American Renal Associates Holdings, Inc.
- Company Name
- American Renal Associates Holdings, Inc.
- Stock Symbol
- Class Period
- August 10, 2016 to March 27, 2019
- Motion Deadline
- May 27, 2019
- District of New Jersey
The complaint charges American Renal and certain of its current and former officers with violations of the Securities Exchange Act of 1934. American Renal operates as a dialysis services provider in the United States.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse information regarding the Company’s business and financial results. Specifically, defendants failed to disclose that American Renal had material weaknesses in its internal control over financial reporting that would cause issues with its accounting process for revenue recognition, collections, and related matters, which had resulted in increased regulatory scrutiny and an investigation by the SEC. As a consequence, American Renal’s financial statements for fiscal years 2014, 2015, 2016 and 2017 contained in its Annual Reports for the years ended December 31, 2016 and 2017, and its condensed consolidated financial statements in quarterly reports from 2016 through 2018 were false and could not be relied upon. As a result of this information being withheld from the market, American Renal securities traded at artificially inflated prices during the Class Period, with the price of its stock reaching a high of $25 per share.
Then on March 27, 2019, after the market closed, American Renal announced that, based on a review by its Audit Committee, the “Board [had] concluded that the Company’s previously issued consolidated financial data for the fiscal years ended December 31, 2014, 2015, 2016 and 2017 contained in its Annual Reports on Form 10-K for the years ended December 31, 2016 and 2017, and its condensed consolidated financial statements for the quarters and year-to-date periods ended March 31, June 30 and September 30, 2016, [2017 and 2018] contained in its Quarterly Reports on Form 10-Q . . . should be restated and should no longer be relied upon.” The Company also stated that its “disclosures related to such financial statements and related communications issued by or on behalf of the Company with respect to [such periods], including management’s assessment of internal control over financial reporting, should no longer be relied upon.”
According to the Company, as previously disclosed, it had received a request from the SEC in October 2018 to provide documents and information relating to certain revenue recognition, collections and related matters. The Audit Committee then began a review of the Company’s revenue recognition methodology and related accounting matters. The Audit Committee’s review found that, “in recording revenue based on expected payments from third-party payers during the [periods under review], the Company did not appropriately reconcile its contractual allowance estimates for discounts and price concessions with cash subsequently received in respect of prior period patient claims. In addition, the Company did not record a reserve for uncollectible accounts across all of its payer categories during” the periods under review. American Renal also announced that day that its CFO had resigned. On this news, the price of American Renal shares fell $3.69 per share, or more than 38%, to close at $6.01 per share on March 28, 2019.