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SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1976 Commission File No. 0-2992 THE SEVEN-UP COMPANY (Exact name of registrant as specified in its charter) MISSOURI 43-0513480 (State of incorporation) (IRS Employer Identification No.) 121 So. Meramec, St. Louis, Missouri 63105 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 314-863-7777 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered (NOT APPLICABLE) Securities registered pursuant to Section 12(g) of the Act: Common Stock -- $1.00 Par Value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yes X No P. Indicate the number of shares outstanding of each of the issuer's classes off,.Common Stock, as of the close of the period covered by this report. Class Common Stock, $1.00 Par Value Outstanding at December 31, 1976 10,719,501

PART I ITEM 1., (a)-(b) Business: GENERAL The Seven-Up Company ("Company"), incorporated in 1921, is _ engaged in the manufacture and sale of soft drink extracts and the manufacture (through independent contractors) and sale of canned and bottled soft drinks to independent franchised developers (bottling companies) in the United States, Canada and 81 other countries. 7UP, the principal finished product of the Company's soft drink business, is the third largest selling soft drink in the United States and Canada and is a major factor in many foreign markets for soft drinks. The Company is also engaged in the manufacture and sale of food flavors, colors, fragrances and specialty products and in lemon processing and the manufacture and sale of lemon products. SOFT DRINK EXTRACTS, FLAVORING COMPOUNDS AND FINISHED PRODUCTS General. In the United States, the Company manufactures and sells extracts for soft drinks, principally 7UP, to 473 franchised developers (bottlers) operating approximately 410 plants in all 50 states. Through independent contractors, the Company is also engaged in the manufacture and sale of canned and bottled 7UP and Sugar Free 7UP and fountain syrup for 7UP and Sugar Free 7UP to many of its franchised bottlers and to the United States Government primarily for consumption by its foreign-based armed forces. The Company's franchised developers (bottlers) sell 7UP and Sugar Free 7UP to retailers in bottles, cans and pre-mix tanks for resale principally in food stores, drive-in and other restaurants, soda fountains, bars and other retail 10

establishments. Retail sales of 7UP and Sugar Free 7UP are also made through vending machines, some of which are owned by franchised developers (bottlers) and some of which are owned or leased by their customers. In addition, the Company's franchised developers (bottlers) sell 7UP fountain syrup to retailers for resale in soda fountains, vending machines and bulk dispensers. The only domestic manufacturing facility owned by the Company for the manufacture of bottled soft drinks for sale to retailers is in Phoenix, Arizona. In 1976, Phoenix commenced construction of a modern new bottling and canning plant in Phoenix, which will contain 80,000 square feet of production and warehouse space, four times more than its present plant. Production will commence in this new facility during March of 1977 and its present plant will be closed. The soft drink business is seasonal in character. Sales of soft drinks are higher during the warm summer months and during the Thanksgiving--New Year's holiday season. International. The Company manufactures 7UP and Sugar Free 7UP extracts in Canada for sale to 80 franchised developers (bottlers) operating approximately 42 plants and 19 warehouses in all the provinces. Sales in Canada accounted for approximately 11% and 12% of the Company's net sales in 1976 and 1975, respectively. The Company also operates one bottling plant and seven warehouses in Ontario through which it sells 7UP and Sugar Free 7UP directly to retailers. The Company sells 7UP extract to franchised developers (bottlers) operating approximately 186 plants in 81 foreign countries other than Canada. During 1976, approximately 35% of this extract was exported from the United States and substantially all of the balance was manufactured by the -3-

Company in Argentina, Brazil, Great Britain, Ireland, Japan, Mexico and the Republic of South Africa. Sales in foreign countries other than Canada (including exports from the United States) accounted for approximately 8% of the Company's net sales for 1976 and 1975. Marketing and Other Services. The Company provides a broad range of marketing services to its franchised developers (bottlers) in the United States, including advertising, sales and management training, vending machine sales and engineering assistance, special events and promotion plans and convention planning. The Company believes such services are essential to the successful merchandising of its soft drinks. The retail sale of 7UP and Sugar Free 7UP is actively promoted in the United States by the Company through national and local television, radio, billboard and newspaper advertising, promotional events, and point-of-purchase displays. Local campaigns are planned and financed cooperatively with the Company's franchised bottlers. Many of the packaging, sales promotion and point-of-purchase display graphics are designed and created by the Company. Its advertising agencies are principally responsible for television and radio advertising of 7UP and Sugar Free 7UP. Expenditures for advertising and promotional programs constituted approximately 61% and 59% of the Company's total selling, administrative and general expenses in 1976 and 1975, respectively. The Company provides specialized marketing and management services to its franchised bottlers in its international markets. The Company maintains a trained technical staff of approximately 44 persons which develops quality control and sanitary standards for the Company's franchised bottlers. Competition. The soft drink industry is highly competitive. The Company's brands compete with other extensively advertised -4-

soft drinks and also with lesser known soft drinks of regional and local bottlers, as well as private brand soft drinks. The Company's major product, 7UP, ranks third in retail sales in the United States and Canadian markets. Two of the Company's competitors have substantially greater sales and resources than the Company. In the so-called "cold drink" market, serviced by cup and bottle vending machines, fountains and other on-premise dispensers, the Company's two major competitors have accounted for a large proportion of vending machine installations. Soft drinks imitative of 7UP have been extensively marketed through vending machines. Since 1973 the Company has increased its efforts in the "cold drink" market with particular emphasis on the marketing of fountain syrup. Vending Equipment Sales. In conjunction with its soft drink business, the Company sells to its domestic and Canadian franchised developers (bottlers) vending equipment, purchased from various manufacturers, as part of a continuous program to increase distribution through coin-operated machines and soda fountain dispensers. Sales are generally made on an installment basis, with payment extending over a period of up to five years. At December 31, 1976, approximately $1,629,000 was owed to the Company by franchised bottlers in connection with such purchases as compared with approximately $1,662,000 at December 31, 1975. These sales accounted for less than 1% of the Company's net sales in both 1976 and 1975. FLAVORS, COLORS, FRAGRANCES AND OTHER SPECIALTY PRODUCTS Through its subsidiary, Warner-Jenkinson Company ("W-J"), the Company manufactures food flavors and food, drug and cosmetic dyes and pigments ("FD&C colors") for sale to various producers of foods and pharmaceuticals. W-J produces more than 1,000 different flavors by the blending of various -5-

ingredients purchased from importers and distributors or directly from domestic and foreign regional cooperatives. In 1976, approximately 75% of the lemon oil used by W-J was purchased,from one large cooperative. Food colors, which constitute substantially all the FD&C colors sold by W-J, are made from chemical processing of synthetic organic chemicals and are marketed as primary colors or 400 different blends. The FD&C colors are subject to governmental regulation in the form of certification by the Federal Food and Drug Administration. W-J markets its products to various producers of beverages, foods, and pharmaceuticals, using its own sales force of approximately 18 persons and through five distributors in Mexico. W-J has a majority ownership interest in a Mexican subsidiary engaged principally in the manufacture of FD&C colors. SV-J owns a domestic perfume and fragrance manufacturer which accounted for less than 1% of the Company's net sales for 1976 and 1975. The FD&C color and food flavor markets are highly competitive in the United States. W-J has five principal competitors in the FD&C color market. There are several hundred competitors selling food flavors. FD&C colors are produced from basic chemicals purchased from independent sources. W-J has in the past experienced, and is presently experiencing, some difficulty in acquiring certain raw materials. See "Raw Materials and Other Supplies." Because of the growth in W-J's sales, its facilities are being expanded. See "Properties."

LEMON PRODUCTS Ventura Coastal Corporation ("Ventura"), a wholly owned subsidiary, is engaged in the business of processing and packaging frozen concentrate for lemonade and the growing, processing and selling of fresh lemons and lemon products. Ventura sales accounted for approximately 12.2% and 12.6% of the Company's net sales in 1976 and 1975, respectively. Ventura sells the principal portion of its frozen concentrate to a number of large grocery chains. Ventura competes with numerous domestic processors and packers of fresh lemons and lemon products in California and Arizona, many of which are larger than Ventura and control a greater amount of lemon producing acreage. Ventura's principal competitor for the production and sale of fresh fruit sells approximately 85% of the lemons produced in the United States. Ventura, which supplies approximately 40% of the domestically produced frozen concentrate for lemonade, is in competition with numerous domestic producers of this product. RAW MATERIALS AND OTHER SUPPLIES The principal materials used by the Company in the manufacture of 7UP extract are essential oils of lemon and lime and ethyl alcohol blended in a highly concentrated form. In addition, sugar, citric acid, sodium citrate, carbonated water and packaging materials are required for the manufacture of the Company's finished soft drink products. In 1976, both the Company and its franchised bottlers, in general passed along to their customers the effect of reduced costs of raw material and packaging materials which occurred in finished soft drink products. See Government Regulation for a discussion relating to the Food and Drug Administration ca ` ~ -7- ~. -P~

announcement of March 9, 1977 on the prohibition of utilizing saccharin in foods and beverages. The principal materials used by W-J in the manufacture of food colors are benzene and naphthalene derivatives. From time to time these materials may be in short supply. However, in 1975 and 1976 supplies were adequate to meet the requirements of W-J. At times of short supply, W-J has in the past always maintained adequate inventories for continuing operations. The principal materials used by Ventura in the production of lemon products, primarily frozen concentrate for lemonade, are fresh or concentrated lemon juice, lemon oil flavor, . sugar solids or sweeteners, such as corn syrup and packaging materials. During the past year, the prices of sugar and sweeteners decreased and accordingly Ventura passed the cost savings to its customers in the form of reduced prices. Ventura's lemon source is presently California where, in 1976, supplies of fruit were affected by inclement weather and other adverse conditions. Ventura is generally dependent on other citrus growers for approximately 88% of its lemon supply. Except as otherwise indicated under Business - Flavors, Colors, Fragrances and Other Specialty Products above, the principal raw materials and other supplies used by the Company are available from a number of different sources. Fuel shortages could pose a problem in the future for the Company's franchised developers who deliver by truck. However, the Company does not know of any significant problems experienced to date by its franchised developers in obtaining adequate fuel supplies. The Company has not experienced any serious disruption of service because of insufficient fuel supplies.

EMPLOYEES The Company had at December 31, 1976, 1,622 employees, including 1,132 in the United States, 303 in Canada and 187 in other countries. Of the Company's employees, less than 5% are represented by unions. All employees of the Company and of four of its domestic subsidiaries (approximately 525 salaried and hourly employees) participate in profit-sharing plans, under which substantially all of the contributions are made by the employers. Most of the Company's employees in the United States and Canada are covered by pension plans. The Company also has a comprehensive employee security program, including life and disability insurance, major medical care and hospitalization for employees and their dependents and other employee benefits. Most of the cost of these benefits is borne by the Company. See Note E to Consolidated Financial Statements. In 1976, the Company made certain amendments in their domestic pension plans to conform to the Employee Retirement Income Security Act of 1974. These amendments did not significantly change pension costs or unfunded vested benefits. TRADEMARKS The Company's principal trademarks include 7UP, SEVEN-UP, THE UNCOLA and HOWDY, all of which are registered in the United States and Canada, and one or more of which are registered in certain other countries. The Company is the sole owner of these trademarks. See Litigation for a discussion of a suit brought by one of the Company's franchisees chal- lenging the Company's ownership of the trademarks 7UP, SEVEN-UP and the UNCOLA. cs -9- a-

GOVERNMENT REGULATION Production and distribution of a number of the Company's products are subject to the Federal Food, Drug and Cosmetic Act and to various other Federal and State statutes regulating safety and labeling of products. On March 9, 1977, the Food and Drug Administration announced that it intends to prohibit use of saccharin in foods and beverages. Saccharin is the non-nutritive sweetener used in Sugar Free 7UP and virtually all other dietary soft drinks. The action is based on adverse results of studies involving consumption of huge quantities of saccharin in laboratory animals. The FDA announced it will formalize its conclusions within 30 days and then allow 60 days for public comments and reaction. The suspension order could be final within days after that. Saccharin is the last known artificial sweetener approved for sale by the FDA following their ban of cyclamates in 1969. Thus, if the saccharin ban becomes effective, it is anticipated that it will eliminate many products used by diabetics. Although no other artificial sweetener currently has FDA approval, the Company has an alternative formulation that is reduced in calories. Until the suspension order becomes effective, Sugar Free 7UP can and is continuing to be manu- factured and sold. FDA has stated emphatically that saccharin is not an immediate hazard to public health. Substantially all of the Company's plants in the United States are subject to Federal, state or local laws or regulations regarding discharges into the environment. Compliance by the Company with these laws and regulations has not had, and is not expected to have, a direct material effect on the i -10-