Good morning, and welcome to the Suburban Propane Partners, L.P. Q1 results. This conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions, and financial condition and the results of operations. These forward-looking statements involve certain risks and uncertainties.
The partnership has listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in its earnings press release, which can be viewed on the company's website.
All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. Please note this event is being recorded. I would now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. Please go ahead.
Thank you, Ailey. Good morning, everyone. Thank you for joining us this morning for our fiscal 2021 Q1 earnings conference call. Joining me this morning are Mike Stivala, our President and Chief Executive Officer, Mike Kuglin, our Chief Financial Officer and Chief Accounting Officer, and Steve Boyd, our Chief Operating Officer.
This morning, we will review our Q1 financial results, along with our current outlook for the business. Once we concluded our prepared remarks, we will open the session to questions. Our annual report on Form 10-K for the fiscal year ended 26 September 2020, and Form 10-Q for the period ended 26 December 2020, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors.
Copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures, as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the investor relations section of our website at suburbanpropane.com. At this time, I will turn the call over to Mike Stivala for some opening remarks. Mike?
Thanks, Davin, and good morning. Thank you all for joining us today. First, I hope you and your families all remain safe and healthy as our nation continues to contend with COVID-19. At Suburban Propane, we are continuing to take necessary precautions to protect the health and safety of our employees and customers, while ensuring that we can seamlessly provide the outstanding essential services that our valued customers rely on.
A brief update on the impact of COVID-19 on our business. As the Q1 progressed, we continued to see demand softness in the commercial sector, albeit not to the extent of the declines that we experienced in the early part of the pandemic.
These declines were offset somewhat by increased usage in the residential sector due to widespread stay-at-home initiatives, as well as in certain other customer segments, such as resellers, restaurants, and others, that benefited from the demand for temporary portable energy solutions.
All that said, customer demand in the fiscal 2021 Q1 was most affected by unseasonably warm weather that dominated the quarter throughout the majority of our service territories. In fact, November registered as one of the warmest on record, and the overall heating degree day index for the quarter was 13% warmer than normal and 9% warmer than the prior year Q1.
Cooler temperatures kicked in toward the end of December and created some momentum heading into the Q2. Throughout the Q1, our operations personnel did an outstanding job staying focused on adhering to our safety and operating protocols, managing margins and expenses, and executing on our customer base growth and retention initiatives.
Overall, adjusted EBITDA was $80 million for the Q1, which was $5.4 million below the prior year, and Mike Kuglin will give some details on that in a moment. On the strategic front, we continued to advance our growth initiatives with the acquisition of a well-run Propane business in North Carolina, as well as further investments in Oberon Fuels to support our collective efforts to commercialize renewable dimethyl ether as a blend with Propane to reduce its carbon intensity.
We are also committed to advancing our advocacy and innovation initiatives for the clean attributes of Propane as a solution for a sustainable energy future. We achieved another important milestone for our Go Green corporate initiative with the recent official registration of our Go Green with Suburban Propane logo with the United States Patent and Trademark Office.
Despite the challenges from the ongoing effects of COVID-19 pandemic, we remain focused on our strategic growth objectives, which includes a combination of organic customer base growth, new market expansion through greenfield development in attractive markets, investments in Propane acquisitions, and strategic diversification with a focus on building a renewable energy platform.
All while continuing to also work toward our debt reduction targets to further strengthen our balance sheet. In a moment, I'll come back for some closing remarks. However, let me turn it over to Mike Kuglin to discuss the Q1 in some more detail. Mike?
Thanks, Mike. Good morning, everyone. To be consistent with previous reporting, as I discuss our Q1 results, I am excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized gain of $4.9 million for the Q1, compared to an unrealized gain of $2.8 million in the prior year.
Excluding these items, as well as the non-cash equity and earnings of an unconsolidated affiliate with Oberon Fuels, net income for the Q1 was $33.4 million, or $0.53 per common unit, compared to net income of $37.4 million, or $0.60 per common unit, in the prior year. Adjusted EBITDA for the Q1 was $80 million, which was $5.4 million lower than the prior year.
As Mike indicated, Q1 earnings were most significantly impacted by lower demand resulting from widespread unseasonably warm temperatures and continued softness in certain segments of our commercial and industrial customer base as a result of the economic slowdown due to COVID-19. While weather and economic conditions were headwinds for the quarter, we reported organic customer base growth and saw incremental demand in our residential and certain other customer segments.
Retail Propane gallons sold in the Q1 were 111.7 million gallons, which was 7.8% lower than the prior year, as a significantly warmer weather pattern more than offset the incremental usage from stay-at-home initiatives and from new temporary outdoor heating demand. Overall, average temperatures across our service territories were 13% warmer than normal and 9% warmer than the prior year.
The decrease in heating degree days compared to the prior year were concentrated in the months of October and November, as average temperatures for the two-month period were 20% warmer than the prior year and 18% warmer than normal, which contributed to lower demand for heating purposes.
For the month of December, average temperatures were 9% warmer than normal and comparable to December 2019. Unseasonably warm temperatures were widespread, but particularly concentrated in our East Coast and Midwest markets.
From a commodity perspective, wholesale Propane prices increased rather steadily during the quarter, primarily due to a decline in U.S. Propane inventory levels, resulting from higher Propane exports. Overall, average wholesale prices for the Q1 were $0.57 per gallon at basis Mont Belvieu, which was 15% higher than the prior year Q1 and the prior sequential quarter.
According to the most recent report from the EIA, U.S. Propane inventory levels were 58 million barrels, which is 25% lower than a year ago and 9% lower than the five-year average for this time of the year. Given the continued decline in the nation's Propane inventory, along with other factors, Propane prices have continued to rise.
This week, wholesale Propane is in the $0.85-$0.90 per gallon range, which represents an increase of about 28% from the end of the Q1 and 115% from the comparable period last year. Total gross margins of $197 million for the Q1 decreased $15.5 million, or 7.3%, compared to the prior year, primarily due to lower Propane volume sold.
Excluding the impact of the mark-to-market adjustments that I mentioned earlier, Propane unit margins were slightly higher than the prior year, despite the challenges from the rising commodity price environment and competitive landscape.
With respect to expenses, combined operating and SG&A expenses of $116.1 million for the Q1 decreased $10 million, or 8%, compared to the prior year, primarily due to lower variable volume-related operating costs, savings from various cost containment efforts, including lower payroll and benefit-related costs, and lower variable compensation expenses.
In addition, the prior year included a charge of $5 million for the settlement of certain product liability and other legal matters. Net interest expense of $18.1 million for the Q1 was $1 million, or 5%, lower than the prior year, primarily due to a lower level of average outstanding borrowings under our revolving credit facility, coupled with a reduction in benchmark interest rates.
Total capital spending for the quarter of $5.8 million was $7.2 million lower than the prior year due to a higher level of investments made in the prior year for new technologies and equipment utilized by our field personnel to enhance the customer experience and drive incremental operating efficiencies, as well as the timing of tank and cylinder purchases to support customer growth.
Turning to our balance sheet. Given the seasonal nature of our business, we typically borrow under our revolving credit facility during the Q1 to help fund a portion of our seasonal working capital needs, as well as for investments in our strategic growth initiatives within the quarter, including acquisition funding.
With that said, despite borrowings to fund our normal working capital requirements and the acquisition that Mike mentioned in his opening remarks, our total debt as of December 2020 was approximately $50 million lower than December of last year. At the end of the Q1, our consolidated leverage ratio for the trailing 12-month period was 4.86 x, which is slightly higher than where we ended the prior year Q1 due to the impact of warmer weather on our earnings, yet well within our debt covenant requirement of 5.75 x.
Our working capital needs typically peak towards the end of the heating season, late February or early March timeframe, after which we expect to continue reducing outstanding borrowings on our revolver with cash flows from operating activities.
With our continued focus on investing excess cash flows in a balanced way with strategic investments and debt reduction, combined with improving earnings profile, we'll begin to see our overall leverage metrics improve toward our target threshold of below 4 x. We have more than ample borrowing capacity under our revolver to fund our remaining working capital needs for the heating season, as well as to support our strategic growth initiatives. Back to you, Mike.
Thanks, Mike. As announced on 21 January , our Board of Supervisors declared our quarterly distribution of $0.30 per common unit in respect of our Q1 of fiscal 2021, which equates to an annualized rate of $1.20 per common unit. Our quarterly distribution was paid on 9 February to our unit holders of record as of 2 February .
Our distribution coverage continues to remain strong at 1.48 x based on our trailing 12-month distributable cash flow, despite the slightly lower earnings for the quarter. Considering the annualized cash requirements at our current annualized distribution rate of $1.20 per common unit, our pro forma distribution coverage is more like 2.2 x.
Looking ahead, now that we are six weeks into the fiscal Q2, the cooler temperatures that started at the end of December have persisted into the early part of the Q2. Average temperatures have been colder than the comparable period in the prior year, yet remain below normal levels for this time of year. Heat-related customer demand has responded to this period of sustained cooler temperatures, which has impacted significant portions of our operating footprint.
There's still plenty of heating season ahead. Operationally, we are very well positioned to meet increased heat-related demand and to adapt to changing demand patterns, including in the event we experience a shift back to unseasonably warm weather or are faced with further demand softness from COVID-19 restrictions.
Financially, we have more than adequate resources to continue to advance our strategic growth initiatives. As our nation recovers from the economic and health effects of COVID-19, we expect to see additional opportunities for the clean burning, cost-effective, and versatile qualities of Propane as a solution to support that recovery and to help achieve long-term sustainability goals.
Finally, I'd like to once again thank all of the more than 3,200 employees at Suburban Propane for their unwavering focus on the safety and comfort of our customers and the communities we serve, especially during these ongoing challenging environments. As always, we appreciate your support and attention. I would now like to open the call up for questions. Ailey, would you mind helping us with that?
Of course. We will now begin the question and answer session. At this time, I'm not showing any questions, so I would like to turn the conference back to Mike Stivala.
Great. Thank you, Ailey. Thank you all for your attention. Stay warm. Cool weather is here. We're excited to see the demand pick up. We look forward to talking to you in early May to talk about our Q2 results. Thank you again.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.