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

Form 10-K

Commission file number 1-871

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

        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 ý    No o

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

        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 o    No ý

        As of March 26, 2004, 1,507,300 shares of common stock of the Registrant were outstanding. Of the total outstanding shares of common stock on March 26, 2004, 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 76,500 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

TABLE OF CONTENTS

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PART I

Market and Industry Data

        This report includes market share and industry data and forecasts that the Company has obtained from internal company surveys, market research, consultant surveys, publicly available information and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy and completeness of such information. The Company has not independently verified any of the data from third-party sources nor has it ascertained the underlying economic assumptions relied upon therein. Similarly, internal company surveys, industry forecasts and market research, which the Company believes to be reliable based upon management's knowledge of the industry, have not been verified by any independent sources. In addition, the Company does not know what assumptions regarding general economic growth were used in preparing the forecasts cited in this report. Except where otherwise noted, statements as to the Company's position relative to our competitors or as to market share refer to the most recent available data.

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," "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 copper, coal, oil sands, iron ore and other ores and minerals; the cash flows of customers; 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; leverage and debt service; success in recruiting and retaining managers and key employees; and wage stability and cooperative labor relations; plant capacity and utilization.

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ITEM 1. BUSINESS

Company Overview

        The Company is one of only two global manufacturers of large excavation machinery used for surface mining. The Company designs, manufactures and markets draglines, electric mining shovels and rotary blasthole drills and provides the aftermarket replacement parts and service for these machines. The Company believes it has the largest installed base of surface mining equipment in the world and the leading market share in draglines and rotary blasthole drills. The Company's products are sold to customers throughout the world in every market where surface mining is conducted with modern methods. Through its predecessor companies, the Company has been producing excavation machines since 1880. The Company's machines dug the Panama Canal.

        Surface mining is growing faster than underground mining and is driven by increased demand for surface mined commodities such as copper (South America), oil sands (Canada) and coal (Australia, South Africa, the Western United States, and increasingly, China and India). The Company believes that coal surface mining in China and India holds significant potential for long-term growth, and in early 2004, the Company entered into a $57,000,000 contract for a dragline sale to the China market. The Company has established a leading position in these fast growing surface mining regions.

        The Company derives sales from both original equipment manufactured ("OEM") and aftermarket parts and service. OEM machine sales are closely correlated with the strength of commodity markets and maintain and augment the Company's $9 billion (calculated by estimated replacement value) installed base, which provides the foundation for the Company's aftermarket activities. The Company's aftermarket parts and service operations accounted for approximately 70% of sales over the last ten years and increased in nine of the past ten years. The Company manufacturers its OEM machines and the majority of aftermarket parts in its facility in South Milwaukee, Wisconsin.

        The Company concentrates on producing technologically advanced and productive machines to allow its customers to conduct cost efficient operations. The Company exclusively produces alternating current ("AC") drive machines and offers unique computer control systems which allow its technicians in South Milwaukee, Wisconsin to remotely monitor its machines all around the world.

        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").

Industry Overview

        The equipment manufactured and serviced by the Company is primarily used to mine copper, coal, oil sands and iron ore. Growth in demand for these commodities is a function of, among other things, economic activity, population increases and continuing improvements in standards of living in many areas of the world. Modern surface mining machines are expensive and complex. These machines are typically kept in continuous operation for 15 to 40 years and require regular maintenance and repair. The largest markets for surface mining equipment have been in the United States, South America, Australia, South Africa and Canada. In the future, the Company expects China, India and Canada to become increasingly important markets.

Commodities Markets Served

        The Company's equipment is primarily used by large multi-national companies engaged in surface mining for a variety of minerals. Surface mining for copper, coal, oil sands, and iron ore have accounted for the largest percentage of industry demand. Copper and oil sands mining operations have accounted for an increasing share of the Company's sales of OEM machines and aftermarket parts and services, and these sectors are expected to continue growing.

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        The following table shows selected commodity prices as of the end of 2003, 2002 and 2001:

(1)

Source: London Metal Exchange.

(2)

Source: The Institute for Energy Economics, Japan

(3)

Source: McCloskey Coal News.

(4)

Source: Skillings Mining Review.

(5)

Source: Sproule Associates, Ltd. The prices quoted are for Hardisty (Canada) Heavy Crude Oil.

        Copper.    Copper is a basic material used in residential and commercial construction, electrical equipment, transportation, industrial machinery and consumer durable goods. Copper is almost exclusively surface mined. Copper prices have risen in recent months and are forecasted to remain strong, due to accelerating economic growth in the developing world. From 2000 to 2003, Chinese copper consumption grew at double-digit rates, and in 2003, China overtook the United States as the largest consumer of refined copper. In addition to organic demand, developing markets do not have the advantage of large pools of recycled copper scrap, which historically has accounted for approximately half of United States copper consumption.

        Coal.    Coal is the world's most abundant low-cost energy source and is a critical element of energy policy. There are two types of coal: steam coal used to generate electricity and coking coal required to produce steel. Demand for coking coal has recently risen in tandem with the increased demand for steel. The largest coal producers are China, the United States, India, Australia, Russia and South Africa.

        Within the United States, environmental legislation has caused a shift in coal mining activity from high sulfur coal reserves in the midwestern states to low sulfur coal which is primarily surface mined in the Powder River Basin area in Wyoming and in Montana. According to the Energy Information Administration, a statistical agency of the United States Department of Energy (the "EIA"), in every year since 1974, levels of surface mining in the United States have exceeded levels of underground mining. In 2002 (the most recent year for which data is available), 735,909,000 short tons of coal were surface mined as compared to 375,385,000 short tons which were underground mined. Recent natural gas price increases have also contributed to the increased demand for coal.

        China and India, which together account for 37% of the world's population, have fast-growing economies and limited domestic energy sources other than coal. In an attempt to support China's growing economy, China is increasingly adopting modern surface mining methods and using western equipment to access its coal reserves.

        Oil Sands.    A geological formation of oil sands exists in the Athabasca region of northern Alberta, Canada. Oil sands are a viscous mixture of sand, bitumen, clay and water with the consistency of cold molasses. The oil sands are believed to contain the equivalent of 300 billion barrels of oil, of which 175 billion has already been established as commercially viable oil. For reference, according to the EIA's International Energy Annual 2002, the oil reserves of Saudi Arabia contain approximately 260 billion barrels. According to Canadian government sources, Alberta's oil sands currently account

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for about 32% of Canada's petroleum production, and by 2005, the Alberta Department of Energy anticipates that more than one-half of Canadian crude oil production and 10% of North American production will come from the oil sands. Surface mining methods account for approximately 65% of the production in the oil sands region. In 1999, the Company acquired certain assets of an Alberta-based Canadian company with extensive experience in the field repair and service of heavy machinery for the surface mining industry. This acquisition enabled the Company to establish a sales and service infrastructure and strengthen its position in the oil sands area of Western Canada.

        Iron Ore.    Iron ore is the only source of primary iron used to make steel and is mined in more than 50 countries. Substantially all iron ore is surface mined. In recent years, the five largest producers, accounting for approximately 75% of world production, have been China, Brazil, Australia, Canada and India. The market for iron ore is largely a function of the demand for steel. Steel is used to produce, among other things, automobiles and other motor vehicles, mass transit and rail transport equipment, structural components for building and infrastructure, including bridges, railroads and factories, and industrial parts. Rapid industrial growth in China is the principal reason for the increased level of international demand for iron ore and steel. The Company expects that Chinese industrialization as well as additional requirements for steel in the developed and developing world will continue to increase worldwide consumption of iron ore in coming years.

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

OEM Products

        The Company's line of OEM machines includes draglines, electric mining shovels and rotary blasthole drills.

        Draglines.    Draglines are primarily used in coal mining applications to remove overburden by dragging a large bucket through the overburden and carrying it away. 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. Draglines are the largest and most expensive type of surface mining equipment, but offer customers the lowest cost per ton of material moved. The average life of a dragline is approximately 40 years.

        Electric Mining Shovels.    Mining shovels are primarily used to load copper, coal, oil sands, iron ore, other mineral-bearing materials, overburden, or rock into trucks. There are two basic types of mining shovels: electric and hydraulic. Electric mining shovels are able to handle a larger load, allowing them to move greater volumes of rock and minerals, while hydraulic shovels are diesel powered, smaller and more maneuverable. An electric mining shovel offers significantly lower cost per ton of mineral mined as compared to a hydraulic shovel. 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. Dipper capacities range from 12 to 80 cubic yards. Prices range from approximately $3,000,000 to approximately $15,000,000 per shovel. The Company's most popular shovels sell for approximately $9,000,000. The Company's electric mining shovels have an average life of approximately 15 years.

        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 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 $3,000,000 per drill, depending on machine size and other variable features. The

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Company's most popular drills sell for approximately $2,500,000. The average life of a rotary blasthole drill is approximately 15 years.

Aftermarket Parts and Services

        The Company has a comprehensive aftermarket business that supplies replacement parts and services for its installed base of operating equipment. Over the life of a machine, customer purchases of aftermarket parts and services generally exceed the original purchase price of the machine. The Company's aftermarket offerings include engineered replacement parts, maintenance and repair labor, technical advice, refurbishment and relocation of machines, comprehensive structural and mechanical engineering, non-destructive testing, repairs and rebuilds of machine components, product and component upgrades, turnkey erections, equipment operation and complete equipment management under comprehensive, long-term maintenance and repair contracts. The Company also distributes less sophisticated components which are consumed in the normal course of operating these machines. 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.

        The Company realizes higher margins on sales of aftermarket parts and services than on sales of OEM machines. Moreover, because these machines tend to operate continuously in all market conditions with expected lives ranging from 15 to 40 years and have predictable parts and maintenance needs, the Company's aftermarket business is inherently more stable and predictable than the market for OEM machines, which is closely correlated with expectations of sustained strength in commodity markets.

        Large mining customers are increasingly outsourcing the skills involved in maintaining large and complex surface mining equipment. The Company offers comprehensive maintenance and repair contracts to address this trend. 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. Maintenance and repair contracts are beneficial to the Company's customers because they promote high levels of equipment reliability and performance, allowing the customer to concentrate on mining production. Maintenance and repair contracts typically have terms of three to five years with provisions for renewal and early termination. New mines in areas such as Argentina, Australia, Canada, Chile and Peru are the Company's primary targets for maintenance and repair contracts because it is difficult and expensive for mining companies to establish the necessary infrastructure for ongoing maintenance and repair in remote regions of these countries.

Customers

        Most of the Company's customers are large multi-national corporations with operations in each of the major surface mining markets. In recent years, customers have reduced their operating costs by employing larger, more efficient machines and have become increasingly sophisticated in their use and understanding of technology.

        Over the past five years, the Company's customers have conducted their most significant operations in the United States, South America, South Africa, Australia, Canada, China and India. The Company expects China and India to experience the most growth in surface mining in the future. In the aggregate, customers spent $65,548,000, $47,551,000 and $64,552,000 on the Company's OEM machines and $272,147,000, $242,047,000 and $226,024,000 on aftermarket parts and services in 2003, 2002 and 2001, respectively. These amounts are projected to increase in 2004 as OEM machine sales increases are driven by customer expectations of sustained strength in the copper, coal, oil sands and iron ore markets, rapid industrialization in China and other parts of the developing world, demand for

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minerals in the developed world and the rising cost of non-coal energy sources. Customers' purchases of OEM products may lag behind such increases in commodity prices because of the time needed to acquire the appropriate mining permits and establish the relevant infrastructure. Aftermarket sales are expected to increase as customers continue the trend of utilizing Bucyrus parts and services in a broader range of applications on their installed base of equipment.

        The Company's customers incur high fixed costs. Small savings on the initial purchase of OEM machines are lost if they lead to less efficient machines and greater down time. Furthermore, their operations are often conducted in remote areas and the large capital investment and long lead time associated with the purchase and erection of a machine encourages customers to select reliable and efficient machines and to keep these machines in continuous operation for as long as possible. As a result, customers are focused on quality as well as price and expect the Company to offer comprehensive aftermarket parts and services to increase efficiency and reduce down time.

        The Company does not consider itself to be dependent upon any single customer, although, on an annual basis a single customer may account for a meaningful percentage of sales, particularly new machine sales. In 2003, 2002 and 2001, one customer, BHP Billiton, accounted for approximately 17%, 12%, and 11%, respectively, of the Company's sales. The Company's top five customers in each of 2003, 2002 and 2001 collectively accounted for approximately 43%, 41% and 30%, respectively, of its sales. This trend reflects the consolidation of the mining industry.

Marketing, Distribution and Sales

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

        Typical payment terms for new equipment require a down payment, and require customers to make progress payments. Lead times for large OEM machines generally vary from four to nine months, but can be as much as two years for a dragline. The Company generally attempts to obtain committed raw materials pricing through arrangements with suppliers for periods of up to a year. Recently, the Company has incurred raw materials surcharges and has been able to include terms providing for recovery of certain cost increases contracts entered into in 2004. 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.

Foreign Operations

        The Company's largest foreign markets are Australia, Canada, Chile, South Africa, China, India and Peru. The Company employs direct marketing strategies in these markets as well as developing markets such as Indonesia, Jordan, Mauritania and Turkey. A substantial portion of the Company's sales and operating earnings is attributable to operations located outside the United States. Over the past five years, over 85% of the Company's OEM machine sales and approximately 70% of the Company's aftermarket sales have been in international markets, of which the most significant over that five year period have been Australia at 15.8%, Canada at 14.7%, Chile at 14.3% and South Africa at 7.9%. The Company's foreign sales, consisting of exports from the Unites States and sales by consolidated foreign subsidiaries, totaled $260,353,000 in 2003, $212,669,000 in 2002 and $209,108,000 in 2001. Approximately $198,580,000, or 85%, of the Company's backlog of firm orders at December 31, 2003, represented orders for export sales compared with $199,234,000, or 81%, at December 31, 2002 and $201,872,000, or 88%, at December 31, 2001.

        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

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ongoing services and replacement parts for equipment installed abroad. The availability and convenience of the services provided through this worldwide network ensure the efficient operation of Bucyrus equipment by its customers, promote high margin aftermarket sales of parts and services, and give the Company a sustained local presence to promote new machine orders.

        The Company sells OEM machines, including those sold directly to foreign customers, and most of its aftermarket parts in United States dollars, with limited aftermarket parts sales denominated in the local currencies of Australia, Canada, South Africa, Brazil and the United Kingdom. Aftermarket services are paid for primarily in local currency, with a natural partial currency hedge through the Company's payment for local labor in local currency. In the aggregate, approximately 70% of the Company's sales are priced in United States dollars. The value, in United States 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 significant currency hedges, although it may enter into arrangements to hedge specific non-United States dollar denominated contracts.

Competition

        The Company's only global competitor in electric mining shovels and draglines and primary competitor in rotary blasthole drills is the P&H division of Joy Global, Inc., although for certain applications the Company's electric mining shovels may also compete against hydraulic shovels made by other manufacturers. In China and Russia the Company also faces limited competition from domestic equipment manufacturers, however such competition is not material to the Company's core markets. Methods of competition are diverse and include price, lead times, operating costs, machine productivity, design and performance, reliability, service, delivery and other commercial factors.

        For most owners of the Company's machines, the Company is the primary replacement source for highly engineered, integral components; however, in certain markets the Company encounters competition for sales of generally less sophisticated, consumable replacement parts and repair services. 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, and are generally acknowledged to be of lower quality than parts produced by the manufacturer of the equipment.

        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 in many cases are unable to duplicate the exact specifications of Bucyrus parts. Moreover, the 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 under warranty for longer periods.

Raw Materials and Supplies

        The Company purchases from outside suppliers raw 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 suppliers and from the Company. Certain additional components are sometimes purchased from suppliers, either to expedite delivery schedules in times of high demand or to reduce costs. Moreover, in countries where local content requirements exist, local subcontractors can frequently be used to manufacture the required components.

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        The Company obtains all of the AC electrical drive components for its products exclusively from a United States subsidiary of Siemens AG, Siemens Energy & Automation, Inc. ("Siemens"). The Company's products incorporate electrical equipment, including AC drive systems and computer hardware and software, which the Company believes provide its products with an efficiency advantage. These electrical systems are produced by Siemens and purchased by the Company under a contract which has been continuously renewed since 1976. The Company expects this relationship to continue and the contract to be renewed prior to its expiration date in 2006. The contract provides for Siemens to supply the Company with electrical systems for the Company's manufactured machinery under specified pricing parameters with exclusivity provisions applying to both parties. The contract also includes limited warranties on parts and services supplied by Siemens. Additionally, the Company and Siemens have entered into particular contracts or arrangements with respect to the development of joint technology for application to specific projects. The Company is not dependent upon any other sole source supplier.

        Recently, demand for steel and consolidation in the steel industry have resulted in pronounced price increases for steel. The Company generally attempts to obtain committed raw materials pricing, through arrangements with its suppliers, for up to a year. Recently, the Company has incurred raw materials surcharges, and has been able to include terms providing for recovery of certain cost increases in contracts entered into in 2004. The Company has done business with a majority of its principal vendors for more than two decades and believes it benefits from good relations with these principal vendors. Through commercial arrangements, forward pricing and contractual cost pass-throughs, management believes it has minimized exposure to price increases and surcharges for raw materials.

Manufacturing

        The design, engineering and manufacturing of most of the Company's machines and manufactured aftermarket parts is done at its 1,048,000 square foot South Milwaukee, Wisconsin complex. The Company uses large, heavy manufacturing equipment in the machining, welding and assembly of OEM machines and manufactured aftermarket parts. OEM machines and the majority of aftermarket parts are customized based on customer requirements. The size and weight of these OEM machines dictate that the machines be shipped to the job site in sub-assembled units where they are assembled for operation with the assistance of Company technicians. Planning and on-site coordination of machine assembly is a critical component of the Company's service to its customers. To reduce lead times and ensure that customer delivery requirements are met, the Company maintains an inventory of sub-assembled units and parts to meet forecasted customer demands. As of December 31, 2003, the Company had $115,898,000 of inventory.

Backlog

        The backlog of firm orders was $233,642,000 at December 31, 2003 and $245,695,000 at December 31, 2002. Approximately 52% of the backlog at December 31, 2003 is expected to be filled during 2004.

Patents, Licenses and Franchises

        The Company has numerous 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.

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Research and Development

        Expenditure for design and development of new products and improvements of existing mining machinery products, including overhead, aggregated $4,594,000 in 2003, $6,512,000 in 2002 and $5,900,000 in 2001. All engineering and product development costs are charged to selling, general and administrative expenses as incurred.

Employees

        At December 31, 2003, the Company employed approximately 1,600 persons, approximately 720 of whom are located outside the United States. Substantially all of the Company's non-United States workforce is not unionized. Approximately 300 of the Company's United States employees are unionized. The Company considers its relationship with its unionized workers to be good. The four-year contract with the United Steel Workers of America representing hourly workers at the South Milwaukee, Wisconsin facility and the three-year contract with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America representing hourly workers at the Memphis, Tennessee facility expire in April 2005 and September 2005, respectively.

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Risks Related To The Company's Business

A material disruption to the Company's manufacturing plant in Wisconsin could adversely affect the ability to generate revenue

        The Company produces most of its equipment and aftermarket parts at its manufacturing plant in South Milwaukee, Wisconsin. If operations at this facility were to be disrupted as a result of equipment failures, natural disasters, work stoppages, power outages or other reasons, the Company's business and results of operations could be adversely affected. Interruptions in production would increase costs and reduce sales. The Company's facilities are also subject to the risk of catastrophic loss due to fires, explosions or adverse weather conditions. Furthermore, any interruption in production capability may require the Company to make large capital expenditures to remedy the situation, which could have a negative effect on profitability and cash flows. The Company maintains property damage insurance which it believes to be adequate to provide for reconstruction of its facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss. However, any recovery under this insurance policy may not offset the lost sales or increased costs that may be experienced during the disruption of operations. In addition to the sales losses, which may not be recoverable under the policy, longer-term business disruptions could result in a loss of customers. If this were to occur, future sales levels, and therefore profitability, could be adversely affected.

If the Company is unable to purchase component parts or raw materials from key suppliers, or the prices of component parts or raw materials rise prohibitively, the Company's business and results of operations may be materially adversely affected

        The Company purchases all of its AC drives and certain other electrical parts from Siemens. The loss of Siemens, the Company's only sole source supplier, could have a material adverse effect on its business. The Company also purchases, track links, castings and forgings from suppliers with whom the Company has long-standing relationships. Although these are not sole source suppliers, the loss of these suppliers could affect the Company's ability to maintain or lower costs. Any significant future delays could have a material adverse effect on the Company's business and results of operations. If the Company had to develop alternative sources of supply, the ability to supply parts to its customers when needed could be impaired, business could be lost and margins could be reduced. In addition, the Company uses substantial quantities of wide-plate steel, which is subject to price fluctuations, in its operations. If the Company were forced to absorb price increases for raw materials it would experience reduced margins.

Leverage could affect the Company's operating results and restrict management's discretion

        At December 31, 2003, the Company's consolidated long-term debt totaled $153,973,000. The Company also may draw upon a revolving line of credit in an aggregate principal amount of up to $74,500,000, and, as of December 31, 2003, there was $37,420,000 outstanding thereunder. There were $7,040,000 of letters of credit issued at December 31, 2003 that correspondingly reduce amounts available under this line of credit. The Company also has the ability to incur additional debt, subject to the conditions imposed by the terms of its senior secured revolving credit facility. Although the Company believes that its future operating cash flow, together with available financing arrangements, will be sufficient to fund the Company's operating and capital expenditure requirements, leverage and debt service obligations could have important consequences, including the following:

— The terms of existing debt obligations contain numerous financial and other restrictive covenants which, among other things, restrict the Company's ability to pay dividends, incur additional debt and sell assets. If the Company does not comply with these obligations, it may

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cause an event of default, which, if not cured or waived, could require repayment of the indebtedness immediately.

— The Company may be more vulnerable in the event of downturns in business, in its industry or in the economy generally.

— The Company may have difficulty obtaining additional financing at favorable interest rates to meet requirements for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes.

— The Company may be required to dedicate a substantial portion of its cash flow to the payment of principal and interest on its indebtedness, which could reduce the amount of funds available for operations and impair the ability to grow operations.

— Any borrowings the Company may make at variable interest rates leaves it vulnerable to increases in interest rates generally.

— The Company's principal borrowings are denominated in U.S. dollars, and it must convert earnings denominated in foreign currencies into U.S. dollars in order to service debt, which exposes the Company to risks associated with currency fluctuations.

The Company is reliant on significant customers

        The Company's business is dependent on securing and maintaining customers by promptly delivering reliable, high-performance products. The Company does not consider itself to be dependent upon any single customer; however, on an annual basis a single customer may account for a large percentage of sales, particularly OEM machine sales. In 2003, 2002 and 2001, BHP Billiton, the Company's single largest customer, accounted for approximately 17%, 12% and 11%, respectively, of the Company's sales. The products that the Company may sell to any particular customer depend on the size of that customer's capital expenditure budget devoted to surface mining plans in a particular year and on the results of competitive bids for major projects. Additionally, the Company's top five customers in each of 2003, 2002 and 2001 collectively accounted for approximately 43%, 41% and 30%, respectively, of the Company's sales. The trend reflects the recent consolidation of the mining industry. While the Company is not dependent on any one customer, the loss of one or more of its significant customers could, at least on a short-term basis, have an adverse effect on results of operations.

Labor disruptions could adversely affect operations

        As of December 31, 2003, 270 of the 574 employees at the Company's South Milwaukee facility were represented by the United Steelworkers of America Union. The four-year contract with the union representing workers at the South Milwaukee, Wisconsin facility and the three-year contract with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America representing workers at the Memphis, Tennessee facility expire in April, 2005 and September, 2005, respectively. Although the Company believes that its relations with employees is good, a dispute between the Company and its employees could have a material adverse effect on the Company's operations. In addition, the workforces of many of the Company's suppliers and the transportation modes on which the Company relies are unionized, and if they are disrupted by labor issues, the Company may experience delays in delivery of parts and materials or reduced orders. In addition, the workforces of many of the Company's customers are unionized, and work stoppages experienced by the Company's customers could cause the Company to lose revenues or incur increased costs.

The Company may be adversely affected by environmental and safety regulations or concerns

        The Company is subject to the requirements of environmental and occupational safety and health laws and regulations in the United States and other countries. The Company cannot assure that it has

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been or will be at all times in complete compliance with all of these requirements, or that it will not incur material costs or liabilities in connection with these requirements in excess of amounts reserved. In addition, increased environmental regulation of the mining industry in North America and overseas could increase costs and adversely affect the sales of the Company's products and future operating earnings. Environmental requirements are complex, change frequently and have tended to become more stringent over time. These requirements may change in the future in a manner that could have a material adverse effect on the Company's business, results of operations and financial condition. The Company has made and will continue to make capital and other expenditures to comply with environmental requirements. For more information about environmental compliance and potential environmental liabilities, see "ITEM 3. LEGAL PROCEEDINGS."

The Company must attract and retain skilled labor in order to maintain and grow its business

        The Company's ability to operate profitably and expand its operations depends in part on the ability to attract and retain skilled manufacturing workers, equipment operators, engineers and other technical personnel. Demand for these workers is currently high and the supply is limited, particularly in the case of skilled and experienced engineers and machinists. As a result, the Company's growth may be limited by the scarcity of skilled labor. Even if the Company is able to attract and retain employees, competition for them may increase total compensation costs. Additionally, a significant increase in the wages paid by competing employers could result in a reduction in the Company's skilled labor force, increases in the rates of wages the Company must pay or both. If compensation costs increase or the Company cannot attract and retain skilled labor, the immediate effect would be a reduction in operating earnings and production capacity and an impairment of the Company's growth potential.

The Company is subject to risks of doing business in foreign countries, including emerging markets

        The Company derives the majority of its sales from foreign markets where it has substantial operations. During 2003, the Company generated $260,353,000, or approximately 77%, of its sales outside the United States. A significant portion of this business is conducted in emerging markets located in Asia, Africa and South America.

        Multiple factors relating to the Company's international operations and to particular countries in which the Company operates could have an adverse effect on the Company's financial condition or results of operations. These factors include:

        — changes in political, regulatory or economic conditions;

        — trade protection measures and price controls;

        — trade sanctions and embargos;

        — import or export licensing requirements;

        — economic downturns, civil disturbances or political instability;

        — nationalization and expropriation; and

        — potentially burdensome taxation.

        Many of the nations in which the Company operates have developing legal and economic systems, which make doing business subject to greater uncertainty than would be the case domestically. The above factors, and related unpredictability, could place the value of the Company's operations and business relationships in overseas markets at risk.

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The Company is subject to risks related to conducting business in foreign currencies

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

        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 revenues 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, finance capital expenditures and pay dividends on our common stock.

The loss of key executives or other key personnel could adversely affect the Company's business

        The Company's success substantially depends upon its ability to attract and retain qualified employees and upon the ability of senior management and other key employees to implement the Company's business strategy and maintain and grow customer and supplier relationships. The Company believes there are only a limited number of available qualified executives in the industry in which it competes. Although the Company is not aware of any planned departures, it relies substantially upon the services of Timothy W. Sullivan and Thomas B. Phillips. The loss of their services or the services of other members of the Company's management team or the inability to attract and retain other talented personnel could impede the further implementation of the Company's business strategy, which could have a material adverse effect on its business. The Company does not currently maintain key man life insurance policies with respect to any of its employees. In addition, competition for qualified employees among companies that rely heavily on engineering and technology is intense, and the loss of qualified employees or an inability to attract, retain and motivate additional highly skilled employees required for the operation and expansion of the Company's business could materially adversely affect its growth, business or results of operations.

The Company must apply significant cash to meet its unfunded pension obligations which may increase

        Substantially all of the Company's United States employees participate in its defined-benefit pension plan. As a result of declines in pension asset values, different actuarial assumptions and the application of purchase accounting, the Company's pension expenses have increased. At December 31, 2003, the Company's unfunded pension liability totaled approximately $30,000,000. Continued declines in interest rates or the market values of the securities held by the plans, or other adverse changes, could materially increase the underfunded status of the Company's plans and affect the level and timing of required cash contributions in 2004 and after.

The Company's continued success depends in part on the ability to protect intellectual property

        The Company's future success depends in part upon the ability to protect intellectual property. The Company relies principally on nondisclosure agreements and other contractual arrangements and trade secret law and, to a lesser extent, trademark and patent law, to protect its intellectual property, including jointly developed intellectual property. However, these measures may be inadequate to

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

The Company's technological capability is dependent in part on the continued alliance with Siemens

        The Company has a long-standing relationship with Siemens to co-develop advanced technology for the Company's machines. The technology co-developed with Siemens is a key factor in the Company's ability to effectively compete in the surface mining industry based on the technological capabilities of the Company's machines, and therefore the Company depends on Siemens' continued ability to assist in the development of technologically-advanced components and systems. The Company has an exclusive contractual relationship with Siemens that by its terms expires in 2006. The Company believes that its relationship with Siemens is mutually beneficial, but cannot provide any assurance that the Company will be able to continue its contractual relationship beyond 2006. If the relationship with Siemens were to be discontinued and the Company could not engage a comparable R&D partner and supplier, the Company's ability to compete based upon technological innovation would be adversely affected.

The Company is, and may be in the future, subject to product liability and other suits related to past and current activities

        The sale and servicing of complex, large-scale machinery used in a variety of locations and climates, and integrating a variety of manufactured and purchased components entails an inherent risk of suit and liability relating to the operation and performance of the machinery and the health and safety of the workers who operate and come into contact with the machinery. The Company maintains product liability and other insurance in respect of claims of this nature, however, the Company's policies are subject to deductibles and recovery limitations as well as limitations on contingencies covered. The Company cannot provide any assurance that these suits will be resolved in a manner that does not materially and adversely affect its financial condition, nor can the Company provide any assurance that it will not be named as a defendant in future product liability or other tort or contractual suits.

The Company has been named as a defendant in multiple suits asserting claims related to exposure to asbestos and other substances

        The Company has been named as a co-defendant in approximately 291 pending personal injury cases in twelve states involving approximately 1,480 plaintiffs alleging damages caused by exposure to asbestos and other substances. See "ITEM 3.—LEGAL PROCEEDINGS" below. The Company has secured the dismissal and resolution of a number of previous claims alleging similar fact patterns. The particular circumstances of many of these cases are difficult to assess because the claims allege exposure to a variety of substances from various sources over varying historical periods and assert the culpability of multiple defendants. The Company has insurance coverage, subject to various deductible and other coverage limitations, for the historical periods during which the pending claims of which the Company is aware allege exposure, however, there can be no assurance that claims will not be brought with respect to subsequent periods or that insurance coverage in respect of periods for which coverage was obtained will be adequate to satisfy adverse judgments and other claim resolutions. As a result, the Company cannot provide any assurance that the pending suits will be resolved in a manner that does not materially and adversely affect its financial condition, nor can it provide any assurance that it will

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not be named as a defendant in future suits alleging damages due to exposure to asbestos and other substances.

Risks Relating To The Company's Industry

The Company operates in a highly competitive industry

        The Company operates in a highly competitive industry. In the aftermarket, the Company competes with numerous will-fitters. Certain of the Company's competitors may be larger, have greater financial resources and may be less leveraged than the Company. The Company's only global competitor in electric mining shovels and draglines and primary competitor in rotary blasthole drills is the P&H division of Joy Global, Inc., although for certain applications the Company's electric mining shovels may also compete against hydraulic shovels made by other manufacturers. In China and Russia the Company also faces some limited competition from regional and domestic equipment manufacturers. Methods of competition are diverse and include price, lead times, operating costs, product productivity, design and performance, reliability, service, delivery and other commercial factors. If the Company cannot compete effectively with existing or future competitors, its operating results could be materially adversely affected.

The industries the Company serves are subject to significant cyclical fluctuations

        Because the Company's customers' purchasing patterns are affected by a variety of factors beyond its control, the Company's sales and operating results may fluctuate significantly from period to period. Given the large sales price of the Company's machinery, one or a limited number of machines may account for a substantial portion of sales in any particular period. Although the Company recognizes sales on a percentage-of-completion basis for new machines, the timing of one or a small number of contracts in any particular period may nevertheless affect operating results. In addition, sales and gross profit may fluctuate depending upon the size and the requirements of the particular contracts entered into in that period.

        The sale of new machines is cyclical in nature and sensitive to changes in general economic conditions, including fluctuations in market prices for copper, coal, oil, iron ore and other minerals as well as alternatives to these minerals. Many factors affect the supply and demand for minerals and oil and thus may affect the Company's sale of products and services, including:

        — the level of production;

        — the levels of mineral inventories;

        — commodities prices;

        — the expected cost of developing new reserves;

        — the cost of conducting surface mining operations;

        — the level of surface mining activity;

        — worldwide economic activity;

        — substitution of new or competing inputs;

        — national government political requirements;

        — environmental regulation; and

        — tax policies.

        If demand for mining services or surface mining equipment utilization rates decrease significantly, then demand for the Company's products and services will decrease. As a result of this cyclicality, the

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Company has experienced, and in the future could experience, extended periods of reduced sales and margins, which may affect the ability to satisfy its debt service obligations.

Demand for the Company's products may be adversely impacted by regulations affecting the mining industry or electric utilities

        The Company's principal customers are surface mining companies. Many of these customers supply coal as a power generating source for the production of electricity in the United States and other industrialized regions. The operations of these mining companies are geographically diverse and are subject to or impacted by a wide array of regulations in the jurisdictions where they operate, including those directly impacting mining activities and those indirectly affecting their businesses, such as applicable environmental laws and an array of regulations governing the operation of electric utilities. As a result of changes in regulations and laws relating to the operation of mines, the Company's customers' mining operations could be disrupted or curtailed by governmental authorities. The high cost of compliance with mining and environmental regulations may also induce customers to discontinue or limit their mining operations, and may discourage companies from developing new mines. Additionally, government regulation of electric utilities may adversely impact the demand for coal to the extent that such regulations cause electric utilities to select alternative energy sources and technologies as a source of electric power. Recent initiatives to regulate mercury emissions, and initiatives targeting acid rain or the perceived threat of global warming, could significantly depress coal consumption in Western economies. As a result of these factors, demand for the Company's products and services could be substantially affected by regulations adversely impacting the mining industry or altering the consumption patterns of electric utilities.

ITEM 2. PROPERTIES

        The Company's principal manufacturing plant in the United States is located in its complex in South Milwaukee, Wisconsin. This plant comprises several buildings totaling 1,048,000 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 specialized machine tools and equipment for fabrication and assembly of the Company's mining machinery, including draglines, electric mining shovels and rotary 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 the South Milwaukee complex. 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.

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

        The Company also has other 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.

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ITEM 3. LEGAL PROCEEDINGS

Product Liability

        The Company is normally subject to numerous product liability claims, many of which relate to products no longer manufactured by the Company or its subsidiaries, and other claims arising in the ordinary course of business in federal and state courts. Such claims are generally related to property damage and to personal injury. The Company's products are operated by its and its customers' employees and independent contractors at various work sites in the United States and abroad. In the United States, workers' claims against employers related to workplace injuries are generally limited by state workers' compensation statutes, but such limitations do not apply to equipment suppliers. In addition, independent contractors may not be subject to state workers' compensation regimes. The Company has insurance covering most of said claims, subject to varying deductibles of up to $3,000,000, and have 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.

        In July 2002, an adverse judgment was issued against the Company in a case styled Underwood, et ux. v. B-E Holdings, Inc. in the United States District Court for the Western District of New York. The plaintiff asserted that the Company was responsible for personal injuries suffered in a workplace accident. The jury in the case awarded the plaintiff over $7,100,000 in damages, and apportioned 35% of the judgment to the Company, with 45% apportioned to the plaintiff's employer and the remainder to the plaintiff. The Company has fully reserved for its uninsured share of the judgment.

Suits Alleging Exposure to Asbestos and Other Substances

        The Company has been named as a co-defendant in approximately 291 personal injury liability cases alleging damages due to exposure to asbestos and other substances, involving approximately 1,480 plaintiffs. The cases are pending in courts in nine states, including California (Los Angeles County, San Francisco County); Illinois (Madison County); Louisiana (U.S. District Court, Middle District of Louisiana; now moved to the U.S. District Court, Eastern District of Pennsylvania); Minnesota (Itasca County); New York (Oneida County, Ontario County, New York County, St. Lawrence County); Oregon (Multnomah County); Texas (Freestone County, Harrison County, Rusk County, Titus County); Utah (Salt Lake County) and Washington (King County). 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.

Other

        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 customer has sued an unaffiliated third party on a negligence theory for property damages and business interruption losses in a range of approximately $25,000,000 to $27,000,000. The unrelated third party has brought a third-party over 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.

        The Company is also involved in various other litigation in the United States and abroad arising in the normal course of business, including arbitration proceedings with unions representing the Company's employees, as well as individual employees, and proceedings before and involving the

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National Labor Relations Board. 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.

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

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

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

        Certain environmental laws, such as 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 is one of 53 entities named by the United States Environmental Protection Agency ("EPA") as potentially responsible parties ("PRP"), 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 both actions with respect to its liability for past costs. In addition, 37 PRPs, including the Company, received administrative orders issued by the EPA pursuant to Section 106(a) 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 has 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. The 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 PRPs (the "Group") for breach of contract claims in an amount in excess of $1,000,000. The Group is defending and negotiating settlement of the claim. At December 31, 2003, the Company does not believe that its

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remaining potential liability in connection with this site will have a material effect on its 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. The 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, 2003, 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, 2003, the Company does not believe that its remaining potential liability in connection with this site will have a material effect on its 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 pursuant to the Asset Purchase and Sale Agreement. The Company responded that it has 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, it has none of the information requested by the EPA. The Company gave notice of this matter and potential claim to Global Industrial Technologies, Inc. ("Global") under indemnification provisions of the Asset Purchase and Sale Agreement. In 2002, the Company received notice that Global had filed Chapter 11 under federal bankruptcy laws. The Company has filed timely claims in that proceeding. Attorneys for Global have participated in a group of potential responsible parties in connection with EPA's investigation of the Tremont City landfill; the Company has not had further contact from EPA concerning this matter. 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 the EPA has not responded to the Company nor has the EPA withdrawn its identification of the Company as a PRP.

        On March 24, 2003, EPA sent a Request for Information pursuant to CERCLA Section 104 and RCRA Section 3007 to Minserco, Inc. ("Minserco"), a wholly-owned subsidiary of the Company, seeking information concerning Minserco's involvement with the Sadler Drum site in Mulberry, Polk County, Florida. Minserco responded that it had purchased drums from Sadler Drum, but did not send any drums to the site or return to Sadler Drum any drums it purchased. EPA has not responded to Minserco's information. The Company is aware that EPA has spent approximately $600,000 for environmental cleanup at the Sadler Drum site, but has not received any indication whether PRPs will be asked to investigate or cleanup.

        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.

        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

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determined its cleanup liabilities with respect to these sites and 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 it 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.

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 2003.

PART II

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

        As of March 15, 2004, there were 10 holders of the Company's common stock. 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. The terms of the Company's debt investments restrict its ability to pay dividends. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Liquidity and Capital Resources."

Unregistered Sales of Securities

        During 2003, the Company issued 71,700 shares of common stock to officers and directors pursuant to exercise of options granted under the 1998 Option Plan (see "ITEM 11. EXECUTIVE COMPENSATION—1998 Management Stock Option Plan") for aggregate consideration of $71,700. The sales and the issuances of such securities were determined to be exempt from registration under Section 4(2) of the Securities Act as transactions by an issuer not involving a public offering.

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. 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 OEM products and manufactured 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, England, India, Peru, South Africa and the United States. The largest markets for this mining equipment have been in the United States, South America, Australia, South Africa and Canada. In the future, China, India and Canada 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 2001 and 2002 the market prices of many surface mined commodities were generally weak. In 2003, market prices for copper, coking coal, iron ore and oil have increased. Commodity markets are expected to remain strong over the next few years, primarily as a result of industrial and economic development in China, India and the developing world together with renewed economic strength in the industrialized world. The OEM machine sales maintain and augment the Company's $9 billion (calculated by estimated replacement value) installed base, and provide the foundation for the Company's aftermarket activities.

        The Company's aftermarket parts and service operations, which historically have accounted for approximately 70% of sales over the past ten years, tend to be more consistent than OEM machine 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.

        A substantial portion of the Company's sales and operating earnings is attributable to operations located outside the United States. The Company sells OEM machines, including those sold directly to foreign customers, and most of its aftermarket parts in United States dollars, with limited aftermarket parts sales denominated in the local currencies of Australia, Canada, South Africa, Brazil 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 sales are priced in United States dollars.

        Over the past three years, during a period of generally weak commodity prices, 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 these results.

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Key Measures

Commodity Prices

        Demand for the Company's OEM machines is driven in large part by the prices of certain commodities, such as copper, coal, oil and iron ore. The prices of these commodities have increased in recent periods, particularly in the fourth quarter of 2003. The following table shows selected commodity prices at the end of 2003, 2002 and 2001: