<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
----------------------------------------
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 1998
OR
( ) 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 O-13198
MORTON INDUSTRIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
Georgia 38-0811650
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
1021 W. Birchwood, Morton, Illinois 61550
(Address of principal executive offices)
(309) 266-7176
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
<TABLE>
<CAPTION>
Outstanding as of
August 5, 1998
------------------
<S> <C>
Class A Common Stock, $.01 par value 3,801,944
Class B Common Stock, $.01 par value 200,000
</TABLE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MORTON INDUSTRIAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Quarters and Six Months Ended June 27, 1998 and June 30, 1997
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
Quarters Ended Six Months Ended
June 27, 1998 June 30, 1997 June 27, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 39,752 $ 25,330 $ 70,424 $ 47,804
Cost of sales 33,022 21,524 58,978 41,335
------------- ------------- ------------- -------------
Gross profit 6,730 3,806 11,446 6,469
------------- ------------- ------------- -------------
Operating expenses
Selling expenses 1,209 542 1,976 1,029
Administrative expenses 3,407 2,122 5,802 3,396
------------- ------------- ------------- -------------
Total operating expenses 4,616 2,664 7,778 4,425
------------- ------------- ------------- -------------
Operating income 2,114 1,142 3,668 2,044
------------- ------------- ------------- -------------
Other income (expense)
Interest expense (925) (831) (1,471) (1,638)
Miscellaneous 16 17 38 29
------------- ------------- ------------- -------------
Total other income (expense) (909) (814) (1,433) (1,609)
------------- ------------- ------------- -------------
Earnings before income taxes 1,205 328 2,235 435
Income taxes 107 105 179 146
------------- ------------- ------------- -------------
Net earnings $ 1,098 $ 223 $ 2,056 $ 289
============= ============= ============= =============
Earnings per Share
Basic $ 0.27 $ 0.11 $ 0.51 $ 0.15
============= ============= ============= =============
Diluted $ 0.23 $ 0.07 $ 0.44 $ 0.09
============= ============= ============= =============
Weighted average number of Shares
Basic $ 4,001,944 $ 1,944,444 $ 4,001,944 $ 1,944,444
============= ============= ============= =============
Diluted $ 4,722,868 $ 3,327,440 $ 4,706,374 $ 3,327,585
============= ============= ============= =============
</TABLE>
These consolidated condensed financial statements should be read only in
connection with the accompanying notes to consolidated condensed financial
statements.
<PAGE> 3
MORTON INDUSTRIAL GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
June 27, 1998 and December 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 27 December 31
1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 3,300 $ 138
Accounts, notes and other receivables, less allowance for
doubtful accounts of $109 in 1998 and $100 in 1997 18,323 7,668
Inventories 14,279 7,510
Prepaid expenses 2,241 815
Refundable income taxes 1,079 2,060
Deferred income taxes 1,597 70
---------- ----------
Total current assets 40,819 18,261
---------- ----------
Deferred income taxes 4,266 114
---------- ----------
Property, plant and equipment, net of accumulated depreciation 40,359 18,813
---------- ----------
Intangible assets, primarily goodwill, net of accumulated amortization 14,608 1,950
---------- ----------
Other 1,535 250
---------- ----------
$ 101,587 $ 39,388
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Note payable to bank $ 10,900 $ 6,740
Current installments of long-term debt, obligations
under capital leases and covenants payable 4,234 2,390
Accounts payable 15,740 11,892
Accrued salaries and wages 1,369 4,615
Other accrued expenses 4,555 3,939
---------- ----------
Total current liabilities 36,798 29,576
---------- ----------
Long-term debt, excluding current installments 55,854 23,000
---------- ----------
Obligations under capital leases, excluding current installment 218 221
---------- ----------
Other 2,087 143
---------- ----------
Total liabilities 94,957 52,940
---------- ----------
Stockholders' Equity (Deficit)
Class A common stock 38 51
Class B common stock 2 1
Additional paid-in capital 19,308 1,203
Retained earnings (deficit) (12,718) (2,037)
Treasury stock - (12,770)
---------- ----------
Total stockholders' equity (deficit) 6,630 (13,552)
---------- ----------
$ 101,587 $ 39,388
========== ==========
</TABLE>
These consolidated condensed financial statements should be read only in
connection with the accompanying notes to consolidated condensed financial
statements.
<PAGE> 4
MORTON INDUSTRIAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
For the Six Months Ended June 27, 1998 and June 30, 1997
(Dollars In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (5,113) $ 4,047
Cash flows from investing activities
Capital expenditures (4,115) (4,108)
Increase in intangible assets (587) -
Carroll George Inc. acquisition (5,568) -
B&W Metal Fabricators, Inc. acquisition (3,758) -
Mid-Central Plastics, Inc. acquisition (20,310) -
SMP Steel Corporation acquisition (2,160) -
Cash received in merger with MLX Corp. 16,241 -
Other 574 135
--------- ---------
Net cash used in investing activities (19,683) (3,973)
--------- ---------
Cash flows from financing activities
Net borrowings (repayments) under revolving credit facility (2,154) 256
Cash received on exercised options 358 -
Proceeds from issuance of long-term debt 55,000 -
Principal payments on long-term debt (25,036) 101
Other (210) (83)
--------- ---------
Net cash provided by financing activities 27,958 72
--------- ---------
Net increase in cash 3,162 146
Cash at beginning of period 138 58
--------- ---------
Cash at end of period $ 3,300 $ 204
========= =========
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 2,207 $ 1,640
========= =========
Income taxes $ 238 $ 687
========= =========
</TABLE>
Noncash Financial Activities:
As part of the acquisition of B&W Metal Fabricators, Inc., the company
issued subordinated notes payable in the amount of $3,650.
These consolidated condensed financial statements should be read only in
connection with the accompanying notes to consolidated condensed financial
statements.
<PAGE> 5
MORTON INDUSTRIAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
For the Quarters and the Six Months Ended June 27, 1998 and June 30, 1997
(Unaudited)
(1) Background - On January 20, 1998, Morton Metalcraft Holding Co. and
Subsidiaries ("Morton") merged (the "Merger") with and into MLX Corp.
("MLX"), with MLX being the surviving corporation. As a result of the
Merger, Morton ceased to exist as a separate corporate entity and MLX
amended its Articles of Incorporation to change the corporate name of MLX
to Morton Industrial Group, Inc. The Merger, for accounting and reporting
purposes, was treated as a purchase in accordance with generally accepted
accounting principles and constituted a reverse acquisition. The
historical financial statements of Morton Metalcraft Holding Co., after the
date of the Merger, become the historical financial statements of Morton
Industrial Group, Inc. as the result of this reverse merger.
(2) Nature of Business -- The Company, operating through its subsidiaries, is a
contract manufacturer and supplier of high-quality fabricated sheet metal
and plastic components and subassemblies for construction, agricultural,
and industrial equipment manufacturers located primarily in the Midwestern
and Southeastern United States.
(3) Interim Financial Data -- The consolidated condensed financial statements
at June 27, 1998, and June 30, 1997, and for the quarters and six months
then ended are unaudited and reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position, operating results, and cash flows for the interim periods
indicated. The Company's fiscal quarters end on a Saturday (nearest to a
quarter end) except for the fourth quarter which ends on December 31. For
the quarter ended June 27, 1998, there were 59 shipping days, compared to
64 shipping days in the quarter ended June 30, 1997. For the six months
ended June 27, 1998, there were 125 shipping days, compared to 124 shipping
days in the six months ended June 30, 1997. Results of operations for the
interim periods are not necessarily indicative of the results of operations
for the full fiscal year. The consolidated condensed financial statements
should be read in connection with the consolidated financial statements and
notes thereto, together with management's discussion of financial condition
and results of operations of Morton Metalcraft Holding Co., contained in
Exhibit 99.1 of MLX Corp.'s 1997 Form 10-K.
(4) Income Taxes -- The Company has not recorded any provision for federal
income taxes for the quarter and six months ended June 27, 1998, due to the
utilization of certain net operating loss carryforwards resulting from the
merger with MLX Corp. The Company has provided for state income taxes.
(5) Acquisitions -- On March 30, 1998, the Company acquired all of the
outstanding shares of common stock of Carroll George Inc. The Company
paid a total purchase price of $ 8.1 million, including payment of all of
Carroll George Inc.'s revolving credit and term loan debt.
On April 8, 1998, the Company acquired all of the outstanding shares of
common stock of B&W Metal Fabricators, Inc. for $ 8.5 million, including
the retirement of B&W indebtedness. This transaction was financed by cash
payments of $ 4.9 million, and the balance in the form of unsecured
subordinated notes. The subordinated notes bear interest at 7.00% per annum
and are payable in 40 equal quarterly installments beginning July 8, 1998.
On May 29, 1998, the Company acquired all of the outstanding shares of
common stock of Mid-Central Plastics, Inc. The Company paid a total
purchase price of $ 23.8 million, including payment of all of Mid-Central
Plastic, Inc.'s revolving credit and term loan debt.
On June 1, 1998 the Company acquired substantially all of the assets of SMP
Steel Corporation, a privately held company. The total purchase price was
not material to the Company.
<PAGE> 6
The unaudited proforma consolidated statement of income for the six
months ended June 27, 1998, has been prepared by consolidating the
statements of income of the Company and:
<TABLE>
<CAPTION>
<S> <C>
Carroll George Inc. For the quarter ended April 4, 1998
B&W Metal Fabricators, Inc. For the period from January 1 through April 8, 1998
Mid-Central Plastics, Inc. For the period from January 1 through May 29, 1998
(dollars in thousands, except per share data)
Proforma revenues $93,272
Proforma net income $ 1,966
Proforma net income per share -- basic $.49
Proforma net income per share - diluted $.42
</TABLE>
The above proforma financial data is based on management's current estimate of
the allocations of the purchase price for the acquisitions. The company has
filed the financial statements of Carroll George Inc., and B&W Metal
Fabricators Inc., and additional proforma information with the Securities and
Exchange Commission on June 11, 1998 and June 22, 1998, respectively. The
company will file the financial statements and additional proforma financial
information of Mid-Central Plastics, Inc. with the Securities and Exchange
Commission on Form 8-K/A no later than August 12, 1998.
(6) The Company's inventory, in thousands of dollars, as of June 27, 1998, and
December 31, 1997, is summarized as follows:
<TABLE>
<CAPTION>
June 27, December 31,
1998 1997
<S> <C> <C>
Raw materials, purchased parts
and manufactured components $ 7,615 $3,349
Work-in-process 2,936 1,573
Finished goods 3,728 2,588
------- ------
Total $14,279 $7,510
======= ======
</TABLE>
(7) 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:
<TABLE>
<CAPTION>
Quarter Ended June 27, 1998 Six Months Ended June 27, 1998
----------------------------------------------- -------------------------------------------
Income Shares Per-Share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Basic income $ 1,098,000 4,001,944 $ .27 $2,056,000 4,001,944 $ .51
per share
Effect of
dilutive securities,
stock options 720,924 704,430
--------- ---------
Diluted income
per share 4,722,868 $ .23 4,706,374 $ .44
========= =========
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
Quarter Ended June 27, 1997 Six Months Ended June 27, 1997
----------------------------------------------- -------------------------------------------
Income Shares Per-Share Income Shares Per-share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
Basic income $ 223,000 1,944,444 $ .11 $ 289,000 1,944,444 $ .15
per share
Effect of
dilutive securities,
stock options 1,382,996 1,383,141
--------- ---------
Diluted income
per share 3,327,440 $ .07 3,327,585 $ .09
========= =========
</TABLE>
PART II - OTHER INFORMATION
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, 1997. The analysis of results of
operations compares the quarter and six months ended June 27, 1998, with the
corresponding periods of 1997.
RESULTS OF OPERATIONS
SECOND QUARTER, 1998 VERSUS SECOND QUARTER, 1997
Revenues for the second quarter, 1998 were $39.8 million compared to $25.3
million for the first quarter of 1997, an increase of $14.5 million, or 57.3%.
As described in footnote 5 of Part I, the Company made acquisitions that
provided incremental revenue during the second quarter, 1998, of approximately
$13.2 million. The additional $1.3 million increase is from those facilities
owned in 1997 and resulted primarily from increased sales of components and
subassemblies used in industrial and agricultural machinery. For the operating
subsidiaries owned during both the second quarters in 1998 and 1997, in the
second quarter, 1998 there were 59 shipping days, while the second quarter of
1997 contained 64 shipping days, and the average sales per shipping day were
approximately $450,000 and $395,000 for the second quarters of 1998 and 1997,
respectively.
Sales to Deere & Co. and Caterpillar, Inc. were approximately 82% and 88%
of the Company's revenues for the second quarters, 1998 and 1997, respectively.
The Company's gross profits for the second quarter, 1998 increased by
approximately $2.9 million over the same three months in 1997, and the gross
profit percentage increased from 15.0% to 16.9%. The incremental gross profits
from acquisitions were approximately $2.1 million. The additional increase of
approximately $ .8 million resulted primarily from additional sales of
components and subassemblies used in industrial and agricultural machinery. This
increase was the result of increased productivity at the Morton and Peoria,
Illinois plants, improved labor efficiency and better material use stemming from
investments in production technology, including laser-cutting technology. The
Company continues to incur costs, including labor inefficiencies and training,
associated with the start-up and rapid growth of its Apex, North Carolina
facility that reduces the Company's gross profits. The Company's management has
introduced a program to address these costs and continues to implement this
program. The Company has also made progress in establishing relationships with
material suppliers located in the Southeast who meet the Company's requirements,
but the Company continues to incur costs to transfer supplies, including steel,
to North Carolina from suppliers in the Midwest. The Company expects that the
Apex, North Carolina facility will continue to experience higher costs than the
Company's Illinois plants for most of calendar year 1998.
<PAGE> 8
Selling and administrative expenses for the second quarter, 1998 amounted
to $4.6 million, or 11.6% of net sales compared to $2.7 million, or 10.5% of net
sales for the second quarter of 1997. The increase in administrative expenses
is attributable primarily to costs associated with operating as a
publicly-traded entity (second quarter, 1998) versus operating as a non-public
entity (second quarter, 1997), including professional and consulting fees.
Banking costs of approximately $600,000, associated with the credit facility
obtained at the time of the merger with MLX Corp., were accelerated when a new
credit facility (described below in liquidity) was provided. The company also
incurred additional selling costs for engineering and customer service related
to the increase in sales volume.
Interest expense for the second quarter, 1998 was $ .9 million, an
increase of $ .1 million compared to the second quarter of 1997. This increase
was due primarily to higher average amounts of outstanding debt, partially
offset by lower interest rates. The Company expects that its interest costs in
the third and subsequent quarters will increase materially as a result of its
borrowings to finance acquisitions. Refer to the following liquidity
discussion.
Income tax expense of approximately $107,000 was provided on pre-tax income
of $1.2 million, for an effective tax rate of 8.9% that reflects the use of
certain net operating loss carryforwards. For the second quarter of 1997, when
net operating loss carryovers were not available, income taxes of approximately
$105,000 were provided on pre-tax income of $328,000 for an effective tax rate
of 32.0%.
FIRST SIX MONTHS, 1998 VERSUS FIRST SIX MONTHS, 1997
Revenues for the first six months, 1998 were $70.4 million compared to
$47.8 million for the first quarter of 1997, an increase of $22.6 million, or
47.3%. During the first six months of 1998, the Company completed acquisitions
that provided incremental revenue of approximately $13.2 million. The
additional $9.4 million increase is from those facilities owned in 1997 and
resulted primarily from increased sales of components and subassemblies used in
industrial and agricultural machinery. For the operating subsidiaries owned
during both the first six months in 1998 and 1997, in the first six months, 1998
there were 125 shipping days, while the first six months of 1997 contained 124
shipping days, and the average sales per shipping day were approximately
$458,000 and $386,000 for the first six months of 1998 and 1997, respectively.
Sales to Deere & Co. and Caterpillar, Inc. were approximately 87% of the
Company's revenues for both the first six months, 1998 and 1997.
The Company's gross profits for the first six months, 1998 increased by
approximately $5.0 million over the same six months in 1997, and the gross
profit percentage increased from 13.5% to 16.2%. The incremental gross profits
from acquisitions were approximately $2.1 million. The additional increase of
approximately $2.9 million resulted primarily from additional sales of
components and subassemblies used in industrial and agricultural machinery. For
the operating subsidiaries owned during both the first six months of 1998 and
1997, the Company's gross profit percentage increased from 15.0% to 17.3%. This
increase was the result of increased productivity at the Morton and Peoria,
Illinois plants, improved labor efficiency and better material use stemming from
investments in production technology, including laser-cutting technology.
Selling and administrative expenses for the first six months, 1998
amounted to $7.8 million, or 11.0% of net sales compared to $4.4 million, or
9.3% of sales for the first six months of 1997. This increase in
administrative expenses is attributable primarily to costs associated with
operating as a publicly-traded entity (first six months, 1998) versus operating
as a non-public entity (first six months, 1997), including professional and
consulting fees. Banking costs of approximately $600,000, associated with the
credit facility obtained at the time of the merger with MLX Corp., were
accelerated when a new credit facility (described below in liquidity) was
provided. The company also incurred additional selling costs for engineering
and customer service related to the increase in sales volume.
Interest expense for the first six months, 1998 was $ 1.5 million, a
decrease of $ .1 million compared to the first six months of 1997. This
decrease was due primarily to lower interest rates during the first half of
1998, and was partially offset by additional interest costs incurred during the
second quarter from increased debt related to the acquisitions.
<PAGE> 9
Income tax expense of approximately $179,000 was provided on pre-tax
income of $2.2 million, for an effective tax rate of 8.1% that reflects the use
of certain net operating loss carryforwards. For the first six months of 1997,
prior to the availability of net operating loss carryovers, income taxes of
approximately $146,000 were provided on pre-tax income of $435,000 for an
effective tax rate of 33.6%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated working capital at June 27, 1998 was $4.0
million compared to $(11.3) million at December 31, 1997, the Company's
preceding fiscal year end. This represents an increase in working capital of
approximately $15.3 million. This change was due primarily to a May 28, 1998
refinancing as described below, and a cash infusion from the merger with MLX
Corp. of approximately $16.0 million. The cash from MLX Corp. was primarily
used in general business operations, for the purchase of equipment and for the
temporary paydown of debt. The resources made available from bank debt have
been used to finance acquisitions and for general business operations.
The Carroll George Inc. acquisition closed on March 30, 1998. The total
purchase price and cash required to retire debt of Carroll George, Inc.
amounted to $8.1 million. This cash requirement was financed by a draw on the
Company's bank line of credit.
The B&W Metal Fabricators, Inc. acquisition, closed on April 8, 1998. The
total purchase price was $8.5 million, including the retirement of B&W
indebtedness. The transaction was financed by cash payments of $4.9 million,
and the balance in the form of unsecured subordinated notes payable to the B&W
Metal Fabricators, Inc. shareholders. This cash requirement was financed by a
draw on the Company's bank line of credit.
On May 28, 1998, the Company entered into a new credit agreement with
Harris Trust and Savings Bank, as Agent. All subsidiaries of the Company are
guarantors of the Company's indebtedness. The credit agreement is a $90 million
facility with the following components: (i) a $35 million revolving credit
facility with a $10 million sub limit for letters of credit; (ii) a $25 million
secured term loan that matures 5 years from the date of the credit agreement
closing; and (iii) a $30 million term loan that matures 7 years from the date
of the credit agreement closing. Both term loans are fully amortized over
their respective terms with quarterly payments. The interest rates on the
loans, at the Company's option, are (i) Harris Trust and Savings Bank Rate
(which is the greater of the prime rate of the Federal Funds Rate plus .5%) or
(ii) the reserve adjusted LIBOR margin, fixed for 30, 60, 90 or 180 day period,
plus an interest rate margin that is determined by the Company's cash flow
leverage ratio. The proceeds under the facility have been used to refinance
the then existing indebtedness, to finance the acquisitions, and general
corporate purposes. This facility is fully secured by a first priority security
interest in all of the assets of the Company and the guarantors, except for
permitted liens, as well as a pledge of all of the stock of the Company's
subsidiaries.
The Mid-Central Plastics, Inc. acquisition closed on May 29, 1998. The
total purchase price and cash required to retire debt amounted to $23.8 million.
This transaction was financed under the May 28, 1998 credit agreement described
above.
The Company incurred $4.1 million of capital expenditures during the first
six months, 1998, primarily for purchases of manufacturing equipment.
The Company currently anticipates making approximately $7.5 million of
capital expenditures during the remaining two quarters of calendar year 1998.
These expenditures will be funded from the cash flow provided by operations and
funds available under the Company's line-of-credit facility. Planned
expenditures include plant expansion and the purchase of fabrication equipment,
including presses, pressbrakes and other new equipment. The Company continually
re-evaluates its capital expenditures budget to respond to changes in sales
levels, and the needs of the operating subsidiaries, including those recently
required.
The Company believes that it can meet its current operating liquidity
requirements from cash generated from operations and borrowing under its
existing bank facility. As of June 27, 1998, the Company had available
approximately $4.6 million under its revolving credit facility.
<PAGE> 10
YEAR 2000 COMPLIANCE
The Company is actively working with its software and hardware to become
Year 2000 compliant. An assessment audit, conducted both internally and
independently, has been completed for the Company's operations in Illinois and
North Carolina. For those recent acquisitions in Iowa and South Carolina, this
assessment process is continuing.
Project milestones have been established, and associated projects are
on-going in an effort to reach a state of readiness no later than September 30,
1999. Current projects include the use of software to identify Year 2000
non-compliance matters, as well as to inventory all information technology and
non-information technology systems, including embedded technology such as
micro-controllers.
The Company is also in the process of surveying its customers' and
suppliers' Year 2000 compliance. At this time, the Company has no reason to
believe that its major customers and suppliers will not be Year 2000 compliant
by the end of 1999. Noncompliance by a major customer or supplier could
materially and adversely affect the Company's business.
The costs expected to become Year 2000 compliant are approximately
$300,000.
FORWARD LOOKING STATEMENTS
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995. This Form 10-Q 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, but not limited to, statements related to the
Company's beliefs, expectations or intentions. These statements involve risk
and uncertainties that may cause the Company's actual results to differ
significantly from those expected, suggested or projected. Factors that could
contribute to such differences include, but are not limited to, competition
with other fabricators, the risks associated with the Company's acquisition
strategy, including unanticipated problems, difficulties in integrating
acquired businesses, diversion of management's attention from daily operations,
possible increased interest costs, and possible adverse effects on earnings
resulting from increased goodwill amortization, introduction of new
technologies that require significant capital expenditures and general economic
and business conditions.
<PAGE> 11
ITEM 4. Submission of Matters to a Vote of Security Holders
Morton Industrial Group, Inc., held its Annual Meeting on June 30, 1998 to:
1. Elect five directors to serve for one year terms until the Annual
Meeting of Shareholders in 1999.
2. Consider and act upon a proposal to ratify the selection of Clifton
Gunderson L.L.C. as independent auditors for the Company for 1998.
The results of the of the shareholders' votes on each of these matters appear
in the following table:
<TABLE>
<CAPTION>
Election of Directors:
- ---------------------
For Against Abstained Unvoted Total
--------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
William D. Morton 3,724,599 2,065 ----- ---- 3,726,664
Fred W. Broling 3,724,819 1,845 ----- ---- 3,726,664
Alfred R. Glancy III 3,724,599 2,065 ----- ---- 3,726,664
Mark W. Mealy 3,724,819 1,845 ----- ---- 3,726,664
Willem F.P.de Vogel 3,724,792 1,872 ----- ---- 3,726,664
</TABLE>
Ratification of Selection of Independent Auditor:
<TABLE>
<CAPTION>
For Against Abstained Unvoted Total
--------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Clifton Gunderson L.L.C. 3,701,094 23,231 2,338 1 3,726,664
</TABLE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
2. None.
3. None.
10. None.
11. The computation can be determined from this report.
15. None.
18. None.
19. None.
22. None.
23. None.
24. None.
27. Financial data schedule.
<PAGE> 12
(B) Reports on Form 8-K and Form 8-K/A
1. Filed Form 8-K on April 14, 1998, announcing the acquisition
of the common stock of B&W Metal Fabrications, Inc., and announcing the
closing of the Carroll George Inc. acquisition.
2. Filed Form 8-K on April 16, 1998, announcing the selection of
Clifton Gunderson L.L.C. as the Company's auditors for the year ended
December 31, 1998, and an amendment thereto, filed on Form 8-K/A on
April 22, 1998.
3. Filed Form 8-K on May 8, 1998, announcing the Company's agreement
to acquire all of the common stock of Mid-Central Plastics, Inc.
4. Filed Form 8-K/A on June 11, 1998, containing the financial
statements of Carroll George, Inc.
5. Filed Form 8-K on June 12, 1998, announcing the acquisition of all
of the common stock of Mid-Central Plastics, Inc., and announced
a new credit agreement with Harris Trust and Savings Bank.
6. Filed Form 8-K/A on June 22, 1998, containing the financial
statements of B&W Metal Fabricators, Inc.
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.
Dated: August 11, 1998 /s/
-----------------------------------
Daryl R. Lindemann
Vice President-Finance, Treasurer and
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-05-1998
<PERIOD-END> JUN-27-1998
<EXCHANGE-RATE> 1
<CASH> 3,300
<SECURITIES> 0
<RECEIVABLES> 18,432
<ALLOWANCES> (109)
<INVENTORY> 14,279
<CURRENT-ASSETS> 40,819
<PP&E> 65,175
<DEPRECIATION> 24,816
<TOTAL-ASSETS> 101,587
<CURRENT-LIABILITIES> 36,798
<BONDS> 56,072
0
0
<COMMON> 40
<OTHER-SE> 6,590
<TOTAL-LIABILITY-AND-EQUITY> 101,587
<SALES> 39,752
<TOTAL-REVENUES> 39,752
<CGS> 33,022
<TOTAL-COSTS> 33,022
<OTHER-EXPENSES> 4,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 925
<INCOME-PRETAX> 1,205
<INCOME-TAX> 107
<INCOME-CONTINUING> 1,098
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,098
<EPS-PRIMARY> .27
<EPS-DILUTED> .23
</TABLE>
