Force Protection, Inc. (FRPT)

belva1 (67.96) Submitted: 3/29/07 6:12 PM

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ZIPPY...I love your genius...been long since before the reverse split. I follow, if not hunger, for your posts on the IV board. I don't post there but I must say your succinct and prescient posts have kept me in this stock. Some weeks ago one of the Motley Fool contributors wrote a small piece on FRPT. I EMailed him at that time and suggested he look you up on IV. Your DD is phenomenal, Thanks.

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stablestock (87.31) Submitted: 5/17/07 12:16 AM

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"How a small SC company outmaneuvered defense giants."

Once sleepy Ladson, SC is not sleepy any more. The buildings around 9801 Highway 78 are buzzing with activity the likes of which have not been seen in these parts since the days of WW2. A defense contractor that was little more than a large garage a few years ago, has become the hub of a multi-billion dollar, high pressure program to get thousands of special blast-proof vehicles produced and into the hands of Marines and Army specialists in Iraq and Afghanistan.

The company is called Force Protection (NASDQ: "FRPT") and the vehicles it makes are referred to these days on Capital Hill as MRAP (Mine Resistant Ambush Protected). Force Protection’s fiercely named Cougars and Buffalos have achieved near legendary status among the Explosive Ordinance Disposal (EOD) technicians in Iraq, whose mission is finding and disabling IED's and land mines.

The company’s web site is replete with letters from Marines and their parents, giving thankful testimony to the life-saving quality of Force Protection’s vehicles.

“I just wanted to send a sincere thank you to your company for the lives it saved in my Company while deployed in Iraq. Your vehicles saved more of my soldiers lives then I could possibly think of.”__1st Lt. Drew Polen

“The [Cougar] JERRV has saved my life once again as an RPG hit the truck right where my head was.”__ Nic (U.S. Army) January 27th, 2007

The soldiers are praising Force Protection’s Cougar and Buffalo vehicles for protecting them from buried land mines and roadside bombs, knows as “IEDs.”

American troops engaged in what has come to be known as “asymmetric” warfare face their gravest threat from such weapons. Simply put, the enemy hides while explosives planted under the ground detonated by remote control or contact destroy vulnerable vehicles and the troops inside them.

Long before the current war in Iraq, Frank Kavanaugh, Force Protection Chairman acquired the nearly bankrupt company (then called Technical Solutions Group) and brought in Gordon McGilton, as CEO. The team saw that none of the huge defense contractors were devoting appropriate resources, time, energy and money to this growing threat. They believed that their company, newly formed in 1997, could serve an important need for the military and build a solid business making blast-protected vehicles.

Using technology licensed from a South African Company, the first of the company’s products, the 24-ton “Buffalo” was produced.
Their first customer was the US Marine Corp. Marine EOD technicians have the dangerous job of searching for and destroying the hidden explosives. These devices are responsible for over two-thirds of the deaths and injuries to US forces in Iraq. Lightly armored Humvees, not designed to defend against these powerful explosives, were being torn apart, along with the soldiers inside them.

Initially the Marines ordered 10 Buffalos in February 2006, and since have increased that to nearly 200 of the vehicles each costing nearly $900,000. These are used for route clearance, so other less protected vehicles could operate on the deadly streets of Iraq. The US Army recently announced plans to issue a “sole source” contract to FP worth over $140 million for 180 Buffalos.

The smaller Cougar was added to the mix in 2003, and since then, the vehicles have logged more than 97,000 vehicle days, or 2,000,000 operational hours in Iraq, with the remarkable record of not a single Marine fatality.

As the reputation of FP’s Cougars and Buffalo’s spread, the demand for them grew. The Marines and the Army determined that thousands of vehicles with MRAP capability were needed in the war zone as soon as possible.

That gave rise to the MRAP program, with a budget exceeding $10 billion and plans for as many as 8,000 vehicles to be produced and deployed in the next four years. While Marine officials invited as many as nine companies to submit candidate vehicles for testing, it is widely believed that only two or three manufacturers will wind up with the lion’s share of the orders, and Force Protection is at the head of the pack with over 60% of the MRAP funding spent so far going for three different categories of MRAP vehicles produced by Force Protection.

To ensure their ability to produce the quantities required by the Marines and other services, Force Protection formed a joint venture last summer with General Dynamics, a well-respected defense contractor with annual sales of over $30 billion.

FP management also established an affiliation with Armor Holdings, another defense contractor, who will act as sub-contractor to build Cougars.

Earlier this year, the large British defense contractor, BAE, saw an opportunity to bid for a contract to supply over 1000 armored vehicles to the fledgling Iraqi army, and approached Force Protection with the idea of bidding their Cougar for the job. (They did this even though they have an “MRAP” vehicle of their own manufacture in use in Iraq).

They were successful, and received an initial order to deliver 378 Cougars in a version known as the Iraqi Light Armored Vehicle (ILAV). An order for 600 more is expected this year. BAE pays Force Protection a royalty on each ILAV delivered.

In 2006, the British military also placed orders for over 100 Cougars built by FP, renaming the vehicle the “Mastiff” and deploying them in Iraq. More Mastiff orders are expected this year as well.

Always looking forward, FP’s designers recently created a third vehicle, named the “Cheetah,” now production-ready and awaiting orders from the US and abroad. The prize being eyed by McGilton for the Cheetah are the 120,000 Humvees that the Army recognizes no longer provide adequate protection in active war zones.

FP has grown from a company with fewer than 50 employees and sales of $6-10 million to around $50 million last year to almost $200 million this year. Employing over 800, it’s market cap passed the $1 billion mark in November and several analysts expect 2008 revenues to reach $800 million to $1 billion.

The company recently announced plans to build a new plant in Florence SC to produce the smaller “Cheetah.”

Recently, Brigadier General Michael M. Brogan Commander, Marine Corps Systems Command said “"I believe I have a moral imperative to provide these vehicles to our troops. We are turning the crank as quickly as we can to provide those assets to the operational forces."

Force Protection sits at the epicenter of the US Military’s plans to refit its vehicle fleet, with FP’s vehicles seen as the “gold standard” in protection. In early May, the company is likely to receive an order to deliver thousands of its Cougars for use in Iraq.

“This is like a David vs. Goliath story,” says Mike Aldrich, VP for marketing and government relations. (note: this is a made up quote) But the real story is found in the letters received at Force Protection almost daily.

Sen. Joe Biden, in a speech on the Senate floor last week, called the production of such vehicles “literally a matter of life and death.”

“For if it weren't for the product you build, I would be planning a funeral at this time and not this email.”__ Father of Spc. Chamblee Poyner, 756th ORD CO. EOD, Camp Taji, Iraq

That’s a return on investment that makes the folks in Ladson mighty proud.

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dwot (100.00) Submitted: 7/23/07 9:57 PM

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Looking at the financial reports and seeing $100 million in sales and only a measly $2.5 million making it to earnings, well, that is pathetic. It gives a P/E of about 130.

So, 195 vehicles delivered, so that makes about $13k profit per vehicle.

At this rate this company needs $2.5 billion in annual sales to get to a more reasonable P/E of 20.

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