Force Protection (FRPT) Initiates Significant Program of Operational Realignment and Overhead Reductions

September 30, 2009 1:35 PM EDT

Force Protection, Inc. (NASDAQ: FRPT) today announced that it had determined, based upon its changing mix of business and related infrastructure requirements, to initiate a significant program of operational realignment and overhead reductions.

The Company expects to substantially complete this program in the first half of 2010, and to create an annualized run rate for cost savings of at least $40 million. The initiative is designed to align the company's cost structure to current and planned vehicle production and to improve operational efficiencies in the area of Total Life Cycle Support.

Included in the Company's cost reduction program is a net reduction of approximately 10% of its current workforce of 1200 employees and contractors. Reductions in manufacturing and engineering headcount are expected to be partially offset by an increase in capability in the Company's Kuwait facility and increases in sustainment and supply-chain management. The Company noted that it anticipates a third-quarter severance-related charge of approximately $2 million. As part of its capability expansion, the Company is streamlining its spares logistics functions in order to better service its customer, reduce lead times, and leverage existing resources. Included in this streamlining are proposed freight management changes that will yield significant cost savings and improved customer response times. The Company also noted that it is pursuing significant savings opportunities in general corporate functions such as finance, consulting, legal and human resources, facilities management, travel, insurance, and other costs.

Michael Moody, Chief Executive Officer of Force Protection, commented, "As the level and mix of our business activities change, we will, as I have stated before, align our business and cost structure accordingly. Over the last several quarters, our vehicle deliveries have decreased while non-vehicle deliveries of spares, modernization, field services and training have increased. Our Total Lifecycle Support operations have grown exceptionally over the past year and we have increased our capability in that area as well as transferred a number of our employees to our Kuwait facilities. We will continue to build vehicles, develop new vehicles and retain vehicle manufacturing capacity as is necessary to fulfill the ongoing demand for our Buffalo route-clearance vehicles, additional Cougar-based vehicles and new products."

Mr. Moody continued, "The cost reduction initiatives we are announcing today are necessary to ensure our ongoing financial strength as we transform the company from a high volume truck manufacturer to a highly skilled, advanced survivability solutions provider of innovative products and solutions around the world."

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