What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-10 compared with 2025-02-11 · 75 added, 89 removed, 220 unchanged (43% of the section changed)

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BUSINESS AND OVERVIEW

We are a worldwide operator, franchisor, and licensor of hotel, residential, timeshare, and other lodging properties under more than 30 brand names.

We are a worldwide franchisor, operator, and licensor of hotel, residential, timeshare, and other lodging properties under a portfolio of compelling brands at different price and service points.

We discuss our operations in the following reportable business segments:

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Our Caribbean & Latin America (“CALA”) operating segment does not meet the applicable accounting criteria for separate disclosure as a reportable business segment, and as such, we include its results in “Unallocated corporate and other.”

Under our asset-light business model, we typically manage or franchise hotels and other lodging offerings, rather than own them.

Under our asset-light business model and consistent with our focus on franchising, management, and licensing, we own or lease very few of our lodging properties.

Under our hotel franchising arrangements, we generally receive an initial application fee and continuing royalty fees, which are typically based on a percentage of room revenues, plus for certain brands, a percentage of food and beverage revenues.

Terms of our management agreements vary, but we earn a management fee that is typically composed of a base management fee, which is a percentage of the revenues of the hotel, and an incentive management fee, which is based on the profits of the hotel.

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& Canada, Europe, and CALA regions), incentive management fees are subject to a specified owner return.

of food and beverage revenues.

We also have license and other agreements with third parties for certain offerings, such as for our timeshare properties, MGM Collection with Marriott Bonvoy, Design Hotels, and The Ritz-Carlton Yacht Collection, under which we receive royalty fees and certain other fees.

Additionally, we earn fees for other uses of our intellectual property, including primarily co-branded credit card fees, as well as residential branding fees and certain other licensing fees.

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ADR, which we calculate by dividing property level room revenue by total rooms sold, measures average room price and is useful in assessing pricing levels.

RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, unless otherwise stated.

Unless otherwise stated, all changes refer to year-over-year changes for the comparable period.

Unless otherwise stated, RevPAR, occupancy, and ADR statistics are on a systemwide basis for comparable properties, and all changes refer to year-over-year changes for the comparable period.

Comparisons to prior periods are on a constant U.S.

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(1) undergone significant room or public space renovations or expansions, (2) been converted between company-operated and franchised, or (3) sustained substantial property damage or business interruption.

Our comparable properties also exclude MGM Collection with Marriott Bonvoy, Design Hotels, The Ritz-Carlton Yacht Collection, and timeshare properties.

Our comparable properties also exclude MGM Collection with Marriott Bonvoy, Design Hotels, The Ritz-Carlton Yacht Collection, residences, and timeshare properties.

For 2025, we had 5,554 comparable U.S.

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Business Trends

We saw solid global RevPAR growth during 2024 compared to 2023.

In 2024, worldwide RevPAR increased 4.3 percent compared to 2023, reflecting ADR growth of 2.8 percent and occupancy improvement of 1.0 percentage point.

The increase in RevPAR was driven by strong year-over-year demand growth in nearly all our regions.

& Canada, where demand has normalized, RevPAR increased 3.0 percent in 2024, led by strong demand from group as well as strong demand from transient customer segments across our brand tiers.

In EMEA, RevPAR growth of 9.1 percent in 2024 was driven by strong demand in most countries across the region, aided by the 2024 Paris Olympics and other special events.

In APEC, RevPAR increased 12.9 percent in 2024, driven by strong demand, including an increase in inbound demand into the region.

In CALA, RevPAR increased 8.8 percent in 2024, driven by strong demand throughout the region.

In Greater China, RevPAR declined 2.3 percent in 2024 due to lower domestic demand as a result of macro-economic conditions and an increase in outbound travel.

In 2024, we launched a comprehensive initiative to enhance our effectiveness and efficiency across the Company.

At this point in the process, we expect this initiative to yield $80 million to $90 million of annual general and administrative cost reductions beginning in 2025.

These efforts are also anticipated to deliver cost savings to our hotel owners.

As part of these efforts, in the second half of 2024, we implemented a voluntary retirement program for certain above-property associates, and some above-property roles in the organization were eliminated or redefined.

We substantially completed this initiative as of year-end 2024.

In 2025, worldwide RevPAR increased 2.0 percent compared to 2024, driven by ADR growth of 2.1 percent.

& Canada, RevPAR increased 0.7 percent in 2025, reflecting strong demand at our luxury hotels, partially offset by softer demand at our select service hotels, which were impacted by weaker business transient demand, in part due to declines in government travel.

In our International regions, RevPAR increased 5.1 percent in 2025, reflecting higher demand in most countries across the APEC, EMEA, and CALA regions.

In Greater China, RevPAR increased 0.4 percent, reflecting softness in macro-economic conditions during the year.

Starwood Data Security Incident

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however, we do not believe this incident will impact our long-term financial health.

See Note 7 for additional information related to legal proceedings and governmental investigations related to the Data Security Incident.

See Note 7 for additional information related to legal proceedings, investigations, and insurance recoveries related to the Data Security Incident.

System Growth and Pipeline

Our system grew from 9,361 properties (1,706,331 rooms) at year-end 2024 to 9,805 properties (1,779,936 rooms) at year-end 2025.

The increase compared to year-end 2023 reflected gross additions of 666 properties (123,389 rooms), including the addition of 16 properties (approximately 38,000 rooms) from our exclusive, long-term strategic licensing agreement with MGM Resorts International and 163 properties (approximately 9,000 rooms) from our long-term agreement with Sonder Holdings Inc., and deletions of 90 properties (14,572 rooms).

Our 2024 gross room additions included approximately 52,300 rooms located outside U.S.

& Canada and roughly 75,300 rooms converted from competitor brands.

At year-end 2024, we had nearly 3,800 properties and over 577,000 rooms in our development pipeline, which includes roughly 29,000 rooms approved for development but not yet under signed contracts.

Our development pipeline includes over 229,000 rooms, or 40 percent, that were under construction or in the process of converting to our system at year-end 2024.

Fifty-five percent of the rooms in our development pipeline are located outside U.S.

In 2024, we signed over 1,200 development deals with hotel owners and other counterparties for nearly 162,000 rooms globally.

Approximately 34 percent of rooms signed were the result of conversion opportunities.

During 2024, we continued to strengthen our luxury portfolio and grow our midscale brands.

In December 2024, we also announced the expansion of our outdoor-focused lodging offerings.

The increase compared to year-end 2024 reflected gross additions of 703 properties (99,459 rooms), including the addition of 37 properties (8,789 rooms) from the citizenM brand acquisition discussed in Note 3, and deletions of 253 properties (25,643 rooms).

The property and room counts as of year-end 2025 reflect the removal of all Sonder properties from our portfolio.

Our 2025 gross room additions included nearly 64,000 rooms located outside U.S.

& Canada (including the citizenM brand acquisition) and roughly 33,400 rooms converted from competitor brands.

At year-end 2025, we had approximately 4,100 properties and nearly 610,000 rooms in our development pipeline, which included over 35,000 rooms approved for development but not yet under signed contracts.

At year-end 2025, our development pipeline included nearly 265,000 rooms, or 43 percent, that were under construction, including hotels that are in the process of converting to our system.

Over half of the rooms in our development pipeline were located outside U.S.

In 2025, we signed nearly 1,200 development deals with hotel owners and other counterparties (excluding the citizenM acquisition) representing approximately 163,000 rooms globally.

Over 30 percent of rooms signed were driven by conversion opportunities.

During 2025, we added three new brands to our portfolio through the citizenM brand acquisition and the introductions of Series by Marriott and the Outdoor Collection by Marriott Bonvoy.

We continued to expand our portfolio across chain scales, including advancing the expansion of our midscale offerings, and we also continued to strengthen our residential portfolio, signing 55 residential agreements in 2025.

In 2026, we expect net rooms growth of 4.5 to 5.0 percent.

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December 31, 2024

1,981 2,046 (65) (3) % 571,889 575,963 (4,074) (1) %

Franchised/Licensed/Other (1)

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144 137 7 5 % 16,253 15,684 569 4 %

(1) In addition to franchised, includes our timeshare properties, MGM Collection with Marriott Bonvoy, Design Hotels, and The Ritz-Carlton Yacht Collection.

9,805 9,361 444 5 % 1,779,936 1,706,331 73,605 4 %

(1) Licensed and other properties include our timeshare properties, MGM Collection with Marriott Bonvoy, Design Hotels, and The Ritz-Carlton Yacht Collection.

Lodging Statistics

The following table presents RevPAR, occupancy, and ADR statistics for comparable properties for 2025, and 2025 compared to 2024.

Systemwide statistics include data from our franchised properties, in addition to our company-operated

Systemwide statistics include data from our franchised properties, in addition to our company-operated properties.

RevPAR Occupancy Average Daily Rate

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Also see the “Business Trends” section above for further discussion.

In the 2025 fourth quarter, we reclassified amounts attributable to other expenses previously reported under the “General, administrative, and other” caption to the “Owned, leased, and other expense” caption of our Income Statements.

See Note 1 for further information.

($ in millions)

2025 2024 Change 2025 vs.

Base management fees $ 1,288 $ 1,238 $ 50 4 %

Franchise fees $ 3,325 $ 3,113 $ 212 7 %

Base management fees 1,322 1,288 34 3 %

Incentive management fees 791 769 22 3 %

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Net fee revenues $ 5,303 $ 5,067 $ 236 5 %

The increase in base management fees primarily reflected higher RevPAR and unit growth ($26 million).

The increase in franchise fees primarily reflected higher RevPAR, unit growth ($99 million), higher co-branded credit card fees ($59 million), higher residential branding fees ($36 million), and higher fees from properties that converted from managed to franchised ($31 million).

The increase in franchise fees primarily reflected higher co-branded credit card and other brand-related fees ($105 million) as well as rooms growth ($94 million).

The increase in base management fees primarily reflected higher RevPAR as well as rooms growth ($25 million).

The increase in incentive management fees primarily reflected higher profits at managed hotels.

In 2024, we earned incentive management fees from 69 percent of our managed hotels worldwide, compared to 68 percent in 2023.

In both 2025 and 2024, we earned incentive management fees from 69 percent of our managed hotels worldwide.

We earned incentive management fees from 32 percent of our U.S.

& Canada managed hotels and 85 percent of our International managed hotels in each of 2024 and 2023.

In addition, 67 percent of our total incentive management fees in 2024 came from our International managed hotels, primarily in EMEA and APEC, versus 65 percent in 2023.

& Canada managed hotels and 85 percent of our International managed hotels in 2025, compared to 31 percent in U.S.

& Canada and 85 percent in International in 2024.

In addition, in both 2025 and 2024, 67 percent of our total incentive management fees came from our International managed hotels, primarily in EMEA and APEC.

Owned, Leased, and Other

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Owned, leased, and other revenue $ 1,679 $ 1,551 $ 128 8 %

Owned, leased, and other - direct expenses 1,200 1,165 35 3 %

Owned, leased, and other, net $ 351 $ 399 $ (48) (12) %

Owned, leased, and other revenue, net of direct expenses, decreased primarily due to $65 million of higher termination fees recorded in the prior year, largely related to one development project in U.S.

Owned, leased, and other expense

1,461 1,329 132 10 %

Owned, leased, and other revenue, net of owned, leased, and other expense

$ 218 $ 222 $ (4) (2) %

Owned, leased, and other revenue, net of owned, leased, and other expense, decreased primarily due to expenses related to the termination of our licensing agreement with Sonder Holdings Inc.

($23 million), partially offset by stronger results at our owned and leased properties in the U.S.

& Canada, which included the results from the Sheraton Grand Chicago hotel that we acquired in the fourth quarter of the prior year.

Cost Reimbursements

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See Note 2 for more information about the accounting for cost reimbursements, including our Loyalty Program.

The decrease in cost reimbursements, net primarily reflected lower revenues, net of expenses, for many of our programs and services, and Loyalty Program activity, which incurred higher program expenses.

The change in cost reimbursements, net primarily reflected higher Loyalty Program revenues, partially offset by higher expenses, net of revenues, for many of our programs and services.

Other Operating Expenses

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Depreciation, amortization, and other $ 213 $ 183 $ 30 16 %

General, administrative, and other 1,074 1,011 63 6 %

Restructuring and merger-related charges 77 60 17 28 %

General, administrative, and other expenses increased primarily due to higher compensation costs ($53 million) and higher guarantee reserves ($22 million).

Restructuring and merger-related charges increased primarily due to $37 million of restructuring charges for employee termination benefits discussed in Note 16 and a $30 million reserve for a loan commitment related to the Company’s acquisition of Starwood, partially offset by $35 million of lower charges related to the Data Security Incident discussed in Note 7.

General and administrative

870 945 (75) (8) %

Restructuring and merger-related (recoveries) charges, and other (2) 77 (79) (103) %

General and administrative expenses decreased primarily due to lower compensation costs ($39 million).

Restructuring and merger-related (recoveries) charges, and other expenses changed primarily due to insurance recoveries related to the Data Security Incident discussed in Note 7 ($47 million), lower restructuring charges for employee termination benefits ($34 million), and a prior year reserve for a loan commitment related to the Company’s acquisition of Starwood ($30 million).

Non-Operating Income (Expense)

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Equity in earnings

8 9 (1) (11) %

Gains and other income, net decreased primarily due to a gain recorded in the prior year on the sale of a hotel in the CALA region ($24 million).

Interest expense increased primarily due to higher debt balances driven by Senior Notes issuances, net of maturities ($129 million).

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$ (793) $ (776) $ (17) (2) %

Our tax provision increased in 2024 primarily due to intellectual property restructuring transactions resulting in non-U.S.

tax benefits in the prior year ($228 million), the prior year release of a tax valuation allowance as the Company concluded it is more likely than not to recognize non-U.S.

tax benefits ($223 million), and the prior year release of tax reserves, which was mostly due to the completion of a prior year tax audit ($103 million).

The increase was partially offset by a decrease in pre-tax income ($51 million).

Our tax provision increased primarily due to higher non-U.S.

taxes mainly from increased tax rates ($90 million) and higher pre-tax income ($62 million), partially offset by the current year release of tax reserves ($137 million).

BUSINESS SEGMENTS

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December 31, 2025 December 31, 2024 vs.

December 31, 2023

December 31, 2024 December 31, 2023 vs.

December 31, 2024 December 31, 2025 December 31, 2024 vs.

December 31, 2024

6,360 6,235 125 2 % 1,065,108 1,043,224 21,884 2 %

1,295 1,142 153 13 % 234,167 218,167 16,000 7 %

EMEA 1,385 1,295 90 7 % 252,257 234,167 18,090 8 %

Greater China 684 589 95 16 % 188,596 172,388 16,208 9 %

589 525 64 12 % 172,388 159,871 12,517 8 %

629 567 62 11 % 143,177 130,158 13,019 10 %

In 2024, net fee revenues grew in U.S.

& Canada, EMEA, and APEC compared to 2023, primarily driven by higher RevPAR and unit growth (see the Lodging Statistics and Properties and Rooms tables above for more information), as well as higher profits at managed hotels.

In Greater China, net fee revenues decreased in 2024 primarily due to lower RevPAR.

& Canada segment profit decreased in 2024 compared to 2023 despite the higher net fee revenues due to $138 million of lower cost reimbursement revenue, net of reimbursed expenses, $59 million of lower owned, leased, and other revenue, net of direct expenses, and $28 million of higher general, administrative, and other expenses.

Owned, leased, and other revenue, net of direct expenses decreased primarily due to higher termination fees in the prior year, largely related to one development project.

General, administrative, and other expenses increased primarily due to higher guarantee reserves.

EMEA segment profit increased in 2024 compared to 2023 due to higher net fee revenues and $30 million of lower general, administrative, and other expenses, primarily due to lower litigation accruals, partially offset by $26 million of lower cost reimbursement revenue, net of reimbursed expenses.

APEC 733 629 104 17 % 157,326 143,177 14,149 10 %

In 2025, segment net fee revenues grew in the U.S.

& Canada, EMEA, and APEC compared to 2024, primarily driven by rooms growth and higher RevPAR (see the Lodging Statistics and Properties and Rooms tables above for more information).

Additionally, U.S.

& Canada segment profit reflected higher owned, leased, and other revenue, net of owned, leased, and other expense ($56 million), partially offset by lower cost reimbursement revenue, net of reimbursed expenses ($34 million).

Owned, leased, and other revenue, net of owned, leased, and other expense increased primarily due to stronger results at our owned and leased properties, which included the results from the Sheraton Grand Chicago hotel that we acquired in the fourth quarter of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

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Available borrowings under the Credit Facility support our commercial paper program and general corporate needs.

dollar borrowings under the Credit Facility bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our

public debt rating.

dollar borrowings under the Credit Facility bear interest at SOFR (the Secured Overnight Financing Rate) plus a spread based on our public debt rating.

We also pay quarterly fees on the Credit Facility at a rate based on our public debt rating.

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The Credit Facility contains certain covenants, including a single financial covenant that limits our maximum leverage (consisting of the ratio of Adjusted Total Debt to EBITDA, each as defined in the Credit Facility) to not more than 4.5 to 1.0.

Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain financial ratios.

Our outstanding public debt does not contain a corresponding financial covenant or a requirement that we maintain certain

financial ratios.

We currently satisfy the covenants in our Credit Facility and public debt instruments, including the leverage covenant under the Credit Facility, and do not expect the covenants will restrict our ability to meet our anticipated borrowing and liquidity needs.

We monitor the status of the capital markets and regularly evaluate the effect that changes in capital market conditions may have on our ability to fund our liquidity needs.

We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements.

We believe the Credit Facility, and our access to capital markets, together with cash we expect to generate from operations, remain adequate to meet our liquidity requirements over the next 12 months and thereafter for the foreseeable future.

Commercial Paper

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Cash from Operations

Net cash provided by operating activities decreased by $421 million in 2024 compared to 2023.

Net cash provided by operating activities in 2024 reflected a cash outflow of $300 million in the “Restructuring and merger-related charges” caption of our Statements of Cash Flows for the settlement of the guarantee liability associated with the purchase of the Sheraton Grand Chicago (discussed in Note 3).

Cash flows for 2023 reflected reduced cash received from U.S.

co-branded credit card issuers related to the 2020 prepayment of certain future revenues.

Such reductions ended as of year-end 2023.

Net cash provided by operating activities increased by $463 million in 2025 compared to 2024.

The increase reflected a cash outflow in the prior year of $300 million in the “Restructuring and merger-related (recoveries) charges, and other” caption of our Statements of Cash Flows for the settlement of the guarantee liability associated with the purchase of the Sheraton Grand Chicago.

Our ratio of current assets to current liabilities was 0.4 to 1.0 at both year-end 2025 and year-end 2024.

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We made capital and technology expenditures of $604 million in 2025 and $750 million in 2024.

Capital and technology expenditures in 2024 increased by $298 million compared to 2023, primarily due to approximately $200 million of spending related to the Sheraton Grand Chicago capitalized assets (discussed in Note 3) and higher than typical spending on our worldwide technology systems transformation, the overwhelming portion of which is expected to be reimbursed over time.

In 2023, we also had cash outflows of $101 million due to the City Express brand acquisition.

Capital and technology expenditures in 2025 decreased by $146 million compared to 2024, primarily due to approximately $200 million of spending related to the Sheraton Grand Chicago capitalized assets in 2024.

In 2025, we also had cash outflows of $350 million due to the citizenM brand acquisition, which we discuss in Note 3.

We expect capital expenditures and other investments will total approximately $1.0 billion to $1.1 billion for 2026, including capital and technology expenditures, loan advances, contract acquisition costs, and other investing activities, but excluding any potential property or brand acquisitions, which we cannot forecast with sufficient accuracy and which may be significant.

Our anticipated capital and technology expenditures include higher than typical spending on our worldwide technology systems transformation and renovations of hotels in our owned and leased portfolio.

Dispositions.

Property and asset sales generated $16 million of cash proceeds in 2024 and $71 million in 2023.

Our anticipated capital and technology expenditures include higher than typical spending on our worldwide technology systems transformation, the overwhelming portion of which we expect to be reimbursed over time, and renovations of hotels in our owned and leased portfolio.

Over time, we have sold lodging properties, both completed and under development, generally subject to long-term management agreements.

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Financing Activities Cash Flows

Debt increased by $2,574 million in 2024, to $14,447 million at year-end 2024 from $11,873 million at year-end 2023, primarily due to the issuances of our Series PP Notes and Series QQ Notes ($1,480 million) and Series NN Notes and Series OO Notes ($1,468 million), partially offset by the maturity of our Series CC Notes ($550 million).

Debt increased by $1,757 million in 2025, to $16,204 million at year-end 2025 from $14,447 million at year-end 2024, primarily due to the issuances of our Series RR Notes and Series SS Notes ($1,960 million) and our Series TT Notes, Series UU Notes, and Series VV Notes ($1,477 million), partially offset by the maturity of our Series P Notes, Series V Notes, and Series EE Notes ($350 million, $318 million, and $600 million, respectively), and net commercial paper repayments ($403 million).

See Note 9 for additional information on Senior Notes issuances.

Our long-term financial objectives include maintaining diversified financing sources, optimizing the mix and maturity of our long-term debt, and reducing our working capital.

At year-end 2024, our long-term debt had a weighted average interest rate of 4.5 percent and a weighted average maturity of approximately 5.0 years.

The ratio of our fixed-rate long-term debt to our total long-term debt was 0.9 to 1.0 at year-end 2024.

At year-end 2025, including the effect of interest rate swaps, our total long-term debt (current and noncurrent) had a weighted average interest rate of 4.5 percent, a weighted average maturity of approximately 5.4 years, and a ratio of fixed-rate to total long-term debt of 0.9 to 1.0.

See the “Our Credit Facility” caption in this “Liquidity and Capital Resources” section for more information on our Credit Facility.

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• We enter into operating leases primarily for hotels, offices, and equipment, which are discussed in Note 8.

• At December 31, 2024, projected Deemed Repatriation Transition Tax payments under the 2017 Tax Cuts and Jobs Act totaled $135 million, which is payable within the next 12 months from year-end 2024.

• The Company had guarantees and letters of credit as of year-end 2025, which are discussed in Note 7.

The majority of our remaining guarantee commitments are not expected to be funded within the next 12 months from year-end 2025.

• In connection with the citizenM brand acquisition discussed in Note 3, we may pay earn-out payments up to $110 million to citizenM Holding BV and certain of its affiliates based on the future growth of the brand over a specified, multi-year timeframe.

Earn-out payments would not begin until the fourth year following closing of the transaction.

• In the normal course of business, we enter into purchase commitments related to the programs and services that we typically provide to hotel owners, and we incur other obligations to manage the daily operating needs of the hotels that we manage.

Since our contracts with hotel owners generally require reimbursement for expenses incurred in providing these programs and services and managing the daily operating needs of the hotels that we manage, these obligations are not expected to have a material impact on our net income and cash flow over the long term.

Since hotel owners are generally responsible for these costs, these obligations are not expected to have a material impact on our net income and cash flow over the long term.

NEW ACCOUNTING STANDARDS

We do not expect that accounting standards updates issued to date and that are effective after December 31, 2024 will have a material effect on our Financial Statements.

See Note 2 for information on our anticipated adoption of recently issued accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts and related disclosures.

Our preparation of financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect reported amounts and related disclosures.

Management considers an accounting policy and estimate to be critical if:

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Loyalty Program , including how we estimate the breakage of hotel points, credit card points, and free night certificates, the volume of points and free night certificates that will be issued under our co-branded credit card agreements, the amount of consideration to which we will be entitled under our co-branded credit card agreements, and the stand-alone selling prices of goods and services provided under our co-branded credit card agreements.

Changes in these estimates could result in material changes to our liability for guest loyalty program and Loyalty Program revenue.

Changes in these estimates could result in material changes to our liability for guest loyalty program and Loyalty Program

Based on the conditions existing at December 31, 2025 and holding other factors constant, a one percent decrease in our estimate of the breakage of points could result in an increase in the liability for guest loyalty program of approximately $50 million.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis