Interest expense, which includes the amortization of debt issue costs, was $2.7 million in the first nine months of 2012 in comparison to $1.1 million in the first nine months of last year as a result of an increase in the average borrowings under our revolving credit facility, which were used to finance a portion of the purchase price for the acquisition of Terphane.
The effective tax rate used to compute income taxes from continuing operations was 28.0% in the first nine months of 2012 compared with 19.9% in the first nine months of 2011. Income taxes for continuing operations in 2011 reflect the recognition of estimated tax benefits of approximately $5 million related to the divestiture of the films products business in Italy, while income taxes for continuing operations in 2012 primarily reflect the benefit of current year foreign tax incentives. Significant differences between the effective tax rate for continuing operations and the U.S. federal statutory rate for the first nine months of 2012 and 2011 will be provided in the notes to the consolidated interim financial statements in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012 that will be filed with the Securities and Exchange Commission (the “SEC”). The change in the effective tax rate for the third quarter primarily reflects the impact to income taxes during the third quarter to adjust the effective tax rate for the first nine months of the year to the rate estimated for the entire year.
Net debt (debt in excess of cash and cash equivalents) was $35.8 million at September 30, 2012, compared with $56.1 million at December 31, 2011. In October 2012, we borrowed an additional $51 million under our revolving credit agreement to fund the acquisition of AACOA. Net debt is a financial measure that is not calculated or presented in accordance with GAAP. See the Notes to the Financial Tables for reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.