##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSIONWashington, D.C.
    20549
      FORM 10-Q
  þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal quarter ended
    March 31, 2006ORo

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, P.O. Box 6687, Providence,
    RI
    02940-6687
 401-621-4200
 (Address and telephone number of
    principal executive offices)
        þ o
  Rule 12b-2
  o o þ
  Rule 12b-2).
  o þ




---



##### 



TEXTRON
    FINANCIAL CORPORATION
  TABLE OF
    CONTENTS
  PagePART I.FINANCIAL INFORMATIONItem 1.


FINANCIAL
    STATEMENTSConsolidated
    Statements of Income for the three months ended March 31,
    2006 and 2005 (unaudited)


2Consolidated
    Balance Sheets at March 31, 2006 and December 31, 2005
    (unaudited)


3Consolidated
    Statements of Cash Flows for the three months ended
    March 31, 2006 and 2005 (unaudited)


4Consolidated
    Statements of Changes in Shareholders Equity through
    March 31, 2006 (unaudited)


5Notes to
    Consolidated Financial Statements (unaudited)


6Item 2.


MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS


15Item 3.


QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


25Item 4.


CONTROLS AND
    PROCEDURES


25PART II.
    OTHER INFORMATIONItem 6.


EXHIBITS


26EX-12 Computation of Ratio of Earnings to Fix Charges.EX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 902 Certification of CFO   1




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##### Table of Contents



PART I.  FINANCIAL
    INFORMATION  Item 1.
    Financial
    Statements   TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF INCOME
    Three Months Ended March 31, 2006 and 2005
    (Unaudited)
  2006


2005(In millions)Finance charges and discounts

$
145


$
104Securitization gains


11



10Rental revenues on operating leases


7



7Other income


19



20Total revenues


182



141Interest expense


73



45Depreciation of equipment on
    operating leases


4



4Net interest margin


105



92Selling and administrative expenses


47



47Provision for losses


9



12Income before income
    taxes


49



33Income taxes


18



11Net income

$
31


$
22    2




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##### Table of Contents



Item 1.Financial
    Statements (Continued)
   TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED BALANCE SHEETS(Unaudited)
  March 31,


December 31,2006


2005(In millions)AssetsCash and equivalents

$
10


$
10Finance receivables, net of
    unearned income:Distribution finance receivables


1,974



1,654Revolving loans


1,643



1,633Installment contracts


1,424



1,374Golf course and resort mortgages


1,083



1,020Leveraged leases


553



569Finance leases


528



513Total finance receivables


7,205



6,763Allowance for losses on finance
    receivables


(100
)


(96
)Finance
    receivables  net


7,105



6,667Equipment on operating
    leases  net


228



231Goodwill


169



169Other assets


360



364Total assets

$
7,872


$
7,441Liabilities and
    shareholders equityLiabilitiesAccrued interest and other
    liabilities

$
537


$
499Amounts due to Textron Inc.


11



11Deferred income taxes


460



461Debt


5,842



5,420Total liabilities


6,850



6,391Shareholders
    equityCapital surplus


574



574Investment in parent company
    preferred stock


(25
)


(25
)Accumulated other comprehensive
    income


8



5Retained earnings


465



496Total shareholders equity


1,022



1,050Total liabilities and
    shareholders equity

$
7,872


$
7,441    3




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWSThree Months Ended March 31, 2006 and 2005
    (Unaudited)
  2006


2005(In millions)Cash flows from operating
    activities:Net income

$
31


$
22Adjustments to reconcile net
    income to net cash provided by operating activities:Provision for losses


9



12Increase in accrued interest and
    other liabilities


50



25Depreciation


7



8Amortization


3



2Collections in excess of noncash
    gains on securitizations and syndications


3



2Deferred income tax provision


(1
)


(2
)Other  net


(2
)


6Net cash provided by operating
    activities


100



75Cash flows from investing
    activities:Finance receivables originated or
    purchased


(2,700
)


(2,456
)Finance receivables repaid


2,201



2,028Proceeds from receivable sales,
    including securitizations






32Other investments


(2
)


7Proceeds from disposition of
    operating lease and other assets


34



8Other capital expenditures


(3
)


(3
)Purchase of assets for operating
    leases


(18
)


(19
)Net cash used by investing
    activities


(488
)


(403
)Cash flows from financing
    activities:Proceeds from issuance of
    long-term debt


556



398Principal payments on long-term
    debt


(50
)


(310
)Net (decrease) increase in
    commercial paper


(54
)


182Net (decrease) increase in other
    short-term debt


(2
)


106Principal payments on nonrecourse
    debt






(14
)Capital contributions from Textron
    Inc.


2



2Dividends paid to Textron
    Inc.


(64
)


(99
)Net cash provided by financing
    activities


388



265Effect of exchange rate changes on
    cash






Net decrease in cash and
    equivalents






(63
)Cash and equivalents at beginning
    of year


10



127Cash and equivalents at end of
    period

$
10


$
64    4




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  CONSOLIDATED
    STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
 (Unaudited)
  Investment


Accumulatedin Parent


OtherCompany


Comprehensive





TotalCapital


Preferred


Income


Retained


ShareholdersSurplus


Stock


(Loss)


Earnings


Equity(In millions)Balance January 1,
    2005

$
574


$
(25
)

$
1


$
485


$
1,035Comprehensive income:Net income














111



111Other comprehensive income:Foreign currency translation










(1
)






(1
)Change in unrealized net losses on
    hedge contracts, net of income taxes


















Change in unrealized net gains on
    interest-only securities, net of income taxes










5







5Other comprehensive income










4







4Comprehensive income


















115Capital contributions from Textron
    Inc.


9















9Dividends to Textron Inc.


(9
)










(100
)


(109
)Balance December 31,
    2005


574



(25
)


5



496



1,050Comprehensive income:Net income














31



31Other comprehensive income:Foreign currency translation


















Change in unrealized net losses on
    hedge contracts, net of income taxes










1







1Change in unrealized net gains on
    interest-only securities, net of income taxes










2







2Other comprehensive income










3







3Comprehensive income


















34Capital contributions from Textron
    Inc.


2















2Dividends to Textron Inc.


(2
)










(62
)


(64
)Balance March 31,
    2006

$
574


$
(25
)

$
8


$
465


$
1,022    5




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
  Note 1.
    Basis of
    Presentation  Form 10-K
  Note 2.
    Recent
    Accounting Pronouncements     6




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
   Note 3.
    Other
    Income  Three Months EndedMarch 31,


March 31,2006


2005(In millions)Servicing income

$
7


$
8Investment income


4



3Prepayment gains


2



2Late charges


1



1Syndication income






1Other


5



5Total other income

$
19


$
20     Note 4.
    Managed
    and Serviced Finance Receivables    March 31,


December 31,2006


2005(In millions)Total managed and serviced finance
    receivables

$
10,059


$
9,915Nonrecourse participations


(341
)


(383
)Third-party portfolio servicing


(333
)


(509
)SBA sales agreements


(25
)


(28
)Total managed finance receivables


9,360



8,995Securitized receivables


(2,070
)


(2,124
)Other managed finance receivables


(85
)


(108
)Owned finance receivables

$
7,205


$
6,763          7




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
   Note 5.
    Loan
    Impairment    March 31,


December 31,2006


2005(In millions)Nonaccrual finance receivables

$
98


$
89Impaired nonaccrual finance
    receivables (included in nonaccrual finance receivables above)

$
80


$
67Impaired accrual finance
    receivables






36Total impaired finance receivables

$
80


$
103Impaired finance receivables with
    identified reserve requirements

$
67


$
53Allowance for losses on finance
    receivables related to impaired loans

$
19


$
18          8




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
   Note 6.
    Other
    Assets  March 31,


December 31,2006


2005(In millions)Retained interests in
    securitizations

$
202


$
208Other long-term investments


58



53Fixed assets  net


33



33Repossessed assets and properties


22



22Investment in equipment residuals


9



10Other


36



38Total other assets

$
360


$
364            9




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
   Note 7.
    Debt and
    Credit Facilities  March 31,


December 31,2006


2005(In millions)Short-term debt:Commercial paper

$
1,133


$
1,187Other short-term debt


11



13Total short-term debt


1,144



1,200Long-term debt:Fixed rate notesDue 2006 (weighted-average rates
    of 2.87% and 3.04%, respectively)


494



519Due 2007 (weighted-average rates
    of 5.54% and 5.54%, respectively)


813



813Due 2008 (weighted-average rates
    of 4.12% and 4.12%, respectively)


603



603Due 2009 (weighted-average rates
    of 5.68% and 5.87%, respectively)


648



542Due 2010 (weighted-average rates
    of 4.58% and 4.58%, respectively)


557



557Due 2011 and thereafter
    (weighted-average rates of 4.98% and 4.71%, respectively)


626



226Variable rate notesDue 2006 (weighted-average rates
    of 5.23% and 4.78%, respectively)


491



516Due 2007 (weighted-average rates
    of 5.33% and 4.93%, respectively)


275



275Due 2008 (weighted-average rates
    of 4.80% and 4.38%, respectively)


220



220Due 2009 (weighted-average rate of
    4.67%)


50



Long-term debt


4,777



4,271Unamortized discount


(4
)


(4
)Fair value adjustments


(75
)


(47
)Total long-term debt


4,698



4,220Total debt

$
5,842


$
5,420  10




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
     Facility Amount


Available Credit


Expiration(In millions)Domestic Committed Lines of Credit:Textron Financial multi-year
    facility

$
1,000


$
987



2010Textron Financial
    364-day
    facility

$
500


$
500



July 2006Textron multi-year facility

$
1,250


$
1,224



2010Other Credit Facilities:Canadian dollar uncommitted credit
    facility


CAD 50



CAD 45



Australian dollar committed credit
    facility


AUD 25



AUD 25



2007Multi-currency committed credit
    facility

$
25


$
19



July 2006       March 31,


March 31,2006


2005Commercial paper


4.81
%


2.83
%Other short-term debt


4.62
%


3.34
%            11




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
     Note 8.
    Accumulated
    Other Comprehensive Income (Loss) and Comprehensive
    Income    Three Months EndedMarch 31,


March 31,2006


2005(In millions)Beginning of year

$
5


$
1Foreign currency translation






(5
)Amortization of deferred loss on
    hedge contracts, net of income taxes of $0.3 million and
    $0.5 million, respectively


1



1Net deferred loss on hedge
    contracts, net of income tax benefit of $2.1 million in 2005






(5
)Net deferred gain on interest-only
    securities, net of income taxes of $1.0 million and
    $0.9 million, respectively


2



1End of period

$
8


$
(7
)     Three Months EndedMarch 31,


March 31,2006


2005(In millions)Net income

$
31


$
22Other comprehensive income (loss)


3



(8
)Comprehensive income

$
34


$
14   Note 9.
    Contingencies     12




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)   TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
      Note 10.
    Financial
    Information about Operating Segments    Three Months EndedMarch 31,


March 31,2006


2005(In millions)Revenues:Distribution Finance

$
59


$
40Resort Finance


30



21Golf Finance


30



22Aircraft Finance


28



22Asset-Based Lending


21



16Structured Capital


7



12Other


7



8Total revenues

$
182


$
141Income before income
    taxes: (1) (2)Distribution Finance

$
22


$
15Resort Finance


13



2Golf Finance


6



6Aircraft Finance


7



6Asset-Based Lending


1



6Structured Capital


2



7Other


(2
)


(9
)Income before income taxes

$
49


$
33   13




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##### Table of Contents



Item 1.
    Financial
    Statements (Continued)  TEXTRON
    FINANCIAL CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    (Unaudited)  (Continued)
  March 31,


December 31,2006


2005(In millions)Finance assets: (3)Distribution Finance

$
2,027


$
1,710Golf Finance


1,432



1,344Aircraft Finance


1,342



1,278Resort Finance


1,132



1,155Asset-Based Lending


789



764Structured Capital


699



704Other


303



332Total finance assets

$
7,724


$
7,287     (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, to the extent possible, variable rate debt
    with variable rate finance assets and fixed rate debt with fixed
    rate finance 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 and properties; retained interests in securitizations;
    investment in equipment residuals; Acquisition, Development and
    Construction arrangements; and other short- and long-term
    investments (some of which are classified in Other assets on
    Textron Financials Consolidated Balance Sheets). 14




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations   TEXTRON
    FINANCIAL CORPORATION
  Key
    Business Initiatives and Trends
      out-of-trend
      Financial
    Condition
  Liquidity
    and Capital Resources
       15




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)              Off-Balance
    Sheet Arrangements
     16




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)   Managed
    Finance Receivables
    March 31,


December 31,


Increase /2006


2005


(Decrease)(Dollars in millions)Distribution Finance

$
3,310



36
%

$
2,993



33
%

$
317Aircraft Finance


1,682



18
%


1,664



19
%


18Golf Finance


1,503



16
%


1,435



16
%


68Resort Finance


1,120



12
%


1,138



13
%


(18
)Asset-Based Lending


788



8
%


764



8
%


24Structured Capital


675



7
%


689



8
%


(14
)Other


282



3
%


312



3
%


(30
)Total managed finance receivables

$
9,360



100
%

$
8,995



100
%

$
365     Nonperforming
    Assets
      March 31,


December 31,2006


2005(Dollars in millions)Resort Finance

$
28



2.52
%

$
31



2.67
%Asset-Based Lending


23



2.87
%


6



0.81
%Golf Finance


13



0.93
%


13



0.99
%Aircraft Finance


11



0.79
%


14



1.07
%Distribution Finance


2



0.08
%


2



0.11
%Other


43



14.28
%


45



13.64
%Total nonperforming assets

$
120



1.55
%

$
111



1.53
%    17




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)    Interest
    Rate Sensitivity
      Financial
    Risk Management
     18




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)   RESULTS
    OF OPERATIONS
  For
    the three months ended March 31, 2006 vs. March 31,
    2005
  Revenues
    and Net Interest Margin
    March 31,


March 31,2006


2005(Dollars in millions)Finance charges and discounts

$
145


$
104Securitization gains


11



10Rental revenues on operating leases


7



7Other income


19



20Total revenues


182



141Interest expense


73



45Depreciation of equipment on
    operating leases


4



4Net interest margin

$
105


$
92Portfolio yield


8.89
%


7.43
%Net interest margin as a
    percentage of average net investment


6.22
%


6.30
%       Selling
    and Administrative Expenses
  March 31,


March 31,2006


2005(Dollars in millions)Selling and administrative expenses

$
47


$
47Selling and administrative
    expenses as a percentage of managed and serviced finance
    receivables


1.91
%


2.03
%Operating efficiency ratio


44.8
%


51.1
%    19




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)    Provision
    for Losses
    March 31,


March 31,2006


2005(In millions)Allowance for losses on finance
    receivables beginning of year

$
96


$
99Provision for losses


9



12Less net charge-offs:Asset-Based Lending


2



Resort Finance


1



4Distribution Finance


1



2Golf Finance






1Aircraft Finance


1



1Other






1Total net charge-offs


5



9Allowance for losses on finance
    receivables end of period

$
100


$
102       Operating
    Results by Segment
    Distribution
    Finance
  March 31,


March 31,2006


2005(In millions)Revenues

$
59


$
40Net interest margin

$
43


$
33Selling and administrative expenses


19



16Provision for losses


2



2Segment income

$
22


$
15    20




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)    Resort
    Finance
  March 31,


March 31,2006


2005(In millions)Revenues

$
30


$
21Net interest margin

$
18


$
13Selling and administrative expenses


6



7Provision for losses


(1
)


4Segment income

$
13


$
2     Golf
    Finance
  March 31,


March 31,2006


2005(In millions)Revenues

$
30


$
22Net interest margin

$
13


$
12Selling and administrative expenses


5



5Provision for losses


2



1Segment income

$
6


$
6     Aircraft
    Finance
  March 31,


March 31,2006


2005(In millions)Revenues

$
28


$
22Net interest margin

$
13


$
11Selling and administrative expenses


5



4Provision for losses


1



1Segment income

$
7


$
6  21




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)     Asset-Based
    Lending
  March 31,


March 31,2006


2005(In millions)Revenues

$
21


$
16Net interest margin

$
12


$
11Selling and administrative expenses


6



5Provision for losses


5



Segment income

$
1


$
6     Structured
    Capital
  March 31,


March 31,2006


2005(In millions)Revenues

$
7


$
12Net interest margin

$
3


$
8Selling and administrative expenses


1



1Segment income

$
2


$
7     Other
    Segment
  March 31,


March 31,2006


2005(In millions)Revenues

$
7


$
8Net interest margin

$
3


$
4Selling and administrative expenses


5



9Provision for losses






4Segment loss

$
(2
)

$
(9
)    22




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)    Net
    Income
    Selected
    Financial Ratios
  Three Months EndedMarch 31,


March 31,2006


2005Net interest margin as a
    percentage of average net investment(1)


6.22
%


6.30
%Return on average equity


12.10
%


8.85
%Return on average assets


1.65
%


1.26
%Selling and administrative
    expenses as a percentage of average managed and serviced finance
    receivables(2)


1.91
%


2.03
%Operating efficiency ratio(3)


44.8
%


51.1
%Net charge-offs as a percentage of
    average finance receivables


0.30
%


0.56
%   March 31,


December 31,2006


200560+ days contractual delinquency
    as a percentage of finance receivables(4)


0.67
%


0.79
%Nonperforming assets as a
    percentage of finance assets(5)


1.55
%


1.53
%Allowance for losses on finance
    receivables as a percentage of finance receivables


1.39
%


1.43
%Allowance for losses on finance
    receivables as a percentage of nonaccrual finance receivables


102.1
%


108.6
%Total debt to tangible
    shareholders equity(6)


6.91
x


6.19
x     (1)
    
    Represents revenues earned less interest expense on borrowings
    and operating lease depreciation as a percentage of average net
    investment. Average net investment includes finance receivables
    plus operating leases, less deferred taxes on leveraged leases.(2)
    
    Average managed and serviced finance receivables include owned
    receivables, receivables serviced under securitizations,
    participations and third-party portfolio servicing agreements.(3)
    
    Operating efficiency ratio is selling and administrative
    expenses divided by net interest margin.(4)
    
    Delinquency excludes any captive finance receivables with
    recourse to Textron. Captive finance receivables represent
    third-party finance receivables originated in connection with
    the sale or lease of Textron manufactured products. Percentages
    are expressed as a function of total Textron Financial
    independent and nonrecourse captive receivables.(5)
    
    Finance assets include: finance receivables; equipment on
    operating leases, net of accumulated depreciation; repossessed
    assets and properties; retained interests in securitizations;
    interest-only securities; investment in equipment residuals;
    Acquisition, Development and Construction arrangements; and
    short- and long-term 23




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)  investments (some of which are classified in Other assets on
    Textron Financials Consolidated Balance Sheets).
    Nonperforming assets include independent and nonrecourse captive
    finance assets.(6)
    
    Tangible shareholders equity equals Shareholders
    equity, excluding Accumulated other comprehensive income (loss),
    less Goodwill.  Recent
    Accounting Pronouncements
      Forward-looking
    Information
  Certain statements in this quarterly report on
    Form 10-Q
    and other oral and written statements made by Textron Financial
    from time to time are forward-looking statements, including
    those that discuss strategies, goals, outlook or other
    nonhistorical 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, including the following:
    (a) changes in worldwide economic and political conditions
    that impact interest and foreign exchange rates; (b) the
    occurrence of slowdowns or downturns in customer markets in
    which Textron products are sold or supplied and financed or
    where we offer financing; (c) the ability to realize full
    value of receivables and investments in securities; (d) the
    ability to control costs and successful implementation of
    various cost reduction programs; (e) increases in pension
    expenses related to lower than expected asset performance or
    changes in discount rates; (f) the impact of changes in tax
    legislation; (g) the ability to maintain portfolio credit
    quality; (h) access to debt financing at competitive rates;
    (i) access to equity in the form of retained earnings and
    capital contributions from
 24




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations (Continued)  Textron; (j) uncertainty in estimating contingent
    liabilities and establishing reserves tailored to address such
    contingencies and (k) performance of acquisitions.
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Form 10-Q.
  Item 4.
    Controls
    and Procedures  Rule 13a-15(e) 15d-15(e)
   25




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##### Table of Contents



PART II.
    OTHER INFORMATION  TEXTRON
    FINANCIAL CORPORATION
  Item 6.
    Exhibits  12


Computation of Ratio of Earnings
    to Fixed Charges31
.1

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

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

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

Certification of Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350  26




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##### Table of Contents



SIGNATURES
    Textron Financial
    Corporation
  Thomas
    J. Cullen
        27