FRPT

[la-onda]

Force Protection "buy," target price raised

Thursday, October 11, 2007 1:08:36 PM ET
Dougherty & Company

NEW YORK, October 11 (newratings.com) - Analysts at Dougherty & Company reiterate their "buy" rating on Force Protection Inc (ticker: FRPT). The target price has been raised from $25 to $30.
Key Points:

• We are re-iterating our BUY rating and increasing our price target to $30.00 from $25.00 based on expected awards and the strong likelihood of upside revisions to our FY08 estimates.

• We believe FRPT could win 750 – 800 in near-term MRAP awards and that the MRAP field could be reduced to three vendors from the current five.

• Funding for 7,000 additional vehicles could be passed by early November. In order for FRPT to meet our FY08 expectations (ignoring awards other than MRAPs), we believe FRPT needs to win 2,000 of the 7,000 expected MRAPs (29%), which could occur this November. FRPT currently has a 31% MRAP market share, a figure we believe could increase if the MRAP field is narrowed.

• We believe upside to our FY08 estimates in likely given the potential for MRAP market share gains, Cougar orders from foreign governments (Mastiffs, ILAVs, interest from several other countries), increased Buffalo production, and upside to our 1,000 Cheetah expectation.

• FRPT's Q307 financial results are likely to include vehicles produced by General Dynamics (GD, NR), see below.
We believe the GD impact will result in FRPT's revenue being reported above street expectations, but that its gross margin will be below expectations. If FRPT gives data showing its "real" production (ex-GD), it will likely result in revenue below the street, but with much higher gross margin.

[la-onda]

I have sold FRPT and I have bought ASTI & SLP.

accounting problems have to be sorted out...
nice 33% gain locked (not as last time  )

Force Protection Warns on Accounting
Monday October 15, 9:48 am ET 
Force Protection Finds Material Weaknesses in Accounting Which Could Result in Restatements


LADSON, S.C. (AP) -- Armored vehicle maker Force Protection Inc. found material weaknesses in accounting system, according to a filing Monday with the Securities and Exchange Commission.
Shares fell 75 cents, or 3.1 percent, to $23.20 in morning trading. They have ranged from $6.35 to $31.16 over the past year.

Force Protection previously restated annual reports for 2003 through 2005 and amended its annual report for 2006. During those restatements, the company found personnel were not properly skilled in certain accounting procedures.
The company said the problems affect all financial reports after Dec. 31, 2006.
Force Protection said the problems could affect its management evaluations and annual audit, and could lead to restatements, delisting from the Nasdaq Stock Market, potential legal issues, and a loss of investor confidence.
The company also said it could take charges through the rest of the year and beyond, related to the hiring of new personnel and other efforts to shore up its accounting.

[la-onda]

hit the sell button probably too early..

Force Protection's Ongoing Accounting Lapses
Evelyn M. Rusli, 10.15.07, 2:20 PM ET

In Force Protection's case, a financial restatement can have more bark than actual bite. Or so claims one analyst.

On Monday, shares of the armored vehicle maker plunged more than 14.4% in morning trading, amid investor anxiety over the company's latest Securities Exchange Commission filing.

In an annual report amendment, Force Protection (nasdaq: FRPT - news - people ) acknowledged accounting problems in 2006 and 2007. In one document, the Ladson, S.C.-based company said its "disclosure controls were not effective as of December 31, 2005 because of certain material weaknesses." Meanwhile, in another document, Force Protection also said that "internal control over financial reporting was not effective as of December 31. 2006, because of certain material weaknesses." According to these reports, the central problem was an inexperienced staff that did not execute proper accounting procedures.

In Force Protection's words: "We did not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience with the Company and training in the application of Generally Accepted Accounting Principles commensurate with our financial reporting requirements. The lack of a sufficient complement of personnel with an appropriate level of accounting knowledge, experience with our Company and training contributed to multiple control problems."

Despite the steep, initial share plunge, Force Protection's stock steadily climbed back to a 6.8% decline, or $1.64, to $22.31 in afternoon trading.

As investors hit the panic button, Dougherty & Company analyst Joe Maxa said there was no real news in the reports and that the negative reaction was overblown. In the past, the company has restated reports for 2003 through 2005, also citing problems with the personnel handling accounting issues.

The filings, according to Maxa, simply add language to accounting problems that were already disclosed. "It is not a meaningful event," he said. He also believes Force Protection has taken steps to correct its problems.

According to one filing, the company has worked towards shoring up its accounting practices, by hiring a new chief financial officer in 2007, Michael S. Durski, and hiring a "professional service organization which specializes in the assessment and the enhancement of the effectiveness of internal controls over financial reporting." In addition, the company is also using computer systems to "enhance our processes and internal control environment, and change the manner of collection, reporting and management of accounting data." Maxa said that as long as these controls hold up, Force Protection should be able to proceed without any accounting problems in the future.

He remains positive on the stock, with a "buy" rating and $30 price target.

Over the past year, Force Protection's stock has been battered by competition, as unlikely rivals such as Navistar and General Dynamics (nyse: GD - news - people ) have won lucrative armored-vehicle contracts from the government. Under the government's Mine Resistant Ambush Protected vehicle program, the Army is expected to award contracts to produce at least 23,000 armored vehicles in the next few years (See: "Force Protection Battered By Rivals." )

[TerryG]

I was half way out the door when it rebounded above 22.35 and went all the way back in.

But you may be right yet. I am in for the rocket of contract announcements.

But the problem being since FRPT is new here, they are being pushed around and tested. And the panic, making mistakes. Mistakes they have to learn not to make. So now they are paying for corrective action. And we are hoping they do not find any big errors or mistakes.

But this is their first audit and they happen rarely. Audits are complex, large, and complete, so they are time consuming and expensive.  And rarely do audits find nothing if they are doing their job. The audit found no errors, but a lack of controls to where errors and mistakes could happen. Again lets hope they do not find any big mistakes.

The only new problem I noticed is that they may have a hazardous waste problem. Which may cost them something. Including cleanup and legal costs.

[la-onda]

Force Protection down on analyst comment
Tuesday , October 16, 2007 13:11ET

By Staff Reporter

NEW YORK, Oct 17, 2007 (AP via COMTEX) -- Shares of Force Protection Inc. skidded Tuesday after a Stephens Inc. analyst began covering the company with an "Underweight" rating, saying troop withdrawals from Iraq could cut sales of its armored vehicles in 2009 and 2010.
Tim Quillin said the stock will lose more than a third of its value over the next year, falling to $14 per share. He recommended investors sell the shares or take "short" positions, betting the stock will go down.

He said the company's mine-resistant ambush-protected vehicle is uniquely suited to fighting in Iraq, and because large numbers of soldiers could be withdrawn in 2009, he expects orders to decrease. That would lead to sharp decreases in the company's profit. Force Protection shares fell 56 cents, or 2.5 percent, to $22.14. The stock traded as low as $20.69 on the day. Quillin said the stock price is high because investors expect Force Protection to keep making large numbers of vehicles, assuming that the mine-resistant vehicle program will be extended, or that the company will win a large number of orders under a different program. He said that situation is "too-good-to-be-true." The company's profit margins could remain thin, he added, because Force Protection outsources much of its business and because of the makeup of Force Dynamics LLC, a joint venture with General Dynamics Corp.

[TerryG]

WAKE UP.

The news hit after close yesterday and the stock is on the move already.

Force Protection, Navistar, BAE May Win Truck Awards (Update1)

By Edmond Lococo

Oct. 17 (Bloomberg) -- Force Protection Inc., Navistar International Corp. and BAE Systems PLC may win orders to build more blast-resistant trucks for the U.S. military as soon as this week, according to a report from the Stanford Group.

Each of the three companies may get awards valued at approximately $400 million for about 800 of the trucks, Washington-based Stanford said in a note to clients today. The report cited Congressional sources it didn't identify.

Stanford estimates the Pentagon will order 15,374 to 23,000 of the trucks for the Mine-Resistant Blast-Protected vehicle, or MRAP, program in fiscal 2008. The trucks have blast-deflecting, V-shaped hulls which the U.S. Marine Corps has said are four times better than flat-bottomed trucks at protecting troops from roadside bombs used in Iraq.

Ladson, South Carolina-based Force Protection rose 88 cents, or 3.8 percent, to $23.80 at 4:30 p.m. New York time in Nasdaq Stock Market composite trading. Warrenville, Illinois- based Navistar gained 55 cents to $71.50 in over-the-counter trading.

Stanford is a member of the Stanford Financial Group of companies, a network of closely held financial-service companies founded by Lodis B. Stanford in 1932. Stanford helps manage funds for high net-worth individuals.

To contact the reporter on this story: Edmond Lococo in Boston at [email protected] .

Last Updated: October 17, 2007 17:13 EDT

[la-onda]

fyi from IV (mrzippy)

Defense Department Background Briefing on Mine Resistant Ambush Protected Vehicles (MRAPS)

SR. DEFENSE OFFICIAL: (In progress from source) -- pleased to be here. Actually, I really am. Today, the MRAP Joint Program Office is placing orders for 2,400 additional MRAP vehicles through our existing contracts. The Defense Department has already ordered roughly 6,400 MRAPs. This will increase our vehicles on order to 8,800. This next step is made possible through a lot of work by Secretary Gates and Secretary England working closely with the Congress, and the Congress taking the remarkable step of providing $5.2 billion in the continuing resolution for this very important program.

The orders are being placed with three vendors. Category II MRAPs are the larger variants, typically six-wheeled vehicles carrying two crew and eight passengers. We will order additional Category II MRAPs from Force Protection Industries, FPI, and British Aerospace, BAE. Category I MRAPs are typically four-wheeled vehicles carrying two crew and four passengers. We will order additional Category I MRAPs from International Military Group and FPI. Again, we are presently ordering these types of vehicles from these vendors. These are additional orders. Indeed, the BAE Category II vehicle was also recently selected through a mini MRAP competition as the preferred design for 400 ambulance versions or variants which the department is now purchasing.

As we go forward, we are seeking to constantly improve the survivability of the MRAP design. Some of the explosively formed projectile or EFP armor enhancement concepts require significant excess payload capacity of the MRAP, though none of the current designs have as much payload capacity as the Defense Department would prefer. The BAE and FPI Category II vehicles provide the largest payload capacity in this class, the Category II class. Similarly, the IMG and FPI Category I MRAPs provide significant excess payload capacity for these armor enhancement concepts.

Further, two of these vendors are currently producing at high and growing rates of production. Indeed, the vendors have delivered some vehicles ahead of schedule. Consistent with the department's goal of building and delivering MRAP vehicles as fast as possible, it makes sense to concentrate our efforts on fewer, more capable vehicle variants. This approach provides several benefits.

First, the MRAP production capacity has reached the point where these three vendors can potentially produce the designs at a total rate of 1,200 MRAPs per month. Even at this rate, the department will have to manage potential conflicts in the demand for hardened and ballistic steel between MRAPs and other programs such as Strykers, Bradleys and Frag Kit 6 armor enhancements.

Second, we hope to succeed in the challenge of producing 1,200 vehicles a month. We are still working towards that goal. Those vehicles then must get radios and other items installed at the Navy's Space and Naval Warfare or SPAWAR Charleston (S.C.) facility. To improve the chances of modifying 1,200 vehicles per month and then quickly moving them to theater, we must reduce the number of MRAP variants moving through the SPAWAR production line.

Third, our current efforts are meeting the most urgent, initial requirement for roughly 8,000 MRAPs. However, we are building at least eight vehicle variants from five vendors. With unique Army and Marine Corps equipment installations, this means we are fielding as many as 16 different vehicle designs. Going forward, we need to reduce the burden for training, maintenance and spare parts on our deployed forces. We can now maintain production rates and shift to fewer variants in an effort to provide better support for fielded MRAPs and reduce the training, maintenance and logistics burden in theater.

Finally, this approach will mean our inventory in the end state has the highest quantity of the most capable MRAP vehicles. I want to note the continuing and near-heroic work of Secretary Etter, General Brogan, the MRAP program manager Paul Mann and the MRAP Joint Program Office. They have done a tremendous job here. And equally importantly, our industry partners have stepped up to the challenge and are meeting their delivery plans to date.

The MRAP program continues to face challenges. This is a highly unusual program. These orders obligate roughly $1.2 billion for 2,400 MRAPs, roughly two months of production. We will need the support of Congress for additional funds at the beginning of December in order to place additional orders to continue the production lines. At this time, we would expect to order roughly 6,500 MRAPs in December. This would bring our total orders to about 15,200, meeting the current stated requirement. The Defense Department continues to evaluate the MRAP requirement in light of the experiences and needs from commanders in Iraq and Afghanistan as relayed to us. But we will have the opportunity and the production lines in place to continue production if that is the requirement from the field.

With that, I'll take questions.

Yes.

            Q     Can you just clarify a few things? Fifteen thousand two hundred -- that number is the total number of MRAPs that will be produced?

            SR. DEFENSE OFFICIAL: I'm trying to use round numbers, but the current stated and endorsed by the Joint Requirements Oversight Council number is 15,274 vehicles.

            Q     Can you break down the dollar amount for each company, how much each contract is worth?

            SR. DEFENSE OFFICIAL: Actually, I think I can.

            (Off mike commentary.)

            We can give them the announcement?

            (Off mike commentary.)

            The announcement has the dollars and the numbers and the exact company names. Please check that, because I may not have -- like it's BAE Systems Land and Armaments. And I didn't get the exact company names. If you would please correct that, that would be great.

            Q     How many in Category I? How many in Category II?

            SR. DEFENSE OFFICIAL: I don't think this press release breaks it out, and that's the best way to let you get it if that's okay.

            Q     Do you know how many are in which category?

            SR. DEFENSE OFFICIAL: Well, IMG is being asked -- we're ordering 1,000 Category I vehicles from IMG. We are ordering 399 Category II vehicles from BAE and 112 of the MRAP Category II ambulance variants. So doing math on the fly does not work for me, so I'll just tell you what it says -- 553 Category I FPI MRAPs, and 247 Category II FPI MRAPs.

            Q     And this is all on that release?

            (Cross talk.)

            Sir, you said earlier that there were 16 different variants, and you said that could be a problem. Are you working to drop that number of variants?

            SR. DEFENSE OFFICIAL: I promise to come back to you.

            Why are you shaking your head?

            Q     Because those numbers don't add up to anywhere near 6,400 do they?

            SR. DEFENSE OFFICIAL: No, because there's 2,400. We ordered 2,400 today. We already have 6,400 on order. That brings our total to 8,800. I'm sorry.

            Q     That's all right, sir. You've got 16 different variants, and you're saying that that could cause problems in the future.

            SR. DEFENSE OFFICIAL: (Inaudible.)

            Q     All right. Are you working to bring that number down?

            SR. DEFENSE OFFICIAL: Well, obviously, by placing these orders, we will make a dramatic step in these vehicles. And to give you an example, the FPI vehicles have been in production for some time, and they are coming up the ramp pretty well. SPAWAR has had some success in processing those vehicles very quickly -- you know, seven to 10 day kind of timelines. Other vehicles are newly coming in to SPAWAR. It takes time to design the package to install either the Army package or the Marine Corps package, proof that, do some initial tests and then set that as a process. So other vehicles have taken longer periods of time to get through SPAWAR. We want to consolidate -- well, first and foremost, we're going to buy the most capable vehicles. And the fact that particularly the Category II vehicles have the largest excess payload capacity, that serves us well for the long term. Making that choice to give vehicles a payload capacity and limit it to those two types will let us then let SPAWAR focus on processing two types of vehicles through the facility. And in general, the Army -- I mean, this isn't -- the Army would like to have, for example, particularly some of the IMG Category I vehicles. The Marine Corps has bought the FPI Category I and II vehicles. But I want to be clear with you, that's not what's happening. Right now, there is a joint allocation board, and it is allocating the vehicles that are produced to the most important areas in theater irrespective of service. So you know, in some cases, a vehicle that might have been intended to the Army is going to the Marine Corps or a Marine Corps is going to the Army. They're going where the theater says we face a threat and we want the vehicles.

            Q     You mentioned increased payload and increased EFP type armor protection and it brought MRAP II to mind. So I wondered where this stands in relation to MRAP II. Is that a separate procurement line, or is this kind related?

            SR. DEFENSE OFFICIAL: It's really a separate issue at this time. There are two things going on that are separate from this order process. The MRAP II competition which you're clearly aware of where we've gotten the proposals and we expect to get vehicles and get them in test, and then we've also allowed these existing vehicle vendors to propose changes to their vehicles that would try to bring them up to the MRAP II standard. And indeed, as we've put the vehicles we're buying today through additional developmental testing, we've found these vehicles have great capability and with some modest changes can get closer to that MRAP II standard or, more importantly, can be vehicles that provide us better protection. But there's a decision down the road as to whether we would shift and buy MRAP IIs. We will clearly make the decision, I think, if we can to cut in some of these change proposals. And again, consistent with what I said in the beginning, make the vehicles we are now ordering and then the ones we will order in December the most capable possible vehicles by cutting in change proposals that help their survivability.

            Q     You had talked about cutting down the number of variants going through SPAWAR. Has the program decided on two or three variants that it's now going to concentrate on; for example, the Cougar, the MaxPro and, say, the RG-33?

            SR. DEFENSE OFFICIAL: Well, that's what I told you today. We are, certainly with these orders, concentrating on the very vehicles I think you outlined -- the BAE Category II vehicle which is an RG-33, the FPI Category I and Category II vehicles which are Cougar derived and then the IMG or MaxPro Category I vehicle.

            Q     Is this going to be a continuing trend where you see that the future 6,500 that you're going to order, is it fair to say they will be distributed among RG-33s, Cougars and the MaxPro?

            SR. DEFENSE OFFICIAL: Well, we'll make that decision when we place that order. What will factor into that decision -- testing, theater feedback and a lot of different factors.

            Q     And I just didn't quite understand when you said you will be asking for more money in December for an additional 6,500. What is it that -- are you saying that that money's coming from another request?

            SR. DEFENSE OFFICIAL: Right. I believe that the department has drafted and is working with the White House to formally request the funds necessary to order those additional vehicles. And it should go over in the form of a budget amendment, you know. But the White House will make all those decisions in the final form.

            Q     And the 2,400, do you know when they are expected to arrive in Iraq?

            SR. DEFENSE OFFICIAL: I can't tell you that.

            Q     (Inaudible) -- decision, would that allow you to continue the production beyond May?

            SR. DEFENSE OFFICIAL: The orders we're placing today we expect, if we make the program plan -- and we have a lot who were cut out for us. People have done a tremendous job to this point. We produced 309 vehicles in September, and that was 34 vehicles ahead of the schedule for that month. And against the plan since February, we're four vehicles ahead of schedule. So we were behind in some months. We've now caught up, and we're on and really slightly ahead of the schedule. But the big months lie ahead of us. We have to produce 419 vehicles in October -- let me use round numbers -- just over 400 vehicles in October, almost 1,000 vehicles in November and 1,200 vehicles in December. That's a challenge that we've got to accomplish. If we meet that challenge then, to answer your question, these orders will deliver a few in February and the bulk of them in March and April. So that does get us to May. And that's why, given the roughly six-month lead time, we must order vehicles the first of December so that production lines can continue to march and deliver vehicles in May and out.

            If we order that 6,500 vehicles in May, they should deliver out, and we should have that 15,200-plus number of vehicles by early October, have them delivered from the vendors to at least SPAWAR Charleston for outfitting.

            (Off mike commentary.)

            Of next year -- October of '08 -- sorry, 2008.

            Q     You had mentioned about 300 vehicles were produced in September of which 101 were flown to Iraq. Do you have estimates on --

            SR. DEFENSE OFFICIAL: I didn't say that.

            Q     I know you didn't say that. That's been previously reported. Geoff Morrell actually said that yesterday.
           
            SR. DEFENSE OFFICIAL: Okay.

            Q     So that's out there. Do you have estimates for October, November and December of how many you anticipate shipping to Iraq for those months?

            SR. DEFENSE OFFICIAL: Our current plan, which I reserve the right to adjust the plans to optimize things, is to fly vehicles to theater, to get them there as fast as possible, consistent with Secretary Gates' goal and my orders from him. And we will do that up to the capacity of airlift we have, which is roughly 360 vehicles a month.

            Q     However, contracts have been awarded to do that. We've got two long-term contracts with the two Russian freight carriers. Poland Air and -- (inaudible) -- have yet to be awarded.

            SR. DEFENSE OFFICIAL: Right. I said our plan is to put in place the air capacity. We're using C-5s, C-17s. And then we will possibly contract for air. But TRANSCOM -- I can assure you I've talked to General Schwartz several times. He's making these decisions and plans. He understands the priority the secretary places on this program. And so we intend to -- until we get to 360 vehicles a month, they will go by air, and the intent under the current plan is that will continue. So roughly mid November, if we produce over 400 vehicles in October, allotting some time to outfit those vehicles at Charleston, in mid November we should broach this 360 number and start loading vehicles for sea lift into theater. And there's still a couple of different options being worked through, but we will send, you know, the production capacity above 360 a month. And certainly, if we make 1,200, it will get to that number by surface lift. And then we will transport them. The current plan is to transport the vehicles from port by airlift to the point where they can be de-processed, if you will, and put to use in the theater.

            Q     Not to belabor the point, what TRANSCOM says is they can fly 360 a month if they have 360 a month. They say what's happening is so many are transitioning through SPAWAR that they don't have those numbers to fly. How are you going to cut down on the time it takes them to transition through SPAWAR so you have that number to fly?

            SR. DEFENSE OFFICIAL: That's a great question, and that's what I told you we're working through. The FPI vehicles, we're having some success in processing through SPAWAR in as few as seven to 10 days. Some of the other vehicles are new variants. We've got to get down the learning curve and process them through more quickly, and we'll do that. We're going through the growing pains, but there are two or three things that are happening in that regard. We've built a tracking tool that tries to let SPAWAR, the program office and TRANSCOM see when vehicles come in the door and immediately assign a prediction to when they will be done and ready for shipment. And that lets TRANSCOM plan for vehicle delivery.

            The other thing is we're moving the program office -- Paul Mann and the team are doing a good job. We're trying to move from monthly delivery estimates to weekly delivery estimates and folk those into the contractual requirements, because we've had a problem with vendors -- and I don't even want to say it's a problem. Again, the great news is we are ramping up to rate fairly quickly. But in meeting that rate, in most months they delivered some of their vehicles at the very end of the month to make the quota. So we are moving to weekly quotas to help smooth the flow of vehicles. That helps level the workload at SPAWAR, and then that helps TRANSCOM do efficient planning, exactly to your question.

            Q     And my final question. Thank you for taking all this time. Is the goal still 1,500 by the end of the year?

            SR. DEFENSE OFFICIAL: I think we -- I don't want to say that is a goal. I want to say what I believe the secretary said today is we expect to have 1,500, and we hope to have more than that. We're going to do everything we can to get as many vehicles in theater as fast as we can.

            Q     (Inaudible.)

            SR. DEFENSE OFFICIAL: Last time I gave you all an estimate on the fly, and it was wrong. And this is almost certainly what you should never do. Please don't quote the number I said on stage anymore. It was a bad estimate. I never should have done it. I made it on the fly on the stage. We can prepare an estimate, but it's very important to understand I have only built 309 vehicles in September. I've got to prove we're going to build 1,200 vehicles in December and roughly 1,000 in November. And if I do that, then I've got to try to get them there as fast and efficiently as I can. And so I don't want to create any false impressions.

            But I do want to tell you everybody's working as hard as they can. They understand, from Secretary Gates down, he wants every vehicle that can be built, outfitted and shipped to theater there as fast as possible. And I think we will make 1,500. I think we will exceed 1,500. But you know, since that's become a sensational press story, I don't want to quote a number anymore.

            Q     Up until now, you've had five companies building MRAPs. You just named four right now that will get additional contracts, and I'm blanking on the name of the fifth that's been doing up until that. Does that mean you're going down to four?

            SR. DEFENSE OFFICIAL: We're moving to three vendors. So two companies will not be getting orders today. But frankly, these two companies are involved in different ways in the production. We have existing orders with General Dynamics Land Systems for RG-31 vehicles. We won't order more from them, but General Dynamics has partnered with Force Protection Industries on the construction of those Cougar vehicles. We had ordered Armor Holding vehicles called Caimans, and we will continue to build those under the existing orders. Armor Holdings is paired with -- I believe British BAE has acquired Armor Holdings. I don't know the state of that acquisition, so I'd have to check. And indeed, BAE is building some of the RG-33s through Armor Holdings' facilities now modest numbers. I expect that when we don't order additional Armor Holdings vehicles, BAE will probably use that capacity to help build the RG-33s that we are ordering. But that's just something the company will have to decide.

            Q     When you get the 1,500, what is the total dollar amount going to be for the contract?

            SR. DEFENSE OFFICIAL: I should probably -- it's roughly -- I wonder if I should do this. I don't know if I have a money chart with me.

            (Off mike commentary.)

            Can we give you an answer for the record? I know about what the number is, but I'd rather give you a little better record number. You know, it's certainly -- the moves a little bit as services changes their mix and they change some of the outfitting. And then I've got to give you some caveats with the number, because the number generally includes the vehicles, the GFE, two years of support, spare parts, and now it includes the EFP enhancement kits that we're planning to add to the vehicles. [Sic: Total MRAP program cost (spent and known future requirements) is $24.5B. Note, this only estimates the sustainment cost in FY09 for 15,274 vehicles]

            Q     Did you mentioned an approximate amount when you were talking about what will be requested of Congress in December for the additional 6,500?

            SR. DEFENSE OFFICIAL: We are trying to manage the program, frankly, in partnership with the Congress. And the Congress was tremendously helpful. You know, the $5 billion that they provided was hugely helpful, and it's what we needed in October to continue the production lines. And the bulk of that money, as you heard, we're using $1.2 billion of that money to place the orders today. The bulk of that money is to finish the 6,400 vehicles, provide the spares and logistics costs for those vehicles and the transportation costs to move those vehicles to theater. So that's one of those unique features of this program. We're cash flowing where we can in order to constantly order the maximum number of vehicles. The cash flow need of the program and the bulk of that money I believe does go to order vehicles in November, but some of it will be for spares and logistics again. But we believe to continue every aspect of the program -- spares, logistics and then orders -- we need about $8.2 billion on or about December the 1st.

            Q     So at what point will you start beginning to consider expanding beyond the 15,000 you have --

            SR. DEFENSE OFFICIAL: That's dependent upon a bunch of different features. And the good news is as we reach a point where we have to make that decision, we'll have a lot of vehicles in theater, we'll have feedback on how those vehicles are performing, we'll understand more about how the theater mission is changing and evolving. I expect that -- so the first source will be the theater will articulate whether they want more vehicles, different vehicles. And they'll articulate that through the joint staff and the joint allocation board. And then I expect to hear from the joint staff if they plan to adjust that requirement. Right now, it's not obvious to me that requirement will be adjusted. I do believe we've met -- you know, the important point is the first joint staff requirement which emerged from theater was to get 8,000 vehicles urgently. We're well on our way to that. A significant portion of these additional vehicles, and we can probably get that for the record, are vehicles that go to the Navy, the Air Force and other entities. So we're starting to fill out both the theater requirements and then some service-specific requirements.

            Q     You mentioned -- EFP kits. Is that something that's going on old vehicles or, you know --

            SR. DEFENSE OFFICIAL: Our intention right now is to design EFP enhancements and install them on all the vehicles. So our planning and budget numbers will include that cost.

            Q     Is that like a new kind of armor solution?

            SR. DEFENSE OFFICIAL: Those things that relate to helping the threat I'm not going to talk about. Sorry about that.

            Q      Just to be clear, the 6,500 you want to order in December, those are on top of the 15,000?

            SR. DEFENSE OFFICIAL: That's on top of the 8,800 that we've -- so 6,400 on order now, 2,400 being ordered today to 8,800, and then 6,500 to be ordered in December, which will take us to 15,200.

            Q     (Inaudible.)

            SR. DEFENSE OFFICIAL: I should have said 6,400 -- 64(00), 6,500, because the requirement's 15,274. This is a program that shouldn't be managed by onesies.

            Q     Can you explain in layman's terms why it takes different times for different vehicles to get through SPAWAR; for example, seven to 10 (days) for the Cougar and longer for others?

            SR. DEFENSE OFFICIAL: Well, yeah. They've been getting Cougars for several months now. So the first Cougars took an amount of time. I can only talk about that in general terms. You get the first vehicles and then you have to make installations in those vehicles -- radios and other items. You have to take the vehicle out and then test it for radio frequency interference. You have to drive it some, make sure you haven't changed any of the driving and performance properties of it. And I believe they actually take them to the test range for those driving. And so there is some time. So it takes several, several days to do the first install -- well, prepare the paper for the install, do the install, take it out and test it, verify the install's right, come back and change the papers if you decide to change things and then set that as the process that you want to make every one of those vehicles go through. So every vehicle's gone through those growing pains. It's just that the ones where we've gotten in quantity are through those growing pains.

            And the good news is SPAWAR is successfully demonstrating that it can process vehicles quickly, you know, if they have a mature package, they get a consistent vehicle that's production-ready, if you will, then out it will go. These other vehicles are just coming in. You know, the IMG contracts were only awarded, I don't recall, but a couple of months ago. And so the first vehicles came in I think in August.

            Let's see -- yeah, the first IMG vehicles came in August, so it's probably not a surprise here at mid October I'm telling you they've gone through their growing pains, and SPAWAR's starting to be able to process those vehicles faster. But one challenge we've got to get behind us is the number of variants we're putting through there and then the fact that we're still installing some unique Army and Marine Corps features on each vehicle. So it's almost like doing two different vehicles. We've (knocked ?) that down some. The Army and Marine Corps, to their credit, agreed on common turrets. And there are a few other things they agreed to be common. But we probably need to go back and look at that one more time to ease the burden on SPAWAR so they can consistently install.

            Q     And the average time then through SPAWAR is now 22 days?

            SR. DEFENSE OFFICIAL: Yeah, 22, 23 days. But you know, that's kind of a good -- it's a sampling of, you know, the recent set of vehicles. So within that mix, there are some that have taken longer, as you can guess, and then some that have taken shorter periods of time. But the goal is seven days.

            Q     For all vehicles?

            SR. DEFENSE OFFICIAL: At a mature state. And frankly, we need it to be about that rate of processing when we get to 1,200 vehicles a month trying to go through there. Otherwise, it will become bottlenecked. And very anxious about that. SPAWAR's done a lot of work. I think we're going to continue to look at helping them and making sure we have every possible option to process 1,200 vehicles, because I haven't met the secretary's goal if I can't get those vehicles processed and into theater.

            (Cross talk.)

            Q     (Inaudible) -- notification Congress regarding buying high hardened steel from foreign sources. Have you gotten any kind of response from Congress, or what's the status of that now?

            SR. DEFENSE OFFICIAL: Well, I believe that waiver was signed, because this is -- as I think I said in my statement, at 1,200 a month, we do expect to have manageable but some conflicts in the demand for high hardened steel and in ballistic steel. And so we've processed a waiver that lets us buy from essentially all the sources that globally can produce these qualities of steel, and we have to have that. Without those waivers and those procedures, we will struggle to deliver MRAPs. And we need to continue to work with the Congress on these issues. They are tough issues. We cannot hinder the war fighter over these kinds of provisions.

            Thank you.

[la-onda]

Force Protection
Wednesday, October 24, 2007 07:00ET

Roopak Chakravarty

Oct 24, 2007 (Zacks Investment Research via COMTEX) -- Force Protection is winning contracts left and right. It recently won the second biggest contract in its history. This is showing up in higher earnings. The company's second quarter beat expectations by almost 42%. Over the past month, next year's earnings estimates have risen seven cents to $1.53 per share. Analysts expect that earnings will soar over 151% next year. FRPT has no debt and a 17% ROE.

Full Analysis

Force Protection, Inc. (FRPT) and its subsidiaries engage in the manufacture of ballistic and blast protected vehicles. The company's products are used to protect personnel during transport, removal of unexploded ordnance, route clearance, humanitarian de-mining, and other missions that require protection from landmines and hostile fire.

Its products include The Buffalo series, which is designed for route clearing activities; and The Cougar series for troop transport, explosive ordinance disposal, command and control, artillery prime mover, recovery and ambulance duty, urban patrol, route clearance support, utility transport, and special unit activities. The company also offers The Cheetah series for reconnaissance, forward command and control, and urban operations.

Earlier this week, the company announced that it received a contract valued at $376 million to build 800 vehicles for the Marine Corps' Mine Resistant Ambush Protected vehicle program. The order for the four- and six-wheel Cougar model vehicles is scheduled to be completed in April.

They will be built by Force Dynamics LLC, a joint venture between Force Protection and a division of General Dynamics Corp. Force Protection Chief Operating Officer Raymond Pollard said the order was second biggest in the company's 10-year history.

The company reported robust second-quarter results in early-August. Force Protection said it earned $32.8 million, or 17 cents a share, in the second quarter, up from $10.2 million, or a penny a share, a year earlier. Net sales rose to $134.7 million from $56.1 million. Analysts expected 12 cents per share.

FRPT also sold 212 of its medium-size Cougar trucks, used for troop transportation. Altogether, the company said it produced 229 vehicles in the recent quarter, compared with 285 produced for all of 2006.

The U.S. military has said it wants to purchase thousands of these trucks -- better known as MRAP, or mine-resistant ambush-protected, vehicles -- to use in place of the more vulnerable Humvee. Recently, the Defense Department requested the transfer of $1.2 billion in existing funds for an additional 2,650 MRAP vehicles, bringing the total size of its order to 6,415.

[setravis]

Rumors.......
Big chatter going around about a Lockheed buy out. Interesting if it's true. 

Way oversold...
Looks like we got a Cup with Handle Pattern here.



Technicals
Stochastic - Bullish
Percentage Gainer

Last Price Quote is:
-5.66%below 13-day MA
-1.31%below 50-day MA
RS Rating: 89 

Fundamentals
Key Data:
Market Cap (M): $1,362.11 
P/E Ratio: 43.16 
PEG Ratio: 1.09818 
Next Earnings: 11/09/2007
Last Analyst Rating: Outperform

Below are the 6 month and 1 year charts.......

[la-onda]

Force Protection is winning contracts left and right. It recently won the second biggest contract in its history. This is showing up in higher earnings. The company's second quarter beat expectations by almost 42%. Over the past month, next year's earnings estimates have risen seven cents to $1.53 per share. Analysts expect that earnings will soar over 151% next year. FRPT has no debt and a 17% ROE.

Full Analysis

Force Protection, Inc. (FRPT) and its subsidiaries engage in the manufacture of ballistic and blast protected vehicles. The company's products are used to protect personnel during transport, removal of unexploded ordnance, route clearance, humanitarian de-mining, and other missions that require protection from landmines and hostile fire.

Its products include The Buffalo series, which is designed for route clearing activities; and The Cougar series for troop transport, explosive ordinance disposal, command and control, artillery prime mover, recovery and ambulance duty, urban patrol, route clearance support, utility transport, and special unit activities. The company also offers The Cheetah series for reconnaissance, forward command and control, and urban operations.

Earlier this week, the company announced that it received a contract valued at $376 million to build 800 vehicles for the Marine Corps' Mine Resistant Ambush Protected vehicle program. The order for the four- and six-wheel Cougar model vehicles is scheduled to be completed in April.

They will be built by Force Dynamics LLC, a joint venture between Force Protection and a division of General Dynamics Corp. Force Protection Chief Operating Officer Raymond Pollard said the order was second biggest in the company's 10-year history.

The company reported robust second-quarter results in early-August. Force Protection said it earned $32.8 million, or 17 cents a share, in the second quarter, up from $10.2 million, or a penny a share, a year earlier. Net sales rose to $134.7 million from $56.1 million. Analysts expected 12 cents per share.

FRPT also sold 212 of its medium-size Cougar trucks, used for troop transportation. Altogether, the company said it produced 229 vehicles in the recent quarter, compared with 285 produced for all of 2006.

The U.S. military has said it wants to purchase thousands of these trucks -- better known as MRAP, or mine-resistant ambush-protected, vehicles -- to use in place of the more vulnerable Humvee. Recently, the Defense Department requested the transfer of $1.2 billion in existing funds for an additional 2,650 MRAP vehicles, bringing the total size of its order to 6,415.

[TerryG]

setravis,

That LMT buyout rumor has surfaced three times, but it is being reported by only one source, the same source, JagFn all three times, including now. Does that sound reliable or insider?

LMT PR answered saying if it were true it would be confidential and he could not comment due to regulations. But he could say that "LMT is not looking at getting into the MRAP area". Case closed.

la-onda I am glad you are still interested.

Here is my take on it, but I am going in circles looking for confirmation. My basic complaint about this is that FRPT is a very high risk.

Think you missed it. Cramer thinks a large short position is a bad reason.

Some people think there is a short squeeze coming. The short position is being quoted to have increased from 11 million to 16 million on a trend reversal and now profit taking on good news. The good news being continueing resolution contracts of 2400 vehicles among and narrowed field of three vendors, with three contacts, for three vehicle types.

Next good news will be Q3 report mid November and contracts for December upon Fiscal 2008 budget approval in December for 6500 vehicles. And today DoD is considering additional funds for vehicles beyond that. Meaning the Supplemental and Emergency budgets being worked on. So the doubt is will they sell on good news like recently? Profit taking and getting ready for tax time?

So analyst estimates may go up if additional funds are approved beyond December. The last short squeeze though contrarian did happen. Narrowing bollinger bands and sideways trading then a straight up rise.

Todays rise was Zacks upgrade from Hold to Buy, GD reporting surprise increased earnings which include MRAP, and DoD considering additional funds and vehicles beyond The Fiscal 2008 budget.

The chartist was wrong last time and the suspicion paid.

The last recent pullback to 17 was about options expiration at 22.50 and 25 so the short squeeze was averted by sinking the stock. Amazing after option expiration it bounces to 20 again today.  So next entry the Q3 report gamble.

[la-onda]

I am invested again 

amstocks82 quotation:

Force Protection was Priced for FEAR and Failure - but the reality is RAPID GROWTH/PROFIT
There has been a HUGE amount of misinformation about how Force Protection is doing - about possible restatements and getting delisted because they would not file their 10Q, about not getting paid by the military, about running out of cash and needing to get $250 million and diluting by millions of shares ....

The news is out - FRPT's revenue and profit comes in about as expected. Force Protection did file their 10Q so won't be getting delisted. Force Protection has been getting paid by the military (which was running behind on payments last quarter) and have paid down their credit line to ZERO, and currently have $72.274 million in cash. They have over $182 million in inventory but Force Protection has told the military that they have $100 million in spare parts ready to ship to Iraq if needed. The new ILS contract and rapid delivery of new vehicles might start reducing that inventory as the parts get shipped to Iraq. Overall, Force Protection is growing fast - faster than any other defense company I know of and making a profit doing so.

&

New article form Lococo about Fidelity and FRPT
Fidelity Investments Triples Its Stake in Force Protection
2007-11-13 11:01 (New York)


By Edmond Lococo
Nov. 13 (Bloomberg) -- Fidelity Investments tripled its stake in Force Protection Inc., the largest supplier of blast- resistant trucks to the U.S. Marine Corps. Fidelity holds 7.89 million shares, or about a 12 percent stake, as of Oct. 31, Boston-based Fidelity said in a regulatory filing today. That makes Fidelity the company's largest shareholder, according to Bloomberg data.
The U.S. Defense Department is rushing-blast resistant trucks to Iraq to protect troops from roadside bombs. The Pentagon has already bought 8,815 trucks. Ladson, South Carolina-based Force Protection has shipped 1,389 trucks as of Nov. 1, more than any other supplier.
The stake represents an increase from 2.62 million shares, or about 3.9 percent, of Force Protection that Fidelity had held at the end of June, according to Bloomberg data. Sophie Launay, a spokeswoman for Fidelity, declined to comment on the purchase.
Force Protection shares gained 39 cents, or 2.3 percent, to $17.26 at 11 a.m. in Nasdaq Stock Market composite trading. They had fallen 3.1 percent so far this year before today.

Chart:

[la-onda]

trustthetape from IV:
What didQ3 earnings tell us?
1. The past 6 quarters, revenues continue to trend up (with a hiccup in 2006 Q3) as follows:

2006 Q2: $56m
2006 Q3: $42m
2007 Q4: $63m
2007 Q1: $100m
2007 Q2: $135m
2007 Q3: $173m  ($206 including GDLS)

Interesting is that over the past 4 quarters, quarter over quarter revenue has grown by over $35m each quarter.

FRPT exceeded analyst expectations by $3m (ignoring the impact of the GDLS revenue) and by $36m including the GDLS revenue.  Personally, I see the GDLS revenue as irrelevant to FRPT (since its just a pass thru).

Deferred revenue was over $52m compared to less than $6m last quarter.  Perhaps indicating that Q4 is off to a good start.

2. Will Gross Margins continue to be solid?  YES

Effective gross margins (again, ignoring the GDLS pass thru) were 23.5% which is exceptionally solid once again.  There was some speculation that the reduced sales cost of the MRAP Cougars would negatively impact gross margins.  That does not appear to be the case and the company continues to achieve exceptional gross margins.


3. In Q1 and Q2, FRPT made sizable (by comparison purposes) investment in R&D ($4.8m in Q1; $3.3m in Q2 vs $3.2m for all of 2006) for development of the Cheetah.  Is FRPT continuing to make investments in product development, whether it be the Cheetah or other products (e.g, EFP technology)?  What impact will the purchase and build out of the Roxboro facility have on the quarter?

The company continues to make investments in the Cheetah and the Roxboro plant with R&D coming in at $2.5m.  IMHO, existing US and international orders for Buffalos and Cougars will provide solid revenue opportunities for the remainder of 2007 and for 2008 and perhaps into 2009.  However, the Cheetah is the future of the company and the stock price will see an exceptional move once orders are received and Cheetahs are produced and sold.


4.  In the past, FRPT has had a number of one time (non-productive, IMHO) charges.  Will the company start showing discipline to get past these types of charges?

There was a one time charge of $820k for liquidated damages related to the prior private placement.  IMHO, this PP was poorly managed by the prior acting CFO and cost the company and shareholders over $7m in capital that could have been better utilized.

5. Q2 was record net income of $9.6m.  Will FRPT report record net income for the quarter?

Net income was over $11.3m, again setting a new record for the company.

6. Analysts EPS estimates vary widely from .10-.22 with an average of .17.   How well did the analysts do in predicting FRPT EPS for the quarter?

Basic EPS was .17 and diluted .16, just outside of consensus analyst expectations.

7. In Q2, FRPT delivered a record 229 vehicles.  Will Q3 establish a new production record and indicate a continued ramp up of production?

FRPT continues to set production records - delivering a total of 302 vehicles (excluding GDLS production of 62 vehicles).  This included 21 Buffalo and 291 Cougar).


8. At the end of Q2, FRPT had a production backlog of approximately 1662 vehicles. Since then, the company has received a number of new orders and also issued orders to GD.  What is the current backlog?  In comparing production capacity to production backlog, how long will it take FRPT to work off the current backlog to put it in position for another MRAP order?

Production backlog continues to expand with a total of 2243 vehicles (including orders subsequent to the end of the quarter).  Of the 2243, GDLS is scheduled to deliver 1106 leaving an effective FRPT backlog of 1137.  At the October production rate of 135 vehicles, the company has approximately 8.4 months of production backlog.  However, given the production expansion underway, it is anticipated that the backlog will likely be worked down in approximately 6 months.


So, for me, this quarterly report will again be telling to confirm the positive trend in revenue, production, backlog, net income, etc and then use that data to gain a better understanding of what to expect in subsequent quarters.

Again, a great quarter for FRPT.  Strong production growth, revenue growth, solid (if not exceptional) gross margins, reasonable cost containment (e.g, G&A, R&D).  Some other notes of interest:

1. Completion of the ERP system and better continuity in the financial dept of the company is critical to future financial reporting - both accuracy and timeliness.  Something to watch for Q4.  Even with these issues, the resulting report is as information packed as any past report - providing a good look into the financial results of the company and the JV with GDLS.  For that, I'm pleased but the issues here are important to be addressed to avoid a recurring problem with quarterly reporting.

2. The company has $182m in inventory (work in progress, supplies and materials, etc).  That is an important number as it indicates (along with the $52m of deferred revenue and the production ramp and the strong backlog) that future quarters will continue to show solid results.  However, it also provides an indication to shareholders of how much capital it takes to run the business.  To this point, should expansion continue at a rapid pace and with the expected ramp of Cheetah production, I'd anticipate the need for additional growth capital - either thru a lending instrument, equity offering, etc.  I've run some models and would like to see the company raise $250-300m so that they can focus on running the business and not being forced to make operational compromises due to insufficient capitalization.

3. It appears that the tax loss carry forward from 2006 has yet to be applied to the expected 2007 tax liabilities.  As a result, Q4 could have an upside EPS surprise of approximately 30 cents.  Even more important, applying the tax loss carry forward will result in up to $23m of capital (that will be available instead of paying taxes with these funds).

[la-onda]

nice news, bad chart

More Armor for U.K. Troops
MoD Seeks to Expand Cougar Fleet; Needs Pentagon To OK Vehicle Diversion
By ANDREW CHUTER


LONDON — Britain will more than double its protected patrol vehicle fleet by adding 148 Force Protection Cougar vehicles, whose purchase is now being negotiated with the U.S. government.
Under what is essentially a mirror image of the U.S. Mine Resistant Ambush Protected (MRAP) requirement, the British military has already acquired 108 modified Cougars — which they call the Mastiff —for use in Iraq and Afghanistan.
Now the British want more to fill an ur¬gent operational requirement to better protect troops fighting the Taliban in south¬ern Afghanistan, industry sources said.
The British Treasury is clamping down on spending on urgent requirements, but it ap¬pears the upcoming Cougar deal has been approved.
But the British requirement for rapid de¬livery could pose a different kind of problem.
If the British are to get their order quick¬ly, the Pentagon will need to allow Force Protection to divert vehicles from produc¬tion lines that are already red-hot from building vehicles for the U.S. military. The company has an MRAP deal to deliver more than 1,900 Cougar and Buffalo vehicles.
The Pentagon allowed such a diversion for the first British order, and the British hope it will again allow something similar despite the high U.S. priority on MRAP production.
So far there is no firm order signed for the additional six-wheel-drive Cougars, al¬though a deal may be imminent, industry sources say.
The contract is a government-to-govern¬ment agreement signed as part of the U.S. Foreign Military Sales process.
A British Ministry of Defence (MoD) spokesman declined to confirm interest in buying more Cougars.
A Force Protection spokesman said the company had no official information re¬garding further British interest in Cougar.
The first vehicles were ordered in July 2006, deliveries got under way in late December, and the last of the 108 arrived in Britain for modification in June. As of early September, more than 80 of the vehicles were in service.
The Mastiff is an uparmored version of the Cougar fitted with the Army's new Bowman tactical communications system and elec¬tronic countermeasures. The modifications were undertaken here.
Most of the early deliveries ended up in Iraq, but as the British draw down their ef¬fort in the Basra region of the country, the requirement has swung toward Afghanistan, where improvised explosive devices (IEDs) have caused several deaths.
One industry source here said Force Pro¬tection may also be providing Cheetah light tactical four-wheel-drive vehicles for a British special forces requirement.
The vehicle was displayed at the recent Defence Systems & Equipment Internation¬al (DSEi) show in London. Ostensibly, that was part of the company's effort to secure an order from the British for the Medium Protected Patrol Vehicle (MPPV) require¬ment. But it now appears Force Protection may have had a second requirement in mind when it exhibited Cheetah.
The British in April kick-started the MPPV requirement to purchase 180 mini-MRAP type vehicles of about 14 tons to sit between the Mastiff and the much lighter Pinzgauer Vector patrol vehicle.
Interest in MPPV High, but Some Confusion
The requirement attracted a huge amount of interest, with BAE Systems, Force Pro¬tection, JCB, Krauss Maffei-Wegmann, Mac¬Neilie, NP Aerospace, Rafael and Thales among the possible contenders.
One media report here this week said the MoD had decided to drop the MPPV contest in favor of buying 250 Cheetahs. That's been denied by the MoD spokesman here.
A narrowing of possible contenders had been expected at about the time of DSEi. That short list hasn't arrived yet.
Until further clarity is available on the MPPV requirement, there will remain suspi¬cions about the future of a project that still requires funding at a time when the British armed forces are facing serious cuts.
Whether the growing Mastiff fleet, which will number about 250 if the new deal goes ahead, will affect MPPV requirements is unclear.
One defense contractor involved in the MPPV competition said there appeared to be "ongoing discussion at the MoD whether a larger, more protected vehicle was needed or whether they should go for something lighter and more agile. The debate is ongoing, leav¬ing MPPV in a bit of disarray for the moment."
Others are more confident that MPPV is not on the ropes.
"We think they have a plan. They are test¬ing and evaluating what is in the gap be¬tween Mastiff and the Snatch Land Rover and may then decide whether to fund it," an¬other contractor source said.
Either way, if the British want the first vehicles in service by their stated date of 2009, somebody will have to decide soon on funding. å

[Houlahan]

I am being vocal tonight
Thanks for all of your posts, charts and updates. You do an awesome job. I appreciate your bravery for posting...even when a stock goes down.
Keep up the great work.