Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 8.           DERIVATIVE FINANCIAL INSTRUMENTS

We are impacted by changes in foreign currency exchange rates. We may manage these risks through the use of derivative financial instruments, primarily forward contracts with banks. During the years ended December 31, 2018 and 2017, we entered into foreign currency exchange forward contracts to manage the exchange rate risk associated with intercompany debt denominated in nonfunctional currencies. These derivative instruments are not designated as hedges; however, they do economically offset the fluctuations of our intercompany debt due to foreign exchange rate changes. These forward contracts are typically for one-month periods. We did not have any currency exchange rate forward contracts outstanding as of December 31, 2019 and 2018. At December 31, 2017, we had outstanding Euro and Pound Sterling forward contracts.

The notional amount of foreign currency exchange forward contracts outstanding at December 31, 2017 was $16.3 million and the fair value of these contracts was not significant at December 31, 2017.

During the years ended December 31, 2019, 2018, and 2017, the gains and losses recorded related to the foreign currency exchange rate forward contracts are as follows:

	Years Ended December 31,
	2019		2018		2017
Foreign currency loss from foreign currency exchange rate forward contracts	$	—	$	(750)	$	(1,438)

These gains and losses were offset by corresponding foreign currency gains and losses on the related intercompany debt and both are included as a component of Other income (expense), net, in our Consolidated Statements of Operations.

During the first quarter of 2017, we entered into a foreign currency exchange rate forward contract at a cost of $3.5 million, to mitigate the exchange rate risk associated with a planned offshore acquisition which was not consummated. The hedge expired upon maturity in the first quarter of 2017. The cost of the forward contract is recorded as a component of Other income (expense), net in our Consolidated Statement of Operations.