OVERVIEw:  rEsulTs OF OPErATIONs 2010 compared to 2009 THE sTATEMENTs OF INCOME salEs by sEGMENT: 25$^{ }$ THE TIMKEN COMPANY Net sales for 2010 increased $913.9 million, or 29.1%, compared to 2009, primarily due to higher volume of approximately $655 million  primarily across the Mobile Industries’ light-vehicle, off-highway and heavy truck market sectors, the Process Industries’ industrial  distribution channel and the Steel segment. Net sales for 2010 also increased due to higher surcharges of approximately $250 million. The income from discontinued operations recognized in 2010 is the result of favorable working capital adjustments from the sale of the  Company’s NRB operations, completed in December 2009, while the loss from discontinued operations was due to the negative impact  of the deteriorating global economy on NRB’s business operations. The Company’s results for 2010 reflect the improvement of the end-market sectors served principally by the Mobile Industries and Steel  segments, higher surcharges, improved manufacturing performance, lower restructuring costs and the favorable impact of prior-year  restructuring initiatives, partially offset by lower demand from aerospace and defense customers, higher raw material costs and related  LIFO expense and higher expense related to incentive compensation plans. The Company reported net sales for 2010 of $4.1 billion, compared to $3.1 billion in 2009, a 29.1% increase. Sales in 2010 were higher  across all business segments except for the Aerospace and Defense segment. The increase in sales was primarily driven by strong  demand from the Mobile Industries and Steel segments and the industrial distribution channel within the Process Industries segment,  as well as higher surcharges, partially offset by lower sales in the Aerospace and Defense segment. For 2010, diluted earnings per share  were $2.81, compared to a net loss per share of $1.39 for 2009. Income from continuing operations per diluted share was $2.73 for  2010, compared to a net loss from continuing operations of $0.64 for 2009. MANAgEMENT’s dIsCussION ANd ANAlYsIs OF FINANCIAl CONdITION ANd rEsulTs OF OPErATIONs  2010 2009 $ Change  % Change  Net sales $ 4,055.5 $ 3,141.6  $ 913.9 29.1%  Income (loss) from continuing operations  269.5   (66.0)  335.5  NM Income (loss) from discontinued operations  7.4   (72.6)  80.0  110.2%  Income (loss) attributable to noncontrolling interest  2.1   (4.6)  6.7  145.7%  Net income (loss) attributable to The Timken Company $ 274.8 $ (134.0) $ 408.8 305.1%  Diluted earnings (loss) per share: Continuing operations $ 2.73 $ (0.64) $ 3.37 NM Discontinued operations  0.08   (0.75)  0.83  110.7%  Diluted earnings (loss) per share  $ 2.81 $ (1.39) $ 4.20 302.2%  Average number of shares – diluted  97,516,202  96,135,783   –  1.4% 2010 2009 $ Change  % Change  (Excludes intersegment sales) Mobile Industries $ 1,560.3 $ 1,245.0 $ 315.3 25.3 %  Process Industries  900.0   806.0   94.0  11.7 %  Aerospace and Defense  338.3   417.7   (79.4) (19.0)% Steel  1,256.9   672.9   584.0  86.8 %  Total Company $ 4,055.5 $ 3,141.6 $ 913.9 29.1 %