Note 3 – Operations in Foreign Currency

We have significant assets in Australia and New Zealand. Historically, we have conducted our Australian and New Zealand operations (collectively “foreign operations”) on a self-funding basis where we use cash flows generated by our foreign operations to pay for the expense of foreign operations. Our Australian and New Zealand assets and liabilities are translated from their functional currencies of Australian dollar (“AU$”) and New Zealand dollar (“NZ$”), respectively, to the U.S. dollar based on the exchange rate as of March 31, 2018. The carrying value of the assets and liabilities of our foreign operations fluctuates as a result of changes in the exchange rates between the functional currencies of the foreign operations and the U.S. dollar. The translation adjustments are accumulated in the Accumulated Other Comprehensive Income in the Consolidated Balance Sheets.

Likewise, historically, our overall operating strategy has been to conduct business mostly on a self-funding basis (except for funds used to pay an appropriate share of our U.S. corporate overhead). As such, we have not historically used derivative financial instruments to hedge against the risk of foreign currency exposure. However, in certain circumstances, we may decide to move funds between jurisdictions where circumstances encouraged us to do so from an overall economic standpoint. Going forward, particularly in light of recent tax law changes, we intend to take a more global view of our financial resources, and to be more flexible in making use of resources from one jurisdiction in other jurisdictions.

As of December 31, 2016, we determined certain historically long-term intercompany loans from the U.S. Parent Company to our Australian subsidiary should be considered short-term. Subsequently, on September 1, 2017, we determined that the remaining AU$21.1 million in such long-term intercompany loans should be considered as short-term as well. This loan was paid in full on December 21, 2017. As a result of the above, we recognized foreign exchange gain on these intercompany advances based on the relative strengthening of the Australian dollar to the U.S. dollar in the amounts of $0 and $825,000 for the three months ended March 31, 2018 and March 2017 respectively in our Consolidated Statements of Income.

Presented in the table below are the currency exchange rates for Australia and New Zealand:


	Foreign Currency / USD
	As of and for the quarter ended	As of and for the twelve months ended	As of and for the quarter ended
	March 31, 2018	December 31, 2017	March 31, 2017
Spot Rate
Australian Dollar	0.7690	0.7815	0.7638
New Zealand Dollar	0.7239	0.7100	0.7001
Average Rate
Australian Dollar	0.7861	0.7670	0.7584
New Zealand Dollar	0.7275	0.7111	0.7122