5.	HEDGING ACTIVITIES AND FOREIGN CURRENCY TRANSLATION

Foreign Currency Transactions

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


(in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Foreign currency transactions gain (loss)	$	155		$	23		$	1,081		$	(475	)
Foreign currency option loss		(82	)		(126	)		(416	)		(387	)
Foreign currency gain (loss), net	$	73		$	(103	)	$	665		$	(862	)

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 2016, we entered into foreign currency forward contracts as economic hedges against the exchange rate fluctuations of the U.S. Dollar (USD) against the Euro (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.

During 2015, we entered into foreign currency forward contracts as economic hedges against the strengthening of the USD against the EUR and the JPY. During the nine months ended September 30, 2015, we recognized a loss of $0.4 million in the 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, Australian Dollar (AUD) and JPY. During the nine months ended September 30, 2016, translation gains were $2.4 million, which were primarily due to the weakening of the GBP and offset partially by the strengthening of the JPY and the AUD in each case against the USD. During the nine months ended September 30, 2015, translation losses were $2.7 million, which were primarily due to the weakening of the JPY against the USD, offset partially by the strengthening of the EUR and GBP against the USD. We do not expect that translation gains and losses for the balance of the year ending December 31, 2016 will have a material adverse effect on our financial position, results of operations or cash flows.

Hedging Activities

We do not enter into or hold derivative instruments for trading or speculative purposes. During December 2015, we terminated our interest rate swap, which we had entered into to eliminate variability in future cash flows by converting LIBOR-based variable-rate interest payments into fixed-rate interest payments. The fair value of our interest rate swap agreement was based on dealer quotes. The change in fair value during the nine months ended September 30, 2015 of $6,000 was recorded as accumulated other comprehensive loss in the consolidated balance sheets.