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Tenneco Inc. 2005 Annual Report 500 North Field Drive Lake Forest, Illinois 60045 www.tenneco.com NYSE: TEN Tenneco Inc. 2005 Annual Report Global growth...

by design A Look Ahead South America Building on 32% revenue growth in 2005 Introducing gas springs in the aftermarket North America Launching four major new diesel platforms Introducing brake products in the aftermarket Expanding share of commercial vehicle exhaust market Opening two new just-in-time facilities to service Toyota Europe Expanding Eastern European footprint Launching four new platforms with electronic suspension Producing nearly 800,000 diesel particulate filter units India Assumed 100% ownership of Indian facilities Launching high-volume ride-control platform for a major customer China Opening elastomer plant and exhaust engineering facility 23 new platform launches for seven customers Increasing ownership of Beijing ride control facility Korea Supporting two new emission-control platforms Our mission is to be recognized by our customers as the number-one technology-driven, global manufacturer and marketer of value differentiated ride control, emission control and elastomer products and systems. We will strengthen our leading position through a shared-value culture of employee involvement, where an intense focus on continued improvement delivers shareholder value ... more. less.

in everything we do. Our Mission Table of Contents Gatefold Tenneco at a Glance Page 1 Financial Highlights Page 2 Chairman 9s Letter Page 5 Our Competitive Advantages Page 9 Emissions Technologies for Environmental Mandates Page 11 Advanced Technology for Improved Vehicle Ride and Handling Page 12 Growth OEMs for Enhanced Customer Mix Page 13 China for Rapid Growth Page 15 Aftermarket Service Products for Incremental Sales Page 16 Board of Directors and Officers Page 17+ Form 10-K Inside back cover Investor Information Corporate Profile Tenneco Inc. is one of the world 9s largest designers, manufacturers and marketers of emission-control and ride-control products and systems for the automotive original equipment market and aftermarket. The company became an independent corporation in 1999, allowing singular focus on strategies to maximize global results. Tenneco markets its products principally under the Monroe ® , Walker ® , Gillet ® , and Clevite ® Elastomer brand names. Leading manufacturers worldwide use our products in their vehicles, attracted principally by our advanced technologies. We are one of the top suppliers to the automotive aftermarket, offering exceptionally strong brand recognition among consumers and trade personnel. Safe Harbor Statement Please see the Safe Harbor Statement, risk factors and the description of our original equipment (OE) revenue forecast under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the accompanying Form 10-K, which is incorporated herein by reference. Tenneco Inc. 2005 Annual Report Global growth... by design Tenneco Inc. 2005 Annual Report 500 North Field Drive Lake Forest, Illinois 60045 www.tenneco.com NYSE: TEN Tenneco Inc. 2005 Annual Report Global growth... by design A Look Ahead South America Building on 32% revenue growth in 2005 Introducing gas springs in the aftermarket North America Launching four major new diesel platforms Introducing brake products in the aftermarket Expanding share of commercial vehicle exhaust market Opening two new just-in-time facilities to service Toyota Europe Expanding Eastern European footprint Launching four new platforms with electronic suspension Producing nearly 800,000 diesel particulate filter units India Assumed 100% ownership of Indian facilities Launching high-volume ride-control platform for a major customer China Opening elastomer plant and exhaust engineering facility 23 new platform launches for seven customers Increasing ownership of Beijing ride control facility Korea Supporting two new emission-control platforms Our mission is to be recognized by our customers as the number-one technology-driven, global manufacturer and marketer of value differentiated ride control, emission control and elastomer products and systems. We will strengthen our leading position through a shared-value culture of employee involvement, where an intense focus on continued improvement delivers shareholder value in everything we do. Our Mission Table of Contents Gatefold Tenneco at a Glance Page 1 Financial Highlights Page 2 Chairman 9s Letter Page 5 Our Competitive Advantages Page 9 Emissions Technologies for Environmental Mandates Page 11 Advanced Technology for Improved Vehicle Ride and Handling Page 12 Growth OEMs for Enhanced Customer Mix Page 13 China for Rapid Growth Page 15 Aftermarket Service Products for Incremental Sales Page 16 Board of Directors and Officers Page 17+ Form 10-K Inside back cover Investor Information Corporate Profile Tenneco Inc. is one of the world 9s largest designers, manufacturers and marketers of emission-control and ride-control products and systems for the automotive original equipment market and aftermarket. The company became an independent corporation in 1999, allowing singular focus on strategies to maximize global results. Tenneco markets its products principally under the Monroe ® , Walker ® , Gillet ® , and Clevite ® Elastomer brand names. Leading manufacturers worldwide use our products in their vehicles, attracted principally by our advanced technologies. We are one of the top suppliers to the automotive aftermarket, offering exceptionally strong brand recognition among consumers and trade personnel. Safe Harbor Statement Please see the Safe Harbor Statement, risk factors and the description of our original equipment (OE) revenue forecast under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the accompanying Form 10-K, which is incorporated herein by reference. Tenneco Inc. 2005 Annual Report Global growth... by design 2005 2004 Revenues (millions) $4,441 $4,213 Original Equipment/ Aftermarket Balance 77/23 76/24 Emission Control/ Ride Control Balance 62/38 63/37 percentage of sales Diverse Customer Base People: Approx. 19,000 Engineering Centers: 13 Manufacturing and Just-In-Time Facilities: 79 Countries Served: 135 Profile $2,390 million Passenger cars Light trucks Commercial vehicles Industrial applications Motorbikes Buses Complete exhaust systems Fabricated manifolds Manifold-converter modules Catalytic converters Mufflers and resonators Diesel particulate filter systems NOx abatement systems Exhaust heat exchangers Exhaust isolators & hanging systems Emission Control $1,030 million Passenger cars Light trucks Commercial vehicles Golf carts Off-road recreational Rail cars Buses Shocks & struts Suspension bushings Coil, air & leaf springs Torque rods Engine/body mounts Suspension modules/systems Control arms/bars/links Cabin dampers Computerized electronic suspension Anti-roll system Ride Control Operations 2005 Sales Applications Products Brands Competitors Key Advantages Top Five Customers Top Five Platforms 2005 Market Opportunities $368 million Passenger cars Light trucks Commercial vehicles Performance vehicles Mufflers Pipes Tubing Mounting components Catalytic converters Performance mufflers Headers Emission Control $653 million Passenger cars Light trucks Commercial vehicles Performance vehicles Trailers Shocks Struts Cartridges Mounting kits Performance shocks, struts, filters and brakes Torque rods Suspension bushings Engine mounts Coil springs Car-appearance products Suspension lift kits Ride Control Operations 2005 Sales Applications Products Brands Competitors Key Advantages Top Five Customers Leading Products Market Opport unities Aftermarket Tenneco Inc. Largest OE Customers Largest AM Customers Growing number of vehicles on the road OE Service New technologies Unperformed maintenance Premium mix expansion Broader product coverage Heavy-duty truck penetration Safety/installer education Testing/diagnostic equipment Reflex ® shocks & struts Sensa-Trac ® shocks & struts Rancho ® shocks, struts and suspension lift kits Quick Strut" Gas-Magnum ® shocks DNX" performance shocks and struts Monro-Matic Plus ® shocks DuPont" car-care line Quiet-Flow3 ® Mufflers/ Assemblies Dynomax ® Ultra-Flo Stainless/ Welded Mufflers/Systems DNX" performance exhaust systems SoundFX" mufflers Clean Air" catalytic converters Growing number of vehicles on the road OE Service New technologies Emission regulations Performance-product demand ArvinMeritor Kayaba OE Service ZF Sachs ArvinMeritor OE Service Bosal Goerlich 9s Exhaust Systems International Muffler Company NAPA Advance Auto Parts O 9Reilly Auto Parts TEMOT Autoteile Automotive Distribution International (ADI) TEMOT Autoteile NAPA Automotive Distribution International (ADI) Advance Auto Parts Group Auto Union (GAU) Brand dominance Relationships with all major wholesale distributors/retailers Global presence Leading market shares Product innovation Product quality Extensive product and vehicle coverage Targeted marketing programs Introduction of service parts Vehicle stability/ safety requirements Modular assembly New technologies Adjacent markets Electronic technologies Emerging markets Seat damping systems Cabin damping systems Commercial vehicle segment GM Silverado, Suburban, Avalanche, Tahoe, Sierra, Yukon Ford Focus, Mazda3, Volvo S40 VW Golf, Caddy, Seat Altea Ford Fiesta, Fusion, Mazda2 DaimlerChrysler Town & Country, Caravan PSA Citroën C5, Peugeot 407, Peugeot 608 GM Escalade, Silverado, Suburban, Avalanche, Tahoe, Sierra, Yukon GM Envoy, Trailblazer Dodge Ram Pickup DaimlerChrysler Town & Country, Caravan Additional content due to emission regulations Diesel aftertreatment Customized sound attenuation Demand for diesel/hybrid/ fuel cell Emerging markets Commercial vehicle segment Adjacent markets ZF Sachs Delphi ArvinMeritor Kayaba Magneti Marelli Hitachi ArvinMeritor Faurecia Eberspächer Bosal Delphi Nelson Fleetguard Ford Motor Co. Volkswagen AG General Motors Corp. Nissan Motor Co., Ltd. DaimlerChrysler AG General Motors Corp. DaimlerChrysler AG Ford Motor Co. Volkswagen AG PSA Peugeot/Citroën Advanced technologies Experienced team Product/process quality Global program management Japanese alliances Joint ventures in China, Thailand and U.K. Customer relationships Broad product range Full-service supplier Just-In-Time (JIT) assembly Test and validation systems Knowledge-based engineering * EBIT is earnings before interest expense, taxes, and minority interest. As of 12.31.05 Top Customers as a % of Total 2005 Revenues NAPA TEMOT Autoteile GmbH Advance Auto Parts ADI (Automotive Distribution Int 9l) Uni-Select O 9Reilly Automotive GAU (Group Auto Union) KFE (Kwik-Fit Europe) 1. 9% 1. 5% 1. 2% 1. 1% 0. 7% 0. 7% 0. 5% 0. 4% General Motors Ford Motor Co. Volkswagen DaimlerChrysler PSA Peugeot Citroën Toyota Motor Co. Nissan Motor Co. BMW AG Original Equipment 2005 Sales 2005 EBIT* North America 46% 47% Europe, South America, and India 46% 45% Asia Pacific 8% 8% North America 67% 77% Europe, South America, and India 25% 12% Asia Pacific 8% 11% 2005200420052004 16.7% 11.6% 9.1% 9.0% 6.1% 3.6% 3.3% 2.5% Corporate Headquarters Tenneco Inc. 500 North Field Drive Lake Forest, Illinois 60045 847.482.5000 Web Site www.tenneco.com Corporate Information Individuals interested in receiving the company 9s latest quarterly earnings press release or other company literature should write the Investor Relations Department at the corporate headquarters address or call 847.482.5146. Information about Tenneco Inc. is also available on the company 9s web site. Stock Listing Tenneco 9s common stock is listed under the ticker symbol TEN. TEN is traded primarily on the New York Stock Exchange and also on the following exchanges: Chicago, Pacific and London. As of February 20, 2006, there were approximately 23,610 holders of record of the company 9s common stock, par value $0.01 per share. Investor Inquiries Securities analysts, portfolio managers and representatives of financial institutions seeking information about the company should contact the Investor Relations department: 847.482.5042. The information on our web site is not part of this annual report Stockholder Inquiries For stockholder services such as exchange of certificates, issuance of certificates, lost certificates, change of address, change in registered ownership or share balance, write, call or e-mail the company's transfer agent: American Stock Transfer & Trust Company, as agent for Wachovia Bank, N.A. 59 Maiden Lane New York, New York 10038 866.839.3259 Toll Free www.amstock.com Click on "Shareholder Account Access" Dividends The company expects that for the foreseeable future it will follow a policy of retaining earnings in order to finance the continued development of its business. Additional information on the company 9s dividend policy and restrictions on the payment of dividends can be found in Part II, Item 5 and in Management 9s Discussion and Analysis in the Annual Report on Form 10-K for the year ended December 31, 2005. AnnualMeeting The Annual Meeting of Stockholders will be held at 10:00 a.m. Central Time on Tuesday, May 9, 2006, at Tenneco Inc. head- quarters, 500 North Field Drive, Lake Forest, Illinois 60045. Investor Information Reconciliation of Adjusted Operating Income and Earnings Per Share Year EndedYear Ended Dec. 31, 2005Dec. 31, 2004 EBIT EarningsEBITEarnings (Millions)Per Share(Millions) Per Share Earnings measures $215$1.29$174$0.35 Adjustments (reflect non-GAAP measures): Restructuring and restructuring-related expenses 120.17400.56 New aftermarket customer-changeover costs 100.1580.12 Consulting fees indexed to stock price 4 440.06 Tax adjustments 4(0.09) 4(0.47)) Costs related to refinancing of debt 4 4 40.60 Non-GAAP earnings measures $237$1.52$226$1.22 Stock Price Data 2006200520042003 Sales PricesSales PricesSales PricesSales Prices HighLowHighLowHighLowHighLow First Quarter* $23.17$19.61$17.36$12.07$14.88$ 6.73$4.32$2.01 Second Quarter $17.22$11.55$15.34$10.09$4.65$2.25 Third Quarter $20.06$16.30$14.51$11.95$7.45$3.61 Fourth Quarter $19.95$15.70$17.49$10.93$7.32$4.66 * 2006 First Quarter through February 17, 2006 (see Chairman 9s Letter, page 2) 2005 2004 Revenues (millions) $4,441 $4,213 Original Equipment/ Aftermarket Balance 77/23 76/24 Emission Control/ Ride Control Balance 62/38 63/37 percentage of sales Diverse Customer Base People: Approx. 19,000 Engineering Centers: 13 Manufacturing and Just-In-Time Facilities: 79 Countries Served: 135 Profile $2,390 million Passenger cars Light trucks Commercial vehicles Industrial applications Motorbikes Buses Complete exhaust systems Fabricated manifolds Manifold-converter modules Catalytic converters Mufflers and resonators Diesel particulate filter systems NOx abatement systems Exhaust heat exchangers Exhaust isolators & hanging systems Emission Control $1,030 million Passenger cars Light trucks Commercial vehicles Golf carts Off-road recreational Rail cars Buses Shocks & struts Suspension bushings Coil, air & leaf springs Torque rods Engine/body mounts Suspension modules/systems Control arms/bars/links Cabin dampers Computerized electronic suspension Anti-roll system Ride Control Operations 2005 Sales Applications Products Brands Competitors Key Advantages Top Five Customers Top Five Platforms 2005 Market Opportunities $368 million Passenger cars Light trucks Commercial vehicles Performance vehicles Mufflers Pipes Tubing Mounting components Catalytic converters Performance mufflers Headers Emission Control $653 million Passenger cars Light trucks Commercial vehicles Performance vehicles Trailers Shocks Struts Cartridges Mounting kits Performance shocks, struts, filters and brakes Torque rods Suspension bushings Engine mounts Coil springs Car-appearance products Suspension lift kits Ride Control Operations 2005 Sales Applications Products Brands Competitors Key Advantages Top Five Customers Leading Products Market Opport unities Aftermarket Tenneco Inc. Largest OE Customers Largest AM Customers Growing number of vehicles on the road OE Service New technologies Unperformed maintenance Premium mix expansion Broader product coverage Heavy-duty truck penetration Safety/installer education Testing/diagnostic equipment Reflex ® shocks & struts Sensa-Trac ® shocks & struts Rancho ® shocks, struts and suspension lift kits Quick Strut" Gas-Magnum ® shocks DNX" performance shocks and struts Monro-Matic Plus ® shocks DuPont" car-care line Quiet-Flow3 ® Mufflers/ Assemblies Dynomax ® Ultra-Flo Stainless/ Welded Mufflers/Systems DNX" performance exhaust systems SoundFX" mufflers Clean Air" catalytic converters Growing number of vehicles on the road OE Service New technologies Emission regulations Performance-product demand ArvinMeritor Kayaba OE Service ZF Sachs ArvinMeritor OE Service Bosal Goerlich 9s Exhaust Systems International Muffler Company NAPA Advance Auto Parts O 9Reilly Auto Parts TEMOT Autoteile Automotive Distribution International (ADI) TEMOT Autoteile NAPA Automotive Distribution International (ADI) Advance Auto Parts Group Auto Union (GAU) Brand dominance Relationships with all major wholesale distributors/retailers Global presence Leading market shares Product innovation Product quality Extensive product and vehicle coverage Targeted marketing programs Introduction of service parts Vehicle stability/ safety requirements Modular assembly New technologies Adjacent markets Electronic technologies Emerging markets Seat damping systems Cabin damping systems Commercial vehicle segment GM Silverado, Suburban, Avalanche, Tahoe, Sierra, Yukon Ford Focus, Mazda3, Volvo S40 VW Golf, Caddy, Seat Altea Ford Fiesta, Fusion, Mazda2 DaimlerChrysler Town & Country, Caravan PSA Citroën C5, Peugeot 407, Peugeot 608 GM Escalade, Silverado, Suburban, Avalanche, Tahoe, Sierra, Yukon GM Envoy, Trailblazer Dodge Ram Pickup DaimlerChrysler Town & Country, Caravan Additional content due to emission regulations Diesel aftertreatment Customized sound attenuation Demand for diesel/hybrid/ fuel cell Emerging markets Commercial vehicle segment Adjacent markets ZF Sachs Delphi ArvinMeritor Kayaba Magneti Marelli Hitachi ArvinMeritor Faurecia Eberspächer Bosal Delphi Nelson Fleetguard Ford Motor Co. Volkswagen AG General Motors Corp. Nissan Motor Co., Ltd. DaimlerChrysler AG General Motors Corp. DaimlerChrysler AG Ford Motor Co. Volkswagen AG PSA Peugeot/Citroën Advanced technologies Experienced team Product/process quality Global program management Japanese alliances Joint ventures in China, Thailand and U.K. Customer relationships Broad product range Full-service supplier Just-In-Time (JIT) assembly Test and validation systems Knowledge-based engineering * EBIT is earnings before interest expense, taxes, and minority interest. As of 12.31.05 Top Customers as a % of Total 2005 Revenues NAPA TEMOT Autoteile GmbH Advance Auto Parts ADI (Automotive Distribution Int 9l) Uni-Select O 9Reilly Automotive GAU (Group Auto Union) KFE (Kwik-Fit Europe) 1. 9% 1. 5% 1. 2% 1. 1% 0. 7% 0. 7% 0. 5% 0. 4% General Motors Ford Motor Co. Volkswagen DaimlerChrysler PSA Peugeot Citroën Toyota Motor Co. Nissan Motor Co. BMW AG Original Equipment 2005 Sales 2005 EBIT* North America 46% 47% Europe, South America, and India 46% 45% Asia Pacific 8% 8% North America 67% 77% Europe, South America, and India 25% 12% Asia Pacific 8% 11% 2005200420052004 16.7% 11.6% 9.1% 9.0% 6.1% 3.6% 3.3% 2.5% Corporate Headquarters Tenneco Inc. 500 North Field Drive Lake Forest, Illinois 60045 847.482.5000 Web Site www.tenneco.com Corporate Information Individuals interested in receiving the company 9s latest quarterly earnings press release or other company literature should write the Investor Relations Department at the corporate headquarters address or call 847.482.5146. Information about Tenneco Inc. is also available on the company 9s web site. Stock Listing Tenneco 9s common stock is listed under the ticker symbol TEN. TEN is traded primarily on the New York Stock Exchange and also on the following exchanges: Chicago, Pacific and London. As of February 20, 2006, there were approximately 23,610 holders of record of the company 9s common stock, par value $0.01 per share. Investor Inquiries Securities analysts, portfolio managers and representatives of financial institutions seeking information about the company should contact the Investor Relations department: 847.482.5042. The information on our web site is not part of this annual report Stockholder Inquiries For stockholder services such as exchange of certificates, issuance of certificates, lost certificates, change of address, change in registered ownership or share balance, write, call or e-mail the company's transfer agent: American Stock Transfer & Trust Company, as agent for Wachovia Bank, N.A. 59 Maiden Lane New York, New York 10038 866.839.3259 Toll Free www.amstock.com Click on "Shareholder Account Access" Dividends The company expects that for the foreseeable future it will follow a policy of retaining earnings in order to finance the continued development of its business. Additional information on the company 9s dividend policy and restrictions on the payment of dividends can be found in Part II, Item 5 and in Management 9s Discussion and Analysis in the Annual Report on Form 10-K for the year ended December 31, 2005. AnnualMeeting The Annual Meeting of Stockholders will be held at 10:00 a.m. Central Time on Tuesday, May 9, 2006, at Tenneco Inc. head- quarters, 500 North Field Drive, Lake Forest, Illinois 60045. Investor Information Reconciliation of Adjusted Operating Income and Earnings Per Share Year EndedYear Ended Dec. 31, 2005Dec. 31, 2004 EBIT EarningsEBITEarnings (Millions)Per Share(Millions) Per Share Earnings measures $215$1.29$174$0.35 Adjustments (reflect non-GAAP measures): Restructuring and restructuring-related expenses 120.17400.56 New aftermarket customer-changeover costs 100.1580.12 Consulting fees indexed to stock price 4 440.06 Tax adjustments 4(0.09) 4(0.47)) Costs related to refinancing of debt 4 4 40.60 Non-GAAP earnings measures $237$1.52$226$1.22 Stock Price Data 2006200520042003 Sales PricesSales PricesSales PricesSales Prices HighLowHighLowHighLowHighLow First Quarter* $23.17$19.61$17.36$12.07$14.88$ 6.73$4.32$2.01 Second Quarter $17.22$11.55$15.34$10.09$4.65$2.25 Third Quarter $20.06$16.30$14.51$11.95$7.45$3.61 Fourth Quarter $19.95$15.70$17.49$10.93$7.32$4.66 * 2006 First Quarter through February 17, 2006 (see Chairman 9s Letter, page 2) Revenue per employee $ in thousands SG&A* as percentage of revenue Stock Price Performance TEN vs. S&P 1500 Auto Parts Index Based on an initial investment of $100 on December 31, 2000 $153 $156 $176 $197 $229 $234 01 000203 04 05 12.1% 10.5% 10.1% 9.7% 9.9% 8.7% 01 000203 04 05 100 100 122.6 223 574.6 653.6 68 109.7 158.6 157 123.3 020405 000103 Tenneco Inc. S&P 1500 Auto Parts Index S&P 1500 Auto Parts Index +23% TEN +554% 134.6 (dollars in millions except share and per share data) 2005 20042003200220012000 Net sales and operating revenues $4,441 $4,213$3,766$3,459$3,364$3,528 Earnings before interest, taxes and minority Interest $215 $174$174$169$90$122 Depreciation and amortization $177 $177$163$144$153$151 EBITDA* $392 $351$337$313$243$273 Net income (loss) before change in accounting principle $58 $15$26$31$(131)$(41) Earnings (loss) per share before change in accounting principle $1.29 $0.35$0.62$0.74$(3.47)$(1.16) Capital expenditures $144 $130$130$138$127$146 Average diluted shares outstanding 45,321,225 44,180,46041,767,95941,667,81538,001,24834,906,825 Total debt $1,378 $1,420$1,430$1,445$1,515$1,527 Cash and cash equivalents $141 $214$145$54$53$35 Debt net of cash balances $1,237 $1,206$1,285$1,391$1,462$1,492 *EBITDA represents income before cumulative effect of change in accounting principle, interest expense, income taxes, minority interest and depreciation and amortization. EBITDA is not a calculation based upon generally accepted accounting principles. The amounts includ- ed in the EBITDA calculation, however, are derived from amounts included in the historical statements of income data. In additi on, EBITDA should not be considered as an alternative to net income or operating income as an indicator of our performance, or as an alter native to operating cash flows as a measure of liquidity. We have reported EBITDA because we believe EBITDA is a measure commonly reporte d and widely used by investors and other interested parties as an indicator of a company 9s performance. We also believe EBITDA as sists investors in comparing a company 9s performance on a consistent basis without regard to depreciation and amortization, which can vary significantly depending upon many factors. However, the EBITDA measure presented in this document may not always be comparable to similarly titled measures reported by other companies due to differences in the components of the calculation. 1 Financial Highlights Year in Review *Selling, general and administrative expenses We have solved the management dilemma 4 growing the business while shrinking costs. 2 Tenneco enters 2006 with our most robust portfolio of projected business ever, the greatest financial strength in our six-year history, and a wide range of competitive advantages. Strategic Growth Drives Robust Sales Projection We are concentrating on strategic growth areas: n Increasing our investment in new technologies for diesel emission and electronic ride control products; n Positioning ourselves in every high- growth region around the globe; n Penetrating adjacent markets like commercial trucks and motorcycles; n Targeting the fast-growing OEMs in Japan and Korea; and n Leveraging our strong brands into higher-replacement service-parts categories, like brakes and filters. These building blocks provide a foundation that has Tenneco poised for $1 billion of projected OE revenue growth in 2007. Furthermore, we estimate 40% of 2007 OE sales will come from these strategic growth areas, up from approximately 22% in 2005. 2005 Operating Performance Sparks Share Gain Our performance last year was a success on many levels, as we continued to outdistance the competition and solidify our leadership position. Our revenue, operating income and earnings per share reached levels unsurpassed at any time in Tenneco 9s independent history. We delivered sales of $4.4 billion, up 5% over 2004, outperforming the industry 9s estimated 3% global light-vehicle production increase. We reached this milestone while carefully managing costs, allowing us to fully translate the greater revenue into operating profit expansion, adjusted* for certain items, despite $135 million of higher steel prices. The end result was a 25% improve- ment in adjusted* earnings per share. Operational accomplishments in 2005 reflect our expansion into adjacent markets. Last year, we were awarded International Truck & Engine Corp. 9s medium-duty truck platform that is a big part of our 2007 projected growth. This is high-content diesel business that marks our first commercial vehicle contract for emission control in North America. We also furthered our penetration into the two-wheeler market when we acquired the primary exhaust provider to Harley-Davidson. Tenneco stockholders realized a 14% return on investment in our common shares last year driven by our solid operating performance; favorable platform, customer and geographic mix; and rising investor appreciation of our growth strategies. In contrast, the S&P 1500 Auto Index declined 21% primarily affected by industry challenges in North America. New Director Brings Global Perspective Earlier this year, we added Mitsunobu cTony d Takeuchi to our board of directors. Tony was formerly the chairman and chief executive officer of DENSO International Americas, Inc., the North American arm of Japan- based DENSO Corp., the world's third-largest automotive supplier. His global perspective, vast industry knowledge and outstanding business judgment will benefit Tenneco greatly as we expand our focus on global growth opportunities. Our performance last year was a success on many levels, culminating in a 25% increase in adjusted * earnings per share. To Our Shareholders *An explanation of these adjustments can be found in the Management 9s Discussion and Analysis of the attached Form 10-K. Additionally, a reconciliation of the results is detailed on the inside back cover of this report. 3 Mark P. Frissora Chairman, Chief Executive Officer and President March 2006 An Appropriate Name Change As I mentioned earlier, our strategies for growth are not limited to the automotive sector. Heavy-duty trucks and motorcycles have emission- and ride-control products that offer opportunities to expand our top line into adjacent, potentially counter- cyclical markets. This diversification into sectors outside of automotive led to our name change late last year to Tenneco Inc. Deleting cAutomotive d from our name is a natural step in the evolution of the enterprise. Tenneco Inc. is less restrictive in representing the direction of our company and how far we aspire to go. As I look out over the next decade, it is imperative that we maintain our passionate customer focus and product leadership in each operating segment served, while expanding into new non- automotive markets. Three years ago we set our sights on the commercial vehicle market for emissions. Today we have platforms in Europe and North America that we estimate will increase our market share in this segment to 10% by 2007. We expect this share to doubleby the end of the decade benefiting from the ever-more stringent heavy truck emission regulations mandated for 2009 and 2010. Penetrating other adjacent markets for emission control, like construction, agriculture and industrial equipment, and small engines for lawnmowers and golf carts, represents a significant incremental growth opportunity for Tenneco that we expect will extend and further diversify our revenue stream over the long term. Growing the Business While Shrinking Costs While delivering sustainable growth, our culture of continuous improvement means that we are standardizing business processes, operating more efficiently and delivering greater value. Training for Lean Manufacturing and Six Sigma programs to reduce waste and improve quality has been effective. Today we are doing more with less. By focusing on our core competencies with a spirit of execution and discipline, we have solved the management dilemma 4growing the business while shrinking costs. Mark P. Frissora Chairman, Chief Executive Officer and President March 2006 Our People are the Key Our future will be built around the great work of the nearly 19,000 employees of Tenneco. We continue to invest in the development of our people as we roll out change management and leadership training for the hourly workforce. I believe our talented employees have made and will continue to make Tenneco a standout enterprise, and it is my privilege to lead them. 4 Competitive Advantages Tenneco has good customer, platform and geographic diversity , and a balance between original equipment sales (77%) and aftermarket sales (23%). About 46% of 2005 sales were generated in North America; 46% in the Europe, South America and India segment; and 8% in the Asia Pacific region. We have OE products on more than 200 platforms with the top 10 platforms representing only 25% of total sales. Revenue by Customer As a percentage of 2005 sales Geographic Revenue Mix 2005 General Motors 16.7% Other 38.1% Ford Motor Co. 11.6% Volkswagen 9.1% DaimlerChrysler 9.0% PSA Peugeot Citroën 6.1% Toyota Motor Co. 3.6% Nissan Motor Co. 3.3% BMW AG 2.5% North America 46% Europe, S. America and India 46% Asia Pacific 8% n Two Wheeler n Passenger Car n Light-Duty Truck n Heavy-Duty Truck A Variety of Markets Served 5 Tenneco has one of the broadest global footprints among automotive parts suppliers. Our geographic diversity helps protect us from regional downturns in automo- tive production. North America and our Europe, South America and India segments each generated 46% of 2005 revenues with Asia Pacific responsible for the remaining 8%. As a result, we are well positioned to offset weakness in any one region of the world with growth from another. Our broad geographic coverage places us closer to our customers, minimizing high shipping costs associated with emission-control products. Besides being well-established in Western Europe, we have penetrated Eastern Europe, where our goal is to generate approximately 25% of our total European unit production by 2010 4 in line with that market 9s production mix. Moreover, we estimate that Tenneco is the #1 emission-control supplier in China, an economy forecasted to grow at a rate more than double the rate of the U.S. economy over the balance of this decade. We have one of the best customer mixes among our peers. In 2005, many North American parts suppliers struggled as a result of their high exposure to domestic OEMs, who cut production after losing nearly two points of market share to foreign automakers. Our balanced customer set made up of more than 30 OEMs includes Toyota, Nissan and Honda among its top 10 OE customers. These growth customers represented 20% of Tenneco 9s total North America OE revenues in 2005, enabling us to outperform the light vehicle market. We continue to build relationships with growing customers, with a goal of matching our customer revenues with their market shares for optimal balance. In the aftermarket, we have contracts with four of the top five retailers in North America and do business with virtually all of the major warehouse distributors globally. No single after- market customer accounted for more than 2% of our 2005 total revenues. Tenneco 9s broad coverage of vehicle platforms encompasses production on the top-selling vehicles worldwide. We have products on more than 200 platforms with average annual revenue per platform of about $14 million, providing an advantageous balance. Suppliers with substantial volumes spread across only a few platforms are at greater risk in a declining production environment. In 2005, for example, suppliers with a significant percent of their total volume tied to full-size SUVs in North America were meaningfully impacted when production on those vehicles declined by nearly 30%. At Tenneco, our largest OE platform represents less than 5% of total company revenues. Our top 10 OE Global Footprint Automakers must operate globally to remain cost competitive, and they require that suppliers develop a similar footprint. Geographic diversity helps reduce logistic costs, allowing for the regional supply of items that are cost prohibitive to ship globally, like exhaust systems. Equally important are global engineering capabilities. Competitive Advantages Chevrolet Tahoe n Tenneco does business in 135 countries n Tenneco has 13 engineering centers worldwide with another to open in China in 2006 platforms make up only 25% of total sales, and are split 50/50 between passenger cars and light trucks. Furthermore, of our top 10 platforms, 40% are produced in North America, 30% in Europe and 30% are global. Expanding penetration into synergistic markets helps diversify business model. We are positioned to offset cyclical trends in the auto industry by diversify- ing into adjacent markets with similarly stringent environmental regulations that drive growth. Today, about 5% of our revenues are derived from the commercial truck market. We expect that percent to increase significantly as we capitalize on the tightening emission regulations for medium- and heavy- duty trucks in 2007 and 2010 in the U.S., and in 2006 and 2009 in Europe. We also have a growing position in the two-wheeler market, supplying exhaust products for BMW and Harley-Davidson. Motorcycles produce up to 15 times the emissions per mile as the average new car or light-duty truck. We are utilizing technologies similar to those that make new cars and trucks cleaner to cost-effectively reduce motorcycle emissions. A new set of emissions standards for motor- cycles went into effect in 2004 with additional reductions required for 2008. We are well-positioned to take advantage of the environmental legislation as it evolves into off-road market segments, including construction, agriculture and industrial equipment. 6 Two-Wheeler Market Tenneco acquired the primary emission- control supplier to Harley-Davidson in early 2005. This acquisition reflects our strategy to grow through adjacent- market opportunities. Harley-Davidson worldwide has been in business for more than 100 years with one of the most lasting brands in U.S. history. Harley-Davidsonwanted a supplier with a global footprint and similar depth of experience. Not only do we meet those requirements, but we have proven our ability to easily transfer our emission- control technology from automobiles to motorcycles. Emissions standards for today 9s off- road equipment are relatively lenient compared to those for on-road vehicles. However, in May 2004 the U.S. Environmental Protection Agency introduced new off-road emission standards, which are to be phased-in between 2008-2015. These standards affect approximately one million off- road units. With the addition of the small engine market for lawnmowers and snowblowers, the market opportu- nity grows to nearly 19 million units. Tenneco has innovative technologies across several product lines. Tenneco has long been known as a leading product innovator. Today we have global networks in place to share knowledge and ideas across departments and locations, and across global employee populations. Our goal is to ensure that no opportunity is overlooked in our quest to deliver leading-edge products and services. Growing demand for our premium products, most notably advanced emission technologies for gas and diesel engine vehicles, and computerized electronic suspensions, anti-rollover devices and elastomer products in ride control, underscores the company 9s technological achievements. A stable, experienced management team focuses on execution and discipline. Tenneco 9s strategic business units are led by experienced executives who have a proven track record and average more than 20 years in the automotive industry. The majority of our senior management team has been with the company since we became independent in late 1999. Together, we have remained disciplined in the execution of the same strategies for six years. Product innovation and debt reduction continue to be priorities. n A highly competitive global footprint n One of the best customer mixes among our peers n Products on more than 200 vehicle platforms n Average platform size only $14 million n Penetrating adjacent growth markets for greater diversity n Innovative technologies across several product lines n A stable, experienced management team Our Competitive Advantages Stricter emission-control standards, demand for improved vehicle stability, expected long-term growth in the Chinese auto market, rapid market share gains from the Japanese and Korean OEMs and new aftermarket products create favorable growth prospects for Tenneco. 7 Growth Prospects 02 2 3 4 0304050607 $2.6 $2.8 $4.5 Global Original Equipment Revenue Projection * $ in billions $1 billion increase over 2006* $3.5 $3.4 $3.2 An estimated 40% of 2007 projected original equipment sales will come from strategic growth areas versus 22% in 2005. *January 2006 projection. See the company 9s attached Form 10-K for information regarding the calculation of its revenue projection. Pipe exhaust Heat exchanger Diesel oxidation catalyst Diesel particulate filter Selective catalytic reduction system Exhaust tailpipe Muffler Ford Motor Company 8 Emission standards and fuel require- ments are tightening around the world. cThe diesel engine is a great alternative for consumers that demand improved power, torque and fuel efficiency. The challenge is in meeting future diesel emissions regulations without degrading the key characteristics of the diesel powertrain. Tenneco is well positioned with a good product at the right time. In addition to diesel, Tenneco worked collaboratively with our Research and Innovation Center to deliver the first diesel hybrid to meet Partial Zero Emissions Vehicle (PZEV) requirements. d Our 2007 sales of higher-content diesel vehicle programs are expected to increase five-fold from 2005. F-350 Ford Super Duty GM Duramax engines Diesel Emission Control N.A. OEM Light Duty Diesel Emission Control International Truck Diesel & Gasoline Emission Control Medium Duty Diesel Emission Control Customer Product New Diesel Business Supports Growth in 2007 2007 cNew-to-Tenneco d Business Stringent global emission regulations offer one of the most important growth opportunities for Tenneco. While pollution control measures have drastically reduced light-vehicle emissions over the past two decades, the U.S., Europe, Japan and other countries are pushing for even tighter regulations in coming years. The best emission-control opportunity may rest in diesel vehicles. Global light- duty diesel volume is forecasted to grow more than 50% by 2012 to 19.6 million units. J.D. Power and Associates predicts U.S. light-duty diesel sales will nearly double to more than one- million units in 2010. Last year, only about 3% of the light vehicles sold in the U.S. had diesel engines, compared to half the vehicles in Europe. Diesel 9s superior fuel economy and low carbon dioxide emissions are driving its forecasted growth. Diesels will also get a boost this October, when U.S. fuel retailers are required to begin selling low-sulfur diesel fuel. And the energy bill recently signed by President Bush gives a tax credit to U.S. purchasers of certain diesel vehicles. Low-sulfur fuel and better technology will help diesels meet new federal emissions standards being phased in beginning in 2007. In Europe, new diesel emission regulations are expected to go into effect in 2010. Tenneco is a leading supplier of advanced emission-control solutions. We expect diesel platforms to repre- sent about 24% of our projected global OE revenues in 2007, up from just 6% in 2005. Also in 2007, we expect to supply 1.5 million diesel particulate filter units 3 more than five times last year 9s level. We 9re also in production with diesel oxidation catalysts, and we 9re supplying selective catalytic reduction systems for heavy-duty trucks. Furthermore, we 9re working on an advanced regeneration diesel particulate filter and developing a NOx adsorber catalyst that removes nitrogen oxides from the exhaust stream. These are just some of our technologies and development activities that address the dramatic diesel growth expected over the next several years. Our technological expertise, commer- cialized exhaust product portfolio and worldwide manufacturing facilities position us well to capitalize on these growth trends. 9 Commercial Vehicle Market Euro 4 and Euro 5 are increasingly stringent emission standards that will be effective in 2006 and 2009, respectively. In order to meet these clean-air regulations, truckmakers are using a variety of diesel aftertreatment solutions to cut nitrogen oxide emissions. Tenneco helped launch DaimlerChrysler 9s Actros heavy-duty commercial truck in Europe last year using an advanced-technology emission-control system that addresses the new mandates. Emissions Technologies for Environmental Mandates 050607 0.29 0.50 1.50 Global Diesel Particular Filter (DPF) Business Units in millions Tenneco 9s DPF volumes to increase five times by 2007 Heavy-duty Truck Continuously Controlled Electronic Suspension 10 Ride quality and handling characteristics remain among the top influencers in consumer buying decisions. Tenneco 9s electronic suspension integrates the latest technology into a highly advanced ride-control system. Volvo cSafety, comfort and handling are key to consumer buying decisions. Volvo used Tenneco 9s computerized electronic suspension to develop our continuously controlled chassis concept, called Four- C, which is standard on our performance vehicles and optional on our S60, V70, XC70 and S80 models. We looked for a partner to further enhance ride control and handling, and believe Tenneco fully understands how to combine new technical solutions, integrations and refinements. d S80 11 Tenneco develops technologically advanced ride-control products that focus on safety as well as comfort. We estimate we are the top supplier to the aftermarket, led by our world- famous Monroe brand, and the #2 provider to original equipment manufacturers worldwide. Our ride- control sales in 2005 contributed $1.7 billion to Tenneco 9s total revenue, with about 60% of this coming from the original equipment market. Strategically, we have dedicated ourselves to developing and commer- cializing premium products. Our advanced Continuously Controlled Electronic Suspension (CES) product provides vehicle handling and safety improvements by continuously monitoring road conditions and vehicle movement, making instantaneous adjustments to vehicle suspension. We are currently producing CES for nearly all Volvo models in Europe as well as Audi 9s A6 and Avant vehicles. Our anti-rollover suspension technology, Kinetic, which offers improved vehicle stability, is available today on Toyota 9s Lexus GX470 sport utility vehicle. And we 9ve developed fluid-filled elastomers that act as dampers to minimize noise, vibration and harshness. All are leading-edge products. For example, CES typically sells for roughly seven times the price of a standard shock. The computerized electronic shock absorber market share for Tenneco was 9% in 2005, but we project it will grow significantly over the next five years. We continue to extend product tech- nologies from our original equipment business to the aftermarket. This practice expands the marketing reach of each product, spreads out the development costs and enhances the return on our investment. The ride-control aftermarket has been strong in recent years, and can be counter-cyclical to the original equipment auto-parts market. Our global Safety Triangle aftermarket campaign educates both installers and consumers on the importance of vehicle maintenance and replacing worn shock absorbers, which can help improve stopping, steering and vehicle stability. Global Platform Capabilities Tenneco was awarded the Volkswagen global emission- and ride-control plat- form that includes the VW Golf and Audi A3 models. Under a global plat- form development strategy, common vehicle platforms are tailored by local design and engineering to suit each geographic end market. Tenneco leveraged its cross-border synergies and capabilities in engineering, purchasing and manufac- turing to successfully launch this strategic platform across North America, Europe and the Asia Pacific region. Advanced Technology for Improved Vehicle Ride and Handling n V-Rod n Bushings and Cartridges n Torque Rod Elastomer Products Winning new business with Asian OEMs, nurturing established relationships with the top three Japanese automakers in North America, extending our European OEM customer base and a more recent focus on building relationships with Korean OEMs will position Tenneco at the forefront of global automotive growth. Revenue from Japanese suppliers represented 20% of our North American original equipment sales in 2005, up from 19% in 2004 and 16% in 2003. We continue to build on these relation- ships. In fact, we are expanding our design, development and program management capabilities in Japan to further enhance the value we bring to these customers. Our relationships with the Japanese automakers started in 1988 with a single customer in a single market. Today, this business spans the globe as we manufacture products for seven Japanese customers in 14 countries. The number of Japanese platforms in North America also continues to grow. Our products are on many leading programs including: the Lexus RX330, Toyota Sienna, Honda Pilot, Acura MDX, Nissan Pathfinder and Nissan Altima. Tenneco also was awarded the exhaust business on Toyota's high-volume Tundra truck platform that launches in 2007. In North America, the Big Three U.S. automakers' sales were down 2% in 2005, while Asian brands' sales climbed 7%. The Detroit Big Three 9s market share in the U.S. was 56.9% last year, down from 58.7% in 2004 and 61.7% three years ago, while Asian brands' U.S. market share rose to 36.5%, up from 34.6% in 2002. Toyota is the second-ranked automotive group in the world in terms of produc- tion and sales. Worldwide, Toyota is our sixth-largest customer among more than 30 different OEMs served. In the highly competitive and ever- changing automotive industry, we are continuously working to improve our customer mix by targeting growth customers in growth markets. For optimal balance, our goal is to have each of our customer 9s percent of our total OE revenues reflect its market share. Growth OEMs for Enhanced Customer Mix 12 Toyota looks to its suppliers to provide superior parts and materials, particularly those that support quantum leaps in the value of its vehicles. Tenneco works to meet those goals with its advanced emission-control products that address higher environmental standards, and innovative suspension systems, which combine ride comfort and safer handling. 03 020405 13.2% 16.3% 18.7% 19.9% Japanese OEMs as a percentage of total North American Original Equipment sales Toyota Tundra Growing with Japanese OEMs Our ride-control joint venture in China produces 1.1 million shocks and struts annually. 13 We estimate that Tenneco is the top emission controls manufacturer in China, operating five facilities through four majority-owned joint ventures. We also are an up-and-coming supplier of ride- control parts through one majority- owned enterprise in Beijing. Our early investments in China, dating back to 1995, have given us experience in that market that few other auto-parts manufacturers possess. China is the world 9s fastest growing automotive market and recently became the world 9s second-largest market for automotive sales. As a percentage of global industry sales, China now represents 8.7%, up from 4.3% in 2001. Furthermore, in 2005, China accounted for 23.2% of the total industry 9s global growth. Ford and GM estimate China will surpass the U.S. as the world 9s largest car market by 2025. Additionally, global light-vehicle production in China is expected to grow 7% compounded annually through this decade. As a result, it represents an important growth opportunity for automotive parts suppliers. Virtually all of our production in China is for use in the Chinese market, supplying OEMs that produced more than five million vehicles in 2005. In keeping with the expected growth, we are opening our first wholly owned elastomer manufacturing plant as well as our first emission control engineering facility joint venture, both located near Shanghai, later this year. We are also investing in the diversity of our customer base in China. Twenty- three platforms launching over the next 18 months bring us additional business with General Motors, Ford, Suzuki, PSA, Nissan, DaimlerChrysler and Mazda. Our goal is to distribute our sales in China more favorably, so that eventually our revenue mix tracks the OEMs 9 market shares in China. Diversifying Our Customer Base in China China for Rapid Growth Chang An Ford chose Tenneco as its 2005 cTop Supplier d in China for emission- control products based on our outstanding engineering capabilities, on-time delivery and favorable cost structure. As a global supply partner, our design, product development and manufacturing processes meet Ford 9s engineering requirements for continuous improvement. Tenneco also helps Chang An Ford satisfy China's Euro 3 environmental regulations through technological innovation. Ford Focus Tenneco is capitalizing on this opportunity by expanding into new product categories. 14 The automotive aftermarket offers significantgrowth potential due to unperformed vehicle maintenance. Temot International cTemot International is one of the strongest aftermarket trade associations in Europe. Our leading warehouse distributors favor major brands over private label. We recommend suppliers that provide superior technologies, outstanding logistics and strong promotional support. Tenneco is a preferred supplier with our buying group for both its Monroe and Walker products. We view them as a strategic partner and a benchmark for evaluating our supplier base. d Monroe Premium Brake Pads Monroe Quick Strut Dupont Car Care Products DNX Stainless Steel Dual Tailpipe Extension DNX Performance Products: Lowering Spring Kits, Air Filters, Brake Pads, Tail Pipe Extensions DNX High Performance Stainless Steel Muffler 15 Tenneco is the leading provider of emission-control and ride-control products to the independent replacement-parts market in both North America and Europe. We generate 23% of our total sales from the aftermarket. The demand for aftermarket products is driven primarily by three factors: the number of miles vehicles are driven, an amount that has increased by almost 2% compounded annually since 1999; the number of vehicles in operation, which has risen to 225 million in 2004 from 206 million in 1998; and the average age of light vehicles on the road, which reached an unprecedented 7.9 years in 2004. Tenneco 9s success in supplying replacement parts through retailers and warehouse distributors is primarily due to: n The strength of our anchor brands, Monroe shock absorbers and Walker mufflers, n Achieving lower manufacturing costs by combining original equipment and aftermarket production in the same facilities, and relocating sources of supply to low-cost countries, n Aggressive investment in compre- hensive installer training and marketing programs, n Convincing installers to upgrade their customers into premium brands, such as our Reflex shock absorbers and Quiet-Flow mufflers, and n Line extensions through products originally developed for the OEM market. As a consequence, our aftermarket business has achieved stable growth, better than most of our competitors, mitigating the cyclicality in demand from the automakers. The Automotive Aftermarket Industry Association says an estimated $62 billion of vehicle maintenance goes unperformed each year. Based on this data, sector sales could increase substantially if con- sumers were educated on the safety value of proper maintenance. We are now supplementing our hard replacement parts 4mufflers and shocks 4with a new emphasis on service parts, products that are replaced more frequently like car-care chemicals, high-performance air filters and premium brake components. We intend to expand our service parts business, now in its infancy, by leveraging our sales and distribution assets and our brand names. Canadian Tire cConsumers and professional installers alike recognize Monroe as a top-quality brand of shocks and struts. Our research indicates there is no limit to extending the brand to other automotive parts associated with safety, durability and performance. The introduction of Monroe brakes provides a valuable new product offering and is important to the goals of our strategic partnership, which include moving consumers up the value ladder, and increasing profitability and customer satisfaction. d Aftermarket Service Products for Incremental Sales Tenneco continues to communicate the need to improve vehicle ride and safety to aftermarket consumers. Board of Directors and Officers Top row, left to right: Charles W. Cramb 1 Executive Vice President, Finance & Technology, and Chief Financial Officer Avon Products, Inc. Timothy R. Donovan Executive Vice President Strategy and Business Development and General Counsel Tenneco Inc. M. Kathryn Eickhoff-Smith 1,3 Retired President and Chief Economist Eickhoff Economics, Inc. Mark P. Frissora Chairman, Chief Executive Officer President Tenneco Inc. Frank E. Macher 1 President and Chief Executive Officer Collins & Aikman Corporation Roger B. Porter 2, 3 IBMProfessor of Business and Government Harvard University Bottom row, left to right: David B. Price, Jr. 2, 3 Chief Executive Officer and President Birdet Price, LLC Dennis G. Severance 1 Accenture Professor of Business Information & Technology, Stephen M. Ross School of Business, University of Michigan Paul T. Stecko 2,3 Chairman and Chief Executive Officer Packaging Corporation of America Mitsunobu Takeuchi Retired Chairman and Chief Executive Officer DENSO International Americas, Inc. Jane L. Warner 2 Group President Finishing Systems Illinois Tool Works Inc. 1Audit Committee 2Compensation/Nominating/ Governance Committee 3Three-Year Independent Director Evaluation Committee Orange numbers indicate the committee chair. Officers Mark P. Frissora Chairman, Chief Executive Officer President Timothy R. Donovan Executive Vice President Strategy and Business Development General Counsel Hari N. Nair Executive Vice President Managing Director Europe, South America and India Kenneth R. Trammell Executive Vice President Chief Financial Officer Richard P. Schneider Senior Vice President Global Administration Timothy E. Jackson Senior Vice President, Technology General Manager, Asia Pacific Paul Schultz Senior Vice President Global Manufacturing Supply Chain Management Brent J. Bauer Senior Vice President General Manager, North America Original Equipment Emission Control Neal A. Yanos Senior Vice President General Manager, North America Original Equipment Ride Control Aftermarket Lois Boyd Vice President and General Manager Commercial Vehicle Systems/ Specialty Markets Global Program Management Josep Fornos Vice President General Manager, Europe Original Equipment Ride Control Ulrich Mehlmann Vice President General Manager, Europe Original Equipment Emission Control Theo Bonneu Vice President, Finance, Europe H. William Haser Vice President Chief Information Officer John E. Kunz Vice President and Treasurer Paul D. Novas Vice President Finance and Administration Europe James A. Perkins Vice President and Controller James K. Spangler Vice President Global Communications J. Jeffrey Zimmerman Vice President, Law 16 2005 2004 Revenues (millions) $4,441 $4,213 Original Equipment/ Aftermarket Balance 77/23 76/24 Emission Control/ Ride Control Balance 62/38 63/37 percentage of sales Diverse Customer Base People: Approx. 19,000 Engineering Centers: 13 Manufacturing and Just-In-Time Facilities: 79 Countries Served: 135 Profile $2,390 million Passenger cars Light trucks Commercial vehicles Industrial applications Motorbikes Buses Complete exhaust systems Fabricated manifolds Manifold-converter modules Catalytic converters Mufflers and resonators Diesel particulate filter systems NOx abatement systems Exhaust heat exchangers Exhaust isolators & hanging systems Emission Control $1,030 million Passenger cars Light trucks Commercial vehicles Golf carts Off-road recreational Rail cars Buses Shocks & struts Suspension bushings Coil, air & leaf springs Torque rods Engine/body mounts Suspension modules/systems Control arms/bars/links Cabin dampers Computerized electronic suspension Anti-roll system Ride Control Operations 2005 Sales Applications Products Brands Competitors Key Advantages Top Five Customers Top Five Platforms 2005 Market Opportunities $368 million Passenger cars Light trucks Commercial vehicles Performance vehicles Mufflers Pipes Tubing Mounting components Catalytic converters Performance mufflers Headers Emission Control $653 million Passenger cars Light trucks Commercial vehicles Performance vehicles Trailers Shocks Struts Cartridges Mounting kits Performance shocks, struts, filters and brakes Torque rods Suspension bushings Engine mounts Coil springs Car-appearance products Suspension lift kits Ride Control Operations 2005 Sales Applications Products Brands Competitors Key Advantages Top Five Customers Leading Products Market Opport unities Aftermarket Tenneco Inc. Largest OE Customers Largest AM Customers Growing number of vehicles on the road OE Service New technologies Unperformed maintenance Premium mix expansion Broader product coverage Heavy-duty truck penetration Safety/installer education Testing/diagnostic equipment Reflex ® shocks & struts Sensa-Trac ® shocks & struts Rancho ® shocks, struts and suspension lift kits Quick Strut" Gas-Magnum ® shocks DNX" performance shocks and struts Monro-Matic Plus ® shocks DuPont" car-care line Quiet-Flow3 ® Mufflers/ Assemblies Dynomax ® Ultra-Flo Stainless/ Welded Mufflers/Systems DNX" performance exhaust systems SoundFX" mufflers Clean Air" catalytic converters Growing number of vehicles on the road OE Service New technologies Emission regulations Performance-product demand ArvinMeritor Kayaba OE Service ZF Sachs ArvinMeritor OE Service Bosal Goerlich 9s Exhaust Systems International Muffler Company NAPA Advance Auto Parts O 9Reilly Auto Parts TEMOT Autoteile Automotive Distribution International (ADI) TEMOT Autoteile NAPA Automotive Distribution International (ADI) Advance Auto Parts Group Auto Union (GAU) Brand dominance Relationships with all major wholesale distributors/retailers Global presence Leading market shares Product innovation Product quality Extensive product and vehicle coverage Targeted marketing programs Introduction of service parts Vehicle stability/ safety requirements Modular assembly New technologies Adjacent markets Electronic technologies Emerging markets Seat damping systems Cabin damping systems Commercial vehicle segment GM Silverado, Suburban, Avalanche, Tahoe, Sierra,

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