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Sheraton Corporation of America, 1961 Annual Report
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Starwood Hotels & Resorts. Sheraton Corporation of America, 1961 Annual Report - Image 19. 1961. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. University of Houston Digital Library. Web. July 24, 2019. https://digital.lib.uh.edu/collection/hiltonar/item/1325/show/1315.

Disclaimer: This is a general citation for reference purposes. Please consult the most recent edition of your style manual for the proper formatting of the type of source you are citing. If the date given in the citation does not match the date on the digital item, use the more accurate date below the digital item.

Starwood Hotels & Resorts. (1961). Sheraton Corporation of America, 1961 Annual Report - Image 19. Annual Reports from the Hospitality Industry Archives. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. Retrieved from https://digital.lib.uh.edu/collection/hiltonar/item/1325/show/1315

Disclaimer: This is a general citation for reference purposes. Please consult the most recent edition of your style manual for the proper formatting of the type of source you are citing. If the date given in the citation does not match the date on the digital item, use the more accurate date below the digital item.

Starwood Hotels & Resorts, Sheraton Corporation of America, 1961 Annual Report - Image 19, 1961, Annual Reports from the Hospitality Industry Archives, Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, accessed July 24, 2019, https://digital.lib.uh.edu/collection/hiltonar/item/1325/show/1315.

Disclaimer: This is a general citation for reference purposes. Please consult the most recent edition of your style manual for the proper formatting of the type of source you are citing. If the date given in the citation does not match the date on the digital item, use the more accurate date below the digital item.

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Compound Item Description
Title Sheraton Corporation of America, 1961 Annual Report
Creator (LCNAF)
  • Starwood Hotels & Resorts
Publisher Starwood Hotels & Resorts
Date 1961
Description Sheraton Corporation of America Annual Report for the year ending on April 30, 1961.
Subject.Topical (LCSH)
  • Hospitality industry
  • Hotel management
  • Corporation reports
Subject.Name (LCNAF)
  • Starwood Hotels & Resorts
Genre (AAT)
  • annual reports
  • business records
Language English
Type (DCMI)
  • Text
  • Image
Original Item Location Conrad N. Hilton Papers
Digital Collection Annual Reports from the Hospitality Industry Archives
Digital Collection URL http://digital.lib.uh.edu/collection/hiltonar
Repository Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston
Repository URL http://www.uh.edu/hilton-college/About/hospitality-industry-archives
Use and Reproduction No Copyright - United States
File Name index.cpd
Item Description
Title Image 19
Format (IMT)
  • image/jpeg
File Name hiltonar_201609_023_019.jpg
Transcript 17 ings" must remain in the same category as unaudited company financial statements. Evaluation Certificates may eventually become almost indispensable to companies such as paper, lumber, or petroleum companies which maintain in the form of growing forests or underground oil reserves extensive assets which — since their value is not periodically redetermined through market "turnover," may be changing materially in value. Changes brought about by inflation, or recessions; changes due to good or poor maintenance; and changes brought about by new competition are all duly reflected through the medium of net worth accounting. These are among the reasons for Sheraton's interest in net worth accounting, and in the proposed depreciation substitutes or net worth factors. The following illustration presents a comparison of application of principles of net worth accounting and ordinary accounting relating to transactions of the Company for the ten years ended April 30, 1961. TEN-YEAR PROFIT & LOSS To April 1961 Accorc ingto Net Worth Accounting Ordinary Accounting Gross Income $1,310,000,000 $1,310,000,000 Operating Costs and Expenses 1,081,000,000 1,081,000,000 Basic Earnings 229,000,000 229,000,000 Interest 52,000,000 52,000,000 Income Taxes 37,000,000 37,000,000 Minority Interests 5,000,000 5,000,000 Depreciation 101,000,000 Net Worth Factor (Note 1) -8,000,000 Net Worth Profit (Note 2) $143,000,000 Income From Operations 34,000,000 Realized Capital Gains 16,000,000 Income From Operations Plus Realized Capital Gains $50,000,000 Note 1 —Takes into account changes in estimated asset values, realized capital transactions, and differences arising from sales and purchases of common stock at more or less than net asset value. Adjusted for minority interests. Not adjusted for income taxes on unrealized appreciation as amounts are based upon a continuing business theory and sale of properties or liquidation are not ordinarily contemplated. Note 2 — See table on page 4. It can be observed from the above tabulation that earnings are 93 million dollars greater as determined in accordance with the net worth accounting concept. It is apparent that this substantial difference can be related largely to the depreciation reserves provided under ordinary accounting which do not always reflect true economic performance. A net worth factor has been substituted, based on Company officers' estimates of changes in market value — realized or unrealized during the period — of real estate as well as other assets of the Company. This net worth factor increases reported earnings (becomes a negative quantity) when net appreciation in values is indicated. The improvement in operations reflected by net worth accounting results largely from the fact that the market value of Sheraton properties and other assets held in 1951, together with the cost of subsequent acquisitions, additions and improvements, — instead of declining to the extent suggested by depreciation reserves of $101,000,000 that were recorded — actually appears to have increased an indicated $8,000,000 in value as measured by the net worth factor. Accordingly, all in all, the depreciation reserves provided during the ten-year period were substantially unnecessary, therefore becoming the equivalent of retained earnings. Such an indicated discrepancy, we believe, should be recognized from year to year if shareholders are to be properly informed on economic developments affecting the Company. It is for this reason that under the concept of "net worth accounting" we would substitute for a $101,- 000,000 theoretical, and in this instance seemingly unrealistic depreciation reserve set up for contingencies which did not materialize, a much more scientific "net worth factor." It is not hereby contended that aging, obsolescence, and shrinkages in values due to competition and other causes, are not a very real and ever present force constantly affecting adversely the value of income real estate. We believe these ever present deterrents can be partially, and in our ten-year (and prior) experience, more than offset by constructive developments such as good maintenance, effective merchandising, and especially by investing the amounts represented by our large depreciation reserves in improvements, additions, or new acquisitions. The added earnings from these improvements when capitalized, usually add enough more, over and above their cost, to the value of Sheraton properties to compensate at least in part, and frequently more than compensate for aging, obsolescence, etc. An example is our experience with another of our larger Sheraton hotels. We purchased it fairly recently for approximately 3% million dollars and have since invested some six million dollars in improvements, additions, etc. This investment of six millions has added over twelve millions to the fair market value of the property as a going business, as measured by capitalizing the increased basic earnings. There are, of course, instances, frequent in the industry, though fortunately rare for Sheraton, when inadequate maintenance, competition, or other factors caused properties to decline in value even faster than was compensated for by depreciation reserves. In such instances the net worth factor could exceed any normal permissible depreciation. Ordinary accounting often obscures such danger signals, sometimes causing costly repercussions, whereas net worth accounting highlights such developments. We believe an important task facing the Company is to clarify to shareholders and to the financial community the basic philosophy behind Sheraton's major objective of building up net asset values. Sheraton cannot be judged by yardsticks applicable to companies whose principal product is constantly revalued through the process of periodic market turnover; nor can the Company's progress be judged by reported earnings, due to the variables involved in determing the large depreciation reserves. It is our belief that Sheraton's rate of growth can only be measured accurately by true economic changes in net asset values, or measured approximately, by its cash flow.