8.	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

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

As of March 31, 2020, we had no foreign exchange contracts outstanding.

Interest Rate Risk Management

As discussed in Note 10, we entered into an amended Credit Agreement in May 2018 and revised via the Seventh Amendment and Reaffirmation Agreement on April 17, 2020. The loan bears interest at adjusted one-month USD LIBOR, plus a margin ranging between 2.00% and 2.75% depending on our overall leverage ratio. As part of its overall risk management policies, in June 2018 we 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 5-year principal repayment terms. The terms of the swap requires us to pay interest on the basis of a fixed rate of 3.02%, and we receive interest on the basis of one-month USD LIBOR.

We 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)	2020			2019
Prepaid expenses and other current assets
Foreign exchange contracts	$	-		$	49
Total asset derivatives		-			49

Other liabilities
Interest rate swaps		(257	)		(160	)
Total liability derivatives		(257	)		(160	)

Net fair value	$	(257	)	$	(111	)

We have not designated any of its derivative contracts as hedges. 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 our 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, 2020 and 2019, we recognized a net (loss) gain on our derivative instruments as outlined below:

	Three months ended March 31,
(in thousands)	2020			2019
Interest rate swap - change in fair value	$	(97	)	$	(26	)
Foreign exchange contracts		17			102
Remeasurement of related contract receivables, and billings in excess of revenue earned		37			17
(Loss) gain on derivative instruments, net	$	(43	)	$	93

During the three months ended March 31, 2020, we realized a gain of $17 thousand for foreign exchange contracts due to their close out during the quarter, and we recorded a gain of $102 thousand related to the change in the fair value of foreign exchange contracts for the three months ended March 31, 2019.