(Dollars in millions, except share data*)

*Unaudited except for December 31, 2002.
See Notes to Consolidated Financial Statements (unaudited).

(Dollars in millions)

Three Months Ended

See Notes to Consolidated Financial Statements (unaudited).

(Dollars in millions)

Three Months Ended

See Notes to Consolidated Financial Statements (unaudited).

See Notes to Consolidated Financial Statements (unaudited).

(Unaudited; dollars in millions)

We believe this information reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the consolidated statements of financial position, profit, changes in equity, and cash flows for the periods presented. The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts. The more significant estimates include the allowance for credit losses, residual values for leased assets, and assumptions used to determine the fair value of derivatives and retained interests in securitizations. Actual results may differ from these estimates and the results for interim periods do not necessarily indicate the results we expect for the year.

Certain amounts for prior periods have been reclassified to conform to the 2003 presentation.

Our segment data is based on disclosure requirements of Statement of Financial Accounting Standards No. 131, which requires that financial information be reported on the basis that is used internally for measuring segment performance. Internally, we report information for operating segments based on management responsibility.

On January 1, 2003, we reassigned the Marine services division in Europe from the Europe segment to the Diversified Services segment. Prior year information has been reclassified to conform to the new structure. We segregate information as follows:

• North America: We have offices in the United States and Canada that serve local dealers and customers.
• Europe: We have offices in Europe to serve European dealers and customers. This segment also includes our new office in Russia, which serves Russian dealers and customers.
• Austral-Asia: We have offices in Asia and Australia that serve local dealers and customers.
• Diversified Services: Included is our Global accounts division, which primarily provides cross-border financing to customers in countries in which we have no local presence; Marine services, which primarily finances marine vessels with Caterpillar engines for all countries; and our offices in Latin America that serve local dealers and customers. Also included is Cat Power Finance, which finances Cat electrical power generation, gas compression and co-generation systems, as well as non-Cat equipment powered by Cat engines.

Supplemental segment data for the three months ended March 31,

In managing foreign currency risk, our objective is to minimize earnings volatility resulting from conversion and the remeasurement of net foreign currency balance sheet positions. Our Policy allows the use of foreign currency forward contracts to offset the risk of currency mismatch between our receivable and debt portfolio. All such foreign currency forward contracts are undesignated. Other revenue included losses of $30 and gains of $15 on the undesignated contracts for the three months ended March 31, 2003 and 2002, respectively, substantially offset by balance sheet remeasurement and conversion gains and losses.

Due to the long-term nature of our net investments in foreign subsidiaries, we generally do not hedge the related currency exposure.

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. Our policy is to use interest rate swap agreements to manage our exposure to interest rate changes and lower the cost of borrowed funds.

We have a "match funding" policy, whereby the interest rate profile (fixed rate or floating rate) of our debt portfolio largely matches the interest rate profile of our receivable portfolio within established guidelines. In connection with that policy, we use interest rate derivative instruments to modify the debt structure to match the receivable portfolio. This "match funding" reduces the volatility of margins between interest-bearing assets and interest-bearing liabilities, regardless of which direction interest rates move. We also use these instruments to gain an economic and/or competitive advantage through a lower cost of borrowed funds. This is accomplished by changing the characteristics of existing debt instruments or entering into new agreements in combination with the issuance of new debt.

We use floating-to-fixed, fixed-to-floating, and floating-to-floating interest rate swaps to meet our "match funding" policy. To support hedge accounting, we designate fixed-to-floating interest rate swaps as fair value hedges of the fair value of our fixed rate debt at the inception of the contract. Our hedge accounting is further supported by designating most floating-to-fixed interest rate swaps as cash flow hedges of the variability of future cash flows. A portion of our floating-to-fixed interest rate swaps used to establish economic hedge relationships are undesignated, and thus do not receive hedge accounting treatment.

For the first quarters of 2002 and 2003, a gain of less than $1 was included in Other revenue for both the ineffectiveness on our floating-to-fixed interest rate swaps designated as cash flow hedges and our mark-to-market on undesignated floating-to-fixed and floating-to-floating interest rate swaps.

Based on current market conditions, $25 of deferred net losses included in Accumulated other comprehensive loss at March 31, 2003 are expected to be reclassified to Interest expense over the next twelve months. The reclassifications are made as interest expense is accrued on our floating-to-fixed interest rate swaps. For the first quarter of 2002, $21 was reclassified. No floating-to-fixed interest rate swaps were liquidated during the quarter ended March 31, 2003 or 2002.

We are contingently liable under loan guarantees in which we have agreed to repurchase loans of certain Caterpillar dealers in the event of default. These guarantees have terms generally ranging from one to four years and are secured primarily by dealer assets or Caterpillar equipment. Most of the guarantees arose due to our relationship with our dealers. No loss has been experienced nor is any anticipated under these guarantees. No liability has been recognized for our obligations under guarantees, as none were issued or modified subsequent to December 31, 2002. The maximum potential amount of future payments (undiscounted and without reduction for any amounts that may possibly be recovered under recourse or collateralized provisions) we could be required to make under the guarantees at March 31 are as follows:

5. New Accounting Standards

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51." FIN 46 addresses consolidation by business enterprises of variable interest entities that have certain characteristics. Transferors to qualifying special-purpose entities and "grandfathered" qualifying special-purpose entities subject to the reporting requirements of SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," are excluded from the scope of FIN 46. FIN 46 is applicable immediately to variable interest entities created or obtained after January 31, 2003. No entities were created or obtained in the first quarter of 2003. For variable interest entities, which we acquired before February 1, 2003, FIN 46 is applicable to us as of July 1, 2003. All of our variable interest entities are qualified special purpose entities, which are excluded from the requirements of FIN 46. We believe the adopti on of FIN 46, effective July 1, 2003 for entities acquired before February 1, 2003, will not have a material impact on our financial statements.

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect reported amounts. The most significant estimates include those related to our residual values for leased assets and for our allowance for credit losses. Actual results may differ from these estimates.

The estimated future wholesale market value of leased equipment at the time of the expiration of the lease term (residual value) represents a careful analysis of historical wholesale market sales prices, projected forward on a level trend line without consideration for inflation or possible future pricing action. At the inception of the lease, the residual value is derived from consideration of the following critical factors: market size and demand, any known significant market/product trends, total expected hours of usage, machine configuration, application, location, model changes, quantities, and past re-marketing experience. Many impact factors are gathered in an application survey that is completed prior to quotation. The application survey also clearly defines applicable return conditions and remedies for non-compliance, thus ensuring the leased equipment will be in good operating condition upon return. Model changes and updates, as well as market strength and product acceptance, are contin ually monitored, and residual adjustments are made in accordance with the significance of any such changes. Remarketing sales staff works closely with customers and dealers to manage the sale of lease returns and the recovery of residual exposure. During the term of the leases, residual amounts are monitored. If estimated market values significantly decline due to economic factors, obsolescence, or other adverse circumstances, the residuals are adjusted to the lower estimated values by a charge to earnings.

As the vast majority of our finance receivables are retail financings, which consist of homogeneous contracts, the allowance for credit losses is evaluated on a regular basis and adjusted based upon management's best estimate of probable losses inherent in the portfolio at the end of the period. In estimating probable losses, we review accounts that are past due, non-performing, or in bankruptcy. We also review accounts that may be at risk using information available about the customer, such as financial statements, news reports, and published credit ratings. We also use general information regarding industry trends and the general economic environment. Using an estimate of current fair market value of collateral and factoring in credit enhancements, such as additional collateral and third party guarantees, we arrive at an estimated loss for specific accounts and estimate an additional amount for the remainder of the portfolio based upon historical trends.

Rental revenue for the first quarter of 2003 was $155. The increase of $35 from the same period last year was due to the increase in equipment on operating leases that resulted from increased marketing efforts and higher customer demand.

Other revenue for the first quarter of 2003 was $14, a decrease of $10 from the same period last year. The decrease was primarily due to the lower gain on the sale of receivables. Items for the three months ended included:

Depreciation expense on equipment leased to others was up $30 over the first quarter of 2002 due to the increase in equipment on operating leases discussed in the Revenues section above.

General, operating, and administrative expenses increased $7 during the first quarter of 2003 compared to the same period last year. This increase primarily resulted from staff-related expenses due to the larger portfolio and geographical expansion. There were 1,202 employees at March 31, 2003, an increase of 73 from March 31, 2002.

The provision for credit losses decreased $5 compared to the first quarter of 2002, resulting from a higher provision taken in the first quarter of 2002 due to an increase in past due receivables. The allowance for credit losses was 1.49% of finance receivables, net of unearned income, at March 31, 2003, compared to 1.46% at March 31, 2002. The Notes receivable from Caterpillar are not included in this calculation.

Net profit for the first quarter of 2003 was $51, down $2 from the first quarter of 2002. The decrease was due to a decreased spread between receivable and debt rates and lower securitization-related income, mostly offset by a larger portfolio. The lower securitization-related income was primarily due to less gains on securitizations (related to an after-tax $5 reduction in the recognition of unamortized discounts on trade receivables purchased from Caterpillar that paid before maturity).

The portfolio (primarily "Total net finance receivables" plus "Equipment on operating leases, less accumulated depreciation") was $16,801 at March 31, 2003, an increase of $1,945 over March 31, 2002.

Securitized receivables at March 31, were as follows:

These receivables are not available to pay our creditors.

The following table shows activity related to the Allowance for credit losses for the three months ending:

Receivables that were past due over 30 days were 3.1% of the total receivables at March 31, 2003, compared to 4.8% at March 31, 2002. The decrease was primarily related to a reduction in past due receivables in our Diversified Services segment. Bad debt write-offs, net of recoveries, were $22 during the quarter compared with $19 for the first quarter of 2002. The increase in write-offs was primarily related to generally weak economic conditions in our North America segment. We will continue to monitor the allowance for credit losses to provide for an amount we believe is adequate, after considering the value of any collateral, to cover uncollectible receivables.

Operations for the first three months of 2003 were funded with a combination of borrowings, proceeds from sales of receivables, and retained earnings.

• $11,241 of medium-term notes
• $ 2,939 of commercial paper
• $ 273 of notes payable to Caterpillar
• $ 271 of money market funds
• $ 179 of short-term bank borrowings
• $ 38 of loans from a company-owned partnership
• $ 33 of long-term bank borrowings

(a) Exhibits

2. Reports on Form 8-K

January 23, 2003 - An 8-K was filed containing the Registrant's fourth-quarter 2002 earnings release.

April 1, 2003 - An 8-K was filed to announce the change in the Controller position from Kenneth C. Springer to Steven R. Elsesser.

1. I have reviewed this quarterly report on Form 10-Q of Caterpillar Financial Services Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
3. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

1. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons fulfilling the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

1. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

1. I have reviewed this quarterly report on Form 10-Q of Caterpillar Financial Services Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

1. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
2. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

1. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

1. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons fulfilling the equivalent function):

1. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

(Unaudited)

(Dollars in millions)

*Those portions of rent expense that are representative of interest cost.