Force Protection Announces Third Quarter Fiscal 2009 Results

November 9, 2009 4:05 PM EST

    --  Net income was $0.05 per share after the $19.3 million pre-tax charge
        for the one-time write-down of the Cheetah inventory related to the
        M-ATV competition and associated costs
    --  Adjusted net income1was $16.1 million and adjusted net income per
        share1was $0.23

LADSON, S.C.--(BUSINESS WIRE)-- Force Protection, Inc. (NASDAQ: FRPT), a leading survivability solutions provider, today reported financial results for the third quarter of 2009. The Company's net income for the third quarter 2009 was $3.2 million, or $0.05 per share, which includes a one-time pre-tax charge of $19.3 million, or $12.9 million after-tax, $0.19 per share, compared to net income of $19.9 million, or $0.29 per share, for the third quarter of 2008. All per share amounts are expressed on a diluted basis.

In the third quarter of 2009, the Company reported net sales of $316.2 million versus $343.3 million in the third quarter of 2008. Net sales in the third quarter of 2008 included $106.9 million of pass-through sales by General Dynamics Land Systems in connection with vehicle deliveries under the Company's MRAP Competitive Contract. There were no vehicle pass-through sales by General Dynamics in the third quarter of 2009. The Company noted that excluding pass-through vehicle sales, the third quarter of 2009 marked a record quarterly revenue performance for the Company. This performance was driven by record shipments of Buffalo vehicles in the quarter, shipments of Wolfhound vehicles and strength in the Company's Total Life Cycle Support business, which includes supplying and installing Independent Suspension System ("ISS") modernization and ForceArmor(TM) kits.

Excluding the one-time write-down for the Cheetah inventory related to the M-ATV competition and associated charges, the Company's adjusted net income1 for the third quarter 2009 was $16.1 million, and adjusted net income per share1 was $0.23. Adjusted net income1 and adjusted net income per share1 reflect the exclusion of the one-time charge related to the Company's previous decision to build 50 Cheetah vehicles in anticipation of a contract award. On June 30, 2009, US Army Tank-Automotive and Armaments Command awarded the M-ATV contract to another defense contractor. Although the Cheetah vehicles were not selected in the M-ATV competition, the Company is actively pursuing other opportunities for this vehicle with potential customers. Based on its current market analysis, the Company reduced the net realizable value of its Cheetah-related inventory by $18.2 million during the third quarter of 2009 to reflect its estimate of the current market value of this inventory. The Company also recorded $1.1 million of other costs related to the Cheetah during the third quarter of 2009. A reconciliation of adjusted net income1 and adjusted net income per share1 to net income and net income per share is included at the end of this press release.

Michael Moody, Chairman and Chief Executive Officer of Force Protection, Inc., said, "We were pleased to see strong, continuing demand for our Total Life Cycle Support business and to have made significant deliveries of both the Buffalo and Wolfhound vehicles during the third quarter. We will continue to adjust our infrastructure to execute against anticipated vehicle orders and significant long-term demand for service, support and upgrade work to our fleet of vehicles. We will also continue to push forward on the development of new products, including both upgrades to our existing platforms and through new vehicle development."

Mr. Moody continued, "We are also very pleased to have submitted our Ocelot vehicle for the United Kingdom's Life Protected Patrol Vehicle (LPPV) competition. This new platform, which was developed in partnership with Ricardo UK Ltd, offers excellent survivability and a wide range of mission capabilities at a curb weight of approximately 12,000 lbs. We believe that there is an opportunity, in addition to the current competition, to market a tactical wheeled vehicle of this weight class and capability range."

For the first nine months of 2009, the Company reported net income of $11.0 million, or $0.16 per share, on sales of $688.0 million. During the comparable period in fiscal 2008, net income was $35.2 million, or $0.51 per share, on sales of $1,087.3 million.

Excluding the one-time write-down for the Cheetah inventory related to the M-ATV competition and associated charges, the Company's adjusted net income1 for the first nine months of 2009 was $23.9 million, and adjusted net income per share1 was $0.35 cents.

The $399.3 million decrease in sales during the first nine months of fiscal 2009 is largely attributable to lower vehicle sales, including the $446.6 million of vehicles sold by General Dynamics Land Systems in the first nine months of 2008 on a pass through basis, which had minimal associated gross margins. For the first nine months of 2009, spare parts and logistics sales increased $339.6 million compared to the first nine months of 2008. The change in net income per share is primarily attributed to the impact on income of lower vehicle sales and the costs and charges associated with the M-ATV competition.

The Company's cash and marketable securities balance rose to $121.9 million as of September 30, 2009 from $111.0 million as of December 31, 2008. Operating activity provided (used) net cash of $21.9 million in the first nine months of 2009 compared with ($1.3) million in the first nine months of 2008. Inventories as of September 30, 2009 increased to $113.8 million from $88.5 million as of December 31, 2008. Inventories increased as a result of higher finished goods comprised primarily of Wolfhound vehicles, ISS kits and increased inventory to support the growth in the Company's Total Life Cycle Support business. Accounts receivable increased $50.1 million, or 36%, as of September 30, 2009 compared to December 31, 2008.

Mr. Moody concluded, "We have a solid base of business from which to build, a clean balance sheet with no debt, and an expertise in survivability technology which positions us to compete for new business and support our fleet around the globe. As the transformation of Force Protection continues, with careful control of our cost structure and continued focus on our stated strategy of pursuing a broader range of products and customers, we will be able to demonstrate the capability to create significant value for our shareholders and our customers."

Conference Call Information

The Company will hold a conference call to discuss these results, including the non-GAAP financial measures, on Monday, November 9, 2009 at 4:30 p.m. Eastern Time and will include comments from Michael Moody, Chairman and Chief Executive Officer, Charles Mathis, Chief Financial Officer and Randy Hutcherson, Executive Vice President, Programs, Global Sales and Business Development. While the question-and-answer session of the call will be limited to institutional analysts and investors, retail brokers and individual investors are invited to listen to a live webcast. The webcast can be accessed via the home page of the Company's website at www.forceprotection.net. Please visit the website at least 15 minutes prior to the call to register for the webcast and download any necessary software. The replay of the call will be available on the Company's website for approximately one year.

About Force Protection, Inc.

Force Protection, Inc. is a leading American designer, developer and manufacturer of survivability solutions, predominantly blast- and ballistic-protected wheeled vehicles currently deployed by the U.S. military and its allies to support armed forces and security personnel in conflict zones. The Company's specialty vehicles, the Cougar, the Buffalo and the Cheetah, are designed specifically for reconnaissance and urban operations and to protect their occupants from landmines, hostile fire, and improvised explosive devices (IEDs, commonly referred to as roadside bombs). The Company also is the developer and manufacturer of ForceArmor(TM), an armor package providing superior protection against explosively formed projectiles (EFPs), now available for a wide range of tactical-wheeled vehicles. The Company is one of the original developers and primary providers of vehicles for the U.S. military's Mine Resistant Ambush Protected, or MRAP, vehicle program. For more information on Force Protection and its vehicles, visit www.forceprotection.net.

Safe Harbor Statement

This press release contains forward looking statements that are not historical facts, including statements about our beliefs and expectations. These statements are based on beliefs and assumptions of Force Protection's management, and on information currently available to management. These forward looking statements include, among other things: the growth and demand for Force Protection's products and services, including the Total Life Cycle Support business, including the Independent Suspension System modernization and ForceArmor(TM) kits; the anticipated long-term demand for service, support and upgrade work to the Company's fleet of vehicles; the opportunities with potential customers for the Company's Cheetah vehicles; the opportunities to market the Ocelot vehicle and the capabilities of the Ocelot; the rate at which the Company will be able to produce its vehicles and products; the Company's ability to develop new technologies and products, and the effectiveness of these technologies and products; the Company's execution of its business strategy and strategic transformation, including its opportunities to grow the business; and the Company's expected financial and operating results, including its revenues and cash flow, for future periods. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any of them publicly in light of new information or future events. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statements. Examples of these factors include, but are not limited to, ability to effectively manage the risks in the Company's business; the ability to develop new technologies and products and the acceptance of these technologies and products; the ability to obtain new orders for its vehicles and products; the Company's ability to identify and remedy its internal control weaknesses and deficiencies, and other risk factors and cautionary statements listed in the Company's periodic reports filed with the Securities and Exchange Commission, including the risks set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, as updated in the Quarterly Report on Form 10-Q for the period ended September 30, 2009.

1 Use of Non-GAAP Financial Measures

Certain disclosures in this press release include "non-GAAP financial measures." A non-GAAP financial measure is defined as a numerical measure of a company's financial performance, financial position or cash flows that excludes or includes amounts so as to be different from the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations. The Company defines "adjusted net income" and "adjusted income per share" as net income and net income per share as reported under GAAP less the one-time charge in the third quarter 2009 for the write-down of Cheetah inventory related to the M-ATV competition and associated charges related to the Company's decision to build 50 Cheetah vehicles in anticipation of an award the Company did not receive. By excluding the one-time Cheetah inventory related to the M-ATV competition and associated charges, management can compare the Company's ongoing operations to prior periods and to the ongoing operations of other companies in its industry who may have materially different unusual charges. Management believes that excluding these items is useful to investors because it is more representative of the on-going business of the Company and are the financial indicators used by management to evaluate the Company's financial results. These amounts are not measures of financial performance under GAAP. They should be considered supplemental to and not a substitute for financial performance in accordance with GAAP. These non-GAAP measures should not be considered measures of the Company's liquidity. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company's definition of "adjusted net income" and/or "adjusted net income per share" may differ from similar measures used by other companies and may differ from period to period. Subject to the review and approval of the Company's audit committee, management may make other adjustments for expenses and gains that it does not consider reflective of core operating performance in a particular period and may modify "adjusted net income" and/or "adjusted net income per share" by excluding these expenses and gains. This information should not be construed as an alternative to the reported results, which have been determined in accordance with GAAP. A reconciliation of "adjusted net income" and "adjusted net income per share" with net income and net income per share are included in the accompanying financial data.

Force Protection, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

                                        As of September 30,  As of December 31,

                                        2009                 2008

                                        (In Thousands)

Assets

Current assets:

Cash and cash equivalents               $ 111,949            $ 111,001

Marketable securities                     9,996                -

Accounts receivable, net                  188,575              138,449

Inventories                               113,847              88,502

Advances to subcontractor                 5,192                -

Deferred income tax assets                16,378               15,572

Prepaid income taxes                      4,572                -

Other current assets                      4,217                2,417

Total current assets                      454,726              355,941

Property and equipment, net               60,059               61,429

Investment in joint venture               2,048                -

Intangible assets, net                    302                  654

Total assets                            $ 517,135            $ 418,024

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable                        $ 138,750            $ 47,115

Due to United States government           33,760               39,015

Advance payments on contracts             36,927               29,504

Other current liabilities                 14,119               20,783

Total current liabilities                 223,556              136,417

Deferred income tax liabilities           1,899                3,141

Other long-term liabilities               -                    139

                                          225,455              139,697

Commitments and contingencies

Shareholders' equity:

Common stock                              70                   68

Additional paid-in capital                259,102              256,939

Accumulated other comprehensive income    152                  -

Retained earnings                         32,356               21,320

Total shareholders' equity                291,680              278,327

Total liabilities and shareholders'     $ 517,135            $ 418,024
equity

Force Protection, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

                For the three months ended       For the nine months ended

                September 30,                    September 30,

                2009         2008                2009         2008

                (In Thousands, Except Per Share  (In Thousands, Except Per Share
                Data)                            Data)

Net sales       $ 316,164    $ 343,309           $ 688,014    $ 1,087,273

Cost of sales     289,628      279,532             598,863      947,814

Gross profit      26,536       63,777              89,151       139,459

General and
administrative    19,196       27,817              60,219       73,967
expenses

Research and
development       4,239        4,306               13,736       10,205
expenses

Operating         3,101        31,654              15,196       55,287
income

Other income,     252          440                 57           1,411
net

Interest          (46     )    (2      )           (79     )    (225      )
expense, net

Income before
income tax        3,307        32,092              15,174       56,473
expense

Income tax        (88     )    (12,185 )           (4,138  )    (21,262   )
expense

Net income      $ 3,219      $ 19,907            $ 11,036     $ 35,211

Earnings per
common share:

Basic           $ 0.05       $ 0.29              $ 0.16       $ 0.52

Diluted         $ 0.05       $ 0.29              $ 0.16       $ 0.51

Weighted
average common
shares
outstanding:

Basic             68,436       68,318              68,423       68,309

Diluted           68,863       68,381              68,930       68,372

Force Protection, Inc. and Subsidiaries

Reconciliation of Net Income to Adjusted Net Income and

Net Income Per Share to Adjusted Net Income Per Share

(In Thousands, Except Per Share Data)

(Unaudited)

               For the three months ended             For the nine months ended

               September 30, 2009                     September 30, 2009

                            M-ATV                                  M-ATV
               Reported     write-down   Comparable   Reported     write-down   Comparable
               Basis        and          Basis        Basis        and          Basis
               (GAAP)       associated   (Adjusted)   (GAAP)       associated   (Adjusted)
                            costs                                  costs

Net sales      $ 316,164    $ -          $ 316,164    $ 688,014    $ -          $ 688,014

Cost of sales    289,628      19,264       270,364      598,863      19,264       579,599

Gross profit     26,536       (19,264 )    45,800       89,151       (19,264 )    108,415

Gross profit     8.4     %                 14.5    %    13.0    %                 15.8    %
percentage

General and
administrative   19,196       -            19,196       60,219       -            60,219
expenses

Research and
development      4,239        -            4,239        13,736       -            13,736
expenses

Operating        3,101        (19,264 )    22,365       15,196       (19,264 )    34,460
income

Other income,    252          -            252          57           -            57
net

Interest         (46     )    -            (46     )    (79     )    -            (79     )
expense, net

Income before
income tax       3,307        (19,264 )    22,571       15,174       (19,264 )    34,438
expense

Income tax       (88     )    6,357        (6,445  )    (4,138  )    6,357        (10,495 )
expense

Net income     $ 3,219      $ (12,907 )  $ 16,126     $ 11,036     $ (12,907 )  $ 23,943

Earnings per
common share:

Basic          $ 0.05       $ (0.19   )  $ 0.24       $ 0.16       $ (0.19   )  $ 0.35

Diluted        $ 0.05       $ (0.19   )  $ 0.23       $ 0.16       $ (0.19   )  $ 0.35

Weighted
average common
shares
outstanding:

Basic            68,436       68,436       68,436       68,423       68,423       68,423

Diluted          68,863       68,863       68,863       68,930       68,930       68,930

    Source: Force Protection, Inc.

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