NOTE C — INVESTMENTS

The Company owns approximately a 30% interest in 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 three and nine month periods ended September 30, 2016 and 2015 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 rates of MXN 19.54 and MXN 17.38 at September 30, 2016 and December 31, 2015, 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 18.73 and MXN 16.41 during the three months ended September 30, 2016 and 2015, respectively, and MXN 17.79 to MXN 18.27 and MXN 14.94 to MXN 16.41 during the nine months ended September 30, 2016 and 2015. The effect of the translation of the Company’s investment resulted in a decrease to the investment of $2.5 million and $5.1 million during the nine months ended September 30, 2016 and 2015, respectively (also see Note L). These translation effects are recorded in accumulated other comprehensive income (loss). Included within prepaid expenses and other current assets at September 30, 2016 and December 31, 2015 are amounts due from Vasconia of $182,000 and $55,000, respectively. Included within accrued expenses and accounts payable at September 30, 2016 and December 31, 2015 are amounts due to Vasconia of $130,000 and $28,000, respectively.

A summarized statement of income information for Vasconia in USD and MXN is as follows:


	Three Months Ended
	September 30,
	2016						2015
	(in thousands)
	USD			MXN			USD		MXN
Net sales	$	34,416		$	644,788		$	42,759	$	701,631
Gross profit		5,736			107,474			7,755		127,258
Income from operations		630			11,798			2,134		35,012
Net income (loss)		(215	)		(4,020	)		1,210		19,859

	Nine Months Ended
	September 30,
	2016						2015
	(in thousands)
	USD			MXN			USD		MXN
Net Sales	$	109,594		$	2,002,137		$	139,748	$	2,169,538
Gross Profit		18,601			339,808			27,838		431,333
Income from operations		3,626			65,933			8,742		135,210
Net Income		521			9,274			4,774		73,981

The Company recorded equity in losses of Vasconia, net of taxes, of $138,000 and $459,000 for the three and nine months ended September 30, 2016, respectively. The Company recorded equity in losses of Vasconia, net of taxes, of $0.5 million and $0.2 million for the three and nine months ended September 30, 2015, respectively. Due to the requirement to record tax benefits for foreign currency translation losses through other comprehensive income (loss), with a corresponding adjustment to deferred tax liabilities, equity in losses for the three and nine months ended September 30, 2016 includes deferred tax expense of $0.1 million and $0.5 million, respectively. Equity in earnings for the three and nine month periods ended 2015 include deferred tax expense of $0.8 million and $1.3 million, respectively.

As of September 30, 2016 and December 31, 2015, the fair value (based upon Vasconia’s quoted stock price) of the Company’s investment in Vasconia was $31.4 million and $35.9 million, respectively. The carrying value of the Company’s investment in Vasconia was $22.3 million and $24.7 million as of September 30, 2016 and December 31, 2015, respectively.

During the nine months ended September 30, 2016 the Company sold its 40% equity interest in GS Internacional S/A (“GSI”), a wholesale distributor of branded housewares products in Brazil. The Company initially acquired GSI in December 2011 and accounted for this investment using the equity method of accounting; however, impairment losses in 2014 reduced the investment balance to zero. Upon the sale of its equity interest in GSI the Company recognized a net gain of $189,000. This gain is included within Equity in earnings (losses), net of tax, and represents the net consideration received of R$2.3 million (approximately $567,000) reduced by currency translation losses of $378,000 which were reclassified out of Other comprehensive income (loss).

The Company evaluated the disclosure requirements of ASC Topic No. 860, Transfers and Servicing, and determined that at September 30, 2016, 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.