Notes to Consolidated Financial Statements/For the Year ended April 30,1967
6 — Earned Surplus
The portion of consolidated earned surplus applicable to
Canadian subsidiaries is $11,423,409, which is subject to a
15% withholding tax on dividends.
In connection with outstanding Debentures, payment of
dividends by a Canadian subsidiary is restricted to amounts
based upon earnings. The foregoing amount includes approximately $4,555,000 of earnings subject to this restriction.
In connection with the 6% Note Payable, due February 15,
1978, the Corporation may pay dividends or make other payments of any kind with respect to subordinated debt, capital
stock or warrants, other than stock dividends, only to the extent
of an amount determined in accordance with a formula related
to earnings since April 30, 1965, plus $2,000,000. The unrestricted balance available for this purpose as of April 30, 1967
exceeded the amount of earned surplus at that date.
7 — Long-Term Leases
As at April 30, 1967, Sheraton Corporation of America
was obligated as guarantor of a subsidiary office building lease
expiring in 2010. The present annual rental of $420,343 will be
reduced in December 1981 to approximately $195,000. The
guarantee is limited to payment of no more than $700,000 reducing $100,000 a year to a minimum of $100,000, in the
event such amounts are deposited upon default.
Certain hotels and motor inns are operated at April 30, 1967
under leases with annual minimum rentals totalling approximately $7,800,000. Of this amount, approximately $6,800,000
represents the annual rents under those leases which are guaranteed by the Corporation for varying terms in accordance with
the lease terms.
At April 30, 1967, other long-term lease rental obligations on
garages, parking lots, etc. executed by subsidiaries of the Corporation were at an annual rate of approximately $900,000 .
8 — Commitments and Contingent Liabilities
The Corporation is liable as guarantor of certain notes and
mortgages payable of subsidiaries. All of these obligations are
included as liabilities in the consolidated balance sheet.
On June 14, 1955, the Corporation executed an Agreement and Declaration of Trust, creating the Sheraton Employees
Savings Plan. Upon voluntary or involuntary withdrawal, an employee is entitled to receive, as a minimum, his contribution plus
interest at 3% per annum. The Corporation is obligated to pay
any deficiency which may exist in the Trust in computing this
Contracts have been entered into and commitments made
with respect to major construction projects for construction in
progress amounting to approximately $5,400,000 in addition to
liabilities already recorded at April 30, 1967.
9 — Pensions and Savings
Contributions to Pension Plans, exclusive of expenses of
administering the Plans, applicable to the year ended April 30,
1967, as estimated by the actuaries, were as follows:
Service Costs Unfunded
Cost of Past
Plan Current Past Total Benefits
subsidiaries) $305,223 $ 76,547 $ 381,770 $ 586,000
Subsidiaries 483,674 158,294 641,968 2,454,000
Total, All Plans $788,897 $234,841 $1,023,738 $3,040,000
In addition to the above, certain subsidiaries maintain pension plans which are funded by the purchase of insurance policies with annual premiums totalling approximately $80,000.
The Corporation intends to amortize the remaining unfunded past service benefits listed above over periods of thirty
years or less. The Parent Company's voluntary non-contributory
Pension Plan and Trust covers all Parent Company employees
and employees of certain United States subsidiaries who have
completed two years of continuous service, have attained age 30
and have not reached age 65.
The actuarially computed liabilities for benefits accrued
to participants through the end of the fiscal year exceeded the
market value of the assets in the plans by approximately
The Corporation and substantially all of its United States
subsidiaries inaugurated an Employees Savings Plan, the details of which are set forth in an Agreement and Declaration of
Trust dated June 14, 1955. The Plan provides that, based on
formula limitations, the employing companies will pay up to
25% of employees' contributions which may be made up to
6% of their pay.
10 — Consolidated Income Statement
The debt discount and expense, incurred in connection
with the &Vi% and 7Vi% Debentures and other debt, is being
amortized uniformly on a straight line basis over the various periods of time from the respective inceptions of the debts to their
respective maturities, giving effect to acquisitions in excess
of annual requirements.
Report of Independent
Certified Public Accountants
To the Stockholders,
Sheraton Corporation of America,
We have examined the accompanying consolidated balance sheet of Sheraton Corporation
of America and its Subsidiaries as at April 30,
1967 and the related consolidated surplus and
income statements for the year then ended. Our
examination was made in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records
and such other auditing procedures as we considered necessary in the circumstances. We had
made a similar examination for the year ended
April 30, 1966.
In our opinion, the accompanying consolidated balance sheet and the related consolidated
statements of surplus and income, present fairly
the financial condition of Sheraton Corporation of
America and Subsidiaries as at April 30, 1967
and the results of their operations for the years
ended April 30, 1967 and 1966, in conformity
with generally accepted principles of accounting
applied on a consistent basis.
HARRIS, KERR, FORSTER & COMPANY
Boston, Massachusetts, July 7,1967