EQUITY INVESTMENTS

12 Months Ended

Dec. 31, 2018

NOTE E — 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, 2018, 2017 and 2016 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 19.64 and MXN 19.68 at December 31, 2018 and 2017, 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 18.71 to 19.81, MXN 17.81 to 20.30 and MXN 18.02 to 19.85,

during the years ended December 31, 2018, 2017 and 2016, respectively. The effect of the translation of the Company’s investment, as well as the translation of Vasconia’s balance sheet, resulted in a decrease of the investment of $1.9 million during the year ended December 31, 2018 and an

increase of the investment of $1.0 million during the year ended December 31, 2017. These translation effects are recorded in accumulated other comprehensive loss. The Company received cash dividends of $115,000, $28,000 and $205,000, from Vasconia during the years ended December 31, 2018, 2017 and 2016, respectively. Included in prepaid expenses and other current assets at December 31, 2018 and 2017 was $95,000 and $64,000, respectively, due from Vasconia.

Summarized income statement information for the years ended December 31, 2018, 2017 and 2016, as well as summarized balance sheet information as of December 31, 2018 and 2017, for Vasconia, calculated in accordance with U.S. GAAP, in USD and MXN is as follows:

	Year Ended December 31,
	2018				2017				2016
	(in thousands)
	USD		MXN		USD		MXN		USD		MXN
Income Statement
Net sales	$	179,547	$	3,456,852	$	167,283	$	3,157,671	$	149,533	$	2,795,009
Gross profit		36,891		711,941		34,626		655,186		27,205		510,617
Income from operations		11,402		222,115		10,475		199,170		5,611		105,334
Net income		2,887		57,590		1,164		23,983		3,491		68,230

	December 31,
	2018				2017
	(in thousands)
	USD		MXN		USD		MXN
Balance Sheet
Current assets	$	96,135	$	1,888,602	$	91,157	$	1,793,832
Non-current assets		86,279		1,694,969		87,900		1,729,745
Current liabilities		64,831		1,273,619		50,766		998,993
Non-current liabilities		32,261		633,772		39,147		770,352

The Company recorded equity in earnings of Vasconia, net of taxes, of $0.9 million, $0.4 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016,

respectively. Equity in earnings in 2018 includes $0.1 million net deferred tax benefit due to a change in the tax basis of the investment as a result of the Tax Act. Equity in earnings in 2017 and 2016 includes deferred tax benefit (expense) of

$0.2 million and ($0.5) million, 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.

As of December 31, 2018, the fair value (based upon the quoted stock price) of the Company’s investment in Vasconia was $31.9 million. The carrying value of the Company’s investment in Vasconia was $22.6 million.

In February 2012, the Company entered into a joint venture, Grand Venture Holdings Limited (“Grand Venture”), with Manweal Development Limited (“Manweal”), a Chinese corporation, to distribute Mikasa

products in China, which included an initial investment by the Company 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. Due to the operating losses the Company evaluated the carrying value of its investment for other-than temporary impairment under the equity method of accounting and recorded an impairment charge of approximately $0.2 million during the year ended December 31, 2018. As of December 31, 2018 and 2017, the carrying value of the Company’s investment in Grand Venture was $0 and $228,000, respectively.

During the year ended December 31, 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 2.3

million Brazilian reals

(approximately $567,000) reduced by currency translation losses of $378,000 recognized upon the sale of the equity interest in GSI.