11.	Derivative Instruments

In the normal course of business, our operations are exposed to fluctuations in foreign currency values and interest rate changes. We may seek to control a portion of these risks through a risk management program that includes the use of derivative instruments.

Foreign Currency Risk Management

The Company utilizes forward foreign currency exchange contracts to manage market risks associated with the fluctuations in foreign currency exchange rates and minimize credit exposure by limiting counterparties to nationally recognized financial institutions.

As of March 31, 2019, the Company had foreign exchange contracts outstanding of approximately 3.2 million Euro. The contracts expire on various dates through December 2020. At December 31, 2018, the Company had contracts outstanding of approximately 3.2 million Euro at fixed rates.

Interest Rate Risk Management

As discussed in Note 13, the Company entered into a term loan to finance the acquisition of True North in May 2018. The loan bears interest at adjusted one-month LIBOR plus a margin ranging between 2% and 2.75% depending on the overall leverage ratio of the Company. As part of our overall risk management policies, in June 2018, the Company entered into a pay-fixed, receive-floating interest rate swap contract with a notional amount of $9.0 million to reduce the impact associated with interest rate fluctuations. The notional value amortizes monthly in equal amounts based on the five-year principal repayment terms. The terms of the swap require the Company to pay interest on the basis of a fixed rate of 3.02%, and the Company will receive interest on the basis of one-month USD-LIBOR-BBA-Bloomberg.

The Company reports all derivatives at fair value. These contracts are recognized as either assets or liabilities, depending upon the derivative’s fair value. The estimated net fair values of the derivative contracts on the consolidated balance sheets are as follows:

	March 31,			December 31,
(in thousands)	2019			2018
Prepaid expenses and other current assets
Foreign exchange contracts	$	145		$	43
Total asset derivatives		145			43

Other liabilities
Interest rate swaps		(128	)		(103	)
Total liability derivatives		(128	)		(103	)

Net fair value	$	17		$	(60	)

The Company has not designated the derivative contracts as hedges. The changes in the fair value of the derivative contracts are included in gain (loss) on derivative instruments, net, in the consolidated statements of operations.

The foreign currency denominated contract receivables, billings in excess of revenue earned, and subcontractor accruals that are related to the outstanding foreign exchange contracts are remeasured at the end of each period into the functional currency using the current exchange rate at the end of the period. The gain or loss resulting from such remeasurement is also included in gain (loss) on derivative instruments, net, in the consolidated statements of operations.

For the three months ended March 31, 2019 and 2018, the Company recognized net gain (loss) on its derivative instruments as outlined below:

	Three months ended March 31,
(in thousands)	2019			2018
Interest rate swap - change in fair value	$	(26	)	$	-
Foreign exchange contracts - change in fair value		102			(118	)
Remeasurement of related contract receivables, and billings in excess of revenue earned		17			(38	)
Gain (loss) on derivative instruments, net	$	93		$	(156	)