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. 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, 2014, 2013, and 2012 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 14.74 and MXN 13.06 at December 31, 2014 and 2013, 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 12.99 to 13.87, MXN 12.46 to 13.01, and MXN 12.94 to 13.51 during the years ended December 31, 2014, 2013, and 2012, respectively. The effect of the translation of the Company’s investment resulted in a (decrease) increase of the investment of $(4.0) million, $(0.3) million, and $2.7 million during the years ended December 31, 2014, 2013, and 2012, respectively. These translation effects are recorded in accumulated other comprehensive loss. The Company received cash dividends of $230,000, $571,000, and $416,000 from Vasconia during the years ended December 31, 2014, 2013, and 2012, respectively. Included in prepaid expenses and other current assets at December 31, 2014 is $33,000 due from Vasconia. Included within accrued expenses at December 31, 2013 is $152,000 due to Vasconia.

Summarized income statement information for the years ended December 31, 2014, 2013, and 2012, as well as summarized balance sheet information as of December 31, 2014 and 2013, for Vasconia in USD and MXN is as follows:


	Year Ended December 31,
	2014				2013				2012
	(in thousands)
	USD		MXN		USD		MXN		USD		MXN
Income Statement
Net Sales	$	188,863	$	2,514,294	$	159,574	$	2,038,200	$	168,712	$	2,224,256
Gross Profit		35,592		474,482		28,775		367,944		38,134		497,413
Income from operations		7,790		103,658		5,438		70,430		14,614		192,182
Net Income		5,328		71,732		4,315		55,077		34,172		443,630

					December 31,
					2014				2013
					(in thousands)
					USD		MXN		USD		MXN
Balance Sheet
Current assets					$	110,865	$	1,634,154	$	100,227	$	1,309,210
Non-current assets						86,888		1,280,723		75,659		988,289
Current liabilities						37,032		545,852		26,187		342,060
Non-current liabilities						58,753		866,022		39,033		509,868

The Company recorded equity in (losses) earnings of Vasconia, net of taxes, of $0.2 million, $(4.0) million, and $6.9 million for the years ended December 31, 2014, 2013, and 2012, 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.

As of December 31, 2014, the fair value (based upon the quoted stock price) of the Company’s investment in Vasconia was $30.8 million. The carrying value of the Company’s investment in Vasconia was $27.8 million.

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.

The Company owns a 40% equity interest in GS Internacional S/A (“GSI”), a wholesale distributor of branded housewares products in Brazil, which the Company acquired in December 2011. As a result of the decline in operating results of GSI and the current business environment in Brazil, the Company evaluated its carrying value of the investment for other-than-temporary impairment under the equity-method of accounting. Management performed an evaluation of quantitative factors and concluded that the investment was other-than-temporarily impaired as of September 30, 2014. The estimate of fair value was based upon the median of the income-approach (discounted cash flow method) and market-approach valuation methodology using Level 3 unobservable inputs. During the fourth quarter of 2014, the Company purchased 40% of newly issued common stock of GSI for R$2.0 million ($764,000). The Company assessed the valuation of its fourth quarter investment in GSI and determined there were no significant changes to the assumptions used in the valuation of GSI performed during the third quarter. As a result, the new investment is also impaired. Accordingly, the Company recorded a total $6.0 million impairment charge, net of tax, in equity in earnings (losses), net of tax during the third and fourth quarters of 2014.

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 October 2014, the Company sold its investment in HCA to an unaffiliated partner. No significant gains or losses were recognized in connection with this sale.

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 percentages. 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 (losses) in the Company’s consolidated statements of operations. The Company recorded equity in losses of the joint venture of $39,000, $83,000 and $125,000 for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014 and 2013, the carrying value of the Company’s investment in Grand Venture was $251,000 and $287,000, respectively.

The Company evaluated the disclosure requirements of ASC Topic No. 860, Transfers and Servicing, and determined that at December 31, 2014, 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.