<PAGE>   1
 
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-Q
 
                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
 
                         COMMISSION FILE NUMBER 0-20854
 
                             PHILIP SERVICES CORP.
             (Exact Name of Registrant as Specified in its Charter)
 
<TABLE>
<S>                                           <C>
                   ONTARIO                                         N/A
       (State of Other Jurisdiction of                       (I.R.S. Employer
        Incorporation or Organization)                    Identification Number)
 
            100 KING STREET WEST,
              HAMILTON, ONTARIO                                  L8N 4J6
   (Address of Principal Executive Offices)                     (Zip Code)
 
                                       (905) 521-1600
                    (Registrant's Telephone Number, Including Area Code)
</TABLE>
 
     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 ___.
                                              ---  
 
     The number of shares of Common Shares of the Registrant, outstanding at
November 12, 1997, was 128,040,401.
 
================================================================================
<PAGE>   2
 
                                  REPORT INDEX
 
<TABLE>
<CAPTION>
                                 PART AND ITEM NO.                                   PAGE NO.
-----------------------------------------------------------------------------------  ---------
<S>                                                                                  <C>
PART I -- Financial Information
  Item 1 -- Financial Statements
  Consolidated Balance Sheets as of September 30, 1997 (unaudited)
     and December 31, 1996.........................................................          3
  Consolidated Statements of Earnings for the Nine and Three Months Ended
     September 30, 1997 and September 30, 1996 (unaudited).........................          4
  Consolidated Statements of Cash Flows for the Nine Months Ended
     September 30, 1997 and September 30, 1996 (unaudited).........................          5
  Notes to Consolidated Financial Statements (unaudited)...........................          6
  Item 2 -- Management's Discussion and Analysis of Financial Condition and
     Results of Operations.........................................................         11

PART II -- Other Information
  Item 1 -- Legal Proceedings......................................................         15
  Item 2 -- Changes in Securities..................................................         15
  Item 3 -- Defaults upon Senior Securities........................................         15
  Item 4 -- Submission of Matters to a Vote of Security Holders....................         15
  Item 5 -- Other Information......................................................         15
  Item 6 -- Exhibits and Reports on Form 8-K.......................................         16

Signature..........................................................................         17
</TABLE>
 
                                        2
<PAGE>   3
 
                             PHILIP SERVICES CORP.
 
                          CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30     DECEMBER 31
                                                                         1997            1996
                                                                     ------------     -----------
                                                                     (UNAUDITED)       (AUDITED)
<S>                                                                  <C>              <C>
                             ASSETS
Current Assets:
  Cash and equivalents...........................................     $   58,771       $    6,044
  Accounts receivable (net of allowance for doubtful
     accounts of $17,898; December 31, 1996 -- $3,276)...........        458,779          199,921
  Inventory for resale...........................................        300,777          181,080
  Other current assets...........................................         80,343           44,690
                                                                     ------------     -----------
                                                                         898,670          431,735
Fixed assets.....................................................        553,329          254,087
Goodwill.........................................................        748,232          235,622
Other assets.....................................................        153,828           55,792
                                                                     ------------     -----------
                                                                      $2,354,059       $  977,236
                                                                      ==========        =========
              LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable...............................................     $  163,475       $  111,197
  Accrued liabilities............................................        176,185           46,907
  Current maturities of long-term debt...........................         11,775           19,956
                                                                     ------------     -----------
                                                                         351,435          178,060
Long-term debt...................................................        871,656          282,825
Deferred income taxes............................................         29,375           31,227
Other liabilities................................................         78,413           35,217
Contingencies
Shareholders' equity.............................................      1,023,180          449,907
                                                                     ------------     -----------
                                                                      $2,354,059       $  977,236
                                                                      ==========        =========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        3
<PAGE>   4
 
                             PHILIP SERVICES CORP.
 
                      CONSOLIDATED STATEMENTS OF EARNINGS
                                  (UNAUDITED)
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                         FOR THE THREE MONTHS ENDED         FOR THE NINE MONTHS ENDED
                                                        -----------------------------     -----------------------------
                                                        SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30
                                                            1997             1996             1997             1996
                                                        ------------     ------------     ------------     ------------
<S>                                                     <C>              <C>              <C>              <C>
Revenue
  Metals recovery...................................      $296,976         $ 73,609        $  758,722        $192,987
  Industrial services...............................       205,176           71,544           366,788         188,672
                                                        ------------     ------------     ------------     ------------
                                                           502,152          145,153         1,125,510         381,659
Operating expenses..................................       399,973          105,524           910,255         289,515
Selling, general and administrative costs...........        35,594           14,123            81,848          38,583
Depreciation and amortization.......................        17,698            6,016            35,288          17,307
                                                        ------------     ------------     ------------     ------------
Income from operations..............................        48,887           19,490            98,119          36,254
Interest expense....................................        13,073            3,813            27,052          13,786
Other income and expense -- net.....................        (1,290)            (429)           (5,341)         (2,228)
                                                        ------------     ------------     ------------     ------------
Earnings from continuing operations before tax......        37,104           16,106            76,408          24,696
Income taxes........................................        11,743            3,723            23,666           5,702
                                                        ------------     ------------     ------------     ------------
Earnings from continuing operations.................        25,361           12,383            52,742          18,994
Discontinued operations (net of tax)................            --           (6,014)               --            (716)
                                                        ------------     ------------     ------------     ------------
Net earnings........................................      $ 25,361         $  6,369        $   52,742        $ 18,278
                                                        ============     ============     ============     ============
Basic earnings per share
  Continuing operations.............................      $   0.28         $   0.23        $     0.68        $   0.42
  Discontinued operations...........................      $     --         $  (0.11)       $       --        $  (0.01)
                                                        ------------     ------------     ------------     ------------
                                                          $   0.28         $   0.12        $     0.68        $   0.41
                                                        ============     ============     ============     ============
Fully diluted earnings per share
  Continuing operations.............................      $   0.27         $   0.19        $     0.67        $   0.36
  Discontinued operations...........................      $     --         $  (0.08)       $       --        $  (0.01)
                                                        ------------     ------------     ------------     ------------
                                                          $   0.27         $   0.11        $     0.67        $   0.35
                                                        ============     ============     ============     ============
Weighted average number of common shares outstanding
  (000's)...........................................        91,369           53,178            77,844          44,814
                                                        ============     ============     ============     ============
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        4
<PAGE>   5
 
                             PHILIP SERVICES CORP.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (UNAUDITED, IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                       FOR THE NINE MONTHS ENDED
                                                                     -----------------------------
                                                                     SEPTEMBER 30     SEPTEMBER 30
                                                                         1997             1996
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
OPERATING ACTIVITIES
Net earnings from continuing operations..........................     $   52,742       $   18,994
Items included in earnings not affecting cash
  Depreciation and amortization..................................         27,495           13,185
  Amortization of goodwill.......................................          7,793            4,122
  Deferred income taxes..........................................          4,379            4,325
                                                                     ------------     ------------
Cash flow from continuing operations.............................         92,409           40,626
Cash used to finance working capital.............................       (191,747)         (58,455)
                                                                     ------------     ------------
Cash used in continuing operating activities.....................        (99,338)         (17,829)
Cash provided by discontinued operating activities...............             --           21,075
                                                                     ------------     ------------
Cash provided by (used in) operating activities..................        (99,338)           3,246
                                                                     ------------     ------------
INVESTING ACTIVITIES
Proceeds from sale of solid waste operations.....................         17,000          137,070
Acquisitions -- including acquired cash (bank indebtedness)......       (215,964)         (17,341)
Purchase of fixed assets.........................................        (34,765)         (12,634)
Other............................................................        (28,485)         (31,517)
                                                                     ------------     ------------
Cash provided by (used in) continuing investing activities.......       (262,214)          75,578
Cash used in investing activities of discontinued operations.....             --          (12,652)
                                                                     ------------     ------------
Cash provided by (used in) investing activities..................       (262,214)          62,926
                                                                     ------------     ------------
FINANCING ACTIVITIES
Changes in long-term debt........................................        401,823         (106,154)
Common shares issued.............................................         12,456           58,945
                                                                     ------------     ------------
Cash provided by (used in) continuing financing activities.......        414,279          (47,209)
Cash used in financing activities of discontinued operations.....             --           (9,271)
                                                                     ------------     ------------
Cash provided by (used in) financing activities..................        414,279          (56,480)
                                                                     ------------     ------------
Net change in cash for the period................................         52,727            9,692
Cash position, beginning of period...............................          6,044               --
                                                                     ------------     ------------
Cash position, end of period.....................................     $   58,771       $    9,692
                                                                      ==========       ==========
</TABLE>
 
   The accompanying notes are an integral part of these financial statements.
 
                                        5
<PAGE>   6
 
                             PHILIP SERVICES CORP.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
(1) SIGNIFICANT ACCOUNTING POLICIES
 
     The consolidated financial statements include the accounts of Philip
Services Corp. and its subsidiaries (the "Company"). There have been no
significant changes in the accounting policies of the Company during the periods
presented. For a description of these policies, see Note 1 of Notes to the
Company's Consolidated Financial Statements for the fiscal year ended December
31, 1996.
 
     The consolidated financial statements herein have been prepared by the
Company without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). As applicable under such regulations,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. The Company believes that the presentation and
disclosures herein are adequate to make the information not misleading, and the
financial statements reflect all elimination entries and normal adjustments
which are necessary for a fair statement of the results for the nine and three
months ended September 30, 1997 and September 30, 1996.
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect reported amounts of assets, liabilities, income and
expenses and disclosures of contingencies. Actual results could differ from the
Company's estimates.
 
     Certain amounts in previously issued financial statements have been
restated to conform to 1997 classifications.
 
(2) ACQUISITIONS
 
     On July 31, 1997, the Company acquired Allwaste, Inc. ("Allwaste") for a
total consideration of $443.8 million. The acquisition was paid by the issuance
of approximately 23 million common shares. During the nine months ended
September 30, 1997, in addition to the Allwaste transaction, the Company
acquired 19 other companies for a total consideration of approximately $314.6
million.
 
     All business combinations have been accounted for using the purchase method
of accounting and are summarized below (in thousands):
 
<TABLE>
<CAPTION>
                                             SEPTEMBER 30
                                             ALLWASTE       OTHERS         TOTAL          TOTAL
                                             ---------     ---------     ---------     -----------
<S>                                          <C>           <C>           <C>           <C>
<->1997                                                                                DECEMBER 31
-----------------------------------------                                                     1996
                                                                                       -----------
Purchase consideration
  Cash...................................    $      --     $ 162,462     $ 162,462      $ 109,301
  Company's common shares................      391,719       115,546       507,265         29,571
  Deferred payments and long-term debt...           --        24,313        24,313         22,373
  Acquisition costs and accruals.........       52,047        12,261        64,308          3,875
                                             ---------     ---------     ---------      ---------
                                             $ 443,766     $ 314,582     $ 758,348      $ 165,120
                                             =========     =========     =========      =========
Fair value of net assets acquired
  Cash (bank indebtedness)...............    $   8,601     $ (12,436)    $  (3,835)     $   1,849
  Long-term debt.........................     (142,363)      (34,308)     (176,671)       (14,513)
  Assets, excluding cash & intangibles...      267,720       346,652       614,372        171,861
  Liabilities............................      (77,318)     (137,300)     (214,618)       (63,092)
  Goodwill...............................      387,126       137,344       524,470         63,535
  Other intangibles......................           --        14,630        14,630          5,480
                                             ---------     ---------     ---------      ---------
                                             $ 443,766     $ 314,582     $ 758,348      $ 165,120
                                             =========     =========     =========      =========
</TABLE>
 
                                        6
<PAGE>   7
 
                             PHILIP SERVICES CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
     The unaudited pro forma information set forth below assumes the acquisition
of Allwaste and the material acquisitions in 1996 of Luntz Corporation and
Intsel Southwest Limited Partnership, occurred at the beginning of 1996. The
unaudited pro forma information is presented for informational purposes only and
is not necessarily indicative of the results of operations that would have
resulted if the acquisitions had occurred on January 1, 1996 (in millions,
except per share amounts):
 
<TABLE>
<CAPTION>
                                                                           NINE MONTHS ENDED
                                                                              SEPTEMBER 30
                                                                           ------------------
                                                                            1997        1996
                                                                           -------     ------
<S>                                                                        <C>         <C>
Revenue................................................................    $1,352.4    $864.1
Earnings from continuing operations....................................    $  54.5     $ 19.1
Fully diluted earnings per share from continuing operations............    $  0.55     $ 0.25
</TABLE>
 
(3) DISCONTINUED OPERATIONS (in thousands)
 
     In August 1996, the Company sold its municipal and commercial solid waste
business (the "Solid Waste Business") for a total consideration of $115,000 to
USA Waste Services Inc. ("USA Waste"). The consideration included $60,000 in
cash, $38,000 in unrestricted common shares of USA Waste, and $17,000 in
restricted common shares of USA Waste (in total, representing less than 2% of
USA Waste's voting stock). The unrestricted common shares of USA Waste were sold
in September 1996 for $39,508, resulting in a gain before tax of $1,508 which is
included in Other income and expense -- net in the Consolidated Statements of
Earnings. The restriction on the $17,000 common shares of USA Waste was removed
in January 1997 and in February 1997, the Company sold these shares for $19,800,
resulting in a further gain before tax of $2,800. Revenue of the Solid Waste
Business, net of intercompany revenue, was $28,656 and $59,028 for the three and
nine months ended September 30, 1996, respectively.
 
<TABLE>
<CAPTION>
                                                                          SEPTEMBER 30, 1996
                                                                     ----------------------------
                                                                     THREE MONTHS     NINE MONTHS
                                                                        ENDED            ENDED
                                                                     ------------     -----------
<S>                                                                  <C>              <C>
Loss on sale of Solid Waste Business, net of income
  taxes recoverable of $2,568....................................      $ (5,588)        $(5,588)
Income from discontinued operations (net of tax).................          (426)          4,872
                                                                     ------------     -----------
Discontinued operations..........................................      $ (6,014)        $  (716)
                                                                     ==========       =========
</TABLE>
 
(4) FIXED ASSETS (in thousands)
 
<TABLE>
<CAPTION>
                                         SEPTEMBER 30, 1997                   DECEMBER 31, 1996
                                  ---------------------------------   ---------------------------------
                                             ACCUMULATED   NET BOOK              ACCUMULATED   NET BOOK
                                    COST     DEPRECIATION   VALUE       COST     DEPRECIATION   VALUE
                                  --------   -----------   --------   --------   -----------   --------
<S>                               <C>        <C>           <C>        <C>        <C>           <C>
Land............................  $ 59,947    $      --    $ 59,947   $ 40,030    $      --    $ 40,030
Landfill sites..................    24,766        1,686      23,080     15,534          651      14,883
Buildings.......................   123,569       22,756     100,813     59,375        7,807      51,568
Equipment.......................   484,688      129,837     354,851    186,033       54,094     131,939
Assets under development........    14,638           --      14,638     15,667           --      15,667
                                  --------   -----------   --------   --------   -----------   --------
                                  $707,608    $ 154,279    $553,329   $316,639    $  62,552    $254,087
                                  ========    =========    ========   ========    =========    ========
</TABLE>
 
                                        7
<PAGE>   8
 
                             PHILIP SERVICES CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
(5)  LONG-TERM DEBT (in thousands)
 
<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30     DECEMBER 31
                                                                     1997            1996
                                                                 ------------     -----------
<S>                                                              <C>              <C>
Bank term loan (a)...........................................      $812,908        $ 248,119
Loans bearing interest at a weighted average fixed rate of
  6.95% maturing at various dates up to 2014.................        42,415            5,175
Loans bearing interest at prime plus a weighted average
  floating rate of 0.80% maturing at various dates up to
  2001.......................................................         4,044            5,481
Loans unsecured, bearing interest at prime, maturing at
  various dates up to 2001...................................         6,056           26,886
Obligations under capital leases on equipment bearing
  interest at rates varying from 6% to 12% maturing at
  various dates to 2002......................................        16,661           14,484
Other........................................................         1,347            2,636
                                                                   --------         --------
                                                                    883,431          302,781
Less current maturities of long-term debt....................        11,775           19,956
                                                                   --------         --------
                                                                   $871,656        $ 282,825
                                                                   ========         ========
</TABLE>
 
(a) In August 1997, the Company signed a US $1.5 billion revolving credit
     agreement with a syndicate of international lenders which replaced the 1996
     revolving term loan agreement and refinanced certain other long-term debt.
     The new credit agreement expires in August of 2002, and contains certain
     restrictive covenants and financial covenants including the following:
 
     -  the Company must meet interest ratio coverage tests as well as total
       debt and fixed charge ratio coverage tests
 
     -  certain acquisitions by the Company must be reviewed by the lenders
       prior to completion
 
     At September 30, 1997 the Company is in compliance with all of the
covenants of the credit agreement.
 
     Borrowings under the credit facility are guaranteed, jointly and severally
by the Company's wholly owned subsidiaries. The facility bears interest based on
a moving grid. At September 30, 1997, the Company was paying LIBOR plus 1.25% on
these borrowings. Letters of credit outstanding under the Credit Agreement
amounted to $59 million at September 30, 1997.
 
(6)  SHAREHOLDERS' EQUITY (in thousands, except share amounts)
 
<TABLE>
<CAPTION>
                                                                 SEPTEMBER 30     DECEMBER 31
                                                                     1997            1996
                                                                 ------------     -----------
<S>                                                              <C>              <C>
Share capital................................................     $  887,609      $  363,079
Retained earnings............................................        163,632         110,890
Cumulative foreign currency translation adjustment...........        (28,061)        (24,062) 
                                                                  ----------      ----------
                                                                  $1,023,180      $  449,907
                                                                  ==========      ==========
</TABLE>
 
                                        8
<PAGE>   9
 
                             PHILIP SERVICES CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
THE ISSUED CAPITAL OF THE COMPANY IS COMPRISED OF THE FOLLOWING:
 
<TABLE>
<CAPTION>
                                                                          COMMON SHARES
                                                                    --------------------------
                                                                      NUMBER          AMOUNT
                                                                    -----------     ----------
<S>                                                                 <C>             <C>
Balance -- December 31, 1996....................................     69,876,868     $  363,079
Shares issued in respect of acquisitions during the period......     30,271,301        507,265
Share options exercised for cash................................      1,684,207         11,987
Other...........................................................        396,842          5,278
                                                                       --------       --------
Balance -- September 30, 1997...................................    102,229,218     $  887,609
                                                                       ========       ========
</TABLE>
 
(7) STATEMENTS OF CASH FLOWS (in thousands)
 
     The supplemental cash flow disclosures and non-cash transactions for the
nine months ended September 30, 1996 and 1997 are as follows:
 
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30     SEPTEMBER 30
                                                                         1997             1996
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
Supplemental Disclosures:
  Interest paid..................................................      $ 27,006         $ 17,470
  Income taxes paid..............................................         1,921            1,117
Non Cash Transactions:
  Common stock issued in acquisitions............................       507,265            9,503
  Capital leases and debt obligations for the purchase of
     property and equipment......................................        12,579           10,312
  Debt and liabilities incurred or assumed in acquisitions.......        42,125              223
  Debt converted to common stock.................................            --           35,051
</TABLE>
 
(8) COMPUTATION OF EARNINGS PER SHARE (in thousands)
 
<TABLE>
<CAPTION>
                                           FOR THE THREE MONTHS ENDED         FOR THE NINE MONTHS ENDED
                                          -----------------------------     -----------------------------
                                          SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30     SEPTEMBER 30
                                              1997             1996             1997             1996
                                          ------------     ------------     ------------     ------------
<S>                                       <C>              <C>              <C>              <C>
Net earnings for the period...........      $ 25,361         $  6,369         $ 52,742         $ 18,278
Interest from conversion of
  subordinated convertible
  debentures..........................           223              901              223            3,440
                                          ------------     ------------     ------------     ------------
Net earnings for the period -- fully
  diluted.............................      $ 25,584         $  7,270         $ 52,965         $ 21,718
                                          ==========       ==========       ==========       ==========
Number of common shares outstanding...       102,229           53,710          102,229           53,710
Effect of using weighted average
  common shares outstanding...........       (10,860)            (532)         (24,385)          (8,896)
                                          ------------     ------------     ------------     ------------
Basic weighted average number of
  common shares outstanding...........        91,369           53,178           77,844           44,814
Effect from conversion of common stock
  equivalents.........................         3,652           14,331            1,687           18,077
                                          ------------     ------------     ------------     ------------
Fully diluted weighted average number
  of common shares outstanding........        95,021           67,509           79,531           62,891
                                          ==========       ==========       ==========       ==========
</TABLE>
 
                                        9
<PAGE>   10
 
                             PHILIP SERVICES CORP.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                                  (UNAUDITED)
 
(9) CONTINGENCIES (in thousands)
 
(a) Certain operating subsidiaries acquired by the Company have been named as a
    potentially responsible or liable party in respect of several US federal or
    state superfund sites. These proceedings are principally based on
    allegations that the subsidiaries (or their predecessors) disposed of
    hazardous substances at the sites in question. Based on its review of these
    claims, the Company has estimated its share of the cost to remediate these
    sites and has accrued $2,540 as at September 30, 1997 (December 31, 1996 --
    $419) to cover these costs.
 
(b) Certain of the Company's subsidiaries' facilities are contaminated as a
    result of operating practices at the sites prior to their acquisition by the
    Company. Investigations of these sites have substantially characterized the
    nature and extent of the contamination.
 
    The Company estimates the remaining liability to remediate these sites to be
    $34,335 and has accrued this amount in its September 30, 1997 financial
    statements (December 31, 1996 -- $19,455).
 
(c) The Company is named as a defendant in several lawsuits which have arisen in
    the ordinary course of its business. Management believes that none of these
    suits is likely to have a material adverse effect on the Company's business
    or financial condition and therefore has made no provision in these
    financial statements for the potential liability if any.
 
(10) SUBSEQUENT EVENTS
 
(a) Acquisitions
 
    On October 10, 1997 the Company acquired the operating assets of Luria
    Brothers and on October 28, 1997 acquired the Steiner-Liff Metals Group of
    companies and the Southern Foundry Supply Group of companies. These
    companies provide scrap processing and mill services to the U.S. steel
    industry. The aggregate consideration to be paid for these businesses is
    $495.9 million, which includes the assumption of $32.9 million in debt, the
    issue of 5.6 million common shares of the Company and cash of $368.8
    million.
 
(b) Public Offering
 
    On November 12, 1997, the Company closed its previously announced
    transaction to sell 20 million Common Shares at $16.50 per share, with the
    net proceeds of $316.8 to be used to repay indebtedness outstanding under
    the Company's Credit Facility.
 
                                       10
<PAGE>   11
 
                     PHILIP SERVICES CORP. AND SUBSIDIARIES
 
             PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion reviews the Company's operations for the three
months ended and nine months ended September 30, 1997 and 1996 and should be
read in conjunction with the Company's condensed Consolidated Financial
Statements and related notes thereto included elsewhere herein, as well as the
Company's Consolidated Financial Statements and related notes thereto included
in the Company's 1996 Annual Report. The Company's quarterly reporting during
1997 is in U.S. dollars and in accordance with U.S. generally accepted
accounting principles.
 
INTRODUCTION
 
     The Company is a supplier of resource recovery and industrial services. The
Company has over 300 operating facilities and over 12,000 employees located
throughout the United States, Canada and Europe, that provide services to
approximately 50,000 industrial and commercial customers. The Company has
achieved its position in the metals recovery and industrial services markets
through internal growth and through the acquisition and integration of over 30
companies since the beginning of 1996. As a result, the Company is viewed as a
leading consolidator in the metals recovery and industrial services industries.
The Company's primary base of operations is in the United States with
approximately 70% of the Company's consolidated revenue generated in U.S.
dollars in the nine months ended September 30, 1997.
 
     The Company's business is organized into two operating divisions -- the
Metals Recovery Group and the Industrial Services Group. The Metals Recovery
Group processes or recycles ferrous (steel), copper and aluminum materials. The
ferrous operations include the collection and processing of ferrous scrap
materials for shipment to steel mills, and brokerage services. The Company also
processes and distributes structural steel products. Copper operations include
processing of wire and cable scrap to recover copper, aluminum and plastics,
refining of second grade copper into prime ingot, and on-site management of
materials recycling centers for the telecommunications industry. Aluminum
operations process aluminum dross into aluminum ingots, and produce aluminum
deoxidizing products and alloys from aluminum scrap for reuse in the steel and
automotive industries respectively. Both the ferrous and non-ferrous operations
of Philip provide significant brokerage capabilities for scrap materials and
primary metals including steel, copper, and aluminum. The Metals Recovery Group
services the steel, telecommunications, aluminum, wire and cable and automotive
industry sectors.
 
     The Industrial Services Group provides industrial outsourcing services,
by-products recovery and environmental services through a network of over 250
facilities. The Industrial Services Group is divided into four main activities:
on-site industrial services, by-products recovery, environmental services and
utilities management. On-site industrial services include industrial cleaning
and maintenance, waste collection and transportation, container services and
tank cleaning, turnaround and outage services, mechanical contracting and
refractory services. By-products recovery includes distillation, fuel blending,
paint overspray recovery, organic and inorganic processing and polyurethane
recycling. Environmental services range from decommissioning and remediation to
emergency response and analytical services. Utilities management services
include industrial and municipal water and wastewater treatment plants, power
plants and related infrastructure. The Industrial Services Group services the
automotive, chemical, food, beverage, oil and gas, paint and coatings,
petrochemical and pulp and paper industry sectors.
 
     The Company's operating expenses include direct and indirect labour and the
related taxes and benefits, fuel, maintenance and repairs of equipment and
facilities, depreciation, property taxes, and accrual for future closure costs.
Selling, general and administrative expenses include management salaries,
clerical and administrative costs, professional services, facility rentals and
insurance costs, as well as costs related to the Company's marketing and sales
force.
 
                                       11
<PAGE>   12
 
EARNINGS FROM CONTINUING OPERATIONS
 
     For the three months ended September 30, 1997, the Company had earnings
from continuing operations of $25.4 million or $0.27 per share on a fully
diluted basis. This compares to $12.4 million of earnings from continuing
operations and $0.19 fully diluted earnings per share from continuing operations
for the three months ended September 30, 1996.
 
     For the first nine months of 1997, net earnings from continuing operations
were $52.7 million or $0.67 per share on a fully diluted basis. For the first
nine months of 1996, net earnings from continuing operations were $19.0 million
or $0.36 per share on a fully diluted basis.
 
REVENUE
 
     Consolidated revenue for the three months ended and nine months ended
September 30, 1997 compared with the same periods in 1996 is shown in the table
which follows:
 
<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED SEPTEMBER      NINE MONTHS ENDED SEPTEMBER
                                                30                               30
                                   -----------------------------    -----------------------------
                                                            %                                %
                                    1997       1996      CHANGE      1997       1996      CHANGE
                                   -------    -------    -------    -------    -------    -------
<S>                                <C>        <C>        <C>        <C>        <C>        <C>
Metals Recovery.................   $ 297.0    $  73.6       304%    $ 758.7    $ 193.0       293%
Industrial Services.............     205.1       71.5       187%      366.8      188.7        94%
                                   -------    -------    -------    -------    -------    -------
Total...........................   $ 502.1    $ 145.2       246%    $1,125.5   $ 381.7       195%
                                   =======    =======    =======    =======    =======    =======
</TABLE>
 
     The 195% increase in consolidated revenue for the first nine months ended
September 30, 1997 was attributable to internal growth of approximately $59
million and approximately $685 million from acquisitions.
 
     In the Metals Recovery Group, the increase in revenue for the first nine
months of 1997 compared to the same period for 1996 is as a result of both
internal growth and acquisitions. The Metals Recovery Group acquired seven new
businesses in the first nine months of 1997 and four new businesses in late 1996
which contributed the majority of the revenue increase. The increase in revenue
for the Industrial Services Group for the nine months ended September 30, 1997
of 94% comes primarily from the acquisitions of Allwaste and Serv-Tech which
were completed on July 31, 1997. These acquisitions contributed 49% of the
revenue increase for the nine months ended September 30, 1997 compared to the
same period in 1996.
 
OPERATING EXPENSES
 
     Operating expenses for the nine months ended September 30, 1997 were $910.3
million, an increase of $620.7 million or 214% over the same period in 1996. The
increase in operating expenses is due mainly to the acquisition of new
businesses in late 1996 and during the first nine months of 1997. As a
percentage of revenues, operating expenses increased from 76% for the first nine
months of 1996 to 81% for the same period of 1997. This increase is the result
of newly acquired businesses in the Metals Recovery Group which generally have
higher operating expenses than Industrial Services Group businesses.
 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
 
     Selling, general and administrative expenses were $81.8 million for the
first nine months of 1997 representing an increase of $43.3 million or 112% over
the same period in 1996. The increase is attributable to the consolidation for
the first time of selling, general and administrative expenses of companies
acquired in late 1996 and during the first nine months of 1997 and to the
addition of selling and corporate staff to manage the increased volume of
business. However, as a percentage of revenue, selling, general and
administrative expenses decreased to 7.3% of consolidated revenue for the first
nine months of 1997 compared to 10.1% in the first nine months of 1996. This is
due to the fact that selling, general and administrative costs associated with
Metals Recovery Group companies acquired, as a percentage of revenue, were lower
than these same costs for Industrial Services Group businesses.
 
                                       12
<PAGE>   13
 
DEPRECIATION AND AMORTIZATION
 
     Depreciation and amortization of fixed assets and goodwill in the first
nine months of 1997 was $35.3 million, representing an increase of $18 million
or 103% over the same period in 1996. This increase was due to acquisitions, to
a continued high level of fixed asset additions, and to the full year effect of
acquisitions completed by the Company in the prior year.
 
INTEREST EXPENSE
 
     Interest expense for the first nine months of 1997 was $27.1 million,
representing an increase of $13.3 million or 96% over the same period in 1996.
This increase was primarily attributable to increased borrowings to finance the
Company's growth by acquisition and fixed asset expansion, together with working
capital requirements to support the Company's increased revenue base.
 
OTHER INCOME AND EXPENSE -- NET
 
     Other income and expense -- net for the first nine months of 1997 includes
a $2.8 million gain before tax on the sale of the USA Waste shares received as
part of the proceeds on the sale of the municipal and commercial solid waste
business in 1996. The shares which were restricted at the time of receipt, were
sold by the Company in February 1997 following the removal of the restriction.
 
INCOME TAXES
 
     The Company's effective income tax rate increased to 31% in the nine months
ended September 30, 1997 from 23% for the same period in 1996, due to a shift in
business to higher income tax rate jurisdictions. The effective income tax rate
was lower than the Canadian statutory combined federal and provincial rate due
to the effect of Philip's significant business in other jurisdictions where
income tax rates are generally lower than those in Canada.
 
DISCONTINUED OPERATIONS
 
     The loss from discontinued operations of $0.7 million for the nine months
ended September 30, 1996 consists of the net earnings of the Company's municipal
and commercial solid waste business. These operations have been discontinued as
a result of the sale of the Company's municipal and commercial solid waste
business in 1996. Interest expense has been allocated to the municipal and
commercial solid waste business segment based upon the relationship of the net
assets of the solid waste business to the Company's consolidated net assets.
 
FINANCIAL CONDITION
 
LIQUIDITY AND CREDIT FACILITY
 
     At September 30, 1997, the Company's working capital was $547.2 million,
representing an increase of $253.7 million from December 31, 1996. Inventory for
resale is a significant component of the working capital at September 30, 1997
and increased by $119.7 million over December 31, 1996. Of this increase, $65.3
million was added through companies acquired since December 31, 1996 and $4.5
million was added by reason of new plant facilities. In addition, at September
30, 1997, accounts receivable were $258.9 million higher than December 31, 1996,
due in part to accounts receivable acquired as part of new business combinations
amounting to $231 million.
 
     In August 1997, the Company signed a five year term, revolving credit
agreement with a syndicate of international banks which provides up to $1.5
billion in borrowings, subject to compliance with specified availability tests.
The credit agreement is guaranteed by all of the Company's wholly-owned
subsidiaries. At September 30, 1997, the Company had undrawn credit capacity
under this facility of approximately $630 million, net of letters of credit
outstanding, which amounted to $59 million.
 
                                       13
<PAGE>   14
 
ACQUISITIONS
 
     During the third quarter of 1997, the Company concluded a number of
acquisitions, the most significant of which were the following:
 
     On July 31, 1997, the shareholders of Allwaste and Serv-Tech voted in
favour of the mergers which were jointly announced by the companies earlier this
year. Under the terms of the respective merger agreements, each share of
Allwaste, Inc. stock was exchanged for 0.611 shares of Philip common stock and
each share of Serv-Tech stock was exchanged for 0.403 shares of Philip common
stock.
 
     In addition to the above acquisitions, the Company has completed 18 other
acquisitions during the nine months ended September 30, 1997.
 
     In October, 1997, subsequent to the end of the third quarter, the Company
announced the acquisition of Luria Brothers, the Steiner Liff Metals group of
companies and the Southern Foundry Supply group of companies. The aggregate
purchase price for Luria, Steiner-Liff and Southern Foundry was $495.9 million
which includes the assumption of $32.6 million in debt. Part of the purchase
price was satisfied by the issuance of 5.6 million Philip common shares.
 
CAPITAL EXPENDITURES
 
     Capital expenditures for continuing operations were $34.8 million for the
first nine months of 1997 compared to $12.6 million for the same period in 1996.
 
CAPITAL STRUCTURE
 
     On November 12, 1997, the Company closed its previously announced
transaction to sell 20 million Common Shares at $16.50 per share, with the net
proceeds of $316.8 to be used to repay indebtedness outstanding under the
Company's Credit Facility.
 
     In addition to the equity offering noted, the Company has issued 32.4
million common shares during 1997 for a total consideration of $524.5 million,
and therefore, the share capital of the Company increased from $363.1 at
December 31, 1996 to $887.6 million at September 30, 1997. The common shares
were issued primarily as a result of acquisitions or as the result of the
exercise of employee stock options. The September 30, 1997 shareholders' equity
does not reflect the net proceeds from the equity offering since this
transaction closed on November 12, 1997.
 
RISKS AND UNCERTAINTIES
 
     See "Commitments and Contingencies" in the notes to the consolidated
financial statements for description of certain contingent liabilities relating
to the Company and its subsidiaries. There has been no material change in the
status of these contingencies since December 31, 1996.
 
                                       14
<PAGE>   15
 
                          PART II -- OTHER INFORMATION
 
ITEM 1: LEGAL PROCEEDINGS
 
     From time to time, the Company is named a defendant in legal actions
arising out of the normal course of business. The Company is not a party to any
pending legal proceeding the resolution of which the management of the Company
believes will have a material adverse effect on the Company's results of
operations or financial condition or to any other pending legal proceedings
other than ordinary, routine litigation incidental to its business. The Company
maintains liability insurance against risks arising out of the normal course of
business.
 
     In January 1997, the State of Missouri brought an enforcement action
against Solvent Recovery Corporation and the Company in state court alleging
numerous violations of hazardous waste regulations at the Company's Kansas City,
Missouri facility. Included were allegations that alterations or additions to
the facility's operations had been implemented without required modification of
the facility's hazardous waste permit as well as allegations of numerous
deficiencies under regulations and the permit in the accumulation, record
keeping, inspection, labeling, transportation and handling of such waste.
Through subsequent meetings and correspondence, the state has required (1)
submittal of a comprehensive application for permit modification; (2) submittal
of a plan for achieving and maintaining compliance with respect to operations;
and (3) payment of a penalty of approximately $560,000. The Company has
submitted permit application documents and a compliance plan and is negotiating
with the State for resolution of this matter. While settlement may require
payment of a substantial penalty, the Company does not expect that matter will
have a material adverse effect on the Company's results of operations or
financial position.
 
ITEM 2: CHANGES IN SECURITIES
 
(C) SALES OF UNREGISTERED SECURITIES
 
     On July 31, 1997, the Company issued 286,418 Common Shares in connection
with the acquisition of the stock of D&L, Inc. The transaction was exempt from
registration under Section 4(2) of the Securities Act.
 
     On July 3, 1997, the Company issued 422,331 Common Shares in connection
with the acquisition of the stock of Roth Bros. Smelting Corp. The transaction
was exempt from registration under Section 4(2) of the Securities Act.
 
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
 
     None.
 
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
     None.
 
ITEM 5: OTHER INFORMATION
 
     None.
 
                                       15
<PAGE>   16
 
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
 
(A)  EXHIBITS
 
3.1   Articles of Amalgamation of Lincoln Waste Management Inc. (previous name
      of the Registrant), dated April 15, 1991 (filed as Exhibit 1.2 to the
      Registration Statement on Form 20-F of the Registrant dated January 14,
      1993 (File No. 0-20854) and incorporated herein by reference)
 
3.2   By-Laws of Lincoln Waste Management Inc. (previous name of the
      Registrant), dated August 16, 1990 (filed as Exhibit 1.4 to the
      Registration Statement on Form 20-F of the Registrant dated January 14,
      1993 (File No. 0-20854) and incorporated herein by reference)
 
10.1 Stock Purchase Agreement dated December 20, 1996 among Pechiney North
     America, Inc., Philip Metals (Delaware), Inc. and PEN Metals (Delaware),
     Inc. relating to the acquisition of Instel Southwest Limited Partnership
     (filed as Exhibit 10.1 to the Registration Statement on Form F-4 of the
     Registrant (File No. 333-6834) and incorporated herein by reference)
 
10.2 Agreement and Plan of Reorganization dated December 30, 1996 among Philip
     Environmental Inc., Philip Environmental Delaware Acquisition Corp., and
     Luntz Corporation (filed as Exhibit 10.2 to the Registration Statement on
     Form F-4 of the Registrant (File No. 333-6834) and incorporated herein by
     reference)
 
10.3 Agreement and Plan of Merger, dated as of March 5, 1997, by and among
     Philip Environmental Inc., Taro Aggregates Ltd., an Ontario corporation and
     a wholly owned subsidiary of the Registrant ("Taro"), Philip/Atlas Merger
     Corp., a Delaware corporation and a wholly owned subsidiary of Taro, and
     Allwaste, Inc., a Delaware corporation (attached as Annex A to the Proxy
     Statement/Prospectus included in the Registration Statement on Form F-4 of
     the Registrant (File No. 332-6272) and incorporated herein by reference)
 
10.4 Agreement and Plan of merger dated March 5, 1997, among Philip
     Environmental Inc., Taro Aggregates Ltd., ST Acquisition Corporation and
     ServTech, Inc. (included as Appendix A to the Proxy Statement/Prospectus in
     Part 1 of the Registration Statement on Form F-4 of the Registrant (File
     No. 333-6834) and incorporated herein by reference)
 
10.5 Credit Agreement, dated as of August 11, 1997, among Philip Services Corp.,
     Philip Environmental (Delaware), Inc., Canadian Imperial Bank of Commerce,
     Bankers Trust Company, Dresdner Bank of Canada, Dresdner Bank AG/New York
     Branch, Royal Bank of Canada and the various persons from time to time
     subject to the Credit Agreement as Lenders.
 
10.6 Asset Purchase Agreement, dated as of October 10, 1997, among Philip
     Services Corp., Philip Metals (Ohio) Inc., Connell Limited Partnership and
     Connell Industries Inc., relating to the acquisition of Luria Brothers
     (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K,
     dated October 25, 1997, and incorporated herein by reference)
 
27.1 Financial Data Schedule
 
(B)  REPORTS OF FORM 8-K
 
     The Company filed a Current Report on Form 8-K, dated August 15, 1997,
relating to the acquisitions of Allwaste, Inc. and Serv-Tech, Inc. on July 31,
1997.
 
     The Company filed a Current Report on Form 8-K, dated September 8, 1997,
relating to the Company's quarterly financial statements for the six month
period ended June 30, 1997.
 
     The Company filed a Current Report on Form 8-K, dated September 29, 1997,
relating to the acquisition of certain assets of A-C-I Holdings.
 
                                       16
<PAGE>   17
 
                                   SIGNATURE
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Philip Services Corp., has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          PHILIP SERVICES CORP.
 
                                          By:    /s/ MARVIN D. BOUGHTON
                                            ------------------------------------
                                            Marvin D. Boughton
                                              Executive Vice President
                                              and Chief Financial Officer
 
Dated: November 14, 1997
 
                                       17
<PAGE>   18
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                   DESCRIPTION                                   PAGE NO.
------   ----------------------------------------------------------------------------  --------
<C>      <S>                                                                           <C>
   3.1   Articles of Amalgamation of Lincoln Waste Management Inc. (previous name of
         the Registrant), dated April 15, 1991 (filed as Exhibit 1.2 to the
         Registration Statement on Form 20-F of the Registrant dated January 14, 1993
         (File No. 0-20854) and incorporated herein by reference)....................
   3.2   By-Laws of Lincoln Waste Management Inc. (previous name of the Registrant),
         dated August 16, 1990 (filed as Exhibit 1.4 to the Registration Statement on
         Form 20-F of the Registrant dated January 14, 1993 (File No. 0-20854) and
         incorporated herein by reference)...........................................
  10.1   Stock Purchase Agreement dated December 20, 1996 among Pechiney North
         America, Inc., Philip Metals (Delaware), Inc. and PEN Metals (Delaware),
         Inc. relating to the acquisition of Instel Southwest Limited Partnership
         (filed as Exhibit 10.1 to the Registration Statement on Form F-4 of the
         Registrant (File No. 333-6834) and incorporated herein by reference)........
  10.2   Agreement and Plan of Reorganization dated December 30, 1996 among Philip
         Environmental Inc., Philip Environmental Delaware Acquisition Corp., and
         Luntz Corporation (filed as Exhibit 10.2 to the Registration Statement on
         Form F-4 of the Registrant (File No. 333-6834) and incorporated herein by
         reference)..................................................................
  10.3   Agreement and Plan of Merger, dated as of March 5, 1997, by and among Philip
         Environmental Inc., Taro Aggregates Ltd., an Ontario corporation and a
         wholly owned subsidiary of the Registrant ("Taro"), Philip/Atlas Merger
         Corp., a Delaware corporation and a wholly owned subsidiary of Taro, and
         Allwaste, Inc., a Delaware corporation (attached as Annex A to the Proxy
         Statement/Prospectus included in the Registration Statement on Form F-4 of
         the Registrant (File No. 332-6272) and incorporated herein by reference)....
  10.4   Agreement and Plan of merger dated March 5, 1997, among Philip Environmental
         Inc., Taro Aggregates Ltd., ST Acquisition Corporation and Serv-Tech, Inc.
         (included as Appendix A to the Proxy Statement/Prospectus in Part 1 of the
         Registration Statement on Form F-4 of the Registrant (File No. 333-6834) and
         incorporated herein by reference)...........................................
  10.5   Credit Agreement, dated as of August 11, 1997, among Philip Services Corp.,
         Philip Environmental (Delaware), Inc., Canadian Imperial Bank of Commerce,
         Bankers Trust Company, Dresdner Bank of Canada, Dresdner Bank AG/New York
         Branch, Royal Bank of Canada and the various persons from time to time
         subject to the Credit Agreement as Lenders..................................
  10.6   Asset Purchase Agreement, dated as of October 10, 1997, among Philip
         Services Corp., Philip Metals (Ohio) Inc., Connell Limited Partnership and
         Connell Industries Inc., relating to the acquisition of Luria Brothers
         (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K, dated
         October 25, 1997, and incorporated herein by reference).....................
  27.1   Financial Data Schedule.....................................................
</TABLE>
 
                                       18