NOTE D — 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, 2016, 2015 and 2014 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 20.70 and MXN 17.38 at December 31, 2016 and 2015, 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 18.02 to 19.85, MXN 14.94 to 16.76 and MXN 12.99 to 13.87, during the years ended December 31, 2016, 2015, and 2014, respectively. The effect of the translation of the Company’s investment resulted in a decrease of the investment of $3.2 million, $4.9 million and $4.0 million during the years ended December 31, 2016, 2015 and 2014, respectively. These translation effects are recorded in accumulated other comprehensive loss. The Company received cash dividends of $205,000, $226,000 and $230,000, from Vasconia during the years ended December 31, 2016, 2015 and 2014, respectively. Included in prepaid expenses and other current assets at December 31, 2016 and 2015 was $83,000 and $55,000 due from Vasconia. Included within accounts payable and accrued expenses at December 31, 2016 and 2015 was $220,000 and $28,000 due to Vasconia.

Summarized income statement information for the years ended December 31, 2016, 2015, and 2014, as well as summarized balance sheet information as of December 31, 2016 and 2015, for Vasconia in USD and MXN is as follows:


	Year Ended December 31,
	2016				2015				2014
	(in thousands)
Income Statement	USD		MXN		USD		MXN		USD		MXN
Net Sales	$	149,533	$	2,795,009	$	178,832	$	2,824,399	$	188,863	$	2,514,294
Gross Profit		27,205		510,617		33,982		534,285		35,592		474,482
Income from operations		5,611		105,334		10,551		165,507		7,790		103,658
Net Income		3,491		68,230		7,353		117,194		5,328		71,732
Adjustments ⁽¹⁾		—		—		—		—		1,131		15,679
Net Income as reported by Vasconia ⁽²⁾	$	3,491	$	68,230	$	7,353	$	117,194	$	6,459	$	87,411

⁽¹⁾

Certain adjustments were identified and not recorded in Vasconia’s consolidated financial statements for the year ended December 31, 2013 and were subsequently recorded by Vasconia in the year ended December 31, 2014. The Company recorded its proportionate share of the adjustments, approximately $0.3 million, net of tax, in the correct period in connection with its equity method of accounting for its investment in Vasconia.

⁽²⁾	Vasconia’s consolidated financial statements for the year ended December 31, 2014 were included as Exhibit 99.1 to Amendment 1 to the Company’s fiscal year 2014 Form 10-K.


	December 31,
	2016				2015
	(in thousands)
Balance Sheet	USD		MXN		USD		MXN
Current assets	$	81,509	$	1,687,396	$	100,482	$	1,745,922
Non-current assets		83,890		1,736,681		87,118		1,513,724
Current liabilities		31,303		648,028		38,983		677,355
Non-current liabilities		49,408		1,022,842		56,339		978,910

The Company recorded equity in earnings of Vasconia, net of taxes, of $0.6 million, $0.6 million and $0.2 million for the years ended December 31, 2016, December 31, 2015, and 2014, respectively. Equity in earnings in 2016, 2015 and 2014 includes deferred tax expense of $0.5 million, $1.3 million and $1.1 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, 2016, the fair value (based upon the quoted stock price) of the Company’s investment in Vasconia was $29.0 million. The carrying value of the Company’s investment in Vasconia was $22.5 million.

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 and the Company recorded a total $6.0 million impairment charge, net of tax, in equity in earnings (losses), net of tax during the year ended December 31, 2014. 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 R$2.3 million (approximately $567,000) reduced by currency translation losses of $378,000 recognized upon the sale of the equity interest in GSI.

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 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. The Company recorded equity in losses of the joint venture of $11,000, $20,000 and $39,000 for the years ended December 31, 2016, 2015 and 2014, respectively. As of December 31, 2016 and 2015, the carrying value of the Company’s investment in Grand Venture was $256,000 and $246,000, respectively.

The Company evaluated the disclosure requirements of ASC Topic No. 860, Transfers and Servicing, and determined that at December 31, 2016, 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.