Sales increased $21.1 million, or 8.5%, to $269.0 million compared to $247.9 million in the third quarter of 2000. On a pro forma, fully taxed basis, net income for the quarter increased $2.4 million, or 13.3%, over the third quarter of 2000 to $20.5 million, or $0.35 per share.
Net sales increased across all business units supported by the launch of new products and growth of the natural stone business. Compared to prior year, company-operated sales centers increased 9.7%, while distributors and home centers grew 8.4% and 1.9%, respectively.
Operating margin was flat vs. prior year. Gross margins declined by approximately one percentage point due to product mix, declining prices for floor tile and reduced production to balance inventories. The decline in gross margin was offset by reductions in selling, general and administrative expense and transportation cost. Profit margin before tax increased 50 basis points to 12.4% due primarily to lower interest expense. Free cash flow was $33.6 million versus $31.0 million in the prior year, and debt was $261.7 million, which was $92.1 million lower than third quarter prior year.
"During the third quarter, the company realized two important milestones," said Jacques Sardas, chairman, president and CEO. "Sales increased to over $1 billion on a trailing twelve-month basis and the ratio of debt to capital fell below 50%. Over the last four years, we have reduced our debt by almost $300.0 million."