Driven Brands (DRVN) - 2024 Q4 - Annual Report

Financial Obligations and Restrictions - The company relies on cash dividends and distributions from subsidiaries to meet its obligations, which may be restricted by debt agreements [180]. - Legal and contractual restrictions may limit the ability to obtain cash from subsidiaries, impacting financial flexibility [180]. - The company made aggregate payments of $38 million under the Tax Receivable Agreement in 2024, with future payments expected to total between$ 130 million and $150 million [186]. - The company expects to repay the majority of its Tax Receivable Agreement obligations by the end of the 2034 fiscal year [186]. - The realization of tax benefits under the Tax Receivable Agreement is contingent on future taxable income, affecting payment obligations [183]. Corporate Governance and Control - Principal Stockholders hold approximately 62% of the outstanding shares, significantly influencing corporate decisions [193]. - The company is classified as a "controlled company" under NASDAQ rules, allowing it to utilize exemptions from certain corporate governance requirements [194]. - The company’s Principal Stockholders control at least 40% of the voting power of the outstanding common stock, allowing them to influence all matters requiring stockholder approval, including director elections and amendments to the certificate of incorporation [205]. - The company has provisions that may restrict stockholder actions, such as prohibiting stockholders from calling special meetings if less than 40% of the voting power is owned by Principal Stockholders [201]. - The company’s organizational documents may impede or discourage takeovers, potentially depriving investors of premium opportunities [195]. - The issuance of preferred stock could delay or prevent a change in control without further action by stockholders [198]. - The company’s certificate of incorporation allows for the issuance of "blank check" preferred stock, which could delay or prevent a change in control [204]. - The company has a provision in its certificate of incorporation that designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of lawsuits, which may limit stockholders' ability to choose a favorable judicial forum [200]. Financial Risks - The company is exposed to interest rate risk, with a hypothetical 1% increase or decrease in variable debt resulting in a change of$ 5 million in interest expense [335]. - The company has issued fixed-rate debt instruments for most of its securitization senior notes, but still has variable rate debt that is subject to interest rate fluctuations [334]. - The company is also exposed to foreign exchange risk due to operations in Canada, Europe, and Australia, which can adversely impact net income and cash flows [339]. - The company has exposure to commodity price volatility, particularly for products like motor oil and paint, which could lead to supplier-imposed price increases [338]. - Inflation did not significantly affect the company's annual results during 2024, 2023, or 2022, but severe inflation increases could impact the business negatively [340]. Stock Market and Trading - The company’s common stock began trading on The Nasdaq Global Select Market on January 15, 2021, and future sales of common stock could reduce its stock price [210]. - The company has a provision in its certificate of incorporation that designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of lawsuits, which may limit stockholders' ability to choose a favorable judicial forum [200].