Company: LGN
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0002052568-25-000018
Chunk: 193

Company: Legence Corp.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 193
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 Statements for the year ended December 31, 2024 as presented in the Prospectus. These policies, along with our underlying judgments and assumptions made in their application, have a significant impact on our Condensed Consolidated Financial Statements.

We identify our critical accounting policies as those that are the most pervasive and important to the portrayal of our financial position and operating results and that require the most difficult, subjective and/or complex judgments regarding estimates in matters that are inherently uncertain. Our critical accounting policies are those related to revenue recognition, goodwill, income taxes, acquisitions and valuation of intangible assets. Refer to "Critical Accounting Estimates" for the year ended December 31, 2024 as presented in the Prospectus for more information. During the nine months ended September 30, 2025, the only significant changes to our critical accounting estimates are as follows:

Tax Receivable Agreement

The TRA generally provides for the payment by us of 85% of the net cash savings, if any, we realize, or are deemed to realize, as a result of certain tax attributes and benefits covered by the TRA.

We estimate our obligation under the TRA utilizing various assumptions set forth in the Tax Receivable Agreement, including: (i) a constant combined federal and state corporate tax rate of 26.39%; (ii) we have sufficient taxable income to fully utilize the tax benefits; and (iii) no material changes in tax law. Because the timing and amount of realized tax savings depend on future taxable income, stock price, and exchange activity, actual TRA payments could differ materially from estimates. Estimating future taxable income is inherently uncertain and requires judgment. See "Item 1. Financial Statements, Note 14—Tax Receivable Agreement" in Notes to Condensed Consolidated Financial Statements for further information.

Recent Accounting Pronouncements 

Refer to “Item 1. Financial Statements, Note 2—Summary of Significant Accounting Policies” in Notes to Condensed Consolidated Financial Statements for more information regarding recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

In the normal course of business, we are exposed to financial risks such as changes in interest rates and inflation risk associated with our input costs. We utilize derivative instruments, classified as cash flow hedges, to manage interest rate exposures on our floating rate debt. 

Interest Rate Risk 

Our exposure to market risk for changes in interest rates relates primarily to our long-term debt. The interest expense associated with our long-term debt will vary with market rates. We