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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________ 

FORM 10-Q

_______________________________________ 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

OR

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

For the transition period from              to             

Commission File No. 1-13881

_________________________________________________ 

MARRIOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 _______________________________________

Delaware			52-2055918
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)
10400 Fernwood Road	Bethesda	Maryland	20817
(Address of principal executive offices)			(Zip Code)

(301) 380-3000

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Class A Common Stock, $0.01 par value	MAR	Nasdaq Global Select Market

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨	Smaller Reporting Company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 324,331,716 shares of Class A Common Stock, par value $0.01 per share, outstanding at October 30, 2020.

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MARRIOTT INTERNATIONAL, INC.

FORM 10-Q TABLE OF CONTENTS

		Page No.
Part I.	Financial Information (Unaudited):
Item 1.	Financial Statements
	Condensed Consolidated Statements of Income (Loss)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Cautionary Statement	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
Part II.	Other Information:
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 6.	Exhibits	47
	Signature	49

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

($ in millions, except per share amounts)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
REVENUES
Base management fees	$	87	$	291	$	341	$	882
Franchise fees	279		530		876		1,505
Incentive management fees	31		134		43		462
Gross fee revenues	397		955		1,260		2,849
Contract investment amortization	(48)		(16)		(94)		(45)
Net fee revenues	349		939		1,166		2,804
Owned, leased, and other revenue	116		393		445		1,186
Cost reimbursement revenue	1,789		3,952		6,788		11,611
	2,254		5,284		8,399		15,601
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct	134		326		527		982
Depreciation, amortization, and other	53		52		275		162
General, administrative, and other	131		220		579		671
Restructuring and merger-related charges	1		9		5		191
Reimbursed expenses	1,683		4,070		6,801		12,069
	2,002		4,677		8,187		14,075
OPERATING INCOME	252		607		212		1,526
Gains and other income, net	2		10		3		16
Interest expense	(113)		(100)		(333)		(299)
Interest income	6		8		20		20
Equity in (losses) earnings	(20)		2		(54)		10
INCOME (LOSS) BEFORE INCOME TAXES	127		527		(152)		1,273
(Provision) benefit for income taxes	(27)		(140)		49		(279)
NET INCOME (LOSS)	$	100	$	387	$	(103)	$	994
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share - basic	$	0.31	$	1.17	$	(0.32)	$	2.97
Earnings (loss) per share - diluted	$	0.31	$	1.16	$	(0.32)	$	2.95

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

($ in millions)

(Unaudited)

	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Net income (loss)	$	100	$	387	$	(103)	$	994
Other comprehensive income (loss):
Foreign currency translation adjustments	163		(182)		(87)		(111)
Derivative instrument adjustments and other, net of tax	(1)		4		2		(2)
Total other comprehensive income (loss), net of tax	162		(178)		(85)		(113)
Comprehensive income (loss)	$	262	$	209	$	(188)	$	881

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

	(Unaudited)
	September 30, 2020		December 31, 2019
ASSETS
Current assets
Cash and equivalents	$	1,577	$	225
Accounts and notes receivable, net	1,791		2,395
Prepaid expenses and other	164		252
Assets held for sale	8		255
	3,540		3,127
Property and equipment, net	1,790		1,904
Intangible assets
Brands	5,947		5,954
Contract acquisition costs and other	2,607		2,687
Goodwill	9,035		9,048
	17,589		17,689
Equity method investments	517		577
Notes receivable, net	154		117
Deferred tax assets	202		154
Operating lease assets	757		888
Other noncurrent assets	599		595
	$	25,148	$	25,051
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	1,316	$	977
Accounts payable	486		720
Accrued payroll and benefits	1,030		1,339
Liability for guest loyalty program	1,724		2,258
Accrued expenses and other	1,450		1,383
	6,006		6,677
Long-term debt	9,679		9,963
Liability for guest loyalty program	4,433		3,460
Deferred tax liabilities	146		290
Deferred revenue	1,615		840
Operating lease liabilities	817		882
Other noncurrent liabilities	2,223		2,236
Shareholders’ equity
Class A Common Stock	5		5
Additional paid-in-capital	5,798		5,800
Retained earnings	9,370		9,644
Treasury stock, at cost	(14,498)		(14,385)
Accumulated other comprehensive loss	(446)		(361)
	229		703
	$	25,148	$	25,051

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in millions)

(Unaudited)

	Nine Months Ended
	September 30, 2020		September 30, 2019
OPERATING ACTIVITIES
Net (loss) income	$	(103)	$	994
Adjustments to reconcile to cash provided by operating activities:
Depreciation, amortization, and other	369		207
Share-based compensation	143		138
Income taxes	(289)		(98)
Liability for guest loyalty program	439		163
Contract acquisition costs	(103)		(140)
Restructuring and merger-related charges	(40)		137
Working capital changes	127		(404)
Gain on asset dispositions	—		(15)
Deferred revenue changes and other	1,080		208
Net cash provided by operating activities	1,623		1,190
INVESTING ACTIVITIES
Capital expenditures	(97)		(235)
Dispositions	260		4
Loan advances	(36)		(23)
Loan collections	6		49
Other	(22)		(38)
Net cash provided by (used in) investing activities	111		(243)
FINANCING ACTIVITIES
Commercial paper/Credit Facility, net	(2,260)		1,177
Issuance of long-term debt	3,556		852
Repayment of long-term debt	(1,278)		(621)
Issuance of Class A Common Stock	—		7
Dividends paid	(156)		(455)
Purchase of treasury stock	(150)		(1,828)
Share-based compensation withholding taxes	(100)		(132)
Other	(9)		(7)
Net cash used in financing activities	(397)		(1,007)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	1,337		(60)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	253		360
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	1,590	$	300

(1)The 2020 amounts include beginning restricted cash of $28 million at December 31, 2019, and ending restricted cash of $13 million at September 30, 2020, which we present in the “Prepaid expenses and other” and “Other noncurrent assets” captions of our Balance Sheets.

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The condensed consolidated financial statements present the results of operations, financial position, and cash flows of Marriott International, Inc. and subsidiaries (referred to in this report as “we,” “us,” “Marriott,” or “the Company”). In order to make this report easier to read, we also refer throughout to (i) our Condensed Consolidated Financial Statements as our “Financial Statements,” (ii) our Condensed Consolidated Statements of Income as our “Income Statements,” (iii) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (iv) our Condensed Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (v) our properties, brands, or markets in the United States (“U.S.”) and Canada as “North America” or “North American,” and (vi) our properties, brands, or markets in our Caribbean and Latin America region, Europe, Middle East and Africa segment, and Asia Pacific segment, as “International.” In addition, references throughout to numbered “Notes” refer to these Notes to Condensed Consolidated Financial Statements, unless otherwise stated.

These Financial Statements have not been audited. We have condensed or omitted certain information and disclosures normally included in financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”). The financial statements in this report should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (“2019 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2019 Form 10-K.

Preparation of financial statements that conform with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting periods, and the disclosures of contingent liabilities. The uncertainty created by the coronavirus and efforts to contain it (“COVID-19”) has made such estimates more difficult and subjective. Accordingly, ultimate results could differ from those estimates.

The accompanying Financial Statements reflect all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2020 and December 31, 2019, the results of our operations for the three and nine months ended September 30, 2020 and September 30, 2019, and cash flows for the nine months ended September 30, 2020 and September 30, 2019. Interim results may not be indicative of fiscal year performance because of seasonal and short-term variations, as well as the impact of COVID-19. We have eliminated all material intercompany transactions and balances between entities consolidated in these Financial Statements.

New Accounting Standards Adopted

Accounting Standards Update (“ASU”) No. 2016-13 - “Financial Instruments-Credit Losses” (Topic 326).

ASU 2016-13 requires the use of an impairment methodology that reflects an estimate of expected credit losses, measured over the contractual life of an instrument, based on information about past events, current conditions, and forecasts of future economic conditions. We adopted ASU 2016-13 in the 2020 first quarter using the modified retrospective transition method. Upon adoption, we increased our allowance for credit losses in the “Accounts and notes receivable, net” caption of our Balance Sheets by $19 million, from $82 million at December 31, 2019 to $101 million at January 1, 2020. We also recorded a $4 million decrease in the “Deferred tax liabilities” caption of our Balance Sheets and a $15 million cumulative-effect adjustment to retained earnings on our Balance Sheets.

Additionally, we recorded a provision for credit losses of $122 million in the 2020 first three quarters, primarily due to the negative economic impact caused by COVID-19 and our estimate of future economic conditions. The allowance for credit losses was $199 million at September 30, 2020.

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NOTE 2. RESTRUCTURING CHARGES

Beginning in the 2020 second quarter, we initiated several regional restructuring plans to achieve cost savings in response to the decline in lodging demand caused by COVID-19. In the 2020 first three quarters, we recorded $305 million of restructuring charges for above-property, property-level, and owned and leased properties employee termination benefits, of which we present $46 million in the “Restructuring and merger-related charges” caption and $259 million in the “Reimbursed expenses” caption of our Income Statements. Our North America segment recorded $215 million of the total restructuring charges in the 2020 first three quarters.

In the 2020 first three quarters, we recorded $109 million of global above-property restructuring charges, primarily for employee termination benefits, of which we present $37 million in the “Restructuring and merger-related charges” caption and $72 million in the “Reimbursed expenses” caption of our Income Statements. Our global above-property restructuring activities are currently expected to result in approximately $115 million to $125 million of charges, including amounts already expensed. We expect to substantially complete the programs relating to our above-property organization by year-end 2020.

In the 2020 first three quarters, we recorded $196 million of property-level and owned and leased properties restructuring charges for employee termination benefits, of which we present $9 million in the “Restructuring and merger-related charges” caption and $187 million in the “Reimbursed expenses” caption of our Income Statements. We anticipate additional property-level and owned and leased properties restructuring charges in future quarters.

The following table presents our restructuring reserve activity during the period:

($ in millions)	Employee termination costs
Balance at December 31, 2019	$	—
Charges	305
Cash payments	(82)
Other	(6)
Balance at September 30, 2020, classified in “Accrued expense and other”	$	217

NOTE 3. DISPOSITIONS

In the 2020 first quarter, we sold a North America property for $268 million. We will continue to operate the hotel under a long-term management agreement.

NOTE 4. EARNINGS PER SHARE

The table below presents the reconciliation of the earnings and number of shares used in our calculations of basic and diluted earnings per share:

	Three Months Ended				Nine Months Ended
(in millions, except per share amounts)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Computation of Basic Earnings Per Share
Net income (loss)	$	100	$	387	$	(103)	$	994
Shares for basic earnings (loss) per share	325.9		329.9		325.7		334.4
Basic earnings (loss) per share	$	0.31	$	1.17	$	(0.32)	$	2.97
Computation of Diluted Earnings (Loss) Per Share
Net income (loss)	$	100	$	387	$	(103)	$	994
Shares for basic earnings (loss) per share	325.9		329.9		325.7		334.4
Effect of dilutive securities
Share-based compensation (1)	0.9		2.6		—		2.8
Shares for diluted earnings (loss) per share	326.8		332.5		325.7		337.2
Diluted earnings (loss) per share	$	0.31	$	1.16	$	(0.32)	$	2.95

(1) For the calculation of diluted loss per share for the nine months ended September 30, 2020, we excluded share-based compensation securities of 1.2 million because the effect was anti-dilutive.

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NOTE 5. SHARE-BASED COMPENSATION

We granted 3.4 million restricted stock units (“RSUs”) during the 2020 first three quarters to certain officers and key employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.1 million performance-based RSUs (“PSUs”) in the 2020 first three quarters to certain executive officers, which are earned, subject to continued employment and the satisfaction of certain performance conditions based on achievement of pre-established targets for gross room openings, active Marriott Bonvoy™ loyalty member growth, and adjusted operating income growth over, or at the end of, a three-year performance period. RSUs, including PSUs, granted in the 2020 first three quarters had a weighted average grant-date fair value of $101 per unit.

We recorded share-based compensation expense for RSUs and PSUs of $49 million in the 2020 third quarter and $44 million in the 2019 third quarter, $134 million in the 2020 first three quarters, and $130 million in the 2019 first three quarters. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $372 million at September 30, 2020 and $176 million at December 31, 2019.

NOTE 6. INCOME TAXES

Our effective tax rate was 21.6 percent for the 2020 third quarter compared to 26.4 percent for the 2019 third quarter. The decrease in our effective tax rate was primarily due to the reduction of the accrual for the ICO fine described in Note 7, which had no tax impact.

Our effective tax rate was a benefit of 32.0 percent for the 2020 first three quarters compared to a provision of 21.9 percent for the 2019 first three quarters. The change in our effective tax rate was primarily due to a more favorable impact from stock based compensation, which was partially offset by an unfavorable impact from uncertain tax positions.

We paid cash for income taxes, net of refunds, of $240 million in the 2020 first three quarters and $376 million in the 2019 first three quarters.

NOTE 7. COMMITMENTS AND CONTINGENCIES

Guarantees

We present the maximum potential amount of our future guarantee fundings and the carrying amount of our liability for our debt service, operating profit, and other guarantees (excluding contingent purchase obligations) for which we are the primary obligor at September 30, 2020 in the following table:

($ in millions) Guarantee Type	Maximum Potential Amount of Future Fundings		Recorded Liability for Guarantees
Debt service	$	53	$	6
Operating profit	183		107
Other	18		4
	$	254	$	117

Our maximum potential guarantees listed in the preceding table include $79 million of guarantees that will not be in effect until the underlying properties open and we begin to operate the properties or certain other events occur.

Contingent Purchase Obligation

Sheraton Grand Chicago. We granted the owner a one-time right, exercisable in 2022, to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). If the owner exercises the put option, we have the option to purchase, at the same time the put transaction closes, the fee simple interest in the underlying land for an additional $200 million in cash. We accounted for the put option as a guarantee, and our recorded liability at September 30, 2020 was $57 million.

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Starwood Data Security Incident

Description of Event

On November 30, 2018, we announced a data security incident involving unauthorized access to the Starwood reservations database (the “Data Security Incident”). Working with leading security experts, we determined that there was unauthorized access to the Starwood network since 2014 and that an unauthorized party had copied information from the Starwood reservations database and taken steps towards removing it. The Starwood reservations database is no longer used for business operations.

Expenses and Insurance Recoveries

In the 2020 third quarter, we recorded a $35 million net reversal of expenses and $4 million of accrued insurance recoveries, and in the 2019 third quarter, we recorded $6 million of expenses and $9 million of accrued insurance recoveries, related to the Data Security Incident. In the 2020 first three quarters, we recorded a $17 million net reversal of expenses and $24 million of accrued insurance recoveries, and in the 2019 first three quarters, we recorded $198 million of expenses and $77 million of accrued insurance recoveries, related to the Data Security Incident. We received insurance recoveries of $1 million in the 2020 third quarter, $6 million in the 2019 third quarter, $45 million in the 2020 first three quarters, and $58 million in the 2019 first three quarters. The net reversal of expenses for the 2020 third quarter and year-to-date is primarily due to the reduction of the accrual for the ICO fine further described below. We recognize insurance recoveries when they are probable of receipt and present them in our Income Statements in the same caption as the related expense, up to the amount of total expense incurred in prior and current periods. We present expenses and insurance recoveries related to the Data Security Incident in either the “Reimbursed expenses” or “Restructuring and merger-related charges” captions of our Income Statements.

Litigation, Claims, and Government Investigations

Following our announcement of the Data Security Incident, approximately 100 lawsuits were filed by consumers and others against us in U.S. federal, U.S. state and Canadian courts related to the incident. All but one of the U.S. cases were consolidated and transferred to the U.S. District Court for the District of Maryland, pursuant to orders of the U.S. Judicial Panel on Multidistrict Litigation (the “MDL”). The plaintiffs in the U.S. and Canadian cases, who generally purport to represent various classes of consumers, generally claim to have been harmed by alleged actions and/or omissions by the Company in connection with the Data Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. Among the U.S. cases consolidated in the MDL proceeding is a putative class action lawsuit that was filed against us and certain of our current officers and directors on December 1, 2018, alleging violations of the federal securities laws in connection with statements regarding our cybersecurity systems and controls, and seeking certification of a class of affected persons, unspecified monetary damages, costs and attorneys’ fees, and other related relief. The MDL proceeding also includes two shareholder derivative complaints that were filed on February 26, 2019 and March 15, 2019, respectively, against the Company, certain of its officers and certain current and former members of our Board of Directors, alleging, among other claims, breach of fiduciary duty, corporate waste, unjust enrichment, mismanagement and violations of the federal securities laws, and seeking unspecified monetary damages and restitution, changes to the Company’s corporate governance and internal procedures, costs and attorneys’ fees, and other related relief. A separate shareholder derivative complaint was filed in the Delaware Court of Chancery on December 3, 2019 against the Company and certain of its officers and certain current and former members of our Board of Directors, alleging claims and seeking relief generally similar to the claims made and relief sought in the other two derivative cases. This case will not be consolidated with the MDL proceeding. We dispute the allegations in the lawsuits described above and are vigorously defending against such claims. We have filed motions to dismiss in each of these cases, some of which have been denied, but the cases generally remain at an early stage. There has been some consolidation of the Canadian cases, with five cases now pending across five provinces, and we expect there could be further consolidation in the future. In April 2019, we received a letter purportedly on behalf of a shareholder of the Company (also one of the named plaintiffs in the putative securities class action described above) demanding that our Board of Directors take action against the Company’s current and certain former officers and directors to recover damages for alleged breaches of fiduciary duties and related claims

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arising from the Data Security Incident. The Board of Directors has constituted a demand review committee to investigate the claims made in the demand letter, and the committee has retained independent counsel to assist with the investigation. The committee’s investigation is ongoing. In addition, on August 18, 2020, a purported representative action was brought against us in the High Court of Justice for England and Wales on behalf of an alleged claimant class of English and Welsh residents alleging breaches of the General Data Protection Regulation and/or the U.K. Data Protection Act 2018 (the “U.K. DPA”) in connection with the Data Security Incident. We dispute all of the allegations in this purported action and will vigorously defend against any such claims. On November 5, 2020, the court issued an order with the consent of all parties staying this action pending resolution of another case raising similar issues, but not involving the Company, that is pending before the U.K. Supreme Court.

In addition, numerous U.S. federal, U.S. state and foreign governmental authorities made inquiries, opened investigations, or requested information and/or documents related to the Data Security Incident and related matters, including Attorneys General offices from all 50 states and the District of Columbia, the Federal Trade Commission, the Securities and Exchange Commission, certain committees of the U.S. Senate and House of Representatives, the Information Commissioner’s Office in the United Kingdom (the “ICO”) as lead supervisory authority in the European Economic Area, and regulatory authorities in various other jurisdictions. With the exception of the ICO proceeding, these matters generally remain open. In July 2019, the ICO issued a formal notice of intent under the U.K. DPA proposing a fine in the amount of £99 million against the Company in relation to the Data Security Incident. We submitted written responses to the ICO vigorously defending our position and have engaged with the ICO regarding the Data Security Incident and proposed fine. We mutually agreed with the ICO to an extension of the regulatory process until October 30, 2020, and on October 30, 2020 the ICO issued a final decision under the U.K. DPA. The decision includes a fine of £18.4 million. The Company does not intend to appeal the ICO’s decision, but has made no admission of liability in relation to the decision or the underlying allegations. Our accrual for this loss contingency, which we present in the “Accrued expenses and other” caption of our Balance Sheets, was $65 million at December 31, 2019, and $23 million at September 30, 2020.

While we believe it is reasonably possible that we may incur additional losses associated with the above described proceedings and investigations related to the Data Security Incident, it is not possible to estimate the amount of loss or range of loss, if any, in excess of the amounts already incurred that might result from adverse judgments, settlements, fines, penalties, or other resolution of these proceedings and investigations based on the current stage of these proceedings and investigations, the absence of specific allegations as to alleged damages, the uncertainty as to the certification of a class or classes and the size of any certified class, if applicable, and/or the lack of resolution of significant factual and legal issues.

NOTE 8. LEASES

The following table presents our future minimum lease payments as of September 30, 2020:

($ in millions)	Operating Leases		Finance Leases
2020, remaining	$	50	$	3
2021	176		13
2022	171		13
2023	120		14
2024	111		14
Thereafter	602		151
Total minimum lease payments	$	1,230	$	208
Less: Amount representing interest	(266)		(55)
Present value of minimum lease payments	$	964	$	153
Current (1)	147		6
Noncurrent (2)	817		147
	$	964	$	153

(1)Operating leases recorded in the “Accrued expenses and other” and finance leases recorded in the “Current portion of long-term debt” captions of our Balance Sheets.

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(2)Operating leases recorded in the “Operating lease liabilities” and finance leases recorded in the “Long-term debt” captions of our Balance Sheets.

As of September 30, 2020, we had entered into an agreement that we expect to account for as an operating lease with a 20-year term for our new headquarters office, which is not reflected in our Balance Sheets or in the table above as the lease has not commenced.

We recorded impairment charges for right-of-use assets and property and equipment, including leasehold improvements, of $105 million in the 2020 first three quarters in the “Depreciation, amortization, and other” caption of our Income Statements relating to the impact of COVID-19 on several North America leased hotels. We determined that we may not be able to fully recover the carrying amount of these North America hotel leases after evaluating the assets for recovery due to declines in market performance and future cash flow projections. We estimated the fair value using an income approach reflecting internally developed Level 3 discounted cash flows that included, among other things, our expectations of future cash flows based on historical experience and projected growth rates, usage estimates, and demand trends.

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NOTE 9. LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table at the end of the 2020 third quarter and year-end 2019:

	At Period End
($ in millions)	September 30, 2020		December 31, 2019
Senior Notes:
Series L Notes, interest rate of 3.3%, face amount of $173, maturing September 15, 2022 (effective interest rate of 3.4%)	$	173	$	349
Series M Notes, interest rate of 3.4%, face amount of $350, matured October 15, 2020 (effective interest rate of 3.6%)	—		349
Series N Notes, interest rate of 3.1%, face amount of $400, maturing October 15, 2021 (effective interest rate of 3.4%)	399		398
Series O Notes, interest rate of 2.9%, face amount of $450, maturing March 1, 2021 (effective interest rate of 3.1%)	450		449
Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%)	346		346
Series Q Notes, interest rate of 2.3%, face amount of $399, maturing January 15, 2022 (effective interest rate of 2.5%)	398		747
Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%)	745		744
Series U Notes, interest rate of 3.1%, face amount of $291, maturing February 15, 2023 (effective interest rate of 3.1%)	291		291
Series V Notes, interest rate of 3.8%, face amount of $318, maturing March 15, 2025 (effective interest rate of 2.8%)	330		332
Series W Notes, interest rate of 4.5%, face amount of $278, maturing October 1, 2034 (effective interest rate of 4.1%)	291		291
Series X Notes, interest rate of 4.0%, face amount of $450, maturing April 15, 2028 (effective interest rate of 4.2%)	444		444
Series Y Notes, floating rate, face amount of $550, maturing December 1, 2020 (effective interest rate of 0.8% at September 30, 2020)	550		549
Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%)	348		347
Series AA Notes, interest rate of 4.7%, face amount of $300, maturing December 1, 2028 (effective interest rate of 4.8%)	297		297
Series BB Notes, floating rate, face amount of $300, maturing March 8, 2021 (effective interest rate of 0.9% at September 30, 2020)	300		299
Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%)	590		564
Series DD Notes, interest rate of 2.1%, face amount of $224, maturing October 3, 2022 (effective interest rate of 1.2%)	229		543
Series EE Notes, interest rate of 5.8%, face amount of $1,600, maturing May 1, 2025 (effective interest rate of 6.0%)	1,582		—
Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030 (effective interest rate of 4.8%)	985		—
Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032 (effective interest rate of 3.7%)	984		—
Commercial paper	30		3,197
Credit Facility	900		—
Finance lease obligations	153		157
Other	180		247
	$	10,995	$	10,940
Less current portion	(1,316)		(977)
	$	9,679	$	9,963

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We paid cash for interest, net of amounts capitalized, of $234 million in the 2020 first three quarters and $247 million in the 2019 first three quarters.

We are party to a multicurrency revolving credit agreement (as amended, the “Credit Facility”) that provides for up to $4.5 billion of aggregate effective borrowings to support our commercial paper program and general corporate needs, including working capital, capital expenditures, letters of credit, and acquisitions. Borrowings under the Credit Facility generally bear interest at LIBOR (the London Interbank Offered 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. We classify outstanding borrowings under the Credit Facility and outstanding commercial paper borrowings as long-term based on our ability and intent to refinance the outstanding borrowings on a long-term basis. The Credit Facility expires on June 28, 2024. In the 2020 first three quarters, we made borrowings of $4.5 billion and repayments of $3.6 billion, reducing the total outstanding borrowings under the Credit Facility to $0.9 billion as of September 30, 2020.

In April 2020, we entered into an amendment to the Credit Facility. The amendment waives the quarterly-tested leverage covenant in the Credit Facility through and including the first quarter of 2021 (which waiver period may end sooner at our election), adjusts the required leverage levels for the covenant when it is re-imposed at the end of the waiver period, and imposes a new monthly-tested liquidity covenant for the duration of the waiver period. The amendment also makes certain other amendments to the terms of the Credit Facility, including increasing the interest and fees payable on the Credit Facility for the duration of the period during which the waiver of the leverage covenant remains in effect, tightening certain existing covenants, and imposing additional covenants for the duration of the waiver period. These covenant changes include tightening the lien covenant and the covenant on dividends, share repurchases and distributions, and imposing new covenants limiting asset sales, investments and discretionary capital expenditures.

In April 2020, we issued $1.6 billion aggregate principal amount of 5.750 percent Series EE Notes due May 1, 2025 (the “Series EE Notes”). We will pay interest on the Series EE Notes in May and November of each year, commencing in November 2020. We received net proceeds of approximately $1.581 billion from the offering of the Series EE Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes.

In June 2020, we issued $1.0 billion aggregate principal amount of 4.625 percent Series FF Notes due June 15, 2030 (the “Series FF Notes”). We will pay interest on the Series FF Notes in June and December of each year, commencing in December 2020. We received net proceeds of approximately $985 million from the offering of the Series FF Notes, after deducting the underwriting discount and estimated expenses. We used the majority of these proceeds to repurchase Senior Notes with near term maturities, as further described below.

In June 2020, we completed a tender offer (the “Tender Offer”) and retired $853 million aggregate principal amount of our Senior Notes consisting of:

•$351 million of our 2.3% Series Q Notes maturing January 15, 2022;

•$176 million of our 3.3% Series L Notes maturing September 15, 2022; and

•$326 million of our 2.1% Series DD Notes maturing October 3, 2022.

We used proceeds from our Series FF Notes offering to complete the repurchase of such notes, including the payment of accrued interest and other costs incurred.

In July 2020, we redeemed all $350 million aggregate principal amount of our Series M Notes due in October 2020.

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In August 2020, we issued $1.0 billion aggregate principal amount of 3.500 percent Series GG Notes due October 15, 2032 (the “Series GG Notes”). We will pay interest on the Series GG Notes in April and October of each year, commencing in April 2021. We received net proceeds of approximately $984 million from the offering of the Series GG Notes, after deducting the underwriting discount and estimated expenses, which were made available for general corporate purposes, including the repayment of a portion of our outstanding borrowings under the Credit Facility.

NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS

We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts. We present the carrying values and the fair values of noncurrent financial assets and liabilities that qualify as financial instruments, determined under current guidance for disclosures on the fair value of financial instruments, in the following table:

	September 30, 2020				December 31, 2019
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior, mezzanine, and other loans	$	154	$	136	$	117	$	112
Total noncurrent financial assets	$	154	$	136	$	117	$	112
Senior Notes	$	(8,432)	$	(8,814)	$	(6,441)	$	(6,712)
Commercial paper / Credit Facility	(930)		(930)		(3,197)		(3,197)
Other long-term debt	(170)		(172)		(174)		(179)
Other noncurrent liabilities	(160)		(160)		(196)		(196)
Total noncurrent financial liabilities	$	(9,692)	$	(10,076)	$	(10,008)	$	(10,284)

The carrying value of our Credit Facility borrowings approximate fair value because they bear interest at a market rate. See Note 13. Fair Value of Financial Instruments and the “Fair Value Measurements” caption of Note 2. Summary of Significant Accounting Policies of our 2019 Form 10-K for more information on the input levels we use in determining fair value.

NOTE 11. ACCUMULATED OTHER COMPREHENSIVE LOSS AND SHAREHOLDERS’ EQUITY

The following tables detail the accumulated other comprehensive loss activity for the 2020 first three quarters and 2019 first three quarters:

($ in millions)	Foreign Currency Translation Adjustments		Derivative Instrument and Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2019	$	(368)	$	7	$	(361)
Other comprehensive (loss) income before reclassifications (1)	(87)		12		(75)
Reclassification adjustments	—		(10)		(10)
Net other comprehensive (loss) income	(87)		2		(85)
Balance at September 30, 2020	$	(455)	$	9	$	(446)

($ in millions)	Foreign Currency Translation Adjustments		Derivative Instrument and Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2018	$	(403)	$	12	$	(391)
Other comprehensive income (loss) before reclassifications (1)	(111)		6		(105)
Reclassification adjustments	—		(8)		(8)
Net other comprehensive (loss) income	(111)		(2)		(113)
Balance at September 30, 2019	$	(514)	$	10	$	(504)

(1)Other comprehensive (loss) income before reclassifications for foreign currency translation adjustments includes intra-entity foreign currency transactions that are of a long-term investment nature, which resulted in losses of $21 million for the 2020 first three quarters and gains of $20 million for the 2019 first three quarters.

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The following tables detail the changes in common shares outstanding and shareholders’ (deficit) equity for the 2020 first three quarters and 2019 first three quarters:

(in millions, except per share amounts)
Common Shares Outstanding		Total		Class A Common Stock		Additional Paid-in-Capital		Retained Earnings		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss
324.0	Balance at year-end 2019	$	703	$	5	$	5,800	$	9,644	$	(14,385)	$	(361)
—	Adoption of ASU 2016-13	(15)		—		—		(15)		—		—
—	Net income	31		—		—		31		—		—
—	Other comprehensive loss	(378)		—		—		—		—		(378)
—	Dividends ($0.48 per share)	(156)		—		—		(156)		—		—
1.2	Share-based compensation plans	(55)		—		(89)		—		34		—
(1.0)	Purchase of treasury stock	(150)		—		—		—		(150)		—
324.2	Balance at March 31, 2020	(20)		5		5,711		9,504		(14,501)		(739)
—	Net loss	(234)		—		—		(234)		—		—
—	Other comprehensive income	131		—		—		—		—		131
0.1	Share-based compensation plans	44		—		42		—		2		—
324.3	Balance at June 30, 2020	(79)		5		5,753		9,270		(14,499)		(608)
—	Net income	100		—		—		100		—		—
—	Other comprehensive income	162		—		—		—		—		162
—	Share-based compensation plans	46		—		45		—		1		—
324.3	Balance at September 30, 2020	$	229	$	5	$	5,798	$	9,370	$	(14,498)	$	(446)

Common Shares Outstanding		Total		Class A Common Stock		Additional Paid-in-Capital		Retained Earnings		Treasury Stock, at Cost		Accumulated Other Comprehensive Loss
339.1	Balance at year-end 2018 (as adjusted)	$	2,225	$	5	$	5,814	$	8,982	$	(12,185)	$	(391)
—	Adoption of ASU 2016-02	1		—		—		1		—		—
—	Net income	375		—		—		375		—		—
—	Other comprehensive income	31		—		—		—		—		31
—	Dividends ($0.41 per share)	(139)		—		—		(139)		—		—
1.7	Share-based compensation plans	(62)		—		(108)		—		46		—
(6.7)	Purchase of treasury stock	(828)		—		—		—		(828)		—
334.1	Balance at March 31, 2019