Company: LGN
Filing Date: 2025-02-14
Form Type: DRS
Source: 0000950123-25-002471
Chunk: 135

Company: Legence Corp.
Filing Date: 2025-02-14
Form: DRS
Chunk 135
---
 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 seek to mitigate this risk with an appropriate amount of fixed rate debt
obligations through interest rate derivative contracts that fix the interest rate on the respective floating rate debt obligations. Without taking into consideration the effect of our interest rate swap agreements, based upon our outstanding
principal amount of floating rate debt of $1,039.0 million as of December 31, 2023, an increase in the current interest rate levels of 1% would result in an increase in our annual interest expense of $10.4 million.

92

Confidential Treatment Requested by Legence Corp.

Pursuant to 17 C.F.R. Section 200.83

Inflation Risk

Inflationary pressures have recently increased, and may continue to increase, the costs of labor and other inputs for our services. We have
experienced, and may continue to experience, higher than expected inflation, including escalating transportation, commodity and other supply chain costs and disruptions. If our costs are subject to significant inflationary pressures, we may not be
able to offset such higher costs through price increases, which could adversely affect our business, results of operations or financial condition.

Credit Risk

Financial instruments
that potentially subject us to a concentration of credit risk consist principally of contract assets and accounts receivable. Exposure to losses on receivables is principally dependent on each customer’s financial condition. We monitor the
exposure for credit losses and maintain allowances for anticipated losses. We may also require prepayments for certain of our services. Concentrations of credit risk with respect to our receivables are limited due to the large number of customers
comprising our customer base and their dispersion among many different geographies.

93

Confidential Treatment Requested by Legence Corp. Pursuant to 17 C.F.R. Section 200.83 INDUSTRY OVERVIEW We participate in the market for engineering, consulting, installation and maintenance services used in the construction of new industrial, commercial and institutional buildings and upgrades and retrofits to existing buildings in the United States. We focus on buildings’ MEP systems