(Unaudited)

(Dollars in Millions, except share data)

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).

See Notes to Consolidated Financial Statements (unaudited).

1. Use of estimates in the preparation of financial statements

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 most significant estimates are the allowance for credit losses and residual values for leased assets. Other significant estimates are the 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 current period presentation.

2. Supplemental segment data

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. The five segments offer primarily the same types of services.

On January 1, 2004, Cat Power Finance was reclassified from Diversified Services into a separate segment. Prior year data 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 office in Russia, which serves dealers and customers in the Commonwealth of Independent States.
• Austral-Asia: We have offices in Australia and Asia 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.
• Cat Power Finance: This division primarily finances Cat electrical power generation, gas compression and co-generation systems, as well as non-Cat equipment powered by Cat engines for all countries.

Debt and other expenses for the Global accounts, Marine services and Cat Power Finance divisions are allocated to their respective segments from the North America and/or Austral-Asia segments based on their respective portfolios. The related interest expense is calculated based on the amount of allocated debt at current market rates. Inter-segment revenues are also based on current market rates.

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, including Caterpillar equipment. Most of our guarantees arose due to our relationship with our dealers. No loss has been experienced nor is any anticipated under these guarantees. Required liabilities associated with obligations under guarantees totaled $5. 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 are as follows:

(Dollars in millions)

We had a very good quarter with record revenues and profit, continued growth in new business volume, and relatively low delinquencies. Our improvements in processes and investments in technology are enabling us to satisfy customer needs and provide quality services during the current level of high financing volume. This is a credit to the dedication of our employees and their use of 6 Sigma and the Baldrige criteria.

• Revenues were a record $457, an increase of $54 or 13% compared with the same period last year.
• Profit after tax was a record $72, up $21 or 41% from a year ago.
• New retail financing was a record first quarter $1,969, an increase of $195 or 11% from the first quarter last year.
• Past dues over 30 days were 2.8% of total receivables compared with 3.1% at March 31, 2003.
• Write-offs of bad debts exceeded recoveries by $11 during the first quarter of 2004 compared to $22 during the same period last year.

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 residual value, which is the estimated future wholesale market value of leased equipment at the time of the expiration of the lease term, 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 lease agreement 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 conti nually 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. For equipment on operating leases, the charge is recognized through depreciation expense. For finance leases, it is recognized through a reduction of finance revenue.

The allowance for credit losses is evaluated on a regular basis and adjusted based upon management's best estimate of probable losses inherent in our finance receivables. 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 finance receivables based upon historical trends. Adverse economic conditions or other factors that might cause deterioration of the financial health of our customers could change the timing and level of payments re ceived and thus necessitate a change in our estimated losses.

Wholesale and retail finance revenue for the first quarter of 2004 was $249, an increase of $15 from the same period last year. The increase was principally due to a 16% increase in the average receivable balance outstanding, partially offset by a 55 basis point decrease in the average interest rate. The annualized average interest rate on finance receivables was 5.91% for the first quarter of 2004 compared with 6.46% for the first quarter of 2003, including the annualized average interest rate on Notes receivable from Caterpillar. The tax benefits of governmental (non-federal) lease purchase contracts and tax-oriented leases are not included in these computed interest rates.

Operating lease revenue for the first quarter of 2004 was $178, or $23 higher than the same period last year due to the increase in equipment on operating leases that resulted from higher customer demand.

Other revenue for the first quarter of 2004 was $30, an increase of $16 from the same period last year. The increase was primarily due to an $8 favorable change in Gain (loss) on sale of equipment returned from lease. This change was mostly due to an improving market for used equipment and enhanced distribution channels. Other revenue items for the three months ended March 31, included:

Depreciation expense on equipment leased to others was $142, up $21 over the first quarter of 2003 due to the increase in operating leases discussed in the Revenues section above.

General, operating, and administrative expenses increased to $65 during the first quarter of 2004 compared to $54 the same period last year. This increase primarily resulted from increased employment and investments in technology to support the growth in total assets and to develop infrastructure to support future growth initiatives. There were 1,284 employees at March 31, 2004, an increase of 69 from March 31, 2003. General, operating, and administrative expenses (and capital expenditures) are expected to be higher throughout 2004 versus 2003, as a result of increased employment and planned investments in technology relating to the first phase of the purchase and implementation of a globally integrated operating system. These expenses for the remaining quarters of 2004 are expected to be comparable to first quarter expenses.

The provision for credit losses decreased from $23 for the first quarter of 2003 to $20 for the first quarter of 2004. The allowance for credit losses was 1.48% of finance receivables, net of unearned income, at March 31, 2004, compared to 1.49% at March 31, 2003. The Notes receivable from Caterpillar are not included in this calculation.

The effective tax rate decreased from the first quarter 2003 rate of 34.6% to 32.7% for first quarter 2004. The decrease from 2003 is attributable to our foreign subsidiaries that are subject to tax rates other than the statutory U.S. rate.

Profit for the first quarter of 2004 was $72, up $21 from the first quarter of 2003.

On a pre-tax basis, profit was up $29, principally due to $20 from growth in earning assets and $16 from increases in Other revenue, as discussed in the Revenues section above, partially offset by higher general, operating, and administrative expenses of $11.

Total assets were $20,330 at March 31, 2004, an increase of $2,903 over March 31, 2003, primarily due to an increase in finance receivables (wholesale and retail).

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 ended March 31:

Bad debt write-offs, net of recoveries, were $11 during the first quarter of 2004 compared with $22 for the first quarter of 2003. 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.

Finance receivables plus rents receivable for operating leases (included in Other assets) that were past due over 30 days were 2.8% of the total such receivables at March 31, 2004 compared to 3.1% at March 31, 2003. There was a decrease due to the growth in finance receivables and rents receivable of $2,653, primarily in the Europe and North America segments. This was partially offset by an $82 increase in past due receivables in the Marine Services division of our Diversified Services segment.

Operations for the first three months of 2004 were funded with a combination of borrowings, proceeds from sales of receivables, and retained earnings. We do not generate material funding through structured finance transactions.

Through the first quarter of 2004, we generated $264 of capital resources from the securitization of trade receivables.

• $12,364 of medium-term notes
• $ 3,793 of commercial paper
• $ 268 of notes payable to Caterpillar
• $ 567 of money market account
• $ 239 of short-term bank borrowings
• $ 73 of long-term bank borrowings
• $  8 of loans from a company-owned partnership

An evaluation was performed under the supervision and with the participation of the Company's management, including the Principal Executive Officer (PEO) and Principal Financial Officer (PFO), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, the Company's management, including the PEO and PFO, concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. During the last fiscal quarter, there have been no significant changes in the Company's internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Although the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote, management's evaluation provided reasonable assurance that these controls will be effective.

(a) Exhibits

During the quarter ended March 31, 2004, reports on Form 8-K were furnished pursuant to Item 12 on January 27, 2004 and filed pursuant to Item 5 on January 30, 2004. Following the quarter, a report on Form 8-K was furnished on April 22, 2004 pursuant to Item 12. No financial statements were filed as part of those reports.