Notes to Consolidated Financial Statements/For the Year ended April 30,1967
1 — Basis of Consolidation
The consolidated financial statements include the Corporation and its 50% or more owned subsidiaries, except Sheraton
Mediterranean Ltd. which leases and operates the Sheraton-
Tel Aviv Hotel in Israel, and Sheraton de Venezuela, C. A. which
manages two hotels in Venezuela; also, two domestic subsidiaries, excluded in prior years, which act as transfer agent and
purchasing agent of the Corporation and most of the subsidiaries.
The equity of the subsidiaries excluded from the financial
statements, based on audited financial statements, was $130,882
more than the cost of these investments. The equity in the
net income of these companies for the year ended April 30,
1967 was $97,700. Dividends received from these subsidiaries
during the year totalled $150,000.
The securities of certain of the consolidated subsidiaries of
Sheraton Corporation of America were acquired at costs which
were less than the book values of the equities thus acquired.
That difference is shown in the balance sheet as Surplus from
Consolidation. The securities of certain of the consolidated subsidiaries were acquired at more than book values of the equities
thus acquired. That difference has been treated in these statements as additional cost of fixed assets owned, allocated on a
pro rata basis to land and leaseholds and to buildings, and as
goodwill from consolidation, the unamortized portion of which,
$587,138 is included in Other Assets.
The remaining difference between the investments in subsidiaries consolidated, as shown by the parent's books, and the
parent's equity in the net assets of such subsidiaries is reflected
in Earned Surplus, representing accumulated undistributed earnings less losses since acquisition.
Revenue of properties operated under management agreements and franchised properties are not included in the Consolidated Income Statement. Management Fees and Franchise
Fees received from those operations, however, are reflected
under the caption "Gross Operating Income — Other."
The properties of Canadian subsidiaries are included at
Canadian dollar cost after adjustment to United States dollar
equivalents reflecting exchange rates in effect at dates of acquisition and after adjustment to increase first mortgage bonds to
par. The amounts of the first mortgage bonds of the Canadian
subsidiaries due after April 30, 1968 are reflected at their United
States dollar equivalents, using the exchange rate in effect at
the date the indebtedness was incurred, but not less than par.
The current assets and liabilities of the Canadian and other
foreign operations are reflected at April 30, 1967 exchange rates.
Income and expenses of foreign operations, except for depreciation and financing expenses, have been converted to United
States dollar equivalents at the average rates of exchange for
the respective periods after adjustment for the difference arising from the conversion of the assets and liabilities described
2 — Investments
Securities — Other than Marketable have been valued as
At Estimated Value for Securities Closely Held $92,700
At Estimated Value for Securities of a Garage
Corporation Serving a Subsidiary's Hotel 5,000
Investments in Securities of Subsidiaries — Eliminated in
Consolidation with a total book value of $2,147,500 are pledged
to secure notes and mortgages payable.
3 — Property, Plant and Equipment
Substantially all of the real estate and furniture and equipment are pledged to secure mortgages and other long-term debt.
4— Long-Term Indebtedness
Long-term indebtedness includes obligations of the Corporation as follows:
6Vi% Income Subordinated Debentures,
Due January 1, 1981 $10,635,500
7Vz% Capital Income Sinking Fund
Debentures, due January 1, 1989 28,194,000
(Stated separately on Balance Sheet)
6% Note Payable, due February 15, 1978 9,400,000
The Trust Indentures, supplements thereto and Loan Agreement with respect to the foregoing require annual sinking fund
payments as follows:
6V2% Debentures, due January 1, 1981
3% of the principal amount of the Debentures outstanding on the previous January 1. The redemption
price for sinking fund reduces Vs of 1% annually
from 101 through January 1, 1973 to par at January
1, 1981. The payment required December 31, 1966
was paid in full. The amortization requirement on
December 31, 1967 is $334,900. Debentures in the
Treasury at April 30, 1967 aggregated $525,100
which exceeds the foregoing requirement.
7Vz% Debentures, due January 1, 1989
1967 through 1979, $990,000 on January 1 of each
1980 through 1988, 10% of the principal amount of
Debentures outstanding at October 31, 1979.
The redemption price for sinking fund reduces Vs of
1% annually from 102% at January 1, 1967 to par
at January 1, 1985.
Debentures aggregating $990,000 were retired on
January 1, 1967.
Debentures in the Treasury at April 30, 1967 aggregated $54,400.
6% Note Payable, due February 15, 1978
1967 through 1977, $600,000 on February 15 of
The loan agreement pursuant to which the 6% Note Payable was issued contains certain restrictions on payment of
dividends by the Corporation, issuance of debt by subsidiaries,
and guarantees by the Corporation of new debt and lease obligations of subsidiary companies (see Note 6).
Federal, Foreign and State Taxes Payable Include known
long-term tax liabilities and provision for proposed or anticipated
additional Federal, Foreign and State taxes, including amounts
which are under litigation.
5 — Capital Shares
The Corporation's charter authorizes the issuance of 100,-
000 shares of Preferred Stock, $100 par value. This Stock is
issuable In series and at terms, at time of issue, within the
discretion of the Board of Directors. An initial series of 15,120
shares of 4% Cumulative Convertible Preferred Stock was issued in 1960. In accordance with the Sinking Fund requirements, during the current year 1,285 shares were redeemed and
retired. The 13,835 shares outstanding at April 30, 1967 are
presently convertible into Common at the rate of one share
of Common for each $50 par value of Preferred and are redeemable in whole or in part at par plus accumulated dividends to
date of redemption.
So long as any shares of the 4% Cumulative Convertible
Preferred Stock are outstanding, the Corporation, on and after
September 1, 1966, shall not declare and pay any dividends on
its Common Stock, except dividends payable in Common Stock,
or purchase or redeem any shares of Common Stock, unless it
shall have paid or set aside for payment with respect to each
prior fiscal year, beginning with tne Corporation's fiscal year
ended April 30, 1966, as a Sinking Fund for the purchase or
redemption of the Preferred shares, the lesser of (1) the total
number of shares originally outstanding multiplied by $8.50, or
(2) an amount equal to the net profits of the Corporation for
such fiscal year less cumulative dividends payable upon such
stock for that year. The amount required to be set aside by
August 31, 196/ is $128,520.
Of the total Common shares shown as authorized, shares
are reserved as follows:
27,670 shares for the conversion of the issued and outstanding 4% Cumulative Convertible Preferred Stock.
122,700 shares for the exercise of the warrants sold at
$.75 per warrant to officers and employees during
the year ended April 30, 1962. Each warrant entitles
the holder to buy, to November 1976, one share of
Common Stock ($.50 Par) for $50, payable in cash.
No fractional shares will be issued as a result of the
exercise of warrants or conversion provisions described above, but cash adjustments will be made
in lieu thereof.