Cracker Barrel Old Country Store Inc (CBRL) 2013 Q3 法說會逐字稿

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  • 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 Eastern through June 17 at 11.59 Eastern by dialing 719-457-0820, and entering pass code 758-7468.

  • 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 - Manager of IR

  • Thanks, Noah.

  • 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 the 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 contest.

  • 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 furnish 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, Sandy Cochran.

  • Sandy?

  • Sandy Cochran - President & CEO

  • 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 19% increase in diluted EPS over the prior-year quarter.

  • Larry will provide more detail on the financial results of the quarter.

  • 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've 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 number one in the 2013 consumer survey conducted by Nation's Restaurant News.

  • In the three 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, intent 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 extend the Cracker Barrel Old Country Store brand.

  • This strategy is supported by our six 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 returns.

  • 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 Plate.

  • The spring promotion is in stores now.

  • And limited time offerings include buttermilk oven fried chicken, grilled chicken and strawberry salad, a multi-berry pancake breakfast.

  • As well as two Country Dinner Plates -- a mushroom Swiss chopped steak, and bacon and cheese cider barbecue chicken.

  • We've also included a stapled 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 entree choices in the $7.69 price point.

  • In addition to the 100 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 guest needs for value and driving our affordability message.

  • Our next focus is on meeting guest needs of better-for-you choices with our new Wholesome Fixins 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 store front, on-site web and digital promotions.

  • This has created new channels to engage with our guest 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're pleased with our retail sales in the third quarter.

  • Despite 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 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 leverage 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 costs and increase guest satisfaction.

  • We completed the roll-out 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 planner also provides more clear direction on preparation and storage time for greater amounts of fresh produce.

  • Which is timely given the roll-out of new items for our upcoming summer promotion and the launch of Wholesome Fixins.

  • Given our operational success, we continue to be focused on enhancing shareholder returns through 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 six business priorities, is delivering results.

  • And we directly increased 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.

  • Larry Hyatt - SVP & CFO

  • Good 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 [120] (corrected by company after the call) basis point increase was the result of higher markdowns and higher in-bound 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%] (corrected by company after the call) 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 lower 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] (corrected by company after the call) 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.

  • 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.

  • Operator

  • (Operator Instructions)

  • Jeff Omohundro with Davenport & Company.

  • Jeff Omohundro - Analyst

  • Thanks and congratulations on the quarter.

  • Larry, just a housekeeping item first.

  • The shift in the capital expenditures target for the year, could you maybe dig into that a little bit?

  • Has a project been delayed?

  • Or is this a new run rate?

  • Some help with that would be great.

  • Larry Hyatt - SVP & CFO

  • Sure, Jeff.

  • Capital expenditures are really a function of three things.

  • The Company's investment in new stores as part of the second of the three 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 two 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.

  • Jeff Omohundro - Analyst

  • 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.

  • Larry Hyatt - SVP & CFO

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

  • Jeff Omohundro - Analyst

  • Okay.

  • Thank you.

  • 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 could give a little more granularity on the drivers.

  • And how sustainable a comp run rate in this general range might be.

  • That's all I had.

  • Thanks.

  • Sandy Cochran - President & CEO

  • Jeff, I'll take that one.

  • 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 I'm optimistic that we'll continue to make progress in the next few quarters.

  • Jeff Omohundro - Analyst

  • Thank you.

  • Operator

  • Jeff Farmer with Wells Fargo.

  • Jeff Farmer - Analyst

  • Good morning and thank you.

  • Just keeping with the theme of volatility, but this time shifting over to the restaurant level, where you've seen 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 hinted at that.

  • And how are you thinking about this 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?

  • Sandy Cochran - President & CEO

  • I 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 month, 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 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 the consumer's adjusting to, in each of their cases, the new reality.

  • It wouldn't surprise me if we did continue to see volatility through the next couple of quarters.

  • Larry Hyatt - SVP & CFO

  • 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.

  • Jeff Farmer - Analyst

  • Okay.

  • That is helpful.

  • And then just one more quick follow-up here as it relates to, again, the decision to add some incremental TV late in the quarter.

  • Again, I'm questioning if there was something specific you saw, if you felt there was an opportunity, or, again, you were being a little bit more defensive here.

  • What was the thinking that went into the decision to increase TV late in the quarter?

  • Sandy Cochran - President & CEO

  • 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.

  • Jeff Farmer - Analyst

  • All right.

  • Thank you.

  • Operator

  • Michael Gallo with CL King.

  • Michael Gallo - Analyst

  • Hi, good morning.

  • I just want to again echo the strong results.

  • Question again on the marketing.

  • As we look at the mix, you've had the media campaign now for some time.

  • It seems like the predilection is to want to increase the percentage of 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 as something you do seasonally in the second and fourth quarter.

  • Or whether you're re-evaluating that mix, and thinking about and 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 update on what you saw in the stores that were near the 200 billboards that were upgraded, whether you saw some improvement relative to the trend line in same-store sales.

  • Thank you.

  • Sandy Cochran - President & CEO

  • Let me try to 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 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 keep you informed as we move through that.

  • Michael Gallo - Analyst

  • In terms of just on the billboards, I was wondering if you saw a big improvement or change in what you saw in mix as you enhanced that affordability message on the 200 billboards.

  • Thank you.

  • Sandy Cochran - President & CEO

  • 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 guests 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.

  • Michael Gallo - Analyst

  • Thank you.

  • Operator

  • Joe Buckley with Bank of America-Merrill Lynch.

  • Joe Buckley - Analyst

  • Good morning.

  • My question is about how you're thinking about the dividend with the big increase in dividend and the paydown in debt.

  • Can you just talk a little bit about the capital structure?

  • I know a couple months ago you offered to buy out the 20% stake held by Biglari.

  • And just maybe give us an update on your thoughts or anything you can share with you us on that topic, as well.

  • So it's a broad capital cash flow kind of -- if you guys can summarize how you are approaching it?

  • Larry Hyatt - SVP & CFO

  • Sure, Joe.

  • As we have said for a number of years now, we are following what we refer 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've tripled that quarterly dividend.

  • Which underscores the confidence that the Company and its Board has in our cash flow generation.

  • The strong performance over the past six 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.

  • Joe Buckley - Analyst

  • Okay.

  • Larry, with respect to buying back stock, you bought 44,000 or something during the quarter.

  • Bring us up to date how you're thinking about that, given the Biglari stake and whether there's any discussions about the Biglari stake.

  • Larry Hyatt - SVP & CFO

  • The discussions about the Biglari stake were public 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.

  • Joe Buckley - Analyst

  • Okay.

  • And just one more question on the dividend.

  • Do you think about it as a dividend payout ratio?

  • Or are you talking a certain competitive yield versus the share price?

  • Or just how are you approaching it?

  • Larry Hyatt - SVP & CFO

  • 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.

  • Joe Buckley - Analyst

  • Okay.

  • Thank you.

  • Operator

  • Steve Anderson with Miller Tabak.

  • Steve Anderson - Analyst

  • Good morning.

  • 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?

  • Larry Hyatt - SVP & CFO

  • 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.

  • Steve Anderson - Analyst

  • Okay.

  • For fourth quarter, are you looking for any particular rate?

  • Larry Hyatt - SVP & CFO

  • 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 third quarter.

  • Steve Anderson - Analyst

  • Okay, that makes sense.

  • Thank you.

  • Operator

  • Chris O'Cull with KeyBanc.

  • Dave Carlson - Analyst

  • This is Dave Carlson on for Chris this morning.

  • Hope all is well with you guys.

  • First question, Larry, on the stock-based comp expense, it was up, I think, more than $3 million in the third quarter over the prior year.

  • Obviously there's been a pretty substantial move in the share price over the past year.

  • 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.

  • Larry Hyatt - SVP & CFO

  • Yes.

  • There's a portion of the Company's share-based comp that, while it previously called fixed plan accounting under what used to be FASB 123R, and there's a portion of the Company's share compensation plans that basically have variable based accounting or mark-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 impact on the Company's G&A expense, which is roughly $0.01 a share.

  • Dave Carlson - Analyst

  • Okay.

  • Thanks for that.

  • Just one last one.

  • Can you remind us what your previous commodity inflation assumption was for the full year?

  • Larry Hyatt - SVP & CFO

  • Our previous -- yes, if you'll hold on for one moment.

  • I think we brought it down about 0.5 point maybe.

  • It was previously -- I don't know if I have that here.

  • But I believe that it was about 0.5 point higher.

  • Dave Carlson - Analyst

  • Okay.

  • Thank you, guys.

  • Operator

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

  • Sandy Cochran - President & CEO

  • 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.