NOTE B —INVESTMENTS

The Company owns an approximately 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 six month periods ended June 30, 2017 and 2016 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 18.05 and MXN 20.70 at June 30, 2017 and December 31, 2016, 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 18.54 and MXN 18.09 during the three months ended June 30, 2017 and 2016, respectively, and MXN 18.54 to MXN 20.30 and MXN 18.06 to MXN 18.07 during the six months ended June 30, 2017 and 2016, respectively. The effect of the translation of the Company’s investment resulted in an increase to the investment of $1.8 million and a decrease to the investment of $1.7 million during the six months ended June 30, 2017 and 2016, respectively (also see Note K). These translation effects are recorded in accumulated other comprehensive income (loss). Included within prepaid expenses and other current assets at June 30, 2017 and December 31, 2016 are amounts due from Vasconia of $85,000 and $83,000, respectively. Included within accrued expenses and accounts payable at June 30, 2017 and December 31, 2016 are amounts due to Vasconia of $24,000 and $220,000, respectively.

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


	Three Months Ended June 30,
	2017				2016
			(in thousands)
	USD		MXN		USD		MXN
Net sales	$	41,736	$	773,825	$	37,854	$	684,771
Gross profit		7,755		143,790		7,446		134,700
Income from operations		1,686		31,258		2,073		37,502
Net income		1,168		21,663		516		9,335

	Six Months Ended June 30,
	2017				2016
			(in thousands)
	USD		MXN		USD		MXN
Net Sales	$	78,558	$	1,521,320	$	75,178	$	1,357,349
Gross Profit		15,609		303,211		12,864		232,334
Income from operations		4,116		80,587		2,996		54,135
Net Income		2,402		46,706		736		13,294

The Company recorded equity in earnings of Vasconia of $458,000 and $998,000, net of taxes, for the three and six months ended June 30, 2017, respectively. The Company recorded equity in losses of Vasconia of $171,000 and $321,000, net of taxes, for the three and six months ended June 30, 2016, respectively. Due to the requirement to record tax benefits/expenses for foreign currency translation losses/gains through other comprehensive income (loss), with a corresponding adjustment to deferred tax liabilities, equity in earnings for the three and six months ended June 30, 2017 includes a deferred tax benefit of $0.1 million and $0.4 million, respectively. Equity in losses for the three and six months ended June 30, 2016 includes deferred tax expense of $0.3 million and $0.5 million, respectively.

As of June 30, 2017 and December 31, 2016, the fair value (based upon Vasconia’s quoted stock price) of the Company’s investment in Vasconia was $34.0 million and $29.0 million, respectively. The carrying value of the Company’s investment in Vasconia was $24.9 million and $22.5 million as of June 30, 2017 and December 31, 2016, respectively.

The Company evaluated the disclosure requirements of ASC Topic No. 860, Transfers and Servicing, and determined that at June 30, 2017, 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.