Fair Value Measurement

At December 31, 2019, our financial instruments consisted of cash, accounts receivable, accounts payable, accrued liabilities and our revolving credit facility. The carrying value of these instruments approximates fair value as a result of the short duration of such instruments or due to the variability of the interest cost associated with such instruments.

Foreign Currency Forward Exchange Contracts. Our derivative assets and liabilities represent foreign exchange contracts that are measured at fair value using observable market inputs such as forward rates, interest rates, our own credit risk and counterparty credit risk. Based on the utilization of these inputs, the derivative assets and liabilities are classified as Level 2.

To manage our risk for transactions denominated in Mexican Pesos, we have entered into forward exchange contracts that are designated as cash flow hedge instruments, which are recorded in the Consolidated Balance Sheets at fair value. The gains and losses as a result of the changes in fair value of the hedge contract is deferred in accumulated other comprehensive loss and recognized in cost of revenues in the period the related hedge transactions are recognized.

Interest Rate Swap Agreement. To manage our exposure to variable interest rates, we have entered into an agreement (the “Interest Rate Swap Agreement”) with Bank of America, N.A. whereby the Company has agreed to exchange, at a specified interval, the difference between fixed and variable interest amounts calculated by reference to an agreed upon notional principal amount. The Interest Rate Swap Agreement is intended to mitigate the impact of rising interest rates on the Company and covers $80 million of outstanding debt under the senior secured term loan facility. The Company expects this agreement to remain effective during the remaining term of the Interest Rate Swap Agreement and records the impact of the agreement in interest and other expense in the Consolidated Statements of Operations.

The fair values of our derivative instruments and contingent consideration measured on a recurring basis as of December 31 and are categorized as follows:



		2019								2018
		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Derivative assets	Foreign exchange contract ¹	$	464	$	—	$	464	$	—	$	496	$	—	$	496	$	—
Derivative assets	Interest rate swap agreement ²	$	150	$	—	$	150	$	—	$	1,131	$	—	$	1,131	$	—
Derivative liabilities	Interest rate swap agreement ³	$	995	$	—	$	995	$	—	$	—	$	—	$	—	$	—
Earnout liability	Contingent consideration⁵	$	4,700	$	—	$	—	$	4,700	$	—	$	—	$	—	$	—
Derivative equity	Foreign exchange contract ⁴	$	464	$	—	$	464	$	—	$	496	$	—	$	496	$	—


¹	Presented in the Consolidated Balance Sheets in other current assets and based on observable market transactions of spot and forward rates.


²	Presented in the Consolidated Balance Sheets in other assets and based on observable market transactions of forward rates.


³	Presented in the Consolidated Balance Sheets in accrued liabilities and other and based on observable market transactions of forward rates.


⁴	Presented in the Consolidated Balance Sheets in accumulated other comprehensive income (loss) and based on observable market transactions of forward rates.


⁵	Presented in the Consolidated Balance Sheets in accrued liabilities and other long term liabilities and based on a Monte Carlo valuation model.

The following table summarizes the notional amount of our open foreign exchange contracts at December 31:



	2019				2018
	U.S. $ Equivalent		U.S. $ Equivalent Fair Value		U.S. $ Equivalent		U.S. $ Equivalent Fair Value
Commitments to buy or sell currencies	$	22,474	$	22,939	$	22,371	$	22,867

We consider the impact of our credit risk on the fair value of the contracts, as well as the ability to execute obligations under the contract.

The following table summarizes the effect of derivative instruments on the Consolidated Statements of Operations for derivatives not designated as hedging instruments at December 31:



		2019			2018
	Location of Gain (Loss) Recognized on Derivatives	Amount of Gain (Loss) Recognized on Derivatives
Foreign exchange contracts	Cost of Revenues	$	4		$	607
Interest rate swap agreement	Interest and Other Expense	$	(1,818	)	$	785

Long-term Debt. The fair value of long-term debt obligations is based on a fair value model utilizing observable inputs. Based on these inputs, our long-term debt is classified as Level 2. The carrying amounts and fair values of our long-term debt at December 31 are as follows:



	2019				2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loan and security agreement ¹	$	156,384	$	157,983	$	163,758	$	161,759


¹	Presented in the Consolidated Balance Sheets as the current portion of long-term debt (net of current prepaid debt financing costs of $0.5 million and current original issue discount of $0.6 million) of $3.3 million and long-term debt (net of long-term prepaid debt financing costs of $1.2 million and long-term original issue discount of $1.3 million) of $153.1 million.

Long-lived Assets. There are no fair value measurements of our long-lived assets and definite-lived intangible assets measured on a non-recurring basis, except for definite-lived intangibles acquired and contingent consideration as a part of the acquisition of First Source Electronics, LLC discussed in Note 5, as of December 31, 2019 and December 31, 2018. The contingent consideration is classified as Level 3 and valued based on a Monte Carlo valuation model.