Silgan Holdings Inc. (SLGN, Financial) filed Quarterly Report for the period ended 2012-06-30.
Silgan Holdings Inc. has a market cap of $2.82 billion; its shares were traded at around $40.54 with a P/E ratio of 14.7 and P/S ratio of 0.8. The dividend yield of Silgan Holdings Inc. stocks is 1.2%. Silgan Holdings Inc. had an annual average earning growth of 6.6% over the past 10 years. GuruFocus rated Silgan Holdings Inc. the business predictability rank of 5-star.
Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increased 3.3 percentage points to 5.7 percent for the second quarter of 2012 as compared to 2.4 percent for the same period in 2011. Selling, general and administrative expenses increased $26.4 million to $46.5 million for the second quarter of 2012 as compared to $20.1 million for the same period in 2011. These increases were primarily due to the inclusion in 2011 of $27.0 million of income from proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs associated with certain corporate development activities. Income from Operations. Income from operations for the second quarter of 2012 decreased by $25.9 million as compared to the second quarter of 2011, and operating margin decreased to 8.3 percent from 11.5 percent over the same periods, principally due to the inclusion in 2011 of income of $27.0 million from proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs associated with certain corporate development activities. Income from operations of the metal container business for the second quarter of 2012 decreased $2.8 million, or 6.5 percent, as compared to the same period in 2011, and operating margin decreased to 8.4 percent from 8.9 percent over the same periods. These decreases were primarily the result of a less favorable mix of products sold, volume declines and increased price pressure due to overall economic weakness in the European markets and costs of $1.9 million associated with the start-up of three new production facilities in eastern Europe and one facility in the Middle East, partially offset by the inclusion in the second quarter of 2011 of a charge of $3.3 million for the resolution of a past product liability dispute and rationalization charges of $1.4 million. Income from operations of the closures business for the second quarter of 2012 increased $0.2 million to $22.9 million as compared to $22.7 million for the same period in 2011, and operating margin increased to 12.5 percent from 12.3 percent over the same periods. These increases were primarily attributable to higher unit volumes in the U.S. single-serve beverage market, continued improvement in manufacturing efficiencies and operating cost savings and a decrease in rationalization charges, largely offset by weaker volumes and increased price pressure in the European market due to macroeconomic issues. Rationalization charges of $0.3 million were recognized in the second quarter of 2011. Income from operations of the plastic container business for the second quarter of 2012 increased $4.6 million to $9.1 million as compared to $4.5 million for the same period in 2011, and operating margin increased to 5.7 percent from 2.9 percent over the same periods. These increases were primarily attributable to the favorable comparison of the year-over-year resin cost pass through lag effect which benefitted the second quarter of 2012, a favorable mix of products sold, cost reduction initiatives and continued improvement in operating performance, an increase in unit volumes and lower rationalization charges. Rationalization charges of $0.2 million and $0.7 million were recognized in the second quarter of 2012 and 2011, respectively. Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the second quarter of 2012 decreased $0.4 million to $16.0 million as compared to the same period in 2011. This decrease was primarily due to lower average interest rates, partially offset by higher average outstanding borrowings as a result of the issuance of the 5% Notes in March 2012 and the refinancing of the senior secured credit facility in July 2011. As a result of the redemption of the 7¼% Notes on April 9, 2012, we recorded a pre-tax charge of $38.7 million for the loss on early extinguishment of debt in the second quarter of 2012. Provision for Income Taxes. The effective tax rate for the second quarter of 2012 was 23.9 percent as compared to 34.4 percent in the same period of 2011. The effective tax rate for the second quarter of 2012 was favorably impacted by the cumulative adjustment of reductions in the enacted tax rates in certain foreign countries.
Six Months Ended June 30, 2012 Compared with Six Months Ended June 30, 2011 Overview. Consolidated net sales were $1.59 billion in the first six months of 2012, representing a 4.2 percent increase as compared to the first six months of 2011 primarily due to the inclusion of net sales from the Vogel & Noot and Nestlé Purina PetCare steel can operations acquisitions, higher average selling prices in the metal container and plastic container businesses due to the pass through of higher raw material costs, higher unit volumes in the U.S. single-serve beverage market and a favorable mix of products sold in the plastic container business. These increases were partially offset by the impact of unfavorable foreign currency translation of $23.2 million, lower net sales in Europe due to weak economic conditions and a less favorable mix of products sold in the metal container business. Income from operations for the first six months of 2012 decreased by $13.7 million, or 9.3 percent, as compared to the same period in 2011 as a result of income of $25.2 million in 2011 for proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities, the impact from weak economic conditions in Europe, a less favorable mix of products sold in the metal container business and start-up costs for new metal container production facilities in eastern Europe and the Middle East. These decreases were partially offset by the favorable comparison of the year-over-year resin cost pass through lag effect, higher unit volumes in the closures business, a favorable mix of products sold in the plastic container business, improved manufacturing efficiencies and ongoing cost controls, a $3.3 million charge in 2011 for the resolution of a past product liability dispute and a decrease in rationalization charges of $0.4 million. Rationalization charges were $3.7 million and $4.1 million in 2012 and 2011, respectively. Results for 2012 included a loss on early extinguishment of debt of $38.7 million. Net income for the first six months of 2012 was $43.3 million, or $0.62 per diluted share, as compared to $77.3 million, or $1.10 per diluted share, for the same period in 2011. Net Sales. The $64.7 million increase in consolidated net sales in the first six months of 2012 as compared to the first six months of 2011 was due to higher net sales across all businesses. Net sales for the metal container business increased $51.9 million, or 5.9 percent, in the first six months of 2012 as compared to the same period in 2011. This increase was primarily attributable to the inclusion of a full six months of net sales from VN and the Nestlé Purina PetCare steel can operations acquired in 2011 and higher average selling prices as a result of the pass through of higher raw material costs, partially offset by a less favorable mix of products sold, unfavorable foreign currency translation of approximately $8.9 million and the impact from weak economic conditions in Europe. Net sales for the closures business in the first six months of 2012 increased $1.5 million, or 0.4 percent, as compared to the same period in 2011. This increase was primarily the result of higher unit volumes principally for the single-serve beverage market in the U.S., partially offset by the impact of unfavorable foreign currency translation of approximately $12.2 million and lower net sales in Europe due to weak economic conditions. Net sales for the plastic container business in the first six months of 2012 increased $11.3 million, or 3.7 percent, as compared to the same period in 2011. This increase was primarily the result of the impact of higher average selling prices as a result of the pass through of higher raw material costs and a favorable mix of products sold, partially offset by unfavorable foreign currency translation of approximately $2.1 million. Gross Profit. Gross Profit margin remained unchanged at 14.4 percent for the first six months of 2012 as compared to the same period in 2011 for the reasons discussed below in “Income from Operations.”
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $24.5 million to $91.2 million for the six months ended June 30, 2012 as compared to $66.7 million for the same period in 2011. Selling, general and administrative expenses as a percentage of consolidated net sales increased to 5.7 percent for the first six months of 2012 as compared to 4.4 percent for the same period in 2011. These increases were primarily due to the inclusion in 2011 of $25.2 million of income from proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities. Income from Operations. Income from operations for the first six months of 2012 decreased by $13.7 million, or 9.3 percent, as compared to the first six months of 2011 and operating margin decreased to 8.4 percent from 9.7 percent over the same periods, principally due to the inclusion in 2011 of income of $25.2 million from proceeds received as a result of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities. Income from operations of the metal container business for the first six months of 2012 increased $1.0 million, or 1.2 percent, as compared to the same period in 2011, while operating margin decreased to 8.9 percent from 9.3 percent over the same periods. The increase in income from operations was primarily the result of a $3.3 million charge in 2011 related to the resolution of a past product liability dispute and $1.4 million of rationalization charges in 2011, mostly offset by a less favorable mix of products sold, $2.9 million of start-up costs for new production facilities in eastern Europe and the Middle East and an increase in depreciation expense. Income from operations of the closures business for the first six months of 2012 increased $2.4 million, or 6.2 percent, as compared to the same period in 2011, and operating margin increased to 11.8 percent from 11.2 percent over the same periods. The increase in income from operations was primarily attributable to higher unit volumes and the benefits of ongoing cost reduction initiatives and improved manufacturing efficiencies, partially offset by increased price pressure in the European market due to macroeconomic issues and higher rationalization charges. Rationalization charges of $2.1 million and $1.4 million were recognized in the first six months of 2012 and 2011, respectively. Income from operations of the plastic container business for the first six months of 2012 increased $7.2 million, or 66.7 percent, as compared to the same period in 2011, and operating margin increased to 5.6 percent from 3.5 percent over the same periods. These increases were primarily attributable to the favorable comparison of the year-over-year resin cost pass through lag effect, a favorable mix of products sold and continued improvement in operating performance, partially offset by higher rationalization charges. Rationalization charges of $1.6 million and $1.3 million were recognized in the first six months of 2012 and 2011, respectively. Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first six months of 2012 increased $1.2 million to $31.6 million as compared to the same period in 2011. This increase was primarily due to higher average outstanding borrowings largely attributable to the refinancing of our senior secured credit facility in July 2011 and the issuance in March 2012 of the 5% Notes, partially offset by lower average interest rates. As a result of the redemption of the 7¼% Notes on April 9, 2012, we recorded a pre-tax charge of $38.7 million for the loss on early extinguishment of debt in the first six months of 2012. Provision for Income Taxes. The effective tax rate for the first six months of 2012 was 32.4 percent as compared to 34.3 percent in the same period of 2011. The effective tax rate for the first six months of 2012 was favorably impacted by the cumulative adjustment of reductions in the enacted tax rates in certain foreign countries.
CAPITAL RESOURCES AND LIQUIDITY Our principal sources of liquidity have been net cash from operating activities and borrowings under our debt instruments, including our senior secured credit facility. Our liquidity requirements arise primarily from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment and the funding of our seasonal working capital needs. On March 23, 2012, we issued $500 million aggregate principal amount of our 5% Notes at 100 percent of their principal amount. Interest on the 5% Notes is payable semi-annually in cash on April 1 and October 1 of each year, and the 5% Notes mature on April 1, 2020. Proceeds from the issuance of the 5% Notes were used to redeem all of the outstanding $250 million aggregate principal amount of our 7¼% Notes in April 2012, to pay the applicable premium for such redemption, to pay related fees and expenses and for general corporate purposes. As a result of this redemption, we incurred a $38.7 million loss on early extinguishment of debt for the premium paid in connection with this redemption and the write-off of unamortized debt issuance costs and discount in the second quarter of 2012. You should also read Note 5 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2012 included elsewhere in this Quarterly Report. For the six months ended June 30, 2012, we used proceeds from the issuance of long-term debt of $526.6 million, net borrowings of revolving loans of $148.7 million and cash and cash equivalents of $28.2 million to fund repayments of long-term debt of $282.6 million (including the redemption of our 7¼% Notes for $280.9 million), cash used in operations of $195.2 million (including contributions of $76.0 million to our domestic pension benefit plans), decreases in outstanding checks of $66.6 million, net capital expenditures of $59.1 million, deferred payments of purchase price for acquisitions of $51.0 million, repurchases of our common stock of $22.1 million, dividends paid on our common stock of $16.9 million, debt issuance costs of $9.8 million related to the 5% Notes and net payments for stock-based compensation issuances of $0.2 million. For the six months ended June 30, 2011, we used net borrowings of long-term debt and revolving loans of $468.1 million and cash and cash equivalents of $47.7 million to fund the acquisitions of VN and the twist-off metal closures operations of DGS S.A. in Poland for $264.4 million, cash used in operations of $52.5 million (which includes the benefit of $25.2 million of proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities), decreases in outstanding checks of $99.6 million, net capital expenditures of $81.0 million, dividends paid on our common stock of $15.6 million and net payments for stock-based compensation issuances of $2.7 million. Because we sell metal containers used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, which generally peak sometime in the summer or early fall, we may incur short-term indebtedness to finance our working capital requirements. In recent years, our seasonal working capital requirements have peaked at approximately $300 million, which were funded through a combination of revolving loans under our senior secured credit facility and cash on hand. We may use the available portion of revolving loans, after taking into account our seasonal needs and outstanding letters of credit, for other general corporate purposes including acquisitions, dividends, stock repurchases and to refinance or repurchase other debt. At June 30, 2012, we had $160.0 million of revolving loans outstanding under the Credit Agreement. After taking into account outstanding letters of credit, the available portion of revolving loans under the Credit Agreement at June 30, 2012 was $610.4 million.
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Silgan Holdings Inc. has a market cap of $2.82 billion; its shares were traded at around $40.54 with a P/E ratio of 14.7 and P/S ratio of 0.8. The dividend yield of Silgan Holdings Inc. stocks is 1.2%. Silgan Holdings Inc. had an annual average earning growth of 6.6% over the past 10 years. GuruFocus rated Silgan Holdings Inc. the business predictability rank of 5-star.
Highlight of Business Operations:
Three Months Ended June 30, 2012 Compared with Three Months Ended June 30, 2011 Overview. Consolidated net sales were $821.6 million in the second quarter of 2012, representing a 0.1 percent decrease as compared to the second quarter of 2011 due primarily to unfavorable foreign currency translation of approximately $18.4 million, softness in the European market and a less favorable mix of products sold in the metal containers business, mostly offset by higher average selling prices as a result of the pass through of higher raw material costs in the metal container business, favorable unit volumes in the U.S. single-serve beverage market, a favorable mix of products sold in the plastic container business and an increase in unit volumes sold in the plastic container and metal container businesses. Income from operations for the second quarter of 2012 of $68.6 million decreased by $25.9 million, or 27.4 percent, as compared to the same period in 2011 primarily due to income of $27.0 million in the second quarter of 2011 for proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities, an unfavorable mix of products sold in metal food containers, increased price pressure and volume declines in the European market, and costs associated with the start-up of new metal container production facilities in eastern Europe and the Middle East, partially offset by the favorable comparison of the year-over-year resin cost pass through lag effect, favorable unit volumes in the U.S. single-serve beverage market, a favorable mix of products sold and an increase in unit volumes in the plastic container business, cost reduction initiatives and continued improvements in operating performance, a $3.3 million charge in 2011 for the resolution of a past product liability dispute and a decrease in rationalization charges of $2.2 million. Rationalization charges were $0.2 million and $2.4 million for the second quarter of 2012 and 2011, respectively. Income before income taxes for 2012 included a loss on early extinguishment of debt of $38.7 million. Net income for the second quarter of 2012 was $10.6 million, or $0.15 per diluted share, as compared to $51.2 million, or $0.73 per diluted share, for the same period in 2011. Net Sales. The $0.6 million decrease in consolidated net sales in the second quarter of 2012 as compared to the second quarter of 2011 was the result of lower net sales in the metal containers and closures businesses, partially offset by higher net sales in the plastic container business. Net sales for the metal container business decreased $2.6 million, or 0.5 percent, in the second quarter of 2012 as compared to the same period in 2011. This decrease was primarily attributable to the impact of unfavorable foreign currency translation of approximately $7.5 million, a less favorable mix of products sold and softness in the European markets, partially offset by higher average selling prices as a result of the pass through of higher raw material costs. Net sales for the closures business decreased $1.4 million, or 0.8 percent, in the second quarter of 2012 as compared to the same period in 2011. This decrease was primarily the result of the impact of unfavorable foreign currency translation of approximately $9.3 million and lower net sales in Europe due to weak market conditions, partially offset by favorable unit volumes in the U.S. single-serve beverage market. Net sales for the plastic container business in the second quarter of 2012 increased $3.4 million, or 2.2 percent, as compared to the same period in 2011. This increase was primarily due to a favorable mix of products sold and an increase in unit volumes, both due to strong seasonal sales in the agricultural and chemical markets and customers building inventory in advance of planned shut downs, partially offset by the unfavorable impact of foreign currency translation of approximately $1.6 million. Gross Profit. Gross profit margin decreased 0.2 percentage points to 14.0 percent in the second quarter of 2012 as compared to the same period in 2011 for the reasons discussed below in “Income from Operations.”Selling, General and Administrative Expenses. Selling, general and administrative expenses as a percentage of consolidated net sales increased 3.3 percentage points to 5.7 percent for the second quarter of 2012 as compared to 2.4 percent for the same period in 2011. Selling, general and administrative expenses increased $26.4 million to $46.5 million for the second quarter of 2012 as compared to $20.1 million for the same period in 2011. These increases were primarily due to the inclusion in 2011 of $27.0 million of income from proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs associated with certain corporate development activities. Income from Operations. Income from operations for the second quarter of 2012 decreased by $25.9 million as compared to the second quarter of 2011, and operating margin decreased to 8.3 percent from 11.5 percent over the same periods, principally due to the inclusion in 2011 of income of $27.0 million from proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs associated with certain corporate development activities. Income from operations of the metal container business for the second quarter of 2012 decreased $2.8 million, or 6.5 percent, as compared to the same period in 2011, and operating margin decreased to 8.4 percent from 8.9 percent over the same periods. These decreases were primarily the result of a less favorable mix of products sold, volume declines and increased price pressure due to overall economic weakness in the European markets and costs of $1.9 million associated with the start-up of three new production facilities in eastern Europe and one facility in the Middle East, partially offset by the inclusion in the second quarter of 2011 of a charge of $3.3 million for the resolution of a past product liability dispute and rationalization charges of $1.4 million. Income from operations of the closures business for the second quarter of 2012 increased $0.2 million to $22.9 million as compared to $22.7 million for the same period in 2011, and operating margin increased to 12.5 percent from 12.3 percent over the same periods. These increases were primarily attributable to higher unit volumes in the U.S. single-serve beverage market, continued improvement in manufacturing efficiencies and operating cost savings and a decrease in rationalization charges, largely offset by weaker volumes and increased price pressure in the European market due to macroeconomic issues. Rationalization charges of $0.3 million were recognized in the second quarter of 2011. Income from operations of the plastic container business for the second quarter of 2012 increased $4.6 million to $9.1 million as compared to $4.5 million for the same period in 2011, and operating margin increased to 5.7 percent from 2.9 percent over the same periods. These increases were primarily attributable to the favorable comparison of the year-over-year resin cost pass through lag effect which benefitted the second quarter of 2012, a favorable mix of products sold, cost reduction initiatives and continued improvement in operating performance, an increase in unit volumes and lower rationalization charges. Rationalization charges of $0.2 million and $0.7 million were recognized in the second quarter of 2012 and 2011, respectively. Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the second quarter of 2012 decreased $0.4 million to $16.0 million as compared to the same period in 2011. This decrease was primarily due to lower average interest rates, partially offset by higher average outstanding borrowings as a result of the issuance of the 5% Notes in March 2012 and the refinancing of the senior secured credit facility in July 2011. As a result of the redemption of the 7¼% Notes on April 9, 2012, we recorded a pre-tax charge of $38.7 million for the loss on early extinguishment of debt in the second quarter of 2012. Provision for Income Taxes. The effective tax rate for the second quarter of 2012 was 23.9 percent as compared to 34.4 percent in the same period of 2011. The effective tax rate for the second quarter of 2012 was favorably impacted by the cumulative adjustment of reductions in the enacted tax rates in certain foreign countries.
Six Months Ended June 30, 2012 Compared with Six Months Ended June 30, 2011 Overview. Consolidated net sales were $1.59 billion in the first six months of 2012, representing a 4.2 percent increase as compared to the first six months of 2011 primarily due to the inclusion of net sales from the Vogel & Noot and Nestlé Purina PetCare steel can operations acquisitions, higher average selling prices in the metal container and plastic container businesses due to the pass through of higher raw material costs, higher unit volumes in the U.S. single-serve beverage market and a favorable mix of products sold in the plastic container business. These increases were partially offset by the impact of unfavorable foreign currency translation of $23.2 million, lower net sales in Europe due to weak economic conditions and a less favorable mix of products sold in the metal container business. Income from operations for the first six months of 2012 decreased by $13.7 million, or 9.3 percent, as compared to the same period in 2011 as a result of income of $25.2 million in 2011 for proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities, the impact from weak economic conditions in Europe, a less favorable mix of products sold in the metal container business and start-up costs for new metal container production facilities in eastern Europe and the Middle East. These decreases were partially offset by the favorable comparison of the year-over-year resin cost pass through lag effect, higher unit volumes in the closures business, a favorable mix of products sold in the plastic container business, improved manufacturing efficiencies and ongoing cost controls, a $3.3 million charge in 2011 for the resolution of a past product liability dispute and a decrease in rationalization charges of $0.4 million. Rationalization charges were $3.7 million and $4.1 million in 2012 and 2011, respectively. Results for 2012 included a loss on early extinguishment of debt of $38.7 million. Net income for the first six months of 2012 was $43.3 million, or $0.62 per diluted share, as compared to $77.3 million, or $1.10 per diluted share, for the same period in 2011. Net Sales. The $64.7 million increase in consolidated net sales in the first six months of 2012 as compared to the first six months of 2011 was due to higher net sales across all businesses. Net sales for the metal container business increased $51.9 million, or 5.9 percent, in the first six months of 2012 as compared to the same period in 2011. This increase was primarily attributable to the inclusion of a full six months of net sales from VN and the Nestlé Purina PetCare steel can operations acquired in 2011 and higher average selling prices as a result of the pass through of higher raw material costs, partially offset by a less favorable mix of products sold, unfavorable foreign currency translation of approximately $8.9 million and the impact from weak economic conditions in Europe. Net sales for the closures business in the first six months of 2012 increased $1.5 million, or 0.4 percent, as compared to the same period in 2011. This increase was primarily the result of higher unit volumes principally for the single-serve beverage market in the U.S., partially offset by the impact of unfavorable foreign currency translation of approximately $12.2 million and lower net sales in Europe due to weak economic conditions. Net sales for the plastic container business in the first six months of 2012 increased $11.3 million, or 3.7 percent, as compared to the same period in 2011. This increase was primarily the result of the impact of higher average selling prices as a result of the pass through of higher raw material costs and a favorable mix of products sold, partially offset by unfavorable foreign currency translation of approximately $2.1 million. Gross Profit. Gross Profit margin remained unchanged at 14.4 percent for the first six months of 2012 as compared to the same period in 2011 for the reasons discussed below in “Income from Operations.”
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $24.5 million to $91.2 million for the six months ended June 30, 2012 as compared to $66.7 million for the same period in 2011. Selling, general and administrative expenses as a percentage of consolidated net sales increased to 5.7 percent for the first six months of 2012 as compared to 4.4 percent for the same period in 2011. These increases were primarily due to the inclusion in 2011 of $25.2 million of income from proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities. Income from Operations. Income from operations for the first six months of 2012 decreased by $13.7 million, or 9.3 percent, as compared to the first six months of 2011 and operating margin decreased to 8.4 percent from 9.7 percent over the same periods, principally due to the inclusion in 2011 of income of $25.2 million from proceeds received as a result of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities. Income from operations of the metal container business for the first six months of 2012 increased $1.0 million, or 1.2 percent, as compared to the same period in 2011, while operating margin decreased to 8.9 percent from 9.3 percent over the same periods. The increase in income from operations was primarily the result of a $3.3 million charge in 2011 related to the resolution of a past product liability dispute and $1.4 million of rationalization charges in 2011, mostly offset by a less favorable mix of products sold, $2.9 million of start-up costs for new production facilities in eastern Europe and the Middle East and an increase in depreciation expense. Income from operations of the closures business for the first six months of 2012 increased $2.4 million, or 6.2 percent, as compared to the same period in 2011, and operating margin increased to 11.8 percent from 11.2 percent over the same periods. The increase in income from operations was primarily attributable to higher unit volumes and the benefits of ongoing cost reduction initiatives and improved manufacturing efficiencies, partially offset by increased price pressure in the European market due to macroeconomic issues and higher rationalization charges. Rationalization charges of $2.1 million and $1.4 million were recognized in the first six months of 2012 and 2011, respectively. Income from operations of the plastic container business for the first six months of 2012 increased $7.2 million, or 66.7 percent, as compared to the same period in 2011, and operating margin increased to 5.6 percent from 3.5 percent over the same periods. These increases were primarily attributable to the favorable comparison of the year-over-year resin cost pass through lag effect, a favorable mix of products sold and continued improvement in operating performance, partially offset by higher rationalization charges. Rationalization charges of $1.6 million and $1.3 million were recognized in the first six months of 2012 and 2011, respectively. Interest and Other Debt Expense. Interest and other debt expense before loss on early extinguishment of debt for the first six months of 2012 increased $1.2 million to $31.6 million as compared to the same period in 2011. This increase was primarily due to higher average outstanding borrowings largely attributable to the refinancing of our senior secured credit facility in July 2011 and the issuance in March 2012 of the 5% Notes, partially offset by lower average interest rates. As a result of the redemption of the 7¼% Notes on April 9, 2012, we recorded a pre-tax charge of $38.7 million for the loss on early extinguishment of debt in the first six months of 2012. Provision for Income Taxes. The effective tax rate for the first six months of 2012 was 32.4 percent as compared to 34.3 percent in the same period of 2011. The effective tax rate for the first six months of 2012 was favorably impacted by the cumulative adjustment of reductions in the enacted tax rates in certain foreign countries.
CAPITAL RESOURCES AND LIQUIDITY Our principal sources of liquidity have been net cash from operating activities and borrowings under our debt instruments, including our senior secured credit facility. Our liquidity requirements arise primarily from our obligations under the indebtedness incurred in connection with our acquisitions and the refinancing of that indebtedness, capital investment in new and existing equipment and the funding of our seasonal working capital needs. On March 23, 2012, we issued $500 million aggregate principal amount of our 5% Notes at 100 percent of their principal amount. Interest on the 5% Notes is payable semi-annually in cash on April 1 and October 1 of each year, and the 5% Notes mature on April 1, 2020. Proceeds from the issuance of the 5% Notes were used to redeem all of the outstanding $250 million aggregate principal amount of our 7¼% Notes in April 2012, to pay the applicable premium for such redemption, to pay related fees and expenses and for general corporate purposes. As a result of this redemption, we incurred a $38.7 million loss on early extinguishment of debt for the premium paid in connection with this redemption and the write-off of unamortized debt issuance costs and discount in the second quarter of 2012. You should also read Note 5 to our Condensed Consolidated Financial Statements for the three and six months ended June 30, 2012 included elsewhere in this Quarterly Report. For the six months ended June 30, 2012, we used proceeds from the issuance of long-term debt of $526.6 million, net borrowings of revolving loans of $148.7 million and cash and cash equivalents of $28.2 million to fund repayments of long-term debt of $282.6 million (including the redemption of our 7¼% Notes for $280.9 million), cash used in operations of $195.2 million (including contributions of $76.0 million to our domestic pension benefit plans), decreases in outstanding checks of $66.6 million, net capital expenditures of $59.1 million, deferred payments of purchase price for acquisitions of $51.0 million, repurchases of our common stock of $22.1 million, dividends paid on our common stock of $16.9 million, debt issuance costs of $9.8 million related to the 5% Notes and net payments for stock-based compensation issuances of $0.2 million. For the six months ended June 30, 2011, we used net borrowings of long-term debt and revolving loans of $468.1 million and cash and cash equivalents of $47.7 million to fund the acquisitions of VN and the twist-off metal closures operations of DGS S.A. in Poland for $264.4 million, cash used in operations of $52.5 million (which includes the benefit of $25.2 million of proceeds received as a result of the termination of the Graham Packaging merger agreement, net of costs attributable to certain corporate development activities), decreases in outstanding checks of $99.6 million, net capital expenditures of $81.0 million, dividends paid on our common stock of $15.6 million and net payments for stock-based compensation issuances of $2.7 million. Because we sell metal containers used in fruit and vegetable pack processing, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the end of the packing season. Due to our seasonal requirements, which generally peak sometime in the summer or early fall, we may incur short-term indebtedness to finance our working capital requirements. In recent years, our seasonal working capital requirements have peaked at approximately $300 million, which were funded through a combination of revolving loans under our senior secured credit facility and cash on hand. We may use the available portion of revolving loans, after taking into account our seasonal needs and outstanding letters of credit, for other general corporate purposes including acquisitions, dividends, stock repurchases and to refinance or repurchase other debt. At June 30, 2012, we had $160.0 million of revolving loans outstanding under the Credit Agreement. After taking into account outstanding letters of credit, the available portion of revolving loans under the Credit Agreement at June 30, 2012 was $610.4 million.
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