Steep loss forecast for Standard Management: Company still anticipates closing deals for more financing as SEC annual report deadline looms

April 10, 2006

Standard Management Corp. is projecting a 2005 loss topping $20 million, and its stock has fallen below a minimum share price required by the NASDAQ exchange.

The Indianapolis pharmaceutical-services firm also missed a deadline to file its annual report, as a push to arrange more financing "has consumed a substantial portion of management's time and limited resources," according to a March 31 filing with the U.S. Securities and Exchange Commission.

Company leaders expect a $20.3 million loss from continuing operations. After factoring in a charge and a loss tied to last year's sale of its life insurance company, they predict a total annual loss of about $54 million.

Hits like those make it harder for companies to line up additional financing, said Ken Skarbeck, a managing partner of Aldebaran Capital, an Indianapolis money-management firm, and an IBJ columnist.

"It's quite obvious they're having difficulty doing it," he said. "They're going to have to pull the rabbit out of the hat here, frankly ... to save this thing."

However, company leaders still see a couple potential avenues for growth, including the new focus they adopted last year after selling Standard Life Insurance Company of Indiana.

Standard Management sold the life insurance company to Louisville-based Capital Assurance Corp. in June. The move allowed the company to concentrate on growing the pharmaceutical-services business it started in 2002, an area company leaders have said has better growth potential.

Results from the new venture-which supplies long-term-care facilities and operates regional pharmacies in Indiana, Seattle and Nashville, Tenn.-have been meager so far.

Pharmaceutical-services revenue increased from $7 million to $29 million last year, thanks mostly to company acquisitions. But the company reported quarterly losses throughout 2005.

Wall Street also has given the company a cool reception. Standard shares fell last week to a new 52-week low of 70 cents.

In fact, shares have closed below $1 every business day since Feb. 22. NASDAQ, the exchange on which Standard shares trade, requires companies to maintain a minimum closing price of $1.

If a company trades below that mark for 30 consecutive days, it receives a deficiency notice from the market, which then allows a six-month window to come back into compliance. If NASDAQ decides to remove a company from its listing, it also provides an appeal process.

"It's not like you go below a dollar and you're sort of instantly delisted," said Bethany Sherman, NASDAQ's senior vice president for corporate communications.

Standard hit that 30-day mark April 4, but Sherman declined to say whether the company received a deficiency notice.

The company also announced in March that it planned to defer payments on its trustpreferred securities and offered to exchange them for common stock shares. That move landed Standard in the March 10 edition of Distressed Company Alert, a weekly newsletter published by Boston-based New Generation Research.

Distressed Company Alert began in 2003. The next year, it profiled 46 of the 90 publicly traded companies that went on to file for bankruptcy protection, Editor Kerry Mastroianni said.

Standard appears to be dealing with some "severe liquidity issues," Skarbeck said. "They definitely have to find money to keep it going."

The company is exploring several options to do just that.

Earlier this year, it put up for sale more than four acres of land it owns near company headquarters on North Pennsylvania Street in Carmel. The company is asking $400,000 per acre.

It has received "a great deal of interest" in the property, spokeswoman Diane Willis said in an e-mail.

In January, Standard announced plans to raise $40 million to make additional acquisitions and build working capital. It scaled that goal down to $25 million in February.

In March, shareholders "overwhelmingly approved" an increase in the number of outstanding common stock shares from 40 million to 60 million and a private placement of stock to raise $10 million toward that $25 million goal.

The company also has entered "the final stages of negotiating and closing two significant financing transactions," according to its recent SEC filing.

Standard submitted a notice of late filing to the SEC on March 31, the same day its annual report was due. The company now has until April 17 to file its annual report.
Source: XMLAr00600.xml

Recent Articles by Tom Murphy

Comments powered by Disqus