10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-K

   (Mark One)

   [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

   For the fiscal year ended December 31, 2004
   Commission File Number 1-1169

                               THE TIMKEN COMPANY
              ______________________________________________________
              (Exact name of registrant as specified in its charter)

             Ohio                                             34-0577130
  ________________________________________                ___________________
  (State or other jurisdiction of                          (I.R.S. Employer
   incorporation or organization)                         Identification No.)

  1835 Dueber Avenue, S.W., Canton, Ohio                       44706-2798
  ________________________________________                ___________________
  (Address of principal executive offices)                      (Zip Code)

  Registrants telephone number, including area code          (330)438-3000
                                                          ___________________

  Securities registered pursuant to Section 12(b) of the Act:

                                                      Name of Each Exchange
        Title of Each Class                              on Which Registered

  Common Stock without par value                      New York Stock Exchange
  ______________________________                      _______________________

  Securities registered pursuant to Section 12(g) of the Act:  None.

  Indicate by check mark whether the registrant (1) has filed all reports
  required to be filed by Section 13 or 15(d) of the Securities Exchange Act
  of 1934 during the preceding 12 months, and (2) has been subject to such
  filing requirements for the past 90 days.
  YES [X]       NO [ ]

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
  405 of Regulation S-K is not contained herein, and will not be contained,
  to the best of registrant's knowledge, in definitive proxy or information
  statements incorporated by reference in Part III of this Form 10-K or any
  amendment to this Form 10-K. [ ]

  Indicate by check mark whether the registrant is an accelerated filer (as
  defined in Exchange Act Rule 12b-2).  YES [X]       NO [ ]
                                                                        i

The aggregate market value of the voting stock held by all shareholders
other than shareholders identified under Item 12 of this Form 10-K as of
June 30, 2004 was $2,095,658,125 (representing 79,111,292 shares).

Indicate the number of shares outstanding of each of the registrant's classes
of Common Stock, as of February 28, 2005.

Common Stock without par value-- 91,337,823 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Annual Report to Shareholders for the year ended
December 31, 2004, are incorporated by reference into Parts I and II.

Portions of the proxy statement for the annual meeting of shareholders to
be held on April 19, 2005, are incorporated by reference into Part III.

Exhibit Index may be found on Pages 20 through 26.


                                                                         ii

                               THE TIMKEN COMPANY

                           INDEX TO FORM 10-K REPORT

                                                                          PAGE
                                                                          ----
I.   PART I.

     Item 1.  Description of Business....................................   1
                General..................................................   2
                Products.................................................   3
                Geographical Financial Information.......................   5
                Sales and Distribution...................................   5
                Industry Segments........................................   6
                Competition..............................................   7
                Joint Ventures...........................................   9
                Backlog..................................................   9
                Raw Materials............................................   9
                Research.................................................  10
                Environmental Matters....................................  10
                Patents, Trademarks and Licenses.........................  11
                Employment...............................................  11
                Available Information....................................  11

     Item 2.  Properties.................................................  12
     Item 3.  Legal Proceedings..........................................  13
     Item 4.  Submission of Matters to a Vote of Security Holders........  13
     Item 4A. Executive Officers of the Registrant.......................  13

II.  PART II.

     Item 5.  Market for Registrant's Common Equity and Related
              Stockholder Matters........................................  15
     Item 6.  Selected Financial Data....................................  15
     Item 7.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations........................  16
     Item 7A. Quantitative and Qualitative Disclosures about Market Risk.  16
     Item 8.  Financial Statements and Supplementary Data................  16
     Item 9.  Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure...................................  16
     Item 9A. Controls and Procedures....................................  16

III. Part III.

     Item 10. Directors and Executive Officers of the Registrant.........  17
     Item 11. Executive Compensation.....................................  17
     Item 12. Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters.................  17
     Item 13. Certain Relationships and Related Transactions.............  18
     Item 14. Principal Accountant Fees and Services.....................  18

IV.  Part IV.

     Item 15. Exhibits and Financial Statement Schedules.................  20

PART 1                                                                   1
 ______
  Item 1.  Description of Business
  ________________________________
  Certain statements set forth in this document (including the company's fore-
  casts, beliefs and expectations) that are not historical in nature are
  "forward-looking" statements within the meaning of the Private Securities
  Litigation Reform Act of 1995.  The company cautions readers that actual
  results may differ materially from those expressed or implied in forward-
  looking statements made by or on behalf of the company due to a variety of
  important factors, such as:

   a)  risks associated with the acquisition of Torrington, including the
       uncertainties in both timing and amount of actual benefits that may
       be realized as a result of the integration of the Torrington
       business with the company's operations and the timing and amount of
       the resources required to achieve those benefits.

   b)  changes in world economic conditions, including additional adverse
       effects from terrorism or hostilities.  This includes, but is not
       limited to, political risks associated with the potential instability
       of governments and legal systems in countries in which the company or
       its customers conduct business and significant changes in currency
       valuations.

   c)  the effects of fluctuations in customer demand on sales, product mix and
       prices in the industries in which the company operates.  This includes
       the ability of the company to respond to the rapid improvements in the
       industrial market, the effects of customer strikes, the impact of changes
       in industrial business cycles and whether conditions of fair trade
       continue in the U.S. market.

   d)  competitive factors, including changes in market penetration,
       increasing price competition by existing or new foreign and domestic
       competitors, the introduction of new products by existing and new
       competitors and new technology that may impact the way the company's
       products are sold or distributed.

   e)  changes in operating costs.  This includes: the effect of changes in
       the company's manufacturing processes; changes in costs associated
       with varying levels of operations; higher cost and availability of raw
       materials and energy; the company's ability to mitigate the impact of
       higher material costs through surcharges and/or price increases; changes
       resulting from inventory management and cost reduction initiatives and
       different levels of customer demands; the effects of unplanned work
       stoppages; and changes in the cost of labor and benefits.

   f)  the success of the company's operating plans, including its ability to
       achieve the benefits from its manufacturing and administrative cost
       reduction initiatives as well as its ongoing continuous improvement and
       rationalization programs; the ability of acquired companies to achieve
       satisfactory operating results; and the company's ability to maintain
       appropriate relations with unions that represent company associates in
       certain locations in order to avoid disruptions of business.
                                                                        2

   g)  the success of the company's plans concerning the transfer of bearing
       production from Canton, including the possibility that the transfer of
       production will not achieve the desired results, the possibility of
       disruption in the supply of bearings during the process, and the outcome
       of the company's discussions with the union that represents company
       associates at the affected facilities.

   h)  unanticipated litigation, claims or assessments.  This includes, but
       is not limited to, claims or problems related to intellectual property,
       product liability or warranty and environmental issues.

   i)  changes in worldwide financial markets, including interest rates to the
       extent they affect the company's ability to raise capital or increase
       the company's cost of funds, have an impact on the overall performance
       of the company's pension fund investments and/or cause changes in the
       economy which affect customer demand.

  Additional risks relating to the company's business, the industries in which
  the company operates or the company's common stock may be described from
  time to time in the company's filings with the SEC.  All of these risk
  factors are difficult to predict, are subject to material uncertainties that
  may affect actual results and may be beyond the company's control.

  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.

  General
  _______

  As used herein, the term "Timken" or the "company" refers to The Timken
  Company and its subsidiaries unless the context otherwise requires.  Timken,
  an outgrowth of a business originally founded in 1899, was incorporated
  under the laws of the state of Ohio in 1904.

  Timken is a leading global manufacturer of highly engineered bearings, alloy
  and specialty steel and related components.  The company is the world's
  largest manufacturer of tapered roller bearings and alloy seamless mechani-
  cal steel tubing and the largest North American-based bearings manufacturer.
  Timken had facilities in 29 countries on six continents, and employed approx-
  imately 26,000 people, as of December 31, 2004.

  On February 18, 2003, the company completed the acquisition of the Engineered
  Solutions business of Ingersoll-Rand Company Limited,  including certain of
  its joint venture interests, operating assets and subsidiaries, including
  The Torrington Company.  This business, referred to as Torrington, is a
  leading worldwide producer of needle roller, heavy-duty roller and ball
  bearings and motion control components and assemblies.  Timken paid
  $700 million in cash and issued $140 million of its common stock
  (9,395,973 shares) for Torrington. The company financed the $700 million
  cash component of the Torrington acquisition through a public offering of
  12,650,000 common shares, an offering of $250 million seven-year senior
  unsecured notes, a five-year revolving credit facility and a $125 million
  securitized accounts receivable facility.

                                                                        3

  Torrington is a leading global manufacturer of needle roller bearings. It
  produces a wide range of bearings sold under a number of brand names,
  including Torrington needle roller bearings, Torrington heavy-duty roller
  bearings, Nadella precision needle roller bearings and linear motion
  solutions and Fafnir ball bearings and housed units.  Torrington also
  produces a variety of precision motion control components and assemblies,
  such as steering shaft assemblies and steering column shafts. Torrington
  sells its products directly or through authorized distributors to automotive
  and industrial manufacturers, as well as to aftermarket users throughout the
  world.

  The Torrington automotive business manufactures a variety of products,
  including roller and needle bearings and other components used in an auto-
  mobile's transmission, chassis, steering column and engine. Many of these
  products, such as column locks and rotary tilt products for steering
  columns, are highly engineered with precision technology, and are specially
  designed through collaborative efforts between Torrington and its customers.
  These products are primarily sold to original equipment manufacturers, or
  OEMs, including large automobile manufacturers, and their principal
  suppliers.

  The Torrington industrial business produces a broad range of products,
  including roller bearings, needle bearings, wider inner ring ball bearings
  and housed units, radial ball bearings, super precision ball bearings,
  airframe control bearings, precision machined bearings and precision
  components and assemblies. These products are sold to OEMs, as well as
  through a global aftermarket network.

  Products
  ________

  The Timken Company manufactures two basic product lines:  anti-friction
  bearings and steel products.  Differentiation in these two product lines
  comes in two different ways:  (1) differentiation by bearing type or steel
  type, and (2) differentiation in the applications of bearings and steel.

  Tapered Roller Bearings.  In the bearing industry, Timken is best known for
  the tapered roller bearing, which was originally patented by the company
  founder, Henry Timken. The tapered roller bearing is Timken's principal
  product in the anti-friction industry segment.  It consists of four
  components:  (1) the cone or inner race, (2) the cup or outer race, (3) the
  tapered rollers, which roll between the cup and cone, and (4) the cage,
  which serves as a retainer and maintains proper spacing between the rollers.
  Timken manufactures or purchases these four components and then sells them in
  a wide variety of configurations and sizes.

 
                                                                         4
  Products (cont.)
  ________________

  The tapered rollers permit ready absorption of both radial and axial load
  combinations.  For this reason, tapered roller bearings are particularly well
  adapted to reducing friction where shafts, gears or wheels are used.  The
  applications for tapered roller bearings have diversified from the original
  application on horse-drawn wagons to applications on passenger cars, light
  and heavy trucks, and trains, as well as a wide range of industrial applica-
  tions, ranging from very small gear drives to bearings over two meters in
  diameter for wind energy machines.  Further differentiation has come in the
  form of adding sensors to these bearings, which measure parameters such as
  speed, load, temperature or overall bearing condition.

  Matching bearings to the specific requirements of customers' applications
  requires engineering, and often sophisticated analytical techniques.  The
  design of Timken's tapered roller bearing permits distribution of unit
  pressures over the full length of the roller.  This fact, combined with high
  precision tolerance, proprietary internal geometry and premium quality
  material, provides Timken bearings with high load carrying capacity,
  excellent friction-reducing qualities and long life.

  Precision Cylindrical and Ball Bearings.  Timken's aerospace and super pre-
  cision facilities produce high-performance ball and cylindrical bearings for
  ultra high-speed and/or high-accuracy applications in the aerospace, medical
  and dental, computer disk drive and other industries.  These bearings
  utilize ball and straight rolling elements and are in the super precision
  end of the general ball and straight roller bearing product range in the
  bearing industry.  A majority of Timken's aerospace and super precision
  bearings products are custom-designed bearings and spindle assemblies.  They
  often involve specialized materials and coatings for use in applications
  that subject the bearings to extreme operating conditions of speed and temp-
  erature.

  Spherical and Cylindrical Bearings.  Timken Romania produces spherical and
  cylindrical roller bearings for large gear drives, rolling mills and other
  process industry and infrastructure development applications.  Timken's
  cylindrical and spherical roller bearing capability has been significantly
  enhanced with the acquisition of Torrington's broad range of spherical and
  heavy-duty cylindrical roller bearings for standard industrial and specialized
  applications.  These products are sold worldwide to OEMs, and industrial
  distributors serving major industries, including construction and mining,
  natural resources, defense, pulp and paper production, rolling mills and
  general industrial goods.

  Needle Bearings.  With the acquisition of Torrington, the company has become
  a leading global manufacturer of highly engineered needle roller bearings.
  Torrington produces a broad range of radial and thrust needle roller bearings,
  as well as bearing assemblies, which are sold to OEMs and industrial
  distributors worldwide. Major applications include products for the
  automotive, consumer product, construction and agriculture and general
  industrial goods industries.

                                                                        5
  Products (cont.)
  ________________

  Bearing Reconditioning.  A small part of the business involves providing
  bearing reconditioning services for industrial and railroad customers, both
  internationally and domestically.  These services account for less than 5%
  of the company's net sales for the year ended December 31, 2004.

  Steel.  Steel products include steels of low and intermediate alloy, vacuum-
  processed alloys, tool steel and some carbon grades.  These products are
  available in a wide range of solid and tubular sections with a variety of
  lengths and finishes.  These steel products are used in a wide array of
  applications, including bearings, automotive transmissions, engine
  crankshafts, oil drilling, aerospace and other similarly demanding
  applications.

  Timken also produces custom-made steel products, including alloy and steel
  components for automotive and industrial customers.  This business has pro-
  vided the company with the opportunity to further expand its market for
  tubing and capture higher value-added steel sales.  This also enables
  Timken's traditional tubing customers in the automotive and bearing
  industries to take advantage of higher performing components that cost less
  than current alternative products.  Customizing of products is a growing
  portion of the company's steel business.

  Geographical Financial Information
  __________________________________

  Information appearing under the caption "Geographic Financial Information,"
  on Page 58 of the Annual Report to Shareholders for the year ended
  December 31, 2004 is incorporated herein by reference.

  Sales and Distribution
  ______________________

  Timken's products in the Automotive Group and Industrial Group are sold
  principally by its own internal sales organization.  A portion of the
  Industrial Group's sales are made through authorized distributors.  Timken's
  sales organization consists of a separate sales force for each business Group.

  Traditionally, a main focus of the company's sales strategy has consisted of
  collaborative projects with customers.  For this reason, Timken's sales
  forces are primarily located in close proximity to its customers rather than
  at production sites.  In some instances, the sales forces are located inside
  customer facilities.  Timken's sales force is highly trained and knowledge-
  able regarding all bearings products and associates assist customers during
  the development and implementation phases and provide support on an ongoing
  basis.

 
                                                                         6
  Sales and Distribution (cont.)
  ______________________________

  The company has a joint venture in North America focused on joint logistics
  and e-business services.  This alliance is called Colinx, and was founded by
  Timken, SKF, INA and Rockwell Automation.  The e-business service was
  launched in April 2001, and is focused on information and business services
  for authorized distributors in the Industrial Group.  The company also has
  another e-business joint venture in Europe which focuses on information and
  business services for authorized distributors in the Industrial Group.  This
  alliance, which Timken founded together with SKF AB, Sandvik AB, Industriewerk
  Schaffler INA-Ingenieurdienst GmBH and Reliance is called Endorsia.com
  International AB.

  Timken's steel products are sold principally by its own sales organization.
  Most orders are customized to satisfy customer-specific applications and are
  shipped directly to customers from Timken's steel manufacturing plants.
  Approximately 12% of Timken's Steel Group net sales are intersegment sales.
  In addition, sales are made to other anti-friction bearing companies and to
  the aircraft, automotive and truck, construction, forging, oil and gas
  drilling, and tooling industries.  Sales are also made to steel service
  centers.

  Timken has entered into individually negotiated contracts with some of
  its customers in its Automotive Group, Industrial Group and Steel Group.
  These contracts may extend for one or more years and, if a price is fixed for
  any period extending beyond current shipments, customarily include a
  commitment by the customer to purchase a designated percentage of its
  requirements from Timken.  Contracts extending beyond one year that are not
  subject to price adjustment provisions do not represent a material portion of
  Timken's sales.  Timken does not believe that there is any significant loss
  of earnings risk associated with any given contract.

  Industry Segments
  _________________

  The company has three reportable segments:  Automotive Group, Industrial Group
  and Steel Group.  Segment information in Note 14 of the Notes to Consolidated
  Financial Statements on pages 58 and 59 of the Annual Report to Shareholders
  for the year ended December 31, 2004, is incorporated herein by reference.
  Export sales from the U.S. and Canada are less than 10% of revenue.  The
  company's Automotive and Industrial Groups' businesses have historically
  participated in the global bearing industry, while the Steel Group has
  concentrated primarily on U.S. customers.  However, over the past few years,
  the Steel Group has acquired non-U.S. companies, such as Timken Alloy Steel
  Europe Limited, in Leicester, England, which specializes in the manufacturing
  of seamless mechanical tubing, and Timken Precision Components Europe, a
  precision component manufacturer based in France.

  Timken's non-U.S. operations are subject to normal international business
  risks not generally applicable to domestic business.  These risks include
 

                                                                         7
  Industry Segments (cont.)
  _________________________

  currency fluctuation, changes in tariff restrictions, difficulties in
  establishing and maintaining relationships with local distributors and
  dealers, import and export licensing requirements, difficulties in staffing
  and managing geographically diverse operations, and restrictive regulations
  by foreign governments, including price and exchange controls.

  Competition
  ___________

  The anti-friction bearing business is highly competitive in every country
  in which Timken sells products.  Timken competes primarily based on price,
  quality, timeliness of delivery, and product design and the ability to provide
  engineering support and service on a global basis.  The company competes with
  domestic manufacturers and many foreign manufacturers of anti-friction
  bearings, including SKF, INA-Holding Schaeffler KG, NTN Corporation, Koyo
  Seiko Co., Ltd. and NSK Ltd.

  Competition within the steel industry, both domestically and globally, is
  intense and is expected to remain so.  However, the recent combination of a
  weakened U.S. dollar, worldwide rationalization of uncompetitive capacity, raw
  material cost increases, and North American and global market strength have
  allowed steel industry prices to increase and margins to improve.  Timken's
  worldwide competitors for seamless mechanical tubing include Copperweld,
  Plymouth Tube, Michigan Seamless Tube, V & M Tube, Sanyo Special Steel, Ovako
  Steel and Tenaris.  Competitors for steel bar products include North American
  producers such as Republic Engineered Products, Mac Steel, Ispat Inland, Steel
  Dynamics  and a wide variety of off-shore steel producers who import into
  North America. Competitors in the precision steel components market include
  Metaldyne, Linamar and overseas companies such as Showa Seiko, SKF and
  FormFlo.  In the specialty steel category, manufacturers compete for sales of
  high-speed, tool and die, and aerospace steels.  High-speed steel competitors
  in North America and Europe include Erasteel, Bohler and Crucible.  Tool and
  die steel competitors include Crucible, Carpenter Technologies and Thyssen.
  The principal competitors for Timken's aerospace steels include Ellwood
  Specialty, Slater/Atlas and Patriot (formerly Republic Technologies, Inc.).

  Maintaining high standards of product quality and reliability while keeping
  production costs competitive is essential to Timken's ability to compete
  with domestic and foreign manufacturers in both the anti-friction bearing
  and steel businesses.

  Trade Law Enforcement

  In the second quarter of 2000, the U.S. International Trade Commission (ITC)
  voted to revoke the bearing industry's anti-dumping orders on imports of
  tapered roller bearings from Japan.  The ITC determined that revocation of
  the anti-dumping duty orders on tapered roller bearings from Japan was not
  likely to lead to continuation or recurrence of material injury to the
  domestic industry within a reasonably foreseeable time.  The company has

                                                                        8
  Competition (cont.)
  ___________________

  filed an appeal of the ITC's decision regarding Japan, which is still pending.
  The ITC upheld the anti-dumping duty order against tapered roller bearings
  from China, which will be up for review again starting in 2005.

  Also in the second quarter of 2000, the ITC voted to continue the bearing
  industry's anti-dumping orders on imports of ball bearings from France,
  Germany, Italy, Japan, Singapore, and the United Kingdom.  Some producers in
  those six countries attempted court appeals of these decisions, some of which
  are still pending.  Separately, these six continuing ball bearing anti-
  dumping orders will be up for review again starting in 2005.

  Continued Dumping and Subsidy Offset Act

  The Continued Dumping and Subsidy Offset Act (CDSOA) provides for distribution
  of monies collected by U.S. Customs from antidumping cases to qualifying
  domestic producers where the domestic producers have continued to invest in
  their technology, equipment and people.  The company reported CDSOA receipts,
  net of expenses, of $44.4 million, $65.6 million and $50.2 million in 2004,
  2003 and 2002, respectively.  Amounts received in 2003 were net of a one-time
  repayment, due to a miscalculation by the U.S. Treasury Department, of funds
  received by the company in 2002.

  Amounts for 2003 and 2004 were net of the amounts that Timken delivered to the
  seller of the Torrington business, pursuant to the terms of the agreement
  under which the company purchased Torrington.  In 2003 and 2004, Timken
  delivered to the seller of the Torrington business 80% of the CDSOA payments
  received in 2003 and 2004 for Torrington's bearing business.  Timken is under
  no further obligation to transfer any CDSOA payments to the seller of the
  Torrington business.

  The company cannot predict whether it will receive any payments under CDSOA
  in 2005 or if so, in what amount.  In September 2002, the World Trade
  Organization (WTO) ruled that such payments are not consistent with
  international trade rules.  The U.S. Trade Representative appealed this
  ruling; however, the WTO upheld the ruling on January 16, 2003.  CDSOA
  continues to be in effect in the United States at this time.

                                                                        9

  Joint Ventures
  _______________

  As part of the Torrington acquisition, several additional equity interests
  were acquired, one of which was a needle bearing manufacturing venture in
  Japan, NTC, that had been operated by NSK Ltd. and Torrington.  In July 2003,
  the company sold its interest in NTC to NSK for approximately $146.3 million,
  pre-tax.

  During 2000, the company's Steel Group invested in a joint venture, PEL
  Technologies LLC (PEL), to commercialize a proprietary technology that
  converts iron units into engineered iron oxides for use in pigments, coatings
  and abrasives.  In the fourth quarter of 2003, the company concluded its
  investment in PEL was impaired due to the following indicators of impairment:
  history of negative cash flow and losses; 2004 operating plan with continued
  losses and negative cash flow; and the continued required support from the
  company or another party.  In the fourth quarter of 2003, the company reported
  a non-cash impairment loss of $45.7 million, which is reported in other
  expense-net on the consolidated statement of income.

  The company concluded that PEL is a variable interest entity and that the com-
  pany is the primary beneficiary.  In accordance with FASB Interpretation No.
  46 "Consolidation of Variable Interest Entities, an interpretation of
  Accounting Research Bulletion No. 51," (FIN 46), the company consolidated PEL
  effective March 31, 2004.  The adoption of FIN 46 resulted in a charge,
  representing the cumulative effect of change in accounting principle, of
  $0.9 million, which is reported in other expense-net on the consolidated
  statement of income.  Also, the adoption of FIN 46 increased the consolidated
  balance sheet as follows:  current assets by $1.7 million; property, plant and
  equipment by $11.3 million; short-term debt by $11.6 million; accounts payable
  and other liabilities by $0.7 million and other non-current liabilities by
  $1.7 million.  All of PEL's assets are collateral for its obligations.  Except
  for PEL's indebtedness for which the company is a guarantor, PEL's creditors
  have no recourse to the general credit of the company.

  Backlog
  _______

  The backlog of orders of Timken's domestic and overseas operations is
  estimated to have been $1.76 billion at December 31, 2004, and $1.33 billion
  at December 31, 2003.  Actual shipments are dependent upon ever-changing
  production schedules of the customer.  Accordingly, Timken does not believe
  that its backlog data and comparisons thereof as of different dates are
  reliable indicators of future sales or shipments.

  Raw Materials
  _____________

  The principal raw materials used by Timken in its North American bearing
  plants to manufacture bearings are its own steel tubing and bars, purchased
  strip steel and energy resources. Outside North America, the company
  purchases raw materials from local sources with whom it has worked closely
  to assure steel quality according to its demanding specifications.  In
  addition, Timken Alloy Steel Europe Limited in Leicester, England is a major
  source of raw materials for the Timken plants in Western Europe.

  The principal raw materials used by Timken in steel manufacturing are scrap
  metal, nickel and other alloys.  The availability and prices of raw
  materials and energy resources are subject to curtailment or change due to,
  among other things, new laws or regulations, changes in demand levels,
  suppliers' allocations to other purchasers, interruptions in production by
  suppliers, changes in exchange rates and prevailing price levels.  For
  example, the weighted average price of scrap metal increased 8.1% from 2001
  to 2002, increased 19.2% from 2002 to 2003, and increased 87.1% from 2003 to
  2004.  Prices for raw materials and energy resources continue to remain high.

                                                                        10

  Raw Materials (cont.)
  _____________________

  The company continues to expect that it will be able to pass a portion of
  these increased costs through to customers in the form of price increases or
  raw material surcharges.

  Disruptions in the supply of raw materials or energy resources could
  temporarily impair the company's ability to manufacture its products for its
  customers or require the company to pay higher prices in order to obtain
  these raw materials or energy resources from other sources, which could
  thereby affect the company's sales and profitability.  Any increase in the
  prices for such raw materials or energy resources could materially affect
  the company's costs and therefore its earnings.

  Timken believes that the availability of raw materials and alloys are
  adequate for its needs, and, in general, it is not dependent on any single
  source of supply.

  Research
  ________

  Timken's major research center, located in Canton, Ohio near its world head-
  quarters, is engaged in research on bearings, steels, manufacturing methods
  and related matters.  Research facilities are also located at the Timken
  Aerospace & Super Precision Bearings New Hampshire plants; the Colmar, France
  plant; the Latrobe, Pennsylvania plant; the Ploiesti, Romania plant; the
  Vierzon, France plant; the Kunsebeck, Germany plant; and facilities in
  Norcross, Georgia; Torrington, Connecticut; Bangelore, India; and Brno, Czech
  Republic.  Expenditures for research, development and testing amounted to
  approximately $58.5 million, $55.7 million and $57.0 million in 2004, 2003 and
  2002, respectively.  Of these amounts, $8.4 million, $3.3 million and
  $5.6 million, respectively, were funded by others.  The company's research
  program is committed to the development of new and improved bearing and steel
  products, as well as more efficient manufacturing processes and techniques
  and the expansion of applications for existing products.

  Environmental Matters
  _____________________

  The company continues its efforts to protect the environment and comply with
  environmental protection laws.  Additionally, it has invested in pollution
  control equipment and updated plant operational practices.  The company is
  committed to implementing a documented environmental management system world-
  wide and to becoming certified under the ISO 14001 standard where appropriate
  to meet or exceed customer requirements.  By the end of 2004, 33 of the
  company's plants had obtained ISO 14001 certification.

  The company believes it has established adequate reserves to cover its
  environmental expenses and has a well-established environmental compliance
  audit program, which includes a proactive approach to bringing its domestic
  and international units to higher standards of environmental performance.
  This program measures performance against applicable laws, as well as
  standards that have been established for all units worldwide.  It is
  difficult to assess the possible effect of compliance with future
  requirements that differ from existing ones.  As previously reported, the
  company is unsure of the future financial impact to the company that could
  result from the United States Environmental Protection Agency's (EPA's) final
  rules to tighten the National Ambient Air Quality Standards for fine
  particulate and ozone.

  The company and certain of its U.S. subsidiaries have been designated as
  potentially responsible parties by the United States EPA for site
  investigation and remediation at certain sites under the Comprehensive
  Environmental Response, Compensation and Liability Act (CERCLA), known
  as the Superfund, or state laws similar to CERCLA. The claims for remediation
  have been asserted against numerous other entities, which are believed to

                                                                        11

  Environmental Matters (cont.)
  _____________________________

  be financially solvent and are expected to fulfill their proportionate share
  of the obligation.  Management believes any ultimate liability with respect
  to all pending actions will not materially affect the company's operations,
  cash flows or consolidated financial position.  The company is also conducting
  voluntary environmental investigations and/or remediations at a number of
  current or former operating sites.  Any liability with respect to such
  investigations and remediations, in the aggregate, is not expected to be
  material to the operations or financial position of the company.

  New laws and regulations, stricter enforcement of existing laws and
  regulations, the discovery of previously unknown contamination or the
  imposition of new clean-up requirements may require the company to incur
  costs or become the basis for new or increased liabilities that could have a
  material adverse effect on Timken's business, financial condition or results
  of operations.

  Patents, Trademarks and Licenses
  ________________________________

  Timken owns a number of U.S. and foreign patents, trademarks and licenses
  relating to certain of its products.  While Timken regards these as items
  of importance, it does not deem its business as a whole, or any industry
  segment, to be materially dependent upon any one item or group of items.

  Employment
  __________

  At December 31, 2004, Timken had 25,931 associates. Twenty percent of
  Timken's U.S. associates are covered under collective bargaining agreements.

  Available Information
  _____________________

  Timken's annual report on Form 10-K, quarterly reports on Form 10-Q, current
  reports on Form 8-K, and amendments to those reports filed or furnished
  pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
  are available, free of charge, on Timken's website at www.timken.com as soon
  as reasonably practicable after electronically filing such material with the
  Securities and Exchange Commission.

                                                                        12
  Item 2.  Properties
  ___________________

  Timken has Automotive Group, Industrial Group and Steel Group manufacturing
  facilities at multiple locations in the United States and in a number of
  countries outside the United States.  The aggregate floor area of these
  facilities worldwide is approximately 19,298,000 square feet, all of which,
  except for approximately 1,848,000 square feet, is owned in fee.  The
  facilities not owned in fee are leased.  The buildings occupied by Timken
  are principally made of brick, steel, reinforced concrete and concrete block
  construction.  All buildings are in satisfactory operating condition in which
  to conduct business.

  Timken's Automotive and Industrial Groups' manufacturing facilities in the
  United States are located in Bucyrus, Canton, New Philadelphia, and Niles,
  Ohio; Altavista, Virginia; Watertown and Torrington, Connecticut; Randleman,
  Iron Station and Rutherfordton, North Carolina; Carlyle, Illinois; South Bend,
  Indiana; Gaffney, Clinton, Union, Honea Path and Walhalla, South Carolina;
  Cairo, Norcross, Sylvania, Ball Ground, and Dahlonega, Georgia; Pulaski and
  Mascot, Tennessee; Keene and Lebanon, New Hampshire; Lenexa, Kansas; Ogden,
  Utah.  These facilities, including the research facility in Canton, Ohio, and
  warehouses at plant locations, have an aggregate floor area of approximately
  7,696,000 square feet.  In 2004, the company divested its plant facility
  in Syracuse, New York.

  Timken's Automotive and Industrial Groups' manufacturing plants outside the
  United States are located in Benoni, South Africa; Brescia, Italy; Colmar,
  Vierzon, Maromme and Moult, France; Northampton and Wolverhampton, England;
  Medemblik, The Netherlands; Bilbao, Spain; Westfalen, Germany; Olomouc, Czech
  Republic; Ploiesti, Romania; Mexico City, Mexico; Sao Paulo and Nova Friburgo,
  Brazil; Singapore; Jamshedpur, India; Sosnowiec, Poland; St. Thomas and
  Bedford, Canada; and Yantai and Wuxi, China.  The facilities, including ware-
  houses at plant locations, have an aggregate floor area of approximately
  5,521,000 square feet.  In 2004, the company divested its plant facility in
  Toronto, Canada.

  Timken's Steel Group's manufacturing facilities in the United States are
  located in Canton, Eaton, Wauseon, Wooster, and Vienna, Ohio; Columbus, North
  Carolina; White House, Tennessee; and Franklin and Latrobe, Pennsylvania.
  These facilities have an aggregate floor area of approximately 5,342,000
  square feet. The manufacturing facility in Columbus, North Carolina ceased
  operations in November of 2004.

  Timken's Steel Group's manufacturing facilities outside the United States are
  located in Leicester and Sheffield, England; and Fougeres and Marnaz, France.
  These facilities have an aggregate floor area of approximately 739,000
  square feet.

  In addition to the manufacturing and distribution facilities discussed
  above, Timken owns warehouses and steel distribution facilities in the
  United States, United Kingdom, France, Singapore, Mexico, Argentina,
  Australia, Brazil, Germany, and China, and leases several relatively small
  warehouse facilities in cities throughout the world.
                                                                        13

  Properties (cont.)
  __________________

  During 2004, the widespread incentive programs on light trucks, increasing
  demand for heavy trucks and new business from new platforms drove an increase
  in North American demand.  Automotive plant utilizations were between 75% and
  85%, which was higher than 2003.  In 2004, as a result of the higher
  industrial global demand, Industrial plant utilizations were between 80% and
  85%, which was higher than 2003.  Also, in 2004, Steel plant utilization
  operated at near capacity and was higher than 2003.  Capacity for many steel
  products was allocated to customers based on recent order history.

  Item 3.  Legal Proceedings
  __________________________

  The company is involved in various claims and legal actions arising in the
  ordinary course of business.  In the opinion of management, the ultimate dis-
  position of these matters will not have a material adverse effect on the
  company's consolidated financial position or results of operations.

  The company is currently in discussions with the State of Ohio concerning
  a violation of Ohio air pollution control laws which was discovered by the
  company and voluntarily disclosed to the State of Ohio approximately eight
  years ago.  Although no final settlement has been reached, the company
  believes that the final settlement will not be material to the company or
  have a material adverse effect on the company's consolidated financial
  position or results of operations.

  Item 4.  Submission of Matters to a Vote of Security Holders
  ____________________________________________________________

  No matters were submitted to a vote of security holders during the
  fourth quarter of the fiscal year ended December 31, 2004.

  Item 4A.  Executive Officers of the Registrant
  ______________________________________________

  The executive officers are elected by the Board of Directors normally for a
  term of one year and until the election of their successors.  All executive
  officers, except for two, have been employed by Timken or by a subsidiary of
  the company during the past five-year period.  The executive officers of the
  company as of February 28, 2005, are as follows:

                                       Current Position and Previous
   Name                Age             Positions During Last Five Years
   ___________________ ___     ____________________________________________

   J. W. Griffith      51      1999  President and Chief Operating Officer;
                                        Director;
                               2002  President and Chief Executive Officer;
                                        Director.

                                                                        14

  Executive Officers of the Registrant (cont.)
  ____________________________________________

                                       Current Position and Previous
   Name                Age             Positions During Last Five Years
   ___________________ ___     ____________________________________________

   M. C. Arnold        48      2000  President - Industrial Group.

   S. B. Bailey        45      2000  Treasurer;
                               2001  Corporate Controller;
                               2002  Senior Vice President - Finance and
                                        Controller.

   W. R. Burkhart      39      2000  Senior Vice President and General Counsel.

   J. A. Dedo          43      2000  Sales, Marketing and Customer Enablement
                                     Executive, Covisint LLC;
                               2001  Vice President and General Manager World-
                                     wide Market Operations, Motorola;
                               2004  President - Automotive Group, The Timken
                                     Company.

   G. A. Eisenberg     43      1999  President and Chief Operating Officer,
                                        United Dominion Industries;
                               2002  Executive Vice President - Finance and
                                        Administration, The Timken Company.

   S. J. Miraglia, Jr. 54      1999  Senior Vice President - Technology.

   W. J. Timken, Jr.   37      2000  Corporate Vice President - Office of the
                                        Chairman;
                               2002  Corporate Vice President - Office of the
                                        Chairman; Director;
                               2003  Executive Vice President and President -
                                        Steel Group; Director.

                                                                        15
PART II
_______

  Item 5.  Market for Registrant's Common Equity and Related Stockholder
  ______________________________________________________________________
           Matters
           _______

  The company's common stock is traded on the New York Stock Exchange (TKR).
  The estimated number of record holders of the company's common stock at
  December 31, 2004, was 7,410. The estimated number of beneficial shareholders
  at December 31, 2004, was 42,484.

  High and low stock prices and dividends for the last two fiscal years are
  presented in the Quarterly Financial Data schedule on Page 65 of the Annual
  Report to Shareholders for the year ended December 31, 2004, and are
  incorporated herein by reference.

  Issuer Purchases of Common Stock:

         The following table provides information about purchases by the company
         during the quarter ended December 31, 2004 of its common stock.

                                                    Total Number   Maximum
                                                    of Shares      Number of
                                                    Purchased as   Shares that
                                                    Part of        May Yet Be
                                                    Publicly       Purchased
                  Total Number     Average          Announced      Under the
                  of Shares        Price Paid       Plans or       Plans or
         Period   Purchased (1)    per Share (2)    Programs       Programs
         ------   -------------    -------------    ------------   -----------
         10/1/04-
          10/31/04           -                -                -             -
         11/1/04-
          11/30/04         149            $23.17               -             -
         12/1/04-
          12/31/04           -                -                -             -
                  -------------    -------------    ------------   -----------
           Total           149            $23.17               -             -
                  =============    =============    ============   ===========

         (1) The company repurchases shares of its common stock that are owned
             and tendered by employees to satisfy tax withholding obligations
             on the vesting of restricted shares.
         (2) The average price paid per share is calculated using the daily high
             and low of the company's common stock as quoted on the New York
             Stock Exchange at the time the employee tenders the shares.

  Information regarding the company's stock compensation plan is presented in
  Notes 1 and 9 to the Consolidated Financial Statements on Pages 42 and 52 of
  the Annual Report to Shareholders for the year ended December 31, 2004, and
  is incorporated herein by reference.

  Item 6.  Selected Financial Data
  ________________________________

  The Summary of Operations and Other Comparative Data on Pages 66-67 of the
  Annual Report to Shareholders for the year ended December 31, 2004, is
  incorporated herein by reference.


                                                                         16
  Item 7.  Management's Discussion and Analysis of Financial Condition and
  ________________________________________________________________________
           Results of Operations
           _____________________

  Management's Discussion and Analysis of Financial Condition and Results of
  Operations on Pages 18-37 of the Annual Report to Shareholders for the year
  ended December 31, 2004, is incorporated herein by reference.

  Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
  ____________________________________________________________________

  Information appearing under the caption "Management's Discussion and
  Analysis of Other Information" appearing on Pages 36 and 37 of the Annual
  Report to Shareholders for the year ended December 31, 2004, is
  incorporated herein by reference.

  Item 8.  Financial Statements and Supplementary Data
  ____________________________________________________

  The Quarterly Financial Data schedule included on Page 65, the
  Consolidated Financial Statements of the registrant and its subsidiaries
  on Pages 38-41, the Notes to Consolidated Financial Statements on Pages
  42-61, and the Report of Management on Internal Control Over Financial
  Reporting on Page 62 of the Annual Report to Shareholders for the year
  ended December 31, 2004, are incorporated herein by reference.

  Item 9.  Changes in and Disagreements with Accountants on Accounting
  ____________________________________________________________________
           and Financial Disclosure
           ________________________

  Not applicable.

  Item 9A.  Controls and Procedures
  __________________________________

  As of the end of the period covered by this report, the Company carried out
  an evaluation, under the supervision and with the participation of the
  Company's management, including the Company's principal executive officer
  and principal financial officer, of the effectiveness of the design and
  operation of the Company's disclosure controls and procedures pursuant to
  Exchange Act Rule 13a-15(e).  Based upon that evaluation, the principal
  executive officer and principal financial officer concluded that the
  Company's disclosure controls and procedures were effective as of the end of
  the period covered by this report.  There have been no significant changes in
  the Company's internal control over financial reporting that have materially
  affected, or are reasonably likely to materially affect, the Company's
  internal control over financial reporting during the Company's most recent
  fiscal quarter.

  The Report of Management on Internal Control Over Financial Reporting is set
  forth in Exhibit 13 of this Annual Report on Form 10-K and is incorporated
  herein by reference.  The attestation report of the company's independent
  registered public accounting firm is included in this Annual Report on Form
  10-K in Item 15.


                                                                         17

PART III
________

  Item 10.  Directors and Executive Officers of the Registrant
  ____________________________________________________________

  Required information is set forth under the captions "Election of Directors"
  on Pages 4-7 and "Section 16(a) Beneficial Ownership Report Compliance" on
  Page 30 of the proxy statement filed in connection with the annual meeting
  of shareholders to be held April 19, 2005, and is incorporated herein by
  reference.  Information regarding the executive officers of the registrant
  is included in Part I hereof.  Information regarding the Company's Audit
  Committee and its Audit Committee Financial Expert is set forth on page 8 of
  the proxy statement filed in connection with the annual meeting of share-
  holders to be held April 19, 2005, and is incorporated herein by reference.

  The General Policies and Procedures of the Board of Directors of the Company
  and the charters of its Audit Committee, Compensation Committee and Nominating
  and Governance Committee are also available on its website at www.timken.com
  and are available to any shareholder upon request to the Corporate Secretary.
  The information on the Company's website is not incorporated by reference
  into this Annual Report on Form 10-K.

  The Company has adopted a code of ethics that applies to all of its employees,
  including its principal executive officer, principal financial officer and
  principal accounting officer, as well as its directors.  The Company's code
  of ethics, The Timken Company Standards of Business Ethics Policy, is
  available on its website at www.timken.com.  The Company intends to disclose
  any amendment to, or waiver from, the code of ethics that applies to its
  principal executive officer, principal financial officer or principal
  accounting officer otherwise required to be disclosed under Item 10 of
  Form 8-K by posting such amendment or waiver, as applicable, on its website.

  Item 11.  Executive Compensation
  ________________________________

  Required information is set forth under the captions "Executive Compensation"
  on Pages 13-25 and "Comparison of Five Year Cumulative Total Return" on
  Page 26 of the proxy statement filed in connection with the annual meeting
  of shareholders to be held April 19, 2005, and is incorporated herein by
  reference.

  Item 12.  Security Ownership of Certain Beneficial Owners and Management and
  ____________________________________________________________________________

            Related Stockholder Matters
            ___________________________

  Required information, including with respect to institutional investors
  owning more than 5% of the company's Common Stock, is set forth under the
  caption "Beneficial Ownership of Common Stock" on Pages 11-12 of the proxy
  statement filed in connection with the annual meeting of shareholders to be
  held April 19, 2005, and is incorporated herein by reference.


                                                                         18

  Item 12.  Security Ownership of Certain Beneficial Owners and Management and
  ____________________________________________________________________________

            Related Stockholder Matters (cont.)
            ___________________________________

  Required information is set forth under the caption "Equity Compensation Plan
  Information" on Page 18 of the proxy statement issued in connection with the
  annual meeting of shareholders to be held April 19, 2005, and is incorporated
  herein by reference.

  Item 13.  Certain Relationships and Related Transactions
  ________________________________________________________

  Required information is set forth under the caption "Election of Directors"
  on Pages 4-7 of the proxy statement issued in connection with the annual
  meeting of shareholders to be held April 19, 2005, and is incorporated herein
  by reference.

  Item 14.  Principal Accountant Fees and Services
  _________________________________________________

  Required information regarding fees paid to and services provided by the
  Company's independent auditor during the years ended December 31, 2004 and
  2003 and the pre-approval policies and procedures of the Audit Committee of
  the Company's Board of Directors is set forth on page 29 of the proxy
  statement issued in connection with the annual meeting of shareholders to be
  held April 19, 2005, and is incorporated herein by reference.

  The Company's independent registered public accountant, Ernst & Young LLP
  ("E&Y"), has recently advised the SEC, the Public Company Accounting Oversight
  Board and the Company's audit committee and board of directors that certain
  non-audit work it has performed in China has raised questions regarding E&Y's
  independence with respect to its performance of audit services to some of its
  clients, including the Company.

  E&Y has disclosed to the Company's audit committee that through August 2003,
  E&Y's affiliate in China ("E&Y China") provided tax calculation, preparation
  and remittance services for two subsidiaries of the Company and a small number
  of employees located in China.  These services included processing cash
  disbursements on behalf of these subsidiaries and employees, which is not
  permitted under SEC auditor independence rules.  Total payments processed by
  E&Y China on behalf of these subsidiaries and employees from 2001 through 2003
  were not significant and all of such payments were paid to Chinese tax
  authorities.  In connection with the performance of these tax services,
  including the cash processing services, the fees which E&Y China received
  were not significant.  The processing of cash disbursements ceased in August
  2003.

  E&Y has also disclosed to the Company's audit committee that a contingent fee
  arrangement for a 2000 research tax credit study that it performed for the
  Company has raised questions regarding E&Y's independence with respect to its
  performance of audit services to the Company.  In July 2001, the Company
  engaged E&Y to provide a research tax credit study in connection with the
  original filing of the Company's federal tax return for 2000.  A portion of
  E&Y's fee was a contingent performance bonus based on a percentage of the
  Company's net tax savings for 2000.  At the time E&Y was engaged for the tax
  credit study, contingent fee arrangements with audit clients were prohibited


                                                                         19
  Item 14.  Principal Accountant Fees and Services  (cont.)
  _________________________________________________________

  by the SEC auditor independence rules and AICPA Ethics Rule 302, except when
  the fee was for tax services and determined based on the findings of a
  governmental agency.  An AICPA interpretation of Rule 302 provided that a fee
  is considered to be based on findings of a governmental agency if there is a
  reasonable expectation, at the time of the fee arrangement, of substantive
  review by a governmental agency, such as the IRS.  However, because the tax
  credit study was for an original return, under AICPA guidance, the contingent
  fee arrangement with E&Y did not fall within the exception provided by
  Rule 302.

  The audit committee and E&Y have discussed E&Y's independence with respect to
  the Company in light of the foregoing.  E&Y has confirmed to the audit
  committee that it is independent under applicable independence standards.  The
  audit committee has concurred that there has been no impairment of E&Y's
  independence.  In making this determination with respect to the cash
  processing services, the audit committee considered that: the amount of funds
  involved were de minimis; the services were ministerial in nature and have
  been discontinued; the operations conducted at the locations involved were not
  material to the consolidated financial statements of the Company; none of
  E&Y's personnel that are members of the Company's audit team were involved in
  providing these tax services; and E&Y concluded that its independence was not
  impaired under the applicable independence standards.  In making this
  determination with respect to the contingent fee arrangement, the audit
  committee considered that: the tax credit study did not place E&Y in a
  position of auditing its own work because both the Company and E&Y expected
  the Company's return to be audited by the IRS (which it was) and the Company
  had its own tax department that was responsible for both the preparation of
  the Company's tax returns and the income tax provision included in the
  Company's financial statements; the work plans and processes of the tax credit
  study were based on techniques and tools developed solely by E&Y, and
  therefore E&Y did not act as management or as an employee of the Company; the
  tax credit study did not place E&Y in a position of being an advocate for the
  Company; and E&Y concluded that its independence was not impaired under the
  applicable independence standards.

  The audit committee and E&Y continue to evaluate and review matters relevant
  to the maintenance of E&Y's independence.

                                                                        20
PART IV
_______

  Item 15.  Exhibits and Financial Statement Schedules.
  ___________________________________________________________________________

  (a)(1) and (2) - The response to this portion of Item 15 is submitted
                    as a separate section of this report.

  Schedules I, III, IV and V are not applicable to the company and, therefore,
  have been omitted.

    (3)  Listing of Exhibits

             Exhibit
             _______

        (3)(i)  Amended Articles of Incorporation of The Timken Company
                (Effective April 16, 1996) were filed with Form S-8 dated
                April 16, 1996 (Registration No. 333-02553), and are
                incorporated herein by reference.

        (3)(ii) Amended Regulations of The Timken Company effective April 21,
                1987, were filed on March 29, 1993 with Form 10-K (Commission
                File No. 1-1169), and are incorporated herein by reference.

        (4.0)   Credit Agreement dated as of December 31, 2002 among The Timken
                Company, as Borrower, Various Financial Institutions, as Banks,
                and Bank of America, N.A. and Keybank National Association, as
                Co-Administrative Agents was filed on March 27, 2003 with
                Form 10-K (Commission File No. 1-1169), and is incorporated
                herein by reference.

        (4.1)   Amendment dated as of September 3, 2004 to the Credit Agreement
                dated as of December 31, 2002 among The Timken Company, as
                Borrower, Various Financial Institutions, as Banks, and Bank of
                America , N.A. and Keybank National Association, as
                Co-Administrative Agents.

        (4.2)   Indenture dated as of July 1, 1990, between Timken and
                Ameritrust Company of New York, which was filed with
                Timken's Form S-3 registration statement dated July 12,
                1990 (Registration No. 333-35773), and is incorporated
                herein by reference.

        (4.3)   First Supplemental Indenture, dated as of July 24, 1996,
                by and between The Timken Company and Mellon Bank, N.A.
                was filed on November 13, 1996 with Form 10-Q (Commission
                File No. 1-1169), and is incorporated herein by
                reference.


                                                                         21

   Listing of Exhibits (cont.)
   ___________________________

        (4.4)   Indenture dated as of February 18, 2003, between The Timken
                Company and The Bank of New York, as Trustee, Providing for
                Issuance of Notes in Series was filed on March 27, 2003 with
                Form 10-K (Commission File No. 1-1169), and is incorporated
                herein by reference.

        (4.5)   The company is also a party to agreements with respect to other
                long-term debt in total amount less than 10% of the
                registrant's consolidated total assets.  The registrant agrees
                to furnish a copy of such agreements upon request.

                Management Contracts and Compensation Plans
                ___________________________________________

        (10.0)  The Management Performance Plan of The Timken Company for
                Officers and Certain Management Personnel, as revised on
                December 18, 2002 was filed on March 27, 2003 with Form 10-K
                (Commission File No. 1-1169), and is incorporated herein by
                reference.

        (10.1)  The Management Performance Plan of The Timken Company for
                Officers and Certain Management Personnel, as revised on
                January 31, 2005.

        (10.2)  The Timken Company 1996 Deferred Compensation Plan for officers
                and other key employees, amended and restated as of April 20,
                1999 was filed on May 13, 1999 with Form 10-Q (Commission File
                No. 1-1169), and is incorporated herein by reference.

        (10.3)  Amendment to The Timken Company 1996 Deferred Compensation Plan
                was filed on March 3, 2004 with Form 10-K (Commission File No.
                1-1169), and is incorporated herein by reference.

        (10.4)  The 1985 Incentive Plan of The Timken Company for Officers and
                other key employees as amended through December 17, 1997 was
                filed on March 20, 1998 with Form 10-K (Commission File No.
                1-1169), and is incorporated herein by reference.

        (10.5)  The Timken Company Long-Term Incentive Plan for directors,
                officers and other key employees as amended and restated as of
                January 30, 2002 and approved by shareholders on April 16, 2002
                was filed as Appendix A to Proxy Statement filed on
                February 22, 2002 (Commission File No. 1-1169), and is
                incorporated herein by reference.

        (10.6)  The Timken Company Long-Term Incentive Plan for directors,
                officers and other key employees as amended and restated as of
                February 6, 2004 and approved by shareholders on April 20, 2004
                was filed as Appendix A to Proxy Statement filed on March 1,
                2004 (Commission File No. 1-1169), and is incorporated herein
                by reference.
                                                                        22

   Listing of Exhibits (cont.)
   ___________________________

                Management Contracts and Compensation Plans (cont.)
                ___________________________________________________

        (10.7)  The form of Severance Agreement entered into with all Executive
                Officers of the company was filed on March 27, 1997 with
                Form 10-K (Commission File No. 1-1169), and is incorporated
                herein by reference.  Each differs only as to name and date
                executed.

        (10.8)  The form of Death Benefit Agreement entered into with all
                Executive Officers of the company was filed on March 30, 1994
                with Form 10-K (Commission File No. 1-1169), and is incorporated
                herein by reference. Each differs only as to name and date
                executed.  Currently applicable only to those Executive Officers
                who retired prior to January 1, 2004.

        (10.9)  The amended form of Death Benefit Agreement entered into with
                Executive Officers and certain key employees of the company who
                held such positions as of October 1, 2003 was filed on August 6,
                2004 with Form 10-Q (Commission File No. 1-1169), and is
                incorporated herein by reference.  Each differs only as to name
                and date executed.

        (10.10) The form of Indemnification Agreements entered into with all
                Directors who are not Executive Officers of the company was
                filed on April 1, 1991 with Form 10-K (Commission File No.
                1-1169), and is incorporated herein by reference.  Each differs
                only as to name and date executed.

        (10.11) The form of Indemnification Agreements entered into with
                all Executive Officers of the company who are not Directors
                of the company was filed on April 1, 1991 with Form 10-K
                (Commission File No. 1-1169), and is incorporated herein
                by reference.  Each differs only as to name and date
                executed.

        (10.12) The form of Indemnification Agreements entered into with
                all Executive Officers of the company who are also
                Directors of the company was filed on April 1, 1991 with
                Form 10-K (Commission File No. 1-1169), and is
                incorporated herein by reference.  Each differs only as to
                name and date executed.

        (10.13) The form of Employee Excess Benefits Agreement entered into with
                all active Executive Officers, certain retired Executive
                Officers, and certain other key employees of the company was
                filed on March 27, 1992 with Form 10-K (Commission File No.
                1-1169), and is incorporated herein by reference. Each differs
                only as to name and date executed.

        (10.14) Amendment to Employee Excess Benefits Agreement was filed on
                May 12, 2000 with Form 10-Q (Commission File No. 1-1169),
                and is incorporated herein by reference.

                                                                        23

   Listing of Exhibits (cont.)
   ___________________________

                Management Contracts and Compensation Plans (cont.)
                ___________________________________________________

        (10.15) The amended form of Employee Excess Benefits Agreement entered
                into with certain Executive Officers and certain key employees
                of the company was filed on August 6, 2004 with Form 10-Q
                (Commission File No.  1-1169), and is incorporated herein
                by reference.  Each differs only as to name and date
                executed.

        (10.16) Amended form of Excess Benefits Agreement entered into with the
                President & Chief Executive Officer and Senior Vice President -
                Technology was filed on August 6, 2004 with Form 10-Q
                (Commission File No. 1-1169), and is incorporated herein by
                reference.

        (10.17) The Amended and Restated Supplemental Pension Plan of
                The Timken Company as adopted March 16, 1998 was filed
                on March 20, 1998 with Form 10-K (Commission File No.
                1-1169), and is incorporated herein by reference.

        (10.18) Amendment to the Amended and Restated Supplemental Pension
                Plan of the Timken Company executed on December 29, 1998
                was filed on March 30, 1999 with Form 10-K (Commission File
                No. 1-1169), and is incorporated herein by reference.

        (10.19) The form of The Timken Company Nonqualified Stock Option
                Agreement for nontransferable options without dividend credit
                as adopted on April 17, 2001 was filed on May 14, 2001 with
                Form 10-Q (Commission File No. 1-1169), and is incorporated
                herein by reference.

        (10.20) The form of The Timken Company Nonqualified Stock Option
                Agreement for transferable options (Officers) as adopted on
                April 16, 2002 was filed on May 14, 2002 with Form 10-Q
                (Commission File No. 1-1169), and is incorporated herein by
                reference.

        (10.21) The form of The Timken Company Nonqualified Stock Option
                Agreement for special award options (performance vesting) as
                adopted on April 18, 2000 was filed on May 12, 2000 with Form
                10-Q (Commission File No. 1-1169), and is incorporated herein by
                reference.

        (10.22) The form of Non-Qualified Stock Option Agreement for Officers
                adopted on January 31, 2005 was filed on February 4, 2005 as
                an exhibit to Form 8-K (Commission File No. 1-1169), and is
                incorporated herein by reference.

        (10.23) The form of The Timken Company Performance Share Agreement
                entered into with W. R. Timken, Jr., was filed on March 20,
                1998 with Form 10-K (Commission File No. 1-1169), and is
                incorporated herein by reference.


                                                                         24
   Listing of Exhibits (cont.)
   ___________________________

                Management Contracts and Compensation Plans (cont.)
                ___________________________________________________

        (10.24) The Timken Company Senior Executive Management Performance
                Plan effective January 1, 1999, and approved by shareholders
                April 20, 1999 was filed as Appendix A to Proxy Statement
                filed on February 28, 1999 (Commission File No. 1-1169), and
                is incorporated herein by reference.

        (10.25) The Timken Company Nonqualified Stock Option Agreement entered
                into with James W. Griffith and adopted on December 16, 1999
                was filed on March 29, 2000 with Form 10-K (Commission File
                No. 1-1169), and is incorporated herein by reference.

        (10.26) The Timken Company Promissory Note entered into with James W.
                Griffith and dated December 17, 1999 was filed on March 29,
                2000 with Form 10-K (Commission File No. 1-1169), and is
                incorporated herein by reference.

        (10.27) The Timken Company Director Deferred Compensation Plan
                effective as of February 4, 2000 was filed on May 12, 2000 with
                Form 10-Q (Commission File No. 1-1169), and is incorporated
                herein by reference.

        (10.28) The form of The Timken Company Deferred Shares Agreement as
                adopted on April 18, 2000 was filed on May 12, 2000 with Form
                10-Q (Commission File No. 1-1169), and is incorporated herein
                by reference.

        (10.29) The amended form of The Timken Company Deferred Shares Agreement
                was filed on August 6, 2004 with Form 10-Q (Commission File
                No. 1-1169), and is incorporated herein by reference.

        (10.30) The form of The Timken Company Restricted Share Agreement as
                adopted on April 16, 2002 was filed on May 14, 2002 with Form
                10-Q (Commission File No. 1-1169), and is incorporated herein by
                reference

        (10.31) The form of The Timken Company Restricted Share Agreement as
                adopted on January 31, 2005 was filed on February 4, 2005 as an
                exhibit to Form 8-K (Commission File No. 1-1169), and is
                incorporated herein by reference.

        (10.32) The form of The Timken Company Performance Unit Agreement as
                adopted on April 16, 2002 was filed on May 14, 2002 with Form
                10-Q (Commission File No. 1-1169), and is incorporated herein
                by reference.

        (10.33) The form of The Timken Company Performance Unit Agreement as
                adopted on January 31, 2005 was filed on February 4, 2005 as
                an exhibit to Form 8-K (Commission File No. 1-1169), and is
                incorporated herein by reference.

                                                                        25

   Listing of Exhibits (cont.)
   ___________________________

                Management Contracts and Compensation Plans (cont.)
                ___________________________________________________

        (10.34) The form of The Timken Company Restricted Share Agreement for
                Non-Employee Directors as adopted on January 31, 2005.

        (10.35) The form of The Timken Company Non-Qualified Stock Option
                Agreement for Non-Employee Directors as adopted on
                January 31, 2005.

        (10.36) Restricted Shares Agreement entered into with Glenn A.
                Eisenberg was filed on March 28, 2002 with Form 10-K
                (Commission File No. 1-1169), and is incorporated herein
                by reference.

        (10.37) Executive Severance Agreement entered into with Glenn A.
                Eisenberg was filed on March 27, 2003 with Form 10-K
                (Commission File No. 1-1169), and is incorporated herein
                by reference.

        (10.38) The form of The Timken Company 1996 Deferred Compensation
                Plan Election Agreement as adopted on December 17, 2003
                was filed on March 3, 2004 with Form 10-K (Commission File
                No. 1-1169), and is incorporated herein by reference.

        (10.39) The form of Associate Election Agreement under the 1996
                Deferred Compensation Plan was filed on February 4, 2005 as an
                exhibit to Form 8-K (Commission File No. 1-1169), and is
                incorporated herein by reference.

        (10.40) The form of The Timken Company 1996 Deferred Compensation Plan
                Election Agreement for Deferral of Restricted Shares was filed
                on August 13, 2002 with Form 10-Q (Commission File No. 1-1169),
                and is incorporated herein by reference.

        (10.41) The form of The Timken Company Director Deferred Compensation
                Plan Election Agreement was filed on May 15, 2003 with Form
                10-Q (Commission File Number 1-1169), and is incorporated
                herein by reference.  Each differs only as to name and date
                executed.

        (10.42) The form of Non-employee Director Election Agreement under the
                1996 Deferred Compensation Plan was filed on February 4, 2005 as
                an exhibit to Form 8-K (Commission File No. 1-1169), and is
                incorporated herein by reference.

        (10.43) Non-Executive Chairman Agreement entered into with
                W. R. Timken, Jr. was filed on March 3, 2004 with Form 10-K
                (Commission File No. 1-1169), and is incorporated herein by
                reference.

        (12)    Computation of Ratio of Earnings to Fixed Charges.

                                                                        26

   Listing of Exhibits (cont.)
   ___________________________

        (13)    Annual Report to Shareholders for the year ended December 31,
                2004 (only to the extent expressly incorporated herein by
                reference).

        (21)    A list of subsidiaries of the registrant.

        (23)    Consent of Independent Registered Public Accounting Firm.

        (24)    Power of Attorney.

        (31.1)  Principal Executive Officer's Certifications pursuant to
                Section 302 of the Sarbanes-Oxley Act of 2002.

        (31.2)  Principal Financial Officer's Certifications pursuant to
                Section 302 of the Sarbanes-Oxley Act of 2002.

        (32)    Certification pursuant to 18 U.S.C. Section 1350, as adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the company has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                             THE TIMKEN COMPANY

By   /s/ James W. Griffith              By  /s/ Glenn A. Eisenberg
     ________________________________       ________________________________
     James W. Griffith                      Glenn A. Eisenberg
     Chief Executive Officer and            Executive Vice President - Finance
     Director                               and Administration (Principal
                                            Financial Officer)
Date          March 15, 2005            Date            March 15, 2005
     ________________________________       _______________________________

                                        By  /s/ Sallie B. Bailey
                                            _________________________________
                                             Sallie B. Bailey
                                             Senior Vice President - Finance
                                             (Principal Accounting Officer)
                                        Date            March 15, 2005
                                            _______________________________

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

By  /s/ Phillip R. Cox*                  By  /s/ Frank C. Sullivan*
    ______________________________           _______________________________
    Phillip R. Cox        Director           Frank C. Sullivan      Director
Date          March 15, 2005          Date              March 15, 2005

By  /s/ Jerry J. Jasinowski*             By  /s/ John M. Timken, Jr.*
    ______________________________           _______________________________
    Jerry J. Jasinowski   Director           John M. Timken, Jr.    Director
Date          March 15, 2005          Date              March 15, 2005

By  /s/ John A. Luke, Jr.*               By  /s/ Ward J. Timken*
    ______________________________           _______________________________
    John A. Luke, Jr.     Director           Ward J. Timken         Director
Date          March 15, 2005          Date              March 15, 2005

By  /s/ Robert W. Mahoney*               By  /s/ Ward J. Timken, Jr.*
    ______________________________           _______________________________
    Robert W. Mahoney     Director           Ward J. Timken, Jr.    Director
Date          March 15, 2005          Date              March 15, 2005

By  /s/ Jay A. Precourt*                 By  /s/ W. R. Timken, Jr.*
    ______________________________           _______________________________
    Jay A. Precourt       Director           W. R. Timken, Jr.      Director
Date          March 15, 2005          Date              March 15, 2005

By  /s/ Joseph W. Ralston*               By  /s/ Joseph F. Toot, Jr.*
    ______________________________           _______________________________
    Joseph W. Ralston     Director           Joseph F. Toot, Jr.    Director
Date          March 15, 2005          Date              March 15, 2005

                                         By  /s/ Jacqueline F. Woods*
                                             _______________________________
                                             Jacqueline F. Woods    Director
                                     Date               March 15, 2005

                                       * By  /s/ Glenn A. Eisenberg
                                         ___________________________________
                                         Glenn A. Eisenberg, attorney-in-fact
                                         By authority of Power of Attorney
                                         filed as Exhibit 24 hereto
                                         Date           March 15, 2005

                           ANNUAL REPORT ON FORM 10-K

                       ITEM 15(a)(1) AND (2), (c) AND (d)

                        LIST OF FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE

                                CERTAIN EXHIBITS

                          FINANCIAL STATEMENT SCHEDULE

                          YEAR ENDED DECEMBER 31, 2004

                               THE TIMKEN COMPANY

                                  CANTON, OHIO

FORM 10-K-ITEM 15(a)(1) AND (2)

THE TIMKEN COMPANY AND SUBSIDIARIES

LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

The following consolidated financial statements of The Timken Company and
subsidiaries, included in the annual report of the registrant to its
shareholders for the year ended December 31, 2004, are incorporated by
reference in Item 8:

 Consolidated statements of income-Years ended December 31, 2004, 2003 and
  2002

 Consolidated balance sheets-December 31, 2004 and 2003

 Consolidated statements of cash flows-Years ended December 31, 2004, 2003
  and 2002

 Consolidated statements of shareholders' equity-Years ended December 31, 2004,
  2003 and 2002

 Notes to consolidated financial statements-December 31, 2004

The consolidated financial statement Schedule II-Valuation and qualifying
accounts of The Timken Company and subsidiaries is included in Item 15(d).

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.

               Report of Independent Registered Public Accounting Firm

To The Board of Directors and Shareholders
The Timken Company

We have audited management's assessment, included in the accompanying Report of
Management on Internal Control Over Financial Reporting, that The Timken Company
maintained effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). The Timken Company's management is responsible
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management's assessment and an
opinion on the effectiveness of the company's internal control over financial
reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that The Timken Company maintained
effective internal control over financial reporting as of December 31, 2004,
is fairly stated, in all material respects, based on the COSO criteria. Also,
in our opinion, The Timken Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004,
based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
The Timken Company as of December 31, 2004 and 2003, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 2004 of The Timken Company
and our report dated February 28, 2005 expressed an unqualified opinion thereon.

                                                         /s/  ERNST & YOUNG LLP

Cleveland, Ohio
February 28, 2005

               Report of Independent Registered Public Accounting Firm

To The Board of Directors and Shareholders
The Timken Company

We have audited the accompanying consolidated balance sheets of The Timken
Company and subsidiaries as of December 31, 2004 and 2003, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 2004. Our audits also
included the financial statement schedule listed in the Index at Item 15(a).
These financial statements and schedule are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Timken Company
and subsidiaries at December 31, 2004 and 2003, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles.  Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Note 8 to the consolidated financial statements, "Goodwill and
Other Intangible Assets," the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" effective January 1,
2002.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of The Timken
Company's internal control over financial reporting as of December 31, 2004,
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 28, 2005 expressed an unqualified opinion thereon.

                                                         /s/  ERNST & YOUNG LLP

Cleveland, Ohio
February 28, 2005

                                       II--VALUATION AND QUALIFYING ACCOUNTS

                                      THE TIMKEN COMPANY AND SUBSIDIARIES

         COL. A               COL. B                 COL. C                COL. D        COL. E
                                                    Additions
                             Balance at    Charged to   Charged to Other
                            Beginning of    Costs and      Accounts--    Deductions--  Balance at End
       Description             Period       Expenses       Describe         Describe     of Period
                                                     (Thousands of dollars)
Year ended December 31, 2004:
 Reserves and allowances
  deducted from asset accounts:
   Allowance for
     uncollectible accounts $ 23,957     $   8,703  (1)   $   (623) (4)  $  7,085 (6)    $ 24,952
   Allowance for surplus
     and obsolete inventory   30,983        12,514  (2)     (7,974) (4)    12,010 (7)      23,513
   Valuation allowance
     on deferred tax assets  100,851        28,360  (3)        860  (5)       743 (8)     129,328
                              ______        ______          _______        ______          ______
                            $155,791     $  49,577        $ (7,737)      $ 19,838        $177,793
                             =======        ======          =======        ======         =======
Year ended December 31, 2003:
 Reserves and allowances
  deducted from asset accounts:
   Allowance for
     uncollectible accounts $ 14,386      $  5,392 (1)    $  9,695  (4)  $  5,516 (6)    $ 23,957
   Allowance for surplus
     and obsolete inventory    8,095         5,306 (2)      22,695  (4)     5,113 (7)      30,983
   Valuation allowance
     on deferred tax assets   64,573         9,360 (3)      26,918  (5)         -         100,851
                              ______        ______        ________         ______         _______
                            $ 87,054      $ 20,058        $ 59,308       $ 10,629        $155,791
                              ======        ======         =======         ======         =======
Year ended December 31, 2002:
 Reserves and allowances
  deducted from asset accounts:
   Allowance for
     uncollectible accounts $ 14,976      $  4,752 (1)           -       $  5,342 (6)    $ 14,386
   Allowance for surplus
     and obsolete inventory    6,389         4,986 (2)           -          3,280 (7)       8,095
   Valuation allowance
     on deferred tax assets   57,250         6,914 (3)      19,588  (5)    19,179 (9)      64,573
                              ______        ______        ________         ______          ______
                            $ 78,615      $ 16,652        $ 19,588       $ 27,801        $ 87,054
                              ======        ======          ======         ======          ======
(1)  Provision for uncollectible accounts included in expenses.
(2)  Provision for surplus and obsolete inventory included in expenses.
(3)  Increase in valuation allowance is recorded as a component of the provision for income taxes.
(4)  The opening balance from acquisitions, primarily Torrington.
(5)  Deferred tax asset with full valuation allowance with no impact to the income statement or
     net deferred tax asset.
(6)  Actual accounts written off against the allowance--net of recoveries.
(7)  Inventory items written off against the allowance.
(8)  Expiration of state and local tax credits previously reserved.
(9)  Reduction in valuation allowance due to utilization of foreign net operating losses previously
     reserved.

EX-4.1

                                EXHIBIT 4.1

                              LETTER AMENDMENT

                                                  Dated as of September 3, 2004

To the banks, financial institutions
  and other institutional lenders
  (collectively, the "Lenders") parties
  to the Credit Agreement referred to
  below and to Bank of America, N.A.
  and Keybank National Association,
  as co-administrative agents
  (the "Agents") for the Lenders

Ladies and Gentlemen:

          We refer to the Credit Agreement dated as of December 31, 2002 (as
amended, supplemented or otherwise modified through the date hereof, the
"Credit Agreement") among the undersigned and you and the other Lenders party
thereto from time to time.  Capitalized terms not otherwise defined in this
Letter Amendment have the same meanings as specified in the Credit Agreement.

          It is hereby agreed by you and us as follows:

          The Credit Agreement is, effective as of the date of this Letter
Amendment, hereby amended as follows:

          (a)  Section 1.01 is amended by amending the definition of
"Subsidiary" to add the following proviso at the end of the first sentence
thereof:

          "provided, that notwithstanding the foregoing, PEL Technologies,
L.L.C. shall not be a Subsidiary hereunder"

          (b)  Section 2.05(b) is amended by amending and restating the first
proviso set forth therein to read in full as follows:

          "provided, however, that the Borrower shall be required to prepay
           Revolving Credit Loans with the Net Cash Proceeds of any Disposition
           of any property or assets permitted by Sections 7.05(f), (i) and
           (j) only to the extent that the aggregate Net Cash Proceeds from all
           such Dispositions exceeds $270,000,000;"

          This Letter Amendment shall become effective as of the date first
above written when, and only when the Agents shall have received counterparts of
this Letter Amendment executed by the undersigned and the Required Lenders or,
as to any of the Lenders, advice satisfactory to the Agents that such Lender has
executed this Letter Amendment, and the consent attached hereto executed by the
Guarantors.  This Letter Amendment is subject to the provisions of Section 10.01
of the Credit Agreement.

          On and after the effectiveness of this Letter Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Credit

                                       2

Agreement, and each reference in the Notes and each of the other Loan Documents
to "the Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement, shall mean and be a reference to the Credit
Agreement, as amended by this Letter Amendment.

          The Credit Agreement, the Notes and each of the other Loan Documents,
as specifically amended by this Letter Amendment, are and shall continue to be
in full force and effect and are hereby in all respects ratified and confirmed.
The execution, delivery and effectiveness of this Letter Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of any Lender or the Agents under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.

          If you agree to the terms and provisions hereof, please evidence such
agreement by executing and returning (i) one counterpart of this Letter
Amendment by fax to Jessica Miller, Shearman & Sterling (telephone 212-848-7631,
fax 646-848-7631) no later than noon on Tuesday, August 31, 2004 and (ii) at
least three counterparts of this Letter Amendment to Jessica Miller, Shearman &
Sterling, 599 Lexington Avenue, New York, New York at your earliest convenience.

          This Letter Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.  Delivery of an executed counterpart
of a signature page to this Letter Amendment by telecopier shall be effective as
delivery of a manually executed counterpart of this Letter Amendment.

                                       3

          This Letter Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.

                                     Very truly yours,

                                     THE TIMKEN COMPANY

                                     By /s/Sallie B. Bailey
                                        Title:  Senior Vice President-
                                        Finance and Corporate Controller

Agreed as of the date first above written:

KEYBANK NATIONAL ASSOCIATION,
  as Co-Administrative Agent and as Lender

By /s/Marianne T. Meil
   Title:  Vice President

BANK OF AMERICA, N.A.,
  as Co-Administrative Agent and as Lender

By /s/Thomas R. Durham
   Title:  Managing Director

                                       4

Agreed as of the date first above written:

_________________________________
The Bank of New York

By /s/Kenneth R. McDonnell
   Title:  Vice President

                                    CONSENT

                                                   Dated as of September 3, 2004

          Each of the undersigned, as Guarantors under the Subsidiary Guaranty
dated as of December 31, 2002, as supplemented by the Subsidiary Guaranty
Supplements dated February 18, 2003 (collectively, the "Guaranty") in favor of
the Agents and the Lenders party to the Credit Agreement referred to in the
foregoing Letter Amendment, hereby consents to such Letter Amendment and hereby
confirms and agrees that notwithstanding the effectiveness of such Letter
Amendment, the Guaranty is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects, except that, on and after
the effectiveness of such Letter Amendment, each reference in the Guaranty to
the "Credit Agreement", "thereunder", "thereof" or words of like import shall
mean and be a reference to the Credit Agreement, as amended by such Letter
Amendment.

                                       EDC, INC.

                                       By /s/Scott A. Scherff
                                          Title:  Secretary

                                           HANDPIECE HEADQUARTERS CORPORATION

                                           By /s/Scott A. Scherff
                                              Title:  Assistant Secretary

                                           KILIAN HOLDINGS, INC.

                                           By /s/Scott A. Scherff
                                              Title:  Secretary


                                           KILIAN MANUFACTURING CORPORATION

                                           By /s/Scott A. Scherff
                                              Title:  Secretary

                                           LATROBE STEEL COMPANY

                                           By /s/Scott A. Scherff
                                              Title:  Assistant Secretary

                                           MPB CORPORATION

                                           By /s/Scott A. Scherff
                                              Title:  Assistant Secretary

                                           MPB EXPORT CORPORATION

                                           By /s/Scott A. Scherff
                                              Title:  Assistant Secretary

                                           OH&R SPECIAL STEELS COMPANY

                                           By /s/Scott A. Scherff
                                              Title:  Secretary

                                           RAIL BEARING SERVICE CORPORATION

                                           By /s/Scott A. Scherff
                                              Title:  Assistant Secretary

                                           TIMKEN COMMUNICATIONS COMPANY

                                           By /s/Scott A. Scherff
                                              Title:  Secretary

                                           THE TIMKEN CORPORATION

                                           By /s/Scott A. Scherff
                                              Title:  Corporate Secretary and
                                              Assistant General Counsel

                                           TIMKEN INDUSTRIAL SERVICES, LLC

                                           By /s/Scott A. Scherff
                                              Title:  Secretary

                                           TIMKEN SERVICE AND SALES COMPANY

                                           By /s/Scott A. Scherff
                                              Title:  Secretary

                                           TIMKEN US CORPORATION
                                           (F/K/A THE TORRINGTON COMPANY)

                                           By /s/Scott A. Scherff
                                              Title:  Corporate Secretary and
                                              Assistant General Counsel

C:\\\\Basinski\Timken Corp\2005\NYDOCS03-737734-Letter Amend to Credit Agr-
conformed.doc

                                       4

Agreed as of the date first above written:

THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH

By /s/Shinichiro Munechika
   Title:  Deputy General Manager

                                       4

Agreed as of the date first above written:

Branch Banking and Trust Co.

By /s/
   Title:  VP

                                       4

Agreed as of the date first above written:

_________________________________
CIBC Inc.

By /s/George Knight
   Title:  Managing Director
           CIBC World Markets Corp. as Agent


                                       4

Agreed as of the date first above written:

Citizens Bank of Pennsylvania

By /s/Debra L. McAllonis
   Title:  Senior Vice President


                                       4

Agreed as of the date first above written:

Fifth Third Bank

By /s/
   Title:  Vice President

                                       4

Agreed as of the date first above written:

HSBC Bank USA, National Association

By /s/
   Title:  Senior Vice President, #9426

                                       4

Agreed as of the date first above written:

Mellon Bank, N.A.

By /s/
   Title:  Vice President

                                       4

Agreed as of the date first above written:

Merrill Lynch Capital Corporation

By /s/
   Title:  Director

                                       4

Agreed as of the date first above written:

Morgan Stanley Bank

By /s/Daniel Twenge
   Title:  Vice President


                                       4

Agreed as of the date first above written:

THE NORTHERN TRUST COMPANY

By /s/Thomas E. Bernhardt
   Title:  Vice President

                                       4

Agreed as of the date first above written:

SANPAOLO IMI SpA

By /s/Carlo Persico
   Title:  CEO for the Americas

By /s/Luca Sacchi
     Title:  Vice President

                                       4

Agreed as of the date first above written:

SOCIETE GENERALE

By /s/Anne Marie Dumortier
   Title:  Vice President


                                       4

Agreed as of the date first above written:

SUNTRUST BANK

By /s/William C. Humphries
   Title:  Managing Director


                                       4

Agreed as of the date first above written:

UNIZAN BANK NATIONAL ASSOCIATION

By /s/
   Title:   Vice President

                                       4

Agreed as of the date first above written:

U.S. Bank, N.A.

By /s/
   Title:  Vice President


                                       4

Agreed as of the date first above written:

Wachovia Bank, N.A.

By /s/Nathan R. Rantala
   Title:  Vice President

EX-10.1

                                  EXHIBIT 10.1

                                      January 1, 2003 (revised January 31, 2005)

                              THE TIMKEN COMPANY
                          MANAGEMENT PERFORMANCE PLAN

Purpose

The purpose of The Timken Company (the "Company") Management Performance Plan
(the "Plan") is to promote the profitable growth of the Company by:

 *  Providing rewards for achieving increasing levels of return on capital.

 *  Recognizing corporate, business unit and individual performance achievement.

 *  Attracting, motivating and retaining superior executive talent.

Administration

It is the responsibility of senior management of the Company to execute the
provisions of the Plan.  Based on senior management recommendations, the
Compensation Committee (the "Committee") approves financial goals,
participation, target bonus awards, actual bonus awards, timing of payment and
other actions necessary to the administration of the Plan.

Participation

The participant group includes Company executive officers and other key
employees of the Company and its subsidiaries in positions assigned to Grades 7
or higher based on the Company's job evaluation process.

Bonus Opportunity

Each position is assigned a target bonus expressed as a percentage of annual
base salary.  The targets are based on market data for companies that are
similar for compensation purposes, including companies of similar size and
similar industries.  The targets are reviewed annually by management, and the
Committee will approve all target bonuses for officers.

The full target bonus opportunity represents an appropriate bonus award if
performance standards are met for Corporate, Business Unit and Individual
results.

Bonus funds for the three components-Corporate, Business Unit and Individual-
will be developed independently based on performance achievement versus the
goal(s) for each component.  The actual value of each component can range from
0% to 200% of target based on performance.

                                                                               1


For most participants, the total bonus will be the sum of the amounts for
Corporate, Business Unit and Individual performance.  In general, the more
senior participants will have greater weight placed on corporate results, while
other participants will have a greater weight placed on business unit and
individual performance results.

The allocations to corporate, business unit and individual performance will be
reviewed annually and changes to the allocations will be determined by senior
management.

Performance Measures

Corporate/Business Unit Components

The primary Corporate and Business Unit performance measure is Return on
Invested Capital, one measure of which is Earnings Before Interest and Taxes
(EBIT) divided by Beginning Invested Capital (BIC).

At the beginning of each year, the Committee will specify the EBIT/BIC and other
financial or non-financial performance measures to be used to evaluate Corporate
and Business Unit performance for the coming year.  Potential performance
measures include, but are not limited to:

     *    Cash flow (including free cash flow)
     *    Continuous improvement
     *    Cost of capital
     *    Customer service
     *    Debt reduction
     *    Earnings growth (including earnings per share and earnings before
          interest and taxes)
     *    Financial performance exceeding that of peer/competitor companies
     *    Improvement of shareholder return
     *    Inventory management
     *    Net income
     *    Productivity improvement
     *    Profit after taxes
     *    Quality
     *    Recruitment and development of excellent associates with emphasis on
          diversity
     *    Reduction of fixed costs
     *    Return on assets
     *    Return on equity
     *    Return on invested capital (EBIT/BIC)
     *    Sales from new products
     *    Sales growth
     *    Successful start-up of new facility
     *    Successful acquisition/divestiture
     *    Working Capital

                                                                               2


For the Corporate, Business Unit and Individual components of the Plan, the size
of the award will be determined by the degree to which targets are achieved for
each measure within that component.  Awards for corporate performance that falls
between threshold, target and maximum will be interpolated.

If the Committee determines that a change in the business, operations, corporate
structure or capital structure of the Corporation, the manner in which it
conducts business or other events or circumstances render the performance
objectives to be unsuitable, the Committee may modify such performance
objectives or the related minimum acceptable level of achievement, in whole or
in part, as the Committee deems appropriate.

Individual Component

Individual performance goals will be established for each participant consistent
with the Company's performance management process.  The participant's supervisor
will assess the participant's performance against these goals and make a
determination of the amount of bonus to be earned for the individual component
of the Plan.  While the value of the individual component can range from 0% to
200% of target for a specific individual, the sum of individual award components
for all participants must not exceed 100% of the final individual fund.

Award Determination

A participant's bonus award will be determined by adding the value of each of
the applicable components (corporate, business unit, individual) once
performance is considered.  The sum of all participant bonus determinations will
equal the Total Fund.

Minimum Performance Requirement

For a payment to be earned for any portion of this Plan, the Company must report
a predetermined net profit for the Plan year after taking into account all Plan
payments for that year.  Once the predetermined profit level is achieved, the
Plan will function as outlined.  If the predetermined profit level is not
achieved, no awards will be paid under the Corporate, Business Unit or
Individual component of the Plan.

Bonus Payments

At the end of the year, senior management will determine whether Corporate
performance has exceeded the minimum performance requirement for paying
bonuses.  Senior management will recommend to the Committee the Total Fund
based on its assessment of performance achievement at Corporate, Business Unit
and individual levels.  The Committee may make further adjustments to such
management recommendations based on its assessment of financial and non-
financial performance.

Awards under the Plan will be paid in cash as soon as practicable after the
Committee's determination of the award payments, but in no event later than two
and one-half months after the close of the last fiscal year of the Company to
which the award relates.

                                                                               3


One hundred percent of awards under the Plan will be included in pension
earnings and earnings for the purpose of calculating 401(k) plan benefits.
Awards will not be included for purposes of any other employee benefits plans,
except long-term disability.

mpplan02revised01-31-2005.doc

                                                                               4

EX-10.34

                    EXHIBIT 10.34

                     THE TIMKEN COMPANY

               Restricted Share Agreement for
                    Nonemployee Directors

[GRANTEE], Grantee:

          The Timken Company (the "Company") pursuant to its Long-Term Incentive
Plan (as Amended and Restated as of February 6, 2004) (the "Plan") has this day
granted to you, the above-named grantee, a total of [NUMBER] Common Shares of
the Company ("Common Shares") subject to the following terms, conditions,
limitations and restrictions:

          1.   Rights of Grantee.  The Common Shares subject to this grant shall
be fully paid and nonassessable and shall be represented by a certificate or
certificates registered in your name and endorsed with an appropriate legend
referring to the restrictions hereinafter set forth.  You shall have all the
rights of a shareholder with respect to such shares, including the right to vote
the shares and receive all dividends paid thereon, provided that such shares,
and any additional shares that you may become entitled to receive by virtue of a
share dividend, a merger or reorganization in which the Company is the surviving
corporation or any other change in the capital structure of the Company, shall
be subject to the restrictions hereinafter set forth.

          2.   Restrictions on Transfer of Common Shares.  The Common Shares
subject to this grant may not be assigned, exchanged, pledged, sold, transferred
or otherwise disposed of by you, except to the Company, and shall be subject to
forfeiture as herein provided until five years have elapsed from the date of
this grant, except that (a) 20 percent of such shares shall become freely
transferable and nonforfeitable at the end of each year from and after the date
of this grant and (b) your rights with respect to such shares may be transferred
by will or pursuant to the laws of descent and distribution.  Any purported
transfer in violation of the provisions of this paragraph shall be null and
void, and the purported transferee shall obtain no rights with respect to such
shares.

          3.   Forfeiture of Awards.  All of the Common Shares subject to this
grant that are then forfeitable shall be forfeited by you if your service as a
member of the Board of Directors of the Company (a "Director") is terminated
before the fifth anniversary of the date of this grant; provided, however, if
your service as a Director of the Company is terminated before the fifth
anniversary of the date of this grant as a result of your death or disability,
or owing to your removal as a Director without cause, a portion of the shares
covered by this grant that then remain forfeitable shall become freely
transferable and nonforfeitable as follows:  that number of shares shall become
freely transferable and nonforfeitable which bears the same ratio to the total
number of shares subject to this grant that then remain forfeitable and would
have become forfeitable at the next anniversary date as the number of full
months from the date of this grant (or, if such service is terminated after the
first anniversary of the date of this grant, then from the date of the latest
anniversary) to the date of termination of such service bears to 12, and the
balance of the shares subject to this grant shall be forfeited to the Company.

          4.   Retention of Certificates.  During the period in which the
restrictions on transfer and risk of forfeiture provided in paragraphs 2 and 3
above are in effect, the certificates representing the Common Shares covered by
this grant shall be retained by the Company, together with the accompanying
stock power signed by you and endorsed in blank.

                        1

CLI-1223277v2


          5.   Change in Control.  Upon any change in control of the Company,
the restrictions on transfer and risk of forfeiture provided in paragraphs 2 and
3 above shall lapse and terminate with respect to all of the Common Shares that
are subject to this grant to which such restriction and risk then remain
applicable.  For purposes of this grant, the term "change in control" shall mean
the occurrence of any of the following events:

     (a)  The acquisition by any individual, entity or group (within the meaning
          of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
          beneficial ownership (within the meaning of Rule 13d-3 promulgated
          under the Exchange Act) of 30% or more of either:  (i) the then-
          outstanding Common Shares or (ii) the combined voting power of the
          then- outstanding voting securities of the Company entitled to vote
          generally in the election of directors ("Voting Shares"); provided,
          however, that for purposes of this subsection (a), the following
          acquisitions shall not constitute a change in control:  (A) any
          acquisition directly from the Company, (B) any acquisition by the
          Company, (C) any acquisition by any employee benefit plan (or related
          trust) sponsored or maintained by the Company or any Subsidiary, or
          (D) any acquisition by any Person pursuant to a transaction which
          complies with clauses (i), (ii) and (iii) of subsection (c) of this
          Section 5; or

     (b)  Individuals who, as of the date hereof, constitute the Board (the
          "Incumbent Board") cease for any reason (other than death or
          disability) to constitute at least a majority of the Board; provided,
          however, that any individual becoming a director subsequent to the
          date hereof whose election, or nomination for election by the
          Company's shareholders, was approved by a vote of at least a majority
          of the directors then comprising the Incumbent Board (either by a
          specific vote or by approval of the proxy statement of the Company in
          which such person is named as a nominee for director, without
          objection to such nomination) shall be considered as though such
          individual were a member of the Incumbent Board, but excluding for
          this purpose, any such individual whose initial assumption of office
          occurs as a result of an actual or threatened election contest (within
          the meaning of Rule 14a-11 of the Exchange Act) with respect to the
          election or removal of directors or other actual or threatened
          solicitation of proxies or consents by or on behalf of a Person other
          than the Board; or

     (c)  Consummation of a reorganization, merger or consolidation or sale or
          other disposition of all or substantially all of the assets of the
          Company (a "Business Combination"), in each case, unless, following
          such Business Combination, (i) all or substantially all of the
          individuals and entities who were the beneficial owners, respectively,
          of the Common Shares and Voting Shares immediately prior to such
          Business Combination beneficially own, directly or indirectly, more
          than 66 2/3% of, respectively, the then-outstanding shares of common
          stock and the combined voting power of the then-outstanding voting
          securities entitled to vote generally in the election of directors, as
          the case may be, of the entity resulting from such Business
          Combination (including, without limitation, an entity which as a
          result of such transaction owns the Company or all or substantially
          all of the

                             2

CLI-1223277v2


          Company's assets either directly or through one or more subsidiaries)
          in substantially the same proportions relative to each other as
          their ownership, immediately prior to such Business Combination, of
          the Common Shares and Voting Shares of the Company, as the case may
          be, (ii) no Person (excluding any entity resulting from such Business
          Combination or any employee benefit plan (or related trust) sponsored
          or maintained by the Company or such entity resulting from such
          Business Combination) beneficially owns, directly or indirectly, 30%
          or more of, respectively, the then-outstanding shares of common stock
          of the entity resulting from such Business Combination, or the
          combined voting power of the then-outstanding voting securities of
          such corporation except to the extent that such ownership existed
          prior to the Business Combination, and (iii) at least a majority of
          the members of the board of directors of the corporation resulting
          from such Business Combination were members of the Incumbent Board at
          the time of the execution of the initial agreement, or of the action
          of the Board, providing for such Business Combination; or

     (d)  Approval by the shareholders of the Company of a complete liquidation
          or dissolution of the Company.

          6.   Severability.  If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision in any other person or circumstances shall not
be affected, and the provisions so held to be invalid, unenforceable or
otherwise illegal shall be reformed to the extent (and only to the extent)
necessary to make it enforceable, valid and legal.

          7.   Processing of Information.  Information about the Grantee and the
Grantee's participation in the Plan may be collected, recorded and held, used
and disclosed for any purpose related to the administration of the Plan.  The
Grantee understands that such processing of this information may need to be
carried out by the Company and its Subsidiaries and by third party
administrators whether such persons are located within the Grantee's country or
elsewhere, including the United States of America.  The Grantee consents to the
processing of information relating to the Grantee and the Grantee's
participation in the Plan in any one or more of the ways referred to above.

          8.   Relation to Plan.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.

          Dated this ____ day of ______________________, 200_

                                   THE TIMKEN COMPANY

                                  By:___________________________
                                        Name:
                                        Title:

                                3

CLI-1223277v2


Accepted and agreed to: _________________
Dated:_____________________

                                       4

CLI-1223277v2

EX-10.35

                                 EXHIBIT 10.35

                             THE TIMKEN COMPANY

                   Nonqualified Stock Option Agreement for
                           Nonemployee Directors

          WHEREAS, [NAME] (hereinafter called the "Optionee") is a Non employee
Director (as defined in The Timken Company Long-Term Incentive Plan (the "Plan")
(As Amended and Restated on February 6, 2004) of The Timken Company (hereinafter
called the "Company");

          WHEREAS, Section 9 of the Plan authorizes the Company's Board of
Directors (the "Board") to grant options to purchase Common Shares of the
Company to Non employee Directors of the Company, subject to the terms and
conditions of the Plan; and

          WHEREAS, the execution of a Nonqualified Stock Option Agreement
substantially in the form hereof has been authorized by a resolution of the
Committee duly adopted on [DATE]; and

          NOW, THEREFORE, the Company hereby grants to the Optionee on this ____
day of __________ (the "Date of Grant") an Option (the "Option") pursuant to the
Plan to purchase [NUMBER] Common Shares of the Company at a price of [PRICE] per
share (the "Option Price") which represents the Market Value per Share on the
Date of Grant.  The Company agrees to cause certificates for any shares
purchased hereunder to be delivered to the Optionee upon payment of the Option
Price in full, subject to the terms and conditions of the Plan and the terms and
conditions hereinafter set forth.

          1.  Vesting of Option.   (a)  Unless terminated as hereinafter
provided, the Option shall be exercisable with respect to all of the Common
Shares covered by the Option after the Optionee continuously serves as a Non-
employee Director of the Company for a period of one (1) year following the Date
of Grant.

               (b)  Notwithstanding the provisions of Section 1(a) hereof, the
Option shall become immediately exercisable in full upon any change in control
of the Company that shall occur while the Optionee is a Nonemployee Director of
the Company.  For the purposes of this agreement, the term "change in control"
shall mean the occurrence of any of the following events:

               (i)  The acquisition by any individual, entity or group (within
     the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
     "Person") of beneficial ownership (within the meaning of Rule 13d-3
     promulgated under the Exchange Act) of 30% or more of either:  (A) the
     then-outstanding Common Shares or (B) the combined voting power of the
     then-outstanding voting securities of the Company entitled to vote
     generally in the election of directors ("Voting Shares"); provided,
     however, that for purposes of this subsection (i), the following
     acquisitions shall not constitute a change in control:  (1) any acquisition
     directly from the Company, (2) any acquisition by the Company, (3) any
     acquisition by any employee benefit plan (or related trust) sponsored or
     maintained by the Company or any Subsidiary, or (4) any acquisition by any
     Person pursuant to a transaction which complies with clauses (A), (B) and
     (C) of subsection (iii) of this Section 1(b); or

CLI-1223273v3


               (ii)  Individuals who, as of the date hereof, constitute the
     Board (the "Incumbent Board") cease for any reason (other than death or
     disability) to constitute at least a majority of the Board; provided,
     however, that any individual becoming a director subsequent to the date
     hereof whose election, or nomination for election by the Company's
     shareholders, was approved by a vote of at least a majority of the
     directors then comprising the Incumbent Board (either by a specific vote
     or by approval of the proxy statement of the Company in which such person
     is named as a nominee for director, without objection to such nomination)
     shall be considered as though such individual were a member of the
     Incumbent Board, but excluding for this purpose, any such individual whose
     initial assumption of office occurs as a result of an actual or threatened
     election contest (within the meaning of Rule 14a-11 of the Exchange Act)
     with respect to the election or removal of directors or other actual or
     threatened solicitation of proxies or consents by or on behalf of a Person
     other than the Board; or

               (iii)  Consummation of a reorganization, merger or consolidation
     or sale or other disposition of all or substantially all of the assets of
     the Company (a "Business Combination"), in each case, unless, following
     such Business Combination, (A) all or substantially all of the individuals
     and entities who were the beneficial owners, respectively, of the Common
     Shares and Voting Shares immediately prior to such Business Combination
     beneficially own, directly or indirectly, more than 66 2/3% of,
     respectively, the then-outstanding shares of common stock and the combined
     voting power of the then-outstanding voting securities entitled to vote
     generally in the election of directors, as the case may be, of the entity
     resulting from such Business Combination (including, without limitation, an
     entity which as a result of such transaction owns the Company or all or
     substantially all of the Company's assets either directly or through one or
     more subsidiaries) in substantially the same proportions relative to each
     other as their ownership, immediately prior to such Business Combination,
     of the Common Shares and Voting Shares of the Company, as the case may be,
     (B) no Person (excluding any entity resulting from such Business
     Combination or any employee benefit plan (or related trust) sponsored or
     maintained by the Company or such entity resulting from such Business
     Combination) beneficially owns, directly or indirectly, 30% or more of,
     respectively, the then-outstanding shares of common stock of the entity
     resulting from such Business Combination, or the combined voting power of
     the then-outstanding voting securities of such corporation except to the
     extent that such ownership existed prior to the Business Combination, and
     (C) at least a majority of the members of the board of directors of the
     corporation resulting from such Business Combination were members of the
     Incumbent Board at the time of the execution of the initial agreement, or
     of the action of the Board, providing for such Business Combination; or

               (iv)  Approval by the shareholders of the Company of a complete
     liquidation or dissolution of the Company.

               (c)  Notwithstanding the provisions of Section 1(a) hereof, the
Option shall become immediately exercisable in full if the Optionee should (i)
retire (within the meaning in the Board's General Policies & Procedures), (ii)
die, (iii)  become permanently disabled (within the meaning of the Company's
long-term disability plan) while serving as a Nonemployee Director of the
Company, or (iv) otherwise cease to be a Nonemployee Director of the Company
for any reason; provided, however, that this Option shall become immediately
exercisable in full pursuant to Section 1(c)(iv) only if the Optionee shall have
continuously served as a Nonemployee Director for at least six months following
the Date of Grant.

CLI-1223273v3


               (d)  To the extent that the Option shall have become exercisable
in accordance with the terms of this agreement, it may be exercised in whole or
in part from time to time thereafter.

          2.  Termination of Option.  The Option shall terminate automatically
and without further notice on the earliest of the following dates:

               (a)  five years after the date upon which the Optionee ceases to
be a Nonemployee Director of the Company or subsidiary for any reason, except
death;

               (b)  one year after the date of the Optionee's death; or

               (c)  ten years after the Date of Grant.

          3.  Payment of Option Price.  The Option Price shall be payable (a) in
cash in the form of currency or check or other cash equivalent acceptable to the
Company, (b) by transfer to the Company of nonforfeitable, unrestricted Common
Shares that have been owned by the Optionee for at least six months prior to the
date of exercise or (c) by any combination of the methods of payment described
in Sections 3(a) and 3(b) hereof.  Nonforfeitable, unrestricted Common Shares
that are transferred by the Optionee in payment of all or any part of the Option
Price shall be valued on the basis of their fair market value as determined by
the Committee from time to time.  Subject to the terms and conditions of Section
4 hereof, and subject to any deferral election the Optionee may have made
pursuant to any plan or program of the Company, the Company shall cause
certificates for any shares purchased hereunder to be delivered to the Optionee
upon payment of the Option Price in full.

          4.  Compliance with Law.  The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this agreement, the Option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
To the extent that the Ohio Securities Act shall be applicable to the Option,
the Option shall not be exercisable unless the Common Shares or other securities
covered by the Option are (a) exempt from registration thereunder, (b) the
subject of a transaction that is exempt from compliance therewith, (c)
registered by description or qualification thereunder or (d) the subject of a
transaction that shall have been registered by description thereunder.

          5.  Transferability and Exercisability.

               (a)  Except as provided in Section 5(b) below, the Option
including any interest in thereof, shall not be transferable by the Optionee
except by will or the laws of descent and distribution, and the Option shall be
exercisable during the lifetime of the Optionee only by him or, in the event of
his legal incapacity to do so, by his guardian or legal representative acting
on behalf of the Optionee in a fiduciary capacity under state law and court
supervision.

               (b)  Notwithstanding Section 5(a) above, the Option or any
interest in thereof, may be transferable by the Optionee, without payment of
consideration therefor, to any one or more members of the immediate family of
Optionee (as defined in Rule 16a-1(e) under the Exchange Act), or to one or
more trusts established solely for the benefit of such members of the immediate
family or to partnerships in which the only partners are such members of the
immediate family of the Optionee; provided, however, that such transfer will not
be effective until notice of such transfer is

CLI-1223273v3


delivered to the Company; and provided, further, however, that any such
transferee is subject to the same terms and conditions hereunder as the
Optionee.

          6.  Adjustments.  The Committee shall make any adjustments in the
Option Price and the number or kind of shares of stock or other securities
covered by the Option that the Committee may determine to be equitably required
to prevent any dilution or expansion of the Optionee's rights under this
agreement that otherwise would result from any (a) stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure
of the Company, (b) merger, consolidation, separation, reorganization or partial
or complete liquidation involving the Company or (c) other transaction or event
having an effect similar to any of those referred to in Section 6(a) or 6(b)
hereof.  Furthermore, in the event that any transaction or event described or
referred to in the immediately preceding sentence shall occur, the Committee may
provide in substitution of any or all of the Optionee's rights under this
agreement such alternative consideration as the Committee may determine, in good
faith, to be equitable under the circumstances.

          7.  Future Employment with the Company or a Subsidiary.  If the
Optionee becomes an employee of the Company or a Subsidiary after the Date of
Grant while remaining a member of the Board, any Option Rights held under the
Plan by the Optionee at the time of commencement of such employment shall not be
affected thereby.

          8.  Amendments.  Any amendment to the Plan shall be deemed to be an
amendment to this agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of the Optionee with respect to the Option without the Optionee's consent.

          9.  Severability.  If any provision of this Agreement or the
application of any provision hereof to any person or circumstances is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision in any other person or circumstances shall not
be affected, and the provisions so held to be invalid, unenforceable or other-
wise illegal shall be reformed to the extent (and only to the extent) necessary
to make it enforceable, valid and legal.

          10.  Processing of Information.  Information about the Optionee and
the Optionee's participation in the Plan may be collected, recorded and held,
used and disclosed for any purpose related to the administration of the Plan.
The Optionee understands that such processing of this information may need to
be carried out by the Company and its Subsidiaries and by third party
administrators whether such persons are located within the Optionee's country or
elsewhere, including the United States of America.  The Optionee consents to the
processing of information relating to the Optionee and the Optionee's
participation in the Plan in any one or more of the ways referred to above.

          11.  Governing Law.  This agreement is made under, and shall be
construed in accordance with, the internal substantive laws of the State of
Ohio.

          12.  Relation to Plan.  Capitalized terms used herein without
definition shall have the meanings assigned to them in the Plan.


          Dated this ____ day of ______________________, 200_

                                               THE TIMKEN COMPANY

                                               By:___________________________
                                                  William R. Burkhart
                                                  Sr. Vice President & General
                                                  Counsel

Accepted and agreed to: _________________
Dated:_____________________

CLI-1223273v3

EX-12

                                  EXHIBIT 12

               COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

                                       Twelve Months Ended   Three Months Ended
                                       Dec. 31    Dec. 31   Dec. 31    Dec. 31
                                        2004       2003      2004       2003
                                      --------   --------  --------   --------
                                   (Thousands of Dollars, except ratio amounts)
Income before income taxes            $199,779   $ 60,802  $ 84,821   $ 37,494
Share of undistributed losses from
  50%-or-less-owned affiliates,
  excluding affiliates with
  guaranteed debt                        5,462      4,827     1,599      1,995
Amortization of capitalized interest     1,352      2,702       341        591
Interest expense                        50,834     48,401    14,893     12,757
Interest portion of rental expense       1,866      1,513       963        588
                                      --------   --------  --------   --------
Earnings                              $259,293   $118,245  $102,617   $ 53,425
                                      ========   ========  ========   ========

Interest                              $ 51,375   $ 48,401  $ 15,076   $ 12,952
Interest portion of rental expense       1,866      1,513       963        588
Interest expense relating to
  guaranteed debt of 50%-or-less-
  owned affiliates                         106        464         -        106
                                      --------   --------  --------   --------
Fixed Charges                         $ 53,347  $ 50,378  $ 16,039   $ 13,646
                                      ========   ========  ========   ========

Ratio of Earnings to Fixed Charges        4.86       2.35      6.40       3.92
                                      ========   ========  ========   ========

EX-13

EXHIBIT 13

ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 2004

FINANCIAL summary

2004		2003
(Thousands of dollars, except per share data)
Net sales Impairment and restructuring charges Income before income taxes Provision for income taxes Net income Earnings per share Earnings per share – assuming dilution Dividends per share	$ 4,513,671 13,434 199,779 64,123 $ 135,656 $ 1.51 $ 1.49 $ .52	$ 3,788,097 19,154 60,802 24,321 $ 36,481 $ .44 $ .44 $  .52

2

TIMKEN

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Introduction

The Timken Company is a leading global manufacturer of highly
engineered antifriction bearings and alloy steels and a provider of
related products and services. Timken operates under three
segments: Automotive Group, Industrial Group and Steel Group. The Automotive and Industrial Groups design, manufacture
and distribute a range of bearings and related products and
services. Automotive Group customers include original equipment
manufacturers of passenger cars, light trucks, and medium to
heavy–duty trucks and their suppliers. Industrial Group
customers include both original equipment manufacturers and
distributors for agriculture, construction, mining, energy, mill,
machine tooling, aerospace, and rail applications. Steel Group
products include different alloys in both solid and tubular sections,
as well as custom–made steel products, for both automotive and
industrial applications, including bearings. On February 18, 2003, Timken acquired The Torrington Company
(Torrington), also a leading bearing manufacturer, for approximately
$840 million. The acquisition strengthened Timken’s market
position among global bearing manufacturers, while expanding
Timken’s product line with complementary products and services
and offering significant cost savings opportunities for the
combined organization. Financial Overview For 2004, The Timken Company reported net sales of approximately
$4.5 billion, an increase of approximately 19 percent from 2003.
Sales were higher across all three business segments. For 2004,
earnings per diluted share were $1.49, compared to $0.44 per
diluted share for 2003. The company achieved record sales and strong earnings growth,
compared to 2003, despite unprecedented high raw material
costs. In 2004, the company leveraged higher volume from the
industrial recovery, implemented surcharges and price increases to
begin to recover high raw material costs, and continued to expand
in emerging markets. The integration of Torrington continued in 2004, with savings from purchasing synergies, workforce consolidation
and other integration activities. During 2004, the company
divested certain non–strategic assets and completed two small
acquisitions, which enhanced its industrial product and service
capabilities. The company expects the improvement in industrial demand to
continue in 2005. In the face of this strong demand, the company
will continue to focus on growth, improving margins, customer
service and productivity. As a result of strategic actions, including
the Torrington acquisition, the company has a more diversified
product portfolio and increased capacity to capitalize on strong
markets. In 2005, the company expects improved performance for
each of its three segments due to increased productivity, price
increases and surcharges, which are expected to recover a signifi–
cant portion of raw material cost increases. In 2004, the Automotive Group’s net sales increased from 2003
due to increased light vehicle penetration from new products,
strong medium and heavy truck production and favorable foreign
currency translation. The Automotive Group’s profitability benefit–
ed from higher sales and improved operating performance, but was
negatively impacted by higher raw material costs. In 2004, the Industrial Group’s net sales increased from 2003
due to higher global demand (notably construction, agriculture, rail
and general industrial equipment), increased prices and favorable
foreign currency translation. In addition to the increased sales
volume, profit for the Industrial Group benefited from operating
cost improvements and price increases. In 2004, the Steel Group’s net sales increased from 2003 due to
surcharges and price increases, which were driven by higher raw
material costs, as well as increased volume. Demand increased
across steel customer segments, led by strong industrial demand.
The Steel Group’s profitability improved significantly due to leverag–ing high volume and the recovery of raw material increases through
surcharges and price increases.

19

TIMKEN

The Statement of Income

2004 compared to 2003

Overview:

2004		2003	$ Change	% Change
(Dollars in millions, except earnings per share)
Net sales Net income Earnings per share – diluted Average number of shares – diluted	$ 4,513.7 $ 135.7 $ 1.49 90,759,571	$ 3,788.1 $ 36.5 $ 0.44 83,159,321	$ 725.6 $ 99.2 $ 1.05 –	19.2% 271.8% 238.6% 9.1%

Sales by Segment:

2004		2003	$ Change	% Change
(Dollars in millions, and exclude intersegment sales)
Automotive Group Industrial Group Steel Group	$ 1,582.2 1,709.8 1,221.7	$ 1,396.1 1,498.8 893.2	$ 186.1 211.0 328.5	13.3% 14.1% 36.8%
Total Company	$ 4,513.7	$ 3,788.1	$ 725.6	19.2%

The Automotive Group’s net sales benefited from increased light
vehicle penetration from new products, strong medium and heavy
truck production and favorable foreign currency translation. The
Industrial Group’s net sales increased due to higher demand,
increased prices and favorable foreign currency translation. Many
end markets recorded substantial growth, especially construction,
agriculture, rail, and general industrial equipment. For both the Automotive and Industrial Groups, a portion of the net sales
increase was attributable to Torrington’s results only being included
from February 18, 2003, the date it was acquired. The increase in
the Steel Group’s net sales resulted primarily from surcharges and
price increases, which were driven by higher raw material costs, as
well as increased volume. Demand increased across steel
customer segments, led by strong industrial demand.

Gross Profit :

2004		2003	$ Change	% Change
(Dollars in Millions)
Gross profit Gross profit % to net sales Integration and special charges included in cost of products sold	$ 838.6 18.6% $ 4.5	$ 639.1 16.9% $ 3.4	$ 199.5 – $ 1.1	31.2% 1.7% 32.4%

Gross profit for 2003 included a reclassification of $7.5 million from
cost of products sold to selling, administrative and general expens–
es for Torrington engineering and research and development
expenses to be consistent with the company’s 2004 cost classifica–
tion methodology. Gross profit in 2004 benefited from higher sales
and volume, strong operating performance and operating cost
improvements. Gross profit was negatively impacted by higher
raw material costs, although the company recovered a significant
portion of these costs through price increases and surcharges. In 2004, integration charges related to the continued integration of
Torrington. In 2003, integration and special charges related prima–
rily to the integration of Torrington in the amount of $9.3 million and
costs incurred for the Duston, England plant closure in the amount
of $4.0 million. These charges were partially offset by curtailment
gains in 2003 in the amount of $9.9 million resulting from the
redesign of the company’s U.S.–based employee benefit plans.

20

TIMKEN

Selling, Administrative and General Expenses:

2004		2003	$ Change	% Change
(Dollars in Millions)
Selling, administrative and general expenses Selling, administrative and general expenses % to net sales Integration charges included in selling, administrative and general expenses	$ 587.9 13.0% $ 22.5	$ 521.7 13.8% $ 30.5	$ 66.2 – $ (8.0)	12.7% (0.8)% (26.2)%

Selling, administrative and general expenses for 2003 included a
reclassification of $7.5 million from cost of products sold. The
increase in selling, administrative and general expenses in 2004
was due primarily to higher sales, higher accruals for performance–
based compensation and foreign currency translation, partially
offset by lower integration charges. The decrease between years
in selling, administrative and general expenses as a percentage
of net sales was primarily the result of the company’s ability to leverage expenses on higher sales, continued focus on controlling
spending, and savings resulting from the integration of Torrington. The integration charges for 2004 related to the continued integra–
tion of Torrington, primarily for information technology and purchas–ing initiatives. In 2003, integration charges included integration
costs for the Torrington acquisition of $27.6 million and curtailment
losses resulting from the redesign of the company’s U.S.–based
employee benefit plans of $2.9 million.

Impairment and Restructuring Charges:

2004		2003	$ Change
(Dollars in millions)
Impairment charges Severance and related benefit costs Exit costs	$ 8.5 4.2 0.7	$ 12.5 2.9 3.7	$ (4.0) 1.3 (3.0)
Total	$ 13.4	$ 19.1	$ (5.7)

In 2004, the impairment charges related primarily to the write–
down of property, plant and equipment at one of the Steel
Group’s facilities. The severance and related benefit costs related
to associates who exited the company as a result of the integration
of Torrington. The exit costs related primarily to facilities in the U.S. In 2003, impairment charges represented the write–off of the
remaining goodwill for the Steel Group in accordance with
Statement of Financial Accounting Standards (SFAS) No. 142,
“Goodwill and Other Intangible Assets,” of $10.2 million and
impairment charges for the Columbus, Ohio plant of $2.3 million.
The severance and related benefit costs of $2.9 million related to
associates who exited the company as a result of the integration of
Torrington and other actions taken by the company to reduce costs.
The exit costs were comprised of $3.0 million for the Columbus,
Ohio plant and $0.7 million for the Duston, England plant. The
Duston and Columbus plants were closed as part of the company’s
manufacturing strategy initiative (MSI) program in 2001. The
additional costs that were incurred in 2003 for these two projects
were the result of changes in estimates. The company continues to evaluate the competitiveness of its
operations and may from time to time determine to close
operations that are not competitive. The company may incur
charges associated with the closure of such operations in future
periods that may be material. In May 2004, the company announced a plan to begin closing its
three bearing plants in Canton, Ohio. In June 2004, the company
and the United Steelworkers of America (Union) began the “effects
bargaining” process. In July 2004, the company and the Union
agreed to enter into early formal negotiations over the current labor
contract, which expires in September 2005. Because the company
and the Union are still in discussions, final decisions have not been
made regarding the plant closings, including the timing, the impact
on employment, and the magnitude of savings and charges for
restructuring, which could be material. Therefore, the company is
unable to determine the impact of these plant closings in
accordance with SFAS No. 146, “Accounting for Costs Associated
with Exit or Disposal Activities.”

21

TIMKEN

Interest Expense and Income:

2004		2003	$ Change
(Dollars in millions)
Interest expense Interest income	$ 50.8 $ 1.4	$ 48.4 $ 1.1	$ 2.4 $ 0.3

Interest expense increased due primarily to higher average debt balances during 2004, compared to 2003.

Other Income and Expense:

2004		2003	$ Change
(Dollars in millions)
CDSOA receipts, net of expenses	$ 44.4	$ 65.6	$ (21.2)
Impairment charge – equity investment Gain on divestitures of non–strategic assets Loss on dissolution of subsidiary Other	$ – $ 16.4 $ (16.2) $ (32.6)	$ (45.7) $ 2.0 $ – $ (12.0)	$ 45.7 $ 14.4 $ (16.2) $ (20.6)
Other expense – net	$ (32.4)	$ (55.7)	$ 23.3

U.S. Continued Dumping and Subsidy Offset Act (CDSOA) receipts
are reported net of applicable expenses. In addition, amounts
received in 2003 are net of a one–time repayment of $2.8 million,
due to a miscalculation by the U.S. Treasury Department, of funds
received by the company in 2002. CDSOA provides for distribution
of monies collected by U.S. Customs from antidumping cases to
qualifying domestic producers where the domestic producers have
continued to invest in their technology, equipment and people. In
2004, the CDSOA receipts of $44.4 million were net of the
amounts that Timken delivered to the seller of the Torrington
business, pursuant to the terms of the agreement under which
the company purchased Torrington. In 2003 and 2004, Timken
delivered to the seller of the Torrington business 80% of the
CDSOA payments received in 2003 and 2004 for Torrington’s
bearing business. Timken is under no further obligation to transfer
any CDSOA payments to the seller of the Torrington business. The
company cannot predict whether it will receive any additional
payments under CDSOA in 2005 or, if so, in what amount. If the
company does receive any additional CDSOA payments, they will
most likely be received in the fourth quarter. In September 2002,
the World Trade Organization (WTO) ruled that such payments
are inconsistent with international trade rules. The U.S. Trade
Representative appealed this ruling, but the WTO upheld the ruling
on January 16, 2003. CDSOA continues to be in effect in the
United States at this time. During 2004, the company sold certain non–strategic assets, which
included: real estate at its facility in Duston, England, which ceased operations in 2002, for a gain of $22.5 million; and the company’s
Kilian bearing business, which was acquired in the Torrington
acquisition, for a loss of $5.4 million. In 2003, the gain related
primarily to the sale of property in Daventry, England. In 2004, the company began the process of liquidating one of its
inactive subsidiaries, British Timken, which is located in Duston,
England. The company recorded a non–cash charge of $16.2 million
on dissolution, which related primarily to the transfer of cumulative
foreign currency translation losses to the statement of income. For 2004, “other expense, net” included losses on the disposal of
assets, losses from equity investments, foreign currency exchange
losses, donations, minority interests, and a non–cash charge for the
adoption of FASB Interpretation No. 46, “Consolidation of Variable
Interest Entities, an interpretation of Accounting Research Bulletin
No. 51” (FIN 46). For 2003, “other expense, net” included losses
from equity investments, losses on the disposal of assets, foreign
currency exchange gains, and minority interests. During 2000, the company’s Steel Group invested in a joint venture,
PEL Technologies (PEL), to commercialize a proprietary technology
that converts iron units into engineered iron oxide for use in
pigments, coatings and abrasives. The company previously
accounted for its investment in PEL, which is a development stage
company, using the equity method. In the fourth quarter of 2003,
the company concluded that its investment in PEL was impaired
and recorded a non–cash impairment charge totaling $45.7 million.
Refer to Note 12 – Equity Investments in the notes to consolidated
financial statements for additional discussion.

22

TIMKEN

Income Tax Expense:

2004		2003	$ Change	% Change
(Dollars in millions)
Income tax expense Effective tax rate	$ 64.1 32.1%	$ 24.3 40.0%	$ 39.8 –	163.8 % (7.9)%

Income tax expense for 2004 was positively impacted by tax
benefits relating to settlement of prior years’ liabilities, the changes
in the tax status of certain foreign subsidiaries, earnings of certain
subsidiaries being taxed at a rate less than 35%, benefits of tax
holidays in China and the Czech Republic, tax benefits from extra–territorial income exclusion, and the aggregate impact of certain
items of income that were not subject to income tax. These
benefits were partially offset by the establishment of a valuation
allowance against certain deferred tax assets associated with loss
carryforwards attributable to a subsidiary, which is in the process of
liquidation; state and local income taxes; and taxes incurred on
foreign remittances. Management does not anticipate that the
extent of the tax benefits relating to settlement of prior years’
liabilities, the tax benefit from changes in tax status of foreign
subsidiaries, and the tax charges associated with the establishment
of the valuation allowance attributable to the subsidiary that is
being liquidated will recur in the near future. The effective
tax rate for 2003 exceeded the U.S. statutory tax rate as a result
of state and local income taxes, withholding taxes on foreign
remittances, losses incurred in foreign jurisdictions that were not available to reduce overall tax expense, and the aggregate effect
of certain nondeductible expenses. The unfavorable tax rate
adjustments were partially mitigated by benefits from extraterritorial
income. On October 22, 2004, the President signed the American Jobs
Creation Act of 2004 (the Jobs Act). The Jobs Act creates a
temporary incentive for U.S. corporations to repatriate accumulated
income earned abroad by providing an 85% dividends received
deduction for certain dividends from controlled foreign corpora–
tions. This deduction is subject to a number of limitations. As
such, the company is not yet in a position to decide on whether,
and to what extent, it might repatriate foreign earnings that have
not yet been remitted to the U.S. The company expects to finalize
its assessment by June 30, 2005. The Jobs Act also contains a
provision that will enable the company to deduct 3%, increasing to
9% by year 2010, of the income derived from certain manufactur–
ing operations. Due to its net operating loss carryforward position,
the company does not anticipate achieving any benefit from this
provision in 2005.

Business Segments:

The primary measurement used by management to measure the
financial performance of each Group is adjusted EBIT (earnings
before interest and taxes, excluding the effect of amounts related
to certain items that management considers not representative of
ongoing operations such as impairment and restructuring, integra–
tion costs, one–time gains or losses on sales of assets, allocated receipts received or payments made under the CDSOA, loss on the
dissolution of subsidiary, and acquisition–related currency exchange
gains). Refer to Note 14 – Segment Information in the notes to
consolidated financial statements for the reconciliation of adjusted
EBIT by Group to consolidated income before income taxes.

Automotive Group:

2004		2003	$ Change	% Change
(Dollars in millions)
Net sales, including intersegment sales Adjusted EBIT Adjusted EBIT margin	$ 1,582.2 $ 15.9 1.0%	$ 1,396.1 $ 15.7 1.1%	$ 186.1 $ 0.2 –	13.3 % 1.3 % (0.1)%

The Automotive Group includes sales of bearings and other
products and services (other than steel) to automotive original
equipment manufacturers. The Automotive Group’s net sales in
2004 benefited from increased light vehicle penetration from new
products, strong medium and heavy truck production and favorable
foreign currency translation. Sales for light vehicle applications
increased, despite lower vehicle production in North America.
Medium and heavy truck demand continued to be strong primarily
due to a 37% increase in North American vehicle production.
A portion of the net sales increase was attributable to the acquisition
of Torrington. The Automotive Group’s profitability in 2004
benefited from higher sales and strong operating performance,
but was negatively impacted by higher raw material costs. The
Automotive Group expects to improve its ability to recover these
higher raw material costs in the future as multi–year contracts
mature. In 2005, the company expects that North American and
European vehicle production will be down slightly and medium and
heavy truck production will grow, but at a lower rate than in 2004.

23

TIMKEN

Industrial Group:

2004		2003	$ Change	% Change
(Dollars in millions)
Net sales, including intersegment sales Adjusted EBIT Adjusted EBIT margin	$ 1,711.2 $ 177.9 10.4%	$ 1,499.7 $ 128.0 8.5%	$ 211.5 $ 49.9 –	14.1% 39.0% 1.9%

Sales by the Industrial Group include global sales of bearings and
other products and services (other than steel) to a diverse customer
base, including: industrial equipment; construction and agriculture;
rail; and aerospace and defense customers. The Industrial Group
also includes aftermarket distribution operations for products other
than steel. The Industrial Group’s net sales in 2004 increased
due to higher demand, increased prices and favorable foreign cur–
rency translation. Many end markets recorded substantial growth,
especially construction, agriculture, rail, and general industrial
equipment. A portion of the net sales increase was attributable to the acquisition of Torrington. Sales to distributors increased slightly
in 2004, as distributors reduced their inventories of Torrington–
branded products. The company expects this inventory reduction
to continue in 2005. In addition to the increased sales volume,
profit for the Industrial Group benefited from operating cost
improvements and price increases. The company has seen a rapid
increase in industrial demand and anticipates strong demand
through 2005. The company continues to focus on increasing
capacity, improving customer service, and exploring global growth
initiatives.

Steel Group:

2004		2003	$ Change	% Change
(Dollars in millions)
Net sales, including intersegment sales Adjusted EBIT (loss) Adjusted EBIT (loss) margin	$ 1,383.6 $ 54.8 4.0%	$ 1,026.5 $ (6.0) (0.6)%	$ 357.1 $ 60.8 –	34.8% – –

The Steel Group’s products include steels of intermediate alloy, low
alloy and carbon grades in both solid and tubular sections, as well
as custom–made steel products, for both industrial and automotive
applications, including bearings. The increase in the Steel Group’s
net sales in 2004 resulted primarily from surcharges and price
increases, which were driven by higher raw material costs, as well
as increased volume. Demand increased across all steel customer
segments, led by strong industrial market growth. The strongest
customer segments for the Steel Group were oil production,
aerospace and general industrial customers. The Steel Group’s
profitability improved significantly in 2004 due to volume, raw
material surcharges and price increases. Raw material costs,
especially scrap steel prices, increased over 2003. The company recovered these cost increases primarily through surcharges. The
Steel Group operated at near capacity during much of 2004, which
the company expects to continue into 2005. Even though the
company anticipates raw material costs to remain high through
2005, the company expects improved earnings with price increases
in contracts effective for 2005. During the second quarter of 2004, the company’s Faircrest steel
facility was shut down for 10 days to clean up contamination from
a material commonly used in industrial gauging. This material
entered the facility from scrap steel provided by one of its suppliers.
In 2004, the company recovered all of the clean–up, business
interruption and disposal costs in excess of $4 million of insurance
deductibles.

24

TIMKEN

2003 compared to 2002

Overview:

2003		2002	$ Change	% Change
(Dollars in millions, except earnings per share)
Net sales Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle, net of tax Net income Earnings per share before cumulative effect of change in         accounting principle – diluted Cumulative effect of change in accounting principle, net of tax Earnings per share – diluted Average number of shares – diluted	$ 3,788.1 $ 36.5 $ – $ 36.5 $ 0.44 $ – $ 0.44 83,159,321	$ 2,550.1 $ 51.4 $ (12.7) $ 38.7 $ 0.83 $ (0.21) $ 0.62 61,635,339	$ 1,238.0 $ (14.9) $ 12.7 $ (2.2) $ (0.39) $ 0.21 $ (0.18) –	48.6 % (29.1)% – (5.9)% (47.0)% – (29.0)% 34.9 %

In 2002, the cumulative effect of change in accounting principle related to the adoption of SFAS No. 142, “Goodwill and Other Intangible
Assets.” The goodwill impairment charge related to the company’s Specialty Steel business.

Sales by Segment:

2003		2002	$ Change	% Change
(Dollars in millions, and exclude intersegment sales)
Automotive Group Industrial Group Steel Group	$ 1,396.1 1,498.8 893.2	$ 752.8 971.5 825.8	$ 643.3 527.3 67.4	85.5% 54.3% 8.2%
Total company	$ 3,788.1	$ 2,550.1	$ 1,238.0	48.6%

The increases in net sales in 2003 for both the Automotive and the
Industrial Groups were primarily the result of the Torrington acquisition. The Automotive Group’s net sales further benefited from
the launch of new product platforms, the increasing demand in the
medium and heavy truck segments, and favorable foreign currency
translation. In addition to the effect of the Torrington acquisition, the Industrial Group’s net sales increased in 2003 due to favorable
foreign currency translation and improved sales to industrial distrib–utors. The increase in the Steel Group’s net sales in 2003 was due primarily to penetration gains in industrial markets and increased
demand from automotive and industrial customers.

Gross Profit:

2003		2002	$ Change	% Change
(Dollars in millions)
Gross profit Gross profit % to net sales Reorganization and integration charges included in cost of products sold	$ 639.1 16.9% $ 3.4	$ 469.6 18.4% $ 8.5	$ 169.5 – $ (5.1)	36.1% (1.5)% (60.0)%

Gross profit increased in 2003, primarily due to the incremental
sales volume from the Torrington acquisition. Gross profit for the
Automotive Group benefited in 2003 from the additional sales
volume, resulting from the Torrington acquisition; however, it was
negatively impacted by additional costs associated with the restruc–turing of its manufacturing plants. During the last six months of
2003, the Automotive Group reduced employment by more than
750 associates. This action, along with others, improved the
Automotive Group’s productivity in the fourth quarter of 2003. In
addition to the increased sales volume from the Torrington acquisi–
tion, gross profit for the Industrial Group benefited in 2003 from
improved performance in Europe that was largely due to favorable
foreign currency exchange, exiting of low–margin businesses and manufacturing cost reductions. Steel Group gross profit in 2003
was negatively impacted by extremely high costs for scrap steel,
natural gas and alloys, which more than offset increased sales, raw
material surcharges passed on to customers and higher capacity
utilization. In 2003, reorganization and integration charges included in cost of
products sold related primarily to the integration of Torrington in the
amount of $9.3 million and costs incurred for the Duston, England
plant closure in the amount of $4.0 million. These charges were
partially offset by curtailment gains in the amount of $9.9 million,
resulting from the redesign of the company’s U.S.–based employee
benefit plans.

25

TIMKEN

Selling, Administrative and General Expenses:

2003		2002	$ Change	% Change
(Dollars in millions)
Selling, administrative and general expenses Selling, administrative and general expenses % to net sales Reorganization and integration charges included in selling,         administrative and general expenses	$ 521.7 13.8% $ 30.5	$ 358.9 14.1% $ 9.9	$ 162.8 – $ 20.6	45.4 % (0.3)% 208.0 %

Selling, administrative and general expenses in 2003 increased
primarily due to the Torrington acquisition, costs incurred in
the integration of Torrington and currency exchange rates. Even
though the amount of selling, administrative and general expenses
in 2003 increased from 2002 as a result of higher net sales, selling,
administrative and general expenses as a percentage of net sales
decreased to 13.8% in 2003 from 14.1% in 2002. In 2003, reorganization and integration charges included in selling,
administrative and general expenses reflected integration costs for
the Torrington acquisition of $27.6 million and curtailment losses
resulting from the redesign of the company’s U.S.–based employee
benefit plans of $2.9 million.

Impairment and Restructuring Charges:

2003		2002	$ Change
(Dollars in millions)
Impairment charges Severance and related benefit costs Exit costs	$ 12.5 2.9 3.7	$ 17.9 10.2 4.0	$ (5.4) (7.3) (0.3)
Total	$ 19.1	$ 32.1	$ (13.0)

In 2003, impairment charges represented the write–off of
the remaining goodwill for the Steel Group in accordance with
SFAS No. 142, “Goodwill and Other Intangible Assets,” of
$10.2 million and impairment charges for the Columbus, Ohio
plant of $2.3 million. The severance and related benefit costs of
$2.9 million related to associates who exited the company as a
result of the integration of Torrington and other actions taken by
the company to reduce costs. The exit costs were comprised of
$3.0 million for the Columbus, Ohio plant and $0.7 million for the Duston, England plant. The Duston and Columbus plants were
closed as part of the company’s MSI program in 2001. The addition–
al costs that were incurred in 2003 for these two projects were the
result of changes in estimates. In 2002, the impairment charges
and exit costs were related to the Duston, England and Columbus,
Ohio plant closures. The severance and curtailment expenses
related primarily to a salaried workforce reduction throughout the
company.

Interest Expense and Income:

2003		2002	$ Change
(Dollars in millions)
Interest expense Interest income	$ 48.4 $ 1.1	$ 31.5 $ 1.7	$ 16.9 $ (0.6)

The increase in interest expense in 2003 was due to the additional debt incurred as a result of the Torrington acquisition. Interest income
was not significant in either year.

26

TIMKEN

Other Income and Expense:

2003		2002	$ Change
(Dollars in millions)
CDSOA receipts, net of expenses Impairment charge – equity investment Other expense, net	$ 65.6 $ (45.7) $ (10.0)	$ 50.2 $ – $ (13.4)	$ 15.4 $ (45.7) $ 3.4

CDSOA receipts are reported net of applicable expenses. In addi–
tion, amounts received in 2003 are net of a one–time repayment,
due to a miscalculation by the U.S. Treasury Department of funds
received by the company in 2002. The amounts received in 2003
related to the original Timken tapered roller, ball and cylindrical
bearing businesses and the Torrington tapered roller bearing
business. Pursuant to the terms of the agreement under which the
company purchased the Torrington business, Timken must deliver
to the seller of the Torrington business 80% of any CDSOA
payments received in 2003 and 2004 related to the Torrington
business. During 2000, the company’s Steel Group invested in PEL to
commercialize a proprietary technology that converts iron units into
engineered iron oxide for use in pigments, coatings and abrasives.
The company previously accounted for its investment in PEL,
which is a development stage company, using the equity method.
In the fourth quarter of 2003, the company concluded that its investment in PEL was impaired due to the following indicators
of impairment: history of negative cash flow and losses; 2004 oper–
ating plan with continued losses and negative cash flow; and the
continued required support from the company or another party.
Accordingly, the company recorded a non–cash impairment charge
totaling $45.7 million, which is comprised of the PEL indebtedness
that the company has guaranteed of $26.5 million and the write–off
of the advances to and investments in PEL that the company has
made of $19.2 million. In 2003, “other expense, net” included losses from other equity
investments, losses from the sale of assets, foreign currency
exchange gains (including acquisition–related currency exchange
gains), and one–time net gains from the sales of non–strategic
assets. In 2002, “other expense, net” included foreign currency
exchange losses, losses on the disposal of assets and losses from
equity investments.

Income Tax Expense:

The effective tax rate was 40.0% for the years ended December
31, 2003 and 2002. The effective tax rate for both years exceeded
the U.S. statutory tax rate, as a result of taxes paid to state and
local jurisdictions, withholding taxes on foreign remittances,
recognition of losses in jurisdictions that were not available to reduce overall tax expense, additional taxes on foreign income, and
the aggregate effect of other permanently non–deductible expenses.
The unfavorable tax rate adjustments were partially mitigated by
benefits from extraterritorial income.

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TIMKEN

Business Segments:

Automotive Group:

2003		2002	$ Change	% Change
(Dollars in millions)
Net sales, including intersegment sales Adjusted EBIT Adjusted EBIT margin	$ 1,396.1 $ 15.7 1.1%	$ 752.8 $ 11.1 1.5%	$ 643.3 $ 4.6 –	85.5 % 41.4 % (0.4)%

The Automotive Group includes sales of bearings and other products
and services (other than steel) to automotive original equip–
ment manufacturers. The increase in sales between years was
primarily the result of the acquisition of Torrington. Strengthening
medium and heavy truck markets, new product introductions and
favorable foreign currency exchange rates further benefited the
Automotive Group’s net sales. The Automotive Group’s results in 2003 reflected higher costs due to issues in the execution of the
restructuring of its automotive plants and expenditures related to
new ventures in China and a U.S.–based joint venture, Advanced
Green Components. However, the Automotive Group began to see
some improvement from the rationalization initiatives in the fourth
quarter of 2003.

Industrial Group:

2003		2002	$ Change	% Change
(Dollars in millions)
Net sales, including intersegment sales Adjusted EBIT Adjusted EBIT margin	$ 1,499.7 $ 128.0 8.5%	$ 971.5 $ 73.0 7.5%	$ 528.2 $ 55.0 –	54.4% 75.2% 1.0%

Sales by the Industrial Group include global sales of bearings and
other products and services (other than steel) to a diverse customer
base, including: industrial equipment; off–highway; rail; and aero–space and defense customers. The Industrial Group also includes
the financial results for Timken’s aftermarket distribution operations
for products other than steel. The sales increase between years
was primarily the result of the acquisition of Torrington. Many of the markets served by the Industrial Group remained relatively flat
during 2003. The Industrial Group benefited from improved
performance in Europe that was largely due to favorable foreign
currency exchange rates and improved results in the rail business,
strong aftermarket sales to industrial distributors, exiting of
low–margin business, and manufacturing cost reductions.

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Steel Group:

2003		2002	$ Change	% Change
(Dollars in millions)
Net sales, including intersegment sales Adjusted EBIT (loss) Adjusted EBIT (loss) margin	$ 1,026.5 $ (6.0) (0.6)%	$ 981.3 $ 32.5 3.3%	$ 45.2 $ (38.5) –	4.6% – –

The increase in the Steel Group’s net sales was primarily the result
of penetration gains in industrial markets and increased demand
from automotive and industrial customers, partially offset by lower
intersegment sales. The Steel Group’s results were negatively impacted by extremely high costs for scrap steel, natural gas and
alloys, partially offset by increased sales, higher capacity utilization,
implementation of new raw material surcharges and price increases.

The Balance Sheet
Total assets as shown on the Consolidated Balance Sheet at December 31, 2004 increased by $248.7 million from December 31, 2003.
This increase was due primarily to increased working capital required to support higher sales.

Current Assets:

12/31/04		12/31/03	$ Change	% Change
(Dollars in millions)
Cash and cash equivalents Accounts receivable, net Deferred income taxes Inventories	$ 51.0 717.4 90.1 874.8	$ 28.6 602.3 50.3 695.9	$ 22.4 115.1 39.8 178.9	78.3% 19.1% 79.1% 25.7%
Total current assets	$ 1,733.3	$ 1,377.1	$ 356.2	25.9%

The increase in cash and cash equivalents in 2004 was partially due
to accumulated cash at certain debt–free foreign subsidiaries. Refer
to the Consolidated Statement of Cash Flows for further explana–
tion. The increase in accounts receivable, net was due primarily to
sales being higher in the fourth quarter of 2004, compared to the fourth quarter of 2003. The increase in deferred income taxes
related primarily to a reclassification of the benefit of certain
loss carryforwards from non–current deferred income taxes. The
increase in inventories was due primarily to increased volume and
higher raw material costs.

Property, Plant and Equipment – Net:

12/31/04		12/31/03	$ Change	% Change
(Dollars in millions)
Property, plant and equipment – cost Less: allowances for depreciation	$ 3,622.2 (2,039.2)	$ 3,503.8 (1,893.0)	$ 118.4 (146.2)	3.4 % (7.7)%
Property, plant and equipment – net	$ 1,583.0	$ 1,610.8	$ (27.8)	(1.7)%

The decrease in property, plant and equipment – net in 2004 was due primarily to depreciation expense in excess of capital expenditures.

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TIMKEN

Other Assets:

12/31/04		12/31/03	$ Change	% Change
(Dollars in millions)
Goodwill Other intangible assets Intangible pension assets Miscellaneous receivables and other assets Deferred income taxes Deferred charges and prepaid expenses	$ 189.3 86.0 92.9 138.5 76.8 38.8	$ 173.1 91.5 106.5 130.1 148.8 51.8	$ 16.2 (5.5) (13.6) 8.4 (72.0) (13.0)	9.4 % (6.0)% (12.8)% 6.5 % (48.4)% (25.1)%
Total other assets	$ 622.3	$ 701.8	$ (79.5)	(11.3)%

The increase in goodwill in 2004 was due primarily to the finaliza–
tion of the purchase price allocation for the Torrington acquisition.
Goodwill resulting from the Torrington acquisition was $56.9 million
at December 31, 2004, compared to $47.0 million at December 31,
2003. During 2004, the Industrial Group completed two small acquisitions, which increased goodwill by $3.7 million. The
decrease in deferred income taxes related primarily to a reclassifi–
cation of certain loss carryforwards to current deferred income
taxes.

Current Liabilities:

12/31/04		12/31/03	$ Change	% Change
(Dollars in millions)
Short–term debt Accounts payable and other liabilities Salaries, wages and benefits Income taxes Current portion of long–term debt	$ 157.4 520.2 343.4 19.0 1.3	$ 114.5 425.2 376.6 78.5 6.7	$ 42.9 95.0 (33.2) (59.5) (5.4)	37.5 % 22.3 % (8.8)% (75.8)% (80.6)%
Total current liabilities	$ 1,041.3	$ 1,001.5	$ 39.8	4.0%

The increase in short–term debt in 2004 was due primarily to addi–
tional borrowings as a result of working capital requirements due to
increased volume and cash contributions to its U.S.–based pension
plans. The increase in accounts payable and other liabilities was
due primarily to an increase in trade accounts payable, resulting
from increased production volume. The decrease in salaries,
wages and benefits was due primarily to a decrease in the current portion of accrued pension cost, based upon the company’s
estimate of contributions to its pension plans in the next twelve
months, partially offset by higher accruals for performance–based
compensation. The decrease in income taxes was due primarily to
the payment of capital gains tax, resulting from the 2003 sale of an
interest in a joint venture and the settlement of taxes from prior
year liabilities.

Non–Current Liabilities:

12/31/04		12/31/03	$ Change	% Change
(Dollars in millions)
Long–term debt Accrued pension cost Accrued postretirement benefits cost Other non–current liabilities	$ 620.6 468.6 490.4 47.7	$ 613.4 477.5 477.0 30.8	$ 7.2 (8.9) 13.4 16.9	1.2 % (1.9)% 2.8 % 54.9 %
Total non–current liabilities	$ 1,627.3	$ 1,598.7	$ 28.6	1.8%

The decrease in accrued pension cost in 2004 was due primarily to plan contributions, partially offset by current year accruals for pen–
sion expense and an increase in the minimum pension liability. Refer to Note 13 – Retirement and Postretirement Benefit Plans
in the notes to consolidated financial statements for additional
discussion.

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TIMKEN

Shareholders’ Equity:

12/31/04		12/31/03	$ Change	% Change
(Dollars in millions)
Common stock Earnings invested in the business Accumulated other comprehensive loss Treasury shares	$ 711.8 847.7 (289.5) (0.2)	$ 689.3 758.9 (358.4) (0.2)	$ 22.5 88.8 68.9 –	3.3% 11.7% 19.2% –
Total shareholders’ equity	$ 1,269.8	$ 1,089.6	$ 180.2	16.5%

Earnings invested in the business were increased in 2004 by net
income, partially offset by dividends declared. The decrease in
accumulated other comprehensive loss was due primarily to an
increase in the foreign currency translation adjustment, partially
offset by an increase in the minimum pension liability. The increase
in the foreign currency translation adjustment was due primarily to
the strengthening of the Euro, Polish Zloty, Romanian Leu, and the
Canadian Dollar relative to the U.S. Dollar and the write–off of the cumulative foreign currency translation adjustment loss, resulting
from the dissolution of one of the company’s inactive subsidiaries,
British Timken. During 2004, the American Institute of Certified
Public Accountants SEC Regulations Committee’s International
Practices Task Force concluded that Romania should come off
highly inflationary status no later than October 1, 2004. Effective
October 1, 2004, the company no longer accounted for Timken
Romania as highly inflationary.

Cash Flows

2004		2003	$ Change
(Dollars in millions)
Net cash provided by operating activities Net cash (used) by investing activities Net cash (used) provided by financing activities Effect of exchange rate changes on cash Increase (decrease) in cash and cash equivalents	$ 139.1 $ (108.6) $ (20.4) $ 12.2 $ 22.3	$ 204.9 $ (665.0) $ 401.9 $ 4.8 $ (53.4)	$ (65.8) $ 556.4 $ (422.3) $ 7.4

Net cash provided by operating activities was negatively impacted
by higher cash contributions to the company’s pension plans in
2004 of $197.0 million ($185.0 million for U.S.–based plans),
compared to $174.0 million ($168.9 million for U.S.–based plans) in
2003. Net cash provided by operating activities was also negatively
impacted by cash used for other changes in operating assets and
liabilities of $90.1 million in 2004, compared to cash provided of
$65.5 million in 2003, which was primarily the result of working
capital requirements for increased sales volume and the payment
in 2004 of capital gains tax, resulting from the 2003 sale of an
interest in a joint venture. These net cash outflows were partially
offset by higher net income, adjusted for non–cash items equaling
$426.2 million in 2004, compared to $313.4 in 2003. The non–cash
items included depreciation and amortization expense, gain or loss
on disposals of assets, loss on dissolution of subsidiary, impairment charges, deferred income tax provision, and common stock issued
in lieu of cash to employee benefit plans. The decrease in net cash used by investing activities was the result
of the cash portion of the Torrington acquisition of $725.1 million in
2003. Proceeds from the sale of non–strategic assets were
$50.7 million and $152.3 million in 2004 and 2003, respectively.
Purchases of property, plant and equipment – net of $155.2 million
in 2004 increased from $118.5 million in 2003. In 2004, net cash used by financing activities related primarily to
dividends paid, partially offset by net borrowings on the company’s
credit facilities. In 2003, net cash provided by financing activities
related primarily to the additional debt incurred and common stock
issued in connection with the Torrington acquisition and the public
equity offerings of the company’s common stock, partially offset by
dividends paid and net payments on the company’s credit facilities.

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Liquidity and Capital Resources

Total debt was $779.3 million at December 31, 2004, compared to
$734.6 million at December 31, 2003. Net debt was $728.4 million
at December 31, 2004, compared to $706.0 million at December
31, 2003. The net debt to capital ratio was 36.5% at December 31,
2004, compared to 39.3% at December 31, 2003. The company
expects that any cash requirements in excess of cash generated
from operating activities will be met by the availability under its
accounts receivable securitization facility and its senior credit facility. At December 31, 2004, the company had outstanding
letters of credit totaling $71.0 million and borrowings of
$10.0 million under the $500 million senior credit facility, which
reduced the availability under that facility to $419.0 million. Also, at
December 31, 2004, the company had no outstanding borrowings
under the $125 million accounts receivable securitization facility.
The company believes it has sufficient liquidity to meet its
obligations through 2005.

Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital:
Net debt:

12/31/04		12/31/03
(Dollars in millions)
Short–term debt Current portion of long–term debt Long–term debt	$ 157.4 1.3 620.6	$ 114.5 6.7 613.4
Total debt Less: cash and cash equivalents	779.3 (50.9)	734.6 (28.6)
Net debt	$ 728.4	$ 706.0

Ratio of net debt to capital:

12/31/04		12/31/03
(Dollars in millions)
Net debt Shareholders’ equity	$ 728.4 1,269.8	$ 706.0 1,089.6
Net debt + shareholders’ equity (capital)	$ 1,998.2	$ 1,795.6
Ratio of net debt to capital	36.5%	39.3%

The company presents net debt because it believes net debt is
more representative of the company’s indicative financial position
due to a temporary increase in cash and cash equivalents. Under its $500 million senior credit facility, the company has three
financial covenants: consolidated net worth; leverage ratio; and
fixed charge coverage ratio. At December 31, 2004, the company
was in full compliance with the covenants under its senior credit
facility and its other debt agreements. In January 2004, Standard & Poor’s Rating Services reaffirmed its
BBB– corporate credit rating on the company. In October 2003,
Moody’s Investors Services lowered its rating of the company’s
debt from Baa3 to Ba1. The ratings apply to the company’s senior
unsecured debt and senior implied and senior unsecured issuer
ratings. The impact of the lowered ratings by Moody’s on the
company’s earnings has been minimal, with only a slight increase in
the cost of the company’s senior credit facility.

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The company’s contractual debt obligations and contractual commitments outstanding as of December 31, 2004 are as follows:

Payments due by Period

Contractual Obligations	Total	Less than 1 Year	1–3 Years	3–5 Years	More than 5 Years
(Dollars in millions)
Long–term debt Short–term debt Operating leases Supply agreement	$ 621.9 157.4 109.7 7.5	$ 1.3 157.4 19.3 5.2	$ 101.2 – 33.9 2.3	$ 27.3 – 23.3 –	$ 492.1 – 33.2 –
Total	$896.5	$ 183.2	$ 137.4	$ 50.6	$ 525.3

The company expects to make cash contributions of $135.0 million
to its defined benefit pension plans in 2005. Refer to Note 13 –
Retirement and Postretirement Benefit Plans in the notes to
consolidated financial statements. In connection with the sale of
the company’s Ashland tooling plant in 2002, the company entered
into a $25.9 million four–year supply agreement, pursuant to which
the company purchases tooling, which expires on June 30, 2006. During 2004, the company did not purchase any shares of its
common stock as authorized under the company’s 2000 common stock purchase plan. This plan authorizes the company to buy in
the open market or in privately negotiated transactions up to four
million shares of common stock, which are to be held as treasury
shares and used for specified purposes. The company may
exercise this authorization until December 31, 2006. The company
does not expect to be active in repurchasing its shares under this
plan in the near–term. The company does not have any off–balance sheet arrangements
with unconsolidated entities or other persons.

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Other Information
Recent Accounting Pronouncements:

In November 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 151, “Inventory Costs, an amendment of
ARB 43, Chapter 4.” SFAS No. 151 requires certain inventory costs
to be recognized as current period expenses. SFAS No. 151 also
provides guidance for the allocation of fixed production costs. This
standard is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. Accordingly, the company will adopt
this standard in 2006. The company has not yet determined the
impact, if any, SFAS No. 151 will have on its results of operations,
cash flows and financial position. In December 2004, the FASB issued SFAS No. 123R, “Share–Based
Payment.” SFAS No. 123R is a revision of SFAS No. 123,
“Accounting for Stock–Based Compensation,” which supersedes
Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees” and amends SFAS No. 95, “Statement
of Cash Flows.” Generally, the approach to accounting for share–
based payments in SFAS No. 123R is similar to the approach
described in SFAS No. 123. However, SFAS No. 123R requires all
share–based payments to employees, including grants of employee
stock options, to be recognized in the consolidated statement of
income based on their fair values. Pro forma disclosure is no longer
an alternative. SFAS No. 123R is effective for the first reporting
period, beginning after June 15, 2005. Early adoption is permitted.
The company expects to adopt the provisions of SFAS No. 123R,
effective July 1, 2005. SFAS No. 123R permits public companies to adopt its requirements
using either the “modified prospective” method or “modified retro–spective” method. Under the “modified prospective” method,
compensation cost is recognized, beginning with the effective date
(a) based on the requirements of SFAS No. 123R for all share–based
payments granted after the effective date and (b) based on the
requirements of SFAS No. 123 for all awards granted to employees
prior to the effective date of SFAS No. 123R that remain unvested
on the effective date. The “modified retrospective” method
includes the requirements of the “modified prospective” method,
but also permits entities to restate based on the amounts previously
recognized under SFAS No. 123 for purposes of pro forma
disclosures either all periods presented or prior interim periods of the year of adoption. The company plans to adopt SFAS No. 123R
using the “modified prospective” method. As permitted by SFAS 123, the company currently accounts for
share–based payments to employees using APB Opinion No. 25’s
intrinsic value method and, as such, generally recognizes no
compensation cost for employee stock options. Accordingly, the
adoption of SFAS No. 123R’s fair value method may have a
significant impact on the company’s results of operations, although
it will have no impact on the company’s overall financial position.
The impact of adoption of SFAS No. 123R cannot be predicted at
this time because it will depend on levels of share–based payments
granted in the future. However, had the company adopted SFAS
No. 123R in prior periods, the impact of that standard would have
approximated the impact of SFAS No. 123 as described in the
disclosure of pro forma net income and earnings per share in Note
1 to the company’s consolidated financial statements. SFAS No.
123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash
flow, rather than as an operating cash flow as required under
current literature. This requirement will reduce net operating cash
flows and increase net financing cash flows in periods after adop–
tion. While the company cannot estimate what those amounts will
be in the future (because they depend on, among other things,
when employees exercise stock options), the amount of operating
cash flows recognized in prior periods for such excess tax
deductions were $3.1 million, $1.1 million and $0 in 2004, 2003 and
2002, respectively. Critical Accounting Policies and Estimates:
The company’s financial statements are prepared in accordance
with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the periods presented. The following paragraphs include a
discussion of some critical areas that require a higher degree of
judgment, estimates and complexity. Revenue recognition:
The company’s revenue recognition policy is to recognize revenue
when title passes to the customer. This occurs at the shipping

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TIMKEN

point, except for certain exported goods, for which it occurs when
the goods reach their destination. Selling prices are fixed, based
on purchase orders or contractual arrangements. Write–offs of
accounts receivable historically have been low. Goodwill:
SFAS No. 142, “Goodwill and Other Intangible Assets” requires
that goodwill and indefinite–lived intangible assets be tested for
impairment at least annually. Furthermore, goodwill is reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. The company
engages an independent valuation firm and performs its annual
impairment test during the fourth quarter after the annual forecasting
process is completed. In 2004, since the fair values of the
company’s reporting units exceeded their carrying values, no
impairment loss was recognized. However, in 2003 and 2002, the
carrying values of the company’s Steel reporting units exceeded
their fair values. As a result, impairment losses of $10.2 million and
$20.5 million, respectively, were recognized. Refer to Note 8 –
Goodwill and Other Intangible Assets in the notes to consolidated
financial statements. Restructuring costs:
For exit and disposal activities that are initiated after December 31,
2002, the company’s policy is to recognize restructuring costs in
accordance with SFAS No. 146, “Accounting for Costs Associated
with Exit or Disposal Activities” or Emerging Issues Task Force
Issue No. 94–3, “Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)” for exit and disposal
activities that are initiated prior to or on December 31, 2002, and
the SEC Staff Accounting Bulletin No. 100, “Restructuring and
Impairment Charges.” Detailed contemporaneous documentation
is maintained and updated on a monthly basis to ensure that
accruals are properly supported. If management determines that
there is a change in estimate, the accruals are adjusted to reflect
this change. Benefit plans:
The company sponsors a number of defined benefit pension
plans, which cover eligible associates. The company also sponsors
several unfunded postretirement plans that provide health care and
life insurance benefits for eligible retirees and dependents. The measurement of liabilities related to these plans is based
on management’s assumptions related to future events, including
discount rate, return on pension plan assets, rate of compensation
increases and health care cost trend rates. The discount rate is
determined using a model that matches corporate bond securities
against projected future pension and postretirement disburse–
ments. Actual pension plan asset performance either reduces
or increases net actuarial gains or losses in the current year, which
ultimately affects net income in subsequent years. For expense purposes in 2004, the company applied a discount rate
of 6.3% and an expected rate of return of 8.75% for the company’s
pension plan assets. For 2005 expense, the company reduced the
discount rate to 6.0%. The assumption for expected rate of return
on plan assets was not changed from 8.75% for 2005. The lower
discount rate will result in an increase in 2005 pretax pension
expense of approximately $5.0 million. A 0.25% reduction in the
discount rate would increase pension expense by approximately
$4.9 million for 2005. A 0.25% reduction in the expected rate
of return would increase pension expense by approximately
$3.9 million for 2005. During 2003, the company made revisions, which became effective
on January 1, 2004, to certain of its benefit programs for its
U.S.–based employees resulting in a pretax curtailment gain of
$10.7 million. Depending on an associate’s combined age and
years of service with the company on January 1, 2004, defined
benefit pension plan benefits were reduced or replaced by a new
defined contribution plan. The company will no longer subsidize
retiree medical coverage for those associates who did not meet a
threshold of combined age and years of service with the company
on January 1, 2004. For measurement purposes for postretirement benefits, the company
assumed a weighted–average annual rate of increase in the
per capita cost (health care cost trend rate) for medical benefits of
10.0% for 2005, declining gradually to 5.0% in 2010 and thereafter;
and 12.75% for 2005, declining gradually to 6.0% in 2014 and there–
after for prescription drug benefits. The assumed health care cost
trend rate may have a significant effect on the amounts reported. A
one–percentage–point increase in the assumed health care cost

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TIMKEN

trend rate would have increased the 2004 total service and interest
components by $1.8 million and would have increased the postre–tirement obligation by $29.7 million. A one–percentage–point
decrease would provide corresponding reductions of $1.6 million
and $26.8 million, respectively. The U.S. Medicare Prescription Drug Improvement and
Modernization Act of 2003 (the Medicare Act) was signed into law
on December 8, 2003. The Medicare Act provides for prescription
drug benefits under Medicare Part D and contains a subsidy to plan
sponsors who provide “actuarially equivalent” prescription plans.
The company believes that it offers “actuarially equivalent”
prescription plans. In May 2004, the FASB issued FASB Staff
Position No. FAS 106–2, “Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003” (FSP 106–2). During the three months
ended September 30, 2004, the company adopted retroactively
FSP 106–2. The effect of the Medicare Act has been measured as
of December 31, 2003 and is now reflected in the company’s
consolidated financial statements and accompanying notes. The
effects of the Medicare Act are reductions to the accumulated
postretirement benefit obligation of $30.7 million and to the net
periodic postretirement benefit cost of $4.1 million. No Medicare
subsidies were received in 2004. Income taxes:
SFAS No. 109, “Accounting for Income Taxes,” requires that a
valuation allowance be established when it is more likely than not
that all or a portion of a deferred tax asset will not be realized. The
company estimates actual current tax due and assesses temporary differences resulting from the treatment of items for tax and
accounting purposes. These differences result in deferred tax
assets and liabilities that are included within the consolidated
balance sheet. Based on known and projected earnings information
and prudent tax planning strategies, the company then assesses
the likelihood that the deferred tax assets will be recovered. To the
extent that the company believes recovery is not likely, a valuation
allowance is established. In the event that the company
determines the realizability of deferred tax assets in the future is in
excess of the net recorded amount, an adjustment to the deferred
tax asset would increase income in the period in which such
determination was made. Likewise, if the company determines
that it is unlikely that all or part of the net deferred tax asset will be
realized in the future, an adjustment to the deferred tax asset would
be charged to expense in the period in which such determination
was made. Net deferred tax assets relate primarily to pension and
postretirement benefits and tax loss and credit carryforwards,
which the company believes will result in future tax benefits.
Significant management judgment is required in determining the
provision for income taxes, deferred tax assets and liabilities, and
any valuation allowance recorded against net deferred tax assets.
Historically, actual results have not differed significantly from those
determined using the estimates described above. Other Matters:
Changes in short–term interest rates related to several separate
funding sources impact the company’s earnings. These sources are
borrowings under an accounts receivable securitization program,
borrowings under the $500 million senior credit facility, floating rate
tax–exempt U.S. municipal bonds with a weekly reset mode, and
short–term bank borrowings at international subsidiaries. The
company is also sensitive to market risk for changes in interest
rates as they influence $80 million of debt that has been hedged by
interest rate swaps. In the first quarter of 2004, the company
entered into interest rate swaps with a total notional value of

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TIMKEN

$80 million to hedge a portion of its fixed–rate debt. Under the
terms of the interest rate swaps, the company receives interest at
fixed rates and pays interest at variable rates. The maturity dates
of the interest rate swaps are January 15, 2008 and February 15,
2010. If the market rates for short–term borrowings increased by
1% around the globe, the impact would be an increase in interest
expense of $2.8 million with a corresponding decrease in income
before income taxes of the same amount. The amount was deter–
mined by considering the impact of hypothetical interest rates on
the company’s borrowing cost, year–end debt balances by category
and an estimated impact on the tax–exempt municipal bonds’
interest rates. Fluctuations in the value of the U.S. Dollar compared to foreign
currencies, predominately in European countries, also impact the
company’s earnings. The greatest risk relates to products shipped
between the company’s European operations and the United
States. Foreign currency forward contracts and options are used to
hedge these intercompany transactions. Additionally, hedges are
used to cover third–party purchases of product and equipment. As
of December 31, 2004, there were $130.8 million of hedges in
place. A uniform 10% weakening of the U.S. Dollar against all
currencies would have resulted in a charge of $12.5 million for
these hedges. In addition to the direct impact of the hedged
amounts, changes in exchange rates also affect the volume of
sales or foreign currency sales price as competitors’ products
become more or less attractive. The company continues its efforts to protect the environment
and comply with environmental protection laws. Additionally, it has
invested in pollution control equipment and updated plant
operational practices. The company is committed to implementing
a documented environmental management system worldwide and
to becoming certified under the ISO 14001 standard to meet
or exceed customer requirements. By the end of 2004, 33 of
the company’s plants had obtained ISO 14001 certification. The
company believes it has established adequate reserves to cover its environmental expenses and has a well–established environmental
compliance audit program, which includes a proactive approach to
bringing its domestic and international units to higher standards of
environmental performance. This program measures performance
against local laws, as well as standards that have been established
for all units worldwide. It is difficult to assess the possible effect of
compliance with future requirements that differ from existing ones.
As previously reported, the company is unsure of the future
financial impact to the company that could result from the United
States Environmental Protection Agency’s (EPA’s) final rules
to tighten the National Ambient Air Quality Standards for fine
particulate and ozone. The company and certain of its U.S. subsidiaries have been
designated as potentially responsible parties by the United States
EPA for site investigation and remediation at certain sites under the
Comprehensive Environmental Response, Compensation and
Liability Act (Superfund). The claims for remediation have been
asserted against numerous other entities, which are believed to be
financially solvent and are expected to fulfill their proportionate
share of the obligation. Management believes any ultimate liability
with respect to all pending actions will not materially affect the
company’s results of operations, cash flows or financial position. On February 1, 2005, the company’s board of directors declared a
quarterly cash dividend of $0.15 per share. The dividend is payable
on March 2, 2005 to shareholders of record as of February 18, 2005.
This will be the 331st consecutive dividend paid on the common
stock of the company.

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TIMKEN

Consolidated Statement of Income

	Year Ended December 31
	2004	2003	2002
(Thousands of dollars, except per share data)
Net sales Cost of products sold	$ 4,513,671 3,675,086	$ 3,788,097 3,148,979	$ 2,550,075 2,080,498
Gross Profit	838,585	639,118	469,577
Selling, administrative and general expenses Impairment and restructuring charges	587,923 13,434	521,717 19,154	358,866 32,143
Operating Income	237,228	98,247	78,568
Interest expense Interest income Receipt of Continued Dumping & Subsidy Offset Act (CDSOA) payment Other expense – net	(50,834) 1,397 44,429 (32,441)	(48,401) 1,123 65,559 (55,726)	(31,540) 1,676 50,202 (13,388)
Income Before Income Taxes and Cumulative Effect                  of Change in Accounting Principle	199,779	60,802	85,518
Provision for income taxes	64,123	24,321	34,067
Income Before Cumulative Effect of Change                 in Accounting Principle	$ 135,656	$ 36,481	$ 51,451
Cumulative effect of change in accounting principle                 (net of income tax benefit of $7,786)	–	–	(12,702)
Net Income	$ 135,656	$ 36,481	$ 38,749
Earnings Per Share:                 Income before cumulative effect of change                          in accounting principle                 Cumulative effect of change in accounting principle	$ 1.51 –	$ 0.44 –	$ 0.84 (0.21)
Earnings Per Share	$ 1.51	$ 0.44	$ 0.63
Earnings Per Share–Assuming Dilution:                 Income before cumulative effect of change in accounting principle                 Cumulative effect of change in accounting principle	$ 1.49 –	$ 0.44 –	$ 0.83 (0.21)
Earnings Per Share–Assuming Dilution	$ 1.49	$ 0.44	$ 0.62

See accompanying Notes to Consolidated Financial Statements on pages 42 through 61.

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TIMKEN

Consolidated Balance Sheet

	December 31
	2004	2003
(Thousands of dollars)
ASSETS Current Assets         Cash and cash equivalents         Accounts receivable, less allowances: 2004– $24,952; 2003–$23,957         Deferred income taxes         Inventories:                 Manufacturing supplies                 Work in process and raw materials                 Finished products	$ 50,967 717,425 90,066 58,357 423,808 392,668	$ 28,626 602,262 50,271 42,052 323,439 330,455
Total Inventories	874,833	695,946
Total Current Assets	1,733,291	1,377,105
Property, Plant and Equipment         Land and buildings         Machinery and equipment	648,646 2,973,542	601,108 2,902,697
Less allowances for depreciation	3,622,188 2,039,231	3,503,805 1,892,957
Property, Plant and Equipment–Net	1,582,957	1,610,848
Other Assets         Goodwill         Other intangible assets         Miscellaneous receivables and other assets         Deferred income taxes         Deferred charges and prepaid expenses	189,299 178,844 138,466 76,834 38,809	173,099 197,993 130,081 148,802 51,861
Total Other Assets	622,252	701,836
Total Assets	$ 3,938,500	$ 3,689,789

LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities         Short–term debt         Accounts payable and other liabilities         Salaries, wages and benefits         Income taxes         Current portion of long–term debt	$ 157,417 520,259 343,409 18,969 1,273	$ 114,469 425,157 376,603 78,514 6,725
Total Current Liabilities	1,041,327	1,001,468
Non–Current Liabilities         Long–term debt         Accrued pension cost         Accrued postretirement benefits cost         Other non–current liabilities	620,634 468,644 490,366 47,681	613,446 477,502 476,966 30,780
Total Non–Current Liabilities	1,627,325	1,598,694
Shareholders’ Equity         Class I and II Serial Preferred Stock without par value:                 Authorized–10,000,000 shares each class, none issued         Common stock without par value:                 Authorized–200,000,000 shares                 Issued (including shares in treasury) (2004 – 90,511,833 shares;                         2003 – 89,076,114 shares)                 Stated capital                 Other paid–in capital         Earnings invested in the business         Accumulated other comprehensive loss         Treasury shares at cost (2004 – 7,501 shares; 2003 – 10,601 shares)	– 53,064 658,730 847,738 (289,486) (198)	– 53,064 636,272 758,849 (358,382) (176)
Total Shareholders’ Equity	1,269,848	1,089,627
Total Liabilities and Shareholders’ Equity	$ 3,938,500	$ 3,689,789

See accompanying Notes to Consolidated Financial Statements on pages 42 through 61.

39

TIMKEN

Consolidated Statement of Cash Flows

	Year Ended December 31
	2004	2003	2002
(Thousands of dollars)
CASH PROVIDED (USED) Operating Activities         Net income         Adjustments to reconcile net income to net cash             provided by operating activities:                 Cumulative effect of change in accounting principle                Depreciation and amortization                Loss on disposals of property, plant and equipment                Gain on sale of non–strategic assets                Loss on dissolution of subsidiary                Deferred income tax provision                Common stock issued in lieu of cash                Impairment and restructuring charges                Changes in operating assets and liabilities:                         Accounts receivable                         Inventories                         Other assets                         Accounts payable and accrued expenses                         Foreign currency translation loss (gain)	$ 135,656 – 209,431 7,053 (17,110) 16,186 62,039 2,775 10,154 (114,264) (130,407) 28,082 (73,218) 2,690	$ 36,481 – 208,851 4,944 – – 4,406 2,744 55,967 (27,543) 33,229 (27,975) (83,982) (2,234)	$ 38,749 12,702 146,535 5,904 – – 17,250 5,217 (13,564) (43,679) (50,611) (3,198) 80,761 10,037
Net Cash Provided by Operating Activities	139,067	204,888	206,103
Investing Activities         Purchases of property, plant and equipment–net         Proceeds from disposals of property, plant and equipment         Proceeds from disposals of non–strategic assets         Acquisitions	(155,180) 5,268 50,690 (9,359)	(118,530) 26,377 152,279 (725,120)	(85,277) 12,616 – (6,751)
Net Cash Used by Investing Activities	(108,581)	(664,994)	(79,412)
Financing Activities         Cash dividends paid to shareholders         Accounts receivable securitization financing borrowings         Accounts receivable securitization financing payments         Proceeds from issuance of common stock         Common stock issued to finance acquisition         Proceeds from issuance of long–term debt         Payments on long–term debt         Short–term debt activity–net	(46,767) 198,000 (198,000) – – 339,547 (334,040) 20,860	(42,078) 127,000 (127,000) 54,985 180,010(1) 629,800 (379,790) (41,082)	(31,713) – – – – – (37,296) (11,498)
Net Cash (Used) Provided by Financing Activities Effect of exchange rate changes on cash	(20,400) 12,255	401,845 4,837	(80,507) 2,474
Increase (Decrease) In Cash and Cash Equivalents Cash and cash equivalents at beginning of year	22,341 28,626	(53,424) 82,050	48,658 33,392
Cash and Cash Equivalents at End of Year	$ 50,967	$ 28,626	$ 82,050

See accompanying Notes to Consolidated Financial Statements on pages 42 through 61.
(1) Excluding $140 million of common stock (9,395,973 shares) issued to the seller of the Torrington business, in conjunction with the acquisition.

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TIMKEN

Consolidated Statement of Shareholders’ Equity

		Common Stock
	Total	Stated Capital	Other Paid–In Capital	Earnings Invested in the Business	Accumulated Other Comprehensive Loss	Treasury Stock
(Thousands of dollars, except share data)
Year Ended December 31, 2002         Balance at January 1, 2002         Net income         Foreign currency translation adjustments                 (net of income tax of                 $2,843)         Minimum pension liability             adjustment (net of income tax of                 $147,303)         Change in fair value of derivative             financial instruments net of                 reclassifications	$ 781,735 38,749 14,050 (254,318) (871)	$ 53,064	$ 256,423	$ 757,410 38,749	$ (224,538) 14,050 (254,318) (871)	$ (60,624)
Total comprehensive loss         Dividends – $0.52 per share         Issuance of 3,186,470 shares from             treasury(1)         Issuance of 369,290 shares from             authorized(1)	(202,390) (31,713) 57,747 3,707		(2,138) 3,707	(31,713)		59,885
Balance at December 31, 2002	$ 609,086	$ 53,064	$ 257,992	$ 764,446	$ (465,677)	$ (739)
Year Ended December 31, 2003         Net income         Foreign currency translation             adjustments (net of income tax of                 $1,638)         Minimum pension liability adjustment             (net of income tax of $19,164)         Change in fair value of derivative             financial instruments net of                 reclassifications	36,481 75,062 31,813 420			36,481	75,062 31,813 420
Total comprehensive income         Dividends – $0.52 per share         Tax benefit from exercise of stock             options         Issuance of 29,473 shares from             treasury(1)         Issuance of 25,624,198 shares from             authorized(1)(2)	143,776 (42,078) 1,104 301 377,438		1,104 (262) 377,438	(42,078)		563
Balance at December 31, 2003	$1,089,627	$ 53,064	$ 636,272	$ 758,849	$ (358,382)	$ (176)
Year Ended December 31, 2004         Net income         Foreign currency translation             adjustments (net of income tax of             $18,766)         Minimum pension liability adjustment             (net of income tax of $18,391)         Change in fair value of derivative                 financial instruments (net of                         reclassifications)	135,656 105,736 (36,468) (372)			135,656	105,736 (36,468) (372)
Total comprehensive income       Dividends – $0.52 per share       Tax benefit from exercise of stock             options       Issuance of 3,100 shares from             treasury(1)       Issuance of 1,435,719 shares from             authorized(1)	204,552 (46,767) 3,068 (1,067) 20,435		3,068 (1,045) 20,435	(46,767)		(22)
Balance at December 31, 2004	$1,269,848	$ 53,064	$ 658,730	$ 847,738	$ (289,486)	$ (198)

(1) Share activity was in conjunction with employee benefit and stock option plans. See accompanying Notes to Consolidated Financial Statements on pages 42 through 61.
(2) Share activity includes the issuance of 22,045,973 shares in connection with the Torrington acquisition and an additional public equity offering of 3,500,000 shares in October 2003.

41

TIMKEN

Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

1 Significant Accounting Policies

Principles of Consolidation: The consolidated financial
statements include the accounts and operations of the company
and its subsidiaries. All significant intercompany accounts and
transactions are eliminated upon consolidation. Investments in
affiliated companies are accounted for by the equity method. Revenue Recognition: The company recognizes revenue when
title passes to the customer. This is FOB shipping point except for
certain exported goods, which is FOB destination. Selling prices
are fixed based on purchase orders or contractual arrangements.
Write–offs of accounts receivable historically have been low. shipping
and handling costs are included in cost of products sold in the
consolidated statement of income. Cash Equivalents: The company considers all highly liquid invest–ments with a maturity of three months or less when purchased to
be cash equivalents. Inventories: Inventories are valued at the lower of cost or market,
with 57% valued by the last–in, first–out (LIFO) method. If all
inventories had been valued at current costs, inventories would
have been $214,900 and $147,500 greater at December 31, 2004
and 2003, respectively. During 2002, inventory quantities were
reduced as a result of ceasing manufacturing operations in Duston,
England (see Note 6). This reduction resulted in a liquidation of
LIFO inventory quantities carried at lower costs prevailing in prior
years, compared to the cost of current purchases, the effect of
which increased income before cumulative effect of change in
accounting principle by approximately $5,700 or $0.09 per
diluted share. Property, Plant and Equipment: Property, plant and equipment
is valued at cost less accumulated depreciation. Maintenance
and repairs are charged to expense as incurred. Provision for
depreciation is computed principally by the straight–line method
based upon the estimated useful lives of the assets. The useful
lives are approximately 30 years for buildings, 5 to 7 years for
computer software and 3 to 20 years for machinery and equipment. Impairment of long–lived assets is recognized when events or
changes in circumstances indicate that the carrying amount of the
asset or related group of assets may not be recoverable. If the
expected future undiscounted cash flows are less than the carrying
amount of the asset, an impairment loss is recognized at that time
to reduce the asset to the lower of its fair value or its net book value. Goodwill: The company tests goodwill and indefinite–lived intangible
assets for impairment at least annually. The company engages
an independent valuation firm and performs its annual impairment
test during the fourth quarter after the annual forecasting process is
completed. Furthermore, goodwill is reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Income Taxes: Deferred income taxes are provided for the
temporary differences between the financial reporting basis and tax
basis of the company’s assets and liabilities. Foreign Currency Translation: Assets and liabilities of
subsidiaries, other than those located in highly inflationary
countries, are translated at the rate of exchange in effect on the balance sheet date; income and expenses are translated at the
average rates of exchange prevailing during the year. The related
translation adjustments are reflected as a separate component
of accumulated other comprehensive loss. Foreign currency gains
and losses resulting from transactions and the translation of
financial statements of subsidiaries in highly inflationary countries
are included in results of operations. The company recorded
foreign currency exchange losses of $7,687 in 2004, $2,666 in
2003, and $5,143 in 2002. During 2004, the American Institute of
Certified Public Accountants SEC Regulations Committee’s
International Practices Task Force concluded that Romania should
come off highly inflationary status no later than October 1, 2004.
Effective October 1, 2004, the company no longer accounted for
Timken Romania as highly inflationary. Stock–Based Compensation: On December 31, 2002, the
Financial Accounting Standards Board (FASB) issued SFAS No. 148,
“Accounting for Stock–Based Compensation – Transition and
Disclosure.” SFAS No. 148 amends SFAS No. 123, “Accounting for
Stock–Based Compensation,” by providing alternative methods of
transition to SFAS No. 123’s fair value method of accounting for
stock–based compensation. SFAS No. 148 also amends the
disclosure requirements of SFAS No. 123. The company has
elected to follow Accounting Principles Board (APB) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and related
interpretations in accounting for its stock options to key associates
and directors. Under APB Opinion No. 25, if the exercise price of
the company’s stock options equals the market price of the
underlying common stock on the date of grant, no compensation
expense is required. Restricted stock rights are awarded to certain
employees and directors. The market price on the grant date is
charged to compensation expense ratably over the vesting period of
the restricted stock rights. The effect on net income and earnings per share as if the company
had applied the fair value recognition provisions of SFAS No. 123 is
as follows for the years ended December 31:

	2004	2003	2002
Net income,as reported Add: Stock–based employee compensation expense, net of related taxes Deduct: Stock–based employee compensation expense determined under fair         value based methods for all awards,net of related taxes	$ 135,656 1,884 (6,751)	$ 36,481 1,488 (7,305)	$ 38,749 1,170 (6,786)
Pro forma net income	$ 130,789	$ 30,664	$ 33,133
Earnings per share:         Basic – as reported         Basic – pro forma         Diluted – as reported         Diluted – pro forma	$1.51 $1.46 $1.49 $1.44	$0.44 $0.37 $0.44 $0.37	$0.63 $0.54 $0.62 $0.54

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TIMKEN

Earnings Per Share: Earnings per share are computed by dividing
net income by the weighted–average number of common shares
outstanding during the year. Earnings per share – assuming
dilution are computed by dividing net income by the weighted–
average number of common shares outstanding adjusted for the
dilutive impact of potential common shares for options. Derivative Instruments: The company accounts for its derivative
instruments in accordance with SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” as amended. The
company recognizes all derivatives on the balance sheet at fair
value. Derivatives that are not designated as hedges must be
adjusted to fair value through earnings. If the derivative is designated
and qualifies as a hedge, depending on the nature of the hedge,
changes in the fair value of the derivatives are either offset against
the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings or recognized in other
comprehensive income (loss) until the hedged item is recognized in
earnings. The company’s holdings of forward foreign exchange
contracts have been deemed derivatives pursuant to the criteria
established in SFAS No. 133, of which the company has designat–
ed certain of those derivatives as hedges. The critical terms, such
as the notional amount and timing of the forward contract and
forecasted transaction, coincide resulting in no significant hedge
ineffectiveness. In 2004, the company entered into interest rate
swaps to hedge a portion of its fixed–rate debt. The critical terms,
such as principal and notional amounts and debt maturity and swap
termination dates, coincide resulting in no hedge ineffectiveness.
These instruments qualify as fair value hedges. Accordingly, the
gain or loss on both the hedging instrument and the hedged item
attributable to the hedged risk are recognized currently in earnings. Recent Accounting Pronouncements In November 2004, the
FASB issued SFAS No. 151, “Inventory Costs, an amendment of
ARB 43, Chapter 4.” SFAS No. 151 requires certain inventory costs
to be recognized as current period expenses. SFAS No. 151 also
provides guidance for the allocation of fixed production costs. This
standard is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. The company has not yet
determined the impact, if any, SFAS No. 151 will have on its results
of operations, cash flows and financial position. In December 2004, the FASB issued SFAS No. 123R, “Share–Based
Payment.” SFAS No. 123R is a revision of SFAS No. 123,
“Accounting for Stock–Based Compensation,” which supersedes
Accounting Principles Board (APB) Opinion No. 25, “Accounting for
Stock Issued to Employees” and amends SFAS No. 95, “Statement
of Cash Flows.” Generally, the approach to accounting for share–
based payments in SFAS No. 123R is similar to the approach
described in SFAS No. 123. However, SFAS No. 123R requires all
share–based payments to employees, including grants of employee
stock options, to be recognized in the consolidated statement of
income based on their fair values. Pro forma disclosure is no longer
an alternative. SFAS No. 123R is effective for the first reporting
period beginning after June 15, 2005. Early adoption is permitted.
The company expects to adopt the provisions of SFAS No. 123R
effective July 1, 2005. SFAS No. 123R permits public companies to adopt its
requirements using either the “modified prospective” method or
“modified retrospective” method. Under the “modified prospec–
tive” method, compensation cost is recognized beginning with the
effective date (a) based on the requirements of SFAS No. 123R for
all share–based payments granted after the effective date and (b)
based on the requirements of SFAS No. 123 for all awards granted
to employees prior to the effective date of SFAS No. 123R that
remain unvested on the effective date. The “modified retrospec–
tive” method includes the requirements of the “modified prospec–
tive” method, but also permits entities to restate based on the
amounts previously recognized under SFAS No. 123 for purposes
of pro forma disclosures either all periods presented or prior
interim periods of the year of adoption. The company plans to
adopt SFAS No. 123R using the “modified prospective” method. As permitted by SFAS 123, the company currently accounts for
share–based payments to employees using APB Opinion No. 25’s
intrinsic value method and, as such, generally recognizes no
compensation cost for employee stock options. Accordingly, the
adoption of SFAS No. 123R’s fair value method may have a signifi–
cant impact on the company’s results of operations, although it will
have no impact on the company’s overall financial position. The
impact of adoption of SFAS No. 123R cannot be predicted at this
time because it will depend on levels of share–based payments
granted in the future. However, had the company adopted SFAS
No. 123R in prior periods, the impact of that standard would have
approximated the impact of SFAS No. 123 as described in the
disclosure of pro forma net income and earnings per share. SFAS
No. 123R also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash
flow, rather than as an operating cash flow as required under
current literature. This requirement will reduce net operating cash
flows and increase net financing cash flows in periods after
adoption. While the company cannot estimate what those
amounts will be in the future (because they depend on, among
other things, when employees exercise stock options), the amount
of operating cash flows recognized in prior periods for such
excess tax deductions were $3,068, $1,104, and $0 in 2004, 2003
and 2002, respectively. Use of Estimates: The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. These estimates and
assumptions are reviewed and updated regularly to reflect recent
experience. Reclassifications: Certain amounts reported in the 2003 and 2002
financial statements have been reclassified to conform to the
2004 presentation.

43

TIMKEN

Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

2 Acquisitions

On February 18, 2003, the company acquired Ingersoll–Rand
Company Limited’s (IR’s) Engineered Solutions business, a leading
worldwide producer of needle roller, heavy–duty roller and ball
bearings, and motion control components and assemblies for
approximately $840,000 plus $25,089 of acquisition costs incurred
in connection with the acquisition. IR’s Engineered Solutions
business, was comprised of certain operating assets and
subsidiaries, including The Torrington Company. With the strategic
acquisition of IR’s Engineered Solutions business, hereafter
referred to as Torrington, the company is able to expand its global
presence and market share as well as broaden its product base in
addition to reducing costs through realizing economies of scale,
rationalizing facilities and eliminating duplicate processes. The
company’s consolidated financial statements include the results of
operations of Torrington since the date of the acquisition. The company paid IR $700,000 in cash, subject to post–closing
purchase price adjustments, and issued $140,000 of its common
stock (9,395,973 shares) to Ingersoll–Rand Company, a subsidiary of
IR. To finance the cash portion of the transaction the company
utilized, in addition to cash on hand: $180,010, net of underwriting
discounts and commissions, from a public offering of
12,650,000 shares of common stock at $14.90 per common share;
$246,900, net of underwriting discounts and commissions, from a
public offering of $250,000 of 5.75% senior unsecured notes due
2010; $125,000 from its Asset Securitization facility; and
approximately $86,000 from its senior credit facility. The final purchase price for the acquisition of Torrington was
subject to adjustment upward or downward based on the differ–
ences for both net working capital and net debt as of December 31,
2001 and February 15, 2003, both calculated in a manner as
set forth in The Stock and Asset Purchase Agreement. These adjustments did not have a material effect on the company’s
financial statements. The allocation of the purchase price has been performed based on
the assignment of fair values to assets acquired and liabilities
assumed. Fair values are based primarily on appraisals performed
by an independent appraisal firm. Items that affected the ultimate
purchase price allocation include finalization of integration initiatives
or plant rationalizations that qualified for accrual in the opening
balance sheet and other information that provided a better estimate
of the fair value of assets acquired and liabilities assumed. In
March 2003, the company announced the planned closing of its
plant in Darlington, England. This plant has ceased manufacturing
as of December 31, 2003. In July 2003, the company announced
that it would close its plant in Rockford, Illinois. As of December
31, this plant has closed, and the fixed assets have been either sold
or scrapped. The building has not yet been sold and is classified as
an “asset held for sale” in miscellaneous receivables and other
assets on the consolidated balance sheet. In October 2003, the
company announced that it reached an agreement in principle
with Roller Bearing Company of America, Inc. for the sale of the
company’s airframe business, which included certain assets at its
Standard plant in Torrington, Connecticut. This transaction closed
on December 22, 2003. In connection with the Torrington
integration efforts, the company incurred severance, exit and other
related costs of $22,602 for former Torrington associates, which
are considered to be costs of the acquisition and are included in the
purchase price allocation. Severance, exit and other related costs
associated with former Timken associates have been expensed
during 2004 and 2003 and are not included in the purchase price
allocation. Refer to footnote 6 for further discussion of impairment
and restructuring charges.

In accordance with FASB EITF Issue No. 95–3, “Recognition of Liabilities in Connection with a Purchase Business Combination,” the
company recorded accruals for severance, exit and relocation costs in the purchase price allocation. A reconciliation of the beginning and
ending accrual balances is as follows:

	Severance	Exit	Relocation	Total
Balance at December 31, 2002 Add: additional accruals Less: payments	$ – 8,536 (4,631)	$ – 2,530 (205)	$ – 5,259 (3,362)	$ – 16,325 (8,198)
Balance at December 31, 2003 Add: additional accruals Less: payments	3,905 287 (1,871)	2,325 6,560 (8,885)	1,897 (570) (1,327)	8,127 6,277 (12,083)
Balance at December 31, 2004	$ 2,321	$ –	$ –	$ 2,321

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The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

Accounts receivable Inventory Other current assets Property, plant & equipment In–process research and development Intangible assets subject to amortization – (12–year weighted average useful life) Goodwill Equity investment in needle bearing joint venture Other non–current assets, including deferred taxes	$ 177,227 210,194 4,418 429,014 1,800 91,642 56,909 146,335 36,451
Total Assets Acquired	$ 1,153,990
Accounts payable and other current liabilities Non–current liabilities, including accrued postretirement benefits cost	$ 192,689 96,212
Total Liabilities Assumed	$ 288,901
Net Assets Acquired	$ 865,089

There is no tax basis goodwill associated with the Torrington
acquisition. The $1,800 related to in–process research and development was
written off at the date of acquisition in accordance with FASB
Interpretation No. 4, “Applicability of FASB Statement No. 2 to
Business Combinations Accounted for by the Purchase Method.”
The write–off is included in selling, administrative and general
expenses in the consolidated statement of income. The fair value
assigned to the in–process research and development was determined
by an independent valuation using the discounted cash flow
method. In July 2003, the company sold to NSK Ltd. its interest in a needle
bearing manufacturing venture in Japan that had been operated by
NSK and Torrington for $146,335 before taxes, which approximated
the carrying value at the time of the sale. The following unaudited pro forma financial information presents
the combined results of operations of the company and Torrington
as if the acquisition had occurred at the beginning of the periods
presented. The unaudited pro forma financial information does not
purport to be indicative of the results that would have been
obtained if the acquisition had occurred as of the beginning of the
periods presented or that may be obtained in the future:

Unaudited
Year Ended December 31

	2003	2002
Net sales Income before cumulative effect of change in accounting principle Net income Earnings per share – assuming dilution:         Income before cumulative effect of change in accounting principle         Cumulative effect of change in accounting principle	$3,939,340 29,629 29,629 $ 0.36 $ –	$3,756,652 104,993 92,291 $ 1.25 $ (0.15)
Earnings per share – assuming dilution	$ 0.36	$ 1.10

Other Acquisitions in 2004 and 2002

During 2004 and 2002, the company finalized several acquisitions.
The total cost of these acquisitions amounted to $8,425 in 2004
and $6,751 in 2002. The purchase price was allocated to the assets
and liabilities acquired, based on their fair values at the dates of
acquisition. The fair value of the assets was $5,513 in 2004 and
$6,751 in 2002 and the fair value of the liabilities assumed was
$815 in 2004 and $6,751 in 2002. The excess of the purchase price over the fair value of the net assets acquired was allocated to
goodwill. The company’s consolidated financial statements include
the results of operations of the acquired businesses for the periods
subsequent to the effective dates of the acquisitions. Pro forma
results of operations have not been presented because the effect
of these acquisitions was not significant.

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Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

3 Earnings Per Share

The following table sets forth the reconciliation of the numerator and the denominator of earnings per share and earnings per share –
assuming dilution for the years ended December 31:

	2004	2003	2002
Numerator:         Net income for earnings per share and earnings per share – assuming             dilution – income available to common shareholders Denominator:         Denominator for earnings per share – weighted–average shares         Effect of dilutive securities:                 Stock options and awards – based on the treasury stock method	$ 135,656 89,875,650 883,921	$ 36,481 82,945,174 214,147	$ 38,749 61,128,005 507,334
Denominator for earnings per share – assuming dilution – adjusted                      weighted–average shares	90,759,571	83,159,321	61,635,339
Earnings per share	$ 1.51	$ 0.44	$ 0.63
Earnings per share – assuming dilution	$ 1.49	$ 0.44	$ 0.62

The exercise prices for certain of the stock options that the company
has awarded exceed the average market price of the company’s
common stock. Such stock options are antidilutive and were
not included in the computation of diluted earnings per share. The
antidilutive stock options outstanding were 2,316,988, 4,414,626
and 4,083,100 at December 31, 2004, 2003 and 2002, respectively. Under the performance unit component of the company’s long–
term incentive plan, the Compensation Committee of the Board of Directors can elect to make payments that become due in the
form of cash or shares of the company’s common stock (refer to
Note 9 – Stock Compensation Plans for additional discussion).
Performance units granted if fully earned would represent 443,372
shares of the company’s common stock at December 31, 2004.
These performance units have not been included in the calculation
of dilutive securities.

4 Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists of the following:

	2004	2003	2002
Foreign currency translation adjustment Minimum pension liability adjustment Fair value of open foreign currency cash flow hedges	$ 100,278 (387,750) (2,014)	$ (5,458) (351,282) (1,642)	$ (80,520) (383,095) (2,062)
	$ (289,486)	$ (358,382)	$ (465,677)

In 2004, the company began the process of liquidating one of its
inactive subsidiaries, British Timken, which is located in Duston,
England. The company recorded a non–cash charge of $16,186 on
dissolution that related primarily to the transfer of cumulative foreign currency translation losses to the consolidated statement of income,
which was included in other expense – net. During 2004, the company sold the real estate of this facility in
Duston, England, which ceased operations in 2002, for a gain of
$22,509, which was included in other expense – net on the consoli–
dated statement of income.

5 Financing Arrangements

Short–term debt at December 31, 2004 and 2003 was as follows:

	2004	2003
Variable–rate lines of credit for certain of the company’s European subsidiaries with     various banks with interest rates ranging from 2.21% to 4.75% and 2.32% to 5.75% at         December 31, 2004 and 2003, respectively Variable–rate Ohio Water Development Authority revenue bonds for PEL      (2.07% and 1.35% at December 31, 2004 and 2003, respectively) Fixed–rate mortgage for PEL with an interest rate of 9.00% Other	$ 109,260 23,000 11,561 13,596	$ 78,196 23,000 – 13,273
Short–term debt	$ 157,417	$ 114,469

Refer to Note 7 – Contingencies and Note 12 – Equity Investments in the notes to consolidated financial statements for a discussion
of PEL’s debts, which are included above.

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Long–term debt at December 31, 2004 and 2003 was as follows:

	2004	2003
Fixed–rate Medium–Term Notes, Series A, due at various dates through     May 2028, with interest rates ranging from 6.20% to 7.76% Variable–rate State of Ohio Air Quality and Water Development     Revenue Refunding Bonds, maturing on November 1, 2025         (1.98% at December 31, 2004) Variable–rate State of Ohio Pollution Control Revenue Refunding     Bonds, maturing on June 1, 2033 (1.98% at December 31, 2004) Variable–rate State of Ohio Water Development Revenue     Refunding Bonds, maturing on May 1, 2007 (2.00% at December 31, 2004) Variable–rate State of Ohio Water Development Authority Solid Waste     Revenue Bonds, maturing on July 1, 2032 (2.02% at December 31, 2004) Fixed–rate Unsecured Notes, maturing on February 15, 2010 with an interest rate of 5.75% Other	$ 286,832 21,700 17,000 8,000 24,000 249,258 15,117	$ 287,000 21,700 17,000 8,000 24,000 250,000 12,471
Less current maturities	621,907 1,273	620,171 6,725
Long–term debt	$ 620,634	$ 613,446

The maturities of long–term debt for the five years subse–
quent to December 31, 2004, are as follows: 2005–$1,273; 2006–
$92,689; 2007–$8,526; 2008–$27,201; and 2009–$88. Interest paid was approximately $52,000 in 2004, $43,000 in 2003
and $33,000 in 2002. This differs from interest expense due to
timing of payments and interest capitalized of $541 in 2004, $0 in
2003; and $436 in 2002. The weighted–average interest rate
on short–term debt during the year was 3.1% in 2004, 4.1% in
2003 and 4.8% in 2002. The weighted–average interest rate on
short–term debt outstanding at December 31, 2004 and 2003 was
3.4% and 2.8%, respectively. In connection with the Torrington acquisition, the company entered
into new $875 million senior credit facilities on December 31, 2002,
with a syndicate of financial institutions, comprised of a five–year
revolving credit facility of up to $500 million and a one–year term
loan facility of up to $375 million. The one–year term loan facility
expired unused on February 18, 2003. The new revolving facility
replaced the company’s then existing senior credit facility.
Proceeds of the new senior credit facility were used to repay the
amounts outstanding under the then existing credit facility. Under the $500 million senior credit facility, the company has three
financial covenants: consolidated net worth; leverage ratio; and
fixed charge coverage ratio. At December 31, 2004, the company
was in full compliance with the covenants under its senior credit
facility and its other debt agreements. At December 31, 2004, the
company had outstanding letters of credit totaling $71.0 million and
borrowings of $10.0 million, which reduced the availability under
the $500 million senior credit facility to $419.0 million. On December 19, 2002, the company entered into an Accounts
Receivable Securitization financing agreement (Asset
Securitization), which provides for borrowings up to $125 million,
limited to certain borrowing base calculations, and is secured
by certain trade receivables. Under the terms of the Asset
Securitization, the company sells, on an ongoing basis, certain
domestic trade receivables to Timken Receivables Corporation, a
wholly owned consolidated subsidiary, that in turn uses the trade
receivables to secure the borrowings, which are funded through a
vehicle that issues commercial paper in the short–term market. As
of December 31, 2004 and 2003, there were no amounts outstand–
ing under this facility. Any amounts outstanding under this facility
would be reported on the company’s consolidated balance sheet in
short–term debt. The yield on the commercial paper, which is the
commercial paper rate plus program fees, is considered a financing
cost, and is included in interest expense on the consolidated statement
of income. This rate was 2.57% and 1.56%, at December 31,
2004 and 2003, respectively. The lines of credit for certain of the company’s European
subsidiaries provide for borrowings up to $134.3 million. At
December 31, 2004, the company had outstanding borrowings
of $109.3 million, which reduced the availability under these
facilities to $25.0 million. The company and its subsidiaries lease a variety of real property
and equipment. Rent expense under operating leases amounted
to $19,550, $19,374, and $14,536 in 2004, 2003 and 2002, respectively.
At December 31, 2004, future minimum lease payments
for noncancelable operating leases totaled $109,729 and are
payable as follows: 2005–$19,347; 2006–$18,287; 2007–$15,573;
2008–$12,373; 2009–$10,935; and $33,214 thereafter.

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Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

6 Impairment and Restructuring Charges

Impairment and restructuring charges are comprised of the following:

	2004	2003	2002
(Dollars in millions)
Impairment charges Severance expense and related benefit costs Exit costs	$ 8.5 4.2 0.7	$ 12.5 2.9 3.7	$ 17.9 10.2 4.0
Total	$ 13.4	$ 19.1	$ 32.1

In 2004, the impairment charge related primarily to the write
down of property, plant and equipment at one of the Steel
Group’s facilities based on the company’s estimate of its fair value.
The severance and related benefit costs related to associates who
exited the company as a result of the integration of Torrington. The
exit costs related primarily to facilities in the U.S. In 2003, impairment charges represented the write–off of the
remaining goodwill for the Steel Group in accordance with
SFAS No. 142, “Goodwill and Other Intangible Assets,” of
$10.2 million and impairment charges for the Columbus, Ohio plant of $2.3 million. The severance and related benefit costs of
$2.9 million related to associates who exited the company as a
result of the integration of Torrington and other actions taken by
the company to reduce costs. The exit costs were comprised of
$3.0 million for the Columbus, Ohio plant and $0.7 million for the
Duston, England plant as a result of changes in estimates for these
two projects. Manufacturing operations at Columbus and Duston
ceased in 2001 and 2002, respectively. In 2002, the impairment charges and exit costs were related to
the Duston, England and Columbus, Ohio plant closures. The
severance and related benefit costs related primarily to a salaried
workforce reduction throughout the company.

Impairment and restructuring charges by segment are as follows:

Year ended December 31, 2004:

	Auto	Industrial	Steel	Total
(Dollars in millions)
Impairment charges Severance expense and related benefit costs Exit costs	$ – 1.7 –	$ – 2.5 0.7	$ 8.5 – –	$ 8.5 4.2 0.7
Total	$1.7	$ 3.2	$ 8.5	$ 13.4

Year ended December 31, 2003:

	Auto	Industrial	Steel	Total
(Dollars in millions)
Impairment charges Severance expense and related benefit costs Exit costs	$ – 0.5 0.7	$ 2.3 2.2 3.0	$ 10.2 0.2 –	$ 12.5 2.9 3.7
Total	$1.2	$ 7.5	$ 10.4	$ 19.1

Year ended December 31, 2002:

	Auto	Industrial	Steel	Total
(Dollars in millions)
Impairment charges Severance expense and related benefit costs Exit costs	$ 14.2 0.9 3.9	$ 3.7 5.5 0.1	$ – 3.8 –	$ 17.9 10.2 4.0
Total	$19.0	$ 9.3	$ 3.8	$ 32.1

As of December 31, 2004, the remaining accrual balance for
severance and exit costs was $4.1 million. The activity for 2004
included expense accrued of $4.9 million, and payments of
$5.3 million. As of December 31, 2003, the accrual balance was
$4.5 million. The activity for 2003 included expense accrued of $6.1 million,
payments of $6.5 million and accrual reversals of $1.1 million. In
2003, the accrual balance was reduced for severance that was
accrued, but not paid as a result of certain associates
retiring or finding other employment. As of December 31, 2002,
the accrual balance was $6.0 million.

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7 Contingencies

The company and certain of its U.S. subsidiaries have been
designated as potentially responsible parties (PRPs) by the United
States Environmental Protection Agency for site investigation and
remediation under the Comprehensive Environmental Response,
Compensation and Liability Act (Superfund) with respect to certain
sites. The claims for remediation have been asserted against
numerous other entities which are believed to be financially
solvent and are expected to fulfill their proportionate share of the
obligation. In addition, the company is subject to various lawsuits,
claims and proceedings which arise in the ordinary course of its
business. The company accrues costs associated with environmental
and legal matters when they become probable and
reasonably estimable. Accruals are established based on the
estimated undiscounted cash flows to settle the obligations and
are not reduced by any potential recoveries from insurance or
other indemnification claims. Management believes that any
ultimate liability with respect to these actions, in excess of
amounts provided, will not materially affect the company’s
consolidated operations, cash flows or financial position. The company is also the guarantor of debt for PEL Technologies
LLC (PEL), an equity investment of the company. A $23,494 letter of credit was provided by the company to secure payment on Ohio
Water Development Authority revenue bonds held by PEL.
In case of default by PEL, the company agrees to pay existing
balances due as of the date of default. The letter of credit expires
on July 22, 2005. Also, the company provided a guarantee for a
$3,500 bank loan of PEL, which the company paid during 2004.
During 2003, the company recorded the amounts outstanding on
the debts underlying the guarantees, which totaled $26,500 and
approximated the fair value of the guarantees. Refer to Note 12 –
Equity Investments for additional discussion. In connection with the Ashland plant sale, the company entered
into a four–year supply agreement with the buyer. The company
agrees to purchase a fixed amount each year ranging from $8,500
in the first year to $4,650 in year four or an aggregate total of
$25,900. The agreement also details the payment terms and
penalties assessed if the buyer does not meet the company’s
performance standards as outlined. This agreement expires on
June 30, 2006.

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Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

8 Goodwill and Other Intangible Assets

SFAS No. 142 requires that goodwill and indefinite–lived intangible
assets be tested for impairment at least annually. The company
engages an independent valuation firm and performs its annual
impairment test during the fourth quarter after the annual forecast–
ing process is completed. There was no impairment in 2004. In 2003, due to trends in the steel industry, the guideline company
values for the Steel reporting unit were revised downward. The
valuation which uses the guideline company method resulted in
a fair market value that was less than the carrying value for the company’s Steel reporting unit. Accordingly, the company had
concluded that the entire amount of goodwill for its Steel reporting
unit was impaired. The company recorded a pretax impairment
loss of $10.2 million, which was reported in impairment and
restructuring charges. In fiscal 2002, upon adoption of SFAS No. 142, the company
recorded an impairment loss of $12.7 million, net of tax benefits of
$7.8 million, related to the Specialty Steel business as a cumulative
effect of change in accounting principle.

Changes in the carrying value of goodwill are as follows:
Year ended December 31, 2004

	Beginning Balance	Impairment	Acquisitions	Other	Ending Balance
Goodwill: Automotive Industrial	$ 1,264 171,835	$ – –	$ – 13,774	$ 414 2,012	$ 1,678 187,621
Totals	$ 173,099	$ –	$ 13,774	$ 2,426	$189,299

Year ended December 31, 2003

	Beginning Balance	Impairment	Acquisitions	Other	Ending Balance
Goodwill: Automotive Industrial Steel	$ 1,633 119,440 8,870	$ – – (10,237)	$ – 46,951 –	$ (369) 5,444 1,367	$ 1,264 171,835 –
Totals	$ 129,943	$ (10,237)	$ 46,951	$ 6,442	$173,099

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The following table displays other intangible assets as of December 31:

	2004			2003
	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Intangible assets subject to amortization: Automotive:         Customer relationships         Engineering drawings         Land use rights         Patents         Technology use         Trademarks         Unpatented technology Industrial:         Customer relationships         Engineering drawings         Know–how transfer         Land use rights         Patents         Technology use         Trademarks         Unpatented technology         PMA licenses Steel trademarks	$ 21,960 3,000 659 18,442 5,535 2,176 10,800 15,209 2,000 486 4,484 878 5,548 1,507 7,200 1,412 633	$ 2,059 1,320 51 3,673 333 897 2,025 1,398 880 431 1,245 242 333 626 1,350 63 126	$ 19,901 1,680 608 14,769 5,202 1,279 8,775 13,811 1,120 55 3,239 636 5,215 881 5,850 1,349 507	$ 21,960 3,000 622 18,094 5,827 2,295 10,800 14,640 2,000 417 4,484 646 5,827 1,492 7,200 – 450	$ 960 616 24 1,685 464 507 945 641 411 360 1,075 94 463 366 630 – 112	$ 21,000 2,384 598 16,409 5,363 1,788 9,855 13,999 1,589 57 3,409 552 5,364 1,126 6,570 – 338
	$ 101,929	$ 17,052	$ 84,877	$ 99,754	$ 9,353	$ 90,401
Intangible assets not subject to amortization: Goodwill Intangible pension asset Automotive land use rights Industrial license agreements	$ 189,299 92,860 144 963	– – – –	$ 189,299 92,860 144 963	$173,099 106,518 115 959	$        – – – –	$173,099 106,518 115 959
	$ 283,266	–	$ 283,266	$280,691	–	$280,691
Total intangible assets	$ 385,195	$ 17,052	$ 368,143	$380,445	$ 9,353	$371,092

Amortization expense for intangible assets was approximately
$8,800 and $7,900 for the years ended December 31, 2004 and
2003, and is estimated to be approximately $8,500 annually for the
next five years. The other intangible assets that are subject to amortization acquired in the Torrington acquisition have useful lives
ranging from 2 to 20 years with a weighted–average useful life of
12 years.

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Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

9 Stock Compensation Plans

Under the company’s stock option plans, shares of common stock
have been made available to grant at the discretion of the
Compensation Committee of the Board of Directors to officers and
key associates in the form of stock options, stock appreciation
rights, restricted shares, performance units, and deferred shares.
In addition, shares can be awarded to directors not employed by
the company. The options have a ten–year term and vest in
25% increments annually beginning twelve months after the
date of grant. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been
determined as if the company had accounted for its associate
stock options under the fair value method of SFAS No. 123. The
fair value for these options was estimated at the date of grant
using a Black–Scholes option pricing model. For purposes of
pro forma disclosures, the estimated fair value of the options
granted under the plan is amortized to expense over the options’
vesting periods.

Following are the related assumptions under the Black–Scholes method:

	2004	2003	2002
Assumptions: Risk–free interest rate Dividend yield Expected stock volatility Expected life – years	4.29% 3.65% 0.401 8	3.94% 3.69% 0.504 8	5.29% 3.57% 0.506 8

A summary of activity related to stock options for the above plans is as follows for the years ended December 31:

	2004		2003		2002
	Options	Weighted– Average Exercise Price	Options	Weighted– Average Exercise Price	Options	Weighted– Average Exercise Price
Outstanding – beginning of year Granted Exercised Canceled or expired	8,334,920 702,250 (1,436,722) (211,538)	$20.68 23.94 17.39 25.13	7,310,026 1,491,230 (93,325) (373,011)	$21.21 17.56 15.65 20.02	6,825,412 1,118,175 (499,372) (134,189)	$20.22 25.01 16.30 20.61
Outstanding – end of year	7,388,910	21.50	8,334,920	20.68	7,310,026	21.21
Options exercisable	5,081,063	$21.95	5,771,810	$21.53	4,397,590	$22.39

The company sponsors a performance target option plan that is
contingent upon the company’s common shares reaching specified
fair market values. Under the plan, the number of shares awarded
were 25,000, 0 and 20,000 in 2004, 2003 and 2002, respectively.
No compensation expense was recognized in 2004, 2003 or 2002. Exercise prices for options outstanding as of December 31, 2004,
range from $15.02 to $19.56, $21.99 to $26.44 and $33.75;
the number of options outstanding at December 31, 2004 that
correspond to these ranges are 3,964,410, 2,723,900 and
700,600, respectively; and the number of options exercisable at
December 31, 2004 that correspond to these ranges are
2,735,130, 1,645,333 and 700,600, respectively. The weighted–
average remaining contractual life of these options is 6 years. The
estimated weighted–average fair values of stock options granted
during 2004, 2003 and 2002 were $7.82, $6.78 and $10.36, respec–
tively. At December 31, 2004, a total of 500,500 restricted
stock rights, restricted shares or deferred shares have been
awarded under the above plans and are not vested. The company distributed 73,025, 125,967 and 100,947 common shares in 2004,
2003 and 2002, respectively, as a result of awards of restricted
stock rights, restricted shares and deferred shares. The number of
restricted stock rights, restricted shares and deferred shares that
were awarded in 2004, 2003 and 2002 totaled 371,650, 38,500 and
256,000, respectively. The company offers a performance unit component under its
long–term incentive plan to certain employees in which grants are
earned based on company performance measured by several
metrics over a three–year performance period. The Compensation
Committee of the Board of Directors can elect to make payments
that become due in the form of cash or shares of the company’s
common stock. 34,398, 48,225 and 44,375 performance units
have been granted in 2004, 2003 and 2002, respectively. 15,007
performance units were cancelled in 2004. Each performance unit
has a cash value of $100. The number of shares available for future grants for all plans at
December 31, 2004, including stock options, is 5,075,782.

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10 Financial Instruments

As a result of the company’s worldwide operating activities, it
is exposed to changes in foreign currency exchange rates,
which affect its results of operations and financial condition.
The company and certain subsidiaries enter into forward exchange
contracts to manage exposure to currency rate fluctuations,
primarily related to anticipated purchases of inventory and equip–
ment. At December 31, 2004 and 2003, the company had forward
foreign exchange contracts, all having maturities of less than
eighteen months, with notional amounts of $130,794 and
$145,590, and fair values of $8,574 and $4,416, respectively. The
forward foreign exchange contracts were entered into primarily by
the company’s domestic entity to manage Euro exposures relative
to the U.S. Dollar and its European subsidiaries to manage Euro
and U.S. Dollar exposures. The realized and unrealized gains and
losses on these contracts are deferred and included in inventory or
property, plant and equipment, depending on the transaction.
These deferred gains and losses are reclassified from accumulated
other comprehensive loss and recognized in earnings when the
future transactions occur, or through depreciation expense. During 2004, the company entered into interest rate swaps with a
total notional value of $80 million to hedge a portion of its fixed–rate
debt. Under the terms of the interest rate swaps, the company
receives interest at fixed rates and pays interest at variable rates.
The maturity dates of the interest rate swaps are January 15, 2008
and February 15, 2010. The fair value of these swaps was $909 at
December 31, 2004. The critical terms, such as principal and
notional amounts and debt maturity and swap termination dates,
coincide resulting in no hedge ineffectiveness. These instruments
are designated and qualify as fair value hedges. Accordingly, the
gain or loss on both the hedging instrument and the hedged item
attributable to the hedged risk are recognized currently in earnings. The carrying value of cash and cash equivalents, accounts
receivable, commercial paper, short–term borrowings and accounts
payable are a reasonable estimate of their fair value due to the
short–term nature of these instruments. The fair value of the
company’s long–term fixed–rate debt, based on quoted market
prices, was $549,000 and $533,000 at December 31, 2004 and
2003, respectively. The carrying value of this debt was $539,000
and $546,000.

11 Research and Development

The company performs research and development under
company–funded programs and under contracts with the Federal
government and others. Expenditures committed to research and
development amounted to $58,500, $55,700 and $57,000 for 2004, 2003 and 2002, respectively. Of these amounts, $8,400,
$3,300 and $5,600, respectively were funded by others.
Expenditures may fluctuate from year to year depending on special
projects and needs.

12 Equity Investments

The balances related to investments accounted for under the
equity method are reported in miscellaneous receivables and
other assets on the consolidated balance sheets, which were
approximately $29,800 and $34,000 at December 31, 2004 and
2003, respectively. Equity investments are reviewed for impairment when circum–
stances (such as lower–than–expected financial performance or
change in strategic direction) indicate that the carrying value of the
investment may not be recoverable. If an impairment does exist,
the equity investment is written down to its fair value with a
corresponding charge to the consolidated statement of income. During 2000, the company’s Steel Group invested in a joint venture,
PEL, to commercialize a proprietary technology that converts iron
units into engineered iron oxides for use in pigments, coatings and
abrasives. In the fourth quarter of 2003, the company concluded
its investment in PEL was impaired due to the following indicators
of impairment: history of negative cash flow and losses; 2004
operating plan with continued losses and negative cash flow; and
the continued required support from the company or another party. In the fourth quarter of 2003, the company recorded a non–cash
impairment loss of $45,700, which is reported in other expense–net
on the consolidated statement of income. The company concluded that PEL is a variable interest entity and
that the company is the primary beneficiary. In accordance with
FASB Interpretation No. 46, “Consolidation of Variable Interest
Entities, an interpretation of Accounting Research Bulletin No. 51,”
(FIN 46), the company consolidated PEL effective March 31, 2004.
The adoption of FIN 46 resulted in a charge, representing the cumulative effect of change in accounting principle, of $948, which is
reported in other expense–net on the consolidated statement of
income. Also, the adoption of FIN 46 increased the consolidated
balance sheet as follows: current assets by $1,659; property, plant
and equipment by $11,333; short–term debt by $11,561; accounts
payable and other liabilities by $659; and other non–current liabilities
by $1,720. All of PEL’s assets are collateral for its obligations.
Except for PEL’s indebtedness for which the company is a guaran–
tor, PEL’s creditors have no recourse to the general credit of the
company.

53

TIMKEN

Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

13 Retirement and Postretirement Benefit Plans

The company sponsors defined contribution retirement and
savings plans covering substantially all associates in the United
States and certain salaried associates at non–U.S. locations. The
company contributes Timken Company common stock to certain
plans based on formulas established in the respective plan agree–
ments. At December 31, 2004, the plans had 12,411,755 shares
of Timken Company common stock with a fair value of $322,954.
Company contributions to the plans, including performance shar–
ing, amounted to $22,801 in 2004; $21,029 in 2003; and $14,603
in 2002. The company paid dividends totaling $6,467 in 2004;
$6,763 in 2003; and $6,407 in 2002, to plans holding common
shares. The company and its subsidiaries sponsor several unfunded
postretirement plans that provide health care and life insurance
benefits for eligible retirees and dependents. Depending on
retirement date and associate classification, certain health care
plans contain contributions and cost–sharing features such as
deductibles and coinsurance. The remaining health care and life
insurance plans are noncontributory. The company and its subsidiaries sponsor a number of defined
benefit pension plans, which cover eligible associates. As part of the Torrington purchase agreement, the company
agreed to prospectively provide former Torrington associates with
substantially comparable retirement benefits for a specified period
of time. The active Torrington associates became part of Timken’s
defined benefit pension plans, but prior service liabilities and
defined benefit plan assets remained with IR for the U.S.–based
pension plans; however, the company did assume prior service
liabilities for certain non–U.S.–based pension plans. During 2003, the company made revisions, which became effec–
tive on January 1, 2004, to certain of its benefit programs for its
U.S.–based employees resulting in a pretax curtailment gain of
$10,720. Depending on an associate’s combined age and years of
service with the company, defined benefit pension plan benefits
were reduced or replaced by a new defined contribution plan. The
company will no longer subsidize retiree medical coverage for
those associates who do not meet a threshold of combined age
and years of service with the company

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TIMKEN

The company uses a measurement date of December 31 to determine pension and other postretirement benefit measurements for the
pension plans and other postretirement benefit plans.

The following tables set forth the change in benefit obligation, change in plan assets, funded status and amounts recognized in the
consolidated balance sheet of the defined benefit pension and postretirement benefits as of December 31, 2004 and 2003:

	Defined Benefit Pension Plans		Postretirement Plans
	2004	2003	2004	2003
Change in benefit obligation Benefit obligation at beginning of year Service cost Interest cost Amendments Actuarial losses Associate contributions Acquisition International plan exchange rate change Curtailment loss (gain) Benefits paid	$ 2,337,722 37,112 145,880 1,258 197,242 962 – 25,953 – (159,983)	$2,117,144 47,381 137,242 (2,350) 111,230 821 34,905 33,278 1,066 (142,995)	$ 802,218 5,751 48,807 2 14,890 – – 222 – (51,295)	$ 720,675 6,765 49,459 (3,586) 20,228 – 65,516 479 (8,097) (49,221)
Benefit obligation at end of year	$ 2,586,146	$2,337,722	$ 820,595	$ 802,218
Change in plan assets(1) Fair value of plan assets at beginning of year Actual return on plan assets Associate contributions Company contributions Acquisition International plan exchange rate change Benefits paid	$ 1,548,142 234,374 962 196,951 – 17,823 (157,386)	$1,198,351 287,597 821 173,990 7,009 22,349 (141,975)
Fair value of plan assets at end of year	$ 1,840,866	$1,548,142
Funded status Projected benefit obligation in excess of plan assets Unrecognized net actuarial loss Unrecognized net asset at transition dates, net of amortization Unrecognized prior service cost (benefit)	$ (745,280) 739,079 (598) 95,820	$ (789,580) 657,781 (660) 109,421	$ (820,595) 303,244 – (33,016)	$ (802,218) 307,003 – (37,701)
Prepaid (accrued) benefit cost	$ 89,021	$ (23,038)	$ (550,367)	$ (532,916)
Amounts recognized in the consolidated balance sheet Accrued benefit liability Intangible asset Minimum pension liability included in accumulated         other comprehensive loss	$ (603,644) 92,860 599,805	$ (674,502) 106,518 544,946	$ (550,367) – –	$ (532,916) – –
Net amount recognized	$ 89,021	$ (23,038)	$ (550,367)	$ (532,916)

(1) Plan assets are primarily invested in listed stocks and bonds and cash equivalents.

The current portion of accrued pension cost, which is included in
salaries, wages and benefits on the consolidated balance sheet,
was $135,000 and $197,000 at December 31, 2004 and 2003,
respectively. The current portion of accrued postretirement benefit cost, which is included in salaries, wages and benefits on
the consolidated balance sheet, was $60,000 and $55,950 at
December 31, 2004 and 2003, respectively.

55

TIMKEN

Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

13 Retirement and Postretirement Benefit Plans (continued)

2004 solid investment performance, which primarily reflected
higher stock market returns, increased the company’s pension
fund asset values. At the same time, the company’s defined
benefit pension liability also increased as a result of lowering the
discount rate from 6.3% to 6.0%. The accumulated benefit obligations at December 31, 2004
exceeded the market value of plan assets for the majority of the
company’s plans. For these plans, the projected benefit obligation
was $2,555,000; the accumulated benefit obligation was
$2,425,000; and the fair value of plan assets was $1,813,000 at
December 31, 2004. In 2004, as a result of increases in the company’s defined benefit
pension liability, the company recorded additional minimum
pension liability of $54,859 and a non–cash after tax charge to
accumulated other comprehensive loss of $36,468. For 2005 expense, the company’s discount rate has been reduced
from 6.3% to 6.0%. This change will result in an increase in 2005
pretax pension expense of approximately $5,000. On September 10, 2002, the company issued 3,000,000 shares of
its common stock to The Timken Company Collective Investment
Trust for Retirement Trusts (Trust) as a contribution to three
company–sponsored pension plans. The fair market value of the
3,000,000 shares of common stock contributed to the Trust was
approximately $54,500, which consisted of 2,766,955 shares of
the company’s treasury stock and 233,045 shares issued from
authorized common stock. As of December 31, 2004, the
company’s defined benefit pension plans held 1,313,000 common
shares with fair value of $34,164. The company paid dividends
totaling $927 in 2004 to plans holding common shares.

The following table summarizes the assumptions used by the consulting actuary and the related benefit cost information:

	Pension Benefits			Postretirement Benefits
	2004	2003	2002	2004	2003	2002
Assumptions Discount rate Future compensation assumption Expected long–term return on plan assets Components of net periodic benefit cost Service cost Interest cost Expected return on plan assets Amortization of prior service cost Recognized net actuarial loss Curtailment loss (gain) Amortization of transition asset	6.0% 3% to 4% 8.75% $ 37,112 145,880 (146,199) 15,137 33,075 – (106)	6.3% 3% to 4% 8.75% $ 47,381 137,242 (133,474) 18,506 19,197 560 (574)	6.6% 3% to 4% 9.5% $ 36,115 132,846 (135,179) 19,725 473 6,706 (1,143)	6.0% $ 5,751 48,807 – (4,683) 17,628 – –	6.3% $ 6,765 49,459 – (5,700) 14,997 (8,856) –	6.6% $ 4,357 47,505 – (6,408) 11,827 871 –
Net periodic benefit cost	$ 84,899	$ 88,838	$ 59,543	$ 67,503	$ 56,665	$ 58,152

For measurement purposes, the company assumed a weighted–
average annual rate of increase in the per capita cost (health care
cost trend rate) for medical benefits of 10.0% for 2005, declining
gradually to 5.0% in 2010 and thereafter; and 12.75% for 2005,
declining gradually to 6.0% in 2014 and thereafter for prescription
drug benefits. The assumed health care cost trend rate may have a significant
effect on the amounts reported. A one–percentage–point increase
in the assumed health care cost trend rate would increase the
2004 total service and interest cost components by $1,807 and
would increase the postretirement benefit obligation by
$29,662. A one–percentage–point decrease would provide
corresponding reductions of $1,616 and $26,759, respectively.

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TIMKEN

On December 8, 2003, the Medicare Prescription Drug,
Improvement and Modernization Act of 2003 (the Act) was signed
into law. The Act provides for prescription drug benefits under
Medicare Part D and contains a subsidy to plan sponsors who pro–
vide “actuarially equivalent” prescription plans. The company
believes that it offers “actuarially equivalent” prescription plans. In
accordance with FASB Staff Position 106–1, as updated by 106–2, all
measures of the APBO or net periodic postretirement benefit cost in the financial statements or accompanying notes reflect the effects of
the Act on the plan for the entire fiscal year. For the year 2004, the effect on the accumulated postretirement
benefit obligation attributed to past service as of January 1, 2004 is
a reduction of $30,663 and the effect on the amortization of
actuarial losses, service cost, and interest cost components of net
periodic benefit cost is a reduction of $4,148. No Medicare
subsidies were received in 2004.

Plan Assets:

The company’s pension asset allocation at December 31, 2004 and 2003, and target allocation are as follows:

	Current Target Allocation	Percentage of Pension Plan Assets at December 31
Asset Category	2005	2004	2003
Equity securities Debt securities	60% to 70% 30% to 40%	68% 32%	70% 30%
Total	100%	100%	100%

The company recognizes its overall responsibility to ensure that
the assets of its various pension plans are managed effectively and
prudently and in compliance with its policy guidelines and all
applicable laws. Preservation of capital is important; however, the
company also recognizes that appropriate levels of risk are
necessary to allow its investment managers to achieve satisfactory
long–term results consistent with the objectives and the fiduciary character of the pension funds. Asset allocation is established in a
manner consistent with projected plan liabilities, benefit payments
and expected rates of return for various asset classes. The expect–
ed rate of return for the investment portfolio is based on expected
rates of return for various asset classes as well as historical asset
class and fund performance.

Cash Flows:

Employer Contributions to Defined Benefit Plans
2003 2004 2005 (expected)	$ 173,990 $ 196,951 $ 135,000

Future benefit payments are expected to be as follows:

Benefit Payments	Pension Benefits	Postretirement Benefits
		Gross	Expected Medicare Subsidies	Net Including Medicare Subsidies
2005 2006 2007 2008 2009 2010–2014	$ 154,034 $ 155,267 $ 157,066 $ 160,036 $ 163,258 $ 884,177	$   59,732 $   63,181 $   65,620 $   67,696 $   69,595 $ 349,879	$           – $   2,179 $   2,340 $   2,493 $   2,619 $ 14,091	$   59,732 $   61,002 $   63,280 $   65,203 $   66,976 $ 335,788

The accumulated benefit obligation was $2,451,345 and $2,227,003 at December 31, 2004 and 2003, respectively.

57

TIMKEN

Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

14 Segment Information

Description of types of products and services from which each
reportable segment derives its revenues

The company’s reportable segments are business units that
target different industry segments. Each reportable segment is
managed separately because of the need to specifically address
customer needs in these different industries. The company has
three reportable segments: Automotive, Industrial and Steel
Groups. Beginning in the first quarter of 2003, the company reorganized two
of its reportable segments – the Automotive and Industrial Groups.
Timken’s automotive aftermarket business is now part of the
Industrial Group, which manages the combined distribution
operations. The company’s sales to emerging markets, principally
in central and eastern Europe and Asia, previously were reported as
part of the Industrial Group. Emerging market sales to automotive
original equipment manufacturers are now included in the
Automotive Group. The Automotive Group includes sales of bearings and other
products and services (other than steel) to automotive original
equipment manufacturers for passenger cars, trucks and trailers.
The Industrial Group includes sales of bearings and other products
and services (other than steel) to a diverse customer base,
including: industrial equipment; off–highway; rail; and aerospace
and defense customers. The company’s bearing products are used
in a variety of products and applications including passenger cars,
trucks, aircraft wheels, locomotive and railroad cars, machine tools,
rolling mills and farm and construction equipment, in aircraft,
missile guidance systems, computer peripherals and medical
instruments. Steel Group includes sales of intermediate alloy, vacuum
processed alloys, tool steel and some carbon grades. These are
available in a wide range of solid and tubular sections with a
variety of finishes. The company also manufactures custom–made steel products, including precision steel components. A significant
portion of the company’s steel is consumed in its bearing
operations. In addition, sales are made to other anti–friction
bearing companies and to aircraft, automotive, forging, tooling, oil
and gas drilling industries and steel service centers. Tool steels are
sold through the company’s distribution facilities. Measurement of segment profit or loss and segment assets
The company evaluates performance and allocates resources
based on return on capital and profitable growth. The primary
measurement used by management to measure the financial
performance of each Group is adjusted EBIT (earnings before
interest and taxes excluding special items such as impairment and
restructuring, integration costs, one–time gains or losses on sales
of assets, allocated receipts received or payments made under the
CDSOA, loss on dissolution of subsidiary, acquisition–related currency
exchange gains, and other items similar in nature). The accounting
policies of the reportable segments are the same as those
described in the summary of significant accounting policies.
Intersegment sales and transfers are recorded at values based on
market prices, which creates intercompany profit on intersegment
sales or transfers. Factors used by management to identify the enterprise’s
reportable segments
In the previous years’ Segment Information note to consolidated
financial statements, the company reported net sales by geographic
area based on the location of its selling subsidiary. In 2004, the
company changed its reporting of net sales by geographic area to
be more reflective of how the company operates its segments,
which is by the destination of net sales. Net sales by geographic
area for 2003 and 2002 have been reclassified to conform to the
2004 presentation. Non–current assets by geographic area are
reported by the location of the subsidiary.

Geographic Financial Information	United States	Europe	Other Countries	Consolidated
2004 Net sales Non–current assets	$ 3,114,138 1,536,859	$ 784,778 410,407	$ 614,755 257,943	$ 4,513,671 2,205,209
2003 Net sales Non–current assets	$ 2,673,007 1,753,221	$ 648,412 365,969	$ 466,678 193,494	$ 3,788,097 2,312,684
2002 Net sales Non–current assets	$ 1,876,696 1,472,680	$ 347,220 223,348	$ 326,159 84,036	$ 2,550,075 1,780,064

58

TIMKEN

Segment Financial Information	2004	2003	2002
Automotive Group Net sales to external customers Depreciation and amortization EBIT as adjusted Capital expenditures Assets employed at year–end	$ 1,582,226 78,100 15,919 73,385 1,280,979	$1,396,104 82,958 15,685 71,294 1,180,537	$ 752,763 33,866 11,095 34,948 663,864
Industrial Group Net sales to external customers Intersegment sales Depreciation and amortization EBIT, as adjusted Capital expenditures Assets employed at year–end	$ 1,709,770 1,437 71,352 177,913 49,721 1,680,175	$1,498,832 837 61,018 128,031 33,724 1,617,898	$ 971,534 – 45,429 73,040 32,178 1,105,684
Steel Group Net sales to external customers Intersegment sales Depreciation and amortization EBIT (loss), as adjusted Capital expenditures Assets employed at year–end	$ 1,221,675 161,941 59,979 54,756 23,907 977,346	$ 893,161 133,356 64,875 (6,043) 24,297 891,354	$ 825,778 155,500 67,240 32,520 23,547 978,808
Total Net sales to external customers Depreciation and amortization EBIT, as adjusted Capital expenditures Assets employed at year–end	$ 4,513,671 209,431 248,588 147,013 3,938,500	$3,788,097 208,851 137,673 129,315 3,689,789	$2,550,075 146,535 116,655 90,673 2,748,356
Reconciliation to Income Before Income Taxes Total EBIT, as adjusted, for reportable segments Impairment and restructuring Integration/Reorganization expenses (Loss) gain on sale of assets CDSOA net receipts, net of expenses Acquisition–related unrealized currency exchange gains Impairment charge for investment in PEL Gain on sale of real estate Loss on dissolution of subsidiary Loss on sale of business Adoption of FIN 46 for investment in PEL Other Interest expense Interest income Intersegment adjustments	$ 248,588 (13,434) (27,025) (734) 44,429 – – 22,509 (16,186) (5,399) (948) (719) (50,834) 1,397 (1,865)	$ 137,673 (19,154) (33,913) 1,996 65,559 1,696 (45,730) – – – – – (48,401) 1,123 (47)	$ 116,655 (32,143) (18,445) – 50,202 – – – – – – – (31,540) 1,676 (887)
Income before income taxes and cumulative effect of change         in accounting principle	$ 199,779	$ 60,802	$ 85,518

59

TIMKEN

Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

15 Income Taxes

For financial statement reporting purposes, income before income
taxes, based on geographic location of the operation to which such
earnings are attributable, is provided below. The Timken Company has elected to treat certain foreign entities as branches for US
income tax purposes, therefore pretax income by location is not
directly related to pretax income as reported to the respective taxing
jurisdictions.

	Income before income taxes
	2004	2003	2002
United States Non– United States	$165,392 $  34,387	$ 53,560 $   7,242	$   191,105 $(105,587)
Income before income taxes	$199,779	$ 60,802	$    85,518

The provision (credit) for income taxes consisted of the following:

	2004		2003		2002
	Current	Deferred	Current	Deferred	Current	Deferred
United States:         Federal         State and local Foreign	$ (12,976) 4,078 10,982	$ 53,646 1,063 7,330	$          – 1,020 18,895	$      48 1,271 3,087	$  5,220 3,936 7,661	$ 17,808 (1,682) 1,124
	$     2,084	$ 62,039	$ 19,915	$ 4,406	$ 16,817	$ 17,250

The company made income tax payments of approximately $49,758 and $13,830 in 2004 and 2003, respectively. During
2002, the company received income tax refunds of approximately $27,000. Taxes paid differ from current taxes provided,
primarily due to the timing of payments.

Following is the reconciliation between the provision for income taxes and the amount computed by applying U.S. federal income tax rate
of 35% to income before income taxes:

	2004	2003	2002
Income tax at the statutory federal rate Adjustments:         State and local income taxes, net of federal tax benefit         Tax on foreign remittances         Losses without current tax benefits         Foreign Jurisdictions with different tax rates         Deductible dividends paid to ESOP         Extraterritorial Income Benefit         Tax Holiday         Settlements of prior year liabilities         Change in tax status of certain entities         Other items Provision for income taxes	$ 69,922 3,743 4,164 28,630 (6,123) (2,013) (2,308) (4,505) (12,673) (11,954) (2,760) $ 64,123	$ 21,281 1,489 3,027 8,866 (2,824) (1,975) (8,626) (2,166) 500 – 4,749 $ 24,321	$ 29,931 1,465 2,225 3,598 664 (2,137) (980) – 2,548 – (3,247) $ 34,067
Effective income tax rate	32.1%	40%	40%

In connection with various investment arrangements, the Company
has a “holiday” from income taxes in the Czech Republic and
China. These agreements were new to the Company in 2003 and expire in 2010 and 2007, respectively. In total, the agreements
reduced income tax expenses by $4,500 in 2004 and $2,200 in
2003. These savings resulted in an increase to earnings per
diluted share of $0.05 in 2004 and $0.03 in 2003.

60

TIMKEN

The effect of temporary differences giving rise to deferred tax assets and liabilities at December 31, 2004 and 2003 were as follows:

	2004	2003
Deferred tax assets:         Accrued postretirement benefits cost         Accrued pension cost         Inventory         Benefit accruals         Tax loss and credit carryforwards         Other–net         Valuation allowance	$ 198,210 166,525 27,832 14,479 170,799 17,302 (129,328)	$192,860 145,451 16,660 22,908 205,086 10,539 (100,851)
Deferred tax liability – depreciation & amortization	465,819 (298,918)	492,653 (293,580)
Net deferred tax asset	$ 166,901	$199,073

The company has U.S. loss carryforwards with tax benefits totaling
$79,800. These losses will start to expire in 2021. In addition,
the company has loss carryforward tax benefits in various foreign
jurisdictions of $62,100 with various expiration dates and state and
local loss carryforward tax benefits of $15,100, which will begin to
expire in 2014. The company has provided a $100,800 valuation
against certain U.S. and foreign loss carryforward tax benefits, a
$12,200 valuation against other deferred tax assets of certain
foreign subsidiaries, and a $12,200 valuation against the state and
local loss carryforward tax benefits. The company has a research tax credit carryforward of $3,400, an
AMT credit carryforward of $5,200 and state income tax credits of
$4,900. The research tax credits will expire annually between 2019
and 2023 and the AMT credits do not have any expiration date. The
state income tax credits will expire at various intervals beginning in
2004 and have a $4,100 valuation against them. Prior to the American Jobs Creation Act of 2004, the company
planned to reinvest undistributed earnings of all non–U.S. sub
sidiaries. The amount of undistributed earnings for this purpose
was approximately $185,000 at December 31, 2004. On October 22, 2004, the President signed the American Jobs
Creation Act of 2004 (the Act). The Act creates a temporary
incentive for U.S. corporations to repatriate accumulated income
earned abroad by providing an 85 percent dividends received
deduction for certain dividends from controlled foreign corpora–
tions. This deduction is subject to a number of limitations. As
such, the company is not yet in a position to decide on whether,
and to what extent, it might repatriate foreign earnings that have
not yet been remitted to the U.S. The company expects to finalize
its assessment by June 30, 2005.

61

TIMKEN

Report of Management on Internal Control
Over Financial Reporting

The management of The Timken Company is responsible for estab– lishing and maintaining adequate internal control over financial reporting for the company. Timken’s internal control system was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projec– tions of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Timken management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2004. In making this assessment, it used the criteria set forth by the	Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment under COSO’s “Internal Control–Integrated Framework,” management believes that, as of December 31, 2004, Timken’s internal control over financial reporting is effective. Ernst & Young LLP, independent registered public accounting firm, has issued an audit report on our assessment of Timken’s internal control over financial reporting. This report appears on page 63.
	/s/ James W. Griffith President and Chief Executive Officer	/s/ Glenn A. Eisenberg Executive Vice President – Finance and Administration

Management Certifications

James W. Griffith, President and Chief Executive Officer of Timken,
has certified to the New York Stock Exchange that he is not aware
of any violation by Timken of New York Stock Exchange corporate
governance standards. Section 302 of the Sarbanes–Oxley Act of 2002 requires Timken’s
principal executive officer and principal financial officer to file certain
certifications with the Securities and Exchange Commission relating
to the quality of Timken’s public disclosures. These certifications are
filed as exhibits to Timken’s Annual Report on Form 10–K.

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and Shareholders
The Timken Company

We have audited the accompanying consolidated balance sheets
of The Timken Company and subsidiaries as of December 31, 2004
and 2003, and the related consolidated statements of income,
shareholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2004. These financial statements
are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based
on our audits. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion. In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
The Timken Company and subsidiaries at December 31, 2004 and
2003, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31,
2004, in conformity with U.S. generally accepted accounting
principles. We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of The Timken Company’s internal control over
financial reporting as of December 31, 2004, based on criteria
established in Internal Control – Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2005 expressed an
unqualified opinion thereon. /s/ Ernst & Young LLP Cleveland, Ohio
February 28, 2005

62

TIMKEN

Report of Independent Registered Public
Accounting Firm

To the Board of Directors and Shareholders
The Timken Company

We have audited management’s assessment, included in the
accompanying Report of Management on Internal Control Over
Financial Reporting, that The Timken Company maintained
effective internal control over financial reporting as of December
31, 2004, based on criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
The Timken Company’s management is responsible for maintaining
effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the company’s
internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management’s
assessment, testing and evaluating the design and operating
effectiveness of internal control, and performing such other procedures
as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of
the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could
have a material effect on the financial statements. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. In our opinion, management’s assessment that The Timken
Company maintained effective internal control over financial
reporting as of December 31, 2004, is fairly stated, in all material
respects, based on the COSO criteria. Also, in our opinion, The
Timken Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2004,
based on the COSO criteria. We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of The Timken Company as of
December 31, 2004 and 2003, and the related consolidated
statements of income, shareholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2004 of
The Timken Company and our report dated February 28, 2005
expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Cleveland, Ohio
February 28, 2005

63

TIMKEN

Forward–Looking Statements

Certain statements set forth in this annual report (including
the company’s forecasts, beliefs 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 Corporate Profile on
pages 3 through 4 and Management’s Discussion and
Analysis on pages 19 through 37 contain numerous forwardlooking
statements. The company cautions readers that
actual results may differ materially from those expressed or
implied in forward–looking statements made by or on behalf
of the company due to a variety of important factors, such as: a) risks associated with the acquisition of Torrington,
     including the uncertainties in both timing and amount
     of actual benefits, if any, that may be realized as a result
     of the integration of the Torrington business with the
     company’s operations and the timing and amount of the
     resources required to achieve those benefits. b) changes in world economic conditions, including
     additional adverse effects from terrorism or hostilities.
     This includes, but is not limited to, political risks
     associated with the potential instability of governments
     and legal systems in countries in which the company
     or its customers conduct business and significant
     changes in currency valuations. c) the effects of fluctuations in customer demand on sales,
     product mix and prices in the industries in which the
     company operates. This includes the ability of the
     company to respond to the rapid improvement in the
     industrial market, the effects of customer strikes, the
     impact of changes in industrial business cycles and
     whether conditions of fair trade continue in the
     U.S. market. d) competitive factors, including changes in market
     penetration, increasing price competition by existing or
     new foreign and domestic competitors, the introduction
     of new products by existing and new competitors and
     new technology that may impact the way the company’s
     products are sold or distributed. e) changes in operating costs. This includes: the effect
     of changes in the company’s manufacturing processes;
     changes in costs associated with varying levels of
     operations; higher cost and availability of raw materials      and energy; the company’s ability to mitigate the impact
     of higher material costs through surcharges and/or price
     increases; changes resulting from inventory management
     and cost reduction initiatives and different levels of
     customer demands; the effects of unplanned work stoppages;
     and changes in the cost of labor and benefits. f) the success of the company’s operating plans, including
     its ability to achieve the benefits from its manufacturing
     transformation, and administrative cost reduction initiatives
     as well as its ongoing continuous improvement and
     rationalization programs; the ability of acquired companies
     to achieve satisfactory operating results; and its ability to
     maintain appropriate relations with unions that represent
     company associates in certain locations in order to avoid
     disruptions of business. g) the success of the company’s plans concerning the
     transfer of bearing production from Canton, including the
     possibility that the transfer of production will not achieve
     the desired results, the possibility of disruption in the
     supply of bearings during the process, and the outcome of
     the company’s discussions with the union that represents
     company associates at the affected facilities. h) unanticipated litigation, claims or assessments. This
     includes, but is not limited to, claims or problems related
     to intellectual property, product liability or warranty and
     environmental issues. i) changes in worldwide financial markets, including interest
     rates to the extent they affect the company’s ability to
     raise capital or increase the company’s cost of funds, have
     an impact on the overall performance of the company’s
     pension fund investments and/or cause changes in the
     economy which affect customer demand. Additional risks relating to the company’s business, the
industries in which the company operates or the company’s
common stock may be described from time to time in the
company’s filings with the SEC. All of these risk factors are
difficult to predict, are subject to material uncertainties that
may affect actual results and may be beyond the company’s
control. 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.

64

TIMKEN

Quarterly Financial Data

2004	Net Sales	Gross Profit	Impairment & Restructuring	Net Income (Loss)	Earnings per Basic	Share(1) Diluted	Dividends per Share
(Thousands of dollars, except per share data)
Q1 Q2 Q3 Q4	$ 1,098,785 1,130,287 1,096,724 1,187,875	$ 202,523 205,587 184,045 246,430	$ 730 329 2,939 9,436	$ 28,470 25,341 17,463 64,382(2)(5)	$ .32 .28 .19 .71	$ .32 .28 .19 .71	$ .13 .13 .13 .13
	$ 4,513,671	$ 838,585	$ 13,434	$135,656	$ 1.51	$ 1.49	$ .52
2003 (Thousands of dollars, except per share data)
Q1 Q2 Q3 Q4	$ 838,007 990,253 938,012 1,021,825	$ 137,762(3) 158,069 147,610 195,677	$ – 853 1,883 16,418	$ 11,339 3,921 (1,275) 22,496(2)(4)	$ .15 .05 (.01) .26	$ .15 .05 (.01) .25	$ .13 .13 .13 .13
	$ 3,788,097	$ 639,118(3)	$ 19,154	$ 36,481	$ .44	$ .44	$ .52

(1)Annual earnings per share do not equal the sum of the individual quarters due to differences in the average number of shares outstanding during the respective periods.
(2)Includes receipt (net of expenses) of $44.4 million and $65.6 million in 2004 and 2003 resulting from the U.S. Continued Dumping and Subsidy Offset Act.
(3)Gross profit for 2003 includes a reclassification of $7.5 million from cost of products sold to selling administrative and general expenses for Torrington engineering and
research and development expenses to be consistent with the company’s 2004 cost classification methodology.
(4)Includes $45.7 million for write–off of investment in joint venture, PEL.
(5)Includes $17.1 million for the gain on sale of non–strategic assets and $16.2 million for the loss on dissolution of a subsidiary.

2004 Stock Prices			2003 Stock Prices
	High	Low		High	Low
Q1 Q2 Q3 Q4	$24.70 26.49 26.49 27.50	$18.74 20.81 22.50 22.82	Q1 Q2 Q3 Q4	$20.46 18.50 19.25 20.32	$14.88 15.59 14.55 15.31

65

TIMKEN

Summary of Operations and Other Comparative Data

	2004	2003	2002	2001
(Thousands of dollars, except per share data)
Statements of Income     Net sales:         Automotive Bearings         Industrial Bearings         Total Bearings         Steel	$ 1,582,226 1,709,770 3,291,996 1,221,675	$ 1,396,104 1,498,832 2,894,936 893,161	$ 752,763 971,534 1,724,297 825,778	$ 642,943 990,365 1,633,308 813,870
Total net sales	4,513,671	3,788,097	2,550,075	2,447,178
Gross profit     Selling, administrative and general expenses     Impairment and restructuring charges     Operating income (loss)     Other income (expense) – net     Earnings before interest and taxes (EBIT)(1)     Interest expense     Income (loss) before cumulative effect of         accounting changes     Net income (loss) Balance Sheets     Inventory     Working capital     Property, plant and equipment – net     Total assets     Total debt:         Commercial paper         Short–term debt         Current portion of long–term debt         Long–term debt	838,585 587,923 13,434 237,228 11,988 249,216 50,834 135,656 $ 135,656 $ 874,833 691,964 1,582,957 3,938,500 – 157,417 1,273 620,634	639,118(6) 521,717(6) 19,154 98,247 9,833 108,080 48,401 36,481 $ 36,481 $ 695,946 375,637 1,610,848 3,689,789 – 114,469 6,725 613,446	469,577 358,866 32,143 78,568 36,814 115,382 31,540 51,451 $ 38,749 $ 488,923 334,222 1,226,244 2,748,356 8,999 78,354 23,781 350,085	400,720 363,683 54,689 (17,652) 22,061 4,409 33,401 (41,666) $ (41,666) $ 429,231 187,224 1,305,345 2,533,084 1,962 84,468 42,434 368,151
Total debt     Net debt:         Total debt         Less: cash and cash equivalents	779,324 779,324 (50,967)	734,640 734,640 (28,626)	461,219 461,219 (82,050)	497,015 497,015 (33,392)
Net debt(5)     Total liabilities     Shareholders’ equity     Capital:         Net debt         Shareholders’ equity	728,357 2,668,652 $ 1,269,848 728,357 1,269,848	706,014 2,600,162 $ 1,089,627 706,014 1,089,627	379,169 2,139,270 $ 609,086 379,169 609,086	463,623 1,751,349 $ 781,735 463,623 781,735
Capital Other Comparative Data     Net income (loss) / Total assets     Net income (loss) / Net sales     EBIT / Net sales     EBIT / Beginning invested capital (2)     Beginning invested capital:         Total assets             Less: cash and cash equivalents             Current portion of deferred income taxes             Long term portion of deferred income taxes             Accounts payable and other liabilities             Salaries, wages and benefits             Accrued pension cost             Accrued postretirement benefits cost             Income taxes	1,998,205 3.4% 3.0% 5.5% 9.7% 3,689,789 (28,626) (50,271) (148,802) (425,157) (376,603) – – (78,514)	1,795,641 1.0% 1.0% 2.9% 5.6% 2,748,356 (82,050) (36,003) (169,051) (296,543) (222,546) – – (3,847)	988,255 1.4% 1.5% 4.5% 6.0% 2,533,084 (33,392) (42,895) (27,164) (258,001) (254,291) – – –	1,245,358 (1.6)% (1.7)% 0.2% 0.2% 2,564,105 (10,927) (43,094) – (239,182) (137,320) – – (1,527)
Beginning invested capital Net sales per associate (3) Capital expenditures Depreciation and amortization Capital expenditures / Net sales Dividends per share Earnings per share (4) Earnings per share – assuming dilution (4) Net debt to capital (5) Number of associates at year–end Number of shareholders (9)	2,581,816 $ 173.6 $ 147,013 $ 209,431 3.3% $ 0.52 $ 1.51 $ 1.49 36.5% 25,931 42,484	1,938,316 $ 172.0 $ 129,315 $ 208,851 3.4% $ 0.52 $ 0.44 $ 0.44 39.3% 26,073 42,184	1,917,341 $ 139.0 $ 90,673 $ 146,535 3.6% $ 0.52 $ 0.63 $ 0.62 38.4% 17,963 44,057	2,132,055 $ 124.8 $ 102,347 $ 152,467 4.2% $ 0.67 $ (0.69) $ (0.69) 37.2% 18,735 39,919

(1) EBIT is defined as operating income plus other income (expense) – net.
(2) The company uses EBIT/Beginning invested capital as a type of ratio that indicates return on capital. EBIT is defined as operating income plus other income (expense) – net. Beginning
invested capital is calculated as total assets less the following balance sheet line items: cash and cash equivalents; the current and long–term portions of deferred income taxes; accounts
payable and other liabilities; salaries, wages and benefits; and income taxes.
(3) Based on the average number of associates employed during the year.
(4) Based on the average number of shares outstanding during the year and includes the cumulative effect of accounting change in 2002, which related to the adoption of SFAS No. 142.
(5) The company presents net debt because it believes net debt is more representative of the company’s indicative financial position due to temporary changes in cash and cash equivalents.
(6) Gross profit for 2003 included a reclassification of $7.5 million from cost of products sold to selling, administrative and general expenses for Torrington engineering and research and
development expenses to be consistent with the company’s 2004 cost classification methodology.
(7) It is impractical for Timken to reflect 2000 segment financial information related to the 2003 reorganization of its Automotive and Industrial Groups, as this structure was not in place
at the time.
(8) It is impracticable for the company to restate prior year segment financial information into Automotive Bearings and Industrial Bearings as this structure was not in place until 2000.
(9) Includes an estimated count of shareholders having common stock held for their accounts by banks, brokers and trustees for benefit plans.

66

TIMKEN

2000	1999	1998	1997	1996	1995
$ 839,838(7) 923,477(7) 1,763,315 879,693	$ (8) (8) 1,759,871 735,163	$ (8) (8) 1,797,745 882,096	$ (8) (8) 1,718,876 898,686	$ (8) (8) 1,598,040 796,717	$ (8) (8) 1,524,728 705,776
2,643,008	2,495,034	2,679,841	2,617,562	2,394,757	2,230,504
500,873 367,499 27,754 105,620 (6,580) 99,040 31,922 45,888 $ 45,888 $ 489,549 311,090 1,363,772 2,564,105 76,930 105,519 26,974 305,181	492,668 359,910 – 132,758 (9,638) 123,120 27,225 62,624 $ 62,624 $ 446,588 348,455 1,381,474 2,441,318 35,937 81,296 5,314 327,343	581,655 356,672 – 224,983 (16,117) 208,866 26,502 114,537 $ 114,537 $ 457,246 359,914 1,349,539 2,450,031 29,873 96,720 17,719 325,086	612,188 332,419 – 279,769 6,005 286,766 21,432 171,419 $ 171,419 $ 445,853 275,607 1,220,516 2,326,550 71,566 61,399 23,620 202,846	566,363 319,458 – 246,905 (3,747) 242,304 17,899 138,937 $ 138,937 $ 419,507 265,685 1,094,329 2,071,338 46,977 59,457 30,396 165,835	507,041 304,046 – 202,995 (10,229) 197,957 19,813 112,350 $ 112,350 $ 367,889 247,895 1,039,382 1,925,925 5,037 54,727 314 151,154
514,604 514,604 (10,927)	449,890 449,890 (7,906)	469,398 469,398 (320)	359,431 359,431 (9,824)	302,665 302,665 (5,342)	211,232 211,232 (7,262)
503,677 1,559,423 $ 1,004,682 503,677 1,004,682	441,984 1,395,337 $ 1,045,981 441,984 1,045,981	469,078 1,393,950 $ 1,056,081 469,078 1,056,081	349,607 1,294,474 $ 1,032,076 349,607 1,032,076	297,323 1,149,110 $ 922,228 297,323 922,228	203,970 1,104,747 $ 821,178 203,970 821,178
1,508,359 1.8% 1.7% 3.7% 4.9% 2,441,318 (7,906) (39,706) – (236,602) (120,295) – – (5,627)	1,487,965 2.6% 2.5% 4.9% 6.0% 2,450,031 (320) (42,288) (20,409) (221,823) (106,999) – – (17,289)	1,525,159 4.7% 4.3% 7.8% 11.4% 2,326,550 (9,824) (42,071) (26,605) (253,033) (134,390) – – (22,953)	1,381,683 7.4% 6.5% 11.0% 17.7% 2,071,338 (5,342) (54,852) (3,803) (237,020) (86,556) (18,724) (19,746) (29,072)	1,219,551 6.7% 5.8% 10.1% 16.9% 1,925,925 (7,262) (50,183) (31,176) (229,096) (76,460) (43,241) (22,765) (30,723)	1,025,148 5.8% 5.0% 8.9% 14.1% 1,858,734 (12,121) (49,222) (45,395) (216,568) (68,812) (29,502) (21,932) (13,198)
2,031,182 $ 127.9 $ 162,717 $ 151,047 6.2% $ 0.72 $ 0.76 $ 0.76 33.4% 20,474 42,661	2,040,903 $ 119.1 $ 173,222 $ 149,949 6.9% $ 0.72 $ 1.01 $ 1.01 29.7% 20,856 42,907	1,837,674 $ 127.5 $ 258,621 $ 139,833 9.7% $ 0.72 $ 1.84 $ 1.82 30.8% 21,046 45,942	1,616,223 $ 130.5 $ 229,932 $ 134,431 8.8% $ 0.66 $ 2.73 $ 2.69 25.3% 20,994 46,394	1,435,019 $ 132.4 $ 155,925 $ 126,457 6.5% $ 0.60 $ 2.21 $ 2.19 24.4% 19,130 31,813	1,401,984 $ 134.2 $ 131,188 $ 123,409 5.9% $ 0.56 $ 1.80 $ 1.78 19.9% 17,034 26,792

67

TIMKEN

APPENDIX TO EXHIBIT 13

On page 1 of the printed document, three bar charts were shown which contain the following information:

(1)	Net Sales ($ Millions)
	2000 2001 2002 2003 2004	2,643 2,447 2,550 3,788 4,514

(2)	Earnings (loss) per share – diluted
	2000 2001 2002 2003 2004	0.76 (0.69) 0.62 0.44 1.49

(3)	Dividends per share
	2000 2001 2002 2003 2004	0.72 0.67 0.52 0.52 0.52

TIMKEN

EX-21

     Exhibit 21.  Subsidiaries of the Registrant
     ___________________________________________

     The Timken Company has no parent company.

     The active subsidiaries of the Company (all of which are included
     in the consolidated financial statements of the Company and its
     subsidiaries) are as follows:
                                                     Percentage of
                                                     voting securities
                                 State or sovereign  owned directly
                                 power under laws    or indirectly
     Name                        of which organized  by Company
     __________________________________________________________________
     MPB Corporation                  Delaware              100%
     Timken Super Precision-
       Europa B.V.                    Netherlands           100%
     Timken Super Precision-
       Singapore Pte. Ltd.            Singapore             100%
     Timken UK, Ltd.                  England               100%
     Australian Timken Proprietary,
       Limited                        Victoria, Australia   100%
     Timken do Brasil
       Comercio e Industria, Ltda.    Sao Paulo, Brazil     100%
     British Timken Limited           England               100%
     Timken Communications Company    Ohio                  100%
     Timken Alloy Steel Europe
       Limited                        England               100%
     EDC, Inc.                        Ohio                  100%
     Timken Engineering and Research -
       India Private Limited          India                 100%
     Timken Espana, S.L.              Spain                 100%
     Timken Germany GmbH              Germany               100%
     Timken Europe B.V.               Netherlands           100%
     Timken Finance Europe B.V.       Netherlands           100%
     HHC1, Inc.                       Delaware              100%
     Timken India Limited             India                  80%
     Timken Industrial Services, LLC  Delaware              100%
     Timken Italia, S.R.L.            Italy                 100%
     Timken Korea Limited Liability
       Corporation                    Korea                 100%
     Latrobe Steel Company            Pennsylvania          100%
     OH&R Special Steels Company      Delaware              100%
     Timken Latrobe Steel-Europe Ltd. England               100%
     Timken de Mexico S.A. de C.V.    Mexico                100%
     MPB Export Corporation           Delaware              100%
     Nihon Timken K.K.                Japan                 100%
     Timken Precision Components
       Europe                         France                100%
     Timken Polska Sp.z.o.o.          Poland                100%
     Rail Bearing Service Corporation Virginia              100%
     Timken Alcor Aerospace
       Technologies, Inc.             Delaware              100%
     Timken (China) Investment Co.,
       Ltd.                           China                 100%
     Timken Bearing Services South
       Africa (Proprietary) Limited   South Africa           74%
     Timken Canada GP Inc.            Canada                100%
     Timken Canada LP                 Canada                100%


     Exhibit 21.  Subsidiaries of the Registrant (cont).
     _______________________________________________

                                                     Percentage of
                                                     voting securities
                                 State or sovereign  owned directly
                                 power under laws    or indirectly
     Name                        of which organized  by Company
     __________________________________________________________________
     Timken Rail Service Company      Russia                100%
     Timken Receivables Corporation   Delaware              100%
     Timken Romania S.A.              Romania                94%
     The Timken Corporation           Ohio                  100%
     The Timken Service & Sales Co.   Ohio                  100%
     Timken Servicios Administrativos
       S.A. de C.V.                   Mexico                100%
     Timken Singapore Pte. Ltd.       Singapore             100%
     Timken South Africa (Pty.) Ltd.  South Africa          100%
     Timken de Venezuela C.A.         Venezuela             100%
     Yantai Timken Company Limited    China                 100%
     Timken Argentina Sociedad De
       Responsabilidad Limitada       Argentina             100%
     International Component Supply,
       Limitada                       Brazil                100%
     Timken Scandinavia AB            Sweden                100%
     Timken Engineered Products
       (Shanghai) Co., Ltd.           China                 100%
     Timken Benelux, SA               Belgium               100%
     Timken Ceska Republika S.R.O.    Czech Republic        100%
     Timken France SAS                France                100%
     Timken Industries SAS            France                100%
     Timken Deutschland GmbH          Germany               100%
     Timken GmbH                      Germany               100%
     Timken SpA                       Italy                 100%
     Timken IRB SA                    Spain                 100%
     Nadella SA                       Switzerland           100%
     Timken Coventry Limited          England               100%
     Timken Great Britain Ltd.        England               100%
     Timken Luxembourg Holdings SARL  Luxembourg            100%
     Timken US Corporation            Delaware              100%
     S.E. Setco Service Company, LLC  Georgia               100%
     KILT Holdings, Inc.              Delaware              100%
     Timken Canada Holdings ULC       Canada                100%
     Timken Holdings, Inc.            Delaware              100%
     Timken SH Holdings ULC           Canada                100%
     Timken U.S. Holdings LLC         Delaware              100%
     Timken Wuxi Bearings Company
       Limited                        China                 100%
     TTC Asia Limited                 Cayman Islands        100%
     TTC Sales Company, Inc.          Barbados              100%

     The Company also has a number of inactive subsidiaries that were
     incorporated for name-holding purposes and a foreign sales
     corporation subsidiary.

EX-23

                                Exhibit 23
                      Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements and
related prospectuses of The Timken Company listed below of our reports dated
February 28, 2005, with respect to the consolidated financial statements and
schedule of The Timken Company, The Timken Company management's assessment of
the effectiveness of internal control over financial reporting, and the
effectiveness of internal control over financial reporting of The Timken
Company, included in this Annual Report (Form 10-K) for the year ended December
31, 2004:

Registration                                                       Filing
   Number           Description of Registration Statement           Date

  2-97340     1985 Incentive Plan of The Timken Company -     November 19, 1990
              Post-effective Amendment No. 1 to Form S-8

333-17503     The Timken Company Dividend Reinvestment         December 9, 1996
              Plan - Form S-3

333-41155     OH&R Investment Plan - Form S-8                 November 26, 1997

333-43847     The Timken Company International Stock            January 7, 1998
              Ownership Plan - Form S-8

333-45753     Rail Bearing Service Employee Savings            February 6, 1998
              Plan - Form S-8

333-45891     $300,000,000 Medium-Term Notes, Series             April 23, 1998
              A - Amendment No. 4 to Form S-3

333-66911     Voluntary Investment Program for Hourly          November 6, 1998
              Employees of Latrobe Steel Company - Form S-8

333-66907     The MPB Employees' Savings Plan - Form S-8       November 6, 1998

333-69129     The Timken Company - Latrobe Steel Company       December 17,1998
              Savings and Investment Pension Plan -
              Form S-8

333-35154     The Timken Company Long-Term Incentive Plan         April 19,2000
              - Form S-8

333-35152     The Hourly Pension Investment Plan - Form S-8       April 19,2000

333-52866     Voluntary Investment Pension Plan for Hourly    December 28, 2000
              Employees of The Timken Company - Form S-8

333-76062     The Company Savings Plan for the Employees of   December 28, 2001
              Timken France - Form S-8

333-86452     The Timken Company Long-Term Incentive Plan -      April 17, 2002
              Form S-8

333-86448     The Timken Company Collective Investment Trust     April 17, 2002
              for Retirement Trusts - Form S-3

333-100731    Prospectus Supplements - 11,000,000 shares of   February 11, 2003
              Timken Company Common Stock; $250,000,000 in
              Senior Notes - Form S-3

333-103753    The Timken Company Savings and Stock Investment    March 11, 2003
              Plan for Torrington Non-Bargaining Associates -
              Form S-8

333-103754    The Timken Company Savings Plan for Torrington     March 11, 2003
              Bargaining Associates - Form S-8

333-105333    The Timken Share Incentive Plan - Form S-8           May 16, 2003

333-108840    The Hourly Pension Investment Plan - Form S-8  September 16, 2003

333-108841    Voluntary Investment Program for Hourly        September 16, 2003
              Employees of Latrobe Steel Company - Form S-8

333-113390    The Voluntary Investment Pension Plan for Hourly    March 8, 2004
              Employees of The Timken Company - Form S-8

333-113391    The Timken Company - Latrobe Steel Company          March 8, 2004
              Savings and Investment Pension Plan - Form S-8

333-113394    The Rail Bearing Service Employee Savings Plan -    March 8, 2004
              Form S-8

333-114647    The Timken Company Long-Term Incentive Plan -      April 20, 2004
              Form S-8

333-118664    MPB Employees' Savings Plan - Form S-8            August 30, 2004

                                          /s/  ERNST & YOUNG LLP
Cleveland, Ohio
March 14, 2005

EX-24

                                  EXHIBIT 24
                               POWER OF ATTORNEY

         KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
     and officers of The Timken Company, an Ohio corporation (the "Company"),
     hereby (1) constitutes and appoints James W. Griffith, Glenn A. Eisenberg,
     William R. Burkhart and Scott A. Scherff, collectively and individually, as
     his or her agent and attorney-in-fact, with full power of substitution and
     resubstitution, to (a) sign and file on his or her behalf and in his or
     her name, place and stead in any and all capacities (i) an Annual Report
     pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
     as amended, on Form 10-K for the fiscal year ended December 31, 2004, (ii)
     any and all amendments and exhibits to such Annual Report, and (b) do and
     perform any and all other acts and deeds whatsoever that may be necessary
     or required in the premises; and (2) ratifies and approves any and all
     actions that may be taken pursuant hereto by any of the above-named agents
     and attorneys-in-fact or their substitutes.

         IN WITNESS WHEREOF, the undersigned directors and officers of the
     Company have hereunto set their hands as of the 15th day of March 2005.

          /s/ Sallie B. Bailey              /s/ Joseph W. Ralston
          _____________________________     ______________________________
          Sallie B. Bailey                  Joseph W. Ralston
          (Principal Accounting Officer)

          /s/ Glenn A. Eisenberg            /s/ Frank C. Sullivan
          _____________________________     ______________________________
          Glenn A. Eisenberg                Frank C. Sullivan
          (Principal Financial Officer)

          /s/ Phillip R. Cox                /s/ John M. Timken, Jr.
          _____________________________     ______________________________
          Phillip R. Cox                    John M. Timken, Jr.

          /s/ James W. Griffith             /s/ Ward J. Timken
          _____________________________     ______________________________
          James W. Griffith                 Ward J. Timken
          (Principal Executive Officer)

          /s/ Jerry J. Jasinowski           /s/ Ward J. Timken, Jr.
          _____________________________     ______________________________
          Jerry J. Jasinowski               Ward J. Timken, Jr.

          /s/ John A. Luke, Jr.             /s/ W.R. Timken, Jr.
          _____________________________     ______________________________
          John A. Luke, Jr.                 W.R. Timken, Jr.

          /s/ Robert W. Mahoney             /s/ Joseph F. Toot, Jr.
          _____________________________     ______________________________
          Robert W. Mahoney                 Joseph F. Toot, Jr.

          /s/ Jay A. Precourt               /s/ Jacqueline F. Woods
          _____________________________     ______________________________
          Jay A. Precourt                   Jacqueline F. Woods

EX-31.1

                                  EXHIBIT 31.1

                PRINCIPAL EXECUTIVE OFFICER'S CERTIFICATIONS
          PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James W. Griffith, certify that:

1.  I have reviewed this Form 10-K of The Timken Company;

2.  Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

    a)  Designed such disclosure controls and procedures, or caused such
    disclosure controls and procedures to be designed under our supervision,
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by others
    within those entities, particularly during the period in which this
    report is being prepared;

    b)  Designed such internal control over financial reporting, or caused such
    internal control over financial reporting to be designed under our
    supervision, to provide reasonable assurance regarding the reliability of
    financial reporting and the preparation of financial statements for external
    purposes in accordance with generally accepted accounting principles;

    c)  Evaluated the effectiveness of the registrant's disclosure controls and
    procedures and presented in this report our conclusions about the
    effectiveness of the disclosure controls and procedures, as of the end of
    the period covered by this report based on such evaluation; and

    d)  Disclosed in this report any change in the registrant's internal control
    over financial reporting that occurred during the registrant's most recent
    fiscal quarter (the registrant's fourth fiscal quarter in the case of an
    annual report) that has materially affected, or is reasonably likely to
    materially affect, the registrant's internal control over financial
    reporting: and

5.  The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

    a)  All significant deficiencies and material weaknesses in the design or
    operation of internal control over financial reporting which are reasonably
    likely to adversely affect the registrant's ability to record, process,
    summarize and report financial information; and

    b)  Any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal
    control over financial reporting.

    Date:  March 15, 2005                BY  /s/  James W. Griffith
                                        ______________________________________
                                        James W. Griffith,
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)

EX-31.2

                                 EXHIBIT 31.2

               PRINCIPAL FINANCIAL OFFICER'S CERTIFICATIONS
           PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Glenn A. Eisenberg, certify that:

1.  I have reviewed this Form 10-K of The Timken Company;

2.  Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

    a)  Designed such disclosure controls and procedures, or caused such
    disclosure controls and procedures to be designed under our supervision,
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by others
    within those entities, particularly during the period in which this
    report is being prepared;

    b)  Designed such internal control over financial reporting, or caused such
    internal control over financial reporting to be designed under our
    supervision, to provide reasonable assurance regarding the reliability of
    financial reporting and the preparation of financial statements for external
    purposes in accordance with generally accepted accounting principles;

    c)  Evaluated the effectiveness of the registrant's disclosure controls and
    procedures and presented in this report our conclusions about the
    effectiveness of the disclosure controls and procedures, as of the end of
    the period covered by this report based on such evaluation; and

    d)  Disclosed in this report any change in the registrant's internal control
    over financial reporting that occurred during the registrant's most recent
    fiscal quarter (the registrant's fourth fiscal quarter in the case of an
    annual report) that has materially affected, or is reasonably likely to
    materially affect, the registrant's internal control over financial
    reporting: and

5.  The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

    a)  All significant deficiencies and material weaknesses in the design or
    operation of internal control over financial reporting which are reasonably
    likely to adversely affect the registrant's ability to record, process,
    summarize and report financial information; and

    b)  Any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal
    control over financial reporting.

    Date:  March 15, 2005            BY  /s/  Glenn A. Eisenberg
                                    ______________________________________
                                    Glenn A. Eisenberg
                                    Executive Vice President - Finance and
                                    Administration (Principal Financial Officer)

EX-32

                                  Exhibit 32

                          CERTIFICATION PURSUANT TO
                           18 U.S.C. SECTION 1350,
                           AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report of The Timken Company (the "Company")
on Form 10-K for the year ended December 31, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), each of
the undersigned officers of the Company certifies, pursuant to 18 U.S.C. 1350,
as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that, to
such officer's knowledge:

     (1)  The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company as of the dates and for the periods expressed in the
          Report.

                                              BY  /s/  James W. Griffith
Date: March 15, 2005                          ______________________________
                                             Name: James W. Griffith
                                             Title:  President and Chief
                                                       Executive Officer

                                              BY  /s/  Glenn A. Eisenberg
                                             ______________________________
                                             Name: Glenn A. Eisenberg
                                             Title: Executive Vice President
                                                  - Finance and Administration

     The foregoing certification is being furnished solely pursuant to 18 U.S.C.
1350 and is not being filed as part of the Report or as a separate disclosure
document.