It seems that Force Protection's
Thursday evening, the Force (as we're now going to call it, for brevity's sake) stunned the critics with an array of impressive numbers:
- 140% year-over-year sales growth to $134.7 million for the quarter; 158% growth year to date.
- Per-share profits quadrodecupled from a penny to $0.14 for the quarter, adding to Q1's $0.04 profit to yield $0.18, where last year's first half booked a loss.
Focusing on year-to-date margins, the Force:
- Tacked on 500 basis points to its gross margin, raising it to 23.5% in H1.
- More than tripled its operating margin to an even 7%.
- Ended up with a 5% net margin on the bottom line.
So while it isn't yet earning as much on its revenues as do larger rivals such as Textron
That, however, is only part of the story -- the one written in GAAP-ese. Translate the story into cash-ese, and we do see some weakness in the Force: namely, cash flow. Last year, the company managed to generate $5.2 million in operating cash flow, which more than covered its capital spending requirements, and left the firm with $2.8 million in free cash flow. But the U.S. government is a notoriously slow payer. Even as sales leapt more than 150% year over year, so did unpaid bills. Accounts receivable now stand at a staggering $91.2 million, pushing operating cash flow deeply into negative territory. Add on the large sums the Force has spent to expand capacity and make even more sales to its tardy customer, and the firm's free cash flow reverses itself. The firm is now $118 million in the red for the year.
To continue financing its eager buyer-cum-reluctant payer, the Force has had to hit up Wachovia Bank
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Fool contributor Rich Smith does not own shares of any company named above. And according to The Motley Fool's disclosure policy, if he keeps on writing about them, he may never get the chance to! How do we keep our writers purer than Caesar's wife? Read it and find out.