Timken Delivers Strong 2012 Results; Provides Outlook for 2013

        Timken Delivers Strong 2012 Results; Provides Outlook for 2013

-- Fourth quarter earnings per share were $0.78 on sales of $1.1 billion;

-- 2012 earnings per share were $5.07 on sales of $5.0 billion, including
benefit from CDSOA receipts;

-- Execution of strategic plan delivers strong operating results and free cash
flow, providing for increased pension funding and share repurchases;

-- Company expects 2013 to remain strong, with earnings per share of $3.75 to
$4.05, reflecting second-half recovery.

PR Newswire

CANTON, Ohio, Jan. 24, 2013

CANTON, Ohio, Jan. 24, 2013 /PRNewswire-FirstCall/ --The Timken Company
(NYSE: TKR; www.timken.com) today reported sales of $5.0billion for 2012, a
decrease of 4percent from the prior year. The decline reflects lower demand
from the light vehicle, heavy truck, industrial machinery, and oil and gas
sectors in the second half of the year. Lower surcharges and the impact of
currency also contributed to the decrease in sales. The company benefited
from improved pricing, the favorable impact of its Philadelphia Gear and
Drives acquisitions, and strength in the company's rail and aerospace and
defense end markets.

(Logo: http://photos.prnewswire.com/prnh/20100210/TIMKENLOGO)

In 2012, the company generated net income of $495.5 million, or $5.07per
diluted share, compared with $454.3million, or $4.59 per diluted share, a
year ago. The increase in earnings reflects favorable pricing, lower material
costs, LIFO income and acquisitions, partially offset by weaker sales volume,
mix, material surcharges and manufacturing costs. The 2012 results also
included two significant items, net of tax (reference Table 1): the benefit of
Continued Dumping and Subsidy Offset Act (CDSOA) receipts in the amount of
$68million, or $0.69 per diluted share, and charges related to the announced
closure of a bearing plant in Canada, totaling $28.1million, or $0.28 per
diluted
share.

Table 1: 2012 Net Income and Diluted Earnings
Per Share (EPS)
                                              ($ in Millions) EPS
Net Income attributable to The Timken Company $495.5           $5.07
Less: CDSOA receipts, net of tax              $ 68.0          $0.69
Add: Charges due to plant closure, net of tax $ 28.1          $0.28
Net Income, after these items                 $455.6           $4.66

"Over the course of the year, we responded quickly and effectively to slowing
demand across our end markets and maintained our focus on driving value for
our customers and shareholders," said JamesW.Griffith, Timken president and
chief executive officer. "Our strategy of continuing to evolve in key markets
and further diversifying our product portfolio with new products and
additional repair services enabled us to achieve double-digit operating
margins in all four segments, even in the face of lower volumes. Our
diversification strategy was reinforced by the positive impact that the Drives
and Philadelphia Gear acquisitions are having on our performance.

"The fundamental changes we've made to improve the structural performance in
our business led to strong operating results and free cash flow generation,"
said Griffith, "as well as a strengthened balance sheet. Our strategic plan
continues to serve us well in the face of uncertainty in the global economy."

During 2012, Timken:

  oRaised the quarterly dividend by 15percent to 23cents per share,
    returning $89million in capital to shareholders through quarterly
    dividends. This year marked 90consecutive years of paying quarterly
    dividends dating back to the company's listing on the NYSE in 1922;
  oAnnounced an increased share repurchase program for up to 10million of
    the company's common shares through 2015 and purchased 2.5million shares
    for a total of $112 million;
  oExpanded its reach in emerging markets and broadened its product
    portfolio, extending the Timken^® spherical bearing line and developing
    new crankshaft steels as well as incorporating Drives^® chain and
    Philadelphia Gear^® repair services into its offerings;
  oCompleted the acquisition of the assets of Wazee Companies, LLC, expanding
    Timken services into critical motor and generator services and uptower
    wind maintenance and repair;
  oBroke ground on a $225million expansion at its Faircrest Steel Plant in
    Canton, Ohio, which will provide large bar production capabilities unique
    in America as well as improve efficiency and increase capacity in a core
    area of its Timken^® engineered steel product portfolio;
  oInvested in a new intermediate tube finishing line and new in-line forge
    press to improve productivity and increase capacity in its steel
    operations. These two investments, which come on line in the first
    quarter, reinforce the company's position of offering the broadest special
    bar quality (SBQ) steel capabilities in North America;
  oContinued to align its manufacturing footprint with market needs,
    announcing the closure of its St. Thomas, Ontario, bearing plant and the
    consolidation of those operations into existing U.S. facilities, and
    realigning its Tyger River plant in Union, S.C., to focus exclusively on
    large bore bearing products; and
  oAppointed Christopher A.Coughlin and RichardG.Kyle as group presidents,
    in connection with the retirement of Salvatore J. Miraglia. Coughlin
    leads the Mobile and Process Industries segments and Kyle oversees the
    Aerospace and Steel segments.

Fourth-Quarter Results
Timken posted sales of $1.1billion in the fourth quarter of 2012, down
15percent from the same period in 2011. The sales decrease primarily
reflects lower demand in the company's light vehicle, heavy truck, mining and
energy-related end market sectors, as well as lower surcharges. This decrease
was partially offset by favorable pricing. From a geographic perspective, the
decline also reflects lower demand in North America and Europe, partially
offset by growth in Asia.

For the fourth quarter, the company generated net income of $75.3million, or
$0.78per diluted share. That compares with $109.1million, or $1.11 per
diluted share, earned in the same period last year. The decrease in earnings
was primarily the result of lower volume, mix, lower material surcharges and
higher manufacturing costs, partially offset by favorable pricing, lower
material costs, LIFO income and a lower tax rate.

Cash Flow and Balance Sheet
The company generated $626.1million in cash from operating activities in 2012
with strong earnings and CDSOA receipts, partially offset by discretionary
pension contributions. Excluding discretionary pension and VEBA trust
contributions of $245million, net of tax, and the benefit of CDSOA receipts,
free cash flow (operating cash after capital expenditures and dividends) was
$416.9million. In addition, the company used $112million of cash to
purchase 2.5million of its common shares.

The company improved its balance sheet and pension funding status in 2012. As
of December31,2012, total debt was $479.0million, or 17.6percent of
capital, and cash was $586.4million, or $107.4million in excess of total
debt, compared with total debt of $515.1 million and net debt of $46.7million
at the end of 2011. Available liquidity at December 31, 2012, was
$1.4billion. Timken ended the year with an unfunded pension liability of
$397.9million, or a funded status of 89percent, improved from
$492.7million, or 84percent, a year ago.

Mobile Industries Segment Results
Mobile Industries' 2012 sales were $1.7billion, down 5percent from
$1.8billion a year ago. The benefits of the Drives acquisition and the
strength of rail markets were more than offset by lower light vehicle and
heavy truck sales as well as currency.

Mobile Industries achieved EBIT of $208.1million, or 12.4percent of sales,
for the year, down 21percent from $261.8million, or 14.8percent of sales,
earned in 2011. The decrease in EBIT was primarily driven by lower volume,
higher manufacturing costs and charges of approximately $25.0million related
to previously announced plant closures, partially offset by favorable pricing.

In the fourth quarter, Mobile Industries' sales were $361.1million, down
14percent relative to the same period a year ago primarily due to lower light
vehicle, heavy truck and off-highway market demand. EBIT in the quarter was
$34.7million, or 9.6percent of sales, compared with $48.8million, or
11.6percent of sales, for the same period a year ago. The decline in EBIT
was due to lower volume, partially offset by favorable pricing.

Process Industries Segment Results
Sales for the Process Industries segment were $1.3 billion in 2012, an
increase of 8percent from $1.2billion a year ago. The increase was primarily
driven by acquisitions. End-market demand was essentially flat while the
benefit of pricing was mostly offset by currency.

Process Industries generated EBIT of $274.9million, or 20.5percent of sales,
up slightly from the prior year's EBIT of $274.2million, or 22percent of
sales. EBIT benefited from acquisitions and pricing, partially offset by
manufacturing costs, mix and currency.

Process Industries' fourth-quarter sales were $338.9million, up 5percent
from the same period a year ago. The increase reflects higher volume and
favorable pricing. EBIT in the quarter was $61.2million, or 18.1percent of
sales, down 5percent from the prior year's fourth quarter EBIT of
$64.6million, or 20percent of sales. The decrease in EBIT resulted from
higher manufacturing and material costs, mix and currency, partially offset by
increased volume, favorable pricing and lower selling and administrative
costs.

Aerospace and Defense Segment Results
For the full year 2012, Aerospace and Defense recorded sales of
$346.9million, up 7percent from $324.1million in 2011. The increase
reflects strong volume across most of the segment's end markets, led by
defense.

Aerospace EBIT was $36.3million, or 10.5percent of sales, up from
$5.1million, or 1.6percent of sales, for the same period a year ago. The
increase in EBIT was led by volume, price and lower manufacturing and selling
and administrative costs. In addition, last year's results were negatively
impacted by approximately $6million in warranty charges.

Aerospace and Defense sales for the fourth quarter were $84.4million, up
6percent from the same period a year ago. The increase reflects higher
volume, led by the defense sector, as well as favorable pricing. EBIT for the
fourth quarter was $10million, or 11.8percent of sales, compared with EBIT
of $2.7million, or 3.4percent of sales, in the same period a year ago. The
increase in EBIT was due to higher volume, pricing, lower manufacturing and
selling and administrative costs.

Steel Segment Results
Sales for Steel, including inter-segment sales, were $1.7billion in 2012,
down 12percent from $2billion last year. The results reflect reduced
shipments to the industrial and oil and gas market sectors and lower
raw-material surcharges of approximately $165million, partially offset by
favorable pricing.

Steel segment EBIT for the year was $251.8million, or 14.6percent of sales,
compared to $267.4million, or 13.7percent of sales, in the prior year. EBIT
was impacted by lower volume, mix, surcharges and higher manufacturing costs,
partially offset by pricing, LIFO income and lower material costs.

For the quarter, Steel segment sales were $316.4million, down 32percent from
the same period last year. Raw-material surcharges decreased approximately
$70million from the same period a year ago as a result of lower volume and
material costs. Lower shipments, primarily in the industrial and oil and gas
market sectors, were partially offset by improved pricing.

EBIT for the fourth quarter of 2012 was $25.2million, or 8percent of sales,
compared with $70.6million, or 15.1percent of sales, for the same period a
year ago. The decline in EBIT was driven by lower volume, mix, material
surcharges and higher manufacturing costs, partially offset by pricing, lower
material costs and LIFO income.

Outlook
"We expect to deliver solid operating results in 2013 as we continue to take
actions to reduce costs and drive efficiencies in response to the
environment," said Griffith. "Our outlook for the year reflects our
expectation that we will continue to see inventory reduction by our customers
in the first half of the year, and anticipate an improving economy in the
second half with customer demand matching consumption."

The company expects sales to be down around 5 percent compared to 2012,
driven primarily by continued lower demand. Operating performance is expected
to remain strong, with all four segments maintaining double-digit operating
margins.

For the full year 2013, The Timken Company expects:

  oMobile Industries' sales down 5 to 10percent for the year due to the
    impact of lower customer demand driven by the company's market strategy;
  oProcess Industries' sales to be relatively flat, based on a second-half
    recovery in Asia and industrial distribution;
  oAerospace and Defense sales up 7 to 12percent, due to increased demand in
    civil and defense as well as critical motion control end markets; and
  oSteel sales down 7 to 12percent, driven by lower oil and gas as well as
    industrial end-market demand and surcharges.

Timken projects 2013 annual earnings per diluted share to range from $3.75 to
$4.05, which includes restructuring costs for previously announced plant
closures totaling approximately $0.20.

The company expects to generate cash from operations of approximately
$330million in 2013. Free cash flow is projected to be a use of $120million
after making capital expenditures of about $360 million and paying about
$90million in dividends. Excluding discretionary pension and VEBA trust
contributions of approximately $180million, net of tax, the company forecasts
free cash flow of approximately $60million in 2013.

Conference Call Information
Timken will host a conference call today at 11:00a.m. to review its financial
results. Presentation materials will be available online in advance of the
call for interested investors and securities analysts.

Conference Call:   Thursday, Jan.24,2013
                       11:00 a.m. Eastern Time
All Callers: Live Dial-In: 800/967-0627 or 816/581-1736
                       (Call 10 minutes prior to be included.)
                       Conference ID: Timken Earnings Call
                       Replay Dial-In available through Feb.7,2013:
                       888/203-1112 or 719/457-0820
                       Replay Passcode: 2099713
Live Webcast:     www.timken.com/investors

About The Timken Company
The Timken Company (NYSE: TKR; www.timken.com), a global industrial technology
leader, applies its deep knowledge of materials, friction management and power
transmission to improve the reliability and efficiency of industrial machinery
and equipment all around the world. The company engineers, manufactures and
markets mechanical components and high-performance steel. Timken^® bearings,
engineered steel bars and tubes—as well as transmissions, gearboxes, chain,
related products and services—support diversified markets worldwide. With
sales of $5.0 billion in 2012 and approximately 20,000 people operating from
30 countries, Timken makes the world more productive and keeps industry in
motion.

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 2012; 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;
weakness in global or regional economic conditions and financial markets;
changes in the expected costs associated with product warranty claims; the
ability to achieve satisfactory operating results in the integration of
acquired companies; the impact on operations of general economic conditions;
higher or lower raw material and energy costs; fluctuations in customer
demand; the company's ability to achieve the benefits of announced programs,
initiatives, and capital investments; and retention of CDSOA distributions.
Additional factors are discussed in the company's filings with the Securities
and Exchange Commission, including the company's Annual Report on Form 10-K
for the year ended Dec. 31, 2011, quarterly reports on Form 10-Q and current
reports on Form 8-K. Except as required by the federal securities laws, the
company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future
events or otherwise.

Media Contact:              Investor Contact:
Pat Carlson                  Steve Tschiegg
Global Media Relations       Director – Capital Markets & Investor Relations
1835 Dueber Avenue, S.W.     1835 Dueber Avenue, S.W.
Canton, OH 44706-0927 U.S.A. Canton, OH 44706-0927 U.S.A.
Telephone: (330)471-3514     Telephone: (330)471-7446
pat.carlson@timken.com       steve.tschiegg@timken.com



The Timken Company
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)                   Three Months Ended       Year Ended
                              December 31,             December 31,
(Dollars in millions, except  2012        2011         2012        2011
share data)
Net sales                     $         $          $         $  
                              1,080.3    1,264.7     4,987.0    5,170.2
Cost of products sold         801.8       922.1        3,620.7     3,800.5
Gross Profit                  278.5       342.6        1,366.3     1,369.7
Selling, general &
administrative expenses       163.5       167.1        643.9       626.2
(SG&A)
Impairment and restructuring  0.7         5.9          29.5        14.4
Operating Income              114.3       169.6        692.9       729.1
Other income, net             (3.6)       (2.7)        101.3       (1.1)
Earnings Before Interest and  $       $        $       $    
Taxes (EBIT) ^(1)             110.7       166.9        794.2       728.0
Interest expense, net         (6.2)       (7.4)        (28.2)      (31.2)
Income Before Income Taxes    104.5       159.5        766.0       696.8
Provision for income taxes    29.1        51.2         270.1       240.2
Net Income                    75.4        108.3        495.9       456.6
Less: Net Income Attributable 0.1         (0.8)        0.4         2.3
to Noncontrolling Interest
Net Income Attributable to    $      $        $       $    
The Timken Company            75.3        109.1        495.5       454.3
Net Income per Common Share
Attributable to The Timken
Company Common Shareholders
Basic Earnings Per Share      $      $       $      $     
                              0.79        1.12         5.11        4.65
Diluted Earnings Per Share    $      $       $      $     
                              0.78        1.11         5.07        4.59
Average Shares Outstanding    95,631,452  97,253,291   96,671,613  97,451,064
Average Shares Outstanding -  96,553,289  98,368,413   97,602,481  98,655,513
assuming dilution





BUSINESS SEGMENTS
(unaudited)
                         Three Months Ended         Year Ended
                         December 31,               December 31,
(Dollars in millions,    2012         2011          2012         2011
except share data)
Mobile Industries
Segment
Net sales to external    $  361.0   $   419.6   $  1,675.0  $  1,768.9
customers
Intersegment sales       0.1          —             0.5          0.5
Total net sales          $  361.1   $   419.6   $  1,675.5  $  1,769.4
Earnings before interest
and taxes (EBIT) ^(1)   34.7         48.8          208.1        261.8
(2)
EBIT Margin ^(1)        9.6 %        11.6 %        12.4 %       14.8 %
Process Industries
Segment
Net sales to external    $  337.1   $   320.8   $  1,337.6  $  1,240.5
customers
Intersegment sales       1.8          1.6           5.7          4.1
Total net sales          $  338.9   $   322.4   $  1,343.3  $  1,244.6
Earnings before interest
and taxes (EBIT) ^(1)   61.2         64.6          274.9        274.2
(2)
EBIT Margin ^(1)        18.1 %       20.0 %        20.5 %       22.0 %
Aerospace and Defense
Segment
Net sales to external    84.4         79.7          346.9        324.1
customers
Earnings (loss) before
interest and taxes       10.0         2.7           36.3         5.1
(EBIT) ^(1) (2)
EBIT Margin ^(1)        11.8 %       3.4 %         10.5 %       1.6 %
Steel Segment
Net sales to external    $  297.8   $   444.6   $  1,627.5  $  1,836.7
customers
Intersegment sales       18.6         23.8          101.2        119.8
Total net sales          $  316.4   $   468.4   $  1,728.7  $  1,956.5
Earnings before interest
and taxes (EBIT) ^(1)   25.2         70.6          251.8        267.4
(2)
EBIT Margin ^(1)        8.0 %        15.1 %        14.6 %       13.7 %
Unallocated corporate    (20.6)       (20.9)        (84.4)       (80.8)
expense ^(2)
Receipt of CDSOA         (0.6)        —             108.0        —
distributions ^(3)
Intersegment
eliminations income      0.8          1.1           (0.5)        0.3
(expense) ^(2) (4)
Consolidated
Net sales to external    1,080.3      1,264.7       4,987.0      5,170.2
customers
Earnings before interest
and taxes (EBIT) ^(1)   110.7        166.9         794.2        728.0
(2)
EBIT Margin ^(1)        10.2 %       13.2 %        15.9 %       14.1 %
(1) EBIT is defined as operating income plus other income (expense). EBIT
Margin is EBIT as a percentage of net sales. 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 are
useful to investors as these measures are representative of the Company's
performance and cash generation.
(2) As of January 1, 2012, the Company modified the way in which certain
selling, general and administrative expenses are allocated among business
segments. Prior year amounts have been revised to be consistent with the new
allocations.
(3) Receipt of the U.S. Continued Dumping and Subsidy Offset Act
distributions, net of expenses (CDSOA), represents the amount of funds
received by the Company for distribution of monies collected by U.S. Customs
from antidumping cases to qualifying domestic producers.
(4) Intersegment eliminations represent profit or loss between the Steel
segment and the Mobile Industries, Process Industries and Aerospace and
Defense segments.





Reconciliation of EBIT and EBITDA to GAAP Net Income:
This reconciliation is provided as additional relevant information about the
Company's performance. Management believes consolidated earnings before
interest and taxes (EBIT) are representative of the Company's performance and
therefore useful to investors. Consolidated earnings before interest, taxes,
depreciation and amortization (EBITDA) are another important measure of
financial performance and cash generation of the business and therefore useful
to investors. Management also believes that it is appropriate to compare GAAP
net income to consolidated EBIT and EBITDA.
                         Three Months Ended            Year Ended
                         December 31,                  December 31,
(Dollars in millions)    2012         2011             2012        2011
(Unaudited)
Net Income               $        $            $       $    
                         75.4         108.3            495.9      456.6
Provision for income     29.1         51.2             270.1       240.2
taxes
Interest expense         7.1          8.6              31.1        36.8
Interest income          (0.9)        (1.2)            (2.9)       (5.6)
Consolidated earnings    $         $            $       $    
before interest and      110.7        166.9            794.2      728.0
taxes (EBIT)
Depreciation and         49.2         49.6             198.0       192.5
Amortization
Consolidated earnings
before interest, taxes,  $         $            $       $    
depreciation and         159.9        216.5            992.2      920.5
amortization (EBITDA)





Reconciliation to Net Income Attributable to The Timken Company, After
Adjustments, to GAAP Net Income Attributable to The Timken Company:
This reconciliation is provided as additional relevant information about the
Company's performance. Management believes that net income attributable to
the Company, after adjustments, and diluted earnings per share, after
adjustments, are representative of the Company's core operations and therefore
useful to investors.
                         Three Months
                                                     Year Ended
                         Ended
                                                     December 31,
                         December 31,
(Dollars in millions,
except share data)       2012            EPS         2012          EPS
(Unaudited)
Net Income Attributable  $         $   0.78  $         $   5.07
to The Timken Company    75.3                       495.5
CDSOA receipts, net of   0.4             —           (68.0)        (0.69)
tax expense ^(1)
Charges due to plant     2.3             0.02        28.1          0.28
closure ^(2)
Net Income Attributable  $                     $    
to The Timken Company,   78.0           $   0.80  455.6        $   4.66
after adjustments
^(1)CDSOA receipts for the year ended December 31, 2012 were $108.0 million,
net of tax expense of $40.0 million.
^(2)On May 24, 2012, the Company announced the closure of its manufacturing
plant in St. Thomas, Ontario, Canada. In the fourth quarter of 2012, the
Company recorded $0.4 million of restructuring charges and $2.3 million of
reorganization charges included in cost of products sold. These charges were
recorded net of tax expense of $0.4 million. In the year ended December 31,
2012, the Company recorded $23.6 million of restructuring charges and $5.2
million of reorganization charges included in cost of products sold. These
charges were recorded net of tax expense of $0.7 million.



Reconciliation of EBIT Margin, After Adjustments, to Net Income as a
Percentage of Sales and EBIT, After Adjustments, to Net Income:
The following reconciliation is provided as additional relevant information
about the Company's performance. Management believes that EBIT, after
adjustments, and EBIT margin, after adjustments, are representative of the
Company's core operations and therefore useful to investors.
                      Three Months                 Year Ended
(Dollars in millions) Ended          Percentage to              Percentage to
(Unaudited)                          Net Sales     December 31, Net Sales
                      December 31,                 2012
                      2012
Net Income            $        7.0 %         $       9.9 %
                      75.4                         495.9
Provision for income  29.1           2.7 %         270.1        5.4 %
taxes
Interest expense      7.1            0.7 %         31.1         0.6 %
Interest income       (0.9)          (0.1)%        (2.9)        (0.1)%
Consolidated earnings $                       $     
before interest and   110.7          10.2 %        794.2       15.9 %
taxes (EBIT)
CDSOA receipts ^(1)   (0.6)          (0.1)%        108.0        2.2 %
Charges due to plant  2.7            0.2 %         28.8         0.6 %
closure ^(2)
Consolidated earnings
before interest and   $         10.4 %        $       18.7 %
taxes (EBIT), after   112.8                         931.0
adjustments
(1) CDSOA receipts for the year ended December 31, 2012 were $108.0 million,
net of tax expense of $40.0 million.
(2) On May 24, 2012, the Company announced the closure of its manufacturing
plant in St. Thomas, Ontario, Canada. In the fourth quarter of 2012, the
Company recorded $0.4 million of restructuring charges and $2.3 million of
reorganization charges included in cost of products sold. In the year ended
December 31, 2012, the Company recorded $23.6 million of restructuring charges
and $5.2 million of reorganization charges included in cost of products sold.



Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital:
This reconciliation is provided as additional relevant information about The
Timken Company's financial position. Capital is defined as total debt plus
total shareholders' equity. Management believes Net Debt is an important
measure of Timken's financial position, due to the amount of cash and cash
equivalents.
(Dollars in millions)                              December 31,  December 31,
(Unaudited)                                        2012          2011
Short-term debt                                    $       $      
                                                      23.9      36.3
Long-term debt                                     455.1         478.8
Total Debt                                         $       $      
                                                     479.0      515.1
Less: Cash, cash
equivalents and                                    (586.4)       (468.4)
restricted cash
Net (Cash) Debt                                    $       $      
                                                     (107.4)      46.7
Total equity                                       $       $      
                                                    2,246.6      2,042.5
Ratio of Total Debt to                             17.6 %        20.1 %
Capital
Ratio of Net Debt to                               (5.0)%        2.2 %
Capital
Reconciliation of Free Cash Flow to GAAP Net Cash Provided by Operating
Activities:
Management believes that free cash flow and free cash flow less discretionary
pension and postretirement contributions and CDSOA receipts are useful to
investors because they are meaningful indicators of cash generated from
operating activities available for the execution of its business strategy.
                         Three Months Ended        Year Ended
                         December 31,              December 31,
(Dollars in millions)    2012         2011         2012          2011
(Unaudited)
Net cash provided (used) $       $       $       $      
by operating activities  259.6        279.1        626.1         211.7
Less: capital            (109.9)      (99.3)       (297.2)       (205.3)
expenditures
Less: cash dividends     (22.2)       (19.4)       (89.0)        (76.0)
paid to shareholders
Free cash flow           127.5        160.4        239.9         (69.6)
Plus: discretionary
pension and
postretirement benefit   —            —            245.0         256.0
contributions, net of
the tax benefit (1)
Less: CDSOA receipts,    0.4          —            (68.0)        —
net of tax expense (2)
Free cash flow less
discretionary            $       $       $       $      
contributions            127.9        160.4        416.9        186.4
postretirement
contributions and CDSOA
(1) There were no discretionary pension and postretirement benefit
contributions for the fourth quarter of 2012. The discretionary pension and
postretirement benefit contributions for the full year 2012 were $364.1
million, before the tax benefit of $119.1 million.There were no discretionary
pension and postretirement benefit contributions for the fourth quarter of
2011. The discretionary pension and postretirement benefit contributions for
the full year 2011 were $401.4 million, before the tax benefit of $145.4
million.
(2) CDSOA receipts for the year ended December 31, 2012 were $108.0 million.





CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions) (Unaudited)      December 31,        December 31,
                                       2012                2011
ASSETS
Cash and cash equivalents              $          $         
                                       586.4               464.8
Accounts receivable                    546.7               645.5
Inventories, net                       862.1               964.4
Other current assets                   178.9               218.2
Total Current Assets                   $            $       
                                       2,174.1            2,292.9
Property, Plant and Equipment - Net    1,405.3             1,308.9
Goodwill                               338.9               332.7
Other assets                           326.4               392.9
Total Assets                           $            $       
                                       4,244.7            4,327.4
LIABILITIES
Accounts payable                       216.2               287.3
Short-term debt                        23.9                36.3
Income taxes                           36.4                48.6
Accrued expenses                       391.4               447.7
Total Current Liabilities              $          $         
                                       667.9               819.9
Long-term debt                         455.1               478.8
Accrued pension cost                   391.4               491.0
Accrued postretirement benefits cost   371.8               395.9
Other non-current liabilities          111.9               99.3
Total Liabilities                      $            $       
                                       1,998.1            2,284.9
EQUITY
The Timken Company shareholders'       2,232.2             2,028.3
equity
Noncontrolling Interest                14.4                14.2
Total Equity                           2,246.6             2,042.5
Total Liabilities and Equity           $            $       
                                       4,244.7            4,327.4





CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)          Three Months Ended      Year Ended
(Unaudited)                    December 31,            December 31,
                               2012        2011        2012        2011
Cash Provided (Used)
OPERATING ACTIVITIES
Net income attributable to The $   75.3 $   109.1 $   495.5 $   454.3
Timken Company
Net income attributable to     0.1         (0.8)       0.4         2.3
noncontrolling interest
Adjustments to reconcile net
income to net cash provided
(used)by operating
activities:
Depreciation and amortization  49.2        49.6        198.0       192.5
Impairment charges             0.2         —           6.6         3.3
Pension and other              21.4        19.1        91.5        74.9
postretirement expense
Pension and other
postretirement benefit         (12.9)      (10.8)      (412.7)     (456.0)
contributions and payments
Changes in operating assets
and liabilities:
Accounts receivable            89.2        76.3        103.0       (111.6)
Inventories                    67.3        (3.4)       102.5       (125.6)
Accounts payable               (56.2)      (24.4)      (73.2)      14.9
Accrued expenses               20.7        31.4        (53.8)      29.1
Income taxes                   0.9         32.4        144.8       133.7
Other - net                    4.4         0.6         23.5        (0.1)
Net Cash Provided (Used) By    259.6       279.1       626.1       211.7
Operating Activities
INVESTING ACTIVITIES
Capital expenditures           (109.9)     (99.3)      (297.2)     (205.3)
Acquisitions                   (20.5)      (93.2)      (20.7)      (292.1)
Investments - net              (2.9)       1.2         14.3        (22.7)
Divestitures                   1.2         —           1.2         4.8
Other                          (0.6)       0.8         4.7         7.3
Net Cash Used by Investing     (132.7)     (190.5)     (297.7)     (508.0)
Activities
FINANCING ACTIVITIES
Cash dividends paid to         (22.2)      (19.4)      (89.0)      (76.0)
shareholders
Purchase of treasury shares,   —           —           (112.3)     (43.8)
net
Net proceeds from common share 1.4         0.4         21.6        23.8
activity
Net proceeds from credit       (8.0)       3.6         (34.5)      1.6
facilities
Other                          —           (5.1)       3.6         (12.2)
Net Cash Used by Financing     (28.8)      (20.5)      (210.6)     (106.6)
Activities
Effect of exchange rate        2.8         (6.2)       3.8         (9.4)
changes on cash
(Decrease) Increase In Cash    100.9       61.9        121.6       (412.3)
and Cash Equivalents
Cash and cash equivalents at   485.5       402.9       464.8       877.1
beginning of period
Cash and Cash Equivalents at   586.4       464.8       586.4       464.8
End of Period

SOURCE The Timken Company

Website: http://www.timken.com