(8)

INCOME TAXES

Income tax expense is composed of the following:


	Year Ended December 31,
	2015		2014		2013
	(Thousands of dollars)
Current
Federal	$	—	$	—	$	—
State		284		307		353
Foreign		3,159		4,352		9,637
Deferred – principally Federal		12,889		15,768		21,195

Total	$	16,332	$	20,427	$	31,185

Income tax expense 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, 2015						December 31, 2014				December 31, 2013
	(Thousands of dollars, except percentage amounts)
	Amount			Tax Rate %			Amount		Tax Rate %		Amount			Tax Rate %
Income taxes at statutory rate	$	15,140			35		$	18,590		35	$	31,550			35
Increase (decrease) in taxes resulting from:
Valuation allowance on foreign tax credits		—			—			113		—		—			—
Valuation allowance reversal–investment in foreign entity		(456	)		(1	)		—		—		—			—
Change in tax rate on deferred items		1,078			3			—		—		(3,850	)		(4	)
State income taxes, net of federal benefit		146			—			916		2		2,161			2
Other items – net		424			1			808		1		1,324			2

Total	$	16,332			38		$	20,427		38	$	31,185			35

The change in tax rate on deferred items relates to the increase in the estimated effective tax rate that will be present at the time the deferred tax assets and liabilities reverse for tax purposes. The increase is attributable to an increase in the apportionment percentages in the various jurisdictions in which we operate as a result of increased operations in certain states.

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:


	2015			2014
	(Thousands of dollars)
Deferred tax assets:
Deferred compensation	$	946		$	1,023
Foreign tax credits		20,118			16,982
Vacation and bonus accrual		1,952			2,031
Inventory valuation		6,808			6,093
Rental accrual		1,691			1,799
Hurricane relief credit		1,255			1,255
Stock-based compensation		3,598			2,977
Other		3,593			2,714
Net operating losses		61,611			56,305

Total deferred tax assets		101,572			91,179
Valuation allowance – state NOL carryforwards		(290	)		(219	)
Valuation allowance – tax credit carryforwards		(2,047	)		(2,047	)
Valuation allowance – other		—			(1,466	)

Total deferred tax assets, net		99,235			87,447

Deferred tax liabilities:
Tax depreciation in excess of book depreciation		(242,501	)		(218,064	)

Total deferred tax liabilities		(242,501	)		(218,064	)

Net deferred tax liabilities	$	(143,266	)	$	(130,617	)

Current deferred tax assets	$	10,379		$	9,915
Deferred tax liability – long-term		(153,645	)		(140,532	)

Net deferred tax liabilities	$	(143,266	)	$	(130,617	)

As a result of certain realization requirements under GAAP, the Company’s deferred tax assets as of December 31, 2015 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 is expected to increase by $1.0 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 $158.3 million that, if not used, will expire beginning in 2028 through 2035. Additionally, for state income tax purposes, the Company has NOLs of approximately $160.4 million available to reduce future state taxable income. These NOLs expire in varying amounts through 2035, the majority of which expire in 2024 through 2035. The Company has a valuation allowance of $0.3 million as of December 31, 2015 against certain net operating losses in nine states which we have determined are more likely than not to be forfeited in future years.

During 2015, the Company recorded $0.1 million of valuation allowances on state NOLs.

The Company also has foreign tax credits of approximately $20.1 million which expire beginning in 2016 through 2025. 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- million was recorded in 2015.

The Company files income tax returns in the U.S. federal jurisdiction and in many U.S. state jurisdictions. The tax years 2012 to 2015 remain open to examination by the major taxing jurisdictions in which the Company is subject to tax.

Income taxes paid were approximately $5.5 million, $9.6 million, and $1.1 million for each of the years ended December 31, 2015, 2014, and 2013, respectively.

At December 31, 2015, 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.