UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 Form 10-Q (Mark
One) x QUARTERLY REPORT
  PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934 For the quarterly
period ended September 30, 2005 OR o TRANSITION REPORT
  PURSUANT TO SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934 For the transition
period from __________ to __________ Commission file
number 000-50858 BUCYRUS INTERNATIONAL,
  INC.(Exact Name of
  Registrant as Specified in its Charter)  DELAWARE
  
  39-0188050(State of Incorporation)
  
  (I.R.S. EmployerIdentification No.)  P. O. BOX 5001100 MILWAUKEE AVENUESOUTH MILWAUKEE,
  WISCONSIN53172(Address of Principal
  Executive Offices)(Zip Code)(414) 768-4000(Registrants Telephone
  Number, Including Area Code)  Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.     Yes x     No o

Indicate
by check mark whether the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Securities Exchange Act of
1934).     Yes o     No x

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934).
     Yes o     No x

Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date.

Class
  Outstanding November 4,
  2005Class A Common Stock,
  $.01 par value
  20,496,401BUCYRUS
INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

Page No.PART I.
  FINANCIAL INFORMATION:Item 1 - Financial Statements
  (Unaudited)Consolidated Condensed Statements of
  Operations - Quarters and nine months ended September 30, 2005 and 2004
  
  4Consolidated Condensed Statements of
  Comprehensive Income (Loss) - Quarters and nine months ended September 30,
  2005 and 2004
  
  5Consolidated Condensed Balance Sheets
  - September 30, 2005 and December 31, 2004
  
  6-7Consolidated Condensed Statements of
  Cash Flows - Nine months ended September 30, 2005 and 2004
  
  8Notes to Consolidated Condensed
  Financial Statements
  
  9-15Item 2 - Managements Discussion and
  Analysis of Financial Condition and Results of Operations
  
  16-24Item 3 - Quantitative and Qualitative
  Disclosures About Market Risk
  
  25Item 4 - Controls and Procedures
  
  26Forward-Looking Statements
  
  27PART II.
  OTHER INFORMATION:Item 1 - Legal Proceedings
  
  28Item 2 - Unregistered Sales of Equity
  Securities and Use of Proceeds
  
  28Item 3 - Defaults Upon Senior
  Securities
  
  28Item 4 - Submission of Matters to a
  Vote of Security Holders
  
  28Item 5 - Other Information
  
  28Item 6 - Exhibits
  
  28Signature Page
  
  29PART IFINANCIAL INFORMATION

BUCYRUS
INTERNATIONAL, INC. AND SUBSIDIARIESITEM 1 - FINANCIAL STATEMENTSCONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(Dollars in Thousands, Except Per Share Amounts)

Quarters
  Ended September 30,
  
  Nine
  Months Ended September 30,2005
  
  2004
  
  2005
  
  2004Sales
  
  $
  157,358
  
  $
  111,509
  
  $
  402,916
  
  $
  325,604Cost of products
  sold
  
  
  120,930
  
  
  87,194
  
  
  306,468
  
  
  256,845Gross
profit
  
  
  36,428
  
  
  24,315
  
  
  96,448
  
  
  68,759Selling, general
  and administrative expenses
  
  
  13,931
  
  
  13,237
  
  
  38,377
  
  
  41,499Research and
  development expenses
  
  
  1,583
  
  
  1,270
  
  
  4,393
  
  
  3,904Amortization of
  intangible assets
  
  
  449
  
  
  412
  
  
  1,352
  
  
  1,235Operating
  earnings
  
  
  20,465
  
  
  9,396
  
  
  52,326
  
  
  22,121Interest expense
  
  
  1,278
  
  
  2,054
  
  
  3,640
  
  
  10,345Other expense 
  net
  
  
  123
  
  
  149
  
  
  238
  
  
  867Loss on
  extinguishment of debt
  
  
  
  
  
  7,316
  
  
  
  
  
  7,316Earnings (loss)
  before income taxes
  
  
  19,064
  
  
  (123
  )
  
  48,448
  
  
  3,593Income tax
  expense
  
  
  6,287
  
  
  885
  
  
  16,322
  
  
  3,987Net earnings
  (loss)
  
  $
  12,777
  
  $
  (1,008
  )
  $
  32,126
  
  $
  (394
  )Net earnings
  (loss) per share data:Basic:Net earnings
  (loss) per share
  
  $
  .63
  
  $
  (.06
  )
  $
  1.59
  
  $
  (.03
  )Weighted
average
  shares
  
  
  20,434,239
  
  
  17,671,362
  
  
  20,266,788
  
  
  13,943,044Diluted:Net earnings
  (loss) per share
  
  $
  .61
  
  $
  (.06
  )
  $
  1.54
  
  $
  (.03
  )Weighted
average
  shares
  
  
  20,852,568
  
  
  17,671,362
  
  
  20,822,104
  
  
  13,943,044See notes to
consolidated condensed financial statements.

  4

BUCYRUS
INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL
STATEMENTSCONSOLIDATED CONDENSED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in Thousands)

Quarters
  Ended September 30,
  
  Nine
  Months Ended September 30,2005
  
  2004
  
  2005
  
  2004Net earnings (loss)
  
  $
  12,777
  
  $
  (1,008
  )
  $
  32,126
  
  $
  (394
  )Other
  comprehensive (loss)-Foreign currency translation adjustments
  
  
  3,632
  
  
  1,705
  
  
  640
  
  
  (2,338
  )Comprehensive income (loss)
  
  $
  16,409
  
  $
  697
  
  $
  32,766
  
  $
  (2,732
  )See notes to consolidated condensed financial statements

  5

BUCYRUS
INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTSCONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(Dollars in Thousands,
Except Per Share Amounts)

September 30,
  
  December 31,2005
  
  2004ASSETSCURRENT ASSETS:Cash and
cash
  equivalents
  
  $
  7,270
  
  $
  20,617Receivables

  net
  
  
  131,182
  
  
  90,802Inventories
  
  
  150,069
  
  
  110,815Deferred
income
  taxes
  
  
  9,331
  
  
  9,607Prepaid
expenses
  and other
  
  
  5,759
  
  
  7,205Total
Current
  Assets
  
  
  303,611
  
  
  239,046OTHER ASSETS:Goodwill
  
  
  47,306
  
  
  47,306Intangible
  assets  net
  
  
  35,509
  
  
  36,935Deferred
income
  taxes
  
  
  6,575
  
  
  7,651Other
assets
  
  
  8,219
  
  
  8,19197,609
  
  
  100,083PROPERTY, PLANT AND EQUIPMENT:Cost
  
  
  133,533
  
  
  120,724Less
accumulated
  depreciation
  
  
  (75,037
  )
  
  (67,044
  )58,496
  
  
  53,680$
  459,716
  
  $
  392,8096

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES 
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Continued) 
(Dollars in Thousands, Except Per Share Amounts)

September
  30,
  
  December
  31,2005
  
  2004LIABILITIES
AND COMMON SHAREHOLDERS INVESTMENTCURRENT
  LIABILITIES:Accounts
payable and accrued expenses
  
  $
  93,544
  
  $
  59,446Liabilities
to customers on uncompleted
  contracts and warranties
  
  
  20,328
  
  
  8,221Income
taxes
  
  
  6,028
  
  
  2,880Current
maturities of long-term debt and
  other short-term obligations
  
  
  1,792
  
  
  6,342Total
Current Liabilities
  
  
  121,692
  
  
  76,889LONG-TERM LIABILITIES:Postretirement benefits
  
  
  14,134
  
  
  13,700Pension and
other
  
  
  32,205
  
  
  38,24246,339
  
  
  51,942LONG-TERM
  DEBT, less current maturities
  
  
  88,227
  
  
  96,910COMMON
  SHAREHOLDERS INVESTMENT:Common
stock  par value $.01per share,
  authorized 41,000,000 shares, issued 20,568,801 shares and 20,095,977 shares,
  respectively
  
  
  206
  
  
  201Additional
paid-in capital
  
  
  296,907
  
  
  289,930Unearned
restricted stock compensation
  
  
  (536
  )
  
  (671
  )Treasury
stock  72,400 shares, at cost
  
  
  (851
  )
  
  (851
  )Accumulated
deficit
  
  
  (71,217
  )
  
  (99,850
  )Accumulated
other comprehensive loss
  
  
  (21,051
  )
  
  (21,691
  )203,458
  
  
  167,068$
  459,716
  
  $
  392,809See notes to consolidated condensed financial
statements.

  7

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES 
ITEM 1 - FINANCIAL STATEMENTS 
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) 
(Dollars in Thousands)

Nine Months Ended September 30,2005
  
  2004Net Cash Provided By
Operating Activities
  
  $
  13,419
  
  $
  5,992Cash Flows From Investing
ActivitiesPurchases of property, plant
and equipment
  
  
  (13,552
  )
  
  (3,804
  )Proceeds from sale of
property, plant and
  equipment
  
  
  263
  
  
  90Payment for purchase of
company
  
  
  (85
  )
  
  (559
  )Other
  
  
  11
  
  
  54Net cash used in investing
activities
  
  
  (13,363
  )
  
  (4,219
  )Cash Flows From Financing
ActivitiesNet borrowings from
(repayment of)
  revolving credit facility
  
  
  84,675
  
  
  (37,420
  )Proceeds from (repayment of)
senior secured
  term loan
  
  
  (98,750
  )
  
  100,000Retirement of Senior
Notes
  
  
  
  
  
  (155,560
  )Payment of deferred interest
on Senior
  Notes owned by Bucyrus Holdings, LLC
  
  
  
  
  
  (23,660
  )Net increase in other
long-term debt and
  bank borrowings
  
  
  843
  
  
  516Payment of financing
expenses
  
  
  (589
  )
  
  (4,753
  )Net proceeds from issuance
of common stock
  
  
  3,884
  
  
  129,821Dividends paid
  
  
  (3,489
  )
  
  Net cash provided by (used
in) financing
  activities
  
  
  (13,426
  )
  
  8,944Effect of exchange rate
changes on cash
  
  
  23
  
  
  (74
  )Net increase (decrease) in
cash and cash
  equivalents
  
  
  (13,347
  )
  
  10,643Cash and cash equivalents at
beginning of
  period
  
  
  20,617
  
  
  6,075Cash and cash equivalents at
end of period
  
  $
  7,270
  
  $
  16,718Supplemental Disclosures of
Cash Flow
Information2005
  
  2004Cash paid during the period
for:Interest
  
  $
  3,910
  
  $
  38,574Income
taxes - net of refunds
  
  
  9,086
  
  
  5,518See notes to consolidated condensed financial statements.

  8

BUCYRUS
INTERNATIONAL, INC. AND SUBSIDIARIESITEM 1 - FINANCIAL
STATEMENTSNOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

1.
  In the opinion of Bucyrus
  International, Inc. (the Company), the consolidated condensed financial
  statements contain all adjustments (consisting only of normal recurring
  accruals) necessary to present fairly the financial results for the interim
  periods. Certain items are included in these statements based on estimates
  for the entire year. Actual results in future periods may differ from the
  estimates. The Companys operations are classified as one operating segment.2.
  Certain notes and other
  information have been condensed or omitted from these interim consolidated
  condensed financial statements. Therefore, these statements should be read in
  conjunction with the Companys 2004 Annual Report to Shareholders and Annual
  Report on Form 10-K filed with the Securities and Exchange Commission on
  March 21, 2005.3.
  Inventories consist of
  the following:September
  30,
  
  December
  31,2005
  
  2004(Dollars in Thousands)Raw
materials
  and parts
  
  $
  36,323
  
  $
  21,583Work in
process
  
  
  24,806
  
  
  7,633Finished
  products (primarily replacement parts)
  
  
  88,940
  
  
  81,599$
  150,069
  
  $
  110,8159

4.
  The following is a reconciliation of the numerators
  and the denominators of the basic and diluted net earnings per share of
  common stock calculations for the quarters and nine months ended September
  30, 2005 and 2004:Quarters
  Ended
  September 30,
  
  Nine
  Months Ended
  September 30,2005
  
  2004
  
  2005
  
  2004(Dollars
  in Thousands, Except Per Share Amounts)Net
earnings
  (loss)
  
  $
  12,777
  
  $
  (1,008
  )
  $
  32,126
  
  $
  (394
  )Weighted
average
  shares outstanding
  
  
  20,434,239
  
  
  17,671,362
  
  
  20,266,788
  
  
  13,943,044Basic net
  earnings (loss) per share
  
  $
  .63
  
  $
  (.06
  )
  $
  1.59
  
  $
  (.03
  )Weighted
average
  shares outstanding
  
  
  20,434,239
  
  
  17,671,362
  
  
  20,266,788
  
  
  13,943,044Effect of
  dilutive stock options and restricted stock
  
  
  418,329
  
  
  
  
  
  555,316
  
  
  Weighted
average
  shares outstanding - diluted
  
  
  20,852,568
  
  
  17,671,362
  
  
  20,822,104
  
  
  13,943,044Diluted
net
  earnings (loss) per share
  
  $
  .61
  
  $
  (.06
  )
  $
  1.54
  
  $
  (.03
  )The weighted average shares outstanding used to
  compute the diluted loss per share for the quarter and nine months ended
  September 30, 2004 exclude outstanding options to purchase 862,400 shares of
  the Companys common stock as of September 30, 2004. The options were
  excluded because their inclusion would have been antidilutive.10

5.
  The Company accounts for stockbased compensation
  arrangements in accordance with Accounting Principles Board Opinion No. 25,
  Accounting for Stock Issued to Employees, as allowed by Statement of
  Financial Accounting Standards No. 123, Accounting for Stock-Based
  Compensation (SFAS 123).  The
  following table illustrates the effect on net earnings and net earnings per
  share as if the fair value-based method provided by SFAS 123 had been
  applied for all outstanding and unvested awards in each period:Quarters
  Ended
  
  Nine
  Months EndedSeptember
  30,
  
  September
  30,2005
  
  2004
  
  2005
  
  2004(Dollars in Thousands, Except Per Share Amounts)Reported net
  earnings (loss)
  
  $
  12,777
  
  $
  (1,008
  )
  $
  32,126
  
  $
  (394
  )Add: Stock-based
  employee compensation expense recorded, net of related tax effects
  
  
  
  
  
  2,590
  
  
  
  
  
  10,031Deduct: Total
  stock-based employee compensation expense determined under fair value based
  method, net of related tax effects
  
  
  
  
  
  (567
  )
  
  
  
  
  (575
  )Pro forma net
  earnings
  
  $
  12,777
  
  $
  1,015
  
  $
  32,126
  
  $
  9,062Net earnings per
  share of common stock:As
reportedBasic
  
  $
  .63
  
  $
  (.06
  )
  $
  1.59
  
  $
  (.03
  )Diluted
  
  
  .61
  
  
  (.06
  )
  
  1.54
  
  
  (.03
  )Pro
formaBasic
  
  
  .63
  
  
  .06
  
  
  1.59
  
  
  .65Diluted
  
  
  .61
  
  
  .06
  
  
  1.54
  
  
  .62Options to purchase 101,548 and 471,568 shares of
  the Companys Class A common stock were exercised during the quarter and nine
  months ended September 30, 2005, respectively.In December 2004, the FASB issued Statement No. 123
  (revised 2004), Share-Based Payment (SFAS 123R).  SFAS 123R eliminates the alternative of
  accounting for share-based compensation under Accounting Principles Board
  Opinion No. 25.  SFAS 123R generally
  requires the recognition of the cost of employee services for share-based
  compensation based on the grant date fair value of the equity or liability
  instruments issued.  The effective
  date for the Company is the beginning of fiscal year 2006.  The Company is currently assessing the
  impact of the adoption of SFAS 123R but does not believe the impact of the
  adoption of this statement will be material to the Companys financial
  statements.11

6.
  Intangible assets consist of the following:September
  30, 2005
  
  December
  31, 2004Gross
  Carrying
  Amount
  
  Accumulated
  Amortization
  
  Gross
  Carrying
  Amount
  
  
  Accumulated
  Amortization(Dollars
  in Thousands)Amortized
  intangible assets:Engineering
  drawings
  
  $
  25,500
  
  $
  (10,224
  )
  $
  25,500
  
  $
  (9,268
  )Bill of
material
  listings
  
  
  2,856
  
  
  (1,145
  )
  
  2,856
  
  
  (1,038
  )Software
  
  
  2,288
  
  
  (1,835
  )
  
  2,288
  
  
  (1,663
  )Other
  
  
  769
  
  
  (269
  )
  
  864
  
  
  (173
  )$
  31,413
  
  $
  (13,473
  )
  $
  31,508
  
  $
  (12,142
  )Unamortized
  intangible assets:Trademarks/Trade
  names
  
  $
  12,436
  
  
  
  
  $
  12,436Intangible
  pension asset
  
  
  5,133
  
  
  
  
  
  5,133$
  17,569
  
  
  
  
  $
  17,569The aggregate intangible amortization expense for
  the quarter and nine months ended September 30, 2005 was $.4 million and $1.4
  million, respectively.  The aggregate
  intangible amortization expense for the quarter and nine months ended
  September 30, 2004 was $.4 million and $1.2 million, respectively.The estimated future amortization expense of
  intangible assets as of September 30, 2005 is as follows:(Dollars
  in Thousands)2005 (remaining three months)
  
  
  $
  4502006
  
  
  
  1,8002007
  
  
  
  1,7392008
  
  
  
  1,5722009
  
  
  
  1,4182010
  
  
  
  1,418Future
  
  
  
  9,543$
  17,94012

7.
  EnvironmentalThe Companys operations and properties are subject
  to a broad range of federal, state, local and foreign laws and regulations
  relating to environmental matters, including laws and regulations governing
  discharges into the air and water, the handling and disposal of solid and
  hazardous substances and wastes, and the remediation of contamination
  associated with releases of hazardous substances at the Companys facilities
  and at off-site disposal locations.
  These laws are complex, change frequently and have tended to become
  more stringent over time.  Future
  events, such as compliance with more stringent laws or regulations, more
  vigorous enforcement policies of regulatory agencies or stricter or different
  interpretations of existing laws, could require additional expenditures by
  the Company, which may be material.Environmental problems have not interfered in any
  material respect with the Companys manufacturing operations to date.  The Company believes that its compliance
  with statutory requirements respecting environmental quality will not
  materially affect its capital expenditures, earnings or competitive
  position.  The Company has an ongoing
  program to address any potential environmental problems.Product WarrantyThe Company recognizes the cost associated with its
  warranty policies on its products as revenue is recognized.  The amount recognized is based on
  historical experience.  The following
  is a reconciliation of the changes in accrued warranty costs for the nine
  months ended September 30, 2005 and 2004:Nine
  Months Ended September 30,2005
  
  2004(Dollars
  in Thousands)Balance at January 1
  
  $
  5,452
  
  $
  4,311Provision
  
  
  2,137
  
  
  2,809Charges
  
  
  (1,219
  )
  
  (1,772
  )Balance at September 30
  
  $
  6,370
  
  $
  5,348Product LiabilityThe Company is normally subject to numerous product
  liability claims, many of which relate to products no longer manufactured by
  the Company or its subsidiaries, and other claims arising in the ordinary
  course of business.  The Company has
  insurance covering most of these claims, subject to varying deductibles up to
  $3.0 million, and has various limits of liability depending on the insurance
  policy year in question.  It is the
  view of management that the final resolution of these claims and other
  similar claims which are likely to arise in the future will not individually
  or in the aggregate have a material effect on the Companys financial
  position, results of operations or cash flows, although no assurance to that
  effect can be given.13

Asbestos LiabilityThe Company has been named as a co-defendant in
  approximately 308 personal injury liability cases alleging damages due to
  exposure to asbestos and other substances, involving approximately 1,498
  plaintiffs.  The cases are pending in
  courts in nine states.  In all of
  these cases, insurance carriers have accepted or are expected to accept
  defense.  These cases are in various
  pre-trial stages.  The Company does
  not believe that costs associated with these matters will have a material
  effect on its financial position, results of operations or cash flows,
  although no assurance to that effect can be given.Other LitigationA wholly owned subsidiary of the Company is a defendant
  in a suit pending in the United States District Court for the Western
  District of Pennsylvania, brought on June 15, 2002, relating to an
  incident in which a dragline operated by an employee of a Company subsidiary
  tipped over. The owner of the dragline has sued an unaffiliated third party
  on a negligence theory for property damages and business interruption losses
  in a range of approximately $25.0 million to $27.0 million. The unrelated
  third party has brought a third-party action against the Companys
  subsidiary. The Companys insurance carriers are defending the claim, but
  have not conceded that the relevant policies cover the claim. At this time
  discovery is ongoing and it is not possible to evaluate the outcome of the
  claim nor the range of potential loss, if any.A wholly-owned Australian subsidiary of the Company
  is a defendant in a suit pending in the Supreme Court of Queensland in
  Australia, brought on May 5, 2002, relating to a contractual claim.  The plaintiff, pursuant to a contract with
  the Companys subsidiary, agreed to erect a dragline sold by the Company to a
  customer for use at its mine site.
  The plaintiff asserts various contractual claims related to breach of
  contract damages and other remedies for approximately AUS $3.6 million related
  to its claim that it is owed amounts for services rendered under the
  contract.  The Companys subsidiary
  has asserted counterclaims against the plaintiff in connection with certain
  aspects of the work performed.  This
  matter is anticipated to go to trial in late 2006.  The Company has established a reserve for its estimate of the
  resolution of this matter.8.
  Statement of Financial Accounting Standards No. 130,
  Reporting Comprehensive Income, requires the reporting of comprehensive
  income (loss) in addition to net earnings from operations.  Comprehensive income (loss) is a more
  inclusive financial reporting method that includes disclosure of financial
  information that historically has not been recognized in the calculation of
  net earnings.  The Company reports
  comprehensive income (loss) and accumulated other comprehensive income (loss)
  which includes net earnings, foreign currency translation adjustments and
  minimum pension liability adjustments.
  Information on accumulated other comprehensive loss is as follows:Cumulative
  Translation
  Adjustments
  
  Minimum
  Pension
  Liability
  Adjustments
  
  Accumulated
  Other
  Comprehensive  
  Loss(Dollars
  in Thousands)Balance at
  December 31, 2004
  
  $
  (5,307
  )
  $
  (16,384
  )
  $
  (21,691
  )Changes  Nine
  months ended  September 30, 2005
  
  
  640
  
  
  
  
  
  640Balance at
  September 30, 2005
  
  $
  (4,667
  )
  $
  (16,384
  )
  $
  (21,051
  )14

9.
  The Company
  has several pension and retirement plans covering substantially all of its
  employees in the United States. The Company also provides certain health care
  benefits to age 65 and life insurance benefits for certain eligible retired
  United States employees.The
  components of net periodic pension cost consisted of the following:Quarters
  Ended
  September 30,
  
  Nine
  Months Ended
  September 30,2005
  
  2004
  
  2005
  
  2004(Dollars
  in Thousands)Service cost
  
  $
  506
  
  $
  420
  
  $
  1,610
  
  $
  1,307Interest
  cost
  
  
  1,350
  
  
  1,269
  
  
  3,970
  
  
  3,911Expected
  return on plan assets
  
  
  (1,675
  )
  
  (1,211
  )
  
  (3,907
  )
  
  (3,733
  )Amortization
  of prior service cost
  
  
  235
  
  
  51
  
  
  339
  
  
  153Amortization
  of actuarial loss
  
  
  377
  
  
  372
  
  
  1,181
  
  
  944Net cost
  
  $
  793
  
  $
  901
  
  $
  3,193
  
  $
  2,582The
  components of other net periodic postretirement benefits cost (health care
  and life insurance) consisted of the following:Quarters
  Ended
  September 30,
  
  Nine
  Months Ended
  September 30,2005
  
  2004
  
  2005
  
  2004(Dollars
  in Thousands)Service cost
  
  $
  276
  
  $
  193
  
  $
  696
  
  $
  578Interest
  cost
  
  
  180
  
  
  285
  
  
  802
  
  
  856Amortization
  of prior service cost
  
  
  (67
  )
  
  (56
  )
  
  (187
  )
  
  (166
  )Amortization
  of actuarial loss
  
  
  52
  
  
  84
  
  
  234
  
  
  252Net cost
  
  $
  441
  
  $
  506
  
  $
  1,545
  
  $
  1,520During the
  first nine months of 2005, the Company contributed approximately $2.0 million
  to its pension plans and $1.0 million for the payment of benefits from its
  postretirement benefit plan. The Company presently anticipates contributing
  an additional $.5 million to its pension plans and $.4 million for the
  payment of benefits from its postretirement benefit plan during the remainder
  of 2005.10.
  The American
  Jobs Creation Act of 2004, which was signed into law on October 24, 2004,
  includes a provision for a one-time dividends received deduction of 85% of
  certain qualified cash dividends that are received from controlled foreign
  corporations before December 31, 2005. The Company is in the process of
  evaluating the repatriation provisions, but has not yet determined the amount
  or range of possible amounts to be repatriated, or the tax effect of such
  repatriation, and expects to complete its evaluation by the end of 2005.15

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES 
ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Business

The
Company designs, manufactures and markets large excavation machinery used for
surface mining, and provides comprehensive aftermarket services, supplying
replacement parts and offering maintenance and repair contracts and services
for these machines. The Company manufactures its original equipment (OEM)
products and the majority of aftermarket parts at its facility in South
Milwaukee, Wisconsin. The Companys principal OEM products are draglines,
electric mining shovels and rotary blasthole drills, which are used primarily
by customers who mine copper, coal, oil sands and iron ore throughout the
world. In addition, the Company provides aftermarket services in mining centers
throughout the world, including Argentina, Australia, Brazil, Canada, Chile,
China, India, Peru, South Africa and the United States. The largest markets for
mining equipment have historically been in Australia, Canada, South Africa,
South America and the United States. In the future, Brazil, Canada, China and
India are expected to be increasingly important markets.

The
market for OEM machines is closely correlated with customer expectations of
sustained strength in prices of surface mined commodities. Growth in demand for
these commodities is a function of, among other things, economic activity,
population increases and continuing improvements in standards of living in many
areas of the world. In 2002, the market prices of many surface-mined
commodities were generally weak. In 2003 and 2004, market prices for copper,
coal, iron ore and oil increased and have continued to be strong in 2005.
Factors that could support sustained demand for these key commodities in 2005
and future years include continued economic growth in China, India and the
developing world and renewed economic strength in industrialized countries. In
the past quarter, inquiries for new machines continued to increase from prior
quarters. The highest interest has been in the oil sands of Western Canada.
Inquiries related to coal, copper and iron ore mines in other areas of the
world have also increased.

The
Companys aftermarket parts and service operations, which have accounted for
approximately 70% of sales over the past ten years, tend to be more consistent
than OEM machine sales. However, recent pronounced strength in commodity
markets has positively affected total aftermarket sales, although total
aftermarket sales remained at approximately 70% of sales during the nine months
ended September 30, 2005. The Companys complex machines are typically kept in
continuous operation from 15 to 40 years, requiring regular maintenance and
repair throughout their productive lives. The size of the Companys installed
base of surface mining equipment and its ability to provide on-time delivery of
reliable parts and prompt service are important drivers of aftermarket sales.
Aftermarket orders and inquiries continue to increase as the existing installed
fleet of machines operates at very high utilization levels due to the current
demand and increased prices for commodities.

The
Company continues to forecast increased sales activity for both aftermarket
parts sales and OEM machine sales relative to prior periods. The Company
anticipates that the current commodity demand will continue for at least the
next three to five years. The Company maintains ongoing efforts to improve
efficiency and contain costs and continually evaluates all opportunities for
reductions to operating costs. Recent strong order volume has caused the
Company to hire new employees, and additional hiring is expected. As sustained
order strength continues, the Company is taking steps to increase its manufacturing
capacity. During the first quarter of 2005, the Company entered into an
agreement to lease a facility to be used for expansion of the Companys
manufacturing operations. This facility is currently operating at 60% of its
capacity and the Company plans to operate the facility at close to 100% of its
capacity by the first quarter of 2006. Also, on August 24, 2005, the Company
announced that it is

  16

proceeding
with plans to expand its manufacturing facilities in South Milwaukee,
Wisconsin. The initial phase of the expansion program will include the
construction of a new facility on the grounds of the Companys South Milwaukee
campus north of Rawson Avenue at an approximate cost of $22 million.

A
substantial portion of the Companys sales and operating earnings is
attributable to operations located outside the United States. The Company
generally sells its OEM machines, including those sold directly to foreign
customers, and most of its aftermarket parts in United States dollars. A portion
of the Companys aftermarket parts sales are also denominated in the local
currencies of Australia, Brazil, Canada, Chile, South Africa and the United
Kingdom. Aftermarket services are paid for primarily in local currency which is
naturally hedged by the Companys payment of local labor in local currency.
Historically, approximately 70% of the Companys sales are priced in United
States dollars.

Over
the past three years, the Company increased gross profits by improving
manufacturing overhead variances, achieving productivity gains, growing its
high margin aftermarket parts and services business and increasing the prices
of its products. To date, increasing prices of steel and other raw materials
have not had a significant impact on the Companys gross profit due to the
higher selling prices of its products.

Following
is a discussion of key measures which contributed to the Companys operating
results.

Key Measures

On-Time
Delivery and Lead Times

Due
to the high fixed cost structure of the Companys customers, it is critical
that they avoid equipment downtime. On-time delivery and reduced lead time of
aftermarket parts and services allow customers to reduce downtime and are
therefore key measures of customer service, and the Company believes they are
fundamental drivers of aftermarket customer demand. The Companys on-time
delivery percentage in the aftermarket, based on achieved promised delivery
dates to customers, was 94% for the year 2004 and 92% for the first nine months
of 2005. Lead times for deliveries were approximately the same in the first
nine months of 2005 as compared to the year 2004, although some suppliers are
now increasing lead times for materials which may affect parts delivery lead
times in the future.

The
Company increased on-time deliveries and reduced lead times in recent years by
focusing on the development of key shop floor metrics, improved communication
between sales, manufacturing and shipping, daily or weekly meetings to resolve
issues, changing of shipment methods and the hiring of an additional
supervisory person dedicated to on-time delivery. The information to accomplish
many of these improvements is available from the Companys enterprise resource
planning (ERP) system.

Productivity

Sales
per full time equivalent employee is a measure of the Companys operational
efficiency. Sales per full time equivalent employee were $.3 million for the
first nine months of 2005 and $.2 million for the first nine months of 2004.
The Company has experienced productivity increases in recent years, primarily
due to the application of worldwide sales and inventory ERP systems and
personnel upgrades which, collectively, allowed sales to grow with minimal
changes in headcount.

Warranty
Claims

Product
quality is another key driver of customer satisfaction and, as a result, sales.
Management uses warranty claims as a percentage of total sales as one objective
benchmark to evaluate product quality. During the year 2004 and the first nine
months of 2005, warranty claims as a percentage of total sales were less than
1%.

  17

Backlog

Backlog
is a tool which allows management to forecast sales and production
requirements. Due to the high cost of some OEM products, backlog is subject to
volatility, particularly over relatively short periods. A portion of the
Companys backlog is related to multi-year contracts that will generate revenue
in future years. The following table shows backlog at September 30, 2005 and
December 31, 2004 as well as the portion of backlog which is or was expected to
be recognized within twelve months of these dates:



September
  30,
  2005
  
  December
  31,
  2004(Dollars
  in Thousands)Next 12
  months
  
  $
  344,378
  
  $
  231,455Total
  
  
  590,230
  
  
  436,317The increase
in the Companys backlog at September 30, 2005 was primarily in aftermarket
parts and service and was due to the improved market conditions in which the
Company sells its products.

Inventory

Inventory
is one of the Companys significant assets. As of September 30, 2005, the
Company had $150.1 million in inventory. Raw materials and work in process
inventory have increased in anticipation of future increased sales activity.
Inventory turned at a rate of approximately 3.0 times during the first nine
months of 2005 and the year 2004. Inventory turned at a rate of approximately
2.9 times during the first six months of 2005. Inventory turns is calculated
based on cost of sales and the average inventory balance during the prior
twelve months. The Company believes that it has appropriately recorded at the
lower of cost or market any slow moving or obsolete inventory in its financial
statements. The factors that could reduce the carrying value of the Companys
inventory include reduced demand for aftermarket parts due to decreased sales
volumes attributable to new or improved technology or customers discontinuing
the use of the Companys older model machines, which could render inventory
obsolete or excess. With the exception of the normal inventory obsolescence
provision recorded in the ordinary course of business, the Company does not
anticipate recording any significant inventory impairments.

Results of Operations

Quarter And Nine Months Ended September 30,
  2005 Compared to Quarter And Nine Months Ended September 30, 2004Sales

Sales
for the quarter and nine months ended September 30, 2005 were $157.4 million
and $402.9 million, respectively, compared with $111.5 million and $325.6
million for the quarter and nine months ended September 30, 2004, respectively.
Sales of aftermarket parts and services for the third quarter of 2005 were
$112.9 million, an increase of 30.1% from $86.7 million for the third quarter
of 2004. Sales of aftermarket parts and services for the nine months ended
September 30, 2005 were $275.7 million, an increase of 15.2% from $239.4
million for the nine months ended September 30, 2004. The increases in
aftermarket sales in 2005 reflect the Companys initiatives and strategies to
capture additional market share as well as continued strong commodity prices.
Aftermarket sales increased in both United States and international markets.
Machine sales for the third quarter of 2005 were $44.5 million, an increase of
79.6% from $24.8 million for the third quarter of 2004. Machine sales for the
nine months ended

  18

September 30,
2005 were $127.2 million, an increase of 47.5% from $86.2 million for the nine
months ended September 30, 2004. The increase in machine sales for the quarter
and nine months ended September 30, 2005 was primarily due to increased
electric mining shovel sales and the recognition of sales on two draglines that
were sold in 2004. Approximately $2.4 million and $6.2 million of the increases
in sales for the quarter and nine months ended September 30, 2005,
respectively, was attributable to a weakening United States dollar, which
primarily impacted aftermarket sales (see Foreign Currency Fluctuations
below).

Gross
Profit

Gross
profit for the third quarter of 2005 was $36.4 million or 23.1% of sales
compared with $24.3 million or 21.8% of sales for the third quarter of 2004.
Gross profit for the nine months ended September 30, 2005 was $96.4 million or
23.9% of sales compared with $68.8 million or 21.1% of sales for the nine
months ended September 30, 2004. The increase in gross profit was primarily due
to an increased sales volume and higher gross margins on both machines and
aftermarket sales. Gross profit for the quarter and nine months ended September
30, 2005 was reduced by $.4 million and $1.1 million, respectively, of training
costs related to the Companys new leased manufacturing facility. Gross profit
for the nine months ended September 30, 2005 and 2004 was also reduced by $4.0
million of additional depreciation expense as a result of the purchase price
allocation to plant and equipment in connection with acquisitions involving the
Company. Approximately $.4 million and $1.2 million of the increase in gross
profit for the quarter and nine months ended September 30, 2005, respectively,
was attributable to a weakening United States dollar, which primarily impacted
aftermarket sales (see Foreign Currency Fluctuations below).

Selling,
General and Administrative Expenses

Selling,
general and administrative expenses for the quarter ended September 30, 2005
were $13.9 million or 8.9% of sales compared with $13.2 million or 11.9% of
sales for the quarter ended September 30, 2004. Selling, general and
administrative expenses for the nine months ended September 30, 2005 were $38.4
million or 9.5% of sales compared to $41.5 million or 12.7% of sales for the
nine months ended September 30, 2004. Selling, general and administrative
expenses for the quarter and nine months ended September 30, 2005 included
$45,000 and $135,000, respectively, related to non-cash stock-based employee
compensation compared to $2.6 million and $10.0 million for the quarter and
nine months ended September 30, 2004. Selling expenses for the quarter and nine
months ended September 30, 2005 increased by $1.6 million and $4.0 million,
respectively, from 2004 primarily due to increased sales efforts and higher
foreign costs as a result of the weakened U.S. dollar, but remained relatively
constant as a percentage of sales. Foreign currency transaction gains (losses)
for the quarter and nine months ended September 30, 2005 were $(.1) million and
$1.2 million, respectively, compared with gains of $.4 million and $1.2 million
for the quarter and nine months ended September 30, 2004, respectively. The
Company incurred approximately $.4 million of consulting expenses during the
nine months ended September 30, 2005 related to Sarbanes-Oxley Section 404
compliance and expects to incur an additional $.7 million in the fourth
quarter.

Research
and Development Expenses

Research
and development expenses for the quarter and nine months ended September 30,
2005 were $1.6 million and $4.4 million, respectively, compared with $1.3
million and $3.9 million for the quarter and nine months ended September 30,
2004, respectively.

  19

Amortization
of Intangible Assets

Amortization
of intangible assets, consisting primarily of engineering drawings, bill of
material listings and software, was $.4 million and $1.4 million for the
quarter and nine months ended September 30, 2005, respectively, compared with
$.4 million and $1.2 million for the quarter and nine months ended September
30, 2004, respectively.

Operating
Earnings

Operating
earnings for the third quarter of 2005 were $20.5 million or 13.0% of sales,
compared with $9.4 million or 8.4% of sales for the third quarter of 2004.
Operating earnings for the nine months ended September 30, 2005 were $52.3
million or 13.0% of sales, compared with $22.1 million or 6.8% of sales for the
nine months ended September 30, 2004. Operating earnings for the quarter and
nine months ended September 30, 2005 increased from 2004 due to increased gross
profit resulting from increased sales volume and higher gross margins on both
machines and aftermarket sales. Operating earnings for the quarter and nine
months ended September 30, 2004 were reduced by $2.6 million and $10.0 million,
respectively, of non-cash stock compensation expense. Approximately $.4 million
and $.8 million of the increase in operating earnings for the quarter and nine
months ended September 30, 2005, respectively, was attributable to a weakening
United States dollar (see Foreign Currency Fluctuations below).

Interest
Expense

Interest
expense for the quarter and nine months ended September 30, 2005 was $1.3
million and $3.6 million, respectively, compared with $2.1 million and $10.3
million for the quarter and nine months ended September 30, 2004, respectively.
The decrease in interest expense in 2005 was due to the refinancing of the
Companys capital structure in connection with its initial public offering
which was completed on July 28, 2004.

Other
Expense - Net

Other
expense - net was $.1 million and $.2 million of expense for the quarter and
nine months ended September 30, 2005, respectively, compared with $.1 million
and $.9 million of expense for the quarter and nine months ended September 30,
2004, respectively. Debt issuance cost amortization was $.3 million and $.7
million for the quarter and nine months ended September 30, 2005, respectively,
compared with $.3 million and $1.1 million for the quarter and nine months
ended September 30, 2004, respectively. These amounts include costs related to
the Companys credit facilities (see Liquidity and Capital Resources -
Financing Cash Flows below).

Income
Taxes

Income
tax expense for the quarter and nine months ended September 30, 2005 was $6.3
million and $16.3 million, respectively, compared with $.9 million and $4.0
million for the quarter and nine months ended September 30, 2004, respectively.
Income tax expense for the quarter and nine months ended September 30, 2004
consisted primarily of foreign taxes at applicable statutory rates since U.S.
income tax expense was reduced by federal net operating loss carryforwards that
were not previously recognized due to a valuation allowance. In the fourth quarter
of 2004, all of the remaining valuation allowance was reversed. In 2005, U.S.
taxable income exceeded available net operating loss carryforwards and income
tax expense was recorded. Foreign taxes continue to be recorded at applicable
statutory rates. At September 30, 2005, the Company had approximately $14.3
million of federal net operating loss carryforwards. The carryforwards are
useable at the rate of $3.6 million per year.

  20

Foreign
Currency Fluctuations

The
following table summarizes the approximate effect of changes in foreign
currency exchange rates on the Companys sales, gross profit and operating
earnings for the quarter and nine months ended September 30, 2005 and 2004, in
each case compared to the same period in the prior year:

Quarters Ended
  September 30,
  
  Nine Months Ended
  September 30,2005
  
  2004
  
  2005
  
  2004(Dollars in Thousands)Increase in sales
  
  $
  2,355
  
  $
  2,581
  
  $
  6,158
  
  $
  9,826Increase in gross profit
  
  
  382
  
  
  496
  
  
  1,217
  
  
  1,774Increase in operating earnings
  
  
  352
  
  
  180
  
  
  760
  
  
  349EBITDA

Earnings
before interest, taxes, depreciation and amortization (EBITDA) for the quarter
and nine months ended September 30, 2005 was $23.9 million and $62.4 million,
respectively, compared with $12.5 million and $31.6 million for the quarter and
nine months ended September 30, 2004, respectively. EBITDA is presented (i)
because the Company uses EBITDA to measure its liquidity and financial
performance and (ii) because the Company believes EBITDA is frequently used by
securities analysts, investors and other interested parties in evaluating the
performance and enterprise value of companies in general, and in evaluating the
liquidity of companies with significant debt service obligations and their
ability to service their indebtedness. The EBITDA calculation is not an
alternative to operating earnings under accounting principles generally accepted
in the United States of America (GAAP) as an indicator of operating
performance or of cash flows as a measure of liquidity. The following table
reconciles Net Earnings (Loss) as shown in the Consolidated Condensed
Statements of Operations to EBITDA and reconciles EBITDA to Net Cash Provided
by (Used in) Operating Activities as shown in the Consolidated Condensed
Statements of Cash Flows:

  21

Quarters Ended
  September 30,
  
  Nine Months Ended
  September 30,2005
  
  2004
  
  2005
  
  2004(Dollars in Thousands)Net earnings
  (loss)
  
  $
  12,777
  
  $
  (1,008
  )
  $
  32,126
  
  $
  (394
  )Interest income
  
  
  (121
  )
  
  (149
  )
  
  (479
  )
  
  (263
  )Interest expense
  
  
  1,278
  
  
  2,054
  
  
  3,640
  
  
  10,345Income taxes
  
  
  6,287
  
  
  885
  
  
  16,322
  
  
  3,987Depreciation
  
  
  2,971
  
  
  2,725
  
  
  8,755
  
  
  8,228Amortization (1)
  
  
  705
  
  
  712
  
  
  2,084
  
  
  2,368Loss on
  extinguishment of debt
  
  
  
  
  
  7,316
  
  
  
  
  
  7,316EBITDA (2)
  
  
  23,897
  
  
  12,535
  
  
  62,448
  
  
  31,587Changes in
  assets and liabilities
  
  
  (8,750
  )
  
  (28,212
  )
  
  (29,772
  )
  
  (21,830
  )Non-cash stock
  compensation expense (3)
  
  
  45
  
  
  2,590
  
  
  135
  
  
  10,031(Gain) loss on
  sale of fixed assets
  
  
  (62
  )
  
  260
  
  
  91
  
  
  273Interest income
  
  
  121
  
  
  149
  
  
  479
  
  
  263Interest expense
  
  
  (1,278
  )
  
  (2,054
  )
  
  (3,640
  )
  
  (10,345
  )Income tax
  expense
  
  
  (6,287
  )
  
  (885
  )
  
  (16,322
  )
  
  (3,987
  )Net cash
  provided by (used in) operating activities
  
  $
  7,686
  
  $
  (15,617
  )
  $
  13,419
  
  $
  5,992Net cash used in
  investing activities
  
  $
  (5,374
  )
  $
  (1,945
  )
  $
  (13,363
  )
  $
  (4,219
  )Net cash
  provided by (used in) financing activities
  
  $
  (2,029
  )
  $
  27,507
  
  $
  (13,426
  )
  $
  8,944(1)
  Includes amortization of intangible assets and debt
  issuance costs.(2)
  EBITDA for the quarter and nine months ended
  September 30, 2004 is reduced by expenses pursuant to a management services
  agreement with American Industrial Partners (AIP) as well as fees paid to
  AIP or its affiliates and advisors for services performed for the Company
  outside the scope of the management services agreement of $.1 million and
  $1.3 million, respectively. The management services agreement was terminated
  in July 2004. EBITDA is also reduced by restructuring charges (severance) for
  the quarters ended September 30, 2005 and 2004 and nine months ended
  September 30, 2005 and 2004 of $251,000, $31,000, $324,000 and $201,000,
  respectively.(3)
  Non-cash stock compensation expense for the quarter
  and nine months ended September 30, 2004 represents the charge recorded
  related to stock options issued prior to the completion of the Companys
  initial public offering on July 28, 2004. At the time of the initial public
  offering, the plan required certain modifications to the determination of
  fair market value for these previously issued options. In accordance with
  EITF Issue No. 87-23, no further compensation expense was recorded
  subsequent to July 28, 2004 related to stock options issued under this plan
  prior to the Companys initial public offering. Under existing accounting
  standards, provision for compensation expense related to the 24,000 shares of
  restricted stock issued under the Bucyrus International, Inc. 2004 Equity
  Incentive Plan in September 2004 will be approximately $.2 million annually
  over the four years subsequent to the date of issuance.Liquidity
and Capital Resources

Cash
Requirements

During
the remainder of 2005, the Company anticipates strong cash flows from
operations due to continued strength in aftermarket parts sales as well as
increased demand for new machines. In expanding markets, customers are
generally contractually obligated to make progress payments under purchase
contracts for machine orders. As a result, the Company does not anticipate
significant outside financing requirements to fund production of these machines
and does not believe that new machine sales will have a negative long-term
effect on its liquidity. If additional borrowings are necessary during the
remainder of 2005, the Company believes it has sufficient capacity under its
revolving credit facility (see Financing Cash Flows below).

  22

As
of September 30, 2005, there have been no material changes to the contractual
obligations with respect to purchase obligations and operating leases and
rental and service agreements as presented in the Companys 2004 Annual Report
to Shareholders. There have also been no material changes to the contractual
obligations with respect to long-term debt and short-term obligations as
presented in the Companys Form 10-Q for the quarterly period ended June 30,
2005.

On
August 24, 2005, the Company announced that it is proceeding with plans to
expand its manufacturing facilities in South Milwaukee, Wisconsin. The initial
phase of the expansion program will include the construction of a new facility
on the grounds of the Companys South Milwaukee campus north of Rawson Avenue
at an approximate cost of $22 million. The construction of this new facility is
expected to be completed during the third quarter of 2006. At September 30,
2005, the Company had not yet incurred any contractual obligations with respect
to this project. During the month of October 2005, the Company entered into
contractual obligations of approximately $5.5 million with respect to this
project. The Company intends to finance the expansion program through working
capital and funds available under its existing revolving credit facility, and
is exploring the availability of governmental grants and other programs.

The
Companys capital expenditures for the nine months ended September 30, 2005
were $13.6 million compared with $3.8 million for the nine months ended
September 30, 2004. Included in capital expenditures for the nine months ended
September 30, 2005 was $2.9 million related to the new leased manufacturing
facility in Milwaukee. The remaining expenditures consist primarily of
production machinery at the Companys main manufacturing facility. The Company
expects a continued increase in capital expenditures during the remainder of
2005 as it increases manufacturing capacity and upgrades and replaces
manufacturing equipment to support increased sales activity. The Company
believes cash flows from operating activities will be sufficient to fund
capital expenditures in 2005.

At
September 30, 2005, there were $24.0 million of standby letters of credit
outstanding under all Company bank facilities.

The
Company believes that cash flows from operations will be sufficient to fund its
cash requirements for the next twelve months.

The
Company intends to pay quarterly cash dividends of $0.575 per share (equal to
$.23 per year). A quarterly cash dividend of $1.2 million was declared on July
14, 2005 and paid on August 15, 2005.

Sources and Uses
of Cash

While
the Company had $7.3 million of cash and cash equivalents as of September 30,
2005, this cash is located at various foreign subsidiaries and is used for
working capital purposes. Cash receipts in the United States are applied
against the Companys revolving credit facility.

Operating
Cash Flows

During
the first nine months of 2005, the Company generated cash from operating
activities of $13.4 million compared to $6.0 million in the first nine months
of 2004. The increase in cash flows from operating activities was driven
primarily by increased sales activity.

  23

Receivables

The
Company recognizes revenues on its machine orders using the
percentage-of-completion method. Accordingly, accounts receivable are generated
when revenue is recognized, which can be before the funds are collected or in
some cases, before the customer is billed. As of September 30, 2005, the
Company had $131.2 million of receivables compared to $90.8 million of
receivables at December 31, 2004. Receivables at September 30, 2005 and
December 31, 2004 included $54.5 million and $31.4 million, respectively, of
revenues from long-term contracts which were not billable at these dates.

Liabilities to
Customers on Uncompleted Contracts and
Warranties

Customers
generally make down payments at the time of the order for a new machine as well
as progress payments throughout the manufacturing process. In accordance with
SOP No. 81-1, these payments are recorded as Liabilities to Customers on
Uncompleted Contracts and Warranties. The increase of $12.1 million from
December 31, 2004 to September 30, 2005 was due to the receipt of customer
payments on certain long-term machine contracts for which the related revenue
has yet to be recognized.

Financing Cash
Flows

On
May 27, 2005, the Company entered into a new credit agreement with GMAC
Commercial Finance LLC as lead lender. The credit agreement provides for a five
year $120.0 million revolving credit facility that may, at the Companys
request and with the lenders approval, be increased to $150.0 million. The
credit agreement provides that interest on borrowed amounts would initially be
set at either the prime rate plus .25% or LIBOR plus 1.25%, with quarterly
adjustments to interest rates beginning after nine months. Proceeds from this
new revolving credit facility were used to pay in full the previously
outstanding senior secured term loan. Borrowings under the revolving credit
facility are subject to a borrowing base formula based on the value of eligible
receivables and inventory. At September 30, 2005, the Company had $84.7 million
of borrowings under its revolving credit facility at a weighted average
interest rate of 5.5%. The amount available for borrowings under the revolving
credit facility at September 30, 2005 was $17.1 million.

The
credit agreement contains covenants limiting the discretion of management with
respect to key business matters and places significant restrictions on, among
other things, the Companys ability to incur additional indebtedness, create
liens or other encumbrances, make certain payments or investments, loans and
guarantees, and sell or otherwise dispose of assets and merge or consolidate
with another entity. All of the Companys domestic assets and the receivables
and inventory of the Companys Canadian subsidiary are pledged as collateral
under the revolving credit facility. In addition, the outstanding capital stock
of the Companys domestic subsidiaries as well as the majority of the capital
stock of the Companys foreign subsidiaries are pledged as collateral. The
Company is also required to maintain compliance with certain financial
covenants, including a leverage ratio (as defined). The Company was in
compliance with all applicable covenants as of September 30, 2005.

Critical
Accounting Policies and Estimates

See
Critical Accounting Policies and Estimates discussed in the Managements
Discussion and Analysis section of the Companys 2004 Annual Report to
Shareholders. There have been no material changes to these policies.

  24

BUCYRUS INTERNATIONAL,
INC. AND SUBSIDIARIESITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

The
Companys market risk is impacted by changes in interest rates and foreign
currency exchange rates.

Interest
Rates

The
Companys interest rate exposure relates primarily to floating rate debt
obligations in the United States. The Company manages its borrowings under its
credit facilities through the selection of LIBOR-based borrowings or prime-rate
based borrowings. If market conditions warrant, interest rate swaps may be used
to adjust interest rate exposures, although none have been used to date.

At
September 30, 2005, a sensitivity analysis was performed for the Companys
floating rate debt obligations. Based on this sensitivity analysis, the Company
has determined that a 10% change in the Companys weighted average interest
rate at September 30, 2005 would have the effect of changing the Companys
interest expense on an annual basis by approximately $.5 million.

Foreign
Currency

The
Company sells new machines, including those sold directly to foreign customers,
and most of its aftermarket parts in United States dollars. A limited amount of
aftermarket parts sales are denominated in the local currencies of Australia,
Canada, Chile, South Africa, Brazil and the United Kingdom which subjects the
Company to foreign currency risk. Aftermarket sales and a portion of the labor
costs associated with such activities are denominated or paid in local
currencies. As a result, a relatively strong United States dollar could
decrease the United States dollar equivalent of the Companys sales without a
corresponding decrease of the United States dollar value of certain related
expenses. The Company utilizes some foreign currency derivatives to mitigate
foreign exchange risk.

Currency
controls, devaluations, trade restrictions and other disruptions in the
currency convertibility and in the market for currency exchange could limit the
Companys ability to timely convert sales earned abroad into United States dollars,
which could adversely affect the Companys ability to service its United States
dollar indebtedness, fund its United States dollar costs and finance capital
expenditures and pay dividends on its common stock.

Based
on the Companys derivative instruments outstanding at September 30, 2005, a
10% change in foreign currency exchange rates would not have a material effect
on the Companys financial position, results of operations or cash flows.

  25

BUCYRUS
INTERNATIONAL, INC. AND SUBSIDIARIESITEM 4 - CONTROLS AND PROCEDURES

As
of the end of the period covered by this Report, an evaluation was carried out
under the supervision and with the participation of the Companys management,
including its President and Chief Executive Officer and its Chief Financial Officer,
Controller and Secretary, of the effectiveness of the design and operation of
the Companys disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the Exchange Act)). Based upon
their evaluation of these disclosure controls and procedures, the President and
Chief Executive Officer and the Chief Financial Officer, Controller and
Secretary concluded that the disclosure controls and procedures were effective
as of the end of the quarter ended September 30, 2005 to ensure that material
information relating to the Company, including its consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Report was being prepared.

There
were no changes in the Companys internal control over financial reporting (as
such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the quarter ended September 30, 2005 that have materially
affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.

It
should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future
events. Because of these and other inherent limitations of control systems,
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.

  26

FORWARD-LOOKING
STATEMENTS

This
report contains statements that constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements may be identified by the use of predictive, future
tense or forward-looking terminology, such as believes, anticipates, expects,
estimates, intends, may, will or similar terms. You are cautioned that
any such forward-looking statements are not guarantees of future performance
and involve significant risks and uncertainties, and that actual results may
differ materially from those contained in the forward-looking statements as a
result of various factors, some of which are unknown. The factors that could
adversely affect the Companys actual results and performance include, without
limitation:


  customers production capacity,
  stockpiles, and production and consumption rates of copper, coal, iron, oil
  and other ores and minerals;
  the cash flows of customers;
  consolidation among customers
  and suppliers;
  work stoppages at customers,
  suppliers or providers of transportation;
  the timing, severity and
  duration of customer and industry buying cycles;
  unforeseen patent, tax,
  product, environmental, employee health or benefit, or contractual
  liabilities that affect the Company;
  litigation;
  nonrecurring restructuring and
  other special charges incurred by the Company;
  changes in accounting or tax
  rules or regulations that affect the Company;
  changes in the relative values
  of currencies;
  the Companys leverage and debt
  service obligations;
  the Companys success in
  recruiting and retaining key managers and employees;
  labor costs and labor
  relations; and
  the Companys plant capacity.The
review of important factors above is not exhaustive, and should be read in
conjunction with the other cautionary statements included in this report and in
the Companys 2004 Annual Report to Shareholders and Annual Report on Form 10-K
filed with the Securities and Exchange Commission on March 21, 2005. All
forward-looking statements attributable to the Company are expressly qualified
in their entirety by the foregoing cautionary statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

  27

PART
II
OTHER INFORMATION

Item 1.
  Legal Proceedings.Not applicable.Item 2.
  Unregistered Sales of Equity Securities and Use of
  Proceeds.Not applicable.Item 3.
  Defaults Upon Senior Securities.Not applicable.Item 4.
  Submission of Matters to a Vote of Security Holders.Not applicable.Item 5.
  Other Information.Not applicable.Item 6.
  Exhibits.See Exhibit Index on last page of this report.28

SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

BUCYRUS INTERNATIONAL, INC.(Registrant)Date
  November 11, 2005
  
  /s/ Timothy W. SullivanTimothy W. SullivanPresident and Chief Executive OfficerDate
  November 11, 2005
  
  /s/ Craig R. MackusCraig R. MackusChief Financial Officer, Controller and SecretaryPrincipal Accounting Officer29

BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2005

Exhibit
  Number
  
  Description31.1
  
  Certification
  of President and Chief Executive Officer pursuant to Section 302 of the
  Sarbanes-Oxley Act and Rules 13a-14(a)/15d-14(a).31.2
  
  Certification
  of Chief Financial Officer, Controller and Secretary pursuant to Section 302
  of the Sarbanes-Oxley Act and Rules 13a-14(a)/15d-14(a).32
  
  Certification
  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
  Sarbanes-Oxley Act of 2002.El-1