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Equity Investments
 9 Months Ended
Sep. 30, 2012
Equity Investments

NOTE B — EQUITY INVESTMENTS

The Company owns approximately 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 statements of operations. Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to excess purchase price) for the three and nine month periods ended September 30, 2012 and 2011 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 12.86 at September 30, 2012 and MXN 13.95 at December 31, 2011. The Company’s proportionate share of Vasconia’s net income has been translated from MXN to USD using the average daily exchange rate of MXN 13.15 and MXN 12.23 during the three months ended September 30, 2012 and 2011, respectively, and MXN 13.21 to MXN 13.24 and MXN 12.03 to MXN 12.06 during the nine months ended September 30, 2012 and 2011, respectively. The effect of the translation of the Company’s investment resulted in an increase in the investment balance of $1.2 million during the nine months ended September 30, 2012 and a decrease in the investment balance of $2.3 million during the nine months ended September 30, 2011 (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, 2012 and December 31, 2011 are amounts due from Vasconia of $84,000 and $216,000, respectively. During the nine months ended September 30, 2012, the Company received a cash dividend of $416,000 from Vasconia related to its 2011 earnings, which is accounted for as a reduction to the cost basis of the investment.

 

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

 

     Three Months Ended
September 30,		  
     2012      2011  
     (in thousands)  
     USD      MXN      USD      MXN  

Net Sales

    $ 48,377       $ 636,347       $ 38,051       $ 465,452   

Gross Profit

      9,913         130,391         10,760         131,619   

Income from operations

      3,754         49,384         5,281         64,598   

Net Income

      2,702         35,545         3,796         46,437   
     Nine Months Ended
September 30,		  
     2012      2011  
     (in thousands)  
     USD      MXN      USD      MXN  

Net Sales

    $ 117,259       $ 1,552,020       $ 97,531       $ 1,173,713   

Gross Profit

      26,745         353,536         27,207         327,524   

Income from operations

      10,220         134,999         11,733         141,501   

Net Income

      6,918         91,482         8,043         97,043   

The Company owns a 40% equity interest in GS Internacional S/A (“GSI”), a leading wholesale distributor of branded housewares products in Brazil, which the Company acquired in December 2011. The Company recorded equity in losses of GSI, net of taxes, of $45,000 for the three months ended September 30, 2012 and $217,000 for the nine months ended September 30, 2012.

In February 2012, the Company entered into a joint venture to distribute Mikasa® products in China, in which it expects to make an initial investment of approximately $500,000.