RNS Number:1411K
Caterpillar Inc
16 April 2003

Caterpillar Inc.

April 16, 2003

FOR IMMEDIATE RELEASE

             Caterpillar first-quarter profit increases 61 percent;
              Expects full-year profit of $2.20 to $2.30 per share


PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported first-quarter 2003
sales and revenues of $4.82 billion and profit of $129 million or 37 cents per
share.

Sales and revenues of $4.82 billion were up 9 percent compared to $4.41 billion
in the first quarter of 2002. Sales and revenues increased due primarily to
currency-related price realization and some higher volume in truck engines and
machines.

Profit of $129 million or 37 cents per share increased 61 percent compared to
$80 million or 23 cents per share in the first quarter of 2002. Profit was up
due to the favorable impact of improved operating efficiencies, better price
realization (excluding currency) and higher volumes.

First-quarter revenues for Financial Products, which consists primarily of
Caterpillar Financial Services Corporation (Cat Financial), Caterpillar
Insurance Holdings Inc. (Cat Insurance) and their subsidiaries, were $440
million, up $38 million or 9 percent compared with first quarter 2002 due
primarily to continued portfolio growth at Cat Financial.

Commenting on the quarter, Caterpillar Chairman and CEO Glen Barton said, "In
this challenging and uncertain business environment, Caterpillar people around
the world continued to demonstrate flexibility and sustained emphasis on cost
reduction. This resulted in strong year-over-year improvement in financial
results."

                                     Page 2
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Caterpillar maintained its focus on diversification this quarter with new
service agreements in Cat Logistics, dealer expansion of Cat Rental Stores and
continued portfolio growth at Cat Financial. Geographic diversity also benefited
Caterpillar this quarter with strong growth in Asia, most significantly in
China. In addition, Caterpillar recorded a substantial improvement this quarter
in its percentage of industry sales for heavy-duty truck engines.

"We continue to invest in innovations such as our new clean-diesel engines with
ACERT(TM) technology. This is just one example of Caterpillar's commitment to
making difficult choices today in pursuit of better long-term solutions.
Customer reaction to our ACERT technology reflects the marketplace's perception
that we made the right choice," said Barton.

Underlying these advancements in technology, diversification and growth is the
company's commitment to 6 Sigma. "As a cornerstone of our strategy, the 6 Sigma
process allows us to improve efficiency and reduce costs, which positions us to
take full advantage of growth opportunities as the global economy recovers. In
addition to product development, operations and marketing projects, we made
significant strides in leveraging the value of 6 Sigma in support areas such as
the consolidation of our global purchasing organization and the formation of
regional human resource centers," Barton said. "We are seeing bottom-line 6
Sigma benefits multiply as we complete and replicate projects worldwide."

Outlook
"Looking forward, we must view these positive results cautiously against a
backdrop of continuing political unrest and delayed economic recovery. Our
outlook has improved somewhat, but given the degree of uncertainty in the
business environment, the balance of the year will prove challenging. We expect
sales and revenues for 2003 to be flat to up 4 percent. Full-year profit per
share is expected to range from $2.20 to $2.30," Barton said.



For more than 75 years, Caterpillar has been building the world's infrastructure
and, in partnership with our independent dealers, is driving positive and
sustainable change on every continent. Caterpillar is a technology leader and
the world's largest maker of construction and mining equipment, diesel and
natural gas engines and industrial gas turbines. More information is available
at http://www.CAT.com/.

                                     Page 3
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                               DETAILED ANALYSIS

FIRST QUARTER 2003 COMPARED WITH FIRST QUARTER 2002
First quarter 2003 sales and revenues were $4.82 billion compared to $4.41
billion in the first quarter of 2002. The 9 percent increase was due to
approximately $200 million improvement in price realization, two-thirds of which
was attributable to the favorable impact of currency. In addition, we
experienced some higher volume in truck engines and machines. Price realization
is defined as the net impact of price changes, sales variances and currency
fluctuations on sales. Sales variances include items such as warranty, special
retail and wholesale incentive programs, and manufacturer and cash discounts.

Profit for first quarter 2003 was $129 million compared to $80 million in the
first quarter of 2002. Favorable profit impacts included improved operational
efficiencies of approximately $70 million, better price realization (excluding
currency and on-highway truck and bus engines) of about $40 million, lower
research and development expenses of about $25 million and the favorable profit
impact of higher sales volume (net of unfavorable sales mix) of approximately
$20 million. Offsetting these items were about $50 million in higher retiree
pension, health care and related benefit costs and the net unfavorable impact of
currency of $20 million. In addition, the changes in emission standards for
on-highway truck and bus engines in North America resulted in a net unfavorable
impact of approximately $20 million. The impact of changes in emission standards
include nonconformance penalties, product cost increases and ramp-up production
costs partially offset by price increases on these engines.

MACHINERY AND ENGINES - SALES
                                                         Sales
-----------------------------------------------------------------------------------------------------------------------
   (Millions of dollars)         Total             North            EAME *              Latin              Asia/
                                                  America                             America **          Pacific
                             --------------     ------------    ---------------    ----------------    --------------
First Quarter 2003
Machinery                    $        2,935     $      1,532    $           787    $            183    $          433
Engines ***                           1,489              676                494                 123               196
                             --------------     ------------    ---------------    ----------------    --------------
                             $        4,424     $      2,208    $         1,281    $            306    $          629
                             --------------     ------------    ---------------    ----------------    --------------

First Quarter 2002
Machinery                    $        2,671     $      1,479    $           663    $            219    $          310
Engines ***                           1,373              614                418                 146               195
                             --------------     ------------    ---------------    ----------------    --------------
                             $        4,044     $      2,093    $         1,081    $            365    $          505
                             --------------     ------------    ---------------    ----------------    --------------

* Europe, Africa & Middle East and Commonwealth of Independent States

** Latin America includes Mexico.

*** Does not include internal engine transfers of $321 million and $309 million in first quarter 2003 and first quarter
2002, respectively. Internal engine transfers are valued at prices comparable to those for unrelated parties.

                                     Page 4
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Machinery sales were $2.94 billion, an increase of $264 million or 10 percent
from first quarter 2002. Sales volume was up 6 percent, the favorable impact of
currency was 3 percent and improved price realization (excluding currency) was
about 1 percent. Sales gains in North America, EAME and Asia/Pacific more than
offset lower sales in Latin America. Sales in North America increased due to
higher dealer retail sales to the heavy and general construction sectors and
increased deliveries of machines to dealer rental operations. Sales increased in
EAME due to the favorable effects of currency. Sales gains in Asia/Pacific were
mainly due to higher retail demand and dealer inventory growth. Sales declined
in Latin America due to reductions in dealer inventory.

Engine sales were $1.49 billion, an increase of $116 million or 8 percent from
first quarter 2002. The favorable impact of currency was 4 percent, price
realization (excluding currency) was about 3 percent and sales volume was up
about 1 percent. First quarter 2003 engine sales volume was up primarily due to
an increase in North American heavy-duty truck engines.

MACHINERY AND ENGINES - OPERATING PROFIT
                                                  Operating Profit
---------------------------------------------------------------------------------------------------------------------
              (Millions of dollars)                        First Quarter                     First Quarter
                                                               2003                              2002
                                                   -----------------------------     -----------------------------
Machinery                                          $               217               $              121
Engines                                                            (51)                             (14)
                                                   -----------------------------     -----------------------------
                                                   $               166               $              107
                                                   -----------------------------     -----------------------------

Caterpillar operations are highly integrated; therefore, the company uses a 
number of allocations to determine lines of business operating profit.


Machinery operating profit increased 79 percent, or $96 million, from first
quarter 2002. Favorable sales volume, improved price realization (excluding the
impact of currency) and improved operating efficiencies were partially offset by
the net unfavorable impact of currency and higher retiree pension, health care
and related benefit costs.

Engine operating profit was $37 million lower than first quarter 2002 as
improved operating efficiencies were more than offset by the profit impacts of
changes in emission standards for on-highway truck and bus engines in North
America (no impact in first quarter 2002), unfavorable sales mix and higher
retiree pension, health care and related benefit costs.

                                     Page 5
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FINANCIAL PRODUCTS
This line of business consists primarily of Caterpillar Financial Services
Corporation (Cat Financial), Caterpillar Insurance Holdings Inc. (Cat Insurance)
and their subsidiaries. Cat Financial provides a wide range of financing
alternatives for Caterpillar machinery and engines, Solar(R) gas turbines, as
well as other equipment and marine vessels. Cat Financial also extends loans to
customers and dealers. Cat Insurance provides various forms of insurance to
customers and dealers to help support the purchase and lease of our equipment.

Financial Products revenues for the first quarter were $440 million, up $38
million or 9 percent compared with first quarter 2002. The favorable impact of
approximately $63 million due to the continued portfolio growth of finance
receivables and leases at Cat Financial was partially offset by the
approximately $30 million impact of lower interest rates on finance receivables.

Operating profit for Financial Products was $80 million, up $4 million or 5
percent from first quarter 2002. The larger portfolio at Cat Financial favorably
impacted profit by about $15 million, but was partially offset by a $10 million
unfavorable impact of a decreased spread between receivable and debt rates.

INCOME TAXES
First-quarter tax expense reflects an estimated annual tax rate of 28 percent
for 2003 and 30 percent for 2002 resulting from a change in the geographic mix
of profits.

UNCONSOLIDATED AFFILIATED COMPANIES
The company's share of unconsolidated affiliated companies' profits increased $9
million from first quarter a year ago, due in part to improved profitability of
Shin Caterpillar Mitsubishi Ltd. resulting from improved export business into
the Asia/Pacific region.

SUPPLEMENTAL INFORMATION
We are providing supplemental information including sales to users and dealer
inventory levels. Due to time lags between our sales to dealers and dealer sales
to users we believe this information will help readers better understand our
business.

Dealer Machine Sales to End Users and Deliveries to Dealer Rental Operations
Worldwide dealer sales (including both sales to end users and deliveries to
dealer rental operations) were up 3 percent. This increase was achieved in the
face of generally weak business conditions due primarily to relatively slow
economic growth and continued geopolitical uncertainty.

                                     Page 6
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Dealer sales in North America increased 6 percent from first quarter 2002. Sales
benefited from a 27 percent growth in deliveries of machines to dealer rental
operations. Sales increased in both the United States, up 2 percent, and Canada,
up 37 percent. For the region, heavy construction sales were up 17 percent due
to continued strong sales to highway construction and higher sales to sewer and
water projects. Sales also increased to the general construction sector, up 14
percent, due to increased housing construction, which benefited from lower
mortgage rates. Rising demand and improved cash flow for building material
suppliers led to increased sales to quarry and aggregates, up 16 percent, and
forestry, up 19 percent. Mining sales fell 34 percent, resulting from further
sharp cutbacks in equipment purchases by coal mining companies.

Dealer sales in EAME declined 6 percent from 2002 due to 14 percent lower sales
in Europe. Business conditions in Europe remained weak due to slow economic
growth and uncertainty regarding the armed conflict in Iraq. Sales in the CIS
increased sharply due to increased demand in general construction and mining
sectors. Sales were 2 percent higher in Africa and the Middle East due largely
to increased machine demand in South Africa.

In Asia/Pacific, dealer sales increased 7 percent due to continued strong sales
in China, principally supported by road construction. For the region, sales were
10 percent higher in the heavy construction sector. Sales were also higher to
the general construction sector, up 80 percent and the forestry sector also
experienced strong growth. Sales also increased to the quarry and aggregates
sector, up 30 percent; and the industrial sector, up 46 percent. Mining sales
declined 27 percent due to a slowdown in equipment purchases by metal and coal
mining companies.

Dealer sales in Latin America increased 11 percent primarily due to a major
road-building project in Mexico, a major purchase by the government of Peru and
several mining projects throughout the region. Beyond these projects, general
business conditions remained weak especially in Brazil and Venezuela.

Dealer Inventories of New Machines
Worldwide dealer new machine inventories at the end of the first quarter were
higher than a year ago. Lower inventory in Latin America was more than offset by
higher inventories in North America, EAME and Asia/Pacific. Inventories compared
to current selling rates were lower than year-earlier levels in EAME, Asia/
Pacific and Latin America and higher in North America compared to year-earlier
levels.

Engine Sales to End Users and OEMs
Worldwide engine sales to end users and OEMs in the first quarter of 2003 rose 1
percent compared to sales in first quarter of 2002. A 24 percent increase in
sales to the on-highway truck and bus sector and 10 percent growth in sales into
the industrial sector were offset by 7 percent lower sales into the petroleum
sector, 8 percent lower sales into the marine sector, and 14 percent lower sales
into the electric power sector. Similar to the business fundamentals discussed
above for construction machinery, global engine sales were impacted by weak
capital spending in industrialized countries, heightened concerns about Middle
Eastern military developments, and depressed operating profits and continuing
investor uncertainties concerning new electric utility and energy investments.

                                     Page 7
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In North America, Caterpillar engine sales to end users rose 6 percent compared
to first quarter 2002. Caterpillar sales of on-highway truck and bus engines
rose 26 percent as rising North American industrial production, increased
housing starts, rising truck tonnage hauled and higher freight rates offset
higher diesel fuel prices and insurance costs. North American Free Trade
Association (NAFTA) heavy-duty truck industry conditions have strengthened
on-highway truck industry engine demand in early 2003 substantially compared to
our earlier expectations. Caterpillar widened its leadership position in the
NAFTA on-highway truck and bus engine industry due to a continuing gain in our
percentage of industry sales in heavy-duty truck engines. Engine sales to users
in the industrial sector rose 12 percent.

Caterpillar engine sales to end users and OEMs in electric power, marine and
petroleum sectors did not benefit from rising industrial production and
continued to be impacted by weak industry profits, continuing economic
uncertainty and delayed new investments until Middle Eastern military
developments are concluded. Caterpillar engine sales to end users and OEMs in
the North American petroleum sector rose only 2 percent despite favorable crude
oil and natural gas prices and a 16 percent increase in North American active
drill rig activity. Sales to end users in the North American electric power
sector declined 18 percent as large reciprocating engine demand was negatively
impacted by weak electric utility profits and continuing investor uncertainty.
Sales to end users and OEMs in the marine sector fell 36 percent, with most of
this decline caused by weak demand for large engines used in workboat
applications.

In EAME, overall sales to end users rose 4 percent, with 8 to 10 percent sales
gains in the electric power, industrial and marine sectors more than offsetting
8 percent lower demand for engines and turbines sold to the petroleum sector.
Caterpillar's engine sales benefited from a weaker U.S. dollar compared to its
stronger position against the euro last year, but benefits from more favorable
exchange rates were partially offset by sluggish economic trends in Western
Europe and increased business uncertainty that further delayed new business
investment decisions.

Sales to end users in Asia/Pacific in the first quarter were up 1 percent
compared to last year with sales gains in industrial, up 49 percent, and the
marine sector, up 13 percent, offset by a 12 percent decline in demand for
engines used in the electric power sector and flat demand for engines used in
the petroleum sector. Asia/Pacific sales of turbine engines were 11 percent
lower than last year's strong first-quarter sales when large engine sales were
unusually strong as select countries in Asia/Pacific increased oil and gas
exploration and development to raise local energy production and offset higher
costs of imported fuels.

Sales to end users in Latin America fell 35 percent, mostly caused by a 65
percent drop in engine sales into the electric power sector. Electric power
sales last year benefited from abnormally strong demand for large reciprocating
engines when Brazilian customers purchased large generator sets to meet a
shortfall in hydroelectric power output. Latin American sales to end users in
the petroleum sector fell 26 percent from last year as political and investor
uncertainty in key oil-producing countries delayed purchase decisions of large
engines.

Dealer Inventories of Engines
Worldwide dealer engine inventories at the end of the first quarter were lower
than a year ago. Inventories were substantially lower in North America and Latin
America but higher in EAME and Asia/Pacific. Inventories compared to current
selling rates were lower than year-earlier levels in North America and Latin
America but still above normal. Dealer inventories compared to current selling
rates were higher than year-earlier levels in EAME and Asia/Pacific.

                                     Page 8
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EMPLOYMENT
At the end of first quarter 2003, Caterpillar's worldwide employment was 67,063
compared with 71,843 one year ago. Employment was reduced by 4,780, or about 7
percent, year over year.

OUTLOOK
Economic and Industry Summary
With events rapidly unfolding in the Iraqi war, we have adopted a "short-war"
scenario for our outlook. The key assumptions of this scenario are as follows:

 1. Uncertainties associated with the war have had a negative impact on business
    and consumer confidence and spending that is producing a limited period of
    lower overall growth.

 2. The conflict is rapidly de-escalating as organized resistance by the Iraqi
    regime collapses, but sporadic unrest is expected to continue for some time.

 3. With the cessation of major armed conflict, uncertainties will diminish, and
    business and consumer confidence will begin to recover in coming months.

 4. Oil prices will move down to a range of $18-28 per barrel as Iraqi oil
    production is restored.

 5. Worldwide economic growth will gradually respond to the reduced uncertainties
    and improved business climate, with improving growth evident in the last
    half of the year.

 6. Initial reconstruction work in Iraq is expected to result in some sales of
    equipment in 2003, however the impact on Caterpillar will not be material.


In this environment we expect a minimal adverse impact from the war, resulting
in worldwide industry machine unit sales about flat with 2002 levels, while
engine demand is expected to be down about 2 percent. However, we do anticipate
some changes in regional demand levels for machines and engines from our
original outlook. A significant increase in industry sales in 2003 from last
year's levels is now expected in Asia/Pacific, offset by flat to slightly lower
demand in North America, a slight decline in EAME and a moderate decline in
Latin America.

North America (United States and Canada)
Overall growth in North America continued at a relatively slow pace in the early
months of 2003, as high oil prices and war uncertainties restrained the growth
of consumer and business spending. The construction sector was mixed, as strong
activity in the housing market was offset by weak commercial development,
industrial utilities and public construction. Growth is expected to remain below
average through the second quarter. Industry machine demand declined by about 5
percent in the first quarter and is expected to be flat to down slightly for the
year as a whole. The North American engine industry is expected to be down about
3 percent.

                                     Page 9
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EAME
General economic conditions in EAME were weak early in the year, and remained
weak through the first quarter in the face of high oil prices and geopolitical
uncertainties. While some improvement is expected when the hostility ends and
oil prices decline, momentum is weak and industry machine demand is expected to
be down about 4 percent for the year as a whole. Engine industry demand is also
expected to be down about 2 percent.

Latin America
Market conditions continue to be mixed. Several major markets are improving -
Mexico, Chile and Peru. However, this is more than offset by slow to moderate
growth in Brazil, low activity levels in Argentina as the economic recovery
there is still in the early stages, and a collapse of demand in Venezuela due to
severe political instability. Industry machine demand is expected to decline by
about 15 percent. Latin American engine industry demand is also expected to
decline significantly since robust electric power industry demand in Brazil is
not repeating in 2003.

Asia/Pacific
Overall economic conditions remained good in the first quarter, driven mainly by
continued strong growth in China and India. Construction activity in Australia
remains at good levels. We expect minimal adverse impact from the war and the
SARS outbreak, as industry machine demand is expected to increase by about 25
percent in 2003. Slight growth in Asia/Pacific engine industry demand is
expected, led by improving business prospects in the electric power sector.

Financial Products
The "short-war" scenario is not expected to adversely impact Financial Products'
2003 results. Overall economic conditions in the first quarter facilitated
continued growth in new retail financing business, portfolio size and revenue.
We expect continued growth in Financial Products for the remainder of 2003, with
revenues expected to increase approximately 10 percent versus 2002.

Company Summary
Our outlook has improved somewhat, but given the degree of uncertainty in the
business environment, the balance of the year will prove challenging. We expect
sales and revenues for 2003 to be flat to up 4 percent. Full-year profit per
share is expected to range from $2.20 to $2.30

                                    Page 10
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                                     * * *

The information included in the Outlook section is forward-looking and involves
risks and uncertainties that could significantly affect expected results. A
discussion of these risks and uncertainties is contained in Form 8-K filed with
the Securities & Exchange Commission (SEC) on April 16, 2003. That filing is
available from the SEC website at  http://www.sec.gov/cgi-bin/srch-edgar.


Caterpillar's latest financial results and current outlook are also available
via:

Telephone:


    (800) 228-7717 (Inside the United States and Canada)
    (858) 244-2080 (Outside the United States and Canada)


Internet:


    http://www.CAT.com/investor
    http://www.CAT.com/irwebcast (live broadcast/replays of quarterly conference
    call)



Caterpillar contact:


    Kelly Wojda
    Corporate Public Affairs
    (309) 675-1307
    wojda_kelly_g@CAT.com


Note: Information contained on our website is not incorporated by reference into
this release.


Financial Pages Follow

                                    Page 11
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                                                 Caterpillar Inc.
                             Condensed Consolidated Statement of Results of Operations
                                                    (Unaudited)
                                    (Dollars in millions except per share data)
-------------------------------------------------------------------------------------------------------------------
                                                                                Three Months Ended
                                                                                    March 31,
                                                                       2003                            2002
                                                               --------------------             -------------------
Sales and revenues:
      Sales of Machinery and Engines                              $          4,424                   $       4,044
      Revenues of Financial Products                                           397                             365
                                                               --------------------             -------------------
      Total sales and revenues                                               4,821                           4,409
                                                               --------------------             -------------------

Operating costs:
      Cost of goods sold                                                     3,524                           3,205
      Selling, general and administrative expenses                             676                             649
      Research and development expenses                                        152                             171
      Interest expense of Financial Products                                   120                             123
      Other operating expenses                                                 122                              91
                                                               --------------------             -------------------
      Total operating costs                                                  4,594                           4,239
                                                               --------------------             -------------------

Operating profit                                                               227                             170

      Interest expense excluding Financial Products                             66                              69
      Other income (expense)                                                    13                              20
                                                               --------------------             -------------------

Consolidated profit before taxes                                               174                             121

      Provision for income taxes                                                49                              36
                                                               --------------------             -------------------
      Profit of consolidated companies                                         125                              85

      Equity in profit (loss) of unconsolidated affiliated                       4                              (5)
      companies
                                                               --------------------             -------------------

Profit                                                            $            129                   $          80
                                                               --------------------             -------------------

-------------------------------------------------------------------------------------------------------------------
Profit per common share                                           $           0.37                   $        0.23
Profit per common share - assuming dilution 1                     $           0.37                   $        0.23
Weighted average common shares outstanding (thousands)
      - Basic                                                               344,316                         343,592
      - Assuming dilution 1                                                 346,826                         347,737
Cash dividends paid per common share                              $           0.35                   $        0.35
-------------------------------------------------------------------------------------------------------------------
1 Diluted by assumed exercise of stock options, using the treasury stock method.

                                    Page 12
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                                                   Caterpillar Inc.
                                     Condensed Consolidated Statement of Cash Flow
                                                      (Unaudited)
                                                 (Millions of dollars)
-----------------------------------------------------------------------------------------------------------------------
                                                                                         Three Months Ended
                                                                                              March 31,
                                                                              -----------------------------------------
                                                                                    2003                   2002
                                                                              ----------------      -------------------
Cash flow from operating activities:
       Profit                                                                    $        129           $           80
       Adjustments for non-cash items:
             Depreciation and amortization                                                332                      296
             Other                                                                        (15)                      57
       Changes in assets and liabilities:
             Receivables - trade and other                                               (115)                     (40)
             Inventories                                                                 (301)                    (289)
             Accounts payable and accrued expenses                                        248                       95
             Other - net                                                                  (60)                     (96)
                                                                              ----------------      -------------------
Net cash provided by operating activities                                                 218                      103
                                                                              ----------------      -------------------

Cash flow from investing activities:
       Capital expenditures - excluding equipment leased to others                        (86)                    (152)
       Expenditures for equipment leased to others                                       (261)                    (231)
       Proceeds from disposals of property, plant and equipment                           160                      120
       Additions to finance receivables                                                (3,386)                  (3,273)
       Collection of finance receivables                                                2,995                    2,473
       Proceeds from the sale of finance receivables                                      269                      665
       Investments and acquisitions (net of cash acquired)                                (17)                    (262)
       Other - net                                                                        (40)                     (39)
                                                                              ----------------      -------------------
Net cash used for investing activities                                                   (366)                    (699)
                                                                              ----------------      -------------------

Cash flow from financing activities:
       Dividends paid                                                                    (120)                    (120)
       Common stock issued, including treasury shares reissued                              -                        6
       Proceeds from long-term debt issued                                              2,053                    1,389
       Payments on long-term debt                                                        (985)                    (881)
       Short-term borrowings - net                                                       (773)                     111
                                                                              ----------------      -------------------
Net cash provided by (used for) financing activities                                      175                      505
                                                                              ----------------      -------------------
Effect of exchange rate on cash                                                            (9)                      (7)
                                                                              ----------------      -------------------
Increase (Decrease) in cash and short-term investments                                     18                      (98)

Cash and short-term investments at beginning of period                                    309                      400
                                                                              ----------------      -------------------
Cash and short-term investments at end of period                                 $        327           $          302
                                                                              ----------------      -------------------

                                    Page 13
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                                                   Caterpillar Inc.
                                Condensed Consolidated Statement of Financial Position
                                                      (Unaudited)
                                                 (Millions of dollars)
-----------------------------------------------------------------------------------------------------------------------
                                                                     Mar. 31,           Dec. 31,           Mar. 31,
                                                                       2003               2002               2002
                                                                  --------------     --------------     ---------------
Assets
    Current Assets
        Cash and short-term investments                           $         327      $          309     $          302
        Receivables - trade and other                                      2,896              2,838              2,619
        Receivables - finance                                              6,741              6,748              6,074
        Deferred and refundable income taxes                                 699                642                439
        Prepaid expenses                                                   1,343              1,328              1,235
        Inventories                                                        3,064              2,763              3,214
                                                                  --------------     --------------     ---------------
    Total current assets                                                  15,070             14,628             13,883
    Property, plant and equipment - net                                    6,998              7,046              6,622
    Long-term receivables - trade and other                                   71                 66                 61
    Long-term receivables - finance                                        6,862              6,714              6,260
    Investments in unconsolidated affiliated companies                       792                747                750
    Deferred income taxes                                                    858                850                899
    Intangible assets                                                        279                281                286
    Goodwill                                                               1,402              1,402              1,397
    Other assets                                                           1,206              1,117                989
                                                                  --------------     --------------     ---------------
Total Assets                                                      $       33,538     $       32,851     $       31,147
                                                                  --------------     --------------     ---------------

Liabilities
    Current liabilities:
        Short-term borrowings:
            -- Machinery and Engines                                          72                 64                353
            -- Financial Products                                          1,565              2,111              1,669
        Accounts payable                                                   2,375              2,269              2,182
        Accrued expenses                                                   1,597              1,620              1,366
        Accrued wages, salaries and employee benefits                      1,093              1,178              1,258
        Dividends payable                                                      -                120                  -
        Deferred and current income taxes payable                            111                 70                  6
        Long-term debt due within one year:
            -- Machinery and Engines                                          33                258                265
            -- Financial Products                                          3,842              3,654              2,946
                                                                  --------------     --------------     ---------------
    Total current liabilities                                             10,688             11,344             10,045

    Long-term debt due after one year:
            -- Machinery and Engines                                       3,449              3,403              3,403
            -- Financial Products                                          9,295              8,193              8,531
    Liability for post-employment benefits                                 4,038              4,038              3,120
    Deferred income taxes and other liabilities                              429                401                375
                                                                  --------------     --------------     ---------------
Total Liabilities                                                         27,899             27,379             25,474
                                                                  --------------     --------------     ---------------
Stockholders' Equity
    Common stock                                                           1,033              1,034              1,036
    Treasury stock                                                       (2,664)            (2,669)             (2,682)
    Profit employed in the business                                        7,978              7,849              7,613
    Accumulated other comprehensive income                                 (708)              (742)               (294)
                                                                  --------------     --------------     ---------------
Total Stockholders' Equity                                                 5,639              5,472              5,673
                                                                  --------------     --------------     ---------------
Total Liabilities and Stockholders' Equity                        $       33,538     $       32,851     $       31,147
                                                                  --------------     --------------     ---------------

                                    Page 14
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                                                   Caterpillar Inc.
                                      Supplemental Data for Results of Operations
                                       For The Three Months Ended March 31, 2003
                                                      (Unaudited)
                                                 (Millions of dollars)
-----------------------------------------------------------------------------------------------------------------------
                                                                                     Supplemental Consolidating Data
                                                                                  -------------------------------------
                                                                  Consolidated    Machinery   Financial   Consolidating
                                                                                     and      Products     Adjustments
                                                                                  Engines 1
                                                                  -------------   ---------   ---------   -------------
Sales and revenues:
  Sales of Machinery and Engines                                    $    4,424    $  4,424     $     -      $      -
  Revenues of Financial Products                                           397           -         440            (43)2
                                                                  -------------   ---------   ---------   -------------
  Total sales and revenues                                               4,821       4,424         440            (43)

Operating costs:
  Cost of goods sold                                                     3,524       3,524           -             -
  Selling, general and administrative expenses                             676         582         114            (20)3
  Research and development expenses                                        152         152           -             -
  Interest expense of Financial Products                                   120           -         124             (4)4
  Other operating expenses                                                 122           -         122             -
                                                                  -------------   ---------   ---------   -------------
  Total operating costs                                                  4,594       4,258         360            (24)
                                                                  -------------   ---------   ---------   -------------

Operating profit                                                           227         166          80            (19)

  Interest expense excluding Financial Products                             66          66           -             -
  Other income (expense)                                                    13          (6)          -             195
                                                                  -------------   ---------   ---------   -------------

Consolidated profit before taxes                                           174          94          80             -

  Provision for income taxes                                                49          20          29             -
                                                                  -------------   ---------   ---------   -------------
  Profit of consolidated companies                                         125          74          51             -

  Equity in profit (loss) of unconsolidated affiliated companies             4           2           2             -
  Equity in profit of Financial Products' subsidiaries                       -          53           -            (53)6
                                                                  -------------   ---------   ---------   -------------

Profit                                                              $      129    $    129     $    53      $     (53)
                                                                  -------------   ---------   ---------   -------------

1 Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.
2 Elimination of Financial Products revenues earned from Machinery and Engines.
3 Elimination of expenses recorded by Machinery and Engines paid to Financial Products.
4 Elimination of interest expense recorded by Financial Products paid to Machinery and Engines.
5 Elimination of discount recorded by Machinery and Engines on receivables sold to Financial Products, and of interest
income earned by Machinery and Engines from Financial Products.
6 Elimination of Financial Products profit for the period reported on Machinery and Engines statement on the equity
basis.
   Because the nature of operations of Machinery and Engines and Financial Products is different, especially with
regard to the
   impact on financial position and cash flow items, this supplemental data allows readers to better understand our
company.

                                    Page 15
--------------------------------------------------------------------------------
                                                   Caterpillar Inc.
                                      Supplemental Data for Results of Operations
                                       For The Three Months Ended March 31, 2002
                                                      (Unaudited)
                                                 (Millions of dollars)
-----------------------------------------------------------------------------------------------------------------------
                                                                                     Supplemental Consolidating Data
                                                                                  -------------------------------------
                                                                   Consolidated   Machinery   Financial   Consolidating
                                                                                     and      Products     Adjustments
                                                                                  Engines 1
                                                                   ------------   ---------   ---------   -------------
Sales and revenues:
  Sales of Machinery and Engines                                     $   4,044    $  4,044     $     -      $      -
  Revenues of Financial Products                                           365           -         402            (37)2
                                                                   ------------   ---------   ---------   -------------
  Total sales and revenues                                               4,409       4,044         402            (37)

Operating costs:
  Cost of goods sold                                                     3,205       3,205           -              -
  Selling, general and administrative expenses                             649         561         108            (20)3
  Research and development expenses                                        171         171           -             -
  Interest expense of Financial Products                                   123           -         127             (4)4
  Other operating expenses                                                  91           -          91             -
                                                                   ------------   ---------   ---------   -------------
  Total operating costs                                                  4,239       3,937         326            (24)
                                                                   ------------   ---------   ---------   -------------

Operating profit                                                           170         107          76            (13)

  Interest expense excluding Financial Products                             69          69           -             -
  Other income (expense)                                                    20          (7)         14             135
                                                                   ------------   ---------   ---------   -------------

Consolidated profit before taxes                                           121          31          90             -

  Provision for income taxes                                                36           2          34             -
                                                                   ------------   ---------   ---------   -------------
  Profit of consolidated companies                                          85          29          56             -

  Equity in profit (loss) of unconsolidated affiliated companies            (5)         (7)          2             -
  Equity in profit of Financial Products' subsidiaries                       -          58           -            (58)6
                                                                   ------------   ---------   ---------   -------------

Profit                                                               $      80    $     80     $    58      $     (58)
                                                                   ------------   ---------   ---------   -------------


1 Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.
2 Elimination of Financial Products revenues earned from Machinery and Engines.
3 Elimination of expenses recorded by Machinery and Engines paid to Financial Products.
4 Elimination of interest expense recorded by Financial Products paid to Machinery and Engines.
5 Elimination of discount recorded by Machinery and Engines on receivables sold to Financial Products, and of interest
   income earned by Machinery and Engines from Financial Products.
6 Elimination of Financial Products profit for the period reported on Machinery and Engines statement on the equity
basis.

                                    Page 16
--------------------------------------------------------------------------------
                                                   Caterpillar Inc.
                                            Supplemental Data for Cash Flow
                                       For the Three Months Ended March 31, 2003
                                                      (Unaudited)
                                                 (Millions of dollars)
-----------------------------------------------------------------------------------------------------------------------
                                                                                  Supplemental Consolidating Data
                                                                            -------------------------------------------
                                                                               Machinery      Financial   Consolidating
                                                            Consolidated     and Engines 1    Products     Adjustments
                                                            -------------   ---------------   ---------   -------------
Cash flow from operating activities:
  Profit                                                     $       129       $       129    $     53     $      (53)2
  Adjustments for non-cash items:
    Depreciation and amortization                                    332               205         127               -
    Profit of Financial Products                                       -               (53)          -             533
    Other                                                            (15)                3         (23)             54
  Changes in assets and liabilities:
    Receivables - trade and other                                   (115)              (53)        (35)           (27)4
    Inventories                                                     (301)             (301)          -               -
    Accounts payable and accrued expenses                            248                43         170             354
    Other - net                                                      (60)              (54)         17            (23)4
                                                            -------------   ---------------   ---------   -------------
Net cash provided by operating activities                            218               (81)        309            (10)
                                                            -------------   ---------------   ---------   -------------
Cash flow from investing activities:
  Capital Expenditures
  - excluding equipment leased to others                             (86)              (81)         (5)              -
  Expenditures for equipment leased to others                       (261)                -        (261)              -
  Proceeds from disposals of property, plant and equipment           160                 -         160               -
  Additions to finance receivables                                (3,386)                -      (3,386)              -
  Collection of finance receivables                                2,995                 -       2,995               -
  Proceeds from the sale of finance receivables                      269                 -         269               -
  Net intercompany borrowings                                          -               522          10           (532)5
  Investments and acquisitions (net of cash acquired)                (17)               (7)        (10)              -
  Other - net                                                        (40)              (13)        (40)            136
                                                            -------------   ---------------   ---------   -------------
Net cash used for investing activities                              (366)              421        (268)          (519)
                                                            -------------   ---------------   ---------   -------------
Cash flow from financing activities:
  Dividends paid                                                    (120)             (120)          -               -
  Common stock issued, including treasury shares reissued              -                 -          13            (13)6
    Net intercompany borrowings                                        -               (10)       (522)           5325
    Proceeds from long-term debt issued                            2,053                79       1,974              -
    Payments on long-term debt                                      (985)             (250)       (735)             -
    Short-term borrowings - net                                     (773)                8        (781)             -
                                                            -------------   ---------------   ---------   -------------
Net cash provided by (used for) financing activities                 175              (293)        (51)           519
                                                            -------------   ---------------   ---------   -------------
Effect of exchange rate on cash                                       (9)              (14)         (5)            107
                                                            -------------   ---------------   ---------   -------------
Increase (Decrease) in cash and short-term investments                18                33         (15)              -
Cash and short-term investments at beginning of period               309               146         163               -
                                                            -------------   ---------------   ---------   -------------
Cash and short-term investments at end of period             $       327       $       179    $    148     $         -
                                                            -------------   ---------------   ---------   -------------

1 Represents Caterpillar Inc. and its subsidiaries with Financial Products accounted for on the equity basis.
2 Elimination of Financial Products profit after tax due to equity method of consolidation.
3 Non-cash adjustment for the undistributed earnings from Financial Products.
4 Elimination of non-cash adjustments and changes in assets and liabilities related to consolidated reporting.
5 Net proceeds and payments to/from Machinery and Engines and Financial Products.
6 Change in investment and common stock related to Financial Products.
7 Elimination of the effect of exchange on intercompany balances.

                                    Page 17
--------------------------------------------------------------------------------
                                                   Caterpillar Inc.
                                            Supplemental Data for Cash Flow
                                       For the Three Months Ended March 31, 2002
                                                      (Unaudited)
                                                 (Millions of dollars)
-----------------------------------------------------------------------------------------------------------------------
                                                                                  Supplemental Consolidating Data
                                                                             ------------------------------------------
 '                                                                             Machinery      Financial   Consolidating
                                                                             and Engines 1    Products     Adjustments
                                                             Consolidated    --------------   ---------   -------------
                                                             -------------
Cash flow from operating activities:
  Profit                                                     $         80      $        80    $     58      $     (58)2
  Adjustments for non-cash items:
    Depreciation and amortization                                     296              201          95               -
    Profit of Financial Products                                        -              (58)          -             583
    Other                                                              57               13          22             224
  Changes in assets and liabilities:
    Receivables - trade and other                                     (40)             (38)         50            (52)4
    Inventories                                                      (289)            (289)          -               -
    Accounts payable and accrued expenses                              95               46           9             404
    Other - net                                                       (96)             (48)        (41)            (7)4
                                                             -------------   --------------   ---------   -------------
Net cash provided by operating activities                             103              (93)        193              3
                                                             -------------   --------------   ---------   -------------
Cash flow from investing activities:
  Capital expenditures                                               (152)            (145)         (7)              -
  - excluding equipment leased to others
  Expenditures for equipment leased to others                        (231)               -        (231)              -
  Proceeds from disposals of property, plant and equipment            120               23          97               -
  Additions to finance receivables                                 (3,273)               -      (3,273)              -
  Collection of finance receivables                                 2,473                -       2,473               -
  Proceeds from the sale of finance receivables                       665                -         665               -
   Net intercompany borrowings                                          -               (8)        (20)            285
   Investments and acquisitions (net of cash acquired)               (262)             (15)       (247)              -
    Other - net                                                       (39)              10         (49)              -
                                                             -------------   --------------   ---------   -------------
Net cash used for investing activities                               (699)            (135)       (592)            28
                                                             -------------   --------------   ---------   -------------
Cash flow from financing activities:
  Dividends paid                                                    (120)             (120)          -               -
  Common stock issued, including treasury shares reissued               6                6           -               -
  Net intercompany borrowings                                           -               19           8            (27)5
  Proceeds from long-term debt issued                               1,389                -       1,389               -
  Payments on long-term debt                                         (881)             (62)       (819)              -
  Short-term borrowings - net                                         111              304        (193)              -
                                                             -------------   --------------   ---------   -------------
Net cash provided by (used for) financing activities                  505              147         385            (27)
                                                             -------------   --------------   ---------   -------------
Effect of exchange rate on cash                                        (7)              (4)          1             (4)6
                                                             -------------   --------------   ---------   -------------
Increase (Decrease) in cash and short-term                            (98)             (85)        (13)              -
investments
Cash and short-term investments at beginning of period                400              251         149               -
                                                             -------------   --------------   ---------   -------------
Cash and short-term investments at end of period             $        302      $       166    $    136      $        -
                                                             -------------   --------------   ---------   -------------

1 Represents Caterpillar Inc. and its subsidiaries with Financial Products 
  accounted for on the equity basis.
2 Elimination of Financial Products profit after tax due to equity method of 
  consolidation.
3 Non-cash adjustment for the undistributed earnings from Financial Products.
4 Elimination of non-cash adjustments and changes in assets and liabilities 
  related to consolidated reporting.
5 Net proceeds and payments to/from Machinery and Engines and Financial Products.
6 Elimination of the effect of exchange on intercompany balances.

                                    Page 18
--------------------------------------------------------------------------------

SAFE HARBOR STATEMENT UNDER THE SECURITIES LITIGATION REFORM ACT OF 1995


Certain statements contained in our First-Quarter 2003 Results Release and
prepared statements from the related results webcast are forward-looking and
involve uncertainties that could significantly impact results. The words
"believes," "expects," "estimates," "anticipates," "will be" and similar words
or expressions identify forward-looking statements made on behalf of
Caterpillar. Uncertainties include factors that affect international businesses,
as well as matters specific to the company and the markets it serves.

World Economic Factors
Our current outlook calls for moderate growth in the U.S. economy in 2003. Our
outlook assumes that the events of September 11, 2001 and the recent armed
conflict in Iraq were unique one-time events and that there will be no further
events of this magnitude in 2003. If, however, there are other significant
shocks or sequence of shocks, financial, economic or acts of war and/or
political terror, there could be a more protracted negative impact on consumer
spending, housing starts, and capital spending which would negatively impact
company results.

U.S. GDP growth is expected to improve to over 3% in the second half of 2003.
Should recent interest rate reductions and fiscal stimulus measures fail to
boost growth in the U.S. economy as expected, leading to renewed economic
weakness, then sales of machines and engines may be lower than expected. The
outlook also projects that economic growth will continue in Asia/Pacific, Africa
& Middle East and the CIS. Growth is expected to improve in Europe, Japan and
Latin America. If, for any reason, these projected growth rates or improvements
do not occur, sales would likely be lower than anticipated in the affected
region. Persistent weakness in the construction sector in Japan is leading to
lower machine sales in the Japanese market. In general, renewed currency
speculation, significant declines in the stock markets, further oil or energy
price increases, political disruptions or higher interest rates could result in
weaker than anticipated economic growth and worldwide sales of both machines and
engines could be lower than expected as a result.

Economic recovery could also be delayed or weakened by growing budget or current
account deficits or inappropriate government policies. In particular, our
outlook assumes that Europe, the United Kingdom and Canada maintain economic
stimulus policies and that the Japanese government remains committed to
stimulating their economic recovery with appropriate monetary and fiscal
policies. The outlook also assumes that the Brazilian government follows through
with promised fiscal and structural reforms; and that the Venezuela crisis is
confined to Venezuela and does not spill over to negatively impact growth
prospects in neighboring countries. If political instability continues to
deteriorate leading to negative spillover effects, this could result in greater
regional economic and financial uncertainty and weaker regional growth.

Our outlook for 2003 also assumes that currency markets remain relatively
stable, that average world oil prices fluctuate in a range of $22 to $29 a
barrel, and equity markets recover. If commodity and/or currency markets
experience a significant increase in volatility, and/or stock markets show
further weakness, uncertainty would increase, both of which would result in
slower economic growth, lower sales and potential impairment of investments. In
addition, an eruption of political violence in the Middle East or a more lengthy
armed conflict with Iraq could lead to oil supply disruptions and persistent
upward pressure on oil prices. In this case business and consumer confidence
would fall and inflation pressures would move up leading to slower world
economic growth and lower company sales. The Russian economy has improved, but
political and economic uncertainty remains high and an unexpected deterioration
could impact worldwide stock or currency markets, which in turn could weaken
company sales.

Commodity Prices
The outlook for our sales also depends on commodity prices. Industrial metal
prices recovered in 2002, and further gains are projected in 2003. But
production rates are depressed and machine sales to the industrial metals
industry are expected to be about flat. Oil prices remained flat near $25 in
2002. We are expecting oil prices to be about flat - an average price of $22 to
$29 a barrel in 2003. Based on this forecast, equipment sales into sectors that
are sensitive to crude oil prices are expected to be about flat. If, for
whatever reason, average oil prices are significantly higher for the duration of
2003, our results would be negatively impacted.

Extended weakness in world economic growth could lead to sharp declines in
commodity prices and production and lower than expected sales to the industrial
metals and agriculture sectors.

                                    Page 19
--------------------------------------------------------------------------------

Monetary and Fiscal Policies
For most companies operating in a global economy, monetary and fiscal policies
implemented in the U.S. and abroad could have a significant impact on economic
growth, and, accordingly, demand for a product. In the United States, the
Federal Reserve reduced interest rates in 2002. These actions, together with
projected federal tax cuts, and other fiscal stimulus measures are expected to
lead to moderate U.S. growth in 2003, with some acceleration in momentum in the
second half. In Europe, the European Central Bank reduced interest rates in
2002, further reductions are expected and growth in Europe is expected to
improve in 2003. However, recent currency movements leading to a stronger euro
may dampen European growth prospects in 2003 and this would cause machine sales
to be lower than expected.

In general, higher than expected interest rates, reductions in government
spending, higher taxes, significant currency devaluations, and uncertainty over
key policies are some factors likely to lead to slower economic growth and lower
industry demand. The current outlook is for moderate U.S. growth in 2003 near
3%. This is expected to lead to about flat industry sales levels. If, for
whatever reason, there was a setback leading to weak or negative growth in 2003,
then demand for company products could fall in the U.S. and Canada and would
also be lower throughout the rest of the world.

Political Factors
Political factors in the U.S. and abroad have a major impact on global
companies. In 2001, the U.S. Congress enacted a tax cut with the first
reductions effective in the third and fourth quarters of 2001 and with
additional benefits in 2002, which is having and should continue to have a
positive impact on the U.S. economy. The company is one of the largest U.S.
exporters as a percentage of sales. International trade and fiscal policies
implemented in the U.S. this year could impact the company's ability to expand
its business abroad. U.S. foreign relations with certain countries and any
related restrictions imposed could also have a significant impact on foreign
sales. There are a number of significant political developments in Latin
America, Asia, and Africa/Middle East which are expected to take place in 2003
that could affect U.S. trade policies and/or de-stabilize local market
conditions leading to lower company sales. In particular, a recent escalation of
political uncertainty in Venezuela and the Middle East is contributing to a
decline in business confidence and reduced capital investment intentions.

In addition, significant political and economic instability persists in
Argentina, Venezuela, the Middle East and Indonesia. Our outlook assumes that
the effects of instability in Venezuela will be confined to Venezuela and not
spread to other countries in the region. Our outlook also assumes that stability
will ultimately be restored in Argentina, Indonesia and Venezuela through
democratic means. If, however, the instability persists, worsens or spreads to
other countries in the region, it could materially impact company sales into
Argentina, Indonesia, Venezuela and other countries in the region. In addition,
our outlook assumes that the armed conflict in Iraq is short and has no net
impact on sales for the year. In addition, we assume that recent terrorist
incidents in Indonesia do not lead to a major, persistent escalation of
political and economic uncertainty in that country.

In recent months there has been a significant escalation in political tensions
in North Korea. Caterpillar does not sell machine or engine products to North
Korea and our outlook assumes there will not be a military conflict there. If,
however, there is a significant escalation of political tensions in North Korea,
leading to a significant military build-up or increase in hostilities between
North and South Korea, it could have a negative impact on sales to South Korea
and other neighboring countries in the Asia/Pacific region.

Our outlook also assumes that the Iraq war is relatively short. If the Iraq
conflict persists for the duration of 2003, it is Iikely business and consumer
confidence will drop sharply, resulting in stagnant worldwide economic growth
and declines in worldwide business demand. In this scenario, worldwide company
sales would likely fall about 10 percent from 2002.

Currency Fluctuations
Currency fluctuations are also an unknown for global companies. The company has
facilities in major sales areas throughout the world and significant costs and
revenues in most major currencies. This diversification greatly reduces the
overall impact of currency movements on results. However, if the U.S. dollar
strengthens suddenly against foreign currencies, the conversion of net non-U.S.
dollar proceeds to U.S. dollars would somewhat adversely impact the company's
results. Since the company's largest manufacturing presence is in the U.S., any
unexpected strengthening of the U.S. dollar versus key overseas currencies could
have an unfavorable impact on our global competitiveness.

                                    Page 20
--------------------------------------------------------------------------------

Dealer Practices
A majority of the company's sales are made through its independent dealer
distribution network. Dealer practices, such as changes in inventory levels for
both new and rental equipment, are not within the company's control (primarily
because these practices depend upon the dealer's assessment of anticipated sales
and the appropriate level of inventory) and may have a significant positive or
negative impact on our results. In particular, the outlook assumes that dealer
inventories of new machines will be slightly lower at the end of 2003 than at
the end of 2002. If dealers reduce inventory levels more than anticipated,
company sales will be adversely impacted.

Other Factors
The rate of infrastructure spending, housing starts, commercial construction and
mining play a significant role in the company's results. Our products are an
integral component of these activities and as these activities increase or
decrease in the U.S. or abroad, demand for our products may be significantly
impacted. In 1999, the six-year Federal highway bill did not boost U.S. sales as
much as anticipated due to delays in getting major capital projects for highways
underway. In 2000/2001 there was an increase in the volume of highway
construction contracts, which had a positive impact on sales of certain types of
equipment. Highway construction contracts in 2002 were up slightly, and heavy
construction machine sales were also up slightly. The appropriations bill
approving federal funding for highways, streets, bridges, airports, etc. for
fiscal 2002/03 (the final year of the TEA 21 legislation) was approved in
January 2003, with a 1% decline in overall Federal funding. This funding level
was 1% below expectation. Furthermore, if infrastructure spending plans are
reduced by Federal and/or state governments due to worsening budget constraints,
machine sales will likely be lower in 2003.

Pursuant to a Consent Decree Caterpillar entered into with the United States
Environmental Protection Agency (EPA), the company was required to meet certain
emission standards by October 2002. The Consent Decree provides for the
possibility that diesel engine manufacturers may not be able to meet these
standards exactly on that date, and allows companies to continue selling
non-compliant engines if they pay non-conformance penalties (NCPs) on those
engines. The company began shipping lower emission engines in October 2002 as a
"bridge" until the fully compliant ACERT engines are introduced in 2003. These
"bridge" engines require the payment of NCPs. Emissions standard changes
negatively impacted our financial results in 2002, by $17 million after tax (5
cents per share). We expect the net unfavorable impact in 2003 to be no more
than the 2002 impact. We do not anticipate having to pay any NCPs on our
medium-duty engines in 2003 due to credits we banked in 2001 and 2002. Early in
2003, Caterpillar will begin ramping up production of medium-duty and heavy-duty
compliant ACERT engines. We do not anticipate paying NCPs beyond 2003. If these
assumptions are not realized, company performance could be negatively impacted.

Projected cost savings or synergies from alliances with new partners could also
be negatively impacted by a variety of factors. These factors could include,
among other things, higher than expected wages, energy and/or materials costs,
and/or higher than expected financing costs due to unforeseen changes in central
bank interest rate policies. Cost savings could also be negatively impacted by
unforeseen changes in tax, trade, environmental, labor, safety, payroll or
pension policies in any of the jurisdictions where the alliances conduct their
operations.

Results may be impacted positively or negatively by changes in the sales mix.
Our outlook assumes a certain geographic mix of sales as well as a product mix
of sales. If actual results vary from this projected geographic and product mix
of sales, our results could be negatively impacted.

The company operates in a highly competitive environment and our outlook depends
on a forecast of the company's share of industry sales. An unexpected reduction
in that share could result from pricing or product strategies pursued by
competitors, unanticipated product or manufacturing difficulties, a failure to
price the product competitively, or an unexpected buildup in competitors' new
machine or dealer owned rental fleets, leading to severe downward pressure on
machine rental rates and/or used equipment prices.

The environment also remains very competitive from a pricing standpoint.
Additional price discounting would result in lower than anticipated price
realization.

                                    Page 21
--------------------------------------------------------------------------------

Inherent in the operation of the Financial Products Division is the credit risk
associated with its customers. The creditworthiness of each customer, and the
rate of delinquencies, repossessions and net losses on customer obligations are
directly impacted by several factors, including, but not limited to, relevant
industry and economic conditions, the availability of capital, the experience
and expertise of the customer's management team, commodity prices, political
events, and the sustained value of the underlying collateral. Additionally,
interest rate movements create a degree of risk to our operations by affecting
the amount of our interest payments and the value of our fixed rate debt. While
our policy is to use interest rate swap agreements to manage our exposure to
interest rate changes and lower the costs of borrowed funds, if interest rates
move upward more sharply than anticipated, it could negatively impact our
results. With respect to our insurance operations, changes in the equity and
bond markets could cause an impairment of the value of our investment portfolio,
thus requiring a negative adjustment to earnings.

This discussion of uncertainties is by no means exhaustive but is designed to
highlight important factors that may impact our outlook. Obvious factors such as
general economic conditions throughout the world do not warrant further
discussion but are noted to further emphasize the myriad of contingencies that
may cause the company's actual results to differ from those currently
anticipated.

                                    Page 22
--------------------------------------------------------------------------------


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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