Concerning Forward­Looking Statements

This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect information concerning possible or assumed future results of operations and planned financing of the Company. In addition, forward-looking statements may be made orally or in press releases, conferences, reports, on the Company's web site, or otherwise, in the future by or on behalf of the Company. When used by or on behalf of the Company, the words "expect," "anticipate," "estimate," "believe," "intend," "will," "plan," "predict," "project," "outlook," "could," "may," "should" or similar expressions generally identify forward-looking statements. The entire section entitled "Executive Overview and Outlook" should be considered forward-looking statements. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the "Risk Factors" section in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2020. Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions, which may not occur as anticipated. Actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein and in the Company's other public filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the Company's fiscal year ended August 31, 2020, as well as other risks and uncertainties not now anticipated. The risks and uncertainties described herein and in the Company's other public filings are not exclusive and further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, may emerge from time to time. Except as required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.





COVID-19 Impact

In March 2020, the World Health Organization declared the 2019 coronavirus disease (COVID-19) a global pandemic. This outbreak, which has continued to spread worldwide, has adversely affected workforces, customers, economies, and financial markets globally, leading to economic uncertainty. Shelter-in-place or stay-at-home orders have been implemented from time to time in many of the jurisdictions in which the Company operates. However, because the Company supports critical industries, the Company's facilities worldwide have generally been considered "business essential" and have remained open throughout the outbreak with limited exceptions. Accordingly, COVID-19 has had a limited impact on the Company's manufacturing operations to date. While the Company has implemented new procedures to protect the health and well-being of employees and customers, costs associated with these procedures have not been material. In addition, the pandemic has not had a material adverse effect on demand for the Company's irrigation or infrastructure products; however, the timing of infrastructure revenue continues to be impacted by reduced road construction activity and delays in project implementations.

The ultimate impact of COVID-19 on the Company's business, results of operations, or cash flows remains uncertain and depends on numerous evolving factors that the Company may not be able to accurately predict or effectively respond to, including, without limitation: the duration and scope of the outbreak; mutations of COVID-19; actions taken by governments, businesses, and individuals in response to the outbreak; the effect on economic activity and actions taken in response; the effect on customers and their demand for the Company's products and services; and the Company's ability to manufacture, sell, distribute and service its products, including without limitation as a result of supply chain challenges, facility closures, social distancing, restrictions on travel, fear or anxiety by the populace, and shelter-in-place orders. As such, the full financial impact of COVID-19 on the Company's business is difficult to estimate.

Accounting Policies

In preparing the Company's condensed consolidated financial statements in conformity with U.S. GAAP, management must make a variety of decisions which impact the reported amounts and the related disclosures. These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and the Company's historical experience.

The Company's accounting policies that are most important to the presentation of its results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as its critical accounting policies. See discussion of the Company's critical accounting policies under Item 7 in the Company's Annual



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Report on Form 10-K for the Company's fiscal year ended August 31, 2020. Management periodically re-evaluates and adjusts its critical accounting policies as circumstances change. There were no significant changes in the Company's critical accounting policies during the six months ended February 28, 2021.

Recent Accounting Guidance

See Note 1 - Basis of Presentation and the disclosure therein of recently adopted accounting guidance to the condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Executive Overview and Outlook

Operating revenues for the three months ended February 28, 2021 were $143.6 million, an increase of 26 percent compared to $113.8 million for the three months ended February 29, 2020. Irrigation segment revenues increased 27 percent to $118.6 million and infrastructure segment revenues increased 23 percent to $25.0 million. Net earnings for the three months ended February 28, 2021 were $11.9 million, or $1.08 per diluted share, compared to net earnings of $5.5 million, or $0.51 per diluted share, for the three months ended February 29, 2020.

The Company's irrigation revenues are highly dependent upon the need for irrigated agricultural crop production, which, in turn, depends upon many factors, including the following primary drivers:



   •  Agricultural commodity prices - As of February 2021, U.S. corn prices have
      increased approximately 43 percent and U.S. soybean prices have increased
      approximately 54 percent from February 2020. The increase in these commodity
      prices resulted from lower production levels caused by unfavorable weather
      conditions coupled with higher demand coming primarily from an increase in
      corn and soybean exports to China.


   •  Net farm income - As of February 2021, the U.S. Department of Agriculture
      (the "USDA") estimated U.S. 2021 net farm income to be $111.4 billion, a
      decrease of eight percent from the USDA's estimated U.S. 2020 net farm
      income of $121.1 billion. The decrease is primarily related to a reduction
      in 2021 in Federal government direct farm program payments from the
      Coronavirus Food Assistance Program ("CFAP") that increased government
      support in 2020. Federal government direct farm program payments are
      estimated to return to more historical levels during 2021. A projected
      increase in cash receipts from crops and livestock is expected to offset a
      portion of the decrease in government support payments.


   •  Weather conditions - Demand for irrigation equipment is often positively
      affected by storm damage and prolonged periods of drought conditions as
      producers look for ways to reduce the risk of low crop production and crop
      failures. Conversely, demand for irrigation equipment can be negatively
      affected during periods of more predictable or excessive natural
      precipitation.


   •  Governmental policies - A number of governmental laws and regulations can
      affect the Company's business, including:


         •  The Agriculture Improvement Act of 2018 (the "Farm Bill") was signed
            into law in December 2018. The Farm Bill continues many of the
            programs that were in the Agricultural Act of 2014, which expired in
            September 2018. Such programs are designed to provide a degree of
            certainty to growers, including funding for the Environmental Quality
            Incentives Program, which provides financial assistance to farmers to
            implement conservation practices, and is frequently used to assist in
            the purchase of center pivot irrigation systems.


         •  The U.S. Tax Cuts and Jobs Act ("U.S. Tax Reform") enacted in December
            2017 increased the benefit of certain tax incentives, such as the
            Section 179 income tax deduction and Section 168 bonus depreciation,
            which are intended to encourage equipment purchases by allowing the
            entire cost of equipment to be treated as an expense in the year of
            purchase rather than amortized over its useful life.


         •  Biofuel production continues to be a major demand driver for irrigated
            corn, sugar cane and soybeans as these crops are used in high volumes
            to produce ethanol and biodiesel.  The U.S. Environmental Protection
            Agency ("EPA") missed the November 30, 2020 deadline to finalize
            Renewable Fuels Standard (RFS) volume requirements for 2021. In
            explaining the delay, the EPA cited a steep decline in gasoline sales
            during the coronavirus pandemic, making it difficult to forecast
            demand in 2021.


         •  Many international markets are affected by government policies such as
            subsidies and other agriculturally related incentives. While these
            policies can have a significant effect on individual markets, they
            typically do not have a material effect on the consolidated results of
            the Company.


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   •  Currency - The value of the U.S. dollar fluctuates in relation to the value
      of currencies in a number of countries to which the Company exports products
      and in which the Company maintains local operations. The strengthening of
      the dollar increases the cost in the local currency of the products exported
      from the U.S. into these countries and, therefore, could negatively affect
      the Company's international sales and margins. In addition, the U.S. dollar
      value of sales made in any affected foreign currencies will decline as the
      value of the dollar rises in relation to these other currencies.

International irrigation markets remain active with opportunities for further development and expansion, however regional political and economic factors, currency conditions and other factors can create a challenging environment. Additionally, international results are heavily dependent upon project sales which tend to fluctuate and can be difficult to forecast accurately.

The infrastructure business is dependent to some extent on government spending for road construction. In December 2015, the U.S. government enacted a five-year, $305 billion highway-funding bill (the "FAST Act") to fund highway and bridge projects. The FAST Act was scheduled to expire in September 2020, however Congress reauthorized a one year extension. This extension includes an additional $13.6 billion added to the Highway Trust Fund, which finances most government spending for highways and mass transit. A Federal COVID-19 relief bill signed December 27, 2020 includes $10 billion of emergency aid for state departments of transportation to help fund eligible projects. Despite government spending uncertainty, opportunities exist for market expansion in each of the infrastructure product lines. Demand for the Company's transportation safety products continues to be driven by population growth and the need for improved road safety.

During the first six months of fiscal 2021, demand for irrigation equipment in the U.S. has increased significantly over the same prior year period due to improved farmer sentiment resulting from higher agricultural commodity prices and improved net farm income in 2020. Also, during this period there has been a significant increase in steel and other raw material costs as well as freight and logistics costs. This has created short-term pressure on operating margins until these increased costs can be fully covered by increases in selling prices. In addition, supply chain constraints impacting availability of raw materials and trucking resources have contributed to cost increases and have resulted in extended lead times for deliveries.

The backlog of unshipped orders at February 28, 2021 was $101.4 million compared with $104.4 million at February 29, 2020. Included in these backlogs are amounts of $2.7 million and $5.5 million, respectively, for orders that are not expected to be fulfilled within the subsequent twelve months. The decrease in the total backlog is due to two large infrastructure orders in the prior year totaling $38.0 million that did not repeat, while order backlogs in North America and international irrigation are higher compared to the prior year. The Company's backlog can fluctuate from period to period due to the seasonality, cyclicality, timing and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders, and therefore is generally not a good indication of the next fiscal quarter's revenues.

The global drivers for the Company's markets of population growth, expanded food production, efficient water use and infrastructure expansion support the Company's long-term growth goals. The most significant opportunities for growth over the next several years are in international markets, where irrigation use is less developed and demand is driven primarily by food security, water scarcity and population growth.



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Results of Operations

For the Three Months ended February 28, 2021 compared to the Three Months ended February 29, 2020

The following section presents an analysis of the Company's operating results displayed in the condensed consolidated statements of earnings for the three months ended February 28, 2021 and February 29, 2020. It should be read together with the industry segment information in Note 13 to the condensed consolidated financial statements:

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