The Timken Company (TKR) 8-K Completion of Acquisition or Disposition of Assets

Exhibit 99.2

THE TIMKEN COMPANY AND SUBSIDIARIES
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following unaudited condensed pro forma consolidated financial statements are based upon the historical financial statements of The Timken Company (“the Company”) and its subsidiaries, adjusted to reflect the disposition of the Needle Roller Bearings (NRB) business which was completed on December 31, 2009. The following unaudited condensed pro forma consolidated financial statements of the Company should be read in conjunction with the related notes and with the historical consolidated financial statements of the Company and the related notes included in previous filings with the Securities and Exchange Commission. The unaudited condensed pro forma consolidated balance sheet reflects the disposition of the NRB business as if it had occurred on September 30, 2009, while the unaudited condensed pro forma statements of consolidated income for the years ended December 31, 2008, December 31, 2007 and December 31, 2006, respectively, give effect to the disposition as if it had occurred at the beginning of each period presented. The pro forma adjustments, described in the related notes, are based on the best available information and certain assumptions that the Company’s management believes to be reasonable. Pro forma statements of consolidated income for the nine months ended September 30, 2009 are not provided, as the Form 10Q filed on November 9, 2009 reflects the NRB operations as discontinued operations.

The unaudited condensed pro forma consolidated financial statements are provided for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred had the disposition of the NRB business closed on September 30, 2009 for the unaudited condensed pro forma consolidated balance sheet or at the beginning of each period presented for the unaudited condensed pro forma statements of consolidated income.

Condensed Pro Forma Consolidated Balance Sheet
September 30, 2009
(unaudited)

				Pro Forma
(Dollars in thousands)	Historical			Adjustments				Pro Forma
ASSETS
Current Assets
Cash and cash equivalents	$	382,878		$	299,698		(a)	$	682,576
Restricted cash		248,158			—				248,158
Accounts receivable, net		458,393			—				458,393
Inventories, net		716,948			—				716,948
Deferred income taxes		69,633			—				69,633
Deferred charges and prepaid expenses		17,536			—				17,536
Current assets, discontinued operations		364,494			(364,494	)	(b)		—
Other current assets		58,657			15,855		(c)		74,512
Total Current Assets		2,316,697			(48,941	)			2,267,756
Property, Plant and Equipment		3,654,951			—				3,654,951
Less allowances for depreciation		(2,228,991	)		—				(2,228,991	)
Property, Plant and Equipment, net		1,425,960			—				1,425,960
Other Assets
Goodwill		222,225			—				222,225
Other intangible assets		134,437			—				134,437
Deferred income taxes		310,928			(4,743	)	(d)		306,185
Other non-current assets		47,774			—				47,774
Total Other Assets		715,364			(4,743	)			710,621
Total Assets	$	4,458,021		$	(53,684	)		$	4,404,337
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and other liabilities	$	352,558		$	11,886		(e)	$	364,444
Short-term debt and current portion of long-term debt		331,860			—				331,860
Income taxes payable		—			—				—
Deferred income taxes		5,060			—				5,060
Current liabilities, discontinued operations		44,181			(44,181	)	(f)		—
Salaries, wages and benefits		147,848			—				147,848
Total Current Liabilities		881,507			(32,295	)			849,212
Non-Current Liabilities
Long-term debt		469,057			—				469,057
Accrued pension cost		786,545			—				786,545
Accrued postretirement benefits cost		611,743			(3,399	)	(g)		608,344
Other non-current liabilities		118,196			—				118,196
Total Non-Current Liabilities		1,985,541			(3,399	)			1,982,142
Shareholders’ Equity
Common Stock		892,783			—				892,783
Earnings invested in the business		1,431,701			(4,179	)	(h)		1,427,522
Accumulated other comprehensive loss		(747,157	)		(13,811	)	(i)		(760,968	)
Treasury Shares		(4,493	)		—				(4,493	)
Total Shareholders’ Equity		1,572,834			(17,990	)			1,554,844
Noncontrolling interest		18,139			—				18,139
Total Equity		1,590,973			(17,990	)			1,572,983
Total Liabilities and Shareholders’ Equity	$	4,458,021		$	(53,684	)		$	4,404,337

See Notes to Unaudited Condensed Pro Forma Financial Statements.

Condensed Pro Forma Statement of Consolidated Income
Year ended December 31, 2008
(unaudited)

				Pro Forma
(Dollars in thousands, except per share data)	Historical			Adjustments (j)			Pro Forma
Net sales	$	5,663,660		$	(622,860	)	$	5,040,800
Cost of products sold		4,422,191			(533,244	)		3,888,947
Gross Profit		1,241,469			(89,616	)		1,151,853
Selling, administrative and general expenses		724,987			(67,856	)		657,131
Impairment and restructuring charges		64,383			(31,593	)		32,790
Gain on divestitures		(8	)		—			(8	)
Operating Income		452,107			9,833			461,940
Interest expense		(44,934	)		533			(44,401	)
Interest income		5,971			(179	)		5,792
Receipt of Continued Dumping & Subsidy Offset Act (CDSOA) payment, net of expenses		10,207			(1,071	)		9,136
Other expense — net		5,827			1,292			7,119
Income from continuing operations before income taxes		429,178			10,408			439,586
Provision for income taxes		157,926			(865	)		157,061
Income from continuing operations	$	271,252		$	11,273		$	282,525
Earnings per share from continuing operations
Basic	$	2.82					$	2.93
Diluted		2.81						2.93
Average common shares outstanding
Basic		95,650,104						95,650,104
Diluted		95,947,643						95,947,643

See Notes to Unaudited Condensed Pro Forma Financial Statements.

Condensed Pro Forma Statement of Consolidated Income
Year ended December 31, 2007
(unaudited)

				Pro Forma
(Dollars in thousands, except per share data)	Historical			Adjustments (j)			Pro Forma
Net sales	$	5,236,020		$	(703,954	)	$	4,532,066
Cost of products sold		4,182,186			(605,103	)		3,577,083
Gross Profit		1,053,834			(98,851	)		954,983
Selling, administrative and general expenses		695,283			(64,121	)		631,162
Impairment and restructuring charges		40,378			(11,973	)		28,405
Loss on divestitures		528			—			528
Operating Income		317,645			(22,757	)		294,888
Interest expense		(42,684	)		370			(42,314	)
Interest income		7,045			(109	)		6,936
Receipt of Continued Dumping & Subsidy Offset Act (CDSOA) payment, net of expenses		7,854			(1,405	)		6,449
Other expense — net		(4,001	)		2,697			(1,304	)
Income from continuing operations before income taxes		285,859			(21,204	)		264,655
Provision for income taxes		62,868			(8,927	)		53,941
Income from continuing operations	$	222,991		$	(12,277	)	$	210,714
Earnings per share from continuing operations
Basic	$	2.34					$	2.21
Diluted		2.32						2.19
Average common shares outstanding
Basic		94,639,065						94,639,065
Diluted		95,281,799						95,281,799

See Notes to Unaudited Condensed Pro Forma Financial Statements.

Condensed Pro Forma Statement of Consolidated Income
Year ended December 31, 2006
(unaudited)

				Pro Forma
(Dollars in thousands, except per share data)	Historical			Adjustments (j)			Pro Forma
Net sales	$	4,973,365		$	(696,971	)	$	4,276,394
Cost of products sold		3,968,271			(585,100	)		3,383,171
Gross Profit		1,005,094			(111,871	)		893,223
Selling, administrative and general expenses		677,342			(66,159	)		611,183
Impairment and restructuring charges		44,881			(13,933	)		30,948
Loss on divestitures		64,271			—			64,271
Operating Income		218,600			(31,779	)		186,821
Interest expense		(49,387	)		350			(49,037	)
Interest income		4,605			867			5,472
Receipt of Continued Dumping & Subsidy Offset Act (CDSOA) payment, net of expenses		87,907			(20,328	)		67,579
Other expense — net		(4,148	)		1,946			(2,202	)
Income from continuing operations before income taxes		257,577			(48,944	)		208,633
Provision for income taxes		77,795			(15,320	)		62,475
Income from continuing operations	$	179,782		$	(33,624	)	$	146,158
Earnings per share from continuing operations
Basic	$	1.91					$	1.55
Diluted		1.90						1.54
Average common shares outstanding
Basic		93,325,729						93,325,729
Diluted		94,092,657						94,092,657

See Notes to Unaudited Condensed Pro Forma Financial Statements.

THE TIMKEN COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(a)	Reflects the gross proceeds of $330 million, less the value of certain receivables and payables retained by the Company, from the sale of the Needle Roller Bearings (NRB) business. In addition, pursuant to the Sale and Purchase Agreement (the “Purchase Agreement”), cash is excluded from assets transferred to the Buyer.
(b)	Reflects the elimination of assets of the NRB business acquired by the Buyer, net of assets that will be retained by the Company, in accordance with the Purchase Agreement.
(c)	Reflects the estimated current tax benefit from the loss on the sale of the NRB business.
(d)	Reflects adjustments to deferred taxes resulting from the sale of the NRB business.
(e)	Reflects transaction costs and transfer taxes, as well as adjustments for property taxes, as a result of the sale of the NRB business.
(f)	Reflects the elimination of liabilities of the NRB business that transfer to the Buyer in accordance with the Purchase Agreement.
(g)	Reflects an adjustment to the curtailment of the Company’s postretirement medical plan.
(h)	Reflects the after-tax pro forma impact of the loss on the sale of the NRB business, assuming an estimated effective tax rate of 69%. The Company expects to incur an after-tax loss on the sale of the NRB business of up to approximately $10 million upon completion of the sale. The expected loss is only an estimate and is subject to change based on the final balance sheet amounts and jurisdictional tax computations, as of the effective date of the sale.
(i)	Reflects the elimination of pension adjustments, net of deferred taxes, associated with certain pension plans of the NRB business that transfer to the Buyer and foreign currency translation adjustments associated with the NRB business.
(j)	Reflects the elimination of the operating results of the NRB business as if the transaction occurred at the beginning of the each period presented. These results have been adjusted to reflect federal and state income taxes of the NRB business on a stand-alone basis. The pro forma loss on the sale of the NRB business is not reflected in the pro forma statements of consolidated income.