Annual report pursuant to section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
12 Months Ended
Dec. 31, 2012
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 17 – INCOME TAXES

The provision for income taxes consisted of the following:

   
Year ended December 31,
 
   
2012
   
2011
   
2010
 
   
(Restated – see Note 3)
   
(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       3,237       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
 
   
(Restated – see Note 3)
   
(Restated – see Note 2)
   
(Restated – see Note 2)
 
   
(thousands of dollars)
 
Income taxes at U.S. statutory rate
  $ 5,679     $ 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
    343       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 3)
   
(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
    ( 1,712 )     (1,736 )
  Total deferred tax liabilities
  $ (10,096 )   $ (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
    (1,470 )     (1,127 )
Total net deferred tax assets
  $ 1,056     $ 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
 
         
(Restated – see Note 2)
 
   
(thousands of dollars)
 
Current:
           
Deferred tax asset
  $ 1,054     $ 1,169  
                 
Non-current:
               
                 
Deferred tax assets
    2,434       1,933  
Deferred tax liability
    (11,058 )     (10,200 )
Valuation allowance
    (1,470 )     (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 increase in the valuation allowance of $343,000 is related to changes in our investment in AMAK.

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.