Quarterly Report for Quarter Ending February 28, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Concerning Forward-Looking 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, 2025. 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, 2025, 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.

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 Report on Form 10-K for the Company's fiscal year ended August 31, 2025. 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, 2026.

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, 2026 were $157.7 million, a decrease of 16 percent compared to $187.1 million for the three months ended February 28, 2025. Irrigation segment revenues for the three months ended February 28, 2026 decreased 5 percent to $141.2 million, while infrastructure segment revenues decreased 58 percent to $16.5 million. Net earnings for the three months ended February 28, 2026 were $12.0 million, or $1.15 per diluted share, compared to net earnings of $26.6 million, or $2.44 per diluted share, for the three months ended February 28, 2025. Operating income was lower than the prior year primarily due to lower revenues in both segments. This decrease in operating income was partially offset by higher other income compared to the prior year, while the effective income tax rate was higher than the prior year.

The primary drivers for the Company's irrigation segment are the need for irrigated agricultural crop production, which is tied to population growth and the attendant need for expanded food production, and the need to use water resources more efficiently. These drivers are affected by a number of factors, including the following:

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While the USDA's forecasted 2026 total net farm income is comparable to the expected 2025 results, forecasted cash receipts in 2026 are expected to be lower than 2025 and only partially offset by government payments. Favorable weather conditions in key U.S. markets during the growing season have resulted in higher crop production and increased inventories of crops in 2025 and have maintained downward pressure on commodity prices in the near term.

The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven not only by commodity prices and net farm income, but also by food security, water scarcity and population growth. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors, including armed conflict, currency conditions and other factors can create a challenging environment. Additionally, international results are influenced by large project sales which tend to fluctuate and can be difficult to forecast accurately. While deliveries in the Middle East and North Africa (MENA) region have not yet been significantly delayed or impacted by the current Iran conflict in the Middle East, the Company continues to monitor the implications on its business and acknowledges that expected project timing in the region could change as the conflict evolves. Additionally, the broader economic impact of the conflict on the Company's supply chain and customers is uncertain as freight and other input costs have increased in the short-term.

In the fourth quarter of fiscal 2024, the Company began shipment under a multi-year supply agreement to provide irrigation systems and remote management and scheduling technology for a large project in the MENA region. The project was valued at over $100 million in revenue, with equipment deliveries occurring throughout fiscal 2025 and completing in the first quarter of fiscal 2026. Additionally, in December 2025, the Company announced a new supply agreement to provide irrigation systems and remote management and scheduling technology for a new large project in the MENA region. The Company began recognizing revenue on the project, valued at more than $80 million in revenue, beginning in the second quarter of fiscal 2026, with approximately $70 million of the total contract revenue anticipated to be recognized in the current fiscal year.

The infrastructure business continues to be driven by the Company's transportation safety products, the demand for which largely depends on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act ("IIJA") in November 2021 introduced $110 billion in incremental federal funding for roads, bridges, and other transportation projects, which the Company anticipates may support higher demand for its transportation safety products as states utilize these funds in construction projects. The federal programs under IIJA are scheduled to run through September 2026.

The backlog of unshipped orders at February 28, 2026 was $151.8 million compared with $127.0 million at February 28, 2025. Included in these backlogs are amounts of $19.2 million and $11.9 million, respectively, for orders that are not expected to be fulfilled within the subsequent 12 months. The backlog in irrigation increased as a result of the large irrigation project in the MENA region, while the backlog in infrastructure decreased 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.

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Results of Operations

For the Three Months ended February 28, 2026 compared to the Three Months ended February 28, 2025

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, 2026 and 2025. It should be read together with the business segments information in Note 13 to the condensed consolidated financial statements:

Revenues

Operating revenues for the three months ended February 28, 2026 decreased 16 percent to $157.7 million from $187.1 million for the three months ended February 28, 2025, as irrigation revenues decreased $6.9 million and infrastructure revenues decreased $22.4 million compared to the prior year period. The irrigation segment provided 90% percent of the Company's revenue during the three months ended February 28, 2026 as compared to 79% percent for the three months ended February 28, 2025.

North America irrigation revenues for the three months ended February 28, 2026 of $71.0 million decreased $6.1 million, or 8 percent, from $77.1 million for the three months ended February 28, 2025. The decrease resulted primarily from lower unit sales volume and was partially offset by slightly higher average selling prices compared to the prior year. Persistent weakness in commodity markets and tempered farmer sentiment continue to constrain demand for irrigation equipment in North America.

International irrigation revenues for the three months ended February 28, 2026 of $70.2 million decreased $0.8 million, or 1 percent, from $71.0 million for the three months ended February 28, 2025. The decrease resulted primarily from lower sales volumes in Brazil and lower project volumes in the MENA region. In Brazil, available credit and elevated interest rates continue to limit farmers' ability to invest in capital equipment. These decreases were partially offset by the favorable effects of foreign currency translation of approximately $4.0 million compared to the prior year period.

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Infrastructure segment revenues for the three months ended February 28, 2026 of $16.5 million decreased $22.4 million, or 58 percent, from $38.9 million for the three months ended February 28, 2025. The decrease was primarily driven by lower Road Zipper System revenues as the prior year included a $20 million project that did not repeat. This decrease was partially offset by higher sales of road safety products in the current period.

Gross Profit

Gross profit for the three months ended February 28, 2026 of $42.3 million decreased 32 percent from $62.5 million for the three months ended February 28, 2025. The decrease in gross profit resulted from lower revenues in both irrigation and infrastructure. Gross margin was 26.9 percent of sales for the three months ended February 28, 2026 compared with 33.4 percent of sales for the three months ended February 28, 2025. Lower irrigation gross margin resulted from a higher proportion of international irrigation project revenue in the current period that was dilutive to gross margin, while infrastructure gross margin also decreased due to the $20 million project that did not repeat.

Operating Expenses

Operating expenses of $29.3 million for the three months ended February 28, 2026 decreased $1.1 million, or 3 percent, compared with $30.4 million for the three months ended February 28, 2025. The decrease in operating expenses was driven primarily by lower incentive compensation expense in the current period.

Other Income (Expense), net

The Company recorded other income of $2.6 million and $1.1 million for the three months ended February 28, 2026 and 2025, respectively. The increase was driven by higher net interest income and was partially offset by foreign currency transaction losses, compared to the prior period.

Income Taxes

The Company recorded income tax expense of $3.5 million and $6.6 million for the three months ended February 28, 2026 and 2025, respectively. The effective income tax rate was 22.6 percent and 20.0 percent for the three months ended February 28, 2026 and 2025, respectively. The estimated annual effective tax rate in the current year is higher than the prior year primarily due to withholding taxes associated with cash repatriation. The impact of discrete items in both the current and prior year was not significant.

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For the Six Months ended February 28, 2026 compared to the Six Months ended February 28, 2025

The following section presents an analysis of the Company's operating results displayed in the condensed consolidated statements of earnings for the six months ended February 28, 2026 and 2025. It should be read together with the business segments information in Note 13 to the condensed consolidated financial statements:

Revenues

Operating revenues for the six months ended February 28, 2026 decreased 11 percent to $313.5 million from $353.3 million for the six months ended February 28, 2025, as irrigation revenues decreased $20.6 million and infrastructure revenues decreased $19.3 million. The irrigation segment provided 88% percent of the Company's revenue during the six months ended February 28, 2026 as compared to 84% percent for the six months ended February 28, 2025.

North America irrigation revenues for the six months ended February 28, 2026 of $145.4 million decreased $9.5 million, or 6 percent, from $154.9 million for the six months ended February 28, 2025. The decrease resulted primarily from lower unit sales volume and was partially offset by slightly higher average selling prices compared to the prior year. Persistent weakness in commodity markets and tempered farmer sentiment continue to constrain demand for irrigation equipment in North America.

International irrigation revenues for the six months ended February 28, 2026 of $129.3 million decreased $11.0 million, or 8 percent, from $140.3 million for the six months ended February 28, 2025. The majority of the decrease resulted from revenues related to shipments for a large project in the MENA region, along with lower sales volumes in Brazil in the current year. The current year was also impacted by the favorable effects of foreign currency translation of approximately $5.5 million compared to the prior year.

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Infrastructure segment revenues for the six months ended February 28, 2026 of $38.9 million decreased $19.3 million, or 33 percent, from $58.1 million for the six months ended February 28, 2025. The decrease was primarily driven by lower Road Zipper System revenues as the prior year included a $20 million project that did not repeat. This decrease was partially offset by higher sales of road safety products in the current year.

Gross Profit

Gross profit for the six months ended February 28, 2026 of $92.5 million decreased 18 percent from $112.5 million for the six months ended February 28, 2025. The decrease in gross profit was driven by lower revenues in both irrigation and infrastructure. Gross margin was 29.5 percent of sales for the six months ended February 28, 2026 compared with 31.8 percent of sales for the six months ended February 28, 2025. Lower irrigation gross margin resulted from a higher proportion of international irrigation project revenue in the current year that was dilutive to gross margin. Infrastructure gross margin also decreased due to the $20 million project that did not repeat, resulting in an unfavorable impact on gross margin.

Operating Expenses

Operating expenses of $59.8 million for the six months ended February 28, 2026 increased $0.4 million compared with $59.4 million for the six months ended February 28, 2025. Increases in selling and R&D expenses were partially offset by lower administrative expenses.

Other Income (Expense), net

The Company recorded other income of $4.8 million and $2.2 million for the six months ended February 28, 2026 and 2025, respectively. The increase in the current year period was driven by favorable changes related to interest income and interest expense and was partially offset by foreign currency losses of $1.5 million in the current year compared to foreign currency gains of $0.3 million in the prior year.

Income Taxes

The Company recorded income tax expense of $8.9 million and $11.5 million for the six months ended February 28, 2026 and 2025, respectively. The effective income tax rate was 23.7 percent and 20.8 percent for the six months ended February 28, 2026 and 2025, respectively. The estimated annual effective tax rate in the current year is higher than the prior year primarily due to withholding taxes associated with cash repatriation. The current year period effective tax rate includes an unfavorable discrete impact of $0.7 million, primarily related to share-based compensation vesting, while the impact of discrete items in the prior year was not significant.

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Liquidity and Capital Resources

The Company's cash, cash equivalents, and marketable securities totaled $186.1 million at February 28, 2026 compared with $186.7 million at February 28, 2025 and $250.6 million at August 31, 2025. The Company requires cash for financing its receivables and inventories, paying operating expenses and capital expenditures, and for dividends and share repurchases. The Company meets its liquidity needs and finances its capital expenditures from its available cash and funds provided by operations along with borrowings under its credit arrangements described below. In the normal course of business, the Company enters into contracts and commitments which obligate the Company to make future payments. The Company does not have any additional off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. The Company believes its current cash resources, investments in marketable securities, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all its expected working capital needs, planned capital expenditures and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.

The Company's total cash and cash equivalents held by foreign subsidiaries were approximately $115.4 million, $93.8 million, and $97.4 million as of February 28, 2026, February 28, 2025, and August 31, 2025, respectively. The Company does not consider earnings in foreign subsidiaries to be permanently reinvested and accrues applicable taxes on its foreign subsidiaries' earnings. The Company does not expect the repatriation of these funds, and any applicable taxes, to have a significant impact on the Company's overall liquidity.

Net working capital was $333.9 million at February 28, 2026, as compared with $381.8 million at February 28, 2025 and $389.2 million at August 31, 2025. Cash provided by operating activities totaled $24.0 million during the six months ended February 28, 2026, compared to cash provided by operating activities of $33.9 million during the six months ended February 28, 2025. The current year period included lower net earnings and a more favorable impact of changes in working capital compared to the prior year period.

Cash flows used in investing activities totaled $28.7 million during the six months ended February 28, 2026 compared to $39.2 million during the six months ended February 28, 2025. Purchases of property, plant, and equipment were $27.5 million, compared to $18.9 million in the prior year. The prior year also includes purchases of marketable securities, the purchase of an equity method investment, and net proceeds related to net investment hedges, each of which did not repeat in the current year.

Cash flows used in financing activities totaled $63.4 million during the six months ended February 28, 2026 compared to cash flows used in financing activities of $9.8 million during the six months ended February 28, 2025. During the current year, the Company repurchased $55.5 million of common shares compared to $1.4 million in the prior year.

Capital Allocation Plan

The Company's capital allocation plan is to continue investing in revenue and earnings growth, combined with a defined process for enhancing returns to stockholders. Under the Company's capital allocation plan, the priorities for uses of cash include:

Capital Expenditures

Capital expenditures for fiscal 2026 are expected to range from $50 million to $55 million, including equipment replacement, productivity improvements, new product development and commercial growth investments. The increase over recent levels of capital expenditures is primarily related to modernization and productivity improvements planned at certain manufacturing facilities. The Company's management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.

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Dividends

In the second quarter of fiscal 2026, the Company paid a quarterly cash dividend to stockholders of $0.37 per common share, or $3.8 million, compared to a quarterly cash dividend of $0.36 per common share, or $3.9 million, in the second quarter of fiscal 2025.

Share Repurchases

The Company's Board of Directors previously authorized a share repurchase program of up to $250.0 million of common stock with no expiration date. Under the program, shares could be repurchased in privately negotiated and/or open market transactions as well as under formalized trading plans in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. In November 2025, the Company's Board of Directors authorized a new share repurchase program of up to $150.0 million of the Company's outstanding common stock. During the three and six months ended February 28, 2026, the Company repurchased $25.2 million and $55.5 million of common shares, respectively, compared to $1.4 million for both the three and six months ended February 28, 2025. The share repurchases completed in the first quarter of fiscal 2026 depleted the previous $250.0 million share repurchase authorization. As of February 28, 2026, the amount available for repurchase under the current $150.0 million authorization amounted to $125.0 million.

Long-Term Borrowing Facilities

Senior Notes. The Company has outstanding $115.0 million in aggregate principal amount of Senior Notes, Series A (the "Senior Notes"). The entire principal of the Senior Notes is due and payable on February 19, 2030. Interest on the Senior Notes is payable semi-annually at a fixed annual rate of 3.82 percent. Borrowings under the Senior Notes are unsecured. The Company used the proceeds of the sale of the Senior Notes for general corporate purposes, including acquisitions and dividends.

Revolving Credit Facility. The Company has outstanding a $50.0 million unsecured Amended and Restated Revolving Credit Facility (the "Revolving Credit Facility") with Wells Fargo Bank, National Association ("Wells Fargo") expiring August 26, 2030. The Company intends to use borrowings under the Revolving Credit Facility for working capital purposes and to fund acquisitions. At February 28, 2026 and 2025, the Company had no outstanding borrowings under the Revolving Credit Facility. The amount of borrowings available at any time under the Revolving Credit Facility is reduced by the amount of standby letters of credit issued by Wells Fargo then outstanding. At February 28, 2026, the Company had the ability to borrow up to $50.0 million under the Revolving Credit Facility. The Revolving Credit Facility may be increased by up to an additional $50.0 million at any time, subject to additional commitment approval. Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the Secured Overnight Financing Rate ("SOFR") plus a margin of between 100 and 210 basis points depending on the Company's leverage ratio then in effect (which resulted in a variable rate of 5.03 percent at February 28, 2026), subject to adjustment as set forth in the loan documents for the Revolving Credit Facility. Interest is paid on a monthly to quarterly basis depending on loan type. The Company currently pays an annual commitment fee on the unused portion of the Revolving Credit Facility. The fee is between 0.125 percent and 0.2 percent on the unused balance depending on the Company's leverage ratio then in effect (which resulted in a fee of 0.125 percent at February 28, 2026).

Borrowings under the Revolving Credit Facility have equal priority with borrowings under the Company's Senior Notes. Each of the credit arrangements described above include certain covenants relating primarily to the Company's financial condition. These financial covenants include a funded debt to EBITDA leverage ratio and an interest coverage ratio. In the event that the loan documents for the Revolving Credit Facility were to require the Company to comply with any financial covenant that is not already included or is more restrictive than what is already included in the arrangement governing the Senior Notes, then such covenant shall be deemed incorporated by reference for the benefit of holders of the Senior Notes. Upon the occurrence of any event of default of these covenants, including a change in control of the Company, all amounts outstanding thereunder may be declared to be immediately due and payable. At February 28, 2026 and 2025, the Company was in compliance with all financial loan covenants contained in its credit arrangements in place as of each of those dates.

Contractual Obligations and Commercial Commitments

There have been no material changes in the Company's contractual obligations and commercial commitments as described in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2025.