Original Source: FD (FAIR DISCLOSURE) WIRE
DAVID KATZ, ANALYST, OPPENHEIMER & CO.: I'm David Katz of Oppenheimer Equity Research. Our nest presentation is Choice Hotels International, a hotel franchiser of 10 brands, primarily in the limited service, mid-scale segment. Choice franchises properties within the United States as well as in 38 countries internationally. The Company has recently launched a new, more upscale brand called Cambria Suites. We are doing a trip down there later this month, which appears to be off to a very strong start.
Leading off today, we have Steve Joyce, Chief Executive Officer of Choice Hotels.
STEVE JOYCE, PRESIDENT, CEO, CHOICE HOTELS INTERNATIONAL, INC.: Good morning. Well, let's see. For those of you who I haven't met before, I'm Steve Joyce. I am a relative newcomer to Choice Hotels. I spent 26 years at Marriott, up through the end of the first quarter. You can kind of see the impact of my leaving on the second quarter results they announce this morning. No, that's not true.
However, I am an enthusiastic newcomer to Choice. I am enormously attracted to the model that they have. It is the best pure franchise play in the business. It is a model that works well in up and down times. It is a model that has several different levers that can be pulled to ensure the Company's and the shareholders' success. And the Company has an extraordinary track record over the last ten years of providing value to the shareholders and to the franchisees, and I think is a platform poised for exciting growth in the future and for future success.
So, to talk a little bit about the platform, it is a pure franchise play. All of the fees come off the top -- very predictable, profitable growth in all economic environments. It has a strong track record of being able to expand its market share. I'll show you a little information on that; it's in the presentation. And, it has long-term franchise agreements, which essentially function as annuities.
There are significant growth opportunities that remain, which is one of the major things that attracted me to the Choice platform, both domestically, while there are continual huge conversion opportunities, and particularly in a downturn, when conversions tick up. That is an opportunity for Choice's conversion brands, which are among the strongest that are out there. And in addition to that, the Company has moved into the upper-moderate and lower-upscale tier with a new brand called Cambria Suites, which, having been involved in this space for 20 years, I can tell you that this is one of the best designed products that I've seen. The consumer reaction to the brand is extraordinarily enthusiastic and, we think, bodes well for future development for that brand as well as bringing in new customers into the Choice system that will experience the other brands as well.
The other thing is, at Marriott, I had a long involvement on the international side. Choice has a very strong international platform with 1100 hotels, but I think that that growth that they have experienced can also be accelerated, and so that shows a big opportunity for us.
It is a company with significant free cash flow, very strong capital structure, obviously a balance sheet that has a lot of capacity and a track record of using that balance sheet for share repurchase when we think that's appropriate. We do it in an environment where we think the stock is underpriced and have historically distributed wealth to the shareholders through that vehicle, and we will continue to do that.
There is also obviously a lot of capacity in the balance sheet to aid additional growth, if we …