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EQUITY INVESTMENTS
9 Months Ended
Sep. 30, 2011
EQUITY INVESTMENTS

NOTE B — EQUITY INVESTMENTS

The Company owns a 30% interest in Grupo Vasconia S.A.B. (“Vasconia”). The Company accounts for its investment in Vasconia using the equity method of accounting and records its proportionate share of Vasconia’s net income in the Company’s statement of operations. Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three and nine month periods ended September 30, 2011 and 2010 in the accompanying condensed consolidated statements of operations. The value of the Company’s investment balance has been translated from Mexican Pesos (“MXN”) to U.S. Dollars (“USD”) using the spot rate of MXN 13.77 and MXN 12.62 at September 30, 2011 and 2010, respectively. The Company’s proportionate share of Vasconia’s net income has been translated from MXN to USD using the average exchange rate of MXN 12.23 and MXN 12.79 during the three months ended September 30, 2011 and 2010, respectively, and MXN 12.03 to MXN 12.06 and MXN 12.71 to MXN 12.73 during the nine months ended September 30, 2011 and 2010, respectively. The effect of the translation of the Company’s investment resulted in a decrease of the investment of $2.3 million during the nine months ended September 30, 2011 and an increase in the investment of $421,000 during the nine months ended September 30, 2010 (also see Note J). These translation effects are recorded in accumulated other comprehensive loss. Included in prepaid expenses and other current assets at September 30, 2011 and December 31, 2010 are amounts due from Vasconia of $195,000 and $102,000, respectively. During the nine months ended September 30, 2011, the Company received a cash dividend of $466,000 from Vasconia related to its 2010 earnings, which is accounted for as a reduction to the cost basis of the investment.

Summarized income statement information for Vasconia in USD and MXN is as follows:

 

00000000000 00000000000 00000000000 00000000000
     Three Months Ended
September 30,		  
     2011      2010  
     (in thousands)  
     USD      MXN      USD      MXN  

Net Sales

    $ 38,051       $ 465,452       $ 29,007       $ 371,124   

Gross Profit

      10,760         131,619         8,214         105,088   

Income from operations

      5,281         64,598         4,153         53,135   

Net Income

      3,796         46,437         2,958         37,846   

 

00000000000 00000000000 00000000000 00000000000
     Nine Months Ended
September 30,		  
     2011      2010  
     (in thousands)  
     USD      MXN      USD      MXN  

Net Sales

    $ 97,531       $ 1,173,713       $ 79,471       $ 1,010,051   

Gross Profit

      27,207         327,524         23,237         295,257   

Income from operations

      11,733         141,501         11,057         140,565   

Net Income

      8,043         97,043         7,075         90,037   

The Company recorded equity in earnings of Vasconia, net of taxes, of $980,000 and $836,000 for the three months ended September 30, 2011 and 2010, respectively, and $2.0 million for both the nine months ended September 30, 2011 and 2010.

The Company also has a 50% joint venture investment in World Alliance Enterprises Limited, a Hong-Kong based company that primarily sells kitchenware and cutlery products to retailers other than in North and South America. During the three and nine month periods ended September 30, 2011, the Company recorded equity in earnings of $133,000 and $448,000, respectively. This reflects the cumulative results of this investment through September 30, 2011. Operating activities of this investment for the remainder of 2011 are expected to be immaterial.