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, 2006

                                       OR

         |_|  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 or Other Jurisdiction of                  (I.R.S. Employer
        Incorporation or Organization)                 Identification No.)

                                  P. O. BOX 500
                              1100 MILWAUKEE AVENUE
                           SOUTH MILWAUKEE, WISCONSIN
                                      53172
                    (Address of Principal Executive Offices)
                                   (Zip Code)

                                 (414) 768-4000
              (Registrant's Telephone Number, Including Area Code)

<PAGE>

      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 |_|

      Indicate  by check mark  whether  the  registrant  is a large  accelerated
filer,  an accelerated  filer,  or a  non-accelerated  filer.  See definition of
"accelerated  filer and large  accelerated  filer" in Rule 12b-2 of the Exchange
Act.  (Check  one):   Large   accelerated   filer  |X|  Accelerated   filer  |_|
Non-accelerated filer |_|

      Indicate  by check mark  whether  the  registrant  is a shell  company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| 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 3, 2006
     ------------------------------------           ----------------------------

     Class A Common Stock, $.01 par value                     31,498,508

<PAGE>

                  BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

                                      INDEX

<TABLE>
<CAPTION>
                                                                                 Page No.
                                                                                 --------
<S>                                                                                 <C>
PART I.  FINANCIAL INFORMATION:

         Item 1 -Financial Statements (Unaudited)

            Consolidated Condensed Statements of Earnings -
            Quarters and nine months ended September 30, 2006 and 2005                  4

            Consolidated Condensed Statements of
            Comprehensive Income - Quarters and nine
            months ended September 30, 2006 and 2005                                    5

            Consolidated Condensed Balance Sheets -
            September 30, 2006 and December 31, 2005                                  6-7

            Consolidated Condensed Statements of Cash Flows -
            Nine months ended September 30, 2006 and 2005                             8-9

            Notes to Consolidated Condensed Financial
            Statements                                                              10-16

         Item 2 - Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                     17-26

         Item 3 - Quantitative and Qualitative Disclosures
                  About Market Risk                                                    27

         Item 4 - Controls and Procedures                                              28

         Forward-Looking Statements                                                    29

PART II. OTHER INFORMATION:

         Item 1 - Legal Proceedings                                                    30

         Item 1A - Risk Fac tors                                                       30

         Item 2 - Unregistered Sales of Equity Securities
                  and Use of Proceeds                                                  30

         Item 3 - Defaults Upon Senior Securities                                      30

         Item 4 - Submission of Matters to a Vote of
                  Security Holders                                                     30

         Item 5 - Other Information                                                    30

         Item 6 - Exhibits                                                             30

         Signature Page                                                                31
</TABLE>

<PAGE>

                                     PART I
                             FINANCIAL INFORMATION

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

<TABLE>
<CAPTION>
                                   Quarter Ended September 30,      Nine Months Ended September 30,
                                  ----------------------------      --------------------------------
                                      2006             2005            2006                  2005
                                  -----------      -----------      -----------          -----------
<S>                               <C>              <C>              <C>                  <C>
Sales                             $   184,980      $   157,358      $   532,437          $   402,916
Cost of products sold                 137,086          120,930          396,736              306,468
                                  -----------      -----------      -----------          -----------

  Gross profit                         47,894           36,428          135,701               96,448

Selling, general and
 administrative expenses               18,728           13,931           52,266               38,377
Research and development
 expenses                               2,182            1,583            7,155                4,393
Amortization of intangible
 assets                                   446              449            1,347                1,352
                                  -----------      -----------      -----------          -----------
  Operating earnings                   26,538           20,465           74,933               52,326

Interest expense                          804            1,278            2,050                3,640
Other expense - net                        83              123              202                  238
                                  -----------      -----------      -----------          -----------

Earnings before income taxes           25,651           19,064           72,681               48,448
Income tax expense                      8,931            6,287           19,881               16,322
                                  -----------      -----------      -----------          -----------
Net earnings                      $    16,720      $    12,777      $    52,800          $    32,126
                                  ===========      ===========      ===========          ===========

Net earnings per share data:
 Basic:
  Net earnings per share          $       .53      $       .42      $      1.69          $      1.06
  Weighted average shares          31,289,478       30,651,359       31,255,652           30,400,182

 Diluted:
  Net earnings per share          $       .53      $       .41      $      1.67          $      1.03
  Weighted average shares          31,498,745       31,278,852       31,547,086           31,233,156
</TABLE>

            See notes to consolidated condensed financial statements.


                                       4
<PAGE>

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

<TABLE>
<CAPTION>
                                  Quarter Ended September 30,      Nine Months Ended September 30,
                                  ---------------------------      -------------------------------
                                     2006             2005            2006                 2005
                                  ----------       ----------      ----------           ----------
<S>                               <C>              <C>             <C>                  <C>
Net earnings                      $   16,720       $   12,777      $   52,800           $   32,126
Other comprehensive
  income (loss)-
    Foreign currency
     translation adjustments            (222)           3,632          (1,155)                 640
                                  ----------       ----------      ----------           ----------

Comprehensive income              $   16,498       $   16,409      $   51,645           $   32,766
                                  ==========       ==========      ==========           ==========
</TABLE>

            See notes to consolidated condensed financial statements


                                       5
<PAGE>

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

                                                  September 30,    December 31,
                                                      2006             2005
                                                  -------------    ------------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                         $  12,787       $  12,451
  Receivables - net                                   163,259         155,547
  Inventories                                         173,292         133,476
  Deferred income taxes                                16,612          18,363
  Prepaid expenses and other                            7,257           6,982
                                                    ---------       ---------
  Total Current Assets                                373,207         326,819
                                                    ---------       ---------

OTHER ASSETS:
  Goodwill                                             47,306          47,306
  Intangible assets - net                              33,149          34,565
  Deferred income taxes                                13,323          10,355
  Other assets                                          8,302           8,767
                                                    ---------       ---------
  Total Other Assets                                  102,080         100,993
                                                    ---------       ---------

PROPERTY, PLANT AND EQUIPMENT:
  Cost                                                184,344         140,938
  Less accumulated depreciation                       (82,409)        (76,783)
                                                    ---------       ---------
  Total Property, Plant and Equipment                 101,935          64,155
                                                    ---------       ---------
  TOTAL ASSETS                                      $ 577,222       $ 491,967
                                                    =========       =========


                                       6
<PAGE>

                  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,
                                                        2006           2005
                                                   -------------    ------------
LIABILITIES AND COMMON
  SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
  Accounts payable                                   $  71,453       $  65,873
  Accrued expenses                                      47,337          40,874
  Liabilities to customers on uncompleted
    contracts and warranties                            29,933          35,239
  Income taxes                                           8,949          11,943
  Current maturities of long-term debt and
    other short-term obligations                         1,891           1,339
                                                     ---------       ---------
  Total Current Liabilities                            159,563         155,268
                                                     ---------       ---------

LONG-TERM LIABILITIES:
  Postretirement benefits                               14,895          14,257
  Pension and other                                     34,171          34,567
                                                     ---------       ---------
  Total Long-Term Liabilities                           49,066          48,824
                                                     ---------       ---------
LONG-TERM DEBT, less current
  maturities                                            92,549          66,975
                                                     ---------       ---------
COMMON SHAREHOLDERS'
  INVESTMENT:
    Common stock - par value $.01
    per share, authorized 75,000,000
    shares, issued 31,606,731 shares
    and 30,991,820 shares, respectively                    316             310
  Additional paid-in capital                           305,461         298,079
  Unearned stock compensation                               --            (466)
  Treasury stock - 108,600 shares, at cost                (851)           (851)
  Accumulated deficit                                   (2,518)        (50,963)
  Accumulated other comprehensive loss                 (26,364)        (25,209)
                                                     ---------       ---------
Total Common Shareholders' Investment                  276,044         220,900
                                                     ---------       ---------
TOTAL LIABILITIES AND COMMON
  SHAREHOLDERS' INVESTMENT                           $ 577,222       $ 491,967
                                                     =========       =========

            See notes to consolidated condensed financial statements.


                                       7
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 Nine Months Ended September 30,
                                                                 -------------------------------
                                                                     2006              2005
                                                                 -----------       -----------
<S>                                                              <C>               <C>
Net Cash Provided By Operating Activities                        $    18,655       $    13,419
                                                                 -----------       -----------

Cash Flows From Investing Activities
Purchases of property, plant and equipment                           (47,458)          (13,552)
Net proceeds from disposal of property, plant and equipment              613               263
Other                                                                    (93)              (74)
                                                                 -----------       -----------
Net cash used in investing activities                                (46,938)          (13,363)
                                                                 -----------       -----------

Cash Flows From Financing Activities                                  25,518            84,675
Net borrowings from revolving credit facility                             --           (98,750)
Repayment of senior secured term loan
Net increase in long-term debt and other
  bank borrowings                                                        609               843
Receipt of government grants for facilities expansion                  2,000                --
Payment of financing expenses                                           (240)             (589)
Proceeds from issuance of common stock                                   756             3,884
Tax benefit from exercise of stock options                             4,353                --
Dividends paid                                                        (4,327)           (3,489)
                                                                 -----------       -----------
Net cash provided by (used in) financing activities                   28,669           (13,426)
                                                                 -----------       -----------
Effect of exchange rate changes on cash                                  (50)               23
                                                                 -----------       -----------
Net increase (decrease) in cash and cash equivalents                     336           (13,347)
Cash and cash equivalents at beginning of period                      12,451            20,617
                                                                 -----------       -----------
Cash and cash equivalents at end of period                       $    12,787       $     7,270
                                                                 ===========       ===========
</TABLE>


                                       8
<PAGE>

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

<TABLE>
<CAPTION>
                                                                 Nine Months Ended September 30,
                                                                 -------------------------------
                                                                       2006            2005
                                                                   ----------      ----------
<S>                                                                <C>             <C>
Supplemental Disclosures of Cash Flow Information

Cash paid during the period for:
  Interest                                                         $    2,468      $    3,910
  Income taxes - net of refunds                                        18,789           9,086

Supplemental Disclosure of Noncash Investing Activity

Capital expenditures related to expansion program included in
  accounts payable                                                 $      351      $       --
</TABLE>

            See notes to consolidated condensed financial statements.


                                       9
<PAGE>

                  BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
                          ITEM 1 - FINANCIAL STATEMENTS
        NOTES 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 2005
      Annual  Report to  Shareholders  and Annual Report on Form 10-K filed with
      the Securities and Exchange Commission on March 15, 2006.

3.    Inventories consist of the following:

                                          September 30,   December 31,
                                              2006            2005
                                          -------------   ------------
                                             (Dollars in Thousands)

      Raw materials and parts              $   46,670      $   36,526
      Work in process                          31,923          12,896
      Finished products
        (primarily replacement parts)          94,699          84,054
                                           ----------      ----------
                                           $  173,292      $  133,476
                                           ==========      ==========

4.    On  March  8,  2006,  the  Company's  Board  of  Directors   authorized  a
      three-for-two split of the Company's Class A common stock. The stock split
      was paid on March 29, 2006 to Company  shareholders of record on March 20,
      2006. The Company's Class A common stock began trading on a split-adjusted
      basis on March 30, 2006. All references in the  accompanying  consolidated
      condensed financial statements and notes thereto to net earnings per share
      and the number of shares have been adjusted to reflect this stock split.

5.    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, 2006 and
      2005:


                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                       Quarters Ended                 Nine Months Ended
                                                        September 30,                    September 30,
                                               ----------------------------      ----------------------------
                                                   2006             2005             2006             2005
                                               -----------      -----------      -----------      -----------
                                                      (Dollars in Thousands, Except Per Share Amounts)
<S>                                            <C>              <C>              <C>              <C>
      Net earnings                             $    16,720      $    12,777      $    52,800      $    32,126
                                               ===========      ===========      ===========      ===========
      Weighted average shares outstanding       31,289,478       30,651,359       31,255,652       30,400,182
                                               ===========      ===========      ===========      ===========
          Basic net earnings per share         $       .53      $       .42      $      1.69      $      1.06
                                               ===========      ===========      ===========      ===========

      Weighted average shares outstanding       31,289,478       30,651,359       31,255,652       30,400,182

      Effect of dilutive stock options,
        nonvested shares, stock
        appreciation rights and
        performance shares                         209,267          627,493          291,434          832,974
                                               -----------      -----------      -----------      -----------
      Weighted average shares
        outstanding - diluted                   31,498,745       31,278,852       31,547,086       31,233,156
                                               ===========      ===========      ===========      ===========
          Diluted net earnings per share       $       .53      $       .41      $      1.67      $      1.03
                                               ===========      ===========      ===========      ===========
</TABLE>

6.    The Company adopted  Statement of Financial  Accounting  Standards No. 123
      (revised 2004),  "Share-Based  Payment" ("SFAS 123R"),  on January 1, 2006
      using the modified prospective  application method.  Adoption of SFAS 123R
      did not have a  material  effect on the  Company's  financial  statements.
      Previously,   the   Company   accounted   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").  For  the  quarter  and  nine  months  ended
      September  30,  2005,  there would have been no effect on net earnings and
      net earnings per share if the fair value-based method provided by SFAS 123
      had been applied for all outstanding and unvested awards in those periods.
      Total stock  compensation  expense  recognized  was $1.1  million and $2.8
      million  for the  quarter  and  nine  months  ended  September  30,  2006,
      respectively,  and  $45,000 and  $135,000  for the quarter and nine months
      ended September 30, 2005.

      SFAS 123R required a classification  change in the statement of cash flows
      whereby the income tax benefit from stock option  exercises is reported as
      a financing  cash flow rather than as an operating cash flow as previously
      reported.  The $4.4 million  excess tax benefit  classified as a financing
      cash inflow for the nine months ended  September  30, 2006 would have been
      classified as an operating cash inflow prior to the adoption of SFAS 123R.
      SFAS 123R  also  required  any  remaining  debit in  common  shareholders'
      investment  related to unearned stock  compensation be reclassified to the
      appropriate equity accounts.

      At September 30, 2006,  there were 207,600  nonvested  shares  outstanding
      which  were   issued  to  certain   employees   pursuant  to  the  Bucyrus
      International,  Inc.  2004 Equity  Incentive  Plan,  (the "2004


                                       11
<PAGE>

      Incentive  Plan").  Of this amount,  179,100 shares cliff vest on December
      31, 2009.  However,  if certain defined  financial goals are attained each
      year,  25% of the shares vest in that year.  The  remaining  28,500 shares
      cliff  vest in  September  2008.  During  the third  quarter  of 2006,  no
      nonvested shares were issued and 19,350 nonvested shares issued earlier in
      2006 were  forfeited.  The  weighted-average  grant date fair value of the
      nonvested  shares  outstanding  as of  September  30, 2006 was $40.19.  At
      September 30, 2006,  there was $7.0 million of  unrecognized  compensation
      cost  related  to the  nonvested  shares.  This  cost  is  expected  to be
      recognized on a straight-line basis over a weighted-average  period of 3.1
      years.

      At September 30, 2006, a total of 358,200 stock  appreciation  rights were
      outstanding  pursuant to the 2004  Incentive  Plan.  The  weighted-average
      grant  date fair value of these  rights  was $21.52 per right.  The rights
      vest over four years and can be settled in shares only.  At September  30,
      2006, there was $6.7 million of unrecognized  compensation cost related to
      the rights,  which is expected to be recognized on a  straight-line  basis
      over a period of 3.25 years.  During the third  quarter of 2006,  no stock
      appreciation  rights were issued and 38,700 rights issued  earlier in 2006
      were forfeited.

      At  September  30,  2006,  a total of  47,137  performance  shares  of the
      Company's Class A common stock have been designated for issuance under the
      2004 Incentive Plan to certain  employees if specific  performance  levels
      are attained by the Company. The weighted-average grant date fair value of
      these  shares was $43.27 per share.  Any  performance  shares  credited to
      employees  will cliff vest on December  31, 2009.  At September  30, 2006,
      there was $1.8 million of  unrecognized  compensation  cost related to the
      performance shares,  which is expected to be recognized on a straight-line
      basis over a period of 3.25 years.  During the third  quarter of 2006,  no
      additional  performance shares were designated for issuance and a total of
      4,838  performance  shares  previously  designated for issuance earlier in
      2006 were forfeited.

      No options to purchase Company shares were granted or exercised during the
      third quarter of 2006. At September 30, 2006,  options were outstanding to
      purchase 9,600 shares of the Company's  Class A common stock at a weighted
      average exercise price of $8.33 per share.

7.    Intangible assets consist of the following:

<TABLE>
<CAPTION>
                                             September 30, 2006             December 31, 2005
                                          ------------------------      -------------------------
                                            Gross                        Gross
                                          Carrying    Accumulated       Carrying      Accumulated
                                           Amount     Amortization       Amount      Amortization
                                           ------     ------------       ------      ------------
                                                         (Dollars in Thousands)
<S>                                       <C>            <C>            <C>            <C>
      Amortized intangible assets:
        Engineering drawings              $ 25,500       $(11,500)      $ 25,500       $(10,543)
        Bill of material listings            2,856         (1,288)         2,856         (1,181)
        Software                             2,288         (2,064)         2,288         (1,892)
                                               629           (345)           773           (309)
                                          --------       --------       --------       --------
        Other                             $ 31,273       $(15,197)      $ 31,417       $(13,925)
                                          ========       ========       ========       ========
      Unamortized intangible assets:
        Trademarks/Trade names            $ 12,436                      $ 12,436
        Intangible pension asset             4,637                         4,637
                                          --------                      --------
                                          $ 17,073                      $ 17,073
                                          ========                      ========
</TABLE>


                                       12
<PAGE>

      The  estimated  future  amortization  expense of  intangible  assets as of
      September 30, 2006 is as follows:

                                            (Dollars in Thousands)

            2006 (remaining three months)            $   443
            2007                                       1,711
            2008                                       1,543
            2009                                       1,418
            2010                                       1,418
            2011                                       1,418
                                                       8,125
                                                     -------
            Future                                   $16,076
                                                     =======

8.    The  following  summarizes  the  Company's  environmental,   warranty  and
      litigation matters.

      Environmental

      The 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 Warranty

      The 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, 2006 and
      2005:


                                       13
<PAGE>

                                        Nine Months Ended September 30,
                                        -------------------------------
                                            2006               2005
                                         -----------       -----------
                                             (Dollars in Thousands)

            Balance at January 1         $     5,977       $     5,452
            Provision                          2,939             2,137
            Claims incurred                   (3,061)           (1,219)
                                         -----------       -----------
            Balance at September 30      $     5,855       $     6,370
                                         ===========       ===========

      Product Liability

      The 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.

      Asbestos Liability

      The Company has been named as a co-defendant in approximately 305 personal
      injury  liability  cases alleging  damages due to exposure to asbestos and
      other substances,  involving  approximately 585 plaintiffs.  The cases are
      pending  in courts in various  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 Litigation

      A 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. Therefore,  the Company has
      not recorded any liability with respect to this litigation.

      A wholly owned  Australian  subsidiary  of the Company is a defendant in a
      lawsuit in Queensland,  Australia relating to a contractual claim in which
      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  asserted various  contractual claims related
      to breach of contract damages and other remedies related to its claim that
      it was owed amounts for services  rendered under the contract.  This claim
      has been settled by the parties,  pending finalization of dismissal of the
      legal  proceedings,  for AUS $2.7  million  (US $2.1  million)  plus legal
      costs,  which have not yet been


                                       14
<PAGE>

      assessed. Based on the claim amount and estimated legal costs, the Company
      has  established  a reserve  for its  estimate of the  resolution  of this
      matter.

9.    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:

<TABLE>
<CAPTION>
                                                              Minimum         Accumulated
                                            Cumulative        Pension            Other
                                            Translation      Liability       Comprehensive
                                            Adjustments     Adjustments          Loss
                                            -----------     -----------      -------------
                                                      (Dollars in Thousands)
<S>                                         <C>              <C>              <C>
      Balance at December 31, 2005          $   (5,896)      $  (19,313)      $  (25,209)

      Changes - Nine months ended
        September 30, 2006                      (1,155)              --           (1,155)
                                            ----------       ----------       ----------
      Balance at September 30, 2006         $   (7,051)      $  (19,313)      $  (26,364)
                                            ==========       ==========       ==========
</TABLE>

10.   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:

<TABLE>
<CAPTION>
                                                     Quarter Ended             Nine Months Ended
                                                     September 30,               September 30,
                                                 ---------------------       ---------------------
                                                   2006          2005          2006          2005
                                                 -------       -------       -------       -------
                                                              (Dollars in Thousands)
<S>                                              <C>           <C>           <C>           <C>
      Service cost                               $   549       $   506       $ 1,781       $ 1,610
      Interest cost                                1,311         1,350         3,915         3,970
      Expected return on plan assets              (1,222)       (1,675)       (3,890)       (3,907)
      Amortization of prior service cost             108           235           336           339
      Amortization of actuarial loss                 221           377         1,267         1,181
                                                 -------       -------       -------       -------
      Net cost                                   $   967       $   793       $ 3,409       $ 3,193
                                                 =======       =======       =======       =======
</TABLE>

      The components of other net periodic  postretirement benefits cost (health
      care and life insurance) consisted of the following:


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                   Quarter Ended            Nine Months Ended
                                                   September 30,              September 30,
                                              ---------------------       ---------------------
                                                2006          2005          2006          2005
                                              -------       -------       -------       -------
                                                            (Dollars in Thousands)
<S>                                           <C>           <C>           <C>           <C>
      Service cost                            $   291       $   276       $   765       $   696
      Interest cost                               190           180           736           802
      Amortization of prior service cost          (62)          (67)         (188)         (187)
      Amortization of actuarial loss              (28)           52           130           234
                                              -------       -------       -------       -------

      Net cost                                $   391       $   441       $ 1,443       $ 1,545
                                              =======       =======       =======       =======
</TABLE>

      During  the  first  nine   months  of  2006,   the   Company   contributed
      approximately  $7.1  million to its pension  plans and $.9 million for the
      payment of benefits  from its  postretirement  benefit  plan.  The Company
      presently  anticipates  contributing  an  additional  $2.5  million to its
      pension  plans  and $.3  million  for the  payment  of  benefits  from its
      postretirement benefit plan during the remainder of 2006.

11.   In July 2006, the Financial  Accounting  Standards  Board ("FASB")  issued
      FASB  Interpretation  No. 48, "Accounting for Uncertainty in Income Taxes"
      ("FIN  48").  FIN 48 is an  interpretation  of  FASB  Statement  No.  109,
      "Accounting  for  Income  Taxes,"  and seeks to reduce  the  diversity  in
      practice associated with certain aspects of measurement and recognition in
      accounting  for  income  taxes.  In  addition,  FIN 48  requires  expanded
      disclosure  with  respect  to  the  uncertainty  in  income  taxes  and is
      effective as of the  beginning  of the  Company's  2007 fiscal  year.  The
      Company is currently  evaluating the impact, if any, that FIN 48 will have
      on its financial statements.

      In September  2006, the FASB issued SFAS No. 158,  "Employers'  Accounting
      for Defined Benefit Pension and Other  Postretirement Plans - an amendment
      of FASB Statements No. 87, 88, 106, and 132(R)" ("SFAS No. 158"). SFAS No.
      158  requires  an employer to  recognize  the over funded or under  funded
      status  of  a  defined   benefit   postretirement   plan   (other  than  a
      multiemployer  plan) as an asset or liability in its balance  sheet and to
      recognize  changes in that funded  status in the year in which the changes
      occur through comprehensive income. SFAS No. 158 also requires an employer
      to  measure  the  funded  status of a plan as of the date of its  year-end
      balance sheet. The Company is required to adopt the provisions of SFAS No.
      158 as of December 31, 2006.  The Company has not yet  determined the full
      impact  implementation of SFAS No. 158 will have on its financial position
      or results of operations;  however,  based on data for its defined benefit
      pension and other postretirement plans as of December 31, 2005, the impact
      of  adopting  SFAS No. 158 would be a  decrease  in  intangible  assets of
      approximately $4.6 million,  an increase in postretirement  liabilities of
      approximately   $4.2   million  and  a  net  of  tax  decrease  in  common
      shareholders' investment of approximately $6.0 million.


                                       16
<PAGE>

                  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 2003 and 2004,  market  prices  for
copper,  coal, iron ore and oil increased and continued to be strong in 2005 and
the first nine  months of 2006,  although  prices  have  recently  moderated  or
declined  slightly.  Factors that could support  sustained  demand for these key
commodities  during the  remainder  of 2006 and future years  include  continued
economic growth in China,  India and the developing  world, and renewed economic
strength in industrialized countries. Inquiries for machines in all three of the
Company's  product lines remain at a high level despite the recent moderation in
commodity prices.  The interest in the Company's machines continues to be strong
in the oil sands of Western Canada,  and inquiries  related to coal,  copper and
iron ore mines in other areas of the world have also remained strong.

      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.  Recent pronounced strength in commodity
markets has positively  affected  aftermarket sales,  although total aftermarket
sales remain at approximately  70% of sales.  Based on current sales and quoting
activity,  the Company  anticipates that aftermarket sales will be approximately
65% of sales  in 2006 and  approximately  60% of  sales in 2007.  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  of
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.  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.  In early  2005,  the Company  entered  into an  agreement  to lease a
facility,  which  has  approximately  94,250  square  feet of  floor  space  and
approximately 130,740 square feet of yard space, to be used for expansion of the
Company's  welding  operations.  On July 20, 2006, the Company announced that it
will undertake the third phase of its multi-


                                       17
<PAGE>

phase expansion program at its South Milwaukee facility.  The first phase of the
expansion provides 110,000 square feet of new space for welding and machining of
large electric mining shovel  components and was  substantially  complete at the
end of the third quarter of 2006.

      The second phase of the expansion program, announced on February 16, 2006,
will expand the  Company's  new facility  north of Rawson Avenue to over 350,000
square  feet  of  welding,  machining  and  outdoor  hard-goods  storage  space.
Construction  is expected to be completed in mid-2007 and is currently  ahead of
the original schedule.  The aggregate cost of phase one and two of the expansion
program is expected to be approximately $54 million.

      The third phase of the  expansion  program was  approved in support of the
Company's  ongoing  efforts  to meet the  continued  growth  of  demand  for its
machines  and their  components.  Phase  three will  include the  renovation  of
manufacturing  buildings and offices at the Company's existing  facilities south
of Rawson Avenue in South Milwaukee.  Its focus is on modernizing its facilities
and  improving  manufacturing  and  administrative   efficiencies  and  includes
renovation  as well as expansion of existing  buildings  and the addition of new
machine tools. The steps for accomplishing phase three are scheduled to maximize
manufacturing throughput during the renovation and construction processes. Phase
three construction is scheduled to be completed by the first quarter of 2008 and
is expected to cost approximately $58 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.  In
the  aggregate,  approximately  75% of the  Company's  2005 sales were priced in
United States dollars.

      Over  the past  three  years,  the  Company  increased  gross  profits  by
improving  manufacturing  overhead variances,  achieving  productivity gains and
growing  the  Company's  aftermarket  parts  and  services  business.  To  date,
increasing  costs 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 87% for the first nine  months of 2006 and 93% for the
year 2005. Lead times for deliveries of aftermarket  parts have increased in the
first nine months of 2006 as compared to the year 2005.  Lead times are expected
to  continue  to  increase  due to the  increase  in sales  volume and  capacity
constraints.  The  Company  is in  the  process  of  implementing  programs  and
identifying  subcontract  opportunities  to improve on-time  deliveries and lead
times.


                                       18
<PAGE>

      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 2006 and  2005.  The  Company  has  experienced
productivity  increases in recent  years,  primarily due to the  application  of
worldwide sales and inventory ERP systems and personnel upgrades.

      Warranty Claims

      Product quality is another key driver of customer  satisfaction  and, as a
result,  sales.  Management uses actual warranty claims incurred as a percentage
of total sales as one objective  benchmark to evaluate product  quality.  During
the first nine months of 2006 and the year 2005, actual warranty claims incurred
as a percentage of total sales were less than 1%.

      Backlog

      A strong  backlog is a tool which allows more accurate  sales forecast and
production  planning.  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, 2006
and  December  31,  2005,  as well as the  portion  of  backlog  which is or was
expected to be recognized as sales within twelve months of these dates:

                                         September 30,     December 31,
                                             2006              2005
                                         -------------     ------------
                                              (Dollars in Thousands)

                   Next 12 months          $504,269          $413,131
                   Total                    755,460           658,612

      The increase in the Company's  backlog at September 30, 2006 was primarily
due to an increase in new  machine  orders,  which  totaled  $120.5  million and
$299.8  million for the quarter and nine months ended  September  30, 2006.  New
machine orders in the third quarter of 2006 included an 8750AC walking  dragline
in Australia. Inquiries for machines in all three of the Company's product lines
remain at a high level.

      Inventory

      Inventory is one of the Company's  significant assets. As of September 30,
2006,  the  Company  had $173.3  million in  inventory.  Inventory  levels  have
increased in support of the Company's  increased sales volume.  Inventory turned
at a rate of approximately  3.5 times as of September 30, 2006 compared with 3.1
for the year 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.  The Company has
recorded  normal  inventory  obsolescence  provisions in the ordinary  course of
business and does not currently anticipate  recording any significant  inventory
impairments.


                                       19
<PAGE>

Results of Operations

      Quarter and Nine Months Ended  September  30, 2006 Compared to Quarter and
      Nine Months Ended September 30, 2005

      Sales

      Sales for the quarter and nine months ended September 30, 2006 were $185.0
million and $532.4  million,  respectively,  compared  with  $157.4  million and
$402.9  million  for the  quarter  and nine months  ended  September  30,  2005,
respectively.  Sales of aftermarket  parts and services for the third quarter of
2006 were $110.5  million,  a decrease of 2.1% from $112.9 million for the third
quarter of 2005.  Sales of  aftermarket  parts and  services for the nine months
ended September 30, 2006 were $350.7  million,  an increase of 27.2% from $275.7
million  for  the  nine  months  ended  September  30,  2005.  The  decrease  in
aftermarket  sales for the third  quarter  of 2006  when  compared  to the third
quarter of 2005 was  primarily  due to the  timing of orders  related to machine
moves and refurbishments.  On a year-to-date basis,  aftermarket sales increased
in both the United States and international markets, which increase reflects the
Company's  continuing  initiatives and strategies to capture  additional  market
share.  Aftermarket  sales  remain  strong as the  existing  installed  fleet of
Company machines around the world operates at very high  utilization  levels due
to the current  demand and  increased  prices for  commodities  that are surface
mined by the  Company's  machines.  Machine  sales for the third quarter of 2006
were $74.5  million,  an  increase  of 67.3% from  $44.5  million  for the third
quarter of 2005. Machine sales for the nine months ended September 30, 2006 were
$181.7  million,  an increase  of 42.9% from $127.2  million for the nine months
ended September 30, 2005. The increase in new machine sales was due to sustained
demand for  commodities  that are surface mined by the  Company's  machines as a
result of continued economic growth in the developing world and renewed economic
strength in industrialized countries.

      Gross Profit

      Gross profit for the third  quarter of 2006 was $47.9  million or 25.9% of
sales  compared  with $36.4  million or 23.1% of sales for the third  quarter of
2005.  Gross  profit for the nine  months  ended  September  30, 2006 was $135.7
million or 25.5% of sales  compared with $96.4 million or 23.9% of sales for the
nine months ended September 30, 2005. The increase in gross profit was primarily
due to increased  aftermarket and machine sales. To date,  increasing  prices of
steel and other raw materials have not had a significant impact on the Company's
gross profit due to higher  selling  prices of its products.  The mix of machine
and aftermarket sales impacts the Company's total gross profit percentage as new
machine sales have lower gross profit  percentages than  aftermarket  sales. New
machine  sales were 40% of total sales for the third quarter of 2006 compared to
28% for the third quarter of 2005 and were 34% of total sales for the first nine
months of 2006  compared to 32% for the first nine months of 2005.  Gross profit
for the  quarter  and nine months  ended  September  30, 2006 was reduced by $.3
million  and  $.7  million,  respectively,  of  training  costs  related  to the
Company's new manufacturing facility in Milwaukee.  These training costs for the
quarter  and nine  months  ended  September  30,  2005 were $.4 million and $1.1
million, respectively. Gross profit for the nine months ended September 30, 2006
and 2005 was reduced in each period 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.

      Selling, General and Administrative Expenses

      Selling,  general  and  administrative  expenses  for  the  quarter  ended
September  30,  2006 were $18.7  million or 10.1% of sales  compared  with $13.9
million or 8.9% of sales for the quarter  ended  September  30,  2005.  Selling,
general and administrative expenses for the nine months ended September 30, 2006
were $52.3 million or 9.8% of sales compared with $38.4 million or 9.5% of sales
for  the  nine  months  ended   September   30,  2005.   Selling,   general  and
administrative expenses for the quarter and nine months ended September 30, 2006
included  $1.1  million  and $2.8  million,  respectively,  related to


                                       20
<PAGE>

non-cash stock-based employee  compensation compared to $45,000 and $135,000 for
the quarter and nine months  ended  September  30,  2005.  In 2006,  the Company
increased  selling  and  administrative  expenses  as a result of the  hiring of
additional employees to support the current year and projected sales growth. The
Company expects continued  increases in selling and administrative  expenses due
to increased sales volumes,  but expects these expenses to remain at 10% or less
of sales.  Foreign currency  transaction  losses for the quarter and nine months
ended  September  30,  2006 were $.5  million  and $1.0  million,  respectively,
compared  with a loss of $.1 million and a gain of $1.2  million for the quarter
and nine months ended September 30, 2005, respectively.

      Research and Development Expenses

      Research  and  development  expenses for the quarter and nine months ended
September  30, 2006 were $2.2 million and $7.2 million,  respectively,  compared
with $1.6  million  and $4.4  million  for the  quarter  and nine  months  ended
September 30, 2005, respectively. The increase in 2006 was due to the continuing
development of electrical and machine upgrade systems.

      Operating Earnings

      Operating  earnings  for the third  quarter of 2006 were $26.5  million or
14.3% of sales,  compared  with  $20.5  million  or 13.0% of sales for the third
quarter of 2005. Operating earnings for the nine months ended September 30, 2006
were $74.9  million or 14.1% of sales,  compared  with $52.3 million or 13.0% of
sales for the nine months ended September 30, 2005.  Operating  earnings for the
quarter and nine months  ended  September  30, 2006  increased  from 2005 due to
increased gross profit resulting from an increased sales volume.

      Interest Expense

      Interest  expense for the quarter and nine months ended September 30, 2006
was $.8 million and $2.1 million,  respectively,  compared with $1.3 million and
$3.6  million  for the  quarter  and  nine  months  ended  September  30,  2005,
respectively.  The Company  capitalized  $.5 million and $.7 million of interest
during the quarter and nine months ended September 30, 2006, respectively,  as a
part of the cost of the Company's  expansion program.  The remaining decrease in
interest  expense for the nine months ended September 30, 2006 was primarily due
to reduced average borrowings.

      Income Taxes

      Income tax expense for the quarter  and nine months  ended  September  30,
2006 was $8.9  million  and  $19.9  million,  respectively,  compared  with $6.3
million and $16.3  million for the quarter and nine months ended  September  30,
2005,  respectively.  U.S.  and  foreign  taxes  are  calculated  at  applicable
statutory rates. Income tax expense for the nine months ended September 30, 2006
was reduced by a net income tax benefit of  approximately  $3.7 million recorded
in the second  quarter of 2006 related to foreign tax  credits.  The foreign tax
credits  resulted  from  the  completion  of  the  Company's  evaluation  of its
potential  to claim  additional  foreign tax credits  generated  in previous tax
periods.  The  lower  effective  tax  rate in 2006  was  also  due to the mix of
domestic and foreign earnings.  At September 30, 2006, the Company had available
approximately $10.7 million of federal net operating loss carryforwards compared
to $14.3 million at December 31, 2005. The carryforwards are useable at the rate
of $3.6 million per year.


                                       21
<PAGE>

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, 2006 and
2005, in each case compared to the same quarter in the prior year:

<TABLE>
<CAPTION>
                                                      Quarter Ended          Nine Months Ended
                                                      September 30,            September 30,
                                                   -------------------      ------------------
                                                    2006         2005        2006        2005
                                                   ------       ------      ------      ------
                                                             (Dollars in Thousands)
<S>                                                <C>          <C>         <C>         <C>
      Increase (decrease) in sales                 $ (948)      $2,355      $   89      $6,158
      Increase (decrease) in
        gross profit                                  (73)         382         250       1,217
      Increase in operating earnings                  163          352         299         760
</TABLE>

EBITDA

      Earnings before interest,  taxes, depreciation and amortization ("EBITDA")
for the quarter and nine months ended  September  30, 2006 was $30.2 million and
$85.8 million,  respectively,  compared with $23.9 million and $62.4 million for
the quarter and nine months ended  September 30, 2005,  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 as shown in the  Consolidated  Condensed  Statements of
Earnings  to EBITDA  and  reconciles  EBITDA to Net Cash  Provided  by (Used in)
Operating  Activities as shown in the Consolidated  Condensed Statements of Cash
Flows:


                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                              Quarter Ended               Nine Months Ended
                                                               September 30,                 September 30,
                                                         -----------------------       -----------------------
                                                           2006           2005           2006           2005
                                                           ----           ----           ----           ----
                                                                        (Dollars in Thousands)
<S>                                                      <C>            <C>            <C>            <C>
Net earnings                                             $ 16,720       $ 12,777       $ 52,800       $ 32,126
Interest income                                              (174)          (121)          (415)          (479)
Interest expense                                              804          1,278          2,050          3,640
Income taxes                                                8,931          6,287         19,881         16,322
Depreciation                                                3,166          2,971          9,406          8,755
Amortization (1)                                              704            705          2,115          2,084
                                                         --------       --------       --------       --------
EBITDA (2)                                                 30,151         23,897         85,837         62,448
Changes in assets and liabilities                         (34,275)        (8,750)       (48,509)       (29,772)
Non-cash stock compensation expense                         1,063             45          2,807            135
(Gain) loss on sale of fixed assets                           (19)           (62)            36             91
Interest income                                               174            121            415            479
Interest expense                                             (804)        (1,278)        (2,050)        (3,640)
Income tax expense                                         (8,931)        (6,287)       (19,881)       (16,322)
                                                         --------       --------       --------       --------
Net cash provided by (used in) operating activities      $(12,641)      $  7,686       $ 18,655       $ 13,419
                                                         ========       ========       ========       ========
Net cash used in investing activities                    $(20,749)      $ (5,374)      $(46,938)      $(13,363)
                                                         ========       ========       ========       ========
Net cash provided by (used in) financing activities      $ 35,992       $ (2,029)      $ 28,669       $(13,426)
                                                         ========       ========       ========       ========
</TABLE>

(1)   Includes amortization of intangible assets and debt issuance costs.

(2)   EBITDA is reduced by severance  expense for the quarters  ended  September
      30, 2006 and 2005 and the nine months ended September 30, 2006 and 2005 of
      $571,000, $251,000, $1,312,000 and $324,000, respectively.

Liquidity and Capital Resources

      Stock Split and Dividend Policy

      On  March  8,  2006,  the  Company's  Board  of  Directors   authorized  a
three-for-two  split of the Company's Class A common stock.  The stock split was
paid on March 29, 2006 to Company  shareholders of record on March 20, 2006. The
Company's Class A common stock began trading on a split-adjusted  basis on March
30, 2006. The Company's  Board of Directors also  authorized,  and  shareholders
approved at the 2006 annual meeting of  shareholders,  an increase in the number
of authorized shares of the Company's Class A common stock to 75,000,000 shares.
This increase in authorized  shares became  effective  upon filing the Company's
Amended and Restated  Certificate of Incorporation with the State of Delaware on
May 3, 2006.

      In addition, the Company's Board of Directors authorized a 30% increase in
the quarterly dividend to the amount of $.05 per share per quarter for dividends
payable after the date of the stock split.  On


                                       23
<PAGE>

October 19,  2006,  a cash  dividend of $.05 per share was declared and is to be
paid on November 20, 2006 to shareholders of record on November 2, 2006.

      Cash Requirements

      During the remainder of 2006,  the Company  anticipates  strong cash flows
from operations due to continued  strength in aftermarket parts sales as well as
continued  high demand for new  machines.  In expanding  markets,  customers are
generally  contractually  obligated to make  progress  payments  under  purchase
contracts for machine  orders and certain large parts 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  effect on its  liquidity,  although  the issuance of letters of
credit reduces the amount available for borrowings under the Company's revolving
credit facility.  If additional borrowings are necessary during the remainder of
2006, the Company believes it has sufficient capacity under its revolving credit
facility (see "Financing Cash Flows" below).

      On July 20, 2006,  the Company  announced that it will undertake the third
phase of its multi-phase expansion program at its South Milwaukee facility.  The
first phase of the expansion program included the construction of a new facility
on the grounds of the Company's  South  Milwaukee  campus north of Rawson Avenue
and was  substantially  complete  at the end of the third  quarter.  The  second
phase,  announced on February 16, 2006,  will expand the  Company's new facility
north of  Rawson  Avenue  and is  expected  to be  completed  in  mid-2007.  The
aggregate cost of phase one and two is expected to be approximately $54 million.
Phase  three  of  the   expansion   program  will  include  the   renovation  of
manufacturing  buildings  and  offices,  as well as the  addition of new machine
tools, at its existing  facilities  south of Rawson Avenue and is expected to be
completed by the first quarter of 2008 at a cost of  approximately  $58 million.
The Company is financing the expansion program through working capital and funds
available under its existing  revolving  credit facility as well as governmental
grants and other programs.

      At  September  30,  2006,  the  Company  had  contractual  obligations  of
approximately  $21.0 million with respect to the expansion  program.  Borrowings
under the Company's  revolving  credit  facility due May 27, 2010 increased from
$63.5 million at December 31, 2005 to $89.0 million at September 30, 2006. As of
September 30, 2006, there have been no other 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  2005 Annual  Report to
Shareholders.

      The Company's capital expenditures for the nine months ended September 30,
2006 were $47.8  million  compared  with $13.6 million for the nine months ended
September 30, 2005.  Included in capital  expenditures for the nine months ended
September  30, 2006 was  approximately  $34.0  million  related to the expansion
program,  of  which  $.4  million  was  paid  in  October  2006.  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  2006  and  in  2007  as  it  increases
manufacturing  capacity and upgrades  and  replaces  manufacturing  equipment to
support increased sales activity. The Company believes cash flows from operating
activities and funds  available  under its revolving  credit facility as well as
governmental  grants  and other  programs  will be  sufficient  to fund  capital
expenditures during the remainder of 2006 and in 2007.

      At September  30,  2006,  there were $58.6  million of standby  letters of
credit outstanding under all Company bank facilities.

      The Company  believes  that cash flows from  operations  and its revolving
credit  facility will be sufficient to fund its cash  requirements  for the next
twelve months. The Company also believes that cash flows from operations will be
sufficient  to repay any  borrowings  under its  revolving  credit  facility  as
necessary.


                                       24
<PAGE>

      Sources and Uses of Cash

      The Company had $12.8 million of cash and cash equivalents as of September
30, 2006. All of this cash is located at various foreign  subsidiaries  and will
be 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 2006,  the  Company  generated  cash from
operating  activities  of $18.7  million  compared to $13.4 million in the first
nine months of 2005.  The increase in cash flows from  operating  activities was
driven primarily by increased sales activity.

      Receivables

      The   Company   recognizes   revenues   on   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, 2006, the Company
had $163.3 million of  receivables  compared to $155.5 million of receivables at
December 31, 2005. The increase in receivables  reflects the Company's increased
sales volume and the timing of  collections.  Receivables  at September 30, 2006
and December 31, 2005 included $63.6 million and $68.2 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.

      Financing Cash Flows

      On May 27, 2005,  the Company  entered into a credit  agreement  with GMAC
Commercial  Finance LLC as lead lender. The credit agreement provides for a five
year revolving credit facility.  During the third quarter of 2006, the amount of
the  revolving  credit  facility  was  increased  from $120.0  million to $200.0
million.  Interest on borrowed  amounts is subject to quarterly  adjustments  to
prime or LIBOR rates as defined in the credit  agreement.  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, 2006, the Company
had $89.0  million  of  borrowings  under its  revolving  credit  facility  at a
weighted  average  interest rate of 6.8%.  The amount  available for  borrowings
under the revolving credit facility at September 30, 2006 was $58.4 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, 2006.


                                       25
<PAGE>

      Registration of Securities

      On June 30,  2006,  the  Company  filed an  automatic  shelf  registration
statement  with the  Securities  and Exchange  Commission,  which will allow the
Company  to issue  and  sell,  from  time to time in one or more  offerings,  an
indeterminate amount of the Company's debt securities,  common stock,  preferred
stock or warrants as the Company  deems prudent or necessary to raise capital at
a later date. The shelf registration statement became effective immediately upon
filing.

      Critical Accounting Policies and Estimates

      See  Critical   Accounting   Policies  and  Estimates   discussed  in  the
Management's Discussion and Analysis section of the Company's 2005 Annual Report
to Shareholders. There have been no material changes to these policies.

      In July 2006, the Financial  Accounting  Standards  Board ("FASB")  issued
FASB  Interpretation  No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 is an  interpretation  of FASB Statement No. 109,  "Accounting  for
Income  Taxes," and seeks to reduce the  diversity in practice  associated  with
certain  aspects of measurement  and recognition in accounting for income taxes.
In addition, FIN 48 requires expanded disclosure with respect to the uncertainty
in income  taxes and is  effective as of the  beginning  of the  Company's  2007
fiscal year. The Company is currently evaluating the impact, if any, that FIN 48
will have on its financial statements.

      In September  2006, the FASB issued SFAS No. 158,  "Employers'  Accounting
for Defined  Benefit  Pension and Other  Postretirement  Plans - an amendment of
FASB  Statements  No. 87, 88, 106, and 132(R)"  ("SFAS No.  158").  SFAS No. 158
requires an employer to recognize  the over funded or under  funded  status of a
defined  benefit  postretirement  plan (other than a  multiemployer  plan) as an
asset or liability in its balance sheet and to recognize  changes in that funded
status in the year in which the changes occur through comprehensive income. SFAS
No. 158 also  requires an employer to measure the funded  status of a plan as of
the date of its  year-end  balance  sheet.  The Company is required to adopt the
provisions  of SFAS No. 158 as of  December  31,  2006.  The Company has not yet
determined  the full  impact  implementation  of SFAS No.  158 will  have on its
financial  position  or results of  operations;  however,  based on data for its
defined benefit pension and other  postretirement plans as of December 31, 2005,
the impact of adopting SFAS No. 158 would be a decrease in intangible  assets of
approximately  $4.6  million,  an  increase  in  postretirement  liabilities  of
approximately  $4.2  million and a net of tax  decrease in common  shareholders'
investment of approximately $6.0 million.


                                       26
<PAGE>

                  BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
       ITEM 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  agreement  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,  2006, 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,  2006 would have the  effect of  changing  the
Company's interest expense on an annual basis by approximately $.6 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,
2006, 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.


                                       27
<PAGE>

                  BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
                        ITEM 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  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  and
Secretary  concluded that the disclosure  controls and procedures were effective
as of the end of the quarter  ended  September  30, 2006 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, 2006 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.


                                       28
<PAGE>

      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:

      o     customers' stockpiles and production capacity,  including customer's
            ability to procure tires for loading  trucks,  as well as production
            and consumption rates of copper,  coal, iron, oil and other ores and
            minerals;

      o     the Company's plant capacity;

      o     raw material supply and subcontractor capacity;

      o     the cash flows of customers;

      o     consolidation among customers and suppliers;

      o     work   stoppages   at   customers,   suppliers   or   providers   of
            transportation;

      o     the timing,  severity and  duration of customer and industry  buying
            cycles;

      o     unforeseen patent, tax, product,  environmental,  employee health or
            benefit, or contractual liabilities that affect the Company;

      o     litigation;

      o     nonrecurring restructuring and other special charges incurred by the
            Company;

      o     changes in  accounting or tax rules or  regulations  that affect the
            Company;

      o     changes in the relative values of currencies;

      o     the Company's leverage and debt service obligations;

      o     the Company's  success in recruiting  and retaining key managers and
            employees; and

      o     labor costs and labor relations.

      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  2005 Annual Report to  Shareholders  and Annual Report on
Form 10-K filed with the Securities  and Exchange  Commission on March 15, 2006.
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.


                                       29
<PAGE>

                                     PART II
                                OTHER INFORMATION

Item 1.    Legal Proceedings.

           Not applicable.

Item 1A.   Risk Factors.

           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.


                                       30
<PAGE>

                                   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 9, 2006                   /s/Timothy W. Sullivan
     --------------------                ---------------------------------------
                                         Timothy W. Sullivan
                                         President and Chief Executive Officer


Date   November 9, 2006                   /s/ Craig R. Mackus
     --------------------                ---------------------------------------
                                         Craig R. Mackus
                                         Chief Financial Officer and Secretary


                                       31
<PAGE>

                           BUCYRUS INTERNATIONAL, INC.
                                  EXHIBIT INDEX
                                       TO
                          QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2006

Exhibit
Number        Description
------        -----------

31.1          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 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