MPW Industrial Services Group, Inc.

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MPW Industrial Services Group, Inc.

9711 Lancaster Road, Southeast
Hebron, Ohio 43025
U.S.A.
Telephone: (740) 927-7890
Toll Free: (800) 827-8790
Fax: (740) 929-1614
Web site: http://www.mpwservices.com

Public Company
Incorporated: 1978 as MPW Industrial Services, Inc.
Employees: 1,400
Sales: $92.2 million(2002)
Stock Exchanges: NASDAQ
Ticker Symbol: MPWG
NAIC: 561720 Custodial Services

MPW Industrial Services Group, Inc. provides industrial cleaning and associated services. While MPW, which stands for Mobile Power Washing, is a public company, its founder, chairman, and CEO, Monte R. Black, owns nearly 60 percent of its stock. With 1,400 employees and 1,200 pieces of major equipment, MPW serves some 800 customers through its headquarters in Hebron, Ohio, and more than 40 operations located in 14 states and Canada. After expanding into new services in the 1990s, MPW has cut back in recent years and now concentrates on three segments. Industrial Cleaning and Facility Maintenance is MPW’s oldest area of business. Generally working on-site, the company cleans important operating equipment, its services including dry vacuuming, wet vacuuming, industrial power washing, high pressure water blasting, cryojetic cleaning, and chemical cleaning. The Facility Support division of this business segment cleans industrial facilities, but is much more than a janitorial service. The focus is on contributing to the efficiency and productivity of an operation through effective cleaning. Customers of the segment include the automotive, utility, chemical, pulp and paper, manufacturing, and steel industries. The second of MPW’s business segments is Industrial Container Cleaning, primarily devoted to automotive paint manufacturers. The company cleans totes, paint resin containers used in the painting of vehicles. Once thoroughly cleaned, they can be refilled with paint resin and are capable once again of producing a high-quality paint finish. The last business segment is Industrial Process Water Purification. MPW provides water purification trailers, on an emergency or regular basis, catering to the utility, healthcare, manufacturing, and automotive industries. In addition, the company runs an exchange service of small tanks of purified water when smaller quantities are needed.

Company Established in 1972

MPW’s founder, Monte Black, was only 20 years old when in 1972 he borrowed $5,000 from his father to buy a truck and a power washer and start a business in Baltimore, Ohio. He called it Central Ohio Mobile Power Wash, and as a one-man operation he washed trucks. Black earned a reputation as a hard worker, showing up early for jobs and following up with customers to ensure satisfaction. As a result, he secured new business through word of mouth, and even decades later most of MPW’s new customers came through referrals from current customers. By 1977, Black had six trucks and 14 employees and was successful enough to build his first office. A year later, he reached an important turning point when a friend who worked at American Electric Power advised him that the plant was a potential client for the services offered by Black’s company. Black incorporated his business as MPW Industrial Services, Inc. in 1978, as he began to add more trucks to his fleet and purchase the high-tech equipment necessary to offer new cleaning services in factories. He also began to expand his geographical reach.

MPW grew steadily for the next ten years, then Black named William C. Clark to serve as president and chief operating officer (COO). Charged with guiding the company to the next level of growth, Clark aimed to make MPW into America’s premier environmental and industrial cleaning service company. Over the next five years, the company doubled in size and revenues, which approached $50 million. In the 1990s, MPW began to expand beyond industrial cleaning. It entered the industrial process water purification business in 1990, then in 1993 became involved in industrial container cleaning, initially working for a single customer on site. By then, in addition to its headquarters in Hebron, MPW had Ohio offices in Cleveland, Youngstown, Toledo, Lima, and Newark. The company had additional operations in Pittsburgh, Pennsylvania; Savannah and Augusta, Georgia; Jacksonville, Florida; and Alliston, Ontario, Canada.

Clark Dies in Helicopter Accident

In October 1993, tragedy struck for Clark’s family and MPW. After meeting with customers in Cleveland, Clark and two MPW employees were flying home when the helicopter they were in struck a power line, obscured by fog, and crashed. Clark was pronounced dead on the scene. Black announced that MPW would continue to pursue the goals laid out by Clark and began recruiting a new management team to make that vision a reality. Most of the new executives came from OHM Corporation, a publicly held environmental services company based in Findlay, Ohio. In March 1994, Ira O. Kane was named to replace Clark as president and COO. An attorney, Kane had served as an executive vice-president and director during his ten years at OHM, then in 1993 was named chairman and executive vice-president of NSC Corporation, an asbestos abatement and industrial services company. Less than a year later, he accepted the position at MPW. Two of his colleagues at OHM, Daniel P. Buettin and Brad A. Martyn, joined Kane at MPW in December 1995, after OHM merged with a subsidiary of Waste Management. Buettin became chief financial officer (CFO) and Martyn was named corporate controller. All three men had experience running a public company, and during his employment at Arthur Andersen & Co. Buettin had been involved in the process of taking companies public. They soon convinced Black to take MPW public, which would help the business to expand faster through acquisitions and to be better able to take advantage of the trend in many industries to outsource services. In addition to the cash raised in the initial public offering (IPO), MPW would be able to use stock as a way to fund purchases.

As it prepared its IPO, MPW continued to grow as a business. In 1996, it acquired Weston Engineering to move into industrial air filtration services, important in the painting of vehicles and a complement to the company’s existing paint container cleaning operation. Weston added nearly $9 million in annual revenues. This new business segment was augmented a year later with the purchase of the air filtration management services companies of ESI International, which added another $6.7 million in sales. Together the two acquisitions served 35 major auto manufacturing plants. The Industrial Container Cleaning portion of MPW’s business, in the meantime, took a major step froward when in 1996 a dedicated facility located in Chesterfield, Michigan, was opened to service a nearby DuPont plant.

MPW Taken Public in 1997

In December 1997, MPW completed its IPO, issuing nearly 4 million shares of stock at $9 per share and netting $32.1 million. A major portion of the money was immediately used to pay down debt, and both cash ($339,000) and stock (37,677 shares) were used in the purchase of a minority stake in Aquatech, a water purification business. It was the first of many deals that MPW would complete over the next two years. In April 1998, MPW added to its industrial container cleaning segment with the acquisition of Vinewood Companies, in the process gaining a major customer in PPG Industries, Inc., which had a master service agreement with Vinewood. Also in that same month, MPW’s Industrial Cleaning business was bolstered by the purchase of Straightline Optical Service, a Georgia company that specialized in the alignment of new industrial equipment and realignment of existing machinery. Industrial Cleaning was further strengthened in June 1998 with the acquisition of Maintenance Concepts.

MPW was able to take advantage of its stock to move via acquisitions into another new business segment, Cleanroom Services. Between November 1998 and January 1999, MPW completed six acquisitions in this area, including Support Systems, Envirosafe, TC International, Sureecso, Dryden Engineering, and Biocon. These businesses were then merged into a new subsidiary called Pentagon Technologies Group, Inc. Cleanroom Services—providing contamination-free manufacturing environments for the semiconductor, microelectronics, pharmaceutical, biotechnology, and healthcare industries— appeared to hold great promise for the future, since companies in industries using cleanrooms tended to grow faster than the Rust Belt industries MPW had traditionally served. Already the market for cleaning and related services for cleanrooms was a $3 billion a year business and growing at a 10 percent clip annually. Moreover, the new segment might ease MPW’s dependence on the business cycle of its traditional manufacturing customers. It fit in well with MPW’s emerging strategy of moving beyond straightforward cleaning services into more lucrative, value-added, technologically-based services. With Pentagon operating out of Fremont, California, the subsidiary also extended MPW’s geographic reach.

MPW added to its Industrial Filtration Management business in August 1998 by acquiring Gauthier Enterprises, a Michigan company that served U.S. automakers. In addition to engineering and consulting, the company also acted as a distributor of filters, filtration media, and such ancillary products as brushes, gloves, and equipment covers. Also in August 1998, MPW expanded the Container Cleaning segment by purchasing Tank Management Inc., another Michigan company that served automotive paint manufacturers, in particular DuPont. MPW’s water purification segment was supplemented by the December 1998 acquisitions of WTW Systems, as was the Industrial Cleaning segment by the addition of Mid-Ohio Industrial in February 1999.

Company Perspectives:

MPW is a leading provider of technology-based services to industrial facilities, including industrial cleaning and maintenance, facility management and support services, container cleaning, process water purification, and other specialized services.

MPW displayed significant growth since going public, with annual revenues increasing from nearly $73 million in fiscal 1997 to more than $104 million in fiscal 1999. Nevertheless, the price of the company’s stock languished. After reaching a peak of $13.88 in June 1998, MPW stock fell as low as $5 and never bounced higher than $12. In April 2000, Black announced his intention to buy MPW’s outstanding shares at $8 per share and take the business private once again. In order to pay off the debt incurred in the buyout, Black indicated a willingness to sell some of MPW’s assets. In fact, on the very day he made his intentions known, the company announced that it was going to sell a majority interest in Pentagon to Baird Capital Partners. The deal closed in July 2000, and MPW retained a 22.3 percent interest in the business. In the meantime, the effort to take MPW private caused some fallout in the ranks of management. Buettin and Robert J. Gilker, a vice-president, resigned. Kane took over as chief financial officer until a successor, Richard R. Kahle, was hired in September 2000. Black upped his buyback offer to $9 per share, then cut it back to a $8.25 base amount, to be increased depending on how much money certain assets could fetch. In the end, Black became concerned that the additional debt burden that MPW would have to assume might hurt the company, and in October 2000 he withdrew his offer to buy the rest of the business. Owning nearly 60 percent of the stock, he still remained very much in control.

MPW’s debt load became even more of a concern as the U.S. economy began to slip into recession in 2001. Several customers declared bankruptcy, resulting in writeoffs for MPW. Moreover, the company was adversely affected by higher costs, cutbacks by customers, and price-cutting by competing firms. The company took steps to meet this challenging business environment with staff cuts and other cost-saving measures. To pay down debt, MPW elected to sell its filter group for approximately $31 million to Clarcor Inc., a Rockville, Illinois, air conditioner and heating filter manufacturer. In addition to debt reduction, the sale reflected a decision to focus on MPW’s three remaining business segments.

In the same month that MPW completed the sale of its filter group, Kane resigned as president and COO, citing his desire to “pursue new leadership challenges elsewhere.” Only a few weeks later, MPW announced a reorganization of management, part of a larger restructuring plan to restore growth. Black would serve as both CEO and COO, Kahle remained as CFO, James P. Mock was made a vice-president to head the industrial cleaning/facility maintenance segment, and C. Douglas Rockwell became a vice-president in charge of both the industrial water purification segment and industrial container cleaning services. Annual revenues, after topping out at $135 million in fiscal 2000, fell to $98.7 million in fiscal 2001, most of which was due to the sale of Pentagon. Of more concern to the company was a net loss of $15.7 million for the year. Revenues fell further in 2002, to $92 million, but cost-cutting measures helped to return MPW to profitability, posting net income of $2.7 million. As long as its customers were adversely impacted by a struggling economy, however, MPW would feel the ripple effects. The company’s long-term prospects nevertheless remained optimistic.