The Dixie Group, Inc. on Friday reported financial results for the quarter ended Sept. 25. For the third quarter of 2021, the company's continuing operations had net sales of $89,294,000 and income of $5,597,000. The net sales for the third quarter of 2020 were $70,035,000. The net income from continuing operations in the third quarter of 2020 was $175,000. On Sept. 13, the company sold its commercial business. Net sales and expenses related to the commercial business have been presented as discontinued operations in the company's financial statements included here and, unless stated otherwise, within the numbers presented here.
Commenting on the results, Daniel K. Frierson, chairman and chief executive officer, said, "With the sale of our commercial business, the third quarter was the beginning of our company as a residential floorcovering only focus. During the quarter, we continued to gain market share and began significant changes, which we believe will enhance our future prospects. Net sales of our residential floorcovering products were up 26 percent, comparing favorably to the industry which we believe was up approximately high-single digits. For the first nine months of the year, our total net sales of residential products was up 49 percent over the same period in the prior year. This significant year over year increase in the net sales of our residential floor covering products was the result of the impact of the COVID-19 pandemic in 2020 and strong growth in new and existing home sales and home remodeling in 2021.
"The departure of STAINMASTER from the residential market represents a major change, but one which offers opportunities for growth and repositioning. We are implementing strategies to help our customers transition to our new brands, EnVision66, EnVisionSD Pet Solutions. Our TRUCOR brand has continued to grow even more rapidly than the LVF market. With additional cutting-edge products and focus on domestic sourcing, we feel we can continue growing faster than the marketplace. As part of our commitment to the upper end of the decorative market, we are bringing two new collections to the market. Our Masland 1866 and Fabrica Décor product offerings bring a large number of fresh and distinctive looks, which are designed to complement our offering for the design community.
"Our residential business in the third quarter continued to be very strong. Net sales were 27 percent ahead of same period in the prior year, including sales of soft surface products that were up 22 percent and hard surfaces up 73 percent. Order entry remained well above prior year levels throughout the quarter.
"We launched several new products in both soft and hard surfaces during the third quarter. Many of these had been delayed from second quarter due to the ransomware attack. On the soft surface side, we launched 13 new styles including EnVision66, EnVisionSD Pet Solutions, and new decorative segment introductions. We now have 40 products in our EnVision family of nylon 6,6 carpets.
"In hard surfaces, we launched TRUCOR Applause, our new domestically sourced SPC offering with eight SKUs. It has quickly generated a significant level of interest and order activity from the market, and we are working with our vendor to maximize production on these SKUs. We also launched our TRUCOR 3DP program with 16 SKUs, including wood and stone looks. TRUCOR 3DP features high resolution digital printing directly onto an SPC core, instead of the traditional film used in most SPC and WPC products, to create the wood plank or stone visual. Like all SPC products, TRUCOR 3DP is waterproof and can be easily installed over most existing hard surface floors and subfloors with minimal floor preparation. The additional benefits of this technology include sharp, realistic visuals, virtual elimination of pattern repeats found in film-based products, and a highly durable AC5 scratch resistance rating.
"During the third quarter, we also executed the specialty retail transition away from the STAINMASTER and PetProtect brands to our EnVision66 and EnVisionSD Pet Solutions brands. This included producing, distributing, and in some cases installing new labels on our products throughout our specialty retail channel. As part of this effort, we executed full floor resets on 217 retail stores who have joined our new Premier Flooring Center network. Through the PFC program we delivered a turnkey solution for retailers who had been closely aligned with the STAINMASTER brand in the past. With a beguiling tagline, "It Matters Where You Buy Flooring", the PFC program offers a best in class selling system which promotes higher tickets and retail margins, highlights the benefits of high-quality carpets made with nylon 6,6, and refreshes the showroom with up-to-date merchandising and messaging. The PFC program has been very well received and is a foundation for future growth in the specialty retail channel," Mr. Frierson concluded.
The gross profit as a percentage of net sales was 27.9 percent for the third quarter of 2021, compared to the 24.5 percent gross profit margin in the third quarter of 2020. The higher margins in the third quarter of 2021 were driven by higher pricing in the current period matched against prior period costs. Although the company benefited from the favorable margins in the third quarter, it continues to receive cost increases for raw materials that can have an unfavorable impact on future margins.
The selling and administrative expenses for the quarter were 20.3 percent of net sales compared to the level of 21.8 percent in the third quarter of 2020 as it continues to retain many of the cost saving initiatives implemented as part of the response to the COVID-19 pandemic. Receivables increased $9.1 million as compared to the third quarter in 2020, primarily due to higher sales for the period. Net inventories increased $15.3 million compared to the third quarter in 2020. Accounts payable and accrued expenses increased by $12.2 million year over year due to higher volumes and higher costs. Capital expenditures for the third quarter of 2021 were approximately $2 million and are planned for 2021 level of approximately $5.0 million. Interest expense was $1.2 million for the third quarter of 2021 and debt decreased by $17.5 million during the quarter. Availability at the end of the quarter was $54.1 million under the line of credit with the senior credit facility.
The company recorded income from discontinued operations of $836,000 on the quarter. Discontinued operations includes a $2.7 million gain from the sale of the commercial business offset by losses from the operations of the commercial business. Discontinued operations for the year to date were recorded at a loss of $1.3 million as a result of losses from the commercial business.
The momentum of sales of residential products has continued into the fourth quarter. For the first five weeks of the quarter, sales are up 20 percent compared to a strong performance a year ago. Due to increased cost pressure on many fronts, industry wide price increases were announced during the third quarter. Additional price increases have been announced for year-end as raw material, labor and transportation costs have continued to escalate.
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