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”the “Company”). In order to make this report easier to read, we also refer throughout to (i)(1) our Condensed Consolidated Financial Statements as our “Financial Statements,” (ii)(2) our Condensed Consolidated Statements of (Loss) Income as our “Income Statements,” (iii)(3) our Condensed Consolidated Balance Sheets as our “Balance Sheets,” (iv)(4) our Condensed Consolidated Statements of Cash Flows as our “Statements of Cash Flows,” (v)(5) our properties, brands, or markets in the United States (“U.S.”) and Canada as “North America” or “North American,“U.S. & Canada,” and (vi)(6) our properties, brands, or markets in our Caribbean and Latin America, region, Europe, Middle East and Africa, segment,Greater China, and Asia Pacific segment,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, 20192020, as amended (“20192020 Form 10-K”). Certain terms not otherwise defined in this Form 10-Q have the meanings specified in our 20192020 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, 2020March 31, 2021 and December 31, 2019,2020, the results of our operations for the three and nine months ended September 30,March 31, 2021 and March 31, 2020, and September 30, 2019, and cash flows for the ninethree months ended September 30, 2020March 31, 2021 and September 30, 2019.March 31, 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.

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.

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

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

We granted 3.40.1 million restricted stock units (“RSUs”) during the 20202021 first three quartersquarter 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 0.10.2 million performance-based RSUs (“PSUs”) in the 20202021 first three quartersquarter to certain executive officers,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 gross room openings, active Marriott Bonvoy™ loyalty member growth,2023 adjusted EBITDA performance and adjusted operating income growthrelative total stockholder return over or at the end of, a three-year2021 to 2023 performance period. RSUs, including PSUs, granted in the 20202021 first three quartersquarter had a weighted average grant-date fair value of $101$139 per unit.

We recorded share-basedstock-based compensation expense for RSUs and PSUs of $49 million in the 2020 third2021 first quarter and $44 million in the 2019 third quarter, $134$38 million in the 2020 first three quarters, and $130 million in the 2019 first three quarters.quarter. Deferred compensation costs for unvested awards for RSUs and PSUs totaled $372$289 million at September 30, 2020March 31, 2021 and $176$301 million at December 31, 2019.2020.

Our effective tax rate was a benefit of 32.059.2 percent for the 2021 first quarter compared to a benefit of 63.5 percent for the 2020 first three quarters compared to a provision of 21.9 percent for the 2019 first three quarters.quarter. The change in our effective tax rate was primarily due to a moreless favorable impact from stock basedstock-based compensation which was partially offset by an unfavorable impact from uncertain tax positions.relative to our pre-tax income (loss).

We paid cash for income taxes, net of refunds, of $240$33 million in the 2021 first quarter and $59 million in the 2020 first three quarters and $376 million in the 2019 first three quarters.quarter.

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, 2020March 31, 2021 in the following table:

In the 2020 third2021 first quarter, we recorded a $35$5 million net reversal of expenses and $4$5 million of accrued insurance recoveries, and in the 2019 third2020 first quarter, we recorded $6$15 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$10 million in the 2020 third2021 first quarter $6 million in the 2019 third quarter, $45and $24 million in the 2020 first three quarters, and $58 million in the 2019 first three quarters.quarter. The net reversal of expenses for the 2020 third2021 first quarter and year-to-date is primarily due to the reduction of the accrual for the ICO fine further described below.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

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 usthe Company and certain of our current and former 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 2 shareholder derivative complaints that were filed on February 26, 2019 and March 15, 2019, respectively, against the Company and certain of its officers and certainour current and former members of our Board of Directors,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 certainour current and former members of our Board of Directors,officers and 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 butin part or in whole and some of which are pending. A putative class action lawsuit brought on behalf of financial institutions has been voluntarily dismissed. The putative class action lawsuit alleging violations of the casesfederal securities laws and the shareholder derivative lawsuits generally remain at an early stage. There has been some consolidationThe other U.S. cases in the MDL proceeding are nearing completion of the discovery process. The Canadian cases with 5 cases now pending across 5 provinces, and we expect there could be further consolidationhave effectively been consolidated into a single case in the future.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 shareholderstockholder 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 certain of the Company’s current and certain former officers and directors to recover damages for alleged breaches of fiduciary duties and related claims

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.

The following table presents our future minimum lease payments as of September 30,March 31, 2021:

The following table presents the composition of our current and noncurrent lease liabilities as of March 31, 2021 and year-end 2020:

As of September 30, 2020,March 31, 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.

We provide detail on our long-term debt balances, net of discounts, premiums, and debt issuance costs, in the following table at the endas of the 2020 third quarterMarch 31, 2021 and year-end 2019:2020:

We paid cash for interest, net of amounts capitalized, of $234$38 million in the 2021 first quarter and $63 million in the 2020 first three quartersquarter.

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 andfor general corporate needs, including working capital, capital expenditures, letters of credit, acquisitions, and acquisitions.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 the 20202021 first three quarters,quarter, we made borrowings of $4.5$0.6 billion and repayments of $3.6$1.1 billion, reducing theand as of March 31, 2021, we had total outstanding borrowings under the Credit Facility to $0.9 billion as of September 30, 2020.$0.4 billion.

In April 2020, we entered into an amendment to the Credit Facility.Facility (the “First Credit Facility Amendment”). The amendmentFirst Credit Facility 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)(the “Covenant Waiver Period”), adjusts the required leverage levels for the covenant when it is re-imposed at the end of the waiver period,Covenant Waiver Period, and imposes a new monthly-tested liquidity covenant for the duration of the waiver period.Covenant Waiver Period. The amendmentFirst 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 period during which the waiver of the leverage covenant remains in effect,Covenant Waiver Period, tightening certain existing covenants, and imposing additional covenants for the duration of the waiver period.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.

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:

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 20192020 Form 10-K for more information on the input levels we use in determining fair value.

The following tables detail the accumulated other comprehensive loss activity for the 2021 first quarter and 2020 first three quarters and 2019 first three quarters:quarter: