10

ITEMITEM 1A — Risk Factors

The following are certain of the more significant risks that may affect the Company’s business, financial condition and results of operations.  

The Company’s irrigation revenues are highly dependent on the agricultural industry and weather conditions.  The Company’s irrigation revenues are cyclical and highly dependent upon the need for irrigated agricultural crop production which, in turn, depends upon many factors, including total worldwide crop production, the profitability of agricultural crop production, agricultural commodity prices, net farm income, availability of financing for farmers, governmental policies regarding the agricultural sector, water and energy conservation policies, the regularity of rainfall, and regional climate conditions. As farm income decreases, farmers may postpone capital expenditures or seek less expensive irrigation alternatives.  

Weather conditions, particularly leading up to the planting and early growing season, can significantly affect the purchasing decisions of consumers of irrigation equipment.  Natural calamities such as regional floods, hurricanes or other storms, and droughts can have significant effects on seasonal irrigation demand.  Drought conditions, which generally affect irrigation equipment demand positively over the long term, can adversely affect demand if water sources become unavailable or if governments impose water restriction policies to reduce overall water availability.

Changing worldwide demand for food and different types of biofuelbiofuels could have an effect on the price of agricultural commodities and consequently the demand for irrigation equipment. Changing worldwide demand for farm outputs to meet the world’s growing food and biofuel demands, driven in part by government policies and an expanding global population, are likely to result in fluctuating agricultural commodity prices, which affect demand for irrigation equipment. The primary benefit of many of the Company’s irrigation products is to increase grain yields and the resulting revenue for farmers.  As grain prices decline, the breakeven point of incremental production is more difficult to achieve, reducing or eliminating the profit and return on investment from the purchase of the Company’s products.  As a result, changes in grain prices can significantly affect the Company’s sales levels.

A decline in oil prices or the overall demand for motor fuels, or changes in government policies regarding biofuels could also negatively affect the biofuels market and/or reduce government revenues of oil-producing countries that purchase or subsidize the purchase of irrigation equipment.  Biofuels production is a significant source of grain demand in the U.S. and certain international markets.  While ethanol productionblending levels are currently mandated within the U.S., potential mandate changes or price declines for ethanol could reduce the demand for grains.  In addition, a number of ethanol producers in the U.S. are cooperatives partially owned by farmers.  Reduced profit of ethanol production could reduce income for farmers which could, in turn, reduce the demand for irrigation equipment.  

The Company’s international sales are highly dependent on foreign market conditions and subject the Company to additional risk, restrictions, and compliance obligations.International revenues are primarily generated from Australia, New Zealand, Canada, Europe, Mexico, the Middle East, Africa, China, Russia, Ukraine, and Central and South America.  In addition to risks relating to general economic and potential instability in these countries, a number of countries are particularly susceptible to disruption from changing socioeconomic conditions as well as terrorism, sanctions, war, outbreaks, and similar incidents.  The collectability of receivables can also be difficult to estimate, particularly in areas of political instability or with governments with which the Company has limited experience or where there is a lack of transparency as to the current credit condition. 

The Company’s international sales efforts and profit margins are affected by international trade barriers, including governmental policies on tariffs, taxes, import or export licensing requirements and trade sanctions.  For example, in 2018, the U.S. and China began to impose partial tariffs on each other's products, and the trade tension between the two countries has escalated in 2019 through 2020.  Certain of the components required for the manufacture of the Company's products have been or may be impacted by tariffs.  Likewise, other international trade disputes, changes to international trade agreements or policies, or any increased regulation on trade with Canada and Mexico resulting from the replacement of the North American Free Trade Agreement (“NAFTA”) with the United States‑Mexico-Canada Agreement, could increase our costs, reduce our competitiveness, and have an adverse effect on the Company’s business, financial condition and results of operations.

In addition, the Company’s international sales efforts must also comply with anti-corruption laws like the U.S. Foreign Corrupt Practices Act. These anti-corruption laws generally prohibit companies and their intermediaries (including, in the Company’s case, dealers and sales representatives) from making improper payments or providing anything of value to improperly influence government officials or certain private individuals for the purpose of obtaining or retaining a business advantage.  As part of the Company’s irrigation and infrastructure sales efforts, the

11

Company promotes and sells products to governmental entities and state-owned or state-backed business enterprises, the employees and representatives of which may be considered government officials for purposes of the U.S. Foreign Corrupt Practices Act.  Further, some of the countries in which the Company does business lack fully developed legal systems and are perceived to have elevated levels of corruption.  Although the Company has compliance and training programs in place designed to reduce the likelihood of potential violations of such laws, violations of these laws or other compliance requirements could occur and result in criminal or civil sanctions and have an adverse effect on the Company’s reputation, business, financial condition and results of operations.

Epidemics, pandemics, and other outbreaks (including the coronavirus (COVID-19) pandemic) can disrupt the Company’s operations and adversely affect its business, results of operations, and cash flows.  Epidemics, pandemics, and other outbreaks of an illness, disease, or virus (including COVID-19) have adversely affected, and could adversely affect in the future, workforces, customers, economies, and financial markets globally, potentially leading to economic downturns. The significance of the impact on the Company’s operations of an epidemic, pandemic, or other outbreak depends on numerous 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; 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, 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. These and other factors relating to or arising from an epidemic, pandemic, or other outbreak could have a material adverse effect on the Company’s business, results of operations, and cash flows, as well as the trading price of the Company’s securities. Please also see the discussion on the Company’s response to COVID-19 in Item 7 of Part II of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Company’s international sales and profit margins are subject to currency exchange risk.Most of theThe Company’s international sales involve some level of export from the U.S., either of components or completed products.  Policies and geopolitical events affecting exchange rates could adversely affect the international flow of agricultural and other commodities, which can cause a corresponding downturn in the demand for agricultural equipment in many areas of the world.  Further, any strengthening of the U.S. dollar or any other currency of a country in which the Company manufactures its products (e.g. the Euro, the Brazilian real, the South African rand, the Turkish lira, and the Chinese renminbi) and/or any weakening of local currencies can increase the cost of the Company’s products in its foreign markets.  Irrespective of any effect on the overall demand for agricultural equipment, the effect of these changes can make the Company’s products less competitive relative to local producing competitors and, in extreme cases, can result in the Company’s products not being cost-effective for customers.  As a result, the Company’s international sales and profit margins could decline.  

The Company’s profitability may be negatively affected by changes in the availability and price of certain parts, components, and raw materials.The Company requires access to various parts, components, and raw materials at competitive prices in order to manufacture its products. Changes in the availability and price of these parts, components, and raw materials (including steel and zinc), which have changed significantly and rapidly at times and are affected by factors like demand, andtariffs, freight costs, and outbreaks, can significantly increase the costs of production.  Due to price competition in the market for irrigation equipment and certain infrastructure products, the Company may not be able to recoup increases in these costs through price increases for its products, which would result in reduced profitability.  Whether increased operating costs can be passed through to the customer depends on a number of factors, including farm income and the price of competing products.  Further, the Company relies on a limited number of suppliers for certain raw materials, parts and components in the manufacturing process.  Disruptions or delays in supply or significant price increases from these suppliers could adversely affect the Company’s operations and profitability.  Such disruptions, terminations or cost increases could result in cost inefficiencies, delayed sales or reduced sales. The aforementioned risks have been, and may continue to be, exacerbated by the impact of COVID-19.

The Company’s infrastructure revenues are highly dependent on government funding of transportation projects and subject to compliance with government regulations.  The demand for the Company’s infrastructure products depends to a large degree on the amount of government spending authorized to improve road and highway systems.  For example, the U.S. government funds highway and road improvements through the Federal Highway Trust Fund Program and matching funding from states may be required as a condition of federal funding.  If highway funding is reduced or delayed, it may reduce demand for the Company’s infrastructure products.

12

In addition, the Company’s infrastructure products are required to meet certain standards as outlined by the various governments worldwide.  The Federal Highway Administration (“FHWA”) has begun to implementand state departments of transportation have implemented Manual for Assessing Safety Hardware (“MASH”) standards which update and supersede National Cooperative Highway Research Program (“NCHRP”) Report 350 standards for evaluating new road safety hardware devices.  In addition, state departments of transportation have the ability to require compliance with MASH standards prior to FHWA mandating such practices.  While infrastructure products previously accepted under NCHRP Report 350 criteria are not required to be retested under MASH standards, they willgenerally are no longer be eligible for federal reimbursement as the MASH standards arehave been implemented by FHWA and the states.  The Company is incurring,has incurred, and will continue to incur, research and development and testing expense to develop products to comply with MASH standards. Any reevaluation of the Company’s infrastructure products’ compliance with applicable standards, the implementation of new standards, and/or any delay in the Company’s development of additional infrastructure products that comply with new standards could have a significant adverse effect on the Company’s competitive position and on sales and profitability from its infrastructure product line.  

Compliance with applicable environmental and health and safety regulations or standards may require additional capital and operational expenditures.The Company is subject to numerous laws and government regulations, including those which govern environmental and occupational health and safety matters.  The Company believes that its operations are substantially in compliance with all such applicable laws and regulations and that it holds all necessary permits to operate its business in each jurisdiction in which its facilities are located.  EnvironmentalLaws and health and safetygovernment regulations applicable to the Company are subject to change and interpretation.  Compliance with applicable laws and regulations or standards may require the Company to make additional capital and operational expenditures.   

The Company’s Lindsay, Nebraska site was added to the list of priority superfund sites of the U.S. Environmental Protection Agency (the “EPA”) in 1989.  The Company andexpenditures that may have a material adverse effect on its environmental consultants have developed a remedial alternative work plan, under whichearnings, liquidity, financial condition or competitive position.  In particular, the Company continues to work with the EPA to define and implement steps to better contain and remediate the remaining contamination.  Although the Company has accrued reasonably estimable

costs associated with remediation of the site, the estimate of costs and their timing could change as a result of a number of factors, including (1) input from the EPA and the Nebraska Department of Environmental Quality on the proposed remediation plan and any changes which they may subsequently require, (2) refinement of cost estimates and length of time required to complete remediation and post-remediation operations and maintenance, (3) effectiveness of the technology chosen in remediation of the site as well as changes in technology that may become available in the future, and (4) unforeseen circumstances existing at the site. As a result of these factors, the actual amount ofincur costs incurred by the Company in connection with the remediation of environmental contamination ofat its Lindsay, Nebraska site couldthat exceed the amounts that the Company has accrued for this expense atpurpose as of the end of fiscal 2017.  The Company’s ongoing remediation activities at its Lindsay, Nebraska facility are2020, as more fully described in Note 13,16, Commitments and Contingencies, to the Company’s consolidated financial statements.

The Company is exposed to risks from legal proceedings.From time to time, the Company may be involved in various legal proceedings and other various claims that arise in the ordinary course of its business, which may include commercial, employment, product liability, tort, and other litigation.  Current and future litigation, governmental proceedings and investigations, audits, indemnification claims or other claims that the Company faces may result in substantial costs and expenses and significantly divert the attention of its management regardless of the outcome.  In addition, these matters could lead to increased costs or interruptions of its normal business operations.  Litigation, governmental proceedings and investigations, audits, indemnification claims or other claims involve uncertainties and the eventual outcome of any such matter could adversely affect the Company’s business, results of operations or cash flows. For a summary of the Company’s infrastructure products litigation, see Note 13,16, Commitments and Contingencies, to the Company’s consolidated financial statements.

The frequency and magnitude of liability claims and the related expenses could lower profitability and increasebusiness risk.The nature of the Company’s business subjects the Company to potential liability for claims alleging property damage and personal injury or death arising from the use of or exposure to its products, especially infrastructure products that are installed along roadways. While the Company’s liability insurance coverage is consistent with commercial norms in the industries in which the Company operates, an unusually large liability claim or a string of claims could potentially exceed the Company’s available insurance coverage. In addition, the availability of, and the Company’s ability to collect on, insurance coverage can be subject to factors beyond the Company’s control.  For example, any accident, incident, or lawsuit involving the Company, its products specifically, or the industries in which the Company operates generally, even if the Company is fully insured, contractually indemnified, or not held to be liable, could significantly affect the cost and availability of insurance to the Company in the future.

If any of the Company’s third-party insurers fail, cancel, or refuse coverage, or otherwise are unable to provide the Company with adequate insurance coverage, then the Company’s overall risk exposure and operational expenses would increase and the management of the Company’s business operations would be disrupted.

Further, as insurance policies expire, increased premiums for renewed or new coverage, if such coverage can be secured, may increase the Company’s insurance expense and/or require that the Company increase its self-insured retention or deductibles. The Company maintains primary coverage and excess coverage policies. If the number of claims or the dollar amounts of any such claims rise in any policy year, the Company could suffer additional costs associated with accessing its excess coverage policies. Also, an increase in the loss amounts attributable to such claims could expose the Company to uninsured damages if the Company was unable or elected not to insure against certain claims because of increased premiums or other reasons.

13

The Company’s infrastructure products are installed along roadways in inherently dangerous applications.  Accidents involving the Company’s infrastructure products could reduce demand for such products and expose the Company to significant damages and reputational harm.  The Company is currently defending a number of product liability lawsuits involving the Company’s X-Lite^® end terminal. In June 2019, the Company was informed by letter that the Department of Justice, Civil Division, and U.S. Attorney’s Office for the Northern District of New York, with the assistance of the Department of Transportation, Office of Inspector General, are conducting an investigation of the Company relating to the Company’s X-Lite end terminal and potential violations of the federal civil False Claims Act.  While the Company’s infrastructure products are designed to meet all applicable standards in effect in the markets in which such products are offered, the risk of product liability claims, demands for reimbursement or compensatory payments, and associated adverse publicity is inherent in the development, manufacturing, marketing, and sale of such products, including end terminals and crash cushions that are ultimately installed along roadways.  In addition to this inherent risk, a sizable False Claims Act judgment against a competitor (although recently(which was reversed on appeal) brought significant attention to the infrastructure products industry and may leadbe a factor leading to additional lawsuits, demands, and investigations being filedpursued against the Company and others in the industry.  

An actual or perceived issue with the Company’s infrastructure products couldcan lead to a decline in demand for such products, the removal of such products from qualified products lists used by government customers in their purchasing decisions, product recalls,the removal and replacement of such products from roadways by government customers and demands for reimbursement or compensatory payments for such actions, adverse publicity, claims or litigation, and/or the diversion of management’s attention, which could materially and adversely affect the Company’s reputation, business, financial condition, and results of operations.  While infrastructure product selection, assembly, installation, operation, repair, and maintenance are the responsibilities of dealers, distributors, customers, and/or state departments of transportation, the Company may nevertheless also be subjected to claims, litigation, or litigationdemands for reimbursement or compensatory payments in connection with a third party’s alleged failure to satisfactorily discharge such responsibilities, including but not limited to claims associated with personal injuries, property damage, and death. Likewise, improper assembly, installation, operation, repair, or maintenance of the Company’s infrastructure products may cause such infrastructure products to fail to meet certain performance standards, which could lead to similar consequences as an actual or perceived issue with the infrastructure products themselves.  

Although the Company currently maintains insurance against product-related claims or litigation, the Company could be exposed to significant losses arising from claims involving infrastructure products if the Company’s insurance does not cover all associated liabilities or if coverage in the future becomes unobtainable on commercially reasonable terms.

The Company may not fully sustain targeted performance improvements and other benefits realized from the Foundation for Growth initiative. Foundation for Growth is a focused performance improvement initiative by the Company announced in March 2018 that includes setting strategic direction, defining priorities, and improving overall operating performance.  The Company's future success is partly dependent upon successfully executing, and realizing performance improvements, revenue gains, cost savings and other benefits from, this initiative.    

While the Company has already realized meaningful benefits and achieved operating margin improvements in large part from the initiative, headwinds such as challenging agricultural market conditions, low commodity prices, and trade uncertainty are largely outside of the Company’s control and continue to weigh on demand. As a result, it is possible that the Company may not fully sustain the targeted operating margin improvements and other benefits realized from Foundation for Growth in future periods.  

Changes in interest rates could reduce demand for the Company’s products. InterestGlobal interest rates globally remainhave recently been at historically low levels.  In some international markets, the Company has recently seen these rates rise to some degree and it is expected that global rates will continue to increase, potentially quickly in the U.S., as the economy continues to improve.or near historic lows.  Rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of the Company’s customers, either or both of which could negatively affect customer demand for the Company’s products and customers’ ability to repay obligations to the Company.  An increase in interest rates could also make it more difficult for customers to cost-effectively fund the purchase of new equipment, which could adversely affect the Company’s sales.

The Company’s consolidated financial results are reported in U.S. dollars while certain assets and other reported items are denominated in the currencies of other countries, creating currency translation risk. The reporting currency for the Company’s consolidated financial statements is the U.S. dollar.  Certain of the Company’s assets,

14

liabilities, expenses and revenues are denominated in other countries’ currencies.  Those assets, liabilities, expenses and revenues are translated into U.S. dollars at the applicable exchange rates to prepare the Company’s consolidated financial statements.  Therefore, increases or decreases in exchange rates between the U.S. dollar and those other currencies affect the value of those items as reflected in the Company’s consolidated financial statements.  Substantial fluctuations in the value of the U.S. dollar compared to other currencies could have a significant effect on the Company’s results. 

Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with its operations and could compromise the Company’s and its customers’ and suppliers’ information, exposing the Company to liability that could cause its business and reputation to suffer.  In the ordinary course of business, the Company relies upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business functions, including supply chain, manufacturing, distribution, invoicing and collection of payments.  The Company uses information technology systems to record, process and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements.  Additionally, the Company collects and stores sensitive data, including intellectual property, proprietary business information and the proprietary business information of customers and suppliers, as well as personally identifiable information of customers and employees, in data centers and on information technology networks.  The secure operation of these networks and the processing and maintenance of this information is critical to the Company’s business operations and strategy.  Despite security measures and business continuity plans, the Company’s information technology networks and infrastructure may be vulnerable to damage, disruptions or shutdowns due to, among other reasons, attacks by hackers or breaches due to employee error or malfeasance or other disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events.  The occurrence of any of these events could compromise the Company’s networks, and the information stored there could be accessed, publicly disclosed, lost or stolen.  Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations, and damage the Company’s reputation, which could adversely affect the Company’s business. 

ITEMITEM 1B — Unresolved Staff Comments

None. 

ITEMITEM 2 — Properties

The Company’s facilities are well-maintained, in good operating condition, and suitable for present purposes.  These facilities, together with both short-term and long-term planned capital expenditures, are expected to meet the Company’s manufacturing needs in the foreseeable future.  The Company does not anticipate any difficulty in retaining occupancy of any leased facilities, either by renewing leases prior to expiration or by replacing them with equivalent leased facilities.  The following are the Company’s significant properties.  

ITEMITEM 3 — Legal Proceedings

In the ordinary course of its business operations, the Company is involved, from time to time, in commercial litigation, product liability litigation, tort litigation, employment disputes, administrative proceedings, business disputes, and other legal proceedings.  No such current proceedings, individually or in the aggregate, are expected to have a material effect on the business or financial condition of the Company, other than the specific environmental remediation matters which are disclosed as part of Note 13,16, Commitments and Contingencies, to the Company’s consolidated financial statements.  Any revisions to the estimates accrued for environmental remediation could be material to the operating results of any fiscal quarter or fiscal year, however the Company does not expect such additional expenses would have a material adverse effect on its liquidity or financial condition.

For a summary of the Company’s infrastructure products litigation, see Note 13,16, Commitments and Contingencies, to the Company’s consolidated financial statements.

ITEMITEM 4 — Mine Safety Disclosures

Not applicable. 

16

PART II

ITEMITEM 5 — Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 

Holders

Lindsay Common Stock trades on the New York Stock Exchange, Inc. (“NYSE”) under the ticker symbol LNN.  As of October 9, 2017,16, 2020, there were approximately 167155 stockholders of record. 

Price Range of Common Stock

The following table sets forth for the periods indicated the range of the high and low stock prices and dividends paid per share: 

Purchases of Equity Securities by the Issuer and Affiliated Purchases

The Company’s Board of Directors authorized a share repurchase program of up to $250.0 million of common stock with no expiration date.  Under the program, shares may 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.  There were no shares repurchased during the twelve months ended August 31, 2017.  During the twelve months ended August 31, 2016, the Company repurchased 688,790 shares of common stock for an aggregate purchase price of $48.3 million.  During the twelve months ended August 31, 2015, the Company repurchased 1,198,089 shares of common stock for an aggregate purchase price of $96.9 million.2020, 2019, and 2018. The remaining amount available under the repurchase program was $63.7 million as of August 31, 2017.  

2020.  

Dividends

The Company paid a total of $12.5$13.6 million and $12.2$13.4 million in dividends during fiscal 20172020 and 2016,2019, respectively.  The Company currently expects that cash dividends comparable to those paid historically will continue to be paid in the future, although there can be no assurance as to the payment of future dividends as such payment depends on results of operations, financial condition, business prospects, capital requirements, contractual restrictions, any potential indebtedness the Company may incur, restrictions imposed by applicable law, tax considerations, and other factors that the Board of Directors deems relevant.  

17

Company Stock Performance

The following graph compares the cumulative five-year total return attained by stockholders on the Company’s Common Stock relative to the cumulative total returns of the S&P Small CapSmallCap 600 Index and the S&P Small CapSmallCap 600 Construction, Farm Machinery and Heavy Truck indexIndex for the five-year period ended August 31, 2017.2020.  An investment of $100 (with the reinvestment of all dividends) is assumed to have been made in the Company’s Common Stock and in each of the indexes on August 31, 20122014 and the graph shows its relative performance through August 31, 2017.2020.

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

18

ITEMITEM 6 — Selected Financial Data 

19

ITEMITEM 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations 

Concerning Forward‑Forward—Looking Statements

This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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 expectations for future Company performance.  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,” and similar expressions generally identify forward-looking statements.  For these statements throughout the Annual Report on Form 10-K, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  The entire sections entitled “Financial Overview and Outlook” and “Risk Factors” should be considered forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section contained in Item 1A.  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, as well as others not now anticipated.  The risks and uncertainties described herein 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.  

Company Overview

The Company manufactures and markets center pivot, lateral move, and hose reel irrigation systems.  The Company also produces and markets irrigation controls, chemical injection systems, and remote monitoring and controlirrigation scheduling systems.  These products are used by farmers to increase or stabilize crop production while conserving water, energy, and labor.  Through its acquisitions and third-party commercial arrangements, the Company has been able to enhance its capabilities in providing innovative, turn-key solutions to customers through the integration of its proprietary pump stations,designs, controls, and designs.pump stations.  The Company sells its irrigation products primarily to a world-wide independent dealer network, who resell to their customers, the farmers.  The Company’s primary production facilities are located in the United States.  The Company has smaller production and sales operations in Brazil, France, China, Turkey, and South Africa, as well as distribution and sales operations in the Netherlands, Australia, and New Zealand.  The Company also manufactures and markets, through distributors and direct sales to customers, various infrastructure products, including moveable barriers for traffic lane management, crash cushions, preformed reflective pavement tapes, and other road safety devices, through its production facilities in the United States and Italy, and has produced road safety products in irrigation manufacturing facilities in China and Brazil.  In addition, the Company’s infrastructure segment produces large diameter steel tubing, and railroad signals and structures, and provides outsourced manufacturing and production services for other companies. 

For the business overall, the global, long-term drivers of population growth, water conservation population growth, increasing importance of biofuels,and environmental sustainability, the need for increased food production, and the need for safer, more efficient transportation solutions remain positive.  Key factors which impact demand for the Company’s irrigation products include total worldwide agricultural crop production, the profitability of agricultural crop production, agricultural commodity prices, net farm income, availability of financing for farmers, governmental policies regarding the agricultural sector, water and energy conservation policies, the regularity of rainfall, regional climate conditions, and foreign currency exchange rates.  A key factor which impacts demand for the Company’s infrastructure products is the amount of spending authorized by governments to improve road and highway systems.  Much of the U.S. highway infrastructure market is driven by government spending programs.  For example, the U.S. government funds highway and road improvements through the Federal Highway Trust Fund Program.  This program provides funding to improve the nation’s roadway system.  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 first long-term national transportation spending bill inprojects. The FAST Act expired September 30, 2020 and a decade.one-year extension has been approved by Congress.  Matching funding from the various states may be required as a condition of federal funding. 

20

The Company continues to have an ongoing, structured, acquisition process that it expects to generate additional growth opportunities throughout the world in irrigation/water solutions.  Lindsayand add to its irrigation and infrastructure capabilities.  The Company is committed to achieving earnings growth by global market expansion, improvements in margins, and strategic acquisitions.  Since 2001,

COVID-19 Impact

In March 2020, the World Health Organization declared coronavirus (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 has utilized acquisitions and greenfield efforts to expand its product lines and add to its operations in France, Italy, Brazil, South Africa, the Netherlands, Australia, New Zealand, China, and Turkey.  The addition of those operations has allowedoperates.  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 strengthen its market positiondate. For the fiscal year ended August 31, 2020, the Company experienced shipment and project delays related to COVID-19 that impacted revenue by approximately $8.0 million. In addition, the Company incurred additional expenses related to premium pay for factory workers and new procedures to protect the health and well-being of employees.  These additional costs have been mostly offset by reductions in those regions.other expenses, such as employee travel and entertainment, resulting in a negligible impact on net earnings.

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; 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, 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 financial impact of COVID-19 on the Company’s business, results of operations, or cash flows cannot be reasonably estimated at this time.

New Accounting Standards Issued But Not Yet Adopted

See Note 2, New Accounting Pronouncements, to the Company’s consolidated financial statements for information regarding recently issued accounting pronouncements.

Critical Accounting Policies and Estimates 

In preparing the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), management must make a variety of decisions which impact the reported amounts and the related disclosures.  Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates.  In reaching such decisions, management applies judgment based on its understanding and analysis of the relevant facts and circumstances.  Certain of the Company’s accounting policies are critical, as these policies are most important to the presentation of the Company’s consolidated results of operations and financial condition.  They require the greatest use of judgments and estimates by management based on the Company’s historical experience and management’s knowledge and understanding of current facts and circumstances.  Management periodically re-evaluates and adjusts the estimates that are used as circumstances change.  Following areis the accounting policiespolicy management considers critical to the Company’s consolidated results of operations and financial condition: 

Revenue Recognition

The Company’s revenue recognition accounting policy is critical because it can significantly impact the Company’s consolidated results of operations and financial condition.  The Company’s basic criteria necessary for revenue recognition are: 1) evidence of a sales arrangement exists; 2) delivery of goods has occurred; 3) the sales price to the buyer is fixed or determinable; and 4) collectability is reasonably assured.  The Company recognizes revenue when these criteria have been met, and when title and risk of loss transfers to the customer.  The Company generally has no post-delivery obligations to its independent dealers other than standard warranties.  Revenues and gross profits on intercompany sales are eliminated in consolidation.  Revenues from the sale of the Company’s products are recognized based on the delivery terms in the sales contract.  If an arrangement involves multiple deliverables, revenues from the arrangement are allocated to the separate units of accounting based on their relative selling price.

The Company offers a subscription-based service for wireless management and recognizes subscription revenue on a straight-line basis over the contract term.  The Company leases certain infrastructure property held for lease to customers, such as moveable concrete barriers and Road Zipper Systems®.  Revenues for the lease of infrastructure property held for lease are recognized on a straight-line basis over the lease term.

The costs related to revenues are recognized in the same period in which the specific revenues are recorded.  Shipping and handling fees billed to customers are reported in revenue.  Shipping and handling costs incurred by the Company are included in cost of sales. Customer rebates, cash discounts, and other sales incentives are recorded as a reduction of revenues at the time of the original sale.  Estimates used in the recognition of operating revenues and cost of operating revenues include, but are not limited to, estimates for product warranties, product rebates, cash discounts, and fair value of separate units of accounting on multiple deliverables. 

Inventories

The Company’s accounting policy on inventories is critical because the valuation and costing of inventory is essential to the presentation of the Company’s consolidated results of operations and financial condition.  Inventories are stated at the lower of cost or market.  Cost is determined by the last‑in, first‑out (“LIFO”) method, the first-in, first-out (“FIFO”) method, or the weighted average cost method for inventory depending on the operations at each specific location.  At all locations, the Company reserves for obsolete, slow moving, and excess inventory by estimating the net realizable value based on the potential future use of such inventory. 

Environmental Remediation Liabilities

The Company’s accounting policy on environmental remediation is critical because it requires significant judgments and estimates by management, involves changing regulations and approaches to remediation plans, and any revisions could be material to the operating results of any fiscal quarter or fiscal year.  The Company is subject to an array of environmental laws and regulations relating to the protection of the environment.  In particular, the Company committed to remediate environmental contamination of the groundwater at, and land adjacent, to its Lindsay, Nebraska facility (the “site”) with the EPA.  The Company and its environmental consultants have developed a remedial alternative work plan, under which the Company continues to work with the EPA to define and implement steps to better contain and remediate the remaining contamination.  

Environmental remediation liabilities include costs directly associated with site investigation and clean up, such as materials, external contractor costs, and incremental internal costs directly related to the remedy.  Estimates used to

21

record environmental remediation liabilities are based on the Company’s best estimate of probable future costs based on site-specific facts and circumstances.  Estimates of the cost for the likely remedy are developed using internal resources or by third-party environmental engineers or other service providers.  The Company records the undiscounted  environmental remediation liabilities that represent the points in the range of estimates that are most probable, or the minimum amount when no amount within the range is a better estimate than any other amount.

During the second quarter of fiscal 2016, the Company completed its testing for a feasibility study which clarified the extent of contamination, including the identification of a source of contamination near the manufacturing building that was not part Portions of the area for which reserves were previously established.  The Company, together with its third-party environmental experts, participated inlong-term liability that are fixed and reliably determinable are discounted at a preliminary meeting with the EPA and the Nebraska Department of Environmental Quality (the “NDEQ”) during the third quarter of fiscal 2016 to review remediation alternatives and proposed plans for the site and submitted its remedial alternatives evaluation report to the EPA in August 2016.  The proposed remediation plan is preliminary and has not been approved by the EPA or the NDEQ. Based on guidance from third-party environmental experts and the preliminary discussions held with the EPA, the Company anticipates that a definitive plan will not be agreed upon until fiscal 2018 or later.

risk-free rate.

The Company accrues the anticipated cost of environmental remediation when the obligation is probable and can be reasonably estimated.  AlthoughWhile the plan has not formally been approved by the EPA, the Company has accrued reasonably estimablebelieves the current accrual is a good faith estimate of the long-term cost of remediation at this site; however, the estimate of costs associated withand their timing could change as a result of a number of factors, including (1) EPA input on the proposed remediation plan and any changes which they may subsequently require, (2) refinement of cost estimates and length of time required to complete remediation and post-remediation operations and maintenance, (3) effectiveness of the technology chosen in remediation of the site additional testing, environmental monitoring, and remediation couldas well as changes in technology that may be requiredavailable in the future, as partand (4) unforeseen circumstances existing at the site. As a result of these factors, the Company’s ongoing discussionsactual amount of costs incurred by the Company in connection with the EPA regardingremediation of contamination of its Lindsay, Nebraska site could exceed the development and implementation of the remedial action plans.amounts accrued for this expense at this time.  While any revisions could be material to the operating results of any fiscal quarter or fiscal year, the Company does not expect such additional expenses would have a material adverse effect on its liquidity or financial condition.  

Trade Receivables and Allowances 

Trade receivables are reported on the balance sheet, net of any doubtful accounts.  Losses are recognized when it is probable that an asset has been impaired and the amount of the loss can be reasonably estimated.  In estimating probable losses, the Company reviews specific accounts that are significant and past due, in bankruptcy, or otherwise identified at risk for potential credit loss.  Collectability of these specific accounts are assessed based on facts and circumstances of that customer, and an allowance for credit losses is established based on the probability of default.  In assessing the likelihood of collection of receivable, the Company considers, for example, the Company’s history of collections, the current status of discussions and repayment plans, collateral received, and other evidence and information regarding collection or default risk that is available in the market place.  The allowance for credit losses attributable to the remaining accounts is established using probabilities of default and an estimate of associated losses based upon the aging of receivable balances, collection experience, economic condition, and credit risk quality.  In evaluating the allowance expense as a percentage of sales, if the prior three-year average rate were to double, the result on the fiscal 2017 consolidated statement of operations would be additional expense of approximately $2.1 million.

As the Company’s international business has grown, the exposure to potential losses in international markets has also increased.  These exposures can be difficult to estimate, particularly in areas of political instability, or with governments with which the Company has limited experience, or where there is a lack of transparency as to the current credit condition of governmental units.  The Company’s allowance for all doubtful accounts related to outstanding receivables decreased to $7.4 million at August 31, 2017 from $8.3 million at August 31, 2016.  The Company’s evaluation of the adequacy of the allowance for credit losses is based on facts and circumstances available to the Company at the date the consolidated financial statements are issued, and considers any significant changes in circumstances occurring through the date that the financial statements are issued.

Valuation of Goodwill and Identifiable Intangible Assets 

The Company’s accounting policy on valuation of goodwill and identifiable intangible assets is critical because it requires significant judgments and estimates by management, and can significantly affect the Company’s consolidated results of operations and financial condition.  Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination.  Acquired intangible assets are recognized separately from goodwill.  Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually at August 31, and whenever triggering events or changes in circumstances indicate its carrying value may not be recoverable.  Assessment of the potential impairment of goodwill and identifiable intangible assets is an integral part of the Company’s normal ongoing review of operations.  Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best estimates at a particular point in time.  The dynamic economic environments in which the Company’s businesses operate and key economic and business assumptions related to projected selling prices, market growth, inflation rates, and operating expense ratios, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results.  Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized.

In fiscal 2017, in conjunction with the Company’s annual review for impairment, the Company performed a qualitative analysis of goodwill for each of the Company’s reporting units, which are the same as its operating segments, and did not identify any potential impairment. Also in fiscal 2017, the Company performed a qualitative analysis of other intangible assets not subject to amortization and concluded there were no indicators of impairment.

Financial Overview and Outlook

Operating revenues in fiscal 20172020 were $518.0$474.7 million, a slight7 percent increase compared to $516.4$444.1 million in the prior year.InfrastructureIrrigation segment revenues decreased 2 percent to $343.5 million and infrastructure segment revenues increased 542 percent to $99.9 million while irrigation segment revenues decreased 1 percent to $418.0$131.2 million.  Net earnings for fiscal 20172020 were $23.2$38.6 million or $2.17$3.56 per diluted share compared with $20.3$2.2 million or $1.85$0.20 per diluted share in the prior year.  

Prior year net earnings were reduced by after-tax costs of $11.6 million, or $1.07 per diluted share, related to the Company’s Foundation for Growth initiative and by after-tax costs of $1.8 million, or $0.17 per diluted share, related to a valuation adjustment for indirect tax credits in a foreign jurisdiction.

Foundation for Growth was a focused performance improvement initiative that includes setting strategic direction, defining priorities, and improving overall operating margin performance.  Pre-tax costs of $15.1 million in fiscal 2019 associated with the initiative were comprised of professional consulting fees, net loss on business divestitures, severance costs and plant closing costs.  These costs have been substantially recovered through improved operating income in fiscal 2020.

The global drivers for the Company’s irrigation revenuessegment are highly dependent uponpopulation growth and the attendant need for expanded food production and efficient water use. The need for irrigated agricultural crop production, which in turn, depends upon many factors, including the following primary drivers:

22

After a four year cyclical downturn in our U.S. irrigation business, indications are that the market has reached a level of stabilization.  Stable commodity prices and net farm income, recalibration of farm input costs and general economic optimism have all contributed to improved grower sentiment towards investment in irrigation equipment.  However, notable growth in demand for irrigation equipment is expected to remain constrained until there is more significant and sustained improvement in commodity prices and net farm income.  International 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.  

TheIn the infrastructure business has continuedsegment, demand for the Company’s transportation safety products continues to generatebe driven by population growth and profitability improvement in an environment of constrainedthe need for improved road safety, but is largely dependent on government spending.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,projects. The FAST Act expired September 30, 2020 and a one-year extension has been approved by Congress. In spite of government spending uncertainty, opportunities exist for market expansion in each of the first long-term national transportation spending bill in a decade.infrastructure product lines. In addition, the FHWAFederal Highway Administration has changed highway safety product certification requirements. The change has required additional research and development spending and could have an impact on the competitive positioning of the Company’s highway safety products.  In spite of 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. 

As of August 31, 2017,2020, the Company had an order backlog of $51.8$58.7 million compared with $50.7$55.4 million at August 31, 2016.2019.  Included in these backlogs are amounts of $6.3 million and $10.0 million, respectively, that are not expected to be fulfilled within the subsequent fiscal 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; therefore, it is generally not a good indication of the next quarter’s revenues.revenues to be realized in succeeding quarters.

23

The global drivers for the Company’s markets of population growth, expanded food production and 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 significantly less developed and demand is driven primarily by food security, water scarcity and population growth.

Results of Operations 

The following “Fiscal 20172020 Compared to Fiscal 2016” and the “Fiscal 2016 Compared to Fiscal 2015” sections present2019” section presents an analysis of the Company’s consolidated operating results displayed in the Consolidated Statements of Earnings and should be read together with the information in Note 16,17, Industry Segment Information, to the consolidated financial statements.A discussion regarding our financial condition and results of operations for fiscal 2019 compared to fiscal 2018 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended August 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on October 31, 2019, which is available free of charge on the SEC’s website at www.sec.gov and the Company’s website at www.lindsay.com under the tab “Investor Relations – SEC Filings.”

Fiscal 20172020 Compared to Fiscal 20162019

The following table provides highlights for fiscal 20172020 compared with fiscal 2016:

2019:

Revenues 

Operating revenues in fiscal 20172020 were $518.0$474.7 million, a slightan increase of 7 percent or $30.6 million, compared with $516.4to $444.1 million in fiscal 2016.2019.  Irrigation segment revenues decreased $8.0 million, or 2 percent, and infrastructure revenues increased $38.6 million, or 42 percent, compared to the prior fiscal year.  The increase is attributable to a $5.1 million increase in infrastructure segment revenues andwas due in part to the completion of a $3.6 million decreaselarge project in irrigation segment revenues.the U.K. of approximately $27.0 million.  The irrigation segment provided 8172 percent of Company revenue in fiscal 20172020 as compared to 8279 percent in fiscal 2016.2019.

U.S.North America irrigation revenues in fiscal 2017 of $242.62020 increased by $0.3 million, decreased $19.6to $219.0 million or 7 percent from $262.2$218.6 million in fiscal 2016.  The decrease in U.S. irrigation revenues resulted from a decline in irrigation system unit sales volume reflecting lower market demand as well as a decline in revenue from other irrigation product lines, including filtration and pump systems.2019.  The impact of lower irrigation system unit sales volumehigher revenue from engineering project services was partially offset by highera decrease of approximately $3.3 million attributable to a business divestiture completed in the first quarter of fiscal 2019.  Irrigation system unit volume and average selling prices from passing through higher raw material costs.  

in fiscal 2020 were comparable to levels experienced in fiscal 2019.

International irrigation revenues in fiscal 2017 of $175.4 million increased $16.02020 decreased by $8.3 million, or 106 percent, to $124.6 million from $159.4$132.9 million in fiscal 2016.  A notable recovery of market demand in Brazil and increased project activity in Africa and the Commonwealth of Independent States region were partially offset by lower revenues in other international markets. Changes2019.  Revenues decreased $8.6 million due to differences in foreign currency translation rates compared to the prior year resulted in an increase inyear.  Excluding the impact of foreign currency translation, international irrigation revenues increased $0.3 million, or less than one percent, compared to the prior year.  Increased sales in Brazil and certain other markets were offset by a lower level of approximately 3 percent for fiscal 2017.    project activity in developing markets.

24

Infrastructure segment revenues in fiscal 2017 of $99.9 million2020 increased $5.1by $38.6 million, or 542 percent, to $131.2 million from $94.8$92.6 million in fiscal 2016.2019.  The increase resulted primarily from higher Road Zipper System^® sales and lease revenue and higher sales of road safety products in international markets.  Sales of road safety products in the U.S. declined modestlyrevenues compared to the prior year.year, including approximately $27.0 million from a single project in the United Kingdom.

Gross Profit 

Gross profit was $145.0$152.5 million for fiscal 2017, a decrease2020, an increase of $3.6$37.9 million, or 233 percent, compared to $114.6 million in fiscal 2016.2019.  The decreaseincrease in gross profit resulted primarily from lower irrigation sales and a declinemore profitable margin mix from higher infrastructure revenues as well as from the results of margin improvement initiatives in both segments. In addition, gross margin to 28.0 percentprofit for fiscal 2017 from 28.8 percent2020 included a gain of $1.2 million on the sale of a building that had been held for sale.  Gross margin was 32.1% of sales for fiscal 2016.  Comparable year-to-year gross margin in the infrastructure segment was offset by lower gross margin in the irrigation segment.  Irrigation gross margin declined primarily due2020 compared to lower overhead cost absorption from lower domestic unit25.8% of sales volume and a higher mix of revenue from international markets which produce lower gross margins.

for fiscal 2019.

Operating Expenses

The Company’s operating expenses of $104.8$98.3 million for fiscal 20172020 decreased $9.4$10.2 million, or 9 percent, compared to fiscal 20162019 operating expenses of $114.2$108.5 million.  The reduction inFiscal 2019 operating expenses included costs of $15.1 million in connection with the current year is due to $13.0Company’s Foundation for Growth initiative and a $2.7 million of environmental remediation expensesvaluation adjustment for indirect tax credits in the prior yeara foreign jurisdiction that did not repeat in fiscal 2017, offset in part by higher product development and testing2020.  Excluding the impact of the non-repeating costs, and professional fees in the current year.   Operatingoperating expenses were 20.2 increased 2 percent of sales for fiscal 2017 compared to 22.1 percent of sales for fiscal 2016.  The Company’s operating income increasedthe prior year primarily due to $40.2 millionan increase in fiscal 2017 compared to $34.4 million during fiscal 2016.    Operating marginincentive compensation that was 7.8 percent for fiscal 2017 as compared to 6.7 percent for fiscal 2016. 

partially offset by reductions in other areas.

Income Taxes 

The Company recorded income tax expense of $12.5$10.2 million and $9.0 millionincome tax benefit of $65 thousand for fiscal 20172020 and fiscal 2016,2019, respectively. The effective tax rate for fiscal 2020 was 20.9 percent and reflected the earnings mix between the U.S. and foreign operations, the utilization of previously reserved net operating loss carryforwards and adjustments related to the accrual for uncertain tax positions. The income tax rate increased to 35.1 percent inbenefit for fiscal 2017 compared to 30.8 percent in fiscal 2016.  The increase in the annual effective income tax rate is2019 resulted primarily due tofrom the impact of differences between book and tax treatment of certain items and proportionately higher earnings from U.S. operationsa change in the current year witheffective state tax rates higher than in foreign jurisdictions.

rate on deferred tax assets and other discrete items.

Net Earnings 

Net earnings for fiscal 20172020 were $23.2$38.6 million, or $2.17$3.56 per diluted share, compared to $20.3$2.2 million, or $1.85$0.20 per diluted share, for fiscal 2016.2019.  

Fiscal 2016 Compared to Fiscal 2015

The following table provides highlights for fiscal 2016 compared with fiscal 2015: