invest1980, is correct and I believe that the $4 million income tax reserve might come due if cash were transfered out of the country instead of reinvested in the company (hence the purchase of KCA Garments). There's a couple of ways at looking at this. I look at the $4 million dollar reserve as an accounting entry and not as a REAL liability. What's nice is that the overseas income is computed with a tax component even though it'll unlikely ever come due. I believe my analysis is correct, but don't rely on it.
I believe the income tax reserve has been grown as follows:
Income tax Expense (Income statement) XXX
-----Income tax Reserve (Balance Sheet) XXX
However, what invest1980 doesn't understand is that in 2003 there was no way of "transporting" the cash out of the company as there were minimal external sales. Remember, if the apparel item costs $2.00 to produce, and Veltex US Apparel pays $2.05 for it, there's only a 5 cent profit to Bangladesh ( 2% profit). If VLXC US sells it for $3.00, it has a $0.95 profit. In other words, once the US business ramps up, cash can be transferred easily between companies. Also remember that Veltex has the ability to buy outside of it's vertical integration to meet sales.
Please note that all of the above is simply my opinion. I do not hold myself out to be an expert in international finance/Veltex.
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