Force Protection Wrecked


You have to hand it to Force Protection (NAS: FRPT) . The company's armor-plated MRAP military trucks may be hard to wreck, but management sure has succeeded in ruining its stock. Last week, Force reported losing $0.22 per share in the fiscal second quarter as sales plummeted 33% and gross margin on those sales fell by more than half. While nobody's doing particularly well on Wall Street these past few days, Force's news has helped send the shares down 19% since before earnings came out.

So a miserable report all around -- but Force found a way to make it worse. No sooner had the bad numbers come out that Force announced a shake-up in management. Former Chief Operating Officer Phillip (Randy) Hutcherson was renamed "Chief of Business Development." Force spins the news as freeing Hutcherson up to focus on winning contracts for the company. But judging from investors' reaction, a lot of folks are looking at it like a demotion, and an indictment of Hutcherson's performance as COO.

I think that's a mistake.

Relieving a winning pitcher
In replacing Hutcherson as COO, Forced reached outside the company and brought in a relief pitcher from rival Lockheed Martin (NYS: LMT) . New COO Philip Ciarlo was poached from Lockheed, where he served as VP for Sourcing at Mission Systems and Sensors. Before that, he was a 20-year veteran of General Electric. If anyone has the resume to make Force work, Ciarlo is that one.

And the news here actually gets better. While Force ran into problems maintaining revenue levels in the second quarter, Hutcherson is handing Ciarlo a firm with plenty of potential to get back on track. For one thing, Hutcherson helped the company put together a $728 million backlog of work to be done. (That's more revenue than the company booked in all of the past year.) For another, Force is flush with cash that Ciarlo can put to work.

Cash on hand now stands at $150 million. Free cash flow -- which ran negative in H1 2010 -- is now modestly positive at $3.5 million for the first half of the year. Valuation-wise, the $51.2 million in free cash flow Force generated over the last 12 months gives the firm an enterprise value-to-free cash flow ratio of just 1.7 times -- a pretty interesting price given the 10% long-term growth Wall Street expects to see at Force.

Seems to me, there's every chance Ciarlo can fix this company ... because it seems to me, Force isn't really broken at all.

Will Ciarlo succeed? Will Force surge?Add it to your Fool Watchlistand find out.

At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) shares of any company named above. The Motley Fool owns shares of Lockheed Martin. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

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