Thank you, Kevin, and good morning. Improving sales trends, a profitable quarter and strong cash flow, those are our key headlines.
Our fiscal third quarter presented us with the beginning of a restaurant recovery in the United States, countered by continued business disruption in the international and foodservice management parts of our portfolio.
As a result, we balanced 5 financial priorities, tactical investments in inventory, team and equipment to get ahead of the business recovery; strategic investments in capabilities and technologies to advance the transformation; careful cost control to mitigate the impact of the COVID environment on our bottom line; purposeful reduction of our indebtedness; and of course, continued return of capital to shareholders through our dividend payments, totaling $689 million so far this fiscal year.
As Kevin called out, we were delighted to see the improving sales trends and the progress on profit, and I will speak more on the income statement shortly. I would like to start today with an emphasis on the strong position we are in as we move up the recovery curve and how that strength is impacting our view of the cash flow and the balance sheet. Recall, at the end of the second quarter, we had $5.8 billion of cash.
During the third quarter, we generated positive cash from operations of $543 million, offset by $83 million of net capital investment, leaving us with incremental positive free cash flow for the third quarter of $460 million. Working capital was a source of cash for us in the quarter even though we invested heavily in inventory. And as Kevin pointed out, we ended the third quarter with inventory on hand and inventory on order exceeding pre-COVID levels. And we benefited from a significant increase in payables at quarter end. We saw rising normal course receivables balances as our customers started purchasing more. But we also made excellent progress on obtaining timely payment from our customers on both pre-COVID and post-COVID bills.
For the 9-month period, even the face of COVID-19, Sysco generated an impressive $1.2 billion in free cash flow. This strong cash flow was approximately $300 million better than we had forecast earlier this year, driven by the combination of higher sales and profit, working capital benefit and lower CapEx than forecast back in the first quarter. All in, we ended the third quarter with $4.9 billion of cash on hand.
We expect that the fourth quarter will bring continued progress on the EBITDA line. It is also expected to bring investments in working capital as we continue to invest in inventory and as the payables, which provided us with benefit in the third quarter, come due in the fourth quarter.
As a result, we are forecasting flattish free cash flow for the fourth quarter, leaving us with free cash for the year of approximately $1.1 billion to $1.2 billion.
Given our balance sheet, our strong cash generation and our optimism for the business recovery, early in the third quarter, we announced that we were continuing the process of reducing our debt levels. We paid down $1.1 billion on that date funded by cash on hand, and you will see that change in leverage reflected in our third quarter financials. What you will not yet see in the financials is that subsequent to the end of our third quarter, we repaid an additional GBP 200 million on the outstanding amount of the U.K. commercial paper program. And we will, later this week, pay off the remaining GBP 100 million balance on that program, which will bring our debt levels down by approximately $1.5 billion since the start of the third quarter and down by $2.3 billion since the start of this fiscal year. Stay tuned for a discussion of our capital allocation strategy at Investor Day.
Let's turn to the income statement.
Given the interest in the shape of the COVID-19 recovery curve, for the next couple of quarters, we will disclose sales comparisons against both fiscal 2019 and fiscal 2020.
Third quarter sales were $11.8 billion, a decrease of 13.7% from the same quarter in fiscal 2020 and a 19.3% decrease from the same quarter in fiscal 2019, but with the important qualification that in the last 2 weeks of the quarter, we began to lap the onset of the COVID-19 crisis. Indeed, looking at the monthly progression, measured against fiscal '19, our sales were down 23% and 14% in January, February and March, reflecting the impact of COVID across the quarter. February would have been better but for the impact of the winter storm in the U.S. during the last week of February.
We are also disclosing today on a onetime basis that our April sales were approximately $4.4 billion, up 102.1% from prior year and improving to only down 8.8% from fiscal 2019.
Our United States sales in the U.S. foodservice segment were down 5.3% versus fiscal 2019, and SYGMA was up 12% versus fiscal 2019, reflecting the increase in restaurant traffic and orders as the lockdowns eased in the U.S.
We will continue to benefit as the U.S. reopening advances. In contrast, Europe, Canada and Latin America regressed in the third quarter as a result of strict lockdowns that are now expected to continue in some cases until the end of May and as a result of slower progress in vaccination. The slower international recovery will continue to impact our fourth quarter results and may carry into early quarters of fiscal 2022, depending on vaccination progress by country.
However, we see good news in the recent reopening taking place in the United Kingdom.
Here are a couple of additional metrics.
For the quarter, local case volume within U.S. Broadline operations decreased 9.7% while total case volume within U.S. Broadline operations decreased 14.1%.
Foreign exchange rates had a positive impact of 77 basis points on our sales results.
As we move down the P&L, gross profit was $2.1 billion in the third quarter, decreasing 17.2% versus same quarter in fiscal 2020. Most of the decline in gross profit was driven by lower volumes due to COVID.
However, we did see modest gross margin dilution at the enterprise level of roughly 77 basis points versus the same period in fiscal 2020 as our rate came in just a touch shy of 18%. The primary reason for the gross margin dilution is business mix.
Our sales and our generally higher margin European business were down, so lower gross margin at the enterprise. Along the same lines, our sales in our lower-margin SYGMA business were up, so lower gross margin at the enterprise.
We also saw a modest margin dilution in each of the business segments with varying causes from product mix shift, the timing by market of the interplay between passing along inflation and implementing our transformation initiatives. Adjusted operating expense decreased 14.7% to just under $1.9 billion, and we saw a modest improvement of operating expense leverage, even with lower sales to prior year.
Our expense profile reflected the counterweights of good cost-out achievement, balanced against our investments for the recovery curve and our investments against the transformation agenda.
As part of this, we targeted and achieved increased significant cost savings.
We are on track to surpass our fiscal 2021 goal of $350 million of cost savings.
We expect to drive continued cost savings opportunities to help fuel our future growth agenda, a topic I will discuss more at Investor Day in 2 weeks.
Finally, at the enterprise level, adjusted operating income decreased 32% to $256 million.
For the third quarter, our non-GAAP tax rate of 14.3% was favorably driven by the impact of stock option exercises. Adjusted earnings per share decreased 51.1% to $0.22 for the quarter. I'll say a few words on our third quarter results by business segment, starting with U.S. Foodservice Operations. Sales were $8 billion, which was a decrease of 12.8% versus the prior year period. In the rapidly evolving environment, the business again acquired a record number of new customers as our sales teams hit the streets, and we deployed digital tools.
We also saw growth in our national accounts customer base. This business, our biggest business, is moving up the COVID recovery curve rapidly.
Within the business, Sysco brand sales for the third quarter decreased 116 basis points to 37.3% of total U.S. cases, driven by customer and product mix shift. With respect to local U.S. case, the Sysco brand sales decreased 234 basis points to 44.5%, which was driven by product mix shift into prepackaged and takeaway-ready products. Regaining Sysco brand sales levels and the healthy margins that come with them will be a focus for fiscal '22 and beyond. Gross profit for U.S. foodservice decreased 13.7% to $1.6 billion for the quarter. The segment's adjusted operating expenses decreased 16.1% to $1.1 billion, and adjusted operating income decreased 8.3% to $525 million. Product cost inflation was 3.5% versus prior year, driven by deflationary categories in fiscal 2020.
Moving to the SYGMA segment.
For the third consecutive quarter, sales increased during the third fiscal quarter to $1.6 billion, a 15.9% increase over fiscal 2020 and a 3% increase over fiscal 2019, driven by the success of national regional quickservice restaurants servicing drive-thru traffic.
While we are pleased with the team's efforts during COVID, SYGMA is our lowest-margin segment, and our team is carefully calibrating our efforts in that business, particularly as it relates to negotiating agreements with customers.
As a result, starting during our fiscal fourth quarter, we will be taking an opportunity to transition away from a large existing regional customer. The financials of that relationship do not meet our preferred profile, and we will be focusing on freeing up capacity for more profitable customers.
Going forward, we will continue to be diligent in our contract review and approval process across the enterprise. Gross profit increased 12.3% to $133 million for the quarter while gross margin was down 27 basis points compared to the prior year. Adjusted operating expenses increased 11.1% to $121 million, and adjusted operating income increased 24.1% to $13 million all at SYGMA.
Moving to the international segment.
As I mentioned earlier, our European, Canadian and Latin American businesses continue to be impacted by COVID lockdowns. The International Foodservice Operations segment saw sales of $1.7 billion, a decrease of 31.3%, while gross profit decreased 35.1% and gross margin decreased 110 basis points. The gross margin decline was a result of country mix, customer mix and product mix.
For the international segment, adjusted operating expenses decreased 15.8%, leading to an adjusted operating loss of $92 million.
We are confident that international will be a significant recovery opportunity for our company in fiscal 2022.
Our other segment, which includes our Guest Worldwide business, remains in the COVID recovery starting blocks as hospitality occupancy rates remain low compared to prior year levels.
While still in turnaround mode, the business improved its underlying profitability during the third quarter.
Additionally, our Guest Worldwide business signed a substantial new customer contract during the quarter that will be very beneficial to the segment as the travel and hospitality sectors recover. That concludes my prepared remarks on the third quarter.
We are not providing further guidance for the fourth quarter, other than to observe that we continue to monitor our operating environment carefully.
While operational challenges remain for many of our customers, we are seeing excellent demand in our core business in the key markets in the center and the south. And we are seeing green shoots on the coast as markets reopen.
Let's be clear. The upswing has begun, and we expect continued progress across the largest parts of our portfolio in the fourth fiscal quarter.
Our team remains resolutely focused on driving our businesses, aggressively managing the business recovery and building customer-centric capabilities to accelerate long-term growth.
As we did in the third quarter, we will continue to deploy our balance sheet to invest in inventory, technology and our people to stay ahead of the recovery curve while also reducing our indebtedness.
During our Investor Day in 2 weeks, Kevin and the executive leadership team will offer more detailed perspective on the business, on our growth plans for fiscal 2022 and beyond and provide further specifics on our transformation efforts.
We will comment on our post-COVID capital allocation strategy, including the breadth and depth of our organic and inorganic investment plans, our plans for further debt reduction and how we're thinking about continued shareholder returns. We look forward to seeing you participate in that virtual event. Thank you for your attention. Operator, we are now ready for questions.