2003
includes only the operations of Mid-Central Plastics, Inc., while the first six
months of 2002 also included the operations of Morton Custom Plastics, LLC,
which was sustaining significant losses from its operations.

LIQUIDITY AND CAPITAL RESOURCES

Our consolidated working capital at June 28, 2003 was a deficit of $39.0
million compared to a working capital deficit of $2.3 million at December 31,
2002. This represents a decrease in working capital of approximately $36.7
million. Our credit facility matures on April 1, 2004, and we have
accordingly classified the related term debt and revolving debt as current
liabilities. As discussed below, we are currently discussing with both our
existing lender, and other potential lenders, the refinancing of the debt that
matures on April 1, 2004.

In February 2002, we entered into a new secured revolving credit facility
with a syndicate of banks led by Harris Trust and Savings Bank, as Agent (the
Harris syndicate). The revolving credit agreement permitted us to borrow up to
a maximum of $21.0 million. The agreement requires payment of a quarterly
commitment fee of .50% per annum of the average daily unused portion of the
revolving credit facility. Interest is due monthly and is based on bank prime
plus 1.5% (effective rate of 5.50% at June 28, 2003). Alternatively, we could
select a LIBOR plus 4.0% interest rate. The amount available under the original
provisions of the revolving credit facility was

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limited to 85% of qualified accounts receivable, 50% of eligible
inventory, plus $2.5 million of other assets. The revolving credit agreement
was originally set to mature on July 1, 2003. As described below, the credit
facility has been amended and the maturity date has been extended to April 1,
2004. At June 28, 2003, we had $14.4 million outstanding and $1.4 million
available under this credit facility.

In February 2002, we entered into an amended and restated secured term
loan arrangement with the Harris syndicate for a term loan of $32.9 million.
The term loan under this financing arrangement is amortized monthly with
principal payments ranging from $235,000 to $500,000 and the balance of $24.9
million due originally on July 1, 2003 (now extended to April 1, 2004).
Interest is due monthly and is based on bank prime plus 1.5% (effective rate of
5.50% at June 28, 2003). Alternatively, we could select a LIBOR plus 4.0%
interest rate.

The February, 2002 Harris syndicate agreement has been amended four times,
most recently on February 28, 2003, and June 20, 2003. Among the key provisions
of the February 28, 2003 amendment: (i) extension of the maturity date to
April 1, 2004; (ii) revisions in the monthly amortization of principal, with
$50,000 payable on February 28, 2003, $100,000 payable on March 31, 2003,
$350,000 payable on April 30, 2003, $500,000 payable each month end from May
31, 2003 through December 31, 2003, and $250,000 payable each month end
thereafter until the April 1, 2004 maturity date, at which time the term loan
balance of $22.2 million will be due. Also, effective February 28, 2003, the
limit of eligible inventory under the revolving credit facility was increased
to 60% and the amount of other assets eligible became $3.5 million. The
Company has begun discussions to obtain loans or funding support from other
sources, or extend its existing credit facility, by the maturity date of the
current agreement, but there are no assurances that we will be successful in
our efforts. Failure to do so could have a material adverse effect on our
operations.

The fourth amendment, dated June 20, 2003, and filed as an exhibit to this
Form 10-Q, provided consent by the Harris Bank syndicate to the Mid-Central
Plastics, Inc. June 20, 2003 transaction and, upon completion of that
transaction, impacted the revolving credit facility as follows: (i) $3.5
million of the $4.8 million cash proceeds received at closing were used to
paydown the revolving line-of-credit; (ii) the amount of other assets eligible
under the revolving credit facility were reduced from $3.5 million to $2.1
million; and (iii) the maximum amount that can be borrowed under the revolving
credit facility was reduced from $21.0 million to $18.8 million.

In connection with these Harris syndicate loans, we have granted the
lender a first lien on all of our accounts receivable, inventory, equipment and
various other assets. These Harris syndicate debt agreements contain
restrictions on capital expenditures, additional debt or liens, investments,
mergers and acquisitions, asset sales and payments such as dividends or stock
repurchases. No amounts are available for the payment of dividends at June 28,
2003. The agreements also impose various financial covenants, including
financial performance ratios.

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

Historically, we have met our near term liquidity requirements with cash
flow from operations, the Harris syndicate line of credit, and management of
our working capital to reflect current levels of operations. The national
economic slowdown has increased pressure on these sources of liquidity. The
February, 2002 Harris syndicate revolving credit facility and term loans
replaced existing credit facilities and did not provide additional
availability. We anticipate that the February, 2002 agreements with the Harris
syndicate, as amended on February 28, 2003 and June 20, 2003, will assist us in
meeting our liquidity requirements through the term of these agreements.

Preferred Stock

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

Capital Expenditures

We incurred $1.9 million of capital expenditures during the first six
months of 2003, including $1.7 related to continuing operations, primarily for
the update and purchase of manufacturing equipment.

We estimate that our capital expenditures in 2003 will total approximately
$3.0 million, of which $1.4 million will be for new production equipment and
the remaining $1.6 million will be for normal replacement items.

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Significant Cash Commitments

The following table summarizes the Companys contractual obligations at
June 28, 2003:

|                                   |                          |       |                        |        |  |       |           |        |       |       |        |   |         |  |       |   |  |  |   |   | 
|---------------------------------- | ------------------------ | ----- | ---------------------- | ------ |  | ----- | --------- | ------ | ----- | ----- | ------ | - | ------- |  | ----- | - |  |  | - | - | 
|                                   |                          |       | Payments Due by Period
|                                   |                          |       |                       
|                                   |                          |       |                        |        |  |       | Less than |        | 1 - 3 |       | 4 - 5  |   | After 5
|(In Thousands)                     |                          | Total |                        | 1 Year |  | Years |           | Years  |       | Years
|                                   |                          |       |                        |        |  |       |           |        |       |      
|Bank indebtedness                  |                          |       |                        |        |  |       |           |        |       |       |        |   |         |  |       |   |  |  |   |  
|                                   | Term loan                |       | $                      | 26,351 |  |       |           | 26,351 |       |       |        |  |         |  |       |  |  |  |   |  | 
|                                   | Revolving line of credit |       |                        | 14,400 |  |       |           | 14,400 |       |       |        |  |         |  |       |  |  |  |   |  | 
|Other debt obligations             |                          |       | 2,258                  |        |  |       | 447       |        |       |       | 1,208  |   |         |  | 603   |   |  |  |  |  
|Redeemable
preferred stock         |                          |       | 9,323                  |        |  |       | 9,323     |        |       |       |       |   |         |  |      |   |  |  |  |  
|Operating leases                   |                          |       | 18,213                 |        |  |       | 5,647     |        |       |       | 10,624 |   |         |  | 1,942 |   |  |  |  |  
|                                   |                          |       |                        |        |  |       |           |        |       |       |        |   |         |  |       |   |  |  |   |  
|Total contractual cash
obligations |                          | $     | 70,545                 |        |  |       | 56,168    |        |       |       | 11,832 |   |         |  | 2,545 |   |  |  |  |  
|                                   |                          |       |                        |        |  |       |           |        |       |       |        |   |         |  |       |   |  |  |   |  

Under our bank credit facility, we have $618,000 standby letters of credit
outstanding at June 28, 2003 in connection with lease obligations. Management
expects that cash flow from operations and availability under its bank
revolving line of credit will assist us in meeting our liquidity requirements
through the term of its bank credit facility. At June 28, 2003, we had $1.4
million in unused availability under the bank revolving line of credit. Our
credit facility with the Harris Bank syndicate matures on April 1, 2004. The
Company has begun discussions to obtain loans or funding support from other
sources, or extend its existing credit facility by the maturity date of the
current agreement, but there are no assurances that we will be successful in
our efforts. Failure to do so could have a material adverse effect on our
operations.

As described previously in the Financial Position and Liquidity section of
this Form 10-Q, the preferred stock issued by the Company becomes redeemable on
April 15, 2004. There are legal proceedings related to certain Worthington
matters as described in Part II, Item 1. We are continuing negotiations with
Worthington to resolve all of the issues presented by the preferred stock,
within the limitations of our available liquidity in 2004, but there are no
assurances that we will be successful in our efforts.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

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

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS No. 150 establishes standards for how an issuer classifies and measures in
its statement of financial position certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within the scope as a liability (or an
asset in some circumstances) because that financial instrument embodies an
obligation of the issuer. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15,
2003. As of the date of this report, the impact of SFAS No. 150 on
the balance sheet classification of redeemable preferred stock has not been determined.

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FORWARD LOOKING STATEMENTS

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




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to interest rate changes primarily as a result of our lines
of credit and long term debt used for maintaining liquidity, funding capital
expenditures, and funding the growth of our business. Our interest rate risk
management objective is to limit the impact of interest rate changes on
earnings and cash flow and to lower overall borrowing costs. To achieve our
objectives, we entered into a financing agreement with a bank syndicate. This
agreement contains a term loan and a revolving credit facility. Interest is
based on our lead banks prime rate plus an applicable variable margin.




ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

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

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

Changes in internal controls

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

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##### Table of Contents






PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

On May 1, 2000, Worthington Industries, Inc. (Worthington) filed suit (in
the United States District Court for the Southern District of Ohio, Eastern
Division) against us and Morton Custom Plastics, LLC (MCP, LLC) related to
MCP, LLCs 1999 acquisition of the non-automotive plastics business from
Worthington. Worthington claimed that it was owed additional amounts under the
sale agreement and a related service agreement, and that it was owed dividends
on shares of our preferred stock that it received. We believed that under the
terms of the agreement, none of the amounts claimed by Worthington were owed by
us. The case has been stayed because of the bankruptcy of MCP, LLC, although
Worthington may attempt to continue the litigation against us on the dividend
matter.




ITEM 2. CHANGES IN SECURITIES

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




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Morton Industrial Group, Inc., held its Annual Meeting on June 10, 2003
to:



| | 1. |  | Elect three directors to serve for one-year terms
until the Annual Meeting of Shareholders in 2004.                   
| | -- |  | ----------------------------------------------------------------------------------------------------------------------
|
| | 2. |  | Consider and act upon a proposal to ratify the
selection of KPMG, LLP as independent auditors of the Company
for 2003.

The results of the shareholders votes on each of these matters appear in the
following tables.

Election of Directors:

|                  |  |     |           |         |  |           |        |       |  |  |   |  |  |  |           | 
|----------------- |  | --- | --------- | ------- |  | --------- | ------ | ----- |  |  | - |  |  |  | --------- | 
|                  |  | For |           | Against |  | Abstained |        | Total
|                  |  |     |           |         |  |           |        |      
|William D. Morton |  |     | 4,968,952 |         |  |           | 91,281 |       |  |  |  |  |  |  | 5,060,233 | 
|Fred W. Broling   |  |     | 4,969,096 |         |  |           | 91,137 |       |  |  |  |  |  |  | 5,060,233 | 
|Mark W. Mealy     |  |     | 4,969,050 |         |  |           | 91,183 |       |  |  |  |  |  |  | 5,060,233 | 

Ratification of Selection of Independent Auditor:

|         |  |     |           |         |  |           |       |       |  |  |       |  |  |  |           | 
|-------- |  | --- | --------- | ------- |  | --------- | ----- | ----- |  |  | ----- |  |  |  | --------- | 
|         |  | For |           | Against |  | Abstained |       | Total
|         |  |     |           |         |  |           |       |      
|KPMG LLP |  |     | 5,049,808 |         |  |           | 7,437 |       |  |  | 2,988 |  |  |  | 5,060,233 | 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|(A) |  | Exhibits
|--- |  | --------

|     |  |                                                                                                             
|---- |  | ------------------------------------------------------------------------------------------------------------
|11.  |  | The computation can be determined from this report.                                                         
|31.1 |  | Certification
pursuant to Rule 13a-14(a)                                                                    
|31.2 |  | Certification
pursuant to Rule 13a-14(a)                                                                    
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2 |  | Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|99.1 |  | Fourth Amendment to Amended and Restated Credit Agreement                                                   



|(B) |  | Reports on Form 8-K.
|--- |  | --------------------



| |  |  | Form 8-K filed on May 30, 2003 announcing the pending sale of Mid-Central Plastics, Inc.                
| |  |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | Form 8-K filed on June 23, 2003 announcing the completion of the sale of Mid-Central Plastics, Inc.     
|
| |  |  | Form 8-K/A filed on July 7, 2003 providing Item 7 information for the sale of Mid-Central Plastics, Inc.

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SIGNATURES

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

|                       |  |                               |  |                          
|---------------------- |  | ----------------------------- |  | -------------------------
|                       |  | MORTON INDUSTRIAL GROUP, INC.
|                       |  |                               |  |                          
|                       |  | By:                           |  | /s/ RODNEY B. HARRISON   
|                       |  |                               |  |                          
|                       |  |                               |  | Rodney B. Harrison       
|                       |  |                               |  | Vice President of Finance
|                       |  |                               |  |                          
|Dated: August 11, 2003 |  |                               |  |                          

16