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CTA EIDP Inc

27.81
-0.89 (-3.10%)
After Hours
Last Updated: 22:43:11
Delayed by 15 minutes
Name Symbol Market Type
EIDP Inc AMEX:CTA AMEX Exchange Traded Fund
  Price Change % Change Price High Price Low Price Open Price Traded Last Trade
  -0.89 -3.10% 27.81 27.99 27.77 27.98 684,481 22:43:11

Interim Results

18/07/2003 8:01am

UK Regulatory


RNS Number:7017N
Caterpillar Inc
17 July 2003

Caterpillar Inc.

July 17, 2003
----------------------------------------------------------------------

FOR IMMEDIATE RELEASE

   Caterpillar second-quarter sales and revenues increase 12 percent, profit
                                    doubles;
                        Company raises full-year outlook

PEORIA, Ill. -- Caterpillar Inc. (NYSE: CAT) today reported second-quarter 2003
sales and revenues of $5.93 billion and profit of $399 million or $1.15 per
share. Through the first half of the year, sales and revenues were $10.75
billion and profit was $528 million or $1.52 per share.

Sales and revenues were a record $5.93 billion, up 12 percent compared to $5.29
billion in the second quarter 2002. The increase was primarily due to a
favorable currency impact of $221 million (due mainly to the stronger euro and
Australian dollar), higher machinery and engine volume of $213 million and
improved revenue yield of $107 million. In addition, Financial Products'
revenues for the second quarter increased $55 million or about 15 percent
compared to the second quarter 2002.

"Even though many economic indicators have not improved from a year ago, our
sales this quarter are encouraging although sales mix remains challenging," said
Chairman and CEO Glen Barton. "We are seeing signs that a replacement cycle has
begun in our machinery business after a long waiting period. Certainly we saw
evidence of this trend in sales to our dealers' rental operations, which jumped
this quarter from a year ago, as dealers updated their rental fleets."

Profit of $399 million or $1.15 per share increased 99 percent compared to $200
million or 58 cents per share in the second quarter 2002 due to $107 million
improved revenue yield, $138 million lower core operating costs and $44 million
favorable net currency impact. Partially offsetting these favorable items was
$69 million of higher retiree pension, healthcare and related benefit costs and
the $22 million net unfavorable impact of changes in emissions standards. We
also experienced unfavorable sales mix, which more than offset the favorable
profit impact of additional machinery and engine sales volume, resulting in a
net unfavorable profit impact of $10 million.

                                     Page 2
--------------------------------------------------------------------------------

"These strong results demonstrate the real and sustainable benefits of 6 Sigma
projects company-wide," said Barton. "We are redesigning processes with 6 Sigma
and driving efficiencies throughout the company. Overall, the 6 Sigma benefits
are accruing faster than we expected."

"Political and economic uncertainty continued in the second quarter, but we made
significant progress by focusing on areas we could control. We held the gains on
revenue yield, controlled costs and continued to produce quality products our
customers value," Barton concluded.

Outlook

"We now expect 2003 sales and revenues to be up about 10 percent. Full-year
profit per share is expected to be in the range of $2.75 to $2.90," 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/.

Note: Glossary of terms included on pages 13-14; first occurrence of terms shown
in bold italics.

                                     Page 3
--------------------------------------------------------------------------------

                               DETAILED ANALYSIS

             SECOND QUARTER 2003 COMPARED WITH SECOND QUARTER 2002

SALES AND REVENUES


        The chart above graphically illustrates reasons for the change in
        Consolidated Sales and Revenues between second quarter 2002 (at left)
        and second quarter 2003 (at right). Items favorably impacting sales and
        revenues appear as upward stair steps with the corresponding dollar
        amounts above each bar, while items negatively impacting sales and
        revenues appear as downward stair steps with dollar amounts reflected in
        parenthesis above each bar. Caterpillar management utilizes these charts
        internally to visually communicate with its Board and employees.


Second quarter 2003 sales and revenues were a record $5.93 billion compared to
$5.29 billion in the second quarter of 2002. The 12 percent increase was due
primarily to the favorable impact of currency on sales of $221 million
(primarily the stronger euro and Australian dollar), higher machinery and engine
volume of $213 million and improved revenue yield of $107 million.

                                     Page 4
--------------------------------------------------------------------------------

                                   Sales and Revenues

(Millions of dollars)                 North                      Latin        Asia/
                                     America        EAME        America      Pacific
                        Total
Second Quarter 2003
Machinery             $   3,666     $  1,930     $  1,028     $   224       $   484
Engines 1                 1,835        862          583           138           252
Financial Products2       431          313          76            22            20
                      $   5,932     $  3,105     $  1,687     $   384       $   756

Second Quarter 2002
Machinery             $   3,248     $  1,865     $  811       $   221       $   351
Engines 1                 1,667        746          488           183           250
Financial Products 2      376          284          61            19            12
                      $   5,291     $  2,895     $  1,360     $   423       $   613

1 Does not include internal engine transfers of $334 million and $332 million in second
quarter 2003 and second quarter 2002, respectively. Internal engine transfers are valued
at prices comparable to those for unrelated parties.

2 Does not include revenues earned from Machinery and Engines of $44 million and $43
million in second quarter 2003 and second quarter 2002, respectively.


Machinery sales were $3.67 billion, an increase of $418 million or about 13
percent from second quarter 2002. The favorable impact of currency accounted for
about 5 percent, sales volume was up about 5 percent and improved revenue yield
added about 3 percent. In North America, improved revenue yield and higher
deliveries to dealer rental operations more than offset reductions in dealer new
machine inventories. Sales in EAME were higher due mostly to the favorable
impact of currency and stronger deliveries into the Commonwealth of Independent
States (CIS). Company sales in Latin America were flat as dealer inventory
growth and higher revenue yield offset sharp declines in dealer retail sales.
Sales increased in Asia/Pacific due to continued strong growth in China and
improved retail sales to the mining, heavy construction and general construction
sectors throughout the region.

Engine sales were $1.84 billion, an increase of $168 million or about 10 percent
from second quarter 2002. The favorable impact of currency added about 4
percent, sales volume was up about 3 percent and improved revenue yield
including emissions contributed about 3 percent. Substantial sales gains in
North America and EAME, and slightly higher sales in Asia/Pacific, more than
offset lower sales in Latin America. Second-quarter 2003 engine sales in North
America benefited from higher revenue yield on Caterpillar heavy-duty on-highway
truck and bus engines. Sales into the North American petroleum sector rose 82
percent with most of the gain caused by higher sales of turbines and related
services. The sales increase in EAME came from stronger engine sales into the
Middle East and the favorable effects of currency. Sales in Asia/Pacific rose
due to stronger demand for large reciprocating engines sold into the electric
power sector, while sharply lower sales of large engines sold to the electric
power and petroleum sectors caused the drop in Latin American sales. Global
sales into the petroleum sector were up 20 percent. Global electric power engine
sales were up 10 percent and industrial engine sales were up 4 percent, with
virtually all of these gains arising from the favorable effects of currency.
Sales into the on-highway truck engine sector were up 5 percent. Global sales of
marine engines were helped by favorable effects of currency, but still declined
3 percent.

                                     Page 5
--------------------------------------------------------------------------------

Financial Products' revenues for the second quarter were $431 million, up $55
million or about 15 percent compared with second quarter 2002. The favorable
impacts of approximately $48 million due to the continued growth of finance
receivables and leases at Cat Financial were partially offset by the
approximately $25 million impact of generally lower interest rates on existing
finance receivables and new finance receivables. Also, there was a $25 million
increase in earned premiums on extended service contracts at Cat Insurance.


OPERATING PROFIT





        The chart above graphically illustrates reasons for the change in
        Consolidated Operating Profit between second quarter 2002 (at left) and
        second quarter 2003 (at right). Items favorably impacting operating
        profit appear as upward stair steps with the corresponding dollar
        amounts above each bar, while items negatively impacting operating
        profit appear as downward stair steps with dollar amounts reflected in
        parenthesis above each bar. Caterpillar management utilizes these charts
        internally to visually communicate with its Board and employees.



Operating profit was favorably impacted by improved revenue yield of $107
million, lower core operating costs of $138 million and the favorable net impact
of currency of $31 million. Lower core operating costs consist primarily of
favorable manufacturing costs of about $150 million mostly due to material cost
improvements and lower R&D expense of about $25 million primarily due to timing,
partially offset by higher SG&A expense of approximately $35 million.

Partially offsetting the favorable items was $69 million in higher retiree
pension, health care and related benefit costs. We also experienced unfavorable
sales mix, which more than offset the favorable profit impact of additional
machinery and engine sales volume, resulting in a net unfavorable profit impact
of $10 million. The unfavorable mix was attributable to higher sales of compact
construction equipment relative to sales of larger machines and lower sales of
higher margin fuel system components relative to other engine business product
lines. 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 $22 million, primarily due to non-conformance penalties (NCPs) in
the second quarter of 2003.

                                     Page 6
--------------------------------------------------------------------------------

                                    Operating Profit

       (Millions of dollars)           Second Quarter             Second Quarter
                                            2002                       2003
Machinery 1                         $    253                  $     421
Engines 1                                86                         93
Financial Products                       76                         93
Consolidating Adjustments                (22)                       (21)
                                    $    393                  $     586

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





Machinery operating profit increased 66 percent, or $168 million, from second
quarter 2002. Improved revenue yield, lower core operating costs, the favorable
impact of additional volume and the net favorable impact of currency more than
offset higher retiree pension, health care and related benefit costs and
unfavorable sales mix.

Engine operating profit increased 8 percent, or $7 million, from second quarter
2002 as lower core operating costs, the favorable impact of additional volume
and the net favorable impact of currency were mostly offset by unfavorable sales
mix, the unfavorable profit impact of changes in emission standards (no impact
in second quarter 2002) and higher retiree pension, health care and related
benefit costs.

Financial Products' operating profit was $93 million, up $17 million or 22
percent from second quarter 2002. The increase was due primarily to an increase
in earning assets at Cat Financial.

                                     Page 7
--------------------------------------------------------------------------------

OTHER PROFIT/LOSS ITEMS

Interest expense excluding Financial Products was $6 million lower compared to
second quarter 2002 primarily due to lower average short-term and long-term
borrowings.

Other income/expense was income of $33 million, up $60 million compared to
second quarter 2002. The increase was primarily due to favorable currency
translation of $22 million for Machinery and Engines, gain on securitized
finance receivables ($22 million from a public securitization of finance
receivables in May 2003) at Cat Financial and a $17 million decrease in
investment impairments at Cat Insurance ($23 million in the second quarter 2003
compared with $40 million a year ago). The increase in securitized receivables
gain was related to the timing of Cat Financial's public securitization, which
took place in the second quarter this year versus a similar gain of $18 million
in the third quarter of 2002.

The provision for income taxes in the second quarter 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.

The equity in profit/loss of unconsolidated affiliated companies increased $6
million from second quarter a year ago, due in part to improved profitability of
Shin Caterpillar Mitsubishi Ltd. resulting from improved export business into
China.


EMPLOYMENT

At the end of second quarter 2003, Caterpillar's worldwide employment was 67,075
compared with 71,556 one year ago. Employment was reduced by 4,481, or about 6
percent, year over year.

OPERATING COST RECLASSIFICATION

In the second quarter, we revised our policy regarding the classification of
certain costs related to distributing replacement parts. Previously, these costs
were included in selling, general and administrative expenses and now are
included in cost of goods sold. This classification is more consistent with
industry practice. The parts distribution costs include shipping and handling
(including warehousing) along with related support costs such as information
technology, purchasing and inventory management.

Prior period amounts have been revised to conform to the new classification. The
amounts reclassified from selling, general and administrative expenses to cost
of goods sold were $118 million and $220 million for the three months and six
months ended June 30, 2002, respectively, and $112 million and $218 million for
the three months and six months ended June 30, 2003, respectively. The
reclassification had no impact on operating profit.

                                     Page 8
--------------------------------------------------------------------------------

                            SUPPLEMENTAL INFORMATION

We are providing supplemental information including deliveries to users and
dealer inventory levels. We sell the majority of our machines and engines to
dealers and OEMs to meet the demands of their customers, the end users. Due to
time lags between our sales and deliveries to end users we believe this
information will help readers better understand our business and the industries
we serve.

Dealer New Machine Deliveries

Worldwide dealer deliveries of new machines to end users (including deliveries
to dealer rental operations) were up 3 percent.

Dealer machine deliveries in North America increased 3 percent from second
quarter 2002. Economic activity in the key industries that dealers serve changed
little from last year and commodity prices improved. A modest firming in
economic fundamentals, combined with very low interest rates, was sufficient to
encourage users in most industries to update fleets. Deliveries increased in
both the United States, up 2 percent, and Canada, up 21 percent. Deliveries to
dealer rental operations increased 25 percent, accounting for much of the
overall gain. For the region, general construction deliveries were up 8 percent,
due to strong growth in deliveries of compact construction equipment, increased
deliveries to dealer rental service operations and higher deliveries to
commercial building contractors. Deliveries increased to the heavy construction
sector, up 5 percent, due to higher deliveries to highway contractors, increased
deliveries to sewer and water construction projects and higher replacement
demand from dealer rental fleets. Mining deliveries were up 4 percent due mostly
to increased purchases by Canadian tar sand companies. Deliveries were lower to
the quarry and aggregates sector, down 13 percent, reflecting lower production
of these materials than a year ago.

Dealer deliveries to end users in EAME increased 3 percent due to higher
deliveries in Africa/Middle East. Deliveries in South Africa nearly doubled, due
to higher mining deliveries. Deliveries to oil producing countries increased 3
percent in response to higher oil prices than last year. Deliveries in Europe
and the CIS were even with a year ago.

In Asia/Pacific, dealer machine deliveries increased 54 percent. Economic growth
was robust across the region and this contributed to significant increases in
deliveries to end users in all industries and in most countries. While China led
the region with a 66 percent increase in deliveries, solid gains also occurred
in Australia, up 41 percent; Indonesia, up 59 percent; Vietnam, up 231 percent;
and India, up 264 percent.

Dealer deliveries in Latin America declined sharply, down 51 percent. Economies
in Latin America were extremely depressed due to a combination of high interest
rates, anemic direct investment inflows and some political disruption. Weak
economies caused deliveries to decline in most countries, with the top four
countries, Brazil, Mexico, Peru and Chile, all falling 50 percent or more.

Dealer Inventories of New Machines

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

                                     Page 9
--------------------------------------------------------------------------------

Engine Deliveries to End Users and OEMs

Worldwide engine deliveries to end users and OEMs in the second quarter of 2003
rose 3 percent compared to deliveries in second quarter of 2002. A 15 percent
gain in worldwide deliveries to the petroleum sector, 8 percent gains in
deliveries into the marine and industrial sectors and a 6 percent gain in
deliveries to the electric power sector more than offset a 12 percent decline in
deliveries to the on-highway truck and bus sector. Worldwide petroleum
deliveries gained from more favorable oil and gas prices compared to last year
with higher active drilling and gas compression activity. Global business
fundamentals for marine, industrial, and electric power sectors in second
quarter 2003 improved compared to last year when corporate profits were
depressed and businesses and investors were delaying capital spending decisions.

In North America, Caterpillar engine deliveries to end users and OEMs in second
quarter 2003 rose 1 percent compared to second quarter 2002 with virtually all
of the gain occurring in the petroleum sector. Petroleum engine demand rose 66
percent due to sharply higher deliveries of turbines and related services caused
by very favorable natural gas prices and surging profits in the natural gas
industry. Caterpillar deliveries of on-highway truck and bus engines were
negatively impacted by lower industry demand for both heavy-duty and midrange
engines compared to last year's abnormally strong second quarter. In the second
quarter of 2002, truck manufacturers were raising their production schedules in
response to higher dealer and customer orders prior to emissions standards
changes effective October 2002. Caterpillar continued its leadership position in
the NAFTA on-highway truck and bus engine industry due to a significant gain in
our percentage of industry sales in heavy-duty truck engines compared to second
quarter 2002. Caterpillar engine deliveries to end users and OEMs in electric
power and marine sectors were impacted by weak industry profits, economic
uncertainty and surplus capacity that delayed new investments in large engines.

In EAME, overall deliveries to end users and OEMs rose 21 percent, with higher
deliveries in all sectors and particularly strong deliveries in the electric
power and petroleum sectors. Most of this overall gain came from favorable
currency movements, but surging natural gas prices and industry profits caused
much stronger demand for turbines and related services in EAME. Deliveries in
the Middle East strengthened due to higher oil prices and the end of major
military action in Iraq. However, weak economic trends and corporate profits in
Western Europe continued to restrict industry demand in key industries.

Deliveries to end users in Latin America fell 38 percent, caused by sharply
lower deliveries into the electric power and petroleum sectors. Electric power
deliveries 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 deliveries to end
users in the petroleum sector continued to fall from last year as political and
investor uncertainty in key oil-producing countries delayed purchase decisions
of large engines.

Deliveries to end users and OEMs in Asia/Pacific in the second quarter were up
10 percent compared to last year with sharp gains in all sectors except
petroleum. Improving economic growth, rising business investment and favorable
currency movements supported growth. Asia/Pacific demand for large engines used
in the petroleum sector weakened from last year's strong second quarter, when
select countries in Asia/Pacific increased oil and gas development and
production.


                                    Page 10
--------------------------------------------------------------------------------

Dealer Inventories of Engines

Worldwide dealer engine inventories at the end of the second quarter were lower
than a year ago. Inventories were about 10 percent lower in North America and
about 40 percent lower in Latin America, but higher in EAME and Asia/Pacific.
Inventories compared to current delivery rates were lower than year-earlier
levels in North America and Latin America but still slightly above normal.
Dealer inventories compared to current delivery rates were higher than
year-earlier levels in EAME and Asia/Pacific.

OUTLOOK

We now expect 2003 sales and revenues to be up about 10 percent. Full-year
profit per share is expected to be in the range of $2.75 to $2.90.

SALES AND REVENUES OUTLOOK

The world economy remained stagnant during the second quarter despite the end of
major military action in Iraq. Inflation declined to rates low enough to cause
central bankers to worry about deflation. Several central banks responded by
lowering interest rates and further rate cuts are likely in the last half of
this year. However, we expect economic growth to improve only slightly in the
rest of 2003 and full-year growth to be only marginally better than in 2002.

Modest economic growth, low interest rates and continued replacement buying for
an aging construction equipment fleet in North America should lead to increased
volume of machinery and engine sales for 2003. We expect the U.S. dollar to
continue to trade weaker than a year ago, resulting in a favorable currency
impact on company sales in the last half.

For the year, we expect machinery and engine sales to increase about 10 percent
over 2002 levels. The favorable effect of volume is expected to contribute about
half of the increase, with a third coming from currency and the balance from
revenue yield including emissions. We expect sales volume increases to be
concentrated in North America and Asia/Pacific. EAME sales volume is expected to
be about flat while Latin American sales volume is expected to decline.

North America (United States and Canada)

Second-quarter U.S. economic growth was anemic for the third consecutive
quarter. In response, the Federal Reserve Board trimmed short-term interest
rates another quarter point and Congress enacted additional tax cuts. These
actions, plus somewhat lower oil prices and a weaker U.S. dollar, should boost
economic growth to over 3 percent in the last half of 2003. An improving economy
and very low interest rates should result in approximately 5 to 10 percent
higher machinery and engine sales for 2003.


EAME

A stalled euro-area economy prompted the European Central Bank to cut interest
rates in June and we expect another cut later this year. However, domestic
spending is expected to remain weak for the rest of the year and the stronger
euro is expected to curtail exports. The currency effect of the strong euro is
expected to boost machinery and engine sales by about 10 percent.

Latin America

Latin America struggled with high interest rates and political disruptions in
the first half of the year. Little relief other than in the mining sector is
expected to occur in the second half, and economic growth is expected to remain
well below trend. Overall, we expect machinery and engine sales to decline by
approximately 10 percent.

                                    Page 11
--------------------------------------------------------------------------------

Asia/Pacific

Most economies grew rapidly in the first half. Economic policies strongly
support growth and the last half should be even better than the first half. Led
by China, we expect a sales increase of 15 to 20 percent in machinery and engine
sales for the full year in the region.

Financial Products

Overall economic conditions in the second quarter resulted in limited financing
opportunities even as earning assets and revenues grew. We expect growth in
Financial Products for the remainder of 2003, with revenues expected to increase
approximately 10 percent versus 2002.

PROFIT OUTLOOK

We expect full-year profit to be $2.75 to $2.90 per share.

Included in the Outlook is a pretax charge of $55 million ($40 million after
tax) for early retirement of our $250 million 6% debentures due in 2007. We will
call these debentures, which were issued at a significant original issue
discount and have an effective annual interest of 13.3%, during the third
quarter. The charge reflects accelerated recognition of the unamortized original
issue discount.

                                    Page 12
--------------------------------------------------------------------------------



GLOSSARY OF TERMS

 1. Changes in Emissions Standards (Emissions) - Generally, emissions describes
    the financial impacts of industry emission standard changes for on-highway
    truck and bus engines in North America. With respect to sales and revenues,
    emissions represents the impact of price increases. With respect to
    operating profit, emissions represents the net impact of price increases,
    production cost increases which include incremental ramp-up production costs
    and non-conformance penalties (NCPs).

 2. Consolidating Adjustments - Eliminations of transactions between Machinery
    and Engines and Financial Products.

 3. Core Operating Costs - Machinery and Engines operating costs excluding
    currency, retiree benefits and emissions production cost increases, ramp-up
    production costs and non-conformance penalties.

 4. Currency - With respect to sales and revenues, currency represents the impact
    on sales resulting from changes in foreign currency exchange rates versus
    the U.S. dollar. With respect to operating profit, currency represents the
    net impact on sales and operating costs resulting from changes in foreign
    currency exchange rates versus the U.S. dollar. Currency includes the
    impacts on sales and operating profit for the Machinery and Engines lines of
    business only; currency impacts on the Financial Products line of business
    are included in the Financial Products' portions of the respective analyses.

 5. EAME - Geographic region including Europe, Africa, the Middle East and the
    Commonwealth of Independent States (CIS).

 6. Earning Assets - These assets consist primarily of total net finance
    receivables plus equipment on operating leases, less accumulated
    depreciation at Cat Financial. Net finance receivables represent the gross
    receivables amount less unearned income and the allowance for credit losses.

 7. Engines - A principal line of business including the design, manufacture and
    marketing of engines for Caterpillar Machinery, electric power generation
    systems; on-highway vehicles and locomotives; marine, petroleum,
    construction, industrial, agricultural and other applications; and related
    parts. Reciprocating engines meet power needs ranging from 5 to over 22,000
    horsepower (4 to over 16 200 kilowatts). Turbines range from 1,600 to 19,500
    horsepower (1 000 to 14 500 kilowatts).

 8. Financial Products - A principal line of business consisting 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.

 9. Latin America - Geographic region including the Central American countries
    and Mexico.

10. Machinery - A principal line of business which includes the design,
    manufacture and marketing of construction, mining, agricultural and forestry
    machinery - track and wheel tractors, track and wheel loaders, pipelayers,
    motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe
    loaders, mining shovels, log skidders, log loaders, off-highway trucks,
    articulated trucks, paving products, telescopic handlers, skid steer loaders
    and related parts.

                                      Page 13
    ----------------------------------------------------------------------------

11. Machinery and Engines (M&E) - Due to the highly integrated nature of
    operations, represents the aggregate total of the Machinery and Engines
    lines of business and includes primarily our manufacturing, marketing and
    parts distribution operations.

12. Non-conformance Penalties (NCPs) - Represents the expense related to
    penalties that have been or will be paid to the United States Environmental
    Protection Agency (EPA) for each on-highway truck and bus engine sold which
    does not meet revised industry emission standards enacted in October 2002.

13. Revenue Yield - The impact of net price changes excluding emissions price
    increases.

14. Sales Volume/Mix - The net operating profit impact of changes in the
    quantities sold for machines, engines and parts combined with the net
    operating profit impact of changes in the relative weighting of machines,
    engines and parts sales with respect to total sales.

15. Securitized Finance Receivables - Cat Financial sells retail installment
    sale contracts and finance leases into public asset-backed securitization
    facilities. Gains/losses on the securitization of finance receivables
    represent the difference between the carrying value and fair value of the
    receivables.

16. 6 Sigma - On a technical level, 6 Sigma represents a measure of variation
    that achieves 3.4 defects per million opportunities. At Caterpillar, 6 Sigma
    represents a much broader cultural philosophy to drive continuous
    improvement throughout the value chain. It is a fact-based, data-driven
    methodology that we are using to improve processes, enhance quality, cut
    costs, grow our business and deliver greater value to our customers through
    Black Belt-led project teams. At Caterpillar, 6 Sigma goes beyond mere
    process improvement; it has become the way we work as teams to process
    business information, solve problems and manage our business successfully.

                                    Page 14
--------------------------------------------------------------------------------

                            *          *          *

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 July 17, 2003. This filing is
available on our website at http://www.CAT.com/sec_filings.

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 15
--------------------------------------------------------------------------------



                                                   Caterpillar Inc.
                               Condensed Consolidated Statement of Results of Operations
                                                      (Unaudited)
                                      (Dollars in millions except per share data)


                                                        Three Months Ended                    Six Months Ended
                                                             June 30,                             June 30,
                                                      2003              2002               2003               2002
                                                     ----------         ---------         ----------         ----------
Sales and revenues:
       Sales of Machinery and Engines              $      5,501       $    4,915        $      9,925       $     8,959
       Revenues of Financial Products                       431              376                 828               741
                                                     ----------         ---------         ----------         ----------
       Total sales and revenues                           5,932            5,291              10,753             9,700

Operating costs:
       Cost of goods sold                                 4,329            3,974               7,959             7,281
       Selling, general and administrative                  604              502               1,174             1,049
       expenses
       Research and development expenses                    169              186                 321               357
       Interest expense of Financial Products               118              135                 238               258
       Other operating expenses                             126              101                 248               192
                                                     ----------         ---------         ----------         ----------
       Total operating costs                              5,346            4,898               9,940             9,137
                                                     ----------         ---------         ----------         ----------

Operating profit                                            586              393                 813               563

       Interest expense excluding Financial                  65               71                 131               140
       Products
       Other income (expense)                                33              (27)                 46                (7)
                                                     ----------         ---------         ----------         ----------

Consolidated profit before taxes                            554              295                 728               416

       Provision for income taxes                           155               89                 204               125
                                                     ----------         ---------         ----------         ----------
       Profit of consolidated companies                     399              206                 524               291

       Equity in profit (loss) of unconsolidated              -               (6)                  4               (11)
       affiliated companies

Profit                                             $        399       $      200        $        528       $       280
                                                     ----------         ---------         ----------         ----------

-----------------------------------------------------------------------------------------------------------------------
Profit per common share                            $       1.16       $     0.58        $       1.53       $      0.81

Profit per common share - assuming dilution 1      $       1.15       $     0.58        $       1.52       $      0.81

Weighted average common shares outstanding
(thousands)
- Basic                                                 344,669           344,010            344,498            343,788
- Assuming dilution 1                                   348,418           348,182            347,273            348,013

Cash dividends paid per common share               $       0.35       $     0.35        $       0.70       $      0.70

-----------------------------------------------------------------------------------------------------------------------
1 Diluted by assumed exercise of stock options, using the treasury stock method.

                                    Page 16
--------------------------------------------------------------------------------
                                                   Caterpillar Inc.
                                     Condensed Consolidated Statement of Cash Flow
                                                      (Unaudited)
                                                 (Millions of dollars)
                                                                                          Six Months Ended

                                                                                              June 30,
Cash flow from operating activities:                                                2003                   2002
                                                                              ----------------      -------------------
       Profit                                                                    $        528           $          280
       Adjustments for non-cash items:
             Depreciation and amortization                                                671                      598
             Other                                                                       (48)                      104
       Changes in assets and liabilities:
             Receivables - trade and other                                               (323)                    (118)
             Inventories                                                                 (186)                    (189)
             Accounts payable and accrued expenses                                        353                      173
             Other - net                                                                  102                     (120)
                                                                              ----------------      -------------------
Net cash provided by operating activities                                               1,097                      728
                                                                              ----------------      -------------------

Cash flow from investing activities:
       Capital expenditures - excluding equipment leased to others                       (210)                    (321)
       Expenditures for equipment leased to others                                       (550)                    (534)
       Proceeds from disposals of property, plant and equipment                           314                      250
       Additions to finance receivables                                                (7,875)                  (7,634)
       Collection of finance receivables                                                 6,452                    5,414
       Proceeds from sale of finance receivables                                         1,200                    1,107
       Investments and acquisitions (net of cash acquired)                               (12)                    (273)
       Other - net                                                                       (100)                     (34)
                                                                              ----------------      -------------------
Net cash used for investing activities                                                   (781)                  (2,025)
                                                                              ----------------      -------------------
Cash flow from financing activities:
       Dividends paid                                                                    (240)                    (241)
       Common stock issued, including treasury shares reissued                             18                        8
       Proceeds from long-term debt issued                                              2,488                    3,422
       Payments on long-term debt                                                      (1,872)                  (1,678)
       Short-term borrowings - net                                                       (742)                    (330)
                                                                              ----------------      -------------------
Net cash provided by (used for) financing activities                                     (348)                   1,181
                                                                              ----------------      -------------------
Effect of exchange rate on cash                                                            32                        1
                                                                              ----------------      -------------------
Increase (Decrease) in cash and short-term investments                                    -                       (115)

Cash and short-term investments at beginning of period                                    309                      400
                                                                              ----------------      -------------------
Cash and short-term investments at end of period                                 $        309           $          285
                                                                              ----------------      -------------------


                                    Page 17
--------------------------------------------------------------------------------


                                                   Caterpillar Inc.
                                Condensed Consolidated Statement of Financial Position
                                                      (Unaudited)
                                                 (Millions of dollars)
Assets                                                               June 30,           Dec. 31,            June 30,
    Current Assets                                                     2003               2002               2002
                                                                  --------------     --------------     ---------------
        Cash and short-term investments                           $         309        $       309         $       285
        Receivables - trade and other                                     3,250              2,838               2,854
        Receivables - finance                                             6,927              6,748               6,930
        Deferred and refundable income taxes                                693                642                 411
        Prepaid expenses                                                  1,361              1,328               1,252
        Inventories                                                       2,949              2,763               3,114
                                                                  --------------     --------------     ---------------
    Total current assets                                                 15,489             14,628              14,846
    Property, plant and equipment - net                                   7,034              7,046               6,779
    Long-term receivables - trade and other                                  72                 66                  56
    Long-term receivables - finance                                       6,918              6,714               6,666
    Investments in unconsolidated affiliated companies                      784                747                 763
    Deferred income taxes                                                   844                850                 889
    Intangible assets                                                       278                281                 287
    Goodwill                                                              1,403              1,402               1,398
    Other assets                                                          1,398              1,117               1,050
                                                                  --------------     --------------     ---------------
Total Assets                                                        $    34,220        $    32,851         $    32,734
                                                                  --------------     --------------     ---------------

Liabilities
    Current liabilities:
        Short-term borrowings:
            -- Machinery and Engines                              $          58        $        64         $        64
            -- Financial Products                                         1,803              2,111               1,961
        Accounts payable                                                  2,516              2,269               2,403
        Accrued expenses                                                  1,567              1,620               1,432
        Accrued wages, salaries and employee benefits                     1,188              1,178               1,276
        Dividends payable                                                   121                120                 120
        Deferred and current income taxes payable                           203                 70                   7
        Long-term debt due within one year:
            -- Machinery and Engines                                         33                258                 266
            -- Financial Products                                         3,678              3,654               3,000
                                                                  --------------     --------------     ---------------
    Total current liabilities                                            11,167             11,344              10,529

    Long-term debt due after one year:
            -- Machinery and Engines                                      3,477              3,403               3,399
            -- Financial Products                                         9,087              8,193               9,583
    Liability for postemployment benefits                                 4,025              4,038               3,079
    Deferred income taxes and other liabilities                             534                401                 386
                                                                  --------------     --------------     ---------------
Total Liabilities                                                        28,290             27,379              26,976
                                                                  --------------     --------------     ---------------
Stockholders' Equity
    Common stock                                                          1,030              1,034               1,026
    Treasury stock                                                       (2,645)            (2,669)             (2,673)
    Profit employed in the business                                       8,136              7,849               7,573
    Accumulated other comprehensive income                                 (591)              (742)               (168)
Total Stockholders' Equity                                                5,930              5,472               5,758
Total Liabilities and Stockholders' Equity                         $     34,220        $    32,851         $    32,734
                                                                  --------------     --------------     ---------------

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


                                                          Caterpillar Inc.
                                             Supplemental Data for Results of Operations
                                              For The Three Months Ended June 30, 2003
                                                             (Unaudited)
                                                        (Millions of dollars)

                                                                                         Supplemental Consolidating Data
                                                                             -------------------------------------------
                                                         Consolidated          Machinery          Financial     Consoli
                                                                              and Engines 1         Products     dating
                                                                                                                 Adjust
                                                                                                                  ments
                                                        -----------------    ----------------    -------------- --------
Sales and revenues:
    Sales of Machinery and Engines                        $         5,501       $       5,501      $          -  $   -
    Revenues of Financial Products                                    431                   -               475   (44) 2
                                                        -----------------    ----------------    -------------- --------
    Total sales and revenues                                        5,932               5,501               475   (44)

Operating costs:
    Cost of goods sold                                              4,329               4,329                 -      -
    Selling, general and administrative expenses                      604                 489               134   (19) 3
    Research and development expenses                                 169                 169                 -      -
    Interest expense of Financial Products                            118                   -               122    (4) 4
    Other operating expenses                                          126                   -               126      -
                                                        -----------------    ----------------    -------------- --------
    Total operating costs                                           5,346               4,987               382   (23)
                                                        -----------------    ----------------    -------------- --------

Operating profit                                                      586                 514                93   (21)

    Interest expense excluding Financial Products                      65                  65                 -      -
    Other income (expense)                                             33                   7                 5     21 5
                                                        -----------------    ----------------    -------------- --------

Consolidated profit before taxes                                      554                 456                98      -

    Provision for income taxes                                        155                 121                34      -
                                                        -----------------    ----------------    -------------- --------
    Profit of consolidated companies                                  399                 335                64      -

                                                                        
        Equity in profit (loss) of unconsolidated                       -                   -                 -      -
        affiliated companies
                                                                       
        Equity in profit of Financial Products'                         -                  64                 -   (64) 6
        subsidiaries

                                                        -----------------    ----------------    -------------- --------

Profit                                                    $           399       $         399      $         64 $ (64)
                                                        -----------------    ----------------    -------------- --------

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
  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 on pages 19-24, allows readers to better 
understand our company.

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

                                                   Caterpillar Inc.
                                      Supplemental Data for Results of Operations
                                       For The Three Months Ended June 30, 2002
                                                      (Unaudited)
                                                 (Millions of dollars)

                                                                          Supplemental Consolidating Data
                                                            -----------------------------------------------------------
                                         Consolidated           Machinery            Financial          Consolidating
                                                              and Engines 1           Products           Adjustments
                                       ----------------     -----------------      --------------     -----------------
Sales and revenues:
    Sales of Machinery and Engines        $      4,915          $      4,915          $        -         $         -
    Revenues of Financial Products                 376                     -                 419                  (43)2
                                       ----------------     -----------------      --------------     -----------------
    Total sales and revenues                     5,291                 4,915                 419                  (43)

Operating costs:
    Cost of goods sold                           3,974                 3,974                   -                    -
    Selling, general and                           502                   416                 103                  (17)3
    administrative expenses
    Research and development expenses              186                   186                   -                   -
    Interest expense of Financial                  135                     -                 139                   (4)4
    Products
    Other operating expenses                       101                     -                 101                   -
                                       ----------------     -----------------      --------------     -----------------
    Total operating costs                        4,898                 4,576                 343                  (21)
                                       ----------------     -----------------      --------------     -----------------

Operating profit                                   393                   339                  76                  (22)

    Interest expense excluding                      71                    71                   -                   -
    Financial Products
    Other income (expense)                         (27)                   (6)                (43)                  22 5
                                       ----------------     -----------------      --------------     -----------------

Consolidated profit before taxes                   295                   262                  33                   -

    Provision for income taxes                      89                    77                  12                   -
                                       ----------------     -----------------      --------------     -----------------
    Profit of consolidated companies               206                   185                  21                   -

                                                    
        Equity in profit (loss) of                  (6)                   (8)                  2                   -
        unconsolidated affiliated
        companies
                                                     
        Equity in profit of Financial                -                    23                   -                  (23)6
        Products' subsidiaries

                                       ----------------     -----------------      --------------     -----------------

Profit                                    $        200          $        200          $       23         $        (23)
                                       ----------------     -----------------      --------------     -----------------

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
  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 20
--------------------------------------------------------------------------------

                                                   Caterpillar Inc.
                                      Supplemental Data for Results of Operations
                                        For The Six Months Ended June 30, 2003
                                                      (Unaudited)
                                                 (Millions of dollars)

                                                                             Supplemental Consolidating Data
                                                                   ----------------------------------------------------
                                                Consolidated         Machinery         Financial        Consolidating
                                                                   and Engines 1        Products         Adjustments
                                               ---------------     --------------     ------------     ----------------
Sales and revenues:
    Sales of Machinery and Engines               $       9,925        $     9,925       $        -        $        -
    Revenues of Financial Products                         828                  -              915                (87)2
                                               ---------------     --------------     ------------     ----------------
    Total sales and revenues                            10,753              9,925              915                (87)

Operating costs:
    Cost of goods sold                                   7,959              7,959                -                 -
    Selling, general and administrative                  1,174                965              248                (39)3
    expenses
    Research and development expenses                      321                321                -                 -
    Interest expense of Financial Products                 238                  -              246                 (8)4
    Other operating expenses                               248                  -              248                 -
                                               ---------------     --------------     ------------     ----------------
    Total operating costs                                9,940              9,245              742                (47)
                                               ---------------     --------------     ------------     ----------------

Operating profit                                           813                680              173                (40)

    Interest expense excluding Financial                   131                131                -                 -
    Products
    Other income (expense)                                  46                  1                5                 40 5
                                               ---------------     --------------     ------------     ----------------

Consolidated profit before taxes                           728                550              178                 -

    Provision for income taxes                             204                141               63                 -
                                               ---------------     --------------     ------------     ----------------
    Profit of consolidated companies                       524                409              115                 -

                                                             
        Equity in profit (loss) of                           4                  2                2                 -
        unconsolidated affiliated companies

                                                             
        Equity in profit of Financial                        -                117                -               (117)6
        Products' subsidiaries

                                               ---------------     --------------     ------------     ----------------

Profit                                           $         528        $       528       $      117        $      (117)
                                               ---------------     --------------     ------------     ----------------

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
   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 21
--------------------------------------------------------------------------------

                                                   Caterpillar Inc.
                                      Supplemental Data for Results of Operations
                                        For The Six Months Ended June 30, 2002
                                                      (Unaudited)
                                                 (Millions of dollars)

                                                                          Supplemental Consolidating Data
                                                            -----------------------------------------------------------
                                         Consolidated           Machinery            Financial          Consolidating
                                                              and Engines 1           Products           Adjustments
                                       ----------------     -----------------      --------------     -----------------
Sales and revenues:
    Sales of Machinery and Engines        $      8,959          $      8,959          $        -         $         -
    Revenues of Financial Products                 741                     -                 821                  (80)2
                                       ----------------     -----------------      --------------     -----------------
    Total sales and revenues                     9,700                 8,959                 821                  (80)

Operating costs:
    Cost of goods sold                           7,281                 7,281                   -                   -
    Selling, general and                         1,049                   875                 211                  (37)3
    administrative expenses
    Research and development expenses              357                   357                   -                   -
    Interest expense of Financial                  258                     -                 266                   (8)4
    Products
    Other operating expenses                       192                     -                 192                   -
                                       ----------------     -----------------      --------------     -----------------
    Total operating costs                        9,137                 8,513                 669                  (45)
                                       ----------------     -----------------      --------------     -----------------

Operating profit                                   563                   446                 152                  (35)

    Interest expense excluding                     140                   140                   -                   -
    Financial Products
    Other income (expense)                          (7)                  (13)                (29)                  35 5
                                       ----------------     -----------------      --------------     -----------------

Consolidated profit before taxes                   416                   293                 123                   -

    Provision for income taxes                     125                    79                  46                   -
                                       ----------------     -----------------      --------------     -----------------
    Profit of consolidated companies               291                   214                  77                   -

                                                   
        Equity in profit (loss) of                 (11)                  (15)                  4                   -
        unconsolidated affiliated
        companies

                                                     
        Equity in profit of Financial                -                    81                   -                  (81)6
        Products' subsidiaries

                                       ----------------     -----------------      --------------     -----------------

Profit                                    $        280          $        280          $       81         $        (81)
                                       ----------------     -----------------      --------------     -----------------

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
   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 22
--------------------------------------------------------------------------------

                                                   Caterpillar Inc.
                                            Supplemental Data for Cash Flow
                                        For the Six Months Ended June 30, 2003
                                                      (Unaudited)
                                                 (Millions of dollars)
                                                                            Supplemental Consolidating Data
                                                                -------------------------------------------------------
                                                                   Machinery           Financial         Consolidating
                                               Consolidated      and Engines 1          Products          Adjustments
                                              --------------    ----------------     --------------     ---------------
Cash flow from operating activities:
   Profit                                       $       528       $         528         $      117        $      (117)2
   Adjustments for non-cash items:
      Depreciation and amortization                     671                 412                259                 -
      Profit of Financial Products                     -                   (117)               -                  117 3
      Other                                            (48)                 (36)              (28)                 16 4
   Changes in assets and liabilities:
      Receivables - trade and other                    (323)               (234)               (62)               (27)4
      Inventories                                      (186)               (186)               -                   -
      Accounts payable and accrued expenses             353                  92                202                 59 4
      Other - net                                       102                 131                  4                (33)4
                                              --------------    ----------------     --------------     ---------------
Net cash provided by operating activities             1,097                 590                492                 15

                                              --------------    ----------------     --------------     ---------------
Cash flow from investing activities:
   Capital Expenditures
   - excluding equipment leased to others              (210)               (199)               (11)                -
   Expenditures for equipment leased to                (550)                 (3)              (547)                -
   others
   Proceeds from disposals of property, plant           314                 -                  314                 -
     and equipment
   Additions to finance receivables                  (7,875)                -               (7,875)                -
   Collection of finance receivables                  6,452                 -                6,452                 -
   Proceeds from the sale of finance                  1,200                 -                1,200                 -
   receivables
   Net intercompany borrowings                          -                    27                 15                (42)5
   Investments and acquisitions (net of cash            (12)                 (5)                (7)                -
   acquired)
   Other - net                                         (100)                (42)               (87)                29 6
                                              --------------    ----------------     --------------     ---------------
Net cash used for investing activities                 (781)               (222)              (546)               (13)
                                              --------------    ----------------     --------------     ---------------
Cash flow from financing activities:
   Dividends paid                                      (240)               (240)               -                   -
   Common stock issued, including treasury               18                  18                 29                (29)6
     shares reissued
      Net intercompany borrowings                       -                   -                  (42)                42 5
      Proceeds from long-term debt issued             2,488                  81              2,407                 -
      Payments on long-term debt                     (1,872)               (251)            (1,621)                -
      Short-term borrowings - net                      (742)                 (6)              (736)                -
                                              --------------    ----------------     --------------     ---------------
Net cash provided by (used for) financing              (348)               (398)                37                 13
activities
                                              --------------    ----------------     --------------     ---------------
Effect of exchange rate on cash                          32                  32                 15                (15)7
                                              --------------    ----------------     --------------     ---------------
Increase (Decrease) in cash and short-term                -                   2                 (2)                -
  investments
                                                        
    Cash and short-term investments at                  309                 146                163                 -
    beginning of period

                                              --------------    ----------------     --------------     ---------------
Cash and short-term investments at end of       $       309       $         148         $      161        $        -
period
                                              --------------    ----------------     --------------     ---------------

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 23
--------------------------------------------------------------------------------

                                                   Caterpillar Inc.
                                            Supplemental Data for Cash Flow
                                        For the Six Months Ended June 30, 2002
                                                      (Unaudited)
                                                 (Millions of dollars)
                                                                             Supplemental Consolidating Data
                                                                  -----------------------------------------------------
                                                                     Machinery          Financial        Consolidating
                                               Consolidated        and Engines 1        Products          Adjustments
                                              ---------------     ---------------     -------------     ---------------
Cash flow from operating activities:
   Profit                                        $       280         $       280         $      81         $      (81) 2
   Adjustments for non-cash items:
      Depreciation and amortization                      598                 398               200                   -
      Profit of Financial Products                         -                 (81)                -                  81 3
      Other                                              104                 (27)              124                  74
   Changes in assets and liabilities:
      Receivables - trade and other                     (118)                 (9)              (79)               (30) 4
      Inventories                                       (189)               (189)                -                   -
      Accounts payable and accrued expenses              173                 223               (97)                47  4
      Other - net                                       (120)                (63)              (43)               (14) 4
                                              ---------------     ---------------     -------------     ---------------
Net cash provided by operating activities                728                 532               186                 10
                                              ---------------     ---------------     -------------     ---------------
Cash flow from investing activities:
   Capital expenditures                                 (321)               (306)              (15)                  -
   - excluding equipment leased to others
   Expenditures for equipment leased to                 (534)                  -              (534)                  -
   others
   Proceeds from disposals of property, plant            250                  36               214                   -
   and equipment
   Additions to finance receivables                   (7,634)                  -            (7,634)                  -
   Collection of finance receivables                   5,414                   -             5,414                   -
   Proceeds from the sale of finance                   1,107                   -             1,107                   -
   receivables
    Net intercompany borrowings                            -                  (5)               46                (41) 5
    Investments and acquisitions (net of cash           (273)                (16)             (257)                  -
   acquired)
      Other - net                                        (34)                (13)              (54)                33  6
                                              ---------------     ---------------     -------------     ---------------
Net cash used for investing activities                (2,025)               (304)           (1,713)                (8)
Cash flow from financing activities:
   Dividends paid                                       (241)               (241)                -                   -
   Common stock issued, including treasury                 8                   8                27                (27) 6
   shares
   reissued
   Net intercompany borrowings                             -                 (46)                5                 41  5
   Proceeds from long-term debt issued                 3,422                 248             3,174                   -
   Payments on long-term debt                         (1,678)                (62)           (1,616)                  -
   Short-term borrowings - net                          (330)               (267)              (63)                  -
                                              ---------------     ---------------     -------------     ---------------
Net cash provided by (used for) financing              1,181                (360)            1,527                 14
activities
                                              ---------------     ---------------     -------------     ---------------
Effect of exchange rate on cash                            1                  23                (6)               (16) 7
                                              ---------------     ---------------     -------------     ---------------
Increase (Decrease) in cash and short-term              (115)               (109)               (6)                  -
investments
Cash and short-term investments at beginning             400                 251               149                   -
of period
                                              ---------------     ---------------     -------------     ---------------
Cash and short-term investments at end of        $       285         $       142         $     143         $         -
period
                                              ---------------     ---------------     -------------     ---------------

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 24
--------------------------------------------------------------------------------

F. Safe Harbor Statement under the Securities Litigation Reform Act of 1995

Certain statements contained in our second-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", "should" 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

The world economy has grown below potential in 2003 and excess capacity has put
downward pressure on prices. Several central banks cut interest rates in the
first half of the year and further cuts are likely in the second half. Our
outlook assumes that these actions will be sufficient to avoid deflation and
allow slow growth to continue. If, however, deflationary tendencies are stronger
than central banks assume and downward pressure on prices increase, economic
growth would likely slow further, weakening machine and engine sales in the last
half.

Economic prospects are considered the most favorable in the United States. Our
outlook assumes that the combination of the recent tax cut, June's interest rate
cut, slightly lower oil prices, and the favorable impact of a weaker U.S. dollar
will allow growth to improve from about 1.5 percent in the first half of the
year to about 3 percent in the second half. Faster growth should allow the
improvement in machinery and engine sales in the first half to continue. If,
however, the U.S. economy fails to respond to actions taken this year, continued
weak growth could threaten our machinery and engine sales.

Economic growth in EAME region as a whole was weak in the first half of the
year. Flat growth in Europe was balanced by stronger growth in Africa/Middle
East and in the Commonwealth of Independent States. In response to weak economic
conditions in Europe and a stronger euro, the European Central Bank cut interest
rates in June and our outlook assumes further cuts in the remaining months of
2003. We further assume that economic growth in Europe will improve in the
second half of the year, based on higher exports to the U.S. (despite the
stronger euro) and a rise in consumer spending. Should these assumptions prove
incorrect, and a recession ensues, machinery and engine sales could fall more
than anticipated.

The Japanese economy has been weak for years and deflation is firmly
established. Our outlook assumes that measures employed by the Bank of Japan -
zero interest rates, the maintenance of high levels of reserves in the banking
system and the purchase of long-term government bonds - will prevent deflation
from worsening and allow modest economic growth to continue. Worsening
deflation, however, would further reduce our sales in that country and could
have a negative impact on other economies, particularly those in the region.

Asia/Pacific economies grew rapidly in the first half and economic policies in
place support a continuation of fast growth. The region's main vulnerability is
Severe Acute Respiratory Syndrome ("SARS"), which disrupted economic activity in
some countries (China and Hong Kong) and sectors (retail sales and travel) in
the second quarter. Our outlook assumes that the disease has come under better
control and there will not be further or worse outbreaks. If, however, there are
further or worse outbreaks in the second half of the year, our results could be
negatively impacted.

The Latin American economy has grown slowly and our outlook assumes only
marginal improvement for the rest of the year. Our outlook assumes that Brazil's
economy has stabilized and will not experience a further recession and that
there will not be renewed political turmoil in Venezuela. If, for whatever
reason, these assumptions prove untrue, our results could be negatively
impacted.

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Commodity Prices

Commodities represent a significant sales opportunity, with prices and
production as key drivers. Prices and production of metals have improved
somewhat this year, but the failure of world industrial production to recover
strongly has kept pressure on prices. Our outlook assumes continued growth in
the world economy will cause metals prices to increase further. Any unexpected
weakening, however, could cause prices to drop sharply to the detriment of our
results.

While coal stocks are high and prices have been soft, our outlook assumes
production and prices will improve later this year. If coal production and
prices do not improve, our results could be negatively affected.

Oil and natural gas prices have remained fairly high this year due to tight
inventories. In the United States, concerns have arisen that high natural gas
prices could disrupt the hoped for economic recovery. Our outlook assumes that
increased production will ease shortages in both oil and natural gas, allowing
prices to ease in the second half. A continuation of recent high prices likely
would slow economies, potentially with a depressing impact upon our sales.

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 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.

Central banks have been slow to react to the sluggish world economy, allowing
below trend growth to continue into its third year.

Our outlook assumes that central banks will act in time to keep the world
economy growing. If, however, the central banks fail to act or are delayed in
acting, it could cause a recession and depress our results.

Weak economic growth has increased budget deficits in many countries and limited
the ability of governments to boost economies with tax cuts and more spending.
Our outlook assumes that governments will not aggressively raise taxes and slash
spending to deal with their budget imbalances. Such actions could disrupt growth
and negatively affect sales to public construction.

Political Factors

Political factors in the United States and abroad have a major impact on global
companies.

Our outlook assumes that there will be no significant military conflict in North
Korea or the Middle East in the second half of the year. Such a military
conflict could severely disrupt sales into countries affected, as well as nearby
countries.

Our outlook also assumes that there will be no major terrorist attack in the
remainder of 2003. If there is a major terrorist attack, confidence could be
undermined, causing a sharp drop in economic activities and our sales. Attacks
in major developed economies would be the most disruptive.

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Our outlook further assumes that efforts by countries to increase their exports
will not result in retaliatory countermeasures by other countries to block such
exports, particularly in the Asia/Pacific region.

Currency Fluctuations

The company has costs and revenues in many currencies and is therefore exposed
to risks arising from currency fluctuations. Many currency positions are fairly
closely balanced, which, along with the diversity of currency positions, helps
diminish exchange rate risks.

The company's largest manufacturing presence is in the United States. So any
unexpected strengthening of the dollar tends to raise the foreign currency value
of costs and reduce our global competitiveness.

The stronger euro had a favorable impact on translating European sales into U.
S. dollars in the second quarter. The outlook assumes similar benefits will
occur in the last half. Should the euro collapse, our results could be
negatively impacted.

Dealer Practices

The company sells primarily through an independent dealer network. Dealers carry
inventories of both new and rental equipment and adjust those inventories based
on their assessments of future needs. Such adjustments can impact our results
either positively or negatively. The current outlook assumes dealers will reduce
inventories slightly in 2003; more drastic reductions would adversely affect
sales.

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 United States or abroad, demand for our products may be
significantly impacted.

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 ACERTR engines are introduced in 2003. These
"bridge" engines require the payment of NCPs. We expect emissions standard
changes to negatively impact our financial results in 2003 by $37 million (after
tax) or $20 million (after tax) more adverse than in 2002 due to higher
shipments of bridge engines in 2003. Early in 2003, Caterpillar began ramping up
production of medium-duty and heavy-duty compliant ACERT engines. We do not
anticipate paying NCPs beyond 2003. Our outlook for 2003 is subject to
assumptions regarding projected NCPs, price increases, and volumes. We are able
to make fairly accurate predictions of the NCP levels per engine due to our
engineering knowledge, development process and internal testing during
development. Our net price increase for heavy-duty bridge engines was
successfully implemented on October 1, 2002; this increase was competitive with
price increases implemented by other engine manufacturers on that date. We
implemented an additional price increase in the first quarter 2003 to truck
manufacturers that purchase our heavy-duty ACERT engines. This increase has been
communicated to the truck manufacturers and is based on the additional value
that we expect truck owners to receive from ACERT engines compared to our
competitors as a result of better fuel economy, less maintenance and greater
durability. The ultimate net price increase we are able to achieve for our ACERT
engines is dependent upon marketplace acceptance of these engines versus
competitive alternatives. While we estimate volume to the best of our ability,
industry volume is an issue out of our control. If our assumptions regarding NCP
levels, market acceptance of the price increases and/or engine volume are not
realized, company performance could be negatively impacted.

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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 material costs,
and/or higher than expected financing costs due to 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 realization.

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 and investment management 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.

In general, our results are sensitive to changes in economic growth,
particularly those originating in construction, mining and energy. Developments
reducing such activities also tend to lower our sales. In addition to the
factors mentioned above, our results could be negatively impacted by any of the
following:

  * Any sudden drop in consumer or business confidence
  * Delays in legislation needed to fund public construction
  * Regulatory or legislative changes that slow activity in key industries;
    and/or
  * Unexpected collapses in stock markets.

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.

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