Annual report pursuant to section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2013
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 15 – INCOME TAXES

The provision for income taxes consisted of the following:

   
Year ended December 31,
  
   
2013
    
2012
    
2011
  
   
(thousands of dollars)
  
Current federal provision
   $ 6,748     $ 4,821     $ 3,072  
Current state provision
     233       199       191  
                         
Deferred federal provision
     1,173       882       3,237  
Deferred state provision (benefit)
     (7 )     2       5  
                         
Income tax expense
   $ 8,147     $ 5,904     $ 6,505  

The difference between the effective tax rate in income tax expense and the Federal statutory rate of 35% for the years ended December 31, 2013 and 2012, and 34% for the year ended December 31, 2011, is as follows:

   
2013
    
2012
    
2011
  
   
(thousands of dollars)
  
Income taxes at U.S. statutory rate
   $ 9,675     $ 5,679     $ 6,933  
State taxes, net of federal benefit
     139       132       127  
Permanent and other items
     (644 )     (250 )     (567 )
Increase (decrease) in valuation allowance
     (1,023 )     343       12  
    Total tax expense
   $ 8,147     $ 5,904     $ 6,505  

Permanent and other items primarily include non-deductible expenses offset by the manufacturers’ deduction under §199 of the Internal Revenue Code and increase in the effective tax rate for the year ended December 31, 2012.  We concluded that our current and future Federal effective tax rate to be 35% based on review of current period income and expectation for future periods.

Tax effects of temporary differences that give rise to significant portions of federal and state deferred tax assets and deferred tax liabilities were as follows:
 
   
December 31,
  
   
2013
    
2012
  
   
(thousands of dollars)
  
Deferred tax liabilities:
            
  Plant, pipeline and equipment
   $ (8,507 )   $ (8,260 )
  Contractual based asset
     (43 )     (124 )
  Investment in AMAK
     ( 4,757 )     ( 1,712 )
  Total deferred tax liabilities
   $ (13,307 )   $ (10,096 )
                 
Deferred tax assets:
                
  Accounts receivable
     260       201  
  Inventory
     131       95  
  Mineral interests
     376       376  
  Unrealized loss on interest rate swap
     214       313  
  Environmental
     71       123  
  Post-retirement benefits
     373       370  
                 
Stock-based compensation
     1,015       716  
Deferred revenue
     654       332  
  Gross deferred tax assets
     3,094       2,526  
Valuation allowance
     (447 )     (1,470 )
Total net deferred tax assets
   $ 2,647     $ 1,056  
  Net deferred tax liabilities
   $ (10,660 )   $ (9,040 )

The current and non-current classifications of the deferred tax balances are as follows:

   
2013
    
2012
  
   
(thousands of dollars)
  
Current:
            
Deferred tax asset
   $ 1,324     $ 1,054  
                 
Non-current:
                
                 
Deferred tax assets
     1,764       2,434  
Deferred tax liability
     (13,301 )     (11,058 )
Valuation allowance
     (447 )     (1,470 )
Non-current deferred tax liability, net
     (11,984 )     (10,094 )
                 
Total deferred liabilities, net
   $ (10,660 )   $ (9,040 )

We have provided a valuation allowance in 2013 and 2012 against certain deferred tax assets because of uncertainties regarding their realization.  The 2013 decrease in the valuation allowance of $1,023,000 is due largely to changes in our investment in AMAK.

We had no Saudi Arabian income tax liability in 2013, 2012, or 2011.

We file an income tax return in the U.S. federal jurisdiction and a margin tax return in Texas. Tax returns for various jurisdictions remain open for examination for the years 2010 through 2013.