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 (www.bmv.com.mx). 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, 2014 and 2013 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 13.49 and MXN 13.06 at September 30, 2014 and December 31, 2013, 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 13.11 and MXN 12.90 during the three months ended September 30, 2014 and 2013, respectively, and MXN 13.05 to MXN 13.11 and MXN 12.41 to MXN 12.77 during the nine months ended September 30, 2014 and 2013, respectively. The effect of the translation of the Company’s investment resulted in a decrease to the investment of $1.3 million and $0.5 million during the nine months ended September 30, 2014 and 2013, respectively (also see Note K). These translation effects are recorded in accumulated other comprehensive loss. Included within accrued expenses at September 30, 2014 and December 31, 2013 are amounts due to Vasconia of $117,000 and $152,000, respectively.

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


	Three Months Ended
	September 30,
	2014				2013
	(in thousands)
	USD		MXN		USD			MXN
Net Sales	$	45,635	$	598,197	$	37,306		$	481,222
Gross Profit		8,173		107,134		6,215			80,167
Income (loss) from operations		1,720		22,547		(131	)		(1,686	)
Net Income (loss)		1,173		15,381		(853	)		(11,003	)

	Nine Months Ended
	September 30,
	2014				2013
	(in thousands)
	USD		MXN		USD			MXN
Net Sales	$	137,348	$	1,799,920	$	116,117		$	1,472,703
Gross Profit		24,989		327,454		20,085			254,861
Income from operations		5,697		74,628		1,423			18,172
Net Income		2,649		34,575		1,794			22,273

The Company recorded equity in earnings of Vasconia, net of taxes, of $0.3 million for the three months ended September 30, 2014 and equity in losses of Vasconia of $5.3 million (including a charge of $5.0 million, net of tax, for the reduction in the fair value of the Company’s investment in Vasconia) for the three months ended September 30, 2013. The Company recorded equity in earnings of Vasconia, net of taxes of $0.6 million and equity in losses of Vasconia of $4.7 million for the nine months ended September 30, 2014 and 2013, respectively.

As of September 30, 2014 and December 31, 2013, the fair value (based upon Vasconia’s quoted stock price) of the Company’s investment in Vasconia was $33.5 million and $35.2 million, respectively. The carrying value of the Company’s investment in Vasconia was $30.5 million and $30.5 million as of September 30, 2014 and December 31, 2013, respectively.

The Company has a 40% equity interest in GS Internacional S/A (“GSI”), a leading wholesale distributor of branded housewares products in Brazil, which the Company acquired in December 2011. As a result of the decline in operating results of GSI and the current business environment in Brazil, the Company evaluated its carrying value of the investment for other-than-temporary impairment under the equity-method of accounting. Management performed an evaluation of quantitative factors and concluded that the investment was other-than-temporarily impaired as of September 30, 2014. The estimate of fair value was based upon the median of the income-approach (discounted cash flow method) and market- approach valuation methodology using Level 3 unobservable inputs. Accordingly the Company recorded a $5.2 million impairment charge, net of tax, in equity in earnings (losses), net of tax, for the three and nine month periods ended September 30, 2014.

The Company, together with Vasconia and unaffiliated partners, formed Housewares Corporation of Asia Limited (“HCA”), a Hong Kong-based company, to supply direct import kitchenware products to retailers in North, Central and South America. The Company initially invested $105,000 for a 40% equity interest in this entity during 2011. The operating results of HCA were not significant through September 30, 2014. As of September 30, 2014 and December 31, 2013, the carrying value of the Company’s investment in HCA was $129,000 and $144,000, respectively. In October 2014, the Company sold its investment in HCA to an unaffiliated partner. No significant gains or losses are expected to be recognized in connection with this sale.

In February 2012, the Company entered into Grand Venture Holdings Limited (“Grand Venture”), a joint 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 percentage. 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), net of tax, in the Company’s condensed consolidated statements of operations. The Company recorded equity in losses of the joint venture of $17,000 and $73,000 for the three and nine months ended September 30, 2014, respectively, and $21,000 and $58,000 for the three and nine months ended September 30, 2013, respectively. As of September 30, 2014 and December 31, 2013, the carrying value of the Company’s investment in Grand Venture was $265,000 and $287,000, respectively.

The Company evaluated the disclosure requirements of ASC Topic No. 860, Transfers and Servicing, and determined that at September 30, 2014, 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.