This was further enhanced by government employee retention assistance that contributed to our solid adjusted earnings per share of $1.31 a share.
Our adjusted EBITDA margin was excellent at 19.4%, and our cash flow was strong at $24 million.
Our parts and consumable revenue made up 66% of total revenue.
On a sequential basis, parts revenue was up 6% to $103 million in the third quarter.
Product mix improved operating leverage and solid execution led to a strong adjusted EBITDA margin of 27.5% for the third quarter, up 70 basis points from the same period last year.
Although demand for aftermarket parts was solid and made up 69% of total revenue in the quarter, customer delays in capital project execution and the inability of our employees to engage face-to-face with customers and prospects due to the pandemic suppressed our bookings performance.
Looking ahead to the fourth quarter, we expect Q4 to show improvement in terms of both capital project bookings and demand for parts and consumables.
Revenue in this segment declined 16% to $62 million year-over-year and down 5% sequentially.
Parts and consumables revenue, on the other hand, was solid and made up 68% of total revenue in the third quarter.
Encouragingly, U.S. housing starts continue to show strength and were $1.4 million in September, up 11% compared to the same period last year, which benefits our customers producing OSB and dimensional lumber.
Just last week, for example, we received a large order for a turnkey recycled stock preparation system from a containerboard producer in the U.S. with a value of approximately $11 million.
Parts and consumables revenue in the third quarter made up 60% of total revenue, but still below historical run rates.
Capital bookings in our material handling segment increased 34% sequentially, led by increased demand for our balers used in agricultural and waste processing applications.
As a result, we will not be providing guidance for Q4.
Our GAAP diluted earnings per share was $1.28 in the third quarter, down 9% compared to $1.41 in the third quarter of 2019.
Our GAAP diluted earnings per share in the third quarter includes $0.03 of restructuring costs, $0.03 from a discrete tax benefit, $0.02 of acquired backlog amortization and $0.01 of acquisition costs.
In addition, our third quarter results included pre-tax income of $2.7 million or $0.18 net of tax attributable to government employee retention assistance programs related to the pandemic.
Consolidated gross margins were 44.2% in the third quarter of 2020, up 140 basis points compared to 42.8% in the third quarter of 2019.
Approximately 110 basis points of this increase was due to the receipt of government assistance benefits related to the pandemic.
The remaining 30 basis point improvement is principally due to better product mix related to a higher percentage of parts and consumables.
Parts and consumables as a percentage of revenue increased to 66% in the third quarter of 2020 compared to 61% last year.
SG&A expenses were $43.9 million or 28.4% of revenue in the third quarter of 2020 compared to $47.1 million or 27.1% of revenue in the third quarter of 2019.
The $3.2 million decrease in SG&A expense was principally due to reduced selling and travel-related expenses and a $1 million benefit from government assistance programs.
Adjusted EBITDA decreased to $30 million or 19.4% of revenue compared to $32.3 million or 18.6% of revenue in the third quarter of 2019.
On a sequential basis, adjusted EBITDA increased 13% due to increased profitability in our Flow Control and Industrial Processing segments.
Operating cash flows were $24.4 million in the third quarter 2020, which included a modest negative impact of $0.8 million from working capital compared to operating cash flows of $25.7 million in the third quarter of 2019.
On a sequential basis, operating cash flows increased 11%.
We repaid $25.5 million of debt, paid a $2.8 million dividend on our common stock and paid $1.8 million for capital expenditures.
Free cash flow increased 7% sequentially to $22.6 million in the third quarter of 2020.
Free cash flow decreased 4% compared to $23.6 million in the third quarter of 2019.
In the third quarter of 2020, GAAP diluted earnings per share was $1.28, and our adjusted diluted earnings per share was $1.31.
In comparison, the third quarter of 2019, our GAAP diluted earnings per share was $1.41, and our adjusted diluted earnings per share was $1.38, which included a $0.02 discrete tax benefit.
As shown in the chart, the decrease of $0.07 and adjusted diluted earnings per share in the third quarter of 2020 compared to the third quarter of 2019 consists of the following: $0.55 due to lower revenue, $0.01 due to higher weighted average shares outstanding.
These decreases were partially offset by $0.18 due to government assistance programs, $0.17 due to lower operating costs, $0.10 due to lower interest expense, $0.02 due to higher gross margin percentages and $0.02 from an acquisition.
Collectively, included in all the categories I just mentioned, was a $0.01 favorable foreign currency translation effect in the third quarter of 2020 compared to the third quarter of last year due to the weakening of the U.S. dollar.
Our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable, was 140 at the end of the third quarter 2020 compared to 128 at the end of the second quarter of 2020 and 122 at the end of the third quarter of 2019.
Working capital as a percentage of revenue was 15.6% in the third quarter of 2020 compared to 14.8% in the second quarter of 2020 and 14.6% in the third quarter of 2019.
Our net debt, that is debt less cash, decreased $18 million or 8% to $204 million at the end of the third quarter of 2020 compared to $222 million at the end of the second quarter of 2020.
We repaid $25.5 million of debt in the third quarter and have repaid $41.9 million in debt in the first nine months of 2020.
During the quarter, we repaid our real estate loan, which had a remaining principal balance of $18.9 million by borrowing from our revolving credit facility.
This effectively swapped debt with an annual interest rate of 4.45% under the real estate loan for U.S. revolver debt currently at 1.65%, which at current rates would reduce interest expense by over $500,000 on an annual basis.
In addition, our leverage ratio calculated in accordance with our credit facility decreased to 1.88 at the end of the third quarter 2020 compared to 2.03 at the end of 2019.
As a result of being below 2, the applicable margin on our revolver debt will decrease by 25 basis points, which at current debt levels, would reduce our interest expense by roughly $600,000 on an annual basis.
Last quarter on our call, I gave a few directional comments indicating our revenue for the year could decrease roughly 11% to 14% compared to 2019.
We recognized $0.5 million in the third quarter and $0.9 million on a year-to-date basis of restructuring costs related to the reduction of employees across our businesses.
In aggregate, we expect these year-to-date restructuring activities will reduce our cost structure by approximately $4.1 million annually.

Summary:
This was further enhanced by government employee retention assistance that contributed to our solid adjusted earnings per share of $1.31 a share.
Looking ahead to the fourth quarter, we expect Q4 to show improvement in terms of both capital project bookings and demand for parts and consumables.
Revenue in this segment declined 16% to $62 million year-over-year and down 5% sequentially.
As a result, we will not be providing guidance for Q4.
Our GAAP diluted earnings per share was $1.28 in the third quarter, down 9% compared to $1.41 in the third quarter of 2019.
In the third quarter of 2020, GAAP diluted earnings per share was $1.28, and our adjusted diluted earnings per share was $1.31.