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Sheraton Corporation of America, 1967 Annual Report
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Starwood Hotels & Resorts. Sheraton Corporation of America, 1967 Annual Report - Image 7. 1967. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. University of Houston Digital Library. Web. November 21, 2019. https://digital.lib.uh.edu/collection/hiltonar/item/1346/show/1332.

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. (1967). Sheraton Corporation of America, 1967 Annual Report - Image 7. 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/1346/show/1332

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, 1967 Annual Report - Image 7, 1967, Annual Reports from the Hospitality Industry Archives, Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston, accessed November 21, 2019, https://digital.lib.uh.edu/collection/hiltonar/item/1346/show/1332.

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, 1967 Annual Report
Creator (LCNAF)
  • Starwood Hotels & Resorts
Publisher Starwood Hotels & Resorts
Date 1967
Description Sheraton Corporation of America Annual Report for the year ending on April 30, 1967.
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 7
Format (IMT)
  • image/jpeg
File Name hiltonar_201609_026_007.jpg
Transcript Source and application of funds (ows omitted) Source of Funds From Operations Net Operating Income $ 5,078 Depreciation 19,559 Total from Operations 24,637 Proceeds from Sale of Properties and Other Capital Transactions ...**« 3,748 Proceeds of Long-Term Borrowing 17,548 Payments Received on Mortgages Receivable Increase in Equity of Minority Interests Decrease in Other Assets Miscellaneous Decrease in Working Capital (exclusive of current debt maturities) 788 191 199 53 5,232 $52,396 Application of Funds Expenditure for Property, Plant and Equipment $31,872 Reductions in Long-Term Debt Cash Dividends .......... Purchase of Common Stock .... Retirement of Preferred Stock 17,387 2,631 378 128 $52,396 by the fact that fifteen years ago the total gross assets of the Company at indicated market values were only $113 million, or in fact $82 million if taken at book values. Especially since substantial non-depreciable items such as land, cash, and accounts receivable were included, it is unlikely that a $210 million reserve could have been needed to cover losses from aging or obsolescence during the following 15 years! Since actual computations establish that depreciation reserves have been taken at almost twice the level required to maintain constant the market values of Sheraton properties, we have this year discontinued showing "Adjusted Earnings" in the tables and have substituted what we call "Modified Earnings" (columns 12-A and 12-B, page 4). These are arrived at by simply reducing each year the provision for depreciation by a calculated amount which equals approximately one half the allowable depreciation set up on the books of the Company. The remaining depreciation reserves still provide, we believe, an ample and scientifically correct allowance to cover any net losses from aging, obsolescence, etc., likely to be encountered in coming years, especially if averaged out over good and bad years. The reason for anticipating future depreciation requirements at a rate no higher than those of the preceding 15 years, is that heavy shrinkages in Sheraton property values did occur during fiscal '62 and '63, due to losses in those years which necessarily affected property values. The resulting abnormal depreciation requirements for those two unsatisfactory years were included in the calculations of actual depreciation needs covering the past 15 years. It is anticipated that the losses of '62 and '63 will turn out to be largely of a non-recurring nature and may thus to a considerable extent be avoided in the future. Such expectations are ma terially strengthened by the consistent sales growth indicating the essentially non-cyclical nature of the hotel business. (See column 3A, page 4.) During the past year, Sheraton's cash earnings from operations before depreciation reserves, but after income tax, referred to as Cash Flow (column 6-A, page 4) amounted to $24.6 million. Of this amount $19.6 million was set aside for depreciation, leaving $5.0 million, or 91 cents a share (column 9-B) as reported operating earnings. The question is frequently asked: why should nearly 80% of the Cash Flow be set aside for possible shrinkage in the value of Sheraton properties when such losses are clearly not realistic. The reason seems to lie in the limitations of generally accepted accounting procedures, in the intricacies of our tax structure, and especially in the dual function that depreciation reserves are expected to perform. The two purposes that depreciation reserves are designed to serve are quite distinct and largely unrelated. They are: (1) A measure of allowable reserves under treasury regulations. These are designed to provide tax free income for the "recapture" of the original investment in properties such as hotel buildings, etc. which have a theoretically measurable useful life. Such allowable reserves are sometimes modified to serve as a tax incentive to stimulate construction and related industries, and accordingly may bear little relationship to actual requirements for offsetting aging and obsolescence. Such reserves, being tax deductible and to some extent discretionary, are usually maximized in order to reduce tax burdens. (2) Depreciation reserves also serve a second purpose: to make meaningful to an investor the amount of earnings being currently generated. Obviously when depreciating assets are involved, there must be adequate reserves taken out of current earnings to offset any trends towards declining property values, before true earnings can be reported. Otherwise attrition of capital could take place, and reported earnings would be meaningless. On the other hand excessive allowable depreciation can also be misleading. Reported earnings under such circumstances are unduly penalized and therefore unrealistic. Such excess would eventually appear in the form of rising net asset values growing out of reserves in excess of requirements. The amount of such appreciation in net assets, (after allowing for any retained reported earnings) can be a measure of the excess depreciation provided. From an investor's point of view, earnings figures can only be fully meaningful when depreciation reserves reflect accurately the trend of change in the market value of depreciable property by supplying a realistic provision for replacement of net losses in property valuations. Fortunately there are many forces which tend to reduce, and sometimes even eliminate the need for depreciation, even if these forces do not in any way affect the amounts properly deductible for tax purposes. Among the forces that tend to reduce from an investor's point of view the amount of net depreciation needed, are the following: (1) The quality of property maintenance provided, and the effectiveness of provisions for modernization. (2) The impact of inflation on property values, augmented by the leverage provided by mortgage indebtedness. (3) The effect of rapidly rising land values, especially in desirable downtown areas where many Sheraton hotels are located. High downtown land values, by discouraging competition in the area, are generally reflected in the level of attainable room-rates. (4) The influence on the level of hotel