##### Table of Contents





UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
    FORM 10-K
  (x)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended January 2,
    2010OR( )

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period from
    
    to   Commission file number
    001-15515
  Textron Financial
    Corporation
 (Exact Name of Registrant as
    Specified in Its Charter)
   Delaware

05-6008768(State or Other Jurisdiction of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)40 Westminster Street, Providence, R.I.(Address of Principal Executive
    Offices)

02940-6687(Zip Code)   Registrants Telephone Number,
    Including Area Code:
    (401) 621-4200
  Securities registered pursuant to Section 12(b) of the
    Act:
  Name of Each Exchange onTitle of Class

Which Registered$100,000,000 5.125% Notes
    due August 15, 2014

New York Stock Exchange    Securities registered pursuant to Section 12(g) of the
    Act:
 Common Stock, $100.00 par value
   X
  X
  X
  Regulation S-T
  Regulation S-K Form 10-K Form 10-K.
  12b-2
 Large
    accelerated filer
    Accelerated filer
    Non-accelerated
    filer X
    Smaller reporting company (Do not check if a smaller
    reporting company)
  Rule 12b-2  X
    REGISTRANT
    MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I (1)
    (a) AND (b) OF
    FORM 10-K
    AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
    DISCLOSURE FORMAT.




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##### 





TABLE OF
    CONTENTS
   
 PART I.Item 1.


Business


3Item 1A.


Risk Factors


8Item 1B.


Unresolved Staff Comments


12Item 2.


Properties


12Item 3.


Legal Proceedings


12Item 4.


Submission of Matters to a Vote of Security
    Holders


13PART II.Item 5.


Market for Registrants Common Equity and
    Related Stockholder Matters


13Item 6.


Selected Financial Data


13Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


15Item 7A.


Quantitative and Qualitative Disclosure about
    Market Risk


30Item 8.


Financial Statements and Supplementary Data


31Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


69Item 9A.


Controls and Procedures


69Item 9B.


Other Information


69PART III.Item 10.


Directors and Executive Officers of the
    Registrant


69Item 11.


Executive Compensation


69Item 12.


Security Ownership of Certain Beneficial Owners
    and Management


69Item 13.


Certain Relationships and Related Transactions


69Item 14.


Principal Accounting Fees and Services


69PART IV.Item 15.


Exhibits, Financial Statement Schedules


70EX-12 Computation of Ratio of Earnings to Fixed ChargesEX-23 Consent of Independent Registered Public Accounting FirmEX-24 Power of Attorney dated as of February 25, 2010EX-31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)EX-31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)EX-32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350EX-32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350   -2-




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##### Table of Contents



PART I.  Item 1.
    Business  General
    E-Z-GO
      Form 10-K.
  Competition
   -3-




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Relationship
    with Textron
  General
    Form 10-K.
  Agreements
    with Textron
    Receivables
    Purchase Agreement
    Support
    Agreement with Textron
    Intercompany
    Loan Agreement
   -4-




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Tax
    Sharing Agreement with Textron
  Form 10-K.
  Regulations
    
    Regulate credit-granting activities;
    Establish maximum interest rates, finance charges and other
    charges;
    Require disclosures to customers;
    Govern secured transactions;
    Affect insurance brokerage activities; and
    Set collection, foreclosure, repossession and claims handling
    procedures and other trade practices.      Employees
    Risk
    Management
   
    Credit risk;
    Asset/liability risk (including interest rate and foreign
    exchange risk); and
    Liquidity risk.   -5-




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Credit
    Risk Management
    
    Underwriting procedures;
    Centralized approval of individual transactions exceeding
    certain size limits; and
    Active portfolio and account management.    
    Analyzing business or property cash flows and collateral values;
    Performing financial sensitivity analyses; and
    Assessing potential exit strategies.        Geographic
    Concentration
  Form 10-K.
  Asset/Liability
    Risk Management
    
    Interest rate exposure arising from changes in interest rate
    indices; and
    Foreign currency exposure arising from changes in exchange rates. -6-




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A A
  Interest
    Rate Risk Management
  Form 10-K.
  Foreign
    Exchange Risk Management
  and/or
  Liquidity
    Risk Management
    
    Collection of existing finance receivables;
    Committed bank lines of credit;
    Sales of finance receivables classified as held for sale;
    Syndication and securitization of finance receivables;
    Other forms of secured financing; and
    Intercompany borrowings from Textron.  Form 10-K.
 -7-




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Available
    Information
  http://www.textronfinancial.com Form 10-K, Form 10-Q, Form 8-K,
  Forward-looking
    Information
  Certain statements in this Annual Report on
    Form 10-K
    and other oral and written statements made by Textron Financial
    from time to time are forward-looking statements, including
    those that discuss strategies, goals, outlook or other
    non-historical matters; or project revenues, income, returns or
    other financial measures. These forward-looking statements speak
    only as of the date on which they are made, and we undertake no
    obligation to update or revise any forward-looking statements.
    These forward-looking statements are subject to risks and
    uncertainties that may cause actual results to differ materially
    from those contained in the statements, including the Risk
    Factors contained herein and the following: (a) changes in
    worldwide economic, political or regulatory conditions that
    impact interest and foreign exchange rates; (b) the
    occurrence of slowdowns or downturns in customer markets in
    which Textron products are sold or supplied and financed or
    where we hold finance receivables; (c) the ability to
    realize full value of finance receivables and investments in
    securities; (d) the ability to control costs and successful
    implementation of various cost-reduction programs;
    (e) increases in pension expenses and other postretirement
    employee costs; (f) the impact of changes in tax
    legislation; (g) the ability to maintain portfolio credit
    quality and certain minimum levels of financial performance
    required under our committed bank line of credit and under our
    Support Agreement with Textron; (h) access to financing,
    including securitizations, at competitive rates; (i) access
    to equity in the form of retained earnings and capital
    contributions from Textron; (j) uncertainty in estimating
    contingent liabilities and establishing reserves to address such
    contingencies; (k) the launching of significant new
    products or programs which could result in unanticipated
    expenses; (l) risks and uncertainties related to
    acquisitions and dispositions, including difficulties or
    unanticipated expenses in connection with the consummation of
    acquisitions or dispositions, the disruption of current plans
    and operations, or the failure to achieve anticipated synergies
    and opportunities; (m) the ability to successfully exit
    from our commercial finance business, other than the captive
    finance business, including effecting an orderly liquidation or
    sale of certain portfolios and businesses; (n) uncertainty
    in estimating the market value of our Finance receivables held
    for sale and our Allowance for losses on finance receivables
    held for investment; (o) bankruptcy or other financial
    problems at major customers that could cause disruptions or
    difficulty in collecting amounts owed by such customers;
    (p) legislative or regulatory actions impacting our
    operations; (q) difficult conditions in the financial
    markets which may adversely impact our ability to obtain
    financing for our new finance receivable originations and, with
    respect to businesses which we are exiting, our customers
    ability to obtain alternative financing negatively impacting
    their ability to repay amounts owed to us; and
    (r) continued volatility in the economy resulting in a
    prolonged downturn in the markets in which we do business.
  Item 1A.
    Risk
    Factors    We may
    not be able to continue to execute the liquidation of our
    Non-captive Finance segment at a favorable pace and level of
    recovery.
   -8-




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and/or mark-to-market and/or mark-to-market and/or
  Difficult
    conditions in the financial markets have adversely affected our
    business and results of operations and we do not expect these
    conditions to improve in the near future.
    If our
    estimates or assumptions used in determining the fair value of
    certain of our assets and our allowance for losses on finance
    receivables prove to be incorrect, our cash flow, profitability,
    financial condition, and business prospects could be materially
    adversely affected.
  held-for-sale
 -9-




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Failure
    to maintain investment grade credit ratings acceptable to
    investors may increase the cost of our funding and may adversely
    affect our access to the capital markets.
    Our
    ability to fund our Captive Finance segment activities at
    economically competitive levels depends on our ability to borrow
    and the cost of borrowing in the credit markets.
    If we
    fail to comply with the covenants contained in our various debt
    agreements, it may adversely affect our liquidity, results of
    operations and financial condition.
       -10-




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The
    soundness of our customers and business partners could affect
    our business and results of operations.
    The
    soundness of financial institutions could adversely affect
    us.
    Our
    international business is subject to the risks of doing business
    in foreign countries.
    Currency
    and interest rate fluctuations, and our ability to hedge those
    transactions may adversely affect our results.
    Changes
    in the regulatory environment in which we operate could have an
    adverse affect on our business and earnings.
   -11-




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We are
    subject to legal proceedings and other claims.
    Unanticipated
    changes in our tax rates or exposure to additional income tax
    liabilities could affect our profitability.
  non-U.S. jurisdictions,
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Form 10-K.
  Item 3.
    Legal
    Proceedings       -12-




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Item 4.
    Submission
    of Matters to a Vote of Security Holders  Form 10-K.
  PART II.  Item 5.
    Market
    for Registrants Common Equity and Related Stockholder
    Matters  Form 10-K.
  Item 6.
    Selected
    Financial Data  Form 10-K:
  For the Years Ended (1)2009


2008


2007


2006


2005(Dollars in millions)Results of OperationsFinance charges


$
434


$
558


$
671


$
652


$
464Portfolio (losses) gains



(162
)


(5
)


15



(8
)


1Gains on early extinguishment of debt



55















Securitization (losses) gains



(28
)


42



62



42



49Segment (loss) income



(292
)


(50
)


222



210



171Special charges



13



489











Net (loss) income



(203
)


(461
)


145



152



111Balance Sheet DataTotal finance receivables held for investment


$
6,024


$
6,915


$
8,603


$
8,310


$
6,763Finance receivables held for sale



819



1,658











Allowance for losses on finance receivables held for investment



339



191



89



93



96Total assets



7,324



9,344



9,383



9,000



7,441Debt



5,488



7,388



7,311



6,862



5,420Deferred income taxes



137



337



472



497



461Shareholders equity



804



1,079



1,138



1,142



1,050Debt to Shareholders equity



6.83
x


6.85
x


6.42
x


6.01
x


5.16
x -13-




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##### Table of Contents



For the Years Ended (1)2009


2008


2007


2006


2005(Dollars in millions)SELECTED DATA AND RATIOSProfitabilityPortfolio yield



6.03
%


6.86
%


8.51
%


9.11
%


7.91
%Net interest margin as a percentage of average net investment (2)



2.46
%


4.74
%


5.66
%


5.81
%


6.40
%Return on average equity (3)



(20.72
)%


(44.26
)%


13.28
%


14.13
%


11.17
%Return on average assets (4)



(2.32
)%


(4.82
)%


1.60
%


1.84
%


1.58
%Selling and administrative expenses as a percentage of average
    managed and serviced finance receivables (5)



2.10
%


1.68
%


1.71
%


1.84
%


2.01
%Credit Quality60+ days contractual delinquency as a percentage of finance
    receivables held for investment (6)



9.51
%


2.59
%


0.43
%


0.77
%


0.79
%Nonaccrual finance receivables as a percentage of finance
    receivables held for investment



17.26
%


4.01
%


0.92
%


0.90
%


1.31
%Allowance for losses on finance receivables held for investment
    as a percentage of finance receivables held for investment



5.63
%


2.76
%


1.03
%


1.11
%


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



32.6
%


68.9
%


111.7
%


123.1
%


108.6
%Net charge-offs as a percentage of average finance receivables
    (7)



1.82
%


1.00
%


0.45
%


0.38
%


0.51
%   (1)
    
    Textron Financials year-end dates conform with
    Textrons year-end, which falls on the nearest Saturday to
    December 31.(2)
    
    Represents revenues earned, including portfolio gains and
    losses, less interest expense on borrowings and operating lease
    depreciation as a percentage of average net investment. Average
    net investment includes owned finance receivables plus operating
    leases, less deferred taxes on leveraged leases.(3)
    
    Return on average equity excludes the cumulative effect of
    change in accounting principle.(4)
    
    Return on average assets excludes the cumulative effect of
    change in accounting principle.(5)
    
    Average managed and serviced finance receivables include owned
    finance receivables, finance receivables serviced under
    securitizations, participations and third-party portfolio
    servicing agreements.(6)
    
    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 finance receivables held for
    investment.(7)
    
    Average finance receivables include both finance receivables
    held for investment and finance receivables held for sale. -14-




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
          Key
    Business Initiatives and Trends
   -15-




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##### Table of Contents



E-Z-GO non-U.S. buyers.
    January 2,


January 3,2010


2009(Dollars in millions)Captive FinanceAviation

$
2,353



34
%

$
2,795



26
%Golf Equipment


417



6
%


608



6
%Non-captive FinanceTimeshare


1,285



19
%


1,374



12
%Distribution Finance


1,076



16
%


3,379



31
%Golf Mortgage


933



14
%


1,177



11
%Structured Capital


349



5
%


508



5
%Hotel


199



3
%


185



2
%Asset-Based Lending


170



2
%


649



6
%Other Liquidating


91



1
%


146



1
%Total managed finance receivables

$
6,873



100
%

$
10,821



100
%      -16-




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Financial
    Condition
  Liquidity
    and Capital Resources
         -17-




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##### Table of Contents



Payments / Receipts Due by PeriodLessthan 1


1-2


2-3


3-4


4-5


More thanyear


Years


Years


Years


Years


5 years


Total(In millions)Payments due:Multi-year credit facilities


$



$



$
1,740


$



$



$



$
1,740Term debt



1,635



419



52



578



111



53



2,848Securitized on-balance sheet debt



85



69



85



76



68



176



559Subordinated debt























300



300Securitized off-balance sheet debt























31



31Interest payments on debt



105



70



55



39



31



77



377Operating lease rental payments



5



4



1



1



1







12Total payments due



1,830



562



1,933



694



211



637



5,867Cash and contractual receipts:Finance receivable receipts - held for investment



1,617



1,251



850



661



350



1,376



6,105Finance receivable receipts -  held for sale



260



249



197



121



76



20



923Securitized off-balance sheet finance receivable and cash
    receipts























31



31Interest receipts on finance receivables



361



261



189



135



96



149



1,191Operating lease rental receipts



26



22



18



11



9



14



100Total contractual receipts



2,264



1,783



1,254



928



531



1,590



8,350Cash



144























144Total cash and contractual receipts



2,408



1,783



1,254



928



531



1,590



8,494Net cash and contractual receipts (payments)


$
578


$
1,221


$
(679
)

$
234


$
320


$
953


$
2,627Cumulative net cash and contractual receipts


$
578


$
1,799


$
1,120


$
1,354


$
1,674


$
2,627        -18-




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##### Table of Contents



non-U.S. buyers.
  3-year E-Z-GO
    Standard &Fitch Ratings

Moodys

PoorsLong-term ratings

BB+

Baa3

BB+Short-term ratings

B

P3

BOutlook

Negative

Stable

Developing     2009


2008


2007Operating activities

$
199


$
167


$
262Investing activities


2,335



(64
)


(281
)Financing activities


(2,420
)


(146
)


29    -19-




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Form 10-K.
  Off-Balance
    Sheet Arrangements
    Interest
    Rate Sensitivity
     -20-




---



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Financial
    Risk Management
        Critical
    Accounting Policies
  Allowance
    for Losses on Finance Receivables Held for Investment
   -21-




---



##### Table of Contents



Income
    Taxes
        Fair
    Value of Financial Instruments
   -22-




---



##### Table of Contents



Finance
    Receivables Held for Sale
  and/or and/or
  Form 10-K.
  Results
    of Operations
  Revenues
    2009


2008vs. 2008


vs. 2007(In millions)Increase in portfolio losses

$
(157
)

$
(20
)Lower market interest rates


(92
)


(163
)Lower securitization gains, net of impairments


(70
)


(20
)Lower average finance receivables of $1.1 billion and
    higher average finance receivables of $258 million,
    respectively


(64
)


21Suspended earnings on nonaccrual finance receivables


(37
)


(9
)Lower other income


(36
)


(8
)(Decrease) increase in servicing and investment income related
    to securitizations


(27
)


9Gains on debt extinguishment


55



Accretion of valuation allowance


29



Benefit from variable-rate receivables interest rate floors


21



24  -23-




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##### Table of Contents



(Loss)
    Income before Income Taxes and Noncontrolling Interest
    2009


2008vs. 2008


vs. 2007(In millions)Increase in portfolio losses

$
(157
)

$
(20
)Lower securitization gains, net of impairments


(70
)


(20
)Suspended earnings on nonaccrual finance receivables


(37
)


(9
)Lower other income


(36
)


(8
)Lower average finance receivables of $1.1 billion and
    higher average finance receivables of $258 million,
    respectively


(29
)


9Increase in the provision for loan losses


(31
)


(201
)(Decrease) increase in servicing and investment income related
    to securitizations


(27
)


9Gains on debt extinguishment


55



Accretion of valuation allowance


29



Lower (higher) borrowing costs relative to market rates


26



(51
)Benefit from variable-rate receivables interest rate floors


21



24Valuation allowance on finance receivables held for sale


293



(293
)Goodwill impairment


169



(169
)Restructuring charges


14



(27
)            -24-




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##### Table of Contents



Income
    Taxes
    2009


2008


2007Federal statutory income tax rate


(35.0
)%


(35.0
)%


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


(2.3
)


(0.8
)


1.0Non-U.S. tax
    rate differential


0.6



3.7



(3.3
)Change in state valuation allowance


1.0



(1.4
)


0.3Tax contingencies


2.0



2.5



4.0Tax credits


(0.9
)


(0.7
)


(1.1
)Goodwill impairment






9.8



Change in status of foreign subsidiary


1.9



7.6



Other, net


(0.1
)


(0.1
)


(1.0
)Effective income tax rate


(32.8
)%


(14.4
)%


34.9
%    -25-




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##### Table of Contents



Credit
    Quality
  Nonaccrual
    Finance Receivables
    and/or
    January 2,


January 3,2010


2009(Dollars in millions)Captive FinanceAviation

$
286



12.17
%

$
17



0.62
%Golf Equipment


16



4.84
%


18



2.96
%Non-captive FinanceTimeshare


378



29.41
%


75



5.69
%Golf Mortgage


178



25.16
%


107



12.11
%Distribution Finance


88



14.71
%


43



9.09
%Hotel


76



38.04
%






Structured Capital


5



1.48
%






Other Liquidating


13



13.99
%


17



11.81
%Total nonaccrual finance receivables

$
1,040



17.26
%

$
277



4.01
%    -26-




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##### Table of Contents



Allowance
    for Losses on Finance Receivables Held for Investment and
    Selected Portfolio Statistics
    2009


2008


2007(Dollars in millions)Allowance for losses on finance receivables held for investment
    beginning of period

$
191


$
89


$
93Provision for losses


265



234



33Less net charge-offs:Captive FinanceAviation


26



5



2Golf Equipment


7



4



2Non-captive FinanceDistribution Finance


40



69



19Golf Mortgage


28



2



1Hotel


4







Timeshare


3



(1
)


(2
)Asset-Based Lending






7



7Other Liquidating


7







8Total net charge-offs


115



86



37Transfer to valuation allowance on finance receivables held for
    sale


(2
)


(44
)


Foreign currency translation






(2
)


Allowance for losses on finance receivables held for investment
    end of period

$
339


$
191


$
89Net charge-offs as a percentage of average finance receivables
    held for investment


1.82
%


1.00
%


0.45
%   January 2,


January 3,2010


2009(Dollars in millions)Nonaccrual finance receivables as a percentage of finance
    receivables held for investment


17.26
%


4.01
%Allowance for losses on finance receivables held for investment
    as a percentage of finance receivables held for investment


5.63
%


2.76
%Allowance for losses on finance receivables held for investment
    as a percentage of nonaccrual finance receivables held for
    investment


32.6
%


68.9
%60+ days contractual delinquency as a percentage of finance
    receivables held for investment


9.51
%


2.59
%60+ days contractual delinquency

$
569


$
178Repossessed assets and properties

$
119


$
70Operating assets received in satisfaction of troubled finance
    receivables

$
112


$
84      -27-




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##### Table of Contents



Portfolio
    (Losses) Gains
    2009


2008


2007(In millions)Captive FinanceAviation

$
(28
)

$
(3
)

$
(1
)Golf Equipment


(2
)






Non-captive FinanceTimeshare


(3
)






Golf Mortgage


(17
)


(5
)


1Distribution Finance


(43
)






(1
)Structured Capital


(62
)


5



19Other Liquidating


(7
)


(2
)


(3
)Total portfolio (losses) gains

$
(162
)

$
(5
)

$
15   Operating
    Results by Segment
    Captive
    Finance
  2009

2008

2007(In millions)Revenues

$
170


$
222


$
225Segment (loss) income

$
(95
)

$
28


$
55     2009


2008vs. 2008


vs. 2007(In millions)Higher average finance receivables of $495 million and
    $356 million, respectively

$
34


$
30Increase in portfolio losses


(27
)


(2
)Lower market interest rates


(27
)


(32
)Other pricing (decrease) increase


(14
)


4Lower securitization gains, net of impairments


(10
)


Suspended earnings on nonaccrual finance receivables


(5
)


  -28-




---



##### Table of Contents



2009


2008vs. 2008


vs. 2007(In millions)Increase in the provision for loan losses

$
(89
)

$
(24
)Increase in portfolio losses


(27
)


(2
)Other pricing (decrease) increase


(14
)


4Lower securitization gains, net of impairments


(10
)


Suspended earnings on nonaccrual finance receivables


(5
)


Higher borrowing costs relative to market rates


(1
)


(6
)Higher average finance receivables of $495 million and
    $356 million, respectively


15



13         Non-captive
    Finance
  2009


2008


2007(In millions)Revenues

$
190


$
501


$
650Segment (loss) income

$
(197
)

$
(78
)

$
167     2009


2008vs. 2008


vs. 2007(In millions)Increase in portfolio losses

$
(130
)

$
(18
)Lower average finance receivables of $1.6 billion and
    $98 million, respectively


(98
)


(9
)Lower market interest rates


(65
)


(131
)Lower securitization gains, net of impairments


(60
)


(20
)Suspended earnings on nonaccrual finance receivables


(32
)


(9
)(Decrease) increase in servicing and investment income related
    to securitizations


(21
)


7(Decrease) increase in other income


(28
)


Increases in valuation allowance for assets held for sale


(14
)


Gains on debt extinguishment


55



Other pricing increase (decrease)


31



(1
)Accretion of valuation allowance


29



Benefit from variable-rate receivables interest rate floors


21



24  -29-




---



##### Table of Contents



2009


2008vs. 2008


vs. 2007(In millions)Increase in portfolio losses

$
(130
)

$
(18
)Lower securitization gains, net of impairments


(60
)


(20
)Lower average finance receivables of $1.6 billion and
    $98 million, respectively


(44
)


(4
)Suspended earnings on nonaccrual finance receivables


(32
)


(9
)(Decrease) increase in other income


(28
)


Increases in valuation allowance for assets held for sale


(14
)


(Decrease) increase in servicing and investment income related
    to securitizations


(21
)


7Decrease (increase) in the provision for loan losses


58



(177
)Gains on debt extinguishment


55



Other pricing increase (decrease)


31



(1
)Accretion of valuation allowance


29



Lower (higher) borrowing costs relative to market rates


27



(45
)Benefit from variable-rate receivables interest rate floors


21



24       Item 7A.
    Quantitative
    and Qualitative Disclosure about Market Risk  Form 10-K.
 -30-




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  REPORT OF
    MANAGEMENT
  Form 10-K. Rules 13a-15(f).
      
       
       -31-




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  The Board of Directors
 Textron Financial Corporation
              
   -32-




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  The Board of Directors
 Textron Financial Corporation
            
   -33-




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF OPERATIONS
    2009


2008


2007(In millions)Finance charges

$
434


$
558


$
671Portfolio (losses) gains


(162
)


(5
)


15Gains on early extinguishment of debt


55







Rental revenues on operating leases


30



34



34Securitization (losses) gains:Total
    other-than-temporary
    impairments


(39
)


(21
)


(3
)Portion of
    other-than-temporary
    impairments recognized in Other comprehensive income, before
    income taxes


13







Net
    other-than-temporary
    impairment recognized in securitization (losses) gains


(26
)


(21
)


(3
)Other securitization (losses) gains


(2
)


63



65Total securitization (losses) gains


(28
)


42



62Other income


31



94



93Total revenues


360



723



875Interest expense


159



307



397Depreciation of equipment on operating leases


18



18



18Net interest margin


183



398



460Provision for losses


265



234



33Selling and administrative expenses


210



214



205Restructuring charges


13



27



Valuation allowance on finance receivables held for sale






293



Goodwill impairment






169



(Loss) income before income taxes and noncontrolling
    interest


(305
)


(539
)


222Income tax (benefit) expense


(100
)


(78
)


77(Loss) income before noncontrolling interest


(205
)


(461
)


145Noncontrolling interest, net of income taxes


(2
)






Net (loss) income

$
(203
)

$
(461
)

$
145    -34-




---



##### Table of Contents



CONSOLIDATED
    BALANCE SHEETS
  January 2,


January 3,2010


2009(In millions)AssetsCash and equivalents

$
144


$
16Finance receivables held for investment, net of unearned income:Installment contracts


2,327



2,787Revolving loans


1,137



1,208Golf course, timeshare and hotel mortgages


1,073



1,206Distribution finance receivables


771



647Finance leases


403



608Leveraged leases


313



459Total finance receivables held for investment


6,024



6,915Allowance for losses on finance receivables held for investment


(339
)


(191
)Finance receivables held for investment  net


5,685



6,724Finance receivables held for sale


819



1,658Equipment on operating leases  net


216



247Other assets


460



699Total assets

$
7,324


$
9,344Liabilities and equityLiabilitiesAccrued interest and other liabilities

$
423


$
379Amounts due to Textron Inc.


472



161Deferred income taxes


137



337Debt


5,488



7,388Total liabilities


6,520



8,265Shareholders EquityCapital surplus


1,487



1,217Subsidiary preferred stock


1



Investment in parent company preferred stock


(25
)


(25
)Accumulated other comprehensive loss


(49
)


(55
)Retained deficit


(610
)


(58
)Total shareholders equity


804



1,079Total liabilities and shareholders equity

$
7,324


$
9,344    -35-




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    2009


2008


2007(In millions)Cash flows from operating activities:Net (loss) income

$
(203
)

$
(461
)

$
145Net income attributable to noncontrolling interest


(2
)






Net (loss) income before noncontrolling interest


(205
)


(461
)


145Adjustments to reconcile net (loss) income before noncontrolling
    interest to net cash provided by operating activities:Provision for losses


265



234



33Deferred income tax provision


(203
)


(94
)


(7
)Increase (decrease) in taxes payable


167



(25
)


6Portfolio losses


162



6



6Depreciation and amortization


36



40



40Gains on early extinguishment of debt


(30
)






Valuation allowance on finance receivables held for sale


(15
)


293



Increase (decrease) in accrued interest and other liabilities


10



(41
)


30Restructuring charges


1



23



Goodwill impairment






169



Other  net


11



23



9Net cash provided by operating activities


199



167



262Cash flows from investing activities:Finance receivables originated or purchased


(3,558
)


(11,879
)


(13,124
)Finance receivables repaid


4,801



11,245



11,863Proceeds from receivable sales, including securitizations


728



631



994Proceeds from disposition of other assets, including repossessed
    assets and properties and operating leases


236



40



55Collection of retained interests in securitizations


117



15



8Purchase of assets for operating leases


(13
)


(26
)


(49
)Other investments


24



(90
)


(28
)Net cash provided (used) by investing activities


2,335



(64
)


(281
)Cash flows from financing activities:Proceeds from line of credit


1,740







Proceeds from issuance of long-term debt






1,161



1,878Principal payments on long-term debt


(2,498
)


(1,307
)


(1,248
)Principal payments on secured debt


(1,092
)






Net decrease in commercial paper


(743
)


(668
)


(315
)Net increase in intercompany loan due to Textron Inc.


311



133



Principal payments on nonrecourse debt


(180
)


(267
)


(96
)Proceeds from issuance of secured debt


143



300



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


(25
)


19



(55
)Proceeds from the sale of majority interest in subsidiary


21







Repurchase of majority interest in subsidiary


(19
)






Proceeds from the sale of subsidiary preferred stock


1







Capital contributions from Textron Inc.


279



634



9Dividends paid to Textron Inc.


(358
)


(151
)


(144
)Net cash (used) provided by financing activities


(2,420
)


(146
)


29Effect of exchange rate changes on cash


14



(1
)


3Net increase (decrease) in cash and equivalents


128



(44
)


13Cash and equivalents at beginning of year


16



60



47Cash and equivalents at end of year

$
144


$
16


$
60    -36-




---



##### Table of Contents



CONSOLIDATED
    STATEMENTS OF CHANGES IN EQUITY
    InvestmentIn Parent







Accumulated







TotalCompany



Subsidiary



Other



Retained



Share-



Non-Capital



Preferred



Preferred



Comprehensive



Earnings



holders



controlling



TotalSurplus



Stock



Stock



Income (Loss)



(Deficit)



Equity



Interest



Equity(In millions)Balance December 30, 2006


$
592



$
(25
)


$




$
7



$
568



$
1,142



$




$
1,142Comprehensive income:Net income























145




145









145Other comprehensive income:Foreign currency translation


















19









19









19Change in unrealized net losses on hedge contracts, net of
    income taxes


















2









2









2Change in unrealized net gains on interest-only securities, net
    of income taxes


















(2
)








(2
)








(2
)Other comprehensive income


















19









19









19Comprehensive income




























164









164Cumulative effect of a change in accounting principle























(33
)



(33
)








(33
)Capital contributions from Textron Inc.



9
























9









9Dividends to Textron Inc.



(9
)


















(135
)



(144
)








(144
)Balance December 29, 2007



592




(25
)








26




545




1,138









1,138Comprehensive loss:Net loss























(461
)



(461
)








(461
)Other comprehensive loss:Foreign currency translation, net of income taxes


















(79
)








(79
)








(79
)Change in unrealized net losses on hedge contracts, net of
    income taxes


















(1
)








(1
)








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


















(1
)








(1
)








(1
)Other comprehensive loss


















(81
)








(81
)








(81
)Comprehensive loss




























(542
)








(542
)Capital contributions from Textron Inc.



634
























634









634Dividends to Textron Inc.



(9
)


















(142
)



(151
)








(151
)Balance January 3, 2009



1,217




(25
)








(55
)



(58
)



1,079









1,079Comprehensive loss:Net loss























(203
)



(203
)



(2
)



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


















7









7









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


















(1
)








(1
)








(1
)Other comprehensive income


















6









6









6Comprehensive loss




























(197
)



(2
)



(199
)Capital contributions from Textron Inc.



279
























279









279Dividends to Textron Inc.



(9
)


















(349
)



(358
)








(358
)Sale of subsidiary preferred stock













1














1









1Sale of noncontrolling interest

































21




21Repurchase of noncontrolling interest

































(19
)



(19
)Balance January 2, 2010


$
1,487



$
(25
)


$
1



$
(49
)


$
(610
)


$
804



$




$
804    -37-




---



##### Table of Contents



NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1Summary of Significant Accounting Policies
  Nature of
    Operations
    E-Z-GO
      Principles
    of Consolidation
   -38-




---



##### Table of Contents



Use of
    Estimates
    Finance
    Charges
      Finance
    Receivable Origination Fees and Costs
    Other
    Income (Loss)
    Portfolio
    (Losses) Gains
    Allowance
    for Losses on Finance Receivables Held for Investment
     -39-




---



##### Table of Contents



Finance
    Receivable Impairment
      Fixed
    Assets
    Equipment
    on Operating Leases
    Pension
    Benefits and Postretirement Benefits Other than
    Pensions
    Income
    Taxes
   -40-




---



##### Table of Contents



Derivative
    Financial Instruments
        Fair
    Value of Financial Instruments
    Finance
    Receivables Held for Sale
  and/or
 -41-




---



##### Table of Contents



and/or
    Cash and
    Equivalents
    NOTE 2Portfolio (Losses) Gains and Other Income
      2009


2008


2007(In millions)Servicing fees

$
24


$
43


$
36Investment income


9



23



14Late charges


3



4



3Syndication income


1



2



4Prepayment (losses) gains


(1
)


3



7Other


(5
)


19



29Total other income

$
31


$
94


$
93     NOTE 3Special Charges
   -42-




---



##### Table of Contents



2009



2008ValuationAllowance onFinanceRestructuring



Receivables


Goodwill


RestructuringCharges



Held for Sale


Impairment


Charges


Total(In millions)Captive Finance

$




$



$
16


$
4


$
20Non-captive Finance


13




293



153



23



469Total Special charges

$
13



$
293


$
169


$
27


$
489   Valuation
    Allowance on Finance Receivables Held for Sale
    Goodwill
    Impairment
    Restructuring
    Charges
      Severance andPension


ContractCurtailment


Termination


AssetCosts


Costs


Impairments


Total(In millions)Balance at December 29, 2007

$



$



$



$
Additions


15



1



11



27Cash Paid


(4
)










(4
)Non-cash utilization










(11
)


(11
)Balance at January 3, 2009


11



1







12Additions


12



1







13Cash Paid


(10
)


(2
)






(12
)Balance at January 2, 2010

$
13


$



$



$
13  -43-




---



##### Table of Contents



Captive


Non-captiveFinance


Finance


Total(In millions)Severance and pension curtailment costs

$
1


$
26


$
27Non-cash asset impairments


3



8



11Contract termination costs






2



2Total Restructuring costs

$
4


$
36


$
40     NOTE 4Relationship with Textron Inc.
       -44-




---



##### Table of Contents



NOTE 5Finance Receivables  Terms and
    Concentrations
  Managed
    and Serviced Finance Receivables
  2009


2008(In millions)Total managed and serviced finance receivables

$
8,283


$
12,173Nonrecourse participations


(765
)


(820
)Third-party portfolio servicing


(645
)


(532
)Total managed finance receivables


6,873



10,821Securitized finance receivables


(30
)


(2,248
)Finance receivables


6,843



8,573Finance receivables held for sale


(819
)


(1,658
)Finance receivables held for investment

$
6,024


$
6,915     non-U.S. buyers.
  Finance
    Receivable Terms
       -45-




---



##### Table of Contents



Concentrations
    January 2, 2010


January 3, 2009(Dollars in millions)United States:Southeast

$
1,609



23
%

$
2,728



25
%West


1,012



15
%


1,667



16
%Southwest


943



14
%


1,419



13
%Midwest


567



8
%


1,294



12
%Mideast


535



8
%


952



9
%Northeast


127



2
%


256



2
%Total United States

$
4,793



70
%

$
8,316



77
%Canada


669



10
%


963



9
%Mexico


415



6
%


414



4
%South America


330



5
%


396



3
%Other international


666



9
%


732



7
%Total managed finance receivables

$
6,873



100
%

$
10,821



100
%  -46-




---



##### Table of Contents



January 2, 2010


January 3, 2009(Dollars in millions)General aviation

$
2,378



35
%

$
2,822



26
%Resort


1,327



19
%


1,434



13
%Golf


1,261



18
%


1,696



16
%Marine


303



4
%


808



7
%Powersports


268



4
%


534



5
%Transportation


251



4
%


404



4
%Manufactured housing


218



3
%


443



4
%Hotel


215



3
%


202



2
%Recreational vehicles


95



1
%


403



4
%Other Real estate


73



1
%


110



1
%Finance company services


49



1
%


177



2
%Outdoor power equipment


11



1
%


315



3
%Information technology equipment










154



1
%Other


424



6
%


1,319



12
%Total managed finance receivables

$
6,873



100
%

$
10,821



100
%   NOTE 6Finance Receivables Held for Investment
  Portfolio
    Maturities
    Less than


1-2


2-3


3-4


4-5


More than1 Year


Years


Years


Years


Years


5 Years


Total(In millions)Installment contracts

$
370


$
318


$
347


$
329


$
230


$
733


$
2,327Revolving loans


288



430



242



131



49



43



1,183Golf course, timeshare and hotel mortgages


209



298



176



178



63



162



1,086Distribution finance receivables


650



125



12



4



2







793Finance leases


102



77



79



28



5



112



403Leveraged leases


(2
)


3



(6
)


(9
)


1



326



313Total finance receivables held for investment

$
1,617


$
1,251


$
850


$
661


$
350


$
1,376


$
6,105      -47-




---



##### Table of Contents



Leveraged
    Leases
  2009


2008(In millions)Rental receivable

$
948


$
1,252Nonrecourse debt


(570
)


(759
)Estimated residual values of leased assets


152



229530



722Less unearned income


(217
)


(263
)Investment in leveraged leases


313



459Deferred income taxes


(238
)


(350
)Net investment in leveraged leases

$
75


$
109       2009


2008


2007(In millions)Income recognized

$
5


$
4


$
11Income tax expense


(2
)


(1
)


(4
)Income from leveraged leases

$
3


$
3


$
7   Finance
    Leases
  2009


2008(In millions)Total minimum lease payments receivable

$
395


$
557Estimated residual values of leased equipment


183



259578



816Less unearned income


(175
)


(208
)Net investment in finance leases

$
403


$
608     Finance
    Receivable Impairment
   -48-




---



##### Table of Contents



Impaired Finance ReceivablesJanuary 2,


January 3,2010


2009(In millions)Impaired nonaccrual finance receivables

$
984


$
234Impaired accrual finance receivables


217



19Total impaired finance receivables


1,201



253Less: Impaired finance receivables without identified reserve
    requirements


362



71Impaired nonaccrual finance receivables with identified reserve
    requirements

$
839


$
182Allowance for losses on impaired nonaccrual finance receivables

$
153


$
43     Nonaccrual Finance ReceivablesJanuary 2,


January 3,2010


2009(In millions)Impaired nonaccrual finance receivables

$
984


$
234Nonaccrual homogeneous finance receivables


56



43Total nonaccrual finance receivables

$
1,040


$
277  -49-




---



##### Table of Contents



January 3, 2009January 2, 2010Allowance









Allowance forfor Losses









Losses onImpaired


on Impaired






Impaired


ImpairedNonaccrual


Nonaccrual


Nonaccrual



Nonaccrual


Nonaccrual


NonaccrualFinance


Finance


Finance



Finance


Finance


FinanceCollateral Type


Receivables


Receivables


Receivables



Receivables


Receivables


Receivables(In millions)Captive Finance:General aviation aircraft


$
286


$
272


$
46



$
17


$
6


$
2Golf equipment



16



2



1




18







Non-captive Finance:Notes
    receivable(1)


$
259


$
254


$
53



$
78


$
74


$
9Golf course property



166



165



27




107



107



25Resort construction/inventory



104



104
















Dealer inventory



88



68



14




43



34



3Hotels



78



78



7












Land



17



17



4












Marinas



12



12
















Other



14



12



1




14



13



4Total


$
1,040


$
984


$
153



$
277


$
234


$
43   (1)
       -50-




---



##### Table of Contents



Allowance
    for Losses on Finance Receivables Held for Investment
    2009


2008


2007(In millions)Balance at beginning of year

$
191


$
89


$
93Provision for losses


265



234



33Charge-offs


(132
)


(98
)


(49
)Recoveries


17



12



12Transfer to valuation allowance on finance receivables held for
    sale


(2
)


(44
)


Foreign currency translation






(2
)


Balance at end of year

$
339


$
191


$
89   NOTE 7Receivable Securitizations
    other-than-temporary other-than-temporary other-than-temporary other-than-temporary
 -51-




---



##### Table of Contents



other-than-temporary
  Distribution
    Finance Securitization Trust
  2009


20082007(In millions)SubordinatedInterest-only



Seller


Interest-only


Interest-onlySecurities



Certificates


Securities


SecuritiesTotal
    other-than-temporary
    impairments


$
(8
)


$
(31
)

$
(15
)

$
(1
)Portion of
    other-than-temporary
    impairments recognized in Other comprehensive income, before
    income taxes








13







Net
    other-than-temporary
    impairments recognized in earnings


$
(8
)


$
(18
)

$
(15
)

$
(1
)   Aviation
    Finance Securitization Trust
  2009


2008


2007(In millions)Interest-only


Interest-only


Interest-onlySecurities


Securities


SecuritiesTotal
    other-than-temporary
    impairments


$



$
(6
)

$
(2
)Portion of
    other-than-temporary
    impairments recognized in Other comprehensive income, before
    income taxes











Net
    other-than-temporary
    impairments recognized in earnings


$



$
(6
)

$
(2
)   other-than-temporary
  NOTE 8Equipment on Operating Leases
  2009


2008(In millions)Equipment on operating leases, at cost:Aircraft

$
256


$
274Golf cars


26



30Accumulated depreciation:Aircraft


(59
)


(50
)Golf cars


(7
)


(7
)Equipment on operating leases  net

$
216


$
247    -52-




---



##### Table of Contents



NOTE 9Other Assets
  January 2,


January 3,2010


2009(In millions)Repossessed assets and properties

$
119


$
70Operating assets received in satisfaction of troubled finance
    receivables


112



84Investments in other marketable securities


68



95Derivative financial instruments


61



133Other long-term investments


54



30Fixed assets  net


21



24Retained interests in securitizations


9



200Other


16



63Total other assets

$
460


$
699     and/or
    other-than-temporarily
   -53-




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##### Table of Contents



NOTE 10Debt and Credit Facilities
  January 2,


January 3,2010


2009(In millions)Short-term debt:Commercial paper

$



$
743Other short-term debt






25Total short-term debt






768Credit Line borrowings:Due 2012 (weighted-average rate of 0.91%)


1,740



Long-term debt:Fixed-rate notesDue 2009 (weighted-average rate of 5.62%)






698Due 2010 (weighted-average rates of 4.80% and 4.82%,
    respectively)


581



1,018Due 2011 (weighted-average rates of 4.96% and 5.04%,
    respectively)


218



452Due 2012 (weighted-average rates of 4.43% and 4.43%,
    respectively)


52



52Due 2013 (weighted-average rates of 5.19% and 5.19%,
    respectively)


478



478Due 2014 (weighted-average rates of 5.07% and 5.07%,
    respectively)


111



111Due 2015 and thereafter (weighted-average rates of 7.21% and
    4.98%, respectively)


53



41Total fixed-rate notes


1,493



2,850Variable-rate notesDue 2009 (weighted-average rate of 2.78%)






836Due 2010 (weighted-average rates of 0.60% and 3.09%,
    respectively)


1,054



1,297Due 2011 (weighted-average rates of 0.75% and 3.40%,
    respectively)


201



275Due 2013 (weighted-average rates of 1.16% and 3.07%,
    respectively)


100



100Total variable-rate notes


1,355



2,508Securitized on-balance sheet debt:Amortizing (weighted-average rates of 1.45% and 3.09%,
    respectively)


559



853Subordinated debt:Due 2017 and thereafter (6.00%)


300



300Unamortized discount


(2
)


(3
)Fair value adjustments


43



112Total long-term, securitized on-balance sheet and subordinated
    debt


3,748



6,620Total debt

$
5,488


$
7,388       Fixed-to-Floating
 -54-




---



##### Table of Contents



and/or
    2009


2008


2007Commercial paper:USD






5.64
%


5.19
%CAD










4.48
%Other short-term debt






1.78
%


4.92
%                -55-




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##### Table of Contents



NOTE 11Derivative Financial Instruments
      Notional
    Amount            Fair
    Value AmountAssets


Liabilities2009


2008



2009


2008


2009


2008(In millions)Fair Value HedgesInterest Rate Exchange AgreementsFixed-rate debt


$
946


$
2,055



$
40


$
112


$



$
Fixed-rate receivable



387








3











Fixed-rate receivable



32



32












(3
)


(7
)Net Investment HedgesForeign Currency Forward Exchange AgreementsForeign-dollar functional currency subsidiary equity



71



139












(2
)


Cash Flow HedgesCross-Currency Interest Rate Exchange AgreementsForeign-dollar denominated variable-rate debt



161



140




18



21







Foreign-dollar denominated variable-rate receivable



4



5












(1
)


(1
)$
1,601


$
2,371



$
61


$
133


$
(6
)

$
(8
)       Fair Value AmountNotional AmountAssets


Liabilities2009


2008



2009


2008


2009


2008(In millions)Foreign currency forward exchange agreements


$
531


$
536



$



$



$
(13
)

$
Interest rate exchange agreements







336
















(13
)$
531


$
872



$



$



$
(13
)

$
(13
)  -56-




---



##### Table of Contents



Amount of Gain/(Loss)Gain/(Loss) Location



2009


2008(In millions)Fair Value HedgesInterest rate exchange agreements


Interest expense



$
(13
)

$
120Interest rate exchange agreements


Finance charges




10



(7
)Non-designated HedgesInterest rate exchange agreements


Other income



$
1


$
(3
)Foreign currency forward exchange agreements


Selling and
    administrative expenses




(107
)


(6
)   Amount of Gain/(Loss)in OtherComprehensive Income






Gain/(Loss) AmountGain/(Loss) Location2009


2008






2009


2008(In millions)Cash Flow HedgesCross-Currency Interest Rate Exchange AgreementInterest impact

$
(4
)

$
(5
)


Interest expense



$
(4
)


$  (2
)Foreign exchange impact










Selling and
    administrative expenses




(2
)


25   NOTE 12Fair Value of Financial Instruments
   -57-




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##### Table of Contents



Assets
    Recorded at Fair Value on a Recurring Basis
    January 2, 2010(In millions)Level 2


Level 3Derivative financial instruments, net

$
42


$
Interest-only security






3Total assets

$
42


$
3   Derivatives
    Changes
    in Fair Value for Unobservable Input
    2009


2008(In millions)Retained Interests in SecuritizationsBalance, beginning of period

$
12


$
43Transfers from nonrecurring classification


110



Reclassification to Finance receivables held for investment


(85
)


(19
)Net gains for the period:Increase due to securitization gains on sale of finance
    receivables






66Change in value recognized in Other income






2Change in value recognized in Other comprehensive income


11



Impairments recognized in earnings


(8
)


(21
)Collections, net


(37
)


(59
)Balance, end of period

$
3


$
12    -58-




---



##### Table of Contents



Assets
    Recorded at Fair Value on a Nonrecurring Basis
    January 2,


January 3,2010


2009(In millions)Finance receivables held for sale

$
819


$
1,658Impaired finance receivables


686



139Repossessed assets and properties


85



Operating assets received in satisfaction of troubled finance
    receivables


41



Total assets

$
1,631


$
1,797   Finance
    Receivables Held for Sale
    and/or
  Impaired
    Finance Receivables
   -59-




---



##### Table of Contents



Repossessed
    Assets and Properties/Operating Assets Received in Satisfaction
    of Troubled Finance Receivables
   -60-




---



##### Table of Contents



Assets
    and Liabilities Not Recorded at Fair Value
    January 2, 2010



January 3, 2009Carrying



Estimated



Carrying


EstimatedValue



Fair Value



Value


Fair Value(In millions)Assets:Installment contracts


$
2,204



$
2,007



$
2,748


$
2,408Revolving loans



1,058




902




1,170



986Golf course, timeshare and hotel mortgages



1,008




924




1,150



931Distribution finance receivables



709




690




597



503Investment in other marketable securities



68




56




95



78Retained interests in securitizations, excluding interest-only
    securities



6




6




188



178$
5,053



$
4,585



$
5,948


$
5,084Liabilities:Bank line of credit


$
1,740



$
1,682



$



$
Fixed-rate debt



1,534




1,490




2,959



2,518Variable-rate debt



1,355




1,333




2,508



2,292Securitized on-balance sheet debt



559




548




853



824Subordinated debt



300




207




300



105Short-term debt













768



768Amounts due to Textron Inc.



472




469




161



156$
5,960



$
5,729



$
7,549


$
6,663     Finance
    Receivables Held for Investment
  and/or
  Investments
    in Other Marketable Securities
   -61-




---



##### Table of Contents



Debt
    NOTE 13Investment in Parent Company Preferred Stock
    NOTE 14Comprehensive (loss) income
    2009



2008


2007(In millions)Net (loss) income


$
(203
)


$
(461
)

$
145Foreign currency translation, net of income tax benefit of
    $8.9 million in 2009 and $39.7 million in 2008



7




(79
)


19Amortization of deferred losses on hedge contracts, net of
    income taxes of $2.9 million in 2007












5Net deferred loss on hedge contracts, net of income tax benefit
    of $0.8 million in 2008 and $1.6 million in 2007








(1
)


(3
)Net deferred loss on retained interests, net of income tax
    benefit of $0.3 million in 2009, $0.2 million in 2008
    and $0.9 million in 2007



(1
)



(1
)


(2
)Comprehensive (loss) income


$
(197
)


$
(542
)

$
164   NOTE 15Income Taxes
    2009



2008


2007(In millions)United States


$
(309
)


$
(478
)

$
206Foreign



4




(61
)


16Total


$
(305
)


$
(539
)

$
222  -62-




---



##### Table of Contents



2009



2008


2007(In millions)Current:Federal


$
108



$
19


$
55State



12




(8
)


14Foreign



(17
)



5



15Total current income tax expense


$
103



$
16


$
84Deferred:Federal


$
(197
)


$
(89
)

$
14State



(23
)



1



(10
)Foreign



17




(6
)


(11
)Total deferred income tax (benefit) expense



(203
)



(94
)


(7
)Total income tax (benefit) expense


$
(100
)


$
(78
)

$
77         2009



2008


2007Federal statutory income tax rate



(35.0
)%



(35.0
)%


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



(2.3
)



(0.8
)


1.0Non-U.S. tax
    rate differential



0.6




3.7



(3.3
)Change in state valuation allowance



1.0




(1.4
)


0.3Tax contingencies



2.0




2.5



4.0Tax credits



(0.9
)



(0.7
)


(1.1
)Goodwill impairment








9.8



Change in status of foreign subsidiary



1.9




7.6



Other, net



(0.1
)



(0.1
)


(1.0
)Effective income tax rate



(32.8
)%



(14.4
)%


34.9
%        -63-




---



##### Table of Contents



2009


2008(In millions)Balance  Beginning of year


$
6


$
9Additions for tax positions of the current year



2



Additions for tax positions of prior years



3



Reductions for tax positions of prior years







(3
)Reductions for settlements with tax authorities



(2
)


Balance  End of year


$
9


$
6       non-U.S. income
 -64-




---



##### Table of Contents



2009


2008(In millions)Deferred tax assets:Allowance for losses on finance receivables held for investment


$
132


$
75Valuation allowance on finance receivables held for sale



69



131Foreign currency translation



32



29Obligation for pension and postretirement benefits



32



29Nonaccrual finance receivables



19



9State net operating losses



10



3Deferred origination fees



9



12Other



41



43Total deferred tax assets



344



331Valuation allowance for deferred tax assets



(26
)


(27
)Net deferred tax assets



318



304Deferred tax liabilities:Leveraged leases



238



350Finance leases



93



138Equipment on operating leases



69



63Change in status of foreign subsidiary







36Other



55



54Total deferred tax liabilities



455



641Net deferred tax liabilities


$
137


$
337     non-U.S. finance non-U.S. loan non-U.S. portion
  NOTE 16Commitments
     -65-




---



##### Table of Contents



January 2, 2010(In millions)Committed revolving lines of credit

$
337Standby letters of credit


32Loans


13     NOTE 17Contingencies
    NOTE 18Financial Information about Operating Segments
    -66-




---



##### Table of Contents



2009



2008



2007(Dollars in millions)Revenues:Captive Finance


$
170




47
%


$
222




30
%


$
225




26
%Non-captive Finance



190




53
%



501




70
%



650




74
%Total revenues


$
360




100
%


$
723




100
%


$
875




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


$
(95
)







$
28








$
55Non-captive Finance



(197
)








(78
)








167Segment (loss) income



(292
)








(50
)








222Restructuring charges



13









27









Valuation allowance on finance receivables held for sale













293









Goodwill impairment













169









(Loss) income before income taxes and noncontrolling
    interest


$
(305
)







$
(539
)







$
222Finance assets:(3)Captive Finance


$
3,016








$
3,668








$
2,869Non-captive Finance



4,404









5,631









6,291Total finance assets


$
7,420








$
9,299








$
9,160   (1)
    
    Interest expense is allocated to each segment in proportion to
    its net investment in finance assets. Net investment in finance
    assets includes finance assets less deferred income taxes,
    security deposits and other specifically identified liabilities.
    The interest allocation matches variable-rate finance assets in
    the Captive Finance segment with variable-rate debt of similar
    duration and fixed-rate finance assets in the Captive Finance
    segment with fixed-rate debt of similar duration to the extent
    possible. The remaining balance of interest expense incurred is
    included in the Non-captive Finance segments interest
    expense.(2)
    
    Direct operating expenses are included in each segments
    (loss)/income. Prior to 2009, indirect expenses were allocated
    to each segment based on the use of such resources and were
    based primarily upon the segments proportion of net
    investment in finance assets, headcount, number of transactions,
    information technology resources and senior management time. Due
    to the plan to exit all of our Non-captive Finance segment and
    the resulting variations in personnel levels and job
    responsibilities, indirect corporate oversight expenses,
    comprised primarily of executive salaries and benefits, are
    included in the segment loss of the Non-captive Finance segment,
    although a portion of these expenses relate to oversight of the
    Captive Finance segment.(3)
    
    Finance assets include: finance receivables; equipment on
    operating leases, net of accumulated depreciation; repossessed
    assets and properties; operating assets received in satisfaction
    of troubled finance receivables; retained interests in
    securitizations; investment in equipment residuals; investments
    in other marketable securities and other short- and long-term
    investments (some of which are classified in Other assets on
    Textron Financials Consolidated Balance Sheets). -67-




---



##### Table of Contents



NOTE 19Quarterly Financial Data (Unaudited)
  First Quarter



Second Quarter



Third Quarter



Fourth Quarter2009



2008



2009



2008



2009



2008



2009


2008(In millions)Revenues


$
122



$
214



$
86



$
177



$
71



$
184



$
81


$
148Net interest margin


$
63



$
123



$
41



$
102



$
33



$
109



$
46


$
64Selling and administrative expenses



53




54




53




49




54




57




50



54Provision for losses



76




27




87




40




43




34




59



133Segment (loss) income



(66
)



42




(99
)



13




(64
)



18




(63
)


(123
)Restructuring charges



3









5









1









4



27Valuation allowance on finance receivables held for sale





































293Goodwill impairment





































169(Loss) income before income taxes and noncontrolling
    interest



(69
)



42




(104
)



13




(65
)



18




(67
)


( 612
)Income tax (benefit) expense



(16
)



11




(39
)



9




(21
)



4




(24
)


(102
)Net (loss) income before noncontrolling interest



(53
)



31




(65
)



4




(44
)



14




(43
)


(510
)Noncontrolling interest, net of income taxes













1









(3
)












Net (loss) income


$
(53
)


$
31



$
(66
)


$
4



$
(41
)


$
14



$
(43
)

$
(510
)  -68-




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rule 13a-15(e) 15d-15(e))
  Form 10-K.
  10-K.
  c)
    Changes in Internal Controls  There has been no
    change in our internal control over financial reporting during
    the fourth fiscal quarter of the fiscal year covered by this
    report that has materially affected, or is reasonably likely to
    materially affect, our internal control over financial reporting.  Item 9B.
    Other
    Information   PART III.  Item 10.
    Directors
    and Executive Officers of the Registrant  Form 10-K.
  Item 11.
    Executive
    Compensation  Form 10-K.
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and
    Management  Form 10-K.
  Item 13.
    Certain
    Relationships and Related Transactions  Form 10-K.
  Item 14.
    Principal
    Accounting Fees and Services    Audit Fees  Forms 10-Q,
  Audit Related Fees
 -69-




---



##### Table of Contents



Tax Fees
  All Other Fees
 PART IV.  Item 15.
    Exhibits,
    Financial Statement Schedules  (1)
    List of
    Financial Statements and Financial Statement Schedules    1.
    Consolidated Statements of Operations for each of the years in
    the three-year period ended January 2, 2010.2.
    Consolidated Balance Sheets at January 2, 2010 and
    January 3, 2009.3.
    Consolidated Statements of Cash Flows for each of the years in
    the three-year period ended January 2, 2010.4.
    Consolidated Statements of Changes in Equity for each of the
    years in the three-year period ended January 2, 2010.5.
    Notes to the Consolidated Financial Statements.    (2)
    Exhibits  Regulation S-K
  Exhibit No.3.1

Restated Certificate of Incorporation of Textron Financial,
    dated July 19, 1993. Incorporated by reference to Exhibit 3.1 to
    Textron Financial Corporations Registration Statement on
    Form 10 (File No. 0-27559).3.2

By-Laws of Textron Financial Corporation as of May 2, 2000.
    Incorporated by reference to Exhibit 3.1 to Textron Financial
    Corporations Quarterly Report on Form 10-Q filed August
    11, 2000.4.1A

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).4.1B

First Supplemental Indenture dated November 16, 2006 between
    Textron Financial Corporation and U.S. Bank National Association
    (successor to SunTrust Bank) to Indenture dated as of December
    9, 1999.  Incorporated by reference to Exhibit 4.3 to Textron
    Financial Corporations Registration Statement on Form S-3
    (File No. 333-138755).4.1C

Form of Medium-Term Note of Textron Financial Corporation.
    Incorporated by reference to Exhibit 4.3 to Textron Financial
    Corporations Current Report on Form 8-K filed November 17,
    2006.4.2A

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. 333-108464). -70-




---



##### Table of Contents



Exhibit No.4.2B

First Supplemental Indenture dated November 16, 2006 between
    Textron Financial Canada Funding Corp., Textron Financial
    Corporation and U.S. Bank National Association (successor
    trustee to SunTrust Bank) to Indenture dated November 30, 2001.
    Incorporated by reference to Exhibit 4.4 to Textron Financial
    Corporations Registration Statement on Form S-3 (File No.
    333-138755).4.2C

Form of Medium-Term Note of Textron Financial Canada Funding
    Corp., including the form of the Guaranty by Textron Financial
    Corporation.  Incorporated by reference to Exhibit 4.4 to
    Textron Financial Corporations Current Report on Form 8-K
    filed November 17, 2006.4.3A

Indenture, dated as of February 8, 2007, between Textron
    Financial Corporation and Deutsche Bank Trust Company Americas,
    as trustee, incorporated herein by reference to Exhibit 99.1 of
    Textron Financial Corporations Current Report on Form 8-K
    filed February 13, 2007.4.3B

Contribution Agreement, dated February 8, 2007, between Textron
    Financial Corporation and Textron Inc, incorporated herein by
    reference to Exhibit 99.2 of Textron Financial
    Corporations Current Report on Form 8-K filed February 13,
    2007.4.3C

Replacement Capital Covenant, dated February 8, 2007,
    incorporated herein by reference to Exhibit 99.3 of Textron
    Financial Corporations Current Report on Form 8-K filed
    February 13, 2007.4.4A

Credit Agreement dated as of July 14, 2009 among Cessna Finance
    Export Corporation, as borrower, Textron Finance Holding
    Company, as borrower parent, Textron Financial Corporation, as
    guarantor, Wells Fargo Bank Northwest, National Association, as
    Security Trustee and Export-Import Bank of the United States.
    Incorporated by reference to Exhibit 99.1 to Textron
    Financial Corporations Current Report on
    Form 8-K
    filed July 16, 2009.4.4B

Servicing Agreement dated as of July 14, 2009 between Textron
    Financial Corporation, as servicer, and Cessna Finance Export
    Corporation. Incorporated by reference to Exhibit 99.2 to
    Textron Financial Corporations Current Report on
    Form 8-K
    filed July 16, 2009.4.4C

TFC Guarantee dated as of July 14, 2009 by Textron Financial
    Corporation in favor of Wells Fargo Bank Northwest, National
    Association, as Security Trustee, and Export-Import Bank of the
    United States. Incorporated by reference to Exhibit 99.3 to
    Textron Financial Corporations Current Report on
    Form 8-K
    filed July 16, 2009.10.1

Support Agreement dated as of May 25, 1994, between Textron
    Financial Corporation and Textron Inc. Incorporated by reference
    to Exhibit 10.1 to Textron Financial Corporations
    Registration on Form 10 (File No. 0-27559).10.2

Receivables Purchase Agreement between Textron Financial and
    Textron dated as of January 1, 1986. Incorporated by reference
    to Exhibit 10.2 to Textron Financial Corporations
    Registration on Form 10 (File No. 0-27559).10.3

Tax Sharing Agreement between Textron Financial and Textron
    dated as of December 29, 1990. Incorporated by reference to
    Exhibit 10.3 to Textron Financial Corporations
    Registration on Form 10 (File No. 0-27559).10.4A

5-Year Credit Agreement, dated as of March 28, 2005, among
    Textron, the Banks listed therein, JPMorgan Chase Bank, N.A., as
    Administrative Agent, and Citibank, N.A., as Syndication Agent.
    Incorporated by reference to Exhibit 10.1 to Textrons
    Current Report on Form 8-K filed March 31, 2005.10.4B

Amendment No. 1, dated as of April 21, 2006, to the 5-Year
    Credit Agreement, dated as of March 28, 2005, among Textron, the
    Banks listed therein, JPMorgan Chase Bank, N.A., as
    Administrative Agent, and Citibank, N.A., as Syndication Agent.
    Incorporated by reference to Exhibit 10.1 to Textrons
    Current Report on Form 8-K filed April 25, 2006.10.4C

Amendment No. 2, dated as of April 20, 2007, to the 5-Year
    Credit Agreement, dated as of March 28, 2005, as amended on
    April 21, 2006, among Textron the Banks listed therein, JPMorgan
    Chase Bank, N.A., as Administrative Agent, and Citibank, N.A.,
    as Syndication Agent, incorporated herein by reference to
    Exhibit 10.1 of Textron Inc.s Current Report on Form 8-K
    filed April 25, 2007.10.5A

Five-Year Credit Agreement dated July 28, 2003 among Textron
    Financial Corporation, the Banks listed therein, and JPMorgan
    Chase Bank, as Administrative Agent.  Incorporated by reference
    to Exhibit 10.2 to Textron Financial Corporations Current
    Report on Form 8-K filed August 26, 2003. -71-




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Exhibit No.10.5B

Amendment No. 1, dated as of July 25, 2005, to the Five-Year
    Credit Agreement dated as of July 28, 2003 among Textron
    Financial, the Banks listed therein, and JPMorgan Chase Bank
    N.A., as Administrative Agent.  Incorporated by reference to
    Exhibit 10.1 to Textron Financial Corporations Current
    Report on Form 8-K filed July 27, 2005.10.5C

Amendment No. 2, dated as of April 28, 2006, to the Five-Year
    Credit Agreement, dated as of July 28, 2003, among Textron
    Financial Corporation, the Banks listed therein and JPMorgan
    Chase Bank N.A., as Administrative Agent. Incorporated by
    reference to Exhibit 10.1 to Textron Financial
    Corporations Current Report on Form 8-K filed May 1, 2006.10.5D

Amendment No. 3, dated as of April 27, 2007, to the Five-Year
    Credit Agreement, dated as of July 28, 2003, as amended on March
    28, 2005 and April 28, 2006, among Textron Financial
    Corporation, the Banks listed therein and JPMorgan Chase Bank
    N.A., as Administrative Agent. Incorporated by reference to
    Exhibit 10.1 to Textron Financial Corporations Current
    Report on Form 8-K filed April 27, 2007.12

Computation of Ratio of Earnings to Fixed Charges.23

Consent of Independent Registered Public Accounting Firm.24

Power of Attorney dated as of February 25, 2010.31.1

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 1350.32.2

Certification of Chief Financial Officer Pursuant to
    18 U.S.C. Section 1350.     Note:
    Instruments defining the rights of holders of certain issues of
    long-term debt of Textron Financial have not been filed as
    exhibits to this Report because the authorized principal amount
    of any one of such issues does not exceed 10% of the total
    assets of Textron Financial and its subsidiaries on a
    consolidated basis. Textron Financial agrees to furnish a copy
    of each such instrument to the Commission upon request. -72-




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SIGNATURES
  Form 10-K
  
  By:
    *       By:
    *      By:
    *     By:
    *     By:
    /s/  Thomas
    J. Cullen      By:
    /s/  Thomas
    N. Nichipor      *By:
    /s/  Elizabeth
    C. Perkins    -73-