- Quarterly Report (10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

¨	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 001-00871

BUCYRUS INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE

39-0188050

(State or Other Jurisdiction of

Incorporation or Organization)

(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)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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


Class		Outstanding November 3, 2010
Common Stock, $.01 par value		81,012,931

Bucyrus International, Inc.

INDEX


			Page No.
PART I.	FINANCIAL INFORMATION:

	Item 1 -	Financial Statements (Unaudited)

		Consolidated Condensed Statements of Earnings – Quarters and nine months ended September 30, 2010 and 2009		3

		Consolidated Condensed Statements of Comprehensive Income – Quarters and nine months ended September 30, 2010 and 2009		4

		Consolidated Condensed Balance Sheets – September 30, 2010 and December 31, 2009		5

		Consolidated Condensed Statements of Cash Flows – Quarters and nine months ended September 30, 2010 and 2009		7

		Notes to Consolidated Condensed Financial Statements		9

	Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31

	Item 3 -	Quantitative and Qualitative Disclosures About Market Risk		50

	Item 4 -	Controls and Procedures		51

PART II.	OTHER INFORMATION:

	Item 1 -	Legal Proceedings		52

	Item 1A -	Risk Factors		52

	Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds		52

	Item 3 -	Defaults Upon Senior Securities		52

	Item 4 -	(Removed and Reserved)		52

	Item 5 -	Other Information		52

	Item 6 -	Exhibits		52

	Signature Page			53

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

Bucyrus International, Inc.

Consolidated Condensed Statements of Earnings (Unaudited)


	Quarter Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(Dollars in thousands, except per share amounts)

Sales	$	937,164		$	675,767		$	2,413,357		$	2,005,947
Costs of products sold		678,534			451,924			1,732,933			1,406,657


Gross profit		258,630			223,843			680,424			599,290

Selling, general and administrative expenses		98,780			71,405			274,028			195,473
Research and development expenses		15,413			11,279			44,687			29,855
Amortization of intangible assets		11,835			4,593			34,700			14,198


Operating earnings		132,602			136,566			327,009			359,764

Interest income		(1,277	)		(1,109	)		(3,694	)		(3,539	)
Interest expense		21,022			6,802			50,981			20,328
Other expense		575			56			4,916			5,699


Earnings before income taxes		112,282			130,817			274,806			337,276
Income tax expense		34,710			38,750			89,009			106,028


Net earnings	$	77,572		$	92,067		$	185,797		$	231,248


Net earnings per share
Basic:
Net earnings per share	$	0.96		$	1.24		$	2.34		$	3.11
Weighted average shares		80,569,773			74,459,337			79,488,123			74,454,844
Diluted:
Net earnings per share	$	0.94		$	1.21		$	2.29		$	3.05
Weighted average shares		82,253,162			76,191,084			81,030,163			75,724,333

See notes to consolidated condensed financial statements.

Bucyrus International, Inc.

Consolidated Condensed Statements of

Comprehensive Income (Unaudited)


	Quarter Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010			2009
	(Dollars in thousands)

Net earnings	$	77,572	$	92,067	$	185,797		$	231,248

Other comprehensive income (loss):
Currency translation adjustments		102,275		27,899		(1,563	)		62,455
Change in pension and postretirement unrecognized costs, net of income tax (benefit) expense of ($436), $454, ($40) and $933, respectively		947		852		(1,672	)		1,645
Derivative fair value changes, net of income tax expense (benefit) of $893, $515, ($9,408) and $9,994, respectively		13,230		475		(12,484	)		18,258

Other comprehensive income (loss)		116,452		29,226		(15,719	)		82,358


Comprehensive income	$	194,024	$	121,293	$	170,078		$	313,606

See notes to consolidated condensed financial statements.

Bucyrus International, Inc.

Consolidated Condensed Balance Sheets (Unaudited)


	September 30, 2010			December 31, 2009
	(Dollars in thousands, except per share amounts)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	352,807		$	101,084
Receivables – net		834,489			741,815
Inventories		1,214,615			627,289
Deferred income taxes		49,584			45,024
Prepaid expenses and other		67,592			40,861


Total Current Assets		2,519,087			1,556,073


OTHER ASSETS:
Goodwill		762,070			351,333
Intangible assets – net		682,508			220,780
Other assets		107,268			61,505


Total Other Assets		1,551,846			633,618


PROPERTY, PLANT AND EQUIPMENT:
Cost		782,636			672,260
Less accumulated depreciation		(178,215	)		(157,839	)


Total Property, Plant and Equipment		604,421			514,421


TOTAL ASSETS	$	4,675,354		$	2,704,112

Bucyrus International, Inc.

Consolidated Condensed Balance Sheets (Unaudited) (Continued)


	September 30, 2010			December 31, 2009
	(Dollars in thousands, except per share amounts)
LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT

CURRENT LIABILITIES:
Accounts payable	$	361,262		$	155,857
Accrued expenses		253,487			172,865
Liabilities to customers on uncompleted contracts and warranties		270,673			183,097
Income taxes		70,013			45,811
Current maturities of long-term debt and short-term obligations		21,875			7,566


Total Current Liabilities		977,310			565,196


LONG-TERM LIABILITIES:
Deferred income taxes		92,116			82,260
Pension and other		228,491			198,000


Total Long-Term Liabilities		320,607			280,260


LONG-TERM DEBT, less current maturities		1,486,646			499,666


COMMON STOCKHOLDERS’ INVESTMENT:
Common stock – par value $0.01 per share, authorized
200,000,000 shares, issued 81,232,869 shares and 75,234,366 shares, respectively		812			753
Additional paid-in capital		1,055,513			687,756
Treasury stock – 217,200 shares		(851	)		(851	)
Accumulated earnings		853,239			673,535
Accumulated other comprehensive loss		(17,922	)		(2,203	)


Total Common Stockholders’ Investment		1,890,791			1,358,990


TOTAL LIABILITIES AND COMMON STOCKHOLDERS’ INVESTMENT	$	4,675,354		$	2,704,112

See notes to consolidated condensed financial statements.

Bucyrus International, Inc.

Consolidated Condensed Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
	2010			2009
	(Dollars in thousands)

Net Cash Provided By Operating Activities	$	340,885		$	133,943


Cash Flows From Investing Activities
Purchases of property, plant and equipment		(46,797	)		(41,647	)
Proceeds from disposal of property, plant and equipment		2,735			1,424
Purchases of investments		(3,157	)		(9,311	)
Proceeds from sale of investments		4,955			8,121
Acquisition of Terex Mining, net of cash acquired		(1,004,143	)		—
Other		(4,450	)		(715	)


Net cash used in investing activities		(1,050,857	)		(42,128	)


Cash Flows From Financing Activities
Borrowings from revolving credit facilities		208,087			—
Repayments of revolving credit facilities		(208,087	)		—
Net repayments of revolving credit facilities		—			(55,157	)
Proceeds from term loan facility		1,000,000			—
Repayments of term loan facility		(6,206	)		(4,359	)
Proceeds from other long-term debt and other bank borrowings		31,857			1,171
Payments of other long-term debt and other bank borrowings		(28,810	)		(249	)
Dividends paid		(6,041	)		(5,583	)
Payment of financing costs		(35,186	)		—
Other		(49	)		(263	)


Net cash provided by (used in) financing activities		955,565			(64,440	)


Effect of exchange rate changes on cash		6,130			13,726


Net increase in cash and cash equivalents		251,723			41,101

Cash and cash equivalents at beginning of period		101,084			102,396


Cash and cash equivalents at end of period	$	352,807		$	143,497


Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	48,089		$	20,230
Income taxes – net of refunds	$	73,890		$	73,678

Supplemental Disclosure of Non-Cash Investing Activities

Capital expenditures included in accounts payable	$	338		$	312

Bucyrus International, Inc.

Consolidated Condensed Statements of Cash Flows (Unaudited) (Continued)

Supplemental Schedule of Non-Cash Investing and Financing Activities

On February 19, 2010, the Company completed its acquisition of Terex Mining. In conjunction with the acquisition, preliminary liabilities were assumed as follows (dollars in thousands):


Fair value of assets acquired	$	1,702,438
Cash consideration		(1,048,525	)
Consideration paid in the form of the Company’s common shares, based on the February 19, 2010 per share closing price of $62.64		(363,922	)

Liabilities assumed	$	289,991

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)

1. Nature of Operations

Bucyrus International, Inc. (the “Company”) is a leading designer, manufacturer and marketer of safe and high productivity mining equipment. The Company operates in two business segments: surface mining and underground mining. Major markets for the surface mining industry are copper, coal, oil sands and iron ore. The major market for the underground mining industry is coal. Most of the Company’s surface mining customers are large multinational corporations with operations in the various major surface mining markets throughout the world. Most of the Company’s underground mining customers are multinational coal mining corporations, but tend to be smaller in size than the Company’s surface mining customers. In addition to the manufacture of original equipment, an important part of the Company’s business consists of aftermarket sales, such as supplying parts, maintenance and repair services and technical advice, as well as refurbishing and relocating older, installed original equipment. The Company has manufacturing facilities in Australia, China, the Czech Republic, Germany, Mexico, the United Kingdom and the United States and service and sales centers in Australia, Brazil, Canada, Chile, China, India, Indonesia, Mexico, Peru, Russia, South Africa, the United Kingdom and the United States.

2. Basis of Presentation

In the opinion of Company management, the consolidated condensed financial statements contain all adjustments necessary to present fairly the financial results for all periods presented. Certain items are included in these statements based on estimates for the entire year. Actual results in future periods may differ from the estimates.

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 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2010.

3. Acquisitions

On February 19, 2010, the Company completed its acquisition of Terex Corporation’s mining equipment business (“Terex Mining”) for $1.0 billion in cash and 5,809,731 shares of the Company’s common stock, subject to certain post-closing net assets, net debt and other adjustments. The financial results for the quarter and nine months ended September 30, 2010 include the net assets and results of operations of Terex Mining since the February 19, 2010 date of acquisition, as well as the preliminary acquisition accounting adjustments and acquisition costs related to the Terex Mining acquisition. As a result, the Company’s financial results for the quarter and nine months ended September 30, 2010 are not necessarily comparable to the results for the quarter and nine months ended September 30, 2009 or as of December 31, 2009 and may not be indicative of future results. Terex Mining is being integrated into the surface mining segment.

Terex Mining is a worldwide manufacturer of hydraulic excavators, off-highway haul trucks and drills, which are complementary to the Company’s existing product lines. As a result of this acquisition, the Company has significantly expanded its product portfolio, which allows it

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

to compete in a larger portion of the mining machinery market. These factors contributed to a purchase price resulting in the recognition of goodwill. Total goodwill acquired was $418.0 million, of which $224.8 million is deductible for income tax purposes.

The acquisition of Terex Mining was accounted for under the acquisition method of accounting for business combinations in accordance with generally accepted accounting principles in the United States. Under this method, the total consideration transferred to consummate the acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The principles of acquisition method of accounting require extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values. Accordingly, the allocation of the consideration transferred in the table below is preliminary and will be adjusted subject to the final adjustments to be agreed upon by Terex Corporation and the Company upon completion of the final valuation of the assets acquired and liabilities assumed. Such adjustments could be significant. The final valuation is expected to be completed as soon as practicable but no later than 12 months after the closing date of the acquisition.

The asset and share purchase agreement between the Company and Terex Corporation contains a post-closing purchase price adjustment provision which includes a calculation of the net asset value (as defined in the asset and share purchase agreement) of Terex Mining as of the closing date of the acquisition. During the course of the calculation of the purchase price adjustment, the Company has identified certain material potential adjustments to specific items on the balance sheet of Terex Mining as of the closing date of the acquisition, which may result in a significant downward adjustment to the preliminary consideration transferred by the Company to Terex Corporation. These potential significant reductions in the consideration transferred by the Company to Terex Corporation are being contested by Terex Corporation and have not been included in the Company’s consolidated financial statements as of September 30, 2010.

The preliminary consideration transferred to acquire Terex Mining was as follows (dollars in thousands):


Cash consideration, including cash acquired	$	1,048,525
Consideration in the form of the Company’s common shares, based on the February 19, 2010 per share closing price of $62.64		363,922

Total consideration	$	1,412,447

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

The total consideration transferred was allocated to Terex Mining’s net tangible and identifiable intangible assets based upon their fair value as of February 19, 2010. The excess of the consideration transferred over the fair value of the net tangible and identifiable intangible assets is reflected as goodwill. The preliminary allocation of the total consideration to the fair value of the assets acquired and liabilities assumed as of February 19, 2010 was as follows (dollars in thousands):


Cash	$	44,382
Receivables, net of $2,848 of reserves		117,967
Inventories		486,674
Prepaid expenses and other		47,595
Goodwill		418,038
Intangible assets		493,646
Other assets		11,827
Property, plant and equipment		82,309
Liabilities assumed		(251,229	)
Deferred tax liability associated with acquisition accounting adjustments		(38,762	)

	$	1,412,447

Major categories of liabilities assumed included trade accounts payable of $94.6 million, accrued warranty costs of $39.1 million, other accrued expenses of $38.3 million, accrued employee costs of $17.3 million, pension liabilities of $16.2 million and liabilities to customers on uncompleted contracts of $12.9 million.

The identifiable intangible assets consist of technology, customer relationships, brand name, trademarks and backlog.

The Company incurred $0.5 million and $16.3 million of acquisition costs for the quarter and nine months ended September 30, 2010, respectively, related to the acquisition of Terex Mining. These costs are included in selling, general and administrative expenses in the Consolidated Condensed Statements of Earnings.

Terex Mining sales for the quarter and nine months ended September 30, 2010 were $246.6 million and $615.9 million, respectively, and Terex Mining net earnings for the quarter and nine months ended September 30, 2010 were $7.2 million and $18.5 million, respectively.

Pro Forma Results of Operations

The following unaudited pro forma results of operations assume that the Company acquired Terex Mining and amended its credit facilities on January 1, 2010 and 2009. The unaudited pro forma results include adjustments to reflect additional interest expense, depreciation expense and amortization of intangibles, as well as the effects of adjustments made to the carrying value of certain assets.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)


	Quarter Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
	(Dollars in thousands, except per share amounts)
Sales	$	937,164	$	917,256	$	2,514,989	$	2,864,123
Net earnings	$	88,490	$	87,084	$	204,551	$	238,753
Net earnings per share:
Basic	$	1.10	$	1.08	$	2.54	$	2.97
Diluted	$	1.08	$	1.06	$	2.49	$	2.93

The unaudited pro forma financial information presented above is not necessarily indicative of either the results of operations that would have occurred had the acquisition of Terex Mining been effective on January 1, 2010 and 2009 or of the Company’s future results of operations. Also, the unaudited pro forma financial information does not reflect the costs that the Company incurred or may incur to integrate Terex Mining. These integration costs have not been material to date and the Company does not expect them to be material in the future.

Finished goods and work in process inventories have been adjusted to their estimated fair market value. Finished parts were valued at their estimated selling prices, less the sum of (i) costs of disposal; and (ii) a reasonable profit allowance for the Company’s selling effort, and work in process was valued at estimated selling prices of finished goods less the sum of (a) costs to complete; (b) costs of disposal; and (c) a reasonable profit allowance for the completing and selling effort of the Company based on profit for similar finished goods. As this inventory adjustment was directly attributed to the transaction and did not have a continuing impact, it is not reflected in the unaudited pro forma results of operations presented above. However, this inventory adjustment will result in a charge to cost of products sold in the periods subsequent to the consummation of the acquisition of Terex Mining during which the related inventories were sold. The actual charge for the quarter and nine months ended September 30, 2010 was $15.2 million and $38.0 million, respectively.

4. Derivative Financial Instruments

The Company enters into certain derivative financial instruments to mitigate foreign exchange rate risk of specific foreign currency denominated transactions and manage and preserve the economic value of cash flows in non-functional currencies. The Company also enters into certain derivative financial instruments to mitigate interest rate risk. The Company has designated substantially all of these contracts as either cash flow hedges or fair value hedges. The Company does not use derivative financial instruments for trading or other speculative purposes.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

The contractual amounts of the Company’s outstanding foreign currency forward contracts, by currency, were as follows:


	September 30, 2010				December 31, 2009
	Buy		Sell		Buy		Sell
	(Dollars in thousands)
United States dollar	$	20,772	$	119,846	$	11,000	$	55,763
Australian dollar		30,611		127,912		29,485		18,548
Brazilian real		1,954		5,240		—		3,912
British pounds sterling		17,509		3,803		14,025		2,106
Canadian dollar		—		31,816		—		8,492
Chilean peso		2,308		—		37,798		1,250
Czech koruna		1,742		—		264		—
Euro		100,903		30,128		213,299		5,639
Indian rupee		—		2,121		—		—
Mexican peso		251		—		—		—
Peruvian sol		—		6,606		—		1,525
Polish zloty		78		—		—		1,894
Russian ruble		—		5,317		675		3,595
South African rand		89		—		—		1,584

	$	176,217	$	332,789	$	306,546	$	104,308

Based upon September 30, 2010 exchange rates, all of the Company’s outstanding contracts were 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 and cash collection of accounts receivable 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 accumulated other comprehensive income (loss) and recognized in earnings when the related inventory is sold or the accounts receivable is recorded. The ineffectiveness of these hedge instruments resulted in the recognition in the Consolidated Condensed Statements of Earnings of pre-tax income of $0.2 million and pre-tax losses of $0.9 million for the quarter and nine months ended September 30, 2010, respectively, and pre-tax losses of $0.7 million and $4.1 million for the quarter and nine months ended September 30, 2009, respectively. The maturity of these instruments generally does not exceed 24 months. The Consolidated Condensed Statements of Earnings for the quarter and nine months ended September 30, 2009 includes $0.7 million of pre-tax income and $3.1 million of pre-tax losses, respectively, as a result of the discontinuance of cash flow hedges because the original forecasted transaction did not occur within the original specified time period or the two months thereafter. There has been no income or loss for this type of transaction in 2010. Net accumulated other comprehensive income related to foreign currency forward contracts was $1.7 million at September 30, 2010 compared to a net loss of $1.6 million at December 31, 2009. The Company estimates that $4.5 million of income included in the $1.7 million of net income will be reclassified into earnings over the next 12 months.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

To manage a portion of its exposure to changes in LIBOR-based interest rates on its variable rate debt, the Company has entered into interest rate swap agreements to effectively fix the interest payments on $745.6 million ($650.0 million plus €70.0 million) of its term loan. All of the swaps in place at September 30, 2010 have been designated as cash flow hedges of LIBOR-based interest payments. The effective portion of the change in fair value of the derivatives is recorded in accumulated other comprehensive income (loss), while any ineffective portion is recorded as an adjustment to interest expense. The differential paid or received on the interest rate swap is recognized as an adjustment to interest expense. Interest rate swaps in place at September 30, 2010 were as follows:


Amount		Interest Rate (1)	Maturity Date
(Dollars in thousands)
	$50,000	2.1750%	January 30, 2012
	50,000	2.4000%	January 28, 2013
	25,000	2.2200%	February 19, 2013
	25,000	2.2500%	February 19, 2013
	25,000	2.2900%	May 19, 2013
	25,000	2.4100%	August 19, 2013
	25,000	2.4500%	November 19, 2013
	50,000	2.5975%	January 28, 2014
	25,000	2.5800%	February 19, 2014
	25,000	2.2100%	April 1, 2014
	50,000	2.9900%	May 4, 2014
	50,000	2.9900%	May 4, 2014
	100,000	2.9900%	May 4, 2014
	25,000	2.6300%	May 19, 2014
	25,000	2.7400%	August 19, 2014
	25,000	2.8200%	November 19, 2014
	25,000	2.8450%	February 19, 2015
	25,000	2.9700%	May 19, 2015
	20,496	1.9600%	March 31, 2012 (2)
	13,664	2.2800%	March 31, 2013 (2)
	34,160	2.5180%	March 31, 2014 (2)
	20,496	2.4900%	March 31, 2014 (2)
	6,832	2.4900%	April 1, 2014 (2)

	$745,648

(1)	Excludes applicable spread of 1.50% to 3.00%.

(2)	This interest rate swap is denominated in euros.

The Company recognized interest expense of $3.4 million and $9.6 million for the quarter and nine months ended September 30, 2010, respectively, and $0.7 million and $1.9 million for the quarter and nine months ended September 30, 2009, respectively, related to the ineffective portion of its interest rate swaps. This interest expense combined with the interest paid to our lender based on the terms of our credit facility results in effective interest rates equal to the swap rates presented in the table above. Accumulated other comprehensive loss, net of tax, related to interest rate swaps was $20.8 million and $5.0 million at September 30, 2010 and December 31, 2009, respectively.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

The Company estimates that $8.3 million of the $20.8 million loss, net of tax, will be reclassified into earnings over the next 12 months.

The pre-tax fair value of the Company’s cash flow hedges related to foreign currency forward contracts and interest rate swaps and the accounts in the Consolidated Condensed Balance Sheets in which the gross amounts are included were as follows:


	September 30, 2010
	Prepaid Expenses and Other		Other Long- Term Assets		Accrued Expenses		Pension and Other
	(Dollars in thousands)
Interest rate swaps	$	—	$	—	$	13,075	$	19,889
Foreign currency forward contracts		10,120		251		2,618		882


Total designated	$	10,120	$	251	$	15,693	$	20,771


	December 31, 2009
	Prepaid Expenses and Other		Other Long- Term Assets		Accrued Expenses		Pension and Other
	(Dollars in thousands)
Interest rate swaps	$	—	$	301	$	2,917	$	4,531
Foreign currency forward contracts		1,787		—		2,551		885


Total designated	$	1,787	$	301	$	5,468	$	5,416

The pre-tax derivative gains and losses included in the Consolidated Condensed Statements of Comprehensive Income and the Consolidated Condensed Statements of Earnings related to cash flow hedges were as follows:

Gain / (Loss) Recognized in Other Comprehensive Income (Loss):


	Quarter Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(Dollars in thousands)
Interest rate swaps	($	7,203	)	($	6,226	)	($	25,085	)	$	3,468
Foreign currency forward contracts		21,326			7,216			3,193			24,784


Total	$	14,123		$	990		($	21,892	)	$	28,252

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

Gain / (Loss) Reclassified From Other Comprehensive Income to Earnings:


	Quarter Ended September 30,						Consolidated Condensed Statement of Earnings Line Item
	2010			2009
	(Dollars in thousands)
Interest rate swaps	($	3,458	)	($	682	)	Interest expense
Foreign currency forward contracts		(9,338	)		6,855		Sales
Foreign currency forward contracts		(995	)		(2,695	)	Cost of products sold
Foreign currency forward contracts		224			(1,345	)	Selling, general and administrative expenses
Foreign currency forward contracts		—			855		Other expense


Total	($	13,567	)	$	2,988


	Nine Months Ended September 30,						Consolidated Condensed Statement of Earnings Line Item
	2010			2009
	(Dollars in thousands)
Interest rate swaps	($	9,643	)	($	1,916	)	Interest expense
Foreign currency forward contracts		(6,677	)		6,855		Sales
Foreign currency forward contracts		(3,366	)		(8,713	)	Cost of products sold
Foreign currency forward contracts		465			(2,068	)	Selling, general and administrative expenses
Foreign currency forward contracts		—			(2,593	)	Other expense


Total	($	19,221	)	($	8,435	)

Gain / (Loss) Recognized in Earnings Due to Ineffectiveness and Amounts Excluded from Effectiveness Testing:


	Quarter Ended September 30,						Consolidated Condensed Statement of Earnings Line Item
	2010			2009
	(Dollars in thousands)
Foreign currency forward contracts	($	4	)	$	128		Sales
Foreign currency forward contracts		134			(689	)	Cost of products sold
Foreign currency forward contracts		69			—		Selling, general and administrative expenses
Foreign currency forward contracts		—			(127	)	Other expense


Total	$	199		($	688	)

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)


	Nine Months Ended September 30,						Consolidated Condensed Statement of Earnings Line Item
	2010			2009
	(Dollars in thousands)
Foreign currency forward contracts	($	56	)	$	128		Sales
Foreign currency forward contracts		(497	)		(3,704	)	Cost of products sold
Foreign currency forward contracts		(375	)		—		Selling, general and administrative expenses
Foreign currency forward contracts		—			(523	)	Other expense


Total	($	928	)	($	4,099	)

The pre-tax gains / (losses) from derivatives not designated as hedging instruments included in the Consolidated Condensed Statements of Earnings were as follows:


	Quarter Ended September 30,						Consolidated Condensed Statement of Earnings Line Item
	2010			2009
	(Dollars in thousands)
Foreign currency forward contracts	$	—		$	1,312		Sales
Foreign currency forward contracts		2,408			—		Cost of products sold
Foreign currency forward contracts		(15,761	)		(2,589	)	Selling, general and administrative expenses


Total	($	13,353	)	($	1,277	)


	Nine Months Ended September 30,						Consolidated Condensed Statement of Earnings Line Item
	2010			2009
	(Dollars in thousands)
Foreign currency forward contracts	$	—		$	1,312		Sales
Foreign currency forward contracts		979			—		Cost of products sold
Foreign currency forward contracts		(12,529	)		(3,743	)	Selling, general and administrative expenses


Total	($	11,550	)	($	2,431	)

Derivative instruments are subject to significant concentrations of credit risk to the banking industry. The Company manages counterparty credit risk by only entering into derivative contracts with large commercial financial institutions. The maximum amount of pre-tax loss, not considering netting arrangements, if any, which the Company would incur if counterparties to derivative instruments fail to meet their obligations was $13.4 million at September 30, 2010 compared to $3.9 million at December 31, 2009. At September 30, 2010, the Company had no knowledge of any of counterparty default.

The Company also has cross-currency foreign currency-denominated debt obligations that are designated as hedges of the foreign currency exposure associated with its net investments in non-United States operations. The currency effects of the debt obligations are reflected in other comprehensive income (loss) where they offset translation gains and losses recorded on the

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

Company’s net investments in Germany. The Company recognized losses of $17.5 million and $1.7 million in other comprehensive income (loss) related to net investment hedges in the quarter and nine months ended September 30, 2010, respectively, and losses of $3.7 million and $5.7 million in the quarter and nine months ended September 30, 2009, respectively.

The Company also uses natural hedges to mitigate risks associated with foreign currency exposures. For example, the Company often 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.

5. Comprehensive Income (Loss)

The Company reports comprehensive income (loss) in addition to net earnings (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 earnings (loss). The Company reports comprehensive income (loss) and accumulated other comprehensive loss in the Consolidated Statements of Common Stockholders’ Investment. Accumulated other comprehensive loss, net of income taxes, was as follows:


	September 30, 2010			December 31, 2009
	(Dollars in thousands)
Currency translation adjustments	$	29,626		$	31,189
Pension and postretirement benefit unrecognized costs		(28,424	)		(26,752	)
Derivative fair value adjustments		(19,124	)		(6,640	)


Accumulated other comprehensive loss	($	17,922	)	($	2,203	)

6. Inventories

Inventories consisted of the following:


	September 30, 2010		December 31, 2009
	(Dollars in thousands)
Raw materials and parts	$	113,793	$	75,111
Work in process		404,956		202,221
Finished products (primarily replacement parts)		695,866		349,957


	$	1,214,615	$	627,289

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

7. Goodwill and Intangible Assets

Intangible assets consisted of the following:


	September 30, 2010					December 31, 2009
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
	(Dollars in thousands)
Amortized intangible assets:
Technology	$	422,848	($	43,237	)	$	121,085	($	26,846	)
Customer relationships		264,446		(24,306	)		118,791		(15,584	)
Trademarks and brand names		47,047		(16,600	)		12,000		(12,000	)
Engineering drawings		25,500		(16,083	)		25,500		(15,644	)
Other		11,771		(5,731	)		5,855		(4,813	)


	$	771,612	($	105,957	)	$	283,231	($	74,887	)

Unamortized intangible assets – Trademarks/Trade names	$	16,853				$	12,436

Changes in the carrying amount of goodwill were as follows:


	Surface Mining		Underground Mining
	(Dollars in thousands)
Balance at January 1, 2010	$	47,306	$	304,027
Goodwill acquired during the year		418,038		—
Currency translation		3,285		(10,586	)


Balance at September 30, 2010	$	468,629	$	293,441

The estimated future amortization expense of intangible assets as of September 30, 2010 was as follows (dollars in thousands):


2010 (remaining three months)	$	11,258
2011		45,031
2012		45,031
2013		45,021
2014		44,694
2015		44,509
Future		430,111


	$	665,655

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

8. Long-Term Debt and Financing Arrangements

Long-term debt consisted of the following:


	September 30, 2010			December 31, 2009
	(Dollars in thousands)
Term loan facility	$	1,494,848		$	496,599
Other		13,673			10,633

		1,508,521			507,232
Less current maturities of long-term debt and short-term obligations		(21,875	)		(7,566	)

	$	1,486,646		$	499,666

On February 19, 2010, the Company amended its credit facilities to finance the acquisition of Terex Mining. As of February 19, 2010, the amended credit facilities included a secured revolving credit facility of $525.0 million ($35.0 million has a maturity date of May 4, 2012 and $490.0 million has a maturity date of May 4, 2014) and an unsecured German revolving credit facility of €65.0 million which matures on May 4, 2014. As of February 19, 2010, the amended credit facilities also included secured term loan facilities totaling $1,473.8 million consisting of (i) $1,280.0 million ($390.0 million matures on May 4, 2014 and $890.0 million matures on February 19, 2016); (ii) A$124.0 million ($104.4 million) with a maturity date of February 19, 2016; and (iii) €73.1 million ($89.4 million) with a maturity date of May 4, 2014. The entire new secured revolving credit facility is eligible to be used for letters of credit.

Borrowings under the secured revolving credit facility that mature on May 4, 2012 and May 4, 2014 bear interest, payable no less frequently than quarterly, at (i) LIBOR or EURIBOR, plus the applicable spread; or (ii) a base rate determined by reference to the United States prime lending rate, the federal funds rate, or one month LIBOR plus 1.00%, plus the applicable spread. The unsecured German revolving credit facility bears interest, payable no less frequently than quarterly, at EURIBOR, plus the applicable spread.

Under each revolving credit facility, the Company pays a commitment fee based on the unused portion of such facilities, payable quarterly, at rates ranging from 0.25% to 0.50% depending on the total leverage ratio for revolving credit facilities that mature on May 4, 2012, and 0.50% for revolving credit facilities that mature on May 4, 2014, and when applicable, customary letter of credit fees.

Borrowings under the term loan facility that mature on May 4, 2014 bear interest, payable no less frequently than quarterly, at (i) LIBOR, plus the applicable spread, for United States dollar denominated loans; and (ii) EURIBOR, plus the applicable spread, for euro denominated loans.

Borrowings under the term loan facility that mature on February 19, 2016 bear interest, payable no less frequently than quarterly, at (i) LIBOR (subject to a 1.50% floor), plus the applicable spread (based on the Company’s total leverage ratio), for United States dollar denominated base rate loans; and (ii) an offered rate of interest based on deposits of Australian dollars, plus (a) the difference between three-month LIBOR and 1.50% (if greater), and (b) between 2.75% and 3.00% (based on the Company’s total leverage ratio), for Australian dollar denominated base rate loans.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

The credit facilities contain operating and financial covenants that, among other things, could limit the Company’s ability to obtain additional sources of capital. The Company’s financial covenants require that it maintain, on a trailing four-quarter basis as of the end of each fiscal quarter, a total leverage ratio of not more than 3.50 to 1.00 and a consolidated interest coverage ratio of at least 3.0 to 1.0. At September 30, 2010, the Company’s total leverage ratio was 1.82 to 1.00 and its interest coverage ratio was 11.0 to 1.00. The Company was also in compliance with all operating covenants at September 30, 2010.

The credit facilities require the Company to prepay outstanding loans with 100% of the net proceeds of the incurrence of certain debt and certain asset sales and 50% (subject to reductions based on the Company’s total leverage ratio) of the Company’s annual excess cash flow, as defined in its credit facilities.

At September 30, 2010, the amount potentially available for borrowings under the secured revolving credit facility was $439.9 million, after taking into account $85.1 million of issued letters of credit. The amount potentially available for borrowings under the unsecured German credit facility at September 30, 2010 was $22.8 million (€16.7 million), after taking into account $66.0 million (€48.3 million) of issued letters of credit. At September 30, 2010, the Company had borrowings of $1,494.8 million ($1,275.8 million plus €72.8 million plus A$123.7 million) under its term loan facility. To manage a portion of its exposure to changes in LIBOR-based interest rates, the Company has entered into interest rate swap agreements that effectively fix the interest payments on $745.6 million ($650.0 million plus €70.0 million) of outstanding borrowings under its term loan facility at a weighted average interest rate of 2.6%, plus the applicable spread. The remaining $749.2 million of outstanding term loan borrowings at September 30, 2010 were at a weighted average interest rate of 5.2%, including the applicable spread.

9. Common Stockholders’ Investment

On February 19, 2010, the Company issued 5,809,731 shares of its common stock as partial consideration for the acquisition of Terex Mining.

At September 30, 2010, the Company’s issued and outstanding shares consisted only of common stock. Holders of common stock are entitled to one vote per share on all matters to be voted on by the Company’s common stockholders.

10. Stock-Based Compensation

The Company recognizes compensation expense for nonvested shares and stock appreciation rights (“SARs”) over the requisite service period for vesting of the award. Total stock-based compensation expense included in the Company’s Consolidated Condensed Statements of Earnings was $2.3 million and $6.4 million for the quarter and nine months ended September 30, 2010, respectively, and $2.6 million and $7.6 million for the quarter and nine months ended September 30, 2009, respectively.

The Company has granted nonvested shares to certain employees pursuant to the Bucyrus International, Inc. Omnibus Incentive Plan 2007 (the “Omnibus Plan”). These shares fully cliff vest in their entirety at the end of the fourth calendar year from the grant date (inclusive of the year of grant) provided the employee remains employed by the Company until such date or has a qualifying retirement prior to such date. Compensation expense related to nonvested shares was

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

$0.7 million and $2.0 million for the quarter and nine months ended September 30, 2010, respectively, and $1.1 million and $3.2 million for the quarter and nine months ended September 30, 2009, respectively. The expense for 2009 includes $0.1 million and $0.4 million, respectively, related to premium nonvested shares that vested in 2009. Nonvested share activity during the nine months ended September 30, 2010 was as follows:


	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2010		370,200		$	20.97
Granted		76,700		$	59.82
Forfeited		(10,000	)	$	26.27
Vested		—			—


Outstanding at September 30, 2010		436,900		$	27.62

At September 30, 2010, there was $5.9 million of unrecognized compensation expense related to nonvested share grants. This cost is expected to be recognized over a weighted-average period of 2.6 years. The grant date fair value was based on the fair market value of the Company’s common stock on the date of grant. At September 30, 2010, the Company expected approximately 399,000 shares to vest and these shares had an aggregate intrinsic value of $27.7 million and a weighted-average remaining contractual term of 2.0 years.

The Company has granted SARs to certain employees pursuant to the Omnibus Plan. The SARs vest incrementally and can be settled in shares only. Compensation expense related to SARs was $1.6 million and $4.4 million for the quarter and nine months ended September 30, 2010, respectively, and $1.5 million and $4.4 million for the quarter and nine months ended September 30, 2009, respectively. SAR activity during the nine months ended September 30, 2010 was as follows:


	Number of Shares			Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2010		2,249,866		$	10.87
Granted		288,550		$	35.36
Forfeited		(28,185	)	$	16.60
Exercised		(274,812	)	$	11.09


Outstanding at September 30, 2010		2,235,419		$	13.93


Vested and exercisable at September 30, 2010		682,774		$	11.63

The 682,774 vested and exercisable shares at September 30, 2010 had a weighted-average exercise price of $22.84 per share, an aggregate intrinsic value of $31.8 million and a weighted-average remaining contractual term of 6.1 years.

At September 30, 2010, approximately 2,049,000 of the outstanding SARs were vested or were expected to vest and these SARs had a weighted average exercise price of $25.67 per share, an intrinsic value of $89.5 million and a weighted-average remaining contractual life of 7.6 years.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

At September 30, 2010, there was $13.0 million of unrecognized compensation expense related to SARs that were vested or were expected to vest. This cost is expected to be recognized over a weighted-average period of 2.6 years. The grant date fair value of the SARs was calculated using the Black-Scholes pricing model. The assumptions used in this model for the 2010 grant were as follows:


Risk-free interest rate	3.17	%
Expected stock price volatility	60.0	%
Expected life	6.5 years
Dividend yield	0.17	%

The risk-free interest rate was based on the U.S. Government Treasury STRIPS rate on the date of grant and a maturity equal to the expected life of the SARs. The expected stock price volatility was based on the historical activity of the Company’s common stock. The expected life was calculated using the simplified method for “plain-vanilla” issuances. The expected dividend yield was based on the annual dividends which have been paid on the Company’s common stock.

11. Pension Benefits

Net pension periodic benefit cost consisted of the following:


	Quarter Ended September 30,					Nine Months Ended September 30,
	2010		2009			2010			2009
	(Dollars in thousands)

Service cost	$	141	$	2,519		$	3,013		$	5,116
Interest cost		1,676		3,228			7,477			9,464
Expected return on assets		131		(1,217	)		(2,525	)		(4,567	)
Amortization of:
Prior service cost		6		187			234			437
Actuarial loss		170		1,232			1,536			2,285


Net periodic benefit cost	$	2,124	$	5,949		$	9,735		$	12,735

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

12. Net Earnings Per Share

The reconciliation of the numerators and the denominators of the basic and diluted net earnings per share of common stock calculations for the quarters and nine months ended September 30, 2010 and 2009 was as follows:


	Quarter Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
	(Dollar in thousands, except per share amounts)

Net earnings	$	77,572	$	92,067	$	185,797	$	231,248


Weighted average shares outstanding		80,569,773		74,459,337		79,488,123		74,454,844


Basic net earnings per share	$	0.96	$	1.24	$	2.34	$	3.11


Weighted average shares outstanding		80,569,773		74,459,337		79,488,123		74,454,844
Effect of dilutive stock options, nonvested shares, stock appreciation rights and performance shares		1,683,389		1,731,747		1,542,040		1,269,489


Weighted average shares outstanding – diluted (1)		82,253,162		76,191,084		81,030,163		75,724,333


Diluted net earnings per share	$	0.94	$	1.21	$	2.29	$	3.05

(1)

Grants of SARs representing approximately an additional 287,000 and 193,000 shares were outstanding for the quarter and nine months ended September 30, 2010, respectively, and approximately an additional 329,000 and 696,000 shares were outstanding for the quarter and nine months ended September 30, 2009, respectively, but were not included in the computation of diluted net earnings per share because their effect would have been antidilutive.

13. Segment Information

The Company has two reportable segments, surface mining and underground mining, which are based on the internal organization used by management for making operating decisions, measuring and evaluating financial performance, and allocating resources, as well as based on the similarity of customers served, distinctive products and services, common use of facilities and economic results attained. Terex Mining is being integrated into the surface mining segment.

The accounting policies of the Company’s segments are the same as those described in Note A to the Company’s 2009 consolidated financial statements. Operating earnings for each segment do not include interest expense, other expense and a provision for income taxes. Corporate expenses consist primarily of costs related to employees who provide services across both of the Company’s segments. Most costs incurred to acquire businesses, including all Terex Mining acquisition costs, are also classified as corporate expenses. There are no significant intersegment sales. Identifiable assets are those used in the operations of each segment.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

Segment information for the quarters and nine months ended September 30, 2010 and 2009 was as follows:


	Quarter Ended September 30, 2010
	Sales		Operating Earnings			Depreciation and Amortization		Capital Expenditures		Total Assets
	(Dollars in thousands)
Surface mining (1)	$	551,418	$	78,946		$	16,600	$	5,482	$	3,035,692
Underground mining		385,746		63,809			8,168		8,536		1,639,662


Total operations		937,164		142,755			24,768		14,018		4,675,354
Corporate		—		(10,153	)		—		—		—


Consolidated total	$	937,164		132,602			24,768	$	14,018	$	4,675,354

Interest income				(1,277	)		—
Interest expense				21,022			—
Other expense				575			2,458


Earnings before income taxes			$	112,282		$	27,226

(1)	Operating earnings include inventory fair value adjustments charged to cost of products sold of $15.2 million. This amount is not included in the depreciation and amortization column.


	Quarter Ended September 30, 2009
	Sales		Operating Earnings			Depreciation and Amortization		Capital Expenditures		Total Assets
	(Dollars in thousands)
Surface mining	$	312,893	$	78,180		$	6,054	$	7,353	$	1,058,074
Underground mining		362,874		72,597			8,781		2,853		1,611,547


Total operations		675,767		150,777			14,835		10,206		2,669,621
Corporate		—		(14,211	)		—		—		—


Consolidated total	$	675,767		136,566			14,835	$	10,206	$	2,669,621

Interest income				(1,109	)		—
Interest expense				6,802			—
Other expense				56			784


Earnings before income taxes			$	130,817		$	15,619

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)


	Nine Months Ended September 30, 2010
	Sales		Operating Earnings			Depreciation and Amortization		Capital Expenditures		Total Assets
	(Dollars in thousands)
Surface mining (1)	$	1,554,366	$	242,518		$	48,510	$	26,383	$	3,035,692
Underground mining		858,991		125,766			25,028		18,022		1,639,662


Total operations		2,413,357		368,284			73,538		44,405		4,675,354
Corporate		—		(41,275	)		—		—		—


Consolidated total	$	2,413,357		327,009			73,538	$	44,405	$	4,675,354

Interest income				(3,694	)		—
Interest expense				50,981			—
Other expense				4,916			6,799


Earnings before income taxes			$	274,806		$	80,337

(1)	Operating earnings include inventory fair value adjustments charged to cost of products sold of $38.0 million. This amount is not included in the depreciation and amortization column.


	Nine Months Ended September 30, 2009
	Sales		Operating Earnings			Depreciation and Amortization		Capital Expenditures		Total Assets
	(Dollars in thousands)
Surface mining	$	979,938	$	224,417		$	17,314	$	25,626	$	1,058,074
Underground mining		1,026,009		165,113			26,319		8,917		1,611,547


Total operations		2,005,947		389,530			43,633		34,543		2,669,621
Corporate		—		(29,766	)		—		—		—


Consolidated total	$	2,005,947		359,764			43,633	$	34,543	$	2,669,621

Interest income				(3,539	)		—
Interest expense				20,328			—
Other expense				5,699			2,600


Earnings before income taxes			$	337,276		$	46,233

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

14. Contingencies

Environmental, product warranty and liability and legal matters as of September 30, 2010 were as follows:

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 have a material adverse effect on its financial position, results of operations or cash flows, although no assurance to that effect can be given. The Company has an ongoing program to proactively address potential environmental problems.

Over the past three years, expenditures for ongoing compliance, remediation, monitoring and cleanup have been immaterial. The Company believes that expenditures for compliance and remediation will not have a material adverse effect on its financial position, results of operations or cash flows, although no assurance to that effect can be given.

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 changes in accrued warranty costs for the nine months ended September 30, 2010 and 2009 were as follows:


	2010			2009
	(Dollars in thousands)
Balance at January 1	$	49,442		$	53,586
Acquired balance (1)		39,099			—
Provisions		31,971			21,218
Settlements		(35,847	)		(22,163	)
Changes in liability for pre-existing warranties, net		(2,948	)		(2,783	)
Foreign currency translation		1,196			3,157


Balance at September 30	$	82,913		$	53,015

(1)	The acquired balance is subject to adjustment pending the completion of the final valuation of the Terex Mining assets acquired and liabilities assumed.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

Product Liability

The Company is 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. At the time a liability associated with a claim becomes probable and can be reasonably estimated, the Company accrues for the liability by a charge to earnings. For all other cases, an estimate of the costs associated with the matters cannot be made due to the inherent uncertainties in the litigation process; however, the Company believes 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 its 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 numerous personal injury liability cases alleging damages due to exposure to asbestos and other substances. The Company has insurance covering most of these cases and has various limits of liability depending on the insurance policy year in question. At the time a liability associated with a case becomes probable and can be reasonably estimated, the Company accrues for the liability by a charge to earnings. For all other cases, an estimate of the costs associated with the matters cannot be made due to the inherent uncertainties in the litigation process; however, the Company does not believe that these costs 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

The Company is involved in various other litigation arising in the normal course of business. The Company does not believe that its recovery or liability, if any, under any such pending litigation will have a material effect on the its financial position, results of operations or cash flows, although no assurance to that effect can be given.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

15. Fair Value Measurements

Accounting guidance regarding fair value measurements defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This guidance classifies the inputs used to measure the fair value into the following hierarchy:


Level 1		Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2		Unadjusted quoted prices in active markets for similar assets or liabilities, or Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or Inputs other than quoted prices that are observable for the assets or liabilities
Level 3		Unobservable inputs for the assets or liabilities

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement.

The Company has determined that its financial assets and liabilities are level 2 in the fair value hierarchy. The Company’s financial assets and liabilities that were accounted for at fair value were as follows:


	September 30, 2010		December 31, 2009
	(Dollars in thousands)
Assets:
Foreign currency forward contracts (1)	$	13,411	$	3,635
Interest rate swaps (2)		—		301

Total assets at fair value	$	13,411	$	3,936


Liabilities:
Foreign currency forward contracts (1)	$	9,005	$	6,434
Interest rate swaps (2)		32,964		7,447

Total liabilities at fair value	$	41,969	$	13,881

(1)	Based on observable market transactions of forward currency prices.

(2)	Based on observable market transactions of forward LIBOR or EURIBOR rates.

The carrying value of the Company’s cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value at September 30, 2010 and December 31, 2009. The carrying value and fair value of the Company’s term loan were as follows:


	September 30, 2010				December 31, 2009
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(Dollars in thousands)
Term loan (1)	$	1,494,848	$	1,508,578	$	496,599	$	469,657

(1)	Fair value based on quoted market prices for the same or similar issues.

Bucyrus International, Inc.

Notes to Consolidated Condensed Financial Statements (Unaudited)—(Continued)

16. Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board issued new accounting guidance regarding the accounting for revenue in arrangements with multiple deliverables. This guidance addresses how the unit of accounting for arrangements involving multiple deliverables and how arrangement consideration should be allocated to the separate units of accounting, when applicable. This guidance becomes effective on a prospective basis for fiscal years beginning on or after June 15, 2010. The Company is currently evaluating the impact that this new guidance will have on its consolidated financial statements.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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. 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 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:

•

our ability to integrate the acquired operations of Terex Mining and to realize expected synergies and expected levels of sales and profit from this acquisition;

•

the availability of operating cash to service our indebtedness, including the substantial indebtedness incurred to acquire Terex Mining;

•

liabilities relating to Terex Mining which are unknown to us;

•

dependence on Terex Mining internal control systems for compliance with Section 404 of the Sarbanes-Oxley Act of 2002;

•

our ability to fulfill certain employment obligations in connection with our acquisition of Terex Mining;

•

our entering into a new line of business in which certain of our competitors have substantially more experience than we do as a result of our acquisition of Terex Mining;

•

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

•

changes in global financial markets and global economic conditions;

•

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

•

our dependence on the commodity price of coal and other conditions in the coal market;

•

the highly competitive nature of the mining industry;

•

our reliance on significant customers;

•

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;

•

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

•

our customers deferring, delaying or canceling capital investments due to volatility and tightening of credit markets, unprecedented financial market conditions and a global recession;

•

the ability of our customers to obtain loan guarantees or other financing from the Export-Import Bank of the United States or other sources;

•

our ability to attract and retain skilled labor;

•

our reliance on local partners in foreign countries;

•

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

•

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

•

our ability to protect intellectual property;

•

our ability to successfully implement a new Enterprise Resource Planning system in our surface segment;

•

our ability to satisfy underfunded pension and postretirement obligations;

•

our production capacity;

•

product liability, environmental and other potential litigation;

•

our ability to purchase component parts or raw materials from key suppliers at acceptable prices and/or on the required time schedule; and

•

the effect of a potential material net asset value adjustment to the purchase price of Terex Mining on both the historical financial statements and acquisition accounting of Terex Mining.

The foregoing factors do not constitute an exhaustive list of factors that could cause 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 included in our 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2010 and our subsequently filed Quarterly Reports on Form 10-Q, including this Quarterly Report on Form 10-Q. 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.

Preamble

All references to “us,” “we” and “our” in the following discussion and analysis means, unless the context indicates otherwise, Bucyrus International, Inc. together with its consolidated subsidiaries.

Business

Terex Mining Acquisition

On February 19, 2010, we completed the acquisition of Terex Mining for $1.0 billion in cash and 5,809,731 shares of our common stock, subject to certain post-closing net assets, net debt and other adjustments. Terex Mining is a worldwide manufacturer of hydraulic excavators, off-highway haul trucks and drills, which are complementary to our existing product lines. As a result of this acquisition, we have significantly expanded our product portfolio, which allows us to compete in a larger portion of the mining machinery market. We believe that this expanded product portfolio has made us the supplier with the most expansive product offering in the mining equipment industry.

Also on February 19, 2010, we amended our existing credit facilities to provide for an additional secured term loan of $1.0 billion and $167.5 million of additional revolving credit facilities to fund the cash portion of the purchase price for Terex Mining and provide us with additional revolving credit facilities to support our future working capital needs and capital expenditure plan.

Terex Mining Acquisition Rationale

Our acquisition of Terex Mining has made us the supplier with the most expansive product offering in the mining equipment industry. We believe that this acquisition has (i) expanded our global geographic footprint since there is little geographic overlap between our historical operations and the operations of Terex Mining; (ii) diversified our product portfolio across a broader range of commodities; (iii) doubled our potential market to approximately $30 billion; and (iv) allowed us to utilize the services of an expanded team of approximately 10,000 employees and contract employees in nearly 100 locations around the world as of the date of the acquisition.

Company Overview

We are a leading designer and manufacturer of safe and highly productive mining equipment for the extraction of coal, copper, oil sands, iron ore and other minerals in major mining centers throughout the world. In addition to the manufacture of original equipment, we also provide the aftermarket replacement parts and service for this equipment. We operate in two business segments: surface mining (including the principal products of Terex Mining) and underground mining. All of our products and services, except those acquired as part of the acquisition of Terex Mining, are marketed under the Bucyrus name. We have manufacturing facilities in Australia, China, the Czech Republic, Germany, Mexico, the United Kingdom and the United States, and service and sales centers in Australia, Brazil, Canada, Chile, China, India, Indonesia, Mexico, Peru, Russia, South Africa, the United Kingdom and the United States. The largest markets for our surface mining original equipment and aftermarket parts and service have historically been in Australia, Canada, China, India, South Africa, South America and the United States. We expect these markets to continue to be our largest surface mining equipment markets and we continue to view the Russian and Indonesian markets as having significant growth opportunities. The largest markets for our underground mining original equipment and aftermarket parts and service have recently been in the United States, Australia and China. We expect these markets to continue to be our largest underground mining equipment markets, and we expect growth potential in the Russian, eastern European and Indian markets in the next three to five years.

A substantial portion of our sales and operating earnings is attributable to our operations located outside the United States. We generally sell our surface mining original equipment, including that sold directly to foreign customers, and most of our aftermarket parts in either United States dollars or euros. Our underground mining original equipment is generally sold in either United States dollars or euros. A portion of our aftermarket parts sales is denominated in the currency of the country in which our products are sold. Aftermarket services are paid for primarily in local currency, which is naturally hedged by our payment of local labor in local currency.

In our surface mining segment, interest in our original equipment remains strong, particularly for our hydraulic excavators, hydraulic track drills and off-highway haul trucks. Customers have continued to express interest in our electric mining shovels, primarily in the Brazilian, Russian, Indian and Chinese markets, as customers forecast stabilized commodity prices. Customers’ interest in our blasthole drills has been primarily in the Australian, Canadian, South African and South American markets, as the coal, iron ore, copper and gold markets continue to expand, and interest in our draglines has been primarily in the Australian, Chinese and United States markets as a result of increasing coal prices. We anticipate increased capital expenditures by our customers during 2011, which is expected to result in increased activity for our surface mining original equipment.

Conditions for aftermarket parts and service in our surface mining segment remain strong as a result of our increased installed base. Activity for our hydraulic excavator aftermarket parts and service has been high in the Australian market as a result of an increased installed base and has been strong in the Indian market as a result of where customers’ machines are at in their life cycle. Aftermarket parts and service activity for our electric mining shovels and blasthole drills in the South America market has been and is expected to remain stable due to the expected stability of commodity prices. We expect activity for aftermarket parts and service in the United States to remain consistent with current levels for the remainder of 2010.

In our underground mining segment, activity for longwall original equipment continued to be strong during the third quarter of 2010 and we expect activity for our longwall original equipment to continue to remain strong during the remainder of 2010, especially in the Australian and Chinese markets. Activity for room and pillar original equipment continues to increase compared to 2009 levels, especially in the Australian and Chinese markets as a result of the strength of the metallurgical coal market in 2010.

Conditions for aftermarket parts and service in our underground mining segment remained strong in the third quarter of 2010 compared to the end of 2009. We expect our longwall aftermarket parts and service activity in the Australian, Chinese and United States markets to increase for the remainder of 2010, primarily due to life cycle projects and aftermarket parts and service packages sold with expected original equipment new orders. We expect our room and pillar aftermarket parts and service activity in the Australian, Chinese, Indian and United States markets to increase primarily due to increased machine utilization and rebuild activity.

Backlog

Our backlog level, which represents unfilled orders for our products and services, allows us to more accurately forecast our upcoming sales and plan our production accordingly. Our backlog also provides us with a relatively predictive level of expected sales and cash flows for the next 12 months. Due to the high cost of some of our original equipment, 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. Our backlog at September 30, 2010 and December 31, 2009, as well as the portion of our backlog which is expected to be recognized within 12 months of these dates, was as follows:


	September 30, 2010		December 31, 2009		% Change
	(Dollars in thousands)
Surface Mining:
Total	$	1,507,057	$	1,062,977		41.8	%
Next 12 months	$	1,015,918	$	641,599		58.3	%
Underground Mining:
Total	$	1,023,552	$	816,543		25.4	%
Next 12 months	$	855,606	$	616,784		38.7	%
Total:
Total	$	2,530,609	$	1,879,520		34.6	%
Next 12 months	$	1,871,524	$	1,258,383		48.7	%

Included in surface mining total and next 12 months backlogs at September 30, 2010 were $540.2 million and $469.2 million, respectively, for Terex Mining. Excluding Terex Mining, surface mining total backlog decreased approximately $96 million from December 31, 2009, primarily due to a decrease in aftermarket parts and service backlog in the United States and Australian markets. The increase in underground mining total backlog was primarily due to an increase in longwall equipment and room and pillar equipment backlog, as well as an increase in aftermarket parts and service backlog in the European, Russian, Indian, Australian and Chinese markets.

New Orders

New orders were as follows:


	Quarter Ended September 30,							Nine Months Ended September 30,
	2010		2009		% Change			2010		2009		% Change
	(Dollars in thousands)
Surface Mining:
Original equipment	$	425,227	$	107,495		295.6	%	$	934,917	$	235,668		296.7	%
Aftermarket parts and service		280,477		186,023		50.8	%		759,439		504,188		50.6	%

		705,704		293,518		140.4	%		1,694,356		739,856		129.0	%


Underground Mining:
Original equipment		155,976		207,931		(25.0	%)		577,162		329,474		75.2	%
Aftermarket parts and service		163,308		126,132		29.5	%		488,838		370,847		31.8	%

		319,284		334,063		(4.4	%)		1,066,000		700,321		52.2	%


Total:
Original equipment		581,203		315,426		84.3	%		1,512,079		565,142		167.6	%
Aftermarket parts and service		443,785		312,155		42.2	%		1,248,277		875,035		42.7	%

	$	1,024,988	$	627,581		63.3	%	$	2,760,356	$	1,440,177		91.7	%

The increase in surface mining original equipment new orders for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was primarily due to the inclusion of $313.8 million and $504.4 million, respectively, of Terex Mining new orders and increased electric mining shovel new orders. The increased electric mining shovel new orders were primarily in the South American market. The majority of the Terex Mining new orders for the quarter ended September 30, 2010 were for off-highway haul trucks in the Brazilian and Chinese markets. The majority of the Terex Mining new orders for the nine months ended September 30, 2010 were for hydraulic excavators in the Australian, Brazilian, Chilean and Chinese markets, as well as off-highway haul trucks in the Brazilian and Chinese markets.

The increase in surface mining aftermarket parts and service new orders for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was primarily due to the inclusion of $135.6 million and $347.6 million, respectively, of Terex Mining new orders. Excluding the impact of Terex Mining, surface mining aftermarket parts and service new orders decreased approximately 22% and 18% for the quarter and nine months ended September 30, 2010, respectively, compared to the same periods of 2009. The largest decreases for the quarter ended September 30, 2010 compared to the same period of 2009 were in the Chilean and Canadian markets. The decrease in the Chilean market was due to reduced customer orders as a result of customers’ excess inventory levels. The decrease in the Canadian market was primarily due to the timing of new orders. The largest decreases for the nine months ended September 30, 2010 compared to the same period of 2009 were in the United States, Chinese, Chilean, and African markets, offset by an increase in the Brazilian market. The decrease in the United States market was related to the cancellation of a multi-year maintenance and repair contract resulting in a reduction of new orders of approximately $29 million, as well as customers delaying major repairs until 2011. The decrease in the Chinese market was due to customers increasing their

inventory levels in 2009 and due to original equipment overhauls in 2009 that have not been repeated in 2010. The decreases in the Chilean and African markets were the result of customers utilizing excess inventory in 2010. The increase in the Brazilian market was due to orders for electric mining shovel parts and service.

Total surface mining new orders for the quarter and nine months ended September 30, 2010 were positively impacted by approximately $58 million and $33 million, respectively, due to the effect of the weaker U.S. dollar on orders and beginning of period backlog denominated in foreign currencies.

The decrease in underground mining original equipment new orders for the quarter ended September 30, 2010 compared to the same period of 2009 was primarily due to a new order received in 2009 for a complete longwall system in the Australian market. The increase for the nine months ended September 30, 2010 compared to the same period of 2009 was due to increased new orders across all product lines, with the largest increase being for longwall equipment new orders in the Australian, Chinese, Eastern and Western European and United States markets.

The increase in underground mining aftermarket parts and service new orders for the quarter ended September 30, 2010 was primarily due to increased new orders in the Chinese and United States markets. The increase in the Chinese market was due to increased aftermarket parts and service orders for longwall equipment and the increase in the United States market was due to increased aftermarket parts and service orders for longwall and room and pillar equipment. The increase in underground mining aftermarket parts and service new orders for the nine months ended September 30, 2010 compared to the same period of 2009 was across substantially all markets, with the largest increases being in the Chinese, Australian, United States, German and Eastern European markets. The increase in the Chinese market was due to aftermarket parts and service ordered along with new longwall original equipment. The increase in the Australian market was in longwall equipment aftermarket parts and service due to increased demand for thermal and coking coal. The increase in the German market was due to orders for a longwall overhaul project and the increase in the Eastern European market was due to increased orders for longwall face extension projects. The increase in the United States market was due to increased orders for room and pillar rebuilds and longwall equipment aftermarket parts and service.

Total underground mining new orders for the quarter and nine months ended September 30, 2010 were positively impacted by approximately $104 million and $28 million, respectively, due to the effect of the weaker U.S. dollar on orders and beginning of period backlog denominated in foreign currencies.

Results of Operations

Quarter and Nine Months Ended September 30, 2010 Compared to Quarter and Nine Months Ended September 30, 2009


	Quarter Ended September 30,
	2010					2009
	Amount		% of Sales			Amount		% of Sales
	(Dollars in thousands, except per share amounts)
Sales	$	937,164		—		$	675,767		—
Gross profit	$	258,630		27.6	%	$	223,843		33.1	%
Selling, general and administrative expenses	$	98,780		10.5	%	$	71,405		10.6	%
Operating earnings	$	132,602		14.1	%	$	136,566		20.2	%
Net earnings	$	77,572		8.3	%	$	92,067		13.6	%
Fully diluted net earnings per share	$	0.94		N/A		$	1.21		N/A

	Nine Months Ended September 30,
	2010					2009
	Amount		% of Sales			Amount		% of Sales
	(Dollars in thousands, except per share amounts)
Sales	$	2,413,357		—		$	2,005,947		—
Gross profit	$	680,424		28.2	%	$	599,290		29.9	%
Selling, general and administrative expenses	$	274,028		11.4	%	$	195,473		9.7	%
Operating earnings	$	327,009		13.5	%	$	359,764		17.9	%
Net earnings	$	185,797		7.7	%	$	231,248		11.5	%
Fully diluted net earnings per share	$	2.29		N/A		$	3.05		N/A

Sales

Sales consisted of the following:


	Quarter Ended September 30,							Nine Months Ended September 30,
	2010		2009		% Change			2010		2009		% Change
	(Dollars in thousands)
Surface Mining:
Original equipment	$	263,313	$	119,800		119.8	%	$	716,440	$	417,103		71.8	%
Aftermarket parts and service		288,105		193,093		49.2	%		837,926		562,835		48.9	%

		551,418		312,893		76.2	%		1,554,366		979,938		58.6	%

Underground Mining:
Original equipment		209,681		215,758		(2.8	%)		460,028		613,348		(25.0	%)
Aftermarket parts and service		176,065		147,116		19.7	%		398,963		412,661		(3.3	%)

		385,746		362,874		6.3	%		858,991		1,026,009		(16.3	%)

Total:
Original equipment		472,994		335,558		41.0	%		1,176,468		1,030,451		14.2	%
Aftermarket parts and service		464,170		340,209		36.4	%		1,236,889		975,496		26.8	%

	$	937,164	$	675,767		38.7	%	$	2,413,357	$	2,005,947		20.3	%

The increase in surface mining original equipment sales for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was primarily due to the inclusion of $115.1 million and $284.0 million of Terex Mining sales in 2010, respectively. Excluding the impact of Terex Mining, original equipment sales increased by approximately 24% and 4% for the quarter and nine months ended September 30, 2010, respectively, compared to the same periods of 2009. The increases were primarily due to increased electric mining shovel sales in most major surface mining markets.

The increase in surface mining aftermarket parts and service sales for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was primarily due to the inclusion of $131.5 million and $331.9 million of Terex Mining sales in 2010, respectively. Excluding the impact of Terex Mining, aftermarket parts and service sales decreased by approximately 19% and 10% for the quarter and nine months ended September 30, 2010, respectively, compared to the same periods of 2009. The decrease for the quarter ended September 30, 2010 was in most markets with the largest decreases being in the Canadian, United States and African markets. The decrease for the nine months ended September 30, 2010 was primarily due to lower sales in the United States, Chilean, Canadian and African markets, partially offset by increased sales in the Brazilian market. The decrease in the United States market for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was primarily due to a dragline repair and rebuild project and a dragline relocation project in 2009 that have not been repeated in 2010. The decrease in the Canadian market for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was due to large scheduled maintenance projects on electric mining shovels at several large customers in 2009. The decrease in the African market for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was due to lower new orders in 2010 as a result of customers utilizing excess inventories. The decrease in the Chilean market for the nine months ended September 30, 2010 compared to the same period of 2009 was due to reduced sales of electric mining shovel aftermarket parts and service.

The decrease in underground mining original equipment sales for the quarter ended September 30, 2010 compared to the same period of 2009 was primarily in the room and pillar product line, partially offset by an increase in the longwall product line. The decrease in underground mining original equipment sales for the nine months ended September 30, 2010 compared to the same period of 2009 was across all product lines. The largest decrease was in the longwall product line due to higher longwall system sales in the Czech Republic in 2009.

The increase in underground mining aftermarket parts and service sales for the quarter ended September 30, 2010 compared to the same period of 2009 was primarily in the Eastern European and Chinese markets, partially offset by a decrease in the Australian market. The increase in the Eastern European market was due to increased aftermarket parts and service sales for longwall face extensions and overhauls. The decrease in the Australian market was due to large longwall equipment aftermarket parts and service sales in 2009 that have not been repeated in 2010. The decrease in underground mining aftermarket parts and service sales for the nine months ended September 30, 2010 compared to the same period of 2009 was primarily in the United States market, offset by an increase in the Chinese market. The decrease in the United States market was due to lower longwall face extension orders in 2010. The increase in the Chinese market for the quarter and nine months ended September 30, 2010 was due to increased sales of longwall equipment aftermarket parts and service.

Gross Profit

Gross profit and gross margin were as follows:


	Quarter Ended September 30,									Nine Months Ended September 30,
	2010			2009			% Change			2010			2009			% Change
	(Dollars in thousands)
Gross profit	$	258,630		$	223,843			15.5	%	$	680,424		$	599,290			13.5	%
Gross margin		27.6	%		33.1	%		N/A			28.2	%		29.9	%		N/A

Gross profit and gross margin were affected by preliminary acquisition accounting adjustments related to the acquisition of Terex Mining as follows:


	Quarter Ended September 30, 2010		Nine Months Ended September 30, 2010
	(Dollars in thousands)
Gross profit reduction	$	14,691	$	36,755
Gross margin reduction (percentage points)		1.6		1.5

Gross margin was 29.2% and 29.7% for the quarter and nine months ended September 30, 2010, respectively, after adjusting for amortization of Terex Mining acquisition accounting adjustments compared to 33.1% and 29.9% for the quarter and nine months ended September 30, 2009. Gross margin in 2010 has been negatively impacted by lower gross margins on the Terex Mining business compared with historical margins. This was offset by lower manufacturing absorption losses at our manufacturing locations.

At September 30, 2010, there was $0.9 million of remaining inventory acquisition accounting adjustments, which is expected to be expensed in the fourth quarter of 2010.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were as follows:


	Quarter Ended September 30,									Nine Months Ended September 30,
	2010			2009			% Change			2010			2009			% Change
	(Dollars in thousands)
Selling, general and administrative expenses	$	98,780		$	71,405			38.3	%	$	274,028		$	195,473			40.2	%
Percent of sales		10.5	%		10.6	%		N/A			11.4	%		9.7	%		N/A

The increase in selling, general and administrative expense for the quarter and nine months ended September 30, 2010 compared to the same periods of 2009 was primarily due to the acquisition of Terex Mining. Selling, general and administrative expenses for the quarter and nine months ended September 30, 2010 included acquisition costs of $0.5 million and $16.8 million, respectively, compared to $0.5 million and $2.2 million, respectively, for the same periods of 2009. The acquisition costs for 2010 primarily related to the acquisition of Terex Mining. Selling, general and administrative expenses for the quarter and nine months ended September 30, 2010 included a gain on the disposal of fixed assets of $0.7 million and a loss of $1.2 million, respectively, compared to losses of $3.3 million and $3.7 million, respectively, for the same periods of 2009 and severance expense of $1.8 million and $2.7 million, respectively, compared to $1.5 million and $5.3 million for same periods of 2009. Severance expense was primarily the result of facility rationalizations.

Research and Development Expenses

Research and development expenses were as follows:


	Quarter Ended September 30,									Nine Months Ended September 30,
	2010			2009			% Change			2010			2009			% Change
	(Dollars in thousands)
Research and development expenses	$	15,413		$	11,279			36.7	%	$	44,687		$	29,855			49.7	%
Percent of sales		1.6	%		1.7	%		N/A			1.9	%		1.5	%		N/A

The increase in research and development expenses for the quarter and nine months ended September 30, 2010 was primarily due to the acquisition of Terex Mining, as well as further development of our electric mining shovels and draglines.

Amortization of Intangible Assets

Amortization of intangible assets acquired in the Terex Mining acquisition was $7.5 million and $21.5 million for the quarter and nine months ended Sept 30, 2010 and is expected to be approximately $7 million in the fourth quarter of 2010 and approximately $7 million per quarter thereafter through December 2019.

Operating Earnings

Operating earnings were as follows:


	Quarter Ended September 30,									Nine Months Ended September 30,
	2010			2009			% Change			2010			2009			% Change
	(Dollars in thousands)
Surface mining	$	78,946		$	78,180			1.0	%	$	242,518		$	224,417			8.1	%
Underground mining		63,809			72,597			(12.1	%)		125,766			165,113			(23.8	%)


Total operations		142,755			150,777			(5.3	%)		368,284			389,530			(5.5	%)
Corporate		(10,153	)		(14,211	)		28.6	%		(41,275	)		(29,766	)		(38.7	%)


Consolidated total	$	132,602		$	136,566			(2.9	%)	$	327,009		$	359,764			(9.1	%)

Operating earnings for the quarter and nine months ended September 30, 2010 for the surface mining segment included Terex Mining earnings of $36.0 million and $86.7 million, respectively, before amortization of preliminary acquisition accounting adjustments. As a result of the acquisition of Terex Mining, operating earnings for the quarter and nine months ended September 30, 2010 were reduced by $22.0 million and $57.9 million of amortization of preliminary acquisition accounting adjustments, respectively, and $0.5 million and $16.3 million of acquisition costs, respectively. Operating earnings for the nine months ended September 30, 2010 were also negatively impacted by lower underground mining sales. Operating earnings for the quarter and nine months ended September 30, 2010 included a gain on the disposal of fixed assets of $0.7 million and a loss of $1.2 million, respectively, compared to losses of $3.3 million and $3.7 million, respectively, for the same periods of 2009 and was reduced by severance expense of $1.8 million and $2.7 million, respectively, compared to $1.5 million and $5.3 million for same periods of 2009. Severance expense was primarily the result of facility rationalizations.

Interest Expense

Interest expense was $21.0 million for the third quarter of 2010 compared to $6.8 million for the third quarter of 2009 and was $51.0 million for the nine months ended September 30, 2010 compared to $20.3 million for the nine months ended September 30, 2009. The increase in interest expense in 2010 was primarily due to the new $1.0 billion secured term loan which was used to acquire Terex Mining. Interest expense is expected to be approximately $20 million in the fourth quarter of 2010.

Other Expense

Other expense was $0.6 million for the third quarter of 2010 compared to $0.1 million for the third quarter of 2009 and was $4.9 million for the nine months ended September 30, 2010

compared to $5.7 million for the nine months ended September 30, 2009. Other expense for the quarter and nine months ended September 30, 2010 was reduced by $1.9 million of income related to the recovery of losses incurred in 2009 due to the discontinuance of cash flow hedges.

Income Tax Expense

The effective tax rate for the third quarter of 2010 was 30.9% compared to 29.6% for the third quarter of 2009 and was 32.4% for the nine months ended September 30, 2010 compared to 31.4% for the nine months ended September 30, 2009. The higher rate for the nine months ended September 30, 2010 was primarily due to non-deductible acquisition costs related to the Terex Mining acquisition. The effective tax rate for all of 2010 is expected to be between 32.5% and 33.0%.

Net Earnings

Net earnings were as follows:


	Quarter Ended September 30,					Nine Months Ended September 30,
	2010	2009		% Change		2010			2009		% Change
	(Dollars in thousands, except per share amounts)
Net earnings	$77,572		$92,067		(15.7%)		$	185,797	$	231,248		(19.7	%)
Fully diluted net earnings per share	$0.94		$1.21		(22.3%)		$	2.29	$	3.05		(24.9	%)

Net earnings were reduced (increased) by amortizations of preliminary acquisition accounting adjustments related to the acquisition of Terex Mining in 2010 as follows:


	Quarter Ended September 30, 2010			Nine Months Ended September 30, 2010
	(Dollars in thousands)
Inventory fair value adjustment charged to cost of product sold	$	15,223		$	38,036
Amortization of intangible assets		7,475			21,471
Depreciation of fixed assets		(665	)		(1,601	)

Operating earnings		22,033			57,906
Income tax benefit		(7,177	)		(18,730	)

Total	$	14,856		$	39,176

Terex Mining

Additional Terex Mining information was as follows:


	Quarter Ended September 30, 2010
	Sales		Operating Earnings			Depreciation and Amortization		Capital Expenditures		Total Assets
	(Dollars in thousands)

Operations (1)	$	246,565	$	13,893		$	8,948	$	1,649	$	1,730,586
Interest income				(53	)		—
Interest expense				2			—


Earnings before income taxes			$	13,944		$	8,948

(1)	Operating earnings include inventory fair value adjustments charged to cost of products sold of $15.2 million. This amount is not included in the depreciation and amortization column.


	Nine Months Ended September 30, 2010
	Sales		Operating Earnings			Depreciation and Amortization		Capital Expenditures		Total Assets
	(Dollars in thousands)

Operations (1)	$	615,885	$	28,755		$	26,073	$	2,808	$	1,730,586
Interest income				(183	)		—
Interest expense				19			—


Earnings before income taxes			$	28,919		$	26,073

(1)	Operating earnings include inventory fair value adjustments charged to cost of products sold of $38.0 million. This amount is not included in the depreciation and amortization column.

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, in each case compared to the prior year:


	Quarter Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010		2009
	(Dollars in thousands)
Increase (decrease) in sales	$	1,051		($	17,796	)	$	50,180	($	100,801	)
(Decrease) increase in gross profit	($	2,071	)	($	5,921	)	$	8,957	($	27,624	)
(Decrease) increase in operating earnings	($	1,721	)	($	3,329	)	$	4,526	($	17,362	)

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA were as follows:


	Quarter Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(Dollars in thousands)
EBITDA	$	159,253		$	152,129		$	402,430		$	400,298
Percent increase from prior year		4.7	%		31.4	%		0.5	%		28.0	%
EBITDA as a percent of sales		17.0	%		22.5	%		16.7	%		20.0	%
Adjusted EBITDA	$	176,630		$	158,052		$	464,322		$	411,587
Percent increase from prior year		11.8	%		35.0	%		12.8	%		24.5	%
Adjusted EBITDA as a percent of sales		18.8	%		23.4	%		19.2	%		20.5	%

EBITDA is defined as net earnings before interest income, interest expense, income tax expense, depreciation and amortization. EBITDA includes the impact of non-cash stock compensation expense, loss on disposals of fixed assets and the inventory fair value acquisition accounting adjustment charged to cost of products sold as set forth below. EBITDA is a measurement not recognized in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should not be viewed as an alternative to GAAP measures of performance. 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.

The following table reconciles Net Earnings as reported in our Consolidated Condensed Statements of Earnings to EBITDA and reconciles EBITDA to Net Cash Provided By (Used In) Operating Activities as reported in our Consolidated Condensed Statements of Cash Flows:


	Quarter Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(Dollars in thousands)
Net earnings	$	77,572		$	92,067		$	185,797		$	231,248
Interest income		(1,277	)		(1,109	)		(3,694	)		(3,539	)
Interest expense		21,022			6,802			50,981			20,328
Income tax expense		34,710			38,750			89,009			106,028
Depreciation		12,933			10,241			38,838			29,434
Amortization (1)		14,293			5,378			41,499			16,799


EBITDA		159,253			152,129			402,430			400,298

Changes in assets and liabilities		(31,140	)		14,117			67,158			(154,827	)
Non-cash stock compensation expense		2,291			2,608			6,420			7,598
(Gain) loss on disposal of fixed assets (2)		(661	)		3,315			1,173			3,691
Interest income		1,277			1,109			3,694			3,539
Interest expense		(21,022	)		(6,802	)		(50,981	)		(20,328	)
Income tax expense		(34,710	)		(38,750	)		(89,009	)		(106,028	)


Net cash provided by operating activities	$	75,288		$	127,726		$	340,885		$	133,943


Net cash used in investing activities	($	13,271	)	($	7,865	)	($	1,050,857	)	($	42,128	)


Net cash (used in) provided by financing activities	($	459	)	($	86,016	)	$	955,565		($	64,440	)

(1)	Includes amortization of intangible assets and debt issuance costs. The $15.2 million and $38.0 million of inventory fair value adjustments charged to cost of products sold for the quarter and nine months ended September 30, 2010, respectively, are not included.

(2)	Reflects losses on the disposal of fixed assets in the ordinary course.

Adjusted EBITDA is a material term in our current credit agreement, which we believe is a material agreement, and is used in the calculation of our leverage ratio covenant. Also, our management uses Adjusted EBITDA when preparing our annual operating budget and financial projections. The following table reconciles EBITDA to Adjusted EBITDA:


	Quarter Ended September 30,					Nine Months Ended September 30,
	2010			2009		2010		2009
	(Dollars in thousands)
EBITDA	$	159,253		$	152,129	$	402,430	$	400,298
Non-cash stock compensation expense		2,291			2,608		6,420		7,598
(Gain) loss on disposal of fixed assets		(661	)		3,315		1,173		3,691
Terex Mining acquisition costs (1)		524			—		16,263		—
Inventory fair value adjustment charged to cost of products sold (2)		15,223			—		38,036		—

Adjusted EBITDA	$	176,630		$	158,052	$	464,322	$	411,587

(1)	Reflects costs incurred to acquire Terex Mining.

(2)	In connection with the acquisition of Terex Mining, inventories acquired were adjusted to estimated fair value. This adjustment is being charged to cost of products sold as the inventory is sold.

Liquidity and Capital Resources

On February 19, 2010, we amended our credit facilities to finance the acquisition of Terex Mining. As of February 19, 2010, the new credit facilities included a secured revolving credit facility of $525.0 million and an unsecured German revolving credit facility of €65.0 million. As of February 19, 2010, the amended credit facilities also included a secured term loan facilities totaling $1,473.8 million consisting of (i) $1,280.0 million; (ii) A$124.0 million ($104.4 million); and (iii) €73.1 million ($89.4 million). We had no secured revolving or German revolving credit facility borrowings during the quarter ended September 30, 2010. The credit facilities contain operating and financial covenants that, among other things, could limit our ability to obtain additional sources of capital. At September 30, 2010, we were in compliance with these covenants. Refer to Note 8 of the Notes to Consolidated Condensed Financial Statements for a more detailed discussion of our current credit facilities and associated financial covenants.

Cash Requirements

Our cash balance increased to $352.8 million at September 30, 2010 from $279.5 million at June 30, 2010 and from $101.1 million at December 31, 2009. The increase from June 30, 2010 and December 31, 2010 was primarily due to cash generated from operations and strong collections of accounts receivable from original equipment orders.

A significant portion of our cash flows is generated outside of the United States. At September 30, 2010, $192.7 million of our $352.8 million cash and cash equivalents balance was

located outside of the United States. We manage our global cash requirements considering available funds among the subsidiaries through which we conduct our business and the cost effectiveness through which those funds can be accessed. We continue to seek opportunities to access cash balances in excess of local operating requirements to meet global liquidity needs in a cost effective manner. We have and will continue to transfer cash from international subsidiaries to the United States and other international subsidiaries when it is cost effective to do so.

Our customers generally are 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 our original equipment and do not believe that original equipment sales will have a material adverse effect on our liquidity, although the issuance of letters of credit reduces the amount available for borrowings under our revolving credit facilities. If additional borrowings are necessary during the remainder of 2010, we believe we have sufficient capacity under our existing revolving credit facilities.

Inventory increased to $1,214.6 million at September 30, 2010 from $627.3 million at December 31, 2009. The increase was primarily due to acquired Terex Mining inventory. Inventory turns were 2.2 at September 30, 2010. Excluding Terex Mining, inventory turns were 2.6 at September 30, 2010 compared to 2.8 at December 31, 2009. The decrease was primarily due to lower cost of products sold as a result of lower sales. We have implemented new initiatives to increase inventory turns. Total inventories increased approximately $66 million from June 30, 2010 due to the effect of exchange rates on balances denominated in foreign currencies.

Ordinary course capital expenditures for the nine months ended September 30, 2010 were $44.4 million compared to $34.5 million for the nine months ended September 30, 2009. Capital expenditures for the nine months ended September 30, 2010 include $21.6 million of facility and SAP implementation costs. We expect our ordinary course capital expenditures in 2010 to be between $70 million and $80 million. We are closely monitoring our capital spending in relation to current economic conditions and business levels. We believe cash flows from operating activities and funds available under our revolving credit facilities will be sufficient to fund our expected ordinary course capital expenditures during 2010.

At September 30, 2010, there were approximately $216.6 million of standby letters of credit outstanding under all of our bank facilities.

In addition to the obligations noted above, we currently anticipate estimated cash funding requirements for interest and dividends of approximately $20 million and $2 million, respectively, and income taxes of between $40 million and $45 million during the remainder of 2010.

During the remainder of 2010, we anticipate continued positive cash flows from operations and expect our cash balances to increase throughout the remainder of the year. We believe that cash flows from operations and our existing revolving credit facilities will be sufficient to fund our ordinary course cash requirements for the remainder of 2010. We also believe that cash flows from operations will be sufficient to repay any borrowings under our revolving credit facilities, as necessary, and all scheduled term loan payments.

Receivables

We recognize revenues on most original equipment 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. At September 30, 2010, we had $834.5 million of accounts receivable compared to $741.8 million of accounts receivable at December 31, 2009. Receivables at September 30, 2010 and December 31, 2009 included $366.2 million and $384.5 million, respectively, of revenues from long-term contracts which were not billable at these dates. Total receivables increased approximately $51 million from June 30, 2010 due to the effect of exchange rates on balances denominated in foreign currencies. Billed receivables at September 30, 2010 increased from December 31, 2009 primarily due to the inclusion of Terex Mining billed receivables of $161.0 million and invoicing of longwall original equipment orders, partially offset by large collections of billed receivables on electric mining shovel orders.

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. These payments are recorded as liabilities to customers on uncompleted contracts and warranties in the Consolidated Condensed Balance Sheets.

Critical Accounting Policies and Estimates

See Critical Accounting Policies and Estimates in the Management’s Discussion and Analysis section of our 2009 Annual Report to Stockholders. There have been no material changes to these policies.

Item 3.

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, EURIBOR based borrowings, or prime-rate based borrowings. To manage a portion of our exposure to changes in LIBOR-based interest rates on its variable rate debt, we have entered into interest rate swap agreements that effectively fix the interest payments on $745.6 million ($650.0 million plus €70.0 million) of our outstanding borrowings under our term loan facility. A sensitivity analysis was performed for our floating rate debt obligations as of September 30, 2010. Based on this analysis, we have determined that a 10% change in the weighted average interest rate as of September 30, 2010 would have the effect of changing our interest expense on an annual basis by approximately $4 million.

Foreign Currency

We sell most of our surface mining original equipment, including those sold directly to foreign customers, in United States dollars and we sell most of our underground mining original equipment in either United States dollars or euros. We sell most of our surface mining aftermarket parts in United States dollars, with limited aftermarket parts sales denominated in the local currencies of various foreign markets. We sell most of our underground mining aftermarket parts in either United States dollars or euros, also with limited aftermarket parts sales denominated in the local currencies of various foreign markets. Both surface mining and underground mining aftermarket services are paid primarily in local currency, with a natural partial currency hedge through payment for local labor in local currency. 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.

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. This 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 at September 30, 2010, a 10% change in foreign currency exchange rates would not have a material effect on our financial position, results of operations or cash flows.

Item 4.

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 September 30, 2010. 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 September 30, 2010 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.

As a result of the acquisition of Terex Mining, there were 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) related to the integration of Terex Mining that occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As part of our ongoing integration activities, we are continuing to incorporate our controls and procedures into this recently acquired business and to augment our existing controls to reflect the risks inherent in an acquisition of this magnitude and complexity. Except as described above, there were no other changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our 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.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Not applicable.

Item 1A.

Risk Factors.

There are no material changes to the disclosures regarding risk factors made in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, except for the risk factor included in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3.

Defaults Upon Senior Securities.

Not applicable.

Item 4.

(Removed and Reserved)

Not applicable.

Item 5.

Other Information.

Not applicable.

Item 6.

Exhibits.

See Exhibit Index on last page of this report.

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)

				/s/ M ARK J. K NAPP
				Mark J. Knapp
				Corporate Controller
Date: November 8, 2010				Principal Accounting Officer

				/s/ C RAIG R. M ACKUS
				Craig R. Mackus
Date: November 8, 2010				Chief Financial Officer and Secretary Principal Financial Officer

				/s/ T IMOTHY W. S ULLIVAN
				Timothy W. Sullivan
Date: November 8, 2010				President and Chief Executive Officer

EXHIBIT INDEX


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.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

Furnished as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Condensed Statements of Earnings for the quarter and nine months ended September 30, 2010 and 2009, (ii) the Consolidated Condensed Statements of Comprehensive Income for the quarter and nine months ended September 30, 2010 and 2009, (iii) the Consolidated Condensed Balance Sheets as of September 30, 2010 and December 31, 2009, (iv) the Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2010 and 2009, and (v) Notes to Consolidated Condensed Financial Statements.

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