The Timken Company (TKR) 8-K Manager – Global Media and Strategic Communications

The Timken Company Media Contact: Lorrie Paul Crum Manager – Global Media and Strategic Communications Mail Code: GNW-37 1835 Dueber Avenue, S.W. Canton, OH 44706 U.S.A. Telephone: (330) 471-3514 Mobile:       (330) 224-5021 lorrie.crum@timken.com Investor Contact: Steve Tschiegg Director – Capital Markets and Investor Relations Mail Code: GNE-26 1835 Dueber Avenue, S.W. Canton, OH 44706 U.S.A. Telephone: (330) 471-7446 steve.tschiegg@timken.com For Additional Information: www.timken.com/media www.timken.com/investors

NEWS RELEASE Timken Reports 2009 Results and 2010 Outlook ·    Strong execution delivers record free cash flow ·    Strategic sale of Needle Roller Bearings business completed ·    Improved markets and results expected in 2010 CANTON, Ohio: Feb. 2, 2010 — The Timken Company (NYSE: TKR) today reported sales of $3.1 billion for 2009, a decrease of 38 percent from a year ago. The sales comparison, which excludes for both periods the results of the Needle Roller Bearings business sold in December (accounted for as “discontinued operations”), reflects weak demand and lower surcharges, partially offset by improved pricing. In 2009, the company incurred a full-year loss of $134.0 million, or $1.39 per share, including a loss of $72.6 million, or $0.75 per share, from the Needle Roller Bearings business. Net of non-controlling interest, the company’s continuing operations incurred a loss of $61.4 million, or $0.64 per share for the year, compared with income of $278.9 million, or $2.89 per diluted share, a year ago. Excluding special items, full-year net income in 2009 was $30.7 million, or $0.32 per diluted share, including a loss of $20.2 million, or $0.21 per share, from discontinued operations. Net of non-controlling interest, income from the company’s continuing operations for 2009 was $50.9 million, or $0.53 per diluted share, excluding special items, compared with $295.0 million, or $3.06 per diluted share, in the prior year. The change in full-year earnings reflects lower sales volume, surcharges and manufacturing utilization, partially offset by pricing, cost reductions, lower material costs and LIFO income (last-in, first-out inventory accounting).

- 2 -

Special items for 2009, net of tax, amounted to $164.6 million of expense, compared with $45.8 million in the prior year. The items in 2009 include asset impairment charges of $49.7 million in Mobile Industries; a loss on the sale of the Needle Roller Bearings business of $37.8 million; impairment charges of $20.8 million in Process Industries for consolidation of bearing operations; and severance costs of $56.4 million associated with the company’s cost-reduction efforts. Special items in the prior year consisted primarily of a goodwill impairment charge in the Mobile Industries segment.

Table 1:  2009 Net (Loss) Income and Diluted Earnings Per Share (a)

	Net (Loss) Income						Earnings Per Share
	As Reported			Adjusted			As Reported			Adjusted
Continuing Operations	$	(61.4	)	$	50.9		$	(0.64	)	$	0.53
Discontinued Operations	$	(72.6	)	$	(20.2	)		(0.75	)		(0.21	)
Total	$	(134.0	)	$	30.7		$	(1.39	)	$	0.32

(a) Dollars in millions, except per-share data. “Adjusted” earnings per share exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits.

“The global economic environment made 2009 an extremely challenging year for The Timken Company, which is reflected in the reduction in our sales and earnings,” said James W. Griffith, Timken president and chief executive officer. “However, we responded quickly to the downturn, taking actions that helped generate record free cash flow. We continued shifting our portfolio towards attractive markets, strengtheningour balance sheet and improving our operating capabilities. Today we are better positioned to leverage an economic recovery.”

During 2009, the company took actions in response to the global economic recession while executing its portfolio management initiatives. The company:

· Realigned the organization to improve focus on target markets, right-sized the company through structural cost reductions and limited discretionary spending;

· Enhanced customer service capabilities and drove supply-chain efficiencies with further deployment of its “Project ONE” enterprise initiative to standardize and streamline systems and processes;

· Completed the sale of its Needle Roller Bearings business, for which Timken received approximately $330 million, including retained receivables;

The Timken Company

- 3 -

· Generated $577 million of net cash provided by operating activities and record free cash flow of $419 million; and

· Strengthened its balance sheet and liquidity, completing three financings, including a  $500-million unsecured Senior Credit Facility; a $100-million accounts-receivable securitization facility; and a $250-million public offering of 6.00% unsecured Senior Notes, due 2014.

Fourth-Quarter Results

For the quarter ended Dec. 31, 2009, sales were $774.6 million, a decrease of 29 percent from the same period a year ago. The reduction reflects weaker demand across most of the company’s end markets and lower surcharges, while favorable pricing and currency partially offset the sales decline.

The company incurred a loss of $0.21 per share in the fourth quarter, which included a loss of $0.13 per share from discontinued operations. Special items recorded in the fourth quarter totaled $0.61 per share, including an after-tax asset impairment charge in the company’s Mobile Industries segment of $55.9 million, or $0.58 per share.

Excluding special items, fourth-quarter 2009 income was $0.40 per diluted share, including $0.09 per diluted share from discontinued operations. Net of non-controlling interest, income from continuing operations, excluding special items, was $0.31 per diluted share in the fourth quarter of 2009, compared with $0.15 for the same period last year. Benefits from pricing, cost reductions, lower material costs and LIFO income were partially offset by lower sales volume, manufacturing underutilization and reduced surcharges.

Table 2:  Fourth-Quarter 2009 Net (Loss) Income and Diluted Earnings Per Share (a)

	Net (Loss) Income					Earnings Per Share
	As Reported			Adjusted		As Reported			Adjusted
Continuing Operations	$	(7.5	)	$	29.5	$	(0.08	)	$	0.31
Discontinued Operations	$	(12.7	)	$	9.4		(0.13	)		0.09
Total	$	(20.2	)	$	38.9	$	(0.21	)	$	0.40

(a) Dollars in millions, except per-share data. “Adjusted” earnings per share exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits.

The Timken Company

- 4 -

Total debt was $513 million as of Dec. 31, 2009, or 24.3 percent of capital. At year-end, the company’s cash position was $756 million, or $243 million in excess of total debt. This compares with net debt of $490 million as of Dec. 31, 2008. The improvement reflects strong free cash flow of $419 million driven primarily by working capital reductions as well as proceeds from the sale of the Needle Roller Bearings business.

The following business results for all periods reflect continuing operations, excluding special items:

Bearings and Power Transmission Group Results

Full-year sales in 2009 for the Bearings and Power Transmission Group were $2.5 billion, down 26 percent compared with the prior year. Earnings before interest and taxes (EBIT) for 2009 were $221.4 million, a decrease of 25 percent from 2008.

Sales in the fourth quarter of 2009 were $613.2 million, down 18 percent from the fourth quarter of 2008. EBIT in the fourth quarter was $71.5 million, an increase of 50 percent from the prior-year period.

Mobile Industries Segment Results

Mobile Industries sales were $1.25 billion in 2009, down 30 percent from $1.77 billion a year ago. The sales results reflect weaker demand among its market sectors and currency, partially offset by favorable pricing.

EBIT for the year was $30.5 million, down 15 percent from $35.8 million in 2008, as benefits from pricing, cost-reduction initiatives and lower material costs were partially offset by lower demand.

Fourth-quarter sales for the Mobile Industries segment in 2009 were $324.6 million, compared with $374.3 million in the same period last year. The 13-percent decrease reflected lower unit volume in most market sectors, partially offset by favorable pricing and currency. EBIT in the fourth quarter was $31.1 million, up from a loss of $7.6 million in the fourth quarter of 2008. Cost-reduction initiatives, increased pricing, lower material costs and LIFO income more than offset the decline in demand. The company also resolved a pricing dispute and certain non-income tax matters during the quarter, which together added approximately $15 million to EBIT.

The Timken Company

- 5 -

Process Industries Segment Results

Sales for the Process Industries segment were $808.7 million in 2009, down 31 percent from $1.17 billion a year ago. Lower demand across most industrial market sectors and currency more than offset favorable pricing. Sales declines were most prominent in the industrial distribution channel.

EBIT for the year decreased to $118.5 million, down 46 percent from $218.7 million in 2008. Lower EBIT primarily resulted from volume and currency, partially offset by pricing and cost-reduction initiatives.

Sales in the fourth quarter of 2009 were $189.6 million, a decline of 29 percent from $268.3 million in the same period a year ago. The decline in sales reflects a broad-based drop in industrial demand, especially in the power-transmission sector and across the industrial distribution channel. This was partially offset by favorable pricing and currency. EBIT in the fourth quarter was $23.9 million, down 37 percent from $37.7 million in the same period of 2008. The decline in volume was partially offset by cost-reduction initiatives, pricing, lower material costs, and LIFO income.

Aerospace and Defense Segment Results

Sales for the Aerospace and Defense segment were $417.7 million in 2009, up one percent from $412.0 million a year ago. The increase was driven primarily by pricing and an acquisition, partially offset by reduced demand across commercial and general aviation markets.

EBIT for the year increased to $72.4 million, up 75 percent from $41.5 million in 2008. The benefits from cost-reduction initiatives, LIFO income and pricing were partially offset by the impact of lower demand.

Sales in the fourth quarter of 2009 were $98.9 million, versus $109.7 million in the prior-year period. The 10-percent decline reflects reduced demand in the commercial and general aviation markets. EBIT in the fourth quarter was $16.5 million, down 5 percent from the same period in the prior year, as benefits from cost-reduction initiatives, LIFO income and favorable pricing were offset by lower demand.

The Timken Company

- 6 -

Steel Group Results

Sales for the Steel Group, including inter-group sales, were $714.9 million in 2009, a decrease of 61 percent from $1.85 billion last year, with 50 percent fewer shipped tons. The greatest market declines were from the industrial and energy sectors. Surcharges declined approximately $555 million from a year ago.

The Steel Group incurred a loss of $57.9 million in 2009, compared with EBIT of $264.0 million in 2008. The decline resulted from lower demand and underutilization of manufacturing capacity. Benefits from cost-reduction actions, lower material costs and an approximate $70-million change in LIFO reserve were offset by lower surcharges. The change in LIFO reserve was due to lower year-end inventory quantities and material costs.

Sales in the fourth quarter, including inter-segment sales, were $173.6 million, a decrease of 53 percent from $371.5 million for the same period a year ago, with approximately 40 percent fewer shipped tons. Weaker end-market demand in the industrial and energy sectors was partially offset by stronger demand in the light-vehicle sector compared with a year ago due to consumer stimulus programs in the U.S. and continued market strengthening in general. Surcharges declined approximately $80 million from the fourth quarter last year. EBIT in the fourth quarter was $2.6 million, up from a loss of $3.5 million in the same period a year ago. Lower material costs, a favorable change in LIFO of approximately $30 million and cost-reduction initiatives more than offset the impact of lower demand.

Outlook

Overall, the companyexpects the global economy to grow modestly in 2010 following 2009’s retraction. Timken anticipates an increase in sales of approximately 5 to 10 percent over 2009, driven primarily by stronger shipments in the Steel Group, as customers rebuild inventory levels. The Mobile Industries segment is expected to be up slightly, as increased demand is largely offset by the company’s initiatives to exit low-margin business. Sales in the Process Industries segment are expected to be up slightly, as growth initiatives in energy and Asia more than offset declines in other areas. Aerospace segment sales are expected to decline slightly due to decreases in commercial and general aviation.

The Timken Company

- 7 -

The company expects 2010 earnings, excluding special items, to range from $0.85 to $1.15 per diluted share for the year, compared with $0.53 per diluted share from continuing operations in 2009.

Conference Call Information

The company will host a conference call for investors and analysts today to discuss financial results.

Conference Call:	Tuesday, Feb. 2, 2010
	11:00 a.m. Eastern Time
All Callers:	Live Dial-In: 800-344-0593 or 706-634-0975
	(Call in 10 minutes prior to be included.)
	Conference ID: 68493687
	Replay Dial-In through Feb. 12, 2010:
	800-642-1687 or 706-645-9291
Live Webcast:	www.timken.com/investors

About The Timken Company

The Timken Company keeps the world turning, with innovative friction management and power transmission products and services, enabling our customers’ machinery to perform more efficiently and reliably. With sales of $3.1 billion in 2009, operations in 26 countries and approximately 17,000 employees, Timken is Where You Turn™ for better performance.

Certain statements in this news release (including statements regarding the company’s forecasts, estimates and expectations) that are not historical in nature are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, the statements related to expectations regarding the company’s future financial performance, including information under the heading “Outlook”, are forward-looking. The company cautions that actual results may differ materially from those projected or implied in forward-looking statements due to a variety of important factors, including: the finalization of the company’s financial statements for the fourth quarter and full year of 2009; the company’s ability to respond to the changes in its end markets that could affect demand for the company’s products; unanticipated changes in business relationships with customers or their purchases from the company; changes in the financial health of the company’s customers, which may have an impact on the company’s revenues, earnings and impairment charges; fluctuations in raw-material and energy costs and their impact on the operation of the company’s surcharge mechanisms; the impact of the company’s last-in first-out accounting; continued weakness in global economic conditions and financial markets; changes in the expected costs associated with product warranty claims; the impact on operations of general economic conditions, higher or lower raw-material and energy costs, fluctuations in customer demand, and the company’s ability to achieve the benefits of its ongoing programs and initiatives, including, without limitation, the initiative to reduce its employment levels and other costs, the implementation of its Mobile Industries Segment restructuring program and initiatives and the rationalization of the company’s Canton bearing operations. These and additional factors are described in greater detail in the company’s Annual Report on Form 10-K for the year ended Dec. 31, 2008, page 44 and in the company’s Form 10-Q for the quarter ended Sept. 30, 2009. The company undertakes no obligation to update or revise any forward-looking statement.

###

The Timken Company

(Unaudited)
CONDENSED CONSOLIDATED STATEMENT OF INCOME	AS REPORTED												ADJUSTED (1)
(Dollars in thousands, except share data)		Q4 2009			Q4 2008		Full Year 2009			Full Year 2008				Q4 2009			Q4 2008		Full Year 2009			Full Year 2008
Net sales	$	774,606		$	1,097,952		$	3,141,627		$	5,040,800		$	774,606		$	1,097,952		$	3,141,627		$	5,040,800
Cost of products sold		596,764			918,483			2,550,647			3,885,540			596,764			918,483			2,550,647			3,885,540
Manufacturing rationalization / reorganization expenses - cost of products sold		4,643			1,647			8,233			3,407			-			-			-			-
Gross Profit	$	173,199		$	177,822		$	582,747		$	1,151,853		$	177,842		$	179,469		$	590,980		$	1,155,260
Selling, administrative & general expenses (SG&A)		112,807			139,729			469,868			655,610			112,807			139,729			469,868			655,610
Rationalization / reorganization expenses - SG&A		1,226			(166	)		2,864			1,521			-			-			-			-
Impairment and restructuring		80,052			25,341			164,126			32,783			-			-			-			-
Operating (Loss) Income	$	(20,886	)	$	12,918		$	(54,111	)	$	461,939		$	65,035		$	39,740		$	121,112		$	499,650
Other income (expense)		(2,058	)		(7,823	)		1,869			(11,990	)		(2,058	)		(7,823	)		1,869			(11,990	)
Special items - other income (expense)		(1,401	)		8,260			(2,009	)		28,247			-			-			-			-
(Loss) Earnings Before Interest and Taxes (EBIT) (2)	$	(24,345	)	$	13,355		$	(54,251	)	$	478,196		$	62,977		$	31,917		$	122,981		$	487,660
Interest expense, net		(14,045	)		(9,528	)		(39,979	)		(38,609	)		(14,045	)		(9,528	)		(39,979	)		(38,609	)
(Loss) Income From Continuing Operations Before Income Taxes		(38,390	)		3,827			(94,230	)		439,587			48,932			22,389			83,002			449,051
Provision (benefit) for income taxes		(31,093	)		1,984			(28,193	)		157,062			19,157			7,500			30,570			150,432
(Loss) Income From Continuing Operations	$	(7,297	)	$	1,843		$	(66,037	)	$	282,525		$	29,775		$	14,889		$	52,432		$	298,619
(Loss) Income from discontinued operations  net of income taxes (3)		(12,677	)		(37,372	)		(72,589	)		(11,273	)		9,373			(7,937	)		(20,233	)		18,388
Net (Loss) Income	$	(19,974	)	$	(35,529	)	$	(138,626	)	$	271,252		$	39,148		$	6,952		$	32,199		$	317,007
Less: Net Income (Loss) Attributable to Noncontrolling Interest		212			622			(4,665	)		3,582			248			622			1,520			3,582
Net (Loss) Income Attributable to The Timken Company	$	(20,186	)	$	(36,151	)	$	(133,961	)	$	267,670		$	38,900		$	6,330		$	30,679		$	313,425
Net Income per Common Share Attributable to The Timken Company Common Shareholders:
(Loss) Earnings Per Share - Continuing Operations	$	(0.08	)	$	0.01		$	(0.64	)	$	2.90		$	0.31		$	0.15		$	0.53		$	3.06
(Loss) Earnings Per Share - Discontinued Operations		(0.13	)		(0.38	)		(0.75	)		(0.12	)		0.09			(0.08	)		(0.21	)		0.20
Earnings Per Share	$	(0.21	)	$	(0.37	)	$	(1.39	)	$	2.78		$	0.40		$	0.07		$	0.32		$	3.26
Diluted (Loss) Earnings Per Share - Continuing Operations	$	(0.08	)	$	0.01		$	(0.64	)	$	2.89		$	0.31		$	0.15		$	0.53		$	3.06
Diluted (Loss) Earnings Per Share - Discontinued Operations		(0.13	)		(0.38	)		(0.75	)		(0.12	)		0.09			(0.08	)		(0.21	)		0.19
Earnings Per Share	$	(0.21	)	$	(0.37	)	$	(1.39	)	$	2.77		$	0.40		$	0.07		$	0.32		$	3.25
Average Shares Outstanding		96,212,813			95,902,494			96,135,783			95,650,104			96,212,813			95,902,494			96,135,783			95,650,104
Average Shares Outstanding - assuming dilution		96,212,813			95,909,934			96,135,783			95,947,643			96,212,813			95,909,934			96,135,783			95,947,643

BUSINESS SEGMENTS

(Dollars in thousands) (Unaudited)	Q4 2009			Q4 2008			Full Year 2009			Full Year 2008
Mobile Industries Segment
Net sales to external customers	$	324,628		$	374,298		$	1,245,012		$	1,771,863
Adjusted (loss) earnings before interest and taxes (EBIT) (2)	$	31,097		$	(7,623	)	$	30,496		$	35,764
Adjusted EBIT Margin (2)		9.6	%		-2.0	%		2.4	%		2.0	%
Process Industries Segment
Net sales to external customers	$	189,115		$	267,390		$	806,000		$	1,163,012
Intergroup sales		520			902			2,719			3,154
Total net sales	$	189,635		$	268,292		$	808,719		$	1,166,166
Adjusted earnings before interest and taxes (EBIT) (2)	$	23,878		$	37,738		$	118,504		$	218,667
Adjusted EBIT Margin (2)		12.6	%		14.1	%		14.7	%		18.8	%
Aerospace and Defense Segment
Net sales to external customers	$	98,929		$	109,746		$	417,696		$	411,954
Adjusted earnings before interest and taxes (EBIT) (2)	$	16,489		$	17,423		$	72,444		$	41,459
Adjusted EBIT Margin (2)		16.7	%		15.9	%		17.3	%		10.1	%
Total Bearings and Power Transmission Group
Net sales to external customers	$	612,672		$	751,434		$	2,468,708		$	3,346,829
Intergroup sales		520			902			2,719			3,154
Total net sales	$	613,192		$	752,336		$	2,471,427		$	3,349,983
Adjusted earnings before interest and taxes (EBIT) (2)	$	71,464		$	47,538		$	221,444		$	295,890
Adjusted EBIT Margin (2)		11.7	%		6.3	%		9.0	%		8.8	%
Steel Group
Net sales to external customers	$	161,934		$	346,518		$	672,919		$	1,693,971
Intergroup sales		11,628			24,980			41,993			157,982
Total net sales	$	173,562		$	371,498		$	714,912		$	1,851,953
Adjusted (loss) earnings before interest and taxes (EBIT) (2)	$	2,555		$	(3,493	)	$	(57,880	)	$	264,006
Adjusted EBIT Margin (2)		1.5	%		-0.9	%		-8.1	%		14.3	%
Unallocated corporate expense	$	(12,913	)	$	(13,633	)	$	(48,715	)	$	(68,357	)
Intergroup eliminations income (expense) (4)	$	1,871		$	1,505		$	8,132		$	(3,879	)
Consolidated
Net sales to external customers	$	774,606		$	1,097,952		$	3,141,627		$	5,040,800
Adjusted earnings before interest and taxes (EBIT) (2)	$	62,977		$	31,917		$	122,981		$	487,660
Adjusted EBIT Margin (2)		8.1	%		2.9	%		3.9	%		9.7	%

(1) "Adjusted" statements exclude the impact of impairment and restructuring, manufacturing rationalization/reorganization and special charges and credits for all periods shown.

(2)EBIT is defined as operating income plus other income (expense).EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT margin on a segment basis exclude certain special items set forth above.EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance.Management believes that reporting EBIT and EBIT Margin best reflect the performance of the company's business segments and EBIT disclosures are responsive to investors.

(3) Discontinued Operations relate to the sale of the Needle Roller Bearings (NRB) operations to JTEKT Corporation that closed in December 2009.

(4) Intergroup eliminations represent intergroup profit or loss between the Steel Group and the Bearings and Power Transmission Group.

Reconciliation of net (loss) income attributable to The Timken Company and EPS - diluted.

This reconciliation is provided as additional relevant information about the company's performance.Management believes adjusted earnings per share are more representative of the company's performance and therefore useful to investors.Management also believes that it is appropriate to compare GAAP income from continuing operations to adjusted income from continuing operations in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.

	Fourth Quarter
	2009						2008
(Dollars in thousands, except per share data) (Unaudited)	$			EPS (5)			$			EPS (5)
Net (loss) income attributable to The Timken Company	$	(20,186	)	$	(0.21	)	$	(36,151	)	$	(0.37	)
Less: loss from discontinued operations, net of income taxes		(12,677	)		(0.13	)		(37,372	)		(0.38	)
Net (loss) income from continuing operations
attributable to The Timken Company	$	(7,509	)	$	(0.08	)	$	1,221		$	0.01
Pre-tax special items:
Manufacturing rationalization/reorganization expenses - cost of products sold		4,643			0.05			1,647			0.02
Rationalization/reorganization expenses - SG&A		1,226			0.01			(166	)		-
Impairment and restructuring		80,052			0.83			25,341			0.26
Special items - other expense (income)		1,401			0.01			(8,260	)		(0.09	)
Provision for income taxes (6)		(50,250	)		(0.52	)		(5,516	)		(0.06	)
Special items attributable to noncontrolling interests		(36	)		-			-			-
Adjusted net income from continuing operations
attributable to The Timken Company		29,527			0.31			14,267			0.15
Add: adjusted (loss) income from discontinued operations		9,373			0.09			(7,937	)		(0.08	)
Adjusted net income attributable to The Timken Company	$	38,900		$	0.40		$	6,330		$	0.07
(Loss) income from continuing operations	$	(7,297	)	$	(0.08	)	$	1,843		$	0.03
Less: Net income (loss) attributable to noncontrolling interest		212			-			622			0.02
Net (loss) income from continuing operations
attributable to The Timken Company	$	(7,509	)	$	(0.08	)	$	1,221		$	0.01
Loss from discontinued operations, net of income taxes	$	(12,677	)	$	(0.13	)	$	(37,372	)	$	(0.38	)
Special items, discontinued operations		22,050			0.22			29,435			0.30
Adjusted (loss) income from discontinued operations,
net of income taxes	$	9,373		$	0.09		$	(7,937	)	$	(0.08	)

	Twelve Months
	2009						2008
(Dollars in thousands, except per share data) (Unaudited)	$			EPS (5)			$			EPS (5)
Net (loss) income attributable to The Timken Company	$	(133,961	)	$	(1.39	)	$	267,670		$	2.77
Less: loss from discontinued operations, net of income taxes		(72,589	)		(0.75	)		(11,273	)		(0.12	)
Net (loss) income from continuing operations
attributable to The Timken Company	$	(61,372	)	$	(0.64	)	$	278,943		$	2.89
Pre-tax special items:
Manufacturing rationalization/reorganization expenses - cost of products sold		8,233			0.09			3,407			0.04
Rationalization/reorganization expenses - SG&A		2,864			0.03			1,521			0.02
Impairment and restructuring		164,126			1.71			32,783			0.34
Special items - other expense (income)		2,009			0.02			(28,247	)		(0.29	)
Provision for income taxes (6)		(58,763	)		(0.61	)		6,630			0.07
Special items attributable to noncontrolling interests		(6,185	)		(0.06	)		-			-
Adjusted net income from continuing operations
attributable to The Timken Company		50,912			0.53			295,037			3.06
Add: adjusted (loss) income from discontinued operations		(20,233	)		(0.21	)		18,388			0.19
Adjusted net income attributable to The Timken Company	$	30,679		$	0.32		$	313,425		$	3.25
(Loss) income from continuing operations	$	(66,037	)	$	(0.69	)	$	282,525		$	2.92
Less: Net income (loss) attributable to noncontrolling interest		(4,665	)		(0.05	)		3,582			0.03
Net (loss) income from continuing operations
attributable to The Timken Company	$	(61,372	)	$	(0.64	)	$	278,943		$	2.89
Loss from discontinued operations, net of income taxes		(72,589	)	$	(0.75	)		(11,273	)	$	(0.12	)
Special items, discontinued operations		52,356			0.54			29,661			0.31
Adjusted (loss) income from discontinued operations,
net of income taxes	$	(20,233	)	$	(0.21	)	$	18,388		$	0.19

(5) EPS amounts may not sum due to rounding differences.

(6) Provision for income taxes includes the tax impact on pre-tax special items, the impact of discrete tax items recorded during the respective period, as well as adjustments to reflect the use of one overall effective tax rate on Adjusted pre-tax income in interim periods.

Reconciliation of GAAP income from continuing operations before income taxes

This reconciliation is provided as additional relevant information about the company's performance.Management believes Consolidated adjusted earnings before interest and taxes (EBIT) and Total Bearings and Power Transmission Group adjusted EBIT are more representative of the company's performance and therefore useful to investors.Management also believes that it is appropriate to compare GAAP Income from Continuing Operations before Income Taxes to Consolidated adjusted EBIT in light of special items related to impairment and restructuring and manufacturing rationalization/reorganization costs, Continued Dumping and Subsidy Offset Act (CDSOA) receipts, and gain/loss on the sale of non-strategic assets.

	Fourth Quarter						Twelve Months
	2009			2008			2009			2008
(Thousands of U.S. dollars) (Unaudited)	$			$			$			$
(Loss) Income from continuing operations before income taxes	$	(38,390	)	$	3,827		$	(94,230	)	$	439,587
Pre-tax reconciling items:
Interest expense		14,696			11,026			41,883			44,401
Interest income		(651	)		(1,498	)		(1,904	)		(5,792	)
Manufacturing rationalization/reorganization expenses - cost of products sold		4,643			1,647			8,233			3,407
Manufacturing rationalization/reorganization expenses - SG&A		1,226			(166	)		2,864			1,521
Impairment and restructuring		80,052			25,341			164,126			32,783
Special items - other income		1,401			(8,260	)		2,009			(28,247	)
Consolidated adjusted earnings before interest and taxes (EBIT)	$	62,977		$	31,917		$	122,981		$	487,660
Steel Group adjusted earnings (loss) before interest and taxes (EBIT)		(2,555	)		3,493			57,880			(264,006	)
Unallocated corporate expense		12,913			13,633			48,715			68,357
Intergroup eliminations expense		(1,871	)		(1,505	)		(8,132	)		3,879
Total Bearings and Power Transmission Group adjusted earnings before interest and taxes (EBIT)	$	71,464		$	47,538		$	221,444		$	295,890

Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital:
(Dollars in thousands) (Unaudited)	Dec. 31, 2009			Dec. 31, 2008
Short-term debt	$	43,380		$	108,590
Long-term debt		469,287			515,250
Total Debt		512,667			623,840
Less:Cash and cash equivalents		(755,545	)		(133,383	)
Net Debt	$	(242,878	)	$	490,457
Shareholders' equity	$	1,595,568		$	1,663,038
Ratio of Total Debt to Capital		24.3	%		27.3	%
Ratio of Net Debt to Capital (Leverage)		-18.0	%		22.8	%

This reconciliation is provided as additional relevant information about The Timken Company's  financial position.Capital is defined as total debt plus shareholders' equity.

Management believes Net Debt is more indicative of Timken's financial position, due to the amount of cash and cash equivalents.

Free cash flow:
(Dollars in thousands) (Unaudited)	Dec. 31, 2009			Dec. 31, 2008
Net cash provided by operating activities	$	576,854		$	577,620
Less: capital expenditures		(114,150	)		(258,147	)
Less: cash dividends paid to shareholders		(43,268	)		(67,462	)
Free cash flow	$	419,436		$	252,011

Management believes that free cash flow is useful to investers because it is a meaningful indicator of cash generated from operating activities that is available for the execution of its business strategy.

CONDENSED CONSOLIDATED BALANCE SHEET	Dec 31,		Dec 31,
(Dollars in thousands) (Unaudited)	2009		2008
ASSETS
Cash & cash equivalents	$	755,545	$	133,383
Accounts receivable		411,226		575,915
Inventories		671,236		1,000,493
Current assets, discontinued operations		-		182,861
Other current assets		225,131		140,813
Total Current Assets		2,063,138		2,033,465
Property, plant & equipment		1,335,228		1,516,972
Goodwill		221,734		221,435
Non-current assets, discontinued operations		-		269,625
Other assets		386,793		494,553
Total Assets	$	4,006,893	$	4,536,050
LIABILITIES
Accounts payable & other liabilities	$	355,228	$	423,523
Short-term debt		43,380		108,590
Income taxes		9,233		27,598
Current liabilities, discontinued operations		-		21,512
Accrued expenses		132,592		217,090
Total Current Liabilities		540,433		798,313
Long-term debt		469,287		515,250
Accrued pension cost		690,889		823,550
Accrued postretirement benefits cost		604,250		613,045
Non-current liabilities, discontinued operations		-		30,329
Other non-current liabilities		106,466		92,525
Total Liabilities		2,411,325		2,873,012
EQUITY
Timken Company shareholders' equity		1,577,584		1,640,244
Noncontrolling interest		17,984		22,794
Total Equity		1,595,568		1,663,038
Total Liabilities and Equity	$	4,006,893	$	4,536,050

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	For the three months ended						For the twelve months ended
	Dec 31,			Dec 31,			Dec 31,			Dec 31,
(Dollars in thousands) (Unaudited)	2009			2008			2009			2008
Cash Provided (Used)
OPERATING ACTIVITIES
Net (loss) income attributable to the Timken Company	$	(20,186	)	$	(36,151	)	$	(133,961	)	$	267,670
Net loss from discontinued operations		12,677			37,372			72,589			11,273
Net (loss) income attributable to noncontrolling interest		212			622			(4,665	)		3,582
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		50,650			45,834			201,486			200,799
Impairment		77,529			20,029			113,671			20,081
Pension and other postretirement expense		19,608			22,380			96,700			84,722
Pension and other postretirement benefit payments		(24,246	)		(14,677	)		(113,462	)		(70,459	)
Accounts receivable		46,123			188,849			174,482			107,601
Inventories		44,636			115,705			356,154			(97,679	)
Accounts payable and accrued expenses		(76,844	)		(108,608	)		(209,880	)		(19,029	)
Other		30,916			(7,044	)		30,943			(3,633	)
Net Cash Provided by Operating Activities - Continuing Operations		161,075			264,311			584,057			504,928
Net Cash (Used) Provided by Operating Activities - Discontinued Operations		(8,536	)		4,451			(7,203	)		72,692
Net Cash Provided by Operating Activities		152,539			268,762			576,854			577,620
INVESTING ACTIVITIES
Capital expenditures		(33,197	)		(81,896	)		(114,150	)		(258,147	)
Other		336			2,865			7,510			36,943
Divestments		303,617			-			303,617			-
Acquisitions		-			(28,846	)		(353	)		(86,024	)
Net Cash Provided (Used) by Investing Activities - Continuing Operations		270,756			(107,877	)		196,624			(307,228	)
Net Cash (Used) by Investing Activities - Discontinued Operations		(819	)		(3,405	)		(2,353	)		(13,468	)
Net Cash Provided (Used) by Investing Activities		269,937			(111,282	)		194,271			(320,696	)
FINANCING ACTIVITIES
Cash dividends paid to shareholders		(8,660	)		(17,379	)		(43,268	)		(67,462	)
Net proceeds from common share activity		264			30			918			16,909
Net (payments) on debt		(288,512	)		(115,830	)		(124,878	)		(95,368	)
Decrease in restricted cash		248,158			-			-			-
Net Cash Used by Financing Activities		(48,750	)		(133,179	)		(167,228	)		(145,921	)
Effect of exchange rate changes on cash		(1,060	)		(6,021	)		18,265			(20,504	)
Increase in Cash and Cash Equivalents		372,666			18,280			622,162			90,499
Cash and Cash Equivalents at Beginning of Period		382,879			115,103			133,383			42,884
Cash and Cash Equivalents at End of Period	$	755,545		$	133,383		$	755,545		$	133,383