Restructuring

In 2010 and 2013, the Company commenced actions under global restructuring programs designed to streamline its cost structure. The actions under these programs include the elimination of positions in sales, administrative and headquarters organizations, as well as the sale or closure of certain manufacturing and research and development sites and the consolidation of office facilities. The Company also continues to reduce its global real estate footprint and improve the efficiency of its manufacturing and supply network.

The Company recorded total pretax costs of $658 million in 2018, $927 million in 2017 and $1.1 billion in 2016 related to restructuring program activities. Since inception of the programs through December 31, 2018, Merck has recorded total pretax accumulated costs of approximately $14.1 billion and eliminated approximately 45,510 positions comprised of employee separations, as well as the elimination of contractors and vacant positions. The Company estimates that approximately two-thirds of the cumulative pretax costs are cash outlays, primarily related to employee separation expense. Approximately one-third of the cumulative pretax costs are non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested. The Company has substantially completed the actions under these programs.

For segment reporting, restructuring charges are unallocated expenses.

The following table summarizes the charges related to restructuring program activities by type of cost:



	Separation Costs		Accelerated Depreciation			Other		Total
Year Ended December 31, 2018
Cost of sales	$	—	$	10		$	11	$	21
Selling, general and administrative	—		2			1		3
Research and development	—		(13		)	15		2
Restructuring costs	473		—			159		632
	$	473	$	(1	)	$	186	$	658
Year Ended December 31, 2017
Cost of sales	$	—	$	52		$	86	$	138
Selling, general and administrative	—		2			—		2
Research and development	—		6			5		11
Restructuring costs	552		—			224		776
	$	552	$	60		$	315	$	927
Year Ended December 31, 2016
Cost of sales	$	—	$	77		$	104	$	181
Selling, general and administrative	—		8			87		95
Research and development	—		142			—		142
Restructuring costs	216		—			435		651
	$	216	$	227		$	626	$	1,069

Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated. Positions eliminated under restructuring program activities were approximately 2,160 in 2018, 2,450 in 2017 and 2,625 in 2016.

Accelerated depreciation costs primarily relate to manufacturing, research and administrative facilities and equipment to be sold or closed as part of the programs. Accelerated depreciation costs represent the difference between the depreciation expense to be recognized over the revised useful life of the asset, based upon the anticipated date the site will be closed or divested or the equipment disposed of, and depreciation expense as determined utilizing the useful life prior to the restructuring actions. All the sites have and will continue to operate up through the respective closure dates and, since future undiscounted cash flows were sufficient to recover the respective book values, Merck is recording accelerated depreciation over the revised useful life of the site assets. Anticipated site closure dates, particularly related to manufacturing locations, have been and may continue to be adjusted to reflect changes resulting from regulatory or other factors.

Other activity in 2018, 2017 and 2016 includes $141 million, $267 million and $409 million, respectively, of asset abandonment, shut-down and other related costs. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 14) and share-based compensation. Other activity also reflects net pretax losses resulting from sales of facilities and related assets of $151 million in 2016.

The following table summarizes the charges and spending relating to restructuring program activities:



	Separation Costs			Accelerated Depreciation			Other			Total
Restructuring reserves January 1, 2017	$	395		$	—		$	146		$	541
Expenses	552			60			315			927
(Payments) receipts, net	(328		)	—			(394		)	(722		)
Non-cash activity	—			(60		)	61			1
Restructuring reserves December 31, 2017	619			—			128			747
Expenses	473			(1		)	186			658
(Payments) receipts, net	(649		)	—			(238		)	(887		)
Non-cash activity	—			1			15			16
Restructuring reserves December 31, 2018 ⁽¹⁾	$	443		$	—		$	91		$	534


⁽¹⁾	The remaining cash outlays are expected to be substantially completed by the end of 2020.