Aaron E. Alt
Executive Vice President and Chief Financial Officer at Sysco
Thank you, Kevin, and good morning. We are upbeat on our business, and we have several notable headlines for our third quarter, as seen on slide 10. Sales growth of almost 43% compared to the prior year, which is also up more than 15% versus 2019, reflecting resilient demand and sequential improvements month-over-month. We recorded more than $3 billion of gross profit, the highest gross profit in absolute dollar terms for any quarter at Sysco ever as we continued significant efforts to optimize our assortment in COGS while effectively managing our product cost inflation.
Our investments in snapback operating costs dropped in the quarter by more than half from $73 million in Q2 to $35 million in Q3. As promised, the impact of our workforce transition on productivity improved. Incremental training and overtime is estimated to have cost us approximately $30 million in the third quarter, down from approximately $40 million in the second quarter, and we expect further improvements as we head into Q4. As an aside, I would note that the actions we're taking around productivity are actually serving to accelerate our supply chain transformation as part of the Recipe for Growth.
We invested $48 million of operating expense against our strategic investments, creating momentum with our commercial capabilities. All in, adjusted operating income more than doubled and adjusted EBITDA increased almost 73% compared to last year. With those headlines on the table, I'm going to provide some details on the financials for the quarter and some thoughts on our outlook. Third quarter sales were $16.9 billion, an increase of 42.9% for fiscal 2021 and a 15.3% increase from fiscal 2019. In the United States, sales in our largest segment, U.S. Foodservice were up dramatically by 43.6% versus fiscal 2021 and up 18.8% versus fiscal 2019.
Local case volume within the U.S. Broadline operations, a subset of U.S. Foodservice increased 14.1%, while total case volume within U.S. Broadline operations increased 18.8% compared to last year. SYGMA sales were up 13.5% versus fiscal 2021 and up 16.8% versus fiscal 2019. International sales were up 64.5% versus fiscal 2021 and up approximately 3% versus fiscal 2019. Sales trends accelerated nicely in our International segment with lower Omicron cases and as government-related restrictions on our customers eased in the quarter. Foreign exchange rates had a negative impact of 0.7% on Sysco's sales results.
Let me pause here and call out one point of progress for the year-to-date period. We are really pleased with the profit contribution and improvements coming from International. In the last nine months, the business has delivered an adjusted operating income swing of $265 million year-over-year. Inflation continued to be a factor during the quarter at approximately 16% in our U.S. Broadline business. We have been able to actively manage the impact of product inflation and those efforts will continue. Gross profit for the enterprise was above $3 billion in the third quarter, an increase of 42% versus fiscal 2021, an increase of 9.4% versus fiscal 2019.
The increase in gross profit was driven by year-over-year improvements in volume versus fiscal 2021 and compared to the same quarter in both fiscal 2021 and fiscal 2019, increases in GP dollars per case across all segments as we successfully managed to increase costs from our product suppliers and acted to optimize our business processes and performance. Of note, the enterprise and U.S. Foodservice both reached all-time highs for Q3 gross profit dollars. Gross margin rate was 17.8% or 18% on an adjusted basis during the quarter, with the adjusted margin rate moving upward as the math was still impacted by inflation.
Of course, it is gross profit dollars that counts in an inflationary environment, and gross profit per case increased in all four segments. We are focused on price relevancy, being right on price and are doing the right things to cover our costs while also supporting our customers. Turning back to the enterprise, adjusted operating expense for the quarter came in at $2.5 billion as we delivered progress on our multi-year cost-out program and improved snapback costs.
As we touched on earlier and as you can see on slide 15, operating costs this quarter were impacted by variable costs associated with significantly increased volumes, more than $35 million of onetime and short-term transitory expenses associated with the snapback, $48 million of purposeful investments to further accelerate our Recipe for Growth initiatives, and lastly, the still present but improving expense challenges associated with new hire productivity. Despite the dynamic operating environment, we expect additional improvements for snapback costs and productivity expenses during the fourth quarter as we balance cost reduction initiatives with continued transformation investments.
Together, the snapback investments and the productivity-related costs totaled approximately $65 million of operating expenses this quarter. That's important because the simple math would say that these transitory expenses had a downward impact to our adjusted EPS of approximately $0.10 further proving our point that there is further opportunity for profit improvement in the future for Sysco as Q3 adjusted EPS without these expenses would have already exceeded 2019 levels. All in, we leveraged our adjusted operating expense structure and delivered expense as a percentage of sales of 14.6%, which was flat through fiscal 2019 and an improvement of 119 basis points for the same quarter in fiscal 2021.
Finally, for the third quarter of fiscal 2022, adjusted operating income increased $319 million from last year to $575 million. This was primarily driven by a 43% improvement in U.S. Foodservice and continued progress on profitability from International. As Kevin called out, adjusted earnings per share increased an impressive $0.49 to $0.71 for the third quarter. Now let's turn to a discussion of year-to-date cash flow. Cash flow from operations was $746 million on a year-to-date basis. Our company continues to transition from a period when sales, profit and working capital were all down during COVID to a period of high growth, growing profit and a focus on making the investments necessary to win the long game.
A year ago at this time, we commented that we had a strategy and the balance sheet to invest in the business and support the Recipe for Growth, and that is exactly what we are doing. Free cash flow year-to-date was $434 million. EBITDA as the primary source of cash is up $900 million year-over-year in the year-to-date period as our sales increased, but we've not yet quite recovered to fiscal '19 levels. The rising sales and profitability were enabled by tactical investments and higher inventory levels this year, both in absolute cases on hand as we lap the purposeful inventory declines from the management of the COVID period and in dollar value, given inflation.
And with our rapidly growing sales comes a higher balance in healthy accounts receivable, also a use of cash year-to-date, which our team continues to manage well, offset in part by higher accounts payable. In the year-to-date, we have also paid higher interest expense from COVID debt and refinancings, paid higher cash taxes, partly due to prior year refunds and deferrals and invested more in capex in support of the Recipe for Growth. This year is effectively a transition year from a free cash flow perspective, and we expect that future years will continue to reinforce the significant cash flow generated by Sysco as sales and profit grow and investments in working capital normalize.
Let me emphasize, we are playing to win the long game and are leveraging our balance sheet and cash flow in support of the long-term growth of Sysco. Along those same lines, recall that we began the year with high cash balances, and we end the quarter with almost $900 million of cash on hand. Year-to-date, we've used that cash to invest in the business, spending $312 million on capex and paying for acquisitions such as Coastal with cash on hand. Our balance sheet is a key differentiator compared to our competition, and we are prepared -- we are better prepared than anyone else in the industry entering a rising interest rate environment. Why?
Because we have strong cash generation, a strong investment-grade rating and a manageable debt profile, including some of the lowest rates ever achieved by Sysco in a 30-year tenure issued in December. We remain committed to maintaining a strong investment-grade rating and achieving a net debt-to-EBITDA target ratio of 2.5 times to 2.75 times. As previously announced, we expect to further reduce indebtedness by paying off the $450 million of debt coming due in June. And reflecting the world in which we all live, we also now have further liquidity and risk protection if we need it. Last week, Sysco announced that we successfully increased our revolver capacity from $2 billion to $3 billion with improved terms.
Return of capital to shareholders is also part of our capital allocation framework. In May of 2021, our Board approved a 4% increase to our quarterly dividend, reflecting an $0.08 increase annually. And two weeks ago, Sysco's Board did it again, effectively announcing another $0.08 annual increase, reinforcing our status as a dividend aristocrat. What we want you to take away from this is that we are serious about all three parts of our capital allocation strategy. We are investing in the future growth of the business. We are maintaining a strong balance sheet, and we are returning surplus capital to shareholders.
On this last point, our track record goes back decades. But as you can see on slide 18, over the last seven years, cumulatively, we've returned over $13 billion of cash to shareholders. We will remain disciplined with our balanced approach to capital allocation and rewarding our shareholders. Now, before I turn to our positive update to guidance, I should address one set of questions we've been getting upfront: the impact of the invasion of Ukraine on our business. As a reminder, Europe represents only about 10% of our net sales. Our European portfolio is geographically distant from Ukraine and focused on Ireland, the U.K., France and Sweden.
In the past, our exposure to Russian products was minimal. With respect to product inflation in Europe, while we are seeing costs rise more consistently with what we've seen in the U.S. in the last couple of quarters, we were prepared and have many of the same tools we developed in the U.S. to address the impact of product cost increases in Europe. Oil and the impact of rising gas prices have also been topics of interest. We benefit from having hedged 80% of our forecasted bulk fuel volume through fiscal 2023 in the U.S. and Europe.
Let's now turn to look forward. We are upbeat about our business. We have witnessed the resiliency of our business as it has responded to the impact of three significant COVID-19 variants, significant inflation, the invasion of Ukraine and now, rising interest rates. We have made great progress in Q3, and we anticipate further progress in Q4, which is why we are upbeat about our business. We are raising our guidance for adjusted EPS in the second half by $0.16 to be from $1.76 to $1.86. Having delivered $0.71 of adjusted EPS in Q3, this means that we expect Q4 to be in the range of $1.05 to $1.15.
On a full year basis, this will equate to adjusted EPS of $3.16 to $3.26. During our last earnings call, we highlighted that we expected a big Q4, and that's not changed with the results of our resilient Q3 results. Our continued optimism for Q4 includes a continued market recovery, continued market share gains, continued pass-through of inflation costs, improved operating expenses as a percentage of sales from lower snapback and productivity-related costs, all is partially offset by continued investments in our transformation and working through the workforce transition. Lastly, recall that Q4 of last year included one extra week, which will impact profitability.
With that, let me turn the call back to Kevin for closing remarks.
