Accrued Expenses

12 Months Ended

Dec. 31, 2019

Current Liabilities

Accrued Expenses

Accrued expenses as of December 31, 2019 and 2018 consisted of accruals for the following (in thousands):



	2019		2018
Salaries and wages	$	29,725	$	23,289
Taxes other than income taxes, primarily Value Added Taxes	22,194		23,197
Warranty	11,626		16,353
Rebates	10,743		7,966
Severance	7,023		1,657
Professional	6,869		5,888
IT service contracts	6,125		—
Freight	3,744		3,363
Interest	3,608		3,992
Advance payment on sale of land & buildings	3,471		—
Deferred revenue	3,173		2,416
Product liability, current portion	2,736		2,728
IT licenses	2,114		—
Derivatives (foreign currency forward exchange contracts)	905		219
Insurance	699		738
Rent	415		483
Supplemental Executive Retirement Program liability Plan (SERP)	391		391
Other items, principally trade accruals	5,386		7,187
Accrued Expenses	$	120,947	$	99,867

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 sales 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 accrual 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.

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.

In the fourth quarter of 2019, the company entered into an agreement with an IT provider to outsource substantially all of the company’s information technology business service activities, including, among other things, support, rationalization and upgrading of the company’s legacy information technology systems and implementation of a global enterprise resource planning (“ERP”) system. Accrued expenses related to IT outsourcing are reflected in IT service contracts. Separately, the company entered into licenses for a new ERP system which are shown as IT licenses.

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 Other Long-Term Obligations as of December 31, 2018 and in the investing section of the Consolidated Statement of Cash Flows in the third quarter of 2018. The company will continue to record depreciation with respect to the Isny facility until control is transferred and expects to recognized a gain upon closing of the transaction when completed in 2020.

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



	2019			2018
Balance as of January 1	$	16,353		$	22,468
Warranties provided during the period	5,504			7,106
Settlements made during the period	(10,882		)	(13,731		)
Changes in liability for pre-existing warranties during the period, including expirations	651			510
Balance as of December 31	$	11,626		$	16,353

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