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, 2021

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 check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 325,683,100 shares of Class A Common Stock, par value $0.01 per share, outstanding at October 22, 2021.

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	30
Item 4.	Controls and Procedures	30
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	45
Item 6.	Exhibits	46
	Signature	47

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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, 2021		September 30, 2020		September 30, 2021		September 30, 2020
REVENUES
Base management fees	$	190	$	87	$	452	$	341
Franchise fees	533		279		1,270		876
Incentive management fees	53		31		141		43
Gross fee revenues	776		397		1,863		1,260
Contract investment amortization	(21)		(48)		(56)		(94)
Net fee revenues	755		349		1,807		1,166
Owned, leased, and other revenue	241		116		536		445
Cost reimbursement revenue	2,950		1,789		7,068		6,788
	3,946		2,254		9,411		8,399
OPERATING COSTS AND EXPENSES
Owned, leased, and other-direct	204		134		507		527
Depreciation, amortization, and other	64		53		166		275
General, administrative, and other	212		131		610		579
Restructuring and merger-related charges	4		1		8		5
Reimbursed expenses	2,917		1,683		7,005		6,801
	3,401		2,002		8,296		8,187
OPERATING INCOME	545		252		1,115		212
Gains and other income, net	—		2		6		3
Loss on extinguishment of debt	(164)		—		(164)		—
Interest expense	(107)		(113)		(323)		(333)
Interest income	8		6		22		20
Equity in losses	(4)		(20)		(24)		(54)
INCOME (LOSS) BEFORE INCOME TAXES	278		127		632		(152)
(Provision) benefit for income taxes	(58)		(27)		(1)		49
NET INCOME (LOSS)	$	220	$	100	$	631	$	(103)
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share - basic	$	0.67	$	0.31	$	1.93	$	(0.32)
Earnings (loss) per share - diluted	$	0.67	$	0.31	$	1.92	$	(0.32)

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, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Net income (loss)	$	220	$	100	$	631	$	(103)
Other comprehensive income (loss):
Foreign currency translation adjustments	(138)		163		(197)		(87)
Derivative instrument adjustments and other, net of tax	—		(1)		—		2
Total other comprehensive (loss) income, net of tax	(138)		162		(197)		(85)
Comprehensive income (loss)	$	82	$	262	$	434	$	(188)

See Notes to Condensed Consolidated Financial Statements.

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MARRIOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in millions)

	(Unaudited)
	September 30, 2021		December 31, 2020
ASSETS
Current assets
Cash and equivalents	$	772	$	877
Accounts and notes receivable, net	2,042		1,768
Prepaid expenses and other	176		180
	2,990		2,825
Property and equipment, net	1,496		1,514
Intangible assets
Brands	5,987		6,059
Contract acquisition costs and other	2,917		2,930
Goodwill	9,084		9,175
	17,988		18,164
Equity method investments	390		422
Notes receivable, net	141		159
Deferred tax assets	232		249
Operating lease assets	642		752
Other noncurrent assets	627		616
	$	24,506	$	24,701
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current portion of long-term debt	$	579	$	1,173
Accounts payable	711		527
Accrued payroll and benefits	1,120		831
Liability for guest loyalty program	2,320		1,769
Accrued expenses and other	1,289		1,452
	6,019		5,752
Long-term debt	9,264		9,203
Liability for guest loyalty program	4,176		4,502
Deferred tax liabilities	69		83
Deferred revenue	1,226		1,542
Operating lease liabilities	697		823
Other noncurrent liabilities	2,137		2,366
Stockholders’ equity
Class A Common Stock	5		5
Additional paid-in-capital	5,869		5,851
Retained earnings	9,838		9,206
Treasury stock, at cost	(14,462)		(14,497)
Accumulated other comprehensive loss	(332)		(135)
	918		430
	$	24,506	$	24,701

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, 2021		September 30, 2020
OPERATING ACTIVITIES
Net income (loss)	$	631	$	(103)
Adjustments to reconcile to cash provided by operating activities:
Depreciation, amortization, and other	222		369
Stock-based compensation	138		143
Income taxes	(292)		(289)
Liability for guest loyalty program	54		439
Contract acquisition costs	(143)		(103)
Restructuring and merger-related charges	(5)		(40)
Working capital changes	71		127
Loss on extinguishment of debt	164		—
Deferred revenue changes and other	(95)		1,080
Net cash provided by operating activities	745		1,623
INVESTING ACTIVITIES
Capital and technology expenditures	(114)		(97)
Dispositions	8		260
Loan advances	(10)		(36)
Loan collections	38		6
Other	(3)		(22)
Net cash (used in) provided by investing activities	(81)		111
FINANCING ACTIVITIES
Commercial paper/Credit Facility, net	(150)		(2,260)
Issuance of long-term debt	1,787		3,556
Repayment of long-term debt	(2,172)		(1,278)
Issuance of Class A Common Stock	2		—
Debt extinguishment costs	(155)		—
Dividends paid	—		(156)
Purchase of treasury stock	—		(150)
Stock-based compensation withholding taxes	(85)		(100)
Other	12		(9)
Net cash used in financing activities	(761)		(397)
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(97)		1,337
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, beginning of period (1)	894		253
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, end of period (1)	$	797	$	1,590

(1)The 2021 amounts include beginning restricted cash of $17 million at December 31, 2020, and ending restricted cash of $25 million at September 30, 2021, 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 (1) our Condensed Consolidated Financial Statements as our “Financial Statements,” (2) our Condensed Consolidated Statements of Income (Loss) as our “Income Statements,” (3) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (4) our Condensed Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (5) our properties, brands, or markets in the United States and Canada as “U.S. & Canada,” and (6) our properties, brands, or markets in our Caribbean and Latin America, Europe, Middle East and Africa, Greater China, and Asia Pacific excluding China regions, 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, 2020, as amended (“2020 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 2020 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 pandemic 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, 2021 and December 31, 2020, the results of our operations for the three and nine months ended September 30, 2021 and September 30, 2020, and cash flows for the nine months ended September 30, 2021 and September 30, 2020. 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.

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. We completed the programs relating to our above-property organization as of year-end 2020. For the property-level programs, including owned and leased properties, we recorded restructuring charges for employee termination benefits in the 2021 first three quarters of $8 million in the “Reimbursed expenses” caption and $1 million in the “Restructuring and merger-related charges” caption of our Income Statements. Cumulative charges incurred for the property-level programs, from the beginning of the programs through September 30, 2021, totaled $258 million. We substantially completed our property-level programs as of September 30, 2021.

Our U.S. & Canada segment recorded $262 million of cumulative charges for above-property and property-level programs from the beginning of the programs through September 30, 2021, of which $7 million was recorded in the 2021 first three quarters.

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

($ in millions)	Employee termination benefits
Balance at December 31, 2020	$	143
Charges	9
Cash payments	(116)
Other	(3)
Balance at September 30, 2021, classified in “Accrued expenses and other”	$	33

Additionally, as of September 30, 2021, we recorded $35 million of costs related to group medical, dental, and vision benefit coverage provided to eligible former associates and furloughed or part-time associates (and their eligible enrolled dependents) pursuant to the continuation coverage requirements under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) for the April 1, 2021 to September 30, 2021 period. The American Rescue Plan Act of 2021 (“ARPA”) provides for refundable tax credits to employers as reimbursement for such benefit coverage continuation costs, which we have claimed as a tax credit against our Medicare tax obligations for that time period and recorded a receivable as of September 30, 2021 for excess tax credits that we expect to receive through payments from the U.S. Treasury.

NOTE 3. 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, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Computation of Basic Earnings Per Share
Net income (loss)	$	220	$	100	$	631	$	(103)
Shares for basic earnings per share	327.3		325.9		327.0		325.7
Basic earnings (loss) per share	$	0.67	$	0.31	$	1.93	$	(0.32)
Computation of Diluted Earnings Per Share
Net income (loss)	$	220	$	100	$	631	$	(103)
Shares for basic earnings per share	327.3		325.9		327.0		325.7
Effect of dilutive securities
Stock-based compensation (1)	2.0		0.9		2.1		—
Shares for diluted earnings per share	329.3		326.8		329.1		325.7
Diluted earnings (loss) per share	$	0.67	$	0.31	$	1.92	$	(0.32)

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

NOTE 4. STOCK-BASED COMPENSATION

We granted 0.3 million restricted stock units (“RSUs”) during the 2021 first three quarters to certain officers and employees, and those units vest generally over four years in equal annual installments commencing one year after the grant date. We also granted 0.2 million performance-based RSUs (“PSUs”) in the 2021 first three quarters to certain executives, which are earned, subject to continued employment and the satisfaction of certain performance and market conditions based on the degree of achievement of pre-established targets for 2023 adjusted EBITDA performance and relative total stockholder return over the 2021 to 2023 performance period. RSUs, including PSUs, granted in the 2021 first three quarters had a weighted average grant-date fair value of $140 per unit.

In the 2020 third quarter, as part of our effort to encourage associate retention in response to the severe impact of COVID-19 on our industry and the Company, we accelerated the issuance of RSU awards to certain officers and employees that ordinarily would have been made in the 2021 first quarter. We did not accelerate the issuance of awards for our most senior executives.

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We recorded stock-based compensation expense for RSUs and PSUs of $40 million in the 2021 third quarter, $49 million in the 2020 third quarter, $130 million in the 2021 first three quarters, and $134 million in the 2020 first three quarters. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $220 million at September 30, 2021 and $301 million at December 31, 2020.

NOTE 5. INCOME TAXES

Our effective tax rate was 21.1 percent for the 2021 third quarter compared to 21.6 percent for the 2020 third quarter, and 0.2 percent for the 2021 first three quarters compared to 32.0 percent for the 2020 first three quarters. The decrease in our effective tax rate for the first three quarters was primarily due to the current year tax benefit from the release of tax reserves due to the favorable resolution of Legacy-Starwood tax audits.

Our unrecognized tax benefits balance decreased by $131 million to $333 million at September 30, 2021 from $464 million at December 31, 2020, primarily due to the release of tax reserves due to the favorable resolution of Legacy-Starwood tax audits.

Our unrecognized tax benefits balance included $283 million at September 30, 2021 and $410 million at December 31, 2020 of tax positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the next 12 months we will reach resolution of income tax examinations in one or more jurisdictions. The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement. Therefore, an estimate of the change cannot be provided. We recognize accrued interest and penalties for our unrecognized tax benefits as a component of tax expenses. Related interest (benefit) expense totaled $(33) million in the 2021 first three quarters and $21 million in the 2020 first three quarters. We accrued interest and penalties related to our unrecognized tax benefits of approximately $52 million at September 30, 2021 and $85 million at December 31, 2020.

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of September 30, 2021, we have settled all issues for Marriott for tax years through 2015 and for Starwood through 2016, the year the acquisition was completed. Our Marriott 2016 through 2020 tax year audits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

We paid cash for income taxes, net of refunds, of $293 million in the 2021 first three quarters and $240 million in the 2020 first three quarters.

NOTE 6. 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, 2021 in the following table:

($ in millions) Guarantee Type	Maximum Potential Amount of Future Fundings		Recorded Liability for Guarantees
Debt service	$	20	$	5
Operating profit	186		116
Other	18		4
	$	224	$	125

Our maximum potential guarantees listed in the preceding table include $65 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.

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Contingent Purchase Obligation

Sheraton Grand Chicago. In 2017, we granted the owner a one-time right to require us to purchase the leasehold interest in the land and the hotel for $300 million in cash (the “put option”). In the 2021 third quarter, we entered into an amendment with the owner to move the exercise period of the put option from the 2022 first half to the 2024 first half. If the owner exercises the put option, the closing is expected to occur in the 2024 fourth quarter, and 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 account for the put option as a guarantee, and our recorded liability at September 30, 2021 was $300 million.

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 2021 third quarter, we recorded $4 million of expenses and no accrued insurance recoveries, and in the 2020 third quarter, we recorded a $35 million net reversal of expenses and $4 million of accrued insurance recoveries, related to the Data Security Incident. In the 2021 first three quarters, we recorded $16 million of expenses and $11 million of accrued insurance recoveries, and in the 2020 first three quarters, we recorded a $17 million net reversal of expenses and $24 million of accrued insurance recoveries, related to the Data Security Incident. We received no insurance recoveries in the 2021 third quarter, and we received insurance recoveries of $1 million in the 2020 third quarter, $10 million in the 2021 first three quarters, and $45 million in the 2020 first three quarters. The expenses for the 2021 third quarter primarily included legal costs. 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 on December 1, 2018 against the Company and certain of our current and former officers and directors, 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 “Securities Case”). The MDL proceeding also included two shareholder derivative complaints that were filed on February 26, 2019 and March 15, 2019, respectively, against the Company and certain of our current and former 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 (the “MDL Derivative Cases”). A separate shareholder derivative complaint was filed in the Delaware Court of Chancery on December 3, 2019 against the Company and certain of our current and former officers and directors, alleging claims and seeking relief generally similar to the claims made

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and relief sought in the other two derivative cases. This case was not consolidated with the MDL proceeding. We filed motions to dismiss in connection with all of the U.S. cases. Our motions to dismiss the Securities Case and the MDL Derivative Cases were granted in June 2021. The plaintiff in the Securities Case has appealed the dismissal, which appeal is still pending, and the plaintiffs in the MDL Derivative Cases have not appealed. Motions to dismiss in the other MDL cases have been denied in part or in whole and these cases remain at varying stages. Our motion to dismiss the Delaware derivative case was granted in October 2021. A putative class action lawsuit brought on behalf of financial institutions has been voluntarily dismissed. The Canadian cases have effectively been consolidated into a single case in the province of Ontario. We dispute the allegations in the lawsuits described above and are vigorously defending against such claims. In April 2019, we received a letter purportedly on behalf of a stockholder of the Company (also one of the named plaintiffs in the Securities Case described above) demanding that our Board of Directors take action against certain of the Company’s current and former officers and directors to recover damages for alleged breaches of fiduciary duties and related claims arising from the Data Security Incident. In October 2021, we received a letter purportedly on behalf of another stockholder of the Company (also one of the named plaintiffs in one of the dismissed MDL Derivative Cases described above) demanding that our Board of Directors take action against certain of the Company’s current and former officers and directors to recover damages for alleged breaches of fiduciary duties and other claims related to the Data Security Incident or associated disclosures. The Board of Directors has constituted a demand review committee to investigate the claims made in these demand letters, and the committee has retained independent counsel to assist with the investigations. The committee’s investigations are 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, which was resolved in October 2020, these matters generally remain open. We are in discussions with the U.S. state Attorneys General, the U.S. Federal Trade Commission, and certain regulatory authorities in other jurisdictions to resolve their investigations and requests.

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.

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NOTE 7. LEASES

The following table presents our future minimum lease payments as of September 30, 2021:

($ in millions)	Operating Leases		Finance Leases
2021, remaining	$	43	$	3
2022	175		14
2023	121		14
2024	114		14
2025	106		14
Thereafter	509		137
Total minimum lease payments	$	1,068	$	196
Less: Amount representing interest	(226)		(48)
Present value of minimum lease payments	$	842	$	148

The following table presents the composition of our current and noncurrent lease liabilities as of September 30, 2021 and year-end 2020:

($ in millions)	September 30, 2021				December 31, 2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Current (1)	$	145	$	7	$	147	$	7
Noncurrent (2)	697		141		823		146
	$	842	$	148	$	970	$	153

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

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

As of September 30, 2021, 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.

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NOTE 8. LONG-TERM DEBT

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table as of September 30, 2021 and year-end 2020:

($ in millions)	September 30, 2021		December 31, 2020
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	$	173
Series N Notes, interest rate of 3.1%, face amount of $400, redeemed August 9, 2021 (effective interest rate of 3.4%)	—		399
Series O Notes, interest rate of 2.9%, face amount of $450, matured March 1, 2021 (effective interest rate of 3.1%)	—		450
Series P Notes, interest rate of 3.8%, face amount of $350, maturing October 1, 2025 (effective interest rate of 4.0%)	347		346
Series Q Notes, interest rate of 2.3%, face amount of $399, maturing January 15, 2022 (effective interest rate of 2.5%)	399		398
Series R Notes, interest rate of 3.1%, face amount of $750, maturing June 15, 2026 (effective interest rate of 3.3%)	746		745
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%)	328		330
Series W Notes, interest rate of 4.5%, face amount of $278, maturing October 1, 2034 (effective interest rate of 4.1%)	290		290
Series X Notes, interest rate of 4.0%, face amount of $450, maturing April 15, 2028 (effective interest rate of 4.2%)	445		445
Series Z Notes, interest rate of 4.2%, face amount of $350, maturing December 1, 2023 (effective interest rate of 4.4%)	348		348
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, matured March 8, 2021	—		300
Series CC Notes, interest rate of 3.6%, face amount of $550, maturing April 15, 2024 (effective interest rate of 3.9%)	574		586
Series DD Notes, interest rate of 2.1%, face amount of $224, maturing October 3, 2022 (effective interest rate of 1.2%)	227		228
Series EE Notes, interest rate of 5.8%, face amount of $600, maturing May 1, 2025 (effective interest rate of 6.0%)	595		1,583
Series FF Notes, interest rate of 4.6%, face amount of $1,000, maturing June 15, 2030 (effective interest rate of 4.8%)	987		986
Series GG Notes, interest rate of 3.5%, face amount of $1,000, maturing October 15, 2032 (effective interest rate of 3.7%)	985		985
Series HH Notes, interest rate of 2.9%, face amount of $1,100, maturing April 15, 2031 (effective interest rate of 3.0%)	1,089		—
Series II Notes, interest rate of 2.8%, face amount of $700, maturing October 15, 2033 (effective interest rate of 2.8%)	693		—
Commercial paper	—		—
Credit Facility	750		900
Finance lease obligations	148		153
Other	131		143
	$	9,843	$	10,376
Less current portion	(579)		(1,173)
	$	9,264	$	9,203

We paid cash for interest, net of amounts capitalized, of $251 million in the 2021 first three quarters and $234 million in the 2020 first three quarters.

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On September 8, 2021, we announced a tender offer (the “Tender Offer”) to purchase certain of our Senior Notes, and on September 23, 2021, we purchased and retired $1 billion aggregate principal amount of our 5.750 percent Series EE Notes maturing May 1, 2025. Because the Tender Offer was oversubscribed as of the early tender time on September 22, 2021, only Series EE Notes were accepted for purchase and no additional Senior Notes were accepted for purchase in the Tender Offer after September 22, 2021. We used the net proceeds from our Series II Notes offering described below and cash on hand to complete the repurchase of such Series EE Notes, including the payment of accrued interest and other costs incurred. As a result of the Tender Offer, in the 2021 third quarter, we recorded a loss of $164 million in the “Loss on extinguishment of debt” caption of our Income Statements.

On September 22, 2021, we issued $700 million aggregate principal amount of 2.750 percent Series II Notes due October 15, 2033 (the “Series II Notes”). We will pay interest on the Series II Notes in April and October of each year, commencing in April 2022. We received net proceeds of approximately $693 million from the offering of the Series II Notes, after deducting the underwriting discount and estimated expenses. We used the net proceeds to fund the Tender Offer, as further described above.

On August 9, 2021, we redeemed all $400 million aggregate principal amount of our Series N Notes due in October 2021.

In March 2021, we issued $1.1 billion aggregate principal amount of 2.850 percent Series HH Notes due April 15, 2031 (the “Series HH Notes”). We will pay interest on the Series HH Notes in April and October of each year, commencing in October 2021. We received net proceeds of approximately $1.089 billion from the offering of the Series HH 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.

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 for general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions, and to support our commercial paper program if and when we resume issuing commercial paper. 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 (if any) 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 April 2020, we entered into an amendment to the Credit Facility (the “First Credit Facility Amendment”). The First Credit Facility Amendment waives the quarterly-tested leverage covenant in the Credit Facility through and including the first quarter of 2021 (the “Covenant Waiver Period”), adjusts the required leverage levels for the covenant when it is re-imposed at the end of the Covenant Waiver Period, and imposes a new monthly-tested liquidity covenant for the duration of the Covenant Waiver Period. The First Credit Facility 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 Covenant Waiver Period, tightening certain existing covenants, and imposing additional covenants for the duration of the Covenant 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 January 2021, we entered into two more amendments to the Credit Facility (the “New Credit Facility Amendments,” and together with the First Credit Facility Amendment, the “Credit Facility Amendments”), which extend the Covenant Waiver Period through and including the fourth quarter of 2021 (which waiver period may end sooner at our election), revise the required leverage levels for such covenant when it is re-imposed at the end of the Covenant Waiver Period (starting at 5.50 to 1.00 when the leverage test is first re-imposed and gradually stepping down to 4.00 to 1.00 over the succeeding five fiscal quarters, as further described in the Credit Facility), and increase the minimum liquidity amount under the liquidity covenant that is tested monthly for the duration of the Covenant Waiver Period. The New Credit Facility Amendments also make certain other amendments to the terms of the Credit Facility, including reducing the rate floor for the LIBOR Daily Floating Rate and the Eurocurrency Rate.

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NOTE 9. 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 in the following table:

	September 30, 2021				December 31, 2020
($ in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Senior, mezzanine, and other loans	$	141	$	127	$	159	$	142
Total noncurrent financial assets	$	141	$	127	$	159	$	142
Senior Notes	$	(8,242)	$	(8,845)	$	(8,031)	$	(8,941)
Credit Facility	(750)		(750)		(900)		(900)
Other long-term debt	(131)		(134)		(126)		(128)
Other noncurrent liabilities	(411)		(411)		(426)		(426)
Total noncurrent financial liabilities	$	(9,534)	$	(10,140)	$	(9,483)	$	(10,395)

See Note 13. Fair Value of Financial Instruments and the “Fair Value Measurements” caption of Note 2. Summary of Significant Accounting Policies of our 2020 Form 10-K for more information on the input levels we use in determining fair value.

NOTE 10. ACCUMULATED OTHER COMPREHENSIVE LOSS AND STOCKHOLDERS’ EQUITY

The following tables detail the accumulated other comprehensive loss activity for the 2021 first three quarters and 2020 first three quarters:

($ in millions)	Foreign Currency Translation Adjustments		Derivative Instrument and Other Adjustments		Accumulated Other Comprehensive Loss
Balance at year-end 2020	$	(139)	$	4	$	(135)
Other comprehensive loss before reclassifications (1)	(197)		—		(197)
Reclassification adjustments	—		—		—
Net other comprehensive loss	(197)		—		(197)
Balance at September 30, 2021	$	(336)	$	4	$	(332)

($ 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)

(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 gains of $30 million for the 2021 first three quarters and losses of $21 million for the 2020 first three quarters.

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The following tables detail the changes in common shares outstanding and stockholders’ equity (deficit) for the 2021 first three quarters and 2020 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
324.4	Balance at year-end 2020	$	430	$	5	$	5,851	$	9,206	$	(14,497)	$	(135)
—	Net loss	(11)		—		—		(11)		—		—
—	Other comprehensive loss	(155)		—		—		—		—		(155)
1.2	Stock-based compensation plans	(30)		—		(64)		—		34		—
325.6	Balance at March 31, 2021	$	234	$	5	$	5,787	$	9,195	$	(14,463)	$	(290)
—	Net income	422		—		—		422		—		—
—	Other comprehensive income	96		—		—		—		—		96
—	Stock-based compensation plans	44		—		43		1		—		—
325.6	Balance at June 30, 2021	$	796	$	5	$	5,830	$	9,618	$	(14,463)	$	(194)
—	Net income	220		—		—		220		—		—
—	Other comprehensive loss	(138)		—		—		—		—		(138)
0.1	Stock-based compensation plans	40		—		39		—		1		—
325.7	Balance at September 30, 2021	$	918	$	5	$	5,869	$	9,838	$	(14,462)	$	(332)

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	Stock-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	Stock-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
—	Stock-based compensation plans	46		—		45		—