Company: LGN
Filing Date: 2025-08-25
Form Type: S-1/A
Source: 0001193125-25-186788
Chunk: 281

Company: Legence Corp.
Filing Date: 2025-08-25
Form: S-1/A
Chunk 281
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 Rate Swaps

The Company has interest rate swap agreements to reduce its exposure to fluctuations in variable interest rates for future interest payments on debt. The
Company has designated these interest rate swaps as cash flow hedges and records the changes in the estimated fair value of the interest rate swaps to Accumulated other comprehensive income (“AOCI”) on its Consolidated Balance Sheets in
accordance with ASC Topic 815, Derivatives and Hedging. Differences between the variable interest rate payments and the fixed interest rate settlements with the swap counterparties are recognized as an adjustment to Interest expense, net of
capitalized interest on the Consolidated Statements of Operations. Amounts reported in AOCI related to cash flow hedges are reclassified to Interest expense, net of capitalized interest, as interest payments are made on the Company’s
variable-rate debt. Cash flows from derivatives designated as cash flow hedges are classified in the same category as the item being hedged in the Consolidated Statements of Cash Flows. To receive hedge accounting treatment, cash flow hedges must be
highly effective in offsetting changes to expected future cash flows on hedged transactions. The Company assesses, both at inception and at each reporting period thereafter, whether the designated derivative instrument is highly effective in
offsetting changes in cash flows of the hedged item. To the extent the interest rate swaps are determined to be ineffective, the Company recognizes the changes in the estimated fair value of the interest rate swaps in earnings. The Company has
elected not to offset the assets and liabilities from derivative agreements and instead presents the related balances on a gross basis. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated, and amounts in AOCI will be reclassified to Interest expense, net of capitalized interest in the current period.

Leases

The Company leases real estate, vehicles and
equipment. The Company determines whether the arrangement is or contains a lease at the inception of the contract and classifies leases as either operating or finance at the lease commencement date.

The Company records right-of-use assets and corresponding lease liabilities
for its leases, which are initially recognized based on the present value of lease payments over the lease term. Right-of-use assets also include initial direct costs
incurred, lease payments made at or before the commencement date, less any lease incentives received. When measuring the right-of-use asset and lease liability, fixed
payments and variable payments that depend on an index or a rate are included. Other variable payments are excluded from