Annual report pursuant to section 13 and 15(d)

INCOME TAXES

v2.4.0.6
INCOME TAXES
 12 Months Ended
Dec. 31, 2012
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 16 – INCOME TAXES

The provision for income taxes consisted of the following:
 
Year ended December 31,
 
 
2012
 
 
2011
 
 
2010
 
 (Restated – see Note 2)
 
(thousands of dollars)
 
Current federal provision
 
$
4,821
 
 
$
3,072
 
 
$
1,022
 
Current state provision
 
 
199
 
 
 
191
 
 
 
6
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred federal provision
 
 
882
 
 
 
3237
 
 
 
663
 
Deferred state provision
 
 
2
 
 
 
5
 
 
 
12
 
 
 
 
 
 
 
 
 
 
 
 
 
Income tax expense
 
$
5,904
 
 
$
6,505
 
 
$
1,703
 


The difference between the effective tax rate in income tax expense and the Federal statutory rate of 35% for the year ended December 31, 2012, and 34% for the years ended December 31, 2011, and 2010, is as follows:
 
2012
 
 
2011
 
 
2010
 
 
(thousands of dollars)
 
 (Restated – see Note 2)
Income taxes at U.S. statutory rate
 
$
6,056
 
 
$
6,933
 
 
$
1,285
 
State taxes, net of federal benefit
 
 
132
 
 
 
127
 
 
 
96
 
Prior year overpayments
 
 
--
 
 
 
--
 
 
 
(15
 )
Permanent and other items
 
 
(250
 )
 
 
(567
 )
 
 
10
 
Increase (decrease) in valuation allowance
 
 
(34)
 
 
 
12
 
 
 
327
 
Total tax expense
 
$
5,904
 
 
$
6,505
 
 
$
1,703
 
 
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.  The Company concluded that its 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,
 
 
2012
 
 
2011
 
 (Restated – see Note 2)
 
(thousands of dollars)
 
Deferred tax liabilities:
 
 
 
 
 
 
Plant, pipeline and equipment
 
$
(8,260
 )
 
$
(7,655
 )
Contractual based asset
 
 
(124
 )
 
 
(206
 )
Unrealized loss on swap agreements
 
 
-
 
 
 
(136
 )
    Investment in AMAK
(2,089
 )
(1,736
 )
Total deferred tax liabilities
 
$
(10,473
 )
 
$
(9,733
 )
 
 
 
 
 
 
 
 
Deferred tax assets:
 
 
 
 
 
 
 
 
Accounts receivable
 
 
201
 
 
 
187
 
Inventory
 
 
95
 
 
 
92
 
Mineral interests
 
 
376
 
 
 
365
 
Unrealized loss on interest rate swap
 
 
313
 
 
 
386
 
Environmental
 
 
123
 
 
 
119
 
Post-retirement benefits
 
 
370
 
 
 
356
 
 
 
 
 
 
 
 
 
Stock-based compensation
 
 
716
 
 
 
569
 
Deferred revenue
 
 
332
 
 
 
561
 
Gross deferred tax assets
 
 
2,526
 
 
 
2,635
 
Valuation allowance
 
 
(1,093
 )
 
 
(1,127
 )
Total net deferred tax assets
 
$
1,433
 
 
$
1,508
 
Net deferred tax liabilities
 
$
(9,040
 )
 
$
(8,225
 )

The current and non-current classifications of the deferred tax balances are as follows:
 
2012
 
 
2011
 
 
(thousands of dollars)
 
       
 
 
 
 
 (Restated – see Note 2)
 
        Current:
Deferred tax asset
 
$
1,054
 
 
$
1,169
 
 
 
 
 
 
 
 
 
Non-current:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred tax assets
 
 
2,057
 
 
 
1,933
 
Deferred tax liability
 
 
(11,058
 )
 
 
(10,200
 )
Valuation allowance
 
 
(1,093
 )
 
 
(1,127
 )
Non-current deferred tax liability, net
 
 
(10,094
 )
 
 
(9,394
 )
 
 
 
 
 
 
 
 
Total deferred liabilities, net
 
$
(9,040
 )
 
$
(8,225
 )

The Company has provided a valuation allowance in 2012 and 2011 against certain deferred tax assets because of uncertainties regarding their realization.  The 2012 decrease in the valuation allowance of $34,000 is related to the realization of certain deferred tax assets net against the Company's increase in its Federal effective tax rate.

The Company had no Saudi Arabian income tax liability in 2012, 2011, or 2010.

The Company files an income tax return in the U.S. federal jurisdiction and Texas. Tax returns for various jurisdictions remain open for examination for the years 2009 through 2011.  In late 2010 the IRS opened an examination of the Company's 2009 tax return which was subsequently closed without change.