<PAGE>

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

                       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 1934

                  FOR THE FISCAL QUARTER ENDED MARCH 31, 2002

                                       OR

         [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

        FOR THE TRANSITION PERIOD FROM                TO

                         COMMISSION FILE NUMBER 0-27559

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

                         TEXTRON FINANCIAL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

<Table>
<S>                                            <C>
                  DELAWARE                                      05-6008768
       (STATE OR OTHER JURISDICTION OF                       (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)
</Table>

       40 WESTMINSTER STREET, P.O. BOX 6687, PROVIDENCE, R.I. 02940-6687
                                 (401) 621-4200
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
                               Yes [X]     No [ ]

     All of the shares of common stock of the registrant are owned by Textron
Inc.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                         TEXTRON FINANCIAL CORPORATION

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

  Condensed Consolidated Statements of Income for the three
     months ended March 31, 2002 and 2001 (unaudited).......    2

  Condensed Consolidated Balance Sheets at March 31, 2002
     and December 29, 2001
     (unaudited)............................................    3

  Condensed Consolidated Statements of Cash Flows for the
     three months ended March 31, 2002 and 2001
     (unaudited)............................................    4

  Condensed Consolidated Statements of Changes in
     Shareholder's Equity through March 31, 2002
     (unaudited)............................................    5

  Notes to Condensed Consolidated Financial Statements
     (unaudited)............................................    6

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS.................   13

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
        MARKET RISK.........................................   17

PART II. OTHER INFORMATION

Item 6. EXHIBITS AND REPORTS ON FORM 8-K....................   18
</Table>

                                        1
<PAGE>

                         PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                         TEXTRON FINANCIAL CORPORATION

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                  (UNAUDITED)

<Table>
<Caption>
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
REVENUES
  Finance charges and discounts.............................  $105,145   $139,261
  Rental revenues on operating leases.......................     7,064      4,756
  Other income..............................................    31,867     26,685
                                                              --------   --------
                                                               144,076    170,702
EXPENSES
  Interest..................................................    46,298     77,764
  Selling and administrative................................    40,976     33,893
  Provision for losses......................................    30,375     11,181
  Depreciation of equipment on operating leases.............     3,545      1,829
                                                              --------   --------
                                                               121,194    124,667
                                                              --------   --------
INCOME BEFORE INCOME TAXES AND DISTRIBUTIONS ON PREFERRED
  SECURITIES................................................    22,882     46,035
Income taxes................................................     8,349     17,258
Distributions on preferred securities (net of tax benefits
  of $201 and $207, respectively)...........................       357        351
                                                              --------   --------
NET INCOME..................................................  $ 14,176   $ 28,426
                                                              ========   ========
</Table>

     See notes to condensed consolidated financial statements (unaudited).
                                        2
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

                         TEXTRON FINANCIAL CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<Table>
<Caption>
                                                              MARCH 31,     DECEMBER 29,
                                                                 2002           2001
                                                              ----------    ------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                           <C>           <C>
ASSETS
Cash and equivalents........................................  $   36,982     $   18,489
Finance receivables, net of unearned income:
  Installment contracts.....................................   2,112,590      2,047,088
  Revolving loans...........................................   1,355,472      1,578,922
  Golf course and resort mortgages..........................     875,452        811,951
  Floorplan receivables.....................................     691,116        474,391
  Leveraged leases..........................................     407,593        404,423
  Finance leases............................................     319,309        318,859
                                                              ----------     ----------
          Total finance receivables.........................   5,761,532      5,635,634
  Allowance for losses on receivables.......................    (147,756)      (143,756)
                                                              ----------     ----------
          Finance receivables -- net........................   5,613,776      5,491,878
Goodwill....................................................     204,494        203,564
Equipment on operating leases -- net........................     203,218        201,060
Other assets................................................     621,269        548,967
                                                              ----------     ----------
          Total assets......................................  $6,679,739     $6,463,958
                                                              ==========     ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
  Accrued interest and other liabilities....................  $  337,090     $  341,394
  Amounts due to Textron Inc. ..............................      33,429         29,985
  Deferred income taxes.....................................     361,162        357,324
  Note payable to Textron Inc. .............................          --        510,000
  Other debt................................................   4,948,651      4,188,420
                                                              ----------     ----------
          Total liabilities.................................   5,680,332      5,427,123
                                                              ----------     ----------
Textron Financial and Litchfield obligated mandatory
  redeemable preferred securities of trust subsidiary
  holding solely Litchfield junior subordinated
  debentures................................................      27,347         27,480
SHAREHOLDER'S EQUITY
Common stock ($100 par value, 4,000 shares authorized; 2,500
  shares issued and outstanding)............................         250            250
Capital surplus.............................................     573,676        573,676
Investment in parent company preferred stock................     (25,000)       (25,000)
Accumulated other comprehensive loss........................     (17,264)       (18,793)
Retained earnings...........................................     440,398        479,222
                                                              ----------     ----------
          Total shareholder's equity........................     972,060      1,009,355
                                                              ----------     ----------
          Total liabilities and shareholder's equity........  $6,679,739     $6,463,958
                                                              ==========     ==========
</Table>

     See notes to condensed consolidated financial statements (unaudited).
                                        3
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

                         TEXTRON FINANCIAL CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                  (UNAUDITED)

<Table>
<Caption>
                                                                 2002          2001
                                                              -----------   -----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................  $    14,176   $    28,426
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Provision for losses......................................       30,375        11,181
  Depreciation..............................................        7,167         4,572
  Deferred income tax provision.............................        3,526         6,117
  Amortization..............................................        2,792         4,003
  Gains on securitizations..................................       (7,595)       (5,170)
  Increase (decrease) in accrued interest and other
     liabilities............................................      (36,574)       19,159
  Other.....................................................       11,694       (23,465)
                                                              -----------   -----------
          Net cash provided by operating activities.........       25,561        44,823
CASH FLOWS FROM INVESTING ACTIVITIES:
Finance receivables originated or purchased.................   (1,889,968)   (1,860,819)
Finance receivables repaid..................................    1,536,477     1,258,849
Proceeds from receivable sales, including securitizations...      190,201       694,729
Proceeds from disposition of operating leases and other
  assets....................................................       16,041         5,364
Purchase of assets for operating leases.....................      (21,743)         (108)
Proceeds from real estate owned.............................        1,761            --
Other capital expenditures..................................       (6,686)       (3,237)
Other investments...........................................          265        (1,518)
                                                              -----------   -----------
          Net cash (used in) provided by investing
            activities......................................     (173,652)       93,260
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt....................      407,370       297,054
Principal payments on long-term debt........................     (402,692)     (409,849)
Net increase (decrease) in commercial paper.................      787,995       (41,128)
Net increase (decrease) in other short-term debt............     (542,442)       16,464
Proceeds from issuance of nonrecourse debt..................           --        60,177
Principal payments on nonrecourse debt......................      (34,091)      (59,495)
Net increase in amounts due to Textron Inc. ................        3,444        13,637
Capital contributions from Textron Inc. ....................        2,252         2,252
Dividends paid to Textron Inc. .............................      (55,252)      (15,652)
                                                              -----------   -----------
          Net cash provided by (used in) financing
            activities......................................      166,584      (136,540)
                                                              -----------   -----------
NET INCREASE IN CASH........................................       18,493         1,543
Cash and equivalents at beginning of period.................       18,489         6,498
                                                              -----------   -----------
Cash and equivalents at end of period.......................  $    36,982   $     8,041
                                                              ===========   ===========
</Table>

     See notes to condensed consolidated financial statements (unaudited).
                                        4
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

                         TEXTRON FINANCIAL CORPORATION

      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
                                  (UNAUDITED)

<Table>
<Caption>
                                                    INVESTMENT    ACCUMULATED
                                                     IN PARENT       OTHER
                                COMMON   CAPITAL      COMPANY       COMPRE-      RETAINED
                                STOCK    SURPLUS    PREF. STOCK   HENSIVE LOSS   EARNINGS     TOTAL
                                ------   --------   -----------   ------------   --------   ----------
<S>                             <C>      <C>        <C>           <C>            <C>        <C>
BALANCE DECEMBER 30, 2000.....   $250    $533,676    $(25,000)            --     $400,751   $  909,677
Comprehensive income:
  Net income..................     --          --          --             --      120,571      120,571
  Other comprehensive income,
     net of income taxes:
  Unrealized net losses on
     hedge contracts..........     --          --          --       $(19,359)          --      (19,359)
  Unrealized net gains on
     interest-only
     securities...............     --          --          --            566           --          566
                                                                    --------                ----------
  Other comprehensive loss....     --          --          --        (18,793)          --      (18,793)
Comprehensive income..........     --          --          --             --           --      101,778
Capital contributions from
  Textron Inc. ...............     --      49,010          --             --           --       49,010
Dividends to Textron Inc. ....     --      (9,010)         --             --      (42,100)     (51,110)
                                 ----    --------    --------       --------     --------   ----------
BALANCE DECEMBER 29, 2001.....    250     573,676     (25,000)       (18,793)     479,222    1,009,355
Comprehensive income:
  Net income..................     --          --          --             --       14,176       14,176
  Other comprehensive income,
     net of income taxes:
  Unrealized net gains on
     hedge contracts..........     --          --          --          2,879           --        2,879
  Unrealized net losses on
     interest-only
     securities...............     --          --          --         (1,350)          --       (1,350)
                                                                    --------                ----------
  Other comprehensive
     income...................     --          --          --          1,529           --        1,529
                                                                                            ----------
Comprehensive income..........     --          --          --             --           --       15,705
Capital contributions from
  Textron Inc. ...............     --       2,252          --             --           --        2,252
Dividends to Textron Inc. ....     --      (2,252)         --             --      (53,000)     (55,252)
                                 ----    --------    --------       --------     --------   ----------
BALANCE MARCH 31, 2002........   $250    $573,676    $(25,000)      $(17,264)    $440,398   $  972,060
                                 ====    ========    ========       ========     ========   ==========
</Table>

     See notes to condensed consolidated financial statements (unaudited).
                                        5
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)

                         TEXTRON FINANCIAL CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

     The financial statements should be read in conjunction with the financial
statements included in Textron Financial Corporation's Annual Report on Form
10-K for the year ended December 29, 2001. The accompanying unaudited
consolidated financial statements include the accounts of Textron Financial
Corporation (Textron Financial or the Company) and its subsidiaries. All
significant intercompany transactions are eliminated. The consolidated financial
statements are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of Textron Financial's consolidated financial position at
March 31, 2002 and December 29, 2001, and its consolidated results of operations
and cash flows for each of the respective three-month periods ended March 31,
2002 and 2001. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year. Certain
prior year balances have been reclassified to conform to the current year
presentation.

NOTE 2. OTHER INCOME

<Table>
<Caption>
                                                             THREE MONTHS ENDED
                                                            ---------------------
                                                            MARCH 31,   MARCH 31,
                                                              2002        2001
                                                            ---------   ---------
                                                               (IN THOUSANDS)
<S>                                                         <C>         <C>
Securitization gains......................................   $  7,595    $  5,170
Servicing fees............................................      5,516       2,287
Investment income.........................................      4,465       3,752
Late charges..............................................      2,275       2,191
Prepayment gains..........................................      1,711       3,002
Syndication gains.........................................      1,495       4,394
Other.....................................................      8,810       5,889
                                                             --------    --------
          Total other income..............................   $ 31,867    $ 26,685
                                                             ========    ========
</Table>

     The Other component of Other income includes custodial fees, commitment
fees, residual gains, insurance fees and other miscellaneous fees, which are
primarily recognized as income when received.

NOTE 3. MANAGED FINANCE RECEIVABLES

     Textron Financial manages finance receivables for a variety of investors,
participants and third-party portfolio owners.

<Table>
<Caption>
                                                      MARCH 31,    DECEMBER 29,
                                                         2002          2001
                                                      ----------   ------------
                                                           (IN THOUSANDS)
<S>                                                   <C>          <C>
Owned receivables...................................  $5,761,532    $5,635,634
Securitized receivables.............................   2,409,432     2,332,025
                                                      ----------    ----------
                                                       8,170,964     7,967,659
Nonrecourse participations..........................     504,260       591,853
Third-party portfolio servicing.....................     599,765       740,246
SBA sales agreements................................      52,763        49,338
                                                      ----------    ----------
          Total managed finance receivables.........  $9,327,752    $9,349,096
                                                      ==========    ==========
</Table>

                                        6
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)
                         TEXTRON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

     Nonrecourse participations consist of undivided interests in loans
originated by Textron Financial, primarily in vacation interval resorts and golf
finance, which are sold to independent investors.

     The third-party portfolio servicing amounts largely represent finance
receivable portfolios of resort developers and third-party securitizations as
well as banks and leasing companies.

     Owned receivables include approximately $27 million of noncash finance
receivables additions, which were unfunded at March 31, 2002, primarily holdback
arrangements. The corresponding liability is included in Accrued interest and
other liabilities on the Condensed Consolidated Balance Sheets.

NOTE 4. LOAN IMPAIRMENT

     Textron Financial periodically assesses finance receivables, excluding
homogeneous loan portfolios and finance leases, for impairment. The Company
considers a loan to be impaired if the fair value of the loan is less than its
carrying amount and establishes a reserve based on this difference. Fair value
is based on the present value of expected future cash flows discounted at the
loan's effective interest rate, the loan's observable market price or, if the
loan is collaterally dependent, at the fair value of the collateral. This
evaluation is inherently subjective, as it requires estimates including the
amount and timing of future cash flows expected to be received on impaired loans
that may differ from actual results.

     The Company suspends the accrual of interest income for accounts that are
contractually delinquent by more than three months, unless collection is not
doubtful. In addition, detailed reviews of loans may result in earlier
suspension if collection is doubtful. Cash payments on nonaccrual accounts,
including finance charges, generally are applied to reduce loan principal. The
Company had $153.9 million of nonaccrual finance receivables at March 31, 2002,
compared to $113.8 million at December 29, 2001. Nonaccrual loans resulted in
Textron Financial's revenues being reduced by approximately $3.8 million and
$2.0 million for the first three months of 2002 and 2001, respectively. No
interest income was recognized using the cash basis method. Excluding
homogeneous loan portfolios and finance leases, the Company had $87.1 million of
nonaccrual finance receivables at March 31, 2002, compared to $53.9 million at
December 29, 2001, which were considered impaired. The allowance for losses on
receivables related to impaired loans was $19.3 million at March 31, 2002, and
$10.9 million at December 29, 2001. The average recorded investment in impaired
loans during the first three months of 2002 was $61.6 million, compared to $72.2
million in the corresponding period in 2001.

NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS

     On December 30, 2001, Textron Financial adopted SFAS No. 142, "Goodwill and
Other Intangible Assets", which requires companies to stop amortizing goodwill
and certain intangible assets with indefinite useful lives, and requires an
annual review for impairment. Upon adoption, Textron Financial has discontinued
the amortization of goodwill. Management is currently in the process of
conducting the first step of the impairment review for its goodwill and expects
to complete this assessment no later than the second quarter of 2002, in
accordance with the provisions of this standard. Although more analysis is
necessary, a preliminary review indicates that there is no impairment of
goodwill.

     Textron Financial also adopted the remaining provisions of SFAS No. 141,
"Business Combinations" on December 30, 2001. For goodwill and intangible assets
reported in connection with acquisitions made prior to July 1, 2001, these
provisions broaden the criteria for recording intangible assets separate from
goodwill and require that certain intangible assets that do not meet the new
criteria, such as workforce, be reclassified into goodwill. Upon adoption of
these provisions, intangible assets totaling $0.9 million were reclassified into
goodwill within the Specialty Finance segment. Goodwill totaled $133.7 million
in the Specialty Finance

                                        7
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)
                         TEXTRON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

segment, $40.6 million in the Structured Capital segment, $16.6 million in the
Aircraft Finance segment and $13.6 million in the Revolving Credit segment at
March 31, 2002.

     The impact of discontinuing the amortization of goodwill is presented
below:

<Table>
<Caption>
                                                           THREE MONTHS ENDED
                                                          ---------------------
                                                          MARCH 31,   MARCH 31,
                                                            2002        2001
                                                          ---------   ---------
                                                             (IN THOUSANDS)
<S>                                                       <C>         <C>
Reported net income.....................................   $14,176     $28,426
Add back: amortization, net of taxes....................        --       2,797
                                                           -------     -------
Adjusted net income.....................................   $14,176     $31,223
                                                           =======     =======
</Table>

NOTE 6. OTHER ASSETS

<Table>
<Caption>
                                                        MARCH 31,   DECEMBER 29,
                                                          2002          2001
                                                        ---------   ------------
                                                             (IN THOUSANDS)
<S>                                                     <C>         <C>
Retained interests in securitizations.................  $221,962      $178,599
Investment in equipment residuals.....................   113,258       112,804
Interest-only securities..............................    81,740        78,939
Short-term investments................................    64,117        63,819
Fixed assets -- net...................................    47,743        44,680
Repossessed assets and properties.....................    39,276        23,235
Other long-term investments...........................    28,078        24,723
Other.................................................    25,095        22,168
                                                        --------      --------
          Total other assets..........................  $621,269      $548,967
                                                        ========      ========
</Table>

     The Investment in equipment residuals represents the remaining equipment
residual values associated with aircraft and Textron golf and turf equipment
lease payments that were securitized in 2002, 2001 and 2000. The cost of fixed
assets is being depreciated using the straight-line method based on the
estimated useful lives of the assets.

                                        8
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)
                         TEXTRON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE 7. DEBT AND CREDIT FACILITIES

<Table>
<Caption>
                                                      MARCH 31,    DECEMBER 29,
                                                         2002          2001
                                                      ----------   ------------
                                                           (IN THOUSANDS)
<S>                                                   <C>          <C>
Short-term debt:
  Commercial paper..................................  $1,411,247    $  623,252
  Other short-term debt.............................      32,013       574,455
                                                      ----------    ----------
          Total short-term debt.....................   1,443,260     1,197,707
Long-term debt:
  5.65% -- 5.95% notes; due 2004 to 2005............     507,870       399,503
  6.71% -- 6.84% notes; due 2003 to 2007............      72,571        31,637
  7.13% -- 7.37% notes; due 2002 to 2004............   1,081,374     1,081,223
  Variable rate notes; due 2002 to 2004.............   1,843,576     1,988,350
                                                      ----------    ----------
          Total long-term debt......................   3,505,391     3,500,713
                                                      ----------    ----------
          Total debt................................  $4,948,651    $4,698,420
                                                      ==========    ==========
</Table>

     The weighted average interest rates on short-term borrowings, before
consideration of the effect of interest rate exchange agreements, have been
determined by relating the annualized interest cost to the daily average dollar
amounts outstanding. The combined weighted average interest rate was 2.15%
during the three months ended March 31, 2002, and 5.87% at March 31, 2001.

     Interest on Textron Financial's variable rate notes is predominately tied
to the three-month LIBOR for U.S. dollar deposits. The weighted average interest
rate on these notes, before consideration of the effect of interest rate
exchange agreements, was 2.31% at March 31, 2002.

     Textron Financial has bank line of credit agreements of $1.5 billion, of
which $500 million will expire in 2002 and $1.0 billion will expire in 2006.
Textron Financial's lines of credit, including the $100 million line of credit
with Textron, not used or reserved as support for commercial paper at March 31,
2002, were $189 million. The Company also maintains a C$50 million committed
Canadian facility under which it can borrow an additional C$50 million on an
uncommitted basis. At March 31, 2002, the Company has fully used the committed
portion of the facility in addition to borrowing C$8 million under the
uncommitted portion of the facility. Textron Financial also has a $25 million UK
facility, of which $16 million remains unused at March 31, 2002. Both the
Canadian and UK facilities expire in 2002, however, prior to expiration Textron
Financial expects to extend the maturity of both facilities to 2003. Textron
Financial generally pays fees in support of these lines.

     Through its subsidiary, Textron Financial Canada Funding Corp. (Textron
Canada Funding), the Company may periodically issue debt securities. Textron
Financial owns 100% of the common stock of Textron Canada Funding. Textron
Canada Funding is a financing subsidiary of Textron Financial with no
operations, revenues or cash flows other than those related to the issuance,
administration and repayment of debt securities that are or will be fully and
unconditionally guaranteed by Textron Financial.

     The terms of certain of the Company's loan agreements and credit
facilities, under the most restrictive covenant, limit the payment of dividends
to $387.0 million at March 31, 2002. In the first quarter of 2002, Textron
Financial declared and paid dividends of $55.3 million.

                                        9
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)
                         TEXTRON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE 8. DERIVATIVE FINANCIAL INSTRUMENTS

     Textron Financial has entered into interest rate exchange agreements to
mitigate its exposure to interest rate changes by converting certain of its
fixed rate receivables and debt issues to floating rates. The agreements require
the Company to make periodic fixed rate payments in exchange for floating rate
receipts based on specified notional amounts. In the first quarter of 2002,
Textron Financial also entered into a foreign currency exchange agreement to
convert a Y6.0 billion fixed rate note to a $44.8 variable rate note. The
agreement requires the Company to make U.S. dollar payments based on LIBOR in
exchange for fixed receipts of Yen at specified notional amounts. The Company
has designated these agreements fair value hedges. The Company does not hold or
issue derivative financial instruments for trading or speculative purposes.

     Textron Financial has also entered into interest rate exchange, cap and
floor agreements to mitigate its exposure on interest-only securities resulting
from securitizations. The exchange agreements require the Company to make
periodic variable payments in exchange for periodic fixed rate receipts and vice
versa based on specified notional amounts. The interest rate cap and floor
agreements require the Company to make periodic variable rate payments based on
specified notional amounts if interest rates exceed or fall below specified
rates. In the first quarter of 2002, the Company also entered into foreign
currency exchange agreements to convert $78.7 million of variable rate notes
receivable to C$125.0 million of fixed rate notes receivable. The agreements
require the Company to make U.S. dollar payments based on LIBOR in exchange for
fixed receipts of Canadian dollars at specified notional amounts. The Company
has designated these agreements cash flow hedges.

     As of March 31, 2002, Textron Financial has not incurred or recognized any
gains or losses in earnings as the result of the ineffectiveness or the
exclusion from its assessment of hedge effectiveness of its fair value or cash
flow hedges.

NOTE 9. TEXTRON FINANCIAL AND LITCHFIELD OBLIGATED MANDATORY REDEEMABLE
        PREFERRED SECURITIES OF TRUST SUBSIDIARY HOLDING SOLELY LITCHFIELD
        JUNIOR SUBORDINATED DEBENTURES

     Prior to Textron Financial's acquisition of Litchfield on November 3, 1999,
a trust, sponsored and wholly-owned by Litchfield, issued to the public $26.2
million of mandatory redeemable preferred securities (Preferred Securities). The
trust subsequently invested in $26.2 million aggregate principal amount of
Litchfield 10% Series A Junior Subordinated Debentures (Series A Debentures),
due 2029. The Series A Debentures are the sole asset of the trust. The amounts
due to the trust under the Series A Debentures and the related income statement
amounts have been eliminated in Textron Financial's consolidated financial
statements.

     The Preferred Securities were recorded by Textron Financial at the fair
value of $28.6 million as of the acquisition date and the fair value adjustment
is being amortized through June 2004.

     The Preferred Securities accrue and pay cash distributions quarterly at a
rate of 10% per annum. The trust's obligation under the Preferred Securities are
fully and unconditionally guaranteed by Litchfield, including, without
limitation, all obligations arising under the Declaration Trust, the Trust
Preferred Securities, the Indenture, the Debentures and the ancillary agreements
entered into in connection with the foregoing. The trust will redeem all of the
outstanding Preferred Securities when the Series A Debentures are paid at
maturity on June 30, 2029, or otherwise become due. Litchfield will have the
right to redeem 100% of the principal plus accrued and unpaid interest on or
after June 30, 2004.

     As a result of the acquisition, Textron Financial has agreed to make
payments to the holders of the Preferred Securities, when due, to the extent not
paid by or on behalf of the trust or the subsidiary.

                                        10
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)
                         TEXTRON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

NOTE 10. ACCUMULATED OTHER COMPREHENSIVE LOSS AND COMPREHENSIVE INCOME

     Accumulated other comprehensive loss is as follows:

<Table>
<Caption>
                                                           THREE MONTHS ENDED
                                                          ---------------------
                                                          MARCH 31,   MARCH 31,
                                                            2002        2001
                                                          ---------   ---------
                                                             (IN THOUSANDS)
<S>                                                       <C>         <C>
Beginning of period.....................................  $(18,793)         --
Transition adjustment due to change in accounting for
  derivative instruments and hedging activities, net of
  income tax benefits of $6,948.........................        --    $(11,580)
Net deferred gain on hedge contracts, net of income
  taxes of $1,183 and $4,850, respectively..............     1,972       8,083
Amortization of deferred loss on terminated hedge
  contracts, net of income taxes of $545................       907          --
Net deferred loss on interest-only securities, net of
  income tax benefits of $810...........................    (1,350)         --
                                                          --------    --------
End of period...........................................  $(17,264)   $ (3,497)
                                                          ========    ========
</Table>

     Comprehensive income is summarized below:

<Table>
<Caption>
                                                           THREE MONTHS ENDED
                                                          ---------------------
                                                          MARCH 31,   MARCH 31,
                                                            2002        2001
                                                          ---------   ---------
                                                             (IN THOUSANDS)
<S>                                                       <C>         <C>
Net income..............................................   $14,176     $28,426
Other comprehensive income (loss).......................     1,529      (3,497)
                                                           -------     -------
Comprehensive income....................................   $15,705     $24,929
                                                           =======     =======
</Table>

NOTE 11. CONTINGENCIES

     There are pending or threatened lawsuits and other proceedings against
Textron Financial and its subsidiaries. Some of these suits and proceedings seek
compensatory, treble or punitive damages in substantial amounts. These suits and
proceedings are being defended or contested on behalf of Textron Financial and
its subsidiaries. On the basis of information presently available, Textron
Financial believes any such liability would not have a material effect on
Textron Financial's financial position or results of operations.

NOTE 12. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

     The Company's reportable segments are strategically aligned on the markets
served and the products offered. During 2001, the Company decided to exit
certain of its businesses and product lines and to realign its remaining
businesses in four operating segments: Specialty Finance, Revolving Credit,
Structured Capital and Aircraft Finance. In order to manage the orderly
liquidation of the portfolios relating to the exited businesses and to segregate
their results from its ongoing businesses, the Company has grouped their results
in the Other segment. As a result of these changes, the financial information
for the three-month period ended March 31, 2001, has been restated reflecting
the realignment of the segments.

                                        11
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS (CONTINUED)
                         TEXTRON FINANCIAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)

<Table>
<Caption>
                                                                THREE MONTHS ENDED
                                                               ---------------------
                                                               MARCH 31,   MARCH 31,
                                                                 2002        2001
                                                               ---------   ---------
                                                                  (IN THOUSANDS)
<S>                                                            <C>         <C>
Revenues
  Specialty Finance.........................................   $ 48,212    $ 57,503
  Revolving Credit..........................................     40,864      38,367
  Structured Capital........................................     24,341      27,128
  Aircraft Finance..........................................     23,208      30,403
  Other.....................................................      7,451      17,301
                                                               --------    --------
Total revenues..............................................   $144,076    $170,702
                                                               ========    ========
Income (loss) before income taxes and distributions on
  preferred securities (1)(2)
  Specialty Finance.........................................   $ 15,565    $ 18,182
  Revolving Credit..........................................     10,467      12,482
  Structured Capital........................................      3,842       8,782
  Aircraft Finance..........................................      1,881       8,662
  Other.....................................................     (8,873)     (2,073)
                                                               --------    --------
Total income before income taxes and distributions on
  preferred securities......................................   $ 22,882    $ 46,035
                                                               ========    ========
</Table>

<Table>
<Caption>
                                                              MARCH 31,    DECEMBER 29,
                                                                 2002          2001
                                                              ----------   ------------
                                                                   (IN THOUSANDS)
<S>                                                           <C>          <C>
Finance assets (3)
  Specialty Finance.........................................  $2,477,127    $2,434,318
  Revolving Credit..........................................   1,337,931     1,221,751
  Structured Capital........................................   1,158,261     1,152,360
  Aircraft Finance..........................................   1,301,468     1,248,305
  Other.....................................................     215,098       251,499
                                                              ----------    ----------
Total finance assets........................................  $6,489,885    $6,308,233
                                                              ==========    ==========
</Table>

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

(1) Interest expense is allocated to each segment in proportion to its net
    investment in finance assets. Net investment in finance assets includes
    deferred income taxes, security deposits and other specifically identified
    liabilities. The interest allocated matches variable rate debt with variable
    rate financing assets and fixed rate debt with fixed rate financing assets.

(2) Indirect expenses are allocated to each segment based on the use of such
    resources. Most allocations are based on the segment's proportion of net
    investment in finance assets, headcount, number of transactions, computer
    resources and senior management time.

(3) Finance assets include: finance receivables; equipment on operating leases,
    net of accumulated depreciation; repossessed assets; beneficial interests in
    securitizations; investment in equipment residuals and long-term investments
    (some of which are classified in Other assets on Textron Financial's
    Condensed Consolidated Balance Sheets).

                                        12
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

                         TEXTRON FINANCIAL CORPORATION

FINANCIAL CONDITION

Liquidity and Capital Resources

     Textron Financial Corporation (Textron Financial or the Company) uses a
broad base of financial resources for its liquidity and capital needs. Cash is
provided from operations and several sources of borrowings, including the
issuance of commercial paper and short-term debt, sales of medium and long-term
debt in the U.S. and foreign financial markets and junior subordinated
borrowings under a $100 million line of credit with Textron Inc. (Textron). For
liquidity purposes, Textron Financial has a policy of maintaining sufficient
unused lines of credit to support its outstanding commercial paper. Textron
Financial has bank line of credit agreements of $1.5 billion, of which $500
million will expire in 2002 and $1.0 billion will expire in 2006. None of these
lines of credit were used at March 31, 2002 or December 29, 2001. While the $500
million facility includes a one year term out option, Textron Financial expects
to negotiate and extend the maturity of the facility in 2002. Textron Financial
also maintains a C$50 million committed Canadian facility under which it can
borrow an additional C$50 million on an uncommitted basis. At March 31, 2002,
Textron Financial has fully used the committed portion of the facility in
addition to borrowing C$8 million under the uncommitted portion of the facility.
Textron Financial also has a $25 million UK facility, of which $16 million
remains unused at March 31, 2002. Both the Canadian and UK facilities expire in
2002, however, prior to expiration Textron Financial expects to extend the
maturity of both facilities to 2003. Unused lines of credit, including the $100
million line of credit with Textron, not reserved as support for commercial
paper were $189 million at March 31, 2002, compared to $975 million at December
29, 2001. The decrease in the unused lines of credit is attributable to the pay
down and termination of the short-term revolving note agreement with Textron.

     Under a shelf registration statement filed with the SEC, Textron Financial
may issue public debt securities in one or more offerings up to a total maximum
offering of $3 billion. In the first quarter of 2002, Textron Financial issued
$249 million of fixed rate notes and $158 million of floating rate notes under
this facility that mature in 2003 through 2007. The proceeds from the issuances
were used to refinance maturing commercial paper and long-term debt at par. At
March 31, 2002, Textron Financial had $2.6 billion available under this
facility.

     During the first quarter of 2002, Textron Financial received proceeds from
securitizations of $132 million of small business finance receivables (on a
revolving basis), $38 million of captive golf and turf finance receivables, $10
million of resort receivables and $5 million of land finance receivables. These
securitizations provided Textron Financial with an alternate source of funding
while maintaining desired debt-to-capital ratios. Textron Financial used the
proceeds from the securitizations to retire commercial paper. In connection with
these securitizations, Textron Financial is obligated to repurchase a certain
class of loans within a $175 million revolving securitization conduit if Textron
Financial's credit rating drops below BBB. Such loans amounted to $33 million at
March 31, 2002. Textron Financial anticipates that it will enter into additional
securitization transactions during the remainder of 2002.

     During the fourth quarter of 2001, certain of Textron Financial's
commercial paper and long-term debt credit ratings were downgraded. Although
Textron Financial's borrowing spreads have increased as a result of the
downgrades, Textron Financial has not experienced any change in its access to
the commercial paper, long-term debt and securitization markets. Further
downgrades in Textron Financial's ratings could increase borrowing spreads or
limit its access to the commercial paper, long-term debt and securitization
markets. In addition, Textron Financial's $1.5 billion revolving bank line of
credit agreements contain certain financial covenants with which Textron
Financial must comply in order to maintain its ability to borrow under the
facilities. Textron Financial was in full compliance with such covenants at
March 31, 2002. Textron Financial believes that it has adequate credit
facilities and access to credit markets to meet its long-term financing needs.

                                        13
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (CONTINUED)

     Cash flows provided by operations were $26 million during the first quarter
of 2002, compared to $45 million in the corresponding period last year. The
decrease was due principally to the timing of payments of accrued interest and
other liabilities, partially offset by a higher loss provision and a decrease in
other assets. Cash flows used in investing activities were funded primarily from
the collection of receivables, the syndication and securitization of receivables
and through the issuance of debt.

     Textron Financial declared and paid dividends to Textron of $55.3 million
during the first quarter of 2002, compared to $15.7 million of dividends
declared and paid during the corresponding period of 2001. The increase in 2002
was due to excess capital that resulted from slower than anticipated receivable
growth in the first quarter of 2002.

     Because the finance business involves the purchase and carrying of
receivables, a relatively high ratio of borrowings to net worth is customary.
Debt as a percentage of total capitalization was 83% at March 31, 2002, up from
82% at December 29, 2001. Textron Financial's ratio of earnings to fixed charges
was 1.49x for the three months ended March 31, 2002, compared to 1.59x for the
corresponding three months in 2001. Commercial paper and Other short-term debt
as a percentage of total debt was 29% at March 31, 2002, compared to 25% at
December 29, 2001. Relative changes in short and long-term debt primarily depend
on matching the duration of assets and liabilities.

Finance Assets

     Textron Financial's portfolio includes a wide variety of loans and leases,
almost entirely on a secured basis, to customers located primarily in North
America. Management believes that the portfolio avoids excessive concentration
of risk through diversification across geographic regions, industries and types
of collateral and among borrowers.

     Total finance assets were $6.5 billion at March 31, 2002, up 3% from $6.3
billion at December 29, 2001. The increase in finance assets was mostly due to
increases in dealer floorplan receivables ($217 million, including a $124
million portfolio purchase), golf finance receivables ($47 million), and
aircraft finance receivables and operating lease assets ($45 million), partially
offset by a decrease in small business financing due to a revolving portfolio
securitization and the continued liquidation of the portfolios relating to the
exited businesses.

     Finance receivable additions for the first quarter of 2002 were consistent
with 2001 at $1.9 billion.

Nonperforming Assets

     Nonperforming assets, which includes independent and nonrecourse captive
finance assets, as a percentage of finance assets increased to 2.97% ($193
million) at March 31, 2002, compared to 2.13% ($134 million) at December 29,
2001. The $59 million increase was primarily related to increases in syndicated
bank loans in the Structured Capital segment, media finance in the Specialty
Finance segment and the highly collateralized Aircraft Finance segment,
partially offset by decreases in other portfolios. The allowance for losses on
receivables as a percentage of nonperforming assets decreased to 77% at March
31, 2002, compared to 107% at December 29, 2001. The decrease in the percentage
reflects the high value collateral supporting the nonperforming assets that
should result in lower expected loan losses.

Interest Rate Sensitivity

     The Company's mix of fixed and floating rate debt is continuously monitored
by management and is adjusted, as necessary, based on evaluations of internal
and external factors.

     Management's strategy of matching interest-sensitive assets with
interest-sensitive liabilities limits Textron Financial's risk to changes in
interest rates and includes entering into interest rate exchange agreements as
part of this matching strategy. At March 31, 2002, interest-sensitive assets in
excess of interest-sensitive liabilities were $466 million, net of $370 million
of variable rate interest rate exchange agreements
                                        14
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (CONTINUED)

relating to debt and $96 million of variable rate interest rate exchange
agreements on finance receivables, compared to interest-sensitive assets in
excess of interest-sensitive liabilities of $410 million, net of $370 million of
interest rate exchange agreements on long-term debt and $97 million of interest
rate exchange agreements on finance receivables. The change in the Company's net
position does not reflect a change in management's match funding strategy, which
is consistent with year-end.

     Management believes that its asset management policy provides adequate
protection against interest rate risks. Increases or decreases in interest
rates, however, could have an adverse effect on interest margin. Variable rate
receivables are generally tied to changes in the prime rate offered by major
U.S. banks or LIBOR. Changes in short-term borrowing costs generally precede
changes in variable rate receivable yields. From a quantitative perspective,
Textron Financial assesses its exposure to interest rate changes using an
analysis that measures the potential loss in net income, over a twelve-month
period, resulting from a hypothetical increase in interest rates of 100 basis
points across all maturities occurring at the outset of the measurement period
(sometimes referred to as a "shock test"). Textron Financial also assumes in its
analysis that prospective receivable additions will be match funded, existing
portfolios will not prepay and all other relevant factors will remain constant.
This shock test model, when applied to Textron Financial's asset and liability
position at March 31, 2002, indicated no material effect on Textron Financial's
net income and cash flows for the following twelve-month period or fair value at
March 31, 2002.

Financial Risk Management

     Textron Financial's results are affected by changes in U.S. and to a lesser
extent, foreign interest rates. As part of managing this risk, Textron Financial
enters into interest rate exchange agreements. Textron Financial's objective of
entering into such agreements is not to speculate for profit, but generally to
convert variable rate debt into fixed rate debt and vice versa. The overall
objective of Textron Financial's interest rate risk management is to achieve a
prudent balance between floating and fixed rate debt. These agreements do not
involve a high degree of complexity or risk. Textron Financial does not trade in
interest rate exchange agreements or enter into leveraged interest rate exchange
agreements.

     Textron Financial manages its foreign currency exposure by funding most
foreign currency denominated assets with liabilities in the same currency. The
Company may enter into foreign currency exchange agreements to convert
foreign-currency-denominated assets and liabilities into
functional-currency-denominated assets and liabilities. In addition, as part of
managing its foreign currency exposure, Textron Financial may enter into foreign
currency forward exchange contracts. The objective of such agreements is to
manage any remaining exposure to changes in currency rates. The notional amounts
of outstanding foreign currency forward exchange contracts are not material.

RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 VS. MARCH 31, 2001

Revenues

     First quarter 2002 revenues decreased by $26.6 million, or 15.6%, compared
to the corresponding period in 2001. Lower finance charges and discounts reflect
a lower average yield of 7.85% versus 10.27% in 2001, primarily due to a lower
interest rate environment. Lower average yields were offset by higher average
finance receivables before consideration of a revolving floorplan securitization
conduit and by higher servicing, investment income and higher operating lease
rental revenue. Operating lease rental revenue increased $2.3 million on a
higher level of average operating lease assets, primarily in the Aircraft
Finance segment.

                                        15
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (CONTINUED)

Interest Expense

     First quarter 2002 interest expense decreased by $31.5 million, or 40.5%,
on 1.9% higher average debt outstanding. The lower interest expense reflects a
decrease in the average borrowing rate to 3.84% from 6.54%, attributable to a
lower interest rate environment.

Interest Margin

     Textron Financial's earnings are influenced by the interest margin earned
on finance receivables (i.e., the excess of revenues over interest expense on
borrowings).

     Interest margin increased $4.8 million, or 25 basis points, (7.01% versus
6.76% on average net investment) for the first quarter of 2002 compared to the
corresponding period in 2001. The increase in interest margin reflects an
increase in the spread between average yield on finance receivables and the
average borrowing rate on the corresponding debt.

Selling and Administrative Expenses

     Selling and administrative expenses of $41.0 million increased $7.1 million
in the first quarter of 2002 compared to the corresponding period in 2001. The
increase in 2002 principally reflects higher operating expenses related to
growth in managed receivables, service-related operations and higher legal and
collection expenses. Selling and administrative expenses as a percentage of
average managed receivables were 1.79% (on an annualized basis) in the first
quarter of 2002, compared to 1.69% in 2001.

Provision for Losses

     The provision for losses of $30.4 million for the first quarter of 2002
increased from $11.2 million for the corresponding period in 2001. The increase
reflects higher net charge-offs primarily in the liquidating portfolios and the
Structured Capital segment, and an increase in the allowance for losses
reflecting growth in nonperforming assets. Net charge-offs were $27.7 million in
the first quarter of 2002 compared to $16.4 million in the corresponding period
of 2001.

     Although management believes it has made adequate provision for anticipated
losses, realization of finance assets remains subject to uncertainties.
Subsequent evaluations of nonperforming assets, in light of factors then
prevailing, including economic conditions, may require additional increases in
the allowance for losses for such assets.

Operating Results by Segment

     Specialty Finance income before income taxes and distributions on preferred
securities decreased by $2.6 million despite $311 million higher average finance
assets and higher interest margin ($1.1 million). The increase in interest
margin was principally offset by higher provision for losses ($2.4 million) and
higher operating expenses ($2.3 million).

     Revolving Credit income before income taxes and distributions on preferred
securities decreased by $2.0 million despite $641 million higher average finance
assets before consideration of the revolving floorplan conduit and higher
interest margin ($12.2 million) offset by higher provision for losses ($8.8
million) and higher operating expenses ($5.4 million).

     Structured Capital income before income taxes and distributions on
preferred securities decreased by $4.9 million despite higher average finance
assets of $216 million principally due to lower interest margin ($1.4 million),
higher operating expenses ($1.2 million) and higher provision for losses ($3.1
million).

     Aircraft Finance income before income taxes and distributions on preferred
securities decreased by $6.8 million principally reflecting a lower interest
margin ($5.1 million), higher provision for losses ($1.0 million) and higher
operating lease depreciation ($1.0 million) despite $163 million higher average

                                        16
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -- (CONTINUED)

finance assets. The lower interest margin is due to competitive pressures
inhibiting the ability to pass on higher interest rate spreads to benchmark
borrowing rates such as U.S. Treasury rates and LIBOR.

Net Income

     First quarter 2002 net income was $14.2 million, $14.3 million or 50.1%
lower than the corresponding period in 2001. Despite a higher interest margin,
net income decreased due to higher provision for losses, reflecting higher net
charge-offs and an increase in the allowance for losses on receivables, higher
operating expenses, primarily related to growth in managed receivables, higher
operating expenses in service-related operations and higher legal and collection
expenses.

Forward-looking Statements

     Certain statements in this 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 nonhistorical
matters; or project revenues, income, returns or other financial measures. These
forward-looking statements are subject to risks and uncertainties that may cause
actual results to differ materially from those contained in the statements,
including the following: (a) the extent to which Textron Financial is able to
successfully integrate acquisitions; (b) changes in worldwide economic and
political conditions and associated impact on interest and foreign exchange
rates; (c) the level of sales of Textron products for which Textron Financial
offers financing; (d) the ability to maintain credit quality and control costs
when entering new markets; (e) the actions of our competitors and our ability to
respond; (f) our ability to attract and retain qualified and experienced
personnel; (g) Textron Financial's access to debt financing at competitive
rates; and (h) access to equity in the form of retained earnings and capital
contributions from Textron.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     For information regarding Textron Financial's Quantitative and Qualitative
Disclosure about Market Risk, see "Interest Rate Sensitivity" and "Financial
Risk Management" in Item 2 of this Form 10-Q.

                                        17
<PAGE>

                          PART II.  OTHER INFORMATION

                         TEXTRON FINANCIAL CORPORATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

<Table>
<Caption>
EXHIBITS
--------
<C>         <S>
     4.1    Indenture dated as of December 9, 1999, between Textron
            Financial Corporation and SunTrust Bank (formerly known as
            Sun Trust Bank, Atlanta), (including form of debt
            securities). Incorporated by reference to Exhibit 4.1 to
            Amendment No. 2 to Textron Financial Corporation's
            Registration Statement on Form S-3 (No. 333-88509).
     4.2    Indenture dated as of November 30, 2001, between Textron
            Financial Canada Funding Corp. and SunTrust Bank, guaranteed
            by Textron Financial Corporation. Incorporated by reference
            to Exhibit 4.2 to amendment No. 1 to Textron Financial
            Corporation's Registration Statement on Form S-3 (No.
            333-72676).
      12    Computation of Ratios of Earnings to Fixed Charges
</Table>

REPORTS ON FORM 8-K

     No reports on Form 8-K were filed during the quarter ended March 31, 2002.

                                        18
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: May 6, 2002                         TEXTRON FINANCIAL CORPORATION

                                          /s/ THOMAS J. CULLEN
                                          --------------------------------------
                                          Thomas J. Cullen
                                          Executive Vice President and Chief
                                          Financial Officer
                                          (Principal Financial Officer)

                                        19