##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C. 20549
      FORM 10-Q
      [x]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal quarter ended June 30, 2010OR[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission file number
    001-15515
      TEXTRON FINANCIAL
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
      Delaware(State or other jurisdiction of
    incorporation or organization)

05-6008768(I.R.S. Employer Identification No.)40 Westminster Street, Providence, RI

02940-6687(Address of principal executive offices)

(Zip code)   401-621-4200
 (Registrants telephone
    number, including area code)
      ü.
  Regulation S-T
  12b-2
  Large accelerated filer.

Accelerated filer.

Non-accelerated
    filer ü.

Smaller reporting company.(Do not check if smaller reporting company)   Rule 12b-2  ü
    REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL
    INSTRUCTION H (1) (a) AND (b) OF
    FORM 10-Q
    AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
    DISCLOSURE FORMAT




---



##### 



TEXTRON
    FINANCIAL CORPORATION
  TABLE OF
    CONTENTS
   
 PagePART I. FINANCIAL INFORMATIONItem 1. FINANCIAL STATEMENTSConsolidated Statements of Operations for the
    three and six months ended June 30, 2010 and 2009
    (unaudited)


2Consolidated Balance Sheets at June 30, 2010
    and January 2, 2010 (unaudited)


3Consolidated Statements of Cash Flows for the six
    months ended June 30, 2010 and 2009 (unaudited)


4Consolidated Statements of Changes in Equity
    through June 30, 2010 (unaudited)


5Notes to the Consolidated Financial Statements
    (unaudited)


6Item 1A. RISK FACTORS


19Item 2. MANAGEMENTS DISCUSSION AND
    ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


19Item 4. CONTROLS AND PROCEDURES


22PART II. OTHER INFORMATIONItem 6. EXHIBITS


23EX-12EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF
    OPERATIONS(Unaudited)
  Three Months Ended



Six Months EndedJune 30,



June 30,



June 30,



June 30,2010



2009



2010



2009(In millions)Finance charges


$
71



$
104



$
156



$
219Portfolio losses, net of gains



(20
)



(50
)



(33
)



(60
)Rental revenues on operating leases



7




7




13




15Gains on early extinguishment of debt








37









39Securitization losses:Total
    other-than-temporary
    impairments








(33
)








(39
)Portion of
    other-than-temporary
    impairments recognized in Other comprehensive income, before
    income taxes








13









13Net
    other-than-temporary
    impairments recognized in securitization losses








(20
)








(26
)Other securitization losses


















(1
)Securitization losses








(20
)








(27
)Other (loss) income



(3
)



8




(8
)



22Total revenues



55




86




128




208Interest expense



33




41




65




95Depreciation of equipment on operating leases



5




4




9




9Net interest margin



17




41




54




104Provision for losses



44




87




99




163Operating and administrative expenses



44




53




85




106Restructuring charges



3




5




6




8Loss before income taxes and noncontrolling interest



(74
)



(104
)



(136
)



(173
)Income tax benefit



(36
)



(39
)



(57
)



(55
)Net loss before noncontrolling interest



(38
)



(65
)



(79
)



(118
)Noncontrolling interest, net of income taxes








1









1Net loss


$
(38
)


$
(66
)


$
(79
)


$
(119
)    2




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##### Table of Contents



TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED BALANCE SHEETS(Unaudited)
  June 30,



January 2,2010



2010(In millions)AssetsCash and equivalents


$
171



$
144Finance receivables held for investment, net of unearned income:Installment contracts



2,042




2,327Golf course, timeshare and hotel mortgages



993




1,073Revolving loans



872




1,137Distribution finance receivables



400




771Leveraged leases



281




313Finance leases



263




403Total finance receivables held for investment



4,851




6,024Allowance for losses on finance receivables held for investment



(350
)



(339
)Finance receivables held for investment  net



4,501




5,685Finance receivables held for sale



535




819Equipment on operating leases  net



202




216Other assets



478




460Total assets


$
5,887



$
7,324Liabilities and equity LiabilitiesAccrued interest and other liabilities


$
382



$
423Amounts due to Textron Inc.



670




472Deferred income taxes



152




137Debt



4,055




5,488Total liabilities



5,259




6,520Shareholders EquityCapital surplus



1,633




1,487Subsidiary preferred stock



1




1Investment in parent company preferred stock



(25
)



(25
)Accumulated other comprehensive loss



(77
)



(49
)Retained deficit



(904
)



(610
)Total shareholders equity



628




804Total liabilities and shareholders equity


$
5,887



$
7,324    3




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##### Table of Contents



TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH
    FLOWSSIX MONTHS ENDED JUNE 30, 2010 and 2009
    (Unaudited)
  2010



2009(In millions)Cash flows from operating activities:Net loss


$
(79
)


$
(119
)Net income attributable to noncontrolling interest








1Net loss before noncontrolling interest



(79
)



(118
)Adjustments to reconcile net loss before noncontrolling interest
    to net cash (used) provided by operating activities:Provision for losses



99




163(Decrease) increase in income taxes payable



(70
)



73Portfolio losses, net of gains



50




60Deferred income tax provision



(19
)



(123
)Depreciation and amortization



16




19Decrease in accrued interest and other liabilities



(11
)



(18
)Gains on early extinguishment of debt








(39
)Impairments in excess of collections on securitizations and
    syndications








21Other  net



1




34Net cash (used) provided by operating activities



(13
)



72Cash flows from investing activities:Finance receivables originated or purchased



(427
)



(2,234
)Finance receivables repaid



1,341




2,905Proceeds from receivable sales, including securitizations



358




184Proceeds from disposition of other assets, including repossessed
    assets and properties and operating leases



82




134Other investments



30




60Purchase of assets for operating leases



(8
)



(6
)Net cash provided by investing activities



1,376




1,043Cash flows from financing activities:Proceeds from line of credit








1,740Principal payments on long-term debt



(1,276
)



(877
)Net decrease in commercial paper








(743
)Principal payments on secured debt



(167
)



(384
)Principal payments on nonrecourse debt



(27
)



(144
)Net increase (decrease) in intercompany loan due to Textron
    Inc.



198




(133
)Capital contributions from Textron Inc.



151




93Dividends paid to Textron Inc.



(220
)



(189
)Other  net



5




21Net cash used by financing activities



(1,336
)



(616
)Effect of exchange rate changes on cash








6Net increase in cash and equivalents



27




505Cash and equivalents at beginning of year



144




16Cash and equivalents at end of period


$
171



$
521    4




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##### Table of Contents



TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF
    CHANGES IN EQUITY(Unaudited)
  Investmentin Parent





Accumulated





TotalCompany


Subsidiary


Other





Share-


Non-Capital


Preferred


Preferred


Comprehensive


Retained


holders


controlling


TotalSurplus


Stock


Stock


Loss


Deficit


Equity


Interest


EquityBalance January 3, 2009

$
1,217


$
(25
)

$



$
(55
)

$
(58
)

$
1,079


$



$
1,079Comprehensive loss:Net loss


















(203
)


(203
)


(2
)


(205
)Other comprehensive income:Foreign currency translation, net of income Taxes














7







7







7Change in unrealized net losses on retained interests, net of
    income tax benefit














(1
)






(1
)






(1
)Other comprehensive income














6







6







6Comprehensive loss






















(197
)


(2
)


(199
)Capital contributions from Textron Inc.


279



















279







279Dividends to Textron Inc.


(9
)














(349
)


(358
)






(358
)Sale of subsidiary preferred stock










1











1







1Sale of noncontrolling interest


























21



21Repurchase of noncontrolling interest


























(19
)


(19
)Balance January 2, 2010


1,487



(25
)


1



(49
)


(610
)


804







804Comprehensive loss:Net loss


















(79
)


(79
)






(79
)Other comprehensive loss:Foreign currency translation, net of income taxes
    (1)














(32
)






(32
)






(32
)Change in unrealized net losses on hedge contracts, net of
    income tax benefit














4







4







4Other comprehensive loss














(28
)






(28
)






(28
)Comprehensive loss
    (2)






















(107
)






(107
)Capital contributions from Textron Inc.


151



















151







151Dividends to Textron Inc.


(5
)














(215
)


(220
)






(220
)Balance June 30, 2010

$
1,633


$
(25
)

$
1


$
(77
)

$
(904
)

$
628


$



$
628    (1)
    
    Primarily represents a reduction of
    the expected tax benefit from previously recognized currency
    translation adjustment losses related to the Companys
    investment in one of its wholly-owned Canadian subsidiaries.(2)
    
    Comprehensive loss was
    $67 million and $107 million for the three and six
    months ended June 30, 2010 as compared to $72 million
    and $125 million for the three and six months ended
    June 30, 2009.   5




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##### Table of Contents



TEXTRON
    FINANCIAL CORPORATION
    NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  Note 1.
    Basis of
    Presentation  Form 10-K
    Note 2.
    Special
    Charges  Restructuring
    charges
    Three Months Ended



Six Months EndedJune 30,



June 30,



June 30,



June 30,2010



2009



2010



2009(In millions)Severance and pension curtailment costs


$
2



$
5



$
5



$
7Contract termination costs



1









1




1Total Restructuring charges


$
3



$
5



$
6



$
8    6




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##### Table of Contents



Severance andPension



ContractCurtailment



TerminationCosts



Costs



Total(In millions)Balance at January 2, 2010


$
13



$




$
13Additions



5




1




6Cash Paid



(9
)








(9
)Balance at June 30, 2010


$
9



$
1



$
10     Captive Finance



Non-captive Finance



Total(In millions)Severance and pension curtailment costs


$
1



$
31



$
32Non-cash asset impairments



3




8




11Contract termination costs








3




3Total Restructuring charges


$
4



$
42



$
46     Other
    Special charges
   7




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##### Table of Contents



Note 3.
    Finance
    Receivables  Managed
    Finance Receivables
    June 30,



January 2,2010



2010(Dollars in millions)Captive FinanceAviation


$
2,018




37%



$
2,353




34%Golf Equipment



353




7%




417




6%Non-captive FinanceTimeshare



1,082




20%




1,302




19%Golf Mortgage



844




16%




933




14%Distribution Finance



494




9%




1,076




16%Structured Capital



318




6%




349




5%Hotel



116




2%




182




3%Asset-Based Lending



85




2%




170




2%Other Liquidating



76




1%




91




1%Total managed finance receivables


$
5,386




100%



$
6,873




100%   Finance
    Receivables Held for Investment
       8




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##### Table of Contents



Impaired Finance ReceivablesJune 30,2010



January 2, 2010(In millions)Impaired nonaccrual finance receivables


$
817



$
984Impaired accrual finance receivables



195




217Total impaired finance receivables



1,012




1,201Less: Impaired finance receivables without identified reserve
    requirements



293




362Impaired nonaccrual finance receivables with identified reserve
    requirements


$
719



$
839Allowance for losses on impaired nonaccrual finance receivables


$
181



$
153     Nonaccrual Finance ReceivablesJune 30,2010



January 2, 2010(In millions)Impaired nonaccrual finance receivables


$
817



$
984Nonaccrual homogeneous finance receivables



59




56Total nonaccrual finance receivables


$
876



$
1,040     June 30, 2010



January 2, 2010Allowance










Allowancefor Losses










for LossesImpaired



on Impaired







Impaired


on ImpairedNonaccrual



Nonaccrual



Nonaccrual



Nonaccrual



Nonaccrual


NonaccrualFinance



Finance



Finance



Finance



Finance


FinanceCollateral Type


Receivables



Receivables



Receivables



Receivables



Receivables


Receivables(In millions)Captive Finance:General aviation aircraft


$
175



$
162



$
39



$
286



$
272


$
46Golf equipment



23




7




1




16




2



1Non-captive Finance:Notes receivable
    (1)(2)


$
255



$
254



$
91



$
259



$
254


$
53Golf course property



132




131




18




166




165



27Resort construction/inventory
    (2)



106




106




3




104




104



Dealer inventory



66




41




2




88




68



14Hotels



56




56




18




78




78



7Marinas



51




51




8




12




12



Land



3




3




1




17




17



4Other



9




6









14




12



1Total


$
876



$
817



$
181



$
1,040



$
984


$
153    (1)
    
    Finance receivables collateralized primarily by timeshare notes
    receivable may also be collateralized by certain real estate and
    other assets of our borrowers. 9




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##### Table of Contents



(2)
    
    Timeshare lending relationships often include both revolving
    loans secured by notes receivable and construction/inventory
    loans secured by real property. These loan balances have been
    presented in their respective categories in the table above.
    These loans are cross-collateralized, therefore the allowance
    for loan losses related to the entire lending relationship is
    presented in the Notes receivable collateral type in the table
    above.        Three Months Ended



Six Months EndedJune 30,



June 30,



June 30,



June 30,2010



2009



2010



2009(Dollars in millions)Allowance for losses on finance receivables held for investment,
    beginning of period


$
363



$
220



$
339



$
191Provision for losses



44




87




99




163Less net charge-offs:Captive FinanceAviation



20




8




30




14Golf Equipment



1




1




3




3Non-captive FinanceGolf Mortgage



30




1




37




22Distribution Finance



5




11




11




23Timeshare



1




2




1




2Hotel













4




Other Liquidating













2




6Total net charge-offs



57




23




88




70Allowance for losses on finance receivables held for investment,
    end of period


$
350



$
284



$
350



$
284Annualized net charge-offs as a percentage of average finance
    receivables held for investment



4.41
%



1.33
%



3.23
%



2.03
%   June 30,2010



January 2, 2010(Dollars in millions)Nonaccrual finance receivables as a percentage of finance
    receivables held for investment



18.06
%



17.26
%Allowance for losses on finance receivables held for investment
    as a percentage of finance receivables held for investment



7.22
%



5.63
%Allowance for losses on finance receivables held for investment
    as a percentage of nonaccrual finance receivables held for
    investment



40.0
%



32.6
%60+ days contractual delinquency as a percentage of finance
    receivables held for investment



7.99
%



9.51
%60+ days contractual delinquency


$
385



$
569Repossessed assets and properties


$
147



$
119Operating assets received in satisfaction of troubled finance
    receivables



130




112  10




---



##### Table of Contents



Note 4.
    Other
    Assets    and/or
  other-than-temporarily
  Note 5.
    Derivative
    Financial Instruments   11




---



##### Table of Contents



Notional Amount


Fair Value AmountAssets


LiabilitiesJune 30,


January 2,


June 30,


January 2,


June 30,


January 2,2010


2010


2010


2010


2010


2010(In millions)Fair Value HedgesInterest Rate Exchange AgreementsFixed-rate debt

$
655


$
946


$
41


$
40


$



$
Fixed-rate receivables


366



419







3



(8
)


(3
)Net Investment HedgesForeign Currency Forward Exchange AgreementsForeign-dollar functional currency subsidiary equity


101



71















(2
)Cash Flow HedgesCross-Currency Interest Rate Exchange AgreementsForeign-dollar denominated variable-rate debt


140



161



29



18







$
1,262


$
1,597


$
70


$
61


$
(8
)

$
(5
)         Amount of Gain/(Loss)Three Months Ended


Six Months EndedGain/(Loss) Location


June 30, 2010


June 30, 2009


June 30, 2010


June 30, 2009(In millions)Fair Value HedgesInterest rate exchange agreements


Interest expense


$
9


$
(19
)

$
19


$
(15
)Interest rate exchange agreements


Finance charges



(7
)


8



(11
)


6  12




---



##### Table of Contents



Note 6.
    Fair
    Value of Financial Instruments    Assets
    Recorded at Fair Value on a Recurring Basis
    Changes
    in Fair Value for Unobservable Input
    Six MonthsThree Months Ended



EndedJune 30,



June 30,



June 30,



June 30,2010



2009



2010



2009(In millions)Retained Interests in SecuritizationsBalance, beginning of period


$




$
3



$
3



$
12Reclassification to Finance receivables held for investment













(3
)



Net losses for the period:Change in value recognized in Other comprehensive income








2









(1
)Impairments recognized in earnings








(2
)








(8
)Balance, end of period


$




$
3



$




$
3  13




---



##### Table of Contents



Assets
    Recorded at Fair Value on a Nonrecurring Basis
    Total Gain/(Loss)Three Months Ended



Six Months EndedJune 30,



June 30,



June 30,2010



2010



2010(In millions)Impaired finance receivables


$
519



$
(45
)


$
(104
)Finance receivables held for sale



421




(5
)



(15
)Repossessed assets and properties



59




(8
)



(17
)Other investments



28









(9
)Total


$
1,027



$
(58
)


$
(145
)   Finance
    Receivables Held for Sale
    and/or
 14




---



##### Table of Contents



Impaired
    Finance Receivables
      Repossessed
    Assets and Properties / Operating Assets Received in
    Satisfaction of Troubled Finance Receivables
    Other
    Investments
   15




---



##### Table of Contents



Assets
    and Liabilities Not Recorded at Fair Value
    June 30, 2010


January 2, 2010Carrying


Estimated


Carrying


EstimatedValue


Fair Value


Value


Fair Value(In millions)Assets:Installment contracts

$
1,929


$
1,795


$
2,204


$
2,007Golf course, timeshare and hotel mortgages


918



815



1,008



924Revolving loans


761



652



1,058



902Distribution finance receivables


361



352



709



690Investment in other marketable securities


59



57



68



56Retained interests in securitizations, excluding interest-only
    securities










6



6$
4,028


$
3,671


$
5,053


$
4,585Liabilities:Bank line of credit

$
1,740


$
1,676


$
1,740


$
1,682Fixed-rate debt


1,144



1,114



1,534



1,490Amounts due to Textron Inc.


670



666



472



469Variable-rate debt


444



440



1,355



1,333Securitized on-balance sheet debt


427



425



559



548Subordinated debt


300



227



300



207$
4,725


$
4,548


$
5,960


$
5,729   Finance
    Receivables Held for Investment
  and/or
  Investments
    in Other Marketable Securities
   16




---



##### Table of Contents



Debt
    Note 7.
    Income taxes
    Three Months Ended



Six Months EndedJune 30,



June 30,



June 30,



June 30,2010



2009



2010



2009Federal statutory income tax rate



(35.0
)%



(35.0
)%



(35.0
)%



(35.0
)%Increase (decrease) in taxes resulting from:State income taxes



(2.2
)



(2.4
)



(2.6
)



(1.4
)Foreign tax rate differential



(1.4
)



(6.6
)



(2.0
)



(0.5
)Canadian dollar functional currency



(8.9
)








(4.8
)



Change in state valuation allowance



0.3




0.2




2.0




(0.3
)Unrecognized tax benefits and interest



3.7




1.2




3.2




1.6Tax credits



(0.6
)



(0.7
)



(0.8
)



(0.8
)Change in status of foreign subsidiary



(3.0
)



4.5




(1.5
)



4.3Other, net



(0.2
)



0.3




(0.1
)



0.1Effective income tax rate



(47.3
)%



(38.5
)%



(41.6
)%



(32.0
)%           Note 8.
    Contingencies
   17




---



##### Table of Contents



Note 9.
    Financial Information about Operating Segments
    Three Months Ended







Six Months EndedJune 30,



June 30,



June 30,



June 30,2010



2009



2010



2009(Dollars in millions)Revenues:Captive Finance


$
30




54
%


$
42




49
%


$
66




51
%


$
95




46%Non-captive Finance



25




46
%



44




51
%



62




49
%



113




54%Total revenues


$
55




100
%


$
86




100
%


$
128




100
%


$
208




100%Loss before income taxes and noncontrolling interest:
    (1)(2)Captive Finance


$
(5
)







$
(19
)







$
(15
)







$
(44
)Non-captive Finance



(66
)








(80
)








(115
)








(121
)Segment loss



(71
)








(99
)








(130
)








(165
)Restructuring charges



3









5









6









8Loss before income taxes and noncontrolling interest


$
(74
)







$
(104
)







$
(136
)







$
(173
)   June 30,


January 2,2010


2010(In millions)Finance assets: (3)Captive Finance

$
2,659


$
3,016Non-captive Finance


3,309



4,404Total finance assets

$
5,968


$
7,420   (1)
    
    Interest expense is allocated to each segment in proportion to
    its net investment in finance assets. Net investment in finance
    assets includes finance assets less deferred income taxes,
    security deposits and other specifically identified liabilities.
    The interest allocation matches variable-rate finance assets in
    the Captive Finance segment with variable-rate debt of similar
    duration and fixed-rate finance assets in the Captive Finance
    segment with fixed-rate debt of similar duration to the extent
    possible. The remaining balance of interest expense incurred is
    included in the Non-captive Finance segments interest
    expense.(2)
    
    Direct operating expenses are included in each segments
    loss. Due to the plan to exit all of our Non-captive Finance
    segment and the resulting variations in personnel levels and job
    responsibilities, indirect corporate oversight expenses,
    comprised primarily of executive salaries and benefits, are
    included in the segment loss of the Non-captive Finance segment,
    although a portion of these expenses relate to oversight of the
    Captive Finance segment.(3)
    
    Finance assets include: finance receivables; equipment on
    operating leases, net of accumulated depreciation; repossessed
    assets and properties; operating assets received in satisfaction
    of troubled finance receivables; investments in other marketable
    securities; retained interests in securitizations and other
    short- and long-term investments (some of which are classified
    in Other assets on Textron Financials Consolidated Balance
    Sheets). 18




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##### Table of Contents



Item 1A.Risk Factors  Form 10-K
 Item 2.Managements Discussion and Analysis of Financial Condition
    and Results of Operations  Liquidity
    and Capital Resources
         19




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##### Table of Contents



Results
    of Operations
  Revenues
    Three Months


Six MonthsEnded


Ended2010 vs. 2009


2010 vs. 2009(In millions)Lower average finance receivables of $1.9 billion and
    $1.8 billion, respectively

$
(27
)

$
(50
)Lower gains on early extinguishment of debt


(37
)


(39
)Decrease in servicing and investment income related to
    securitizations


(8
)


(18
)Impact of variable-rate receivable interest rate floors


(7
)


(17
)Lower other income


(3
)


(12
)Suspended earnings on nonaccrual finance receivables


(3
)


(11
)Portfolio losses, net of gains


30



27Lower securitization losses, including impairments


20



27Accretion of valuation allowance


5



11   Loss
    before Income Taxes and Noncontrolling Interest
    Three Months


Six MonthsEnded


Ended2010 vs. 2009


2010 vs. 2009(In millions)Decrease in the provision for loan losses

$
43


$
64Portfolio losses, net of gains


30



27Lower securitization losses, including impairments


20



27Lower operating and administrative expenses


9



21Accretion of valuation allowance


5



11Lower gains on early extinguishment of debt


(37
)


(39
)Lower average finance receivables of $1.9 billion and
    $1.8 billion, respectively


(13
)


(19
)Decrease in servicing and investment income related to
    securitizations


(8
)


(18
)Impact of variable-rate receivable interest rate floors


(7
)


(17
)Lower other income


(3
)


(12
)Suspended earnings on nonaccrual finance receivables


(3
)


(11
)      20




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##### Table of Contents



Income
    Tax Benefit
          Forward-looking
    Information
  Certain statements in this Quarterly Report on
    Form 10-Q
    and other oral and written statements made by Textron Financial
    from time to time are forward-looking statements, including
    those that discuss strategies, goals, outlook or other
    non-historical matters; or project revenues, income, returns or
    other financial measures. These forward-looking statements speak
    only as of the date on which they are made, and we undertake no
    obligation to update or revise any forward-looking statements.
    These forward-looking statements are subject to risks and
    uncertainties that may cause actual results to differ materially
    from those contained in the statements, such as the Risk Factors
    contained in our Annual Report on
    Form 10-K,
    our Quarterly Reports on
    Form 10-Q
    and including the following: (a) changes in worldwide
    economic, political or regulatory conditions that impact
    interest and foreign exchange rates; (b) the occurrence of
    slowdowns or downturns in customer markets in which Textron
    products are sold or supplied and financed or where we hold
    finance receivables; (c) the ability to realize full value
    of finance receivables and investments in securities;
    (d) the ability to control costs and successful
    implementation of various cost-reduction programs;
    (e) increases in pension expenses and other postretirement
    employee costs; (f) the impact of changes in tax
    legislation; (g) the ability to maintain portfolio credit
    quality and certain minimum levels of financial performance
    required under our committed bank line of credit and under our
    Support Agreement with Textron; (h) access to financing,
    including securitizations, at competitive rates; (i) access
    to equity in the form of retained earnings and capital
    contributions from Textron; (j) uncertainty in estimating
    contingent liabilities and establishing reserves to address such
    contingencies; (k) risks and uncertainties related to
    dispositions, including
 21




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##### Table of Contents



difficulties or unanticipated expenses in connection with the
    consummation of dispositions or the disruption of current plans
    and operations; (l) the ability to successfully exit from
    our commercial finance business, other than the captive finance
    business; (m) uncertainty in estimating the market value of
    our Finance receivables held for sale and our Allowance for
    losses on finance receivables held for investment;
    (n) bankruptcy or other financial problems at major
    customers that could cause disruptions or difficulty in
    collecting amounts owed by such customers; (o) legislative
    or regulatory actions impacting our operations;
    (p) difficult conditions in the financial markets which may
    adversely impact our ability to obtain financing which enables
    us to offer competitive terms for our new finance receivable
    originations and, with respect to businesses which we are
    exiting, our customers ability to obtain alternative
    financing negatively impacting their ability to repay amounts
    owed to us; and (q) continued volatility in the economy
    resulting in a prolonged downturn in the markets in which we do
    business.
 Item 4.Controls and Procedures  Rule 13a-15(e) 15d-15(e)
   22




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##### Table of Contents



PART II.
    OTHER INFORMATION



TEXTRON
    FINANCIAL CORPORATION Item 6.Exhibits  12


Computation of Ratio of Earnings to Fixed Charges31
.1

Certification of Chief Executive Officer Pursuant to
    Rule 13a-14(a)31
.2

Certification of Chief Financial Officer Pursuant to
    Rule 13a-14(a)32
.1

Certification of Chief Executive Officer Pursuant to
    18 U.S.C. Section 135032
.2

Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350  23




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##### Table of Contents



SIGNATURES
      
       24