##### 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 September 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

02903(Address of principal executive offices)

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

Accelerated filer.

Non-accelerated
    filer ü.

Smaller reporting company.(Do not check if a 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 nine months ended September 30, 2010 and 2009
    (unaudited)


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


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


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


5Notes to the Consolidated Financial Statements
    (unaudited)


6Item 2. MANAGEMENTS DISCUSSION AND
    ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


19Item 4. CONTROLS AND PROCEDURES


22PART II. OTHER INFORMATIONItem 1A. RISK FACTORS


23Item 6. EXHIBITS


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




---



##### Table of Contents



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


Nine Months EndedSeptember 30,


September 30,


September 30,


September 30,2010


2009


2010


2009(In millions)Finance charges


$
59



$
108



$
215



$
327Portfolio losses, net of gains



(13
)



(54
)



(46
)



(114
)Rental revenues on operating leases



7




8




20




23Gains on early extinguishment of debt



1




9




1




48Securitization losses:Total
    other-than-temporary
    impairments


















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


















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


















(26
)Other securitization losses


















(1
)Securitization losses


















(27
)Other income (loss)



1









(7
)



22Total revenues



55




71




183




279Interest expense



31




33




96




128Depreciation of equipment on operating leases



4




5




13




14Net interest margin



20




33




74




137Operating and administrative expenses



45




54




130




160Provision for losses



28




43




127




206Special charges



94




1




100




9Loss before income taxes and noncontrolling interest



(147
)



(65
)



(283
)



(238
)Income tax benefit



(35
)



(21
)



(92
)



(76
)Net loss before noncontrolling interest



(112
)



(44
)



(191
)



(162
)Noncontrolling interest, net of income taxes








(3
)








(2
)Net loss


$
(112
)


$
(41
)


$
(191
)


$
(160
)    2




---



##### Table of Contents



TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED BALANCE SHEETS(Unaudited)
  September 30,



January 2,2010



2010(In millions)AssetsCash and equivalents


$
189



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



1,907




2,327Golf course, timeshare and hotel mortgages



917




1,073Revolving loans



812




1,137Distribution finance receivables



281




771Leveraged leases



281




313Finance leases



256




403Total finance receivables held for investment



4,454




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



(352
)



(339
)Finance receivables held for investment  net



4,102




5,685Finance receivables held for sale



252




819Equipment on operating leases  net



194




216Other assets



442




460Total assets


$
5,179



$
7,324Liabilities and equityLiabilitiesAccrued interest and other liabilities


$
365



$
423Amounts due to Textron Inc.



276




472Deferred income taxes



147




137Debt



3,856




5,488Total liabilities



4,644




6,520Shareholders EquityCapital surplus



1,715




1,487Subsidiary preferred stock



1




1Investment in parent company preferred stock



(25
)



(25
)Accumulated other comprehensive loss








(49
)Retained deficit



(1,156
)



(610
)Total shareholders equity



535




804Total liabilities and shareholders equity


$
5,179



$
7,324    3




---



##### Table of Contents



TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH
    FLOWSNINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
    (Unaudited)
  2010



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


$
(191
)


$
(160
)Net loss attributable to noncontrolling interest








(2
)Net loss before noncontrolling interest



(191
)



(162
)Adjustments to reconcile net loss before noncontrolling interest
    to net cash provided by operating activities:Provision for losses



127




206Portfolio losses, net of gains



76




114Special charges



72




9(Decrease) increase in income taxes payable



(43
)



99Deferred income tax provision



(23
)



(116
)Depreciation and amortization



22




27Decrease in accrued interest and other liabilities



(12
)



(28
)Gains on early extinguishment of debt



(1
)



(48
)Impairments in excess of collections on securitizations and
    syndications








25Other  net



34




10Net cash provided by operating activities



61




136Cash flows from investing activities:Finance receivables originated or purchased



(580
)



(3,044
)Finance receivables repaid



1,825




3,937Proceeds from receivable sales



643




252Proceeds from disposition of other assets, including repossessed
    assets and properties and operating leases



110




197Other investments



22




128Net cash provided by investing activities



2,020




1,470Cash flows from financing activities:Proceeds from line of credit








1,740Principal payments on long-term debt



(1,488
)



(1,250
)Net decrease in commercial paper








(743
)Principal payments on securitized on-balance sheet debt



(194
)



(425
)Principal payments on nonrecourse debt



(36
)



(148
)Net decrease in intercompany loan due to Textron Inc.



(196
)



(115
)Capital contributions from Textron Inc.



235




204Dividends paid to Textron Inc.



(362
)



(291
)Other  net



5




12Net cash used by financing activities



(2,036
)



(1,016
)Effect of exchange rate changes on cash








10Net increase in cash and equivalents



45




600Cash and equivalents at beginning of year



144




16Cash and equivalents at end of period


$
189



$
616    4




---



##### 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


















(191
)


(191
)






(191
)Other comprehensive loss:Foreign currency translation, net of income tax benefit
    (1)














46







46







46Change in unrealized net losses on hedge contracts, net of
    income tax benefit














3







3







3Other comprehensive loss






























Comprehensive loss
    (2)






















(142
)






(142
)Capital contributions from Textron Inc.


235



















235







235Dividends to Textron Inc.


(7
)














(355
)


(362
)






(362
)Balance September 30, 2010

$
1,715


$
(25
)

$
1


$



$
(1,156
)

$
535


$



$
535    (1)
    
    Includes the $74 million
    non-cash reclassification of the cumulative currency translation
    adjustments related to one of the Companys wholly-owned
    Canadian subsidiaries within Other comprehensive loss, to
    Special charges in the Consolidated Statements of Operations.(2)
    
    Comprehensive loss was
    $35 million and $142 million for the three and nine
    months ended September 30, 2010 as compared to
    $28 million and $153 million for the three and nine
    months ended September 30, 2009.   5




---



##### Table of Contents



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



Nine Months EndedSeptember 30,



September 30,



September 30,



September 30,2010



2009



2010



2009(In millions)Severance and pension curtailment costs


$
1



$
1



$
6



$
8Contract termination costs



2









3




1Total Restructuring charges


$
3



$
1



$
9



$
9    6




---



##### Table of Contents



Severance andPension



ContractCurtailment



TerminationCosts



Costs



Total(In millions)Balance at January 2, 2010


$
13



$




$
13Additions



6




3




9Cash Paid



(12
)








(12
)Balance at September 30, 2010


$
7



$
3



$
10     Captive



Non-captiveFinance



Finance



Total(In millions)Severance and pension curtailment costs


$
1



$
32



$
33Non-cash asset impairments



3




8




11Contract termination costs








5




5Total Restructuring charges


$
4



$
45



$
49     Other
    Special charges
   7




---



##### Table of Contents



Note 3.
    Finance
    Receivables  Managed
    Finance Receivables
    September 30,



January 2,2010



2010(Dollars in millions)Captive FinanceAviation


$
1,903




40%



$
2,353




34%Golf Equipment



236




5%




417




6%Non-captive FinanceTimeshare



1,007




21%




1,302




19%Golf Mortgage



813




17%




933




14%Structured Capital



318




7%




349




5%Distribution Finance



214




5%




1,076




16%Hotel



105




2%




182




3%Asset-Based Lending



39




1%




170




2%Other Liquidating



71




2%




91




1%Total managed finance receivables


$
4,706




100%



$
6,873




100%   Finance
    Receivables Held for Investment
    Impaired Finance ReceivablesSeptember 30,



January 2,2010



2010(In millions)Impaired nonaccrual finance receivables


$
820



$
984Impaired accrual finance receivables



168




217Total impaired finance receivables



988




1,201Less: Impaired finance receivables without identified reserve
    requirements (including all impaired accrual finance receivables)



265




362Impaired nonaccrual finance receivables with identified reserve
    requirements


$
723



$
839Allowance for losses on impaired nonaccrual finance receivables


$
193



$
153      8




---



##### Table of Contents



Nonaccrual Finance ReceivablesSeptember 30,



January 2,2010



2010(In millions)Impaired nonaccrual finance receivables


$
820



$
984Nonaccrual homogeneous finance receivables



52




56Total nonaccrual finance receivables


$
872



$
1,040     September 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


$
189



$
176



$
47



$
286



$
272


$
46Golf equipment



20




6




2




16




2



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


$
220



$
219



$
91



$
259



$
254


$
53Resort construction/inventory
    (2)



136




136




3




104




104



Golf course property



132




131




17




166




165



27Hotels



58




58




14




78




78



7Marinas



50




50




12




12




12



Dealer inventory



48




28




6




88




68



14Land



7




7









17




17



4Other



12




9




1




14




12



1Total


$
872



$
820



$
193



$
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.(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.     9




---



##### Table of Contents



Three Months Ended



Nine Months EndedSeptember 30,



September 30,



September 30,



September 30,2010



2009



2010



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


$
350



$
284



$
339



$
191Provision for losses



28




43




127




206Less net charge-offs:Captive FinanceAviation



6




5




36




19Golf Equipment



2




2




5




5Non-captive FinanceGolf Mortgage



3




1




40




23Distribution Finance



5




9




16




32Hotel



4




4




8




4Timeshare



4




1




5




3Other Liquidating



2




1




4




7Total net charge-offs



26




23




114




93Transfer to valuation allowance on finance receivables held for
    sale








(2
)








(2
)Allowance for losses on finance receivables held for investment,
    end of period


$
352



$
302



$
352



$
302Annualized net charge-offs as a percentage of average finance
    receivables held for investment



2.25
%



1.43
%



2.93
%



1.92
%   September 30,



January 2,2010



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



19.57
%



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



7.91
%



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



40.44
%



32.62
%Allowance for losses on impaired nonaccrual finance receivables
    as a percentage of impaired nonaccrual finance receivables



23.52
%



15.57
%60+ days contractual delinquency as a percentage of finance
    receivables held for investment



7.96
%



9.51
%60+ days contractual delinquency


$
352



$
569Repossessed assets and properties


$
149



$
119Operating assets received in satisfaction of troubled finance
    receivables



126




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


LiabilitiesSeptember 30,


January 2,


September 30,


January 2,


September 30,


January 2,2010


2010


2010


2010


2010


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

$
649


$
946


$
43


$
40


$



$
Fixed-rate receivables


344



419







3



(7
)


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


111



71















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






161







18







$
1,104


$
1,597


$
43


$
61


$
(7
)

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


Nine Months EndedSeptember 30,


September 30,


September 30,


September 30,Gain/(Loss) Location


2010


2009


2010


2009(In millions)Fair Value HedgesInterest rate exchange agreements


Interest expense


$
8


$
2


$
27


$
(13
)Interest rate exchange agreements


Finance charges







2



(11
)


8  12




---



##### Table of Contents



Note 6.
    Fair
    Value of Financial Instruments    Assets
    Recorded at Fair Value on a Recurring Basis
   13




---



##### Table of Contents



Changes
    in Fair Value for Unobservable Input
    Three Months Ended


Nine Months EndedSeptember 30,


September 30,


September 30,


September 30,2010


2009


2010


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


$




$
3



$
3



$
12Transfer from nonrecurring classification








110









110Reclassification to Finance receivables held for investment













(3
)



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








12









11Impairments recognized in earnings


















(8
)Collections, net








(37
)








(37
)Balance, end of period


$




$
88



$




$
88   Assets
    Recorded at Fair Value on a Nonrecurring Basis
    Total Gain/(Loss)Balance at

Three Months Ended

Nine Months EndedSeptember 30,

September 30,

September 30,

September 30,

September 30,

September 30,2010

2009

2010

2009

2010

2009(In millions)Impaired finance receivables

$
521


$
532


$
(26
)

$
(26
)

$
(130
)

$
(143
)Finance receivables held for sale


252



998



(2
)


(4
)


(17
)


(16
)Repossessed assets and properties


98



37



(12
)


(5
)


(29
)


(21
)Other investments


28



15







(19
)


(9
)


(19
)Operating assets received in satisfaction of troubled finance
    receivables






6







(1
)






(7
)   Impaired
    Finance Receivables
   14




---



##### Table of Contents



Finance
    Receivables Held for Sale
    and/or
  Repossessed
    Assets and Properties / Operating Assets Received in
    Satisfaction of Troubled Finance Receivables
   15




---



##### Table of Contents



Other
    Investments
    Assets
    and Liabilities Not Recorded at Fair Value
    September 30, 2010


January 2, 2010Carrying


Estimated


Carrying


EstimatedValue


Fair Value


Value


Fair Value(In millions)Assets:Installment contracts

$
1,796


$
1,705


$
2,204


$
2,007Golf course, timeshare and hotel mortgages


838



723



1,008



924Revolving loans


700



600



1,058



902Distribution finance receivables


245



237



709



690Investment in other marketable securities


55



54



68



56Retained interests in securitizations, excluding interest-only
    securities










6



6$
3,634


$
3,319


$
5,053


$
4,585Liabilities:Bank line of credit

$
1,740


$
1,684


$
1,740


$
1,682Fixed-rate debt


1,140



1,118



1,534



1,490Securitized on-balance sheet debt


400



392



559



548Subordinated debt


300



230



300



207Variable-rate debt


276



277



1,355



1,333Amounts due to Textron Inc.


276



274



472



469$
4,132


$
3,975


$
5,960


$
5,729   Finance
    Receivables Held for Investment
  and/or
 16




---



##### Table of Contents



Investments
    in Other Marketable Securities
    Debt
    Note 7.
    Income
    taxes    Three Months Ended



Nine Months EndedSeptember 30,



September 30,



September 30,



September 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



(0.8
)



(4.8
)



(1.6
)



(2.4
)Foreign tax rate differential



(1.4
)



0.9




(1.9
)



(0.1
)Canadian dollar functional currency













(2.3
)



Change in state valuation allowance



0.4




7.4




1.2




1.8Unrecognized tax benefits and interest



2.8




2.5




3.0




1.8Tax credits



(0.3
)



(1.0
)



(0.5
)



(0.8
)Change in status of foreign subsidiary



10.5




(3.0
)



4.9




2.3Other, net



(0.6
)



0.5




(0.5
)



0.2Effective income tax rate



(24.4
)%



(32.5
)%



(32.7
)%



(32.2
)%      17




---



##### Table of Contents



Note 8.
    Contingencies    Note 9.
    Financial
    Information about Operating Segments    Three Months Ended



Nine Months EndedSeptember 30,



September 30,



September 30,



September 30,2010



2009



2010



2009(In millions)Revenues:Captive Finance


$
23



$
37



$
89



$
132Non-captive Finance



32




34




94




147Total revenues


$
55



$
71



$
183



$
279Loss before income taxes and noncontrolling interest:
    (1)(2)Captive Finance


$
(18
)


$
(19
)


$
(33
)


$
(63
)Non-captive Finance



(35
)



(45
)



(150
)



(166
)Segment loss



(53
)



(64
)



(183
)



(229
)Special charges



94




1




100




9Loss before income taxes and noncontrolling interest


$
(147
)


$
(65
)


$
(283
)


$
(238
)   September 30,


January 2,2010


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

$
2,409


$
3,016Non-captive Finance


2,864



4,404Total finance assets

$
5,273


$
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. 18




---



##### Table of Contents



(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).  Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Liquidity
    and Capital Resources
         19




---



##### Table of Contents



Results
    of Operations
  Revenues
    Three Months


Nine MonthsEnded


Ended2010 vs. 2009


2010 vs. 2009(In millions)Lower average finance receivables of $2.0 billion and
    $1.9 billion, respectively

$
(29
)

$
(79
)Lower gains on early extinguishment of debt


(8
)


(47
)Decrease in servicing and investment income related to
    securitizations


(6
)


(24
)Impact of variable-rate receivable interest rate floors


(5
)


(22
)Suspended earnings on nonaccrual finance receivables






(10
)Lower accretion of valuation allowance


(15
)


(4
)Lower portfolio losses, net of gains


41



68Lower securitization losses






27   Loss
    before Income Taxes and Noncontrolling Interest
    Three Months


Nine MonthsEnded


Ended2010 vs. 2009


2010 vs. 2009(In millions)Special charges

$
(93
)

$
(91
)Lower gains on early extinguishment of debt


(8
)


(47
)Lower average finance receivables of $2.0 billion and
    $1.9 billion, respectively


(17
)


(36
)Decrease in servicing and investment income related to
    securitizations


(6
)


(24
)Impact of variable-rate receivable interest rate floors


(5
)


(22
)Interest expense rate impact


(10
)


(11
)Suspended earnings on nonaccrual finance receivables






(10
)Lower accretion of valuation allowance


(15
)


(4
)Decrease in the provision for loan losses


15



79Lower portfolio losses, net of gains


41



68Lower operating and administrative expenses


9



30Lower securitization losses






27    20




---



##### 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 us 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 ability to
    maintain portfolio credit quality and to realize full value of
    finance receivables and of assets acquired upon foreclosure of
    finance receivables; (c) the ability to control costs and
    successful implementation of various cost-reduction programs;
    (d) increases in pension expenses and employee and retiree
    medical benefits; (e) the impact of changes in tax
    legislation; (f) the ability to maintain certain minimum
    levels of financial performance required under our committed
    bank line of credit and under our Support Agreement with
    Textron; (g) access to financing, including
    securitizations, at competitive rates; (h) access to equity
    in the form of retained earnings and capital contributions from
    Textron; (i) uncertainty in estimating contingent
    liabilities and establishing reserves to address such
    contingencies; (j) risks and uncertainties related to
    dispositions, including difficulties or unanticipated expenses
    in connection with the consummation of dispositions or the
    disruption of current plans and operations; (k) the ability
    to successfully exit from our commercial finance business, other
    than the captive finance business; (l) uncertainty in
    estimating the market value of our Finance receivables held for
    sale and our Allowance for losses on finance receivables held
    for investment; (m) bankruptcy or other financial problems
    at major
 21




---



##### Table of Contents



customers that could cause disruptions or difficulty in
    collecting amounts owed by such customers; (n) legislative
    or regulatory actions impacting our operations;
    (o) 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 (p) 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




---



##### Table of Contents



PART II.
    OTHER INFORMATION  Item 1A.
    Risk
    Factors  Form 10-K
  Difficult
    conditions in the financial markets have adversely affected our
    business and results of operations and we do not expect these
    conditions to improve in the near future.
    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




---



##### Table of Contents



SIGNATURES
      
   
   24