Leases

12 Months Ended

Dec. 31, 2021

Leases:

PMI has operating and finance leases that are principally for real estate (office space, warehouses and retail store space), machinery and equipment, and vehicles. Lease terms range from 1 year to 72 years, some of which include options to renew, which are reasonably certain to be renewed. Lease terms may also include options to terminate the lease. The exercise of a lease renewal or termination option is at PMI’s discretion.

PMI’s operating and finance leases at December 31, 2021 and 2020, were as follows:


	At December 31,
(in millions)	2021				2020
	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Assets:
Machinery and equipment	$	—	$	108	$	—	$	12
Other assets	526		—		697		64
Total lease assets	$	526	$	108	$	697	$	76

Liabilities:
Current
Current portion of long-term debt	$	—	$	48	$	—	$	13
Accrued liabilities - Other	192		—		190		—
Noncurrent
Long-term debt	—		23		—		24
Income taxes and other liabilities	344		—		517		—
Total lease liabilities	$	536	$	71	$	707	$	37

The components of PMI’s lease cost were as follows for the years ended December 31, 2021, 2020 and 2019:


	For the Years Ended December 31,
(in millions)	2021		2020		2019
Operating lease cost	$	259	$	237	$	242
Finance lease cost:
Amortization of right-of-use assets	54		31		18
Interest on lease liabilities	1		1		1
Short-term lease cost	55		49		61
Variable lease cost	25		31		29
Total lease cost	$	394	$	349	$	351

Maturity of PMI’s lease liabilities, on an undiscounted basis, as of December 31, 2021, were as follows:


(in millions)	Operating Leases		Finance Leases
2022	$	215	$	49
2023	131		18
2024	84		2
2025	54		1
2026	24		1
Thereafter	140		1
Total lease payments	648		72
Less: Interest	112		1
Present value of lease liabilities	$	536	$	71

Other information related to PMI’s leases was as follows for the year ended December 31, 2021, 2020 and 2019:


	December 31,
(in millions)	2021						2020						2019
	Operating Leases			Finance Leases			Operating Leases			Finance Leases			Operating Leases			Finance Leases
Cash paid for amounts included in the measurement of lease liabilities in operating cash flows (1)	$	259		$	—		$	238		$	—		$	240		$	—
Cash paid for amounts included in the measurement of lease liabilities in financing cash flows	$	—		$	26		$	—		$	19		$	—		$	15
Leased assets obtained in exchange for new lease liabilities	$	64		$	89		$	149		$	32		$	221		$	38
Weighted-average remaining lease term (years)	8.3			1.7			10.1			1.6			9.6			2.4
Weighted-average discount rate(2) (3)	3.6		%	5.3		%	4.3		%	6.7		%	4.4		%	7.1		%

(1) Cash paid included in the operating cash flows of finance leases is not material.

(2) PMI’s weighted-average discount rate for operating leases is based on its estimated pre-tax cost of debt adjusted for country-specific risk.

(3) PMI’s weighted-average discount rate for finance leases, excluding embedded leases, is based on its estimated pre-tax cost of debt adjusted for country-specific risk and where applicable the interest rate explicit to lease contracts.