NET INcOME (lOss) aTTRIbuTablETO NONcONTROllING INTEREsT: 2010 2009 $   Change  % Change  Net income (loss) attributable to noncontrolling interest $ 2.1 $ (4.6) $ 6.7 145.7% MANAgEMENT’s dIsCussION ANd ANAlYsIs OF FINANCIAl CONdITION ANd rEsulTs OF OPErATIONs  For 2010, the net income attributable to noncontrolling interest was $2.1 million, compared to a net loss attributable to noncontrolling  interest of $4.6 million in 2009. The increase in net income attributable to noncontrolling interests in 2010 was primarily due to improved  market conditions served by subsidiaries in which the Company holds less than 100% ownership. In 2009, the loss attributable to noncontrolling interest increased by $6.1 million due to a correction of an error related to the $18.4  million goodwill impairment loss the Company recorded in the fourth quarter of 2008 for the Mobile Industries segment. In recording  the goodwill impairment loss in the fourth quarter of 2008, the Company did not recognize that a portion of the goodwill impairment  loss related to two separate subsidiaries in India and South Africa in which the Company holds less than 100% ownership. As a result,  the Company’s 2008 financial statements were understated by $6.1 million and the Company’s first quarter 2009 financial statements  were overstated by $6.1 million. Management concluded the effect of this adjustment was not material to the Company’s 2009 or 2008  financial statements. The presentation below reconciles the changes in net sales for each segment reported in accordance with U.S. GAAP to net sales  adjusted to remove the effects of acquisitions made in 2010 and currency exchange rates. The effects of acquisitions and currency  exchange rates are removed to allow investors and the Company to meaningfully evaluate the percentage change in net sales on a  comparable basis from period to period. During the third quarter of 2010, the Company completed the acquisition of QM Bearings. QM  Bearings is part of the Process Industries segment. The acquisition of City Scrap, completed on December 31, 2010, had no impact on  the 2010 operating results. The year 2009 represents the base year for which the effects of currency are measured; as a result, currency  is assumed to be zero for 2009. The Mobile Industries segment’s net sales, excluding the effects of currency-rate changes, increased 25.1% in 2010 compared to 2009,  primarily due to higher volume of approximately $220 million and higher pricing of approximately $90 million. The higher sales were  seen across all market sectors, led by a 40% increase in heavy truck, a 33% increase in off-highway and a 28% increase in light vehicles.  EBIT was higher in 2010 compared to 2009 primarily due to the impact of higher volume and pricing of approximately $180 million,  lower impairment and restructuring charges of approximately $95 million, favorable sales mix of approximately $40 million and improved  manufacturing utilization of approximately $25 million. These increases were partially offset by higher selling, general and administrative  expenses of approximately $30 million and LIFO expense of approximately $25 million. busINEss sEGMENTs: MObIlE INDusTRIEs sEGMENT: 2010 2009 $   Change  Change  Net sales, including intersegment sales  $ 1,560.6 $ 1,245.0  $ 315.6 25.3%  EBIT $ 207.6 $ (85.5) $ 293.1 342.8%  EBIT margin  13.3% (6.9)% – 2,020 bps 2010 2009 $   Change  % Change  Net sales, including intersegment sales  $ 1,560.6 $ 1,245.0  $ 315.6 25.3%  Currency  3.5  –  3.5  NM Net sales, excluding the impact of currency  $ 1,557.1 $ 1,245.0  $ 312.1 25.1%  29 THE TIMKEN COMPANY