The Force Is No Longer With This One… As a Matter of Fact, They May Be Seeking Protection…

At the request of one of our Professional Subscribers, we performed a
preliminary analysis of Force Protection, Inc. While it doesn’t suit
our needs, I have decided to put the summary out in the public domain. I
urge any and all readers, subscribers or not, to forward me leads on
opportunities (long or short) that you truly feel may be worthwhile. I
will offer a month’s professional (high end) subscription to anyone who
proffers and idea that I consider actionable. Now, on the the analysis…

Force Protection, Inc. (FRPT) provides survivability solutions to
support the armed forces of the United States and its allies. The
company produces specialty vehicles, which are based on the blast- and
ballistic-protected technology, and are designed to protect their
occupants from landmines, hostile fire, and improvised explosive
devices, referred to as IEDs. The company designs, manufactures, tests,
delivers and supports its blast- and ballistic-protected products to
increase the survivability of the users of these products. The business
has only one operating segment which is ‘survivability solutions’.  FRPT
is a key provider of the U.S. military’s Mine Resistant Ambush
Protected (”MRAP”) vehicle program and have sold and delivered over
3,000 vehicles under this program. FRPT currently offers four vehicle
platforms the Buffalo, Cougar (includes Mastiff and Ridgeback variants),
Cheetah and Ocelot. In addition to vehicle platforms the company also
offers modernization and spare and sustainment services for its supplied
vehicles.

Poor operating performance is a key concern for the company

• For 1Q10, net sales declined 27.0% to $134.8 million compared to
  $184.7 million in 1Q09. Operating margins also declined significantly to
  1.3% from 6.2% in 1Q09. Though, in 1Q10, the company added $48.2
  million of modernization revenue, it has failed to offset the decline in
  revenues from vehicle sales and spares and sustainment.

• For 2009, net sales for the company declined to $977.1 million
  compared to $1,326.3 million in 2008 driven by decline in MRAP (Mine
  Resistant Ambush Protected) sales (the decline was driven by the
  termination of MRAP contract in mid-2009), which was the key contributor
  to company’s net sales in 2008. Operating margin also declined to 4.4%
  from 5.2% in 2008.

• FRPT’s backlog has declined substantially from 90 vehicles in 1Q09
  to 41 vehicles in 1Q10, clearly reflecting decline in its new orders.

• Sustainability of Revenues is another concern, as majority (73% in
  1Q10) of the company’s revenue is now derived from Modernization and
  Spares and sustainment. Both the above services are dependent on the
  MRAP fleet owned by the US military. And once the term of the related
  modernization contracts ends, the possibility of its renewal is bleak
  since the US military has no plans to extend its MRAP fleet.
  • According to FRPT’s 2009 10K “Modernization: In 2009, the Cougar
    was upgraded with an independent suspension system, or ISS, providing
    it with off-road capability to deal with more rugged terrain encountered
    by our customers. This modernization effort consisted of the supply and
    installation of ISS on most of the U.S. Department of Defense’s Cougar
    fleet for deployment to Afghanistan, which will continue in 2010. We
    continue to work with our customers on additional modernization upgrades
    of our vehicles for continued service”. This statement clearly (at
    least to us) implied that modernization revenues are likely to seize
    after 2010, as the US military contacted works comes to an end.
  • FRPT’s spares and sustainment revenues relates to maintenance and
    supply of spares for its vehicles. Until now, a very significant amount
    of the vehicles that the company has supplied included MRAPs to the US
    military. Thus, a material amount (if not most) of these revenues are
    dependent on the MRAP fleet owned by the US military. Since the US
    military has no plans to increase its MRAP fleet, and is working towards
    in-house maintenance of its MRAPs, the spares and sustainment revenues
    are bound to take a hit once the US military starts in-house
    maintenance.

The balance of this report, including valuation and a quick
forensic opinion, is available to all paying subscribers by clicking here.
Those who are interested in subscribing can do so by clicking here, and anyone who wants to take
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domain in order to be considered.

Comments

[Tic tock]

Currently in development is tyre that can withstand being shot up and exploded on. Apparently, this was the one weakness of these vehicles. Once that enters production, the demand dynamic for these products could change:

Wisconsin-based start-up Resilient Technologies LLC is working on a four-year, US$18 million project with the U.S. DoD (Department of Defense) and the University of Wisconsin-Madison to research and develop a non-pneumatic tire for use on heavy-grade military vehicles such as Humvees. Tires have proven to be the weak link in Humvees, which can be immobilised by the scourge of the 21st century urban battlefield, the IED (Improvised Explosive Device). Once the mobility of a Humvee is compromised in a hostile environment, its inhabitants’ life expectancy closely approximates zero.

mind you, this is a nov 18, 2008 article..

[Fish Gone Bad]

Speaking of Afghanistan, how is it that there are an incredible number of drones flying over the country and poppy cultivation is sky high?  The reason is simple.  Opium is worth a great deal of money.  The Taliban got rid of the opium poppies (http://www.orwelltoday.com/afghanheroin.shtml), so the Taliban had to go.  Perhaps our presence in Afghanistan is not just to surround Iran and its oil, but to get the US ready for another Opium war.

[Pegasus Muse]

Actually chunk, the MRAP vehicles have been a life-saver to an untold number of Soldiers & Marines in Iraq and Afghanistan.  Much improved survivability over the HUMMWV and previous generation thin-skinned vehicles.  I have two buddies who survived an IED ambush outside Fallujah.  The blast destroyed their MRAP but they walked away with minor injuries.  They would have died in a lesser vehicle.

http://www.forceprotection.net/products/cougar_4x4/  

So while these vehicles are expensive they are priceless to the guys that go in harm’s way.  

I suppose if you are a worthless POS that's never put his CS butt on the line anything or anyone you may have a less informed and less relevant opinion.  

[Vix_Noob]

MRAPs are the reason guns won't protect your gold.  If SHTF .gov can bring back some of the thousands of these things they bought for Iraq and Afghanistan and lend them to the nat. guard units, swat teams or what have you.  Everything built for the last 6 or 7 years is bullet proof.

[DosZap]

Vix,

"and lend them to the nat. guard units, swat teams or what have you.  Everything built for the last 6 or 7 years is bullet proof."

You assume, our Brothers and sisters, and family members will/would use these against us?.

Secondly, you assume IF they did, they would never get out of them?.

Anyone, anywhere,anytime, can be gotten to.............remember that.

NO one is safe............NO ONE.

[whiteshadow]

Dear Mr. Reggie,

I am an undergraduate student. I have read ur reports on various occasions and was wandering if I can join your research team as an intern? I could greatly appreciate your help.

[Reggie Middleton]

Emial me via the contact us link at the top of my site and let's talk.

[Fish Gone Bad]

+1

That was really decent of you Reggie.

[Popo]

"Mr. Reggie"?  Fail.

You were "wandering"?  Fail.

[Ripped Chunk]

Yet another of the thousands of examples of wasteful government spending.

Probably has a relative on the Joint (smokin') Chiefs of Staff