Accrued Expenses

6 Months Ended

Jun. 30, 2019

Accrued expenses consist of accruals for the following (in thousands):



	June 30, 2019		December 31, 2018
Salaries and wages	$	26,070	$	23,289
Taxes other than income taxes, primarily Value Added Taxes	22,796		23,197
Warranty	13,860		16,353
Professional	5,631		5,888
Interest	3,906		3,992
Advance payment on sale of land & buildings	3,471		—
Freight	3,370		3,363
Deferred revenue	2,676		2,416
Product liability, current portion	2,631		2,728
Rebates	2,368		7,966
Severance	1,582		1,657
Insurance	889		738
Derivative liabilities (foreign currency forward exchange contracts)	428		219
Rent	415		483
Supplemental Executive Retirement Program liability	391		391
Other items, principally trade accruals	7,491		7,187
Accrued Expenses	$	97,975	$	99,867

Depending on the terms of the contract, the company may defer the recognition of a portion of the revenue at the end of a reporting period to align with the transfer of control of the company’s products to the customer. In addition, to the extent performance obligations are satisfied over time, the company defers revenue recognition until the performance obligations are satisfied.

Accrued rebates relate to several volume incentive programs the company offers its customers. The company accounts for these rebates as a reduction of revenue when the products are sold. Rebates are netted against gross accounts receivables. If rebates are in excess of such receivables, they are then classified as accrued expenses. The reduction in accrued rebates from December 31, 2018 to June 30, 2019 primarily relates to payments principally made in the first quarter each year.

Generally, the company's products are covered by warranties against defects in material and workmanship for various periods depending on the product from the date of sale to the customer. Certain components carry a lifetime warranty. A provision for estimated warranty cost is recorded at the time

of sale based upon actual experience. In addition, the company has sold extended warranties that, while immaterial, require the

company to defer the revenue associated with those warranties until earned. The company has established procedures to appropriate defer such revenue.

The company continuously assesses the adequacy of its product warranty accruals and makes adjustments as needed. Historical analysis is primarily used to determine the company's warranty reserves. Claims history is reviewed and provisions are adjusted as needed. However, the company does consider other events, such as a product field action and recalls, which could require additional warranty reserve provision.

The following is a reconciliation of the changes in accrued warranty costs for the reporting period (in thousands):



Balance as of January 1, 2019	$	16,353
Warranties provided during the period	2,541
Settlements made during the period	(5,752		)
Changes in liability for pre-existing warranties during the period, including expirations	718
Balance as of June 30, 2019	$	13,860

Warranty reserves are subject to adjustment in future periods as new developments change the company's estimate of the total cost.

In the third quarter of 2018, the company agreed to sell its Isny, Germany location with a net book value at the signing of the agreement of approximately $2,900,000. In accordance with the agreement, control will not transfer to the buyer until April 2020; however, the company received an advance payment for a portion of the proceeds, as disclosed above. The advance payment was reflected in the investing section of the Consolidated Statement of Cash Flows in the third quarter of 2018. The company will continue to depreciate the building and expects to record a gain on the transaction when completed in 2020.