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

Form 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 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	39-0188050
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

P. O. BOX 500

1100 MILWAUKEE AVENUE

SOUTH MILWAUKEE, WISCONSIN

53172

(Address of Principal Executive Offices)

(Zip Code)

(414) 768-4000

(Registrant’s Telephone Number, Including Area Code)

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

          Indicate by check mark whether the registrant is 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 o Non-accelerated filer o

          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

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

Class	Outstanding August 2, 2006
Class A Common Stock, $.01 par value	31,517,481

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX

			Page No.
PART I.	FINANCIAL INFORMATION:
	Item 1 -	Financial Statements (Unaudited)
	Consolidated Condensed Statements of Earnings - Quarters and six months ended June 30, 2006 and 2005		4
	Consolidated Condensed Statements of Comprehensive Income - Quarters and six months ended June 30, 2006 and 2005		5
	Consolidated Condensed Balance Sheets - June 30, 2006 and December 31, 2005		6-7
	Consolidated Condensed Statements of Cash Flows - Six months ended June 30, 2006 and 2005		8-9
	Notes to Consolidated Condensed Financial Statements		10-16
	Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-26
	Item 3 -	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4 -	Controls and Procedures	28
	Forward-Looking Statements		29
PART II.	OTHER INFORMATION:
	Item 1 -	Legal Proceedings	30
	Item 1A	- Risk Factors	30
	Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	30
	Item 3 -	Defaults Upon Senior Securities	30
	Item 4 -	Submission of Matters to a Vote of Security Holders	30-31
	Item 5 -	Other Information	31
	Item 6 -	Exhibits	31
	Signature Page		32

PART I
FINANCIAL INFORMATION

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

	Quarter Ended June 30,					Six Months Ended June 30,
	2006			2005		2006		2005
Sales	$	181,804		$	140,037	$	347,457	$	245,558
Cost of products sold		134,870			109,043		259,650		185,538
Gross profit		46,934			30,994		87,807		60,020
Selling, general and administrative expenses		18,078			12,141		33,538		24,446
Research and development expenses		3,051			1,460		4,973		2,810
Amortization of intangible assets		449			450		901		903
Operating earnings		25,356			16,943		48,395		31,861
Interest expense		601			1,110		1,246		2,362
Other (income) expense – net		(3	)		92		119		115
Earnings before income taxes		24,758			15,741		47,030		29,384
Income tax expense		3,200			5,517		10,950		10,035
Net earnings	$	21,558		$	10,224	$	36,080	$	19,349
Net earnings per share data:
Basic:
Net earnings per share	$	.69		$	.34	$	1.15	$	.64
Weighted average shares		31,284,624			30,440,985		31,238,416		30,272,511
Diluted:
Net earnings per share	$	.68		$	.33	$	1.14	$	.62
Weighted average shares		31,615,978			31,245,990		31,571,657		31,209,929

See notes to consolidated condensed financial statements.

4

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

	Quarter Ended June 30,					Six Months Ended June 30,
	2006			2005		2006			2005
Net earnings	$	21,558		$	10,224	$	36,080		$	19,349
Other comprehensive income (loss)-
Foreign currency translation adjustments		(984	)		781		(933	)		(2,992	)
Comprehensive income	$	20,574		$	11,005	$	35,147		$	16,357

See notes to consolidated condensed financial statements

5

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

	June 30, 2006			December 31, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10,128		$	12,451
Receivables – net		154,369			155,547
Inventories		155,614			133,476
Deferred income taxes		19,051			18,363
Prepaid expenses and other		4,255			6,982
Total Current Assets		343,417			326,819
OTHER ASSETS:
Goodwill		47,306			47,306
Intangible assets – net		33,619			34,565
Deferred income taxes		14,452			10,355
Other assets		8,046			8,767
Total Other Assets		103,423			100,993
PROPERTY, PLANT AND EQUIPMENT:
Cost		169,434			140,938
Less accumulated depreciation		(80,921	)		(76,783	)
Total Property, Plant and Equipment		88,513			64,155
TOTAL ASSETS	$	535,353		$	491,967

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

	June 30, 2006			December 31, 2005
LIABILITIES AND COMMON SHAREHOLDERS’ INVESTMENT
CURRENT LIABILITIES:
Accounts payable	$	75,895		$	65,873
Accrued expenses		40,031			40,874
Liabilities to customers on uncompleted contracts and warranties		36,715			35,239
Income taxes		14,062			11,943
Current maturities of long-term debt and other short-term obligations		272			1,339
Total Current Liabilities		166,975			155,268
LONG-TERM LIABILITIES:
Postretirement benefits		14,749			14,257
Pension and other		35,205			34,567
Total Long-Term Liabilities		49,954			48,824
LONG-TERM DEBT, less current maturities		58,373			66,975
COMMON SHAREHOLDERS’ INVESTMENT:
Common stock – par value $.01 per share, authorized 75,000,000 shares, issued 31,626,081 shares and 30,991,820 shares, respectively		316			310
Additional paid-in capital		304,397			298,079
Unearned stock compensation		—			(466	)
Treasury stock – 108,600 shares, at cost		(851	)		(851	)
Accumulated deficit		(17,669	)		(50,963	)
Accumulated other comprehensive loss		(26,142	)		(25,209	)
Total Common Shareholders’ Investment		260,051			220,900
TOTAL LIABILITIES AND COMMON SHAREHOLDERS’ INVESTMENT	$	535,353		$	491,967

See notes to consolidated condensed financial statements.

7

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

	Six Months Ended June 30,
	2006			2005
Net Cash Provided By Operating Activities	$	31,296		$	5,733
Cash Flows From Investing Activities
Purchases of property, plant and equipment		(26,426	)		(8,015	)
Proceeds from sale of property, plant and equipment		342			112
Other		(105	)		(86	)
Net cash used in investing activities		(26,189	)		(7,989	)
Cash Flows From Financing Activities
Net borrowings from (repayments of) revolving credit facility		(8,603	)		85,853
Repayment of senior secured term loan		—			(98,750	)
Net increase (decrease) in long-term debt and other bank borrowings		(1,066	)		687
Payment of financing expenses		—			(533	)
Proceeds from issuance of common stock		756			3,661
Tax benefit from exercise of stock options		4,353			—
Dividends paid		(2,763	)		(2,315	)
Net cash used in financing activities		(7,323	)		(11,397	)
Effect of exchange rate changes on cash		(107	)		(178	)
Net decrease in cash and cash equivalents		(2,323	)		(13,831	)
Cash and cash equivalents at beginning of period		12,451			20,617
Cash and cash equivalents at end of period	$	10,128		$	6,786

8

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

	Six Months Ended June 30,
	2006		2005
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	1,408	$	2,848
Income taxes - net of refunds		8,191		7,621
Supplemental Disclosure of Noncash Investing Activity
Capital expenditures related to expansion program included in accounts payable	$	4,451		—

See notes to consolidated condensed financial statements.

9

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

1.	In the opinion of Bucyrus International, Inc. (the “Company”), the consolidated condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial results for the interim periods. Certain items are included in these statements based on estimates for the entire year. Actual results in future periods may differ from the estimates. The Company’s operations are classified as one operating segment.
2.	Certain notes and other information have been condensed or omitted from these interim consolidated condensed financial statements. Therefore, these statements should be read in conjunction with the Company’s 2005 Annual Report to Shareholders and Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2006.
3.	Inventories consist of the following:

	June 30, 2006		December 31, 2005
	(Dollars in Thousands)
Raw materials and parts	$	46,673	$	36,526
Work in process		21,093		12,896
Finished products (primarily replacement parts)		87,848		84,054
	$	155,614	$	133,476

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

10

5. The following is a reconciliation of the numerators and the denominators of the basic and diluted net earnings per share of common stock calculations for the quarters and six months ended June 30, 2006 and 2005:

	Quarters Ended June 30,				Six Months Ended June 30,
	2006		2005		2006		2005
	(Dollars in Thousands, Except Per Share Amounts)
Net earnings	$	21,558	$	10,224	$	36,080	$	19,349
Weighted average shares outstanding		31,284,624		30,440,985		31,238,416		30,272,511
Basic net earnings per share	$	.69	$	.34	$	1.15	$	.64
Weighted average shares outstanding		31,284,624		30,440,985		31,238,416		30,272,511
Effect of dilutive stock options, nonvested shares, stock appreciation rights and performance shares		331,354		805,005		333,241		937,418
Weighted average shares outstanding - diluted		31,615,978		31,245,990		31,571,657		31,209,929
Diluted net earnings per share	$	.68	$	.33	$	1.14	$	.62

6.

The Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), on January 1, 2006 using the modified prospective application method. Adoption of SFAS 123R did not have a material effect on the Company’s financial statements. Previously, the Company accounted for stock–based compensation arrangements in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). For the quarter and six months ended June 30, 2005, there would have been no effect on net earnings and net earnings per share if the fair value-based method provided by SFAS 123 had been applied for all outstanding and unvested awards in those periods. Total stock compensation expense recognized was $1.2 million and $1.7 million for the quarter and six months ended June 30, 2006, respectively, and $45,000 and $90,000 for the quarter and six months ended June 30, 2005.

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

11

On April 25, 2006, the Company issued 37,800 nonvested shares to certain employees pursuant to the Bucyrus International, Inc. 2004 Equity Incentive Plan (the “2004 Incentive Plan”). These shares cliff vest on December 31, 2009. The vesting period may be accelerated based on the attainment of certain defined financial goals of the Company. A summary of the status of the Company’s nonvested shares as of June 30, 2006 and changes during the six months ended June 30, 2006 is as follows:

	Shares			Weighted-Average Grant Date Fair Value Per Share
Nonvested 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 on May 31, 2006		(20,100	)		39.76
Nonvested at June 30, 2006		232,650			39.66

The grant date fair values were 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 June 30, 2006, there was $7.9 million of unrecognized compensation cost related to the nonvested shares granted under the 2004 Incentive Plan. This cost is expected to be recognized on a straight-line basis over a weighted-average period of 3.3 years.

On April 25, 2006, the Company also issued 75,600 stock appreciation rights to certain employees pursuant to the 2004 Incentive Plan. The grant date fair value of the rights was $28.27 per right 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 rights. 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 ten years. The expected dividend yield was based on the annual dividend of $.23 per share, which had been paid on the Company’s Class A common stock prior to the stock split.

At June 30, 2006, a total of 396,900 stock appreciation rights were outstanding pursuant to the 2004 Incentive Plan. The weighted-average grant date fair value of these rights was $21.35 per right. The rights vest over four years and can be settled in shares only. At June 30, 2006, there was $7.4 million of unrecognized compensation cost related to the rights, which is expected to be recognized on a straight-line basis over a period of 3.5 years. A total of 40,200 rights issued during the first quarter of 2006 were forfeited in the second quarter of 2006.

On April 25, 2006, the Company also designated 9,600 shares of its Class A common stock for issuance to certain employees if specific performance levels are attained by the Company. The grant date fair value of the performance shares was $57.00 per share and was based on the fair market value, as defined in the 2004 Incentive Plan, of the Company’s Class A common stock on

12

	the date of grant. At June 30, 2006, a total of 51,975 performance shares have been designated for issuance and the weighted-average grant date fair value of these shares was $42.94 per share. Any performance shares credited to employees will cliff vest on December 31, 2009. At June 30, 2006, there was $2.0 million of unrecognized compensation cost related to the performance shares, which is expected to be recognized on a straight-line basis over a period of 3.5 years. A total of 5,025 performance shares previously designated for issuance were forfeited in the second quarter of 2006.
	No options to purchase Company shares were granted or exercised during the second quarter of 2006. At June 30, 2006, options were outstanding to purchase 9,600 shares of the Company’s Class A common stock at a weighted average exercise price of $8.33 per share.
7.	Intangible assets consist of the following:

	June 30, 2006					December 31, 2005
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(Dollars in Thousands)
Amortized intangible assets:
Engineering drawings	$	25,500	$	(11,181	)	$	25,500	$	(10,543	)
Bill of material listings		2,856		(1,252	)		2,856		(1,181	)
Software		2,288		(2,006	)		2,288		(1,892	)
Other		682		(341	)		773		(309	)
	$	31,326	$	(14,780	)	$	31,417	$	(13,925	)
Unamortized intangible assets:
Trademarks/Trade names	$	12,436				$	12,436
Intangible pension asset		4,637					4,637
	$	17,073				$	17,073

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

	(Dollars in Thousands)
2006 (remaining six months)		$	892
2007			1,721
2008			1,554
2009			1,418
2010			1,418
2011			1,418
Future			8,125
		$	16,546

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8.	Environmental
	The Company’s operations and properties are subject to a broad range of federal, state, local and foreign laws and regulations relating to environmental matters, including laws and regulations governing discharges into the air and water, the handling and disposal of solid and hazardous substances and wastes, and the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and at off-site disposal locations. These laws are complex, change frequently and have tended to become more stringent over time. Future events, such as compliance with more stringent laws or regulations, more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws, could require additional expenditures by the Company, which may be material.
	Environmental problems have not interfered in any material respect with the Company’s manufacturing operations to date. The Company believes that its compliance with statutory requirements respecting environmental quality will not materially affect its capital expenditures, earnings or competitive position. The Company has an ongoing program to address any potential environmental problems.
	Product Warranty
	The Company recognizes the cost associated with its warranty policies on its products as revenue is recognized. The amount recognized is based on historical experience. The following is a reconciliation of the changes in accrued warranty costs for the six months ended June 30, 2006 and 2005:

	Six Months Ended June 30,
	2006			2005
	(Dollars in Thousands)
Balance at January 1	$	5,977		$	5,452
Provision		4,599			1,346
Claims incurred		(1,115	)		(954	)
Balance at June 30	$	9,461		$	5,844

Product Liability

The Company is normally subject to numerous product liability claims, many of which relate to products no longer manufactured by the Company or its subsidiaries, and other claims arising in the ordinary course of business. The Company has insurance covering most of these claims, subject to varying deductibles up to $3.0 million, and has various limits of liability depending on the insurance policy year in question. It is the view of management that the final resolution of these claims and other similar claims which are likely to arise in the future will not individually or in the aggregate have a material effect on the Company’s financial position, results of operations or cash flows, although no assurance to that effect can be given.

Asbestos Liability

The Company has been named as a co-defendant in approximately 300 personal injury liability cases alleging damages due to exposure to asbestos and other substances, involving approximately 580 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

14

	various pre-trial stages. The Company does not believe that costs associated with these matters will have a material effect on its financial position, results of operations or cash flows, although no assurance to that effect can be given.
	Other Litigation
	A wholly owned subsidiary of the Company is a defendant in a suit pending in the United States District Court for the Western District of Pennsylvania, brought on June 15, 2002, relating to an incident in which a dragline operated by an employee of a Company subsidiary tipped over. The owner of the dragline has sued an unaffiliated third party on a negligence theory for property damages and business interruption losses in a range of approximately $25.0 million to $27.0 million. The unrelated third party has brought a third-party action against the Company’s subsidiary. The Company’s insurance carriers are defending the claim, but have not conceded that the relevant policies cover the claim. At this time discovery is ongoing and it is not possible to evaluate the outcome of the claim nor the range of potential loss, if any.
	A wholly owned Australian subsidiary of the Company is a defendant in a suit pending in the Supreme Court of Queensland in Australia, brought on May 5, 2002, relating to a contractual claim. The plaintiff, pursuant to a contract with the Company’s subsidiary, agreed to erect a dragline sold by the Company to a customer for use at its mine site. The plaintiff asserts various contractual claims related to breach of contract damages and other remedies for approximately AUS $2.4 million (US $1.8 million) related to its claim that it is owed amounts for services rendered under the contract. The Company’s subsidiary has asserted counterclaims against the plaintiff in connection with certain aspects of the work performed. This matter is anticipated to go to trial in late 2006 or early 2007. The Company has established a reserve for its estimate of the resolution of this matter.
9.	Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income,” requires the reporting of comprehensive income (loss) in addition to net earnings from operations. Comprehensive income (loss) is a more inclusive financial reporting method that includes disclosure of financial information that historically has not been recognized in the calculation of net earnings. The Company reports comprehensive income (loss) and accumulated other comprehensive income (loss) which includes net earnings, foreign currency translation adjustments and minimum pension liability adjustments. Information on accumulated other comprehensive loss is as follows:

	Cumulative Translation Adjustments			Minimum Pension Liability Adjustments			Accumulated Other Comprehensive Loss
	(Dollars in Thousands)
Balance at December 31, 2005	$	(5,896	)	$	(19,313	)	$	(25,209	)
Changes – Six months ended June 30, 2006		(933	)		—			(933	)
Balance at June 30, 2006	$	(6,829	)	$	(19,313	)	$	(26,142	)

10. The Company has several pension and retirement plans covering substantially all of its employees in the United States. The Company also provides certain health care benefits to age 65 and life insurance benefits for certain eligible retired United States employees.

15

The components of net periodic pension cost consisted of the following:

	Quarters Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
	(Dollars in Thousands)
Service cost	$	616		$	552		$	1,232		$	1,104
Interest cost		1,302			1,310			2,604			2,620
Expected return on plan assets		(1,334	)		(1,116	)		(2,668	)		(2,232	)
Amortization of prior service cost		114			52			228			104
Amortization of actuarial loss		523			402			1,046			804
Net cost	$	1,221		$	1,200		$	2,442		$	2,400

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

	Quarters Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
	(Dollars in Thousands)
Service cost	$	237		$	210		$	474		$	420
Interest cost		273			311			546			622
Amortization of prior service cost		(63	)		(60	)		(126	)		(120	)
Amortization of actuarial loss		79			91			158			182
Net cost	$	526		$	552		$	1,052		$	1,104

During the first six months of 2006, the Company contributed approximately $3.1 million to its pension plans and $.6 million for the payment of benefits from its postretirement benefit plan. The Company presently anticipates contributing an additional $6.5 million to its pension plans and $.6 million for the payment of benefits from its postretirement benefit plan during the remainder of 2006.

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

Overview

          Business

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

          The market for OEM machines is closely correlated with customer expectations of sustained strength in prices of surface mined commodities. Growth in demand for these commodities is a function of, among other things, economic activity, population increases and continuing improvements in standards of living in many areas of the world. In 2003 and 2004, market prices for copper, coal, iron ore and oil increased and continued to be strong in 2005 and the first half of 2006. Factors that could support sustained demand for these key commodities in 2006 and future years include continued economic growth in China, India and the developing world, and renewed economic strength in industrialized countries. Inquiries for the Company’s machines remain at a high level. The highest interest has been in the oil sands of Western Canada, and inquiries related to coal, copper and iron ore mines in other areas of the world have also remained strong.

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

          The Company continues to forecast increased sales activity for both aftermarket parts sales and OEM machine sales relative to prior periods. The Company anticipates that the current commodity demand will continue for at least the next three to five years. Recent strong order volume has caused the Company to hire new employees and additional hiring is expected. As sustained order strength continues, the Company is taking steps to increase its manufacturing capacity. In early 2005, the Company entered into an agreement to lease a facility to be used for expansion of the Company’s manufacturing operations. Also, on July 20, 2006, the Company announced that it will undertake the third phase of its multi-phase expansion program at its South Milwaukee facility. The first phase of the expansion, which was announced on August 24, 2005, will provide 110,000 square feet of new space for welding and machining of large electric mining shovel components. Phase one is expected to be fully completed in the fourth quarter of 2006 with initial manufacturing to begin ahead of schedule in August 2006.

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

          The third phase of the expansion project was approved in support of the Company’s ongoing efforts to meet the continued growth of demand for its machines and their components. Phase three will include the renovation of manufacturing buildings and offices at the Company’s existing facilities south of Rawson Avenue in South Milwaukee. Its focus is on modernizing and improving manufacturing and administrative efficiencies and includes renovation as well as expansion of existing buildings and the addition of new machine tools. The steps for accomplishing phase three are scheduled to maximize manufacturing throughput during the renovation and construction processes. Phase three construction is scheduled to be completed by the fourth quarter of 2007 and is expected to cost approximately $58 million.

          A substantial portion of the Company’s sales and operating earnings is attributable to operations located outside the United States. The Company generally sells its OEM machines, including those sold directly to foreign customers, and most of its aftermarket parts in United States dollars. A portion of the Company’s aftermarket parts sales are also denominated in the local currencies of Australia, Brazil, Canada, Chile, South Africa and the United Kingdom. Aftermarket services are paid for primarily in local currency which is naturally hedged by the Company’s payment of local labor in local currency. In the aggregate, approximately 75% of the Company’s 2005 sales were priced in United States dollars.

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

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

Key Measures

          On-Time Delivery and Lead Times

          Due to the high fixed cost structure of the Company’s customers, it is critical that they avoid equipment downtime. On-time delivery and reduced lead time of aftermarket parts and services allow customers to reduce downtime and are therefore key measures of customer service, and the Company believes they are fundamental drivers of aftermarket customer demand. The Company’s on-time delivery percentage in the aftermarket, based on achieved promised delivery dates to customers, was 87% for the first six months of 2006 and 93% for the year 2005. Lead times for deliveries of aftermarket parts have increased slightly in the first six months of 2006 as compared to the year 2005. Lead times are expected to increase due to the expected increase in sales volume and capacity constraints.

          The Company maintained on-time deliveries and reduced lead times in recent years by focusing on the development of key shop floor metrics, improved communication between sales, manufacturing and shipping, daily or weekly meetings to resolve issues, changing of shipment methods and the hiring of an additional supervisory person dedicated to on-time delivery. In 2006, lead times have increased slightly due to increased demand and capacity constraints. The information to accomplish much of these improvements is available from the Company’s enterprise resource planning (“ERP”) system.

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          Productivity

          Sales per full time equivalent employee is a measure of the Company’s operational efficiency. Sales per full time equivalent employee were $.3 million for the first six months of 2006 and 2005. The Company has experienced productivity increases in recent years, primarily due to the application of worldwide sales and inventory ERP systems and personnel upgrades which, collectively, allowed sales to grow with minimal changes in headcount.

          Warranty Claims

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

          Backlog

          A strong backlog is a tool which allows more accurate sales forecast and production planning. Due to the high cost of some OEM products, backlog is subject to volatility, particularly over relatively short periods. A portion of the Company’s backlog is related to multi-year contracts that will generate revenue in future years. The following table shows backlog at June 30, 2006 and December 31, 2005 as well as the portion of backlog which is or was expected to be recognized as sales within twelve months of these dates:

	June 30, 2006		December 31, 2005
		(Dollars in Thousands)
Next 12 months	$	442,056	$	413,131
Total		715,855		658,612

The increase in the Company’s backlog at June 30, 2006 was primarily due to an increase in new machine orders, which totaled $178.2 million and $179.3 million for the quarter and six months ended June 30, 2006. Inquiries for the Company’s machines remain at a high level.

          Inventory

          Inventory is one of the Company’s significant assets. As of June 30, 2006, the Company had $155.6 million in inventory. Raw materials and work in process inventory have increased in support of increased sales volume. Inventory turned at a rate of approximately 3.5 times as of June 30, 2006 compared with 3.1 for the year 2005. Inventory turns is calculated based on cost of sales and the average inventory balance during the prior twelve months. The Company believes that it has appropriately recorded at the lower of cost or market any slow moving or obsolete inventory in its financial statements. The factors that could reduce the carrying value of the Company’s inventory include reduced demand for aftermarket parts due to decreased sales volumes attributable to new or improved technology or customers discontinuing the use of the Company’s older model machines, which could render inventory obsolete or excess. With the exception of the normal inventory obsolescence provision recorded in the ordinary course of business, the Company does not anticipate recording any significant inventory impairments.

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Results of Operations

Quarter And Six Months Ended June 30, 2006 Compared to Quarter And Six Months Ended June 30, 2005

          Sales

          Sales for the quarter and six months ended June 30, 2006 were $181.8 million and $347.5 million, respectively, compared with $140.0 million and $245.6 million for the quarter and six months ended June 30, 2005, respectively. Sales of aftermarket parts and services for the second quarter of 2006 were $128.0 million, an increase of 50.5% from $85.1 million for the second quarter of 2005. Sales of aftermarket parts and services for the six months ended June 30, 2006 were $240.3 million, an increase of 47.5% from $162.9 million for the six months ended June 30, 2005. The increases in aftermarket sales in 2006 reflect the Company’s continuing initiatives and strategies to capture additional market share. Also, aftermarket shares continue to increase as the existing installed fleet of machines operates at very high utilization levels due to the current demand and increased prices for commodities. Aftermarket sales increased in both the United States and international markets. Machine sales for the second quarter of 2006 were $53.8 million, a decrease of 2.2% from $54.9 million for the second quarter of 2005. The decrease in new machine sales was primarily due to the manufacturing of one dragline being substantially completed at the end of the first quarter of 2006. Machine sales for the six months ended June 30, 2006 were $107.2 million, an increase of 29.7% from $82.7 million for the six months ended June 30, 2005. The increase in new machine sales resulted from the sustained strength in prices of commodities that are surface mined by the Company’s machines. Approximately $.6 million and $1.0 million of the increases in sales for the quarter and six months ended June 30, 2006, respectively, was attributable to a weakening United States dollar, which primarily impacted aftermarket sales (see “Foreign Currency Fluctuations” below).

          Gross Profit

          Gross profit for the second quarter of 2006 was $46.9 million or 25.8% of sales compared with $31.0 million or 22.1% of sales for the second quarter of 2005. Gross profit for the six months ended June 30, 2006 was $87.8 million or 25.3% of sales compared with $60.0 million or 24.4% of sales for the six months ended June 30, 2005. The increase in gross profit was primarily due to an increased sales volume and higher gross margins on aftermarket sales. Gross profit for the six months ended June 30, 2006 and 2005 was reduced by $2.7 million of additional depreciation expense as a result of the purchase price allocation to plant and equipment in connection with acquisitions involving the Company. Approximately $.1 million and $.3 million of the increase in gross profit for the quarter and six months ended June 30, 2006, respectively, was attributable to a weakening United States dollar, which primarily impacted aftermarket sales (see “Foreign Currency Fluctuations” below).

          Selling, General and Administrative Expenses

          Selling, general and administrative expenses for the quarter ended June 30, 2006 were $18.1 million or 9.9% of sales compared with $12.1 million or 8.7% of sales for the quarter ended June 30, 2005. Selling, general and administrative expenses for the six months ended June 30, 2006 were $33.5 million or 9.7% of sales compared to $24.4 million or 10.0% of sales for the six months ended June 30, 2005. Selling, general and administrative expenses for the quarter and six months ended June 30, 2006 included $1.2 million and $1.7 million, respectively, related to non-cash stock-based employee compensation compared to $45,000 and $90,000 for the quarter and six months ended June 30, 2005. In 2006, the Company also had increased selling and administrative expenses, primarily in the aftermarket support areas, when compared to 2005. Foreign currency transaction losses for the quarter and six months ended June 30, 2006 were $.7 million and $.4 million, respectively, compared with gains of $.5 million and $1.3 million for the quarter and six months ended June 30, 2005, respectively.

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          Research and Development Expenses

          Research and development expenses for the quarter and six months ended June 30, 2006 were $3.1 million and $5.0 million, respectively, compared with $1.5 million and $2.8 million for the quarter and six months ended June 30, 2005, respectively. The increase in 2006 was in part due to the continuing development of electrical and machine upgrade systems.

          Amortization of Intangible Assets

          Amortization of intangible assets, consisting primarily of engineering drawings, bill of material listings and software, was $.4 million and $.9 million for the quarter and six months ended June 30, 2006, respectively, compared with $.5 million and $.9 million for the quarter and six months ended June 30, 2005, respectively.

          Operating Earnings

          Operating earnings for the second quarter of 2006 were $25.4 million or 13.9% of sales, compared with $16.9 million or 12.1% of sales for the second quarter of 2005. Operating earnings for the six months ended June 30, 2006 were $48.4 million or 13.9% of sales, compared with $31.9 million or 13.0% of sales for the six months ended June 30, 2005. Operating earnings for the quarter and six months ended June 30, 2006 increased from 2005 due to increased gross profit resulting from an increased sales volume.

          Interest Expense

          Interest expense for the quarter and six months ended June 30, 2006 was $.6 million and $1.2 million, respectively, compared with $1.1 million and $2.4 million for the quarter and six months ended June 30, 2005, respectively. The decrease in interest expense in 2006 was primarily due to reduced borrowings. Also, $.2 million of interest was capitalized during the second quarter of 2006 as a part of the cost of the Company’s expansion program.

          Income Taxes

          Income tax expense for the quarter and six months ended June 30, 2006 was $3.2 million and $11.0 million, respectively, compared with $5.5 million and $10.0 million for the quarter and six months ended June 30, 2005, respectively. U.S. and foreign taxes are calculated at applicable statutory rates. Income tax expense for the quarter ended June 30, 2006 was reduced by a net income tax benefit of approximately $3.7 million related to foreign tax credits. The foreign tax credits resulted from the completion of the Company’s evaluation of its potential to claim additional foreign tax credits generated in previous tax periods. Not including this item, the lower effective tax rate in 2006 was due to the mix of domestic and foreign earnings. At June 30, 2006, the Company had available approximately $10.7 million of federal net operating loss carryforwards compared to $14.3 million at December 31, 2005. The carryforwards are useable at the rate of $3.6 million per year.

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Foreign Currency Fluctuations

          The following table summarizes the approximate effect of changes in foreign currency exchange rates on the Company’s sales, gross profit and operating earnings for the quarter and six months ended June 30, 2006 and 2005, in each case compared to the same quarter in the prior year:

	Quarters Ended June 30,					Six Months Ended June 30,
	2006			2005		2006		2005
	(Dollars in Thousands)
Increase in sales	$	594		$	1,738	$	1,037	$	3,803
Increase in gross profit		97			426		323		835
Increase (decrease) in operating earnings		(24	)		257		136		408

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EBITDA

          Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the quarter and six months ended June 30, 2006 was $29.1 million and $55.7 million, respectively, compared with $20.3 million and $38.6 million for the quarter and six months ended June 30, 2005, respectively. EBITDA is presented (i) because the Company uses EBITDA to measure its liquidity and financial performance and (ii) because the Company believes EBITDA is frequently used by securities analysts, investors and other interested parties in evaluating the performance and enterprise value of companies in general, and in evaluating the liquidity of companies with significant debt service obligations and their ability to service their indebtedness. The EBITDA calculation is not an alternative to operating earnings under accounting principles generally accepted in the United States of America (“GAAP”) as an indicator of operating performance or of cash flows as a measure of liquidity. The following table reconciles Net Earnings as shown in the Consolidated Condensed Statements of Earnings to EBITDA and reconciles EBITDA to Net Cash Provided by (Used in) Operating Activities as shown in the Consolidated Condensed Statements of Cash Flows:

	Quarters Ended June 30,						Six Months Ended June 30,
	2006			2005			2006			2005
	(Dollars in Thousands)
Net earnings	$	21,558		$	10,224		$	36,080		$	19,349
Interest income		(127	)		(149	)		(241	)		(358	)
Interest expense		601			1,110			1,246			2,362
Income taxes		3,200			5,517			10,950			10,035
Depreciation		3,133			2,920			6,240			5,784
Amortization (1)		705			691			1,411			1,379
EBITDA (2)		29,070			20,313			55,686			38,551
Changes in assets and liabilities		(38,056	)		(23,271	)		(14,234	)		(21,022	)
Non-cash stock compensation expense		1,166			45			1,744			90
(Gain) loss on sale of fixed assets		13			(129	)		55			153
Interest income		127			149			241			358
Interest expense		(601	)		(1,110	)		(1,246	)		(2,362	)
Income tax expense		(3,200	)		(5,517	)		(10,950	)		(10,035	)
Net cash provided by (used in) operating activities	$	(11,481	)	$	(9,520	)	$	31,296		$	5,733
Net cash used in investing activities	$	(18,751	)	$	(5,388	)	$	(26,189	)	$	(7,989	)
Net cash provided by (used in) financing activities	$	31,980		$	(12,213	)	$	(7,323	)	$	(11,397	)

(1)	Includes amortization of intangible assets and debt issuance costs.
(2)	EBITDA is reduced by severance expense for the quarters ended June 30, 2006 and 2005 and the six months ended June 30, 2006 and 2005 of $469,000, $60,000, $741,000 and $73,000, respectively.

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Liquidity and Capital Resources

          Stock Split and Dividend Policy

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

          In addition, the Company’s Board of Directors authorized a 30% increase in the quarterly dividend to the amount of $.05 per share per quarter for dividends payable after the date of the stock split. On July 20, 2006, a cash dividend of $.05 per share was declared and is to be paid on August 21, 2006 to shareholders of record on August 3, 2006.

          Cash Requirements

          During the remainder of 2006, the Company anticipates strong cash flows from operations due to continued strength in aftermarket parts sales as well as continued high demand for new machines. In expanding markets, customers are generally contractually obligated to make progress payments under purchase contracts for machine orders and certain large parts orders. As a result, the Company does not anticipate significant outside financing requirements to fund production of these machines and does not believe that new machine sales will have a negative effect on its liquidity. If additional borrowings are necessary during the remainder of 2006, the Company believes it has sufficient capacity under its revolving credit facility (see “Financing Cash Flows” below).

          On July 20, 2006, the Company announced that it will undertake the third phase of its multi-phase expansion program at its South Milwaukee facility. The first phase of the expansion program, which was announced on August 24, 2005, includes the construction of a new facility on the grounds of the Company’s South Milwaukee campus north of Rawson Avenue and is expected to be completed during the fourth quarter of 2006. The second phase, announced on February 16, 2006, will expand the Company’s new facility north of Rawson Avenue and is expected to be completed in mid-2007. The aggregate cost of phase one and two is expected to be approximately $54 million. Phase three of the expansion program will include the renovation of manufacturing buildings and offices, as well as the addition of new machine tools, at its existing facilities south of Rawson Avenue and is expected to be completed by the fourth quarter of 2007 at a cost of approximately $58 million. The Company intends to finance the expansion program through working capital and funds available under its existing revolving credit facility, and is exploring the availability of governmental grants and other programs.

          At June 30, 2006, the Company had contractual obligations of approximately $26.2 million with respect to the expansion program. As of June 30, 2006, there have been no other material changes to the contractual obligations with respect to purchase obligations and operating leases and rental and service agreements as presented in the Company’s 2005 Annual Report to Shareholders.

          The Company’s capital expenditures for the six months ended June 30, 2006 were $30.9 million compared with $8.0 million for the six months ended June 30, 2005. Included in capital expenditures for the six months ended June 30, 2006 was $21.2 million related to the expansion program, of which $4.5 million was paid in July 2006. The remaining expenditures consist primarily of production machinery at the Company’s main manufacturing facility. The Company expects a continued increase in capital expenditures during the remainder of 2006 as it increases manufacturing capacity and upgrades and

24

replaces manufacturing equipment to support increased sales activity. The Company believes cash flows from operating activities and funds available under its revolving credit facility will be sufficient to fund capital expenditures during the remainder of 2006.

          At June 30, 2006, there were $46.5 million of standby letters of credit outstanding under all Company bank facilities.

          The Company believes that cash flows from operations will be sufficient to fund its cash requirements for the next twelve months. The Company also believes that cash flows from operations will be sufficient to repay any borrowings under its revolving credit facility. During the first six months of 2006, the Company reduced its borrowings under the revolving credit facility by $8.6 million.

          Sources and Uses of Cash

          The Company had $10.1 million of cash and cash equivalents as of June 30, 2006. All of this cash is located at various foreign subsidiaries and will be used for working capital purposes. Cash receipts in the United States are applied against the Company’s revolving credit facility.

          Operating Cash Flows

          During the first six months of 2006, the Company generated cash from operating activities of $31.3 million compared to $5.7 million in the first six months of 2005. The increase in cash flows from operating activities was driven primarily by increased sales activity.

          Receivables

          The Company recognizes revenues on machine orders using the percentage-of-completion method. Accordingly, accounts receivable are generated when revenue is recognized, which can be before the funds are collected or in some cases, before the customer is billed. As of June 30, 2006, the Company had $154.4 million of receivables compared to $155.5 million of receivables at December 31, 2005. Receivables at June 30, 2006 and December 31, 2005 included $53.7 million and $68.2 million, respectively, of revenues from long-term contracts which were not billable at these dates.

          Liabilities to Customers on Uncompleted Contracts and Warranties

          Customers generally make down payments at the time of the order for a new machine as well as progress payments throughout the manufacturing process. In accordance with SOP No. 81-1, these payments are recorded as Liabilities to Customers on Uncompleted Contracts and Warranties.

          Financing Cash Flows

          On May 27, 2005, the Company entered into a credit agreement with GMAC Commercial Finance LLC as lead lender. The credit agreement provides for a five year $120.0 million revolving credit facility that may, at the Company’s request and with the lender’s approval, be increased to $150.0 million. 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 June 30, 2006, the Company had $54.9 million of borrowings under its revolving credit facility at a weighted average interest rate of 7.4%. The amount available for borrowings under the revolving credit facility at June 30, 2006 was $24.4 million.

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          The credit agreement contains covenants limiting the discretion of management with respect to key business matters and places significant restrictions on, among other things, the Company’s ability to incur additional indebtedness, create liens or other encumbrances, make certain payments or investments, loans and guarantees, and sell or otherwise dispose of assets and merge or consolidate with another entity. All of the Company’s domestic assets and the receivables and inventory of the Company’s Canadian subsidiary are pledged as collateral under the revolving credit facility. In addition, the outstanding capital stock of the Company’s domestic subsidiaries as well as the majority of the capital stock of the Company’s foreign subsidiaries are pledged as collateral. The Company is also required to maintain compliance with certain financial covenants, including a leverage ratio (as defined). The Company was in compliance with all applicable covenants as of June 30, 2006.

          Registration of Securities

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

          Critical Accounting Policies and Estimates

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

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

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

Interest Rates

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

          At June 30, 2006, a sensitivity analysis was performed for the Company’s floating rate debt obligations. Based on this sensitivity analysis, the Company has determined that a 10% change in the Company’s weighted average interest rate at June 30, 2006 would have the effect of changing the Company’s interest expense on an annual basis by approximately $.4 million.

Foreign Currency

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

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

          Based on the Company’s derivative instruments outstanding at June 30, 2006, a 10% change in foreign currency exchange rates would not have a material effect on the Company’s financial position, results of operations or cash flows.

27

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES
ITEM 4 - CONTROLS AND PROCEDURES

          As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer and Secretary, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer and Secretary concluded that the disclosure controls and procedures were effective as of the end of the quarter ended June 30, 2006 to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Report was being prepared.

          There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

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FORWARD-LOOKING STATEMENTS

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

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

• the Company’s plant capacity;

• raw material supply and subcontractor capacity;

• the cash flows of customers;

• consolidation among customers and suppliers;

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

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

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

• litigation;

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

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

• changes in the relative values of currencies;

• the Company’s leverage and debt service obligations;

• the Company’s success in recruiting and retaining key managers and employees; and

• labor costs and labor relations.

          The review of important factors above is not exhaustive, and should be read in conjunction with the other cautionary statements included in this report and in the Company’s 2005 Annual Report to Shareholders and Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2006. All forward-looking statements attributable to the Company are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

29

PART II
OTHER INFORMATION

Item 1.	Legal Proceedings.
	Not applicable.
Item 1A.	Risk Factors.
	Not applicable.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.
	Not applicable.
Item 3.	Defaults Upon Senior Securities.
	Not applicable.
Item 4.	Submission of Matters to a Vote of Security Holders.
	At the Company’s annual meeting of shareholders on May 3, 2006, the two continuing directors who were management’s nominees for re-election were elected to the Company’s Board of Directors for terms expiring at the 2009 annual meeting of shareholders. The directors were re-elected with the following votes:

Director’s Name	For	Withheld
Robert L. Purdum	7,864,944	11,909,805
Timothy W. Sullivan	17,474,153	2,300,596

Edward G. Nelson, Theodore C. Rogers and Robert C. Scharp continue as directors whose terms expire in 2007 and Ronald A. Crutcher, Robert W. Korthals and Gene E. Little continue as directors whose terms expire in 2008. On July 20, 2006, Paul W. Jones was appointed by the Board of Directors to fill a vacant term expiring in 2009.

At the meeting, shareholders approved an amendment to the Company’s Restated Certificate of Incorporation to increase the number of authorized shares of Class A common stock from 41,000,000 to 75,000,000 shares by the following vote:

For	15,880,469
Against	2,800,682
Abstained	3,295
Non Vote	1,090,303

Shareholders also approved an amendment to the Company’s 2004 Equity Incentive Plan to increase the number of shares of the Company’s common stock reserved for issuance under the Plan from 1,000,000 to 2,000,000 shares of Class A common stock by the following vote:

For	13,373,356
Against	5,306,459
Abstained	4,631
Non Vote	1,090,303

30

Shareholders also ratified the selection of Deloitte & Touche LLP to serve as independent registered public accountants of the Company for fiscal 2006 by the following vote:

For	17,490,603
Against	2,283,760
Abstained	386

Item 5.	Other Information.
	Not applicable.
Item 6.	Exhibits.
	See Exhibit Index on last page of this report.

31

SIGNATURES

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

	BUCYRUS INTERNATIONAL, INC.
	(Registrant)
Date August 8, 2006	/s/ Timothy W. Sullivan
	Timothy W. Sullivan
	President and Chief Executive Officer
Date August 8, 2006	/s/ Craig R. Mackus
	Craig R. Mackus
	Chief Financial Officer and Secretary

32

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

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

EI-1