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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-K
(MARK ONE)
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
    OF 1934
 
                    FOR THE FISCAL YEAR ENDED JUNE 30, 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: 0-23335
                      MPW INDUSTRIAL SERVICES GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
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                     OHIO                                        31-1567260
         (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
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                 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
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                        COMMON STOCK, WITHOUT PAR VALUE
                                (TITLE OF CLASS)
 
     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 [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]
 
     As of September 18, 1998, the aggregate market value of the voting stock
held by non-affiliates of the registrant (based on the closing sale price of
such stock on such date) was approximately $38,141,209.*
 
     The number of shares of Common Stock outstanding on September 18, 1998, was
10,700,201 shares.
 
     The Registrant's Definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on November 11, 1998 is incorporated by reference in
Part III of this Form 10-K to the extent stated herein.
                            ------------------------
 
* Calculated by excluding all shares that may be deemed to be beneficially owned
  by executive officers and directors of the registrant, without conceding that
  all such persons are "affiliates" of the registrant for purposes of the
  federal securities laws.
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                               TABLE OF CONTENTS
 
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                                   PART I
Item 1.   Business....................................................    2
Item 2.   Properties..................................................   10
Item 3.   Legal Proceedings...........................................   10
Item 4.   Submission of Matters to a Vote of Security Holders.........   10
                                  PART II
Item 5.   Market for Common Equity and Related Stockholder Matters....   11
Item 6.   Selected Consolidated Financial Data........................   12
Item 7.   Management's Discussion and Analysis of Financial Condition    13
          and Results of Operations...................................
Item 7A.  Quantitative and Qualitative Disclosures about Market          20
          Risk........................................................
Item 8.   Financial Statements and Supplementary Data.................   21
Item 9.   Changes and Disagreements with Accountants on Accounting and   39
          Financial Disclosure........................................
                                  PART III
Item 10.  Directors and Executive Officers............................   39
Item 11.  Executive Compensation......................................   39
Item 12.  Security Ownership of Certain Beneficial Owners and            39
          Management..................................................
Item 13.  Certain Relationships and Related Transactions..............   39
                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form    39
          8-K.........................................................
SIGNATURES............................................................   42
EXHIBIT INDEX.........................................................   44
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                                     PART I
 
     All statements, other than statements of historical facts, included in this
Form 10-K, including, without limitation, statements made in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, including the amount and nature thereof,
potential acquisitions by the Company, trends affecting the Company's financial
condition or results of operations, and the Company's business and growth
strategies are forward-looking statements. Such statements are subject to a
number of risks and uncertainties, including risks and uncertainties identified
in "Item 1. Business -- Investment Considerations" and other general economic
and business conditions, the business opportunities (or lack thereof) that may
be presented to and pursued by the Company, changes in laws or regulations
affecting the Company's operations and other factors, many of which are beyond
the control of the Company. Also, there is always risk and uncertainty in
pursuing and defending litigation and other disputes in the course of the
Company's business. All of these risks and uncertainties could cause actual
results to differ materially from those assumed in the forward-looking
statements. These forward-looking statements reflect management's analysis,
judgment, belief or expectation only as of the date of this Form 10-K. The
Company undertakes no obligation to revise publicly these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
In addition to the disclosure contained herein, readers should carefully review
risks and uncertainties contained in other documents the Company files or has
filed from time to time with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934, as amended, that are incorporated by
reference herein or are otherwise publicly available at the offices of the
Securities and Exchange Commission or at its website (http://www.sec.gov).
 
ITEM 1.  BUSINESS
 
GENERAL
 
     MPW Industrial Services Group, Inc. ("MPW" or the "Company") is a leading
provider of industrial cleaning and facilities support services in the Midwest
and Southeast focused on technology-based industrial services, including
industrial filtration management services, industrial container cleaning,
industrial process water purification and other specialized services. During the
Company's fiscal year ended June 30, 1998 ("fiscal 1998"), the Company provided
services to more than 1,000 customers. MPW serves customers in a broad range of
industries including automotive, electric power, chemical, pulp and paper,
steel, transportation, aerospace and other heavy manufacturing. The Company's
services typically are performed within large industrial facilities and require
the use of Company-owned equipment and specially trained personnel. The Company
believes that its services are generally recurring in nature and are essential
to manufacturing efficiency and safety at its customers' facilities. The Company
has over 25 years of experience and currently has more than 1,400 employees, a
network of 41 offices and over 1,200 pieces of operating equipment. The
following is a description of the Company's primary service lines.
 
  Industrial Cleaning and Facility Support
 
     The cornerstone of the Company's business is its industrial cleaning and
facility support services that are provided primarily at customer facilities.
These services accounted for 67.3% of the Company's fiscal 1998 revenues. The
Company's industrial cleaning and facility support operations are provided on
both a daily recurring basis and a project-by-project basis, as well as pursuant
to longer-term arrangements. MPW uses conventional cleaning techniques and
employs a number of specialized technologies including the following:
 
     Dry Vacuum.  The Company's dry vacuum cleaning operation removes sand,
grain, resins, coke, fly ash, powder and dozens of other materials for customers
on regular cleaning schedules, during regularly scheduled outages and in
emergency spill situations. The Company's fleet of dry vacuum vehicles has both
trucks and chassis custom-built to the Company's specifications for maximum
versatility, performance and durability. The dry vacuum vehicles operate around
the clock if required, both on dry vacuum projects and as power boosters for wet
vacuum tankers. MPW performs its dry vacuum services for customers in
environments such as heavy
 
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industrial boilers and precipitator ductwork and provides site cleaning at steel
mills, foundries, pulp and paper plants, mines, grain processing plants,
aluminum plants and electric generating facilities.
 
     Wet Vacuum.  The Company's wet vacuum cleaning operations provide for the
removal of liquid and semi-solid waste for customers involved in the steel,
cement, foundry, aluminum, pulp and paper, mining and grain processing
industries as well as customers involved in electric power generation. The
Company's custom fabricated vacuum tankers, with custom hydraulics and up to
6,500 gallon capacities, can handle liquids, sludges and semi-solids with
pumping capacities ranging from 1,200 cfm to 4,500 cfm. The Company's wet vacuum
equipment includes transport tankers, vacuum tankers, straight truck turbo
vacuums and straight truck maxi vacuums.
 
     Industrial Power Wash.  The Company's customized, hot high-pressure wash
trucks, ideally suited for off-road heavy equipment cleaning, are totally
self-contained, complete with water supply and 1,500,000 btu kerosene heaters
and can deliver flow rates from 65 gpm to 180 gpm at pressures up to 3,000 psi.
Beyond truck and equipment washing, the Company's industrial power wash business
also services such diverse industrial needs as brick cleaning, building
restoration, factory floor and ceiling cleaning and mill cleaning. MPW also
performs hydrostatic pipeline testing to detect pipeline leaks through the
injection of water at a prescribed pressure. In connection with its industrial
power wash business, the Company has instituted certain environmental safeguards
ranging from the use of environmentally acceptable soaps and degreasers to
post-wash evaluation of residue.
 
     Water Blasting.  MPW began its water blasting business by cleaning kettles
and reactors in the paint and resin manufacturing industries. With custom-built
high pressure pumps capable of up to 20,000 psi, and specially designed
components for variable flow rates and coverage, the Company has the equipment
and technology necessary for a variety of water blasting projects. The Company's
water blasting projects have included such diverse services as exterior
cleaning; removal of latex, phosphates, resins, coke, fly ash, black liquor,
water scale, mastics, rust, asphalt, metal burrs, cement and other materials;
the cleaning of piping, heat exchangers and boilers; and the cutting of grooves
in cement pipes. The Company uses water blasting technology in paper mills,
chemical plants, paint plants, oil refineries, power plants and various other
industrial environments.
 
     Ultra-High Pressure Water Blasting.  The Company provides ultra-high
pressure industrial cleaning and cutting services using specially designed and
fabricated equipment. Such ultra-high pressure services, ranging from 20,000 psi
to 40,000 psi, provide several benefits over conventional water blasting
methods, including the ability to apply ultra-high pressure cleaning methods
with a very low volume of water, the minimization of surface damage or
degradation, the reduction or elimination of by-products or waste products that
may require clean-up or disposal, the elimination of certain safety hazards as a
"non-spark generating" technique, the elimination of airborne contaminants, and
reduced preparatory and clean-up times. By introducing an abrasive material into
the water stream, ultra-high pressure cleaning can also be used to cut virtually
any material without the use of heat or open flames. The Company provides its
ultra-high pressure cleaning and cutting services primarily to the automotive
and power generation industries.
 
     Cryojetic Cleaning.  The Company's cryojetic cleaning process uses dry ice
pellets to remove surface contaminants without abrasives or chemicals, making it
well suited for sensitive cleaning applications, such as removing slag, epoxies,
urethanes or oils from such surfaces as hot molds, printed circuit boards, paint
hooks, storage vessels and radioactive surfaces. MPW's cryojetic system
incorporates the principles of mass transfer, thermal shock and supersonic
velocity, and utilizes dry ice pellets to create an inert non-abrasive, non-
contaminating cleaning medium. Once the dry ice has performed its cleaning
function, it evaporates, leaving only the removed surface contaminate material
as waste. The Company's cryojetic cleaning operation serves utility, automotive,
aerospace, electronics, chemical, tire, rubber and petroleum concerns.
 
     Chemical Cleaning.  Using equipment that is specially designed and
maintained, the Company's dedicated team of chemical technicians, engineers and
service engineers provide chemical cleaning services to a variety of customers.
Applications include the cleaning of boilers, cooling systems, condensers, heat
exchangers, tanks, piping systems and evaporators. The Company's chemical
cleaning operations primarily serve customers in the chemical, power utility,
paper, petroleum and steel industries. MPW utilizes mobile laboratories that
allow an
 
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analysis of solvents to be made on-site. The customers retain and dispose of
chemicals used in the cleaning process in accordance with their own
environmental programs.
 
     Other Specialized Services.  In response to special customer and industry
requirements, the Company has developed sophisticated equipment and technologies
designed to bring higher quality, greater efficiency and safety to the cleaning
process. Examples of such specialized services include: (i) on-line boiler
de-slagging for the electric power industry using high energy, robotically
controlled machinery; (ii) closed loop continuous line cleaning to reduce levels
of contamination for the nuclear power industry; and (iii) combination washing
and filtration processes to reduce contaminants for the gas pipeline industry.
Additionally, in April 1998, the Company completed the acquisition of
substantially all of the assets of Straightline Optical Service, Inc., a Georgia
corporation ("SOS"). With the SOS acquisition, MPW is now able to offer
customers industrial equipment alignment services for the installation of new
equipment and resolving process problems due to misalignment in existing
machines.
 
  Industrial Filtration Management Services
 
     MPW entered the industrial filtration management services market in April
1996 with its acquisition of Weston Engineering, and expanded its presence in
this market through the acquisition of ESI North, Limited and ESI International,
Inc. (collectively "ESI International"), another industrial filtration
management services provider. In August 1998, MPW further expanded its
industrial filtration management services business through the acquisition of
Gauthier Enterprises, Inc., a Michigan corporation ("Gauthier"), a liquid
filtration services and media provider primarily to domestic automobile
manufacturers. The Company provides engineering and consulting services through
the identification of various contaminant sources and the management of air and
liquid flow. In addition, the Company installs and regularly services filtration
devices in many of the automotive facilities in the North American automotive
market.
 
     The Company is a major authorized distributor of filters and filtration
media and ancillary products used in production automobile facilities. MPW also
manages certain other commodity products, such as brushes, gloves, rags and
equipment covers, used in automotive paint shops. The Company markets products
manufactured by over 100 different suppliers, primarily to major auto
manufacturers in the United States. The Company typically prices its filters and
related products to recover the costs of providing engineering and consulting
support to customers.
 
  Industrial Container Cleaning
 
     The Company's industrial container cleaning operations began in April 1993
within a single customer's facility. In 1996, the Company completed its
dedicated facility located in Chesterfield, Michigan, which was primarily
intended to serve the Mt. Clemens, Michigan facility of E.I. duPont de Nemours'
("duPont") automotive paint division. The automotive industry uses 30 to 575
gallon paint resin containers (called "totes") in the vehicle painting process.
Totes are portable stainless steel or aluminum containers that are filled with
paint resin and are refilled after use. In order to produce a high-quality paint
finish, these totes must be thoroughly cleaned between each use. The Company
utilizes a patented technology to high pressure clean totes. In August 1998, MPW
acquired substantially all of the assets of Tank Management, Inc., a Michigan
corporation ("TMI"), a full-service provider of industrial container cleaning
and related container management services to automotive paint manufacturers. TMI
also provided tote cleaning services to the Mt. Clemens facility. In connection
with the acquisition of TMI, the Company entered into a new five year contract
with duPont providing for the Company to clean a minimum of 90% of the annual
tote volume of the Mt. Clemens facility.
 
     In April 1998, the Company completed the acquisition of substantially all
of the assets of Vinewood Corporation and its affiliated entities (collectively,
the "Vinewood Companies"), an integrated provider of industrial container
cleaning and related container management services. With this acquisition, MPW
acquired the Vinewood Companies' rights under a master service agreement with
PPG Industries, Inc. ("PPG"), which provided that the Vinewood Companies were
the preferred vendor for industrial container cleaning and management services
to PPG facilities in North America.
 
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  Industrial Process Water Purification
 
     The Company's industrial water purification operation is based at its
14,000 square foot resin regeneration facility located in Newark, Ohio and
provides pure feed water to customers primarily in the utility, steel and
automotive industries. MPW's water purification business offers reverse osmosis
treatment, deionization technologies and water filtration through a mobile fleet
of equipment and through temporary and permanent on-site servicing. The Company
also provides its water purification services on an emergency response basis.
MPW's industrial process water purification projects are typically priced on a
per gallon basis with the exception of emergency response projects.
 
     The Company's mobile trailers feature an independent valve structure that
allows for maximum flexibility on every site. Because each tank is individually
accessible, it is used only for one pre-designated purpose, so the possibility
of cross-contamination is eliminated. The Company's mobile water units work in
tandem with existing water purification systems or function independently at a
particular site. The Company also offers service exchange, an economical
solution for small quantity requirements. Service exchange tanks are maintained
to the same high standards as the Company's mobile operations and provide an
ideal means of attaining on-site efficiency without incurring capital investment
costs.
 
MARKETING
 
     The Company believes that it attracts and retains customers primarily
because of its ability to respond effectively and efficiently to customers'
needs and its broad service line. The Company engages in cross-selling as a
means to obtain incremental business from its current customers for new
services.
 
     While the Company has long term commitments with certain customers for the
provision of services, most orders for services are received on a job-by-job
basis. In certain instances the Company maintains equipment at the locations of
customers that have issued blanket purchase orders to the Company for the
provision of services over an extended period. Such blanket orders do not
obligate the customer to purchase a specified dollar amount of services. Blanket
orders permit the Company to be contacted to perform services when needed. Such
blanket orders, in combination with the location of the Company's personnel and
equipment, allow the Company to expedite its response to a particular customer's
needs and may constitute a competitive advantage versus service providers
without on-site equipment. MPW provides its services primarily at prescribed
rates or based upon competitive bidding and in some cases through direct
negotiation with the customer. The Company generally does not have any
meaningful backlog of service orders. The Company does not consider backlog to
be an important indicator of future performance.
 
     The Company does not typically provide a separate written guaranty or
warranty to customers for the services it provides. Due to the size and type of
customers serviced, MPW does not generally experience significant delays or
other problems in collecting its accounts receivable.
 
CUSTOMERS
 
     During fiscal 1998, MPW had sales to more than 1,000 customers and its ten
largest customers represented 48% of revenues. General Motors Corporation
represented approximately 14.4% and each of Chrysler Corporation and Toyota
Motor Corporation represented over 5% of MPW's fiscal 1998 revenues. No other
customer represented more than 5% of MPW's fiscal 1998 revenues.
 
     The Company relies heavily on repeat customers and uses both the written
and verbal referrals of its satisfied customers to help generate new customers.
Many of the Company's customers or prospective customers have a qualification
procedure for becoming an approved bidder or vendor based upon the satisfaction
of particular performance and safety standards set by the customer. Such
customers often maintain a list of vendors meeting such standards and award
contracts for individual jobs only to such suppliers. The Company strives to
maintain its status as a preferred or qualified vendor.
 
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EMPLOYEES
 
     As of June 30, 1998, the Company employed over 1,400 full-time employees.
Of these, approximately 100 employees were employed by Aquatech Environmental,
Inc. ("Aquatech"), a subsidiary located in Michigan and a signatory to a
collective bargaining agreement with certain unions. MPW has not experienced any
work stoppages and believes that its relations with employees are good.
 
SAFETY, TRAINING AND QUALITY ASSURANCE
 
     Performance of the Company's services requires the use of equipment and
exposure to conditions that can be dangerous. Although the Company is committed
to a policy of operating safely and prudently, the Company has been and is
subject to claims by employees, customers and third parties for property damage
and personal injuries resulting from performance of the Company's services. To
minimize these risks, the Company has adopted broad training and educational
programs and comprehensive safety policies and regulations. MPW requires that
all operational personnel complete applicable safety courses mandated by the
Occupational Safety and Health Administration ("OSHA"), Environmental Protection
Agency, Department of Transportation and Mine Safety and Health Administration
in areas including hazard communication, protective equipment, confined space
entry, first aid, decontamination procedures and emergency response. In addition
to these mandated training courses, the Company requires that water blast, dry
and wet vacuum and power wash operational personnel complete a Company-designed
hands-on skill training program prior to commencing such activities. The
Company's management regularly monitors compliance with regulations promulgated
by OSHA and the other regulatory authorities and is responsible for directing
the Company's overall safety, training, quality assurance and environmental
compliance programs. In addition, most of the Company's service facilities have
a designated safety/training manager, who has responsibility for overseeing the
Company's safety policies and procedures at the facility.
 
     The Company performs onsite services using employees who have completed
applicable Company safety and training programs. In addition, the Company's
policies require that employees complete a minimum amount of training and
service with the Company prior to performing more sophisticated and technical
jobs.
 
PROPRIETARY TECHNOLOGY
 
     The Company has developed proprietary technology and know-how that it uses
in connection with its provision of cleaning services to customers. Certain of
the equipment used by the Company contains components that are readily available
in the industry; however, the Company custom designs and fabricates many
components. The design of these custom components and the design of certain
equipment used in specialized operations are proprietary to the Company. The
Company owns a substantial number of vehicles and other pieces of production
equipment that have been specially made or customized for MPW. Some of the water
cleaning services provided by the Company are dependent upon the Company's
proprietary technologies and self-designed equipment, tools and accessories.
This technology is not only encompassed by the techniques used by its service
personnel in providing services, but is inherent in the design of the component
parts of the equipment used by the Company in providing those services.
 
COMPETITION
 
     The market for industrial services is fragmented. There are many
competitors, no one of which MPW believes holds a substantial market share. The
Company competes with a number of companies in substantially all of the regions
in which it operates. The larger national or regional industrial service
companies are typically divisions or subsidiaries of engineering, construction
or other service firms. In recent years there has been a greater concentration
of resources in the industrial cleaning industry. In October 1996, The
ServiceMaster Company acquired Premier Manufacturing Support Services, Inc., one
of the leading providers of outsourcing services to the automotive industry. In
July 1997, Philip Services Corp. (formerly Philip Environmental, Inc.) acquired
Allwaste, Inc. and Serv-Tech, Inc., and in September 1998, HydroChem Industrial
Services, Inc. announced its intention to acquire Valley Systems, Inc., all of
which are competitors of the Company. Some of
 
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the larger industrial services companies have significantly greater financial
and other resources than the Company.
 
     The Company believes that the principal competitive factors in the
industrial services industry are experience, capability and price
competitiveness. The Company believes that its principal competitive advantages
are the quality of the equipment that it uses, its ability to respond quickly to
customer needs and its reputation for competent and professional personnel. MPW
positions itself competitively as a value leader and not a price leader, though
it remains necessary for MPW to price its services at levels where its customers
will achieve cost savings versus performing the same services themselves.
 
REGULATION
 
     The Company's operations are subject to numerous rules and regulations at
the federal, state and local levels. All of the Company's operations are subject
to regulations issued by the United States Department of Labor under the
Occupational Safety and Health Act. These regulations have strict requirements
for protecting employees involved with any materials that are classified as
hazardous.
 
     As part of its services, the Company provides support to its customers for
the management of their hazardous materials and other contaminants generally in
the form of assisting in the movement of such materials within customers'
facilities and, occasionally, assisting its customers in the logistics of
transporting hazardous materials, including advising customers on the completion
of waste manifests and providing customers with information regarding permitted
disposal facilities. The Company does not transport or dispose of such hazardous
materials itself, and the Company attempts to not take regulatory responsibility
for such hazardous materials. The Company attempts to avoid such regulatory
responsibility by not taking title to any wastes as defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976 and the Superfund Amendments and
Reauthorization Act.
 
     As part of its industrial container cleaning operations, the Company
manages certain solvents used in the cleaning process. Once they are used, these
solvents are sent by licensed transporters to licensed recycling facilities. The
Company does not believe that its current activities are subject to the
regulations pertaining to hazardous waste treatment, storage or disposal
facilities or transporters of such wastes. The Company's industrial container
cleaning operation is subject to regulations pertaining to the disposition of
spent solvents. This facility was constructed by the Company in compliance with
such regulatory requirements and the Company believes that it provides adequate
safeguards to prevent environmental exposure.
 
     The Company's employees typically perform their work within the customer's
operating facilities. These work environments generally do not expose the
customer's employees or the Company's employees to hazardous materials beyond
levels allowed by applicable regulations. The Company's employees also generally
do not perform work that requires any direct contact with harmful materials.
Occasionally, as part of the Company's support services, Company employees may,
at a customer's request, move hazardous materials within such customer's
facility. In addition, some of the Company's more specialized cleaning
procedures may require Company employees to work near hazardous materials.
Before any such work is commenced, however, a complete survey of the material is
performed and a health and safety plan with respect to such material is
developed and implemented. Company employees are required to perform such work
only with the proper protective equipment and training.
 
     The Company maintains a full-time staff of safety and environmental
specialists to ensure that the Company's personnel operate in safe conditions
and are properly protected against harmful exposure. The staff of specialists
design training materials, develop safety and environmental policies and
materials, conduct training classes for employees regarding compliance with
governmental regulations and Company procedures, conduct environmental and
safety audits at Company work sites and monitor safety and environmental
compliance at on-site customer locations.
 
     MPW believes that it has obtained the permits and licenses required to
perform its business and believes that it is in substantial compliance with all
federal, state and local laws and regulations governing its business. To date,
the Company has not been subject to any significant fines, penalties or other
liabilities under such laws and
 
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regulations. However, no assurance can be given that future changes in such law
and regulations, or interpretations thereof, will not have an adverse impact on
the Company's operations.
 
INSURANCE
 
     Much of the work performed by the Company is pursuant to contracts that
require the Company to indemnify the customer for injury or damage occurring on
the work site. The terms of such indemnity agreements vary, but generally they
provide that the Company is required to indemnify the customer for losses
resulting from or incurred in connection with the actions of the Company in
providing its services whether or not the Company has been negligent. Liability
for such indemnification claims is covered primarily by the Company's insurance
policies.
 
     Although the Company believes that its insurance coverage is consistent
with industry practice, there are exclusions from the Company's insurance
coverage for matters of environmental pollution and other types of environmental
damage claims. An uninsured or partially insured claim, if successful and of
sufficient magnitude, could have a material adverse effect on the Company or its
financial condition.
 
INVESTMENT CONSIDERATIONS
 
  Highly Competitive Industry
 
     The industrial services industry is highly competitive and fragmented and
requires substantial labor and capital resources. Each of the geographic markets
in which the Company competes or will likely compete is served by one or more of
the larger national or regional industrial services companies, as well as
numerous local industrial services companies of varying sizes and resources. The
larger industrial services companies may have significantly greater financial
and other resources than the Company. From time to time, these or other
competitors may reduce the price of their services in an effort to expand market
share. These practices may either require MPW to reduce the pricing of its
services or result in a loss of business. There can be no assurance that the
Company will be able to compete effectively with existing or potential
competitors and any inability to compete would have a material adverse effect on
the Company's competitive strategies, results of operations and its efforts to
achieve its objectives.
 
  Dependence on Customer Outsourcing
 
     The Company's business and growth strategies depend in large part on the
continuation of a trend toward outsourcing industrial services. The decision to
outsource is dependent upon customer perception that outsourcing may provide
higher quality services at a lower overall cost and such decision is subject to
change at the customer's discretion. There can be no assurance that the trend
toward outsourcing industrial services will continue, as organizations, due to
perceptions of quality or pricing advantages, may elect to perform such services
in-house. In addition, labor unions representing employees of certain of the
Company's current and prospective customers have generally opposed the
outsourcing trend and sought to direct to union employees the performance of
services typical of those offered by the Company. A reversal of the trend toward
outsourcing could have a material adverse effect on the Company's business and
growth strategies.
 
  Risks Related to Growth Through Acquisition
 
     One of MPW's business strategies is to increase its revenues, earnings and
market share through the acquisition of businesses that complement its existing
operations, expand its service capabilities or provide it with an entry into
markets it does not currently serve. Growth through acquisitions involves
substantial risks, including the risk of improper valuation of the acquired
business and the risk of inadequate integration. There can be no assurance that
suitable acquisition candidates will be available, that the Company will have
access to financing or that MPW will be able to acquire or profitably integrate
such additional businesses. The Company may compete for acquisition and
expansion opportunities with companies that have significantly greater financial
resources than the Company. In addition, to the extent that consolidation
becomes more prevalent in the industry, the prices for attractive acquisition
candidates may be increased, and there can be no assurance that businesses
acquired in the future will achieve levels of profitability that justify the
investment therein. The risks associated with growth
 
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through acquisitions could have a material adverse effect on the Company's
growth strategies as well as its business, results of operations and financial
condition.
 
  Environmental Risks
 
     Although the Company attempts to not take responsibility for, nor transport
or dispose of, hazardous materials generated by the Company's customers in the
normal course of the Company's business, the Company does provide support to its
customers for the management of their hazardous materials. Such support includes
certain on-site movement and packaging of its customers' hazardous materials and
logistical support for its customers' transportation and disposal of hazardous
materials. In addition, some of the Company's more specialized cleaning
procedures may require Company employees to work near hazardous materials. In
performing such services, the Company could potentially be liable to third
parties or its employees for various claims for property damage or personal
injury stemming from a release of hazardous substances or otherwise. Personal
injury claims could arise contemporaneously with performance of the work or long
after completion of the project as a result of alleged exposure to toxic
substances. A large number of such claims or one or more such claims that result
in a significant liability to the Company could have a material adverse effect
upon the Company. See "-- Regulation."
 
  Concentration of Customers
 
     In fiscal 1998, MPW's ten largest customers represented 48% of revenues.
General Motors Corporation represented 14.4% and each of Chrysler Corporation
and Toyota Motor Corporation represented over 5% of fiscal 1998 revenues.
Substantially all of the Company's arrangements to perform services may be
terminated or modified by its customers at will and without penalty. Although
MPW has historically maintained long-term relationships with many customers, a
portion of the Company's services are project oriented and the Company has few
long-term contracts. The Company's loss of, and failure to replace the revenues
from, one or more large customers, could have a material adverse effect on the
Company's business, results of operations and financial condition.
 
  Availability of Labor Personnel
 
     MPW's industrial cleaning and facility support services are labor
intensive. The Company employs a large number of hourly workers in order to
provide its services and incurs substantial expenses for recruiting and training
new personnel. Approximately 80% of the Company's workforce is comprised of
hourly workers. The current low unemployment rate in certain geographic areas in
which MPW operates has contracted the labor pool available to the Company in
those areas. The Company has historically experienced a high level of turnover,
and there can be no assurance that the Company will be able to maintain a labor
force adequate to operate efficiently, that the Company's labor expenses will
not increase as a result of a shortage in the supply of hourly workers or that
the Company will not have to curtail its growth strategy as a result of labor
shortages.
 
  General Economic Conditions
 
     The Company's results of operations may fluctuate as a result of general
economic conditions. Many of the Company's customers operate in industries, such
as the automotive and steel industries, which have historically shown
sensitivity to recessions and other adverse conditions in the general economy.
Consequently, a general or regional economic downturn may result in a reduction
in the demand for the Company's services and, thus, have a material adverse
effect on the Company's business, results of operations and financial condition.
 
  Fluctuations in Quarterly Results
 
     The Company's quarterly results of operations may fluctuate 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 and changes in its competitors'
pricing policies. 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. The
Company's results of
 
                                        9
<PAGE>   11
 
operations tend to vary seasonally, with the third quarter generating the least
amount of revenues, higher revenues in the second quarter and the greatest
amount of revenues in the first and fourth quarters. As a result, the Company's
financial performance can vary significantly from quarter to quarter, which
could have an impact on the Company's stock price.
 
  Voting Control of Current Shareholders
 
     Monte R. Black, Chairman of the Board and Chief Executive Officer, owns
beneficially, directly and indirectly, approximately 57.9% of the outstanding
Common Stock. Accordingly, Mr. Black is able to exercise control over the
Company's affairs, the election of individuals to the Board of Directors and the
outcome of other matters submitted to a vote of shareholders.
 
  Dependence on Senior Management
 
     MPW's success is largely dependent upon the efforts of the members of its
senior management team, particularly Monte R. Black, Chairman of the Board and
Chief Executive Officer, and Ira O. Kane, President and Chief Operating Officer.
If these executive officers or certain other officers of the Company do not
continue in their present positions, or if a material number of other managers
fail to continue with the Company, MPW's business could be adversely affected.
See "Executive Officers of the Company" in Part I of this Form 10-K.
 
ITEM 2.  PROPERTIES
 
FACILITIES
 
     The Company currently services customers through its Hebron, Ohio
headquarters and 40 branch locations in 19 states plus Canada and Mexico. The
Company owns an industrial container cleaning facility in Cleveland, Ohio and a
facility in Nashville, Tennessee, which is used in its filtration management
business. Many of the Company's locations are leased facilities ranging from
3,000 to 37,400 square feet at which the Company houses equipment and maintains
a small sales and administrative staff. Each industrial cleaning branch location
is equipped to perform minor equipment maintenance. The Company leases its
principal executive offices and main fabrication, maintenance and training
facility in Hebron, Ohio, consisting of approximately 67,000 square feet, its
industrial water facility located in Newark, Ohio, consisting of approximately
14,000 square feet, and its industrial container cleaning facility located in
Chesterfield, Michigan, consisting of approximately 36,000 square feet, from
related parties. See "Item 13. Certain Relationships and Related Transactions."
 
     Most of the Company's facilities are in sufficient proximity to another of
the Company's facilities to enable the Company to transfer equipment and
personnel between locations to respond to fluctuating service demands and to
perform larger projects. The Company believes that such location strategy
maximizes utilization of equipment and personnel. Operating and sales personnel
staff the Company's service facilities and operate under the direction of
divisional and regional management in accordance with policies, procedures and
objectives established by the Company's management.
 
ITEM 3.  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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
                                       10
<PAGE>   12
 
EXECUTIVE OFFICERS OF THE COMPANY
 
     The Company furnishes the following information concerning the executive
officers of the Company. Executive officers are elected annually by and serve at
the pleasure of the board of directors.
 
     Monte R. Black (age 48).  Mr. Black originally founded the Company in 1972
and has served as Chief Executive Officer and Chairman of the Board of Directors
since that time.
 
     Ira O. Kane (age 51).  Mr. Kane has served as President, Chief Operating
Officer and Director of the Company since March 1994. Prior to joining the
Company, Mr. Kane served as chairman of the board of directors, senior executive
vice president and director of NSC Corporation, an asbestos abatement company,
and president and chief operating officer of NSC Industrial Services Corp., an
industrial services company, from June 1993 until February 1994. Prior to
joining NSC Corporation, Mr. Kane served as director and executive vice
president of OHM Corporation, an environmental services company, from January
1984 until June 1993. Prior to joining OHM Corporation, Mr. Kane was a partner
with Crabbe, Brown, Jones, Potts & Schmidt, a law firm.
 
     Daniel P. Buettin (age 45).  Mr. Buettin has served as Vice President,
Chief Financial Officer and Assistant Secretary of the Company since September
1995. Prior to joining the Company, Mr. Buettin served in the following
capacities with OHM Corporation, an environmental services company: (i) chief
financial officer and vice president of finance from November 1994 until June
1995; (ii) vice president and general manager -- midwest region from April 1992
until November 1994; and (iii) corporate controller from February 1987 until
April 1992. Before joining OHM Corporation, Mr. Buettin was employed by Arthur
Andersen & Co., a public accounting firm.
 
     Robert J. Gilker (age 47).  Mr. Gilker has served as Vice President, Law
and Administration and Secretary of the Company since August 1998. Prior to
joining the Company, Mr. Gilker was a partner with Jones, Day, Reavis & Pogue, a
law firm, since 1987.
 
     Brad A. Martyn (age 37).  Mr. Martyn has served as Corporate Controller,
Treasurer and Assistant Secretary of the Company since December 1995. Prior to
joining the Company, Mr. Martyn served in the following capacities for OHM
Corporation, an environmental services company: (i) corporate director of
finance from May 1995 until November 1995; (ii) controller -- eastern operations
from August 1994 until May 1995; (iii) controller -- southern region from
February 1990 until August 1994; and (iv) corporate tax manager from May 1987
until February 1990. Before joining OHM Corporation, Mr. Martyn was employed by
Arthur Andersen & Co., a public accounting firm.
 
                                    PART II
 
ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company's Common Stock has been traded on the Nasdaq National Market
("NASDAQ") under the symbol "MPWG" since the Company's initial public offering
on December 2, 1997 (the "Offering"). As of September 18, 1998, the Company had
approximately 59 shareholders of record. The following table sets forth, for the
periods indicated, the range of high and low closing prices for the Common Stock
as reported on NASDAQ:
 
<TABLE>
<CAPTION>
                                                               PRICE RANGE
                                                              -------------
                        FISCAL 1998                           HIGH      LOW
                        -----------                           ----      ---
<S>                                                           <C>       <C>
Second Quarter (from December 2, 1997)......................    9 5/16   9
Third Quarter...............................................   11 1/2    7 1/4
Fourth Quarter..............................................   13 7/8   10 1/2
</TABLE>
 
     The Company anticipates that all future earnings will be retained to
finance the Company's operations and for the growth and development of its
business. Accordingly, the Company does not currently anticipate paying cash
dividends on its Common Stock. The payment of any future dividends will be
subject to the discretion of the Board of Directors of the Company and will
depend on the Company's results of operations, financial condition, contractual
restrictions, restrictions imposed by applicable law and other factors that the
Board of Directors deem relevant. The Company's credit facilities contain
covenants that prohibit the payment of cash dividends.
 
                                       11
<PAGE>   13
 
ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA
 
The selected consolidated financial data presented below as of and for each of
the years in the five-year period ended June 30, 1998 have been derived from the
Consolidated Financial Statements, which have been audited by Ernst & Young LLP,
independent auditors. The selected consolidated financial data below should be
read in conjunction with the audited Consolidated Financial Statements of the
Company, including the Notes thereto, set forth in Item 8 of this Form 10-K and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" ("MD&A") set forth in Item 7 of this Form 10-K.
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED JUNE 30,(1)
                                           ---------------------------------------------------
                                            1994       1995       1996      1997(2)    1998(2)
                                           -------    -------    -------    -------    -------
                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>        <C>        <C>        <C>        <C>
STATEMENT OF INCOME DATA:
Revenues.................................  $49,172    $56,305    $58,430    $72,908    $93,416
Costs and expenses:
  Cost of services.......................   31,759     37,768     37,543     48,460     63,012
  Selling, general and administrative
     expenses............................    9,265     10,208     11,009     13,603     16,657
  Depreciation and amortization(3).......    4,589      4,356      4,933      3,655      3,610
  Deferred stock option
     compensation(4).....................       --         --         --      2,764      3,415
  Non-recurring item(5)..................    1,011         --         --         --         --
                                           -------    -------    -------    -------    -------
  Total costs and expenses...............   46,624     52,332     53,485     68,482     86,694
                                           -------    -------    -------    -------    -------
Income from operations...................    2,548      3,973      4,945      4,426      6,722
Interest expense, net....................      274        104        541        974        874
Minority earnings(6).....................       --         --        172        207        119
                                           -------    -------    -------    -------    -------
Income from continuing operations before
  income taxes...........................    2,274      3,869      4,232      3,245      5,729
Provision for income taxes(7)............      134        331        360      1,085        336
                                           -------    -------    -------    -------    -------
Income from continuing operations........    2,140      3,538      3,872      2,160      5,393
Discontinued operations, net of income
  taxes..................................      268        367        163         --         --
                                           -------    -------    -------    -------    -------
Net income...............................  $ 2,408    $ 3,905    $ 4,035    $ 2,160    $ 5,393
                                           =======    =======    =======    =======    =======
Pro forma information:
  Historical income from continuing
     operations before taxes.............                                   $ 3,245    $ 5,729
  Pro forma taxes on income..............                                     1,298      2,292
                                                                            -------    -------
  Pro forma net income...................                                   $ 1,947    $ 3,437
                                                                            =======    =======
  Pro forma net income per common
     share...............................                                   $  0.31    $  0.40
                                                                            =======    =======
  Pro forma net income per common share,
     assuming dilution...................                                   $  0.29    $  0.37
                                                                            =======    =======
  Weighted average common shares
     outstanding.........................                                     6,200      8,604
  Weighted average common shares
     outstanding, assuming dilution......                                     6,765      9,290
</TABLE>
 
                                       12
<PAGE>   14
 
<TABLE>
<CAPTION>
                                                                JUNE 30,
                                           ---------------------------------------------------
                                            1994       1995       1996       1997       1998
                                           -------    -------    -------    -------    -------
                                                             (IN THOUSANDS)
<S>                                        <C>        <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Working capital..........................  $ 4,394    $ 3,906    $ 2,521    $ 7,069    $11,429
Net property and equipment...............   13,004     12,775     21,258     23,400     28,593
Total assets.............................   26,579     27,695     39,468     45,285     72,367
Total debt and capital leases, including
  current maturities.....................    2,328      1,234     12,471     14,732     16,991
Total shareholders' equity...............   16,681     16,605     16,067     16,478     39,721
</TABLE>
 
---------------
(1) During the three month period ended December 31, 1997, numerous events
    occurred and certain transactions were recorded that were directly related
    to the Offering and affect the comparability of the results of operations
    for the Company for the year ended June 30, 1998 to prior periods. See MD&A
    set forth in Item 7 of this Form 10-K.
 
(2) The pro forma financial results of operations presented for the years ended
    June 30, 1997 and 1998 reflect a pro forma adjustment to taxes on income
    based on an effective rate of 40.0% for the periods prior to the termination
    of Industrial's S Corporation status. See Note (7) below.
 
(3) Effective July 1, 1996, the Company changed its useful life assumptions for
    certain categories of property and equipment, resulting in a $1,620,000
    reduction in depreciation and amortization expense in fiscal 1997. See Note
    4 to the Consolidated Financial Statements.
 
(4) Represents compensation expense related to the Company's obligation, under
    certain conditions, to repurchase securities issued under certain of the
    Company's stock option plans. Such repurchase obligation terminated
    effective with the Offering.
 
(5) Represents charges related principally to the termination of certain
    workers' compensation insurance with the State of Ohio's Bureau of Workers'
    Compensation by the Company. This change occurred effective October 1, 1993,
    whereby the Company restructured its primary workers' compensation insurance
    program with respect to the State of Ohio.
 
(6) Effective December 5, 1997, the Company purchased the remaining minority
    stock ownership interests in Aquatech.
 
(7) Prior to October 31, 1997, Industrial was an S Corporation for income tax
    purposes and did not record a provision for federal and certain state income
    taxes. However, certain of the Company's other subsidiaries were
    historically taxed as C Corporations and appropriate provisions for federal
    and state income taxes were recorded. Effective October 31, 1997, Industrial
    terminated its S Corporation status and became subject to corporate income
    taxes.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
 
     The following information should be read in conjunction with the
Consolidated Financial Statements of the Company, including the Notes thereto,
set forth in Item 8 of this Form 10-K.
 
OVERVIEW
 
     The Company has been providing industrial services to customers for over 25
years. In recent years, the Company added several key members to its management
team and developed a strategy to more aggressively pursue acquisitions and
internal growth initiatives, as well as to implement systems, controls and other
infrastructure necessary to support future growth.
 
     MPW primarily derives its revenues by providing industrial services and
materials under time and materials or fixed price agreements with its customers.
Revenues from time and materials agreements are recognized based on labor and
materials expended. Revenues from fixed price agreements are recorded based on
the percentage of completion method.
 
     Cost of services includes all direct labor, materials, subcontractor and
other costs related to the performance of MPW's services. Cost of services also
includes all costs associated with the Company's 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 the Company's
information systems.
 
                                       13
<PAGE>   15
 
     Depreciation and amortization consists of depreciation of operating
equipment and amortization of capital leases and goodwill. Depreciation is
calculated using the straight-line method over the estimated useful lives of
property and equipment. Capital leases are amortized on a straight-line basis
over the lease term and goodwill is amortized on a straight-line basis over a
period not exceeding 25 years. Depreciation and amortization as a percentage of
revenues declined in the year ended June 30, 1997 ("fiscal 1997") primarily as a
result of the Company's decision to change its estimates of the useful lives of
certain property and equipment, effective July 1, 1996. The Company made this
change in order to more accurately reflect the Company's actual history of
useful lives. The Company used the net book value of each of its property and
equipment assets as of July 1, 1996 and applied the remaining useful life of
each asset in the calculation of depreciation from that date forward. The change
reduced fiscal 1997 depreciation and amortization expense by $1.6 million.
 
     Effective December 31, 1995, MPW disposed of its 70% interest in B&B
Underground. See Note 5 to the Consolidated Financial Statements. The operations
and subsequent sale of the Company's interest in B&B Underground have been
accounted for as discontinued operations and the Consolidated Financial
Statements have been restated to report this business separately as discontinued
operations for all periods presented.
 
     In April 1996, the Company expanded into the complementary business of
industrial filtration management services through the acquisition of Weston,
with revenues of $8.6 million for the twelve-month period ended June 30, 1996.
In fiscal 1998, the Company completed the acquisitions of four companies, ESI
International, the Vinewood Companies, Straightline Optical Service and
Maintenance Concepts (collectively, the "1998 acquisitions"). The 1998
acquisitions contributed $7.0 million of revenues in fiscal 1998. See Note 3 to
the Consolidated Financial Statements.
 
     On December 1, 1997, the Registration Statement related to the Offering was
declared effective by the Securities and Exchange Commission and the Company's
stock began trading on NASDAQ on December 2, 1997. Pursuant to the terms of the
Offering, on December 5, 1997, the Company issued 3,750,000 shares of its common
stock that were sold at $9.00 per share. On January 2, 1998, the over-allotment
option in connection with the Offering was partially exercised and on January 6,
1998, the Company issued an additional 237,500 shares of its common stock at
$9.00 per share. The net proceeds to the Company in connection with the
Offering, including the partial exercise of the over-allotment option, were
$33.4 million before deducting expenses of $1.3 million.
 
     During the three month period ended December 31, 1997, numerous events
occurred and certain transactions were recorded that were directly related to
the Offering and affect the comparability of the results of operations for the
Company for fiscal 1998 to fiscal 1997. These events and transactions were:
 
          1. Effective October 31, 1997, Industrial terminated its S Corporation
     election under subchapter S of the Internal Revenue Code of 1986, as
     amended, for federal income tax purposes and under comparable state tax
     laws. In connection therewith, Industrial declared a dividend of $21.2
     million evidenced by the AAA Notes, as defined in Note 2 of the
     Consolidated Financial Statements of the Company set forth in Item 8 of
     this Form 10-K, and the Company recorded a net non-recurring tax benefit of
     $702,000 and a related current deferred tax asset and noncurrent deferred
     tax liability of $2.1 million and $1.4 million, respectively.
 
          2. In connection with the Offering, the Company recorded a non-cash,
     non-recurring charge of $1,869,000, net of tax, associated with certain of
     its stock option plans. This charge resulted in a concurrent increase in
     paid-in capital. The Company also eliminated the related deferred stock
     option compensation liabilities previously recorded because, effective with
     the Offering, the Company's repurchase obligations for stock options
     exercised under these stock option plans were eliminated.
 
          3. Effective with the Offering, the Company adjusted the historical
     lease costs for certain facilities leased by the Company from related
     parties and recharacterized such leases from capital to operating as a
     result of restructured lease agreements.
 
          4. On December 5, 1997, the Company purchased certain minority stock
     ownership interests in Aquatech with cash in the amount of $339,000 and the
     issuance of 37,667 shares of the Company's common stock.
 
                                       14
<PAGE>   16
 
          5. On December 5, 1997 the Company used a portion of the net proceeds
     from the Offering to repay $15.9 million of outstanding liabilities to its
     principal banks.
 
          6. During December 1997, the Company used a portion of the net
     proceeds from the Offering to repay $13.4 million of the outstanding
     balance of the AAA Notes.
 
     For purposes of this MD&A, the following adjusted pro forma information is
being presented as supplemental information to the Consolidated Financial
Statements contained in Item 8 of this Form 10-K for fiscal 1997 and 1998, only.
Management's analysis of fiscal 1998 compared to fiscal 1997 under the heading
of "Results of Operations" below utilizes this supplemental information.
 
                         ADJUSTED PRO FORMA INFORMATION
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED JUNE 30,
                                                              --------------------
                                                                1997        1998
                                                              --------    --------
<S>                                                           <C>         <C>
Income from continuing operations before income taxes as
  reported..................................................   $3,245      $5,729
Adjustments other than income taxes:
  Reduction of historical lease costs for certain facilities
     leased by the Company from related parties pursuant to
     restructured lease agreements which took effect in
     connection with the Offering...........................      261          90
  Elimination of interest expense, net, related to repayment
     of existing debt from the proceeds of the Offering.....      618         438
  Elimination of minority earnings as a result of the
     Company's purchase of certain minority shareholders'
     interests effective with the Offering..................      207         119
  Elimination of deferred stock option compensation
     expense................................................    2,764       3,415
                                                               ------      ------
Adjusted pro forma income before income taxes...............    7,095       9,791
Provision for income taxes(1)...............................    2,838       3,916
                                                               ------      ------
Adjusted pro forma net income...............................   $4,257      $5,875
                                                               ======      ======
Adjusted pro forma net income per common share..............   $ 0.43      $ 0.58
                                                               ======      ======
Adjusted pro forma net income per common share, assuming
  dilution..................................................   $ 0.40      $ 0.54
                                                               ======      ======
Weighted average common shares outstanding(2)...............    9,988      10,202
Weighted average common shares outstanding, assuming
  dilution(2)...............................................   10,669      10,901
</TABLE>
 
---------------
(1) Based on an effective rate of 40%.
 
(2) Based on the assumption that the sale of 3,750,000 shares of the Company's
    common stock in the Offering and the issuance of 37,667 shares of the
    Company's common stock in exchange for certain minority shareholders'
    interests occurred at the beginning of each period presented.
 
                                       15
<PAGE>   17
 
(3) The following table presents the Company's unaudited consolidated quarterly
    financial results of operations on an adjusted pro forma basis for each of
    the four quarters in fiscal 1997 and 1998:
 
<TABLE>
<CAPTION>
                                                                    QUARTER ENDED                             YEAR
                                              ---------------------------------------------------------      ENDED
                                              SEPTEMBER 30   DECEMBER 31      MARCH 31       JUNE 30        JUNE 30
                                              ------------   ------------   ------------   ------------   ------------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
 <S>                                          <C>            <C>            <C>            <C>            <C>
 FISCAL 1998
 Revenues...................................    $21,756        $24,078        $21,021        $26,561        $93,416
 Costs and expenses:
   Cost of services.........................     14,271         16,237         14,759         17,745         63,012
   Selling, general and administrative
     expenses...............................      3,587          4,230          4,024          4,872         16,713
   Depreciation and amortization............        841            856            831          1,049          3,577
                                                -------        -------        -------        -------        -------
   Total costs and expenses.................     18,699         21,323         19,614         23,666         83,302
                                                -------        -------        -------        -------        -------
 Adjusted pro forma income from
   operations...............................      3,057          2,755          1,407          2,895         10,114
 Interest expense, net......................         --             --             86            237            323
                                                -------        -------        -------        -------        -------
 Adjusted pro forma income before income
   taxes....................................      3,057          2,755          1,321          2,658          9,791
 Provision for income taxes.................      1,209          1,102            528          1,077          3,916
                                                -------        -------        -------        -------        -------
 Adjusted pro forma net income..............    $ 1,848        $ 1,653        $   793        $ 1,581        $ 5,875
                                                =======        =======        =======        =======        =======
 Adjusted pro forma net income per common
   share, assuming dilution.................    $  0.17        $  0.15        $  0.07        $  0.14        $  0.54
                                                =======        =======        =======        =======        =======
 Weighted average common shares outstanding,
   assuming dilution........................     10,738         10,774         10,996         11,143         10,901
 
 FISCAL 1997
 Revenues...................................    $19,422        $18,157        $15,994        $19,335        $72,908
 Costs and expenses:
   Cost of services.........................     12,641         11,925         10,900         12,994         48,460
   Selling, general and administrative
     expenses...............................      3,382          3,476          3,588          3,865         14,311
   Depreciation and amortization............        747            759            764            772          3,042
                                                -------        -------        -------        -------        -------
   Total costs and expenses.................     16,770         16,160         15,252         17,631         65,813
                                                -------        -------        -------        -------        -------
 Adjusted pro forma income from
   operations...............................      2,652          1,997            742          1,704          7,095
 Interest expense, net......................         --             --             --             --             --
                                                -------        -------        -------        -------        -------
 Adjusted pro forma income before income
   taxes....................................      2,652          1,997            742          1,704          7,095
 Provision for income taxes.................      1,060            799            297            682          2,838
                                                -------        -------        -------        -------        -------
 Adjusted pro forma net income..............    $ 1,592        $ 1,198        $   445        $ 1,022        $ 4,257
                                                =======        =======        =======        =======        =======
 Adjusted pro forma net income per common
   share, assuming dilution.................    $  0.15        $  0.11        $  0.04        $  0.10        $  0.40
                                                =======        =======        =======        =======        =======
 Weighted average common shares outstanding,
   assuming dilution........................     10,669         10,669         10,669         10,669         10,669
</TABLE>
 
                                       16
<PAGE>   18
 
RESULTS OF OPERATIONS
 
     The following table sets forth, for the periods indicated, consolidated
statement of income data as a percentage of revenues for actual results for the
years ended June 30, 1996, 1997 and 1998 and adjusted pro forma results for the
years ended June 30, 1997 and 1998:
 
<TABLE>
<CAPTION>
                                                 ACTUAL, AS REPORTED           ADJUSTED PRO FORMA
                                             ---------------------------      --------------------
                                                 YEAR ENDED JUNE 30,          YEAR ENDED JUNE 30,
                                             ---------------------------      --------------------
                                             1996       1997       1998        1997         1998
                                             -----      -----      -----      -------      -------
<S>                                          <C>        <C>        <C>        <C>          <C>
Revenues...................................  100.0%     100.0%     100.0%      100.0%       100.0%
Costs and expenses:
  Cost of services.........................   64.3       66.5       67.5        66.5         67.5
  Selling, general and administrative
     expenses..............................   18.8       18.7       17.8        19.6         17.9
  Depreciation and amortization............    8.4        5.0        3.9         4.2          3.8
  Deferred stock option compensation.......     --        3.8        3.7          --           --
                                             -----      -----      -----       -----        -----
  Total costs and expenses.................   91.5       93.9       92.8        90.3         89.2
                                             -----      -----      -----       -----        -----
Income from operations.....................    8.5        6.1        7.2         9.7         10.8
Interest expense, net......................    0.9        1.3        0.9          --          0.3
Minority earnings..........................    0.3        0.3        0.1          --           --
                                             -----      -----      -----       -----        -----
Income from continuing operations before
  income taxes.............................    7.2        4.5        6.1         9.7         10.5
Provision for income taxes.................    0.6        1.5        0.4         3.9          4.2
                                             -----      -----      -----       -----        -----
Income from continuing operations..........    6.6%       3.0%       5.8%        5.8%         6.3%
                                             =====      =====      =====       =====        =====
</TABLE>
 
  Fiscal 1998 Compared to Fiscal 1997
 
     Basis of Presentation.  Management's analysis of fiscal 1998 compared to
fiscal 1997 utilizes the adjusted pro forma information as provided in the
tables above.
 
     Revenues.  Revenues increased by $20.5 million, or 28.1%, to $93.4 million
in fiscal 1998 from $72.9 million in fiscal 1997. The internal rate of growth in
revenues in fiscal 1998 was 18.5% as a result of growth of 11.9% in industrial
cleaning and facility support along with significant growth in each of the
Company's complementary services lines. Internal growth in revenues in the
Company's industrial filtration management service line in fiscal 1998 was
46.8%. The Company's internal growth was aided by new customers, cross-selling
and expansion of services to existing customers and geographic expansion.
Revenues also increased in fiscal 1998 as a result of the 1998 acquisitions.
 
     Cost of Services.  Cost of services increased by $14.5 million, or 30%, to
$63.0 million in fiscal 1998 from $48.5 million in fiscal 1997. Cost of services
as a percentage of revenues increased to 67.5% in fiscal 1998 from 66.5% in
fiscal 1997. The increase in cost of services as a percentage of revenues is the
result of a greater percentage of revenues being derived in fiscal 1998 from the
Company's industrial filtration management customers and from certain of the
Company's industrial cleaning and facility support customers from which the
Company experienced lower margins as compared to fiscal 1997.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased by $2.4 million, or 16.8%, to $16.7 million in
fiscal 1998 from $14.3 million in fiscal 1997. Selling, general and
administrative expenses decreased as a percentage of revenues to 17.9% in fiscal
1998 from 19.6% in fiscal 1997. The increase in selling, general and
administrative expenses is primarily due to the 1998 acquisitions, costs
associated with the Company's status as a public company and other investments
in the Company's infrastructure to support overall growth.
 
     Depreciation and Amortization.  Depreciation and amortization increased by
$535,000, or 17.6%, to $3.6 million in fiscal 1998 from $3.0 million in fiscal
1997. This increase is a result of additional capital expenditures relating to
the Company's growth and additional goodwill arising out of the 1998
acquisitions. Depreciation and
 
                                       17
<PAGE>   19
 
amortization decreased as a percentage of revenues to 3.8% in fiscal 1998 from
4.2% in fiscal 1997. This decrease as a percentage of revenues is primarily due
to revenue growth in the industrial container cleaning and industrial water
service lines for which capital investments were made in prior years and to
growth in revenues in industrial air filtration that requires less capital
investment than the Company's other service lines.
 
     Income from Operations.  Income from operations increased $3.0 million, or
42.6%, to $10.1 million in fiscal 1998 from $7.1 million in fiscal 1997. Income
from operations also increased as a percentage of revenues to 10.8% in fiscal
1998 from 9.7% in fiscal 1997. The increase in income from operations and the
improved operating margin are due to the factors discussed above.
 
     Interest Expense, net.  Immediately following the Offering, the Company had
no borrowings under the Credit Facility with its banks. For this reason,
interest expense has been eliminated in the adjusted pro forma information in
fiscal 1997 and through the first five months of fiscal 1998 to give effect as
if the repayment of the Company's debt obligations from the proceeds of the
Offering had occurred as of the beginning of the period. Adjusted pro forma
interest expense in fiscal 1998 is the result of new borrowings subsequent to
the Offering, primarily resulting from the 1998 acquisitions.
 
     Provision for Income Taxes.  Prior to October 31, 1997, Industrial was an S
Corporation for income tax purposes and did not record a provision for federal
and certain state income taxes. The provision for income taxes in the adjusted
pro forma information reflects an effective rate of 40% for each of the periods
presented prior to the Offering.
 
     Net Income and Net Income per Share.  Net income increased $1.6 million, or
38%, to $5.9 million in fiscal 1998 from $4.3 million in fiscal 1997. Assuming
dilution, net income per share increased to $0.54 in fiscal 1998 from $0.40 in
fiscal 1997. These increases are due to the factors discussed above. Weighted
average common shares outstanding used in the calculation of net income per
share for fiscal 1997 and 1998 assumes that the Offering and repurchase of
minority interests had occurred at the beginning of each of the periods
presented.
 
  Fiscal 1997 Compared to Fiscal 1996
 
     Basis of Presentation.  Management's analysis of fiscal 1997 compared to
the year ended June 30, 1996 ("fiscal 1996") utilizes actual, as reported
information.
 
     Revenues.  Revenues increased by $14.5 million, or 24.8%, to $72.9 million
in fiscal 1997 from $58.4 million in fiscal 1996. This increase resulted
primarily from the April 1996 acquisition of Weston, internal growth and
revenues generated from the Company's industrial container cleaning facility
that began full scale operations in September 1996. Revenues, exclusive of
revenues resulting from the Weston acquisition, increased $5.4 million, or 9.7%,
in fiscal 1997 over fiscal 1996. In addition to the opening of the Company's new
industrial container cleaning facility in September 1996, internal growth was
aided by three new offices opened in fiscal 1997 and related new customers,
price increases and increased volume of services provided to certain existing
customers.
 
     Cost of Services.  Cost of services increased by $10.9 million, or 29.1%,
to $48.5 million in fiscal 1997 from $37.5 million in fiscal 1996. Cost of
services as a percentage of revenues increased to 66.5% in fiscal 1997 from
64.3% in fiscal 1996. As a percentage of revenues, exclusive of the effect of
the Weston acquisition, costs of services increased to 64.8% for fiscal 1997
from 63.6% for fiscal 1996, which was primarily a result of investments made in
personnel and infrastructure during fiscal 1996 and fiscal 1997 to strengthen
the Company's service delivery capabilities in certain of its operations. The
Weston operations tend to have higher cost of services as a percentage of
revenues than the average for other Company operations.
 
     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased by $2.6 million, or 23.6%, to $13.6 million in
fiscal 1997 from $11.0 million in fiscal 1996. This increase was primarily due
to the Weston acquisition, the commencement of operations of the container
cleaning facility and an increase in other infrastructure investments in support
of the Company's growth. Selling, general and administrative expenses decreased
as a percentage of revenues to 18.7% for fiscal 1997 from 18.8% for fiscal 1996
primarily due to the benefits of absorbing certain fixed selling, general and
administrative expenses over an increased revenue base.
                                       18
<PAGE>   20
 
     Depreciation and Amortization.  Depreciation and amortization decreased by
$1.3 million, or 25.9%, to $3.7 million in fiscal 1997 from $4.9 million in
fiscal 1996. Effective July 1, 1996, the Company changed its estimates for the
remaining useful lives of certain property and equipment to more accurately
reflect the Company's actual history of useful lives. The Company used the net
book value of each of its property and equipment assets as of July 1, 1996 and
applied the remaining useful life of each asset in the calculation of
depreciation from that date forward.
 
     Income from Operations.  Excluding the $2.8 million of deferred stock
option compensation, income from operations increased $2.3 million, or 45.4%, to
$7.2 million in fiscal 1997 from $4.9 million in fiscal 1996. Income from
operations also increased as a percentage of revenues to 9.9% for fiscal 1997
from 8.5% for fiscal 1996. The increase was due to the factors discussed above.
 
     Interest Expense, net.  Interest expense, net increased $433,000 to
$974,000 in fiscal 1997 from $541,000 in fiscal 1996. This increase was
primarily the result of increased borrowings under the Company's credit
facilities due to the Weston acquisition, the completion of the Company's
industrial container cleaning facility and certain other capital expenditures.
 
     Income from Continuing Operations before Income Taxes.  For the reasons
described above, the Company's income from continuing operations before income
taxes, excluding the $2.8 million of deferred stock option compensation,
increased by $1.8 million, or 42%, to $6.0 million in fiscal 1997 from $4.2
million in fiscal 1996 and increased as a percentage of revenues to 8.2% for
fiscal 1997 from 7.2% for fiscal 1996.
 
QUARTERLY RESULTS AND SEASONALITY
 
     The Company's 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.
The Company's quarterly results of operations may fluctuate significantly 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 that, when
offset by differing levels of revenues, may result in fluctuations in quarterly
results.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The total proceeds of the Offering and partial exercise of the
underwriters' over-allotment option received by the Company were $32.1 million,
net of underwriting discounts and other costs associated with the Offering of
$3.8 million. Of the proceeds, the Company used $15.9 million to repay all of
the outstanding debt under the Company's various credit arrangements with its
principal banks. Additionally, $13.4 million was used to satisfy a portion of
the AAA Notes. As a result of these payments, and as of December 31, 1997, the
Company had no borrowings from its principal banks.
 
     On February 11, 1998, $3.6 million of AAA Notes were redeemed by the
Company in connection with the sale of a corporate aircraft to an entity
controlled by the Company's principal shareholder. On April 15, 1998, the
Company paid off the remaining $4.2 million of AAA Notes.
 
     During the period following the Offering and to June 30, 1998, the Company
borrowed $15.9 million primarily for the 1998 acquisitions and working capital
needs. The Company's total debt as of June 30, 1998, including current
maturities, was $16.9 million.
 
     As of June 30, 1998, the Company had cash and cash equivalents of $507,000
and working capital of $11.4 million. During fiscal 1998, the Company had net
cash provided by operating activities of $5.9 million and made capital
investments of $8.4 million.
 
     Subsequent to June 30, 1998, the Company completed two acquisitions and
borrowed an additional $6.5 million. Following these acquisitions, the Company's
borrowings grew from $16.9 million to approximately $24.0 million.
 
                                       19
<PAGE>   21
 
     Effective December 10, 1997, the Company entered into a new credit
agreement with its principal banks (the "Credit Facility"). The Credit Facility,
as amended, provides the Company with $50.0 million of credit availability for a
three-year period. Under the Credit Facility, $15.0 million is available for
working capital needs, of which $5.0 million may be used for letters of credit.
The remaining $35.0 million is available for use by the Company in growth
initiatives such as capital expenditure programs and acquisitions. Borrowing
under the Credit Facility is at rates, based on the prime or Eurodollar rate,
that the Company believes to be very favorable. Availability of borrowing is
subject to the maintenance of a minimum level of tangible net worth, certain
levels of debt service coverage and maintenance of a certain ratio of funded
debt to equity that the Company believes are achievable. In September 1998, the
Company received a commitment from its existing banks to increase its available
borrowings under the Credit Facility to $75.0 million. The Company expects to
finalize an amendment to the Credit Facility (the "$75.0 Million Credit
Facility") with respect to this commitment during the second quarter of the year
ended June 30, 1999 ("fiscal 1999").
 
     The Company actively seeks opportunities to expand its business operations.
If acquisition opportunities develop, the Company believes that it has adequate
financing capacity in the $75.0 Million Credit Facility. If acquisition
opportunities of significant size develop that would extend the Company's
borrowings beyond the capacity of the $75.0 Million Credit Facility, the Company
may be required to seek additional financing.
 
     In fiscal 1998, the Company completed four acquisitions that required an
aggregate of $14.5 million in cash and the issuance of 255,480 shares of Common
Stock. The Company intends to continue its strategy of complementing its
internal growth and to expand its service offerings through acquisitions. In the
first quarter of fiscal 1999, the Company entered into agreements in principle
to purchase certain other companies that may require the payment of up to an
aggregate of $5,050,000 in cash and the issuance of up to $6,800,000 in shares
of Common Stock. Each of these acquisitions is conditioned upon approval of both
companies' boards of directors, satisfactory completion of due diligence and
other customary conditions. The Company believes that it will continue to pursue
attractive acquisition opportunities.
 
     The Company believes that cash on hand as of June 30, 1998, cash flow from
operations and available borrowings under the $75.0 Million Credit Facility,
will be sufficient to fund the acquisitions discussed above, its currently
planned capital projects and operations for at least the next 24 months.
 
YEAR 2000 ISSUE
 
     Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize a date using "00" as the year 1900 rather than the year 2000. This
could cause many computer applications to fail completely or to create erroneous
results unless corrective measures are taken.
 
     The Company recognizes the need to ensure its operations will not be
adversely impacted by year 2000 software failures. Major areas of potential
business impact have been identified and initial conversion efforts are
underway. The Company is also addressing this risk with its suppliers, dealers,
financial institutions and others with which it does business to coordinate year
2000 conversion. The Company's main operating and financial system became year
2000 compliant effective with the recent normal software upgrade completed in
December 1997. The cost of achieving year 2000 compliance for the remaining
systems is estimated to be less than $100,000 over the cost of normal software
upgrades and replacements and will be incurred through the end of the second
quarter of fiscal 1999, at which time the Company expects that all of its
financial and operating systems will be year 2000 compliant.
 
INFLATION
 
     The effects of inflation on the Company's operations were not significant
during the periods presented in the Consolidated Financial Statements.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     The Company's exposures to market risk are not material.
 
                                       20
<PAGE>   22
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Directors
  MPW Industrial Services Group, Inc.
 
     We have audited the accompanying consolidated balance sheets of MPW
Industrial Services Group, Inc. and subsidiaries as of June 30, 1997 and 1998,
and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended June 30,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of MPW Industrial
Services Group, Inc. and subsidiaries at June 30, 1997 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1998, in conformity with generally
accepted accounting principles.
 
                                                               ERNST & YOUNG LLP
 
Columbus, Ohio
July 27, 1998
 
                                       21
<PAGE>   23
 
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                   JUNE 30,
                                                              ------------------
                                                               1997       1998
                                                              -------    -------
<S>                                                           <C>        <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $   489    $   507
  Accounts receivable.......................................   13,560     19,386
  Inventories...............................................    3,361      4,959
  Deferred income taxes.....................................       --      1,439
  Prepaid expenses..........................................      960      1,178
  Other current assets......................................      596        351
                                                              -------    -------
                                                               18,966     27,820
Property and equipment, net.................................   23,400     28,593
Noncurrent assets:
  Costs in excess of net assets of acquired businesses,
     net....................................................    2,518     15,115
  Other assets..............................................      401        839
                                                              -------    -------
          Total assets......................................  $45,285    $72,367
                                                              =======    =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 3,414    $ 6,279
  Accrued compensation and related taxes....................    3,052      3,729
  Current maturities of noncurrent liabilities..............      965      2,615
  Other accrued liabilities.................................    4,466      3,768
                                                              -------    -------
                                                               11,897     16,391
Noncurrent liabilities:
  Long-term debt............................................   11,719     14,296
  Capital leases............................................    2,048         80
  Deferred income taxes.....................................       --      1,192
  Deferred stock option compensation........................    2,764         --
  Other.....................................................       --        687
                                                              -------    -------
                                                               16,531     16,255
Minority interest...........................................      379         --
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;
     6,200,000 and 10,496,647 shares issued and outstanding
     at June 30, 1997 and 1998, respectively................       62        105
  Additional paid-in capital................................      837     37,591
  Retained earnings.........................................   15,579      2,025
                                                              -------    -------
                                                               16,478     39,721
                                                              -------    -------
          Total liabilities and shareholders' equity........  $45,285    $72,367
                                                              =======    =======
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       22
<PAGE>   24
 
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED JUNE 30,
                                                              -----------------------------
                                                               1996       1997       1998
                                                              -------    -------    -------
<S>                                                           <C>        <C>        <C>
Revenues....................................................  $58,430    $72,908    $93,416
Costs and expenses:
  Cost of services..........................................   37,543     48,460     63,012
  Selling, general and administrative expenses..............   11,009     13,603     16,657
  Depreciation and amortization.............................    4,933      3,655      3,610
  Deferred stock option compensation........................       --      2,764      3,415
                                                              -------    -------    -------
  Total costs and expenses..................................   53,485     68,482     86,694
                                                              -------    -------    -------
Income from operations......................................    4,945      4,426      6,722
Interest expense, net.......................................      541        974        874
Minority earnings...........................................      172        207        119
                                                              -------    -------    -------
Income from continuing operations before income taxes.......    4,232      3,245      5,729
Provision for income taxes..................................      360      1,085        336
                                                              -------    -------    -------
Income from continuing operations...........................    3,872      2,160      5,393
Discontinued operations, net of income taxes................      163         --         --
                                                              -------    -------    -------
Net income..................................................  $ 4,035    $ 2,160    $ 5,393
                                                              =======    =======    =======
Pro forma information (see Note 11):
  Historical income from continuing operations before
     taxes..................................................             $ 3,245    $ 5,729
  Pro forma taxes on income.................................               1,298      2,292
                                                                         -------    -------
  Pro forma net income......................................             $ 1,947    $ 3,437
                                                                         =======    =======
  Pro forma net income per common share.....................             $  0.31    $  0.40
                                                                         =======    =======
  Pro forma net income per common share, assuming
     dilution...............................................             $  0.29    $  0.37
                                                                         =======    =======
  Weighted average common shares outstanding................               6,200      8,604
  Weighted average common shares outstanding, assuming
     dilution...............................................               6,765      9,290
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       23
<PAGE>   25
 
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                         COMMON STOCK      ADDITIONAL
                                                        ---------------     PAID-IN      RETAINED
                                                        SHARES   AMOUNT     CAPITAL      EARNINGS
                                                        ------   ------    ----------    --------
<S>                                                     <C>      <C>       <C>           <C>
Balance at July 1, 1995...............................   6,200    $ 62      $    64      $ 16,479
  Net income..........................................      --      --           --         4,035
  Distributions.......................................      --      --           --        (4,616)
  Deferred translation adjustment.....................      --      --           --            43
                                                        ------    ----      -------      --------
Balance at June 30, 1996..............................   6,200      62           64        15,941
  Net income..........................................      --      --           --         2,160
  Distributions.......................................      --      --           --        (1,161)
  Distribution of previously consolidated affiliate...      --      --           --        (1,359)
  Capital contributions...............................      --      --          773            --
  Deferred translation adjustment.....................      --      --           --            (2)
                                                        ------    ----      -------      --------
Balance at June 30, 1997..............................   6,200      62          837        15,579
  Net income..........................................      --      --           --         5,393
  Distributions.......................................      --      --           --       (22,442)
  Capital contributions...............................      --      --          233            --
  Reclassification of retained earnings...............      --      --       (3,495)        3,495
  Issuance of common stock:
     Initial public offering, net of related
       expenses.......................................   3,988      40       32,053            --
     Acquisitions.....................................     293       3        2,946            --
     Stock plans......................................      16      --          112            --
  Elimination of deferred stock option compensation
     liability, net of taxes..........................      --      --        4,905            --
                                                        ------    ----      -------      --------
Balance at June 30, 1998..............................  10,497    $105      $37,591      $  2,025
                                                        ======    ====      =======      ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       24
<PAGE>   26
 
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED JUNE 30,
                                                              --------------------------------
                                                                1996        1997        1998
                                                              --------    --------    --------
<S>                                                           <C>         <C>         <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income..................................................  $  4,035    $  2,160    $  5,393
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation..............................................     4,421       2,953       3,384
  Amortization..............................................       512         702         226
  (Gain) loss on disposals of assets........................      (100)         76         (12)
  Gain on disposition of discontinued operation.............      (114)         --          --
  Minority interest.........................................       172         207         119
  Effect of exchange rate changes on cash...................        43          (2)         --
  Deferred stock option compensation........................        --       2,764       3,415
  Deferred income taxes.....................................        --          --        (247)
  Changes in operating assets and liabilities:
     Accounts receivable....................................      (796)     (2,043)     (4,098)
     Inventories............................................         2      (1,729)     (1,008)
     Prepaid expenses and other assets......................      (714)       (267)        128
     Accounts payable.......................................       722        (663)      1,987
     Other accrued liabilities..............................      (792)        837      (3,395)
                                                              --------    --------    --------
Net cash provided by operating activities...................     7,391       4,995       5,892
 
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment.........................   (14,269)     (5,932)     (8,373)
Purchase of business, net of acquired cash..................    (1,771)         --     (11,964)
Purchase of minority interest...............................        --          --        (339)
Proceeds from sale of affiliate.............................       500          --          --
Proceeds from the disposal of property and equipment........     3,020         151         113
                                                              --------    --------    --------
Net cash used in investing activities.......................   (12,520)     (5,781)    (20,563)
 
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net.................        --          --      32,146
Proceeds from revolving credit facility.....................    15,556      32,668      26,361
Payments on revolving credit facility.......................   (13,521)    (28,883)    (28,513)
Proceeds from notes payable.................................     7,600          --      14,500
Payments on notes payable...................................      (673)       (880)    (11,169)
Payments on AAA Notes.......................................        --          --     (17,600)
Payments on capital lease obligations.......................      (634)       (644)        (27)
Proceeds from capital contributions.........................        --         773         233
Distributions to shareholders...............................    (4,616)     (2,267)     (1,242)
                                                              --------    --------    --------
Net cash provided by financing activities...................     3,712         767      14,689
                                                              --------    --------    --------
Increase (decrease) in cash and cash equivalents............    (1,417)        (19)         18
Cash and cash equivalents at beginning of year..............     1,925         508         489
                                                              --------    --------    --------
Cash and cash equivalents at end of year....................  $    508    $    489    $    507
                                                              ========    ========    ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       25
<PAGE>   27
 
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               (FOR THE YEARS ENDED JUNE 30, 1996, 1997 AND 1998)
 
NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS  MPW Industrial Services
Group, Inc. and its subsidiaries (the "Company") is an industrial services firm
that provides industrial cleaning and facility support services, industrial
process water purification, industrial filtration management services and other
specialized services. Such services are typically provided at customer
facilities. The Company also operates process facilities for industrial
container cleaning. The Company's principal customers are large industrial
facilities in the automotive, electric power, chemical, pulp and paper, steel,
transportation, aerospace and other heavy manufacturing industries. The Company
provides services primarily in the Midwestern and Southeastern United States.
 
     The accompanying consolidated financial statements include the accounts of
the Company and all of its wholly-owned subsidiaries, including Aquatech
Environmental, Inc. ("Aquatech"), which was 70% owned by the Company until
December 5, 1997, at which time the Company purchased the remaining minority
shareholders' interests of Aquatech, and it became wholly-owned. The minority
shareholders' interests in the equity and net income of Aquatech are presented
separately in the accompanying consolidated financial statements for the periods
through December 4, 1997. All material intercompany transactions and balances
have been eliminated in consolidation.
 
     REVENUES AND COST RECOGNITION  The Company primarily derives its revenues
from services under time and materials, fixed price and unit price contracts.
Revenues from time and materials type contracts are recorded based on
performance and efforts expended. Contract costs include all direct labor,
material, per diem, subcontract and other direct and indirect project costs
related to contract performance. Revenues derived from non-contract activities
are recorded as services are performed or goods are sold.
 
     During fiscal 1997 and 1998, the Company had revenues from General Motors
Corporation that represented 10.4% and 14.4% of consolidated revenues,
respectively. In fiscal 1996, no customer represented more than 10% of
consolidated revenues.
 
     INVENTORIES  Inventories, primarily consisting of products purchased for
resale and operating supplies, are stated at the lower of cost or market. Cost
is determined using the first-in, first-out (FIFO) method.
 
     PROPERTY AND EQUIPMENT  Property and equipment, including assets under
capital leases, are recorded at cost and include expenditures which
substantially increase the useful lives of the assets. Maintenance and repairs
that do not improve or extend the life of the respective assets are expensed as
incurred. Depreciation is provided over the estimated useful lives of the
respective assets using the straight-line method. Amortization of capital leases
is provided over the lease terms using the straight-line method.
 
     Depreciation and amortization on the Company's property and equipment has
been computed based on the following useful lives:
 
<TABLE>
<CAPTION>
                                                               YEARS
                                                              -------
<S>                                                           <C>
Buildings and improvements..................................  5 to 30
Motor vehicles and transportation equipment.................  3 to 10
Machinery and equipment.....................................   3 to 8
Furniture and fixtures......................................   5 to 7
</TABLE>
 
     COSTS IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES  Costs in excess of
net assets of acquired businesses ("goodwill"), resulting primarily from certain
acquisitions accounted for using the purchase method of accounting, is amortized
on a straight-line basis over periods not exceeding 25 years. Accumulated
amortization of goodwill as of June 30, 1997 and 1998 was $256,000 and $569,000,
respectively.
 
                                       26
<PAGE>   28
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     FINANCIAL INSTRUMENTS  Financial instruments consist primarily of cash,
accounts receivable, accounts payable and long-term debt. The carrying value of
all financial instruments at June 30, 1997 and 1998 approximated their fair
value.
 
     INCOME TAXES  Prior to October 31, 1997, the income of MPW Industrial
Services, Inc. ("Industrial") was taxed under the provisions of Subchapter S of
the Internal Revenue Code of 1986, as amended, which provides that in lieu of
corporate income taxes, the shareholders of the S Corporation were taxed on
their proportionate share of Industrial's taxable income. Therefore, no
provision or liability for federal income tax has been included in historical
financial statements related to Industrial prior to October 31, 1997. The
accompanying financial statements do, however, include provisions for income
taxes for federal, state, provincial and local tax purposes for the other
subsidiaries of the Company that are subject to corporate income taxes. Deferred
tax assets and liabilities are recorded based on differences between the
financial reporting and tax basis of assets and liabilities which are measured
by applying enacted tax rates for years in which such differences are expected
to reverse.
 
     STATEMENT OF CASH FLOWS  The Company considers all short-term deposits and
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. Cash paid for income taxes for fiscal 1996, 1997
and 1998 was $224,000, $525,000 and $2,074,000, respectively. Cash paid for
interest was $315,000, $1,255,000 and $921,000 for fiscal 1996, 1997 and 1998,
respectively. During fiscal 1998, the Company redeemed $3,600,000 of the AAA
Notes (as hereinafter defined) as consideration for the sale of a corporate
aircraft to an entity controlled by its principal shareholder. Distributions to
shareholders during fiscal 1996 included a note receivable of $250,000.
 
     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.
 
     RECENT ACCOUNTING PRONOUNCEMENTS  In June 1997, the Financial Accounting
Standards Board issued Statement No. 131, Disclosures about Segments of an
Enterprise and Related Information, which is effective for fiscal years
beginning after December 15, 1997. This statement establishes requirements for
reporting information about operating segments. This statement may require a
change in the way the Company presently reports financial information; however,
the extent of the change, if any, has not been determined.
 
     In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, Reporting on the Costs of Start-Up Activities, which
is effective for fiscal years beginning after December 15, 1998. This statement
requires the costs of start-up activities to be expensed as incurred and that
such costs previously capitalized be expensed upon adoption. This statement will
require a change in the way the Company presently accounts for the costs of
start-up activities; however, the extent to which this statement will affect the
Company's results of operations has not yet been determined.
 
NOTE 2.  INITIAL PUBLIC OFFERING OF COMMON STOCK
 
     On December 1, 1997, the registration statement related to the Company's
initial public offering of its common stock (the "Offering") was declared
effective by the Securities and Exchange Commission and its stock began trading
on the Nasdaq National Market on December 2, 1997. Pursuant to the terms of the
Offering, on December 5, 1997, the Company issued 3,750,000 shares of its common
stock that were sold at $9.00 per share. On January 2, 1998, the over-allotment
option in connection with the Offering was partially exercised and on January 6,
1998, the Company issued an additional 237,500 shares of its common stock at
$9.00 per share. The total net proceeds to the Company in connection with the
Offering, including the partial exercise of the over-
 
                                       27
<PAGE>   29
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
allotment option, were $33,375,000 before deducting expenses of $1,282,000. The
following is a summary of transactions related to the Offering:
 
  Restructuring of the Company and Termination of Industrial's S Corporation
Status
 
     In connection with the Offering, effective October 31, 1997, Industrial and
its subsidiaries were restructured resulting in the creation of the Company. In
connection with this restructuring, Industrial's S Corporation status was
terminated. Prior to this termination, Industrial made a distribution to the S
Corporation shareholders in the amount of $21,200,000 for undistributed earnings
associated with Industrial's S Corporation status. These distributions were made
through Industrial's issuance of promissory notes to such shareholders (the "AAA
Notes"), of which $13,400,000 was subsequently paid off with the Offering
proceeds. The remaining $7,800,000 was paid as follows: (i) $4,200,000 in cash
on April 15, 1998 and (ii) $3,600,000 redeemed in connection with the sale of a
corporate aircraft to an entity controlled by the Company's principal
shareholder.
 
     Also in connection with this restructuring, the outstanding shares of
Industrial were exchanged for common shares of the Company, and subsequently
subject to a 4 for 1 stock split. The authorized capital stock of the Company
consists of 5,000,000 preferred shares, $0.01 par, and 30,000,000 common shares,
no par value. These changes have been reflected in the accompanying financial
statements.
 
  Deferred Stock Option Compensation Expense
 
     In connection with the Offering, the Company recorded a non-cash,
non-recurring charge of $1,869,000, net of tax, associated with certain of its
stock option plans. This charge resulted in a concurrent increase in paid-in
capital. The Company also eliminated the related deferred stock option
compensation liabilities previously recorded because, effective with the
Offering, the Company's repurchase obligations for stock options exercised under
these stock option plans were eliminated.
 
  Related Party Lease Agreements
 
     In connection with the Offering, the Company restructured certain lease
agreements with its principal shareholder for facilities that the Company uses
in its business operations. Additionally, the Company redeemed $3,600,000 of the
AAA Notes as consideration for the sale of a corporate aircraft at its fair
market value to an entity controlled by the Company's principal shareholder. In
connection with this transaction, the Company entered into a lease agreement
with this entity for the lease of this corporate aircraft.
 
  Purchase of Remaining Minority Shareholders' Interests
 
     In connection with the Offering, on December 5, 1997, the Company purchased
the remaining minority shareholders' interests in the equity and net income of
Aquatech for an aggregate purchase price of $678,000, at which time Aquatech
became a wholly-owned subsidiary of the Company. The purchase price included the
issuance of 37,667 shares of common stock of the Company, representing an
aggregate value of $339,000.
 
NOTE 3.  ACQUISITIONS
 
     ESI INTERNATIONAL  Effective October 1, 1997, the Company acquired all of
the outstanding stock of ESI International, Inc., a Tennessee corporation, and
purchased all of the members' interests in ESI North, Limited, an Ohio limited
liability company (collectively "ESI International"), for aggregate
consideration of $4,903,000 and $1,043,000 of assumed liabilities. The
consideration included the issuance of 110,029 shares of common stock of the
Company, representing an aggregate value of $960,000. The stock portion of the
purchase price is held in escrow for a period of one year. The purchase price
may be increased by a maximum of $600,000 contingent upon the achievement of
certain revenue and operating objectives over the three-year period following
the date of acquisition. The acquisition has been accounted for using the
purchase method of accounting. The
 
                                       28
<PAGE>   30
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
accompanying consolidated financial statements include the results of operations
of ESI International from the effective acquisition date through June 30, 1998.
 
     THE VINEWOOD COMPANIES  Effective April 7, 1998, the Company purchased
substantially all of the assets of Vinewood Corp., Vinewood of Ohio, Inc.,
D.R.C. Enterprises, Inc. and R.C.R. Leasing Company (collectively the "Vinewood
Companies") for aggregate consideration of $8,490,000. The consideration
included the issuance of 55,427 shares of common stock of the Company,
representing an aggregate value of $600,000. The stock portion of the purchase
price is held in escrow for a period of one year. The purchase price may be
increased by a maximum of $1,000,000 contingent upon the achievement of certain
revenue and operating objectives over the three-year period following the date
of acquisition. The acquisition has been accounted for using the purchase method
of accounting. The accompanying financial statements include the results of
operations of the Vinewood Companies from the effective acquisition date through
June 30, 1998.
 
     STRAIGHTLINE OPTICAL SERVICE  Effective April 21, 1998, the Company
purchased substantially all of the assets of Straightline Optical Service, Inc.
("SOS") for aggregate consideration of $1,110,000 and approximately $120,000 of
assumed liabilities. The consideration included the issuance of 50,808 shares of
common stock of the Company, representing an aggregate value of $550,000. The
stock portion of the purchase price is held in escrow for a period of one year.
The purchase price may be increased by a maximum of $600,000 contingent upon the
achievement of certain revenue and operating objectives over the three-year
period following the date of acquisition. The acquisition has been accounted for
using the purchase method of accounting. The accompanying financial statements
include the results of operations of SOS from the effective acquisition date
through June 30, 1998.
 
     MAINTENANCE CONCEPTS  Effective June 1, 1998, the Company acquired all of
the outstanding stock of Maintenance Concepts, Inc., an Ohio corporation
("Maintenance Concepts"), for aggregate consideration of $2,435,000 and
$2,181,000 of assumed liabilities. The consideration included the issuance of
39,216 shares of common stock of the Company, representing an aggregate value of
$500,000. The stock portion of the purchase price is held in escrow for a period
of one year. The acquisition has been accounted for using the purchase method of
accounting. The accompanying consolidated financial statements include the
results of operations of Maintenance Concepts from the effective acquisition
date through June 30, 1998.
 
     WESTON ENGINEERING  Effective April 1, 1996, the Company purchased
substantially all of the assets of Weston Engineering, a Michigan partnership
("Weston"), for $2,050,000 and assumed certain liabilities. The acquisition has
been accounted for using the purchase method of accounting. The accompanying
financial statements include the results of operations of Weston from the
effective acquisition date through June 30, 1998.
 
     The following table sets forth the unaudited consolidated proforma results
of operations for fiscal 1997 and 1998 giving effect to the acquisitions noted
above as if such acquisitions had occurred on July 1, 1996 and based on an
effective tax rate of 40%:
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED JUNE 30,
                                                  ---------------------
                                                    1997        1998
                                                  --------    ---------
                                                  (IN THOUSANDS, EXCEPT
                                                     PER SHARE DATA)
<S>                                               <C>         <C>
Revenues........................................  $89,639     $104,559
Net income......................................    2,131        3,549
Net income per common share, assuming
  dilution......................................     0.30         0.38
</TABLE>
 
NOTE 4.  CHANGE IN ACCOUNTING ESTIMATE
 
     Effective July 1, 1996, the Company changed its estimates for the useful
lives of certain property and equipment to more accurately reflect the Company's
actual history of useful lives. The Company utilized the net book value of each
of its property and equipment assets as of July 1, 1996 and applied the
remaining useful life of
 
                                       29
<PAGE>   31
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
each asset in the calculation of depreciation from that date forward. In fiscal
1997, the effect of applying these changes was a reduction in depreciation
expense of $1,620,000.
 
NOTE 5.  DISCONTINUED OPERATIONS
 
     Effective December 31, 1995, the Company disposed of its 70% interest in
B&B Underground, a general partnership, to the remaining partner for $750,000.
Under the terms of the agreement, $500,000 was received during fiscal 1996 with
the remainder to be received in five equal annual installments of $50,000 plus
interest. The transaction resulted in a gain of $114,000. The sale of the
Company's interest in B&B Underground has been accounted for as discontinued
operations and, accordingly, the accompanying consolidated statements of income
have been restated to report this business separately as discontinued
operations.
 
     The results of operations of B&B Underground for fiscal 1996 are summarized
as follows (in thousands):
 
<TABLE>
<S>                                                             <C>
Revenues....................................................    $968
Operating income............................................      21
Net income..................................................      49
</TABLE>
 
NOTE 6.  ACCOUNTS RECEIVABLE
 
     Accounts receivable is summarized as follows:
 
<TABLE>
<CAPTION>
                                                        JUNE 30,
                                                   ------------------
                                                    1997       1998
                                                   -------    -------
                                                     (IN THOUSANDS)
<S>                                                <C>        <C>
Accounts receivable..............................  $14,274    $20,344
Less allowance for doubtful accounts.............      714        958
                                                   -------    -------
                                                   $13,560    $19,386
                                                   =======    =======
</TABLE>
 
     The following is a summary of activity in the allowance for doubtful
accounts:
 
<TABLE>
<CAPTION>
                                                YEAR ENDED JUNE 30,
                                            ---------------------------
                                             1996      1997      1998
                                            -------   -------   -------
                                                  (IN THOUSANDS)
<S>                                         <C>       <C>       <C>
Beginning balance.........................  $   670   $   764   $   714
Allowance for receivables acquired........       75        --       190
Provision for bad debts...................      122       189       227
Account write-offs, net...................     (103)     (239)     (173)
                                            -------   -------   -------
Ending balance............................  $   764   $   714   $   958
                                            =======   =======   =======
</TABLE>
 
                                       30
<PAGE>   32
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 7.  PROPERTY AND EQUIPMENT
 
     Property and equipment is summarized as follows:
 
<TABLE>
<CAPTION>
                                                        JUNE 30,
                                                   ------------------
                                                    1997       1998
                                                   -------    -------
                                                     (IN THOUSANDS)
<S>                                                <C>        <C>
Land and buildings...............................  $ 2,200    $ 3,603
Motor vehicles and transportation equipment......   32,613     31,341
Machinery and equipment..........................    9,627     15,299
Leasehold improvements...........................    3,323      3,579
Furniture and fixtures...........................    1,610      1,829
Construction in progress.........................    1,486      2,139
                                                   -------    -------
                                                    50,859     57,790
Less accumulated depreciation and amortization...   27,459     29,197
                                                   -------    -------
                                                   $23,400    $28,593
                                                   =======    =======
</TABLE>
 
NOTE 8.  OTHER ACCRUED LIABILITIES
 
     Other accrued liabilities are summarized as follows:
 
<TABLE>
<CAPTION>
                                                         JUNE 30,
                                                     ----------------
                                                      1997      1998
                                                     ------    ------
                                                      (IN THOUSANDS)
<S>                                                  <C>       <C>
Insurance retention reserves.......................  $2,722    $1,970
Other..............................................   1,744     1,798
                                                     ------    ------
                                                     $4,466    $3,768
                                                     ======    ======
</TABLE>
 
NOTE 9.  LONG-TERM DEBT
 
     Long-term debt is summarized as follows:
 
<TABLE>
<CAPTION>
                                                        JUNE 30,
                                                   ------------------
                                                    1997       1998
                                                   -------    -------
                                                     (IN THOUSANDS)
<S>                                                <C>        <C>
Revolving credit facility........................  $ 6,529    $ 4,377
Notes payable to financial institutions..........    6,070     11,135
Other............................................       --      1,399
                                                   -------    -------
                                                    12,599     16,911
Less current maturities..........................      880      2,615
                                                   -------    -------
                                                   $11,719    $14,296
                                                   =======    =======
</TABLE>
 
     Prior to the Offering, the Company had various credit arrangements with its
principal banks, including term notes and a revolving credit line with
outstanding balances totaling $8,948,000 and $6,935,000, respectively. On
December 5, 1997, the entire outstanding balance under these arrangements,
$15,883,000, was repaid.
 
     Effective December 10, 1997, the Company entered into a new credit
agreement with its principal banks (the "Credit Facility") to replace the
existing agreement. The Credit Facility, as amended, provides the Company with
$50,000,000 of unsecured credit availability for a three-year period. Under the
Credit Facility, $15,000,000 is available for working capital needs, of which
$5,000,000 may be used for letters of credit, and the remaining $35,000,000 is
available for the Company's growth initiatives, including acquisitions.
Borrowings under the
                                       31
<PAGE>   33
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Credit Facility currently bear interest at the prime rate less 0.50% or, at the
Company's option, the Eurodollar market rate plus 1.00%. The interest rate is
subject to change based on interest rate formulas tied to financial performance
as measured by debt service coverage and by the ratio of funded debt to equity.
The Credit Facility also provides covenants that impose minimum levels for
interest coverage and tangible net worth and ceiling levels for funded debt to
equity. The Company pays a commitment fee for unused portions of the Credit
Facility of 0.25%. The Credit Facility also imposes a covenant prohibiting the
payment of dividends.
 
     The revolving credit facility expires on December 31, 2000, at which time
the principal balance outstanding, together with all accrued interest, will
become immediately due and payable. There were $1,062,000 and $1,632,000 of
letters of credit outstanding at June 30, 1997 and 1998, respectively. The
weighted average interest rate for the revolving credit facility was 7.00% at
June 30, 1998.
 
     In connection with acquisitions made during fiscal 1998, the Company
borrowed an aggregate of $11,500,000 against the Credit Facility in the form of
term notes. Principal payments are in the amount of $575,000 through March 31,
2003 and $210,000 due on June 30, 2003. The outstanding balance at June 30, 1998
was $11,135,000. The notes bear interest at the Eurodollar market rate plus
1.50%. The rate in effect for the notes at June 30, 1998 was 6.91%.
 
     Also in connection with acquisitions made during fiscal 1998, the Company
issued unsecured promissory notes in the aggregate of $1,119,000. These notes
are payable to the former owners of the acquired companies and have principal
payments of $56,000 due quarterly through October 31, 2002. The outstanding
balance of these notes at June 30, 1998 was $1,007,000.
 
     The aggregate maturities of long-term debt for the five years ending June
30 are: 1999, $2,615,000; 2000, $2,584,000; 2001, $6,961,000; 2002, $2,584,000;
2003, $2,106,000; 2004 and thereafter, $61,000.
 
NOTE 10.  LEASE COMMITMENTS
 
     The Company leases certain land and buildings under noncancelable operating
leases with entities controlled by its principal shareholder. Prior to the
restructuring of these leases in connection with the Offering, these leases had
been treated as capital leases in the accompanying consolidated financial
statements. Property and equipment includes the following amounts related to
capital leases:
 
<TABLE>
<CAPTION>
                                                         JUNE 30,
                                                     ----------------
                                                      1997      1998
                                                     ------    ------
                                                      (IN THOUSANDS)
<S>                                                  <C>       <C>
Land and buildings.................................  $2,200    $   --
Machinery and equipment............................      --        36
                                                     ------    ------
                                                      2,200        36
Less accumulated amortization......................     206         7
                                                     ------    ------
                                                     $1,994    $   29
                                                     ======    ======
</TABLE>
 
     The aggregate minimum rent commitment under noncancelable operating leases
for the five years ending June 30 are: 1999, $1,514,000; 2000, $1,340,000; 2001,
$1,266,000; 2002, $1,062,000; 2003, $1,007,000; 2004 and thereafter, $1,587,000.
 
     Rental expense related to all operating leases, including short-term
rentals, was approximately $541,000, $944,000 and $1,850,000 for fiscal 1996,
1997 and 1998, respectively.
 
                                       32
<PAGE>   34
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 11.  INCOME TAXES
 
     Prior to October 31, 1997, Industrial's income was taxed under the
provisions of Subchapter S of the Internal Revenue Code of 1986, as amended,
which provides that in lieu of corporate income taxes, the shareholders of the S
Corporation were taxed on their proportionate share of Industrial's taxable
income. Therefore, no provision or liability for federal income tax has been
included in historical financial statements related to Industrial prior to
October 31, 1997. The accompanying financial statements do, however, include
provisions for income taxes for federal, state, provincial and local tax
purposes for the other subsidiaries of the Company that were subject to
corporate income taxes prior to October 31, 1997.
 
     Effective October 31, 1997, Industrial terminated its S Corporation status
and became subject to corporate income taxes. The Company recorded a current
deferred tax asset and a noncurrent deferred tax liability of $2,111,000 and
$1,409,000, respectively, to recognize the cumulative deferred income taxes
attributable to Industrial's change in tax status (from an S Corporation to a C
Corporation). Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
 
     The components of the provision for income taxes are as follows:
 
<TABLE>
<CAPTION>
                                                       YEAR ENDED JUNE 30,
                                                     ------------------------
                                                     1996      1997     1998
                                                     -----    ------    -----
                                                          (IN THOUSANDS)
<S>                                                  <C>      <C>       <C>
Current:
  Federal..........................................  $ 133    $  663    $ 384
  Canada...........................................     --       105      131
  State and local..................................    227       317       68
                                                     -----    ------    -----
                                                       360     1,085      583
Deferred:
  Federal..........................................     --        --     (210)
  Canada...........................................     --        --       --
  State and local..................................     --        --      (37)
                                                     -----    ------    -----
                                                        --        --     (247)
                                                     -----    ------    -----
                                                     $ 360    $1,085    $ 336
                                                     =====    ======    =====
</TABLE>
 
                                       33
<PAGE>   35
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The significant components of the Company's deferred tax asset and
liability at June 30, 1998 are as follows (in thousands):
 
<TABLE>
<S>                                                           <C>
Current deferred tax asset:
  Bad debt reserves.........................................  $  383
  Workers compensation reserves.............................     789
  IRC Section 481 adjustment................................     408
  Prepaid expenses..........................................    (354)
  Other.....................................................     213
                                                              ------
                                                              $1,439
                                                              ======
Long-term deferred tax liability:
  Property and equipment....................................  $1,605
  IRC Section 481 adjustment................................    (408)
  Other.....................................................      (5)
                                                              ------
                                                              $1,192
                                                              ======
</TABLE>
 
     Differences arising between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to income before
income taxes are as follows:
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED JUNE 30,
                                                        ----------------------
                                                        1996     1997    1998
                                                        -----    ----    -----
<S>                                                     <C>      <C>     <C>
Federal tax at statutory rate.........................   34.0%   34.0%    34.0%
State and local taxes (net of federal benefit)........    4.0     4.0      4.5
Effect of S Corporation status........................  (30.8)   (6.2)   (21.4)
Cumulative effect of deferred tax recorded............     --      --    (12.3)
Other.................................................    1.3     1.6      1.1
                                                        -----    ----    -----
                                                          8.5%   33.4%     5.9%
                                                        =====    ====    =====
</TABLE>
 
     The pro forma income taxes presented in the Consolidated Statements of
Income for the years ended June 30, 1997 and 1998 represent the estimated income
taxes that would have been reported had Industrial been subject to federal and
state income taxes for each of the periods presented.
 
NOTE 12.  EMPLOYEE BENEFITS
 
     The Company sponsors a Savings Plan, which qualifies for tax-deferred
contributions under Section 401(k) of the Internal Revenue Code (the "401(k)
Plan"), that covers substantially all employees of the Company who are over 21
years of age with at least one year of continuous service. Employees covered by
collective bargaining agreements are excluded from the 401(k) Plan.
Contributions by eligible employees are matched at a rate of 50% of the first 6%
of the employee's earnings contributed. Additional discretionary contributions
may be made to the 401(k) Plan by the Company. Matching contributions
approximated $142,000, $160,000 and $190,000 for fiscal 1996, 1997 and 1998,
respectively.
 
NOTE 13.  STOCK OPTION PLANS
 
     1991 STOCK OPTION PLAN  The Company's 1991 Stock Option Plan (the "1991
Plan") provided for the granting of up to 200,000 stock options to key
management personnel. Effective with the Offering, no additional options will be
granted under the 1991 Plan and the Company's repurchase obligation upon
exercise of stock
 
                                       34
<PAGE>   36
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
options was terminated. As of June 30, 1998, 56,000 options are outstanding at
an exercise price of $3.65 per share.
 
     1994 STOCK OPTION PLAN  The Company's 1994 Stock Option Plan (the "1994
Plan") provided for the granting of up to 1,000,000 stock options to key
management personnel. Effective with the Offering, no additional options will be
granted under the 1994 Plan and the Company's repurchase obligation upon
exercise of stock options was terminated. As of June 30, 1998, 877,000 options
are outstanding at a weighted average exercise price of $2.46 per share.
 
     1997 STOCK OPTION PLAN  On November 15, 1997, the Company adopted the 1997
Stock Option Plan (the "1997 Plan"), which provides for the granting of up to
700,000 stock options to officers, key employees, consultants and directors of
the Company. Any options granted that lapse or are canceled are available for
re-grant under the terms of the 1997 Plan. Stock option grants may be in the
form of incentive stock options, non-qualified options, or a combination
thereof. The exercise price of the stock options granted will be determined by
the Compensation Committee of the Board of Directors of the Company which, in
the case of incentive stock options, shall be equal to or greater than the
market value per share on the date of grant and, in the case of non-qualified
options shall not be less than 85% of the market value per share at the date of
grant. The stock options vest over a period of time determined by the
Compensation Committee and expire after ten years from the date of grant.
Non-employee directors shall be granted 2,000 non-qualified options at the first
annual shareholders meeting subsequent to the adoption of the 1997 Plan at which
he or she is elected a director, and 1,000 options shall be granted at each
subsequent annual shareholders meeting at which he or she is re-elected as a
director. The non-employee director option grants vest after one full year from
the date of grant and expire in ten years from the date of grant. Options
covering 462,500 shares of common stock have been granted and 448,500 options
are outstanding as of June 30, 1998 at a weighted average exercise price of
$9.36 per share.
 
     The following table summarizes stock option activity:
 
<TABLE>
<CAPTION>
                                                                       WEIGHTED
                                                                       AVERAGE
                                                      NUMBER OF     EXERCISE PRICE
                                                      OPTIONS(#)     PER SHARE($)
                                                      ----------    --------------
                                                         (IN THOUSANDS, EXCEPT
                                                            PER SHARE DATA)
<S>                                                   <C>           <C>
Outstanding at July 1, 1995.........................       68            3.65
  Granted...........................................       --              --
  Expired or canceled...............................       (4)           3.65
  Exercised.........................................       --              --
                                                        -----
Outstanding at June 30, 1996........................       64            3.65
  Granted...........................................      880            2.46
  Expired or canceled...............................      (74)           2.62
  Exercised.........................................       --              --
                                                        -----
Outstanding at June 30, 1997........................      870            2.53
  Granted...........................................      572            9.35
  Expired or canceled...............................      (44)           9.00
  Exercised.........................................      (16)           3.26
                                                        -----
Outstanding at June 30, 1998........................    1,382            4.75
                                                        =====
</TABLE>
 
                                       35
<PAGE>   37
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following summarizes information about stock options outstanding at
June 30, 1998:
 
<TABLE>
<CAPTION>
                     OPTIONS OUTSTANDING
              ---------------------------------   OPTIONS EXERCISABLE
                          WEIGHTED                --------------------
                          AVERAGE      WEIGHTED              WEIGHTED
  RANGE OF               REMAINING     AVERAGE                AVERAGE
  EXERCISE    OPTIONS   CONTRACTUAL    EXERCISE   OPTIONS    EXERCISE
  PRICE($)      (#)     LIFE (YEARS)   PRICE($)     (#)      PRICE($)
------------  -------   ------------   --------   --------   ---------
            (IN THOUSANDS, EXCEPT PER SHARE AND YEAR DATA)
<S>           <C>       <C>            <C>        <C>        <C>
        3.65      56        2.5          3.65        56        3.65
2.14 -  3.23     877        6.6          2.46       611        2.46
7.65 - 13.13     449        9.4          9.36        --          --
               -----        ---          ----       ---        ----
               1,382        7.4          4.75       667        2.56
               =====        ===          ====       ===        ====
</TABLE>
 
     The Company has adopted the disclosure only provision of Statement of
Financial Accounting Standard No. 123 ("SFAS No. 123"), Accounting for
Stock-Based Compensation, but has elected to continue to measure compensation
expense in accordance with Accounting Principles Board Opinion No. 25 ("APB No.
25"), Accounting for Stock Issued to Employees, and related interpretations
because, as discussed below, the alternative fair value accounting provided for
under SFAS No. 123 requires use of option valuation models that were not
developed for use in valuing employee stock options.
 
     In accordance with APB No. 25 and related interpretations, the Company
recorded deferred stock option compensation expense in fiscal 1997 and 1998 for
options granted under the 1991 and 1994 Plans to reflect the value of the
options at each date of grant, appreciation in the option values subsequent to
the grant date and conversion of the options to market-value fixed-rate options
as a result of the Offering. Subsequent to the Offering, no additional deferred
stock option compensation expense was recorded for the 1991 and 1994 Plans. The
Company's consolidated results of operations include deferred stock option
compensation expense related to the 1991 and 1994 Plans in the amount of
$2,764,000, of which $1,980,000 relates to prior years' service of the
participants, and $3,365,000 in fiscal 1997 and 1998, respectively.
 
     The 1997 Plan is a fixed-rate plan and, under APB No. 25, no compensation
expense is recognized for grants when the exercise price equals or exceeds the
market price of the underlying stock on the date of grant. The Company's
consolidated results of operations for fiscal 1998 include compensation expense
of $50,000 related to options granted under the 1997 Plan at exercise prices
less than the market price of the underlying stock on the date of grant.
 
     Pro forma information disclosures regarding net income and earnings per
share are required by SFAS No. 123 and have been determined as if the Company
had accounted for its employee stock options under the fair value method of that
Statement. Since the 1991 and 1994 Plans contained repurchase obligation
provisions prior to the Offering, the pro forma information regarding
pre-Offering net income and earnings per share related to the 1991 and 1994
Plans under SFAS No. 123 would not be materially different from reported amounts
under APB No. 25. For purposes of determining the required pro forma information
for fiscal 1998, the fair value of options granted in fiscal 1998 under the 1997
Plan and the fair value of 1991 and 1994 Plan options re-measured at the
Offering price of $9.00 per share were estimated at the date of grant or
re-measurement using a Black-Scholes option pricing model with the following
weighted average assumptions: risk-free interest rate of 5.75%, dividend yield
of 0.0%, volatility factor of the expected market price of the Company's common
stock of 25.0% and a weighted average expected life of the options of four
years. The weighted average estimated fair value of options granted and
re-measured during fiscal 1998 was $2.70 per share. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period. Had compensation expense for the Company's
stock option plans been determined based on the fair value at the dates of grant
and
 
                                       36
<PAGE>   38
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
re-measurement consistent with the methods prescribed by SFAS No. 123, the
Company's proforma net income and earnings per share for fiscal 1998 would have
been as follows:
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED JUNE 30, 1998
                                                     ---------------------------
                                                                    PROFORMA FOR
                                                     AS REPORTED    SFAS NO. 123
                                                     -----------    ------------
                                                        (IN THOUSANDS, EXCEPT
                                                           PER SHARE DATA)
<S>                                                  <C>            <C>
Proforma net income................................    $3,437          $2,323
Proforma net income per share......................      0.40            0.27
Proforma net income per share, assuming dilution...      0.37            0.25
</TABLE>
 
     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
NOTE 14.  EARNINGS PER SHARE
 
     In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), Earnings per Share,
effective for periods ending after December 15, 1997. SFAS No. 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is similar to the previously reported
fully diluted earnings per share. All earnings per share amounts for all periods
have been presented to conform to the SFAS No. 128 requirements.
 
     The following table sets forth the computation of pro forma basic and
diluted earnings per share:
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED JUNE 30,
                                                             ----------------------
                                                               1997         1998
                                                             ---------    ---------
                                                             (IN THOUSANDS, EXCEPT
                                                                PER SHARE DATA)
<S>                                                          <C>          <C>
Numerator for basic and diluted earnings per share:
  Pro forma net income.....................................   $1,947       $3,437
                                                              ======       ======
Denominator for basic earnings per share -- weighted
  average common shares....................................    6,200        8,604
  Effect of dilutive employee stock options................      565          686
                                                              ------       ------
Denominator for diluted earnings per share -- adjusted
  weighted average common shares and assumed conversions...    6,765        9,290
                                                              ======       ======
Pro forma net income per share.............................   $ 0.31       $ 0.40
                                                              ======       ======
Pro forma net income per share, assuming dilution..........   $ 0.29       $ 0.37
                                                              ======       ======
</TABLE>
 
NOTE 15.  RELATED PARTY TRANSACTIONS
 
     On August 9, 1996, the Company sold certain land and a commercial building
to an entity controlled by its principal shareholder for $2,200,000. The
transaction resulted in no gain or loss. On February 11, 1998, the Company
redeemed $3,600,000 of the AAA Notes as consideration for the sale of a
corporate aircraft to an entity
 
                                       37
<PAGE>   39
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
controlled by its principal shareholder. The transaction resulted in a gain of
$238,000 which has been deferred over the life of the lease described below. The
Company rents certain land, buildings and equipment, including the commercial
real estate and aircraft described above, from entities controlled by its
principal shareholder under long-term lease agreements. Total payments related
to these leases were $726,000, $991,000 and $1,211,000 for fiscal 1996, 1997 and
1998, respectively.
 
     The Company provides, from time to time, certain operational,
administrative and financial services to Pro-Kleen Industrial Services, Inc.
("Pro-Kleen"), a portable sanitation services company wholly-owned by the
Company's principal shareholder. At June 30, 1997, the amount due from Pro-Kleen
was $148,000. No amounts were due from Pro-Kleen at June 30, 1998.
 
NOTE 16.  COMMITMENTS AND CONTINGENCIES
 
     The Company is subject to various claims and lawsuits in the ordinary
course of its business. In the opinion of management, the outcome of these
actions, which is not clearly determinable at the present time, is either
adequately covered by insurance, or will not, in the aggregate, have a material
adverse effect upon the financial position or the results of future operations
of the Company.
 
NOTE 17.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                  QUARTER ENDED
                                                --------------------------------------------------
                                                SEPTEMBER 30    DECEMBER 31    MARCH 31    JUNE 30
                                                ------------    -----------    --------    -------
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>             <C>            <C>         <C>
FISCAL 1998
Revenues......................................    $21,756         $24,078      $21,021     $26,561
Income (loss) from operations.................      2,914            (494)       1,407       2,895
Pro forma net income (loss)...................      1,501            (438)         793       1,581
Pro forma net income (loss) per common
  share.......................................       0.24           (0.06)        0.08        0.15
Pro forma net income (loss) per common share,
  assuming dilution...........................       0.22           (0.06)        0.07        0.14
 
FISCAL 1997
Revenues......................................    $19,422         $18,157      $15,994     $19,335
Income from operations........................        484           1,800          649       1,493
Pro forma net income..........................         87             826          247         787
Pro forma net income per common share.........       0.01            0.13         0.04        0.13
Pro forma net income per common share,
  assuming dilution...........................       0.01            0.12         0.04        0.12
</TABLE>
 
     The comparability of the first and second quarters of fiscal 1998 and all
quarters of fiscal 1997 to any other period was impacted by events that occurred
and transactions that were recorded in connection with the Offering. See Note 2
above.
 
NOTE 18.  SUBSEQUENT EVENTS (UNAUDITED)
 
     On August 5, 1998, the Company acquired substantially all of the assets of
Tank Management, Inc. for a combination of cash and common stock of the Company
for aggregate consideration of $5,750,000.
 
     On August 18, 1998, the Company acquired Gauthier Enterprises, Inc. for a
combination of cash and common stock of the Company for aggregate consideration
of $3,000,000 and approximately $2,000,000 of assumed liabilities.
 
                                       38
<PAGE>   40
                      MPW INDUSTRIAL SERVICES GROUP, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In September 1998, the Company received a commitment letter from its
principal banks to increase the Credit Facility from $50,000,000 to $75,000,000
of overall availability. The Company expects to execute an amendment to the
Credit Facility with respect to this commitment in the second quarter of fiscal
1999.
 
ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
     None
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS
 
     The information required by Item 10 of Form 10-K with respect to
identification of directors is incorporated by reference from the information
contained in the section captioned "Election of Directors" in MPW's Definitive
Proxy Statement for the Annual Meeting of Shareholders to be held on November
11, 1998 (the "Proxy Statement"), a copy of which will be filed with the
Securities and Exchange Commission before the meeting date. For information with
respect to the executive officers of the Company, see "Executive Officers of the
Company" in Part I of this Form 10-K.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     The information required by Item 11 of Form 10-K is incorporated by
reference from the information contained in the section captioned "Executive
Compensation and Other Information" in the Proxy Statement.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by Item 12 of Form 10-K is incorporated by
reference from the information contained in the section captioned "Stock
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by Item 13 of Form 10-K is incorporated by
reference from the information contained in the section captioned "Certain
Relationships and Related Transactions" in the Proxy Statement.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a)(1)  The following consolidated financial statements of the Company and
its subsidiaries are included in Item 8:
 
     Report of Independent Auditors
     Consolidated Balance Sheets as of June 30, 1997 and 1998
     Consolidated Statements of Income for the Years Ended June 30, 1996, 1997
     and 1998
     Consolidated Statements of Changes in Shareholders' Equity for the Years
     Ended June 30, 1996, 1997
          and 1998
     Consolidated Statements of Cash Flows for the Years Ended June 30, 1996,
     1997 and 1998
     Notes to Consolidated Financial Statements
 
     (a)(2)  All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are either not
required under the related instructions, are inapplicable and therefore
 
                                       39
<PAGE>   41
 
have been omitted, or the required information is provided in the Consolidated
Financial Statements of the Company and its subsidiaries or Notes thereto.
 
     (a)(3)  Exhibits
 
     The following Exhibits are included in this Annual Report on Form 10-K:
 
<TABLE>
<C>    <S>
 3(a)  Amended and Restated Articles of Incorporation of the
       Company effective October 30, 1997 (filed as Exhibit 3(a) to
       the Company's Registration Statement on Form S-1 (File No.
       333-36887) ("Registration Statement"), and incorporated
       herein by reference)
 3(b)  Amended and Restated Code of Regulations of the Company
       effective October 30, 1997 (filed as Exhibit 3(b) to the
       Company's Registration Statement and incorporated herein by
       reference)
 4(a)  Revolving Credit and Term Loan Agreement among the Company
       and its subsidiaries and affiliates, Bank One, NA, and
       National City Bank of Columbus (filed as exhibit 4(a) to the
       Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
 4(b)  First Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus (filed as
       exhibit 4(b) to the Company's Quarterly Report on Form 10-Q
       for the quarter ended December 31, 1997, and incorporated
       herein by reference)
 4(c)  Second Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus (filed as
       exhibit 4(c) to the Company's Quarterly Report on Form 10-Q
       for the quarter ended March 31, 1998, and incorporated
       herein by reference)
 4(d)  Third Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus
 4(e)  Fourth Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus
10(a)  1997 Stock Option Plan (filed as exhibit 10(a) to the
       Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)*
10(b)  Lease for Hebron, Ohio facility (filed as exhibit 10(b) to
       the Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
10(c)  Lease for Newark, Ohio facility (filed as exhibit 10(c) to
       the Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
10(d)  First Lease Amendment for Chesterfield, Michigan facility
       (filed as exhibit 10(d) to the Company's Quarterly Report on
       Form 10-Q for the quarter ended December 31, 1997, and
       incorporated herein by reference)
10(e)  Aircraft Purchase Agreement (filed as exhibit 10(e) to the
       Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
10(f)  Aircraft Lease (filed as exhibit 10(f) to the Company's
       Quarterly Report on Form 10-Q for the quarter ended December
       31, 1997, and incorporated herein by reference)
10(g)  Form of Employment Agreement by and between MPW Industrial
       Services Group, Inc. and Ira O. Kane (filed as Exhibit 10(d)
       to the Company's Registration Statement and incorporated
       herein by reference)*
10(h)  Form of Severance Agreement by and between MPW Industrial
       Services Group, Inc. and Executive Officers (filed as
       Exhibit 10(e) to the Company's Registration Statement and
       incorporated herein by reference)*
10(i)  Form of Indemnification Agreement by and between MPW
       Industrial Services Group, Inc. and Directors (filed as
       Exhibit 10(f) to the Company's Registration Statement and
       incorporated herein by reference)*
10(j)  Form of Indemnification Agreement by and between MPW
       Industrial Services Group, Inc. and persons who are a
       Director and an Officer (filed as Exhibit 10(g) to the
       Company's Registration Statement and incorporated herein by
       reference)*
10(k)  Form of Indemnification Agreement by and between MPW
       Industrial Services Group, Inc. and Executive Officers
       (filed as Exhibit 10(h) to the Company's Registration
       Statement and incorporated herein by reference)*
</TABLE>
 
                                       40
<PAGE>   42
 
<TABLE>
<C>    <S>
   21  Subsidiaries of the Company
   23  Consent of Independent Auditors
   24  Powers of Attorney
   27  Financial Data Schedule
</TABLE>
 
---------------
* Indicates a management contract or compensatory plan or arrangement required
  to be filed pursuant to Item 14 of Form 10-K.
 
     (b) There were no reports on Form 8-K filed during the three months ended
         June 30, 1998.
 
     (c) The response to this portion of Item 14 is included as Exhibits to this
         report.
 
                                       41
<PAGE>   43
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 25th day of
September, 1998.
 
                                          MPW INDUSTRIAL SERVICES GROUP, INC.
 
                                          By:
                                            ------------------------------------
                                                      Robert J. Gilker
                                                  Vice President, Law and
                                                        Administration
                                                       and Secretary
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Company and in the capacities indicated and on August 18, 1998.
 
<TABLE>
<CAPTION>
                     SIGNATURE                                             TITLE
                     ---------                                             -----
<C>                                                  <S>
                         *                           Chairman of the Board of Directors and Chief
---------------------------------------------------  Executive Officer (Principal Executive Officer)
                  Monte R. Black
 
                         *                           President and Chief Operating Officer; Director
---------------------------------------------------
                    Ira O. Kane
 
                         *                           Vice President, Chief Financial Officer and
---------------------------------------------------  Assistant Secretary (Principal Financial Officer)
                 Daniel P. Buettin
 
                         *                           Corporate Controller, Treasurer and Assistant
---------------------------------------------------  Secretary (Principal Accounting Officer)
                  Brad A. Martyn
 
                         *                           Director
---------------------------------------------------
                 Pete A. Klisares
 
                         *                           Director
---------------------------------------------------
              Gerald Nilsson-Weiskott
 
                         *                           Director
---------------------------------------------------
                 Robert E. Oyster
</TABLE>
 
                                       42
<PAGE>   44
 
<TABLE>
<CAPTION>
                     SIGNATURE                                             TITLE
                     ---------                                             -----
<C>                                                  <S>
                         *                           Director
---------------------------------------------------
                 Timothy A. Walsh
 
                         *                           Director
---------------------------------------------------
                 Scott N. Whitlock
</TABLE>
 
---------------
* The undersigned, pursuant to certain Powers of Attorney executed by each of
  the directors and officers noted above and previously filed or filed herewith
  contemporaneously with the Securities and Exchange Commission, by signing his
  name hereto, does hereby sign and execute this report on behalf of each of the
  persons noted above, in the capacities indicated.
 
                                          By:
                                            ------------------------------------
                                                      Robert J. Gilker
                                                      Attorney-in-Fact
 
Dated: September 25, 1998
 
                                       43
<PAGE>   45
 
                                 EXHIBIT INDEX
 
<TABLE>
<C>    <S>
  3(a) Amended and Restated Articles of Incorporation of the
       Company effective October 30, 1997 (filed as Exhibit 3(a) to
       the Company's Registration Statement on Form S-1 (File No.
       333-36887) ("Registration Statement"), and incorporated
       herein by reference)
 
  3(b) Amended and Restated Code of Regulations of the Company
       effective October 30, 1997 (filed as Exhibit 3(b) to the
       Company's Registration Statement and incorporated herein by
       reference)
  4(a) Revolving Credit and Term Loan Agreement among the Company
       and its subsidiaries and affiliates, Bank One, NA, and
       National City Bank of Columbus (filed as exhibit 4(a) to the
       Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
  4(b) First Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus (filed as
       exhibit 4(b) to the Company's Quarterly Report on Form 10-Q
       for the quarter ended December 31, 1997, and incorporated
       herein by reference)
  4(c) Second Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus (filed as
       exhibit 4(c) to the Company's Quarterly Report on Form 10-Q
       for the quarter ended March 31, 1998, and incorporated
       herein by reference)
  4(d) Third Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus
  4(e) Fourth Amendment to Revolving Credit and Term Loan Agreement
       among the Company and its subsidiaries and affiliates, Bank
       One, NA, and National City Bank of Columbus
 10(a) 1997 Stock Option Plan (filed as exhibit 10(a) to the
       Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)*
 10(b) Lease for Hebron, Ohio facility (filed as exhibit 10(b) to
       the Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
 10(c) Lease for Newark, Ohio facility (filed as exhibit 10(c) to
       the Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
 10(d) First Lease Amendment for Chesterfield, Michigan facility
       (filed as exhibit 10(d) to the Company's Quarterly Report on
       Form 10-Q for the quarter ended December 31, 1997, and
       incorporated herein by reference)
 10(e) Aircraft Purchase Agreement (filed as exhibit 10(e) to the
       Company's Quarterly Report on Form 10-Q for the quarter
       ended December 31, 1997, and incorporated herein by
       reference)
 10(f) Aircraft Lease (filed as exhibit 10(f) to the Company's
       Quarterly Report on Form 10-Q for the quarter ended December
       31, 1997, and incorporated herein by reference)
 10(g) Form of Employment Agreement by and between MPW Industrial
       Services Group, Inc. and Ira O. Kane (filed as Exhibit 10(d)
       to the Company's Registration Statement and incorporated
       herein by reference)*
 10(h) Form of Severance Agreement by and between MPW Industrial
       Services Group, Inc. and Executive Officers (filed as
       Exhibit 10(e) to the Company's Registration Statement and
       incorporated herein by reference)*
 10(i) Form of Indemnification Agreement by and between MPW
       Industrial Services Group, Inc. and Directors (filed as
       Exhibit 10(f) to the Company's Registration Statement and
       incorporated herein by reference)*
 10(j) Form of Indemnification Agreement by and between MPW
       Industrial Services Group, Inc. and person who are a
       Director and an Officer (filed as Exhibit 10(g) to the
       Company's Registration Statement and incorporated herein by
       reference)*
</TABLE>
 
                                       44
<PAGE>   46
<TABLE>
<C>    <S>
 10(k) Form of Indemnification Agreement by and between MPW
       Industrial Services Group, Inc. and Executive Officers
       (filed as Exhibit 10(h) to the Company's Registration
       Statement and incorporated herein by reference)*
 21    Subsidiaries of the Company
 23    Consent of Independent Auditors
 24    Powers of Attorney
 27    Financial Data Schedule
</TABLE>
 
---------------
* Indicates a management contract or compensatory plan or arrangement required
  to be filed pursuant to Item 14 of Form 10-K.
 
                                       45