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Bucyrus International 10-Q 2005

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32
  5. Ex-32

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

 

(Mark One)

 

|X|             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2005

 

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
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

 

 

P. O. BOX 500

1100 MILWAUKEE AVENUE

SOUTH MILWAUKEE, WISCONSIN

                            53172                             

(Address of Principal Executive Offices)

(Zip Code)

 

                                 (414) 768-4000                                  

(Registrant’s Telephone Number, Including Area Code)

 



 

 

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

 

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 ]

 

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

 

 

Class

Outstanding August 5, 2005

 

 

Class A Common Stock, $.01 par value

20,445,405

 

 



 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

 

INDEX

 

Page No.

PART I.

FINANCIAL INFORMATION:

 

 

 

Item 1 -

Financial Statements (Unaudited)

 

 

 

 

Consolidated Condensed Statements of Operations -
Quarters and six months ended June 30, 2005 and 2004

 

4

 

 

Consolidated Condensed Statements of
Comprehensive Income (Loss) - Quarters and six
months ended June 30, 2005 and 2004

5

 

 

Consolidated Condensed Balance Sheets -

 

 

June 30, 2005 and December 31, 2004

6-7

 

 

Consolidated Condensed Statements of Cash Flows -

 

 

Six months ended June 30, 2005 and 2004

8

 

 

Notes to Consolidated Condensed Financial

 

 

Statements

9-15

 

 

Item 2 -

Management’s Discussion and Analysis of

 

 

Financial Condition and Results of Operations

16-25

 

 

Item 3 -

Quantitative and Qualitative Disclosures

 

 

About Market Risk

26

 

 

Item 4 -

Controls and Procedures

27

 

 

Forward-Looking Statements

28

 

PART II.

OTHER INFORMATION:

 

 

Item 1 -

Legal Proceedings

29

 

 

Item 2 -

Unregistered Sales of Equity Securities

 

 

and Use of Proceeds

29

 

 

Item 3 -

Defaults Upon Senior Securities

29

 

 

Item 4 -

Submission of Matters to a Vote of

 

 

Security Holders

29

 

 

Item 5 -

Other Information

29

 

 

Item 6 -

Exhibits

29

 

 

Signature Page

30

 

 



 

 

PART I

FINANCIAL INFORMATION

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in Thousands, Except Per Share Amounts)

 

Quarters Ended June 30,
  Six Months Ended June 30,
 
2005
  2004
  2005
  2004
 
Sales     $ 140,037   $ 116,967   $ 245,558   $ 214,095  
Cost of products sold       109,043     92,180     185,538     169,651  




      Gross profit       30,994     24,787     60,020     44,444  
     
Selling, general and    
  administrative expenses       12,141     14,206     24,446     28,262  
Research and development    
  expenses       1,460     1,280     2,810     2,634  
Amortization of intangible       450     411     903     823  
  assets    




      Operating earnings       16,943     8,890     31,861     12,725  
                             
Interest expense       1,110     4,166     2,362     8,291  
Other expense - net       92     373     115     718  




Earnings before income    
  taxes       15,741     4,351     29,384     3,716  
Income tax expense       5,517     1,722     10,035     3,102  




Net earnings     $ 10,224   $ 2,629   $ 19,349   $ 614  




Net earnings per share data:    
  Basic:    
     Net earnings per share     $ .50   $ .22   $ .96   $ .05  
     Weighted average shares       20,293,990     12,058,400     20,181,674     12,058,400  
     
  Diluted:    
   Net earnings per share     $ .49   $ .21   $ .93   $ .05  
   Weighted average shares       20,830,660     12,687,687     20,806,619     12,716,552  

 

 

See notes to consolidated condensed financial statements.

 

4

 



 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED STATEMENTS OF

COMPREHENSIVE INCOME (LOSS) (Unaudited)

(Dollars in Thousands)


Quarters Ended June 30,
  Six Months Ended June 30,

 
2005
  2004
  2005
  2004
 
Net earnings     $ 10,224   $ 2,629   $ 19,349   $ 614  
Other comprehensive (loss)-    
 Foreign currency    
   translation adjustments       781     (3,048 )   (2,992 )   (4,043 )




Comprehensive income    
   (loss)     $ 11,005   $ (419 ) $ 16,357   $ (3,429 )




 

 

See notes to consolidated condensed financial statements

 

 

5

 



 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)

(Dollars in Thousands, Except Per Share Amounts)


June 30,
2005

  December 31,
2004

 
ASSETS            
     
CURRENT ASSETS:    
   Cash and cash equivalents     $ 6,786   $ 20,617  
   Receivables - net       106,484     90,802  
   Inventories       147,485     110,815  
   Deferred income tax assets       9,087     9,607  
   Prepaid expenses and other    
       current assets       6,862     7,205  


   Total Current Assets       276,704     239,046  


OTHER ASSETS:    
   Goodwill       47,306     47,306  
   Intangible assets - net       35,936     36,935  
   Deferred income tax assets       5,386     7,651  
   Other assets       8,364     8,191  


        96,992     100,083  


PROPERTY, PLANT AND EQUIPMENT:    
   Cost       126,863     120,724  
   Less accumulated depreciation       (71,460 )   (67,044 )


        55,403     53,680  


      $ 429,099   $ 392,809  


 

 

6

 



 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Continued)

(Dollars in Thousands, Except Per Share Amounts)

 

June 30,
2005

  December 31,
2004

 
LIABILITIES AND COMMON            
   SHAREHOLDERS’ INVESTMENT    
     
CURRENT LIABILITIES:    
                 
  Accounts payable and accrued expenses     $ 87,195   $ 59,446  
  Liabilities to customers on uncompleted    
    contracts and warranties       11,961     8,221  
  Income taxes       1,786     2,880  
  Current maturities of long-term debt and    
   other short-term obligations       1,661     6,342  


  Total Current Liabilities       102,603     76,889  


LONG-TERM LIABILITIES:    
  Postretirement benefits       14,064     13,700  
  Pension and other       36,505     38,242  


        50,569     51,942  


LONG-TERM DEBT, less current    
  maturities       89,381     96,910  
     
COMMON SHAREHOLDERS’    
  INVESTMENT:    
   Common stock - par value $.01    
    per share, authorized 41,000,000    
    shares, issued 20,467,109 shares    
    and 20,095,977 shares, respectively       205     201  
  Additional paid-in capital       295,274     289,930  
  Unearned restricted stock compensation       (581 )   (671 )
  Treasury stock - 72,400 shares, at cost       (851 )   (851 )
  Accumulated deficit       (82,818 )   (99,850 )
  Accumulated other comprehensive loss       (24,683 )   (21,691 )


        186,546     167,068  


      $ 429,099   $ 392,809  


 

 

See notes to consolidated condensed financial statements.

 

7

 



 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 1 - FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in Thousands)

 

Six Months Ended June 30,
 
2005
  2004
 
                 
Net Cash Provided By Operating Activities     $ 5,733   $ 21,609  


Cash Flows From Investing Activities    
Purchases of property, plant and equipment       (8,015 )   (2,346 )
Proceeds from sale of property, plant and equipment       112     57  
Other       (86 )   15  


Net cash used in investing activities       (7,989 )   (2,274 )


Cash Flows From Financing Activities    
Net borrowings from (repayment of) revolving credit facility       85,853     (19,066 )
Repayment of senior secured term loan       (98,750 )    
Net increase in long-term debt and other    
   bank borrowings       687     711  
Payment of financing expenses       (533 )   (208 )
Proceeds from issuance of common stock       3,661      
Dividends paid       (2,315 )    


                 
Net cash used in financing activities       (11,397 )   (18,563 )


                 
Effect of exchange rate changes on cash       (178 )   (306 )


                 
Net increase (decrease) in cash and cash equivalents       (13,831 )   466  
Cash and cash equivalents at beginning of period       20,617     6,075  


                 
Cash and cash equivalents at end of period     $ 6,786   $ 6,541  


     
Supplemental Disclosures of Cash Flow Information    
2005
  2004
 
Cash paid during the period for:                
   Interest     $ 2,848   $ 8,446  
   Income taxes - net of refunds       7,621     4,623  

 

 

See notes to consolidated condensed financial statements.

 

8

 



 

 

 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

 

 

ITEM 1 - FINANCIAL STATEMENTS

 

 

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)

 

1.

In the opinion of Bucyrus International, Inc. (the "Company"), the consolidated condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial results for the interim periods. Certain items are included in these statements based on estimates for the entire year. Actual results in future periods may differ from the estimates. The Company’s operations are classified as one operating segment.

 

2.

Certain notes and other information have been condensed or omitted from these interim consolidated condensed financial statements. Therefore, these statements should be read in conjunction with the Company’s 2004 Annual Report to Shareholders and Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 2005.

 

3.

On May 27, 2005, the Company entered into a new credit agreement which provides for a five-year $120.0 million revolving credit facility that may, at the Company’s request and with the lenders' approval, be increased to $150.0 million. Proceeds from this revolving credit facility were used to pay in full the previously outstanding senior secured term loan. The Company had $85.9 million of borrowings under its new revolving credit facility as of June 30, 2005. The new credit agreement provides that interest on borrowed amounts would initially be set at either the prime rate plus .25% or LIBOR plus 1.25%, with quarterly adjustments to interest rates beginning after six months. Borrowings under the revolving credit facility are subject to a borrowing base formula based on the value of eligible receivables and inventory.

 

4.

Inventories consist of the following:

 

June 30,
2005

  December 31,
2004

 
(Dollars in Thousands)
  Raw materials and parts     $ 31,193   $ 21,583  
  Work in process       33,735     7,633  
  Finished products
      (primarily replacement parts)
      82,557     81,599  


        $ 147,485   $ 110,815  


 

 

9

 



 

 

5.

The following is a reconciliation of the numerators and the denominators of the basic and diluted net earnings per share of common stock calculations for the quarters and six months ended June 30, 2005 and 2004:

 

Quarters Ended June 30,
  Six Months Ended June 30,
 
2005
  2004
  2005
  2004
 
(Dollars in Thousands, Except Per Share Amounts)  
                               
  Net earnings     $ 10,224   $ 2,629   $ 19,349   $ 614  




                               
  Weighted average shares outstanding       20,293,990     12,058,400     20,181,674     12,058,400  




                               
      Basic net earnings per share     $ .50   $ .22   $ .96   $ .05  




  Weighted average shares outstanding       20,293,990     12,058,400     20,181,674     12,058,400  
  Effect of dilutive stock options and    
     restricted stock       536,670     629,287     624,945     658,152  




  Weighted average shares    
    outstanding -diluted       20,830,660     12,687,687     20,806,619     12,716,552  




                               
      Diluted net earnings per share     $ .49   $ .21   $ .93   $ .05  




 

 

10

 



 

 

  6.

The Company accounts for stock–based compensation arrangements in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). The following table illustrates the effect on net earnings and net earnings per share as if the fair value-based method provided by SFAS 123 had been applied for all outstanding and unvested awards in each period:


Quarters Ended June 30,
  Six Months Ended June 30,
 
2005
  2004
  2005
  2004
 
  (Dollars in Thousands, Except Per Share Amounts)  
                             
  Reported net earnings   $ 10,224   $ 2,629   $ 19,349   $ 614  
     
  Add: Stock-based employee  
   compensation expense recorded,  
   net of related tax effects         3,293         7,441  
  Deduct: Total stock-based  
   employee compensation expense  
   determined under fair value based  
   method, net of related tax effects         (4 )       (8 )




  Pro forma net earnings   $ 10,224   $ 5,918   $ 19,349   $ 8,047  




     
  Net earnings per share of common stock:  
   As reported  
    Basic   $ .50   $ .22   $ .96   $ .05  
    Diluted     .49     .21     .93     .05  
   Pro forma  
    Basic     .50     .49     .96     .67  
    Diluted     .49     .47     .93     .63  

 

Options to purchase 195,102 and 370,020 shares of the Company’s Class A common stock were exercised during the quarter and six months ended June 30, 2005, respectively.

 

11

 



 

 

7. Intangible assets consist of the following:

 

June 30, 2005
  December 31, 2004
 
Gross
Carrying
Amount

  Accumulated
Amortization

  Gross
Carrying
Amount

  Accumulated
Amortization

 
(Dollars in Thousands)
 
  Amortized intangible assets:                    
    Engineering drawings     $ 25,500   $ (9,906 ) $ 25,500   $ (9,268 )
    Bill of material listings       2,856     (1,109 )   2,856     (1,038 )
    Software       2,288     (1,778 )   2,288     (1,663 )
    Other       737     (221 )   864     (173 )




        $ 31,381   $ (13,014 ) $ 31,508   $ (12,142 )




  Unamortized intangible assets:    
    Trademarks/Trade names     $ 12,436       $ 12,436      
    Intangible pension asset       5,133         5,133      


 
        $ 17,569       $ 17,569      


 

 

The aggregate intangible amortization expense for the quarter and six months ended June 30, 2005 was $.5 million and $.9 million, respectively. The aggregate intangible amortization expense for the quarter and six months ended June 30, 2004 was $.4 million and $.8 million, respectively.

 

The estimated future amortization expense of intangible assets as of June 30, 2005 is as follows:

 

(Dollars in Thousands)
  2005 (remaining six months)   $ 897  
  2006     1,794  
  2007     1,732  
  2008     1,565  
  2009     1,418  
  2010     1,418  
  Future      9,543  
     
 
      $ 18,367  
     
 

 

8.

Environmental

 

The Company’s operations and properties are subject to a broad range of federal, state, local and foreign laws and regulations relating to environmental matters, including laws and regulations governing discharges into the air and water, the handling and disposal of solid and hazardous substances and wastes, and the remediation of contamination associated with releases of hazardous substances at the Company’s facilities and at off-site disposal locations. These laws are complex, change frequently and have tended to become more stringent over time. Future events, such as compliance with more stringent laws or regulations, more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws, could require additional expenditures by the Company, which may be material.

 

 

12

 



 

 

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

 

Product Warranty

 

The Company recognizes the cost associated with its warranty policies on its products as revenue is recognized. The amount recognized is based on historical experience. The following is a reconciliation of the changes in accrued warranty costs for the six months ended June 30, 2005 and 2004:

 

Six Months Ended June 30,
 
2005
  2004
 
(Dollars in Thousands)  
                   
  Balance at January 1     $ 5,452   $ 4,311  
  Provision       1,346     1,835  
  Charges       (954 )   (978 )


  Balance at June 30     $ 5,844   $ 5,168  


 

Product Liability

 

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

 

Asbestos Liability

 

The Company has been named as a co-defendant in approximately 300 personal injury liability cases alleging damages due to exposure to asbestos and other substances, involving approximately 1,490 plaintiffs. The cases are pending in courts in nine states. In all of these cases, insurance carriers have accepted or are expected to accept defense. These cases are in various pre-trial stages. The Company does not believe that costs associated with these matters will have a material effect on its financial position, results of operations or cash flows, although no assurance to that effect can be given.

 

 

13

 



 

 

             Other Litigation

 

A wholly owned subsidiary of the Company is a defendant in a suit pending in the United States District Court for the Western District of Pennsylvania, brought on June 15, 2002, relating to an incident in which a dragline operated by an employee of a Company subsidiary tipped over. The owner of the dragline has sued an unaffiliated third party on a negligence theory for property damages and business interruption losses in a range of approximately $25.0 million to $27.0 million. The unrelated third party has brought a third-party action against the Company’s subsidiary. The Company’s insurance carriers are defending the claim, but have not conceded that the relevant policies cover the claim. At this time discovery is ongoing and it is not possible to evaluate the outcome of the claim nor the range of potential loss, if any.

 

A wholly-owned Australian subsidiary of the Company is a defendant in a suit pending in the Supreme Court of Queensland in Australia, brought on May 5, 2002, relating to a contractual claim. The plaintiff, pursuant to a contract with the Company’s subsidiary, agreed to erect a dragline sold by the Company to a customer for use at its mine site. The plaintiff asserts various contractual claims related to breach of contract damages and other remedies for approximately AUS $3.6 million related to its claim that it is owed amounts for services rendered under the contract. The Company’s subsidiary has asserted counterclaims against the plaintiff in connection with certain aspects of the work performed. This matter is anticipated to go to trial in late 2006. The Company has established a reserve for its estimate of the resolution of this matter.

 

9.

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

 

  Cumulative
Translation
Adjustments
  Minimum
Pension
Liability
Adjustments
  Accumulated
Other
Comprehensive
Loss
 



  (Dollars in Thousands)  
  
           Balance at December 31, 2004 $ (5,307 )          $ (16,384 )          $ (21,691 )
  
Changes – Six months ended   (2,992 )       (2,992 )
    June 30, 2005


  
Balance at June 30, 2005 $ (8,299 ) $ (16,384 ) $ (24,683 )



 

10.

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

 

14

 



 

 

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

 

  Quarters Ended June 30,               Six Months Ended June 30,  


2005               2004 2005               2004




  (Dollars in Thousands)  
  
           Service cost $ 552 $ 444   $ 1,104   $ 887  
Interest cost   1,310     1,332     2,620     2,642  
Expected return on plan assets   (1,116 )   (1,266 )   (2,232 )   (2,522 )
Amortization of prior service cost   52     51     104     102  
Amortization of actuarial loss   402     401     804     572  
  




Net cost $ 1,200   $ 962   $ 2,400   $ 1,681  




 

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

 

  Quarters Ended June 30,               Six Months Ended June 30,  


2005               2004 2005               2004




  (Dollars in Thousands)  
  
           Service cost $ 210   $ 195   $ 420   $ 385  
Interest cost   311     307     622     571  
Amortization of prior service cost   (60 )   (55 )   (120 )   (110 )
Amortization of actuarial loss   91     77     182     168  
  




Net cost $ 552   $ 524   $ 1,104   $ 1,014  




 

During the first six months of 2005, the Company contributed approximately $.9 million to its pension plans and $.6 million for the payment of benefits from its postretirement benefit plan. The Company presently anticipates contributing an additional $1.9 million to its pension plans and $.6 million for the payment of benefits from its postretirement benefit plan during the remainder of 2005.

 

15

 



 

 

BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

 

Business

 

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

 

The market for OEM machines is closely correlated with customer expectations of sustained strength in prices of surface mined commodities. Growth in demand for these commodities is a function of, among other things, economic activity, population increases and continuing improvements in standards of living in many areas of the world. In 2002, the market prices of many surface-mined commodities were generally weak. In 2003 and 2004, market prices for copper, coal, iron ore and oil increased and have continued to be strong in 2005. Factors that could support sustained demand for these key commodities in 2005 and future years include continued economic growth in China, India and the developing world and renewed economic strength in industrialized countries. In the past quarter, inquiries for new machines have increased from prior quarters. The highest interest has been in the oil sands of Western Canada and copper mines in South America. Inquiries from other areas of the world have also increased.

 

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

 

The Company continues to forecast increased sales activity for both aftermarket parts sales and OEM machine sales relative to prior periods of weaker OEM sales. The Company maintains ongoing efforts to improve efficiency and contain costs and continually evaluates all opportunities for reductions to operating costs. While the Company has recorded restructuring charges in recent years, it does not anticipate significant restructuring charges in the current year. Recent strong order volume has caused the Company to hire new employees, and additional hiring is expected. As sustained order strength continues, the Company is taking steps to increase its manufacturing capacity. During the first quarter of 2005, the Company entered into an agreement to lease a facility to be used for expansion of the Company’s manufacturing operations. The Company anticipates that the current commodity demand will continue for at least the next three to five years. The Company is currently reviewing other expansion alternatives.

 

 

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A substantial portion of the Company’s sales and operating earnings is attributable to operations located outside the United States. The Company generally sells its OEM machines, including those sold directly to foreign customers, and most of its aftermarket parts in United States dollars. A portion of the Company’s aftermarket parts sales are also denominated in the local currencies of Australia, Brazil, Canada, Chile, South Africa and the United Kingdom. Aftermarket services are paid for primarily in local currency which is naturally hedged by the Company’s payment of local labor in local currency. In the aggregate, approximately 70% of the Company’s 2004 sales were priced in United States dollars.

 

Over the past three years, the Company increased gross profits by improving manufacturing overhead variances, achieving productivity gains and growing its high margin aftermarket parts and services business.

 

 

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

 

Key Measures

 

 

On-Time Delivery and Lead Times

 

Due to the high fixed cost structure of the Company’s customers, it is critical that they avoid equipment downtime. On-time delivery and reduced lead time of aftermarket parts and services allow customers to reduce downtime and are therefore key measures of customer service, and the Company believes they are fundamental drivers of aftermarket customer demand. The Company’s on-time delivery percentage in the aftermarket, based on achieved promised delivery dates to customers, was 94% for the year 2004 and 93% for the first six months of 2005. Lead times for deliveries were approximately the same in the first six months of 2005 as compared to the year 2004, although some suppliers are now increasing lead times for materials which may affect parts delivery lead times in the future.

 

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

 

 

Productivity

 

Sales per full time equivalent employee is a measure of the Company’s operational efficiency. Sales per full time equivalent employee were $.3 million for the first six months of 2005 and $.2 million for the first six months of 2004. The Company has experienced productivity increases in recent years, primarily due to the application of worldwide sales and inventory ERP systems and personnel upgrades which, collectively, allowed sales to grow with minimal changes in headcount.

 

 

Warranty Claims

 

Product quality is another key driver of customer satisfaction and, as a result, sales. Management uses warranty claims as a percentage of total sales as one objective benchmark to evaluate product quality. During the year 2004 and the first six months of 2005, warranty claims as a percentage of total sales were less than 1%.

 

 

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             Backlog

 

Backlog is a tool which allows management to forecast sales and production requirements. Due to the high cost of some OEM products, backlog is subject to volatility, particularly over relatively short periods. A portion of the Company’s backlog is related to multi-year contracts that will generate revenue in future years. The following table shows backlog at June 30, 2005 and December 31, 2004 as well as the portion of backlog which is or was expected to be recognized within twelve months of these dates:

 

June 30,
2005

  December 31,
2004

 
(Dollars in Thousands)  
                 
Next 12 months     $ 324,367              $ 231,455  
Total       573,268     436,317  

 

The increase in the Company’s backlog at June 30, 2005 is due to the improved market conditions in which the Company sells its products.

 

 

Inventory

 

Inventory is one of the Company’s significant assets. As of June 30, 2005, the Company had $147.5 million in inventory. Inventory turned at a rate of approximately 2.9 times during the first six months of 2005 and approximately 3.0 times in the year 2004. Inventory turns is calculated based on cost of sales and the average inventory balance during the prior twelve months. The Company believes that it has appropriately recorded at the lower of cost or market any slow moving or obsolete inventory in its financial statements. The factors that could reduce the carrying value of the Company’s inventory include reduced demand for aftermarket parts due to decreased sales volumes attributable to new or improved technology or customers discontinuing the use of the Company’s older model machines, which could render inventory obsolete or excess. With the exception of the normal inventory obsolescence provision recorded in the ordinary course of business, the Company does not anticipate recording any significant inventory impairments.

 

Results of Operations

 

Quarter And Six Months Ended June 30, 2005 Compared to Quarter And Six Months Ended June 30, 2004

 

 

Sales

 

Sales for the quarter and six months ended June 30, 2005 were $140.0 million and $245.6 million, respectively, compared with $117.0 million and $214.1 million for the quarter and six months ended June 30, 2004, respectively. Sales of aftermarket parts and services for the second quarter of 2005 were $85.1 million, an increase of 2.3% from $83.2 million for the second quarter of 2004. Sales of aftermarket parts and services for the six months ended June 30, 2005 were $162.9 million, an increase of 6.7% from $152.6 million for the six months ended June 30, 2004. The increases in aftermarket sales in 2005 reflect the Company’s initiatives and strategies to capture additional market share as well as continued strong commodity prices. A significant portion of the increase in aftermarket sales for the six months ended June 30, 2005 was in the United States. Machine sales for the second quarter of 2005 were $54.9 million,

 

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an increase of 62.7% from $33.8 million for the second quarter of 2004. Machine sales for the six months ended June 30, 2005 were $82.7 million, an increase of 34.5% from $61.4 million for the six months ended June 30, 2004. The increase in machine sales for the three months ended June 30, 2005 was primarily due to the recognition of sales on two draglines that were sold in 2004. The increase in machine sales for the six months ended June 30, 2005 was primarily due to the aforementioned draglines as well as increased electric mining shovel sales. Approximately $1.7 million and $3.8 million of the increases in sales for the quarter and six months ended June 30, 2005, respectively, was attributable to a weakening United States dollar, which primarily impacted aftermarket sales (see "Foreign Currency Fluctuations" below).

 

 

Gross Profit

 

Gross profit for the second quarter of 2005 was $31.0 million or 22.1% of sales compared with $24.8 million or 21.2% of sales for the second quarter of 2004. Gross profit for the six months ended June 30, 2005 was $60.0 million or 24.4% compared with $44.4 million or 20.8% for the six months ended June 30, 2004. The increase in gross profit was primarily due to an increased sales volume and higher gross margins on both machines and aftermarket sales. Gross profit for the six months ended June 30, 2005 and 2004 was reduced by $2.5 million of additional depreciation expense as a result of the purchase price allocation to plant and equipment in connection with acquisitions involving the Company. Approximately $.4 million and $.8 million of the increase in gross profit for the quarter and six months ended June 30, 2005, respectively, was attributable to a weakening United States dollar, which primarily impacted aftermarket sales (see "Foreign Currency Fluctuations" below).

 

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses for the quarter ended June 30, 2005 were $12.1 million or 8.7% of sales compared with $14.2 million or 12.1% of sales for the quarter ended June 30, 2004. Selling, general and administrative expenses for the six months ended June 30, 2005 were $24.4 million or 10.0% of sales compared to $28.3 million or 13.2% of sales for the six months ended June 30, 2004. Selling, general and administrative expenses for the quarter and six months ended June 30, 2005 included $45,000 and $90,000, respectively, related to non-cash stock-based employee compensation compared to $3.3 million and $7.4 million for the quarter and six months ended June 30, 2004. Selling expenses for the quarter and six months ended June 30, 2005 increased by $1.2 million and $2.4 million, respectively, from 2004 primarily due to increased sales efforts and higher foreign costs as a result of the weakened U.S. dollar, but remained relatively constant as a percentage of sales. Foreign currency transaction gains for the quarter and six months ended June 30, 2005 were $.5 million and $1.3 million, respectively, compared with gains of $.2 million and $.8 million for the quarter and six months ended June 30, 2004, respectively.

 

 

Research and Development Expenses

 

Research and development expenses for the quarter and six months ended June 30, 2005 were $1.5 million and $2.8 million, respectively, compared with $1.3 million and $2.6 million for the quarter and six months ended June 30, 2004, respectively.

 

 

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             Amortization of Intangible Assets

 

Amortization of intangible assets, consisting primarily of engineering drawings, bill of material listings and software, was $.5 million and $.9 million for the quarter and six months ended June 30, 2005, respectively, compared with $.4 million and $.8 million for the quarter and six months ended June 30, 2004, respectively.

 

 

Operating Earnings

 

Operating earnings for the second quarter of 2005 were $16.9 million or 12.1% of sales, compared with $8.9 million or 7.6% of sales for the second quarter of 2004. Operating earnings for the six months ended June 30, 2005 were $31.9 million or 13.0% of sales, compared with $12.7 million or 5.9% of sales for the six months ended June 30, 2004. Operating earnings for the quarter and six months ended June 30, 2005 increased from 2004 due to increased gross profit resulting from an increased sales volume and higher gross margins on both machines and aftermarket sales. Operating earnings for the quarter and six months ended June 30, 2004 were reduced by $3.3 million and $7.4 million, respectively, of non-cash stock compensation expense. Approximately $.3 million and $.4 million of the increase in operating earnings for the quarter and six months ended June 30, 2005, respectively, was attributable to a weakening United States dollar (see "Foreign Currency Fluctuations" below).

 

 

Interest Expense

 

Interest expense for the quarter and six months ended June 30, 2005 was $1.1 million and $2.4 million, respectively, compared with $4.2 million and $8.3 million for the quarter and six months ended June 30, 2004, respectively. The decrease in interest expense in 2005 was due to the refinancing of the Company’s capital structure in connection with its initial public offering which was completed on July 28, 2004.

 

 

Other Expense - Net

 

Other expense - net was $.1 million of expense for the quarter and six months ended June 30, 2005, respectively, compared with $.4 million and $.7 million of expense for the quarter and six months ended June 30, 2004, respectively. Debt issuance cost amortization was $.2 million and $.5 million for the quarter and six months ended June 30, 2005 compared with $.4 million and $.8 million for the quarter and six months ended June 30, 2004, respectively. These amounts include costs related to the Company’s credit facilities (see "Liquidity and Capital Resources - Financing Cash Flows" below).

 

 

Income Taxes

 

Income tax expense for the quarter and six months ended June 30, 2005 was $5.5 million and $10.0 million, respectively, compared with $1.7 million and $3.1 million for the quarter and six months ended June 30, 2004, respectively. Income tax expense for the quarter and six months ended June 30, 2004 consisted primarily of foreign taxes at applicable statutory rates since taxable U.S. income was offset by federal net operating loss carryforwards. In 2005, U.S. taxable income exceeded available net operating loss carryforwards and income tax expense was recorded. At June 30, 2005, the Company had approximately $14.3 million of federal net operating loss carryforwards.

 

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Foreign Currency Fluctuations

 

The following table summarizes the approximate effect of changes in foreign currency exchange rates on the Company’s sales, gross profit and operating earnings for the quarter and six months ended June 30, 2005 and 2004, in each case compared to the same quarter in the prior year:

 

Quarters Ended
June 30,

Six Months Ended
June 30,

2005
2004
2005
2004
(Dollars in Thousands)
     
              Increase in sales     $ 1,738   $ 2,825   $ 3,803   $ 7,132  
              Increase in gross profit       426     550     835     1,320  
              Increase in operating earnings       257     328     408     354  

 

EBITDA

 

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the quarter and six months ended June 30, 2005 was $20.3 million and $38.6 million, respectively, compared with $12.0 million and $19.1 million for the quarter and six months ended June 30, 2004, respectively. EBITDA is presented (i) because the Company uses EBITDA to measure its liquidity and financial performance and (ii) because the Company believes EBITDA is frequently used by securities analysts, investors and other interested parties in evaluating the performance and enterprise value of companies in general, and in evaluating the liquidity of companies with significant debt service obligations and their ability to service their indebtedness. The EBITDA calculation is not an alternative to operating earnings under accounting principles generally accepted in the United States of America (“GAAP”) as an indicator of operating performance or of cash flows as a measure of liquidity. The following table reconciles Net Earnings as shown in the Consolidated Condensed Statements of Operations to EBITDA and reconciles EBITDA to Net Cash Provided by (Used in) Operating Activities as shown in the Consolidated Condensed Statements of Cash Flows:

 

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Quarters Ended
June 30,

Six Months Ended
June 30,

2005
2004
2005
2004
(Dollars in Thousands)
     
Net earnings     $ 10,224   $ 2,629   $ 19,349   $ 614  
Interest income       (149 )   (49 )   (358 )   (114 )
Interest expense       1,110     4,166     2,362     8,291  
Income taxes       5,517     1,722     10,035     3,102  
Depreciation       2,920     2,742     5,784     5,503  
Amortization (1)       691     834     1,379     1,656  




     
EBITDA (2)       20,313     12,044     38,551     19,052  
Changes in assets and liabilities       (23,271 )   10,651     (21,022 )   6,382  
Non-cash stock compensation expense (3)       45     3,293     90     7,441  
(Gain) loss on sale of fixed assets       (129 )   5     153     13  
Interest income       149     49     358     114  
Interest expense       (1,110 )   (4,166 )   (2,362 )   (8,291 )
Income tax expense       (5,517 )   (1,722 )   (10,035 )   (3,102 )




     
Net cash provided by (used in) operating activities     $ (9,520 ) $ 20,154   $ 5,733   $ 21,609  




     
Net cash used in investing activities     $ (5,388 ) $ (1,573 ) $ (7,989 ) $ (2,274 )




     
Net cash used in financing activities     $ (12,213 ) $ (16,159 ) $ (11,397 ) $ (18,563 )




 

(1)

Includes amortization of intangible assets and debt issuance costs.

(2)

EBITDA for the quarter and six months ended June 30, 2004 is reduced by expenses pursuant to a management services agreement with American Industrial Partners (“AIP”) as well as fees paid to AIP or its affiliates and advisors for services performed for the Company outside the scope of the management services agreement of $.6 million and $1.2 million, respectively. The management services agreement was terminated in July 2004. EBITDA is also reduced by restructuring charges (severance) for the quarters ended June 30, 2005 and 2004 and six months ended June 30, 2005 and 2004 of $60,000 and $116,000, $73,000 and $170,000, respectively.

(3)

Non-cash stock compensation expense for the quarter and six months ended June 30, 2004 represents the charge recorded related to stock options issued prior to the completion of the Company’s initial public offering on July 28, 2004. At the time of the initial public offering, the plan required certain modifications to the determination of fair market value for these previously issued options. In accordance with EITF Issue No. 87-23, no further compensation expense was recorded subsequent to July 28, 2004 related to stock options issued under this plan prior to the Company’s initial public offering. Under existing accounting standards, provision for compensation expense related to the 24,000 shares of restricted stock issued under the Bucyrus International, Inc. 2004 Equity Incentive Plan in September 2004 will be approximately $.2 million annually over the four years subsequent to the date of issuance.

 

 

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Liquidity and Capital Resources

 

 

Cash Requirements

 

During the remainder of 2005, the Company anticipates strong cash flows from operations due to continued strength in aftermarket parts sales as well as increased demand for new machines. In expanding markets, customers are generally contractually obligated to make progress payments under purchase contracts for machine orders. As a result, the Company does not anticipate significant outside financing requirements to fund production of these machines and does not believe that new machine sales will have a negative long-term effect on its liquidity. If additional borrowings are necessary during the remainder of 2005, the Company believes it has sufficient capacity under its new revolving credit facility (see “Financing Cash Flows" below).

 

The following table summarizes the Company’s contractual obligations with respect to long-term debt and short-term obligations as of June 30, 2005:

 

Total
1 Year
Or Less

2-3 Years
4-5 Years
Thereafter
Long-term debt     $ 89,792   $ 411   $ 472   $ 86,921   $ 1,988  
     
Short-term    
  obligations       1,250     1,250              





      $ 91,042   $ 1,661   $ 472   $ 86,921   $ 1,988  






           There have been no material changes to the contractual obligations with respect to purchase obligations and operating leases and rental and service agreements as presented in the Company’s 2004 Annual Report to Shareholders.

 

The Company’s capital expenditures for the six months ended June 30, 2005 were $8.0 million compared with $2.3 million for the six months ended June 30, 2004. Included in capital expenditures for the six months ended June 30, 2005 was $2.2 million related to the new manufacturing facility in Milwaukee. The Company expects a continued increase in capital expenditures during the remainder of 2005 as it increases manufacturing capacity and upgrades and replaces manufacturing equipment to support increased sales activity. The Company believes cash flows from operating activities will be sufficient to fund capital expenditures in 2005.

 

At June 30, 2005, there were $26.9 million of standby letters of credit outstanding under all Company bank facilities.

 

The Company believes that cash flows from operations will be sufficient to fund its cash requirements for the next twelve months.

 

The Company intends to pay quarterly cash dividends of $0.575 per share (equal to $.23 per year). A quarterly cash dividend of $1.2 million was declared on April 14, 2005 and paid on May 16, 2005.

 

 

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Sources and Uses of Cash

 

While the Company had $6.8 million of cash and cash equivalents as of June 30, 2005, this cash is located at various foreign subsidiaries and is used for working capital purposes. Cash receipts in the United States are applied against the Company’s revolving credit facility.

 

 

Operating Cash Flows

 

During the first six months of 2005, the Company generated cash from operating activities of $5.7 million compared to $21.6 million in the first six months of 2004. The decrease in cash flows from operating activities was driven primarily by increased working capital requirements.

 

 

Receivables

 

The Company recognizes revenues on its machine orders using the percentage-of-completion method. Accordingly, accounts receivable are generated when revenue is recognized, which can be before the funds are collected or in some cases, before the customer is billed. As of June 30, 2005, the Company had $106.5 million of receivables compared to $90.8 million of receivables at December 31, 2004. Receivables at June 30, 2005 and December 31, 2004 included $36.9 million and $31.4 million, respectively, of revenues from long-term contracts which were not billable at these dates.

 

 

Liabilities to Customers on Uncompleted Contracts and Warranties

 

Customers generally make down payments at the time of the order for a new machine as well as progress payments throughout the manufacturing process. In accordance with SOP No. 81-1, these payments are recorded as Liabilities to Customers on Uncompleted Contracts and Warranties. The increase of $3.7 million from December 31, 2004 to June 30, 2005 was due to the receipt of customer payments on certain long-term machine contracts for which the related revenue has yet to be recognized.

 

 

Financing Cash Flows

 

On May 27, 2005, the Company entered into a new credit agreement with GMAC Commercial Finance LLC as lead lender. The new credit agreement provides for a five year $120.0 million revolving credit facility that may, at the Company’s request and with the lender’s approval, be increased to $150.0 million. The new credit agreement provides that interest on borrowed amounts would initially be set at either the prime rate plus .25% or LIBOR plus 1.25%, with quarterly adjustments to interest rates beginning after six months. Proceeds from this new revolving credit facility were used to pay in full the previously outstanding senior secured term loan. Borrowings under the revolving credit facility are subject to a borrowing base formula based on the value of eligible receivables and inventory. At June 30, 2005, the Company had $85.9 million of borrowings under its revolving credit facility at a weighted average interest rate of 4.9%. The amount available for borrowings under the revolving credit facility at June 30, 2005 was $12.9 million.

 

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The new credit agreement contains covenants limiting the discretion of management with respect to key business matters and places significant restrictions on, among other things, the Company’s ability to incur additional indebtedness, create liens or other encumbrances, make certain payments or investments, loans and guarantees, and sell or otherwise dispose of assets and merge or consolidate with another entity. All of the Company’s domestic assets and the receivables and inventory of the Company’s Canadian subsidiary are pledged as collateral under the revolving credit facility. In addition, the outstanding capital stock of the Company’s domestic subsidiaries as well as the majority of the capital stock of the Company’s foreign subsidiaries are pledged as collateral. The Company is also required to maintain compliance with certain financial covenants, including a leverage ratio (as defined). The Company was in compliance with all applicable covenants as of June 30, 2005.

 

 

Critical Accounting Policies and Estimates

 

See Critical Accounting Policies and Estimates discussed in the Management's Discussion and Analysis section of the Company’s 2004 Annual Report to Shareholders. There have been no material changes to these policies.

 

 

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BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

Interest Rates

 

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

 

At June 30, 2005, a sensitivity analysis was performed for the Company’s floating rate debt obligations. Based on this sensitivity analysis, the Company has determined that a 10% change in the Company’s weighted average interest rate at June 30, 2005 would have the effect of changing the Company’s interest expense on an annual basis by approximately $400,000.

 

Foreign Currency

 

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

 

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

 

Based on the Company’s derivative instruments outstanding at June 30, 2005, a 10% change in foreign currency exchange rates would not have a material effect on the Company’s financial position, results of operations or cash flows.

 

 

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BUCYRUS INTERNATIONAL, INC. AND SUBSIDIARIES

ITEM 4 - CONTROLS AND PROCEDURES

 

As of the end of the period covered by this Report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including its President and Chief Executive Officer and its Chief Financial Officer, Controller and Secretary, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). Based upon their evaluation of these disclosure controls and procedures, the President and Chief Executive Officer and the Chief Financial Officer, Controller and Secretary concluded that the disclosure controls and procedures were effective as of the end of the quarter ended June 30, 2005 to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Report was being prepared.

 

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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

 

 

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FORWARD-LOOKING STATEMENTS

 

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

 

• customers’ production capacity, stockpiles, and production and consumption rates of copper, coal,

iron, oil and other ores and minerals;

 

• the cash flows of customers;

 

• consolidation among customers and suppliers;

 

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

 

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

 

• unforeseen patent, tax, product, environmental, employee health or benefit, or contractual liabilities

that affect the Company;

 

• litigation;

 

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

 

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

 

• changes in the relative values of currencies;

 

• the Company’s leverage and debt service obligations;

 

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

 

• labor costs and labor relations; and

 

• the Company’s plant capacity.

 

The review of important factors above is not exhaustive, and should be read in conjunction with the other cautionary statements included in this report and in the Company’s 2004 Annual Report to Shareholders and Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 2005. All forward looking statements attributable to the Company are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

 

 

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PART II

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings.

 

Not applicable.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

 

Not applicable.

 

 

Item 3.

Defaults Upon Senior Securities.

 

 

Not applicable.

 

 

Item 4.

Submission of Matters to a Vote of Security Holders.

 

At the Company’s annual meeting of shareholders on April 14, 2005, the three continuing directors who were management’s nominees for re-election were elected to the Company’s Board of Directors for terms expiring at the 2008 annual meeting of shareholders. The directors were re-elected with the following votes:

 

  Director’s Name
    For
  Withheld
 
  Ronald A Crutcher       18,288,127       92,498  
  Robert W. Korthals       18,167,937     212,688  
  Gene E. Little       18,206,352     174,273  

 

At the meeting, shareholders also ratified the selection of Deloitte & Touche LLP to serve as independent registered public accountants of the Company for fiscal 2005, by the following vote:

 

 
  For:   18,266,690  
  Against:   88,285  
  Abstained:   25,650  

 

 

Item 5.

Other Information.

 

 

Not applicable.

 

 

Item 6.

Exhibits.

 

See Exhibit Index on last page of this report.

 

 

29

 



 

 

 

SIGNATURES

 

 

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

 

 

 

BUCYRUS INTERNATIONAL, INC.

 

(Registrant)

 

 

 

 

Date

August 12, 2005

/s/Timothy W. Sullivan  

 

 

Timothy W. Sullivan
President and Chief xecutive Officer

 

 

 

 

Date

August 12, 2005

/s/Craig R. Mackus  

 

 

Craig R. Mackus
Chief Financial Officer, Controller and Secretary
Principal Accounting Officer

 

 

 

 

30

 



 

 

BUCYRUS INTERNATIONAL, INC.

EXHIBIT INDEX

TO

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2005

 

Exhibit

Number

Description

 

31.1

Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a)/15d-14(a).

 

31.2

Certification of Chief Financial Officer, Controller and Secretary pursuant to Section 302 of the Sarbanes-Oxley Act and Rules 13a-14(a)/15d-14(a).

 

32

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

El-1

 

 

 

 

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