What does Del Taco do to determine the adequacy of accruals and related disclosures for contingencies?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
| Sixteen Weeks Ended | ||
|---|---|---|
| January 19, | January 21, | |
| 2025 | 2024 | |
| Weighted-average shares outstanding – basic | 19,050 | 19,893 |
| Effect of potentially dilutive securities: | ||
| Nonvested stock awards and units | 97 | 145 |
| Performance share awards | 68 | 13 |
| Weighted-average shares outstanding – diluted | 19,215 | 20,051 |
| Excluded from diluted weighted-average shares outstanding: | ||
| Antidilutive | 324 | 24 |
| Performance conditions not satisfied at the end of the period | 150 | 136 |
14. COMMITMENTS AND CONTINGENCIES
Legal matters — The Company assesses contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of January 19, 2025, the Company had accruals of $17.5 million for all of its legal matters in aggregate, presented within "Accrued liabilities" on our condensed consolidated balance sheet. Because litigation is inherently unpredictable, assessing contingencies is highly subjective and requires judgments about future events. When evaluating litigation contingencies, we may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter. In addition, damage amounts claimed in litigation against us may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of our potential liability or financial exposure. The Company regularly reviews contingencies to determine the adequacy of the accruals and related disclosures.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the company regularly reviews contingencies to determine if the accruals and related disclosures are adequate. Del Taco assesses contingencies, including litigation contingencies, to determine the degree of probability and range of possible loss for potential accrual in their financial statements. An estimated loss contingency is accrued if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of January 19, 2025, Del Taco had accruals of $17.5 million for all of its legal matters in aggregate, presented within "Accrued liabilities" on their condensed consolidated balance sheet.
However, the disclosure notes that assessing contingencies is highly subjective and requires judgments about future events because litigation is inherently unpredictable. When evaluating litigation contingencies, Del Taco may be unable to provide a meaningful estimate due to a number of factors, including the procedural status of the matter in question, the availability of appellate remedies, insurance coverage related to the claim or claims in question, the presence of complex or novel legal theories, and the ongoing discovery and development of information important to the matter.
Furthermore, the document states that damage amounts claimed in litigation against Del Taco may be unsupported, exaggerated, or unrelated to possible outcomes, and as such are not meaningful indicators of their potential liability or financial exposure. The ultimate amount of loss may differ from these estimates, and any estimate is not an indication of expected loss, if any, or of the company's maximum possible loss exposure, and the ultimate amount of loss may differ materially from these estimates in the near term. This means that while Del Taco actively monitors and assesses potential liabilities, the actual financial impact can be difficult to predict and may vary significantly.