Good morning, welcome to the Safe Harbor fiscal 2020 third quarter results conference call. All participants will be in listen-only mode. Should you need assistance, please let a conference specialist by pressing the star key followed by zero. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note, 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 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 attributed 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.
Thanks, Ian. Good morning, everyone. Thank you for joining us this morning for our fiscal 2020 third quarter earnings conference call. Joining me this morning are Michael Stivala, President and Chief Executive Officer, Michael Kuglin, Chief Financial Officer and Chief Accounting Officer, and Steven Boyd, Chief Operating Officer. This morning, we will review our third quarter financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our annual report on Form 10-K for the fiscal year ended September 28, 2019, and 10-Q for the period just ended June 27, 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 www.suburbanpropane.com. At this point, I will turn the call over to Michael Stivala for some opening remarks. Mike?
Thanks, Davin, and welcome. Thank you all for joining us this morning. I hope that you and your families remain safe and healthy. Once again, our hearts go out to those that have lost loved ones or who may be suffering from the consequences of the COVID-19 virus that has plagued our entire nation over the last five months. At Suburban Propane, our business has been essential service throughout this crisis, and our personnel have done an outstanding job supporting the needs of our customers and local communities while also adapting to the new business protocols developed to help protect our employees, our customers, and the workplace.
As I indicated back in May during our fiscal second quarter earnings call, we expected to experience some challenges in our business as a result of job losses and the dramatic slowdown of the economy, particularly in our commercial and industrial customer sectors. We developed operational and manpower plans to adapt our business model to the shifting customer demand patterns and the potential for an extended period of demand softness. As the fiscal third quarter progressed, we did experience lower demand from our commercial and industrial customers, with volumes that were 9% below the prior year third quarter.
That decline in volumes was more than offset by strong demand from our residential customers as a result of a combination of cooler average temperatures in the April/May timeframe and the higher usage resulting from the stay-at-home measures instituted by government leaders throughout our operating footprint in order to help mitigate the spread of the virus. In our residential sector, volumes increased more than 21% over the prior year. The fiscal 2020 third quarter was an exceptionally strong quarter for Suburban Propane. Adjusted EBITDA of $32.2 million was $12.1 million, or 61% higher than the prior year third quarter, and in fact, represented the highest level of Adjusted EBITDA for any third quarter in our history.
During the quarter, we also repaid more than $35 million under our revolving credit facility from excess cash flows, which resulted in a significant improvement in our leverage metrics compared to the second quarter. While we have certainly faced some tremendous challenges managing through this unprecedented crisis and adapting to the ever-changing circumstances, we are proud of the way our people have responded to those challenges, how they have remained focused on safely meeting the needs of our customers, and how we have positioned the business to be nimble as the country continues to wrestle with the virus for the foreseeable future. In a moment, I'll come back for some closing remarks. At this point, I'll turn it over to Michael Kuglin to discuss the third quarter results in more detail. Mike?
Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, as I discuss our third quarter results, I am excluding the impact of unrealized non-cash mark-to-market adjustments on derivative instruments used in risk management activities
Which resulted in an $861,000 unrealized gain in the third quarter of 2020, compared to a $138,000 unrealized gain in the prior year. Excluding these items, as well as a $900,000 pension settlement charge in the third quarter of this year, our net loss for the third quarter improved by $13.6 million, or $0.22 per common unit, compared to the prior year. Adjusted EBITDA for the third quarter was $32.2 million, an increase of $12.1 million, or 60.5%, compared to the prior year. The improvement in earnings was driven by a combination of higher volume sold resulting from strong residential customer demand, higher unit margins, and savings from various cost containment efforts. While the unprecedented health crisis had a varying impact on customer demand and volume sold during the third quarter, it did not materially impact bottom-line earnings.
There's still a fair amount of uncertainty about the future impact from the economic slowdown resulting from COVID-19. We will continue to adapt our business and take steps to help mitigate the potential negative consequences of lower demand to the extent we experience prolonged sluggishness in the economy. Retail propane gallons sold in the third quarter were 75.4 million gallons, which was 2.2% higher than the prior year. Although weather during the third quarter typically has less of an impact on volume sold than it does during heating season, volumes in the third quarter benefited from cooler temperatures during April and May that resulted in strong residential heat-related demand. Average temperatures for the months of April and May were 17% cooler than the same period last year and 5% cooler than normal.
Overall, average temperatures across our service territories for the third quarter were comparable to normal and 12% colder than the prior year. The combination of the cooler weather and temporary stay-at-home governmental measures helped drive residential propane usage that more than offset the decline in commercial and industrial volumes. From a customer mix perspective, residential volumes increased 21% compared to the prior year, whereas commercial and industrial volumes decreased 9%. In the commodity markets, wholesale propane prices remained relatively low compared to historical levels, but increased steadily during the quarter, with the price of propane, basis Mont Belvieu, rising from $0.27 per gallon at the start of the quarter to $0.46 per gallon at the end of June. Overall, average wholesale prices for the third quarter were 26% lower than the prior year third quarter and 11% higher than the second quarter of fiscal 2020.
In the early part of the fourth fiscal quarter, propane prices continued to remain relatively low and range-bound, resulting from U.S. inventory levels that remain considerably above average levels for this time of the year. Total gross margins of $146.4 million for the third quarter increased $10.9 million, or 8%, compared to the prior year, primarily due to higher propane volumes and higher average unit margins. Overall, propane unit margins increased $0.09 per gallon or 5.2%, compared to the prior year, due to favorable volume mix and from the year-over-year decrease in commodity prices. With respect to expenses, despite the 2% increase in volume sold, combined operating and G&A expenses decreased $1.1 million, or 1%, compared to the prior year. The savings reflected the operational plans that we developed and implemented to address different customer demand scenarios resulting from COVID-19, including a temporary reduction to our manpower.
The savings from these actions were partially offset by higher variable operating costs to support higher volume-related demand and an increase in accruals for self-insurance liabilities and reserves for potential doubtful accounts. Net interest expense of $18.5 million for the third quarter decreased $400,000 compared to the prior year, primarily due to a decrease in benchmark interest rates on borrowings under our revolver. Total capital spending for the third quarter of $5.6 million was $2.1 million lower than the prior year due to a lower level of spending on vehicles and tanks. Turning to our balance sheet. During the third quarter, we repaid more than $35 million under our revolver with cash flows from operating activities.
Despite a modest delay in collection activities resulting from the impact of the economic slowdown on our customers and from government-imposed restrictions in certain states that limited some of our traditional means of helping ensure customer payments, the collection of accounts receivable was a significant source of cash during the third quarter. In the early part of the fourth quarter, our collection activities continue to improve and are nearing the historical levels that we would generally experience for this time of the year. While we are encouraged by the improvement, this is something that we continue to closely monitor. From a leverage perspective, the increase in Adjusted EBITDA, coupled with the debt repayment during the third quarter, resulted in our consolidated leverage ratio improving to 4.83 times at the end of June, compared to 5.22 times at the end of the second quarter.
Our borrowings under the revolver at the end of Q3 were $109.7 million, which was $17.5 million lower than June 2019 and $3.8 million lower than the level at the beginning of the fiscal year. We remain well within our debt covenant requirements. We'll continue utilizing excess cash flows in a balanced fashion to strengthen the balance sheet and to invest in strategic growth. Back to you, Mike.
Thanks, Mike. On the topic of strengthening the balance sheet and our overall leverage, let me first address our recent announcement on July 23rd regarding our decision to reduce the quarterly distribution from $0.60 per common unit in the previous quarter to $0.30 per common unit in respect of the third quarter of fiscal 2020. After a thorough assessment of the potential for shifting demand patterns as a result of the economic uncertainties associated with the ongoing efforts to mitigate the spread of COVID-19, we decided to take this proactive step to reduce our annual cash requirements. This reduction will provide an incremental $75 million of excess cash flow. It will significantly enhance our distribution coverage. It will provide excess liquidity to accelerate our debt reduction efforts. Importantly, it will provide enhanced financial flexibility to support our growth initiatives.
One that has served us well in managing through challenging environments. All that being said, our business fundamentals remain strong. Operationally, we remain focused on providing exceptional service to our customers, driving efficiencies and cost savings, implementing additional protocols to protect the health and safety of our employees, executing on our customer base growth and retention initiatives, and positioning the business for long-term growth. While we may experience continued softness and demand from our commercial industrial customers in the near term, our efficient and flexible business model leaves us well-positioned to support our customers and local communities as they recover. Interestingly, what we're also seeing is a recognition that propane is a part of the solution in the recovery as a result of its clean-burning attributes and the portability and dependability and new operating protocols to help protect their health and safety.
Thank you for all that you do every day. As always, we appreciate your support and attention this morning. Now we'll take questions. Ian, if you could help us out with that.
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will momentarily pause to assemble our roster. Once again, if you have a question, please press star, then one. At this time, we have no questions.
Okay, great. Ian, thank you very much. Thank you all for your attention today. Appreciate all the support. We look forward to talking to you again in November as we get to close out the fiscal year and prepare ourselves for a new fiscal year and a new heating season in 2021. Stay healthy, stay safe. Thank you all.
And just a final announcement. To access the replay for this call, please dial 877-344-7529 or 412-317-0088 and enter the code 10145783. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.