Despite the difficult sales environment, our operating margin in this reporting segment has sequentially improved from 2.0% in the first quarter to 8.9% in the second quarter to 9.2% this quarter. We intend to continue to aggressively pursue several significant sales opportunities in our pipeline over the remainder of the year. Accordingly, we expect our Packaging segment operating performance to continue to improve sequentially in the fourth quarter.
Our third quarter effective tax rate of 33.9% was 3.0 percentage points higher than the third quarter of 2011. This higher rate was primarily driven by a $1.0 million tax benefit related to the release of a valuation allowance at a foreign subsidiary in the third quarter of 2011 that did not recur in 2012. This tax benefit lowered the third quarter 2011 average tax rate by approximately 2.2 percentage points. The remainder of the increase from the third quarter of 2011 was primarily due to the research and experimentation tax credit not being renewed for 2012. The higher effective tax rate in the third quarter of 2012 negatively impacted our diluted earnings per share by approximately $0.03 compared with the third quarter of 2011.
2012 GuidanceChris Conway commented on 2012 guidance: “Based upon our results for the third quarter of 2012 and our expectations for the fourth quarter, we are lowering our full year diluted earnings per share guidance to be in the range of $2.35 to $2.45, down from our previous guidance of $2.50 to $2.65. This revised guidance implies a fourth quarter diluted earnings per share range of $0.65 to $0.75—up from diluted earnings per share of $0.60 in the third quarter. This anticipated increase in projected diluted earnings per share in the fourth quarter from the third quarter of 2012 is primarily due to higher sales—which are expected to increase 8% from the third quarter of 2012 based upon the mid-point of our revised full-year sales growth guidance. We anticipate that these higher fourth quarter sales will be driven by a backlog of aviation fuel, marine fuel and petrochemical filtration vessel sales in Europe, the Middle East and Africa and higher projected sales of heavy-duty engine filtration products in markets outside the U.S. including China where we expect to benefit from the launch of an OEM aftermarket program with a large local diesel engine manufacturer. Our projections imply flat sales in the domestic heavy-duty engine filter aftermarket in the fourth quarter compared with the third quarter of 2012.