<PAGE> 1
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 ACT OF 1934
For quarterly period ended March 31, 2000
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: 0-23335
MPW INDUSTRIAL SERVICES GROUP, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-1567260
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
9711 Lancaster Road, S.E., Hebron, Ohio 43025
(Address of principal executive offices) (Zip code)
(740) 927-8790
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
- --------------------------------------------------------------------------------
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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
As of April 30, 2000, 10,929,257 shares of the issuer's common stock,
without par value, were outstanding.
================================================================================
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MPW INDUSTRIAL SERVICES GROUP, INC.
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and June 30, 1999...............3
Consolidated Statements of Income for the three and nine months ended March 31,
2000 and 1999 (unaudited)....................................................................4
Consolidated Statements of Cash Flows for the nine months ended March 31,
2000 and 1999 (unaudited)....................................................................5
Notes to Consolidated Financial Statements (unaudited).......................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.......10
Item 3. Quantitative and Qualitative Disclosures About Market Risk..................................15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...........................................................................15
Item 2. Changes in Securities and Use of Proceeds...................................................15
Item 3. Defaults Upon Senior Securities.............................................................15
Item 4. Submission of Matters to a Vote of Security Holders.........................................15
Item 5. Other Information...........................................................................16
Item 6. Exhibits and Reports on Form 8-K............................................................16
SIGNATURES ............................................................................................17
EXHIBIT INDEX ..........................................................................................18
</TABLE>
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PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
2000 1999
---------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 266 $ 318
Accounts receivable, net 41,997 35,744
Inventories 12,519 9,044
Deferred income taxes 820 1,492
Prepaid expenses 2,083 1,868
Other current assets 1,239 973
-------- --------
58,924 49,439
Property and equipment, net 50,024 41,429
Noncurrent assets:
Intangibles, net 60,209 50,946
Other assets 547 436
-------- --------
Total assets $169,704 $142,250
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,789 $ 9,968
Accrued compensation and related taxes 2,542 4,638
Current maturities of noncurrent liabilities 325 714
Other accrued liabilities 10,717 5,846
-------- --------
24,373 21,166
Noncurrent liabilities:
Long-term debt 86,762 65,475
Deferred income taxes 4,410 4,456
Other 28 312
-------- --------
91,200 70,243
Minority interest 1,200 1,275
Shareholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and
outstanding - -
Common stock, no par value; 30,000,000 shares authorized; 10,929,257 and 10,784,945 shares
issued and outstanding at March 31, 2000 and June 30, 1999, respectively 109 108
Additional paid-in capital 41,461 40,531
Retained earnings 11,361 8,927
-------- --------
52,931 49,566
-------- --------
Total liabilities and shareholders' equity $169,704 $142,250
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------------------------
2000 1999 2000 1999
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 48,703 $ 38,147 $143,526 $106,398
Costs and expenses:
Cost of services 34,145 26,161 97,365 71,808
Selling, general and administrative expenses 8,295 7,572 24,636 19,424
Depreciation and amortization 2,524 1,950 7,168 4,882
-------- -------- -------- --------
Total costs and expenses 44,964 35,683 129,169 96,114
-------- -------- -------- --------
Income from operations 3,739 2,464 14,357 10,284
Interest expense, net 1,639 1,064 4,571 2,333
Loss on sale of subsidiary 5,712 -- 5,712 --
-------- -------- -------- --------
Income (loss) from operations before income taxes (3,612) 1,400 4,074 7,951
Provision (benefit) for income taxes (1,445) 574 1,629 3,259
-------- -------- -------- --------
Net income (loss) $ (2,167) $ 826 $ 2,445 $ 4,692
======== ======== ======== ========
Net income (loss) per share $ (0.20) $ 0.08 $ 0.22 $ 0.44
======== ======== ======== ========
Net income (loss) per share, assuming dilution $ (0.20) $ 0.07 $ 0.21 $ 0.41
======== ======== ======== ========
Weighted average common shares outstanding 10,908 10,785 10,877 10,717
Weighted average common shares outstanding, assuming dilution 10,908 11,501 11,520 11,488
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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MPW INDUSTRIAL SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 2,445 $ 4,692
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 5,111 3,627
Amortization 2,057 1,255
Loss on sale of subsidiary 5,712 --
Loss on disposals of assets 248 176
Change in deferred income taxes 522 247
Changes in operating assets and liabilities:
Accounts receivable (5,683) (9,710)
Inventories (3,936) (823)
Prepaid expenses and other assets (532) (2,144)
Accounts payable 667 217
Other accrued liabilities (4,144) 141
-------- --------
Net cash provided by (used in) operating activities 2,467 (2,322)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment (12,815) (11,021)
Purchase of businesses, net of acquired cash (9,656) (29,246)
Proceeds from the disposal of property and equipment 37 257
-------- --------
Net cash used in investing activities (22,434) (40,010)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 29 62
Proceeds from revolving credit facility 56,982 96,484
Payments on revolving credit facility (36,486) (38,282)
Proceeds from notes payable -- 6,804
Payments on notes payable (558) (22,901)
Payments on capital lease obligations (52) (91)
-------- --------
Net cash provided by financing activities 19,915 42,076
-------- --------
Decrease in cash and cash equivalents (52) (256)
Cash and cash equivalents at beginning of year 318 507
-------- --------
Cash and cash equivalents at end of period $ 266 $ 251
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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MPW INDUSTRIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS MPW Industrial
Services Group, Inc. and its subsidiaries (the "Company") provide
technically-based services, including industrial cleaning and facility
maintenance, industrial filtration management, contamination control services
for critical cleanroom environments, industrial container cleaning and
industrial process water purification. Such services are primarily provided at
customer facilities. The Company serves customers in numerous industries
including automotive, electric power, pulp and paper, chemical, steel,
transportation, semiconductor, microelectronics and pharmaceutical. The Company
provides services primarily throughout the United States, Mexico and Canada.
The accompanying unaudited consolidated financial statements presented
herein have been prepared by the Company and reflect all adjustments of a normal
recurring nature that are, in the opinion of management, necessary for a fair
presentation of financial results for the three and nine months ended March 31,
2000 and 1999, in accordance with generally accepted accounting principles for
interim financial reporting and pursuant to Article 10 of Regulation S-X.
Certain footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. These interim consolidated
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended June 30, 1999 ("Annual Report"). The
results of operations for the three and nine months ended March 31, 2000 and
1999 are not necessarily indicative of the results for the full year (see Note 8
for further information regarding fluctuations in quarterly results).
USE OF ESTIMATES The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
accompanying consolidated financial statements. Actual results could differ from
those estimates.
NOTE 2. ACQUISITIONS
INDUSTRIAL SERVICES On January 4, 2000, the Company purchased
substantially all of the assets of Industrial Services, Inc. ("Industrial
Services") for an aggregate cash consideration of $4,500,000. The acquisition
has been accounted for using the purchase method of accounting. The accompanying
financial statements include the results of operations of Industrial Services
from the acquisition date through March 31, 2000.
THERMAL COATING On August 10, 1999, effective as of April 1, 1999, the
Company purchased substantially all of the assets of Thermal Coating, Inc.
("Thermal Coating") for an aggregate consideration of $3,434,000. The
consideration included the issuance of preferred stock of Pentagon Technologies
Group, Inc., a wholly-owned subsidiary of the Company ("Pentagon"), representing
1% of the equity in Pentagon. Also included in the consideration was the
issuance of an unsecured convertible subordinated promissory note with a
principal amount of $1,000,000 and accruing interest at 10%, which is
convertible into shares of common stock of the Company. The acquisition has been
accounted for using the purchase method of accounting. The accompanying
financial statements include the results of operations of Thermal Coating from
the effective acquisition date through March 31, 2000.
The terms of certain of the Company's other acquisition agreements also
provide for additional consideration to be paid based on the achievement of
certain objectives. Such additional consideration is paid in cash, common stock
of the Company, or a combination thereof, and is capitalized as goodwill. During
the nine months ended March 31, 2000, the Company paid additional consideration
of $3,837,000, of which $1,079,000 related to the issuance of 86,389 shares of
the Company's common stock.
NOTE 3. RECAPITALIZATION OF PENTAGON
On April 25, 2000, the Company entered into a definitive agreement with
Baird Capital Partners, an investment partnership ("BCP"), which provides for
BCP to invest in Pentagon, a wholly-owned subsidiary. Under the terms of the
agreement, the Company will receive approximately $22 million, adjusted for
changes in Pentagon working capital, which
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will be used to repay debt. Effective with the close of this transaction, BCP
will become the majority owner of Pentagon's capital stock and the Company and
Pentagon's management would each retain a minority interest. The transaction is
expected to close during the quarter ending June 30, 2000.
During the three months ended March 31, 2000, the Company recorded a
one-time, non-cash charge of approximately $3.4 million, net of related tax
benefits, to reflect the estimated amount of loss and transaction-related
expenses to be recognized from this transaction.
The following is a pro forma consolidated balance sheet of the Company
as of March 31, 2000 as if the transaction with BCP had occurred as of March 31,
2000 and the related transaction proceeds to the Company were used to repay
long-term debt:
ASSETS:
Current assets $ 51,195
Property and equipment, net 44,036
Intangibles, net 33,136
Other assets 8,177
------------
$ 136,544
============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities $ 19,965
Long-term debt 63,365
Other liabilities 3,711
------------
87,041
Shareholders' equity 49,503
------------
$ 136,544
============
The following is selected pro forma consolidated statement of income
data for the Company for the three and nine month periods ended March 31, 2000
as if the transaction with BCP had occurred as of July 1, 1999:
THREE MONTHS NINE MONTHS
ENDED ENDED MARCH
MARCH 31, 2000 31, 2000
----------------- --------------
Revenues $ 40,633 $ 120,570
Income from operations 2,921 12,039
NOTE 4. INTANGIBLES
Intangibles are summarized as follows (in thousands):
MARCH 31, JUNE 30,
2000 1999
------------ ------------
Goodwill $51,411 $42,318
Customer lists 7,314 6,971
Patents 1,161 1,264
Non-compete agreements 323 393
------------ ------------
$60,209 $50,946
============ ============
Accumulated amortization of intangibles as of March 31, 2000 and June
30, 1999 was $4,436,000 and $2,418,000, respectively.
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NOTE 5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ ------------------------
2000 1999 2000 1999
------------------------ ------------------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per
share - net income (loss) $(2,167) $826 $2,445 $4,692
========== ======= ====== ======
Denominator for basic earnings per share -
weighted average common shares 10,908 10,785 10,877 10,717
Effect of dilutive securities:
Dilutive employee stock options -- 673 643 675
Preferred stock of Pentagon -- 43 -- 96
---------- ------- ------ ------
Dilutive potential common shares -- 716 643 771
Denominator for diluted earnings per share -
adjusted weighted average common shares and
assumed conversions 10,908 11,501 11,520 11,488
========== ======= ====== ======
Net income (loss) per share $(0.20) $ 0.08 $ 0.22 $ 0.44
========== ======= ====== ======
Net income (loss) per share, assuming dilution $(0.20) $ 0.07 $ 0.21 $ 0.41
========== ======= ====== ======
</TABLE>
Options to purchase 773,350 and 171,250 shares of common stock at a
weighted average price of $10.07 and $11.73 per share, respectively, were
outstanding during the three months ended March 31, 2000 and 1999, respectively,
but were not included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive. Options to
purchase 897,000 shares of common stock at a weighted average price of $2.51 per
share were outstanding during the three months ended March 31, 2000, but were
not included in the computation of diluted earnings per share because the
Company reported a net loss for the three months ended March 31, 2000 and,
therefore, the effect would be antidilutive.
Options to purchase 765,350 and 398,250 shares of common stock at a
weighted average price of $10.09 and $11.13 per share, respectively, were
outstanding during the nine months ended March 31, 2000 and 1999, respectively,
but were not included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
The 10% convertible debenture that was issued in connection with the
acquisition of Thermal Coating is convertible into 86,505 shares of common stock
of the Company if the common stock price is at least $11.56 per share. These
shares were not included in the computation of diluted earnings per share
because the conversion price of the convertible debenture was greater than the
market price of the common shares at the end of the three and nine months ended
March 31, 2000 and, therefore, the effect would be antidilutive.
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NOTE 6. OPERATING SEGMENTS
Summarized financial information concerning the Company's reportable
segments is shown in the following table. The column entitled "Other" primarily
includes corporate related items and are not allocated to the Company's
reportable segments.
<TABLE>
<CAPTION>
FACILITIES
SUPPORT FILTRATION OTHER TOTAL
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 2000
Revenues $ 33,421 $ 15,282 $ -- $ 48,703
Depreciation and amortization 2,159 235 130 2,524
Income (loss) from operations 4,250 760 (1,271) 3,739
Assets 121,822 37,001 10,881 169,704
THREE MONTHS ENDED MARCH 31, 1999
Revenues $ 26,752 $ 11,395 $ -- $ 38,147
Depreciation and amortization 1,716 151 83 1,950
Income (loss) from operations 3,054 1,179 (1,769) 2,464
Assets 101,501 29,600 4,774 135,875
NINE MONTHS ENDED MARCH 31, 2000
Revenues $101,121 $ 42,405 $ -- $143,526
Depreciation and amortization 6,193 642 333 7,168
Income (loss) from operations 15,985 3,290 (4,918) 14,357
Assets 121,822 37,001 10,881 169,704
NINE MONTHS ENDED MARCH 31, 1999
Revenues $ 75,726 $ 30,672 $ -- $106,398
Depreciation and amortization 4,252 417 213 4,882
Income (loss) from operations 11,839 3,115 (4,670) 10,284
Assets 101,501 29,600 4,774 135,875
</TABLE>
NOTE 7. SUBSEQUENT EVENTS
In April 2000, the Company received an offer from a group of its
current management to acquire the Company through a cash merger at $8.00 per
share. The management group, which consists of certain current members of the
Company's senior management team, currently owns 57% of the outstanding shares
of the Company and intends to retain all of its shares. The management group has
obtained financing in amounts necessary to acquire all other outstanding shares
in the merger and assume the existing debt of the Company and anticipates the
delivery of a commitment upon execution of a definitive agreement. The offer to
acquire the Company came during a regularly scheduled meeting of the Company's
Board of Directors. Following the offer, the outside members of the Board of
Directors formed a special committee to consider the offer. If approved by the
special committee, the merger is then subject to the approval of the Company's
shareholders.
NOTE 8. FLUCTUATIONS IN QUARTERLY RESULTS
The Company's revenues and results of operations tend to vary
seasonally as a result of a number of factors over which the Company has no
control, including its customers' budgetary constraints, the timing and duration
of its customers' planned maintenance activities and shutdowns, changes in its
competitors' pricing policies and general economic conditions. Also, certain
operating and fixed costs remain relatively constant throughout the fiscal year,
which when offset by differing levels of revenues, may result in fluctuations in
quarterly operating results. Because of these factors, the Company typically
generates the least amount of revenues in the third quarter, higher revenues in
the second quarter and the greatest amount of revenues in the first and fourth
quarters. Although the Company believes that the historical trend in quarterly
revenue for the
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first and fourth quarters are generally higher than the second and third
quarters, there can be no assurance that this trend will occur in future
periods. Accordingly, quarterly or other interim results should not be
considered indicative of results to be expected for any quarter or for the full
year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Except for historical information, certain statements in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") are forward looking. These forward looking statements are
based on current expectations that are subject to a number of uncertainties and
risks and actual results may differ materially. The uncertainties and risks
include, but are not limited to, competitive and other market factors, customer
purchasing behavior, general economic conditions and other facets of our
business operations as well as other risk factors identified in "Investment
Considerations" in our Annual Report. We undertake no obligation and do not
intend to update, revise or otherwise publicly release the result of any
revisions to these forward looking statements that may be made to reflect future
events or circumstances.
The following information should be read in conjunction with our
Unaudited Consolidated Financial Statements and related notes included elsewhere
in this Form 10-Q. The following information should also be read in conjunction
with our Audited Consolidated Financial Statements and related notes and MD&A
for the year ended June 30, 1999 as contained in our Annual Report.
OVERVIEW
CURRENT EVENTS In April 2000, we entered into a definitive agreement
with Baird Capital Partners, an investment partnership ("BCP"), which provides
for BCP to invest in Pentagon. Under the terms of the agreement, the Company
will receive approximately $22 million, adjusted for changes in Pentagon's
working capital, which will be used to repay debt. Effective with the close of
this transaction, BCP will become the majority owner of Pentagon's capital stock
and the Company and Pentagon's management would each retain a minority interest.
The transaction is expected to close during the quarter ending June 30, 2000.
During the three months ended March 31, 2000, the Company recorded a
one-time, non-cash charge of approximately $3.4 million, net of related tax
benefits, to reflect the estimated amount of loss to be recognized from this
transaction. Pentagon's revenues for the three and nine months ended March 31,
2000 were $8.1 million and $23.0 million, respectively.
Although it does not affect the three and nine months ended March 31,
2000, the Company recently received an offer from a group of its current
management to acquire the Company through a cash merger at $8.00 per share. The
management group, which consists of certain current members of the Company's
senior management team, currently owns 57% of the outstanding shares of the
Company and intends to retain all of its shares. The management group has
obtained financing in amounts necessary to acquire all other outstanding shares
in the merger and assume the existing debt of the Company and anticipates the
delivery of a commitment upon execution of a definitive agreement. The offer to
acquire the Company came during a regularly scheduled meeting of the Company's
Board of Directors. Following the offer, the outside members of the Board of
Directors formed a special committee to consider the offer. If approved by the
special committee, the merger is then subject to the approval of the Company's
shareholders.
UNUSUAL EVENTS IN FISCAL 1999 In late June 1998 through July 1998,
General Motors experienced a strike, which affected our operations primarily at
our industrial filtration management and our industrial container cleaning
service lines.
In March 1999, we experienced a fire at our Austin, Texas facility.
This facility provided critical parts cleaning within the cleanroom services
service line. The fire caused the facility, and most equipment within the
facility, to be unusable. A portion of the business from this facility was
temporarily transferred to our Hopewell Junction, New York facility and the
remainder was temporarily lost to other service providers. We obtained a new
site in Austin to replace the damaged facility and completed construction in
August 1999. The new facility was ramped up to pre-fire business levels during
the second quarter of fiscal 2000.
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ACQUISITIONS Since June 1998, we have acquired 12 businesses that
represent an aggregate increase in our revenues of approximately $61.0 million.
We agreed to pay an aggregate consideration for these businesses of
approximately $50.9 million, which included cash, common stock, preferred stock
of Pentagon and contingent consideration for future performance. We accounted
for each of these acquisitions using the purchase method of accounting and each
are included in our results of operations only from the effective date of
acquisition. Certain of the acquisitions related to our entry in late 1998 into
a new service line that provides contamination control services for critical
cleanroom environments. These companies have been combined into a single
subsidiary of the Company, Pentagon. See discussion above under the sub-heading
Current Events.
As a result of these acquisitions, we do not believe that our results
of operations are necessarily comparable on a period to period basis. Our
discussion of results of operations below should be read in conjunction with our
Annual Report and the Consolidated Unaudited Financial Statements and related
notes included herein where each of these acquisitions has been described in
more detail.
GENERAL
We primarily derive our revenues from services under time and
materials, fixed price and unit price contracts. We recognize revenues from time
and materials type contracts based on performance and efforts expended. We
record revenues from non-contract activities as we perform services or sell
goods.
Cost of services includes all direct labor, materials, subcontractor
and other costs related to the performance of our services. Cost of services
also includes all costs associated with our operating equipment, excluding
depreciation and amortization.
Selling, general and administrative expenses include management
salaries, clerical and administrative overhead, professional services, costs
associated with marketing and sales efforts and costs associated with our
information systems.
Depreciation and amortization consists of depreciation of operating
equipment and amortization of capital leases and intangibles. Depreciation is
calculated using the straight-line method over the estimated useful lives of
property and equipment. We amortize capital leases on a straight-line basis over
the lease term and goodwill and other intangibles on a straight-line basis over
periods not exceeding 25 years.
RESULTS OF OPERATIONS
The following table sets forth selected statement of income data as a
percentage of revenues:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of services 70.1 68.6 67.8 67.5
Selling, general and administrative expenses 17.0 19.8 17.2 18.3
Depreciation and amortization 5.2 5.1 5.0 4.6
---- ---- ---- ----
Total costs and expenses 92.3 93.5 90.0 90.3
---- ---- ---- ----
Income from operations 7.7 6.5 10.0 9.7
Interest expense, net 3.4 2.8 3.2 2.2
Loss on sale of subsidiary 11.7 -- 4.0 --
---- ---- ---- ----
Income (loss) from operations before income taxes -7.4 3.7 2.8 7.5
Provision (benefit) for income taxes -3.0 1.5 1.1 3.1
---- ---- ---- ----
Net income (loss) -4.4% 2.2% 1.7% 4.4%
==== ==== ==== ====
</TABLE>
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THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1999
Revenues. Revenues increased by $10.6 million, or 27.7%, to $48.7
million in the three months ended March 31, 2000 from $38.1 million in the three
months ended March 31, 1999. This increase is the result of internal growth of
21.0%, but is also due to acquisitions that have not been reported in our
results of operations for a full fiscal year, which contributed an aggregate of
$2.5 million of incremental growth in revenues.
Revenues in the Industrial Facilities Support Services segment
increased by $6.7 million, or 24.9%, to $33.4 million in the three months ended
March 31, 2000 from $26.8 million in the three months ended March 31, 1999. This
increase is the result of internal growth of 16.0%, but is also due to
acquisitions that have not been reported in our results of operations for a full
fiscal year, which contributed an aggregate of $2.5 million of incremental
growth in revenues.
Revenues in the Industrial Filtration Products and Services segment
increased by $3.9 million, or 34.1%, to $15.3 million in the three months ended
March 31, 2000 from $11.4 million in the three months ended March 31, 1999, all
related to internal growth.
Cost of Services. Cost of services increased by $8.0 million, or 30.5%,
to $34.1 million in the three months ended March 31, 2000 from $26.2 million in
the three months ended March 31, 1999. Cost of services as a percentage of
revenues increased to 70.1% in the three months ended March 31, 2000 from 68.6%
in the three months ended March 31, 1999. The increase in cost of services as a
percentage of revenues is the result of a significant increase in cost of
services as a percentage of revenue in the Industrial Filtration Products and
Services segment related to lower product margins than were experienced in the
same quarter of the previous year related to this segment's business expansion
efforts to new customers. To a lesser extent, cost of services was increased as
a result of certain one-time charges relating to that segment's decision to
reduce our business presence in Mexico. Cost of services was also impacted by
the Industrial Facilities Support Services segment, which experienced higher
than expected labor and subcontract costs in the industrial cleaning and
facility maintenance service line for the work that the business unit performed
during the three months ended March 31, 2000.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $723,000, or 9.5%, to $8.3 million in the
three months ended March 31, 2000 from $7.6 million in the three months ended
March 31, 1999. The increase in selling, general and administrative expenses is
due to the overhead costs assumed in acquisitions completed since the year
earlier period and other investments in our infrastructure to support overall
growth. Selling, general and administrative expenses as a percentage of revenues
decreased to 17.0% in the three months ended March 31, 2000 from 19.8% in the
three months ended March 31, 1999.
Depreciation and Amortization. Depreciation and amortization increased
by $574,000, or 29.4%, to $2.5 million in the three months ended March 31, 2000
from $2.0 million in the three months ended March 31, 1999. Depreciation and
amortization increased as a percentage of revenues to 5.2% in the three months
ended March 31, 2000 from 5.1% in the three months ended March 31, 1999. This
increase is primarily a result of additional goodwill and other intangible
assets arising out of acquisitions, but is also due to additional capital
expenditures related to our growth.
Income from Operations. Income from operations in the Industrial
Facilities Support Services segment increased by $1.2 million, or 39.2%, to $4.3
million in the three months ended March 31, 2000 from $3.1 million in the three
months ended March 31, 1999. Income from operations increased as a percentage of
revenues to 12.7% in the three months ended March 31, 2000 from 11.4% in the
three months ended March 31, 1999. The increase in income from operations and
operating margin is due to strong internal growth and improved operating margins
in our cleanroom cleaning and related services, industrial container cleaning
and industrial process water purification service lines that resulted from
improved operating efficiencies and consolidation of facilities and management,
offset by the lower operating margins in the industrial cleaning and facility
maintenance service line as discussed above. In the year earlier period, income
from operations was affected by the fire at the Company's Austin, Texas
facility. See discussion above under the heading Unusual Events in Fiscal 1999.
Income from operations in the Industrial Filtration Products and
Services segment decreased by $419,000, or 35.5%, to $760,000 in the three
months ended March 31, 2000 from $1.2 million in the three months ended March
31, 1999. Income from operations decreased as a percentage of revenues to 5.0%
in the three months ended March 31, 2000 from 10.3% in the three months ended
March 31, 1999. This decrease in operating margin is due to the reasons
discussed above.
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<PAGE> 13
Consolidated income from operations increased $1.3 million, or 51.7%,
to $3.7 million in the three months ended March 31, 2000 from $2.5 million in
the three months ended March 31, 1999. Consolidated income from operations
increased as a percentage of revenues to 7.7% in the three months ended March
31, 2000 from 6.5% in the three months ended March 31, 1999. The increase in
consolidated income from operations and consolidated operating margin are due to
the factors discussed above.
Interest Expense, net. Interest expense increased $575,000, or 54.0%,
to $1.6 million in the three months ended March 31, 2000 from $1.1 million in
the three months ended March 31, 1999. This increase is the result of new
borrowings primarily related to acquisitions.
Provision for Income Taxes. The provision for income taxes for the
three months ended March 31, 2000 and 1999 reflects an effective rate of 40% and
41%, respectively.
NINE MONTHS ENDED MARCH 31, 2000 COMPARED TO NINE MONTHS ENDED
MARCH 31, 1999
Revenues. Revenues increased by $37.1 million, or 34.9%, to $143.5
million in the nine months ended March 31, 2000 from $106.4 million in the nine
months ended March 31, 1999. This increase came from acquisitions that were
completed since June 30, 1998, which contributed an aggregate of $17.2 million
of incremental growth in revenues, but also included our internal rate of growth
in revenues in the nine months ended March 31, 2000, which was 18.7%.
Revenues in the Industrial Facilities Support Services segment
increased by $25.4 million, or 33.5%, to $101.1 million in the nine months ended
March 31, 2000 from $75.7 million in the nine months ended March 31, 1999. This
increase primarily came from certain acquisitions, which contributed an
aggregate of $15.6 million of incremental growth in revenues, but also included
an internal rate of growth in revenues for this segment in the nine months ended
March 31, 2000 of 12.9%.
Revenues in the Industrial Filtration Products and Services segment
increased by $11.7 million, or 38.3%, to $42.4 million in the nine months ended
March 31, 2000 from $30.7 million in the nine months ended March 31, 1999. This
increase is primarily the result of internal growth of 33.1%, but is also due to
certain acquisitions, which contributed an aggregate of $1.6 million of
incremental growth in revenues.
Cost of Services. Cost of services increased by $25.6 million, or
35.6%, to $97.4 million in the nine months ended March 31, 2000 from $71.8
million in the nine months ended March 31, 1999. Cost of services as a
percentage of revenues increased to 67.8% in the nine months ended March 31,
2000 from 67.5% in the nine months ended March 31, 1999. The flatness in
operating margins as compared to prior year is the result of improved operating
margins in our cleanroom cleaning and related services, industrial container
cleaning and industrial process water purification service lines, offset by
slightly lower margins in our industrial cleaning and facility maintenance and
industrial filtration products and services service lines.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $5.2 million, or 26.8%, to $24.6 million in
the nine months ended March 31, 2000 from $19.4 million in the nine months ended
March 31, 1999. The increase in selling, general and administrative expenses is
primarily due to the overhead costs assumed in acquisitions completed since the
year earlier period and other investments in our infrastructure to support
overall growth. Selling, general and administrative expenses decreased as a
percentage of revenues to 17.2% in the nine months ended March 31, 2000 from
18.3% in the nine months ended March 31, 1999.
Depreciation and Amortization. Depreciation and amortization increased
by $2.3 million, or 46.8%, to $7.2 million in the nine months ended March 31,
2000 from $4.9 million in the nine months ended March 31, 1999. Depreciation and
amortization increased as a percentage of revenues to 5.0% in the nine months
ended March 31, 2000 from 4.6% in the nine months ended March 31, 1999. This
increase is primarily a result of additional goodwill and other intangible
assets arising out of acquisitions, but is also due to additional capital
expenditures related to our growth.
Income from Operations. Income from operations in the Industrial
Facilities Support Services segment increased by $4.1 million, or 35.0%, to
$16.0 million in the nine months ended March 31, 2000 from $11.8 million in the
nine months ended March 31, 1999. This increase is primarily the result of
strong internal growth, improved operating efficiencies in our industrial
container cleaning service line and certain acquisitions. Income from operations
increased as a percentage of revenues to 15.8% in the nine months ended March
31, 2000 from 15.6% in the nine months ended March 31, 1999. The
Page 13
<PAGE> 14
increase in income from operations and operating margin is due to strong
internal growth and improved operating margin in our cleanroom cleaning and
related services, industrial container cleaning and industrial process water
purification service lines that resulted from improved operating efficiencies
and consolidation of facilities and management, offset by the lower operating
margins in the industrial cleaning and facility maintenance service line as
discussed above.
Income from operations in the Industrial Filtration Products and
Services segment increased by $175,000, or 5.6%, to $3.3 million in the nine
months ended March 31, 2000 from $3.1 million in the nine months ended March 31,
1999. Income from operations decreased as a percentage of revenues to 7.8% in
the nine months ended March 31, 2000 from 10.2% in the nine months ended March
31, 1999. The decrease in operating margin is the result of lower product
margins than were experienced in the same period of the previous year related to
this segment's business expansion efforts to new customers. To a lesser extent,
the operating margin decreased as a result of certain one-time charges relating
to that segment's decision to reduce our business presence in Mexico. In the
year earlier period, income from operations was affected by the General Motors
strike. See discussion above under the heading Unusual Events in Fiscal 1999.
Consolidated income from operations increased $4.1 million, or 39.6%,
to $14.4 million in the nine months ended March 31, 2000 from $10.3 million in
the nine months ended March 31, 1999. Consolidated income from operations
increased as a percentage of revenues to 10.0% in the nine months ended March
31, 2000 from 9.7% in the nine months ended March 31, 1999. The increase in
consolidated income from operations and consolidated operating margin are due to
the factors discussed above.
Interest Expense, net. Interest expense increased $2.2 million, or
95.9%, to $4.6 million in the nine months ended March 31, 2000 from $2.3 million
in the nine months ended March 31, 1999. This increase is the result of new
borrowings primarily related to acquisitions.
Provision for Income Taxes. The provision for income taxes for the nine
months ended March 31, 2000 and 1999 reflects an effective rate of 40% and 41%,
respectively.
QUARTERLY RESULTS AND SEASONALITY
Our results of operations tend to vary seasonally, with the least
amount of revenues generated in the third quarter, higher revenues in the second
quarter and the greatest amount of revenues in the first and fourth quarters.
Our quarterly results of operations may fluctuate significantly as a result of a
number of factors over which we have no control, including our customers'
budgetary constraints, the timing and duration of our customers' planned
maintenance activities and shutdowns, changes in our competitors pricing
policies and general economic conditions. Also, certain operating and fixed
costs remain relatively constant throughout the fiscal year, which when offset
by differing levels of revenues, may result in fluctuations in quarterly
results.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had cash and cash equivalents of $266,000 and
working capital of $34.6 million. During the nine months ended March 31, 2000,
we had net cash provided by operating activities of $2.5 million and made
capital investments of $12.8 million.
In the nine months ended March 31, 2000, we completed two acquisitions
that required an aggregate of $6.0 million in cash, net of cash received, and
the issuance of an unsecured convertible subordinated promissory note with a
principal amount of $1.0 million, which is convertible into shares of common
stock of the Company. In addition, we paid additional consideration of $2.8
million in cash and issued 86,389 shares of our common stock in connection with
several of our other acquisition agreements that provide for additional
consideration to be paid based on the achievement of certain objectives. The
borrowings under our revolving credit facility reached $85.1 million as of March
31, 2000.
During October 1999, we entered into our current credit facility with
our principal banks and two additional banks. The current credit facility
provides us with up to $100.0 million of revolving credit availability for a
three-year period, subject to extension by the banks each year on the
anniversary of the agreement. Under the terms of our current credit facility,
the entire $100.0 million is available for general corporate purposes, including
working capital, capital expenditures and acquisitions. Borrowing under our
current credit facility is at rates, based on the prime or Eurodollar rate, that
we
Page 14
<PAGE> 15
believe to be very favorable. Availability of borrowing is subject to the
maintenance of a minimum level of net worth, certain levels of interest coverage
and maintenance of a specific ratio of funded debt to earnings before interest,
taxes, depreciation and amortization that we believe will not affect the
availability of borrowings under our current credit facility. During the quarter
ended March 31, 2000, we exceeded our ceiling amount for total capital
expenditures and received a waiver from the banks allowing capital expenditures
for the year to be $15 million, up from $12 million. The terms of the current
credit facility include a mechanism that allows us, with the approval of the
banks, to increase the capacity under the credit agreement up to $150.0 million.
In conjunction with the agreement in principle with Baird Capital
Partners noted above, we expect to receive a payment of approximately $22.0
million, which will be used to repay debt. Following this repayment, we expect
our cost of borrowing under the credit facility to be reduced by approximately
fifty basis points.
As discussed previously, the Company recently received an offer from a
group of its current management to acquire the Company through a cash merger at
$8.00 per share. The management group, which consists of certain current members
of the Company's senior management team, currently owns 57% of the outstanding
shares of the Company and intends to retain all of its shares. The management
group has obtained financing in amounts necessary to acquire all other
outstanding shares in the merger and assume the existing debt of the Company and
anticipates the delivery of a commitment upon execution of a definitive
agreement. The offer to acquire the Company came during a regularly scheduled
meeting of the Company's Board of Directors. Following the offer, the outside
members of the Board of Directors formed a special committee to consider the
offer. If approved by the special committee, the merger is then subject to the
approval of the Company's shareholders.
INFLATION
The effects of inflation on our operations were not significant during
the periods presented in the Consolidated Financial Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to certain market risks from transactions that are
entered into during the normal course of business. We have not entered into
derivative financial instruments for trading purposes. Our primary market risk
exposure relates to interest rate risk. We had a balance of $85.1 million on our
revolving credit facility at March 31, 2000, which is subject to a variable rate
of interest based on the prime or Eurodollar rate. Assuming borrowings at March
31, 2000, a one hundred basis point change in interest rates would impact net
interest expense by approximately $851,000 per year.
PART II. -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Various legal actions arising in the ordinary course of business are
pending against the Company. None of the litigation pending against the
Company, individually or collectively, is expected to have a material
adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
Page 15
<PAGE> 16
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3(a) Amended and Restated Articles of
Incorporation of the Company effective
November 4, 1999 (filed as Exhibit 3(a) to
the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999,
and incorporated herein by reference).
3(b) Amended and Restated Code of Regulations of
the Company effective November 4, 1999
(filed as Exhibit 3(b) to the Company's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999, and
incorporated herein by reference).
4 Credit Agreement, dated as of October 20,
1999, among the Company and its
subsidiaries, Bank One, NA, National City
Bank, LaSalle Bank, National Association,
SunTrust Bank, Central Florida, N.A., and
Banc One Capital Markets, Inc. (filed as
Exhibit 4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended September
30, 1999, and incorporated herein by
reference).
27 Financial Data Schedule.
99(a) Press Release dated April 25, 2000.
99(b) Press Release dated April 25, 2000.
(b) No reports on Form 8-K were filed during the period.
Page 16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on behalf by the
undersigned thereunto duly authorized.
MPW INDUSTRIAL SERVICES GROUP, INC.,
an Ohio corporation
Dated: May 15, 2000 By: /s/ Daniel P. Buettin
---------------------- ----------------------
Daniel P. Buettin
Vice President and Chief Financial Officer
(on behalf of the Registrant and as Principal
Financial Officer)
Page 17
<PAGE> 18
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
3(a) Amended and Restated Articles of Incorporation of the Company
effective November 4, 1999 (filed as Exhibit 3(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, and incorporated herein by reference).
3(b) Amended and Restated Code of Regulations of the Company
effective November 4, 1999 (filed as Exhibit 3(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, and incorporated herein by reference).
4 Credit Agreement, dated as of October 20, 1999, among the
Company and its subsidiaries, Bank One, NA, National City
Bank, LaSalle Bank, National Association, SunTrust Bank,
Central Florida, N.A., and Banc One Capital Markets, Inc.
(filed as Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, and
incorporated herein by reference).
27 Financial Data Schedule.
99(a) Press Release dated April 25, 2000.
99(b) Press Release dated April 25, 2000.
Page 18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MPW
INDUSTRIAL SERVICES GROUP INC. FORM 10-Q FOR THE THREE & NINE MONTH PERIOD ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 266
<SECURITIES> 0
<RECEIVABLES> 43,151
<ALLOWANCES> 1,154
<INVENTORY> 12,519
<CURRENT-ASSETS> 58,924
<PP&E> 88,278
<DEPRECIATION> 38,254
<TOTAL-ASSETS> 169,704
<CURRENT-LIABILITIES> 24,373
<BONDS> 86,762
0
0
<COMMON> 109
<OTHER-SE> 52,822
<TOTAL-LIABILITY-AND-EQUITY> 169,704
<SALES> 143,526
<TOTAL-REVENUES> 143,526
<CGS> 97,365
<TOTAL-COSTS> 129,169
<OTHER-EXPENSES> 5,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,571
<INCOME-PRETAX> 4,074
<INCOME-TAX> 1,629
<INCOME-CONTINUING> 2,445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,445
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
</TABLE>
<PAGE> 1
EXHIBIT 99(a)
-------------
MPW INDUSTRIAL SERVICES GROUP, INC.
9711 LANCASTER RD. S.E.
HEBRON, OHIO 43025
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Daniel P. Buettin Jeffrey A. Wilhoit
Vice President & Chief Financial Officer Vice President & Account Manager
MPW Industrial Services Group, Inc. The Financial Relations Board
9711 Lancaster Rd., S.E. 875 North Michigan Avenue
Hebron, Ohio 43025 Chicago, Illinois 60611
(740) 927-8790 (312) 640-6757
FOR IMMEDIATE RELEASE
TUESDAY, APRIL 25, 2000
MPW MANAGEMENT GROUP SUBMITS OFFER TO ACQUIRE THE COMPANY
COMPANY EXPECTS FISCAL THIRD QUARTER EARNINGS BELOW ANALYSTS EXPECTATIONS
---------
HEBRON, OHIO, APRIL 25, 2000 -- MPW INDUSTRIAL SERVICES GROUP, INC. (NASDAQ:
MPWG) today announced that it has received an offer from a group of its current
management, led by Chairman and Chief Executive Officer Monte R. Black, to
acquire the Company through a cash merger at $8.00 per share, representing a
56.1% premium to MPW's closing price of $5.125 on April 24th.
The management group, which consists of certain current members of MPW's senior
management team, currently owns 57% of the outstanding MPW shares and intends to
retain all of its shares. The management group has indicated that it has no
interest in selling its controlling ownership position to a third party. The
management group also indicated that it has obtained financing in amounts
necessary to acquire all other outstanding shares in the merger and assume the
existing debt of MPW and anticipates the delivery of a commitment upon execution
of a definitive agreement. Total debt outstanding under MPW's credit facilities
at March 31, 2000 was approximately $80 million. The management group has also
indicated that, should the proposed transaction be completed, it may consider
sales of certain assets of the Company to pay down the debt incurred to complete
the acquisition.
The offer to acquire the Company came during a regularly scheduled meeting of
the MPW Board of Directors. Following the offer, the outside members of the MPW
Board
-MORE-
<PAGE> 2
MPW INDUSTRIAL SERVICES GROUP, INC.
ADD 1
formed a special committee to consider the offer. If approved by the
special committee, the merger is then subject to the approval of MPW
shareholders.
In a separate press release issued today, the Company announced that it has
executed a definitive agreement with respect to the previously-announced
transaction with Baird Capital Partners (BCP), an investment partnership, to
acquire a majority interest in its Pentagon Technologies Group (Pentagon)
subsidiary. Under the terms of that agreement, BCP will obtain majority
ownership in the equity of Pentagon. MPW will continue to own approximately 20%
of Pentagon.
The Company expects to report fiscal third quarter results for the period ended
March 31, 2000 within 7 to 10 days. The Company expects to post a one-time,
non-cash charge of approximately $3.4 million, net of related tax benefits, in
the quarter to reflect the estimated amount of loss from the Pentagon
transaction. Management believes the per share loss for the quarter, including
the charge, will fall within the range of $0.18 to $0.20 per share. In the
absence of the charge, the Company would have expected earnings of approximately
$0.10 to $0.12 per share. The consensus of analyst estimates, according to First
Call, is $0.17 per share, which also excludes the special Pentagon charge.
MPW Industrial Services Group, Inc. is a leading provider of integrated,
technically-based industrial cleaning and related facilities support services in
North America. MPW offers five principal service lines that are integral to a
wide variety of manufacturing processes. These five service lines are industrial
cleaning and facility maintenance, industrial filtration management,
contamination control for cleanroom environments and related services,
industrial container cleaning and industrial process water purification. MPW
provides these services to more than 1,200 customers in diverse industries. With
headquarters in Hebron, Ohio, MPW has over 27 years of experience and currently
has more than 2,200 employees in a network of over 50 offices.
The statements contained in this news release that are forward looking are based
on current expectations that are subject to a number of uncertainties and risks,
and actual results may differ materially. The uncertainties and risks include,
but are not limited to competitive and other market factors, customer purchasing
behavior, general economic conditions and other facets of the Company's business
operations. Also, the Company's quarterly results of operations may fluctuate as
a result of a number of factors including but not limited to the timing of
customer activity and weather conditions. Additional information about these and
other risks and uncertainties can be found in "Investment Considerations" in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999;
and in other documents the Company files or has filed with the Securities and
Exchange Commission. Further information may also be obtained at the Company's
Internet site: www.mpwservices.com.
###
<PAGE> 1
EXHIBIT 99(b)
-------------
MPW INDUSTRIAL SERVICES GROUP, INC.
9711 LANCASTER RD. S.E.
HEBRON, OHIO 43025
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Daniel P. Buettin Jeffrey A. Wilhoit
Vice President & Chief Financial Officer Vice President & Account Manager
MPW Industrial Services Group, Inc. The Financial Relations Board
9711 Lancaster Rd., S.E. 875 North Michigan Avenue
Hebron, Ohio 43025 Chicago, Illinois 60611
(740) 927-8790 (312) 640-6757
FOR IMMEDIATE RELEASE
TUESDAY, APRIL 25, 2000
MPW ANNOUNCES DEFINITIVE AGREEMENT FOR EQUITY INVESTMENT
IN PENTAGON SUBSIDIARY
---------
HEBRON, OHIO, APRIL 25, 2000 -- MPW INDUSTRIAL SERVICES GROUP, INC. (NASDAQ:
MPWG) today reported that it has entered into a definitive agreement with Baird
Capital Partners (BCP), an investment partnership, providing for the partnership
to invest in MPW's subsidiary, Pentagon Technologies Group, Inc. (Pentagon).
Subsequent to the close of this transaction, BCP would become the majority owner
of Pentagon's capital stock and MPW and Pentagon's management would each retain
a minority interest. BCP is an affiliate of Robert W. Baird & Co. Incorporated,
one of the nation's largest investment banking firms headquartered outside of
New York.
Under the terms of the transaction, MPW will receive payments totaling
approximately $22 million, which will be used to repay debt. Upon closing of the
transaction, Pentagon will be well capitalized and will complete a new $30
million credit facility to support its acquisition and growth objectives.
Pentagon will continue to have its headquarters in Silicon Valley. The
transaction is expected to close during the quarter ending June 30, 2000.
"The semiconductor industry is well into a strong growth period that should
present real opportunities for Pentagon," said Monte R. Black, Chairman and
Chief Executive Officer of MPW. "The access to capital that BCP will provide
will give Pentagon the resources and flexibility to take full advantage of its
leadership position in a marketplace that is presenting significant
opportunities for growth."
-MORE-
<PAGE> 2
MPW INDUSTRIAL SERVICES GROUP, INC.
ADD 1
Commenting on the transaction, Pentagon Chief Executive Officer Frank A. McBride
added, "Since the formation of Pentagon over a year ago, we have worked
tirelessly to build this group into a leader in contamination control services
to the semiconductor industry. With BCP as our partner, we're confident that we
can take the company to the next level in pursuit of our growth objectives."
MPW Industrial Services Group, Inc. is a leading provider of integrated,
technically-based industrial cleaning and related facilities support services in
North America. MPW offers five principal service lines that are integral to a
wide variety of manufacturing processes. These five service lines are industrial
cleaning and facility maintenance, industrial filtration management,
contamination control for cleanroom environments and related services (through
Pentagon), industrial container cleaning and industrial process water
purification. MPW provides these services to more than 1,200 customers in
diverse industries. With headquarters in Hebron, Ohio, MPW has over 27 years of
experience and currently has more than 2,200 employees in a network of over 50
offices.
Pentagon, based in Fremont, California, is the leading company providing
contamination control solutions primarily to the semiconductor industry and
companies with critically clean manufacturing environments. With offices in 10
U.S. locations, Pentagon provides technical services, parts cleaning and coating
management, facility cleaning and unique specialized products to help its
customers improve both production and yield in the manufacture of products.
Pentagon was formed in early 1999 through the acquisition of seven leading
companies in their respective fields. Further information may also be obtained
at the Company's Internet site: www.pen-tec.com
Baird Capital Partners focuses primarily on private equity investments in
attractive U.S-based middle-market companies. In February 2000, BCP closed its
third private equity limited partnership raising a total of approximately $175
million. Collectively, BCP and its European affiliate, Granville Baird Capital
Partners, have more than $500 million in committed capital. BCP partners with
highly motivated, entrepreneurial management teams where its expertise, capital
and strong network of resources will complement management's business
objectives.
The statements contained in this news release that are forward looking are based
on current expectations that are subject to a number of uncertainties and risks,
and actual results may differ materially. The uncertainties and risks include,
but are not limited to competitive and other market factors, customer purchasing
behavior, general economic conditions and other facets of the Company's business
operations. Also, the Company's quarterly results of operations may fluctuate as
a result of a number of factors including but not limited to the timing of
customer activity and weather conditions. Additional information about these and
other risks and uncertainties can be found in "Investment Considerations" in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1999;
and in other documents the Company files or has filed with the Securities and
Exchange Commission. Further information may also be obtained at the Company's
Internet site: www.mpwservices.com.
###
