EX-99.1 2 d448306dex991.htm EX-99.1

THE TIMKEN COMPANY INVESTOR PRESENTATION DECEMBER 2012 Exhibit 99.1

FORWARD-LOOKING STATEMENTS SAFE HARBOR AND NON-GAAP FINANCIAL INFORMATION Certain statements in this presentation (including statements regarding the company's forecasts, beliefs, 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 Timken’s plans, outlook, future financial performance, targets, projected sales, cash flows, and liquidity, including the information under the headings “Attractiveness/Strategic Priorities”, “Sales”, “Earnings Per Share”, “Free Cash Flow”, “Capital Spending”, “Pension”, “2012 Capital Allocation Highlights” and “Return on Invested Capital” 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 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 integrate acquired companies to achieve satisfactory operating results; 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 its ongoing programs, initiatives & 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. The company undertakes no obligation to update or revise any forward-looking statement. This presentation includes certain non-GAAP financial measures as defined by the rules and regulations of the Securities and Exchange Commission. A reconciliation of those measures to the most directly comparable GAAP equivalent is provided in the Appendix to this presentation. 2

INVESTOR RELATIONS CONTACT Steve Tschiegg Director - Capital Markets & Investor Relations PH: (330) 471-7446 E-mail: steve.tschiegg@timken.com

TIMKEN OVERVIEW A global industrial technology leader applies its deep knowledge of metallurgy, friction management and mechanical power transmission to improve the reliability and efficiency of machinery all around the world Our high-performance steel and mechanical components support diversified markets worldwide Established in 1899 and headquartered in Canton, Ohio 2011 sales: $5.2 billion Global footprint with operations in 30 countries & 21,000 associates 4 • Bearings • Alloy steel bars & tubes • Transmissions • Gearboxes • Engineered chain • Related products & services

Process -- Global growth beyond bearings, diversified, strong aftermarket Sales: $1.0 Billion EBIT Margin: 21.3% Mobile -- Transformed portfolio, more aftermarket focus Sales: $1.3 Billion EBIT Margin: 13.2% Aerospace & Defense -- Diversified into transmissions and aftermarket Sales: $263 million EBIT Margin: 10.0% Steel -- High-performance, customized alloy steels Sales: $1.4 Billion EBIT Margin: 16.0% THE TIMKEN COMPANY TODAY Note: Based on September 30, 2012 YTD financial results. Steel segment sales include $82.6 million of inter-segment sales. Process Process Industries Industries Steel Steel Aerospace Aerospace & Defense & Defense Mobile Mobile Industries Industries 5 25% 33% 35% 7% Nine Months 2012 Total Sales: $3.9 Billion

STRONG TIES BETWEEN BUSINESSES DRIVE VALUE • Best in class provider of high performance products for demanding conditions • Technical knowledge • Research synergies • Production capabilities • Application engineering • Supply-chain efficiencies • Manufacturing efficiencies • Value-based pricing • Ability to leverage investments across platform • Customer service and delivery Process Industries | Mobile Industries Steel | Aerospace & Defense • Automotive Common End- Market Sectors • Construction • Energy Shared Customers Shared Expertise Operating Efficiencies Combined platform drives performance and value 6 • Aerospace & Defense • Mining • Agriculture • Industrial Machinery • Rail • Heavy Truck

CREATE UNPARALLELED VALUE Offering a broad array of mechanical power transmission components, high-performance steel and related solutions and services. Extending our knowledge, products, services and channels to meet customer needs, wherever they are in the world. Delivering exceptional results with a passion for superior execution. Using our knowledge of metallurgy, friction management and mechanical power transmission to create unique solutions used in demanding applications. TIMKEN STRATEGY TO DELIVER SHAREHOLDER VALUE 7

THE STRATEGY IS WORKING: TIMKEN HAS DELIVERED TOP QUARTILE PERFORMANCE 8 Timken has delivered top quartile performance versus comparable companies in: EBITDA margin Return on invested capital (ROIC) (1) Source: Company filings and Factset as of October 26, 2012. Represents average of 2008 through LTM 2012. Tax rate assumed at 35%. Results exclude U.S. Continued Dumping Subsidy Offset Act (CDSOA) receipts and impairment and restructuring expense. See Appendix for reconciliation of EBITDA and ROIC to the most directly comparable GAAP equivalents. EBITDA and ROIC are not defined under U.S. GAAP and should not be considered in isolation or as a substitute for measures of our performance prepared in accordance with GAAP. Because not all companies use identical calculations, the presentation of EBITDA and ROIC may not be comparable to other similarly titled measures of other companies. (2) Comparable Companies include: AK Steel, Allegheny Technologies, Altra, Carpenter Technology, JTEKT, Kennametal, NSK, NTN, Nucor, SKF, Steel Dynamics, and US Steel.

(77.4%) (47.3%) (42.0%) (21.8%) (16.5%) (15.6%) (4.8%) 9.0% 42.9% 52.1% 63.2% 67.8% 100.9% (120.0%) (80.0%) (40.0%) 0.0% 40.0% 80.0% 120.0% 160.0% (88.9%) (76.5%) (74.7%) (67.3%) (57.9%) (44.0%) (40.1%) (27.2%) (7.8%) 8.0% 11.6% 45.1% 71.2% (120.0%) (80.0%) (40.0%) 0.0% 40.0% 80.0% Source: Factset as of November 23, 2012. (1) Bearings & Power Transmission (B&PT) comparables include: Altra, JTEKT, Kennametal, NSK, NTN, and SKF. (2) Steel comparable companies include: AK Steel, Allegheny Technologies, Carpenter Technology, Nucor, Steel Dynamics, and US Steel. B&PT (1) Steel (2) Timken SKF Timken Altra Carpenter Nucor Kennametal Steel Dynamics NSK JTEKT Allegheny US Steel NTN AK Steel Carpenter Kennametal Timken SKF Altra NSK Nucor Steel Dynamics Allegheny JTEKT NTN US Steel AK Steel Last 5 Years – Total Shareholder Return Last 3 Years – Total Shareholder Return DELIVERING STRONG TOTAL SHAREHOLDER RETURNS 9

10 THE STRATEGY IS WORKING: KEY TAKEAWAYS

Markets Geographies Products Performance A MULTI-FACETED TRANSFORMATION 11

Broad-based end markets and customers Increased sales from demanding applications Expanded channels into the aftermarket; represents approximately 25% of global sales Portfolio Diversification 12 Note: End market sector diversification based on 2011 sales of $5.2 billion.

EMERGING MARKETS: A SOURCE OF GROWTH Emerging market growth 10-Year Sales Revenue -- CAGR 15% 13 Diversified global scope, growing faster outside the U.S. (1) ($ in Millions) Note: (1) Geographic diversification based on 2011 sales of $5.2 billion.

PRODUCT LINE EXPANSION & DIVERSIFICATION 14 Bearings Specialty Steels Power Transmission Services Related Products

NEW ACQUISITIONS, NEW CAPABILITIES Differentiated performance • Industrial focus • Strong aftermarket • Supply chain synergy Sales/Timing Product Offering Growth Synergies Sales: $85M Purchase date: July ‘11 Sales: $100M Purchase date: Oct. ‘11 2011 Sales: $23M Purchase date: Sept. ‘10 Gear drive repair Engineered chains and augers Mounted spherical roller bearings and couplings Capture lifetime of revenue opportunity Leverage distribution channel Opportunities for cross-selling and development of product lines Global expansion NOTE: Sales for Philadelphia Gear and Drives reflect last 12-month sales at time of purchase. Sales for QM Bearings reflect both Mobile Industries and Process Industries sales. 15

DELIVERING SUPERIOR FINANCIAL PERFORMANCE 16 3 year average EBIT Margins 3 year average ROIC Note: The above data represents an average of 2010 through LTM 2012. Segment returns have been adjusted to reflect a proportionate amount of unallocated corporate expenses. Tax rate assumed at 35% for return on invested capital calculations. Results exclude CDSOA receipts and impairment and restructuring charges. See Appendix for reconciliation of ROIC and consolidated EBIT to the most directly comparable GAAP equivalents.

MOBILE INDUSTRIES 17 Bearings, power transmission components and related products and services Serves diverse market sectors Customers: OEM and aftermarket distributors Portfolio shift toward attractive markets; In 2005 passenger car and light truck was 54% of the portfolio versus 35% in 2011 Profitability turn-around; achieving returns in excess of cost of capital Capitalizing on mining, agricultural and commercial transportation demand while managing strategic pricing initiative Strategy – provide high-value power transmission products and services focused on demanding applications to global OE and aftermarket channels Sector Profile Segment Overview Attractiveness / Strategic Priorities Geographic Sales

PROCESS INDUSTRIES 18 Precision-engineered bearings and related mechanical components and services for diverse industrial markets Diverse and global customer base ~65% aftermarket in 2011; consistent, profitable business Diversified product portfolio 56% tapered roller bearings in 2011 versus 96% in 2000 Growing market share in spherical & cylindrical roller bearings, housed units, other bearings & services Sector Profile Segment Overview 2011 sales: $1.2B Attractiveness / Strategic Priorities Extensive global portfolio of differentiated mechanical power transmission products and services Strong distribution channels to maximize lifetime profit Aggressive annual sales growth; gaining share and unlocking new mechanical power transmission opportunities Strategy - focus on end-user value chain and needs Geographic Sales

AEROSPACE & DEFENSE 19 Sector Profile Segment Overview Power transmission systems and flight-critical components for civil and military aircraft Top 10 aerospace platforms represent 38% of sales in 2011 Aftermarket engine overhaul, replacement parts, bearing and component repair Aftermarket channel represents approximately 70% of sales in 2011 Health and positioning control applications 2011 sales: $0.3B Product Offering Beyond Bearings Attractiveness / Strategic Priorities Leverage strong commercial and improving general aviation market sectors serving diverse platforms while defense market sectors have bottomed Strong execution combined with improving markets and targeted channels have led to growth and a return to attractive profitability Strategy – provide a globally diverse portfolio focused on growing platforms through OE & aftermarket channels

STEEL 20 Sector Profile Segment Overview Market leadership position in high quality air-melted alloy steel bars, tubes, precision components and value-added services Bars: 1” to 16” Serving niche high-end applications where demands on performance are significant Special machining characteristics Resistance to heat, stresses or wear High strength or other traits Tubes: 2” to 13” 2011 sales: $2.0B Differentiated Solutions Attractiveness / Strategic Priorities An improved variable cost structure More than half of our specialized products cannot be competitively replicated in North America today 450 grades of high-performance steels; for power transmission applications Know-how to design custom solutions with strength where it matters Efficient supply chains

FINANCIAL REVIEW

2012 RESULTS – FIRST NINE MONTHS Sales of $3.9B, up slightly from prior year Driven by acquisitions, pricing & mix, partially offset by lower sales volume and the impact of currency EBIT of $684M, or 17.5% of sales Includes CDSOA receipts of $109M & St. Thomas plant closure costs of $26M Earnings benefited from improved pricing, lower material costs and acquisitions, partially offset by lower volume, surcharges and higher SG&A EPS of $4.28 per diluted share, up from prior year’s $3.48 Includes CDSOA receipts of $0.70 per share & St. Thomas plant closure costs of $0.27 per share Note: See Appendix for reconciliation of EBIT to the most directly comparable GAAP equivalent. CDSOA is a reference to the US Continued Dumping Subsidy and Offset Act. 22

Free Cash Flow of $112M vs. $(230)M use of cash in prior year From operating activities after pension contributions, capital expenditures and dividends Includes $245M of discretionary pension and post-retirement benefit contributions and $68M of CDSOA receipts, both net of tax Strong Balance Sheet Cash position of $486M and debt of $489M, or $3M net debt Pension & post-retirement benefits unfunded liability of $560 million, down $400 million from 2011 year-end Repurchased 2.5 million shares; 7.5 million shares remaining under the authorization Liquidity of $1.4B Note: Free cash flow is defined as net cash provided by operating activities (includes pension contributions) minus capital expenditures and dividends. Net debt is not a GAAP measure. See Appendix for reconciliation of Free Cash Flow and Net Debt to the most directly comparable GAAP equivalents. 23 2012 RESULTS – FIRST NINE MONTHS

Outlook 2012 Sales Estimate: down 3 to 5% Weakening demand, including exited light vehicle business as well as lower surcharges, to be partially offset by price & acquisitions 2014 Sales Target: 3-Year CAGR of +7 to 12% global GDP recovery/ growth in 2013-2014 of 3.5% to 4% includes inorganic growth SALES Note: 2003 includes Torrington acquisition as acquired February 2003. Historical results exclude the discontinued operations of Latrobe Steel (2006 divestment) and the Needle Roller Bearings (NRB) business (2009 divestment). NRB discontinued operations for 2003 and 2004 are based on internal estimates. Net Sales ($ Mils.) 24 *Rolling 3-year targets are typically provided annually and were last updated Feb. 14, 2012.

EARNINGS PER SHARE Earnings Per Share Net Sales ($ Mils.) Note: Earnings are reported on a GAAP basis and include the impact of special items, such as restructuring and reorganization expenses, CDSOA payments and goodwill amortization. EPS assumes dilution. 2003 includes Torrington acquisition as acquired February 2003. Historical results exclude the discontinued operations of Latrobe Steel (2006 divestment) and the Needle Roller Bearings (NRB) business (2009 divestment). NRB discontinued operations for 2003 and 2004 are based on internal estimates. 25 Outlook 2012 EPS Estimate: $4.75 to $4.95 per diluted share includes CDSOA receipts of $0.70 and St. Thomas closure costs of $(0.30) 2014 EPS Target: $6.50 to $7.00 per diluted share redeployment of capital including inorganic growth Net Sales Midpoint Estimate ($ Mils.) *Rolling 3-year targets are typically provided annually and were last updated Feb. 14, 2012.

FREE CASH FLOW Free Cash Flow ($ Mils.) ’91-’01 Cycle Avg: $16M ’02-’09 Cycle Avg: $87M Note: Free cash flow is defined as net cash provided by operating activities (includes pension contributions) minus capital expenditures and dividends. Results include discontinued operations until divested. See Appendix for reconciliation of Free Cash Flow to the most directly comparable GAAP equivalent. VEBA is in reference to the company’s voluntary employee benefit association trust. 2014 FCF Target* 26 2012 FCF Estimate Outlook 2012 FCF Estimate: $145M after, - CapEx of $300M - dividends of $90M - discretionary 2014 FCF Target: $250 to $300M - CapEx above *Rolling 3-year targets are typically provided annually and were last updated Feb. 14, 2012. pension / VEBA trust contributions of $245M (net of tax) targeted range, increased dividends and lower pension / VEBA contributions

CAPITAL SPENDING Note: Estimated 2012 capital spending as a percent of sales is based on mid-point of company sales estimate. Capital Spending ($ Mils.) Cap Ex % of Sales Outlook 2012 CapEx Estimate: $300M - driven by global - targeted +20% IRR - ~$80M maintenance spending 2013-2014 CapEx above long term target 27 energy, mining, infrastructure and heavy industries growth hurdle rate

PENSION PBO Funded % Discount Rate Note: Discount rate noted is for Timken’s domestic pension fund which represents the majority of the company’s global pension assets. PBO funded percent denotes the Company’s pension benefit obligation (PBO) funded status. 86% 84% Outlook 2012: - discretionary pension contributions of ~$210M, net of tax - expected funded status of ~90% 2013 – 2014: - expected discretionary pension contributions of ~$100M/year, net of tax - targeting to reduce liability through potential lump-sum and annuitization programs 28

NET DEBT Net Debt /Capital Net Debt ($ Mils.) Note: 2003 includes Torrington acquisition as acquired February 2003. Net debt is not a GAAP measure. Net Debt / Capital (leverage) is defined as Net Debt / (Net Debt + Equity). See Appendix for reconciliation of Net Debt to the most directly comparable GAAP equivalent. 29

2012 CAPITAL ALLOCATION HIGHLIGHTS • $300M to be spent on growth,continuous improvement and maintenance • ~$180M returned to shareholders YTD (9/30/12) - Dividend raised 15% to $0.23/quarter - 2.5 million shares repurchased YTD Strong Capital Redeployment • Strong balance sheet to fund future acquisitions • Discretionary contributions of ~$245M, net of tax • Expected pension funded status of ~90% 30

RETURN ON INVESTED CAPITAL Cost of Capital Note: The company uses NOPAT/Average Invested Capital as a type of ratio that indicates return on invested capital (ROIC). See Appendix for reconciliation of ROIC to the most directly comparable GAAP equivalent. Return on Invested Capital 31 *Rolling 3-year targets are typically provided annually and were last updated Feb. 14, 2012.

THE STRATEGY IS WORKING

THE TIMKEN COMPANY INVESTOR PRESENTATION DECEMBER 2012

APPENDIX

GEOGRAPHIC PROFILE Note: Based on 2011 financial results. 35 2011 Sales: $5.2 Billion Over 70 manufacturing facilities and distribution centers across the globe 10 global Technology & Engineering Centers Nearly 90 sales offices to serve customers in different regions of the world Global Footprint Excluding Steel segment, sales abroad represent nearly 50% of the portfolio in 2011 Global Sales Diversification

INCENTIVE COMPENSATION Annual Long-Term Objective Short-term Operational Business Priorities 3-Year Strategic Business Priorities Long-term Shareholder Value Creation Participants 6,000 Associates Globally 160 Senior Leadership Associates 265 Mid-level Managers 160 Senior Leadership Associates Time Horizon 1 Year 3 Years 4 Year Vesting with a 10 Year Term 4 Year Vesting with a 10 Year Term Metrics 40% Corporate EBIT/BIC 50% EPS 50% ROIC Share Price Share Price 30% Business Unit EBIT/BIC 15% BU Working Capital % of Sales 15% Customer Service or New Business Sales Ratio Note: EBIT/BIC is a pre-tax return on invested capital (ROIC) measure. BIC denotes beginning invested capital. The incentive compensation plan depicted above is effective January 2012. Award Cash Restricted Stock Units (in cash or shares) Equity – Restricted Stock Units Equity – Non Qualified Stock Options 36

GAAP RECONCILIATION OF EBIT AND EBITDA ($ Mils.) 12-Months Ended 9/30/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008 Net Income $528.8 $456.6 $276.9 ($139) $271 Income from discontinued operations, net of tax 0.0 0.0 (7.4) 72.6 11.3 Provision for income taxes 292.2 240.2 136.0 (28.2) 157.1 Interest Expense 32.6 36.8 38.2 41.9 44.4 Interest Income (3.2) (5.6) (3.7) (1.9) (5.8) Impairment and Restructuring 34.7 14.4 21.7 164.1 32.8 Receipt of CDSOA Distribution (107.5) 1.1 (2.0) (3.6) (9.1) EBIT $777.6 $743.5 $459.7 $106.3 $501.9 Revenue $5,171.4 $5,170.2 $4,055.5 $3,141.6 $5,663.7 % EBIT Margin 15.0% 14.4% 11.3% 3.4% 8.9% Depreciation and Amortization 198.4 192.5 189.7 201.5 200.8 EBITDA $976.0 $936.0 $649.4 $307.8 $702.7 % EBITDA Margin 18.9% 18.1% 16.0% 9.8% 12.4% Average EBITDA Margin 15.0% 12-Months Ended 9-Months Ended 12-Months Ended 12/31/2011 Plus: 9/30/2012 Less: 9/30/2011 9/30/2012 Net Income $456.6 $420.5 $348.3 $528.8 Income from discontinued operations, net of tax 0.0 0.0 0.0 0.0 Provision for income taxes 240.2 241.0 189.0 292.2 Interest Expense 36.8 24.0 28.2 32.6 Interest Income (5.6) (2.0) (4.4) (3.2) Impairment and Restructuring 14.4 28.8 8.5 34.7 Receipt of CDSOA Distribution 1.1 (108.6) 0.0 (107.5) EBIT $743.5 $603.7 $569.6 $777.6 Revenue $5,170.2 $3,906.7 $3,905.5 $5,171.4 % EBIT Margin 14.4% 15.5% 14.6% 15.0% 0 Depreciation and Amortization 192.5 148.8 142.9 198.4 EBITDA $936.0 $752.5 $712.5 $976.0 % EBITDA Margin 18.1% 19.3% 18.2% 18.9% Source: Company filings and Factset as of October 26, 2012. 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. 37

12-Months Ended 9/30/2012 12/31/2011 12/31/2010 12/31/2009 12/31/2008 GAAP Operating Income $748.2 $729.1 $436.2 ($54.1) $462.0 GAAP Other Income / Expenses 102.2 (1.1) 3.8 (0.1) 16.2 Impairment and Restructuring 34.7 14.4 21.7 164.1 32.8 Receipt of CDSOA Distribution (107.5) 1.1 (2.0) (3.6) (9.1) EBIT $777.6 $743.5 $459.7 $106.3 $501.9 Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0% Provision for Income taxes $272.2 $260.2 $160.9 $37.2 $175.7 NOPAT $505.4 $483.3 $298.8 $69.1 $326.2 Total Debt $488.9 $515.1 $513.7 $512.7 $623.9 Shareholder's Equity 2,345.8 2,042.5 1,941.8 1,595.6 1,663.0 Invested Capital 2,834.7 2,557.6 2,455.5 2,108.3 2,286.9 Average Invested Capital 2,696.2 2,506.6 2,281.9 2,197.6 2,485.4 ROIC (1) 18.7% 19.3% 13.1% 3.1% 13.1% Average 3-Year ROIC 17.0% Average 5-Year ROIC 13.5% 38 Source: Company filings and Factset as of October 26, 2012. (1) Return on Invested Capital calculated as Net Operating Profit After Taxes / (Average Total Debt + Average Shareholders’ Equity). Tax rate assumed at 35%. GAAP RECONCILIATION OF ROIC ($ Mils.) 12-Months Ended 9-Months Ended 12-Months Ended 12/31/2011 Plus: 9/30/2012 Less: 9/30/2011 9/30/2012 GAAP Operating Income $729.1 $578.6 $559.5 $748.2 GAAP Other Income / Expenses (1.1) 104.9 1.6 102.2 Impairment and Restructuring 14.4 28.8 8.5 34.7 Receipt of CDSOA Distribution 1.1 (108.6) 0.0 (107.5) EBIT $743.5 $603.7 $569.6 $777.6 $0.0 Tax Rate 35.0% 35.0% 35.0% 35.0% Provision for Income taxes $260.2 $211.3 $199.4 $272.2 NOPAT $483.3 $392.4 $370.2 $505.4 Reconciliation of ROIC to GAAP Operating Income Management believes ROIC is representative of the company’s performance and therefore useful to investors.

GAAP RECONCILIATION OF SEGMENT ROIC ($ Mils.) 39 Reconciliation of ROIC to GAAP Operating Income Management believes ROIC is representative of the company’s performance and therefore useful to investors. LTM LTM LTM LTM 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 GAAP Operating Income 183 218 196 118 261 254 6 (3) 14 129 251 279 Impairment/Restructuring 13 13 33 3 1 1 5 1 0 (0) - - EBIT 197 232 230 122 262 255 11 (3) 14 129 251 279 Tax Rate 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% Provision for Taxes 69 81 80 43 92 89 4 (1) 5 45 88 97 NOPAT 128 151 149 79 170 165 7 (2) 9 84 163 181 Invested Capital 879 840 864 553 692 829 391 362 516 632 663 625 Avg Invested Capital 860 860 852 511 623 761 378 377 439 533 647 644 ROIC 14.9% 17.5% 17.5% 15.5% 27.3% 21.7% 1.8% -0.4% 2.1% 15.7% 25.2% 28.1% Average ROIC LTM LTM LTM LTM Q4 11 YTD 12 2012 Q4 11 YTD 12 2012 Q4 11 YTD 12 2012 Q4 11 YTD 12 2012 EBIT 49 173 222 65 214 278 3 26 29 71 227 297 Allocation of Corp (6) (19) (26) (6) (19) (25) (4) (12) (15) (5) (14) (19) Impairment/Restructuring 5 28 33 - 1 1 0 - 0 - - - Adjusted EBIT 48 182 230 59 196 255 (1) 15 14 66 213 279 Tax Rate 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% Provision for Taxes 17 64 80 20 69 89 (0) 5 5 23 74 97 NOPAT 31 118 149 38 127 165 (0) 10 9 43 138 181 Invested Capital 864 829 516 625 Avg Invested Capital 852 761 439 644 ROIC 17.5% 21.7% 2.1% 28.1% Mobile Process Aerospace & Defense Steel Mobile Process Aerospace & Defense Steel 17% 22% 1% 24%

($ Mils.) 40 GAAP RECONCILIATION OF EBIT Nine Months Ended September 30, 2012 (Dollars in millions) (Unaudited) Net Income 420.5 $ Provision for income taxes 241.0 Interest expense 24.0 Interest income (2.0) Consolidated earnings before interest and taxes (EBIT) 683.5 $ 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. Management also believes that it is appropriate to compare GAAP net income to consolidated EBIT.

($ Mils.) 41 GAAP RECONCILIATION OF FREE CASH FLOW 2012 2011 366.5 $ (67.4) $ (187.3) (106.0) (66.8) (56.6) 112.4 $ (230.0) $ Nine Months Ended September 30, (Dollars in millions) (Unaudited) Reconciliation of Free Cash Flow to GAAP Net Cash Provided (Used) by Operating Activities: Management believes that free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy. Free cash flow Less: cash dividends paid to shareholders Net cash provided (used) by operating activities Less: capital expenditures

($ Mils.) 42 GAAP RECONCILIATION OF NET DEBT September 30, 2012 27.5 $ 461.4 488.9 (485.5) 3.4 $ 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. Reconciliation of Total Debt to Net Debt (Dollars in millions) (Unaudited) Net Debt Short-term debt Long-term debt Total Debt Less: Cash, cash equivalents and restricted cash

GAAP RECONCILIATION OF FREE CASH FLOW (1) Free cash flow is defined as net cash provided by operating activities (including pension contributions) minus capital expenditures and dividends. Results include discontinued operations until divested. 43 Reconciliation of Free Cash Flow to GAAP Net Cash Provided (Used) by Operating Activities Management believes that free cash flow is useful to investors because it is a meaningful indicator of cash generated from operating activities available for the execution of its business strategy.

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total Debt (a) 273 321 277 280 211 303 359 469 450 514 Less: Cash 2 8 5 12 7 5 10 0 8 11 Net Debt 271 313 271 267 204 297 350 469 442 503 Equity 1,019 985 685 733 821 922 1,032 1,056 1,046 1,005 Total Debt to Capital 21.1% 24.5% 28.7% 27.6% 20.5% 24.7% 25.8% 30.8% 30.1% 33.8% Net Debt to Capital 21.0% 24.1% 28.4% 26.7% 19.9% 24.4% 25.3% 30.8% 29.7% 33.4% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total Debt (a) 497 461 735 779 721 598 723 624 513 514 515 Less: Cash 33 82 29 51 65 101 30 133 756 877 468 Net Debt 464 379 706 728 656 497 693 490 (243) (363) 47 Equity 782 609 1,090 1,270 1,497 1,476 1,961 1,663 1,596 1,942 2,043 Total Debt to Capital 38.9% 43.1% 40.3% 38.0% 32.5% 28.8% 26.9% 27.3% 24.3% 20.9% 20.1% Net Debt to Capital 37.2% 38.4% 39.3% 36.5% 30.5% 25.2% 26.1% 22.8% -18.0% -23.0% 2.2% GAAP RECONCILIATION OF NET DEBT ($ Mils.) (a) Total Debt is the sum of commercial paper, short-term debt, current portion of long-term debt and long-term debt 44 Reconciliation of Net Debt to Total Debt and the Ratio of Net Debt to Capital Management believes Net Debt is an important measure of Timken's financial position, due to the amount of cash and cash equivalents.

GAAP RECONCILIATION OF ROIC ($ Mils.) 45 Reconciliation of ROIC to GAAP Operating Income Management believes ROIC is representative of the company’s performance and therefore useful to investors. 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 GAAP Operating Income (1) (9) 42 14 132 203 247 280 225 133 106 GAAP Other Income / (Expenses) (8) (2) (6) 2 (5) (5) 7 (16) (10) (7) Earnings Before Interest and Taxes (EBIT) (2) (17) 41 8 135 198 242 287 209 123 99 Provision for income taxes (6) 15 3 51 73 93 102 80 45 35 Adjusted tax rate 37.6% 37.6% 37.6% 37.6% 36.9% 38.3% 35.7% 38.2% 36.8% 35.0% Net Operating Profit After Taxes (NOPAT) (3) (10) 25 5 84 125 149 184 129 78 64 Invested Capital: Total Debt 266 273 321 277 280 211 303 359 469 450 514 Shareholders' Equity 1,075 1,019 985 685 733 821 922 1,032 1,056 1,046 1,005 Total 1,341 1,292 1,306 962 1,012 1,032 1,225 1,392 1,526 1,496 1,519 Average Invested Capital (4) 1,317 1,299 1,134 987 1,022 1,129 1,308 1,459 1,511 1,507 ROIC: NOPAT / Average Invested Capital (4) -0.8% 1.9% 0.4% 8.5% 12.2% 13.2% 14.1% 8.9% 5.2% 4.3% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 GAAP Operating Income (1) (18) 79 98 237 327 219 295 462 (54) 436 729 GAAP Other Income / (Expenses) 22 37 10 12 68 80 5 16 (0) 4 (1) Earnings Before Interest and Taxes (EBIT) (2) 4 115 108 249 395 299 300 478 (54) 440 728 Provision for income taxes 2 46 43 80 129 91 61 171 (16) 148 251 Adjusted tax rate 39.8% 39.8% 40.0% 32.1% 32.6% 30.6% 20.4% 35.7% 29.9% 33.5% 34.5% Net Operating Profit After Taxes (NOPAT) (3) 3 69 65 169 266 208 239 307 (38) 292 477 Invested Capital: Total Debt 497 461 735 779 721 598 723 624 513 514 515 Shareholders' Equity 782 609 1,090 1,270 1,497 1,476 1,961 1,623 1,596 1,942 2,043 Total 1,279 1,070 1,824 2,049 2,218 2,074 2,684 2,246 2,108 2,456 2,558 Average Invested Capital (4) 1,399 1,175 1,447 1,937 2,134 2,146 2,379 2,465 2,177 2,282 2,507 ROIC: NOPAT / Average Invested Capital (4) 0.2% 5.9% 4.5% 8.7% 12.5% 9.7% 10.0% 12.5% -1.7% 12.8% 19.0% (1) GAAP Operating Income exclude discontinued operations for Latrobe Steel (divested Dec. 8, 2006) for years 2004 through 2006 and the Needle Roller Bearings business for years 2007 through 2009 (divested Dec. 31, 2009). (2) EBIT is defined as operating income plus other income (expense) - net. (3) NOPAT is defined as EBIT less an estimated provision for income taxes. This tax provision excludes the tax effect of pre-tax special items on the company's effective tax rate, as well as the the impact of discrete tax items recorded during the year. (4) The company uses NOPAT/Average Invested Capital as a type of ratio that indicates return on invested capital (ROIC). Average Invested Capital is the sum of Total Debt and Share- holders' Equity taken at the beginning and ending of each year and then averaged. Total Debt is the sum of commercial paper, ST-debt, curr. portion of LT-debt & LT-debt.