Note 3. Derivative Financial Instruments

Foreign Currency Exchange Rate Risk

The Company enters into foreign currency forward contracts not formally designated as hedges to manage the consolidated exchange rate risk associated with the remeasurement of non-functional currency denominated monetary assets and liabilities. Non-functional currency denominated monetary assets and liabilities consist primarily of cash, receivables, payables and intercompany loans. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Changes in fair value of foreign currency forward contracts are recognized in income at the end of each reporting period based on the difference between the contract rate and the spot rate. In general, these gains and losses are offset in the Consolidated Statements of Income by the reciprocal gains and losses from the underlying assets or liabilities which originally gave rise to the exposure. The net amount of the gains and losses related to derivative instruments recorded in other (income) expense, net for the year ended December 31, 2017, 2016 and 2015 were a loss of $9.4 million, $7.9 million and a gain of $1.2 million, respectively.

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent the Company's total exposure to foreign currency gains or losses. The table below presents the net notional amounts of the Company’s outstanding foreign currency forward contracts by currency at December 31, 2017 and 2016 (in thousands):



	Year Ended December 31,
	2017		2016
Swedish kroner	$	59,373	$	48,555
European euro	34,800		156,352
British pound sterling	34,317		33,862
Brazilian real	7,794		2,747
Canadian dollar	7,426		15,645
Japanese yen	3,362		3,251
Australian dollar	2,817		1,653
Other	3,095		—
	$	152,984	$	262,065

At December 31, 2017, the Company’s foreign currency forward contracts, in general, had maturities of three months or less.

The carrying amount of the foreign exchange contracts included in the Consolidated Balance Sheets are as follows (in thousands):



	December 31, 2017				December 31, 2016
	Prepaid Expenses and Other Current Assets		Other Current Liabilities		Prepaid Expenses and Other Current Assets		Other Current Liabilities
Foreign exchange contracts	$	1,760	$	579	$	2,369	$	75

Interest Rate Swap Contracts

On May 31, 2016, the Company drew down $105 million under the revolving credit facility as described in Note 9, "Credit Agreement," and repaid the term loan originally issued under the credit agreement dated April 5, 2013. Interest was accrued and paid monthly based on the one-month LIBOR rate. To manage the interest rate risk arising from the variability in monthly interest expense attributable to the original term loan and amounts drawn under the revolver, the Company entered into two amortizing interest rate swaps with an aggregate notional amount of $105 million. The interest rate swaps were designated, and effective, as cash flow hedges.

Note 3. Derivative Financial Instruments - (Continued)

Interest Rate Swap Contracts - (Continued)

During the year ended December 31, 2017, the Company repaid all amounts outstanding under the revolving credit facility. Concurrently, the Company exited both interest rate swaps which had a combined notional amount at the time of $86.3 million and discontinued the cash flow hedge. The Company reclassified a gain of $0.5 million from accumulated other comprehensive income to interest expense because it was probable that the forecasted variable monthly LIBOR-based interest rate payments would no longer occur.