ManageMent’s Discussion anDanalysis of financial conDition anD Results of opeRations 32 THE TIMKEN COMPANY THE BAlANCE sHEETs The following discussion is a comparison of the Consolidated Balance Sheets at December 31, 2011 and December 31, 2010. Refer to the Consolidated Statements of Cash Flows for a discussion of the decrease in cash and cash equivalents. Accounts  receivable, net increased as a result of the higher sales in the fourth quarter of 2011 as compared to the same period in 2010, as well  as the acquisitions of Philadelphia Gear and Drives. Inventories increased primarily to support higher sales volume and expected future  demand. Inventories also increased as a result of acquisitions. The increase in deferred income taxes was primarily due to an increase  in book-tax differences related to accrued liabilities, primarily related to incentive-based compensation, and other employee benefit  accruals. The increase in other current assets was primarily due to an increase in short-term marketable securities of approximately  $30 million, partially offset by the sale of the Company’s equity investment in ICS, which had been classified as assets held for sale. The increase in property, plant and equipment – net in 2011 was primarily due to the impact of acquisitions in 2011, as well as capital  expenditures in 2011 exceeding depreciation expense. In November 2010, the Company entered into an agreement to sell the real estate of its former manufacturing facility in Sao Paulo,  Brazil. The transfer of this land is expected to be completed in 2012 after the Company has completed the soil remediation of the site  and the groundwater remediation plan has been approved. Based on the terms of the agreement, once the title transfers, the Company  expects to receive approximately $33.7 million, including interest, over an 18-month period, subject to fluctuations in foreign currency  exchange rates. cuRRENT assETs: December 31, 2011 2010 $ Change  % Change  Cash and cash equivalents  $ 464.8 $ 877.1 $ (412.3) (47.0)% Restricted cash  3.6  –  3.6  NM Accounts receivable, net  645.5   516.6   128.9  25.0 %  Inventories, net  964.4   828.5   135.9  16.4 %  Deferred income taxes   113.7   100.4   13.3  13.2 %  Deferred charges and prepaid expenses  12.8   11.3   1.5  13.3 %  Other current assets  87.5   65.3   22.2  34.0 %  Total current assets  $ 2,292.3 $ 2,399.2 $ (106.9) (4.5)% PROPERTy, PlaNT aND EquIPMENT – NET: December 31, 2011 2010 $ Change  % Change  Property, plant and equipment $ 3,589.4  $ 3,454.0  $ 135.4 3.9 %  Less: allowances for depreciation  (2,280.5)  (2,186.3)  (94.2) (4.3)% Property, plant and equipment – net $ 1,308.9  $ 1,267.7  $ 41.2 3.2 %