(8)

INCOME TAXES

Income tax expense (benefit) is composed of the following:


	Year Ended		Year Ended		Year Ended
	December 31,		December 31,		December 31,
	2014		2013		2012
	(Thousands of dollars)
Current
Federal	$	—	$	—	$	—
State		307		353		360
Foreign		4,352		9,637		—
Deferred – principally Federal		15,768		21,195		15,632

Total	$	20,427	$	31,185	$	15,992

Income tax expense (benefit) as a percentage of pre-tax earnings varies from the effective Federal statutory rate of 35% as a result of the following:


	Year Ended				Year Ended						Year Ended
	December 31, 2014				December 31, 2013						December 31, 2012
	(Thousands of dollars, except percentage amounts)
	Amount		Tax Rate %		Amount			Tax Rate %			Amount		Tax Rate %
Income taxes at statutory rate	$	18,590		35	$	31,550			35		$	11,917		35
Increase (decrease) in taxes resulting from:
Valuation allowance – foreign tax credit		113		—		—			—			1,649		5
Change in tax rate on deferred items		—		—		(3,850	)		(4	)		—		—
State income taxes, net of federal benefit		916		2		2,161			2			1,688		5
Other items – net		808		1		1,324			2			738		2

Total	$	20,427		38	$	31,185			35		$	15,992		47

The change in tax rate on deferred items relates to the reduction in the estimated effective tax rate that will be present at the time the deferred tax assets and liabilities reverse for tax purposes. The reduction is attributable to a decline in the apportionment percentages in the various states in which we operate as a result of our expansion into international areas of operation.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising our net deferred tax balance at December 31 are as follows:


	2014			2013
	(Thousands of dollars)
Deferred tax assets:
Deferred compensation	$	1,023		$	656
Foreign tax credits		16,982			12,611
Vacation and bonus accrual		2,031			5,931
Inventory valuation		6,093			5,655
Rental accrual		1,799			1,634
Hurricane relief credit		1,255			1,255
Stock-based compensation		2,977			1,307
Other		2,714			2,674
Net operating losses		56,305			55,990

Total deferred tax assets		91,179			87,713
Valuation allowance – state NOL carryforwards		(219	)		(541	)
Valuation allowance – tax credit carryforwards		(2,047	)		(1,933	)
Valuation allowance – other		(1,466	)		(1,515	)

Total deferred tax assets, net		87,447			83,724

Deferred tax liabilities:
Tax depreciation in excess of book depreciation		(218,064	)		(198,358	)

Total deferred tax liabilities		(218,064	)		(198,358	)

Net deferred tax liabilities	$	(130,617	)	$	(114,634	)

Current deferred tax assets	$	9,915		$	12,723
Deferred tax liability – long-term		(140,532	)		(127,357	)

Net deferred tax liabilities	$	(130,617	)	$	(114,634	)

As a result of certain realization requirements under GAAP, the Company’s deferred tax assets as of December 31, 2014 in the table above do not include certain deferred tax assets that arose directly from tax deductions related to equity compensation in excess of compensation recognized for financial reporting. Equity will increase by $0.5 million when the deferred tax assets are ultimately realized. The Company uses tax law ordering for purposes of determining when excess tax benefits have been realized.

The Company has U.S. Federal net operating loss carryforwards (“NOLs”) of approximately $143.4 million that, if not used, will expire beginning in 2022 through 2032. Additionally, for state income tax purposes, the Company has NOLs of approximately $126.6 million available to reduce future state taxable income. These NOLs expire in varying amounts through 2032, the majority of which expire in 2017 through 2027. The Company has a valuation allowance of $0.2 million as of December 31, 2014 against certain net operating losses in six states which are not more likely than not to be realized in future years.

During 2014, the Company reversed $0.3 million of previously recorded valuation allowances on these state NOLs.

The Company also has foreign tax credits of approximately $17.0 million which expire beginning in 2015 through 2024. The estimated future U.S. taxable income, after utilization of the available net operating loss carryforwards, will limit the ability of the Company to utilize some of the foreign tax credit carryforwards during their carry forward period and it is not more likely than not that a portion of these credits will be utilized in future years. Therefore, the Company has a valuation allowance of $2.0 million on these credits, of which of $0.1 million was recorded in 2014.

The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state jurisdictions.

The tax years 2011 to 2014 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax.

Income taxes paid were approximately $9.6 million, $1.1 million, and $0.2 million for each of the years ended December 31, 2014, 2013, and 2012, respectively.

At December 31, 2014, the Company had no unrecognized tax benefits. It is the Company’s practice to recognize interest and penalties related to income tax expense as part of non-operating expenses.