Company: LGN
Filing Date: 2025-02-14
Form Type: DRS
Source: 0000950123-25-002471
Chunk: 241

Company: Legence Corp.
Filing Date: 2025-02-14
Form: DRS
Chunk 241
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 fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value, as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2: Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and
liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3: Inputs are unobservable inputs that reflect the reporting entity’s own assumptions on which assumptions the market participants would use
in pricing the asset or liability based on the best available information.

Interest 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 Sheet 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

F-14

Confidential Treatment Requested by Legence Corp.

Pursuant to 17 C.F.R. Section 200.83

Legence Holdings LLC and Subsidiaries

Notes to Consolidated Financial Statements

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