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Cracker Barrel Old Country Store (NASDAQ:CBRL)

Q3 2013 Earnings Call

June 03, 2013 11:00 am ET

Executives

Coco Kyriopoulos

Sandra Brophy Cochran - Chief Executive Officer, President, Director and Member of Executive Committee

Lawrence E. Hyatt - Chief Financial Officer and Senior Vice President

Analysts

Jeffrey F. Omohundro - Davenport & Company, LLC, Research Division

Jeffrey D. Farmer - Wells Fargo Securities, LLC, Research Division

Michael W. Gallo - CL King & Associates, Inc., Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Stephen Anderson - Miller Tabak + Co., LLC, Research Division

David Carlson - KeyBanc Capital Markets Inc., Research Division

Operator

Good day, and welcome to the Cracker Barrel Fiscal 2013 Third Quarter Earnings Conference Call. Today's conference is being recorded and will be available for replay, today, from 2 p.m. Eastern through June 17 at 11:59 p.m. Eastern, by dialing (719) 457-0820 and entering passcode 7587468. At this time, for opening remarks and introductions, I would like to turn the call over to Coco Kyriopoulos. Please go ahead, ma'am.

Coco Kyriopoulos

Thanks, Mella. Good morning, and welcome to Cracker Barrel's Third Quarter Fiscal 2013 Conference Call and Webcast. This morning, we issued a press release announcing our third quarter results and outlook for the 2013 fiscal year. In this press release and on this call, we will refer to non-GAAP financial measures for the current fiscal year, adjusted to exclude severance and proxy contest expenses and their related tax effects, as well as adjustments related to the retroactive reinstatement of the Work Opportunities Tax Credit. We will also refer to non-GAAP financial measures for the prior year and prior year quarter, adjusted to exclude charges and tax effects related to severance and the prior year proxy contests.

The company believes that excluding these charges and tax effects from its financial results provides information that may be more indicative of the company's ongoing operating performance, while improving comparability to prior periods. This information is not intended to be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

The last page of the press release includes a reconciliation from the non-GAAP information to the GAAP financials. The press release can be found in the Investor section of our website, crackerbarrel.com. In that press release and during this call, statements may be made by management of their beliefs and expectations of the company's future operating results or expected future events. These are what are known as forward-looking statements, which involve risks and uncertainties and, in many cases, are beyond management's control and may cause actual results to differ materially from expectations. We urge caution to our listeners and readers in considering forward-looking statements and information. Many of the factors that could affect results are summarized in the cautionary description of risks and uncertainties found at the end of this morning's press release and are described in detail in our reports that we file with, or furnished to, the SEC. We urge you to read this information carefully.

We also remind you that we do not comment on earnings estimates made by other parties. In addition, any guidance or outlook we provide or statements we make regarding trends speak only as of the date they are given, and we do not update or express continuing comfort with our guidance, outlook or trends, except in broadly disseminated disclosures, such as this morning's press release, filings with the SEC or as otherwise required by law.

On the call with me this morning are Cracker Barrel's President and CEO, Sandy Cochran; and Senior Vice President and CFO, Larry Hyatt. Sandy will begin with a review of the business, and Larry will review the financials and outlook. We will then open up the call for questions, and Sandy will return to close.

We ask that you please limit your questions to matters relating to the company's performance, outlook and plans. With that, I'll now turn the call over to Cracker Barrel's President and CEO, Sandra Cochran. Sandy?

Sandra Brophy Cochran

Thanks, Coco, and good morning, everyone. I'm pleased to report excellent results for the third quarter across a number of operating and financial fronts. Our store traffic and sales were strong, our operating margins increased and our earnings exceeded our expectations. In addition to strong performance, we further delivered on our priority to increase returns to our shareholders by increasing our quarterly dividend by 50% to $0.75 per share.

Since November of 2011, we've tripled our quarterly dividend. We generated strong sales in the quarter by focusing on our priorities around menu initiatives, merchandise, marketing and operations. As a result of the focus in these areas, this was our sixth consecutive quarter of positive traffic, positive restaurant and retail sales, and outperformance of the Knapp-Track Casual Dining Index for sales and traffic.

Earnings also exceeded our expectations, including an improvement in our operating margins and a 19% increase in diluted EPS over the prior year quarter. Larry will provide more detail on the financial results of the quarter. And in the meantime, I want to update you on the progress we've made around our business priorities for fiscal 2013.

As we review the third quarter and look back on our fiscal year-to-date, what becomes apparent is the progress we've made improving the guest experience. Our field employees consistently execute against our mission of Pleasing People. It's evidenced not only by our financial results but also by the industry awards we received, the increased traffic to our stores and guest loyalty surveys.

I'd like to congratulate all 70,000 Cracker Barrel employees. First, for being voted #1 in the 2013 Consumer Pick Survey conducted by Nation's Restaurant News. In the 3 years the magazine has performed this survey, we've ranked first place in our category each year. And this year, we led in 9 out of 10 attribute categories, and our overall score was a significant margin ahead of our competitors.

And second, for another record-breaking day this past Mother's Day, which occurred early in our fourth quarter, and was the highest combined restaurant and retail sales day in the history of the company.

Most importantly, congratulations on consistently receiving high guest survey scores. The third quarter represents the seventh consecutive quarter with increases in overall satisfaction. We also saw increases in overall value and tend to return and likelihood to recommend in the third quarter over the prior year.

In order to deliver a great guest experience, the employee experience must also be great. Our field management retention rate remains high and we are pleased with the significant improvement in the scores of our recent field employee engagement survey.

Strong operating and financial results during the third quarter reflected the continued progress on our long-term strategy to enhance the core business, expand the footprint and expand the Cracker Barrel Old Country Store brand. This strategy is supported by our 6 key business priorities: to refresh select menu categories; to reinforce the availability of both affordable and healthy options; to grow retail sales with unique merchandise; to build on our successful Handcrafted by Cracker Barrel marketing campaign; to invest in technology and equipment to support operations and reduce costs; to focus on enhancing shareholder return; and to improve e-commerce and develop a licensing platform.

Delivering on the priorities that support our strategy to enhance the core business, our near-term focus is to reinforce the affordability of our menu by highlighting our Country Dinner Plates. The spring promotion is in stores now and limited-time offerings include: Buttermilk Oven Fried Chicken; Grilled Chicken n' Strawberry Salad; the Multi-Berry Pancake Breakfast; as well as 2 Country Dinner Plates; the Mushroom Swiss Chopped Steak; and Bacon n' Cheese Cider BBQ Chicken. We've also included a staple insert in the menu featuring the full line of Country Dinner Plates. We've also been driving interest and excitement in the affordability of our menu through both our billboards and our digital campaigns.

As I mentioned last quarter, we converted over 200 billboards to Country Dinner Plate messaging, highlighting the 14 entrée choices in the $7.69 price point. In addition to the 200 billboards highlighting the Daily Lunch Specials, we have 20% of our billboards now with sharp price point value messaging.

While the current advertising strategy includes national cable TV and spot radio running in the second and fourth quarters, we decided to run a limited amount of TV and radio ads covering about 20% of our store base late in the third quarter to support our sales momentum. As we look to the fourth quarter, we will run new Handcrafted by Cracker Barrel national cable TV ads and new radio spots to further support our value and brand messaging.

We know our guests desire affordable offerings and better-for-you choices, and we believe we've had success meeting our guests' needs for value and driving our affordability message. Our next focus is on meeting guests needs, better-for-you choices with our new Wholesome Fixin category. This category will provide guests with flavorful and fresh options for under 500 calories at breakfast and under 600 calories at lunch and dinner. We continue testing the new category with the expectation of adding it to the menu in late August.

Beyond our menu enhancements, we continue to engage guests with the Cracker Barrel brand through our music program. Currently, we're offering an exclusive version of Brad Paisley's Wheelhouse CD and are sponsoring his Beat This Summer Tour. We significantly integrated the Cracker Barrel Old Country Store brand into his tour from wrapping the tour truck fleet to pop-up storefront, on-site web and digital promotions. This has created new channels to engage with our guests through our partnership with this major recording artist.

Another component of the enhancing-the-core strategy is our priority to grow retail sales with unique merchandise. We are pleased with our retail sales in the third quarter. Despite the Easter selling -- the shorter Easter selling season and sluggish early sales, seasonal sales improved as the holiday approached, especially in our more traditional Easter decorating theme.

We also continue to have strong sales growth in women's apparel and accessories. Top sellers for the quarter included a broad selection of cotton tunics, unique jewelry pieces and spring scarves.

Home decor was another area for growth for us in the quarter, especially our assortment of distinctive lamps and wall decor. We've also expanded the assortment of products made in the USA. You'll find our American pride theme in stores now, and every item in this line is manufactured in the United States.

Our Head of Retail, Laura Daily, has now been in place for a full year, and we're beginning to see her positive influence on our merchandise selection. We're focused on developing products with broad generational appeal that fit our unique Cracker Barrel Old Country Store brand in the quarters to come.

It's also a priority to invest in and leveraged technology and equipment to support operations and reduce costs. And we're pleased with our progress in the third quarter, as we continue to reduce labor cost and increase guest satisfaction. We completed the rollout of the second phase of our production planning tool, which helps cooks prepare the right amount of food at the right time, and therefore reduces waste. The plan also provides more clear direction on preparation and storage time for greater amounts of fresh produce, which is timely, given the rollout of new items for our upcoming summer promotion and the launch of Wholesome Fixin's.

Given our operational success, we continue to be focused on enhancing shareholder returns to a balanced approach of returning cash to shareholders while investing in opportunities to drive future growth.

During the quarter, we increased our quarterly dividend 50%, paid down $125 million of our long-term debt, opened a new Cracker Barrel Old Country Store.

Finally, regarding our strategy to extend the brand outside of the Cracker Barrel Old Country Stores, we remain optimistic on our licensing initiative. But given the pending litigation with Kraft Foods, we're limited to what we can say at this time.

In summary, we had another quarter of strong sales, solid operations and earnings that exceeded our expectation. We believe our strategy to enhance the core business, expand the footprint and extend the brand with a focus on our 6 business priorities is delivering results and we directly increase shareholder returns by raising our dividend.

With increased sales, improved margins and reduced debt, we have solid momentum heading into the final quarter. And with that, I'll hand the call over to Larry for more details on the quarter.

Lawrence E. Hyatt

Morning, everyone, and thank you, Sandy. I would like to begin by discussing our financial performance for the third quarter of fiscal 2013 and then our outlook for the 2013 fiscal year.

For the third quarter of fiscal 2013, we reported net income of $24.6 million or $1.02 per diluted share compared with GAAP net income of $19 million or $0.81 per diluted share, and adjusted net income of $20.1 million or $0.86 per diluted share in the prior year quarter. Our revenue in the quarter was $640.4 million, a 5.2% increase over the $608.5 million of revenue in the prior year third quarter.

Our restaurant revenues increased 4.5% to $522.6 million and retail revenues increased 8.6% to $117.8 million. Our comparable store restaurant sales increased 3.1% as traffic increased 0.7% and average check increased 2.4%. The increase in average check reflected menu price increases of approximately 2.3% and a favorable mix impact of 0.1%.

Our comparable store retail sales increased 5.5% for the quarter. The company estimates that inclement weather in the third quarter reduced comparable store traffic and sales by approximately 0.3%. Our total cost of goods in the quarter was 31.5% of revenue, a 30 basis point increase over the prior year quarter. Our restaurant cost of goods was 27.1%, which is flat to the prior year quarter. Our commodity costs were up approximately 3.8% in the quarter compared to the prior year quarter as increases in beef, in pork, poultry and fruits and vegetables were partially offset by reductions in seafood. These commodity cost increases were offset by changes in menu mix, by increases in menu prices and reductions in food waste due to our food production initiatives.

Our retail cost of goods was 51.3% of retail sales compared to 50.1% in the prior year quarter. This 100 basis point increase was a result of higher markdowns and higher inbound freight costs, partially offset by a reduction in shrinkage. Our retail inventories at the end of the quarter were $98.1 million compared to $96.4 million in the prior year quarter.

Our store payroll and related expenses were $241.9 million or 37.8% of sales, a decrease of 80 basis points compared to the prior year quarter. This year-over-year improvement was primarily the result of reductions in store hourly labor expense as a percent of sales due to our productivity initiatives and the leverage of menu price increases. Our other store operating expenses in the quarter were $116.4 million or 18.4% of revenue compared with $109.9 million or 18.1% of revenue in the prior year quarter. This 10 basis point increase was primarily the result of our decision to increase advertising spending in the quarter to support our sales momentum.

Our store operating income was $80.2 million or 12.5% of revenue compared with $73.7 million or 12.1% of revenue in the prior year quarter. Our general and administrative expenses in the quarter were $36 million or 5.6% of revenue. In the prior year quarter, our G&A expenses on a GAAP basis were $34.6 million and were $32.9 million or 5.4% of revenue when adjusted for the charges associated with last year's organizational restructuring. The 20 basis point increase is due primarily to increases in incentive compensation and higher legal expenses resulting from the Kraft litigation, partially offset by lower payroll expenses resulting from last year's headcount reductions. Our operating income was $44.2 million or 6.9% of revenue. In the prior year quarter, our GAAP operating income was $39.1 million or 6.4% of revenue, and our adjusted operating income was $40.8 million or 6.7% of revenue. Our interest expense in the quarter was $10.2 million compared to $11.2 million in the prior year quarter as a result of lower borrowings and a lowered credit spread on our bank facility.

Our effective income tax rate was 27.6% for the quarter compared to 32.1% in the prior year quarter. The year-over-year reduction in the tax rate is due primarily to provisions for uncertain state tax positions taken in the prior year quarter. Our capital expenditures for the quarter were $16.4 million and $46.2 million year-to-date compared to $18.6 million in the prior year quarter and $54.7 million for the prior year-to-date. This decrease is primarily a result of fewer new store openings than in the prior year.

At the end of the third quarter, the 2006 interest rate swap expired and we paid down $125 million of long-term debt. We expect that the lower debt balance and lower interest rates will reduce our annual interest expense by approximately $25 million or $0.70 per diluted share. We expect to recognize $0.17 per diluted share of this year-over-year benefit in the fourth quarter of fiscal 2013. As a result of the debt repayment, we ended the quarter with $58.5 million of cash and equivalents compared with $127.3 million at the end of the prior year quarter. Our total debt is approximately $400 million. We repurchased 44,300 shares in the third quarter to offset dilution.

In this morning's release, we announced that our board has increased our quarterly dividend by 50% to $0.75 per share. Since November 2011, the company has tripled its quarterly dividend.

Okay. With respect to our outlook, everyone should be mindful of the risks and uncertainties associated with this outlook as described in today's earnings release and in our reports filed with the SEC. Based upon our year-to-date financial performance, recent trends and current estimates, we are again raising our full year earnings guidance for fiscal 2013. We continue to expect total revenue for fiscal 2013 of between $2.6 billion and $2.65 billion, reflecting anticipated increases in comparable store restaurant and retail sales in the range of 2.5% to 3% for the year. We now expect to report adjusted earnings per diluted share for the fiscal year of between $4.75 and $4.85. Our adjusted earnings guidance for the full year excludes the impact of proxy contest and severance expense and the prior year portion of the WOTC benefit.

Food commodity costs for the full year are expected to increase by between 3.5% and 4% from the prior year and adjusted operating income margins are expected to range between 7.4% and 7.6% of total revenues. We expect depreciation expense of between $64 million and $66 million, net interest expense of approximately $36 million and capital expenditures of between $75 million and $80 million.

And with that, I will now turn the call back over to the operator for a few questions. Thank you very much.

Question-and-Answer Session

Operator

[Operator Instructions] We'll take our first question from Jeff Omohundro with Davenport & Company.

Jeffrey F. Omohundro - Davenport & Company, LLC, Research Division

Larry, just a -- I guess, a housekeeping item first. The shift in the capital expenditures target for the year, is there -- can you maybe dig into that a little bit? Has the project been delayed or is this a new run rate? Some help with that would be great.

Lawrence E. Hyatt

Sure, Jeff. The capital expenditures are really a function of 3 things. The company's investment in new stores as part of the second of the 3 legs of our strategic stool expanding our brand. Second is the investment for maintenance capital in our existing store base. And third is funding our sales driving, margin driving and the information systems initiatives. We will actually be spending a little more this year than we spent last year on maintenance CapEx as the company's base of stores continues aging. We will actually spend in percentage terms significantly more on the sales driving, margin driving and information systems initiatives, and we will spend significantly less for new stores. And the lower spending on new stores is really a function of 2 things: one, as we have noted compared to 13 new stores last year, we're expecting to open 8 this year; and second, the timing of 2014 openings may be more back-end loaded, which affects some of the timing of that capital spend.

Jeffrey F. Omohundro - Davenport & Company, LLC, Research Division

So the difference from last quarter to this quarter, was there any specific project linked to that? I'm talking about this year's guidance.

Lawrence E. Hyatt

Yes. This quarter to last quarter, no, it really is more in the new store area, Jeff.

Jeffrey F. Omohundro - Davenport & Company, LLC, Research Division

Okay. And then on the retail, the strong results in the quarter, there was some monthly volatility in that. I'm just wondering, maybe, if you'd give a little more granularity on the drivers. And how sustainable a comp run rate in this general range might be?

Sandra Brophy Cochran

Jeff, I'll take that one. So we were pleased with the retail results we delivered for the quarter. Some amount of the volatility was related to weather and the shift in the holiday. But we're also seeing a little bit of volatility with the consumer in terms of as they're adjusting to economic news, tax increases. I'm sure our assortment, as it's been changing with the new leadership and the new kind of assortment we're bringing in. So I'm excited about the progress we've made and we continue -- I'm optimistic that we'll continue to make progress in the next few quarters.

Operator

We'll take our next question from Jeff Farmer with Wells Fargo.

Jeffrey D. Farmer - Wells Fargo Securities, LLC, Research Division

And just keeping with the theme of volatility, but this time shifting over to the restaurant level, where you're seeing some similar degrees of volatility there. I'm just curious, again, what your view is on your expectation as to whether or not that volatility persists. You sort of hinted at that. And how are you thinking about these traffic trends moving forward? Does that volatility maybe dry up a little bit? Or do you think you have another few quarters ahead of you where traffic numbers could be bouncing between negative and positive in any given month?

Sandra Brophy Cochran

Well, think in general, Jeff -- I'll take a stab, and then if Larry wants to add to it. I think in general, we feel that there has been some, as we look back over the past few months, more volatility on both the restaurant and the retail side. The retail side is our most discretionary part of our business. And then as you know, our business is impacted by both a travel component and a local. So we have lots of issues sort of affecting people's usage. But in general, we think the consumer -- certain segments of the consumer, in particular, continue to be challenged. In terms of the unemployment picture, I think that as more news comes out about tax increases and their view about their own job security, we could continue to see some volatility. The weather in the past few months, as I mentioned, has had an effect. And so -- and the consumer's sort of adjusting to, in each of their cases, the new reality. So I do expect -- it wouldn't surprise me if we did continue to see volatility through the next couple of quarters.

Lawrence E. Hyatt

Yes, additionally, Jeff, the only other observation that I'll add is the volatility that we are seeing is volatility in the percentage increase versus the prior year month. And so you, to some extent, need to look at last year's volatility, which to some extent, exacerbates the same-store sales volatility you are seeing in this quarter's results.

Jeffrey D. Farmer - Wells Fargo Securities, LLC, Research Division

Okay, that is helpful. And then just one more quick sort of follow-up here as it relates to, again, the decision to add some incremental TV late in the quarter. Again, I'm questioning, is there something specific you saw? If you felt there's an opportunity or, again, you are being a little more defensive here? What was the thinking that went into the decision to increase TV late in the quarter?

Sandra Brophy Cochran

Well, given what we knew about the challenges that the consumer might have in absorbing, at that point, the changes in the payroll tax and the shift in the Easter timing and the weather impact that we experienced in February, we wanted to put additional assurances to supporting our sales expectations. So we built a plan that leveraged some of our learnings from our recent media flights. We believed we understood the benefit it would deliver. We watched the quarter, we made a decision in March to proceed. And really it was a spend that replicated as much as possible what we've done in the holiday and summer media. It was a combination of cable TV and spot radio that focused on 13 core markets here in the Southeast, about 120 stores, and we're pleased with the results.

Operator

And we'll take our next question from Michael Gallo with CL King.

Michael W. Gallo - CL King & Associates, Inc., Research Division

Question again on the marketing. I guess, as we look at the mix, you had the media campaign now for some time. It seems like the predilection has been want to increase the percentage of the TV media. It seems like whenever you do that, you generally are pretty pleased with the results. I was wondering how we should think about that mix going forward, whether this was a one-off in terms of what happened in the third quarter and we should still think about it longer-term or something you do seasonally in the second and fourth quarter or whether you kind of reevaluating that mix and thinking about whether you should run it more frequently during the year. And on that same front, I was wondering if you can give us just any kind of update on what you saw in the stores where you had the up that were near the 200 billboards that were upgraded, whether you saw some sort of improvement relative to the trend line in same-store sales?

Sandra Brophy Cochran

So let me try to address -- address all that. As you know, we've got a marketing effort that has a variety of elements. We've got TV, radio, billboards, digital, and then we've got this music program that I talked about. And all of those, we evaluate after we use any of them to understand whether they're delivering as we anticipated and how we might improve, what we're getting from each of them. So we continue to learn from them. Right now, I'm happy with all of them. We look -- we continue to look at how to fine tune both the allocation and the delivery of each of those. In terms of the second quarter, yes, we did try to do some supplemental advertising. We had an expectation of what it would deliver. We were pleased with what it did and we'll look at that and try to understand it as we decide whether to allocate more money to that type of thing going forward. We are looking at testing a few additional things in the fourth quarter and we'll kind of keep you informed as we move through that.

Michael W. Gallo - CL King & Associates, Inc., Research Division

And in terms of just on the billboards, I was wondering if you saw a big, big improvement or change on what you saw in mix as you enhanced out affordability message on the 200 billboards?

Sandra Brophy Cochran

Well, in general, with respect to our initiative to highlight our Country Dinner Plates, we did see that it met or exceeded our sales expectations. And we saw improvements, as we had hoped and expected in our GLP scores as in the perception of the guest in terms of overall value. So I believe that was driven by a combination of our in-store marketing, as well as the billboards that we did.

Operator

We'll take our next question from Joe Buckley with Bank of America Merrill Lynch.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

My question is about the -- how you're thinking about the dividends with the big increase in dividends and the pay down in debt? And you've struggled about the capital structure, and I know a couple of months ago, you offered to buy out the 20% stake held by Biglari. And just maybe give us an update on your thoughts or any data you can share with us on that topic as well? So, just kind of a broad capital cash flow, kind of you guys can kind of summarize how you guys are approaching it.

Lawrence E. Hyatt

Sure, Joe. As we have said for, I guess, a number of years now, we are following what we referred to as a balanced approach to capital allocation. We are fully funding the capital needs of the business and we offered our full year guidance for that, and then are seeking ways to return capital to shareholders that is not otherwise required for the business. Our company and the company's board is committed to creating long-term value for all of our shareholders. We believe that the increases in the company's regular quarterly dividend are in the best interest of all of our shareholders, which is why we tripled that quarterly dividend, which underscores the confidence that the company and its board has in the cash -- in our cash flow generation. The strong performance over the past 6 quarters, combined with our strategy of returning cash to shareholders in the company's mind, has helped us to consistently drive our total shareholder return.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Okay. Larry, and with respect to buying back stock, you mentioned you bought 44,000 or something during the quarter. Can we set the date how you're thinking about that, you giving Biglari stake and whether there's any discussions about Biglari stake?

Lawrence E. Hyatt

So the discussions about the Biglari stake were public, I guess, in February, and we really don't have anything further to comment on that. We will continue to selectively repurchase shares for the purpose of countering dilution.

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Okay. And just one more question on the dividend. Do you think about it as a dividend payout ratio? Or are you targeting a certain competitive yield versus the share price? Or just how you're approaching it.

Lawrence E. Hyatt

Yes, we are approaching it as looking at what the cash flow needs of the business are. And then prudently returning as much to our shareholders based upon our view on the cash flow generation potential of the business.

Operator

We'll take our next question from Steve Anderson with Miller Tabak.

Stephen Anderson - Miller Tabak + Co., LLC, Research Division

Just a modeling question. In terms of the tax rate, do you have a model you're assuming for this year and possibly into fiscal '14?

Lawrence E. Hyatt

We're not yet commenting on our guidance for fiscal '14, so I'd rather not comment on the tax rate for '14. But I'd be happy to answer any of your questions about our 2013 tax rate, Stephen.

Stephen Anderson - Miller Tabak + Co., LLC, Research Division

Okay. For fourth quarter, you're looking for any particular rate?

Lawrence E. Hyatt

We are basically anticipating a full year tax rate in the 28% to 29% range. So roughly comparable with the rate you saw in the fourth quarter -- I'm sorry, in the third quarter.

Operator

And we'll take our final question from Chris O'Cull with KeyBanc.

David Carlson - KeyBanc Capital Markets Inc., Research Division

This is Dave Carlson for Chris this morning. First question, Larry. On the stock-based comp expense, it was up, I think, more than $3 million in the third quarter of the prior year. Obviously, there's been a pretty substantial move in the share price over the past year or so. I was hoping you might be able to help us understand how maybe we should be thinking about modeling that for the fourth quarter?

Lawrence E. Hyatt

Yes. There's a portion of the company's share base comp that gets what was previously called fixed plan accounting under what was used to be FASB 123R, and there's a portion of the company's share compensations plans that basically have variable-based accounting or marked-to-market accounting. And so a significant amount of the increase in share-based comp expense year-over-year, as you rightly point out, is due to the doubling almost of the company's share price. I believe the basic rule of thumb that we've been using is that a $1 increase in the company's share price in the current fiscal year will have about a $200,000 to $300,000 increase in -- $200,000 to $300,000 impact on the company's G&A expense, which is roughly $0.01 a share.

David Carlson - KeyBanc Capital Markets Inc., Research Division

Okay. Just one last one. Can you remind us what your commodity inflation assumption was for the full year?

Lawrence E. Hyatt

Our -- yes, if you'll hold on for one moment. I think we brought it down about a 0.5 point, maybe. It was previously -- I don't know if I have it here, I may have -- but I believe that, that it was about a 0.5 point higher.

Operator

I would now like to turn the call back over to Ms. Cochran for any additional or closing remarks.

Sandra Brophy Cochran

Well, thank you for joining us today. As we head into the final quarter of the year, I am pleased with the progress we're making on our strategic priorities. And I look forward to building on this success and further executing our strategy as we move into the next fiscal year. We appreciate your interest and support. Thank you.

Operator

This concludes today's conference. Thank you for your participation.

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