10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to

Commission file number 000-50858

BUCYRUS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)

DELAWARE (State or Other Jurisdiction of Incorporation or Organization)	39-0188050 (I.R.S. Employer Identification No.)
P. O. BOX 500 1100 MILWAUKEE AVENUE SOUTH MILWAUKEE, WISCONSIN (Address of Principal Executive Offices)	53172 (Zip Code)
(414) 768-4000 (Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: Class A Common Stock, $.01 per share Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

          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 o No x

          The aggregate market value of the registrant’s common stock held by non-affiliates was $1.6 billion as of June 30, 2006, which was the last business day of the registrant’s most recently completed second fiscal quarter.

          As of February 23, 2007, 31,594,598 shares of Class A common stock of the Registrant were outstanding.

          Documents Incorporated by Reference:

          1) Portions of our 2006 Annual Report to Stockholders are incorporated by reference in Part II.

          2) Portions of our Proxy Statement for the Annual Meeting of Stockholders to be held on April 25, 2007                        are incorporated by reference in Part III.

TABLE OF CONTENTS

Item	Description	Page
	PART I
	Sources of Market and Industry Data	1
	Forward-Looking Statements	2-3
1	Business	4-16
1A	Risk Factors	16-25
1B	Unresolved Staff Comments	25
2	Properties	25-26
3	Legal Proceedings	26-28
4	Submission of Matters to a Vote of Security Holders	28
	Executive Officers	29
	PART II
5	Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	30
6	Selected Financial Data	31
7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
7A	Quantitative and Qualitative Disclosures about Market Risk	31
8	Financial Statements and Supplementary Data	31
9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
9A	Controls and Procedures	32
9B	Other Information	32
	PART III
10	Directors, Executive Officers and Corporate Governance	33
11	Executive Compensation	33
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
13	Certain Relationships, Related Transactions and Director Independence	33
14	Principal Accounting Fees and Services	33
	PART IV
15	Exhibits and Financial Statement Schedules	34-36
	Signatures and Power of Attorney	37-38
	Exhibit Index	39-42

PART I

SOURCES OF MARKET AND INDUSTRY DATA

          This report includes market share and industry data and forecasts that Bucyrus International, Inc. (“we”, “us”, “our”) has obtained from internal company surveys, market research, consultant surveys, publicly available information and industry publications and surveys. Information regarding historical equipment sales, industry surveys of equipment installation and industry aftermarket purchasing and sales information are derived primarily from databases maintained by the Parker Bay Company, which specializes in providing market research for the mining and earthmoving equipment industries. Third party surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such information. We have not independently verified any of the data from third party sources nor have we ascertained that the underlying economic assumptions relied upon therein. Similarly, internal company surveys and reports, industry forecasts and market research, which we believe to be reliable based upon our knowledge of the industry, have not been verified by any independent sources. In addition, we do not know what assumptions regarding general worldwide or country specific economic growth were used in preparing the third party forecasts cited in this report. Except where otherwise noted, statements as to our position relative to our competitors or as to market share refer to the then most recent available data.

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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 our 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 cause our actual results to differ materially from those anticipated in such forward-looking statements and could adversely affect our actual results of operations and financial condition include, without limitation:

• disruption of our plant operations due to equipment failures, natural disasters or other reasons;

• our ability to attract and retain skilled labor;

• our production capacity;

• our ability to purchase component parts or raw materials from key suppliers at acceptable prices;

• the cyclical nature of the sale of machines due to fluctuations in market prices for copper, coal, oil, iron ore and other minerals, changes in general economic conditions, interest rates, customers’ replacement or repair cycles, consolidation in the mining industry and competitive pressures;

• the loss of key customers or key members of management;

• the risks and uncertainties of doing business in foreign countries, including emerging markets, and foreign currency risks;

• our ability to continue to offer products containing innovative technology that meets the needs of our customers;

• costs and risks associated with regulatory compliance and changing regulations affecting the mining industry and/or electric utilities;

• product liability, environmental and other potential litigation;

• work stoppages at our company, our customers, suppliers or providers of transportation;

• our ability to satisfy under-funded pension obligations;

• our ability to complete the acquisition of DBT GmbH on the terms and conditions and/or timetable previously announced, to selectively integrate the operations of DBT GmbH and to realize expected synergies and expected levels of sales and profit from this acquisition;

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• potential risks and liabilities of DBT GmbH unknown to us; and

• our leverage and debt service obligations, including particularly if we complete the acquisition of DBT GmbH.

The foregoing factors do not constitute an exhaustive list of factors that could cause our actual results to differ materially from those anticipated in forward-looking statements, and should be read in conjunction with the other cautionary statements and risk factors described in Item 1A to this Annual Report on Form 10-K and other cautionary statements described in our subsequent reports filed with the Securities and Exchange Commission. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 1. BUSINESS

Company Overview

           We design, manufacture and market draglines, electric mining shovels and rotary blasthole drills (collectively, “machines”) used for surface mining and provide the aftermarket replacement parts and service for these machines. We believe that we have the largest installed base of this equipment (we calculate the value of our installed base of equipment based on its estimated replacement value) in the world and are the leading market provider of draglines and large rotary blasthole drills. Our products are sold to customers throughout the world in every market where surface mining is conducted with modern methods. Our products are continuously evolving as improvements in design and technology emerge, with the goal of providing the customer maximum productivity and cost effectiveness. We concentrate on producing technologically advanced and productive machines that allow our customers to conduct cost-efficient operations. We manufacture alternating current (“AC”) drive draglines and electric mining shovels and offer advanced computer control systems which allow technicians at our headquarters to remotely monitor and adjust the operating parameters of suitably equipped machines at locations around the world via the Internet.

           Growth in our industry is driven by increased demand for surface mined commodities such as copper (especially in South America), oil sands (Canada) and coal (China, the United States, India, Australia, South African and Russia). We believe that surface mining of coal in China and India holds potential for long-term growth.

          Machine sales are closely correlated with the strength of commodity markets and maintain and augment our almost $12.6 billion installed base as of December 31, 2006. Our installed base of machines provides the foundation for our aftermarket activities. Our aftermarket parts and service operations, which historically have been more stable and more profitable than our machine sales, have accounted for approximately 72% of our sales over the last 10 years. Over that period and throughout various commodities cycles, our aftermarket sales have sustained a compound annual sales growth rate of 10%, increasing every year except for 1999, in which sales declined 2%. We have established a global presence with a network of 26 sales and service offices located in all countries where major surface mining operations are located. We manufacture our machines and the majority of our aftermarket parts at our facilities in South Milwaukee and Milwaukee, Wisconsin. We are in the process of completing a multi-phase expansion of our South Milwaukee manufacturing facilities. See ITEM 2 - PROPERTIES for further discussion of this expansion program.

           We incorporated in Delaware in 1927 as the successor to a business that began producing excavation machines in 1880.

Pending Acquisition of DBT

           On December 17, 2006, we signed a definitive agreement to acquire DBT GmbH (“DBT”), a subsidiary of RAG Coal International AG (“RAG”). DBT is a leading worldwide supplier of complete system solutions for underground coal mining and manufactures equipment including roof support systems, armored face conveyers, plows, shearers and continuous miners used primarily by customers who mine coal. We have agreed to pay $710.0 million in cash and issue to RAG 471,476 shares of our Class A common stock with an initial market value of $21 million (based on the average closing price of our Class A common stock for the 20-day trading period

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ended December 14, 2006). The transaction is subject to various closing conditions and regulatory approvals.

Industry Overview

           The equipment that we manufacture and the services that we provide are primarily used to mine copper, coal (thermal and metallurgical), oil sands and iron ore. 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. While our aftermarket parts and service sales have grown consistently, mine operators tend to purchase machines when they anticipate sustained strength in the commodities markets. Factors that could support sustained demand for these key commodities include continued economic growth in China, India and other nations in the developing world and continued economic strength in industrialized countries.

Commodities Markets Served

          Our equipment is primarily used by large multinational companies engaged in surface mining for a variety of commodities. Surface mining equipment for copper, coal (thermal and metallurgical), oil sands and iron ore operations have accounted for the largest percentage of industry demand. In recent years, coal mining operations have accounted for an increasing share of our sales of machines and aftermarket parts and services, and activity relating to copper and oil sands have remained strong.

          Copper. Copper is a basic material used in residential and commercial construction, electrical equipment, transportation, industrial machinery and durable consumer goods. According to the Copper Development Association, on average each Western single family home contains approximately 440 pounds of copper and each automobile contains more than 50 pounds of copper. Copper is predominantly surface mined. Demand for copper is being driven by accelerating economic growth in the developing world and continued consumption in the developed world. Developing world demand is compounded because developing markets do not have the advantage of large pools of recycled copper scrap, which historically has accounted for approximately half of United States copper consumption. According to the International Copper Study Group (“ICSG”), world copper use in 2007 is projected to grow by 4.2%, or about .8 million tons, to 19.7 million tons. According to the Australian Bureau of Agricultural and Resource Economics (“ABARE”), China’s copper consumption is forecasted to increase by 10% in 2007, based on strong growth in infrastructure development and rebuilding of stocks in 2005. According to the ICSG, worldwide mine production of copper was 16.4 million tons in 2005 and is projected to increase to 16.7 million tons in 2006 and 17.9 million tons in 2007. In addition, according to ICSG, total expansion of annual mine capacity from 2005 to 2009 is expected to be approximately 3.6 million tons. The projected expansions exclude additional production that could come from existing capacity at mines that are currently on care and maintenance or temporary cutback.

          Coal. Coal is the world’s most abundant low-cost energy source and is a critical element of energy policy for many countries. There are two types of coal: steam or thermal coal used to generate electricity and coking or metallurgical coal required to produce steel. Coal accounts for approximately 40% of global electricity generation according to the Energy Information Administration. Demand for coking coal has recently risen in tandem with the increased demand for steel. The largest coal producing nations are China, the United States, India, Australia, South Africa and Russia, according to the World Coal Institute.

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           China and India, which together account for 37% of the world’s population according to the U.S. Census Bureau, have fast-growing economies and limited domestic energy sources other than coal. In China, coal is primarily mined underground, but surface mining is growing and in an attempt to support China’s growing economy, China is increasingly adopting modern mining methods and using Western equipment to access its coal reserves. According to China’s National Development and Reform Commission, China produced approximately 2.41 billion tons of coal in 2005, a 23% increase over 2004. China is expected to produce 2.76 billion tons of coal by 2010. I In India, coal is predominately surface mined. According to India’s Ministry of Coal, India produced 422 million tons of coal in 2005 and, according to Coal India Limited, demand is expected to be 578 million tons by 2011.

           Oil Sands. A geological formation of oil sands exists in the Athabasca region of northern Alberta, Canada. Oil sands are a viscous mixture of sand, bitumen, clay and water with the consistency of cold molasses. According to the Canadian Association of Petroleum Producers (“CAPP”), the oil sands are believed to contain the equivalent of 315 billion barrels of oil, of which 175 billion has already been established as commercially viable using today’s extraction methods. For reference, according to 2005 United States Energy Information Administration data, the oil reserves of Saudi Arabia contain approximately 260 billion barrels. According to CAPP, Alberta’s oil sands currently account for about 39% of Canada’s total petroleum production at approximately 1 million barrels per day and is expected to grow to 4 million barrels per day by 2020. Surface mining methods account for approximately two-thirds of current production in the oil sands region, according to the Alberta Economic Development Authority. We have an established sales and service infrastructure as a platform to strengthen our position in the oil sands area of Western Canada.

           Iron Ore. Iron ore is the only source of primary iron used to make steel and is mined in more than 50 countries. Substantially all iron ore is surface mined. In recent years, according to ABARE, the five largest producers, accounting for approximately 74% of world production, have been Brazil, Australia, China, India and Russia. The market for iron ore is largely a function of the demand for steel. Steel is used to produce, among other things, automobiles and other motor vehicles, mass transit and rail transport equipment, structural components for building and infrastructure, including bridges, railroads and factories, and industrial parts. According to ABARE, worldwide production of iron ore in 2005 was 1.45 billion tons and is estimated to be 1.62 billion tons in 2006 and 1.77 billion tons in 2007. Growth is being driven by Chinese industrialization as well as additional requirements for steel in the developed and developing world.

           Other Minerals. Surface mining machines are also used to mine molybdenum, phosphate, bauxite, gold, diamonds and uranium.

Machines

           Our line of machines includes draglines, electric mining shovels and rotary blasthole drills.

           Draglines. Draglines are primarily used in coal mining applications to remove overburden (i.e., the rock and soil that lies above the coal being mined) by dragging a large bucket through the overburden and carrying it away. Our draglines weigh from 500 to 7,500 tons, and are typically described in terms of their “bucket size,” which can range from nine to 220 cubic yards. We

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currently offer a full line of models ranging in price from $30 million to in excess of $100 million per dragline. Draglines are the largest and most expensive type of surface mining equipment, but offer customers the lowest cost per ton of material moved. The average life of a dragline is approximately 40 years.

           Our long-time alliance with Siemens Energy & Automation (“Siemens”) led recently to the development of new dragline technology entitled Direct Drive for Draglines (“D^3”), a gearless drive system for hoist and drag motions that enables mines to increase productivity and reduce downtime, maintenance costs and energy consumption. Bucket filling times are reduced and hoisting, lowering and payout speeds are increased. The customer also realizes cost savings through the elimination of hoist/drag gearing and related lubrication systems and the hoist/drag DC motors and generators, which are no longer required with the D³ system. The removal of these items immediately eliminates the associated maintenance and downtime costs.

           Electric Mining Shovels. Mining shovels are primarily used to load copper, coal, oil sands, iron ore, other mineral bearing materials, overburden, or rock into trucks. There are two basic types of mining shovels: electric and hydraulic. Electric mining shovels are able to handle a larger load, allowing them to move greater volumes of rock and minerals, while hydraulic shovels are diesel powered, smaller and more maneuverable. An electric mining shovel offers significantly lower cost per ton of mineral mined over a longer period of time as compared to a hydraulic shovel. Electric mining shovels are characterized in terms of hoisting capability and dipper or load capacity. We offer a full line of electric mining shovels, with available hoisting capability of up to 120 tons. Dipper capacities range from 7 to 90 cubic yards. Prices range from approximately $5 million to $23 million per shovel, with the selling price of our most popular shovels being in the upper part of this range. Our electric mining shovels have an average life of approximately 15 years.

           In recent years, we have developed the innovative 495 Series High-Performance shovels. The highlights of this series include planetary gear configuration, insulated gate bipolar transistor (“IGBT”) electrics and a third rail swing system to enhance shovel operation through increased efficiency and lower maintenance costs. A fully modularized electrical room ships directly to the field to facilitate the field assembly process. We are focused on continuous reliability enhancements to support our customers’ needs. Since machine downtime results in lost revenue for our customers, shovel availability is vitally important in mining operations.

           Rotary Blasthole Drills. Many surface mines require breakage of rock, overburden or ore by blasting with explosives. To accomplish this, it is necessary to bore out a pattern of holes in the ground area to be mined into which explosives are then placed. Rotary blasthole drills are used to drill these holes and are usually described in terms of the diameter of the hole they bore. We offer a line of rotary blasthole drills ranging in hole diameter size from 6.0 inches to 17.5 inches and ranging in price from approximately $0.6 million to $4 million per drill, depending on machine size and other variable features. The selling price of our most popular drills is in the upper part of this range. The average life of a rotary blasthole drill is approximately 15 years.

          Modular design techniques have been applied to blasthole drills to provide ease of maintenance by simplifying equipment change outs and servicing. Our 39HR is a drill with the production capabilities of larger machines and the flexibility, speed and maneuverability of smaller machines. An important flexibility feature of the 39HR drill is its ability to drill under itself at a ­–15 degree slope. The efficient angle hole drilling is accomplished without the use of back braces,

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which allows angle adjustments between –15 and +30 degrees, and is the only machine available today with this capability.

Aftermarket Parts and Services

           We have a comprehensive aftermarket business that supplies replacement and upgrade parts and services for our installed base of operating equipment. Over the life of a machine, customer purchases of aftermarket parts and services generally exceed the original purchase price of the machine. Our aftermarket offerings include engineered replacement parts, maintenance and repair labor, technical advice, refurbishment and relocation of machines, comprehensive structural and mechanical engineering, non-destructive testing, repairs and rebuilds of machine components, product and component upgrades, turnkey erections, equipment operation and complete equipment management under comprehensive, long-term maintenance and repair contracts. We also distribute less sophisticated components which are consumed in the normal course of operating these machines. A substantial portion of our international repair and maintenance services are provided through our global network of wholly owned foreign subsidiaries and overseas offices operating in Australia, Brazil, Canada, Chile, China, England, India, Peru and South Africa. We also maintain a continuous physical presence at certain customers’ domestic and overseas mine sites in some of these countries in connection with our maintenance and repair contract operations.

          We generally realize higher margins on sales of our aftermarket parts and services than on sales of our machines. Moreover, because these machines tend to operate continuously in all market conditions with expected lives ranging from 15 to 40 years and have predictable parts and maintenance needs, our aftermarket business has historically been more stable and predictable than the market for our machines, which is closely correlated with expectations of sustained strength in commodity markets.

           Large mining customers are increasingly outsourcing the skills involved in maintaining large and complex surface mining equipment. We offer comprehensive maintenance and repair contracts to address this trend. Under these contracts, we provide all replacement parts, regular maintenance services and necessary repairs for the excavation equipment at a particular mine with an on-site support team. In addition, some of these contracts call for our personnel to operate the equipment being serviced. Maintenance and repair contracts are beneficial to our customers because they promote high levels of equipment reliability and performance, allowing the customer to concentrate on mining production. Maintenance and repair contracts typically have terms of three to five years with provisions for renewal and early termination. New mines in areas such as Australia, Canada, Chile and Peru are our primary targets for maintenance and repair contracts because it is difficult and expensive for mining companies to establish the necessary infrastructure for ongoing maintenance and repair in remote regions of these countries.

           Our aftermarket parts and service sales have generally grown consistently over the past 10 years. For most of our customers, mining continues even during periods of lower commodity prices, maintaining demand for aftermarket parts and services, although competition from independent firms called “will-fitters” that produce copies of the parts manufactured by us and other original equipment manufacturers tends to intensify during periods of commodity price weakness. We continue to try to improve our performance in key areas such as reducing lead times, increasing on-time delivery and implementing an information technology infrastructure which motivate customers to purchase their aftermarket parts and services from us. We believe our emphasis on quality and technology has further increased customer motivation to use more of our aftermarket parts and services. We believe that our continued focus on on-time delivery,

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competitive lead times and enhanced information technology systems combined with our comprehensive offerings of quality aftermarket components and installation services and our development of key supplier alliances position it to compete effectively for most aftermarket opportunities.

Customers

           Most of our customers are large multinational corporations with operations in the various major surface mining markets throughout the world. In recent years, customers have reduced their operating costs by employing larger, more efficient machines such as those we produce and have become increasingly sophisticated in their use and understanding of technology. Our focus on incorporating advanced technology such as AC drives and advanced controls has increased customer adoption of our product offerings. Further, we believe these developments have contributed to increased demand for our aftermarket parts and service since we are well equipped to provide the more sophisticated parts, product technical knowledge and service required by customers who use more complex and efficient machines.

           Over the past five years, our customers have conducted their most significant operations in the United States, South America, South Africa, Australia, Canada, China and India. We expect China and India to experience the most growth in surface mining in the future. In the aggregate, sales of our machines were $255.7 million, $180.6 million and $132.8 million and sales of our aftermarket parts and services were $482.3 million, $394.4 million and $321.4 million in 2006, 2005 and 2004, respectively. Our customers use our aftermarket parts and services because our high quality, reliable and durable products, and services that are well suited to the long productive lives of our machines. However, some surface mine operators may find it more economical to buy lower quality and less durable parts from will-fitters for equipment that is near the end of its useful life.

           Our customers operate under a high fixed cost structure. Small savings on the initial purchase of machines may be offset by less efficient operations and greater down time. Furthermore, our customers’ operations are often conducted in remote areas and the large capital investment and long lead time associated with the purchase and erection of a machine encourages many customers to select more reliable and efficient machines and to keep these machines in continuous operation for as long as possible. As a result, our customers are focused on quality as well as price and expect us to offer comprehensive aftermarket parts and services to increase efficiency and reduce down time.

           We do not consider ourselves to be dependent upon any single customer, although on an annual basis a single customer may account for a meaningful percentage of our sales, particularly machine sales. In 2006, 2005 and 2004, one customer, BHP Billiton, accounted for approximately 13%, 14%, and 12%, respectively, of our sales. Our top five customers in each of 2006, 2005 and 2004 collectively accounted for approximately 40%, 38% and 36%, respectively, of our annual sales. We believe this trend reflects the recent consolidation within the mining industry.

Information Technology Infrastructure

           Baan, an enterprise resource planning (“ERP”) system, is installed at all of our worldwide locations. This ERP system allows us to more rapidly analyze information in real time on a regional, customer, product line and commodity basis. Through this ERP system we can monitor numerous functions, including engineering, distribution, inventory and finance. We can collect data regarding our customers’ buying patterns and pricing history and deliver this information in

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real time to our managers to assist in their decision making. Our ERP system also allows us to apply company wide performance metrics, which we use to evaluate and improve our operations.

           We believe we can utilize our information technology infrastructure to generate new sales, particularly aftermarket sales. Our ERP system allows us to monitor our worldwide inventory, determine when we or our suppliers can deliver parts and track on time delivery performance, which together enables us to improve the accuracy of our quoted lead times, thereby increasing customer satisfaction and inventory turns. We are developing strategies to increase sales and more effectively compete on price, delivery and available inventory because we can identify success rates on quotations for specific parts and customers and can record and communicate determinations as to the reasons for lost sales. We can ensure consistency and optimize pricing by monitoring pricing trends of individual parts sold worldwide. We are able to use this system to examine data related to our installed base, categorized by commodities, customers, and specific machines, to discern trends and formulate strategies for adding incremental sales. Information on global vendor sourcing and cost will enable us to identify and utilize lower cost sources of supply.

Product Technologies

           We believe that field-proven designs coupled with innovative technologies enable mines to achieve peak efficiency and top production levels. To achieve these goals, we believe that it is critical for mining companies to have the most accurate, detailed and up-to-date information on their machines and in their mines. Over the last decade, reliable and economical information and communication systems have been adapted to virtually all facets of surface mine operations bringing the industry up to 21^st century service and communication standards. Initially, the introduction and adaptation of information technologies to the surface mining industry was relatively slow compared to other industries due to the unique characteristics and differences found in open pit mining environments. However, mining companies are gradually embracing these technologies to remain competitive and achieve the lowest cost per ton.

           The growth and integration of technologies such as wireless communication, global positioning systems (“GPS”), onboard electronics and operation management software allows mining systems to be monitored, optimized and integrated throughout the mine. These technologies enable mining operations to collect and transmit data in real-time throughout mines and worldwide if needed. High precision GPS based systems assist mineral resource companies with all phases of a project from exploration, to mine planning and development, to production and reclamation. When used on mobile mining equipment, we believe that GPS technology provides more precise and safer methods for extracting materials. Shovels equipped with GPS technology allow operators to monitor and track the positioning of personnel and equipment thereby increasing safety through improved visibility. Operators are able to view the location of the shovel’s dipper in relation to the haul truck and position it for optimal dumping.

           We have applied GPS as a new technology for enhancing blasthole drill productivity. Blasthole drills equipped with GPS allow equipment operators to use the minimum amount of explosives required for maximum accuracy and control. GPS also allows the operator to navigate the drill without stakes to within centimeters of the desired blasthole location. GPS creates a more accurate drill pattern and eliminates blasting bench surveying and individual hole flagging. Our 49HR drill can be outfitted with any GPS system on the market, allowing our drill customers to decide which system best meets their needs.

           We believe that a crucial element to maintaining a successful mining operation in today’s global economy is having the ability to access and share real-time machine data throughout the

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mine. We offer a tool called AccessDirect that meets this need by incorporating key technologies to provide intelligent solutions that enhance productivity and reduce downtime. Our AccessDirect system allows remote troubleshooting and monitoring of a machine’s controls via the Internet. This is accomplished through a wireless transmission from a machine’s maintenance station to a computer in the mine office. The remote user can then log into the mine computer via the Internet or phone connection from virtually anywhere in the world and monitor or adjust electrical control parameters without interfering with machine operation. For machines that would otherwise require hours and sometimes days to reach, this can be critical in sustaining a machine’s productivity.

           We believe the future needs of the surface mining industry most likely center around increased automation and standardization on machines and consolidation of mine operations. The technologies available for today’s mobile mining equipment help to accomplish these needs. We believe these technologies will also provide for more integrated mining operations and will be the basis for increasing levels of remote and autonomous mining processes. We believe the key to accomplishing this will be our ability to bring new technology to market by blending new and proven technologies with innovative design applications.

Marketing, Distribution and Sales

           Our machines and aftermarket parts and services are primarily sold directly by our personnel both in the United States and in foreign markets. Sales outside the United States are made through our offices located in Australia, Brazil, Canada, Chile, China, England, India, Peru and South Africa and, in some markets, by independent sales representatives.

           Typical payment terms for our machines require a down payment and require customers to make progress payments. Lead times for our large machines generally vary from four to nine months, but can be two years or more for a dragline. We generally attempt to obtain committed raw materials pricing through arrangements with suppliers for periods of up to a year. Recently, we have incurred raw materials surcharges, but have been able to include terms providing for recovery of these cost increases in contracts. Sales contracts for our machines are predominantly at fixed prices, with escalation clauses in certain cases. Most sales of our replacement parts call for prices in effect at the time of order.

Foreign Operations

           Our largest foreign markets in 2006 were Chile, Australia, Canada, China, South Africa, Brazil and Peru. We employ direct marketing strategies in these markets as well as developing markets such as Indonesia, Jordan, Mauritania and Turkey. A substantial portion of our sales and operating earnings is attributable to operations located outside the United States. Over the past five years, approximately 75% of our machine sales and aftermarket sales have been in international markets. Our foreign sales, consisting of exports from the United States and sales by consolidated foreign subsidiaries, totaled $556.4 million in 2006, $428.8 million in 2005 and $327.4 million in 2004. Approximately $790.8 million, or 88%, of our backlog of firm orders as of December 31, 2006, represented orders for export sales compared with $552.2 million, or 84%, as of December 31, 2005 and $352.9 million, or 81%, as of December 31, 2004.

           Machine sales in foreign markets are supported by our established network of foreign subsidiaries and overseas offices that directly market our products and provide ongoing services and replacement parts for equipment installed abroad. We believe that the availability and convenience of the services provided through our worldwide network help to ensure the efficient

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operation of our equipment by our customers, help to promote high margin aftermarket sales of parts and services, and give us a sustained local presence to promote new machine orders.

           We sell most of our machines, including those sold directly to foreign customers, and most of our aftermarket parts in United States dollars, with limited aftermarket parts sales denominated in the local currencies of Australia, Brazil, Canada, South Africa and the United Kingdom. Aftermarket services are paid for primarily in local currency, with a natural partial currency hedge through payment for local labor in local currency. In the aggregate, approximately 74% of our 2006 sales were priced in United States dollars. The value, in United States dollars, of our investments in our foreign subsidiaries and of dividends paid to us by those subsidiaries will be affected by changes in exchange rates. We enter into currency hedges to help mitigate currency exchange risks.

Competition

           Our only global competitor in electric mining shovels and draglines is P&H Mining Equipment (“P&H”), a division of Joy Global Inc., although for certain applications our electric mining shovels may also compete against hydraulic shovels made by other manufacturers. In rotary blasthole drills, our primary competitors are P&H and Atlas Copco AB. In China and Russia, we also face limited competition from regional and domestic equipment manufacturers; however, such competition is not material to our core markets. Methods of competition are diverse and include price, lead times, operating costs, machine productivity, technological enhancements, design and performance, reliability, service, delivery and other commercial factors. Long-standing relationships that we and our competitors have with customers and their decision makers can provide a strong incumbency advantage in retaining business and securing new orders.

           For most owners of our machines, we are the primary replacement source for highly engineered, integral components. Competition in replacement parts sales consists primarily of will-fitters. Our principal original equipment manufacturer competitor also participates in this business. These copies are generally sold at lower prices for use on older machines and are generally acknowledged to be of lower quality than parts produced by the manufacturer of the original equipment. We also face significant competition from manufacturers and distributors in the sale of consumable replacement parts which we do not manufacture, including wire rope, non-specialized parts and electrical parts, as well as aftermarket services competition from these market participants and local machining and repair shops.

           We have a variety of programs to attract large volume customers for our replacement parts. Although will-fitters engage in significant price competition in parts sales, we believe that we possess non-price advantages over will-fitters. We believe that our engineering and manufacturing technology and marketing expertise exceed that of our will-fit competitors, who in many cases are unable to duplicate the exact specifications of our replacement parts. Moreover, the use of replacement parts not manufactured by us can void the warranty on a new machine, which generally runs for one year, with certain components under warranty for longer periods.

           In recent years, we have received several large orders for the refurbishment and relocation of machines, especially draglines. Our principal original equipment manufacturer competitor also participates in this business, as do several smaller regional companies.

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Raw Materials and Supplies

           We purchase from outside suppliers raw materials, principally structural steel, castings and forgings required for our manufacturing operations, and other items, such as electrical equipment, that are incorporated directly into the end product. Our foreign subsidiaries purchase components and manufacturing services both from local suppliers and from us. Certain additional components are sometimes purchased from suppliers, either to expedite delivery schedules in times of high demand or to reduce costs. Moreover, in countries where local content requirements exist, local subcontractors can occasionally be used to manufacture the required components.

           We obtain all of the AC electrical drive components for our products exclusively from Siemens, a United States subsidiary of Siemens AG. Our products incorporate electrical equipment, including AC drive systems and computer hardware and software, which we believe provides our products with an efficiency advantage. We are not dependent upon any other sole source critical supplier.

           In recent years, demand for steel and consolidation in the steel industry have resulted in pronounced cost increases for steel. We generally attempt to obtain committed raw materials pricing, through arrangements with our suppliers, for up to one year. Also, in recent years, we have incurred raw materials surcharges and have been able to include terms providing for recovery of these cost increases in contracts entered into since 2004. We have done business with a majority of our principal vendors for more than two decades and believe that we benefit from good relations with these vendors. Through commercial arrangements, forward pricing and contractual cost pass-throughs, we believe we have reduced our exposure to price increases and surcharges for raw materials.

Manufacturing

          The design, engineering and manufacturing of most of our machines and manufactured aftermarket parts is done at our South Milwaukee, Wisconsin complex. We are in the process of completing a multi-phase expansion of our South Milwaukee manufacturing facilities. See ITEM 2 – PROPERTIES for further discussion of this expansion program. We use large, heavy manufacturing equipment in the machining, welding and assembly of our machines and manufactured aftermarket parts. Our machines typically consist of thousands of parts, many of which are specialized. Our machines and the majority of our aftermarket parts are customized based on customer requirements. The size and weight of these machines dictate that the machines be shipped to the job site in sub-assembled units where they are assembled for operation with the assistance of our technicians. Planning and on-site coordination of machine assembly is a critical component of our service to our customers. To reduce lead times and ensure that customer delivery requirements are met, we maintain an inventory of sub-assembled units and parts to meet forecasted customer demands. As of December 31, 2006, we had $176.3 million of inventory, compared to $133.5 million as of December 31, 2005.

Backlog

           Our backlog of firm orders was $894.7 million as of December 31, 2006 and $658.6 million as of December 31, 2005. Approximately 66% of our backlog as of December 31, 2006 is expected to be shipped during 2007.

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Patents, Licenses and Franchises

          We have numerous United States and foreign patents, patent applications and patent licensing agreements. We do not consider our business to be materially dependent upon any patent, patent application, patent license agreement or group thereof.

Research and Development

          Our expenditures for design and development of new products and improvements of existing mining machinery products, including overhead, aggregated $10.7 million in 2006, $7.2 million in 2005 and $5.6 million in 2004. The continuing increases were in part due to expenditures related to the continuing development of electrical and machine upgrade systems.

Employees

          As of December 31, 2006, we employed approximately 2,400 persons, approximately 1,000 of whom are located outside the United States. Approximately 415 of our United States employees are unionized. Our non-United States workforce is not unionized, with the exception of a portion of the staff of certain Chilean operations. We consider our relationship with our unionized and non-unionized workers to be good. Our five and one-half year contract with the United Steel Workers of America representing hourly workers at our South Milwaukee, Wisconsin facility and our three-year contract with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America representing hourly workers at our Memphis, Tennessee facility expire in April 2010 and September 2008, respectively. Also, one of subsidiaries is a party to a contract with the United Mine Workers of America and the Association of Bituminous Contractors under which its employees’ employment is governed only if they are working at locations that are operated by the United Mine Workers.

Regulations Affecting Our Customer Base

          Our customers are engaged in long-term, capital intensive extractive operations subject to and affected by a variety of environmental, safety, land-use and other regulations. In the United States, federal, state and local authorities regulate mining activities with respect to aspects such as permitting and licensing, air quality, employee safety and health, water pollution, protection of plants and wildlife and land reclamation and restoration. Mining operations may not commence or continue absent federal, state and local government approvals. Approvals may be contingent upon production of costly and time-consuming environmental impact assessments and mitigation measures. The Surface Mining Control and Reclamation Act of 1977 (the “Act”), which is administered by the federal Office of Surface Mining Reclamation and Enforcement (“OSM”), requires coal mine operators to obtain permits before they can conduct surface coal mining operations. All the important surface coal mining states have OSM-approved programs vesting them with permitting authority under the Act. Permitting under the Act can take from six months to two years or more, and is subject to public comment. Permits are contingent upon the posting of a bond or other security to assure compliance with land reclamation obligations, and permits must be renewed every five years. The Federal Clean Water Act also imposes costs on all surface mining operations (not just coal mines) by imposing permitting requirements contingent upon monitoring, reporting and performance standards related to activities that result in discharges into bodies of water. Over the past several years, litigation in Kentucky and West Virginia over the standards for Clean Water Act permits for surface coal mines has resulted in occasional injunctions in those states against new mine permits, and has lengthened the permitting process.

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          Extractive enterprises in foreign jurisdictions are subject to extensive local regulation. Most key mining jurisdictions subject extractive enterprises to permitting and permit renewal requirements and to royalty assessments. Several key nations place restrictions or assessments on foreign investment. Foreign mining operations may also be subject to safety and environmental regulations that can delay extractive projects or increase associated costs.

          Our customers’ operations may also be adversely affected by regulatory regimes concerning surface mined commodities. In particular, regulations affecting fossil fuel emissions, most notably coal combustion emissions, have had a significant impact on the domestic coal industry. The principal law affecting U.S. coal consumption is the Federal Clean Air Act and the many regulatory initiatives under the Clean Air Act, including: the Environmental Protection Agency’s (“EPA”) New Source Review reform initiative (affecting repair and life extension work at existing coal-fired power plants); National Ambient Air Quality Standards rulemaking (chiefly regarding ozone non-attainment and emissions of particulate matter); the 2003 Clean Air Interstate Rule (“CAIR”), which has required many coal-fired plants to upgrade their nitrogen oxides (“NOx”) and sulfur dioxide emissions control systems; and the NOx State Implementation Plan rules (“the NOx SIP Call”). These initiatives and further pending initiatives related to mercury, NOx and carbon dioxide emissions have had and could in the future have the effect of reducing the relative desirability of coal as a fuel source for electrical generation facilities. Similar regulatory regimes have been imposed or proposed in foreign countries or may be instituted in the future. Existing emissions and air quality regulations in the United States and elsewhere have shifted coal production to low-sulfur coal, a significant portion of which, in the United States, is surface mined in the Powder River Basin of Wyoming and Montana.

          Further regulatory initiatives targeting carbon dioxide and other greenhouse gas emissions, byproducts of coal consumption, could potentially depress coal consumption in the Western United States and other developed nations. The United States and over 160 other nations are signatories to the 1992 United Nations Framework Convention on Climate Change, which is intended to limit emissions of greenhouse gases, such as carbon dioxide. In December 1997, in Kyoto, Japan, the signatories to the convention established a binding set of emission targets for developed nations which require national reductions in greenhouse gas emissions (the “Kyoto Protocol”). Although the United States has not ratified the Kyoto Protocol, and there are no comprehensive regulations limiting United States greenhouse gas emissions, there is now a program in California, and the new U. S. Congress has put the enactment of a national program for greenhouse gas emissions controls on its agenda. These restrictions, whether through national legislation or state and regional programs to stabilize or reduce greenhouse gas emissions, could adversely impact the price of, and demand for, coal in the United States. This in turn could reduce demand for our coal-mining customers’ output and thus their demand for our products, which could have a material adverse effect on our business.

Financial Information

          Financial information about our business segment and geographic areas of operation is contained in ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA and ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

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Available Information

          Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed with the Securities and Exchange Commission (“SEC”) are available free of charge through our Internet site (www.Bucyrus.com) as soon as practicable after filing with the SEC.

          Copies of our Code of Ethics for our principal executive officer and senior financial officers are available free of charge by contacting us at 1100 Milwaukee Ave., South Milwaukee, Wisconsin 53172 (414-768-4000) or through our Internet site (www.Bucyrus.com).

ITEM 1A. RISK FACTORS

          Our business, results of operations and financial condition are subject to a wide variety of risks, many of which are not exclusively within our control, that may cause our actual performance to differ materially from historical or projected future performance, including the risks that we identify below. In addition, other risks that are currently unknown to us or that we currently consider to be immaterial may also materially adversely affect our results of operations and financial condition.

Risks Related to Our Current Business

A material disruption to our manufacturing plants in Wisconsin could adversely affect our ability to generate revenue.

          We produce most of our machines and aftermarket parts at our manufacturing plants in South Milwaukee and Milwaukee, Wisconsin. If operations at these facilities were to be disrupted as a result of equipment failures, natural disasters, work stoppages, power outages or other reasons, our business, financial conditions and results of operations could be adversely affected. Significant events could require us to make large capital expenditures to remedy the situation. Interruptions in production could increase costs and delay delivery of units in production. Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available. Our facilities are also subject to the risk of catastrophic loss due to fires, explosions or adverse weather conditions. Lost sales or increased costs that may we may experience during the disruption of operations may not be recoverable under our insurance policies, and longer-term business disruptions could result in a loss of customers. If this were to occur, our future sales levels, and therefore our future profitability and cash flow, could be adversely affected.

We must attract and retain skilled labor in order to maintain and grow our business.

          Our ability to operate profitably and expand our operations depends in part on our ability to attract and retain skilled manufacturing workers, equipment operators, engineers and other technical personnel. Demand for these workers is currently high and the supply is limited, particularly in the case of skilled and experienced machinists, welders and engineers. As a result, our growth may be limited by the scarcity of skilled labor. Additionally, a significant increase in the wages paid by competing employers could result in a reduction in our skilled labor force, increases in the rates of wages we must pay or both. Further, we may be faced with increased training costs and reduced productivity as we train new employees. If our compensation costs increase or we cannot attract and retain skilled labor, our operating earnings could be reduced, and production capacity and growth potential could be impaired.

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Our production capacity may not be sufficient to meet customer demand.

          We are currently operating at very high capacity utilization levels. In addition, our backlog of firm orders was $894.7 million as of December 31, 2006 compared to $658.6 million as of December 31, 2005. Our expectations for 2007 assume continued strong world economic growth, as well as continued growth of our sales. We are in the midst of a multi-phase expansion program at our South Milwaukee facility that will ultimately substantially increase our production capacity. However, our production capacity may not be expanded soon enough, or to a sufficient extent, to satisfy customer demand for our products. If we are unable to commit to producing products for our customers within the timeframes they require, they may seek to procure equipment from other sources to meet their project deadlines, which could adversely affect our future sales levels and profitability.

If we are unable to purchase component parts or raw materials from key suppliers, or the prices of component parts or raw materials rise materially, or the costs of shipping products rise materially, our business and results of operations may be materially adversely affected.

          We purchase all of our AC drives and certain other electrical parts from Siemens. The loss of Siemens, our only critical sole source supplier, or delays, disruptions or other difficulties procuring parts from Siemens, could have a material adverse effect on our business. We also purchase track links, castings and forgings from suppliers with whom we have long-standing relationships. Although these are not sole source suppliers, the loss of these suppliers could affect our ability to maintain or lower costs. If we are required to procure alternative sources of supply, our ability to supply parts to our customers when needed could be impaired, we could lose business and our margins and cash flow could be reduced. Also, because we maintain limited production input inventories, even brief unanticipated delays in delivery by suppliers, including those due to capacity constraints, labor disputes, impaired financial condition of suppliers, weather emergencies or other natural disasters, may impair our ability to satisfy our customers and could adversely affect our operations.

          In addition, we use substantial quantities of wide-plate steel in our production processes. If the price of steel or other raw materials increases further and we are unable to recover those price increases, we will experience reduced margins. Any significant future delays in obtaining production inputs and other supplies could result in our delay in delivering or producing products for our customers, which could subject us to contractual damage claims or otherwise harm our business and results of operations. In addition, there recently has been consolidation within the steelmaking industry, which could impede our ability to rely on competitive balance and long-standing business relationships to procure steel on favorable terms and in a timely manner.

          We also purchase production inputs on terms extended to us by our suppliers based on our overall credit rating. If our credit rating were to change adversely, our suppliers may not be willing or able to continue to extend favorable terms to us, which could negatively impact our cash flow or cause us to incur increased indebtedness under our revolving credit facility.

          Some of our contracts require us to bear all costs of shipping and handling to the customer’s site. Because of the size and weight of our goods, these costs can be a significant portion of the total costs of a given contract. If transportation costs rise materially due to fuel prices or other factors, our margins could be reduced.

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The industries we serve are subject to significant cyclical fluctuations.

          Because our customers’ purchasing patterns are affected by a variety of factors beyond our control, our sales and operating results may fluctuate significantly from period to period. Given the large sales prices of our machines, one or a limited number of machines may account for a substantial portion of our sales in any particular quarter or other period. Although we recognize sales on a percentage-of-completion basis for our machines, the timing of one or a small number of contracts in any particular period may nevertheless affect our operating results. In addition, sales and gross profit may fluctuate depending upon the sizes and the requirements of the particular contracts we enter into in that period.

          The sale of machines is cyclical in nature and sensitive to a variety of factors, including fluctuations in market prices for copper, coal, oil, iron ore and other minerals as well as alternatives to these minerals, changes in general economic conditions, interest rates, our customers’ replacement or repair cycles, consolidation in the mining industry and competitive pressures. Many factors affect the supply and demand for coal, minerals and oil and thus may affect the sale of our products and services, including:

• the levels of commodity production;

• the levels of mineral inventories;

• commodities prices and changes in those prices;

• the expected cost of developing new reserves;

• the cost of conducting surface mining operations;

• the level of surface mining activity;

• worldwide economic activity;

• substitution of new or competing inputs and mining methods;

• national government political requirements;

• environmental regulation; and

• tax policies.

          If demand for mining services or surface mining equipment utilization rates decrease significantly, then demand for our products and services will decrease. As a result of this cyclicality, we have experienced, and in the future could experience, extended periods of reduced sales and margins.

We rely on significant customers.

          Our business is dependent on securing and maintaining customers by promptly delivering reliable, high-performance products. We do not believe we are dependent upon any single customer; however, on an annual basis a single customer may account for a large percentage of our sales, particularly machine sales. In 2006, 2005 and 2004, BHP Billiton, our single largest

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customer, accounted for approximately 13%, 14% and 12%, respectively, of our sales. The products that we may sell to any particular customer depend on the size of that customer’s capital expenditure budget devoted to surface mining plans in a particular year and on the results of competitive bids for major projects. Additionally, our top five customers in each of 2006, 2005 and 2004 collectively accounted for approximately 40%, 38% and 36%, respectively, of our sales. This trend reflects the recent consolidation within the mining industry. In addition, key sectors of the surface mining industry are dominated by a few enterprises, most of which are our customers. The loss of one or more of our significant customers or significantly reduced sales orders from significant customers caused by a downturn in the surface coal mining industry could, at least on a short-term basis, have a material adverse effect on our results of operations.

The loss of key members of our management team could adversely affect our business.

          Our success substantially depends upon our ability to attract and retain qualified employees and upon the ability of senior management and other key employees to implement our business strategy and maintain and grow customer and supplier relationships. We believe there are only a limited number of available qualified executives in our industry. We rely substantially upon the services of Timothy W. Sullivan, our president and chief executive officer. The loss of Mr. Sullivan’s services or the services of other members of our management team or our inability to attract or retain other talented personnel could impede the further implementation of our business strategy, which could have a material adverse effect on our business.

We are subject to risks of doing business in foreign countries, including emerging markets.

          We derive the majority of our sales from foreign markets where we have substantial operations. During 2006, we generated $556.4 million, or approximately 75%, of our sales outside the United States. Various political, regulatory or economic factors, or changes in those factors, have the potential to adversely affect our international operations and our financial results. These factors principally include:

• trade protection measures and price controls;

• trade sanctions and embargos;

• import or export licensing requirements;

• economic downturns, civil disturbances or political instability;

• employment regulations;

• regulations regarding repatriation of earnings;

• ability to enforce contract and intellectual property rights;

• nationalization and expropriation; and

• potentially burdensome taxation.

          In addition, a significant portion of our international business is conducted in emerging markets located in Asia, Africa and South America. Many of the countries in these regions in

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which we operate have developing legal and economic systems, adding a level of uncertainty to our operations in those countries relative to those that would be expected domestically.

          The above factors, and related unpredictability, could place the value of our operations and business relationships in overseas markets at risk, which could materially adversely affect our business and results of operations.

We are subject to risks related to conducting business in foreign currencies.

          Our Australian, Canadian, South African, Brazilian, Chilean and British aftermarket parts sales are denominated in the currencies of those nations, and the majority of our service sales are denominated in these and other local currencies. Although a portion of the expenses of providing overseas services are denominated in local currencies, the cost of goods associated with overseas sales are generally incurred in United States dollars. As a result, an increase in the value of the United States dollar relative to these nations’ currencies would decrease the United States dollar equivalent of aftermarket sales earned abroad without decreasing the United States dollar value of a portion of the expenses associated with overseas sales. We do not hedge currency exposures related to our aftermarket business, which is naturally hedged only in part through the incurrence of part of the associated labor, operating expenses and ancillary costs in local currencies.

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

We operate in a highly competitive industry.

          Methods of competition are diverse and include price, customer relationships, lead times, operating costs, product productivity, design and performance, reliability, warranty, service, delivery and other commercial factors. In the aftermarket, we compete with P&H, Atlas Copco AB and numerous independent firms that produce copies of the parts manufactured by us and other original equipment manufacturers. In electric mining shovels and draglines, we compete almost exclusively with P&H, although for certain applications our electric mining shovels may also compete against hydraulic shovels made by other manufacturers. In the market for rotary blasthole drills, our primary competitors are P&H and Atlas Copco AB. In China and Russia, we also face some limited competition from regional and domestic equipment manufacturers. As those markets and markets in other industrialized countries continue to develop, this competition may increase.

          Certain of our competitors may be larger or have greater financial, marketing, manufacturing or distribution resources than we do. Demand for our products may be affected by our ability to respond to downward pricing pressure from our competitors or to continue to provide shorter lead time and quicker delivery of our products than our competitors. We cannot assure you that our products will continue to compete successfully with those of our competitors or that we will be able to retain our customer base or improve or maintain our profit margins on sales to our customers. If we are unable to do so, our operating results could be materially adversely affected.

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If we fail to offer technologically advanced equipment to our customers, demand for our products may be materially adversely affected.

          Increasingly, mining companies must have accurate, detailed and up-to-date information on their machines and their mines in order to compete efficiently and effectively. The growth and integration of technologies such as wireless communication, GPS, onboard electronics and operation management software allows mining systems to be monitored, optimized and integrated throughout the mine, and provides more precise and safer methods for extracting materials. We believe that our mining industry customers are focused on improving automation, standardization and consolidation of machines and mining operations. In that regard, we concentrate on producing technologically advanced machines that allow our customers to conduct cost-efficient operations. To remain competitive, we believe we must develop new and innovative products on an on-going basis. If we are unable to continue developing new and innovative products that incorporate technological advancements and meet the evolving requirements of our customers, or if we are unable to successfully bring such products to market, or if our competitors produce and sell equipment that is more technologically advanced than ours, the demand for our mining equipment could be materially adversely affected.

Regulations affecting the mining industry or electric utilities may reduce demand for our products and services.

          Our principal customers are surface mining companies. Many of these customers supply coal as a power generating source for the production of electricity in the United States and other industrialized regions and emerging markets around the world. The operations of these mining companies are geographically diverse and are subject to or affected by a wide array of regulations in the jurisdictions in which they operate, including those with a direct impact on mining activities and those indirectly affecting their businesses, such as applicable environmental laws and regulations governing the operation of electric utilities. As a result of changes in regulations and laws relating to the operation of mines, our customers’ mining operations could be disrupted or curtailed by governmental authorities. The high cost of compliance with mining and environmental regulations may also induce customers to discontinue or limit their mining operations, and may discourage companies from developing new mines. Additionally, government regulation of electric utilities may adversely impact the demand for coal to the extent that such regulations cause electric utilities to select alternative energy sources and technologies as a source of electric power. Initiatives to regulate mercury emissions, and initiatives targeting acid rain or greenhouse gas emissions, could significantly depress coal consumption in Western economies. If demand for coal declines, demand for our products will also decline, which would have a material adverse effect on our business.

Labor disruptions could adversely affect our operations.

          As of December 31, 2006, approximately 415 of our employees at our South Milwaukee and Milwaukee, Wisconsin and Memphis, Tennessee facilities were unionized. Our five and one-half year contract with the United Steel Workers of America representing hourly workers at our South Milwaukee and Milwaukee facilities and our three-year contract with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America representing workers at our Memphis warehouse facility expire in April 2010 and September 2008, respectively. After expiration of these agreements, we cannot assure you that we will be able to reach new agreements without a work stoppage or strike, and any new agreements may not be reached on terms satisfactory to us, may be on substantially different terms from our current agreements and may result in increased direct and indirect labor costs. A dispute between our employees and us

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could divert significant management time and attention and disrupt our operations, and the resulting adverse impact on our relationships with customers could reduce our revenue. Also, certain of our mine site operations and production and other facilities are located in areas of high union concentration or in nations with laws favorable to unionization, and, as a result, such operations and facilities are susceptible to union organizing activity.

          In addition, the workforces of many of our suppliers and our transportation providers are unionized. If they are disrupted by labor issues, delivery of parts and materials to us could be reduced or delayed. Many of our customers have unionized work forces, and work stoppages experienced by our customers could cause us to lose sales or incur increased costs.

We may be adversely affected by environmental and safety regulations or concerns.

          We are subject to increasingly stringent environmental and occupational health and safety laws and regulations in the countries in which we operate, including laws and regulations governing emissions to air, discharges to water and the generation, handling, storage, transportation, treatment and disposal of waste materials. While we believe that we are currently in compliance in all material respects with these laws and regulations, we cannot assure you that we have always on a historical basis complied, or will continue to comply, with these requirements. If we are not in compliance with these laws and regulations, we may incur remediation obligations or other costs in excess of amounts reserved, or fines, penalties or suspension of production. We may be adversely impacted by costs, liabilities or claims with respect to existing or subsequently acquired operations, under either present laws and regulations or those that may be adopted or imposed in the future. We are also subject to laws requiring the cleanup of contaminated property. If a release of hazardous substances occurs at or from any of our current or former properties or at a landfill or another location where we have disposed of hazardous materials, we may be held liable for the contamination, and the amount of such liability could be material.

          In addition, increased environmental regulation of the mining industry in North America and overseas could increase costs to us or to our customers and adversely affect the sales of our products and future operating results. These requirements may change in the future in a manner that could require us to make capital and other expenditures, which could have a material adverse effect on our business, results of operations and financial condition.

We may have to apply significant cash to meet our unfunded pension obligations, and these obligations are subject to increase.

          A substantial majority of our United States employees participate in our defined benefit pension plans and we also provide certain postretirement benefits. As of December 31, 2006, our unfunded pension and postretirement benefit liability totaled approximately $44.9 million. Declines in interest rates or the market values of the securities held by the plans, or other adverse changes, could materially increase the under-funded status of our plans and affect the level and timing of required cash contributions in 2007 and after.

Our continued success depends in part on our ability to protect our intellectual property.

          Our future success depends in part on our ability to protect our intellectual property. We rely principally on nondisclosure agreements and other contractual arrangements and trade secret laws and, to a lesser extent, trademark and patent law, to protect our intellectual property, including jointly developed intellectual property. However, these measures could prove

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inadequate to protect our intellectual property from infringement by others or to prevent misappropriation of our proprietary rights. In addition, the laws and enforcement mechanisms of some foreign countries do not protect proprietary rights to the same extent as do United States laws. Our inability to protect our proprietary information and enforce intellectual property rights through infringement or other enforcement proceedings could have a material adverse effect on our business, financial condition and results of operations.

We are, and may be in the future, subject to product liability and other lawsuits related to past and current activities.

          The sale and servicing of complex, large scale machinery used in a variety of locations and climates, and integrating a variety of manufactured and purchased components entails an inherent risk of lawsuits and liability relating to the operation and performance of the machinery and the health and safety of the workers who operate and come into contact with the machinery. For example, we have been named as a co-defendant as of December 31, 2006, in approximately 290 personal injury liability cases alleging damages caused by exposure to asbestos and other substances, and the particular circumstances of many of these cases are difficult to assess because the claims allege exposure to a variety of substances from various sources over varying historical periods and assert the culpability of multiple defendants. These types of claims, and product liability claims in general, can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless of the ultimate outcome. While we maintain product liability and other insurance to cover claims of this nature, including coverage for the historical periods during which the pending claims of which we are aware allege asbestos exposure, those policies are subject to deductibles and recovery limitations as well as limitations on contingencies covered. Also, we cannot assure you that we will be able to obtain insurance on acceptable terms in the future, if at all, or obtain insurance that will provide adequate coverage against potential future claims. These lawsuits and future lawsuits against us could be resolved in a manner that materially and adversely affects our product reputation, business, financial condition or results of operations.

Risks Related to Our Pending Acquisition of DBT

We may not be able to complete the acquisition of DBT.

          Our share purchase agreement with RAG is subject to various closing conditions and termination provisions. We cannot assure you that we will successfully close the transaction on the terms or time frame previously disclosed or at all. If we are unable to complete the acquisition of DBT, our future growth may be adversely affected.

We may encounter difficulties in integrating DBT’s operations that may have a material adverse impact on our future growth and operating performance.

          If we complete the acquisition of DBT, full realization of the benefits and synergies of the acquisition will require selective integration of certain aspects of DBT’s manufacturing, engineering, administrative, sales and marketing and distribution functions, as well as some integration of DBT’s multiple information systems platforms and processes, which can be a long and difficult process and can require substantial attention from our management team and involve substantial expenditures. Even if we are able to successfully integrate the selective operations of DBT, we may not be able to realize the benefits and synergies of the acquisition, either in the amount or within the time frame that we expect, or at all, and the costs of achieving these benefits may be higher than, and the timing may differ from, what we currently expect. Our ability to

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realize anticipated benefits and synergies may be affected by a number of factors, including the following:

• The use of more cash or other financial resources on integration and implementation activities than we expect, including restructuring and other exit costs;

• increases in other expenses related to the acquisition, which may offset the cost savings and other synergies from the acquisition; and

• our ability to avoid labor disruptions in connection with any integration.

          We cannot assure you that we will be able to integrate the selective operations of DBT successfully, that we will be able to realize anticipated benefits and synergies from the acquisition or that we will be able to operate the DBT business as profitably as anticipated after the acquisition.

To the extent we increase our debt service obligations to finance the acquisition of DBT, we may have less cash flow available for business operations, we could become increasingly vulnerable to general adverse economic and industry conditions and interest rate trends, and our ability to obtain future financing may be limited.

          We have received a financing commitment from Lehman Brothers to fund the cash purchase price for the DBT transaction. We currently expect that this financing will provide us with up to $1.23 billion of senior secured credit facilities, including an $825 million term loan that we will use to finance the DBT acquisition and refinance existing debt, as well as a $400 million revolving credit facility to fund our ongoing capital needs. We are currently evaluating various more permanent capital structures that could include the issuance of a combination of debt and/or equity securities.

          Our total long-term debt as of December 31, 2006 was approximately $82.3 million, which means that borrowings under our new facility will represent significantly increased aggregate debt levels for us. Our ability to make required payments of principal and interest on our increased debt levels will depend on our future performance (including the future performance of DBT), which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control. We cannot assure you that our business (including the business of DBT) will generate sufficient cash flow from operations or that future borrowings will be available under our new credit facilities in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs. In addition, our new credit agreement will contain financial and restrictive covenants that will limit our ability to, among other things, borrow additional funds or take advantage of business opportunities. Our failure to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our business, financial condition, results of operations and debt service capability.

          Our increased level of debt and the covenants contained in our new credit facilities could have important consequences for our operations, including:

• Increasing our vulnerability to general adverse economic and industry conditions and detract from our ability to successfully withstand a downturn in our markets or the economy generally;

24

• requiring us to dedicate a substantial portion of our cash flow from operations to required payments on debt, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, manufacturing capacity expansion, additional business opportunities and other general corporate activities;

• limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, manufacturing capacity expansion, additional business opportunities and other general corporate requirements;

• limiting our flexibility in planning for, or reacting to, changes in our business and the markets we serve;

• placing us at a competitive disadvantage compared to less leveraged competitors; and

• making us vulnerable to increases in interest rates because debt under our new credit facility will bear interest at variable rates.

DBT may have liabilities which are not known to us.

          Because our acquisition subsidiary is purchasing the shares of DBT, it will assume DBT’s liabilities or risks after the closing of the transaction. There may be liabilities that we failed, or were unable, to discover in the course of performing due diligence investigations of DBT. We cannot assure you that our rights to indemnification contained in our share purchase agreement will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with the business or property acquired. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition or results of operations. After the closing of the transaction, we may learn additional information about DBT that adversely affects us, such as unknown or contingent liabilities and issues relating to compliance with applicable laws.

ITEM 1B. UNRESOLVED STAFF COMMENTS

          None.

ITEM 2. PROPERTIES

          Our principal manufacturing operations are located in South Milwaukee, Wisconsin on approximately 70 acres of land The manufacturing plant, prior to the ongoing expansion program discussed below, comprises several buildings totaling approximately 1,048,000 square feet of floor space, including approximately 798,000 square feet for manufacturing and manufacturing support. A portion of this facility houses our corporate headquarters and research and development facilities. The major buildings at this facility are constructed principally of structural steel, concrete and brick and have sprinkler systems and other devices for protection against fire. The buildings and equipment therein, which include specialized machine tools and equipment for fabrication, welding and assembly of our mining machinery, including draglines, electric mining shovels and rotary blasthole drills, are well-maintained, in good condition and in regular use. We lease a portion of the land and buildings in the South Milwaukee complex which includes 927,685 square feet of manufacturing and office space. The term of the lease is 20 years through 2021 with the option to renew the lease for up to five five-year terms at our option. Annual rent under the lease is $1.1 million through 2016. The lease is

25

a net lease under which we are responsible for associated taxes, utilities and insurance. We continue to own the remainder of the land and buildings in South Milwaukee.

          In response to sustained order strength, we are in the process of completing a multi-phase capacity expansion of our manufacturing facilities in South Milwaukee. The first phase of our expansion provided 110,000 square feet of new space for welding and machining of large electric mining shovel components north of Rawson Avenue and was substantially complete at the end of the third quarter of 2006. The second phase of our expansion program will further expand our new facility north of Rawson Avenue from 110,000 square feet to over 350,000 square feet of welding, machining and outdoor hard-goods storage space. Construction is expected to be completed in April 2007. We expect the aggregate cost of phase one and two of our expansion program to be approximately $54 million. The third phase of our expansion program, which we announced in July 2006, is intended to help us meet the continued growth of demand for machines and their components. Phase three will include the renovation and expansion of our manufacturing buildings and offices at our existing facilities south of Rawson Avenue. Our focus is on modernizing our facilities and improving manufacturing and administrative efficiencies. The steps for accomplishing phase three are scheduled to maximize manufacturing throughput during both the renovation and construction processes. We expect that phase three construction will be completed by the first quarter of 2008.

          When completed, we expect that the additional manufacturing capacity provided by our multi-phase expansion program will allow us to significantly increase the total number of electric mining shovels and draglines that we are able to produce in any given year.

          We lease a facility in Milwaukee, Wisconsin, which has approximately 94,250 square feet of floor space and approximately 130,740 square feet of yard space, for expansion of our welding operations. The lease expires in January 2010. We also lease a facility in Memphis, Tennessee, which has approximately 90,000 square feet of floor space and is used as a central parts warehouse. This lease expires in December 2007.

          Bucyrus Canada Limited, a wholly owned subsidiary, owns a facility in Edmonton, Alberta, Canada. An outstanding mortgage loan at Bucyrus Canada Limited is collateralized by this facility.

          We own or lease administrative and sales offices in the United States, Australia, Brazil, Canada, Chile, China, England, India, Peru and South Africa and have repair facilities in the United States, Australia, Brazil, Canada, Chile and South Africa.

          All of our domestic assets are pledged as collateral under our credit agreement.

          We believe that our domestic and foreign properties, including the ongoing expansion, taken together with our ability to purchase goods and services from outside vendors and perform work at customer sites, are sufficient to meet our production needs.

ITEM 3. LEGAL PROCEEDINGS

Product Liability

          We are normally subject to numerous product liability claims, many of which relate to products no longer manufactured by us or our subsidiaries, and other claims arising in the ordinary course of business in federal and state courts. Such claims are generally related to property damage and to personal injury. Our products are operated by us and our customers’

26

employees and independent contractors at various work sites in the United States and abroad. In the United States, workers’ claims against employers related to workplace injuries are generally limited by state workers’ compensation statutes, but such limitations do not apply to equipment suppliers. In addition, independent contractors may not be subject to state workers’ compensation regimes. We have insurance covering most of these claims and various limits of liability depending on the insurance policy year in question. We do not believe that the final resolution of these claims and other similar adverse claims which are likely to arise in the future will individually or in the aggregate have a material effect on our financial condition, results of operations or cash flows, although no assurance to that effect can be given.

Suits Alleging Exposure to Asbestos and Other Substances

          We have been named as a co-defendant as of December 31, 2006 in approximately 290 personal injury liability cases alleging damages due to exposure to asbestos and other substances, involving approximately 567 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. We do not believe that costs associated with these matters will have a material adverse effect on our financial condition, results of operations or cash flows, although no assurance to that effect can be given.

Other

          One of our wholly owned subsidiaries 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 one of our subsidiaries 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 million to $27 million. The unrelated third party has brought a third party action against our subsidiary. Our insurance carriers are defending the claim, but have not conceded that the relevant policies cover the claim. As of December 31, 2006, discovery was ongoing and it is not possible to evaluate the outcome of the claim nor the range of potential loss, if any. Therefore, we have not recorded any liability with respect to this litigation.

          Our wholly owned Australian subsidiary is a defendant in a lawsuit in Queensland, Australia relating to a contractual claim in which the plaintiff, pursuant to a contract with our subsidiary, agreed to erect a dragline sold by us to a customer for use at its mine site. The plaintiff asserts 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 was settled by the parties in late 2006, 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 finally assessed. Based on the claim amount and estimated legal costs, we have established a reserve for its estimate of the resolution of this matter.

          We are also involved in various other litigation in the United States and abroad arising in the normal course of business. It is the belief of our management that our recovery or liability, if any, under pending litigation is not expected to have a material effect on our financial position, results of operations, or cash flows, although no assurance to that effect can be given.

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Environmental and Related Matters

          Our 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 our 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 required 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 us, which may be material.

          Environmental problems have not interfered in any material respect with our manufacturing operations to date. We believe that our compliance with statutory requirements respecting environmental quality will not materially affect our capital expenditures, earnings or competitive position. We have an ongoing program to address any potential environmental problems.

          Certain environmental laws, such as the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), provide for strict, joint and several liability for investigation and remediation of spills and other releases of hazardous substances. Such laws may apply to conditions at properties currently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors come to be located.

          We have previously been named as a potentially responsible party under CERCLA and analogous state laws at sites throughout the United States. We believe we have determined our cleanup liabilities with respect to these sites and do not believe that any such remaining liabilities, if any, either individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or cash flows. We cannot assure, however, that we will not incur additional liabilities with respect to these sites in the future, the costs of which could be material, nor can we assure that we will not incur remediation liability in the future with respect to sites formerly or currently owned or operated by us, or with respect to off-site disposal locations, the costs of which could be material.

          Over the past three years, expenditures for ongoing compliance, remediation, monitoring and clean-up have been immaterial. While no assurance can be given, we believe that expenditures for compliance and remediation will not have a material effect on our future capital expenditures, results of operations or competitive position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          No matters were submitted to a vote of our stockholders during the fourth quarter of 2006.

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EXECUTIVE OFFICERS

          The following table sets forth the names and ages, as of February 23, 2007, of our executive officers, as well as the positions and offices held by those persons. Officers are elected annually and serve at the discretion of, and for the term set by, our Board of Directors.

Name	Age	Position
Timothy W. Sullivan	53	President, Chief Executive Officer and Director
John F. Bosbous	54	Treasurer
Kenneth W. Krueger	50	Chief Operating Officer
Craig R. Mackus	54	Chief Financial Officer and Secretary

          Mr. Sullivan became our president and chief executive officer in March 2004 and was previously president and chief operating officer from August 2000 to March 2004. Mr. Sullivan rejoined us in January 2000 as executive vice president. From January 1999 through December 1999, Mr. Sullivan served as president and chief executive officer of United Container Machinery, Inc. From June 1998 through December 1998, Mr. Sullivan was our executive vice president - marketing and from April 1995 through May 1998 was our vice president marketing and sales. Mr. Sullivan is also a director of Foundations Bank, Pewaukee, Wisconsin.

          Mr. Bosbous has served as our treasurer since March 1998. Mr. Bosbous was assistant treasurer from 1988 to 1998, and assistant to the treasurer from August 1984 to February 1988.

          Mr. Krueger joined us as executive vice president in December 2005 and was promoted to chief operating officer in May 2006. Mr. Krueger held the position of senior vice president and chief financial officer with A.O. Smith Corporation, a diversified manufacturing company, from August 2000 to June 2005. Mr. Krueger held various senior management positions at Eaton Corporation from July 1999 to July 2000 and Rockwell Automation from October 1983 to June 1999. He is also a director of Manitowoc Company, Inc.

          Mr. Mackus became our chief financial officer in June 2004 after serving as vice president-finance from October 2002 through June 2004, and has served as our secretary since May 1996 and as controller from February 1988 through May 2006. Mr. Mackus was our division controller and assistant corporate controller from 1985 to 1988, our manager of corporate accounting from 1981 to 1982 and 1984 to 1985, and assistant corporate controller of Western Gear Corporation from 1982 to 1984.

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PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

          Our Class A common stock is traded on the NASDAQ Stock Market under the symbol “BUCY”. As of February 23, 2007, there were 24 stockholders of record. The following table sets forth the high and low sales prices and dividend payments for our stock for the periods indicated.

			Price			Dividends
	High			Low
2006
First Quarter	$	49.40		$	34.59		$	.0383
Second Quarter		60.71			37.73		$	.0500
Third Quarter		53.41			38.56		$	.0500
Fourth Quarter		52.12			39.87		$	.0500
2005
First Quarter	$	31.17		$	23.13		$	.0383
Second Quarter		26.50			21.07			.0383
Third Quarter		32.97			23.27			.0383
Fourth Quarter		36.17			25.48			.0383
2004
Third Quarter (1)	$	23.63		$	13.33		$	—
Fourth Quarter		28.19			17.91			.0383

(1) Our Class A common stock began trading on the NASDAQ Stock Market on July 23, 2004.

          On March 8, 2006, our Board of Directors authorized a three-for-two split of our Class A common stock. The stock split was payable on March 29, 2006 to stockholders of record on March 20, 2006. Our Class A common stock began trading on a split-adjusted basis on March 30, 2006. The above per share data has been adjusted to reflect this stock split.

          We made no purchases of our Class A common stock in the fourth quarter of 2006.

          The information required by Item 5 regarding securities authorized for issuance under our equity compensation plans as of December 31, 2006 is incorporated herein by reference from the AMENDMENT AND RESTATEMENT OF THE BUCYRUS INTERNATIONAL, INC. 2004 EQUITY INCENTIVE PLAN – EQUITY COMPENSATION PLAN INFORMATION section of our Proxy Statement.

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ITEM 6. SELECTED FINANCIAL DATA

          The information required by Item 6 is incorporated herein by reference from our 2006 Annual Report to Stockholders.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          The information required by Item 7 is incorporated herein by reference from our 2006 Annual Report to Stockholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          The information required by Item 7A is incorporated herein by reference from our 2006 Annual Report to Stockholders.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The information required by Item 8 is incorporated herein by reference from our 2006 Annual Report to Stockholders.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

          None.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

          In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), our management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer and Secretary, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2006. Based upon their evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer and Secretary concluded that the disclosure controls and procedures were effective as of December 31, 2006 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

          There were no changes in our 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 December 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

          Management’s Report on Internal Control over Financial Reporting and the attestation report of Deloitte & Touche LLP with respect thereto as required by Item 9A are incorporated herein by reference from our 2006 Annual Report to Stockholders.

ITEM 9B. OTHER INFORMATION

          None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

          The information required by Item 10 is incorporated herein by reference from the ELECTION OF DIRECTORS, BOARD OF DIRECTORS, and SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE sections of our Proxy Statement.

          The information regarding executive officers is included in Part I of this Form 10-K as permitted by General Instruction G(3) and information regarding our Code of Ethics for the Principal Executive Officer and Senior Financial Officers is included in Part I of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

          The information required by Item 11 is incorporated herein by reference from the BOARD OF DIRECTORS and COMPENSATION DISCUSSION AND ANALYSIS sections of our Proxy Statement and from the PERFORMANCE INFORMATION section of our 2006 Annual Report to Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

          The information required by Item 12 is incorporated herein by reference from the SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT section of our Proxy Statement. The information required by Item 5 regarding securities authorized for issuance under our equity compensation plans as of December 31, 2006 is incorporated herein by reference from the AMENDMENT AND RESTATEMENT OF THE BUCYRUS INTERNATIONAL, INC. 2004 EQUITY INCENTIVE PLAN – EQUITY COMPENSATION PLAN INFORMATION section of our Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

          None.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

          The information required by Item 14 is incorporated herein by reference from the RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM and AUDIT COMMITTEE REPORT sections of our Proxy Statement.

33

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are incorporated herein by reference from this Annual Report on Form 10-K and our 2006 Annual Report to Stockholders:

			Form 10-K	Annual Report to Stockholders
	1.	FINANCIAL STATEMENTS
		Consolidated Statements of Earnings for the years ended December 31, 2006, 2005 and 2004		X
		Consolidated Statements of Comprehensive Income for the years ended December 31, 2006, 2005 and 2004		X
		Consolidated Balance Sheets as of December 31, 2006 and 2005		X
		Consolidated Statements of Common Stockholders’ Investment for the years ended December 31, 2006, 2005 and 2004		X
		Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004		X
		Notes to Consolidated Financial Statements for the years ended December 31, 2006, 2005 and 2004		X
		Report of Independent Registered Public Accounting Firm –Deloitte & Touche LLP		X
	2.	FINANCIAL STATEMENT SCHEDULE
		Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP	X
		Schedule II—Valuation and Qualifying Accounts and Reserves for the years ended December 31, 2006, 2005 and 2004	X
		All other schedules are omitted because they are inapplicable, not required by the instructions or the information is included in the consolidated financial statements or notes thereto.
(b)		EXHIBITS
		The exhibits listed in the accompanying Exhibit Index are filed as a part of this Annual Report on Form 10-K.	X

34

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
    Bucyrus International, Inc.:

We have audited the consolidated financial statements of Bucyrus International, Inc. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, and have issued our reports thereon dated February 26, 2007 (which report expresses an unqualified opinion and includes an explanatory paragraph concerning the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106 and 132(R)” in 2006); such consolidated financial statements and reports are included in your 2006 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of the Company listed in Item 15. This consolidated financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

Milwaukee, Wisconsin
February 26, 2007

35

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004

	Balance at Beginning of Period			Charges (Credits) to Costs and Expenses				(Charges) Credits to Reserves(1)				Balance at End of Period
	(Dollars in Thousands)
Allowances for possible losses on notes and accounts receivable:
Year ended December 31, 2006		$	1,499		$	(61	)		$	(687	)		$	751
Year ended December 31, 2005		$	1,590		$	137			$	(228	)		$	1,499
Year ended December 31, 2004		$	1,472		$	38			$	80			$	1,590

(1) Includes effect of changes in foreign currency exchange rates.

36

SIGNATURES

          Pursuant to the requirements of Section 13 or 15(d) 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)
		February 27, 2007
By	/s/ T. W. Sullivan
	Timothy W. Sullivan
	Chief Executive Officer

POWER OF ATTORNEY

          KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints T. W. Sullivan and C. R. Mackus, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

          Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature and Title	Date
/s/ Ronald A. Crutcher	February 27, 2007
Ronald A. Crutcher, Director
/s/ Paul W. Jones	February 28, 2007
Paul W. Jones, Director
/s/ Robert W. Korthals	February 28, 2007
Robert W. Korthals, Director
/s/ Gene E. Little	February 27, 2007
Gene E. Little, Director
/s/ Edward G. Nelson	February 26, 2007
Edward G. Nelson, Director
/s/ Robert L. Purdum	February 27, 2007
Robert L. Purdum, Director
/s/ T. C. Rogers	February 28, 2007
Theodore C. Rogers, Director and Chairman
/s/ Robert C. Scharp	February 28, 2007
Robert C. Scharp, Director
/s/ T. W. Sullivan	February 27, 2007
Timothy W. Sullivan, Director and Chief Executive Officer

37

/s/ C. R. Mackus	February 27, 2007
Craig R. Mackus, Chief Financial Officer and Secretary
(Principal Financial Officer)
/s/ M. J. Knapp	February 28, 2007
Mark J. Knapp, Corporate Controller (Principal Accounting Officer)

38

BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
2006 ANNUAL REPORT ON FORM 10-K

Exhibit No.	Description
2.1	Share Purchase Agreement by and among RAG Coal International Aktiengesellschaft, DBT Holdings GmbH and Registrant, dated December 16, 2006 (incorporated by reference herein to Exhibit 10.1 to the Registrant’s Form 8-K, filed December 21, 2006).
2.2	Forward Purchase Agreement by and among HMS Hamburg Trust GmbH, Bucyrus Holdings GmbH and RAG Coal International Aktiengesellschaft, dated December 16, 2006 (incorporated by reference herein to Exhibit 10.2 to the Registrant’s Form 8-K, filed December 21, 2006).
2.3	Shareholders’ Agreement by and between Bucyrus Holdings GmbH and HMS Hamburg Trust GmbH, dated December 16, 2006 (incorporated by reference herein to Exhibit 10.3 to the Registrant’s Form 8-K, filed December 21, 2006).
3.1	Amended and Restated Certificate of Incorporation, effective May 3, 2006 (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed May 4, 2006).
3.2	Amended and Restated Bylaws, effective July 27, 2004 (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K, filed February 17, 2006).
4.1	Loan and Security Agreement by and among Registrant, Minserco, Inc., Boonville Mining Services, Inc., the guarantor named therein, the lenders party thereto, and GMAC Commercial Finance LLC and Goldman Sachs Credit Partners L.P. as sole lead arranger, book runner and syndication agent with respect to the revolving facility and the term loans, respectively, dated July 28, 2004 (incorporated by reference herein to Exhibit 99.2 to the Registrant’s Form 8-K, filed July 29, 2004).
4.2	Amended and Restated Loan and Security Agreement by and among Registrant, Minserco, Inc., Boonville Mining Services, Inc., the guarantor named therein, the lenders party thereto, GMAC Commercial Finance LLC as sole lead arranger, JP Morgan Chase Bank as documentation agent, and LaSalle Bank National Association as syndication agent, dated May 27, 2005 (incorporated by reference herein to Exhibit 10.1 to the Registrant’s Form 8-K, filed June 1, 2005).
4.3	First Amendment dated August 14, 2006 to Amended and Restated Loan and Security Agreement (incorporated by reference herein to Exhibit 10.1 to Registrant’s Form 8-K, filed October 24, 2006).
4.4	Second Amendment dated September 15, 2006 to Amended and Restated Loan and Security Agreement (incorporated by reference herein to Exhibit 10.2 to Registrant’s Form 8-K, filed October 24, 2006).

39

Exhibit No.	Description
4.5	Third Amendment dated October 18, 2006 to Amended and Restated Loan and Security Agreement (incorporated by reference herein to Exhibit 10.3 to Registrant’s Form 8-K, filed October 24, 2006).
10.1*	Employment Agreement between Registrant and Craig R. Mackus, dated as of May 21, 1997 (incorporated by reference herein to Exhibit 10.17 to Registrant’s Form 10-Q, filed August 14, 1997).
10.2*	Bucyrus International, Inc. 1998 Management Stock Option Plan (incorporated by reference herein to Exhibit 10.17 to Registrant’s Form 10-K for year ended December 31, 1997).
10.3	Bucyrus International, Inc. 1998 Management Stock Option Plan (October 2006 Amendment and Restatement), effective October 18, 2006 (incorporated by reference herein to Exhibit 10.9 to Registrant’s Form 8-K, filed October 24, 2006).
10.4	Agreement to Purchase and Sell Industrial Property between Registrant and InSite Real Estate Development, L.L.C., dated October 25, 2001 (incorporated by reference herein to Exhibit 10.18 to Registrant’s Form 10-K for year ended December 31, 2001).
10.5	Industrial Lease Agreement between Registrant and InSite South Milwaukee, L.L.C., dated January 4, 2002 (incorporated by reference herein to Exhibit 10.19 to Registrant’s Form 10-K for year ended December 31, 2001).
10.6*	Termination Benefits Agreement between Registrant and John F. Bosbous dated March 5, 2002 (incorporated by reference herein to Exhibit 10.20 to Registrant’s Form 10-K for year ended December 31, 2002).
10.7*	Bucyrus International, Inc. Amended and Restated 2004 Equity Incentive Plan effective October 18, 2006 (incorporated herein by reference to Exhibit 10.8 to Registrant’s Form 8-K, filed October 24, 2006).
10.8*	Form of Performance Share Award Agreement under Amended and Restated 2004 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.10 to Registrant’s Form 8-K, filed October 24, 2006).
10.9*	Form of Stock Appreciation Rights Agreement under Amended and Restated 2004 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.11 to Registrant’s Form 8-K, filed October 24, 2006).
10.10*	Bucyrus International, Inc. Non-Employee Directors Stock Fee Guidelines under 2004 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to Registrant’s Form 8-K, filed October 24, 2006).

40

Exhibit No.	Description
10.11*	Bucyrus International, Inc. 2004 Executive Officer Incentive Plan (incorporated herein by reference to Exhibit 10.23 to the Company’s Registration Statement on Form S-1/A (Commission File No. 333-119273), filed July 16, 2004).
10.12*	Bucyrus International, Inc. Non-Employee Directors Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.24 to the Company’s Registration Statement on Form S-1/A (Commission File No. 333-119273), filed July 16, 2004).
10.13*	Bucyrus International, Inc. Amended and Restated Non-Employee Director Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.5 to Registrant’s Form 8-K, filed October 24, 2006).
10.14*	Bucyrus International, Inc. Supplemental Executive Retirement Plan effective October 20, 2006 (incorporated herein by reference to Exhibit 10.6 to Registrant’s Form 8-K, filed October 24, 2006).
10.15*	Bucyrus International, Inc. Executive Deferred Compensation Plan effective January 1, 2007 (incorporated herein by reference to Exhibit 10.7 to Registrant’s Form 8-K, filed October 24, 2006).
10.16*	Amended and Restated Letter Agreement between Registrant and Timothy W. Sullivan dated July 27, 2004 (incorporated herein by reference to Exhibit 10.21 to Registrant’s Form 10-Q, filed August 16, 2004).
10.17*	Complete and Permanent Release and Retirement Agreement between Registrant and Frank P. Bruno dated August 16, 2006.
10.18*	Form of 2007 Stock Appreciation Rights Agreement (incorporated by reference herein to Exhibit 10.1 to the Registrant’s Form 8-K, filed February 22, 2007).
10.19*	Form of 2007 Restricted Share Award Agreement (incorporated by reference herein to Exhibit 10.2 to the Registrant’s Form 8-K, filed February 22, 2007).
10.20*	Form of Tier 1 Key Executive Employment and Severance Agreement entered into as of February 15, 2007 between the Company and Timothy W. Sullivan (incorporated by reference herein to Exhibit 10.3 to the Registrant’s Form 8-K, filed February 22, 2007).
10.21*	Form of Tier 2 Key Executive Employment and Severance Agreement entered into as of February 15, 2007 between the Company and each of Kenneth W. Krueger and Craig R. Mackus (incorporated by reference herein to Exhibit 10.4 to the Registrant’s Form 8-K, filed February 22, 2007).
10.22*	Form of Tier 3 Key Executive Employment and severance Agreement entered into as of February 15, 2007 between the Company and John F. Bosbous (incorporated by reference herein to Exhibit 10.5 to the Registrant’s Form 8-K, filed February 22, 2007).

41

Exhibit No.	Description
10.23*	Amendment dated February 15, 2007 to Letter Agreement, dated July 14, 2004, by and between the Company and Timothy W. Sullivan (incorporated by reference herein to Exhibit 10.6 to the Registrant’s Form 8-K, filed February 22, 2007).
10.24*	Amendment dated February 15, 2007 to Employment Agreement, dated May 21, 1997, by and between the Company and Craig R. Mackus (incorporated by reference herein to Exhibit 10.7 to the Registrant’s Form 8-K, filed February 22, 2007).
13	Portions of the 2006 Annual Report to Stockholders.
14	Bucyrus International, Inc. Business Ethics and Conduct Policy (incorporated herein by reference to Exhibit 14 to Registrant’s Form 10-K for year ended December 31, 2003).
21.1	Subsidiaries of Registrant.
23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.
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, Controller and Secretary pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a)/15d-14(a).
32	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contract or compensatory plan or arrangement.

42

EX-10.17

EXHIBIT 10.17

COMPLETE AND PERMANENT RELEASE AND RETIREMENT AGREEMENT

          WHEREAS, Frank P. Bruno (“Mr. Bruno”) has worked for Bucyrus International, Inc. (“the Company”) pursuant to a December 1, 1997 Employment Agreement (the “Employment Agreement”); and

          WHEREAS, there is a question as to whether Mr. Bruno’s termination is for cause, which the Company is willing to forego as a part of this agreement; and

          WHEREAS, the Company has notified Mr. Bruno, pursuant to paragraph 4(b) of the Employment Agreement, that his employment is being terminated without cause; and

          WHEREAS, Mr. Bruno wishes to submit his resignation and retire from employment with the Company pursuant to the terms of this Complete And Permanent Release And Retirement Agreement (the “Retirement Agreement”);

         WHEREAS, it is the desire of the parties, in the interest of avoiding further proceedings with respect to their relationship, to compromise and to finally, fully and completely terminate that relationship in its entirety;

          NOW, THEREFORE, in consideration of the provisions of this Retirement Agreement, Mr. Bruno and the Company do mutually agree and do hereby compromise and finally, fully and completely settle all of these matters as follows:

          1. Mr. Bruno acknowledges that he has been notified of his termination, and he desires to resign and retire from the Company instead.

          2. Upon the execution of this Retirement Agreement and its return to the Company in final form, and expiration of the revocation period set forth in paragraph 8(F) below, the Company will provide Mr. Bruno with the following payments and benefits:

A.	A payment to Mr. Bruno of his one year of severance pay under paragraph 5 of the Employment Agreement, in the gross amount of $193,200.00 less required withholding, in a lump sum payment in lieu of payment pursuant to the Company’s normal payroll periods;
B.	Reimbursement of Mr. Bruno’s health insurance premium payments, on the same basis as if he remained actively employed, through October 30, 2007, conditioned upon a valid COBRA election submitted by Mr. Bruno; and
C.	A payment to Mr. Bruno in the amount of $15,000.00 less required withholding, in lieu of the outplacement services described in the Employment Agreement.

All other payments, benefits and insurance coverages and contributions to the Company’s pension, 401(k) and other benefit plans on behalf of Mr. Bruno will cease as of October 15, 2006, and as of that date, Mr. Bruno shall have all of his preexisting rights, if any, with respect to such benefit programs. October 15, 2006 shall be deemed the qualifying event for health insurance continuation purposes under state and federal law. None of the payments under this Retirement Agreement shall be taken into account as compensation under any Company welfare, pension, profit sharing plan or similar program that bases benefits in whole or in part on compensation received from the Company, nor shall Mr. Bruno accrue vacation, sick pay, or other similar benefits during the period of these severance payments. The foregoing payments constitute all of the Company’s obligations under this Retirement Agreement.

2

          3. Mr. Bruno acknowledges that his last day of work will be October 15, 2006 (the “termination date”) and that his employment with the Company irrevocably terminates by this Retirement Agreement as of that date, with no right of reemployment. Mr. Bruno shall retain all rights which have fully vested as of his termination date in any Company pension or benefit plan, but he shall not continue to accrue or vest in any benefits in such plans following his termination date.

          4. Mr. Bruno agrees that he will not apply for or seek employment with the Company or any of its parent corporations, affiliates, predecessors, successors and/or subsidiaries, at any time.

          5. Mr. Bruno and his attorneys, if any, agree and promise that none of the contents of this Retirement Agreement or the fact that he has entered into a special Retirement Agreement with the Company shall be published, displayed, discussed, disclosed, revealed or characterized (directly or indirectly by innuendo or other means) in any way to anyone under any circumstances other than those required by law, except to his counsel, tax advisor and immediate family, and then only on the condition that those individuals agree to keep such information confidential.

          6. In consideration of the foregoing benefits, which Mr. Bruno acknowledges are adequate consideration for his commitments herein, and to the fullest extent permitted by law, Mr. Bruno, for himself, his spouse, heirs and assigns, agrees never to sue or grieve against the Company, its parent corporations, or its or their affiliates or subsidiaries, or its or their past, current or future officers, directors, agents, shareholders, employees, predecessors, successors or assigns (hereinafter collectively referred to as the “Releasees”). Mr. Bruno releases the Releasees of and from any and all claims, whether currently known or unknown, and whether

3

brought by or on behalf of Mr. Bruno. This release includes, without limitation by enumeration, claims for back pay, front pay, bonuses, incentive payments, performance share awards, stock appreciation rights, personal injury, compensatory and punitive damages, injunctive and declaratory relief, attorneys’ fees (which claim is also hereby released by Mr. Bruno’s attorneys, if any), and for future damages allegedly arising from the alleged continuation of the effects of any past action, omission or event. This release includes any and all suits, charges, liability and damages, in law or in equity (including, without limitation by enumeration, any complaints, claims and suits under the United States and Wisconsin Constitutions; 42 U.S.C. §§ 1981, 1981a, 1983, 1985, 1986 and 1988; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et seq.; the Americans With Disabilities Act, 42 U.S.C. §12101 et seq.; the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. § 621 et seq.; the Federal Family and Medical Leave Act, 29 U.S.C. § 2601 et seq.; the Employment Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001 et seq.; Executive Order 11246; the Wisconsin Fair Employment Act § 111.31 et. seq., Wis. Stats.; and any other law, ordinance or regulation prohibiting discrimination in employment or otherwise regulating the employment relationship). This release includes any and all matters in connection with, or based wholly or partially upon, without limitation by enumeration, acts of age or other discrimination, retaliation, suspension, discharge, promotion, demotion, transfer, harassment, libel, slander, infliction of emotional distress, interference with contract or with prospective business relationships, invasion of privacy, failure to interview, hire or appoint, terms and conditions of employment, breach of employment contract, wrongful discharge or constructive discharge allegedly committed against Mr. Bruno by the Releasees, or in any way arising directly or indirectly out of Mr. Bruno’s

4

employment with and termination from the Company, up to and including the date Mr. Bruno signs this Retirement Agreement.

          7. Mr. Bruno agrees not to make disparaging remarks about any of the Releasees, or their products or practices (including, but not limited to, personnel practices); provided, however, that Mr. Bruno may give non-malicious and truthful testimony about these matters if he is properly subpoenaed to do so.

          8. Mr. Bruno acknowledges that:

                        A. he has read the foregoing document, understands its contents and agrees to its terms and conditions freely and voluntarily;

                        B. he has made an independent investigation of the facts and does not rely on any statements or representations by the Company, its agents or representatives, other than those explicitly set forth herein, in entering into this Retirement Agreement;

                        C. he has been and hereby is advised to consult with legal counsel before signing this Retirement Agreement;

                        D. he has twenty-one (21) days from the date of receipt of this Retirement Agreement within which to consider it;

                        E. he understands and agrees that this Retirement Agreement includes a final general release and that, as stated in paragraph 6 of this Retirement Agreement, he can make no further claims against any of the Releasees for any matters having connection with the events covered herein;

                        F. he may, within seven (7) calendar days following the date he executes this Retirement Agreement and returns it to the Company, cancel and terminate this Retirement Agreement by giving written notice of his intent to terminate to the Company, and this

5

Retirement Agreement shall not become effective or enforceable until this seven-day period has expired. TIME IS OF THE ESSENCE WITH REGARD TO THIS SUBPARAGRAPH; and

                        G. he wants no further claims.

          9. The parties understand and agree that any breach by either of them of any of the foregoing covenants shall entitle either to bring an action for failure to comply with the terms of this Retirement Agreement and, further, should the non-breaching party prevail in such action, the non-breaching party shall be entitled to recover its or his actual reasonable attorneys’ fees and costs as part of such action. In addition, the parties agree that the remedy at law for breach of this Retirement Agreement shall be inadequate and that the non-breaching party shall be entitled to injunctive relief and any other remedy or relief ordered by a court.

          10. Mr. Bruno and the Company each acknowledge that this Retirement Agreement is a joint product and shall not be construed against either party on the grounds of sole authorship.

          11. Mr. Bruno hereby authorizes and ratifies all that his attorneys, if any, may have done or may do in the effectuation of this Retirement Agreement.

          12. Neither the Company’s signing of this Retirement Agreement nor any actions taken by the Company in compliance with the terms of this Retirement Agreement constitute an admission by the Company that it has acted wrongfully toward, unlawfully discriminated against, or wrongfully discharged Mr. Bruno or that it has violated any federal, state or local law, Executive Order or regulation or that it has breached a contract with Mr. Bruno.

          13. Should any of the provisions of this Retirement Agreement be rendered invalid by a court or government agency of competent jurisdiction, it is agreed that this shall not in any way affect the enforceability of the other provisions of this Retirement Agreement which shall remain in full force and effect provided, however, that if the release of claims in paragraph 6 above is

6

held to be invalid or unenforceable by the Company, then this Retirement Agreement shall be void in its entirety and the Company shall be entitled to the return of all sums paid hereunder in accordance with applicable law.

          14. This Retirement Agreement constitutes the complete understanding between Mr. Bruno and the Company, and fully supersedes the Employment Agreement, with the specific exception of paragraphs 7 and 8, which shall remain in full force and effect in accordance with their terms. No other promises or agreements shall be binding unless signed by these parties.

/s/ F. Bruno		16 August 2006
Frank P. Bruno		Date
BUCYRUS INTERNATIONAL, INC.
By:	/s/ C. R. Mackus	16 August 2006
	Authorized Representative	Date

7

EX-13

EXHIBIT 13

Portions of the 2006

Annual Report to Stockholders

Bucyrus International, Inc.^â
Financial Statements

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in Thousands, Except Per Share Amounts)

	Years Ended December 31,
	2006			2005			2004
Sales	$	738,050		$	575,042		$	454,186
Cost of products sold		551,275			437,611			357,819
Gross profit		186,775			137,431			96,367
Selling, general and administrative expenses		73,138			54,354			53,050
Research and development expenses		10,661			7,225			5,619
Amortization of intangible assets		1,792			1,801			1,817
Operating earnings		101,184			74,051			35,881
Interest expense		3,693			4,865			11,547
Other income		(818	)		(718	)		(321	)
Other expense		1,035			987			1,979
Loss on extinguishment of debt		—			—			7,316
Earnings before income taxes		97,274			68,917			15,360
Income tax expense		26,930			15,358			9,276
Net earnings	$	70,344		$	53,559		$	6,084
Net earnings per share data
Basic:
Net earnings per share	$	2.25		$	1.76		$	.26
Weighted average shares		31,264,580			30,483,453			23,197,292
Diluted:
Net earnings per share	$	2.23		$	1.71		$	.25
Weighted average shares		31,539,761			31,246,137			24,221,550

See notes to consolidated financial statements.

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in Thousands)

	Years Ended December 31,
	2006		2005			2004
Net earnings	$	70,344	$	53,559		$	6,084
Other comprehensive income (loss):
Foreign currency translation adjustments		1,215		(589	)		3,721
Minimum pension liability adjustment, net of income taxes		4,626		(2,929	)		8,824
Other comprehensive income (loss)		5,841		(3,518	)		12,545
Comprehensive income	$	76,185	$	50,041		$	18,629

See notes to consolidated financial statements.

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Amounts)

	December 31,
	2006			2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	9,575		$	12,451
Receivables-net		162,535			155,547
Inventories		176,277			133,476
Deferred income taxes		11,725			18,363
Prepaid expenses and other		16,408			6,982
Total Current Assets		376,520			326,819
OTHER ASSETS:
Goodwill		47,306			47,306
Intangible assets-net		28,097			34,565
Deferred income taxes		16,117			10,355
Other assets		7,523			8,767
Total Other Assets		99,043			100,993
PROPERTY, PLANT AND EQUIPMENT:
Land		4,099			2,331
Buildings and improvements		55,439			18,593
Machinery and equipment		151,066			120,014
Less accumulated depreciation		(85,455	)		(76,783	)
Total Property, Plant and Equipment		125,149			64,155
TOTAL ASSETS	$	600,712		$	491,967

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in Thousands, Except Per Share Amounts)

	December 31,
	2006			2005
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Accounts payable	$	83,603		$	65,729
Accrued expenses		44,121			41,018
Liabilities to customers on uncompleted contracts and warranties		32,233			35,239
Income taxes		9,978			11,943
Short-term obligations		121			939
Current maturities of long-term debt		210			400
Total Current Liabilities		170,266			155,268
LONG-TERM LIABILITIES:
Postretirement benefits		17,313			14,257
Pension and other		34,871			34,567
Total Long-Term Liabilities		52,184			48,824
LONG-TERM DEBT, less current maturities		82,266			66,975
COMMITMENTS AND CONTINGENCIES – Note M
COMMON STOCKHOLDERS’ INVESTMENT:
Class A common stock – par value $.01 per share, authorized 75,000,000 shares, issued 31,685,767 and 30,991,820 shares in 2006 and 2005, respectively		317			310
Additional paid-in capital		306,981			298,079
Unearned restricted stock compensation		—			(466	)
Treasury stock, at cost – 108,600 shares		(851	)		(851	)
Accumulated earnings (deficit)		13,451			(50,963	)
Accumulated other comprehensive loss		(23,902	)		(25,209	)
Total Common Stockholders’ Investment		295,996			220,900
TOTAL LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT	$	600,712		$	491,967

See notes to consolidated financial statements.

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ INVESTMENT
(Dollars in Thousands)

	Class A Common Stock		Additional Paid-In Capital			Unearned Restricted Stock Compensation			Treasury Stock			Accumulated Earnings (Deficit)			Accumulated Other Comprehensive Loss
Balance at January 1, 2004	$	121	$	149,472			—		$	(851	)	$	(104,783	)	$	(34,236	)
Initial public offering		80		129,711			—			—			—			—
Issuance of restricted stock(36,000 shares)		—		720		$	(720	)		—			—			—
Stock compensation expense		—		10,027			49			—			—			—
Net earnings		—		—			—			—			6,084			—
Dividends declared		—		—			—			—			(1,151	)
Translation adjustments		—		—			—			—			—			3,721
Minimum pensionliability adjustment		—		—			—			—			—			8,824
Balance at December 31, 2004		201		289,930			(671	)		(851	)		(99,850	)		(21,691	)
Issuance of common stock (849,654 shares)		6		3,961			—			—			—			—
Income tax effect of stock options exercised		—		4,316			—			—			—			—
Stock compensation expense		—		—			180			—			—			—
Restricted stock forfeited (1,800 shares)		—		(25	)		25			—			—			—
Net earnings		—		—			—			—			53,559			—
Dividends declared		—		—			—			—			(4,672	)		—
Translation adjustments		—		—			—			—			—			(589	)
Minimum pension liability adjustment		—		—			—			—			—			(2,929	)
Balance at December 31, 2005		207		298,182			(466	)		(851	)		(50,963	)		(25,209	)
Stock split three-for-two		103		(103	)		—			—			—			—
Cash in lieu of fractional shares		—		(98	)		—			—			—			—
Issuance of common stock (438,841 shares)		4		832			—			—			—			—
Issuance of nonvested common stock (306,075 shares)		3		(3	)		—			—			—			—
Income tax effect of stock options exercised		—		4,353			—			—			—			—
Stock compensation expense		—		4,284			—			—			—			—
Reclassification of unearned compensation to additional paid-in-capital upon adoption of SFAS 123(R) – see Note G		—		(466	)		466			—			—			—
Net earnings		—		—			—			—			70,344			—
Dividends declared		—		—			—			—			(5,930	)		—
Translation adjustments		—		—			—			—			—			1,215

	Class A Common Stock		Additional Paid-In Capital		Unearned Restricted Stock Compensation		Treasury Stock			Accumulated Earnings (Deficit)		Accumulated Other Comprehensive Loss
Minimum pension liability adjustment, net of income taxes		—		—		—		—					4,626
Adjustment to initially adopt SFAS No. 158, net of income taxes - see Notes I and J		—		—		—		—			—		(4,534	)
Balance at December 31, 2006	$	317	$	306,981	$	—	$	(851	)	$	13,451	$	(23,902	)

See notes to consolidated financial statements.

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

	Years Ended December 31,
	2006			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	70,344		$	53,559		$	6,084
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		12,892			11,681			11,061
Amortization		2,827			2,788			3,194
Stock compensation expense		4,284			180			10,076
Stock issued in payment of director’s fees		81			70			—
Deferred income taxes		275			(9,765	)		3,772
Tax benefit from exercise of stock options		—			4,316			—
Loss on sale of property, plant and equipment		140			273			287
Receipt of government grants for training expenses		800			—			—
Loss on extinguishment of debt		—			—			7,316
Secondary offering expenses		—			—			602
Changes in assets and liabilities:
Receivables		(6,443	)		(64,729	)		(15,023	)
Inventories		(42,433	)		(21,904	)		8,726
Other current assets		(8,840	)		(1,112	)		5,473
Other assets		(414	)		1,574			(3,309	)
Current liabilities other than income taxes, short-term obligations and current maturities of long-term debt		13,848			72,752			(14,849	)
Income taxes		(1,171	)		7,708			(1,376	)
Long-term liabilities other than deferred income taxes		4,740			(7,033	)		(6,371	)
Net cash provided by operating activities		50,930			50,358			15,663
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(71,306	)		(22,164	)		(6,285	)
Proceeds from sale of property, plant and equipment		517			305			105
Other		186			(250	)		(526	)
Net cash used in investing activities		(70,603	)		(22,109	)		(6,706	)

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Dollars in Thousands)

	Years Ended December 31,
	2006			2005			2004
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from (repayments of) revolving credit facilities	$	15,299		$	63,490		$	(37,420	)
Proceeds from other bank borrowings and long-term debt		150			643			263
Payments of other bank borrowings and long-term debt		(1,166	)		(321	)		(393	)
Proceeds from senior secured term loan		—			—			100,000
Retirement of Senior Notes		—			—			(150,000	)
Payment of prepayment penalty on Senior Notes		—			—			(5,560	)
Payment of deferred interest on Senior Notes owned by Holdings		—			—			(23,660	)
Repayment of senior secured term loan		—			(98,750	)		(1,250	)
Receipt of government grants for facilities expansion		2,000			—			—
Payment of financing expenses		(268	)		(591	)		(4,830	)
Payment of secondary offering expenses		—			—			(602	)
Net proceeds from issuance of common stock		756			3,896			129,791
Tax benefit from exercise of stock options		4,353			—			—
Dividends paid		(5,892	)		(4,666	)		(1,151	)
Payment in lieu of fractional shares - stock split		(98	)		—			—
Net cash provided by (used in) financing activities		15,134			(36,299	)		5,188
Effect of exchange rate changes on cash		1,663			(116	)		397
Net increase (decrease) in cash and cash equivalents		(2,876	)		(8,166	)		14,542
Cash and cash equivalents at beginning of year		12,451			20,617			6,075
Cash and cash equivalents at end of year	$	9,575		$	12,451		$	20,617
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	4,297		$	5,443		$	39,569
Income taxes-net of refunds		26,735			14,462			6,976
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Capital expenditures related to expansion program included in accounts payable	$	3,047			—			—

See notes to consolidated financial statements.

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF ACCOUNTING POLICIES

          Nature of Operations

          Bucyrus International, Inc. (the “Company”) is a Delaware corporation and a leading manufacturer of surface mining equipment, principally draglines, electric mining shovels and large rotary blasthole drills. Major markets for the surface mining industry are copper, coal, oil sands and iron ore. The Company also has a comprehensive aftermarket business that includes replacement parts, maintenance and other services. The largest markets for the Company's products and services are in Australia, Canada, China, India, South Africa, South America and the United States.

          Use of Estimates

          The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

          Principles of Consolidation

          The consolidated financial statements include the accounts of all subsidiaries. All significant intercompany transactions, profits and accounts have been eliminated.

          Cash Equivalents

          All highly liquid investments with maturities of three months or less when purchased are considered to be cash equivalents. The carrying value of these investments approximates fair value.

          Inventories

          Inventories are stated at lower of cost (first-in, first-out method) or net realizable value. The cost of finished goods and work in progress includes the cost of raw materials, other direct costs and production overheads. Net realizable value is the estimate of the selling price in the ordinary course of business, less the cost of completion and selling. Provision is made to reduce the cost to net realizable value for obsolete and slow-moving inventories. Advances from customers are netted against inventories to the extent of related accumulated costs. Advances in excess of related costs and earnings on uncompleted contracts are classified as a liability to customers. Advances netted against inventory costs were zero and $.4 million at December 31, 2006 and 2005, respectively.

          Goodwill and Intangible Assets

          Goodwill and intangible assets are accounted for in accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”) (see Note D).

          Intangible assets consist primarily of engineering drawings, bill-of-material listings, software, trademarks and trade names. At December 31, 2005, intangible assets also included $4.6 million related to an adjustment to record an additional minimum pension liability (see Note I). Upon the adoption of 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)”, on December 31, 2006, an intangible asset related to this adjustment is no longer required.

          Property, Plant and Equipment

          Depreciation is provided over the estimated useful lives of respective assets using the straight-line method for financial reporting and accelerated methods for income tax purposes. Estimated useful lives used for financial reporting purposes range from ten to forty years for buildings and improvements and three to 17 years for machinery and equipment.

          Capitalized Interest

          Under certain conditions, the Company capitalizes interest as part of the acquisition cost of an asset. Interest is capitalized only during the period of time required to complete and prepare the asset for its intended use. For the year ended December 31, 2006, the Company capitalized $.8 million of interest as a part of the cost of a multi-phase expansion of its manufacturing facilities.

          Impairment of Long-Lived Assets

          The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful lives of property, plant and equipment and intangible assets with finite lives may warrant revision or that the remaining balance of each may not be recoverable. The Company accounts for any impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

          Foreign Currency Translation

          The assets and liabilities of foreign subsidiaries are translated into U.S. dollars using year-end exchange rates. Sales and expenses are translated at average rates during the year. Adjustments resulting from this translation are deferred and reflected as a separate component of Common Stockholders’ Investment. Gains and losses from foreign currency transactions are included in Selling, General and Administrative expenses in the Consolidated Statements of Earnings. Transaction losses totaled $1.0 million for the year ended December 31, 2006, and transaction gains totaled $1.0 million and $2.7 million for the years ended December 31, 2005 and 2004, respectively. Transaction gains and losses on intercompany advances to foreign subsidiaries for which settlement is not planned or anticipated in the foreseeable future are deferred and reflected as a component of Common Stockholders’ Investment.

          Comprehensive Income (Loss)

          Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” requires the reporting of comprehensive income (loss) in addition to net income (loss). 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 income (loss). The Company reports comprehensive income (loss) and accumulated other comprehensive loss, which encompasses net income (loss), foreign currency translation adjustments, minimum pension liability adjustments and an adjustment to adopt SFAS No. 158 (see Notes I and J), in the Consolidated Statements of Common Stockholders’ Investment. Information regarding accumulated other comprehensive loss is as follows:

	Cumulative Translation Adjustments			Minimum Pension Liability Adjustments			Adjustment to Adopt SFAS No. 158			Accumulated Other Comprehensive Loss
	(Dollars in Thousands)
Balance at January 1, 2004	$	(9,028	)	$	(25,208	)	$	—		$	(34,236	)
Changes—Year ended December 31, 2004		3,721			8,824			—			12,545
Balance at December 31, 2004		(5,307	)		(16,384	)		—			(21,691	)
Changes—Year ended December 31, 2005		(589	)		(2,929	)		—			(3,518	)
Balance at December 31, 2005		(5,896	)		(19,313	)		—			(25,209	)
Changes—Year ended December 31, 2006		1,215			4,626			(4,534	)		1,307
Balance at December 31, 2006	$	(4,681	)	$	(14,687	)	$	(4,534	)	$	(23,902	)

          Revenue Recognition

          Revenue from long-term sales contracts, such as for the manufacture of the Company’s machines and certain replacement parts, is recognized using the percentage-of-completion method prescribed by Statement of Position No. 81-1 due to the length of time to fully manufacture and assemble the Company’s machines or replacement parts. The Company measures revenue recognized based on the ratio of estimated costs incurred to date in relation to total costs to be incurred. The percentage-of-completion method of accounting for these contracts most accurately reflects the status of these uncompleted contracts in the Company’s consolidated financial statements and most accurately measures the matching of revenues with expenses. The Company also has long-term maintenance and repair contracts with customers. Under these contracts, the Company provides all replacement parts, regular maintenance services and necessary repairs for the excavation equipment at a particular mine with an on-site support team. In addition, some of these contracts call for Company personnel to operate the equipment being serviced. Parts consumed and services provided are charged to cost of products sold and sales are calculated and recorded based on the parts and service utilization. The customer is billed monthly and a liability for deferred revenues is recorded if payments received exceed revenues recognized. At the time a loss on a contract becomes known, the amount of the estimated loss is recognized in the consolidated financial statements. Revenue from all other types of sales, primarily sales of aftermarket parts, net of estimated returns and allowances, is recognized in

conformity with Staff Accounting Bulletin No. 104, when all of the following circumstances are satisfied: persuasive evidence of an arrangement exists, the price is fixed or determinable, collectibility is reasonably assured, and delivery has occurred or services have been rendered. Criteria for revenue recognition is generally met at the time products are shipped, as the terms are FOB shipping point.

          Included in the current portion of liabilities to customers on uncompleted contracts and warranties are advances in excess of related costs and earnings on uncompleted contracts of $25.1 million and $28.9 million at December 31, 2006 and 2005, respectively.

          Warranty

          Sales of the Company’s products generally carry typical manufacturers’ warranties, the majority of which cover products for one year, based on terms that are generally accepted in the marketplace. The Company records provisions for estimated warranty and other related costs as revenue is recognized based on historical warranty loss experience and periodically adjusts these provisions to reflect actual experience.

          Shipping and Handling Fees and Costs

          Revenue received from shipping and handling fees is reflected in sales. Shipping fee revenue was insignificant for all periods presented. Shipping and handling costs are included in cost of products sold.

          Income Taxes

          Deferred taxes are provided to reflect temporary differences between the financial and tax basis of assets and liabilities using presently enacted tax rates and laws. A valuation allowance is recognized if it is more likely than not that some or all of the deferred tax assets will not be realized.

          Financial Instruments

          Based on Company estimates, the carrying amounts of cash equivalents, receivables, accounts payable, accrued liabilities and variable rate debt approximated fair value at December 31, 2006 and 2005.

          Derivative Financial Instruments

          The Company has entered into foreign exchange forward contracts in order to manage and preserve the economic value of cash flows in non-functional currencies. At December 31, 2006, the Company’s domestic operations had financial contracts outstanding to purchase 53.8 Australian dollars at a total price of $42.1 million, purchase 1.6 million British pounds at a total price of $3.1 million and sell 20.1 million African rands at a total price of $2.8 million. The Company’s operations in South Africa have contracts outstanding to purchase $.5 million at a total price of 3.8 million African rands. Based upon year-end exchange rates, all outstanding contracts are recorded at fair value. The Company conducts its business on a multinational basis in a wide variety of foreign currencies and hedges foreign currency exposures arising from various receivables, liabilities and expected inventory purchases. Derivative instruments that are utilized to hedge the foreign currency risk associated with anticipated inventory purchases in foreign currencies are designated as cash-flow hedges. Gains and losses on these instruments, to the extent that they have been effective, are deferred in other comprehensive income and recognized in earnings when the related inventory is sold. Ineffectiveness related to these hedge relationships

is recognized currently in the Consolidated Statements of Earnings and was not significant. The maturity of these instruments does not exceed 12 months.

          The Company also uses natural hedges to mitigate risks associated with foreign currency exposures. For example, oftentimes the Company has non-functional currency denominated receivables from customers for which the exposure is partially mitigated by a corresponding non-functional currency payable to a vendor.

          Stock Split

          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 stockholders 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 financial statements and notes thereto to net earnings per share and the number of shares have been adjusted to reflect this stock split, except for the Consolidated Statements of Common Stockholders’ Investment which reflect the stock split by reclassifying from Additional Paid-In Capital to Class A Common Stock an amount equal to the par value of the additional shares issued to effect the stock split.

          Accounting for Stock–Based Compensation

          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. 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”).

          The following table illustrates the effect on net earnings and net earnings per share as if the fair value-based method provided by SFAS 123 had been applied for all outstanding and unvested awards in each period:

	Years Ended December 31,
	2005		2004
	(Dollars in Thousands, Except Per Share Amounts)
Reported net earnings	$	53,559	$	6,084
Add: Stock-based employee compensation expense recorded, net of related tax effects		—		6,217
Deduct: Total stock-based employee compensation expense determined under fair value based method, net of related tax effects		—		(360	)
Pro forma net earnings	$	53,559	$	11,941
Net earnings per share of common stock:
As reported:
Basic	$	1.76	$	.26
Diluted		1.71		.25
Pro forma:
Basic		1.76		.51
Diluted		1.71		.49

          SFAS 123R requires 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 year ended December 31, 2006 would have been classified as an operating cash inflow prior to the adoption of SFAS 123R. SFAS 123R also requires any remaining debit in Common Stockholders’ Investment related to unearned stock compensation be reclassified to the appropriate equity accounts.

NOTE B – RECEIVABLES

          Receivables at December 31, 2006 and 2005 include $77.0 million and $68.2 million, respectively, of revenues from long-term contracts which were not billable at these dates. Billings on long-term contracts are made in accordance with the terms as defined in the individual contracts. The unbilled receivables are for contracts that were near completion as of the balance sheet dates and collection of amounts due was scheduled to be within the next twelve months of such dates.

          Current receivables are reduced by an allowance for losses of $.8 million and $1.5 million at December 31, 2006 and 2005, respectively.

NOTE C – INVENTORIES

          Inventories consist of the following:

	December 31,
	2006		2005
	(Dollars in Thousands)
Raw materials and parts	$	45,392	$	36,526
Work in process		30,794		12,896
Finished products (primarily replacement parts)		100,091		84,054
	$	176,277	$	133,476

NOTE D – GOODWILL AND INTANGIBLE ASSETS

          In accordance with SFAS 142, goodwill is no longer subject to amortization, but instead is subject to an evaluation for impairment at least annually by applying a two-step fair-value-based test. Additionally, intangible assets with indefinite lives are also no longer amortized but are subject to an evaluation for impairment at least annually by applying a lower-of-cost-or-market test. Intangible assets with finite lives continue to be amortized over a period of 5 to 20 years. For goodwill, the fair value of the Company’s reporting units exceeds the carrying amounts and an impairment charge is not required. The Company also completed an impairment analysis of its indefinite life intangible assets in accordance with the provisions of SFAS 142 and determined that an impairment charge is not required.

Intangible assets consist of the following:

	December 31, 2006							December 31, 2005
	Weighted Average Life		Gross Carrying Amount		Accumulated Amortization			Weighted Average Life		Gross Carrying Amount		Accumulated Amortization
	(years)		(Dollars in Thousands)					(years)		(Dollars in Thousands)
Amortized intangible assets:
Engineering drawings		20	$	25,500	$	(11,818	)		20	$	25,500	$	(10,543	)
Bill of material listings		20		2,856		(1,324	)		20		2,856		(1,181	)
Software		10		2,288		(2,121	)		10		2,288		(1,892	)
Other		5		700		(420	)		5		773		(309	)
			$	31,344	$	(15,683	)			$	31,417	$	(13,925	)
Unamortized intangible assets:
Trademarks/Trade names			$	12,436						$	12,436
Intangible pension asset				—							4,637
			$	12,436						$	17,073

          At December 31, 2006, the intangible pension asset was no longer reported upon adoption of SFAS No. 158 (see Note I).

          The aggregate intangible amortization expense was $1.8 million for each of the years ended December 31, 2006, 2005 and 2004. The estimated future amortization expense of intangible assets is as follows:

	(Dollars in Thousands)
2007	$	1,725
2008		1,558
2009		1,418
2010		1,418
2011		1,418
Future		8,124
	$	15,661

NOTE E – ACCRUED EXPENSES

          Accrued expenses consist of the following:

	December 31,
	2006		2005
	(Dollars in Thousands)
Wages and salaries	$	13,708	$	11,030
Pension		373		10,182
Other		30,040		19,806
	$	44,121	$	41,018

NOTE F – LONG-TERM DEBT AND FINANCING ARRANGEMENTS

          Long-term debt consists of the following:

	December 31,
	2006			2005
	(Dollars in Thousands)
Revolving credit facility	$	78,789		$	63,490
Other		3,687			3,885
		82,476			67,375
Less current maturities of long-term debt		(210	)		(400	)
	$	82,266		$	66,975

          On May 27, 2005, the Company entered into a credit agreement with GMAC Commercial Finance LLC as lead lender which provides for a revolving credit facility and expires on May 27, 2010. In 2006, the amount of the revolving credit facility was increased to $200.0 million from $120.0 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 December 31, 2006, the Company had $78.8 million of borrowings outstanding under the revolving credit facility at a weighted average interest rate of 6.8%. The amount available for additional borrowings under the revolving credit facility at December 31, 2006 was $69.7 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 senior secured credit facility. In addition, the outstanding capital stock of the Company’s domestic subsidiaries, as well as the capital stock of a majority 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 these covenants as of December 31, 2006.

          Previously, the Company had a senior secured credit facility it had entered into upon completion of an initial public offering (“IPO”) on July 28, 2004 (see Note G). The net proceeds from the IPO together with proceeds from other borrowings were used to retire all the Company’s previously outstanding 9-3/4% Senior Notes due 2007 (“Senior Notes”) and accrued interest. Included in the Consolidated Statement of Earnings for the year ended December 31, 2004 was a $7.3 million loss on extinguishment of debt, which consisted of prepayment penalty and the write-off of unamortized deferred financing costs related to the Senior Notes.

          The average revolving credit facility borrowings under the Company’s credit agreement for the year ended December 31, 2006 were $59.7 million at a weighted average interest rate of 6.9%, and the maximum borrowing outstanding was $111.8 million. The average borrowings under the revolving portion of the Company’s credit agreement during the period from May 27, 2005 to December 31, 2005 were $81.9 million at a weighted average interest rate of 5.4%, and the maximum borrowing outstanding was $94.2 million.

          At December 31, 2006 and 2005, there were $76.2 million and $26.3 million, respectively, of standby letters of credit outstanding under all Company bank facilities.

          Maturities of long-term debt are as follows for each of the next five years:

	(Dollars in Thousands)
2007		$	210
2008			889
2009			189
2010			79,304
2011			219

NOTE G – COMMON STOCKHOLDERS’ INVESTMENT

          At December 31, 2006, the Company’s issued and outstanding shares consist only of Class A common stock. Holders of Class A common stock are entitled to one vote per share on all matters to be voted on by the Company’s common stockholders. On March 8, 2006, the Company’s Board of Directors authorized, and stockholders approved on May 3, 2006 at the 2006 annual meeting of stockholders, 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. At December 31, 2006, the Company also has authorized but not issued 25,000,000 shares of Class B common stock and 10,000,000 shares of preferred stock.

          On July 28, 2004, the Company completed an IPO of 18,543,750 shares of its Class A common stock at an offering price of $12 per share, from which the Company received net proceeds, after commissions and expenses, of $129.8 million. Subsequent to the IPO, the Company paid quarterly cash dividends of $.0383 per share (equal to $.153 per year). Effective with the stock split, 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 March 2006 stock split.

          In 2004, the Company’s Board of Directors adopted, and the Company obtained stockholder approval of, the Bucyrus International, Inc. 2004 Equity Incentive Plan (the “2004 Incentive Plan”), which has subsequently been amended and restated. The 2004 Incentive Plan will expire on the tenth anniversary of its effective date, unless terminated earlier by the Company’s Board of Directors. The 2004 Incentive Plan provides for the grant of equity based awards, including restricted (or nonvested) stock, restricted stock units, stock options, stock appreciation rights (“SARs”), and other equity based awards to the Company’s directors, officers, and other employees, advisors and consultants and those of the Company’s subsidiaries who are selected by the compensation committee of the Company’s Board of Directors for participation in the plan. A maximum of three million shares of the Company’s Class A common stock are available for awards under the 2004 Incentive Plan, as amended. The compensation committee of the Company’s Board of Directors will determine all of the terms and conditions of awards under the plan, including whether the vesting or payment of an award will be subject to the attainment of performance goals.

          On September 22, 2004, the Company issued 36,000 nonvested shares to certain employees pursuant to the 2004 Incentive Plan. These shares become freely transferable and nonforfeitable at the end of four years. During 2005, 1,800 of these nonvested shares were forfeited. In 2006, the Company issued additional nonvested shares to certain employees pursuant to the 2004 Incentive Plan. These shares fully cliff vest on December 31, 2009, although the vesting period may be accelerated based on the attainment of certain defined financial goals of the Company. The Company did attain the defined financial goals for the year ended December 31, 2006 and 25% of the shares fully vested. A summary of the status of the Company’s nonvested shares at December 31, 2006 and changes during the year ended December 31, 2006 is as follows:

	Shares			Weighted-Average Grant Date Fair Value
Balance at January 1, 2006		34,200		$	20.00
Granted on February 16, 2006		180,750			39.76
Granted on April 25, 2006		37,800			57.00
Forfeited		(48,900	)		39.01
Shares vested		(5,700	)		20.00
Balance at December 31, 2006		198,150		$	40.39
Vested or expected to vest		196,530		$	40.26

          The grant date fair value was based on the fair market value, as defined in the 2004 Incentive Plan, of the Company’s Class A common stock on the date of grant. At December 31, 2006, there was $6.2 million of unrecognized compensation cost related to the nonvested shares granted under the 2004 Incentive Plan. This cost is expected to be recognized over a weighted-average period of 2.9 years. The shares vested or expected to vest as of

December 31, 2006 had an aggregate intrinsic value of $7.9 million and a weighted-average remaining contractual term of 2.9 years.

          In 2006, the Company also granted premium nonvested shares to certain employees. These shares partially vest if specific performance levels are attained by the Company. Any nonvested premium shares credited to employees will fully cliff vest on December 31, 2009 if the employee is still employed by the Company on that date. The Company did attain the specific performance levels for the year ended December 31, 2006, which resulted in the partial vesting of 25% of the nonvested premium shares. A summary of the status of the Company’s premium nonvested shares at December 31, 2006 and changes during the year ended December 31, 2006 is as follows:

	Shares			Weighted-Average Grant Date Fair Value
Granted on February 16, 2006		90,375		$	39.76
Granted on April 25, 2006		18,900			57.00
Forfeited		(21,750	)		41.37
Balance at December 31, 2006		87,525		$	43.08
Vested or expected to vest		46,442		$	42.74

          At December 31, 2006, there was $1.6 million of unrecognized compensation cost related to the premium nonvested shares, which is expected to be recognized over a period of 3.0 years. The grant date fair value of the nonvested premium shares was based on the fair market value, as defined in the 2004 Incentive Plan, of the Company’s Class A common stock on the date of grant. The shares vested or expected to vest as of December 31, 2006 had an aggregate intrinsic value of $2.0 million and a weighted-average remaining contractual life of 3.0 years.

          In 2006, the Company also issued SARs to certain employees pursuant to the 2004 Incentive Plan. A summary of the status of the Company’s SARs at December 31, 2006 and changes during the year ended December 31, 2006 is as follows:

	SARs			Weighted-Average Grant Date Fair Value
Granted on February 16, 2006		361,500		$	19.72
Granted on April 25, 2006		75,600			28.27
Forfeited		(87,000	)		20.52
Balance at December 31, 2006		350,100		$	21.37
Vested or expected to vest		346,860		$	21.30

          The SARs vest incrementally over four years and can be settled in shares only. At December 31, 2006, there was $6.2 million of unrecognized compensation cost related to the

SARs, which is expected to be recognized over a period of 3.0 years. The SARs vested or expected to vest as of December 31, 2006 had an aggregate intrinsic value of $7.4 million and a weighted-average remaining contractual life of 3.0 years. The grant date fair value of the SARs was calculated using the Black Sholes pricing model. The assumptions used in this model were as follows:

Risk-free interest rate	4.37	%
Expected volatility	43.25	%
Expected life	7 years
Dividend yield	.43	%

          The risk-free interest rate was based on the current U.S. Treasury rate for a bond of seven years, the expected life of the SARs. The expected volatility was based on the historical activity of the Company’s Class A common stock. The expected life was based on the average of the vesting term of four years and the original contract term of 10 years. The expected dividend yield was based on the annual dividend of $.153 per share which had been paid on the Company’s Class A common stock prior to the stock split.

          In 1998, the Company’s Board of Directors adopted, and the Company obtained stockholder approval of, the Bucyrus International, Inc. 1998 Management Stock Option Plan (the “1998 Option Plan”) as part of the compensation and incentive arrangements for certain of the Company’s management employees and those of the Company’s subsidiaries. The 1998 Option Plan provides for the grant of stock options to purchase up to an aggregate of 2.4 million shares of the Company’s Class A common stock at exercise prices to be determined in accordance with the provisions of the 1998 Option Plan. All outstanding options under the 1998 Option Plan became fully vested and exercisable upon completion of the Company’s IPO on July 28, 2004.

          The following table sets forth the activity and outstanding balances of options issued pursuant to the 1998 Option Plan:

	Options Outstanding
	Number of Options			Weighted Average Exercise Price			Available For Future Grants
Balances at January 1, 2004		1,527,000			$	3.69		12,600
Options granted		102,600				18.57		(102,600	)
Options forfeited		(336,000	)			8.33		336,000
Balances at December 31, 2004		1,293,600				3.66		246,000
Options exercised		(847,014	)			4.60		—
Balances at December 31, 2005		446,586				1.87		246,000
Options exercised		(436,986	)			1.73		—
Balances at December 31, 2006		9,600				8.33		246,000

          At December 31, 2006, all of the options outstanding were fully vested and exercisable and had a weighted average remaining contractual life of 1.2 years. At December 31, 2005, all of the options outstanding were vested and exercisable and had a weighted average remaining contractual life of 4.9 years. At December 31, 2004, all of the options outstanding were vested and exercisable and had a weighted average remaining contractual life of 6 years.

          The weighted average grant date fair value of stock options granted in 2004 under the 1998 Option Plan was $6.27 per option. No options were granted in 2006 or 2005. The fair value of grants in 2004 was estimated on the date of grant using the PEV lattice-based binomial method with the following weighted average assumptions:

	1998 Option Plan
	2004
Risk-free interest rate	3.29%
Expected dividend yield	.77%
Expected life	5 years
Calculated volatility	N/A

NOTE H – INCOME TAXES

          Earnings before income taxes consists of the following:

	Years Ended December 31,
	2006		2005		2004
	(Dollars in Thousands)
United States	$	62,547	$	44,240	$	6,584
Foreign		34,727		24,677		8,776
Total	$	97,274	$	68,917	$	15,360

          The provision for income tax expense consists of the following:

	Years Ended December 31,
	2006			2005			2004
	(Dollars in Thousands)
Foreign income taxes:
Current	$	12,454		$	10,067		$	3,939
Deferred		(1,478	)		(560	)		63
Total		10,976			9,507			4,002
Federal income taxes:
Current		11,729			14,215			1,606
Deferred		3,538			(10,460	)		3,356
Total		15,267			3,755			4,962
Other (state and local taxes):
Current		2,472			841			(41	)
Deferred		(1,785	)		1,255			353
Total		687			2,096			312
Total income tax expense	$	26,930		$	15,358		$	9,276

          Total income tax expense differs from amounts expected by applying the federal statutory income tax rate to earnings before income taxes as set forth in the following table:

	Years Ended December 31,
	2006			2005			2004
	(Dollars in Thousands)
Tax expense at federal statutory rate	$	34,046		$	24,121		$	5,376
Valuation allowance adjustments		(944	)		—			502
Impact of foreign subsidiary income, tax rates and tax credits		(1,503	)		(328	)		3,677
Foreign tax credit carryforward benefit		(4,308	)		(8,788	)		—
State income taxes		447			1,679			597
Extraterritorial income exclusion		(893	)		(1,439	)		(1,494	)
Other items		85			113			618
Total income tax expense	$	26,930		$	15,358		$	9,276

          Significant components of deferred tax assets and deferred tax liabilities are as follows:

	December 31,
	2006			2005
	(Dollars in Thousands)
Deferred tax assets:
Postretirement benefits	$	6,185		$	5,989
Pension benefits		11,265			11,837
Inventory		—			2,022
Accrued and other liabilities		9,346			7,105
Research and development expenditures		950			1,391
Tax loss carryforward		8,104			9,435
Alternative minimum tax credit carryforward		479			479
Foreign tax credit carryforward		12,216			12,190
Unexercised stock options		13			1,728
Other items		2,165			626
		50,723			52,802
Less valuation allowance		(2,767	)		(3,711	)
Total deferred tax assets		47,956			49,091
Deferred tax liabilities:
Excess of book basis over tax basis of property, plant and equipment and intangible assets		(17,757	)		(20,888	)
Inventory		(2,844	)		—
Total deferred tax liabilities		(20,601	)		(20,888	)
Net deferred tax asset	$	27,355		$	28,203
The classification of the net deferred tax assets and liabilities is as follows:
	December 31,
	2006			2005
	(Dollars in Thousands)
Current deferred tax asset	$	11,725		$	18,363
Long-term deferred tax asset		16,117			10,355
Current deferred tax liability		(120	)		(182	)
Long-term deferred tax liability		(367	)		(333	)
Net deferred tax asset	$	27,355		$	28,203

          The current deferred tax liability is included in Income Taxes and the long-term deferred tax liability is included in Pension and Other in the Company’s consolidated balance sheet.

           Prior to the fourth quarter of 2004, a valuation allowance had been used to reduce the net deferred tax assets (after giving effect to deferred tax liabilities) for domestic operations to an amount that is more likely than not to be realized. At December 31, 2004, an analysis was completed and the valuation allowance was reversed based on the determination that it is now more likely than not that all deferred tax assets will be realized. A roll-forward of the valuation allowance is presented below:

	Balance at Beginning of Period		Additions - Allowance Established			Deductions - Allowance Used		Balance at End of Period
	(Dollars In Thousands)
Year ended December 31, 2004	$	25,638	$	—		$	21,927	$	3,711
Year ended December 31, 2005	$	3,711	$	—		$	—	$	3,711
Year ended December 31, 2006	$	3,711	$	(944	)	$	—	$	2,767

           In 2005, income tax expense included a net income tax benefit of $7.0 million, which consisted of $1.8 million of foreign tax expense related to a foreign dividend distribution and the recognition of an income tax benefit of approximately $8.8 million related to foreign tax credits. In 2005, the Company began to quantify the amount of previously unclaimed foreign tax credits which the Company can utilize in part by amending historical income tax returns. In 2006, the Company completed this evaluation and amended the historical income tax returns, and income tax expense for the year ended December 31, 2006 was reduced by an additional net income tax benefit of approximately $4.3 million related to foreign tax credits.

           As of December 31, 2006, the Company had available approximately $10.7 million of federal net operating loss carry forwards (“NOL”) from the years 1991 through 1994 that expire in the years 2007 through 2009, to offset against future federal taxable income. Because the 1994 consummation of the Second Amended Joint Plan of Reorganization of B-E Holdings, Inc. and the Company as modified on December 1, 1994 (the “Amended Plan”) resulted in an “ownership change” within the meaning of Section 382 of the Internal Revenue Code, the use of such NOL is limited to $3.6 million per year.

           As of December 31, 2006, the Company also had $78.8 million of state NOL (which expire in the years 2007 through 2019) available to offset future state taxable income in various states.

           As of December 31, 2006, the Company also had a federal alternative minimum tax credit carryforward of $.5 million, which carries forward indefinitely. Because this credit carryforward arose prior to the effective date of the Amended Plan, it is subject to the annual limitations discussed above and is not usable until the year 2010.

          Cumulative undistributed earnings of foreign subsidiaries that are considered to be permanently reinvested and on which U.S. income taxes have not been provided by the Company, amounted to approximately $61.5 million at December 31, 2006. It is not practicable to estimate the amount of additional tax which would be payable upon repatriation of such earnings; however, due to foreign tax credit limitations, higher effective U.S. income tax rates and foreign withholding taxes, additional taxes could be incurred.

           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 year. The Company is currently evaluating the impact, if any, that FIN 48 will have on its financial statements.

NOTE I – PENSION AND RETIREMENT PLANS

           The Company has several pension and retirement plans covering substantially all of its employees in the United States. All plans have a measurement date of December 31.

           At its October 2006 meeting, the Company’s Board of Directors approved the Bucyrus International, Inc. Supplemental Executive Retirement Plan (“SERP”). The SERP, which became effective on October 20, 2006 and applied to 2006, provides an allocation to the Company’s senior management equal to the amount that cannot be allocated to such employees under the Company’s cash balance pension plan due to the Internal Revenue Service-imposed annual compensation limits imposed by the Internal Revenue Service. Benefits are to be paid under the SERP upon the employee’s separation from service in a lump sum or in 5 or 10 annual installments, as the participating employee elects.

           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 impact of adopting SFAS No. 158 at December 31, 2006, as required, was as follows:

	Increase (Decrease)
	(Dollars in Thousands)
Intangible assets		$	(4,141	)
Liability for pension benefits			1,345
Deferred income tax assets			2,027
Accumulated other comprehensive income			(3,459	)

          The following tables set forth the plans’ funded status and amounts recognized in the consolidated financial statements at December 31, 2006 and 2005:

	December 31,
	2006			2005
	(Dollars in Thousands)
Change in projected benefit obligation:
Projected benefit obligation at January 1	$	99,510		$	93,272
Service cost		2,531			2,148
Interest cost		5,220			5,294
Plan amendments		—			537
Actuarial loss		(3,641	)		4,510
Benefits paid		(6,812	)		(6,251	)
Projected benefit obligation at December 31		96,808			99,510
Change in plan assets:
Fair value of plan assets at January 1		59,870			60,008
Actual return on plan assets		7,925			3,588
Employer contributions		9,601			2,525
Benefits paid		(6,812	)		(6,251	)
Fair value of plan assets at December 31		70,584			59,870
Net amount recognized:
Funded status		(26,224	)		(39,640	)
Unrecognized prior service cost		—			4,497
Unrecognized net actuarial loss		—			32,805
Net amount recognized	$	(26,224	)	$	(2,338	)
Amounts recognized in consolidated balance sheets at December 31:
Current pension liabilities	$	—		$	(9,600	)
Noncurrent pension liabilities		(26,244	)		(28,525	)
Intangible asset		—			4,637
Accumulated other comprehensive loss		—			31,150
Net amount recognized	$	(26,224	)	$	(2,338	)
Amounts recognized in accumulated other comprehensive income at December 31:
Net actuarial loss	$	24,735		$	—
Net prior service cost		4,045			—
Net amount recognized	$	28,780		$	—
Weighted-average assumptions used to determine benefit obligations at December 31:
Discount rate		5.75	%		5.5	%
Rate of compensation increase		4	%		4	%

          The accumulated benefit obligation for all defined benefit pension plans was $95.5 million and $98.0 million at December 31, 2006 and 2005, respectively. Information for pension plans with an accumulated benefit obligation in excess of plan assets was as follows:

	December 31,
	2006		2005
	(Dollars in Thousands)
Projected benefit obligation	$	96,808	$	99,510
Accumulated benefit obligation		95,463		97,994
Fair value of plan assets		70,584		59,870

          The components of net periodic benefit cost are as follows:

	Years Ended December 31,
	2006			2005			2004
	(Dollars in Thousands)
Service cost	$	2,531		$	2,147		$	1,745
Interest cost		5,220			5,294			5,221
Expected return on plan assets		(5,198	)		(5,210	)		(4,983	)
Amortization of prior service cost		452			452			206
Amortization of net actuarial loss		1,700			1,575			1,325
Total benefit cost	$	4,705		$	4,258		$	3,514
Weighted-average assumptions used to determine net periodic benefit cost for the year:
Discount rate		5.50	%		5.75	%		6.25	%
Expected return on plan assets		8.50	%		9	%		9	%
Rate of compensation increase		4	%		4	%		3.75% - 4	%

          In selecting the expected long-term rate of return on assets, the Company considered the average rate of earnings expected on the classes of funds invested or to be invested to provide for the benefits of these plans. This included considering the trusts’ targeted asset allocation for the year and the expected returns likely to be earned over the next 20 years. The assumptions used for the return of each asset class are conservative when compared to long-term historical returns.

          The Company’s pension plans’ weighted-average actual and targeted asset allocations by asset category at December 31, 2006 and 2005 are as follows:

	December 31, 2006						December 31, 2005
	Actual			Target			Actual			Target
Asset category:
Equity securities		66	%		65	%		66	%		65	%
Debt securities		34	%		35	%		34	%		35	%
Total		100	%		100	%		100	%		100	%

          The desired investment objective is a long-term real rate of return on assets that is approximately 6% greater than the assumed rate of inflation measured by the Consumer Price Index, currently assumed to be approximately 3%. The target rate of return for the plans has been based upon an analysis of historical returns supplemented with an economic and structural review of each asset class. The Benefit Plan Committee of the Company realizes that market performance varies and that a 6% real rate of return may not be meaningful during some periods. The Benefit Plan Committee also realizes that historical performance is no guarantee of future performance.

          To achieve these goals the minimum and maximum allocation ranges for fixed securities and equity securities are as follows:

	Minimum		Maximum
Equity	63	%	67	%
Fixed	33	%	37	%
Cash equivalents	0	%	2	%

          Investment in international oriented equity funds is limited to a maximum of 18.25% of the equity range.

          The Company expects to contribute $9.2 million to its domestic pension plans in 2007.

          Estimated future benefit payments from the Company’s pension plans are as follows:

	(Dollars in Thousands)
2007		$ 6,952
2008		7,277
2009		7,040
2010		8,140
2011		7,688
2012-2016		45,031

          The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $1.2 million and $.5 million, respectively.

          The Company has 401(k) Savings Plans available to substantially all United States employees. Matching employer contributions are made in accordance with plan provisions subject to certain limitations. Matching employer contributions made were $1.5 million, $1.1 million and $.9 million in 2006, 2005 and 2004, respectively.

NOTE J – POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

          The Company provides certain health care benefits to age 65 and life insurance benefits for certain eligible retired United States employees. Substantially all current employees may become eligible for those benefits if they reach early retirement age while working for the Company. The measurement date is December 31.

          The impact of adopting SFAS No. 158 at December 31, 2006 as required was as follows:

	Increase (Decrease)
	(Dollars in Thousands)
Liability for postretirement benefits	$	1,705
Deferred income tax assets		630
Accumulated other comprehensive income		(1,075	)

          The following tables set forth the plan’s status and amounts recognized in the consolidated financial statements at December 31, 2006 and 2005:

	December 31,
	2006			2005
	(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at January 1	$	20,184		$	20,144
Service cost		1,020			928
Interest cost		978			1,070
Plan participants’ contributions		148			145
Plan amendments		—			(365	)
Net actuarial (gain) loss		(2,534	)		(240	)
Benefits paid		(1,122	)		(1,498	)
Benefit obligation at December 31		18,674			20,184
Change in plan assets:
Fair value of plan assets at January 1		—			—
Employer contributions		974			1,353
Plan participants’ contributions		148			145
Benefits paid		(1,122	)		(1,498	)
Fair value of plan assets at December 31		—			—
Net amount recognized:
Funded status		(18,674	)		(20,184	)
Unrecognized net actuarial loss		—			5,838
Unrecognized prior service credit		—			(1,672	)
Net amount recognized	$	(18,674	)	$	(16,018	)
Amounts recognized in consolidated balance sheets at December 31:
Current benefit liability	$	(1,360	)	$	(1,761	)
Long-term benefit liability		(17,314	)		(14,257	)
Net amount recognized	$	(18,674	)	$	(16,018	)

	December 31,
	2006			2005
	(Dollars in Thousands)
Amounts recognized in accumulated other comprehensive income at December 31:
Net actuarial loss	$	3,128		$	—
Net prior service credit		(1,423	)		—
Net amount recognized	$	1,705		$	—
Weighted-average assumptions used to determine benefit obligations at December 31 - discount rate		5.75	%		5.5	%

	Years Ended December 31
	2006			2005			2004
	(Dollars in Thousands)
Components of net periodic benefit cost:
Service cost	$	1,020		$	928		$	770
Interest cost		978			1,070			1,142
Amortization of prior service cost		(249	)		(249	)		(221	)
Amortization of net actuarial loss		175			311			336
Net periodic benefit cost	$	1,924		$	2,060		$	2,027
Weighted average assumptions used to determine net periodic benefit cost - discount rate		5.50	%		5.75	%		6.25	%
Assumed health care cost trend rates:
Health care cost trend rate assumed for next year		6	%		7	%		8	%
Rate to which the cost trend rate is assumed to decline		5	%		5	%		5	%
Year that the rate reaches the ultimate trend rate		2008			2008			2008

          Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one percentage point change in assumed health care cost trend rates would have the following effects:

	One Percentage Point Increase		One Percentage Point Decrease
	(Dollars in Thousands)
Effect on total of service and interest cost	$	224	$	(191	)
Effect on postretirement benefit obligation		1,548		(1,363	)

          The Company expects to contribute approximately $1.3 million for the payment of benefits from its postretirement benefit plan in 2007.

          Estimated future benefit payments from the Company’s postretirement benefit plan are as follows:

	(Dollars in Thousands)
2007	$	1,332
2008		1,280
2009		1,302
2010		1,444
2011		1,602
2012-2016		9,896

          The estimated net loss and prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $.1 million and $.2 million, respectively.

NOTE K – CALCULATION OF NET EARNINGS PER SHARE OF COMMON STOCK

          Basic net earnings per share of common stock was computed by dividing net earnings by the weighted average number of shares of common stock outstanding. Diluted net earnings per share of common stock was computed by dividing net earnings by the weighted average number of shares of common stock outstanding after giving effect to dilutive securities. 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 years ended December 31, 2006, 2005 and 2004:

	Years Ended December 31,
	2006		2005		2004
	(Dollars in Thousands)
Net earnings	$	70,344	$	53,559	$	6,084
Weighted average shares outstanding		31,264,580		30,483,453		23,197,292
Basic net earnings per share	$	2.25	$	1.76	$	.26
Weighted average shares outstanding		31,264,580		30,483,453		23,197,292
Effect of dilutive stock options, nonvested shares, stock appreciation rights and performance shares		275,181		762,684		1,024,258
Weighted average shares outstanding – diluted		31,539,761		31,246,137		24,221,550
Diluted net earnings per share	$	2.23	$	1.71	$	.25

NOTE L – SEGMENT AND GEOGRAPHICAL INFORMATION

          The Company designs, manufactures and markets large excavation machinery used for surface mining and supplies replacement parts and services for such machines. The Company manufactures its machines and replacement parts primarily at two locations. There is no significant difference in the production process for machines and replacement parts. The Company’s products are sold primarily to large companies and government-owned entities engaged in the mining of copper, coal, oil sands and iron ore throughout the world. New equipment and replacement parts and services are sold in North America primarily by Company personnel and its domestic subsidiaries, and overseas by Company personnel and through independent sales representatives and the Company’s foreign subsidiaries and offices.

          Based on the above, the Company’s operations are classified as one operating segment.

          The following table summarizes the Company’s sales:

	Years Ended December 31,
	2006		2005		2004
	(Dollars in Thousands)
Machines	$	255,739	$	180,587	$	132,780
Parts and services		482,311		394,455		321,406
	$	738,050	$	575,042	$	454,186

          Financial information by geographical area is set forth in the following table. In the case of sales to external customers, the amounts presented represent the sales originating in the respective geographic area.

	Sales to External Customers		Long – Lived Assets
	(Dollars in Thousands)
2006
United States	$	379,794	$	112,651
Africa		36,527		950
Australia		118,896		443
Chile		96,344		3,570
Canada		50,158		5,984
Other foreign		56,331		1,551
	$	738,050	$	125,149
2005
United States	$	306,959	$	51,775
Africa		37,509		994
Australia		76,151		248
Chile		63,398		3,929
Canada		41,972		6,024
Other foreign		49,053		1,185
	$	575,042	$	64,155
2004
United States	$	241,689	$	41,787
Africa		38,933		1,004
Australia		45,861		260
Chile		58,793		3,950
Canada		37,808		5,480
Other foreign		31,102		1,199
	$	454,186	$	53,680

          The Company does not consider itself to be dependent upon any single customer or group of customers; however, on an annual basis a single customer may account for a large percentage of sales, particularly new machine sales. In 2006, 2005 and 2004, one customer accounted for approximately 13%, 14% and 12%, respectively, of the Company’s sales.

NOTE M – COMMITMENTS, CONTINGENCIES, CREDIT RISKS AND CONCENTRATIONS

          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 required 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.

          Certain environmental laws, such as the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), provide for strict, joint and several liability for investigation and remediation of spills and other releases of hazardous substances. Such laws may apply to conditions at properties currently or formerly owned or operated by an entity or its predecessors, as well as to conditions at properties at which wastes or other contamination attributable to an entity or its predecessors come to be located.

          The Company has previously been named as a potentially responsible party under CERCLA and analogous state laws at other sites throughout the United States. The Company believes it has determined its remediation liabilities with respect to the sites discussed above and does not believe that any such remaining liabilities, if any, either individually or in the aggregate, will have a material adverse effect on its business, financial condition, results of operations or cash flows. The Company cannot, however, assure that it will not incur additional liabilities with respect to these sites in the future, the costs of which could be material, nor can it assure that it will not incur remediation liability in the future with respect to sites formerly or currently owned or operated by the Company or with respect to off-site disposal locations, the costs of which could be material.

          Over the past three years, expenditures for ongoing compliance, remediation, monitoring and cleanup have been immaterial. While no assurance can be given, the Company believes that expenditures for compliance and remediation will not have a material effect on its future capital expenditures, results of operations or competitive position.

          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 years ended December 31, 2006 and 2005:

	December 31,
	2006			2005
	(Dollars in Thousands)
Balance at January 1	$	5,977		$	5,452
Provision		4,046			2,739
Charges		(4,235	)		(2,214	)
Balance at December 31	$	5,788		$	5,977

          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 in federal and state courts. Such claims are generally related to property damage and to personal injury. The Company’s products are operated by its employees and its customers’ employees and independent contractors at various work sites in the United States and abroad. In the United States, workers’ claims against employers related to workplace injuries are generally limited by state workers’ compensation statutes, but such limitations do not apply to equipment suppliers. The Company has insurance covering most of these claims 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 290 personal injury liability cases alleging damages due to exposure to asbestos and other substances, involving approximately 567 plaintiffs. 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.

          A reconciliation of claims pending at December 31, 2006 and 2005 is as follows:

	December 31,
	2006			2005
Number of claims pending at January 1		309			300
New claims filed		6			24
Claims dismissed, settled or resolved		(25	)		(15	)
Number of claims pending at December 31		290			309

          The average claim settlement amount was immaterial in both years.

          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. As of December 31, 2006, discovery was 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 asserts 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 was settled by the parties in late 2006, 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 finally 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.

          The Company is involved in various other litigation arising in the normal course of business. It is the view of management that the Company’s recovery or liability, if any, under pending litigation is not expected to 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.

          Commitments

          The Company has obligations under various operating leases and rental and service agreements. The expense relating to these agreements was $10.1 million in 2006, $8.7 million in 2005 and $6.7 million in 2004. Future minimum annual payments under non-cancelable agreements are as follows:

	(Dollars in Thousands)
2007	$	6,971
2008		4,689
2009		4,046
2010		3,226
2011		3,137
After 2011		14,915
	$	36,984

          Management Services Agreement

          Prior to the completion of the IPO, American Industrial Partners (“AIP”) provided ongoing financial and management services to the Company utilizing the extensive operating and financial experience of AIP’s principals pursuant to a management services agreement among AIP and the Company. The expense recognized related to this agreement was $1.2 million in 2004. The management services agreement was terminated in July 2004 and all amounts owed AIP under the agreement were paid in full in connection with the completion of the Company’s IPO on July 28, 2004.

          Credit Risks

          A significant portion of the Company’s sales are to customers whose activities are related to the coal, copper and iron ore mining industries, including some who are located in foreign countries. The Company generally extends credit to these customers and, therefore, collection of receivables may be affected by the mining industry economy and the economic conditions in the countries where the customers are located. However, the Company closely monitors extension of credit and has not experienced significant credit losses. Also, most foreign sales are made to large, well-established companies. The Company generally requires letters of credit on foreign sales to smaller companies.

          Concentrations

          The Company currently purchases alternating current drives and other electrical parts, an important component of its equipment, from Siemens Energy & Automation, Inc. (“Siemens”). The loss of Siemens, the Company’s only critical sole source supplier, could cause a delay in manufacturing and a possible loss of sales, which could have a material adverse effect on the Company’s business.

NOTE N – QUARTERLY RESULTS – UNAUDITED

          Quarterly results are as follows:

	Quarters Ended at End of
	March		June		September		December
	(Dollars in Thousands, Except Per Share Amounts)
Net sales:
2006	$	165,653	$	181,804	$	184,980	$	205,613
2005		105,521		140,037		157,358		172,126
Gross profit:
2006	$	40,873	$	46,934	$	47,894	$	51,074
2005		29,026		30,994		36,428		40,983
Net earnings:
2006 (1)	$	14,522	$	21,558	$	16,720	$	17,544
2005 (2)		9,125		10,224		12,777		21,433
Basic net earnings per common share:
2006	$	.47	$	.69	$	.53	$	.56
2005		.30		.34		.42		.70
Weighted average shares outstanding-basic (in thousands):
2006		31,192		31,285		31,289		31,291
2005		30,102		30,441		30,651		30,731
Diluted net earnings per common share:
2006	$	.46	$	.68	$	.53	$	.56
2005		.29		.33		.41		.69

	Quarters Ended at End of
	March		June			September		December
	(Dollars in Thousands, Except Per Share Amounts)
Weighted average shares outstanding-diluted (in thousands):
2006		31,527			31,616		31,499		31,518
2005		31,173			31,246		31,279		31,284
Dividends per common share – Class A common stock:
2006	$	.0383		$	.05	$	.05	$	.05
2005		.0383			.0383		.0383		.0383

(1)	Net earnings for the quarter ended June 30, 2006 includes a net income tax benefit of approximately $3.7 million related to foreign tax credits (see Note H).
(2)	Net earnings for the quarter ended December 31, 2005 includes a net income tax benefit of $7.0 million, which consisted of the recognition of an income tax benefit of approximately $8.8 million related to foreign tax credits and $1.8 million of foreign tax expense related to a foreign dividend distribution (see Note H).

NOTE O – PENDING ACQUISITION

          On December 17, 2006, the Company signed a definitive agreement to acquire DBT GmbH (“DBT”), a subsidiary of RAG Coal International AG (“RAG”). DBT is a leading worldwide supplier of complete system solutions for underground coal mining and manufactures equipment including roof support systems, armored face conveyers, plows, shearers and continuous miners used primarily by customers who mine coal. The Company has agreed to pay $710.0 million in cash and issue to RAG 471,476 shares of the Company’s Class A common stock with an initial market value of $21.0 million (based on the average closing price of the Company’s Class A common stock for the 20-day trading period ended December 14, 2006). The transaction is subject to various closing conditions and regulatory approvals.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Bucyrus International, Inc.:

We have audited the accompanying consolidated balance sheets of Bucyrus International, Inc. and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of earnings, comprehensive income, common stockholders’ investment, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Bucyrus International, Inc. and subsidiaries at December 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note A to the consolidated financial statements, effective January 1, 2006 the Company changed its method of accounting for share-based compensation to adopt Statement of Financial Accounting Standards No. 123 (revised 2004), “Shared-Based Payment.” As discussed in Notes A, I and J to the consolidated financial statements, effective December 31, 2006 the Company changed its method of accounting for the funded status of their defined benefit pension and postretirement plans to adopt Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R).”

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2007 expressed an unqualified opinion on management’s assessment of the effectiveness of the Company’s internal control over financial reporting and an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Milwaukee, Wisconsin
February 26, 2007

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Bucyrus International, Inc.:

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over Financial Reporting, that Bucyrus International, Inc. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting

as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2006 of the Company and our report dated February 26, 2007 expressed an unqualified opinion on those financial statements and included an explanatory paragraph concerning the Company’s adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Shared-Based Payment” and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R) in 2006.

Milwaukee, Wisconsin
February 26, 2007

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Stockholders of
Bucyrus International, Inc.:

          The management of Bucyrus International, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities and Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles.

          The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer and Secretary, has assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, the Company’s management has concluded that, as of December 31, 2006, the Company’s internal control over financial reporting was effective based on that criteria.

          Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

          The Company’s independent registered public accounting firm has issued an audit report on management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2006, which is included herein.

Timothy W. Sullivan
President and Chief Executive Officer
February 26, 2007

Craig R. Mackus
Chief Financial Officer and Secretary
February 26, 2007

Bucyrus International, Inc.^â
Management Discussion & Analysis
and
Other Financial Information

SELECTED CONSOLIDATED FINANCIAL DATA

	2006		2005		2004		2003			2002
	(Dollars in thousands, except per share amounts)
Statement of Earnings Data:
Sales	$	738,050	$	575,042	$	454,186	$	337,695		$	289,598
Net earnings (loss)		70,344		53,559		6,084		(3,581	)		(10,786	)
Net earnings (loss) per share of common stock:
Basic		2.25		1.76		.26		(.21	)		(.63	)
Diluted		2.23		1.71		.25		(.21	)		(.63	)
Cash dividends per common share	$	.1883	$	.153	$	.0383	$	—		$	—
Balance Sheet Data:
Total assets	$	600,712	$	491,967	$	392,809	$	362,143		$	346,878
Long-term liabilities, including long-term debt		134,450		115,799		148,852		231,689			283,574

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

          The following discussion and analysis and information contained elsewhere in this report contain 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. We caution that any such forward-looking statements are not guarantees of our 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, which are more fully described in our 2006 Form 10-K filed with the Securities and Exchange Commission.

Business

          We design, manufacture and market draglines, electric mining shovels and rotary blasthole drills (collectively, “machines”) used primarily by customers who mine copper, coal, oil sands and iron ore throughout the world. We also provide the aftermarket replacement parts and service for these machines 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 our mining equipment have historically been in Australia, Canada, South Africa, South America and the United States. In the future, we expect that Brazil, Canada, China and India will be increasingly important markets for us. We manufacture our original equipment products and the majority of our aftermarket parts at our facilities in South Milwaukee and Milwaukee, Wisconsin.

          The market for our 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. Market prices for copper, coal, iron ore and oil generally continued to be strong in 2005 and 2006, although certain commodity prices have recently moderated or declined slightly during 2006. Factors that could support sustained demand for these key commodities in 2007 include continued expected economic growth in China, India and the developing world, as well as renewed economic strength in industrialized countries. As of December 31, 2006, inquiries for machines in all three of our product lines remained at a high level despite the recent moderation in commodity prices. As of December 31, 2006, interest in our machines continued to be strong in the oil sands region of Western Canada, and inquiries related to coal, copper and iron ore mines in other areas of the world have also remained strong.

          Our aftermarket parts and service operations, which have accounted for approximately 72% of our total sales over the past 10 years, tend to be more consistent than our machine sales. However, although strength in commodity markets in 2005 and 2006 positively affected our aftermarket sales, our total aftermarket sales decreased to approximately 65% of our sales during 2006 as a result of increased machine sales activity and are currently expected to be approximately 55% of our sales in 2007 based on end of year sales and quoting activity. Our complex machines are typically kept in continuous operation from 15 to 40 years by our customers, requiring regular maintenance and repair throughout their productive lives. The size of our installed base of surface mining equipment as of December 31, 2006 was almost $12.6 billion based on estimated replacement value. Our ability to provide on-time delivery of reliable parts

and prompt service are important drivers of our aftermarket sales. As of December 31, 2006, aftermarket orders and inquiries continued to remain at high levels as the existing installed fleet of our machines is operating at very high utilization levels due to the current demand and increased prices for related mined commodities.

          A substantial portion of our sales and operating earnings is attributable to our operations located outside the United States. We generally sell our machines, including those sold directly to foreign customers, and most of our aftermarket parts in United States dollars. A portion of our 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 our payment of local labor in local currency. In the aggregate, approximately 74% of our 2006 sales were priced in United States dollars.

          As of December 31, 2006, we anticipated increased sales activity for both our aftermarket parts sales and machine sales in 2007 relative to 2006. We expect machine sales to increase in 2007, driven by customer expectations of sustained strength in the copper, coal, oil sands and iron ore markets, ongoing and rapid industrialization in China and other parts of the developing world, demand for minerals in the developed world and the rising cost of non-coal energy sources. While we expect that the current commodity demand will continue for the near term, customers’ purchases of our original equipment products may lag behind such increases in commodity prices because of the time needed to acquire the appropriate mining permits and establish the relevant infrastructure. We also expect our aftermarket sales to increase as customers continue the trend of utilizing our parts and services in a broader range of applications on their installed base of equipment. Strong sales volume and demand as of the end of the year has caused us to hire new employees, and additional hiring is expected.

          In response to sustained order strength, we are in the process of completing a multi-phase capacity expansion of our manufacturing facilities in South Milwaukee. The first phase of our expansion provided 110,000 square feet of new space for welding and machining of large electric mining shovel components north of Rawson Avenue and was substantially complete at the end of the third quarter of 2006. The second phase of our expansion program will further expand our new facility north of Rawson Avenue from 110,000 square feet to over 350,000 square feet of welding, machining and outdoor hard-goods storage space. Construction is expected to be completed in April 2007. We expect the aggregate cost of phase one and two of our expansion program to be approximately $54 million, which is being financed by borrowings under our revolving credit facility. The third phase of our expansion program, which we announced in July 2006, is intended to help us meet the continued growth of demand for our machines and their components. Phase three will include the renovation and expansion of manufacturing buildings and offices at our existing facilities south of Rawson Avenue. Our focus is on modernizing our facilities and improving manufacturing and administrative efficiencies. The steps for accomplishing phase three are scheduled to maximize manufacturing throughput during both the renovation and construction processes. We expect that phase three construction will cost approximately $58 million and is scheduled to be completed by the first quarter of 2008. Phase three is being financed by borrowings under our revolving credit facility.

          When completed, we expect that the additional manufacturing capacity provided by our multi-phase expansion program will allow us to significantly increase the total number of electric mining shovels and draglines that we are able to produce in any given year.

          Over the past three years, we have increased our gross profits by reducing manufacturing overhead variances, achieving productivity gains, improving machine margins and increasing higher margin aftermarket parts and services business. Through December 31, 2006, increasing

costs of steel and other raw materials have been offset by the higher selling prices of our products.

Pending Acquisition of DBT

          On December 17, 2006, we signed a definitive agreement to acquire DBT GmbH (“DBT”), a subsidiary of RAG Coal International AG (“RAG”). DBT is a leading worldwide supplier of complete system solutions for underground coal mining and manufactures equipment including roof support systems, armored face conveyers, plows, shearers and continuous miners used primarily by customers who mine coal. We have agreed to pay $710.0 million in cash and issue to RAG 471,476 shares of our Class A common stock with an initial market value of $21 million (based on the average closing price of our Class A common stock for the 20-day trading period ended December 14, 2006). The transaction is subject to various closing conditions and regulatory approvals.

          We have received a financing commitment from Lehman Brothers to fund the cash purchase price for the DBT transaction. We currently expect that this financing will provide us with up to $1.23 billion of senior secured credit facilities, including an $825 million term loan that we will use to finance the DBT acquisition and refinance existing debt, as well as a $400 million revolving credit facility to fund our ongoing capital needs. We are currently evaluating various more permanent capital structures that could include the issuance of a combination of debt and/or equity securities.

Key Measures

          The following is a discussion of key measures which contributed to our operating results in 2006.

          On-Time Delivery and Lead Times

          Due to the high fixed cost structure of our customers, we believe that it is critical that we help them avoid equipment downtime. On-time delivery and reduced lead time of aftermarket parts and services allow our customers to reduce their equipment downtime and are therefore key measures of customer service, and we believe that these are fundamental drivers of our aftermarket sales. Our on-time delivery percentage in the aftermarket, based on achieved promised delivery dates to customers, was 86% for 2006, 92% for 2005 and 94% for 2004. The decrease in recent years was due to the increase in our sales volume and our capacity constraints. Customer delivery lead times increased in 2006 and are expected to continue to increase in 2007 due to the expected increase in sales volume and our capacity restraints. In addition to our multi-phase expansion program, which will increase our production capacity, we are in the process of implementing programs and identifying subcontract opportunities to improve our on-time deliveries and lead times.

          Installed Base

          Our almost $12.6 billion (calculated by estimated replacement value) installed base as of December 31, 2006, provides the foundation for our aftermarket sales. Over the life of a machine, customer purchases of aftermarket parts and services often exceed the original purchase price of the machine. Additionally, we realize higher margins on sales of our aftermarket parts and services than on sales of our machines. Moreover, because these machines tend to operate continuously in all market conditions, with expected lives ranging from 15 to 40 years, and have predictable parts and maintenance needs, our aftermarket business has historically been more stable and predictable than the market for our machines, which is closely correlated with expectations of sustained strength in commodity markets.

          Research and Development

          We believe that our technologically advanced products are a competitive advantage for us. As a result, we spend a significant amount on research and development to continue to maintain this advantage. Our research and development expenses for 2006 were $10.7 million, and we expect to maintain this level of research and development spending in 2007. We concentrate on producing technologically advanced and productive machines that allow our customers to conduct cost-efficient operations. We manufacture alternating current (“AC”) drive draglines and electric mining shovels and offer advanced computer control systems that allow technicians at our headquarters to remotely monitor and adjust the operating parameters of suitably equipped machines at locations around the world via the Internet. Our focus on incorporating advanced technologies such as AC drives and advanced controls has increased customer adoption of our product offerings. Further, we believe that these developments have contributed to increased demand for our aftermarket parts and service since we are well equipped to provide the more sophisticated parts, product technical knowledge and service required by customers who use more complex and efficient machines.

          Backlog

          Our relative backlog level allows us to more accurately forecast our upcoming sales and plan our production accordingly. Our backlog also provides us with a predictive level of future expected cash flows. Due to the high cost of some machines, our backlog is subject to volatility, particularly over relatively short periods. A portion of our backlog is related to multi-year contracts that will generate revenue in future years. The following table shows our backlog as of December 31, 2006, 2005 and 2004, as well as the portion of backlog which is or was expected to be recognized within 12 months of these dates:

	December 31,
	2006		2005		2004
	(Dollars in thousands)
Next 12 months	$	593,828	$	413,131	$	231,455
Total	$	894,749	$	658,612	$	436,317

          The increase in our backlog as of December 31, 2006 from December 31, 2005 was primarily due to an increase in new machine orders, which totaled $486.9 million for 2006. New machine orders in 2006 included an 8750AC dragline sale to a customer in Australia.

          Inventory

          Our proper management of our inventory levels can facilitate our on time deliveries and lead times. As of December 31, 2006, we had $176.3 million in inventory compared to $133.5 million as of December 31, 2005. Inventory levels have increased in support of our increased sales activity. Our inventory turned at an annual rate of 3.4 times in 2006 compared to 3.1 times during 2005. We calculate our inventory turns based on our cost of sales and our average inventory balance during the prior 12 months.

          Warranty Claims

          Product quality is another key driver of our customer’s satisfaction and, as a result, our sales. We use warranty claims as a percentage of total sales as one objective benchmark to

evaluate our product quality. During each of 2006, 2005 and 2004, our warranty claims as a percentage of total sales were less than 1%.

          Productivity

          Sales per full time equivalent employee is a measure of our operational efficiency. Our sales per full time equivalent employee were $.3 million for 2006, 2005 and 2004. We have attempted to increase our productivity in recent years, primarily through the application of worldwide sales and inventory ERP systems and personnel upgrades.

Results of Operations

2006 Compared to 2005

	2006					2005					% Change In Reported Amounts
	Amount		% of Sales			Amount		% of Sales
	(Dollars in thousands)
Sales	$	738,050		—		$	575,042		—			28.4	%
Gross profit	$	186,775		25.3	%	$	137,431		23.9	%		36.0	%
SG&A	$	73,138		9.9	%	$	54,354		9.5	%		34.4	%
Operating earnings	$	101,184		13.7	%	$	74,051		12.9	%		36.6	%
Net earnings	$	70,344		9.5	%	$	53,559		9.3	%		31.2	%

          Sales

          Sales for 2006 were $738.0 million compared with $575.0 million for 2005, an increase of 28.4%. Sales of aftermarket parts and services for 2006 were $482.3 million, an increase of 22.3% from $394.4 million for 2005. Aftermarket sales increased in both the United States and international markets, reflecting our continuing initiatives and strategies to capture additional market share. Aftermarket sales remained strong as customers continued the trend of utilizing our parts and services in a broader range of applications on their installed fleet of machines which are operating at very high utilization levels. Machine sales for 2006 were $255.7 million, an increase of 41.6% from $180.6 million for 2005. The increase in our machine sales was due to sustained demand for commodities that are surface mined by our machines.

          Gross Profit

          Gross profit for 2006 was $186.8 million, or 25.3% of sales, compared with $137.4 million, or 23.9% of sales, for 2005. The increase in gross profit was primarily due to increased aftermarket and machine sales. Through December 31, 2006, increasing prices of steel and other raw materials have been offset by the higher selling prices of our products. The mix of machine and aftermarket sales impacts our gross margin as machine sales generally have lower gross margins than our aftermarket sales. Machine sales were 35% of our sales for 2006 compared to 31% for 2005. Gross profit for 2006 and 2005 was reduced by $.9 million and $1.5 million, respectively, of training costs for employees hired at our new manufacturing facility in Milwaukee. We are continuing to hire and train new employees to support our increased capacity initiatives. Gross profit for 2006 and 2005 was reduced by $5.2 million and $5.3 million, respectively, of additional depreciation expense as a result of the purchase price allocation to plant and equipment in connection with prior acquisitions of companies.

          Selling, General and Administrative Expenses

          Selling, general and administrative expenses for 2006 were $73.1 million, or 9.9% of sales, compared with $54.4 million, or 9.5% of sales, for 2005. Selling, general and administrative expenses for 2006 included $4.3 million related to non-cash stock-based employee compensation compared to $.2 million for 2005. In 2006, selling and administrative expenses increased as a result of our hiring of additional employees to support our projected sales growth and increased plant capacity. We expect continued increases in selling, general and administrative expenses due to increased sales volumes, but expect that these expenses to remain at 10% or less of sales. Foreign currency transaction losses for 2006 were $1.0 million compared with a gain of $1.0 million for 2005. We incurred approximately $.6 million and $1.2 million of consulting expenses during 2006 and 2005, respectively, related to Sarbanes-Oxley Section 404 compliance.

          Research and Development Expenses

          Research and development expenses for 2006 were $10.7 million compared with $7.2 million for 2005. The increase in 2006 was due to the continuing development of electrical and machine upgrade systems.

          Operating Earnings

          Operating earnings for 2006 were $101.2 million, or 13.7% of sales, compared with $74.1 million, or 12.9% of sales, for 2005. The improvement in 2006 was primarily due to increased gross profit resulting from increased sales volume.

          Interest Expense

          Interest expense for 2006 was $3.7 million compared with $4.9 million for 2005. We capitalized $.8 million of interest during 2006 as a part of the cost of our capacity expansion program. The remaining decrease in interest expense was primarily due to reduced average borrowings in 2006.

          Income Taxes

          Income tax expense for 2006 was $26.9 million compared to $15.4 million for 2005. U.S. and foreign taxes are calculated at applicable statutory rates. Income tax expense for 2006 was reduced by a net income tax benefit of approximately $4.3 million related to foreign tax credits. The foreign tax credits resulted from the completion of our evaluation of the 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 our domestic and foreign earnings. Income tax expense for 2005 was reduced by a net income tax benefit of $7.0 million, which consisted of $1.8 million of foreign tax expense related to a foreign dividend distribution and the recognition of an income tax benefit of approximately $8.8 million related to foreign tax credits. Amounts included in income tax expense are further described in Note H to our consolidated financial statements. At December 31, 2006, we had available approximately $10.7 million of federal net operating loss carryforwards. These carryforwards are useable at the rate of $3.6 million per year.

2005 Compared to 2004

          Sales

          Sales for 2005 were $575.0 million compared with $454.2 million for 2004. Sales of aftermarket parts and services for 2005 were $394.4 million, an increase of 22.7% from $321.4 million for 2004. The increase in aftermarket sales reflected our continuing initiatives and

strategies to capture additional market share as well as continued strong commodity prices. Aftermarket sales increased in both the United States and international markets. Machine sales for 2005 were $180.6 million, an increase of 36.0% from $132.8 million for 2004. The increase in machine sales in 2005 was primarily due to increased electric mining shovel sales and the recognition of sales on two draglines that were sold in 2004. Approximately $6.5 million of the increase in sales for 2005 was attributable to a weakening United States dollar, which primarily impacted aftermarket sales (see “Foreign Currency Fluctuations” below).

          Gross Profit

          Gross profit for 2005 was $137.4 million, or 23.9% of sales, compared with $96.4 million, or 21.2% of sales, for 2004. The increase in our gross profit was primarily due to an increased sales volume and higher gross margins on both machines and aftermarket sales. Gross profit for 2005 was reduced by $1.5 million of training costs for employees hired at our new leased manufacturing facility. Gross profit for 2005 and 2004 was also reduced by $5.3 million and $5.2 million, respectively, of additional depreciation expense as a result of purchase price allocation to plant and equipment in connection with prior acquisitions of companies. Approximately $1.5 million of the increase in 2005 was attributable to a weakening United States dollar (see “Foreign Currency Fluctuations” below).

          Selling, General and Administrative Expenses

          Selling, general and administrative expenses for 2005 were $54.4 million, or 9.5% of sales, compared with $53.1 million, or 11.7% of sales, for 2004. Selling, general and administrative expense for 2005 included $.2 million related to non-cash stock-based employee compensation compared to $10.1 million for 2004. Non-cash stock compensation expense in 2004 primarily represented the charge recorded related to stock options issued prior to the completion of our initial public offering. Selling expenses for 2005 increased by $4.5 million from 2004 primarily due to increased sales efforts and higher foreign costs as a result of the weakened U.S. dollar, but remained relatively constant as a percentage of sales. Foreign currency transaction gains for 2005 were $1.0 million compared with gains of $2.7 million for 2004. We incurred approximately $1.2 million of consulting expenses during 2005 related to Sarbanes-Oxley Section 404 compliance.

          Research and Development Expenses

          Research and development expenses for 2005 were $7.2 million compared with $5.6 million for 2004. The increase in 2005 was in part due to the continuing development of electrical and machine upgrade systems.

          Operating Earnings

          Operating earnings for 2005 were $74.1 million, or 12.9% of sales, compared with $35.9 million, or 7.9% of sales, for 2004. Operating earnings for 2005 increased from 2004 due to increased gross profit resulting from increased sales volume and higher gross margins on both machines and aftermarket sales. Operating earnings for 2004 were reduced by $10.1 million of non-cash stock compensation expense. Approximately $.6 million of the increase in operating earnings for 2005 was attributable to a weakening United States dollar (see “Foreign Currency Fluctuations” below).

          Interest Expense

          Interest expense for 2005 was $4.9 million compared with $11.5 million for 2004. The decrease in interest expense in 2005 was primarily due to the refinancing of our capital structure in connection with our initial public offering.

          Other Expense

          Other expense for 2005 and 2004 was $1.0 million and $2.0 million, respectively. Included in the amount for 2004 was $.6 million of secondary common stock offering expenses. Debt issuance cost amortization was $1.0 million and $1.4 million for 2005 and 2004, respectively. These amounts included costs related to our credit facilities (see “Liquidity and Capital Resources-Financing Cash Flows” below).

          Income Taxes

          Income tax expense for 2005 was $15.4 million compared with $9.3 million for 2004. In 2005, U.S. taxable income exceeded available net operating loss carryforwards and income tax expense was recorded. Foreign taxes continue to be recorded at applicable statutory rates. Income tax expense for 2005 was reduced by a net income tax benefit of $7.0 million, which consisted of $1.8 million of foreign tax expense related to a foreign dividend distribution and the recognition of an income tax benefit of approximately $8.8 million related to foreign tax credits. During 2005, we began to quantify the amount of previously unclaimed foreign tax credits which we can utilize in part by amending historical income tax returns. As of December 31, 2005, we had approximately $14.3 million of federal net operating loss carryforwards.

Foreign Currency Fluctuations

          The following table summarizes the approximate effect of changes in foreign currency exchange rates on our sales, gross profit and operating earnings for 2006, 2005 and 2004, in each case compared to the prior year:

	2006		2005		2004
	(Dollars in thousands)
Increase in sales	$	577	$	6,536	$	11,946
Increase in gross profit		321		1,528		2,103
Increase in operating earnings		304		573		246

EBITDA

          Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for 2006, 2005 and 2004 was $116.0 million, $87.6 million and $48.2 million, respectively. EBITDA is presented because (i) we use EBITDA to measure our liquidity and financial performance and (ii) we believe 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. Our 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 our Consolidated Statements of Earnings to EBITDA and reconciles EBITDA to Net Cash Provided by Operating Activities as shown in our Consolidated Statements of Cash Flows:

	2006			2005			2004
	(Dollars in thousands)
Net earnings	$	70,344		$	53,559		$	6,084
Interest income		(663	)		(669	)		(316	)
Interest expense		3,693			4,865			11,547
Income taxes		26,930			15,358			9,276
Depreciation		12,892			11,681			11,061
Amortization (1)		2,827			2,788			3,194
Loss on extinguishment of debt		—			—			7,316
EBITDA (2)		116,023			87,582			48,162
Changes in assets and liabilities		(39,557	)		(18,123	)		(22,957	)
Non-cash stock compensation expense		4,284			180			10,076
Loss on sale of fixed assets		140			273			287
Interest income		663			669			316
Interest expense		(3,693	)		(4,865	)		(11,547	)
Income tax expense		(26,930	)		(15,358	)		(9,276	)
Secondary offering expenses		—			—			602
Net cash provided by operating activities	$	50,930		$	50,358		$	15,663
Net cash used in investing activities	$	(70,603	)	$	(22,109	)	$	(6,706	)
Net cash provided by (used in) financing activities	$	15,134		$	(36,299	)	$	5,188

(1)

Includes amortization of intangible assets and debt issuance costs.

(2)

EBITDA for 2004 was reduced by expenses pursuant to a management services agreement with American Industrial Partners (“AIP”) as well as fees paid to AIP or its affiliates and advisors for services performed for us outside the scope of the management services agreement of $1.3 million. The management services agreement was terminated in July 2004. EBITDA for 2006, 2005 and 2004 was also reduced by severance expense of $1.4 million, $.5 million and $.4 million, respectively.

Liquidity and Capital Resources

          Cash Requirements

          During 2007, we anticipate strong cash flows from operations due to continued strength in our aftermarket parts sales as well as continued high demand for our 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, we do not anticipate significant outside financing requirements to fund production of these machines and do not believe that new machine sales will have a material negative effect on our liquidity, although the issuance of letters of credit reduces the amount available for borrowings under our revolving credit facility. If additional borrowings are necessary during 2007, we believe we have sufficient capacity under our revolving credit facility (see “Financing Cash Flows” below).

          Our 2006 capital expenditures were $74.4 million compared with $22.2 million for 2005. Included in capital expenditures for 2006 was approximately $56.2 million related to our expansion program, of which $3.0 million was paid in early 2007. The remaining expenditures consisted

primarily of production machinery at our main manufacturing facility. We expect capital expenditures in 2007 to remain near our 2006 level as we increase our manufacturing capacity and upgrade and replace our manufacturing equipment to support our increased sales activity. We believe cash flows from operating activities and funds available under our revolving credit facility, as well as governmental grants and other programs, will be sufficient to fund our expected capital expenditures in 2007.

          As of December 31, 2006, there were $76.2 million of standby letters of credit outstanding under all of our bank facilities.

          As of December 31, 2006, our long-term liabilities consisted primarily of warranty and product liability accruals and pension and postretirement benefit accruals. For 2007, we expect to contribute $9.2 million to our pension plans and $1.3 million for the payment of benefits from our postretirement benefit plan. As of December 31, 2006, our unfunded pension and postretirement benefit liability was $44.9 million.

          Payments of warranty and product liability claims are not subject to a definitive estimate by year. We do not anticipate cash requirements for warranty claims to be materially different than historical funding levels. We do not expect to pay any material product liability claims in 2007.

          In addition to the obligations noted above, we anticipate cash funding currently estimated requirements for interest, dividends and income taxes of approximately $5.7 million, $6.3 million and $37.1 million, respectively, during 2007.

          We believe that cash flows from our operations and our revolving credit facility will be sufficient to fund our normal cash requirements for 2007. We also believe that cash flows from our operations will be sufficient to repay any borrowings under our revolving credit facility as necessary.

          Sources and Uses of Cash

          We had $9.6 million of cash and cash equivalents as of December 31, 2006. All of this cash is located at various subsidiaries and is used for working capital purposes. Cash receipts in the United States are applied against our revolving credit facility.

          Operating Cash Flows

          During 2006, we generated cash from operating activities of $50.9 million compared to $50.4 million in 2005. The increase in our cash flows from operating activities resulted primarily from increased sales activity.

          Receivables

          We recognize 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 December 31, 2006, we had $162.5 million of accounts receivable compared to $155.5 million of accounts receivable as of December 31, 2005. Receivables as of December 31, 2006 and 2005 included $77.0 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 Statement of Position No. 81-1, these payments are recorded as Liabilities to Customers on Uncompleted Contracts and Warranties.

          Financing Cash Flows

          Our credit agreement as of December 31, 2006, with GMAC Commercial Finance LLC as lead lender, provides for a revolving credit facility and expires on May 27, 2010. In 2006, the amount of the revolving credit facility was increased to $200.0 million from $120.0 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. As of December 31, 2006, we had $78.8 million of borrowings under our revolving credit facility at a weighted average interest rate of 6.8%. The amount available for borrowings under the revolving credit facility as of December 31, 2006 was $69.7 million.

          Our credit agreement contains covenants limiting our discretion with respect to key business matters and places significant restrictions on, among other things, our 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 our domestic assets and the receivables and inventory of our Canadian subsidiary are pledged as collateral under the revolving credit facility. In addition, the outstanding capital stock of our domestic subsidiaries, as well as the capital stock of a majority of our foreign subsidiaries, are pledged as collateral. We are also required to maintain compliance with certain covenants, including a leverage ratio (as defined). We were in compliance with these covenants as of December 31, 2006.

          Current Dividend Policy

          In 2006, our Board of Directors authorized a 30% increase in our stockholders’ quarterly cash dividend to the amount of $.05 per share per quarter, subject to future authorization by our Board of Directors.

          Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2006:

	Total		1 Year or Less		2-3 Years		4-5 Years		Thereafter
	(Dollars in thousands)
Long-term debt	$	82,476	$	210	$	1,078	$	79,523	$	1,665
Short-term obligations		121		121		—		—		—
Purchase obligations (1)		2,020		1,328		692		—		—
Operating leases and rental and service agreements		36,984		6,971		8,735		6,363		14,915
Expansion project (2)		13,975		13,975		—		—		—
Total	$	135,576	$	22,605	$	10,505	$	85,886	$	16,580

(1)

Obligations related to purchase orders entered into in the ordinary course of business are excluded from the above table. Any amounts for which we are liable for goods or services received under purchase orders are reflected in the Consolidated Balance Sheets as accounts payable.

(2)

We are in the midst of a multi-phase expansion program at our South Milwaukee facility. We expect that the aggregate cost of phase one and two will be approximately $54 million, and that the cost of phase three will be approximately $58 million. We are financing the expansion program through working capital and funds available under our existing revolving credit facility as well as governmental grants and other programs.

Critical Accounting Policies and Estimates

          The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions about future events that affect the amounts reported in our financial statements and accompanying footnotes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to the financial statements. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. We evaluate these significant factors as facts and circumstances dictate. Historically, actual results have not differed significantly from those determined using estimates.

          The following are the accounting policies that most frequently require us to make estimates and judgments and are critical to understanding our financial condition, results of operations and cash flows:

          Revenue Recognition - Revenue from long-term sales contracts, such as for the manufacture of our machines and certain parts orders, is recognized using the percentage-of-completion method prescribed by Statement of Position No. 81-1 due to the length of time to fully manufacture and assemble our machines or replacement parts. We measure revenue recognized based on the ratio of estimated costs incurred to date in relation to total costs to be incurred. The percentage-of-completion method of accounting for these contracts most accurately reflects the status of these uncompleted contracts in our financial statements and most accurately measures the matching of revenues with expenses. We also have long-term maintenance and repair contracts with customers. Under these contracts, we provide all replacement parts, regular

maintenance services and necessary repairs for the excavation equipment at a particular mine with an on-site support team. In addition, some of these contracts call for our personnel to operate the equipment being serviced. Parts consumed and services provided are charged to cost of products sold and sales are calculated and recorded based on the parts and services utilization. The customer is billed monthly and a liability for deferred revenues is recorded if payments received exceed revenues recognized. At the time a loss on a contract becomes known, the amount of the estimated loss is recognized in our consolidated financial statements. Revenue from all other types of sales, primarily sales of aftermarket parts, net of estimated returns and allowances, is recognized in conformity with Staff Accounting Bulletin No. 104, when all of the following circumstances are satisfied: persuasive evidence of an arrangement exists, the price is fixed or determinable, collectibility is reasonably assured and delivery has occurred or services have been rendered. Criteria for revenue recognition is generally met at the time products are shipped, as the terms are FOB shipping point.

          The complexity of the cost estimation process and all issues related to assumptions, risks and uncertainties inherent with the use of estimated costs in the percentage of completion method of accounting affect the amounts reported in our financial statements. A number of internal and external factors affect our cost of sales estimates, including engineering design changes, estimated future material prices and customer specification changes. If we had used different assumptions in the application of this and other accounting policies, it is likely that materially different amounts would be reported in the financial statements. Bid and proposal costs are expensed as incurred. A 1% change in the gross margin percentage on machines in progress at December 31, 2006 would have the effect of changing our gross profit by approximately $2.2 million.

          Warranty - - Sales of our products generally carry typical manufacturers’ warranties, the majority of which cover products for one year, based on terms that are generally accepted in the marketplaces that we serve. We record provisions for estimated warranty and other related costs as revenue is recognized based on historical warranty loss experience and periodically adjust these provisions to reflect actual experience. Estimates used to determine the product warranty accruals are significantly impacted by the historical percentage of warranty claims costs to net sales. Over the last three years, this percentage has varied by approximately 0.1 percentage points compared to the warranty costs to net sales percentage during 2006. Holding other assumptions constant, if this estimated percentage were to increase or decrease 0.1 percentage points, our warranty expense for 2006 would increase or decrease by approximately $0.7 million.

          Pension and Other Postretirement Benefits - In September 2006, the Financial Accounting Standards Board (“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. We adopted the provisions of SFAS No. 158 as of December 31, 2006 as required.

          We have several defined benefit pension plans that are separately funded. We also provide certain health care benefits to employees until age 65 and life insurance benefits for certain eligible retired United States employees. Several statistical and judgmental factors which attempt to anticipate future events are used in calculating the expense and liability related to these plans. These factors include assumptions about the discount rate, expected return on plan assets, rate of future compensation increases and health care cost trend rates, as we determine within certain guidelines. In addition, our actuarial consultants also use subjective factors such as withdrawal

and mortality rates to estimate these factors. The actuarial assumptions we use may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates, longer or shorter life spans of participants and changes in actual costs of health care. These differences may result in a significant impact to the amount of pension and other postretirement benefit expenses recorded by us.

          In determining net periodic cost for pension benefits and for postretirement benefits other than pensions for 2006, our actuarial consultants used a 5.50% discount rate and an expected long-term rate of return on plan assets of 8.5%. The discount rate for 2006 was decreased from 5.75% in 2005 and the expected long-term rate of return on plan assets was decreased from 9.0% in 2005.

          In selecting an assumed discount rate, we reviewed various corporate bond yields. The 8.5% expected long-term rate of return on plan assets is based on the average rate of earnings expected on the classes of funds invested or to be invested to provide for the benefits of these plans. This includes considering the trusts’ targeted asset allocation for the year and the expected returns likely to be earned over the next 20 years. The assumptions used for the return of each asset class are conservative when compared to long-term historical returns

          The table below shows the effect that a 1% increase or decrease in the discount rate and expected rate of return on plan assets would have on our pension and other postretirement benefits obligations and costs:

	2006 Benefit Cost (Income)/Expense					January 1, 2006 Benefit Obligation Increase/(Decrease)
	One Percentage- Point Increase			One Percentage- Point Decrease		One Percentage- Point Increase			One Percentage- Point Decrease
	(Dollars in thousands)
Pension benefits:
Assumed discount rate	$	(526	)	$	605	$	(8,684	)	$	10,259
Expected long-term rate of return on plan assets		(612	)		612		N/A			N/A
Other postretirement benefits:
Assumed discount rate		(156	)		180		(1,545	)		1,799

          Accounting for Uncertainty in Income Taxes - In July 2006, the 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 2007. We are currently evaluating the impact, if any, that FIN 48 will have on our financial statements.

          Off Balance Sheet Arrangements

          We do not have any off balance sheet financing arrangements that we believe have or are reasonably likely to have a current or future material effect on our financial condition.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Our market risk is impacted by changes in interest rates and foreign currency exchange rates.

          Interest Rates - Our interest rate exposure relates primarily to floating rate debt obligations in the United States. We manage borrowings under our 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. As of December 31, 2006, a sensitivity analysis was performed for our floating rate debt obligations. Based on these sensitivity analyses, we have determined that a 10% change in the weighted average interest rate as of December 31, 2006 would have the effect of changing our interest expense on an annual basis by approximately $.6 million.

          Foreign Currency – We sell most of our machines, including those sold directly to foreign customers, and most of our aftermarket parts in United States dollars. A limited amount of aftermarket parts sales are denominated in the local currencies of Australia, Canada, South Africa, Brazil, Chile and the United Kingdom, which subjects us 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 our sales without a corresponding decrease of the United States dollar value of certain related expenses. We utilize 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 our ability to timely convert sales earned abroad into United States dollars, which could adversely affect our ability to service our United States dollar indebtedness, fund our United States dollar costs and finance capital expenditures and pay dividends on our common stock.

          Based on our derivative instruments outstanding as of December 31, 2006, a 10% change in foreign currency exchange rates would not have a material effect on our financial position, results of operations or cash flows.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF BUCYRUS INTERNATIONAL INC.

Corporate Name	State/Country of Incorporation
Boonville Mining Services, Inc.	Delaware
Bucyrus (Africa) (Proprietary) Limited	Republic of South Africa
Minserco SA (Proprietary) Limited	Republic of South Africa
Contel Plus Automation & Drive Systems (Proprietary) Limited	Republic of South Africa
Bucyrus (Brasil) Ltda.	Brazil
Bucyrus Canada Limited	Ontario
Bucyrus Canada Acquisition, Ltd.	Alberta
Bucyrus Europe Holdings, Ltd.	United Kingdom
Bucyrus Europe Limited	United Kingdom
White Line Plant Ltd.	United Kingdom
Bucyrus India Private Limited	India
Bucyrus Industries, Inc.	Delaware
Bucyrus International (Chile) Limitada	Chile
Bucyrus International (Peru) S.A.	Peru
Bucyrus (Mauritius) Limited	Mauritius
BWC Gear, Inc.	Delaware
BWP Gear Inc.	Delaware
Minserco, Inc.	Delaware
Western Gear Machinery Co.	Delaware
Equipment Assurance Limited	Cayman Islands
Wisconsin Holdings Pty. Ltd.	Australia
Bucyrus (Australia) Proprietary Ltd.	Australia

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-119273, 333-135558, and 333-135555 of our report dated February 26, 2007 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004), “Shared-Based Payment” and Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)”) relating to the financial statements and financial statement schedule of Bucyrus International, Inc., and report dated February 26, 2007 relating to management’s report on the effectiveness of internal control over financial reporting appearing in and incorporated by reference in this Annual Report on Form 10-K of Bucyrus International, Inc. for the year ended December 31, 2006.

Milwaukee, Wisconsin
February 26, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Timothy W. Sullivan, certify that:
1.	I have reviewed this Annual Report on Form 10-K of Bucyrus International, Inc.;
2.	Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report;
3.	Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2007
	/s/ T. W. Sullivan
	Timothy W. Sullivan Chief Executive Officer

2

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Craig R. Mackus, certify that:
1.	I have reviewed this Annual Report on Form 10-K of Bucyrus International, Inc.;
2.	Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report;
3.	Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Annual Report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2007
	/s/ C. R. Mackus
	Craig R. Mackus Chief Financial Officer and Secretary

2

EX-32

EXHIBIT 32

CERTIFICATION OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002

In connection with the Annual Report of Bucyrus International, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Timothy W. Sullivan, as President and Chief Executive Officer of the Company, and Craig R. Mackus, Chief Financial Officer and Secretary of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 /s/ T. W. Sullivan

Timothy W. Sullivan

President and Chief Executive Officer

February 27, 2007

 /s/ C. R. Mackus

Craig R. Mackus

Chief Financial Officer and Secretary

February 27, 2007

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.