Restructuring

12 Months Ended

Dec. 31, 2021

Restructuring and Related Activities [Abstract]

In 2019, Merck approved a global restructuring program (Restructuring Program) as part of a worldwide initiative focused on further optimizing the Company’s manufacturing and supply network, as well as reducing its global real estate footprint. This program is a continuation of the Company’s plant rationalization and builds on prior restructuring programs. The actions currently contemplated under the Restructuring Program are expected to be substantially completed by the end of 2023, with the cumulative pretax costs to be incurred by the Company to implement the program estimated to be approximately $3.5 billion. The Company estimates that approximately 70% of the cumulative pretax costs will result in cash outlays, primarily related to employee separation expense and facility shut-down costs. Approximately 30% of the cumulative pretax costs will be non-cash, relating primarily to the accelerated depreciation of facilities to be closed or divested.

The Company recorded total pretax costs of $868 million in 2021, $880 million in 2020 and $915 million in 2019 related to restructuring program activities. Since inception of the Restructuring Program through December 31, 2021, Merck has recorded total pretax accumulated costs of approximately $2.7 billion. The Company expects to record charges of approximately $400 million in 2022 related to the Restructuring Program. 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, 2021
Cost of sales	$	—	$	52	$	108	$	160
Selling, general and administrative	—		12		7		19
Research and development	—		27		1		28
Restructuring costs	451		—		210		661
	$	451	$	91	$	326	$	868
Year Ended December 31, 2020
Cost of sales	$	—	$	143	$	32	$	175
Selling, general and administrative	—		44		3		47
Research and development	—		81		2		83
Restructuring costs	385		—		190		575
	$	385	$	268	$	227	$	880
Year Ended December 31, 2019
Cost of sales	$	—	$	198	$	53	$	251
Selling, general and administrative	—		33		1		34
Research and development	—		2		2		4
Restructuring costs	572		—		54		626
	$	572	$	233	$	110	$	915

Separation costs are associated with actual headcount reductions, as well as those headcount reductions which were probable and could be reasonably estimated.

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 are 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 2021, 2020 and 2019 includes asset abandonment, facility shut-down and other related costs, as well as pretax gains and losses resulting from the sales of facilities and related assets. Additionally, other activity includes certain employee-related costs associated with pension and other postretirement benefit plans (see Note 14) and share-based compensation.

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


	Separation Costs		Accelerated Depreciation		Other		Total
Restructuring reserves January 1, 2020	$	690	$	—	$	25	$	715
Expenses	385		268		227		880
(Payments) receipts, net	(508)		—		(271)		(779)
Non-cash activity	—		(268)		38		(230)
Restructuring reserves December 31, 2020	567		—		19		586
Expenses	451		91		326		868
(Payments) receipts, net	(422)		—		(186)		(608)
Non-cash activity	—		(91)		(118)		(209)
Restructuring reserves December 31, 2021 (1)	$	596	$	—	$	41	$	637

(1) The remaining cash outlays are expected to be substantially completed by the end of 2023.