Wisconsin, USA. The Company also manufactures and markets various infrastructure products, including moveable barriers for traffic lane management, crash cushions, preformed reflective pavement tapes and other road safety devices, through its wholly-owned subsidiaries BSI (located in Rio Vista, California) and Snoline (located in Milan, Italy). In addition, the Company's infrastructure segment produces large diameter steel tubing and railroad signaling structures, and provides outsourced manufacturing and production services for other companies.
Key factors which impact demand for the Company's irrigation products include agricultural commodity prices, crop yields, weather, environmental regulations, availability of financing and interest rates. Significantly lower crop prices, lower U.S. Department of Agriculture ("USDA") projected Net Farm income, and declining farmer sentiment created unfavorable market conditions for domestic irrigation equipment sales during fiscal 2009. International sales were primarily influenced by the same factors affecting the domestic market. 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 Program. This program provides funding to improve the nation's roadway system. Matching funding from the various states may be required as a condition of federal funding.
The Company will continue to focus on opportunities for growth both organically and through acquisitions. On January 24, 2008, the Company completed the acquisition of Watertronics. The acquisition reflects the execution of the Company's strategy to grow its irrigation business with additional proprietary irrigation products. On November 9, 2007, the Company completed the acquisition of certain assets of Traffic Maintenance Attenuators, Inc. and Albert W. Unrath, Inc. In addition, on August 28, 2009, the Company completed the acquisition of certain assets of GE Transportation Systems Global Signaling, LLC. The Company sees opportunities to create shareholder value through the acquisition of product line extensions that will enhance the Company's highway safety product offering, globally.
Since 2001, the Company has added the operations in Europe, South America, South Africa and China. The addition of those operations has allowed the Company to strengthen its market position in those regions, yet they remain relatively small in scale. As a result, none of the international operations has achieved the operating margin of the United States based irrigation operations. Recently Issued Accounting Pronouncements In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations ("SFAS No. 141R"). SFAS No. 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141R became effective for the Company for business combinations for which the acquisition date is on or after September 1, 2009.
In April 2008, the FASB issued FASB Staff Position No. SFAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP No. SFAS 142-3"). FSP No. FAS 142-3 requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for SFAS No. 142's, Goodwill and Other Intangible Assets, entity-specific factors. FSP No. SFAS 142-3 will be effective for the Company beginning in the first quarter of its fiscal year 2010. The Company does not expect this pronouncement to have a material impact on the Company's consolidated financial statements.
In April 2009, the FASB issued FSP SFAS No. 107-1 and Accounting Principles Board (APB) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments ("FSP SFAS 107-1 and APB 28-1"). This FSP extends the requirements of SFAS No. 107, Disclosures about Fair Value of Financial Instruments to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP SFAS 107-1 and APB 28-1 also amend APB Opinion No. 28, "Interim Financial Reporting," to require those disclosures in summarized financial information at interim reporting periods. FSP SFAS 107-1 and APB 28-1 became effective for the Company's fiscal year ended August 31, 2009. This pronouncement resulted in enhanced disclosures in the Company's reports, but did not have an impact on the Company's consolidated financial statements.
In April 2009, the FASB issued FSP SFAS No. 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, ("FSP SFAS 141R-1"). This FSP amends and clarifies SFAS No. 141R to require that an acquirer recognize at fair value, at the acquisition date, an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition date fair value of that asset or liability can be determined during the measurement period. If the acquisition date fair value of such an asset acquired or liability assumed cannot be determined, the acquirer should apply the provisions of SFAS No. 5,

Accounting for Contingencies, to determine whether the contingency should be recognized at the acquisition date or after it. FSP SFAS 141R-1 is effective for the Company for business combinations for which the acquisition date is on or after September 1, 2009. The Company will assess the effect of this pronouncement on future acquisitions by the Company as they occur.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS No. 165"). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 became effective for the Company for its fiscal year ended August 31, 2009. This pronouncement resulted in enhanced disclosures in the Company's reports, but did not have an impact on the Company's consolidated financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and Hierarchy of GAAP ("SFAS No. 168"). SFAS No. 168 replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles and establishes the FASB Accounting Standards CodificationTM as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements that the Company will issue for interim and annual periods ending after September 15, 2009. The adoption of this guidance will change the way the Company references various elements of GAAP when preparing the financial statement disclosures, but will not have an impact on the Company's consolidated financial statements.
In August 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-05, "Fair Value Measurements and Disclosures (Topic 820) - Measuring Liabilities at Fair Value" ("ASU 2009-05"). This ASU provides amendments for fair value measurements of liabilities. It provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more techniques. ASU 2009-05 also clarifies that when estimating a fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. ASU 2009-05 is effective for the first reporting period (including interim periods) beginning after issuance. This would be effective for the Company beginning in the second quarter of its fiscal year 2010. The Company is assessing the impact of ASU 2009-05 on its consolidated financial statements.
In October 2009, the FASB issued ASU No. 2009-13 ("ASU 2009-13"), which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is assessing the impact that the adoption of this standard will have on its consolidated financial statements. 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. There were no significant changes to the Company's critical accounting policies during fiscal 2009.
Following are the accounting policies management considers critical to the Company's consolidated results of operations and financial condition:
Inventories - Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for the Company's Lindsay, Nebraska inventory and two warehouses in Idaho and Texas. Cost is determined by the first-in, first-out (FIFO) method for inventory at the Company's Omaha, Nebraska warehouse, BSI, Watertronics, China and non-U.S. warehouse locations. Cost is determined by the weighted average cost method for inventory at the Company's other operating locations in Washington State, France, Brazil, Italy and South Africa. 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.

Note A to the consolidated financial statements provides a summary of the significant accounting policies followed in the preparation of the consolidated financial statements. Other footnotes describe various elements of the financial statements and the assumptions on which specific amounts were determined. While actual results could differ from those estimated at the time of the preparation of the consolidated financial statements, management is committed to preparing financial statements which incorporate accounting policies, assumptions, and estimates that promote the representational faithfulness, verifiability, neutrality, and transparency of the accounting information included in the consolidated financial statements.
Results of Operations
The following "Fiscal 2009 Compared to Fiscal 2008" and the "Fiscal 2008 Compared to Fiscal 2007" sections present an analysis of the Company's consolidated operating results displayed in the Consolidated Statements of Operations and should be read together with the industry segment information in Note R to the consolidated financial statements. Fiscal 2009 Compared to Fiscal 2008
The following table provides highlights for fiscal 2009 compared with fiscal 2008:

                                                   For the Years Ended        Percent
                                                       August 31,             Increase
    $ in thousands                                 2009          2008        (Decrease)
    Consolidated
    Operating revenues                          $ 336,228     $ 475,087         (29.2 )%
    Cost of operating revenues                  $ 255,597     $ 351,255         (27.2 )%
    Gross profit                                $  80,631     $ 123,832         (34.9 )%
    Gross margin                                     24.0 %        26.1 %
    Operating expenses (1)                      $  58,214     $  61,593          (5.5 )%
    Operating income                            $  22,417     $  62,239         (64.0 )%
    Operating margin                                  6.7 %        13.1 %
    Interest expense                            $  (2,030 )   $  (3,035 )       (33.1 )%
    Interest income                             $     934     $   1,735         (46.2 )%
    Other income (expense), net                 $    (782 )   $     172        (554.7 )%
    Income tax provision                        $   6,716     $  21,706         (69.1 )%
    Effective income tax rate                        32.7 %        35.5 %
    Net earnings                                $  13,823     $  39,405         (64.9 )%
    Irrigation Equipment Segment (See Note R)
    Operating revenues                          $ 255,507     $ 374,906         (31.8 )%
    Operating income (2)                        $  35,504     $  66,848         (46.9 )%
    Operating margin (2)                             13.9 %        17.8 %
    Infrastructure Products Segment
    Operating revenues                          $  80,721     $ 100,181         (19.4 )%
    Operating income (2)                        $     (36 )   $   9,624        (100.4 )%
    Operating margin (2)                              0.0 %         9.6 %

(1) Includes $13.1 million and $14.2 million of unallocated general and administrative expenses for fiscal 2009 and fiscal 2008, respectively.

(2) Excludes unallocated corporate general and administrative expenses. Beginning in fiscal 2009, segment-specific general & administrative expenses have been allocated to each of the Company's reporting segments. Prior year disclosures have been modified accordingly.

Revenues
Operating revenues for fiscal 2009 decreased by $138.9 million or 29% from fiscal 2008. This decrease was attributable to a 32% decrease in irrigation equipment revenues and a 19% decrease in infrastructure product revenues.
Domestic irrigation revenues decreased $81.1 million or 34% compared to fiscal 2008. The decline in domestic irrigation equipment revenues was mostly due to a decline in the number of systems shipped compared to fiscal 2008. The Company has generally not reduced prices for its irrigation equipment in order to maintain sales volume or market share. Near-record projected harvests have continued to keep commodity prices lower than last year.

Commodity prices for corn, soybeans, and wheat were lower when compared to the same time last year. USDA projections for 2009 Net Farm Income show a 38% decline when compared to 2008 estimates and 15% below the ten year average. Throughout the traditional selling season in fiscal 2009, and in the typically slower fourth quarter, farmers remained cautious about making investments in capital goods. International irrigation revenues decreased $38.3 million or 28% compared to fiscal 2008. Export shipments decreased to Australia, Central America, Mexico and the Mideast, but were partially offset by increased exports to China. The net decrease in export irrigation sales was driven by general economic conditions, lower commodity prices and funding availability in developing markets. Revenue from the Company's international irrigation business units in Brazil, South Africa, and France were also significantly lower as compared to fiscal 2008 for similar reasons. While global farmer sentiment regarding capital goods purchases was impacted by general economic conditions and lower commodity prices, the long-term market drivers remain positive. A growing world-wide population, the benefits of mechanized irrigation in expanding yields and improving water use efficiencies remain a very compelling proposition for farmers
Infrastructure products segment revenues decreased by $19.5 million or 19% compared to the prior fiscal year. The decrease in infrastructure revenues is primarily attributable to revenues decreasing approximately 32% and 21% in the Company's BSI and Diversified Manufacturing business units, respectively. The decrease in revenues for BSI was due to lower sales of moveable barrier projects compared to fiscal 2008. While BSI had anticipated significant revenues in 2009 from an order for a large road project in Mexico City, this project was delayed and is now expected to generate those revenues in fiscal 2010. Road infrastructure projects from Federal stimulus funds have been implemented, but it appears that those projects have had minimal incremental effect on demand as States have faced reduced tax revenues, resulting in curtailing other planned infrastructure projects. In addition, the early stimulus funds have been applied to "shovel ready" maintenance projects, versus more significant road widening or new road construction projects, which are more likely to use the Company's moveable barrier and crash cushion products. The decrease in revenues for the Diversified Manufacturing business unit was due to lower sales of tubing to manufacturers of grain handling equipment, also affected by farmers' sentiment regarding equipment purchases. Diversified Manufacturing revenues were also lower on shipments of railroad signaling structures sold to GE Transportation Systems. During the fourth quarter of fiscal 2009, the Company purchased this product line from GE Transportation Systems and is transitioning from contract manufacturing these products to direct sales to the railroads. As this change is fully implemented, the Company's management expects this to improve gross margins in the Diversified Manufacturing business unit. Gross Margin
Gross profit was $80.6 million for fiscal 2009 a decrease of $43.2 million compared to fiscal 2008. Gross margin was 24.0% for fiscal 2009 compared to 26.1% for the prior fiscal year. Manufacturing efficiency decreased on irrigation products during fiscal 2009 resulting from significantly reduced factory volume. Gross margin on infrastructure products decreased primarily as a result of unfavorable product mix, manufacturing variances on lower volume, and higher steel costs.
Operating Expenses
The Company's operating expenses of $58.2 million for fiscal 2009 decreased $3.4 million as compared to fiscal 2008. The decrease in operating expenses for fiscal 2009 was primarily attributable to lower personnel related costs. Interest, Other Income (Expense), net
Interest expense for fiscal 2009 of $2.0 million decreased by $1.0 million compared to the prior fiscal year. The decrease in interest expense is due to principal reductions on the Company's two outstanding term notes. In addition, the Company had an outstanding balance of $15.0 million on its revolving line of credit for a portion of fiscal 2008 compared to having no outstanding balances during fiscal 2009.
Interest income for fiscal 2009 decreased by $0.8 million compared to fiscal 2008. The decrease in interest income is primarily due to earning a lower interest rate on investments of the Company's cash balances.
Other expense, net during fiscal 2009 increased by $1.0 million compared with the same prior year period. This primarily resulted from foreign currency transaction losses realized from the volatility of exchange rates during fiscal 2009.
Taxes
The Company recorded income tax expense of $6.7 million and $21.7 million for fiscal 2009 and 2008, respectively. The effective tax rate was 32.7% and 35.5% for fiscal 2009 and 2008, respectively. The effective tax rate for the fiscal year 2009 was lower than the U.S. statutory tax rate primarily due to three items that reduced income tax expense for the period. The first item was a benefit of $0.1 million due to the reversal of previously

recorded liabilities for uncertain tax positions relating to taxation of the Company's Brazilian subsidiary. This reversal was recorded due to the expiration of the statute of limitations without any actual tax liability being assessed. The second item was a benefit of $0.4 million resulting from finalizing the fiscal 2008 income tax return calculation that was less than the estimated fiscal 2008 income tax provision. The third item was a benefit of $0.4 million related to the section 199 domestic production activities deduction. Net Earnings
Net earnings were $13.8 million or $1.11 per diluted share for fiscal 2009 compared with $39.4 million or $3.20 per diluted share for the same prior year period. The Company's operating income fell to $22.4 million for fiscal 2009 compared to $62.2 million for fiscal 2008 due primarily to a decline in revenues and in gross margins, which were partially offset by lower operating costs. Fiscal 2008 Compared to Fiscal 2007
The following table provides highlights for fiscal 2008 compared with fiscal 2007:

                                                  For the Years Ended         Percent
                                                      August 31,             Increase
   $ in thousands                                 2008          2007        (Decrease)
   Consolidated
   Operating revenues                          $ 475,087     $ 281,857           68.6 %
   Cost of operating revenues                  $ 351,255     $ 212,125           65.6 %
   Gross profit                                $ 123,832     $  69,732           77.6 %
   Gross margin                                     26.1 %        24.7 %
   Operating expenses (1)                      $  61,593     $  45,973           34.0 %
   Operating income                            $  62,239     $  23,759          162.0 %
   Operating margin                                 13.1 %         8.4 %
   Interest expense                            $  (3,035 )   $  (2,399 )         26.5 %
   Interest income                             $   1,735     $   2,162          (19.8 %)
   Other income (expense), net                 $     172     $     611          (71.8 %)
   Income tax provision                        $  21,706     $   8,513          155.0 %
   Effective income tax rate                        35.5 %        35.3 %
   Net earnings                                $  39,405     $  15,620          152.3 %
   Irrigation Equipment Segment (See Note R)
   Operating revenues                          $ 374,906     $ 216,480           73.2 %
   Operating income (2)                        $  66,848     $  26,283          154.3 %
   Operating margin (2)                             17.8 %        12.1 %
   Infrastructure Products Segment
   Operating revenues                          $ 100,181     $  65,377           53.2 %
   Operating income (2)                        $   9,624     $   8,079           19.1 %
   Operating margin (2)                              9.6 %        12.4 %

(1) Includes $14.2 million and $10.6 million of unallocated general and administrative expenses for fiscal 2008 and fiscal 2007, respectively.

(2) Excludes unallocated corporate general and administrative expenses. Beginning in fiscal 2009, segment-specific general & administrative expenses have been allocated to each of the Company's reporting segments. Prior year disclosures have been modified accordingly.

Revenues
Operating revenues for fiscal 2008 increased by $193.2 million or 69% from fiscal 2007. This increase was attributable to a 73% increase in irrigation equipment revenues and a 53% increase in infrastructure product revenues. . . .