Feb. 2, 2006 — The Timken Co. reported net income of $94.9 million on sales of $1.3 billion for the fourth quarter, and record net income of $260.3 million on record sales of $5.2 billion for the full year 2005.

Fourth Quarter Results—Net income of $94.9 million compares to net income of $64.4 million for the fourth quarter of 2004. Earnings per diluted share were $1.01, compared to $0.71 in the same period a year ago. Sales of $1.3 billion reflect an 8% increase from a year ago. Sales across all three business groups improved from the fourth quarter of 2004.

Excluding special items, the company's adjusted fourth quarter earnings per diluted share were $0.54, versus $0.44 a year ago. Special items in the fourth quarter included income from CDSOA, a gain on the sale of assets and restructuring and rationalization charges.

"While adjusted fourth quarter earnings per diluted share were up 23 percent over the same period last year, they were lower than anticipated due to higher manufacturing costs, a write-off of obsolete and slow-moving inventory and increased reserves for automotive industry credit exposure," said Mr. Griffith.

Full Year Results—Net income in 2005 increased sharply to a record $260.3 million ($2.81 per diluted share) from $135.7 million ($1.49 per diluted share) last year. Record sales of $5.2 billion reflect a 15% increase compared to sales for 2004.

Excluding the impact of special items, the company reported adjusted 2005 net income of $234.2 million ($2.53 per diluted share) compared to $122.3 million ($1.35 per diluted share) in 2004. These special items include the benefits received under the Continued Dumping and Subsidy Offset Act [CDSOA], which were partially offset by charges related to restructuring and rationalization of operations.

"In 2005, demand across a broad range of industrial markets drove record sales. The combination of strong markets and our execution translated into significantly improved results," said James W. Griffith, President and CEO. "We have made considerable strides in our efforts to structurally improve Timken's profitability. We continued that process in 2005 by launching several key initiatives to position the company for continued success."

During 2005, Timken increased production capacity in targeted areas (including significant investments in the U.S., China and Romania), and launched a major growth initiative in Asia. The company also initiated the $90-million Project ONE, a five-year program designed to improve business processes and systems to deliver enhanced customer service and financial performance.

In 2005, Timken began restructuring its automotive operations, with changes expected to cost between $80 and $90 million and annual savings of approximately $40 million targeted by the end of 2007. The company also reached a new four-year agreement with the United Steelworkers union, covering employees in the Canton, Ohio, bearing and steel plants. As a result of the contract settlement, the company has refined its plans to rationalize the Canton bearing operations, with expected costs of approximately $35 to $40 million over the next four years and targeted annual savings of approximately $25 million.

In 2005, Timken also company expanded its presence in the aerospace aftermarket through acquisitions and alliances, providing a broader range of engine bearing repair and reconditioning, while also completing the divestiture of several non-strategic product lines.

Outlook—Timken says it expects continued financial improvement in 2006. Global industrial markets are expected to remain strong, while improvements in Timken's operating performance will be partially constrained by investments in Project ONE and Asia growth initiatives as well as the expensing of stock options. The company estimates earnings per diluted share for 2006 (excluding special items) at $2.65 to $2.80 for the full year and $0.55 to $0.60 for the first quarter.