NOTE C — EQUITY INVESTMENTS

The Company owns approximately 30% of the outstanding capital stock of Grupo Vasconia, S.A.B. (“Vasconia”) an integrated manufacturer of aluminum products and one of Mexico’s largest housewares companies. Shares of Vasconia’s capital stock are traded on the Bolsa Mexicana de Valores, the Mexican Stock Exchange (www.bmv.com.mx). The Quotation Key is VASCONI. 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 years ended December 31, 2013, 2012 and 2011 in the accompanying 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 13.06 and MXN 12.97 at December 31, 2013 and 2012, respectively. The Company’s proportionate share of Vasconia’s net income has been translated from MXN to USD using the average exchange rates of MXN 12.46 to 13.01, MXN 12.94 to 13.51 and MXN 11.74 to 13.62 during the years ended December 31, 2013, 2012 and 2011, respectively. The effect of the translation of the Company’s investment resulted in a (decrease) increase of the investment of $(0.3) million, $2.7 million and $(0.5) million during the years ended December 31, 2013, 2012 and 2011, respectively. These translation effects are recorded in accumulated other comprehensive loss. The Company received cash dividends of $571,000, $416,000 and $466,000 from Vasconia during the years ended December 31, 2013, 2012 and 2011, respectively. Included in prepaid expenses and other currents assets at December 31, 2012 are amounts due from Vasconia of $71,000. Included within accrued expenses at December 31, 2013 are amounts due to Vasconia of $152,000.

Summarized income statement information for the years ended December 31, 2013, 2012 and 2011, as well as summarized balance sheet information as of December 31, 2013 and 2012, for Vasconia in USD and MXN is as follows:


	Year Ended December 31,
	2013				2012				2011
	(in thousands)
Income Statement	USD		MXN		USD		MXN		USD		MXN
Net Sales	$	159,574	$	2,038,200	$	168,712	$	2,224,256	$	132,310	$	1,647,479
Gross Profit		28,775		367,944		38,134		497,413		38,143		476,501
Income from operations		5,438		70,430		14,614		192,182		17,254		216,715
Net Income		4,315		55,077		34,172		443,630		11,395		142,698


	December 31,
	2013				2012
	(in thousands)
Balance Sheet	USD		MXN		USD		MXN
Current assets	$	100,227	$	1,309,210	$	106,953	$	1,386,731
Non-current assets		75,659		988,289		75,511		979,059
Current liabilities		26,187		342,060		29,282		379,663
Non-current liabilities		39,033		509,868		44,405		575,746

The Company recorded equity in (losses) earnings of Vasconia, net of taxes, of $(4.0) million, $6.9 million and $2.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. Equity in losses in 2013 includes a charge of $5.0 million, net of tax, for the reduction in Vasconia’s fair value, as discussed in the following paragraph. Equity in earnings of Vasconia in 2012 includes $4.1 million related to the Company’s portion of a bargain purchase gain recognized by Vasconia on its purchase of Almexa, an aluminum mill and manufacturer of aluminum foil, a $1.1 million tax benefit realized in the period and the reduction of the Company’s investment to fair value of $1.3 million, net of tax.

In 2013, as a result of a decline in the quoted stock price and the 2013 quarterly decline in the operating results of Vasconia, the carrying amount of the Company’s investment in Vasconia exceeded its fair value and, therefore, the Company reduced its investment value by $5.0 million during the year ended December 31, 2013, net of tax, to its fair value.

In 2012, as a result of recording the bargain purchase gain and a corresponding increase in the investment, the Company determined it was necessary to perform an impairment test on its investment in Vasconia as of December 31, 2012. The test involved the assessment of the fair value of the Company’s investment in Vasconia based on Level 1 quoted prices in active markets. The result of the assessment of the Company’s investment in Vasconia indicated that the carrying amount of the investment exceeded its quoted fair value and, therefore, was required to be reduced by $1.3 million, net of tax.

As of December 31, 2013, the fair value (based upon the quoted stock price) of the Company’s investment in Vasconia was $35.2 million. The carrying value of the Company’s investment in Vasconia was $30.5 million.

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 $656,000 and $727,000 for the years ended December 31, 2013 and 2012, respectively. The operating results of GSI were not significant during the period of December 9, 2011 through December 31, 2011. As of December 31, 2013, the carrying value of the Company’s investment in GSI was $6.0 million.

The Company, together with Vasconia and unaffiliated partners, formed Housewares Corporation of Asia Limited (“HCA”), a Hong Kong-based company, to supply direct import kitchenware products to retailers in North, Central and South America. The Company initially invested $105,000 for a 40% equity interest in this entity during 2011.

The operating results of HCA were not significant through December 31, 2013. As of December 31, 2013, the carrying value of the Company’s investment in HCA was $144,000.

In February 2012, the Company entered into Grand Venture Holdings Limited (“Grand Venture”), a joint venture with Manweal Development Limited (“Manweal”), a Chinese corporation, to distribute Mikasa^® products in China, which included an initial investment of $500,000. The Company and Manweal each own 50% of Grand Venture and have rights and obligations proportionate to their ownership percentage. The Company accounts for its investment in Grand Venture using the equity method of accounting and has recorded its proportionate share of Grand Venture’s net loss as equity in earnings in the Company’s consolidated statements of operations. The Company recorded equity in losses of the joint venture of $83,000 and $125,000 for the years ended December 31, 2013 and 2012, respectively. As of December 31, 2013, the carrying value of the Company’s investment in Grand Venture was $0.3 million.

The Company evaluated the disclosure requirements of ASC Topic No. 860, Transfers and Servicing, and determined that at December 31, 2013, the Company did not have a controlling voting interest or variable interest in any of its investments and therefore continued accounting for the investments using the equity method of accounting.