Corporate Expenses, Interest and Taxes
Pension expense was $8.1 million in 2012, an unfavorable change of $5.8 million from 2011. Most of the pension impact on earnings is reflected in “Corporate expenses, net” in the net sales and operating profit by segment table. Corporate expenses, net increased in 2012 versus 2011 primarily due to the higher pension expenses noted above, an unrealized loss on our investment in the Harbinger Capital Partners Special Situations Fund, L.P. (see Note (f) within the Notes to the Financial Tables for additional detail), certain acquisition-related expenses and higher performance-based incentives.
Interest expense, which includes the amortization of debt issue costs, was $3.6 million in 2012 in comparison to $1.9 million in 2011 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 acquisitions of Terphane in the fourth quarter of 2011 and AACOA in the fourth quarter of 2012.
The effective tax rate used to compute income taxes from continuing operations was 29.8% in 2012 compared with 26.4% in 2011. Income taxes from continuing operations in 2012 primarily reflect the benefit of current year foreign tax incentives. Income taxes for continuing operations in 2011 reflect the recognition of estimated tax benefits from the divestiture of the film products business in Italy, partially offset by the nondeductible acquisition-related expenses associated with the acquisition of Terphane by Film Products. Significant differences between the effective tax rate for continuing operations and the U.S. federal statutory rate for 2012 and 2011 will be provided in our Annual Report on Form 10-K for the year ended December 31, 2012 that will be filed with the Securities and Exchange Commission (the “SEC”). The change in the effective tax rate for the fourth quarter primarily reflects the impact to income taxes during the fourth quarter to adjust the effective tax rate to the calculated effective tax rate for the full year.