Force Protection: Blast-Resistant Manufacturer Headed for Implosion?
Force Protection’s CFO Michaek Durski resigned recently, after management “discovered significant accounting errors during its year end review.” The firm has also seen American MRAP vehicle orders for its Force Dynamics joint venture tail off, even as competitors like BAE Systems and Navistar continue to receive large orders. A March 15/08 Bloomberg report claims that the firm has has enough orders to last 8 more months in production, plus ongoing maintenance and support business. Which explains why their new manufacturing facility in Roxboro, NC designed to enhance manufacturing capacity, may shut down before it ever ramps up.
With at least 4 shareholder lawsuits underway, the latest news raises questions concerning the company’s survival, as talk of buyouts and even collapse floats in the air. Force Protection’s management says the firm has the resources to continue. A look at the firm’s difficulties and its resources, however, show a challenging set of business problems ahead…
From a recent Force Protection Inc. release:
“Force Protection, Inc. (NASDAQ: FRPT) today announced that on March 19, 2008 it received a notice from the staff of The Nasdaq Stock Marke… as a result of not filing with the SEC its Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and that Force Protection is subject to having its stock delisted from the Nasdaq Capital Market. Force Protection has requested and been granted an oral hearing… at which the Panel will consider whether such delisting is appropriate.
…Separately, on March 18, 2008, Force Protection was informed by Elliott Davis, LLC, the Company’s independent registered public accounting firm, that it was resigning as the Company”s independent registered public accounting firm for the fiscal year ended December 31, 2007 effective immediately… Elliott Davis, LLC has not completed an audit or issued a report on the Company’s consolidated financial statements or internal control over financial reporting… stated that the material weaknesses reported by the Company in Form 12b-25 on March 3, 2008 and, in its professional judgment, the Company’s lack of internal controls necessary to be able to develop reliable financial statements at this time, prevents Elliott Davis, LLC from completing its audit and forming an opinion.”
A report in South Carolina’s The State quotes new CEO Moody as saying that Force Protection will rely on maintenance contracts from the U.S. Marine Corps as it woos foreign military orders, while continuing development of its Cheetah vehicle as the Hummer’s replacement in the JLTV competition.
Moody added that the firm has $70 million in cash, and an expected revenue of $580 million for 2008’s confirmed vehicle orders. The Charleston Post & Courier sharpens those figures by reporting about 230 vehicles delivered by the end of February 2008, out of orders for 1,134 vehicles, with no orders on the books yet for 2009.