
5.	HEDGING ACTIVITIES AND FOREIGN CURRENCY TRANSLATION

Foreign Currency Transactions

The following table provides information on the components of our foreign currency activities recognized in the unaudited condensed consolidated statements of income:




(in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,
	2017		2016			2017			2016
Foreign currency transactions gain	$	470	$	155		$	1,739		$	1,081
Foreign currency option loss	—		(82		)	(539		)	(416		)
Foreign currency gain, net	$	470	$	73		$	1,200		$	665

Foreign Currency Transactions – Gains and losses resulting from our transactions and our subsidiaries’ transactions that are made in currencies different from our and their own are included in income as they occur and as other income (expense) in the condensed consolidated statements of income.

Foreign Currency Options – During 2017, we entered into foreign currency forward contracts as economic hedges against exchange rate fluctuations of the U.S. Dollar (USD) against the Euro (EUR) and the Australian Dollar (AUD) and recognized losses of $0.5 million, related to these instruments. The recognized losses are recorded in other income (expense) in the unaudited condensed consolidated statements of income related to the fair value of these currency options based upon dealers' quotes. During the three months ended September 30, 2017 we did not enter into any foreign currency options.

During 2016, we entered into foreign currency forward contracts as economic hedges against the exchange rate fluctuations of the USD against the EUR, the British Pound (GBP) and the Japanese Yen (JPY). During the nine months ended September 30, 2016, we recognized losses of $0.4 million related to these instruments. The recognized losses were recorded in other income (expense) in the unaudited condensed consolidated statements of income related to the fair value of these currency options based upon dealers' quotes.

Foreign Currency Translation

We are exposed to market risk related to changes in foreign currency exchange rates. The functional currency of substantially all of our international subsidiaries is their local currency. Transactions are translated into USD, and translation gains and losses are recognized in “Other comprehensive income (loss)”. Fluctuations in exchange rates affect our financial position and results of operations. The majority of our foreign currency exposure is to the EUR, GBP, JPY, and AUD. During the nine months ended September 30, 2017, translation gains were $0.1 million, which were primarily due to the strengthening of the EUR and AUD against the USD during the nine months ended September 30, 2017. During the nine months ended September 30, 2016, translation gains were $2.4 million, which were primarily due to the strengthening of the JPY and the AUD, and offset partially by the weakening of the GBP, in each case against the USD. While we may experience translation gains and losses during the balance of the year ending December 31, 2017, these gains and losses are not expected to have a material adverse effect on our financial position, results of operations, or cash flows.