Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk refers to the potential for losses arising from changes in interest rates, foreign currency fluctuations and exchange rates, equity prices and commodity prices including the correlation among these factors and their volatility.
Our principal market risks are our exposure to changes in interest rates and foreign currency exchange rates. We enter into derivative instruments only to the extent considered necessary to meet risk management objectives and do not use derivative contracts for speculative purposes.
Interest Rate Risk. We have a revolving credit facility that is subject to the risk of higher interest charges associated with increases in interest rates. As of December 31, 2020, we had $19.0 million in floating-rate obligations drawn under the Amended Revolving Credit Facility. The use of floating-rate obligations exposes us to the risk of increased interest expense in the event of increases in short-term interest rates. If the floating interest rates increased by 1% from December 31, 2020 levels, our consolidated interest expense would increase by a total of approximately $0.2 million annually.
Foreign Currency Exchange Rate Risk. Our operations are conducted in various countries around the world and we receive revenue from these operations in a number of different currencies. As such, our earnings are subject to movements in foreign currency exchange rates when transactions are denominated in (i) currencies other than the U.S. dollar, which is our functional currency, or (ii) the functional currency of our subsidiaries, which is not necessarily the U.S. dollar. In order to mitigate the effects of foreign currency exchange rate risks in areas outside of the United States (primarily in our Offshore/Manufactured Products segment), we generally pay a portion of our expenses in local currencies and a substantial portion of our contracts provide for collections from customers in U.S. dollars. During 2020, our reported foreign currency exchange losses
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were $0.2 million and are included in "Other operating (income) expense, net" in the consolidated statements of operations. In order to reduce our exposure to fluctuations in foreign currency exchange rates, we may enter into foreign currency exchange agreements with financial institutions. No foreign currency contracts were outstanding as of December 31, 2020 or 2019.
Our accumulated other comprehensive loss, reported as a component of stockholders' equity, increased from $67.7 million as of December 31, 2019 to $71.4 million as of December 31, 2020, primarily as a result of foreign currency exchange rate differences of $3.8 million in the current year. This other comprehensive income is primarily related to fluctuations in the currency exchange rates compared to the U.S. dollar for certain of the international operations of our reportable segments. During 2020, the exchange rate of the British pound strengthened by 3% compared to the U.S. dollar and the Brazilian real weakened by 23% compared to the U.S. dollar. During 2019, the exchange rate of the British pound strengthened by 4% compared to the U.S. dollar while the Brazilian real weakened by 4% compared to the U.S. dollar.