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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 19, 2000
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)
Registrant's telephone number, including area code: (740) 927-8790
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Item 2. Acquisition or Disposition of Assets
On July 19, 2000, MPW Industrial Services Group, Inc. (the "Company") closed on
a transaction related to its majority-owned subsidiary Pentagon Technologies
Group, Inc. ("Pentagon") pursuant to the Recapitalization Agreement, dated as of
April 25, 2000, by and among Pentagon, MPW Industrial Services Group, Inc., MPW
Management Services Corp., Pentagon Merger Sub, Inc., Baird Capital Partners III
Limited Partnership, BCP III Special Affiliates Limited Partnerships and BCP III
Affiliates Fund Limited Partnership, as amended (the "Recapitalization
Agreement"). Under the Recapitalization Agreement, Baird Capital Partners and
certain of its affiliates ("BCP") have invested in Pentagon, the Company has
sold a majority of its equity interest in Pentagon to BCP and Pentagon
indebtedness to the Company has been repaid. BCP is now the majority owner of
Pentagon's capital stock. The Company's retained interest in the capital stock
of Pentagon is 22.3 percent.
In connection with this transaction, the Company received payments totaling
$22.7 million, which will be used to repay debt. 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 enclosed pro forma unaudited consolidated balance sheet at
March 31, 2000 includes a revised estimated net loss and transaction-related
expenses of $3.9 million. The revised loss amount is estimated subject to the
determination of final post closing adjustments.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements
Not applicable.
(b) Unaudited Pro Forma Consolidated Financial Information.
MPW Industrial Services Group, Inc.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The following unaudited pro forma consolidated financial statements give effect
to the disposition of MPW Industrial Services Group, Inc.'s (the Company)
majority equity interest in Pentagon Technologies Group, Inc. (Pentagon)
pursuant to the Recapitalization Agreement described in Item 2 and enclosed as
Exhibit 2 to this report on Form 8-K.
The unaudited pro forma consolidated balance sheet presents the financial
condition of the Company at March 31, 2000 giving effect to the disposition of
the Company's majority equity interest in Pentagon as if it had occurred on such
date. The unaudited pro forma consolidated statements of operations for the year
ended June 30, 1999 and the nine months ended March 31, 2000 give effect to the
disposition as if it had occurred as of June 30, 1998.
The unaudited pro forma financial information is presented for information
purposes only and it is not necessarily indicative of the financial position and
results of operations that would have been achieved had the disposition been
completed as of the dates indicated and is not necessarily indicative of the
Company's future financial position or results of operations.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the accompanying notes herein and the historical consolidated
financial statements and related notes of the Company included in its 1999
Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the nine months
ended March 31, 2000.
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MPW Industrial Services Group, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
MPW
Industrial
Services Pro Forma
Group, Inc. Adjustments Pro Forma
----------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 266 $ (75) a $ 191
Accounts receivable, net 41,997 (6,492) a 35,505
Inventories 12,519 (731) a 11,788
Deferred income taxes 820 (246) a 574
Prepaid expenses 2,083 (97) a 1,986
Other current assets 1,239 13,789 a 1,151
(13,877) b
----------------------------------------------
58,924 (7,729) 51,195
Property and equipment, net 50,024 (5,988) a 44,036
Noncurrent assets:
Intangibles, net 60,209 (27,073) a 33,136
Investment in Pentagon -- 22,510 a 7,621
(8,834) b
(6,055) c
Other assets 547 (90) a 457
----------------------------------------------
Total assets $169,704 $(33,259) $136,445
==============================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 10,789 $ (917) a $ 9,872
Accrued compensation and related taxes 2,542 (470) a 2,072
Current maturities of noncurrent liabilities 325 (41) a 284
Other accrued liabilities 10,717 (1,088) a 7,443
(2,186) c
----------------------------------------------
24,373 (4,702) 19,671
Noncurrent liabilities
Long-term debt 86,762 (50) a 64,001
(22,711) b
Deferred income taxes 4,410 (727) a 3,683
Other 28 -- 28
----------------------------------------------
91,200 (23,488) 67,712
Minority interest 1,200 (1,200) a --
Shareholders' equity 52,931 (3,869) c 49,062
----------------------------------------------
Total liabilities and shareholders' equity $169,704 $(33,259) $136,445
==============================================
</TABLE>
The accompanying notes are an integral part of the consolidated pro forma
financial information.
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MPW Industrial Services Group, Inc.
Unaudited Pro Forma Consolidated
Statement of Operations
For the Year Ended June 30, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
MPW
Industrial
Services Pro Forma
Group, Inc. Adjustments Pro Forma
------------------------------------------
<S> <C> <C> <C>
Revenues $147,197 $(12,952) a $134,245
Costs and expenses:
Cost of services 99,113 (8,457) a 90,656
Selling, general and administrative expenses 26,303 (3,349) a 22,954
Depreciation and amortization 6,846 (641) a 6,205
----------------------------------------
Total costs and expenses 132,262 (12,447) 119,815
----------------------------------------
Income from operations 14,935 (505) 14,430
Interest expense, net 3,448 (1,816) c 1,632
Equity income in Pentagon -- 68 a 68
----------------------------------------
Income before income taxes 11,487 1,379 12,866
Provision for income taxes 4,595 551 d 5,146
----------------------------------------
Net income $ 6,892 $ 828 $ 7,720
========================================
Net income per share, basic $ 0.64 $ 0.72
========================================
Net income per share, diluted $ 0.60 $ 0.68
========================================
Weighted average shares outstanding, basic 10,734 10,734
Weighted average shares outstanding, diluted 11,521 11,404
</TABLE>
The accompanying notes are an integral part of the consolidated pro forma
financial information.
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MPW Industrial Services Group, Inc.
Unaudited Pro Forma Consolidated
Statement of Operations
For the Nine Months Ended March 31, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
MPW
Industrial
Services Pro Forma
Group, Inc. Adjustments Pro Forma
-----------------------------------------
<S> <C> <C> <C>
Revenues $143,526 $(22,956) a $120,570
Costs and expenses:
Cost of services 97,365 (14,129) a 83,236
Selling, general and administrative expenses 24,636 (5,307) a 19,329
Depreciation and amortization 7,168 (1,203) a 5,965
-----------------------------------------
Total costs and expenses 129,169 (20,639) 108,530
-----------------------------------------
Income from operations 14,357 (2,317) 12,040
Interest expense, net 4,571 (1,363) c 3,208
Loss on sale of subsidiary 5,712 (5,712) b --
Equity income in Pentagon -- 310 a 310
-----------------------------------------
Income before income taxes 4,074 5,068 9,142
Provision for income taxes 1,629 2,028 d 3,657
-----------------------------------------
Net income $ 2,445 $ 3,040 $ 5,485
=========================================
Net income per share, basic $ 0.22 $ 0.50
=========================================
Net income per share, diluted $ 0.21 $ 0.48
=========================================
Weighted average shares outstanding, basic 10,877 10,877
Weighted average shares outstanding, diluted 11,520 11,520
</TABLE>
The accompanying notes are an integral part of the consolidated pro forma
financial information.
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MPW Industrial Services Group, Inc.
Notes to Unaudited Pro Forma Consolidated
Financial Statements
Note 1 - Balance Sheet
The pro forma balance sheet has been prepared to reflect the disposition of the
Company's majority equity interest in Pentagon as if it had happened on March
31, 2000. Pro forma adjustments are made to reflect:
a. The elimination of the assets and liabilities of Pentagon included in
the historical financial statements, recording the Company's investment
in and advances to Pentagon under the equity method of accounting, and
assumption of certain Pentagon liabilities to be retained by the
Company.
b. A payment of $22.7 million to the Company for the repayment of
Pentagon's indebtedness to the Company and the Company's sale of
capital stock in Pentagon to Baird Capital Partners and certain
affiliates. Total proceeds have been applied to reduce long term debt.
c. Recording of a loss on the disposition of the Company's majority equity
ownership in Pentagon and related expenses totaling $6.1 million,
accrual of related transaction expenses, and a reduction in income
taxes payable of $2.6 million related to the tax benefit associated
with the transaction loss and related expenses.
Note 2 - Statements of Operations
The pro forma statements of operations have been prepared to reflect the
following pro forma adjustments necessary to reflect the disposition of the
Company's majority equity interest in Pentagon as if it had occurred at June 30,
1998 prior to the period of operations presented in the pro forma statements of
operations. Pro forma adjustments are made to reflect:
a. The elimination of the revenues and expenses of Pentagon included in
the historical financial statements, and recording the Company's equity
earnings in Pentagon at the Company's post transaction ownership
percentage of 22.3 percent.
b. Elimination of the loss on sale of subsidiary which reflects the
estimated loss on the Company's disposition of it majority ownership
percentage in Pentagon and related expenses and tax benefit that were
recorded in the Company's historical financial statements for the nine
month period ended March 31, 2000.
c. A reduction in interest expense for the repayment of the Company's
long-term debt from the $22.7 million proceeds received in this
transaction.
d. Record tax provision (benefit) on pro forma adjustments at 40 percent
rate.
(c) Exhibits
2.1 Recapitalization Agreement, dated April 25, 2000, by
and among Pentagon Technologies Group, Inc., MPW
Industrial Services Group, Inc., MPW Management
Services Corp., Pentagon Merger Sub, Inc., Baird
Capital Partners III Limited Partnership, BCP III
Special Affiliates Limited Partnerships and BCP III
Affiliates Fund Limited Partnership.
2.2 Amendment No. 1 to Recapitalization Agreement, dated
as of July 17, 2000, by and among Pentagon
Technologies Group, Inc., MPW Industrial Services
Group, Inc., MPW Management Services Corp., Pentagon
Merger Sub, Inc., Baird Capital Partners III Limited
Partnership, BCP III Special Affiliates Limited
Partnerships, BCP III Affiliates Fund Limited
Partnership, PPM America Private Equity Fund, L.P.,
Old Hickory Fund I, LLC, and Antares Capital
Corporation.
99.1 MPW Industrial Services Group, Inc. Press Release
dated July 19, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MPW Industrial Services Group, Inc.
(Registrant)
By: /s/ Ira O. Kane
--------------------------------------
President and Chief Operating Officer;
Director
Dated: August 3, 2000
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INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
2.1 Recapitalization Agreement, dated as of April 25, 2000, by and
among Pentagon Technologies Group, Inc., MPW Industrial
Services Group, Inc., MPW Management Services Corp., Pentagon
Merger Sub, Inc., Baird Capital Partners III Limited
Partnership, BCP III Special Affiliates Limited Partnerships
and BCP III Affiliates Fund Limited Partnership.
2.2 Amendment No. 1 to Recapitalization Agreement, dated as of
July 17, 2000, by and among Pentagon Technologies Group, Inc.,
MPW Industrial Services Group, Inc., MPW Management Services
Corp., Pentagon Merger Sub, Inc., Baird Capital Partners III
Limited Partnership, BCP III Special Affiliates Limited
Partnerships, BCP III Affiliates Fund Limited Partnership, PPM
America Private Equity Fund, L.P., Old Hickory Fund I, LLC,
and Antares Capital Corporation.
99.1 MPW Industrial Services Group, Inc. Press Release dated July
19, 2000.
