NOTE C — 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 nine month periods ended September 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 18.25 and MXN 20.70 at September 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 17.81 and MXN 18.73 during the three months ended September 30, 2017 and 2016, respectively, and MXN 17.81 to MXN 20.30 and MXN 17.79 to MXN 18.27 during the nine months ended September 30, 2017 and 2016, respectively. The effect of the translation of the Company’s investment resulted in an increase to the investment of $1.3 million and a decrease to the investment of $2.5 million during the nine months ended September 30, 2017 and 2016, 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, 2017 and December 31, 2016 are amounts due from Vasconia of $47,000 and $83,000, respectively. Included within accrued expenses and accounts payable at September 30, 2017 and December 31, 2016 are amounts due to Vasconia of $70,000 and $220,000, respectively.

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


	Three Months Ended
	September 30,
	2017						2016
	(in thousands)
	USD			MXN			USD			MXN
Net sales	$	40,184		$	715,577		$	34,416		$	644,788
Gross profit		7,553			134,507			5,736			107,474
Income from operations		1,766			31,440			630			11,798
Net loss		(648	)		(11,538	)		(215	)		(4,020	)


	Nine Months Ended
	September 30,
	2017				2016
	(in thousands)
	USD		MXN		USD		MXN
Net sales	$	118,743	$	2,236,897	$	109,594	$	2,002,137
Gross profit		23,162		437,718		18,601		339,808
Income from operations		5,881		112,027		3,626		65,933
Net income		1,754		35,168		521		9,274

The Company recorded equity in losses of Vasconia of $326,000 and equity in earnings of Vasconia of $672,000, net of taxes, for the three and nine months ended September 30, 2017, respectively. The Company recorded equity in losses of Vasconia of $138,000 and $459,000, net of taxes, for the three and nine months ended September 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 (losses) for the three and nine months ended September 30, 2017 includes a deferred tax expense of $0.1 million and deferred tax benefit of $0.2 million, respectively. 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.

As of September 30, 2017 and December 31, 2016, the fair value (based upon Vasconia’s quoted stock price on the Mexican Stock Exchange using the average exchange rates of MXN 18.25 and MXN 20.70, respectively) of the Company’s investment in Vasconia was $34.3 million and $29.0 million, respectively. The carrying value of the Company’s investment in Vasconia was $24.2 million and $22.5 million as of September 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 September 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.