BUCYRUS INTERNATIONAL INC - 10-K Annual Report

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

Form 10-K

(Mark One)

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-871

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

DELAWARE 39-0188050
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

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

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

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

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

As of June 30, 2002 and March 26, 2003, 1,435,600 shares of common stock
of the Registrant were outstanding. Of the total outstanding shares of common
stock on June 30, 2002 and March 26, 2003, 1,430,300 were held of record by
Bucyrus Holdings, LLC, which is controlled by American Industrial Partners
Capital Fund II, L.P. and may be deemed an affiliate of Bucyrus International,
Inc., and 4,800 shares were held by directors and officers of the Company.
There is no established public trading market for such stock.

Documents Incorporated by Reference: None

PART I

FORWARD-LOOKING STATEMENTS

This Report includes "forward-looking statements" within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Discussions
containing such forward-looking statements may be found in ITEM 1 - BUSINESS,
in ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS and elsewhere within this Report. Forward-looking
statements include statements regarding the intent, belief or current
expectations of Bucyrus International, Inc. (the "Company"), primarily with
respect to the future operating performance of the Company or related industry
developments. When used in this Report, terms such as "anticipate,"
"believe," "estimate," "expect," "indicate," "may be," "objective," "plan,"
"predict," and "will be" are intended to identify such statements. Readers
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ from those described in the forward-looking statements as a
result of various factors, many of which are beyond the control of the
Company. Forward-looking statements are based upon management's expectations
at the time they are made. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
such expectations ("Cautionary Statements") are described generally below and
disclosed elsewhere in this Report. All subsequent written or oral forward-
looking statements attributable to the Company or persons acting on behalf of
the Company are expressly qualified in their entirety by the Cautionary
Statements.

Factors that could cause actual results to differ materially from those
contemplated include:

Factors affecting customers' purchases of new equipment, rebuilds,
parts and services such as: production capacity, stockpiles, and
production and consumption rates of coal, copper, iron and other ores and
minerals; the cash flows of customers; the cost and availability of
financing to customers and the ability of customers to obtain regulatory
approval for investments in mining projects; consolidations among
customers; work stoppages at customers or providers of transportation;
and the timing, severity and duration of customer buying cycles.

Factors affecting the Company's general business, such as:
unforeseen patent, tax, product, environmental, employee health or
benefit, or contractual liabilities; nonrecurring restructuring and other
special charges; changes in accounting or tax rules or regulations;
reassessments of asset valuations for such assets as receivables,
inventories, fixed assets and intangible assets; leverage and debt
service; success in recruiting and retaining managers and key employees;
and wage stability and cooperative labor relations; plant capacity and
utilization.

ITEM 1. BUSINESS

The Company, formerly known as Bucyrus-Erie Company, was incorporated in
Delaware in 1927 as the successor to a business which commenced in 1880. The
Company is currently substantially wholly-owned by Bucyrus Holdings, LLC
("Holdings"). Holdings is controlled by American Industrial Partners Capital
Fund II, L.P.

The Company designs, manufactures and markets large excavation machinery
used for surface mining, and has a comprehensive aftermarket business that
supplies replacement parts and service for such machines. The Company's
principal products are large walking draglines, electric mining shovels and
blasthole drills, which are used by customers who mine coal, iron ore, copper,
oil sands, diamonds, phosphate, bauxite and other minerals throughout the
world.

Industry Overview

The large-scale surface mining equipment manufactured and serviced by the
Company is used primarily in coal, copper, oil sands and iron ore mines
throughout the world. Growth in demand for these commodities is a function
of, among other things, population growth and continuing improvements in
standards of living in many areas of the world. The market for new surface
mining equipment is cyclical in nature due to market fluctuations for these
commodities; however, the aftermarket for parts and services is more stable
because these expensive, complex machines are typically kept in continuous
operation for 15 to 30 years and require regular maintenance and repair
throughout their productive lives.

The largest markets for this mining equipment have been in Australia,
Canada, China, India, South Africa, South America and the United States.
Together, these markets typically account for approximately 90% of all new
machines sold, although in any given year markets in other regions may assume
greater importance.

Markets Served

The Company's products are used in a variety of different types of mining
operations, including coal, copper, iron ore, gold, phosphate, bauxite,
diamonds and oil sands, as well as for land reclamation. The Company
manufactures surface mining equipment primarily for large companies and
certain governmental entities engaged in mining throughout the world. Until
the late 1980's, coal mining accounted for the largest percentage of industry
demand for the Company's machines, and it continues to be one of the largest
users of replacement parts and services. Since then, however, copper and more
recently oil sands mining operations have accounted for an increasing share of
new machine sales.

Copper. The copper industry has seen a consolidation of large
producers in recent years. A number of the smaller North American high-
cost producers closed their facilities as new mines in South America
started producing copper at lower costs. The price of copper dropped to
an eleven-year low in early 1999 but increased later in 1999 and during
2000 due to increasing world demand. In 2001, the price of copper
dropped again due to reduced demand and increased inventory levels.
Copper prices have recovered in recent months and are forecasted to
increase in 2003.

Oil Sands. A unique geological formation of oil sands exists in the
Athabasca region of northern Alberta, Canada. Although these sands were
discovered many years ago, oil companies did not actively pursue
exploiting these potential oil reserves in earnest until the Arab oil
embargo of 1973. Various methods to mine the sands, separate the oil
from the sands and process the resultant bitumen into crude oil were
tried between 1973 and 1993 with varying degrees of success. The
commercial viability of mining these reserves remained in question until
two pioneering companies began employing electric mining shovels to
exploit these reserves. Since the implementation of these new extraction
methods, the cost to produce a barrel of oil has dropped to less than
$10. This has made the exploitation of these reserves very economical.
Since 1993, both companies have engaged in major expansions of their
previous operations. There is further expansion planned and numerous
additional entities are in the permitting stage or considering future
development. The Company expects that the Athabasca oil sands will
evolve into a major market for electric mining shovels in years to come.

Coal. There are two types of coal: steam coal used to generate
electricity and coking coal used in the process of producing steel. The
largest producers are China, the United States, India, Australia, Russia
and South Africa. In the United States, environmental legislation has
caused demand for high sulfur coal to be reduced, particularly in the
eastern United States. The result has been the idling of numerous mines.
Demand for low sulfur coal mined in the western United States, primarily
the Powder River Basin area in Wyoming, has increased significantly.
Draglines and mining shovels are used to extract coal in the western
United States, increasing potential demand for the Company's parts and
service. In addition, demand for coal has improved due to increases in
the price of oil and natural gas in recent years.

Iron Ore. Iron ore is the only source of primary iron and is mined
in more than 50 countries. In recent years, the five largest producers,
accounting for approximately 75% of world production, have been China,
Brazil, Australia, Russia and India.

The Company's excavation machines are used for land reclamation as well
as for mining, which has a positive effect on the demand for its products and
replacement parts and expands the Company's potential customer base. Current
federal and state legislation regulating surface mining and reclamation may
affect some of the Company's customers, principally with respect to the cost
of complying with, and delays resulting from, reclamation and environmental
requirements.

OEM Products

The Company's line of original equipment manufactured products includes a
full range of rotary blasthole drills, electric mining shovels and draglines.

Rotary Blasthole Drills. Many surface mines require breakage or
blasting of rock, overburden, or ore by explosives. To accomplish this,
it is necessary to bore out a pattern of holes into which the explosives
are placed. Rotary blasthole drills are used to drill these holes and
are usually described in terms of the diameter of the hole they bore.
The average life of a blasthole drill is approximately 15 years.

The Company offers a line of rotary blasthole drills ranging in hole
diameter size from 6.0 inches to 17.5 inches and ranging in price from
approximately $600,000 to $2,800,000 per drill, depending on machine size
and variable features.

Electric Mining Shovels. Mining shovels are primarily used to load
coal, copper ore, iron ore, other mineral-bearing materials, overburden,
or rock into trucks. There are two basic types of mining shovels,
electric and hydraulic. Electric mining shovels are able to handle
larger shovels or "dippers", allowing them to load greater volumes of
rock and minerals, while hydraulic shovels are smaller and more
maneuverable. The electric mining shovel offers the lowest cost per ton
of mineral mined as compared to hydraulic shovels. Its use is determined
by size of operation, the availability of electricity and expected mine
life. The Company manufactures only electric mining shovels. The
average life of an electric mining shovel is approximately 20 years.

Electric mining shovels are characterized in terms of hoisting
capability and dipper capacity. The Company offers a full line of
electric mining shovels, with available hoisting capability of up to 120
tons for the 495 model shovel. Dipper capacities range from 12 to 80 or
more cubic yards. Prices range from approximately $3,000,000 to
approximately $10,000,000 per shovel.

Draglines. Draglines are primarily used to remove overburden, which
is the earth located over a coal or mineral deposit, by dragging a large
bucket through the overburden, carrying it away and depositing it in a
"spoil pile". The Company's draglines weigh from 500 to 7,500 tons, and
are typically described in terms of their "bucket size", which can range
from nine to 220 cubic yards. The Company currently offers a full line
of models ranging in price from $10,000,000 to over $70,000,000 per
dragline. The average life of a dragline is 20 to 30 years.

Draglines are one of the industry's largest and most expensive type
of equipment, but offer the customer the lowest cost per ton of material
moved. While sales are sporadic, each dragline represents a significant
sales opportunity.

Aftermarket Parts and Services

The Company has a comprehensive aftermarket business that supplies
replacement parts and services for the surface mining industry. The Company's
aftermarket services include complete equipment management under Maintenance
and Repair Contracts ("MARCs"), maintenance and repair labor, technical
advice, refurbishment and relocation of older, installed machines,
particularly draglines. The Company also provides engineering, manufacturing
and servicing for the consumable rigging products that attach to dragline
buckets (such as dragline teeth and adapters, shrouds, dump blocks and chains)
and shovel dippers (such as dipper teeth, adapters and heel bands).

In general, the Company realizes higher margins on sales of parts and
services than it does on sales of new machines. Moreover, because the
expected life of large, complex mining machines ranges from 15 to 30 years,
the Company's aftermarket business is inherently more stable and predictable
than the fluctuating market for new machines. Over the life of a machine, net
sales generated from aftermarket parts and services can exceed the original
purchase price.

A substantial portion of the Company's international repair and
maintenance services are provided through its global network of wholly-owned
foreign subsidiaries and overseas offices operating in Argentina, Australia,
Brazil, Canada, Chile, China, England, India, Peru and South Africa.
Minserco, Inc. ("Minserco"), a wholly-owned subsidiary of the Company with
offices in Florida, Kentucky, Texas and Wyoming, provides repair and
maintenance services. These services include comprehensive structural and
mechanical engineering, non-destructive testing, repairs and rebuilds of
machine components, product and component upgrades, contract maintenance,
turnkey erections, machine moves and dragline operation.

To meet the increasing aftermarket demands of large mining customers, the
Company offers comprehensive MARCs. Under these contracts, the Company
provides all replacement parts, regular maintenance services and necessary
repairs for the excavation equipment at a particular mine with an on-site
support team. In addition, some of these contracts call for Company personnel
to operate the equipment being serviced. MARCs are highly beneficial to the
Company's mining customers because they promote high levels of equipment
reliability and performance, allowing the customer to concentrate on mining
production. MARCs typically have terms of three to five years with standard
termination and renewal provisions, although some contracts allow termination
by the customer for any cause. New mines in areas such as Argentina,
Australia, Canada, Chile and Peru are the Company's primary targets for MARCs
because it is difficult and expensive for mining companies to establish the
necessary infrastructures for ongoing maintenance and repair in remote
locations.

Acquisition

On April 30, 1999, the Company's wholly-owned subsidiary, Bucyrus Canada
Limited, consummated the acquisition of certain assets of Bennett & Emmott
(1986) Ltd. ("Bennett & Emmott"), a privately owned Canadian company with
extensive experience in the field repair and service of heavy machinery for
the surface mining industry. In addition to the surface mining industry,
Bennett & Emmott serviced a large number of customers in the pulp and paper,
sawmill, oil and natural gas industries in Western Canada, the Northwest
Territories and the Yukon. The company provides design and manufacturing
services, as well as in-house and field repair and testing of electrical and
mechanical equipment. Bennett & Emmott also distributes compressors,
generators and related products. This acquisition strengthened the Company's
position in the oil sands area of Western Canada.

Customers

The Company does not consider itself dependent upon any single customer
or group of customers; however, on an annual basis a single customer may
account for a large percentage of sales, particularly new machine sales. In
2002, 2001 and 2000, one customer accounted for approximately 12%, 11% and
11%, respectively, of the Company's consolidated net sales.

Marketing, Distribution and Sales

In the United States, new mining machinery is primarily sold directly by
Company personnel. Outside of the United States, new equipment is sold by
Company personnel, through independent sales representatives and through the
Company's subsidiaries and offices located in Argentina, Australia, Brazil,
Canada, Chile, China, England, India, Peru and South Africa. Aftermarket
parts and services are primarily sold directly by Company personnel and
through independent sales representatives, the Company's foreign subsidiaries
and offices and Minserco. The Company believes that marketing through its own
global network of subsidiaries and offices offers better customer service and
support by providing customers with direct access to the Company's
technological and engineering expertise.

Typical payment terms for new equipment require a down payment, and
invoicing is generally done as the machine is completed such that a
substantial portion of the purchase price is received by the time shipment is
made to the customer. Sales contracts for machines are predominantly at fixed
prices, with escalation clauses in certain cases. Most sales of replacement
parts call for prices in effect at the time of order. During 2002, price
increases from inflation had a relatively minor impact on the Company's
reported net sales; however, the strong United States dollar continues to
negatively affect net sales reported by certain of the Company's foreign
subsidiaries.

Foreign Operations

A substantial portion of the Company's net sales and operating earnings
is attributable to operations located outside the United States. Over the
past five years, over 80% of the Company's new machine sales have been in
international markets. The Company's foreign sales, consisting of exports
from the United States and sales by consolidated foreign subsidiaries,
totalled $212,669,000 in 2002, $209,108,000 in 2001 and $213,972,000 in 2000.
Approximately $199,234,000 or 81.1% of the Company's backlog of firm orders at
December 31, 2002 represented orders for export sales compared with
$201,872,000 or 88% at December 31, 2001 and $148,258,000 or 90% at
December 31, 2000.

The Company's largest foreign markets are in Australia, Canada, Chile,
China, India, Peru and South Africa. The Company also employs direct
marketing strategies in developing markets such as Indonesia, Jordan,
Mauritania and Russia. In recent years, Australia and South Africa have
emerged as strong producers of coking coal. Chile and Peru are producers of
copper. The Company expects that India, Russia and China will become major
coal producing regions in the future. In India, the world's second most
populous country, the demand for coal as a major source of energy is expected
to increase substantially over the next several decades.

New machine sales in foreign markets are supported by the Company's
established network of foreign subsidiaries and overseas offices that directly
market the Company's products and provide ongoing services and replacement
parts for equipment installed abroad. The availability and convenience of the
services provided through this worldwide network not only promotes higher
margin aftermarket sales of parts and services, but also gives the Company an
advantage in securing new machine orders.

The Company and its domestic subsidiaries normally price their products,
including direct sales of new equipment to foreign customers, in U.S. dollars.
Foreign subsidiaries normally procure and price aftermarket replacement parts
and repair services in the local currency. Approximately 70% of the Company's
net sales are priced in U.S. dollars. The value, in U.S. dollars, of the
Company's investments in its foreign subsidiaries and of dividends paid to the
Company by those subsidiaries will be affected by changes in exchange rates.
The Company does not normally enter into currency hedges, although it may do
so with regard to certain individual contracts.

Further segment and geographical information is included in ITEM 8 -
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Competition

There are a limited number of manufacturers of new surface mining
equipment. The Company is one of two manufacturers of electric mining shovels
and draglines. The Company's only competitor in electric mining shovels and
draglines is the P&H division of Joy Global, Inc., although electric mining
shovels may also compete against hydraulic shovels of which there are
primarily four other manufacturers. In rotary blasthole drills, the Company
competes with at least three other manufacturers, including the P&H Division
of Joy Global, Inc. Methods of competition are diverse and include capital
cost, operating costs, product productivity, design and performance,
reliability, service, delivery, financing terms and other commercial factors.

For most owners of the Company's machines, the Company is the primary
replacement source for large, highly engineered, integral components; however,
the Company encounters intense competition for sales of generally smaller,
less sophisticated, consumable replacement parts and repair services in
certain markets. The Company's competition in parts sales consists primarily
of independent firms called "will-fitters" that produce copies of the parts
manufactured by the Company and other original equipment manufacturers. These
copies are generally sold at lower prices than genuine parts produced by the
manufacturer.

The Company has a variety of programs to attract large volume customers
for its replacement parts. Although will-fitters engage in significant price
competition in parts sales, the Company possesses clear non-price advantages
over will-fitters. The Company's engineering and manufacturing technology and
marketing expertise exceed that of its will-fit competitors, who are in many
cases unable to duplicate the exact specifications of genuine Bucyrus parts.
Moreover, use of parts not manufactured by the Company can void the warranty
on a new Bucyrus machine, which generally runs for one year, with certain
components being warranted for longer periods.

Raw Materials and Supplies

The Company purchases from outside vendors the semi- and fully-processed
materials (principally structural steel, castings and forgings) required for
its manufacturing operations, and other items, such as electrical equipment,
that are incorporated directly into the end product. The Company's foreign
subsidiaries purchase components and manufacturing services both from local
subcontractors and from the Company. Certain additional components are
sometimes purchased from subcontractors, either to expedite delivery schedules
in times of high demand or to reduce costs. Moreover, in countries where
local content preferences or requirements exist, local subcontractors are used
to manufacture a substantial portion of the components required in the
Company's foreign manufacturing operations. Although the Company is not
dependent upon any single supplier, there can be no assurance that the Company
will continue to have an adequate supply of raw materials or components
necessary to enable it to meet the demand for its products. Competitors are
believed to be subject to similar conditions.

Manufacturing

A substantial portion of the design, engineering and manufacturing of the
Company's machines is done at the Company's South Milwaukee, Wisconsin plant.
The size and weight of these mining machines dictates that the machines be
shipped to the job site in sub-assembled units where they are assembled for
operation with the assistance of Company technicians. Planning and on-site
coordination of machine assembly is a critical component of the Company's
service to its customers. Moreover, to reduce lead time and ensure that
customer delivery requirements are met, the Company maintains an inventory of
sub-assembled units for frequently utilized components of various types of
equipment.

The Company manufactures and sells replacement parts and components and
provides comprehensive aftermarket service for its entire line of mining
machinery. The Company's large installed base of surface mining machinery
provides a steady stream of parts sales due to the long useful life of the
Company's machines, averaging 20 to 30 years for draglines, approximately
20 years for electric mining shovels and approximately 15 years for blasthole
drills. Parts sales and aftermarket services comprise a substantial portion
of the Company's net sales.

Although a majority of the Company's operating profits are derived from
sales of parts and services, the long-term prospects of the Company depend
upon maintaining a large installed equipment base worldwide. Therefore, the
Company remains committed to improving the design and engineering of its
existing line of machines, as well as developing new products.

Backlog

The backlog of firm orders was $245,695,000 at December 31, 2002 and
$229,752,000 at December 31, 2001. Approximately 62% of the backlog at
December 31, 2002 is not expected to be filled during 2003.

Inventories

Inventories at December 31, 2002 were $114,312,000 compared with
$102,008,000 at December 31, 2001. At December 31, 2002 and December 31,
2001, finished goods inventory (primarily replacement parts) totalled
$80,986,000 and $75,525,000, respectively.

Patents, Licenses and Franchises

The Company has a number of United States and foreign patents, patent
applications and patent licensing agreements. It does not consider its
business to be materially dependent upon any patent, patent application,
patent license agreement or group thereof.

Research and Development

Expenditures for design and development of new products and improvements
of existing mining machinery products, including overhead, aggregated
$6,512,000 in 2002, $5,900,000 in 2001 and $7,299,000 in 2000. All
engineering and product development costs are charged to Engineering and Field
Service Expense as incurred.

Environmental Factors

Environmental problems have not interfered in any material respect with
the Company's manufacturing operations to date. The Company believes that its
compliance with statutory requirements respecting environmental quality will
not materially affect its capital expenditures, earnings or competitive
position. The Company has an ongoing program to address any potential
environmental problems.

Current federal and state legislation regulating surface mining and
reclamation may affect some of the Company's customers, principally with
respect to the cost of complying with, and delays resulting from, reclamation
and environmental requirements. The Company's products are used for
reclamation as well as for mining, which has a positive effect on the demand
for such products and replacement parts therefor.

Employees

At December 31, 2002, the Company employed approximately 1,600 persons.
The four-year contract with the union representing hourly workers at the South
Milwaukee, Wisconsin facility and the three-year contract with the union
representing hourly workers at the Memphis, Tennessee facility expire in
April, 2005 and September, 2005, respectively.

Seasonal Factors

The Company does not consider a material portion of its business to be
seasonal.

ITEM 2. PROPERTIES

The Company's principal manufacturing plant in the United States is
located in South Milwaukee, Wisconsin. This plant comprises approximately
1,026,000 square feet of floor space. A portion of this facility houses the
Company's corporate offices. The major buildings at this facility are
constructed principally of structural steel, concrete and brick and have
sprinkler systems and other devices for protection against fire. The
buildings and equipment therein, which include machine tools and equipment for
fabrication and assembly of the Company's mining machinery, including
draglines, electric mining shovels and blasthole drills, are well-maintained,
in good condition and in regular use. On January 4, 2002, the Company
completed a sale and leaseback transaction for a portion of the land and
buildings in South Milwaukee. The term of the lease is twenty years with
options for renewals. The remainder of the land and buildings in South
Milwaukee continue to be owned by the Company.

The Company leases a facility in Memphis, Tennessee, which has
approximately 90,000 square feet of floor space and is used as a central parts
warehouse. The current lease is for three years commencing in July 2001.

The Company also has administrative and sales offices and, in some
instances, repair facilities and parts warehouses, at certain of its foreign
locations, including Argentina, Australia, Brazil, Canada, Chile, China,
England, India, Peru and South Africa.

ITEM 3. LEGAL PROCEEDINGS AND OTHER CONTINGENCIES

Product Liability

The Company is normally subject to numerous product liability claims,
many of which relate to products no longer manufactured by the Company or its
subsidiaries, and other claims arising in the ordinary course of business.
The Company has insurance covering most of said claims, subject to varying
deductibles up to $3,000,000, and has various limits of liability depending on
the insurance policy year in question. It is the view of management that the
final resolution of said claims and other similar claims which are likely to
arise in the future will not individually or in the aggregate have a material
effect on the Company's financial position, results of operations or cash
flows, although no assurance to that effect can be given.

To the date of this Report, the Company has been named as a co-defendant
in 278 personal injury liability asbestos cases, involving approximately 1,400
plaintiffs, which are pending in various state courts. In all of these cases,
insurance carriers have accepted or are expected to accept the defense of such
cases. These cases are in preliminary stages and the Company does not believe
that costs associated with these matters will have a material effect on the
Company's financial position, results of operations or cash flows, although no
assurance to that effect can be given.

Environmental and Related Matters

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 Company facilities and at off-site
disposal locations. These laws are complex, change frequently and have tended
to become more stringent over time. Future events, such as compliance with
more stringent laws or regulations, more vigorous enforcement policies of
regulatory agencies or stricter or different interpretations of existing laws,
could require additional expenditures by the Company, which may be material.

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

The Company was one of 53 entities named by the United States
Environmental Protection Agency ("EPA") as potentially responsible parties
("PRPs") with regard to the Millcreek dumpsite, located in Erie County,
Pennsylvania, which is on the National Priorities List of sites for cleanup
under CERCLA. The Company was named as a result of allegations that it
disposed of foundry sand at the site in the 1970's. Both the United States
government and the Commonwealth of Pennsylvania initiated actions to recover
cleanup costs. The Company has settled with both with respect to its
liability for past costs. In addition, 37 PRP's, including the Company,
received Administrative Orders issued by the EPA pursuant to Section 106a of
CERCLA to perform site capping and flood control remediation at the Millcreek
site. The Company was one of eighteen parties responsible for a share of the
cost of such work, and shared such cost per capita to date; however, such cost
may be subject to reallocation. In 2002, final remedial work in the form of
installation of a municipal golf course as cover was completed and the cost
thereof was paid. EPA has certified completion and its approval thereof. The
former remediation contractor, IT Corporation, commenced suit against the
Millcreek Dumpsite Group, an unincorporated association including the Company
and other cooperating Millcreek PRP's (the "Group"), for breach of contract
claims in an amount in excess of $1,000,000. The Group is defending and
negotiating settlement of IT's claim. At December 31, 2002, the Company does
not believe that its remaining potential liability in connection with this
site will have a material effect on the Company's financial position, results
of operations or cash flows, although no assurance can be given to that
effect.

The Company has also been named as a PRP in two additional CERCLA
matters. EPA named the Company as a PRP with respect to the clean up of the
Chemical Recovery Systems, Inc. ("CRS") site in Elyria, Ohio. On December 20,
2002, EPA offered the Company a de minimis settlement in the amount of $6,800
to resolve its liabilities under CERCLA Sections 106, 107 and 113. The
Company accepted EPA's settlement offer and is awaiting notification from EPA
that the settlement is effective. As of December 31, 2002, the Company does
not believe that its remaining potential liability in connection with this
site will have a material effect on the Company's financial position, results
of operations or cash flows, although no assurance can be given to that
effect.

EPA also named the Company as a PRP in the Tremont City, Ohio, Landfill
matter. The EPA identified the Company as a PRP based upon past operations of
The Marion Power Shovel Company, the assets of which the Company acquired in
1997. The Company responded that it had not operated The Marion Power Shovel
Company, that the periods of operation of the Tremont City Landfill expired
many years prior to 1997 and that, accordingly, the Company had none of the
information requested by EPA. The Company gave notice of this matter and
potential claim to the sellers under indemnification provisions of the Asset
Purchase and Sale Agreement. In 2002, the Company received notice that the
sellers had filed Chapter 11 Bankruptcy. The Company has filed timely claims
in that proceeding. Although the Company has not regarded, and does not
regard, this site as presenting a material contingent liability, there can be
no assurances to that effect because EPA has not responded to the Company nor
has EPA withdrawn its identification of the Company as a PRP.

In December 1990, the Wisconsin Department of Natural Resources ("DNR")
conducted a pre-remedial screening site inspection on property owned by the
Company located at 1100 Milwaukee Avenue in South Milwaukee, Wisconsin.
Approximately 35 acres of this site were allegedly used as a landfill by the
Company until approximately 1983. The Company disposed of certain
manufacturing wastes at the site, primarily foundry sand. The DNR's Final
Site Screening Report, dated April 16, 1993, summarized the results of
additional investigation. A DNR Decision Memo, dated July 21, 1991, which was
based upon the testing results contained in the Final Site Screening Report,
recommended additional groundwater, surface water, sediment and soil sampling.
To date, the Company is not aware of any initiative by the DNR to require any
further action with respect to this site. Consequently, the Company has not
regarded, and does not regard, this site as presenting a material contingent
liability. There can be no assurance, however, that additional investigation
by the DNR will not be conducted with respect to this site at some later date
or that this site will not in the future require removal or remedial actions
to be performed by the Company, the costs of which could be material,
depending on the circumstances.

Prior to 1985, a wholly-owned, indirect subsidiary of the Company
provided comprehensive general liability insurance coverage for affiliate
corporations. The subsidiary issued such policies for occurrences during the
years 1974 to 1984, which policies could involve material liability. It is
possible that claims could be asserted in the future with respect to such
policies. While the Company does not believe that liability under such
policies will result in material costs, this cannot be guaranteed.

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

While no assurance can be given, the Company believes that expenditures
for compliance and remediation will not have a material effect on its capital
expenditures, results of operations or competitive position.

Other

The Company is involved in various other litigation arising in the normal
course of business. It is the view of management that the Company's recovery
or liability, if any, under pending litigation is not expected to have a
material effect on the Company's financial position, results of operations or
cash flows, although no assurance to that effect can be given.

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

No matters were submitted to a vote of security holders of the Company
during the fourth quarter of 2002.

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Substantially all of the Company's common stock is held by Holdings and
there is no established public trading market therefor. The Company does not
have a recent history of paying dividends and has no present intention to pay
dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

Years Ended December 31,
2002 2001 2000 1999 1998
(Dollars In Thousands, Except Per Share Amounts)

Consolidated Statements of
Operations Data:
Net sales $289,598 $290,576 $280,443 $318,635 $315,838
Net loss $(10,786) $(10,463) $(32,797) $(22,575) $ (8,264)
Net loss per share of
common stock:
Basic $ (7.51) $ (7.29) $ (22.76) $ (15.65) $ (5.75)
Diluted $ (7.51) $ (7.29) $ (22.76) $ (15.65) $ (5.75)
Adjusted EBITDA (a) $ 29,002 $ 31,236 $ 9,583 $ 20,742 $ 35,967
Cash dividends per
common share $ - $ - $ - $ - $ -

Consolidated Balance
Sheets Data:
Total assets $346,878 $355,745 $367,766 $416,987 $417,195
Long-term debt $207,804 $222,188 $217,813 $214,009 $202,308

(a) Earnings before interest expense, income taxes, depreciation, amortization, (gain) loss on sale of
fixed assets, loss on fixed asset impairment and inventory fair value adjustment charged to cost of
products sold. Adjusted EBITDA for the year ended December 31, 2001 includes $8,704,000 of income
from the sale of shares the Company received as a result of the demutualization of The Principal
Financial Group.

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

Acquisition

In connection with acquisitions involving the Company in 1997, assets and
liabilities were adjusted to their estimated fair values. The consolidated
financial statements include the related amortization charges associated with
the fair value adjustments.

Liquidity and Capital Resources

Liquidity

Working capital and current ratio are two financial measurements which
provide an indication of the Company's ability to meet its short-term
obligations. These measurements at December 31, 2002, 2001 and 2000 were as
follows:

2002 2001 2000
(Dollars in Thousands)

Working capital $106,022 $114,336 $101,342
Current ratio 2.5 to 1 3.0 to 1 2.4 to 1

The decrease in working capital and current ratio in 2002 was primarily
due to increased accounts payable and accrued expenses. The increase in
working capital and current ratio in 2001 was primarily due to reduced
accounts payable and the reclassification of borrowings under the revolving
term loan at Bucyrus Canada Limited from current to long-term liabilities (see
below).

The Company is presenting below a calculation of earnings (loss) before
interest expense, income taxes, depreciation, amortization and loss on sale of
fixed assets ("Adjusted EBITDA"). Adjusted EBITDA is presented (i) because
the Company believes EBITDA is frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in its
industry; and (ii) because the Company is required to maintain certain minimum
EBITDA levels as defined under the Loan and Security Agreement (and previously
the Credit Agreement (see below)). EBITDA as defined under these agreements
does not differ materially from Adjusted EBITDA as calculated below. The
Adjusted EBITDA calculation is not an alternative to operating income under
generally accepted accounting principles as an indicator of operating
performance or to cash flows as a measure of liquidity. The following table
reconciles Loss Before Income Taxes to Adjusted EBITDA:

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands)

Loss before income taxes $ (5,739) $ (7,053) $(29,732)
Depreciation 10,666 11,240 11,393
Amortization 4,748 5,414 5,821
Loss on sale of fixed assets 655 750 7
Interest expense 18,672 20,885 22,094
________ ________ ________

Adjusted EBITDA(1)(2) $ 29,002 $ 31,236 $ 9,583

(1) Adjusted EBITDA for the years ended December 31, 2002, 2001 and
2000 was reduced by restructuring charges of $1,308,000, $899,000 and
$2,689,000, respectively, primarily related to severance payments and related
matters.

(2) Adjusted EBITDA for the year ended December 31, 2001 includes
$8,704,000 of income from the sale of shares the Company received as a result
of the demutualization of The Principal Financial Group (see below).

On March 7, 2002, the Company entered into a Loan and Security Agreement
with GMAC Business Credit, LLC (the "Loan and Security Agreement") which
provides the Company with an $85,000,000 senior secured revolving credit
facility. On January 9, 2003, the Loan and Security Agreement was amended to
reduce the maximum availability of the revolving credit facility to
$76,000,000. The Loan and Security Agreement, as amended, expires on
January 8, 2005. Proceeds from the Loan and Security Agreement were used to
repay in full all outstanding borrowings under the previous Credit Agreement
and Bucyrus Canada Limited revolving term loan (see below). Outstanding
borrowings under the Loan and Security Agreement bear interest equal to either
the prime rate plus an applicable margin (2% to 2.25%) or LIBOR plus an
applicable margin (3.5% to 3.75%) and are subject to a borrowing base formula
based on receivables and inventory. Borrowings at December 31, 2002 were
$54,023,000 at a weighted average interest rate of 6.3% and were classified as
long-term debt. Substantially all of the domestic assets of the Company
(excluding real property) and the receivables and inventory of the Company's
Canadian subsidiary are pledged as collateral under the Loan and Security
Agreement. In addition, all outstanding capital stock of the Company and its
domestic subsidiaries as well as 65% of the capital stock of the Company's
foreign subsidiaries are pledged as collateral. At March 26, 2003, the amount
available for borrowings under the Loan and Security Agreement was
$15,055,000. This amount must be reduced by $5,000,000 which is the minimum
availability the Company must maintain at all times.

The Company previously had a Credit Agreement with Bank One, Wisconsin
(the "Credit Agreement") which provided the Company with a $75,000,000 senior
secured revolving credit facility (the "Revolving Credit Facility") with a
$25,000,000 sublimit for standby letters of credit. Borrowings under the
Revolving Credit Facility were at variable interest rates and were subject to
a borrowing base formula based on receivables, inventory and machinery and
equipment. Direct borrowings under the Revolving Credit Facility at
December 31, 2001 were $63,100,000 at a weighted average interest rate of
5.3%.

At December 31, 2002 and 2001, there were $2,199,000 and $1,200,000,
respectively, of standby letters of credit outstanding under all Company bank
facilities.

The Company has outstanding $150,000,000 of its 9-3/4% Senior Notes due
2007 (the "Senior Notes") which were issued pursuant to an indenture among the
Company, certain of its domestic subsidiaries (the "Guarantor Subsidiaries"),
and BNY Midwest Trust Company, as Trustee (the "Senior Notes Indenture"). The
Senior Notes mature on September 15, 2007 and interest thereon is payable each
March 15 and September 15. During 2000, Holdings acquired $75,635,000 of the
Company's $150,000,000 issue of Senior Notes. Holdings has agreed as part of
the Loan and Security Agreement, and previously the Credit Agreement, to defer
the receipt of interest on these Senior Notes during the life of the two
agreements. At December 31, 2002 and 2001, $18,436,000 and $11,062,000,
respectively, of interest was accrued and payable to Holdings. An amendment
to the Credit Agreement dated March 20, 2001 required Holdings to contribute
to equity of the Company a portion of the accrued interest. As a result, on
March 20, 2001, the Company recorded an equity contribution from Holdings and
a corresponding reduction in interest payable to Holdings in the amount of
$2,171,000, which represented accrued interest as of June 30, 2000 on the
Senior Notes acquired by Holdings. In addition, in 2001 Holdings made a cash
capital contribution to the Company in the amount of $1,093,000.

Both the Loan and Security Agreement and the Senior Notes Indenture
contain certain covenants which may affect the Company's liquidity and capital
resources. Also, both the Loan and Security Agreement and the Senior Notes
Indenture contain numerous covenants that limit the discretion of management
with respect to certain business matters and place significant restrictions
on, among other things, the ability of the Company to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments
or investments, loans and guarantees, and to sell or otherwise dispose of
assets and merge or consolidate with another entity.

The Loan and Security Agreement also contains a number of financial
covenants that require the Company (A) to maintain certain financial ratios,
including: (i) leverage ratio (as defined); and (ii) fixed charge coverage
ratio; and (B) to maintain minimum levels of EBITDA (as defined). Other
covenants exist which limit the ability of the Company to incur liens; merge,
consolidate or dispose of assets; make loans and investments; incur
indebtedness; engage in certain transactions with affiliates; incur contingent
obligations; enter into joint ventures; enter into lease agreements; pay
dividends and make other distributions; change its business; redeem the Senior
Notes; and make capital expenditures. At December 31, 2002, the Company was
in compliance with all covenants.

The Senior Notes Indenture contains certain covenants that, among other
things, limit the ability of the Company and the Guarantor Subsidiaries to:
(i) incur additional indebtedness; (ii) pay dividends or make other
distributions with respect to capital stock; (iii) make certain investments;
(iv) use the proceeds of the sale of certain assets; (v) enter into certain
transactions with affiliates; (vi) create liens; (vii) enter into certain sale
and leaseback transactions; (viii) enter into certain mergers and
consolidations or a sale of substantially all of its assets; and (ix) prepay
the Senior Notes. Such covenants are subject to important qualifications and
limitations. At December 31, 2002, the Company was in compliance with all
covenants.

A failure to comply with the obligations contained in the Loan and
Security Agreement or the Senior Notes Indenture could result in an Event of
Default (as defined) under the Loan and Security Agreement or an Event of
Default (as defined) under the Senior Notes Indenture that, if not cured or
waived, would permit acceleration of the relevant debt and acceleration of
debt under other instruments that may contain cross-acceleration or cross-
default provisions.

On April 30, 2002, Bucyrus Canada Limited, a wholly-owned subsidiary of
the Company, entered into a new C$3,510,000 mortgage loan. The term of the
mortgage loan is 15 years at an initial rate of 7.55% which is fixed for the
first five years. The balance outstanding at December 31, 2002 was
C$3,425,000. The mortgage loan is collateralized by the land, buildings and
certain building attachments owned by Bucyrus Canada Limited. The net book
value of this collateral at December 31, 2002 was C$4,283,000. Previously,
Bucyrus Canada Limited had a C$15,000,000 credit facility with The Bank of
Nova Scotia. On March 7, 2002, the outstanding balance of C$9,083,000 under
the C$10,000,000 revolving term loan portion of this credit facility was paid
in full with proceeds from the Loan and Security Agreement. The balance
outstanding under the revolving term loan portion at December 31, 2001 was
C$9,125,000. On April 30, 2002, Bucyrus Canada Limited paid the remaining
non-revolving term loan portion of the credit facility in full with proceeds
from the new mortgage loan. The balance outstanding under the non-revolving
term loan portion at December 31, 2001 was C$3,960,000. The new mortgage loan
contains a number of financial covenants which, among other items, require
Bucyrus Canada Limited to maintain certain financial ratios on an annual
basis. At December 31, 2002, Bucyrus Canada Limited was in compliance with
all applicable covenants.

In December 2001, the Company, as a policyholder, received an allocation
of 369,918 shares as a result of the demutualization of The Principal
Financial Group. Net proceeds from the sale of these shares by the Company
were $8,704,000 and is recognized as Other Income in the Consolidated
Statement of Operations for the year ended December 31, 2001. Of the net
proceeds, $2,974,000 was received on January 2, 2002 for shares sold in 2001
and is included in Receivables in the Consolidated Balance Sheet at
December 31, 2001.

On January 4, 2002, the Company completed a sale and leaseback
transaction for a portion of its land and buildings in South Milwaukee,
Wisconsin. The term of the lease is twenty years with options for renewals.
Net proceeds received from this transaction were $7,157,000 less $500,000
required as a security deposit.

Contractual Obligations and Commercial Commitments

The following table sets forth the Company's contractual obligations and
commercial commitments as of December 31, 2002:

5 Years
1 Year 2 - 3 4 and
Total or Less Years Years Thereafter
(Dollars in Thousands)

Long-term debt $208,235 $ 431 $ 54,669 $ 282 $152,853
Short-term
obligations 495 495 - - -
Operating leases and
rental and service
agreements 34,145 5,680 8,110 1,777 18,578
________ ________ ________ ________ ________

Total $242,875 $ 6,606 $ 62,779 $ 2,059 $171,431

Operating Losses

The Company is highly leveraged and low sales volumes in recent years
have had an adverse effect on the Company's liquidity. While the Company
believes that current levels of cash and liquidity, together with funds
generated by operations and funds available from the Loan and Security
Agreement, will be sufficient to permit the Company to satisfy its debt
service requirements and fund operating activities for the foreseeable future,
there can be no assurances to this effect and the Company continues to closely
monitor its operations.

The Company is subject to significant business, economic and competitive
uncertainties that are beyond its control. Accordingly, there can be no
assurance that the Company's performance will be sufficient for the Company to
maintain compliance with the financial covenants under the Loan and Security
Agreement and the Senior Notes Indenture, satisfy its debt service obligations
and fund operating activities under all circumstances. At this time, the
Company continues to believe that future cash flows will be sufficient to
recover the carrying value of its long-lived assets, including goodwill and
other intangible assets.

Capital Resources

At December 31, 2002, the Company had approximately $831,000 of open
capital appropriations. The Company's capital expenditures for the year ended
December 31, 2002 were $5,457,000 compared with $4,127,000 for the year ended
December 31, 2001. Included in capital expenditures for 2002 were amounts
related to the construction of a new facility in Gillette, Wyoming. In the
near term, the Company anticipates spending close to current levels.

Capitalization

The long-term debt to total capitalization ratio at December 31, 2002 and
2001 was 1.0 to 1 and .9 to 1, respectively. Total capitalization is defined
as total common shareholders' investment plus long-term debt plus current
maturities of long-term debt and short-term obligations.

Results of Operations

Net Sales

Net sales for 2002 were $289,598,000 compared with $290,576,000 for 2001.
Net sales of repair parts and services for 2002 were $242,047,000, which was
an increase of 7.1% from 2001. Net machine sales for 2002 were $47,551,000,
which was a decrease of 26.3% from 2001. The changes between periods were
primarily due to fluctuations in volume. The decrease in machine sales for
2002 was primarily in blasthole drills and draglines.

Net sales for 2001 were $290,576,000 compared with $280,443,000 for 2000.
Net sales of repair parts and services for 2001 were $226,024,000 which was an
increase of 6.9% from 2000. Net machine sales for 2001 were $64,552,000,
which was a decrease of 6.3% from 2000. The changes between years were
primarily due to fluctuations in volume.

Other Income

Other income for 2001 includes $8,704,000 from the aforementioned sale of
shares of The Principal Financial Group.

Cost of Products Sold

Cost of products sold for 2002 was $233,516,000 or 80.6% of net sales
compared with $243,791,000 or 83.9% of net sales for 2001 and $239,134,000 or
85.3% of net sales for 2000. The decrease in cost of products sold as a
percentage of net sales for 2002 was primarily due to the improved mix of
aftermarket sales. The decrease in the cost of products sold percentage for
2001 when compared to 2000 was primarily due to reduced warranty expense and
favorable manufacturing variances resulting from higher manufacturing
activity. Included in cost of products sold in 2000 was approximately
$1,300,000 of costs associated with the closing of the manufacturing facility
in Boonville, Indiana which was effective June 30, 2000. Cost of products
sold in 2000 was reduced by a $1,800,000 favorable adjustment related to
commercial issues. Also included in cost of products sold for 2002, 2001 and
2000 was $5,127,000, $5,248,000 and $5,038,000, respectively, of additional
depreciation expense as a result of the fair value adjustment to plant and
equipment in connection with acquisitions involving the Company.

Engineering and Field Service, Selling, Administrative and Miscellaneous
Expenses

Engineering and field service, selling, administrative and miscellaneous
expenses for 2002 were $43,449,000 or 15.0% of net sales compared with
$42,095,000 or 14.5% of net sales in 2001 and $50,161,000 or 17.9% of net
sales in 2000. Included in the amounts for 2002 and 2001 was $655,000 and
$750,000, respectively, of losses on disposals of fixed assets. Also, due to
a reduction in new orders, the Company continues to reduce a portion of its
manufacturing production workforce through layoffs and reduce the number of
its salaried employees. As a result, restructuring charges of $1,308,000,
$899,000 and $2,689,000 were included in the amounts for 2002, 2001 and 2000,
respectively. These charges primarily related to severance payments and
related matters. As a result of the adoption of Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets," goodwill
and intangible asset amortization expense decreased by $2,645,000 in 2002 when
compared to 2001. This decrease was partially offset by an increase in
expenses related to the Loan and Security Agreement.

Interest Expense

Interest expense for 2002 was $18,672,000 compared with $20,885,000 for
2001 and $22,094,000 for 2000. The decrease in interest expense in 2002 when
compared to 2001 was primarily due to declining interest rates and reduced
borrowings under the Loan and Security Agreement and Revolving Credit
Facility. The decrease in interest expense in 2001 when compared to 2000 was
primarily due to declining interest rates on borrowings under the Revolving
Credit Facility. Included in interest expense for 2002, 2001 and 2000 was
$14,625,000 related to the Senior Notes. The interest expense in 2002, 2001
and 2000 on the Senior Notes includes $7,374,000, $7,374,000 and $5,859,000,
respectively, related to the Senior Notes acquired by Holdings. Holdings has
agreed as part of the Loan and Security Agreement, and previously the Credit
Agreement, to defer the receipt of interest on these Senior Notes during the
life of the two agreements.

Income Taxes

Income tax expense consists primarily of foreign taxes at applicable
statutory rates. For United States tax purposes, the Company recorded a
federal income tax benefit of $421,000 in 2002 related to the carryback of a
portion of the 2001 alternative tax net operating loss to obtain a refund of
the entire alternative minimum tax paid for 2000.

Net Loss

The net loss for 2002 was $10,786,000 compared with net losses of
$10,463,000 for 2001 and $32,797,000 for 2000. The net loss in 2001 was
reduced by $8,704,000 of income from the sale of shares of The Principal
Financial Group. Excluding the effects of this sale of shares, the reduced
net loss in 2002 when compared to 2001 was primarily due to the improved mix
of aftermarket sales. The improvement in 2001 when compared to 2000 was due
to the aforementioned sale of shares and improvements in margin as a result of
increased volume and cost reduction efforts. Non-cash depreciation and
amortization charges were $15,414,000 in 2002 compared with $16,654,000 in
2001 and $17,214,000 in 2000.

New Orders and Backlog

New orders for 2002 were $305,541,000, which was a decrease of 14.2% from
2001. New machine orders for 2002 were $49,442,000, which was a decrease of
33.4% from 2001. The decrease was primarily in electric mining shovels.
Copper prices remain at low levels compared to the mid 1990's which has
negatively impacted demand for the Company's machines. However, the Company
did receive an order in 2002 for a walking dragline to be used in coal mining
in North Dakota. New repair parts and service orders for 2002 were
$256,099,000, which was a decrease of 9.1% from 2001. New repair parts and
service orders in 2001 included two long-term maintenance and repair
contracts, a machine move and a long-term mining contract. Revenues related
to these contracts will be recognized over multiple years.

The Company's consolidated backlog at December 31, 2002 was $245,695,000
compared with $229,752,000 at December 31, 2001 and $164,408,000 at
December 31, 2000. Machine backlog at December 31, 2002 was $34,429,000,
which is an increase of 5.8% from December 31, 2001. Repair parts and service
backlog at December 31, 2002 was $211,266,000, which is an increase of 7.1%
from December 31, 2001. A portion of this backlog is related to multi-year
contracts which will generate revenue in future years.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Interest Rates

The Company's interest rate exposure relates primarily to debt
obligations in the United States. The Company manages its borrowings under
the Loan and Security Agreement through the selection of LIBOR based
borrowings or prime-rate based borrowings. The Company's Senior Notes are at
a fixed interest rate. If market conditions warrant, interest rate swaps may
be used to adjust interest rate exposures, although none have been used to
date.

At December 31, 2002, a sensitivity analysis was performed for the debt
obligations that have interest rate risk. Based on this sensitivity analysis,
the Company has determined that a 10% change in the Company's weighted average
interest rate at December 31, 2002 would have the effect of changing the
Company's interest expense on an annual basis by approximately $300,000.

Foreign Currency

Changes in foreign exchange rates can impact the Company's financial
position, results of operations and cash flow. The Company manages foreign
currency exchange rate exposure by utilizing some natural hedges to mitigate
some of its transaction and commitment exposures, and may utilize forward
contracts in certain situations.

Based on the Company's derivative instruments outstanding at December 31,
2002, a 10% change in foreign currency exchange rates will not have a material
effect on the Company's financial position, results of operations or cash
flows.

New Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"). SFAS 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or
disposal plan. Examples of costs covered by SFAS 146 include lease
termination costs and certain employee severance costs that are associated
with a restructuring, discontinued operations, plant closing, or other exit or
disposal activity. SFAS 146 is to be applied prospectively to exit or
disposal activities initiated after December 31, 2002. Adoption of SFAS 146
is not expected to have a material effect on the Company's consolidated
financial position, results of operations or cash flows.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Interpretation No. 45 requires that a
guarantor must recognize, at the inception of a guarantee, a liability for the
fair value of the obligation that it has undertaken in issuing a guarantee.
Interpretation No. 45 also addresses the disclosure requirements that a
guarantor must include in its financial statements for guarantees issued. The
disclosure requirements in this interpretation are effective for financial
statements ending after December 15, 2002. The initial recognition and
measurement provisions of this interpretation are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The Company
has not completed its evaluation of Interpretation No. 45 and has not assessed
the impact the adoption may have on its financial position, results of
operations or cash flows.

Critical Accounting Policies and Estimates

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

The following are the accounting policies that most frequently require
the Company to make estimates and judgements and are critical to understanding
the Company's financial condition, results of operations and cash flows:

Revenue Recognition - Revenue from long-term sales contracts, such as for
the manufacture of Company machines, is recognized using the percentage-of-
completion method. The Company also has long-term maintenance and repair
contracts with customers to supply parts and service over a period of years.
Revenue is recognized in the period in which the parts are supplied or
services provided. The customer is billed monthly and deferred revenues are
recorded based on payments received. Revenue from all other types of sales is
recognized as products are shipped or services are rendered. At the time a
loss on a contract becomes known, the amount of the estimated loss is
recognized in the consolidated financial statements.

Goodwill and Intangible Assets - The Company accounts for goodwill and
intangible assets in accordance with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). As a
result, goodwill is not subject to amortization, but instead is subject to an
evaluation for impairment at least annually by applying a two-step fair-value-
based test. Additionally, intangible assets with indefinite lives are also
not amortized but are subject to an evaluation for impairment at least
annually by applying a lower-of-cost-to-market test. Intangible assets with
finite lives continue to be amortized. For goodwill, the fair value of the
Company's reporting units exceeds the carrying amounts and an impairment
charge is not currently required. The Company has also completed an
impairment analysis of its indefinite life intangible assets in accordance
with the provisions of SFAS 142 and has determined that an impairment charge
is not required.

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

Warranty - Sales of the Company's products generally carry typical
manufacturers' warranties based on terms that are generally accepted in the
Company's marketplaces. The Company records provisions for estimated warranty
and other related costs at the time of sale based on historical warranty loss
experience and periodically adjusts these provisions to reflect actual
experience.

Product Liability - The Company is normally subject to numerous product
liability claims, many of which relate to products no longer manufactured by
the Company or its subsidiaries, and other claims arising in the ordinary
course of business. The Company has insurance covering most of said claims,
subject to varying deductibles up to $3,000,000, and has various limits of
liability depending on the insurance policy year in question. The Company
establishes product liability reserves for the self-insured portion of any
known outstanding matters based on the likelihood of loss and the Company's
ability to reasonably estimate such loss. The Company makes estimates based
on available information and the Company's best judgment after consultation
with appropriate experts. The Company periodically revises estimates based
upon changes to facts or circumstances.

Pension and Other Post-Retirement Benefits - The Company has two major
defined benefit pension plans which are separately funded and also provides
certain health care benefits to age 65 and life insurance benefits for certain
eligible retired United States employees. Several statistical and judgmental
factors which attempt to anticipate future events are used in calculating the
expense and liability related to these plans. These factors include
assumptions about the discount rate, expected return on plan assets, rate of
future compensation increases and health care cost trend rates, as determined
by the Company within certain guidelines. In addition, the Company's
actuarial consultants also use subjective factors such as withdrawal and
mortality rates to estimate these factors. The actuarial assumptions used by
the Company may differ materially from actual results due to changing market
and economic conditions, higher or lower withdrawal rates, longer or shorter
life spans of participants and changes in actual costs of health care. These
differences may result in a significant impact to the amount of pension and
other post-retirement benefit expenses recorded by the Company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED STATEMENTS OF OPERATIONS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)

Years Ended December 31,
2002 2001 2000
REVENUES:
Net sales $289,598 $290,576 $280,443
Other income 300 9,142 1,214
________ ________ ________

289,898 299,718 281,657
________ ________ ________
COSTS AND EXPENSES:
Cost of products sold 233,516 243,791 239,134
Engineering and field
service, selling,
administrative and
miscellaneous expenses 43,449 42,095 50,161
Interest expense 18,672 20,885 22,094
________ ________ ________

295,637 306,771 311,389
________ ________ ________

Loss before income taxes (5,739) (7,053) (29,732)

Income taxes 5,047 3,410 3,065
________ ________ ________

Net loss $(10,786) $(10,463) $(32,797)

Net loss per share
of common stock:

Basic $ (7.51) $ (7.29) $ (22.76)

Diluted $ (7.51) $ (7.29) $ (22.76)

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)

Years Ended December 31,
2002 2001 2000

Net loss $(10,786) $(10,463) $(32,797)
________ ________ ________

Other comprehensive
loss:
Foreign currency
translation
adjustments (569) (6,300) (6,147)
Minimum pension
liability adjustment (13,948) (15,245) -
________ ________ ________

Other comprehensive loss (14,517) (21,545) (6,147)
________ ________ ________

Comprehensive loss $(25,303) $(32,008) $(38,944)

See notes to consolidated financial statements.

CONSOLIDATED BALANCE SHEETS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands, Except Per Share Amounts)

December 31, December 31,
2002 2001 2002 2001

LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
ASSETS (DEFICIENCY IN ASSETS)
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 4,189 $ 7,218 Accounts payable and
Receivables 52,770 55,554 accrued expenses $ 59,216 $ 47,760
Inventories 114,312 102,008 Liabilities to customers on
Prepaid expenses and uncompleted contracts and
other current assets 6,186 5,827 warranties 7,850 6,008
________ ________ Income taxes 3,443 1,205
Short-term obligations 495 566
Total Current Assets 177,457 170,607 Current maturities of long-
term debt 431 732
OTHER ASSETS: ________ ________
Restricted funds on
deposit 1,485 582 Total Current Liabilities 71,435 56,271
Goodwill 55,860 55,660
Intangible assets - net 37,662 39,601 LONG-TERM LIABILITIES:
Other assets 11,935 12,092 Liabilities to customers
________ ________ on uncompleted contracts
and warranties 2,000 2,000
106,942 107,935 Postretirement benefits 12,751 13,277
Deferred expenses,
PROPERTY, PLANT AND EQUIPMENT: pension and other 42,583 33,775
Land 1,850 2,294 Interest payable to
Buildings and improvements 7,395 11,755 Holdings 18,436 11,062
Machinery and equipment 97,320 101,681 ________ ________
Less accumulated
depreciation (44,086) (38,527) 75,770 60,114
________ ________
LONG-TERM DEBT, less
62,479 77,203 current maturities 207,804 222,188

COMMITMENTS AND
CONTINGENCIES - Note O

COMMON SHAREHOLDERS'
INVESTMENT (DEFICIENCY
IN ASSETS):
Common stock - par
value $.01 per share,
authorized 1,700,000
shares, issued
1,444,650 shares 14 14
Additional paid-in
capital 147,715 147,715
Treasury stock, at cost -
9,050 shares (851) (851)
Accumulated deficit (101,202) (90,416)
Accumulated other
comprehensive loss (53,807) (39,290)
________ ________

(8,131) 17,172
________ ________ ________ ________

$346,878 $355,745 $346,878 $355,745

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' INVESTMENT (DEFICIENCY IN ASSETS)
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)

Notes Accumulated
Additional Receivable Other
Common Paid-In Treasury From Accumulated Comprehensive
Stock Capital Stock Shareholders Deficit Loss

Balance at December 31, 1999 $ 14 $ 144,451 $ (196) $ (524) $ (37,997) $(11,598)

Purchase of treasury
stock (6,550 shares) - - (655) 524 - -
Net loss - - - - (32,797) -
Utilization of net operating
loss carryforwards by
Bucyrus Holdings, LLC - - - - (9,159) -
Translation adjustments - - - - - (6,147)
______ ________ ________ ________ _________ ________

Balance at December 31, 2000 14 144,451 (851) - (79,953) (17,745)

Capital contributions from
Bucyrus Holdings, LLC - 3,264 - - - -
Net loss - - - - (10,463) -
Translation adjustments - - - - - (6,300)
Minimum pension liability
adjustment - - - - - (15,245)
______ ________ ________ ________ _________ ________

Balance at December 31, 2001 14 147,715 (851) - (90,416) (39,290)

Net loss - - - - (10,786) -
Translation adjustments - - - - - (569)
Minimum pension liability
adjustment - - - - - (13,948)
______ ________ ________ ________ _________ ________

Balance at December 31, 2002 $ 14 $147,715 $ (851) $ - $(101,202) $(53,807)

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Bucyrus International, Inc. and Subsidiaries
(Dollars in Thousands)

Years Ended December 31,
2002 2001 2000

Cash Flows From Operating Activities

Net loss $(10,786) $(10,463) $(32,797)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities:
Depreciation 10,666 11,240 11,393
Amortization 4,748 5,414 5,821
Loss on sale of
property, plant and
equipment 655 750 7
Gain on sale of The
Principal Financial
Group shares - (8,704) -
Changes in assets and
liabilities:
Receivables 1,329 3,860 (75)
Inventories (10,953) (5,843) 19,972
Other current assets (825) (12) (953)
Other assets 1,004 (1,431) (1,650)
Current liabilities other
than income taxes, short-
term obligations and
current maturities of
long-term debt 9,618 157 (4,920)
Income taxes 2,186 (546) 1,007
Long-term liabilities
other than deferred
income taxes 2,063 4,269 1,596
________ ________ ________

Net cash provided by (used in)
operating activities 9,705 (1,309) (599)
________ ________ ________

Cash Flows From Investing Activities

Decrease in restricted funds on
deposit (903) (32) (461)
Proceeds from sale of The Principal
Financial Group shares 2,974 5,730 -
Purchases of property, plant
and equipment (5,457) (4,127) (3,501)
Proceeds from sale of property,
plant and equipment 745 536 1,449
Net proceeds from sale and
leaseback transaction 6,657 - -
Purchase of Bennett & Emmott
(1986) Ltd. (200) - -
________ ________ ________

Net cash provided by (used in)
investing activities 3,816 2,107 (2,513)
________ ________ ________

Cash Flows From Financing Activities

Net proceeds from (repayments of)
revolving credit facilities (14,809) (1,052) 5,100
Net increase (decrease)
in other bank borrowings (71) 271 (150)
Proceeds from issuance of
long-term debt 925 1,237 -
Payment of long-term debt (801) (1,641) (2,251)
Payment of refinancing expenses (2,047) - -
Capital contribution from
Bucyrus Holdings, LLC - 1,093 -
Purchase of treasury stock - - (131)
________ ________ ________

Net cash provided by (used in)
financing activities (16,803) (92) 2,568
________ ________ ________

Effect of exchange rate
changes on cash 253 (436) (877)
________ ________ ________
Net increase (decrease) in
cash and cash equivalents (3,029) 270 (1,421)

Cash and cash equivalents at
beginning of year 7,218 6,948 8,369
________ ________ ________

Cash and cash equivalents at
end of year $ 4,189 $ 7,218 $ 6,948

Supplemental Disclosures of
Cash Flow Information

Cash paid during the period for:
Interest $ 11,258 $ 14,297 $ 18,367
Income taxes - net of refunds 2,749 1,522 1,551

Supplemental Schedule of Non-Cash Investing and Financing Activities

On March 20, 2001, the Company recorded an equity contribution from Bucyrus
Holdings, LLC ("Holdings"), the Company's parent, and a corresponding
reduction in interest payable to Holdings, in the amount of $2,171,000, which
represented accrued interest as of June 30, 2000 on the 9-3/4% Senior Notes
due 2007 acquired by Holdings.

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Bucyrus International, Inc. and Subsidiaries

NOTE A - SUMMARY OF ACCOUNTING POLICIES

Nature of Operations

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

Basis of Presentation and Use of Estimates

The consolidated financial statements as of December 31, 2002 and
2001 and for the years ended December 31, 2002, 2001 and 2000 were
prepared under a basis of accounting that reflects the fair value of
the assets acquired and liabilities assumed, and the related expenses
and all debt incurred, in connection with the acquisition of the
Company by Holdings in 1997.

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

Principles of Consolidation

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

Cash Equivalents

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

Restricted Funds on Deposit

Restricted funds on deposit represent cash and temporary investments
used to support the issuance of standby letters of credit and other
obligations. The carrying value of these funds approximates fair
value.

Inventories

Inventories are stated at lower of cost (first-in, first-out method)
or market (replacement cost or estimated net realizable value).
Advances from customers are netted against inventories to the extent
of related accumulated costs. Advances in excess of related costs
and earnings on uncompleted contracts are classified as a liability
to customers.

Goodwill and Intangible Assets

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

Through 2001, goodwill was being amortized on a straight-line basis
over 30 years. During 2000, goodwill was reduced by $9,159,000 to
reflect the utilization of previously unrecognized federal net
operating loss carryforwards which existed at the date the Company
was acquired by Holdings (see Note I). Accumulated amortization was
$10,191,000 at December 31, 2001.

Intangible assets consist of engineering drawings, bill-of-material
listings, software, trademarks and trade names and are being
amortized on a straight-line basis over 10 to 20 years. At
December 31, 2002 and 2001, intangible assets also included
$3,259,000 and $3,551,000, respectively, related to an adjustment to
record an additional minimum pension liability (see Note J).

Property, Plant and Equipment

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

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

Foreign Currency Translation

The assets and liabilities of foreign subsidiaries are translated
into U.S. dollars using year-end exchange rates. Revenues and
expenses are translated at average rates during the year.
Adjustments resulting from this translation are deferred and
reflected as a separate component of Common Shareholders' Investment.
Gains and losses from foreign currency transactions are included in
Engineering and Field Service, Selling, Administrative and
Miscellaneous Expenses in the Consolidated Statements of Operations.
Transaction losses totalled $1,022,000, $780,000 and $277,000 for the
years ended December 31, 2002, 2001 and 2000, respectively. Certain
of the Company's intercompany advances to foreign subsidiaries are
evaluated as not likely to be repaid in the foreseeable future.
Transaction gains and losses on these advances are deferred and
reflected as a component of Common Shareholders' Investment
(Deficiency in Assets).

Comprehensive Income (Loss)

Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," requires the reporting of comprehensive income
(loss) in addition to net income (loss) from operations.
Comprehensive income (loss) is a more inclusive financial reporting
method that includes disclosure of financial information that
historically has not been recognized in the calculation of net income
(loss). The Company has chosen to report comprehensive loss and
accumulated other comprehensive loss which encompasses net loss,
foreign currency translation adjustments and minimum pension
liability adjustments in the Consolidated Statements of Common
Shareholders' Investment (Deficiency in Assets). Information on
accumulated other comprehensive loss is as follows:

Minimum Accumulated
Cumulative Pension Other
Translation Liability Comprehensive
Adjustments Adjustments Loss
(Dollars in Thousands)

Balance at December 31, 1999 $(11,598) $ - $(11,598)
Changes - Year ended
December 31, 2000 (6,147) - (6,147)
________ ________ ________

Balance at December 31, 2000 (17,745) - (17,745)
Changes - Year ended
December 31, 2001 (6,300) (15,245) (21,545)
________ ________ ________

Balance at December 31, 2001 (24,045) (15,245) (39,290)
Changes - Year ended
December 31, 2002 (569) (13,948) (14,517)
________ ________ ________

Balance at December 31, 2002 $(24,614) $(29,193) $(53,807)

Revenue Recognition

Revenue from long-term sales contracts, such as for the manufacture
of Company machines, is recognized using the percentage-of-completion
method. The Company also has long-term maintenance and repair
contracts with customers to supply parts and service over a period of
years. Revenue is recognized in the period in which the parts are
supplied or services provided. The customer is billed monthly and
deferred revenues are recorded based on payments received. Revenue
from all other types of sales is recognized as products are shipped
or services are rendered. At the time a loss on a contract becomes
known, the amount of the estimated loss is recognized in the
consolidated financial statements.

Included in the current portion of liabilities to customers on
uncompleted contracts and warranties are advances in excess of
related costs and earnings on uncompleted contracts of $4,201,000 and
$3,249,000 at December 31, 2002 and 2001, respectively.

Shipping and Handling Fees and Costs

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

Financial Instruments

Based on Company estimates, the carrying amounts of cash equivalents,
receivables, accounts payable, accrued liabilities and variable rate
debt approximated fair value at December 31, 2002 and 2001. The
Company's Senior Notes (see Note G) were bid at 40% and 30% at
December 31, 2002 and 2001, respectively. Based on this information,
management believes the fair value of the Senior Notes was
$60,000,000 and $45,000,000 at December 31, 2002, and 2001,
respectively.

Derivative Financial Instruments

The Company manages foreign currency exchange rate exposure by
utilizing some natural hedges to mitigate some of its transactions
and commitment exposures, and may utilize forward contracts in
certain situations.

Accounting for Stock Options

The Company accounts for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB 25") as allowed by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123").

New Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities"
("SFAS 146"). SFAS 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred
rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by SFAS 146 include lease termination costs
and certain employee severance costs that are associated with a
restructuring, discontinued operations, plant closing, or other exit
or disposal activity. SFAS 146 is to be applied prospectively to
exit or disposal activities initiated after December 31, 2002.
Adoption of SFAS 146 is not expected to have a material effect on the
Company's consolidated financial position, results of operations or
cash flows.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." Interpretation No.
45 requires that a guarantor must recognize, at the inception of a
guarantee, a liability for the fair value of the obligation that it
has undertaken in issuing a guarantee. Interpretation No. 45 also
addresses the disclosure requirements that a guarantor must include
in its financial statements for guarantees issued. The disclosure
requirements in this interpretation are effective for financial
statements ending after December 15, 2002. The initial recognition
and measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31,
2002. The Company has not completed its evaluation of Interpretation
No. 45 and has not assessed the impact the adoption may have on its
financial position, results of operations or cash flows.

NOTE B - RECEIVABLES

Receivables at December 31, 2002 and 2001 include $2,896,000 and
$959,000, respectively, of revenues from long-term contracts which
were not billable at that date. Billings on long-term contracts are
made in accordance with the payment terms as defined in the
individual contracts.

Current receivables are reduced by an allowance for losses of
$1,158,000 and $1,134,000 at December 31, 2002 and 2001,
respectively.

NOTE C - INVENTORIES

Inventories consist of the following:

2002 2001
(Dollars in Thousands)

Raw materials and parts $ 15,509 $ 13,646
Work in process 17,817 12,837
Finished products (primarily
replacement parts) 80,986 75,525
________ ________

$114,312 $102,008

NOTE D - GOODWILL AND INTANGIBLE ASSETS

On June 30, 2001, the FASB issued SFAS 142. SFAS 142 establishes
accounting and reporting standards associated with goodwill and other
intangible assets. With the adoption of SFAS 142, goodwill is no
longer subject to amortization, but instead is subject to an
evaluation for impairment at least annually by applying a two-step
fair-value-based test. Additionally, intangible assets with
indefinite lives are also no longer amortized but are subject to an
evaluation for impairment at least annually by applying a lower-of-
cost-or-market test. Intangible assets with finite lives continue to
be amortized. The Company adopted SFAS 142 on January 1, 2002. For
goodwill, the fair value of the Company's reporting units exceeds the
carrying amounts and an impairment charge is not required. The
Company has also completed an impairment analysis of its indefinite
life intangible assets in accordance with the provisions of SFAS 142
and has determined that an impairment charge is not required. The
following table summarizes the effects of SFAS 142 on the Company's
net loss and loss per share for the prior periods presented:

Years Ended December 31,
2002 2001 2000
(Dollars In Thousands, Except Per Share Amounts)

Reported net loss $(10,786) $(10,463) $(32,797)
Goodwill amortization,
net of tax - 2,162 2,355
Trademarks/Trade names
amortization,
net of tax - 483 483
________ ________ ________

Adjusted net loss $(10,786) $ (7,818) $(29,959)

Basic and diluted loss
per share:
Reported net loss $ (7.51) $ (7.29) $ (22.76)
Goodwill amortization - 1.50 1.63
Trademarks/Trade names
amortization - .34 .34
________ ________ ________
Adjusted net loss
per share $ (7.51) $ (5.45) $ (20.79)

Intangible assets consist of the following:

December 31, 2002 December 31, 2001
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
(Dollars in Thousands)
Amortized intangible
assets:
Engineering drawings $ 25,500 $ (6,719) $ 25,500 $ (5,443)
Bill of material
listings 2,856 (752) 2,856 (610)
Software 2,288 (1,206) 2,288 (977)
________ ________ ________ ________

$ 30,644 $ (8,677) $ 30,644 $ (7,030)

Unamortized intangible
assets:
Trademarks/Trade names $ 12,436 $ 12,436
Intangible pension
asset 3,259 3,551
________ ________

$ 15,695 $ 15,987

The aggregate intangible amortization expense for the year ended
December 31, 2002 was $1,647,000. The estimated annual amortization
expense in each of the years 2003 through 2006 is $1,647,000. The
estimated amortization expense in 2007 is $1,585,000.

During the year ended December 31, 2002, goodwill increased by
$200,000 as the result of contingent consideration paid in connection
with the acquisition of certain assets of Bennett & Emmott (1986)
Ltd. in 1999.

NOTE E - SALE AND LEASEBACK

On January 4, 2002, the Company completed a sale and leaseback
transaction for a portion of its land and buildings in South
Milwaukee, Wisconsin. The Company is leasing back the property under
an operating lease over a period of twenty years with options for
renewals. Net proceeds received from this transaction were
$7,157,000 less $500,000 required as a security deposit. No gain or
loss was recognized on this transaction.

NOTE F - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

2002 2001
(Dollars in Thousands)

Trade accounts payable $ 30,607 $ 27,538
Wages and salaries 5,917 4,918
Pension 3,706 692
Other 18,986 14,612
________ ________

$ 59,216 $ 47,760

NOTE G - LONG-TERM DEBT AND FINANCING ARRANGEMENTS

Long-term debt consists of the following:

2002 2001
(Dollars in Thousands)

9-3/4% Senior Notes due 2007 $150,000 $150,000
Revolving credit facility 54,023 63,100
Mortgage loan at Bucyrus
Canada Limited 2,178 -
Revolving term loan at
Bucyrus Canada Limited - 5,732
Non-revolving term loan at
Bucyrus Canada Limited - 2,488
Other 2,034 1,600
________ ________

208,235 222,920
Less current maturities of
long-term debt (431) (732)
________ ________

$207,804 $222,188

The Company has outstanding $150,000,000 of 9-3/4% Senior Notes due
2007 (the "Senior Notes") which were issued pursuant to an indenture
among the Company, certain of its wholly-owned domestic subsidiaries
(the "Guarantor Subsidiaries"), and BNY Midwest Trust Company, as
Trustee (the "Senior Notes Indenture"). The Senior Notes mature on
September 15, 2007 and interest thereon is payable each March 15 and
September 15. During 2000, Holdings acquired $75,635,000 of the
Company's $150,000,000 issue of Senior Notes. Holdings has agreed as
a part of the Loan and Security Agreement (see below), and previously
the Credit Agreement (see below), to defer the receipt of interest on
these Senior Notes during the life of the two agreements. At
December 31, 2002 and 2001, $18,436,000 and $11,062,000,
respectively, of interest was accrued and payable to Holdings. The
amendment to the Credit Agreement dated March 20, 2001 required
Holdings to contribute to equity of the Company a portion of the
accrued interest. As a result, on March 20, 2001, the Company
recorded an equity contribution from Holdings and a corresponding
reduction in interest payable to Holdings in the amount of
$2,171,000, which represented accrued interest as of June 30, 2000 on
the Senior Notes acquired by Holdings.

The Senior Notes Indenture contains certain covenants that, among
other things, limit the ability of the Company and the Guarantor
Subsidiaries to: (i) incur additional indebtedness; (ii) pay any
dividends or make any other distributions with respect to capital
stock; (iii) make certain investments; (iv) use the proceeds of the
sale of certain assets; (v) enter into certain transactions with
affiliates; (vi) create liens; (vii) enter into certain sale and
leaseback transactions; (viii) enter into certain mergers and
consolidations or a sale of substantially all of its assets; and (ix)
prepay the Senior Notes. Such covenants are subject to important
qualifications and limitations. At December 31, 2002, the Company
was in compliance with these covenants.

On March 7, 2002, the Company entered into a Loan and Security
Agreement with GMAC Business Credit, LLC (the "Loan and Security
Agreement") which provides the Company with an $85,000,000 senior
secured revolving credit facility. On January 9, 2003, the Loan and
Security Agreement was amended to reduce the maximum availability of
the revolving credit facility to $76,000,000. The Loan and Security
Agreement, as amended, expires on January 8, 2005. Proceeds from the
Loan and Security Agreement were used to repay in full all
outstanding borrowings under the previous Credit Agreement and
Bucyrus Canada Limited revolving term loan (see below). Outstanding
borrowings under the Loan and Security Agreement bear interest equal
to either the prime rate plus an applicable margin (2% to 2.25%) or
LIBOR plus an applicable margin (3.5% to 3.75%) and are subject to a
borrowing base formula based on receivables and inventory.
Borrowings at December 31, 2002 were $54,023,000 at a weighted
average interest rate of 6.3%. The average borrowings under the Loan
and Security Agreement (and previously the Credit Agreement) during
2002 was $61,628,000 at a weighted average interest rate of 5.9%, and
the maximum borrowing outstanding was $69,333,000. Substantially all
of the domestic assets of the Company (excluding real property) and
the receivables and inventory of the Company's Canadian subsidiary
are pledged as collateral under the Loan and Security Agreement. In
addition, all outstanding capital stock of the Company and its
domestic subsidiaries as well as 65% of the capital stock of the
Company's foreign subsidiaries are pledged as collateral. The Loan
and Security Agreement contains covenants which, among other things,
require the Company to maintain certain financial ratios and minimum
levels of EBITDA, as defined. At December 31, 2002, the Company was
in compliance with these covenants. The amount available for
borrowings under the Loan and Security Agreement at December 31, 2002
was $19,314,000. This amount must be reduced by $5,000,000 which is
the minimum availability the Company must maintain at all times.

The Company previously had a Credit Agreement with Bank One,
Wisconsin (the "Credit Agreement") which provided the Company with a
$75,000,000 senior secured revolving credit facility (the "Revolving
Credit Facility") with a $25,000,000 sublimit for standby letters of
credit. Borrowings under the Revolving Credit Facility were at
variable interest rates and were subject to a borrowing base formula
based on receivables, inventory and machinery and equipment. Direct
borrowings under the Revolving Credit Facility at December 31, 2001
were $63,100,000 at a weighted average interest rate of 5.3%. The
average borrowing under the Revolving Credit Facility during 2001 was
$68,642,000 at a weighted average interest rate of 7.7%, and the
maximum borrowing outstanding was $73,375,000. The average borrowing
under the Revolving Credit Facility during 2000 was $64,512,000 at a
weighted average rate of 9.9%, and the maximum borrowing outstanding
was $71,200,000.

At December 31, 2002 and 2001, there were $2,199,000 and $1,200,000,
respectively, of standby letters of credit outstanding under all
Company bank facilities.

A failure to comply with the obligations contained in the Loan and
Security Agreement or the Senior Notes Indenture could result in an
Event of Default (as defined) under the Loan and Security Agreement
or an Event of Default (as defined) under the Senior Notes Indenture
that, if not cured or waived, would permit acceleration of the
relevant debt and acceleration of debt under other instruments that
may contain cross-acceleration or cross-default provisions. While
the Company believes that current levels of cash and liquidity,
together with funds generated by operations and funds available from
the Loan and Security Agreement, will be sufficient to permit the
Company to satisfy its debt service requirements for the foreseeable
future, there can be no assurance that the Company's performance will
be sufficient for the Company to maintain compliance with the
financial covenants under the Loan and Security Agreement and satisfy
its debt service obligations under all circumstances.

On April 30, 2002, Bucyrus Canada Limited, a wholly-owned subsidiary
of the Company, entered into a new C$3,510,000 mortgage loan. The
term of the mortgage loan is 15 years at an initial rate of 7.55%
which is fixed for the first five years. The balance outstanding at
December 31, 2002 was C$3,425,000. The mortgage loan is
collateralized by the land, buildings and certain building
attachments owned by Bucyrus Canada Limited. The net book value of
this collateral at December 31, 2002 was C$4,283,000. Previously,
Bucyrus Canada Limited had a C$15,000,000 credit facility with The
Bank of Nova Scotia. On March 7, 2002, the outstanding balance of
C$9,083,000 under the C$10,000,000 revolving term loan portion of
this credit facility was paid in full with proceeds from the Loan and
Security Agreement. On April 30, 2002, Bucyrus Canada Limited paid
the remaining non-revolving term loan portion of the credit facility
in full with proceeds from the new mortgage loan. The new mortgage
loan contains a number of financial covenants which, among other
items, require Bucyrus Canada Limited to maintain certain financial
ratios on an annual basis. At December 31, 2002, Bucyrus Canada
Limited was in compliance with all applicable covenants.

Maturities of long-term debt after giving effect to the new Loan and
Security Agreement are as follows for each of the next five years:

(Dollars in Thousands)

2003 $ 431
2004 317
2005 54,352
2006 282
2007 150,177

NOTE H - COMMON SHAREHOLDERS' INVESTMENT

In 2001, Holdings made capital contributions to the Company in the
amount of $1,093,000 of cash and $2,171,000 of accrued interest on
Senior Notes owned by Holdings (see Note G).

In 1998, the Company's Board of Directors adopted the Bucyrus
International, Inc. 1998 Management Stock Option Plan (the "1998
Option Plan") which authorizes the granting of stock options to key
employees for up to a total of 200,000 shares of common stock of the
Company at exercise prices to be determined in accordance with the
provisions of the 1998 Option Plan. Other than the options granted
on August 1, 2001, all other options granted under the 1998 Option
Plan are targeted to vest on the last day of the plan year at the
rate of 25% of the aggregate number of shares of common stock
underlying each series of options per year, provided that the Company
attains specified EBITDA goals. In the event that the EBITDA goal is
not attained in any plan year, the options scheduled to vest at the
end of that plan year will vest according to a pro rata schedule set
forth in the 1998 Option Plan. Options granted under the 1998 Option
Plan on August 1, 2001 are targeted to vest at the rate of 25% of the
total option shares covered by the grant per year for the four (4)
years subsequent to the date of the grant. Notwithstanding the
foregoing, all options granted under the 1998 Option Plan shall vest
automatically on the ninth anniversary of the date of the grant,
regardless of performance criteria or, in the event of a Company Sale
(as defined in the 1998 Option Plan), immediately prior to such sale
provided such sale occurs prior to the fourth anniversary of the
grant of options. Options granted pursuant to the 1998 Option Plan
may be forfeited or repurchased by the Company at fair value, as
defined, in the event of the participating employee's termination,
and if not previously forfeited or exercised, expire and terminate no
later than ten years after the date of grant or, in the event of a
Company Sale, upon the consummation of such sale.

The following table sets forth the activity and outstanding balances
of options exercisable for shares of common stock under the 1998
Option Plan:

Options Available For
Outstanding Future Grants

Balances at January 1, 2000 78,300 121,700

Options forfeited ($100 per share) (19,950) 19,950
________ ________

Balances at December 31, 2000 58,350 141,650

Options forfeited (1,750) 1,750
($100 per share)
Granted on August 1, 2001
($1 per share) 143,400 (143,400)
________ ________

Balances at December 31, 2001 200,000 0

Options forfeited ($100 per share) (500) 500
________ ________

Balances at December 31, 2002 199,500 500

At December 31, 2002, 33,234 of the options outstanding were vested.
The outstanding options had a weighted average exercise price of
$28.84 per share and a weighted average remaining contractual life of
7.6 years.

The Company accounted for the 1998 Option Plan in accordance with
APB 25, as allowed by SFAS 123. Had compensation expense for this
plan been determined consistent with SFAS 123, the Company's net loss
and net loss per share would have been reduced to the following pro
forma amounts:

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands,
Except Per Share Amounts)
Net loss:
As reported $(10,786) $(10,463) $(32,797)
Pro forma (11,069) (10,721) (32,957)

Net loss per share
of common stock
(basic and diluted):
As reported (7.51) (7.29) (22.76)
Pro forma (7.71) (7.47) (22.87)

The weighted average grant date fair value of stock options granted
in 2001 under the 1998 Option Plan was $.80 per option. No options
were granted in 2002 or 2000. The fair value of grants was estimated
on the date of grant using the minimum value method with the
following weighted average assumptions:

1998 Option Plan
2001

Risk-free interest rate 4.7%
Expected dividend yield 0%
Expected life 5 years
Calculated volatility N/A

NOTE I - INCOME TAXES

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

Loss before income taxes consists of the following:

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands)

United States $(18,039) $(12,719) $(34,193)
Foreign 12,300 5,666 4,461
________ ________ ________

Total $ (5,739) $ (7,053) $(29,732)

The provision for income tax expense consists of the following:

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands)

Foreign income taxes:
Current $ 4,505 $ 2,581 $ 2,433
Deferred 857 737 33
________ ________ ________

Total 5,362 3,318 2,466
________ ________ ________
Federal income taxes:
Current (421) - 424
Deferred - - -
________ ________ ________

Total (421) - 424
________ ________ ________
Other (state and
local taxes):
Current 106 92 175
Deferred - - -
________ ________ ________

Total 106 92 175
________ ________ ________
Total income
tax expense $ 5,047 $ 3,410 $ 3,065

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

Years Ended December 31,
2002 2001 2000
Tax Tax Tax
Expense Expense Expense
(Benefit) Percent (Benefit) Percent (Benefit) Percent
(Dollars in Thousands)

Tax expense (benefit) at federal
statutory rate $ (2,008) (35.0)% $ (2,469) (35.0)% $(10,406) (35.0)%
Valuation allowance adjustments 3,099 54.0 2,750 39.0 9,828 33.0
Impact of foreign subsidiary income,
tax rates and tax credits 4,833 84.2 2,902 41.1 2,201 7.4
State income taxes net of federal
income tax benefit 69 1.2 60 .9 114 .4
Nondeductible goodwill amortization - - 757 10.7 824 2.8
Extraterritorial income exclusion (665) (11.6) (560) (7.9) - -
Alternative minimum tax (421) (7.3) - - 424 1.4
Other items 140 2.4 (30) (.5) 80 .3
________ ______ ________ ______ ________ ______

Total income tax expense $ 5,047 87.9% $ 3,410 48.3% $ 3,065 10.3%

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

December 31,
2002 2001
(Dollars in Thousands)
Deferred tax assets:
Postretirement benefits $ 5,592 $ 5,785
Minimum pension liability
adjustment 11,677 6,098
Inventory valuation
provisions 5,971 6,181
Accrued and other
liabilities 4,866 4,500
Research and development
expenditures 3,752 3,413
Tax loss carryforward 22,031 27,176
Tax credit carryforward 479 900
Other items 1,293 727
________ ________

Total deferred tax assets 55,661 54,780

Deferred tax liabilities:
Excess of book basis over
tax basis of property,
plant and equipment and
intangible assets (30,356) (33,460)

Valuation allowance (24,539) (19,697)
________ ________

Net deferred tax asset $ 766 $ 1,623

The classification of the net deferred tax assets and liabilities is
as follows:

December 31,
2002 2001
(Dollars in Thousands)

Current deferred tax asset $ 565 $ 1,429
Long-term deferred tax asset 1,080 863
Current deferred tax liability (478) (279)
Long-term deferred tax
liability (401) (390)
________ ________

Net deferred tax asset $ 766 $ 1,623

Due to the recent history of domestic net operating losses, a
valuation allowance has been used to reduce the net deferred tax
assets (after giving effect to deferred tax liabilities) for domestic
operations to an amount that is more likely than not to be realized.
In 2002, the valuation allowance increased by $4,842,000 to offset an
increase in net deferred tax assets for which no tax benefit was
recognized.

During 2000, Holdings elected to be treated as a corporation for
income tax purposes. As a result, the Company, along with its
domestic subsidiaries, and Holdings began filing consolidated federal
income tax returns. The consolidated tax liability of the affiliated
group was allocated based on each company's positive contribution to
consolidated federal taxable income.

As discussed in Note G, during 2000, Holdings acquired $75,635,000 of
the Company's $150,000,000 issue of Senior Notes. This transaction
resulted in taxable income which was offset by the use of previously
unrecognized net operating loss carryforwards ("NOL"). Approximately
$9,159,000 of the NOL utilized existed at the date the Company was
acquired by Holdings. As a result, the utilization of the NOL and
the reversal of the valuation allowance was accounted for as a
reduction in goodwill and a distribution to Holdings.

As of December 31, 2002, the Company has available approximately
$55,100,000 of federal NOL from the years 1990 through 1999 and 2001,
expiring in the years 2005 through 2019 and 2021, respectively, to
offset against future federal taxable income. Because both the 1997
acquisition of the Company by Holdings and the 1994 consummation of
the Second Amended Joint Plan of Reorganization of B-E Holdings, Inc.
and the Company as modified on December 1, 1994 (the "Amended Plan")
resulted in an "ownership change" within the meaning of Section 382
of the Internal Revenue Code, the use of the majority of such NOL is
subject to certain annual limitations. The total NOL available to
offset federal taxable income in 2003 is approximately $33,700,000.

As of December 31, 2002, the Company also has a federal alternative
minimum tax credit carryforward of $479,000 which carries forward
indefinitely. However, because the credit arose prior to the
effective date of the Amended Plan, it will not be usable until the
year 2010.

The Company also has a significant amount of state NOL (which expire
in the years 2002 through 2014, 2016 and 2017) available to offset
future state taxable income in states where it has significant
operations. Since the majority of states in which the Company files
its state returns follow rules similar to federal rules, it is
expected that the usage of state NOL will be limited to approximately
$73,000,000.

Cumulative undistributed earnings of foreign subsidiaries that are
considered to be permanently reinvested, and on which U.S. income
taxes have not been provided by the Company, amounted to
approximately $20,830,000 at December 31, 2002. It is not
practicable to estimate the amount of additional tax which would be
payable upon repatriation of such earnings; however, due to foreign
tax credit limitations, higher effective U.S. income tax rates and
foreign withholding taxes, additional taxes could be incurred.

NOTE J - PENSION AND RETIREMENT PLANS

The Company has several pension and retirement plans covering
substantially all employees.

The following tables set forth the domestic plans' funded status and
amounts recognized in the consolidated financial statements at
December 31, 2002 and 2001:

Years Ended December 31,
2002 2001
(Dollars in Thousands)
Change in projected benefit
obligation:
Projected benefit obligation
at beginning of year $ 77,962 $ 71,912
Service cost 1,609 1,439
Interest cost 5,401 5,270
Amendments - 3,551
Actuarial loss 3,023 2,020
Benefits paid (5,988) (6,230)
________ ________
Projected benefit obligation
at end of year 82,007 77,962
________ ________

Change in plan assets:
Fair value of plan assets
at beginning of year 59,851 69,896
Actual loss on
plan assets (6,339) (4,993)
Employer contributions 692 1,178
Benefits paid (5,988) (6,230)
________ ________
Fair value of plan assets
at end of year 48,216 59,851
________ ________

Net amount recognized:
Funded status (33,791) (18,111)
Unrecognized prior
service cost 2,366 2,571
Unrecognized net
actuarial loss 31,207 17,413
________ ________

Net amount recognized $ (218) $ 1,873

Amounts recognized in
consolidated balance
sheets:
Long-term prepaid benefit
costs $ 3,928 $ 5,289
Accrued benefit
liabilities (36,598) (22,212)
Intangible asset 3,259 3,551
Accumulated other
comprehensive loss 29,193 15,245
________ ________

Net amount recognized $ (218) $ 1,873

Weighted-average assumptions
at end of year:
Discount rate 6.75% 7.25%
Expected return on
plan assets 9% 9%
Rate of compensation
increase 3.75% - 4% 4.5%

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 1,609 $ 1,439 $ 1,590
Interest cost 5,401 5,270 5,274
Expected return
on plan assets (5,155) (6,090) (6,847)
Amortization of
prior service cost 206 (86) (91)
Recognized net
actuarial
loss 723 - 24
________ ________ ________
Total benefit
cost (credit) $ 2,784 $ 533 $ (50)

The Company was required to record an additional minimum pension
liability of $32,452,000 and $18,796,000 at December 31, 2002 and
2001, respectively. This liability represented the amount by which
the accumulated benefit obligation exceeded the sum of the fair
market value of plan assets and accrued amounts previously recorded.
The additional liability was offset by an intangible asset of
$3,259,000 and $3,551,000 at December 31, 2002 and 2001,
respectively, which was equal to the previously unrecognized prior
service cost. The remaining amount of $29,193,000 and $15,245,000 at
December 31, 2002 and 2001, respectively, was recorded as a component
of Accumulated Other Comprehensive Loss in Common Shareholders'
Investment (Deficiency in Assets). At December 31, 2002 and 2001, a
long-term pension liability of $32,903,000 and $21,520,000,
respectively, including the minimum liability, was included in
Deferred Expenses and Other in the Consolidated Balance Sheet.

The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were $82,007,000,
$80,886,000 and $48,216,000, respectively, at December 31, 2002.
These amounts were $77,962,000, $76,773,000 and $59,851,000,
respectively, at December 31, 2001.

The Company has 401(k) Savings Plans available to substantially all
United States employees. Matching employer contributions are made in
accordance with plan provisions subject to certain limitations.
Matching employer contributions made were $720,000, $743,000 and
$848,000 in 2002, 2001 and 2000, respectively.

NOTE K - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

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

The following tables set forth the plan's status and amounts
recognized in the consolidated financial statements at December 31,
2002 and 2001:

Years Ended December 31,
2002 2001
(Dollars in Thousands)
Change in benefit obligation:
Benefit obligation at
beginning of year $ 16,027 $ 13,031
Service cost 557 409
Interest cost 1,054 929
Plan participants'
contributions 119 95
Net actuarial loss 395 3,368
Benefits paid (2,116) (1,805)
________ ________
Benefit obligation
at end of year 16,036 16,027
________ ________

Change in plan assets:
Fair value of plan assets
at beginning of year - -
Employer contributions 1,997 1,710
Plan participants'
contributions 119 95
Benefits paid (2,116) (1,805)
________ ________
Fair value of plan assets
at end of year - -
________ ________
Net amount recognized:
Funded status (16,036) (16,027)
Unrecognized net
actuarial loss 3,673 3,359
Unrecognized prior
service credit (1,998) (2,219)
________ ________

Net amount recognized $(14,361) $(14,887)

Amounts recognized in
consolidated balance
sheets:
Accrued benefit liability $ 1,610 $ 1,610
Long-term benefit liability 12,751 13,277
________ ________

Net amount recognized $ 14,361 $ 14,887

Weighted-average assumptions
at end of year - discount rate 6.75% 7.25%

For measurement purposes, a 10% gross health care trend rate was used
for benefits for 2002. Trend rates were assumed to decrease
gradually to 5% in 2007 and remain at that level thereafter.

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands)
Components of
net periodic
benefit cost:
Service cost $ 557 $ 409 $ 420
Interest cost 1,054 929 970
Recognized net
actuarial
loss 81 - -
Amortization
of prior
service cost (221) (221) (221)
________ ________ ________
Net periodic
benefit cost $ 1,471 $ 1,117 $ 1,169

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

One Percentage One Percentage
Point Increase Point Decrease
(Dollars in Thousands)

Effect on total of service
and interest cost components $ 150 $ (130)

Effect on postretirement
benefit obligation 1,207 (1,064)

NOTE L - RESEARCH AND DEVELOPMENT

Expenditures for design and development of new products and
improvements of existing mining machinery products, including
overhead, aggregated $6,512,000 in 2002, $5,900,000 in 2001 and
$7,299,000 in 2000. All engineering and product development costs
are charged to engineering and field service expense as incurred.

NOTE M - CALCULATION OF NET LOSS PER SHARE OF COMMON STOCK

Basic and diluted net loss per share of common stock was computed by
dividing net loss by the weighted average number of shares of common
stock outstanding. Stock options outstanding were not included in
the per share calculations because they did not have a dilutive
effect. The following is a reconciliation of the numerators and the
denominators of the basic and diluted net loss per share of common
stock calculations:

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands,
Except Per Share Amounts)
Basic and Diluted

Net loss $ (10,786) $ (10,463) $ (32,797)

Weighted
average shares
outstanding 1,435,600 1,435,600 1,441,158

Net loss
per share $ (7.51) $ (7.29) $ (22.76)

NOTE N - SEGMENT AND GEOGRAPHICAL INFORMATION

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

Due to the relatively low number of new machines sold each year, the
profitability of each machine sale is evaluated on an order by order
basis with specific margin goals being established prior to the sale
of the machine. Historically, there has been very little variance
between the estimated margin on a machine sale and the actual margin
achieved. The sales of replacement parts and services occur on a
consistent basis throughout the year. The gross margins on
replacement parts and service sales are regularly reviewed by the
Company's chief operating decision maker to assess performance. Over
the past several years, the sale of replacement parts and services
has accounted for approximately 80% of the Company's annual net
sales. Operating expenses and assets are managed on a macro basis
and are not allocated to machines or replacement parts and services
as part of performance assessment.

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

The following table summarizes the Company's net sales:

Years Ended December 31,
2002 2001 2000
(Dollars in Thousands)

Machines $ 47,551 $ 64,552 $ 68,925
Parts and services 242,047 226,024 211,518
________ ________ ________

$289,598 $290,576 $280,443

Financial information by geographical area is set forth in the
following table. Each geographic area represents the origin of the
financial information.

Sales to
External Long-Lived
Customers Assets
(Dollars in Thousands)
2002

United States $140,326 $ 51,964
Australia 33,357 247
South America 56,079 4,732
Canada 32,204 4,550
Other Foreign 27,632 986
________ ________

$289,598 $ 62,479

2001

United States $153,805 $ 66,075
Australia 35,870 269
South America 49,132 5,334
Canada 30,910 4,719
Other Foreign 20,859 806
________ ________

$290,576 $ 77,203

2000

United States $151,841 $ 73,390
Australia 33,598 342
South America 44,257 5,780
Canada 26,459 5,245
Other Foreign 24,288 1,796
________ ________

$280,443 $ 86,553

The Company does not consider itself to be dependent upon any single
customer or group of customers; however, on an annual basis a single
customer may account for a large percentage of sales, particularly
new machine sales. In 2002, 2001 and 2000, one customer accounted
for approximately 12%, 11% and 11%, respectively, of the Company's
consolidated net sales.

NOTE O - COMMITMENTS, CONTINGENCIES AND CREDIT RISKS

Environmental

Expenditures for ongoing compliance with environmental regulations
that relate to current operations are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or
future revenue generation are expensed. Liabilities are recorded
when environmental assessments indicate that remedial efforts are
probable and the costs can be reasonably estimated. Estimates of the
liability are based upon currently available facts, existing
technology and presently enacted laws and regulations. These
liabilities are included in the Consolidated Balance Sheets at their
undiscounted amounts. Recoveries are evaluated separately from the
liability and, if appropriate, are recorded separately from the
associated liability in the Consolidated Balance Sheets.

Product Warranty

The Company recognizes the cost associated with its warranty policies
on its products at the time of sale. The amount recognized is based
on historical experience. The following is a reconciliation of the
changes in accrued warranty costs for the year ended December 31,
2002:
(Dollars in Thousands)

Balance at January 1, 2002 $ 2,951
Provision 3,793
Charges (3,147)
________

Balance at December 31, 2002 $ 3,597

Product Liability

The Company is normally subject to numerous product liability claims,
many of which relate to products no longer manufactured by the
Company or its subsidiaries, and other claims arising in the ordinary
course of business. The Company has insurance covering most of said
claims, subject to varying deductibles up to $3,000,000, and has
various limits of liability depending on the insurance policy year in
question. It is the view of management that the final resolution of
said claims and other similar claims which are likely to arise in the
future will not individually or in the aggregate have a material
effect on the Company's financial position, results of operations or
cash flows, although no assurance to that effect can be given.

Asbestos Liability

The Company has been named as a co-defendant in 278 personal injury
liability asbestos cases, involving approximately 1,400 plaintiffs,
which are pending in various state courts. In all of these cases,
insurance carriers have accepted or are expected to accept the
defense of such cases. These cases are in preliminary stages and the
Company does not believe that costs associated with these matters
will have a material effect on the Company's financial position,
results of operations or cash flows, although no assurance to that
effect can be given.

Other Litigation

The Company is involved in various other litigation arising in the
normal course of business. It is the view of management that the
Company's recovery or liability, if any, under pending litigation is
not expected to have a material effect on the Company's financial
position, results of operations or cash flows, although no assurance
to that effect can be given.

Commitments

The Company has obligations under various operating leases and rental
and service agreements. The expense relating to these agreements was
$5,940,000 in 2002, $3,616,000 in 2001 and $4,170,000 in 2000.
Future minimum annual payments under noncancellable agreements,
including the sale and leaseback agreement (see Note E), are as
follows:

(Dollars in Thousands)

2003 $ 5,680
2004 4,737
2005 3,373
2006 1,777
2007 1,446
After 2007 17,132
________

$ 34,145

Management Services Agreement

American Industrial Partners ("AIP") provides substantial ongoing
financial and management services to the Company utilizing the
extensive operating and financial experience of AIP's principals.
Pursuant to a management services agreement among AIP, the Company
and the Guarantor Subsidiaries, AIP provides general management,
financial and other corporate advisory services to the Company for an
annual fee of $1,450,000 and is reimbursed for out-of-pocket
expenses. Payment of the annual fee is subordinated in right of
payment to the Loan and Security Agreement. At December 31, 2002 and
2001, $4,364,000 of fees was deferred and payable to AIP under this
agreement and is included in Deferred Expenses, Pension and Other in
the Consolidated Balance Sheets. In addition, at December 31, 2002,
$725,000 of fees under this agreement was currently payable and is
included in Accrued Expenses in the Consolidated Balance Sheet.

AIP has agreed to waive its right to receive interest on unpaid
management fees as defined in the current Management Services
Agreement through December 31, 2002. If the lenders under the Loan
and Security Agreement were to permit retroactive accretion of
interest, there may be a retroactive amount due to AIP of $1,051,000
as of December 31, 2002.

Credit Risks

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

NOTE P - RESTRUCTURING

Due to a reduction in new orders, the Company continues to reduce a
portion of its manufacturing production workforce through layoffs and
also reduce the number of its salaried employees. These activities
resulted in restructuring charges of $1,308,000, $899,000 and
$2,689,000 during the years ended December 31, 2002, 2001 and 2000,
respectively. Such charges primarily relate to severance payments
and related matters and are included in Engineering and Field
Service, Selling, Administrative and Miscellaneous Expenses in the
Consolidated Statement of Operations. Substantially all of these
restructuring charges were paid in the year incurred.

NOTE Q - OTHER INCOME

In December 2001, the Company, as a policyholder, received an
allocation of 369,918 shares as a result of the demutualization of
The Principal Financial Group. Net proceeds from the sale of these
shares by the Company were $8,704,000 and is recognized as Other
Income in the Consolidated Statement of Operations for the year ended
December 31, 2001. Of the net proceeds $2,974,000 was received on
January 2, 2002 for shares sold in 2001 and is included in
Receivables in the Consolidated Balance Sheet at December 31, 2001.

NOTE R - SUPPLEMENTAL CONSOLIDATING CONDENSED FINANCIAL INFORMATION

The Company's payment obligations under the Senior Notes are
guaranteed by the Guarantor Subsidiaries. Such guarantees are full,
unconditional and joint and several. Separate financial statements
of the Guarantor Subsidiaries are not presented because the Company's
management has determined that they would not be material to
investors. The following supplemental financial information sets
forth, on an unconsolidated basis, statement of operations, balance
sheet and statement of cash flow information for the Company (the
"Parent Company"), for the Guarantor Subsidiaries and for the
Company's non-guarantor subsidiaries (the "Other Subsidiaries"). The
supplemental financial information reflects the investments of the
Company in the Guarantor and Other Subsidiaries using the equity
method of accounting. The Company has determined that it is not
practicable to allocate goodwill, intangible assets and deferred
income taxes to the Guarantor Subsidiaries and Other Subsidiaries.
Parent Company amounts for net earnings (loss) and common
shareholders' investment differ from consolidated amounts as
intercompany profit in subsidiary inventory has not been eliminated
in the Parent Company statement but has been eliminated in the
Consolidated Totals.

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2002
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

Revenues:
Net sales $148,559 $ 46,890 $155,481 $(61,332) $289,598
Other income 2,993 3 1,320 (4,016) 300
________ ________ ________ ________ ________

151,552 46,893 156,801 (65,348) 289,898
________ ________ ________ ________ ________

Costs and Expenses:
Cost of products sold 122,167 46,500 125,127 (60,278) 233,516
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 24,218 1,940 17,291 - 43,449
Interest expense 19,403 1,368 1,917 (4,016) 18,672
________ ________ ________ ________ ________

165,788 49,808 144,335 (64,294) 295,637
________ ________ ________ ________ ________

Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (14,236) (2,915) 12,466 (1,054) (5,739)
Income taxes (benefit) (8) 24 5,031 - 5,047
________ ________ ________ ________ ________

Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (14,228) (2,939) 7,435 (1,054) (10,786)

Equity in net earnings of
consolidated subsidiaries 4,496 - - (4,496) -
________ ________ ________ ________ ________

Net earnings (loss) $ (9,732) $ (2,939) $ 7,435 $ (5,550) $(10,786)

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2001
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

Revenues:
Net sales $151,036 $ 51,080 $144,616 $(56,156) $290,576
Other income 12,757 51 851 (4,517) 9,142
________ ________ ________ ________ ________

163,793 51,131 145,467 (60,673) 299,718
________ ________ ________ ________ ________

Costs and Expenses:
Cost of products sold 130,495 49,354 120,023 (56,081) 243,791
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 24,511 937 16,647 - 42,095
Interest expense 20,697 1,679 3,026 (4,517) 20,885
________ ________ ________ ________ ________

175,703 51,970 139,696 (60,598) 306,771
________ ________ ________ ________ ________

Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (11,910) (839) 5,771 (75) (7,053)
Income taxes 511 23 2,876 - 3,410
________ ________ ________ ________ ________

Earnings (loss) before
equity in net earnings of
consolidated subsidiaries (12,421) (862) 2,895 (75) (10,463)

Equity in net earnings of
consolidated subsidiaries 2,033 - - (2,033) -
________ ________ ________ ________ ________

Net earnings (loss) $(10,388) $ (862) $ 2,895 $ (2,108) $(10,463)

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Operations
For the Year Ended December 31, 2000
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

Revenues:
Net sales $159,376 $ 37,866 $137,408 $(54,207) $280,443
Other income 5,177 4 726 (4,693) 1,214
________ ________ ________ ________ ________

164,553 37,870 138,134 (58,900) 281,657
________ ________ ________ ________ ________

Costs and Expenses:
Cost of products sold 142,589 35,593 115,134 (54,182) 239,134
Engineering and field
service, selling,
administrative
and miscellaneous
expenses 34,421 1,225 14,515 - 50,161
Interest expense 21,476 1,889 3,422 (4,693) 22,094
________ ________ ________ ________ ________

198,486 38,707 133,071 (58,875) 311,389
________ ________ ________ ________ ________

Earnings (loss) before
income taxes and equity
in net earnings of
consolidated subsidiaries (33,933) (837) 5,063 (25) (29,732)
Income taxes 848 74 2,143 - 3,065
________ ________ ________ ________ ________

Earnings (loss) before equity
in net earnings of
consolidated subsidiaries (34,781) (911) 2,920 (25) (32,797)

Equity in net earnings of
consolidated subsidiaries 2,009 - - (2,009) -
________ ________ ________ ________ ________

Net earnings (loss) $(32,772) $ (911) $ 2,920 $ (2,034) $(32,797)

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 2002
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ - $ 24 $ 4,165 $ - $ 4,189
Receivables 20,100 6,006 26,664 - 52,770
Intercompany receivables 76,916 347 24,222 (101,485) -
Inventories 63,648 7,493 49,705 (6,534) 114,312
Prepaid expenses and
other current assets 845 311 5,030 - 6,186
________ ________ ________ _________ ________

Total Current Assets 161,509 14,181 109,786 (108,019) 177,457

OTHER ASSETS:
Restricted funds on deposit 758 - 727 - 1,485
Goodwill 55,660 - 200 - 55,860
Intangible assets - net 37,662 - - - 37,662
Other assets 10,135 - 1,800 - 11,935
Investment in subsidiaries 13,525 - - (13,525) -
________ ________ ________ _________ ________

117,740 - 2,727 (13,525) 106,942

PROPERTY, PLANT AND
EQUIPMENT - net 45,098 6,866 10,515 - 62,479
________ ________ ________ _________ ________

$324,347 $ 21,047 $123,028 $(121,544) $346,878

LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT
(DEFICIENCY IN ASSETS)

CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 40,390 $ 2,103 $ 17,009 $ (286) $ 59,216
Intercompany payables 117 27,915 70,855 (98,887) -
Liabilities to customers
on uncompleted contracts
and warranties 4,584 286 2,980 - 7,850
Income taxes 335 29 3,079 - 3,443
Short-term obligations - - 495 - 495
Current maturities of
long-term debt 126 44 261 - 431
________ ________ ________ _________ ________

Total Current Liabilities 45,552 30,377 94,679 (99,173) 71,435

LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 2,000 - - - 2,000
Postretirement benefits 12,381 - 370 - 12,751
Deferred expenses,
pension and other 41,240 335 1,008 - 42,583
Interest payable to
Holdings 18,436 - - - 18,436
________ ________ ________ _________ ________

74,057 335 1,378 - 75,770

LONG-TERM DEBT, less
current maturities 204,023 1,226 2,555 - 207,804

COMMON SHAREHOLDERS'
INVESTMENT (DEFICIENCY
IN ASSETS) 715 (10,891) 24,416 (22,371) (8,131)
________ ________ ________ _________ ________

$324,347 $ 21,047 $123,028 $(121,544) $346,878

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Balance Sheets
December 31, 2001
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ - $ 28 $ 7,190 $ - $ 7,218
Receivables 24,407 7,146 24,001 - 55,554
Intercompany receivables 79,336 1,127 12,529 (92,992) -
Inventories 53,365 9,025 43,237 (3,619) 102,008
Prepaid expenses and
other current assets 542 282 5,003 - 5,827
________ ________ ________ _________ ________

Total Current Assets 157,650 17,608 91,960 (96,611) 170,607

OTHER ASSETS:
Restricted funds on deposit 42 - 540 - 582
Goodwill 55,660 - - - 55,660
Intangible assets - net 39,601 - - - 39,601
Other assets 10,203 - 1,889 - 12,092
Investment in subsidiaries 7,103 - - (7,103) -
________ ________ ________ _________ ________

112,609 - 2,429 (7,103) 107,935

PROPERTY, PLANT AND
EQUIPMENT - net 60,172 5,904 11,127 - 77,203
________ ________ ________ _________ ________

$330,431 $ 23,512 $105,516 $(103,714) $355,745

LIABILITIES AND COMMON
SHAREHOLDERS' INVESTMENT

CURRENT LIABILITIES:
Accounts payable and
accrued expenses $ 30,732 $ 2,533 $ 14,730 $ (235) $ 47,760
Intercompany payables 44 27,771 60,532 (88,347) -
Liabilities to customers
on uncompleted contracts
and warranties 2,800 522 2,686 - 6,008
Income taxes 234 29 942 - 1,205
Short-term obligations - - 566 - 566
Current maturities of
long-term debt 237 8 487 - 732
________ ________ ________ _________ ________

Total Current Liabilities 34,047 30,863 79,943 (88,582) 56,271

LONG-TERM LIABILITIES:
Liabilities to customers
on uncompleted contracts
and warranties 2,000 - - - 2,000
Postretirement benefits 12,863 - 414 - 13,277
Deferred expenses,
pension and other 32,032 249 1,494 - 33,775
Interest payable to
Holdings 11,062 - - - 11,062
________ ________ ________ _________ ________

57,957 249 1,908 - 60,114

LONG-TERM DEBT, less
current maturities 213,226 352 8,610 - 222,188

COMMON SHAREHOLDERS'
INVESTMENT 25,201 (7,952) 15,055 (15,132) 17,172
________ ________ ________ _________ ________

$330,431 $ 23,512 $105,516 $(103,714) $355,745

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2002
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

Net Cash Provided By
Operating Activities $ 4,579 $ 683 $ 4,443 $ - $ 9,705
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease in restricted
funds on deposit (716) - (187) - (903)
Proceeds from the sale of
The Principal Financial
Group shares 2,974 - - - 2,974
Purchases of property,
plant and equipment (2,697) (1,598) (1,162) - (5,457)
Proceeds from sale of
property, plant and
equipment 363 2 380 - 745
Net proceeds from sale
and leaseback transaction 6,657 - - - 6,657
Purchase of Bennett &
Emmott (1986) Ltd. - - (200) - (200)
Dividends paid to parent 99 - (99) - -
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities 6,680 (1,596) (1,268) - 3,816
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Net proceeds from
(repayments of) revolving
credit facilities (9,077) - (5,732) - (14,809)
Net increase (decrease) in
other bank borrowings - - (71) - (71)
Proceeds from issuance of
long-term debt - 925 - - 925
Payment of long-term debt (236) (16) (549) - (801)
Payment of refinancing
expenses (1,946) - (101) - (2,047)
________ ________ ________ ________ ________
Net cash provided by
(used in) financing
activities (11,259) 909 (6,453) - (16,803)
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - 253 - 253
________ ________ ________ ________ ________
Net decrease in cash and
and cash equivalents - (4) (3,025) - (3,029)
Cash and cash equivalents
at beginning of year - 28 7,190 - 7,218
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 24 $ 4,165 $ - $ 4,189

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2001
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

Net Cash Provided By (Used
In) Operating Activities $ (3,626) $ 600 $ 1,717 $ - $ (1,309)
________ ________ ________ ________ ________
Cash Flows From Investing
Activities
Decrease (increase)in
restricted funds on deposit 308 - (340) - (32)
Proceeds from sale of
The Principal Financial
Group shares 5,730 - - - 5,730
Purchases of property,
plant and equipment (1,990) (968) (1,169) - (4,127)
Proceeds from sale of
property, plant and
equipment 23 - 513 - 536
Dividends paid to parent 200 - (200) - -
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities 4,271 (968) (1,196) - 2,107
________ ________ ________ ________ ________
Cash Flows From Financing
Activities
Proceeds from (repayments
of) revolving credit
facilities (1,350) - 298 - (1,052)
Net (increase) decrease
in other bank borrowings (52) - 323 - 271
Proceeds from issuance of
long-term debt - 360 877 - 1,237
Payment of long-term debt (336) - (1,305) - (1,641)
Capital contribution from
Holdings 1,093 - - - 1,093
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities (645) 360 193 - (92)
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (436) - (436)
________ ________ ________ ________ ________
Net increase (decrease) in
cash and cash equivalents - (8) 278 - 270
Cash and cash equivalents
at beginning of year - 36 6,912 - 6,948
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 28 $ 7,190 $ - $ 7,218

Bucyrus International, Inc. and Subsidiaries
Consolidating Condensed Statements of Cash Flows
For the Year Ended December 31, 2000
(Dollars in Thousands)

Parent Guarantor Other Consolidated
Company Subsidiaries Subsidiaries Eliminations Total

Net Cash Provided By (Used
In) Operating Activities $ (6,332) $ 3,201 $ 2,532 $ - $ (599)
________ ________ ________ ________ ________

Cash Flows From Investing
Activities
Increase in restricted
funds on deposit (350) - (111) - (461)
Purchases of property,
plant and equipment (1,903) (210) (1,388) - (3,501)
Proceeds from sale of
property, plant and
equipment 54 522 873 - 1,449
Dividends paid to parent 4,130 (3,500) (630) - -
________ ________ ________ ________ ________
Net cash provided by (used
in) investing activities 1,931 (3,188) (1,256) - (2,513)
________ ________ ________ ________ ________

Cash Flows From Financing
Activities
Net proceeds from revolving
credit facility 5,100 - - - 5,100
Net decrease in other bank
borrowings (98) - (52) - (150)
Payment of long-term debt (470) - (1,781) - (2,251)
Purchase of treasury stock (131) - - - (131)
________ ________ ________ ________ ________
Net cash provided by (used
in) financing activities 4,401 - (1,833) - 2,568
________ ________ ________ ________ ________
Effect of exchange rate
changes on cash - - (877) - (877)
________ ________ ________ ________ ________
Net increase (decrease) in
cash and cash equivalents - 13 (1,434) - (1,421)
Cash and cash equivalents
at beginning of year - 23 8,346 - 8,369
________ ________ ________ ________ ________
Cash and cash equivalents
at end of year $ - $ 36 $ 6,912 $ - $ 6,948

Report of Deloitte & Touche LLP, Independent Auditors

Deloitte & Touche LLP
411 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202-4496

Tel: (414) 271-3000
www.deloitte.com

Deloitte
& Touche

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

We have audited the accompanying consolidated balance sheet of Bucyrus
International, Inc. and subsidiaries (the "Company"), a majority-owned
subsidiary of Bucyrus Holdings, LLC, as of December 31, 2002, and the related
consolidated statements of operations, comprehensive loss, shareholders'
investment (deficiency in assets), and cash flows for the year then ended.
Our audit also included the financial statement schedule for the year ended
December 31, 2002 listed in the Index at Item 15(a)2. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the 2002
financial statements and financial statement schedule based on our audit. The
Company's financial statements and financial statement schedules as of
December 31, 2001, and for each of the two years in the period ended
December 31, 2001, were audited by other auditors who have ceased operations.
Those auditors expressed an unqualified opinion on those financial statements
and stated that such 2001 and 2000 financial statement schedules, in relation
to the 2001 and 2000 basic consolidated financial statements taken as a whole,
fairly stated in all material respects the financial data required to be set
forth therein, in their report dated February 8, 2002 (except with respect to
the matter discussed in Note F as to which the date is March 7, 2002).

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

In our opinion, such 2002 financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2002, and
the results of their operations and their cash flows for the year then ended
in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, such 2002 financial statement
schedule, when considered in relation to the basic 2002 consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

As described in Note D to the consolidated financial statements, on January 1,
2002, the Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("Statement No. 142").

_________
Deloitte
Touche
Tohmatsu
________

2

As discussed above, the financial statements of the Company as of December 31,
2001, and for each of the two years in the period ended December 31, 2001,
were audited by other auditors who have ceased operations. As described in
Note D, these financial statements have been revised to include the
transitional disclosures required by Statement No. 142 which was adopted by
the Company as of January 1, 2002. Our audit procedures with respect to the
disclosures in Note D with respect to 2001 and 2000 included (i) agreeing the
previously reported net loss to the previously issued financial statements and
the adjustments to reported net loss representing amortization expense
(including any related tax effects) recognized in those periods related to
goodwill and intangible assets that are no longer being amortized as a result
of initially applying Statement No. 142 (including any related tax effects) to
the Company's underlying records obtained from management; and (ii) testing
the mathematical accuracy of the reconciliation of adjusted net loss to
reported net loss and the related loss per share amounts. In our opinion, the
disclosures for 2001 and 2000 in Note D are appropriate. However, we were not
engaged to audit, review or apply any procedures to the 2001 and 2000
financial statements of the Company other than with respect to such
disclosures and, accordingly, we do not express an opinion or any other form
of assurance on the 2001 and 2000 financial statements taken as a whole.

/s/Deoitte & Touche LLP

February 7, 2003

This report set forth below is a copy of a previously issued audit report by
Arthur Andersen LLP. This report has not been reissued by Arthur Andersen LLP
in connection with its inclusion in this Form 10-K. During the year ended
December 31, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). As
discussed in Note D of the Notes to Consolidated Financial Statements, the
Company has presented the transitional disclosures for the years ended
December 31, 2001 and 2000 required by SFAS 142. The Arthur Andersen LLP
report does not extend to these transitional disclosures. These disclosures
are reported on by Deloitte & Touche LLP as stated in their report appearing
herein.

ANDERSEN

Report of Independent Public Accountants

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

We have audited the accompanying consolidated balance sheets of Bucyrus
International, Inc. (Delaware corporation) and subsidiaries as of December 31,
2001 and 2000 and the related consolidated statements of operations,
comprehensive loss, common shareholders' investment and cash flows for the
three years ended December 31, 2001. These financial statements and the
schedule referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bucyrus
International, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of its operations and its cash flows for the three years ended
December 31, 2001 in conformity with accounting principles generally accepted
in the United States.

Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The schedule listed in the index at
item 14(a)2 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated
financial statements. This schedule for the three years ended December 31,
2001 has been subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin
February 8, 2002 (except with respect to the matter
discussed in Note F, as to which the date is
March 7, 2002.)

Bucyrus International, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts and Reserves
For the Years Ended December 31, 2002, 2001 and 2000
(Dollars in Thousands)

Charges
Balance At (Credits) (Charges) Balance At
Beginning To Costs Credits End
Of Period And Expenses To Reserves(1) Of Period

Allowance for possible losses:

Year ended December 31, 2002:
Notes and accounts receivable - current $1,134 $ 47 $ (23) $1,158

Year ended December 31, 2001:
Notes and accounts receivable - current $1,159 $ 14 $ (39) $1,134

Year ended December 31, 2000:
Notes and accounts receivable - current $1,090 $ 3 $ 66 $1,159

(1) Includes uncollected receivables written off, net of recoveries, and translation adjustments at the foreign
subsidiaries.

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

(a) On June 24, 2002, the Company filed a Current Report on Form 8-K
(the "Current Report") to report the dismissal of Arthur Andersen LLP
("Andersen") as the Company's independent public accountants and the
engagement of Deloitte & Touche LLP to serve as the Company's independent
public accountants for the fiscal year ending December 31, 2002. As reported
in the Current Report (i) there were no disagreements between the Company and
Andersen on any matter of accounting principle or practice, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Andersen's satisfaction, would have caused Andersen to make reference to the
subject matter in connection with Andersen's report on the Company's
consolidated financial statements for such years; and (ii) there were no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

(b) Not applicable because, as disclosed under (a) above, there were no
"disagreements" or "reportable events" as defined in Item 304(a) of regulation
S-K in connection with the dismissal of Andersen.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Directors

Directors of the Company are elected annually and hold office until the
next annual meeting of shareholders and until their successors are duly
elected and qualified. The executive officers of the Company serve at the
discretion of the Company's Board of Directors (the "Board").

The following table sets forth, for each of the seven directors of the
Company, information regarding their names, ages, principal occupations, and
other directorships in certain companies held by them, and their length of
continuous service as a director of the Company. Except as otherwise noted,
each director has engaged in the principal occupation or employment and has
held the offices shown for more than the past five years. Unless otherwise
indicated, each director listed above is a citizen of the United States and
the address of such person is the Company's principal executive offices.
There are no family relationships among the directors and executive officers
of the Company.

Name Age Principal Occupation and Directorships

W. Richard Bingham 67 Mr. Bingham is a general partner of
American Industrial Partners
Corporation. He co-founded American
Industrial Partners and has been a
director and officer of the firm since
1988. Mr. Bingham is also a director
of Great Lakes Carbon Corporation,
Stanadyne Automotive Corporation, MBA
Polymers, Inc., Fundimak y Subsidiaries
S.A. de C.V. (Sanluis) and Williams
Controls, Inc. He formerly served on
the boards of Avis, Inc., ITT Life
Insurance Corporation, Sweetheart
Holdings and Valero Energy Corporation.
Mr. Bingham has been a director of the
Company since September 1997.

Wayne T. Ewing 69 Mr. Ewing is a coal industry management
consultant doing business as The Ewing
Company since 1997. Mr. Ewing was
Senior Vice President for Coal
Operations from 1995 to 1996 and
Executive Vice President Marketing from
1993 to 1995 with Kerr-McGee Coal
Corporation. From 1963 to 1993,
Mr. Ewing held various executive
positions with Peabody Holding Company.
Mr. Ewing has been a director of the
Company and a non-executive vice
chairman of the Company's Board since
February 1, 2000.

Willard R. Hildebrand 63 Mr. Hildebrand was President and Chief
Executive Officer of the Company from
March 11, 1996 to December 14, 1998
upon which he became a non-executive
vice chairman of the Company's Board
until March 11, 2000. Mr. Hildebrand
was President and Chief Executive
Officer of Great Dane Trailers, Inc. (a
privately held manufacturer of a
variety of truck trailers) from 1991 to
1996. Prior to 1991, Mr. Hildebrand
held a variety of sales and marketing
positions with Fiat-Allis North
America, Inc. and was President and
Chief Operating Officer from 1985 to
1991. Mr. Hildebrand is currently a
director of Qualitor, Inc.
Mr. Hildebrand has been a director of
the Company since March 1996.

Kim A. Marvin 41 Mr. Marvin is a Managing Director of
American Industrial Partners
Corporation. Mr. Marvin joined
American Industrial Partners in 1997
from the Mergers & Acquisitions
Department of Goldman, Sachs & Co.
where he had been employed since 1994.
Mr. Marvin is also a director of
Consoltex Group, Great Lakes Carbon
Corporation and Stanadyne Corporation.
Mr. Marvin has been a director of the
Company since September 1997.

Robert L. Purdum 67 Mr. Purdum is a director and a Managing
Director of American Industrial
Partners Corporation. Mr. Purdum
became the Non-Executive Chairman of
the Company's Board following the AIP
Merger. Mr. Purdum retired as Chairman
of Armco, Inc. in 1994. From November
1990 to 1993, Mr. Purdum was Chairman
and Chief Executive Officer of Armco,
Inc. Mr. Purdum has been a director of
AIP Management Co. since joining
American Industrial Partners in 1994.
Mr. Purdum is also a director of
Berlitz International, Inc. Mr. Purdum
has been a director of the Company
since November 1997.

Theodore C. Rogers 68 Mr. Rogers has served as Chief
Executive Officer of the Company since
December 23, 1999. Mr. Rogers also
served as President of the Company from
December 1999 to August 2000. Mr.Rogers
is a General Partner of American
Industrial Partners. He co-founded
American Industrial Partners and has
been a director and officer of the firm
since 1988. He is also a director of
Consultex Group, Inc., Great Lakes
Carbon Corporation and Stanadyne
Automotive Corporation. Mr. Rogers has
been a director of the Company since
November 1997.

Timothy W. Sullivan 49 Mr. Sullivan has served as President
and Chief Operating Officer of the
Company since August 14, 2000.
Mr. Sullivan rejoined the Company on
January 17, 2000 as Executive Vice
President. From January 1999 through
December 1999 Mr. Sullivan served as
President and Chief Executive Officer
of United Container Machinery, Inc.
From 1986 through 1998 Mr. Sullivan
held various positions with the
Company; Executive Vice President -
Marketing from June 1998 through
December 1998, Vice President Marketing
and Sales from April 1995 through May
1998, Director of Business Development
in 1994, Director of Parts Sales and
Subsidiary Operations from 1990 to 1994
and Product Manager of Electric Mining
Shovels and International Sales from
1986 to 1990. Mr. Sullivan has been a
director of the Company since August
2000.

Executive Officers

Set forth below are the names, ages and present occupations of all
executive officers of the Company. Executive officers named therein are
elected annually and serve at the pleasure of the Board. Messrs. Bruno and
Mackus are each employed under one-year employment agreements which
automatically renew for additional one-year terms subject to the provisions
thereof. See ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
Employment Agreements.

Name Age, Position and Background

Theodore C. Rogers Mr. Rogers, age 68, has served as Chief Executive
Officer since December 23, 1999. Mr. Rogers also
served as President from December 1999 to August
2000. Mr. Rogers co-founded American Industrial
Partners and has been an officer and director of
the firm since 1988. Mr. Rogers was President,
Chairman, Chief Executive Officer and Chief
Operating Officer of NL Industries. Mr. Rogers has
been a director of the Company since November 1997.

John F. Bosbous Mr. Bosbous, age 50, has served as Treasurer since
March 1998. Mr. Bosbous was Assistant Treasurer
from 1988 to 1998, and Assistant to the Treasurer
from August 1984 to February 1988.

Frank P. Bruno Mr. Bruno, age 66, has served as Vice President -
Human Resources since December 1, 1997. Mr. Bruno
was a consultant from 1996 to 1997. From 1984 to
1995, Mr. Bruno held various positions in Human
Resources and Administration with Eagle Industries,
Inc.

Craig R. Mackus Mr. Mackus, age 51, has served as Vice President-
Finance since October 2002, as Secretary since
May 1996 and as Controller since February 1988.
Mr. Mackus was Division Controller and Assistant
Corporate Controller from 1985 to 1988, Manager of
Corporate Accounting from 1981 to 1982 and 1984 to
1985, and Assistant Corporate Controller of Western
Gear Corporation from 1982 to 1984.

Thomas B. Phillips Mr. Phillips, age 57, has served as Executive Vice
President since August 2000. Mr. Phillips rejoined
the Company on January 10, 2000 as Vice President-
Operations. From September, 1999 through January,
2000 Mr. Phillips served as a Consultant and
Assistant to the President at United Container
Machinery, Inc. From 1983 through 1999 Mr.
Phillips held various positions with the Company;
Executive Vice President - Operations from June
1998 through April 1999, Vice President - Materials
from March 1996 to June 1998, Director of Materials
from 1986 to 1996, Manufacturing Manager from June
1986 to October 1986 and Materials Manager from
1983 to 1986.

Timothy W. Sullivan Mr. Sullivan, age 49, has served as President and
Chief Operating Officer of the Company since August
2000. Mr. Sullivan rejoined the Company on
January 17, 2000 as Executive Vice President. From
January 1999 through December 1999 Mr. Sullivan
served as President and Chief Executive Officer of
United Container Machinery, Inc. From 1986 through
1998 Mr. Sullivan held various positions with the
Company; Executive Vice President - Marketing from
June 1998 through December 1998, Vice President
Marketing and Sales from April 1995 through May
1998, Director of Business Development in 1994,
Director of Parts Sales and Subsidiary Operations
from 1990 to 1994 and Product Manager of Electric
Mining Shovels and International Sales from 1986 to
1990. Mr. Sullivan has been a director of the
Company since August 2000.

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Directors

Directors of the Company are not compensated for their service as
directors, except Mr. Purdum who is paid $12,500 per month, regardless of
whether meetings are held or the number of meetings held, and Mr. Ewing who is
paid an annual fee of $25,000. Directors are reimbursed for out-of-pocket
expenses.

Summary Compensation Table

The following table sets forth certain information for each of the last
three fiscal years concerning compensation awarded to, earned by or paid to
each person who served as the Company's Chief Executive Officer during fiscal
2002 and each of the four most highly compensated executive officers other
than the Chief Executive Officer who were in office on December 31, 2002. The
persons named in the table are sometimes referred to herein as the "named
executive officers".

Long-Term
Annual Compensation
Compensation(1) Awards
Securities All Other
Name and Underlying Compensation
Principal Position Year Salary($) Bonus($) Options(#) ($)(2)

Theodore C. Rogers (3) 2002 - - - -
Chief Executive Officer 2001 - - - -
2000 - - - -

Frank P. Bruno 2002 $144,089 $ 58,183 - $ 6,248
Vice President- 2001 138,150 39,690 11,974 5,721
Human Resources 2000 133,602 26,578 - 4,651

Craig R. Mackus 2002 163,212 66,411 - 6,730
Vice President-Finance 2001 154,728 44,580 13,408 5,666
and Secretary 2000 148,902 29,768 - 4,905

Thomas B. Phillips(4) 2002 221,279 129,108 - 7,399
Executive Vice 2001 207,004 85,862 35,850 6,546
President 2000 185,001 56,250 - 94,653

Timothy W. Sullivan(5) 2002 379,173 640,000 - 6,310
President and Chief 2001 329,169 240,000 71,700 6,060
Operating Officer 2000 259,126 200,000 - 120,234
_______________

(1) Certain personal benefits provided by the Company to the named executive officers are not included in the
above table as permitted by SEC regulations because the aggregate amount of such personal benefits for each
named executive officer in each year reflected in the table did not exceed the lesser of $50,000 or 10% of
the sum of such officer's salary and bonus in each respective year.

(2) "All Other Compensation" includes the following: (i) the employer match under the Company's 401(k) savings
plan for 2002, 2001 and 2000, respectively: Mr. Bruno ($5,513, $4,575 and $3,990), Mr. Mackus ($6,000,
$5,250 and $4,467), Mr. Phillips ($6,000, $5,250 and $5,250), and Mr. Sullivan ($5,500, $5,250 and $5,250);
(ii) imputed income from life insurance for 2002, 2001 and 2000, respectively: Mr. Bruno ($735, $1,146 and
$661), Mr. Mackus ($730, $416 and $438), Mr. Phillips ($1,399, $1,296 and $1,374) and Mr. Sullivan ($810,
$810 and $742); (iii) relocation allowance paid to Mr. Sullivan for 2000 ($114,242); (iv) supplemental
pension payment to Mr. Phillips for 2000 ($85,000) and severance of $3,029 paid before his return to the
Company in January 2000.

(3) Mr. Rogers became the Chief Executive Officer on December 23, 1999. No compensation has been paid to
Mr. Rogers during his tenure as Chief Executive Officer.

(4) Mr. Phillips rejoined the Company in January 2000 as Vice President - Operations.

(5) Mr. Sullivan rejoined the Company in January 2000 as Executive Vice President.

1998 Management Stock Option Plan

On March 17, 1998, the Board adopted the 1998 Management Stock Option
Plan (the "1998 Option Plan") as part of the compensation and incentive
arrangements for certain management employees of the Company and its
subsidiaries. The 1998 Option Plan provides for the grant of stock options to
purchase up to an aggregate of 200,000 shares of common stock of the Company
at exercise prices to be determined in accordance with the provisions of the
1998 Option Plan. Other than options granted on August 1, 2001, all other
options granted under the 1998 Option Plan are targeted to vest on the last
day of the plan year at the rate of 25% of the aggregate number of shares of
common stock underlying each series of options per year, provided that the
Company attained a specified target of EBITDA in that plan year. In the event
that the EBITDA goal is not attained in any plan year, the options scheduled
to vest at the end of that plan year will vest according to a pro rata
schedule set forth in the 1998 Option Plan, provided that if less than 90% of
the EBITDA goal is achieved, then no portion of the options shall vest at the
end of that plan year. In the event that the EBITDA goal is surpassed in any
plan year, the surplus shall be applied first to offset any EBITDA deficit
from prior plan years, and second to accelerate vesting of up to one-quarter
of the options scheduled to vest in 2001 according to a pro rata schedule set
forth in the 1998 Option Plan. Options granted under the 1998 Option Plan on
August 1, 2001 are targeted to vest at the rate of 25% of the total option
shares covered by the grant per year for the four (4) years subsequent to the
date of the grant. A total of 33,234 of the options granted under the 1998
Option Plan have vested as of the date of this report.

Notwithstanding the foregoing, all options granted under the 1998 Option
Plan shall vest automatically on the ninth anniversary of the date of the
grant, regardless of performance criteria or, in the event of a Company Sale
(as defined in the 1998 Option Plan), immediately prior to such sale provided
such sale occurs prior to the fourth anniversary of the grant of options.
Options granted pursuant to the 1998 Option Plan may be forfeited or
repurchased by the Company at fair value, as defined, in the event of the
participating employee's termination, and if not previously forfeited or
exercised, expire and terminate no later than ten years after the date of
grant or, in the event of a Company Sale, upon the consummation of such sale.

The information in the following table is presented as of December 31, 2002
with respect to shares of the Company's Common Stock that may be issued
pursuant to the 1998 Option Plan, which was not approved by the Company's
shareholders:

(a) (b) (c)
Number of
Securities
Remaining
Number of Available for
Securities to Future Issuance
be Issued Upon Weighted-Average Under Equity
Exercise of Exercise Price Compensation
Outstanding of Outstanding Plans (Excluding
Options, Options, Securities
Warrants and Warrants and Reflected in
Plan Category Rights Rights Column (a))

Equity compensation
plans approved by
shareholders 199,500 $ 28.84 500

Equity compensation
plans not approved
by shareholders N/A N/A N/A
_______ _______ ___

Total 199,500 $ 28.84 500

Additional information about the 1998 Option Plan is set forth in Note H
to the Company's audited financial statements appearing in this Report.

Option Grants Table

There were no options granted to the named executive officers in 2002
under the Company's 1998 Option Plan.

Aggregate Option Exercises in 2002 and Year-End Option Values

The following table sets forth information regarding the exercise of stock options by each of the
named executive officers during 2002 and the fiscal year-end value of the unexercised stock options held by
such officers.

Value of Unexercised
Number of Securities In-The-Money
Shares Underlying Unexercised Options at End of
Acquired Options at End of Fiscal Year 2002 (1)
On Value Fiscal Year 2002 (#) ($)
Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable

T. C. Rogers 0 N/A 0 0 0 0

F. P. Bruno 0 N/A 2,994 15,080 0 0

C. R. Mackus 0 N/A 3,352 17,556 0 0

T. B. Phillips 0 N/A 8,963 26,887 0 0

T. W. Sullivan 0 N/A 17,925 53,775 0 0

(1) Substantially all of the Company's common stock is owned by Holdings and there is no established public
trading market therefor. Under the 1998 Option Plan, the fair value of a share of common stock is
established by the board of directors as the price at which the Company will buy or sell its common
stock. The fair value as of December 31, 2002, as so established, was $1 per share, which is equal to
or less than the stock option exercise price for all of the options listed in the above table.
Accordingly, none of the options listed in the above table was "in-the-money" on December 31, 2002.

Defined Benefit Pension Plan

The Company maintains a defined benefit pension plan (the "Pension Plan")
for salaried employees, including certain of the named executive officers.

Defined Benefit Formula

Historically, the Pension Plan used a Defined Benefit Formula to
determine the annual benefits payable to employees upon normal retirement age.
The following table sets forth the estimated annual benefits payable on a
straight life annuity basis (prior to offset of one-half of estimated Social
Security benefits) to participating employees upon retirement at normal
retirement age for the years of service and the average annual earnings
indicated under the defined benefit formula.

Years of Service
Remuneration 35 30 25 20 15

$125,000 $ 76,563 $ 65,625 $ 54,688 $ 43,750 $ 32,813
150,000 91,875 78,750 65,625 52,500 39,375
175,000 107,188 91,875 76,563 61,250 45,938
200,000 122,500 105,000 87,500 70,000 52,500
225,000 137,813 118,125 98,438 78,750 59,063
250,000 153,125 131,250 109,375 87,500 65,625
300,000 183,750 157,500 131,250 105,000 78,750
400,000 245,000 210,000 175,000 140,000 105,000
450,000 275,625 236,250 196,875 157,500 118,125
500,000 306,250 262,500 218,750 175,000 131,250

Cash Balance Formula

Effective January 1, 2000, the Pension Plan was converted to a cash
balance formula for all employees except for those who, on December 31, 1999,
were either age 60 and above or age 55 with 10 years or more years of credited
service. The actuarial equivalent of benefits earned as of December 31, 1999
was used to establish an opening account balance. Each month a percentage of
the employee's earnings is credited to the account in accordance with the
following table:

Service at the Beginning of Year Pay Credits

Less than 5 4.0%
5 but less than 10 4.5%
10 but less than 15 5.0%
15 but less than 20 5.5%
20 but less than 25 6.0%
25 but less than 30 6.5%
30 or more 7.0%

In addition, employees hired prior to January 1, 1999 receive transition
pay-based credits of 1.5% to 2.5% for the next five years. Each account is
also credited with interest using the average annual rate of U.S. 30-year
Treasury Securities for the November preceding the plan year.

Upon termination of employment, the employee may receive benefits in the
form of a lump sum equal to the value of the cash balance account or a monthly
annuity equal to the actuarial equivalent of the cash account balance.

General

Covered compensation for purposes of the Pension Plan consists of the
average of a participant's highest total salary and bonus (excluding
compensation deferred pursuant to any non-qualified plan) for a consecutive
five year period during the last ten calendar years of service prior to
retirement.

Supplemental Plan

Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
amended, limit the annual benefits which may be paid from a tax-qualified
retirement plan. As permitted by the Employee Retirement Income Security Act
of 1974, the Company has a supplemental plan which authorizes the payment out
of general funds of the Company of any benefits calculated under provisions of
the applicable retirement plan which may be above the limits under these
sections.

Mr. Rogers does not participate in the Pension Plan. Mr. Bruno's
benefits under the Pension Plan will be determined under the Defined Benefit
Formula described above. The years of credited service under the Pension Plan
for Mr. Bruno is five (5).

The Pension Plan benefits payable to Messrs. Mackus, Phillips and
Sullivan will be determined under the cash balance formula described above.
The years of credited service under the Pension Plan for Messrs. Mackus,
Phillips and Sullivan are 23, 26 and 23, respectively. The estimated annual
benefits payable under the Pension Plan at normal retirement age (as
determined under the Pension Plan) to Messrs. Mackus, Phillips and Sullivan
are $80,047, $65,194 and $78,036, respectively. In making these estimates,
the assumtions were (i) that 2002 pay remains level to normal retirement age;
(ii) that the 2002 compensation limit of $200,000 remains level to normal
retirement age; (iii) that the interest crediting rate for all years is
5.12% - the November, 2001 30-year Treasury rate, which is the rate used for
the 2002 plan year; and the projected cash balance at normal retirement age
was converted to an annuity using an interest rate of 5.12% and the 1983 Group
Annuity Mortality Table for Males and Females.

Board Compensation Report on Executive Compensation

The Board is responsible for the compensation packages offered to the
Company's executive officers, including the Chief Executive Officer (the
"CEO") and the named executive officers.

Executive Compensation

The Board, in consultation with the CEO, establishes base salaries for
the executive officers of the Company which the Company believes are
commensurate with their respective responsibilities, position and experience.
Consideration is also given to the compensation levels of similarly situated
personnel of other companies in the industry where such information is
available. When making adjustments in base salaries, the Board generally
considers the foregoing factors as well as corporate financial performance.
In individual cases where appropriate, the Board also considers nonfinancial
performance measures, such as increases in market share, manufacturing
efficiency gains, improvements in product quality and improvements in
relations with customers, suppliers and employees. Executive officers' base
salaries are reviewed annually. The Board generally begins its review by
analyzing the current base salaries of the executive officers. Based on such
review, the corporate performance of the Company, the individual contributions
of the executive officers, and the factors discussed above, the Board will
approve such compensation.

Executive officers and other Company employees participated in the 2002
Management Incentive Plan. Under the 2002 Management Incentive Plan, the
Board established a management incentive budget based on achievement in
several critical areas that combine to determine the overall Company
performance and in consultation with the CEO, established target incentive
bonus percentages of between 10% and 50% of base salary for executive officers
(other than the CEO, who is not a participant) and certain employees. These
targeted percentages were adjustable pursuant to a formula based on a range of
values whereby the target incentive bonus percentage would be zero (and no
bonuses would be paid) if actual achievement was less than 80% of budgeted
goals, and a maximum bonus of two times the target incentive bonus percentage
would be paid if actual achievement was 120% or more of budgeted goals. In
2002, the Company's actual achievement in certain categories did meet or
exceed budgeted goals, and bonuses were awarded under this plan.

Chief Executive Officer Compensation

Mr. Rogers does not receive any compensation directly from the Company.

Internal Revenue Code Section 162(m)

Under Section 162(m) of the Internal Revenue Code, the tax deduction by
certain corporate taxpayers, such as the Company, is limited with respect to
compensation paid to certain executive officers unless such compensation is
based on performance objectives meeting specific regulatory criteria or is
otherwise excluded from the limitation. Where practical, the Board intends to
qualify compensation paid to the Company's executive officers in order to
preserve the full deductibility thereof under Section 162(m), although the
Board reserves the right in individual cases to cause the Company to enter
into compensation arrangements which may result in some compensation being
nondeductible under Code Section 162(m).

BOARD OF DIRECTORS OF
BUCYRUS INTERNATIONAL, INC.

W. Richard Bingham
Wayne T. Ewing
Willard R. Hildebrand
Kim A. Marvin
Robert L. Purdum
Theodore C. Rogers
Timothy W. Sullivan

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial owners of more than five
percent of the Company's common stock as of March 26, 2003:

Amount and Nature
Name and Address of of Beneficial Ownership Percent of Class
Beneficial Owner (# of Shares) Class

Bucyrus Holdings, LLC 1,430,300 99.6%
One Maritime Plaza
Suite 2525
San Francisco, CA 94111

The following table sets forth the beneficial ownership of the Company's
common stock by each director, each of the named executive officers and by all
directors and executive officers of the Company as a group as of March 26,
2003:

Amount and Nature
Name of of Beneficial Ownership (1) Percent of Class
Beneficial Owner (# of Shares) Class (2)

W. R. Bingham 0 (3) *
W. T. Ewing 0 *
W. R. Hildebrand 4,000 *
K. A. Marvin 0 (3) *
R. L. Purdum 0 (3) *
T. C. Rogers 0 (3) *
F. P. Bruno 300 *
C. R. Mackus 500 *
T. B. Phillips 0 *
T. W. Sullivan 0 *
All directors and
executive officers
as a group (11 persons) 4,800 *

(1) Amounts indicated reflect shares as to which the beneficial owner
possesses sole voting and dispositive powers.
(2) Asterisk denotes less than 1%.
(3) Messrs. Bingham and Rogers are members of Holdings which is the
beneficial owner of 1,430,300 shares of common stock of the Company.
Messrs. Marvin and Purdum are managing directors of American Industrial
Partners Corporation, Holdings' general partner. Messrs. Bingham,
Marvin, Purdum and Rogers each disclaim beneficial ownership of all such
shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Employment Agreements

The Company has employment agreements with certain of the named executive
officers. These agreements govern the compensation, benefits and treatment
upon termination under various circumstances, including voluntary termination
by either party, or termination by reason of retirement, death or disability,
or in the event of a change of control, as those terms are defined in the
agreements. Each employment agreement automatically renews for a one-year
term upon the expiration of its initial term and any subsequent terms, unless
two months written notice is given by either party of intent to terminate at
the end of that term. Each employment agreement may be terminated by either
the Company or the executive at any time by giving notice as required under
the agreement, provided, however, that if the named executive officer is
terminated by the Company without cause at any time, or if the executive
terminates his employment with good reason in connection with a change in
control, as those terms are defined in the agreement, then the executive will
be entitled to certain severance benefits as described in that executive's
individual agreement. Finally, each agreement imposes confidentiality
restrictions on the executive and places restrictions on the executive's
involvement in activities that may compete with the Company both during
employment and following termination. Violation of such confidentiality and
non-competition provisions, or other termination for cause, as defined in the
agreements, may result in forfeiture of severance and other benefits that may
otherwise accrue. Individual compensation, benefits and other salient
features of each agreement are described below.

Mr. Hildebrand

Mr. Hildebrand was entitled to participate in the Company's retirement
programs. Under the retirement programs, Mr. Hildebrand is entitled to
receive a retirement amount equal to the non-vested accrued portion of the
benefit from the Company's salaried employee retirement benefit plan and
supplemental retirement benefit plan. In 2002, Mr. Hildebrand received
payments totalling $19,957 under these retirement programs. In addition,
Mr. Hildebrand was offered (i) up to 4,000 shares of common stock of the
Company for $100.00 per share, and (ii) options to purchase seven times the
number of shares of common stock purchased in (i) above at a price of $100.00
per share pursuant to the 1998 Option Plan.

Mr. Sullivan

In August 2000, the Company entered into an agreement with Mr. Sullivan
to serve as President of the Company. Simultaneous with that agreement,
Mr. Sullivan was elected to the Board of Directors and assumed the additional
position as Chief Operating Officer. The agreement provides for a base salary
which is subject to increase at the discretion of the Board. Mr. Sullivan is
eligible to participate in the 2002 Management Incentive Plan and is the only
named executive officer to participate in the Company's Incentive Program for
Sales and Marketing Personnel, pursuant to which Mr. Sullivan will be entitled
to receive a bonus based on the outcome of sales of machines and parts. In
addition, Mr. Sullivan is entitled to participate in employee and fringe
benefit plans that the Company provides to similarly situated management
employees.

Others

Messrs. Bruno and Mackus each serve under one-year employment agreements
with the Company dated December 1, 1997 and May 21, 1997, respectively. Each
of these agreements provides for the executive's position and base salary,
which is subject to merit increases in accordance with the Company's normal
salary merit increase review policy. In addition, the executive is entitled
to participate in such employee and fringe benefits plans as the Company
provides to other similarly situated management employees. On March 5, 2002,
the Company entered into a Termination Benefit Agreement with Mr. Phillips
which is intended to provide benefits to the executive only in the event of a
change of control or ownership of the Company or any of its subsidiaries prior
to December 31, 2005.

Consulting Agreement

On January 1, 2002, the Company entered into a new one year Consulting
Agreement with Mr. Ewing which renews automatically for an additional twelve
(12) months unless either party gives sixty (60) days prior written notice of
termination. The Consulting Agreement with Mr. Ewing provides for Mr. Ewing
to perform certain consulting assignments for the Company at a rate of $1,500
per day plus reimbursement of reasonable expenses. During the term of the
Consulting Agreement, Mr. Ewing will be entitled to receive bonuses for the
sale of Company machines into the North American coal industry. In addition,
Mr. Ewing will be entitled to a bonus if the incremental standard parts margin
generated on Company parts sales to the North American coal industry in each
calendar year are above an established base.

Management Services Agreement

American Industrial Partners ("AIP") provides substantial ongoing
financial and management services to the Company utilizing the extensive
operating and financial experience of AIP's principals. Pursuant to a
management services agreement among AIP, the Company and the Guarantor
Subsidiaries, AIP provides general management, financial and other corporate
advisory services to the Company for an annual fee of $1,450,000 and is
reimbursed for out-of-pocket expenses. Payment of a substantial portion of
this fee has been deferred and is subordinated in right of payment to the Loan
and Security Agreement. In 2002, $725,000 of fees was paid to AIP under this
agreement. At December 31, 2002 and 2001, $5,089,000 and $4,364,000,
respectively, of fees was payable to AIP under this agreement.

PART IV

ITEM 14. CONTROLS AND PROCEDURES

The Company has established disclosure controls and procedures to ensure
that material information relating to the Company, including its consolidated
subsidiaries, is made known to the officers who certify the financial reports
and to other members of senior management and the Board of Directors.

Based on their evaluation as of a date within 90 days of the filing date of
this Annual Report on Form 10-K, the principal executive officer and principal
financial officer of the Company have concluded that the disclosure controls
and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
Securities Exchange Act of 1934) are effective to ensure that the information
required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within
the time periods specified in SEC rules and forms.

There were no significant changes in the Company's internal controls or in
other factors that could significantly affect those controls subsequent to the
date of their most recent evaluation.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Page No.

(a) 1. FINANCIAL STATEMENTS

Consolidated Statements of Operations for 28
the years ended December 31, 2002, 2001
and 2000.

Consolidated Statements of Comprehensive Loss 29
for the years ended December 31, 2002, 2001 and 2000.

Consolidated Balance Sheets as of December 31, 30-31
2002 and 2001.

Consolidated Statements of Common Shareholders' 32
Investment (Deficiency in Assets) for the years
ended December 31, 2002 2001 and 2000.

Consolidated Statements of Cash Flows for the 33-34
years ended December 31, 2002, 2001 and 2000.

Notes to Consolidated Financial Statements 35-70
for the years ended December 31, 2002, 2001
and 2000.

Report of Deloitte & Touche LLP 71

Report of Arthur Andersen LLP 72

2. FINANCIAL STATEMENT SCHEDULE

Schedule II - Valuation and Qualifying 73
Accounts and Reserves

All other schedules are omitted because they are inapplicable, not
required by the instructions or the information is included in the
consolidated financial statements or notes thereto.

3. EXHIBITS

The exhibits listed in the accompanying Exhibit Index are filed as a
part of this Annual Report on Form 10-K.

(b) REPORTS ON FORM 8-K

No reports on Form 8-K were filed during the fourth quarter of 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

BUCYRUS INTERNATIONAL, INC.
(Registrant)

By /s/ T. C. Rogers March 27, 2003
Theodore C. Rogers,
Chief Executive Officer

POWER OF ATTORNEY

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

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

Signature and Title Date

/s/ W. Richard Bingham March 24, 2003
W. Richard Bingham, Director

/s/ Wayne T. Ewing March 24, 2003
Wayne T. Ewing, Director

/s/ W. R. Hildebrand March 24, 2003
Willard R. Hildebrand, Director

/s/ Kim A. Marvin March 28, 2003
Kim A. Marvin, Director

/s/ Robert L. Purdum March 24, 2003
Robert L. Purdum, Director

/s/ T. C. Rogers March 27, 2003
Theodore C. Rogers, Director

/s/ T. W. Sullivan March 24, 2003
Timothy W. Sullivan, Director

/s/ Craig R. Mackus March 24, 2003
Craig R. Mackus, Vice President-Finance
and Secretary
(Principal Accounting and
Financial Officer)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT

I, Theodore C. Rogers, certify that:

1. I have reviewed this Annual Report on Form 10-K of Bucyrus International,
Inc.

2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;

3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual
Report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and

c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 27, 2003

/s/Theodore C. Rogers
Theodore C. Rogers
Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT

I, Craig R. Mackus, certify that:

1. I have reviewed this Annual Report on Form 10-K of Bucyrus International,
Inc.

2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this Annual Report;

3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this Annual
Report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this Annual Report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this Annual Report (the "Evaluation Date"); and

c) presented in this Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.

Date: March 24, 2003

/s/Craig R. Mackus
Craig R. Mackus
Vice President-Finance and Secretary

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH
REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT

The Registrant does not furnish an annual report or proxy soliciting
material to its security holders.

BUCYRUS INTERNATIONAL, INC.
EXHIBIT INDEX
TO
2002 ANNUAL REPORT ON FORM 10-K

Incorporated
Exhibit Herein By Filed
Number Description Reference Herewith

2.1 Agreement and Plan of Exhibit 1 to
Merger dated August 21, Registrant's
1997, between Registrant, Tender Offer
American Industrial Solicitation/
Partners Acquisition Recommendation
Company, LLC and Bucyrus Statement on
Acquisition Corp. Schedule 14D-9
filed with the
Commission on
August 26, 1997.

2.2 Certificate of Merger Exhibit 2.2 to
dated September 26, 1997, Registrant's
issued by the Secretary Current Report
of State of the State of on Form 8-K
Delaware. filed with the
Commission on
October 10, 1997.

2.3 Second Amended Joint Plan Exhibit 2.1 to
of Reorganization of B-E Registrant's
Holdings, Inc. and Bucyrus- Current Report
Erie Company under Chapter 11 on Form 8-K,
of the Bankruptcy Code, as filed with the
modified December 1, 1994, Commission and
including Exhibits. dated December 1,
1994.

2.4 Order dated December 1, Exhibit 2.2 to
1994 of the U.S. Bankruptcy Registrant's
Court, Eastern District of Current Report
Wisconsin, confirming the on Form 8-K
Second Amended Joint Plan filed with the
of Reorganization of B-E Commission and
Holdings, Inc. and Bucyrus- dated December 1,
Erie Company under Chapter 11 1994.
of the Bankruptcy Code, as
modified December 1, 1994,
including Exhibits.

3.1 Restated Certificate Exhibit 3.6 to
of Incorporation of Registrant's
Registrant. Annual Report on
Form 10-K for
the year ended
December 31, 1998.

3.2 By-laws of Registrant. Exhibit 3.5 to
Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1998.

3.3 Certificate of Amendment Exhibit 3.3
to Certificate of to Registrant's
Formation of Bucyrus Quarterly Report
Holdings, LLC, effective on Form 10-Q
March 25, 1999. filed with the
Commission on
May 15, 2000.

4.1 Indenture of Trust dated Exhibit 4.1 to
as of September 24, 1997 Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Harris Boonville Mining
Trust and Savings Bank, Services, Inc.,
Trustee. Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)

(a) Letter dated Exhibit 4.1(a)
February 15, 2000 to Registrant's
evidencing change of Quarterly Report
Indenture Trustee. on Form 10-Q
filed with the
Commission on
November 6, 2000.

4.2 Form of Guarantee of Included as
Boonville Mining Services, Exhibit E
Inc., Minserco, Inc. and to Exhibit 4.1
Von's Welding, Inc. dated above.
as of September 24, 1997
in favor of Harris Trust
and Savings Bank as Trustee
under the Indenture.

4.3 Form of Registrant's Exhibit 4.3 to
9-3/4% Senior Note due 2007. Registration
Statement on
Form S-4 of
Registrant, Boonville
Mining Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)

10.1 Credit Agreement, dated Exhibit 10.1 to
September 24, 1997 between Registrant's
Bank One, Wisconsin and Current Report
Registrant. on Form 8-K
filed with the
Commission on
October 10, 1997.

(a) First amendment dated Exhibit 10.1(a)
July 21, 1998 to Credit to Registrant's
Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 16, 1998.

(b) Second amendment dated Exhibit 10.1(b)
September 30, 1998 to to Registrant's
Credit Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 1998.

(c) Third amendment dated Exhibit 10.1(c)
April 20, 1999 to Credit to Registrant's
Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
August 12, 1999.

(d) Fourth amendment dated Exhibit 10.1(a)
September 30, 1999 to to Registrant's
Credit Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 12, 1999.

(e) Fifth amendment dated Exhibit 10.1(e)
March 14, 2000 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 1999.

(f) Sixth amendment dated Exhibit 10.1(f)
September 8, 2000 to Credit to Registrant's
Agreement. Quarterly Report
on Form 10-Q
filed with the
Commission on
November 6, 2000.

(g) Seventh amendment dated Exhibit 10.1(g)
March 20, 2001 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2000.

(h) Eighth amendment dated Exhibit 10.1(h)
January 4, 2002 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2001.

(i) Ninth amendment dated Exhibit 10.1(i)
January 22, 2002 to Credit to Registrant's
Agreement. Annual Report on
Form 10-K for
the year ended
December 31, 2001.

10.2 Management Services Agreement Exhibit 10.2 to
by and among Registrant, Registration
Boonville Mining Services, Statement on
Inc., Minserco, Inc. and Form S-4 of
Von's Welding, Inc. and Registrant,
American Industrial Partners. Boonville Mining
Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)

10.3 Registration Agreement dated Exhibit 10.3 to
September 24, 1997 by and Registration
among Registrant, Boonville Statement on
Mining Services, Inc., Form S-4 of
Minserco, Inc. and Von's Registrant,
Welding, Inc. and Salomon Boonville Mining
Brothers, Inc., Jefferies & Services, Inc.,
Company, Inc. and Donaldson, Minserco, Inc. and
Lufkin & Jenrette Securities Von's Welding, Inc.
Corporation. (SEC Registration
No. 333-39359)

10.4 Employment Agreement Exhibit 10.17 to
between Registrant and Registrant's
C. R. Mackus dated as of Quarterly Report
May 21, 1997. on Form 10-Q for
the quarter ended
June 30, 1997.

10.5 Annual Management Incentive Exhibit 10.14 to
Plan for 1997, adopted by Registrant's
Board of Directors Annual Report on
February 5, 1997. Form 10-K for
the year ended
December 31, 1997.

10.6 1998 Management Stock Option Exhibit 10.17 to
Plan. Registrant's
Annual Report on
Form 10-K for
the year ended
December 31, 1997.

10.7 Employment Agreement Exhibit 10.18 to
between Registrant and Registrant's
F. P. Bruno dated as of Annual Report on
December 1, 1997. Form 10-K for
the year ended
December 31, 1998.

10.8 Consulting Agreement Exhibit 10.19
between Registrant and to Registrant's
Wayne T. Ewing dated Annual Report on
February 1, 2000. Form 10-K for
the year ended
December 31, 1999.

10.9 Letter Agreement Exhibit 10.7
between Registrant and to Registrant's
T. W. Sullivan Quarterly Report
dated August 8, 2000. on Form 10-Q
filed with the
Commission on
August 14, 2000.

10.10 Agreement of Debt Exhibit 10.21
Conversion between to Registrant's
Registrant and Annual Report on
Bucyrus Holdings, LLC Form 10-K for
dated March 22, 2001. the year ended
December 31, 2000.

10.11 Consulting Agreement Exhibit 10.8
between Registrant and to Registrant's
Willard R. Hildebrand Quarterly Report
dated July 25, 2001. on Form 10-Q
filed with the
Commission on
November 14, 2001.

10.12 Agreement to Purchase and Exhibit 10.18
Sell Industrial Property to Registrant's
between Registrant and Annual Report on
InSite Real Estate Form 10-K for
Development, L.L.C. the year ended
dated October 25, 2001. December 31, 2001.

10.13 Industrial Lease Agreement Exhibit 10.19
between Registrant and to Registrant's
InSite South Milwaukee, L.L.C. Annual Report on
dated January 4, 2002. Form 10-K for
the year ended
December 31, 2001.

10.14 Termination Benefits Agreement Exhibit 10.20
between Registrant and to Registrant's
John F. Bosbous dated Annual Report on
March 5, 2002. Form 10-K for
the year ended
December 31, 2001.

10.15 Termination Benefits Agreement Exhibit 10.21
between Registrant and to Registrant's
Thomas B. Phillips dated Annual Report on
March 5, 2002. Form 10-K for
the year ended
December 31, 2001.

10.16 Loan and Security Agreement Exhibit 10.22
by and among Registrant, to Registrant's
Minserco, Inc., Boonville Annual Report on
Mining Services, Inc. and Form 10-K for
GMAC Business Credit, LLC, the year ended
and Bank One, Wisconsin dated December 31, 2001.
March 7, 2002.

(a) First amendment dated X
December 31, 2002 to Loan
and Security Agreement.

(b) Second amendment dated X
January 9, 2003 to Loan
and Security Agreement.

(c) Letter agreement as of X
December 31, 2002 to Loan
and Security Agreement.

10.17 Board of Directors X
Resolution dated
December 16, 1998
amending the 1998
Management Stock
Option Plan.

21.1 Subsidiaries of Registrant. Exhibit 21.1 to
Registration
Statement on
Form S-4 of
Registrant,
Boonville Mining
Services, Inc.,
Minserco, Inc. and
Von's Welding, Inc.
(SEC Registration
No. 333-39359)

99.1 Letter from Registrant Exhibit 99.1
to Securities and to Registrant's
Exchange Commission Annual Report on
dated March 27, 2002 Form 10-K for
with respect to the year ended
representations December 31, 2001.
received from Arthur
Andersen LLP.