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In fiscal year 2008, the Company's revenues increased substantially, but it still incurred a significant, but reduced, loss from continuing operations due to continuing high engineering expenditures for the CRAFT products (AN/USM-719 and AN/USM-708), a substantially lower gross profit margin on the documentation and testing phase of the ITATS (AN/ARM-206) program, and the fourth quarter write-down of Tel's investment in its ITI subsidiary.
Tel is anticipating a return to profitable operations in fiscal year 2009 due primarily to a strong increase in projected sales from the two recent large IDIQ ("Indefinite Delivery/Indefinite Quantity") contracts with the Army and the previously announced $2.2 million AN/USM-719 IFF test set order from the U.S. Navy. In addition, the Company continues to sell its legacy products and pursue business in the commercial market. Engineering expenses are also projected to decline as the development phase of the AN/USM-708 program nears completion.
With respect to the new Army contracts, Tel was successful in recently winning a competitively bid five year IDIQ contract from the U.S. Army for 57 to 590 units of T-30D Navigation test sets with a maximum contract value of $3.2 million, and a five year IDIQ contract from the U.S. Army for 56 to 156 units of T-47N IFF test sets, with a maximum contract value of $2.7 million. First shipments under both contracts began in the first quarter of fiscal year 2009. Tel is also planning to deliver 83 units of AN/USM-719 IFF test sets to the U.S. Navy in fiscal year 2009. Significant additional growth is expected in fiscal year 2010 when substantial production deliveries of the AN/USM-719, AN/USM-708, and AN/ARM-206 are expected to commence in volume.
Over the last several years, Tel has aggressively invested in revitalizing its product line with three cutting edge products now nearing completion, including two variants of CRAFT listed above, and the AN/ARM-206 TACAN bench test set. The CRAFT products are still the only Mode 5 flight line test sets under contract with the U.S. Military. Tel continues to work to finalize the AN/USM-708 product, with the Navy technical evaluation process scheduled to commence later this year. To date, the Navy has exercised CRAFT production options for 98 pilot production units out of a maximum IDIQ contract of 1,200 units. The AN/ARM-206 TACAN Test Set design combines advanced digital technology with state of the art automated testing capabilities. This product will represent an important expansion to Tel's current product line and its automated testing capabilities will represent a significant benefit to our customers. This IDIQ contract is for up to 180 units with a maximum contract value of $12 million.
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