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AAR Ventures Into Medical Logistics

Zacks Equity Research

AAR Corp. (AIR) recently announced a contract win from the U.S. Army Medical Material Center, Southwest Asia. The contract, with a one year term and two renewal options, involves the management of medical logistics. The value of the contract remains undisclosed.

Per the contract, AAR’s Defense Systems and Logistics business will take up the responsibility of providing the U.S. Central Command (:CENTCOM) with medical inventory management services. The services will be extended to a few nations like Iraq, Afghanistan, Kuwait, Qatar and the United Arab Emirates.

With the contract, the company ventures into a whole new field of medical logistics. Previous to this, AAR had only been involved in the logistics of products related to the aerospace industry and ground equipment.

Illinois-based AAR Corp. provides a wide range of high-quality, and cost-effective technical services. AAR Defense Systems and Logistics currently supports the U.S. government through its supply chain management, and is ranked one of the top defense contractors in the world.

In a separate press release, the company also announced that some of its 1.75% Convertible Senior Notes due 2026 holders have surrendered their notes to the company, in response to the put option that expired on Jan 31, 2013. The total amount paid as a result of the surrender was roughly $63.6 million and was paid through the company’s free cash flow as well as unsecured revolving credit facility. The total notes, remaining due, values roughly $25.3 million.

AAR currently has a Zacks #3 Rank (Hold). Other stocks worth a look in the industry are Alliant Techsystems Inc. (ATK), Rolls Royce Holdings Plc. (RYCEY) and BAE Systems Plc. (BAESY); each holding a Zacks Rank #1 (Strong Buy).

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