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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 9. 1967. Hospitality Industry Archives, Conrad N. Hilton College of Hotel and Restaurant Management, University of Houston. University of Houston Digital Library. Web. November 20, 2019. https://digital.lib.uh.edu/collection/hiltonar/item/1346/show/1334.

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 9. 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/1334

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 9, 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 20, 2019, https://digital.lib.uh.edu/collection/hiltonar/item/1346/show/1334.

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 9
Format (IMT)
  • image/jpeg
File Name hiltonar_201609_026_009.jpg
Transcript depreciation required. (In the event that any substantial repurchases or distributions of the Company's common stock had taken place, these should be taken into account. Likewise the operations of the Company's major subsidiary Thompson Industries engaged in the manufacturing business should be excluded.) The indicated excess depreciation based on a simple calculation of appreciation in Sheraton net assets during the past 15 years is $107 million compared with $210 million provided, or 51%. By taking into account purchases and issuance of Sheraton stock during the 15 year period, and eliminating Thompson Industries, the figure becomes 50%. The latter more precise measure of excess depreciation is being used in the calculations of "Modified Earnings." Applying this formula to the period since 1952, shows that actual depreciation requirements were $105 million, or approximately 50% of the reserves of $210 million recorded on the books, which means that excess reserves of $105 million were not needed. These excess reserves were in fact essentially comparable to any other reserves set up for contingencies that did not materialize. They should thus, we believe, be added back to the reported earnings from operations. This would indicate that for the fiscal year just concluded total earnings, referred to as "Modified Earnings" (column 12-A, page 4) were $10.7 million, or $1.94 a share compared with actual reported earnings of $5 million, or 91 cents per share, arrived at in accordance with prescribed accounting procedure. ("Modified Earnings" for the past year were after a provision of $3.8 million for possible future added income taxes.) Although some of these added earnings do show up occasionally in the form of capital gains In the event that properties are actually sold, In most instances Sheraton hotels are retained as long-term investments. With reference once more to "Adjusted Earnings" tabulated in earlier reports, it should be noted that this concept, based on depreciation reserves equal to 6% of hotel sales, is still retained for determining property valuations. For this purpose, the Company's equity in a hotel over and above mortgage Indebtedness is measured by capitalizing at 9% the so-called "Adjusted Earnings" before income tax (after interest, and depreciation using the 6% of sales formula). Sheraton, having sold many hotels over the years, has found its measurements of market values to be quite reliable, erring if at all on the side of understatement. The seeming contradiction of using close to 50% of allowable depreciation in determining Sheraton's "Modified Earnings" and a figure equal to six per cent of sales, amounting to approximately 75% of allowable depreciation, when calculating indicated market values, is nonetheless quite logical. It reflects the fact that depreciation reserves ordinarily needed by the Industry, tend to be somewhat higher than the net amount required by a major hotel system which generally has above average facilities for maintaining and improving properties, and for developing increased earning power. In establishing indicated market values of real estate holdings, it is the presumed earning power under generally prevailing operating conditions in the industry that ordinarily governs market values; not necessarily the somewhat more favorable conditions experienced by a large hotel system. Thus the somewhat more generous depreciation reserves equal to 6% of hotel sales are considered both realistic and have the added advantage that they are easily determinable. To adopt the concept of "Modified Earnings" as the official method of reporting Company income would presumably require the sanction of the Company's certified public accountants, the Securities and Exchange Commission and perhaps others. The fact that this change in the method of reporting Sheraton income is not feasible at the present time does not detract from the need to inform stockholders as fully as possible of the inadequacies of present depreciation concepts in measuring the performance of a real estate company such as a hotel enterprise. We take comfort in noting that a partner of a leading national accounting firm (see New York Times June 17, 1967, page 38) has recently advocated revisions In proposed legislation so as to require "value reporting" by companies especially as a means of informing stockholders who have to pass on proposed mergers and tender offers. He notes that "as a workable accounting method, value reporting has been successful for Investment companies for more than twenty- five years." He further notesthat the "value reporting principle should apply to all assets owned and not just to securities." The Company's present net worth of some $168 million arrived at on the basis of an estimated $30.52 a share of net asset value, would indeed be difficult to explain on the basis of operating earnings reported over the 30 years' life of the Company, since such earnings have amounted to less than $60 million, and most of these were distributed as cash dividends. Since the Company's net worth 30 years ago was under Vt million dollars, and only a modest amount of retained earnings from operations were available to contribute to the present indicated net worth, clearly the Company's growth from $% million to $168 million cannot have come from these relatively small reported earnings. Only through some concept such as that of "Modified Earnings" based on the recapture of close to one half the depreciation reserves set up on the books, could the retained earnings be sufficient to account realistically for the present indicated net worth of the Company. oLoo3Stw cA_SJ_A^-< Chairman of the Board