Financial Information
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PART II
Item 8. Financial Statements and Supplementary Data.
MARRIOTT INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8. LEASES
We enter into operating and finance leases primarily for hotels, offices, and equipment. Most leases have initial terms of up to 20 years, and contain one or more renewals at our option, generally for five- or 10-year periods. We have generally not included these renewal periods in the lease term as it is not reasonably certain that we will exercise the renewal option.
The following table details the composition of lease expense at year-end 2019:
In the 2019 fourth quarter, we recorded impairment charges of $78 million and $21 million in the “Depreciation, amortization, and other” caption of our Income Statements to reduce the carrying amount of the Renaissance New York Times Square Hotel lease right-of-use asset and property and equipment, including leasehold improvements, respectively. We determined that we may not be able to fully recover the carrying amount of this North American Full-Service hotel lease 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. Additionally, during the year ended 2019, we recorded an expense of $34 million in the “Merger-related costs and charges” caption of our Income Statements due to the impairment of a legacy-Starwood office building accounted for as a finance lease.
The following table presents our future minimum lease payments at year-end 2019:
(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.
At year-end 2019, 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.
The following table presents additional information about our lease obligations at year-end 2019:
The following table presents supplemental cash flow information for 2019:
