Company: LGN
Filing Date: 2025-02-14
Form Type: DRS
Source: 0000950123-25-002471
Chunk: 119

Company: Legence Corp.
Filing Date: 2025-02-14
Form: DRS
Chunk 119
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 earnout of $50.0 million based upon the business’s results for the year ended December 31, 2023. As of
December 31, 2022, the estimated fair value of the contingent earnout obligation was $23.0 million. Based upon actual fiscal year 2023 results, the maximum earnout was achieved, resulting in a $27.0 million increase to the contingent
earnout obligation. We paid the earnout amount in 2024 and have no further obligations to Black Bear Energy shareholders under the earnout agreement.

Goodwill Impairment

During the
year ended December 31, 2023, it was determined the carrying amount of goodwill for one reporting unit in the Engineering & Consulting segment exceeded fair value, resulting in goodwill impairment charges of $5.1 million. During
the year ended December 31, 2022, it was determined the carrying amount of goodwill for one reporting unit in the Installation & Maintenance segment exceeded fair value, resulting in goodwill impairment charges of $23.4 million.
In both years, the impairment was primarily driven by a decline in projected cash flows due to lower revenue projections, investments in support functions and increased cost of capital due to rising interest rates.

Interest Expense, Net of Capitalized Interest and Interest Expense—Related Parties

The increase in interest expense, net of capitalized interest and interest expense—related parties is primarily attributable to additional
borrowings. This includes $155.0 million of borrowings under the Term Loan Credit Facility during 2023, as well as the full year impact of $146.7 million of borrowings under the Term Loan Credit Facility during 2022.

Income Tax Expense (Benefit)

Income tax benefit was $7.9 million in the year ended December 31, 2023, and the effective tax rate was 14.5%, as compared to income
tax expense of $7.6 million in the year ended December 31, 2022 and a negative effective tax rate of 10.3%. These rates are lower than the federal statutory rate of 21%. The effective tax rate in the year ended December 31, 2023 was
primarily due to a significant portion of the pre-tax loss being generated by pass-through entities that are not subject to income taxes at the Company level, partially offset by favorable return-to-provision adjustments in the tax paying C corporations. The effective tax rate in the year ended December 31, 2022 was primarily due to a significant portion