Accrued Expenses

3 Months Ended

Mar. 31, 2020

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



	March 31, 2020		December 31, 2019
Salaries and wages	$	29,633	$	29,725
Taxes other than income taxes, primarily Value Added Taxes	17,670		22,194
IT service contracts	12,850		6,125
Warranty	10,667		11,626
Severance	6,545		7,023
Professional	5,522		6,869
Interest	5,065		3,608
Deferred revenue	4,933		3,173
Freight	4,017		3,744
Advance payment on sale of land & buildings	3,471		3,471
Product liability, current portion	2,970		2,736
Derivative liabilities (foreign currency forward exchange contracts)	2,581		905
Rebates	986		10,743
Insurance	714		699
Supplemental Executive Retirement Program liability	391		391
Rent	346		415
IT licenses	—		2,114
Other items, principally trade accruals	7,773		5,386
Accrued Expenses	$	116,134	$	120,947

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. The reduction in accrued rebates from December 31, 2019 to March 31, 2020 primarily relates to payments principally made in the first quarter each year.

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.

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



Balance as of January 1, 2020	$	11,626
Warranties provided during the period	1,742
Settlements made during the period	(2,826		)
Changes in liability for pre-existing warranties during the period, including expirations	125
Balance as of March 31, 2020	$	10,667

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