Accrued Expenses

6 Months Ended

Jun. 30, 2020

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


	June 30, 2020		December 31, 2019
Salaries and wages	$	31,445	$	29,725
Taxes other than income taxes, primarily Value Added Taxes	25,220		22,194
Warranty	10,634		11,626
Professional	8,095		6,869
Severance	6,014		7,023
IT service contracts	3,704		6,125
Freight	3,348		3,744
Deferred revenue	2,794		3,173
Rebates	2,767		10,743
Product liability, current portion	2,589		2,736
Interest	2,183		3,608
Derivative liabilities (foreign currency forward exchange contracts)	1,036		905
Insurance	740		699
Rent	405		415
Supplemental Executive Retirement Program liability	391		391
Advance payment on sale of land & buildings	—		3,471
IT licenses	—		2,114
Other items, principally trade accruals	7,993		5,386
Accrued Expenses	$	109,358	$	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 June 30, 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	3,266
Settlements made during the period	(4,493)
Changes in liability for pre-existing warranties during the period, including expirations	235
Balance as of June 30, 2020	$	10,634

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