INVESTMENTS

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

As of September 30, 2022, the Company owned 24.7% 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 condensed consolidated statements 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 months ended September 30, 2022 and 2021 in the accompanying unaudited condensed consolidated statements of operations.

On June 30, 2021, Vasconia issued additional shares of its stock, which diluted the Company’s investment ownership from approximately 30% to approximately 27%. The Company recorded a non-cash gain of $1.7 million, increasing the Company’s investment balance. Additionally, a loss of $2.0 million was recognized for the proportionate share of the diluted ownership for amounts previously recognized in accumulated other comprehensive loss. The net loss of $0.3 million was included in equity in

earnings, net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the nine months ended September 30, 2021.

On July 29, 2021, the Company sold 2.2 million shares further reducing its ownership from approximately 27% to approximately 25% in Vasconia for net cash proceeds of approximately $3.1 million. As a result, the Company recorded a gain of $1.0 million, after decreasing the Company’s investment balance. The gain on the sale resulted in a tax expense of $0.1 million. Additionally, a loss of $1.4 million was recognized for the proportionate share of the reduced ownership for amounts previously recognized in accumulated other comprehensive loss. The net loss, including taxes, of $0.5 million was included in equity in earnings (losses), net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

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 20.13 and MXN 20.46 at September 30, 2022 and December 31, 2021, respectively.

The Company’s proportionate share of Vasconia’s net (loss) income has been translated from MXN to USD using the following exchange rates:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Average exchange rate (USD to MXN)	20.22	20.01	20.02 - 20.50	20.01 - 20.33

The effect of the translation of the Company’s investment, as well as the translation of Vasconia’s balance sheet, resulted in a decrease to the investment of $0.5 million and an increase of $1.3 million during the nine months ended September 30, 2022 and 2021, respectively. These translation effects are recorded in accumulated other comprehensive loss.

Summarized income statement information for the three and nine months ended September 30, 2022 and 2021 for Vasconia in USD and MXN is as follows (in thousands):


	Three Months Ended September 30,
	2022				2021
	USD		MXN		USD		MXN
Net sales	$	56,488	$	1,142,171	$	61,783	$	1,236,289
Gross profit	4,405		89,061		12,958		259,285
(Loss) income from operations	(5,459)		(110,380)		3,886		77,756
Net (loss) income	(8,009)		(161,936)		2,952		59,063



	Nine Months Ended September 30,
	2022				2021
	USD		MXN		USD		MXN
Net Sales	$	187,001	$	3,785,921	$	174,468	$	3,508,858
Gross profit	29,629		600,976		40,837		821,125
(Loss) income from operations	(256)		(3,974)		14,169		284,799
Net (loss) income	(4,875)		(98,366)		4,562		91,063

The Company recorded equity in losses of Vasconia, net of taxes, of $8.2 million and $7.4 million for the three and nine months ended September 30, 2022, respectively. Equity in losses for the three and nine months ended September 30, 2022, included a non-cash charge of $6.2 million for an impairment charge to write-down the Company's investment balance to fair value, as discussed below. The Company recorded equity in earnings of Vasconia, net of taxes, of $0.7 million and $1.2 million for the three and nine months ended September 30, 2021, respectively.

Included within the Company's unaudited condensed consolidated balance sheets were the following amounts due to and due from Vasconia (in thousands):


Vasconia due to and due from balances	Balance Sheet Location	September 30, 2022		December 31, 2021
Amounts due from Vasconia	Prepaid expenses and other current assets	$	80	$	80
Amounts due to Vasconia	Accrued expenses and Accounts payable	(1)		(146)

The fair value (based on Level 1 inputs using the quoted stock price) of the Company's investment in Vasconia declined in the third quarter. As a result of the decline in the quoted stock price and the quarterly decline in the operating results of Vasconia the Company determined the decline in fair value was other than temporary. The Company reduced its investment by $6.2 million during the three months ended September 30, 2022 to its fair value. The carrying value of the Company’s investment in Vasconia, after the recorded impairment, was $14.4 million as of September 30, 2022.

As of December 31, 2021, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $31.5 million. The carrying value of the Company’s investment in Vasconia was $22.3 million as of December 31, 2021, respectively.