Jump to:

Philip Morris

the Seven-Up Company 760000 Annual Report

Date: 19770217/Y
Length: 36 pages
2048189155-2048189190
Jump To Images
snapshot_pm 2048189155-2048189190

Document Images

Text Control

Highlight Text:

OCR Text Alignment:

Image Control

Image Rotation:

Image Size:

Page 1: iym26e00
The Seven-Up Company 1976 Annual Report
Page 2: iym26e00
Form 10-K Availability Shareholders may receive without charge, upon written request to the Secretary of the Company, a copy of its Form 10-K Annual Report, including the financial_ statements and schedules _ thereto, required to-be filed with the Securities and Exchange Conimissi _on. Copies of the exhibits to the report will be provided upon the payment of a fee of five cents for each page copied. It is -.-- -- - estimated that the exhibits to the Form 10-K will contain twelve pages: Notice of Annual Meeting --The Annual Meeting of Shareholders will be held at 10 a.m. on Monday, April 11, 1977, at the world headquarters of the Company, 121 South Meramec Avenue, St. Louis, Missouri. All shareholders are invited to attend. -
Page 3: iym26e00
in 19 `UNdoing it' , t~ -- UlVdoingThe Seven-Up Company's 1976 annual report=wrappez~represents more than Just an_ uriusua~ ethe of getting inside the subleci _ It is d ainc~ic~ fbn of the ~arymarf.eting - strategy_ior 7UP the United States for "UNdo it!„ . T 'U_Ndo it!" capitalizes on eight years of successful 7UP market identification as The Uncola. It carries a two-fold nripssage: encouraging sof# drink consurn.ers fq- abari~ion fhe routme san}eness ©~ theii;~c~la-cor3sumption liabz~s and cfferincr a fresh, versatile alternative-7UP! The concept, directed toward multiple-brand t drink users, will be extended in 1977 through a&Tertising, promotion, merchandising, display, paCkaging, public relations and all phases of 7UP contac.t with consumers. Movin 7 Ahead Metrically =_-~~ ror i>':ze secona consecunve year, i ne ;Deven-up Company annual _report measures 20 by 30 centimet~~rs instead,of the standard_8 1/2 by 11 inches, symbolic of 7UP leadership in "metrifying" soft drink packaging in the United States, Seven-Up introduced its metric program in 1975, replacing conventional 16- and 32-ounce packages with half-liter (16.9-ounce) and liter (33.8-ounce) bottles, positioning 7UP and Sugar Free 7UP as the first internationally marketed soft drinks available in metric sizes in the nation, Printscent" fragrance Printscent lemon fragrance, an aromatic example of The Seven-Up Company's broadening product line, again has been made a part of this year's annual report. The pages of the Company's 1976 publication have been treated with this subtle, natural fragrance, one of many Printscent fragrances produced for commercial use by the Company's Warner-Jenkfnson subsidiary. Contents Financial Hi hlights . - g ~ Letter to Shareholders -- ........... ...... - 6 Soft Dios . . ' . Food Ct~~ors and FJdStors 1 Q_ .. t . Lemon Products.11 Finrrnrir^rl Ac1ricIAr 1 7 Consolidated Balance Sheets . _ . . . . ........... 20 - Consolidated Statements of Income .......... 22: . Consolidated Stctt-rrien#s otChanges in Finanlial Position : } _ ............... 2~~-- Consolidated Statements of Stockholders' Equity. . ...... ._ _- . -= ............................. _ - - 24 Notes to Consolidated_ Financial Statements..-. 25 Accountants' Report. . .......... 27 Seven Year Statistical Summary.............. 28 Board of Directors ........................... 30 Corporate Officers ........................... 31 Foreign and Domestic Subsidiaries ........... 32 Transfer Agents and Registrars ............... . 33
Page 4: iym26e00
t,omparatzve Financial Highlights 1976 1975 Percent Change Net Sales ....................................... $233,282,664 $213,622,918 + 9.2 Income Before Income Taxes ..................... 47,145,005 39,844,463 + 18.3 Net Income .................................... 24,751,005 20,340,463 +21.7 Percent of sales .............................. 10.6% 9.5% Earnings on Common Stock ....................... 24,535,725 20,010,273 +22.6 Per Share of Common Stock Net income* ................................ $2.28 $1.88 +21,3 Dividends .................................. 1.13 .75 +50.7 Book value ................................. 9.14 7.93 + 15. 3 Total Dividends Paid Preferred stock .............................. 215,280 215,280 Convertible preferred stock ................... 114,910 Common stock .............................. 12,106,244 7,949,106 Common Shareholders' Equity .................... 97,963,436 84,865,423 Working Capital ................................ 60,601,600 51,779,101 Capital Expenditures ............................ 8,449,923 6,839,430 Depreciation and Amortization .................... 3,263,252 2,899,639 Long-Term Debt-less current maturities ............ 942,603 2,129,352 Net Investment in Property, Plant and Equipment ..... 37,581,529 32,739,830 Number of Shareholder Accounts .................. 5,565 5,854 Average Number of Common Shares Outstanding .:. 10,741,116 10,636,841 Number of Employees at December 31 Serving U.S. markets .......................... 1,132 1,127 Serving Canadian markets .................... 303 290 Serving international markets ................. 187 178 1,622 1,595 r•a ~ ca ~ [u ~ ,.~. * Based on weighted average number of shares outstanding during the year ca co
Page 5: iym26e00
To Our Shareholders: The Seven Up Company in 1976 again achieved record net sales and net income in each quarter and for the year. Consolidated net sales reached $233,282,664, a 9.2 percent increase over the $213,622,918 of 1975. Consolidated net income for the year was $24,751,005, an increase of 21.6 percent over the $20,340,463 achieved the previous year. After payments of preferred dividends, earnings per share of common stock were $2.28, in contrast with $1.88 in 1975, a 21.3 percent improvement. During 1976, cash dividend payments on cpmmon stock were $1.13, compared to 75 cents 2 1975. In November, the quarterly common d~;.dend payment was increased from 21 cents to 3G cents. In addition, an extra dividend of 20 cents per share was made, a reflection of the exx::eptional sales and earnings achievement during, .1976, The payment of the extra dividend is not to be interpreted as a basic change in dividend policy for future years. The November increase will produce an annual dividend rate of $1.20. When the Company went public in 1967, the annual dividend rate was 12 cents per common share. The consistent, targeted growth of the Company in the 1970's is highlighted by the fact that since the beginning of the decade sales have increased by an annual average of 13 percent, net income by 14 percent, earnings per share by 17 percent and dividends by 23 percent. Reflective of the improved economic environment, the soft drink industry in the United States exhibited renewed vitality in 1976, compared with the lethargic results of 1974 and 1975. The total 7UP brand (regular 7UP, Sugar Free 7UP and Fountain 7UP) shared in this industry growth, Unit sales of regular 7UP, although up modestly, were off from the industry pace, Sugar Free 7UP sales continued to increase sharply-continuing a trend established in February 1974, when the brand was introduced. In October, an entirely new soft drink marketing program and a completely restruc- tured organization for the 7UP marketing operation in the U. S. were unveiled in San Francisco at a national sales meeting of over 1,000 7UP Developers (bottlers). A key objective of the program is to increase the U. S, market share and the sales growth of regular 7UP. The new "UNdo it" marketing strategy is a direct outgrowth of the highly successful marketing program for "The Uncola" begun in 1968. It is aimed directly at soft drink consumers who drink colas, The "UNdo it" message will be an integral part of all elements of the new marketing program-advertising, sales promotion, merchandising, etc. 7UP Developer reaction to the new marketing program has been enthusiastic and, while it is still too early to measure the results of the campaign, it already has produced some encouraging signs. While professional awards for advertising do not necessarily make sales, it is gratifying to have the readers of The Gallagher Report vote "UNdo it" the outstanding advertising campaign of 1976. As a major national advertiser, The Seven-Up Company recognizes its responsibility to do everything possible to merit consumer confidence and loyalty. To insure that 7UP and Sugar Free 7UP advertising reflects positively on the public image of your Company and its products, Seven- Up management has adopted a policy not to knowingly support television programs or magazines that feature violence or exploit sex. This policy has been communicated to our advertising agency. Sales of finished soft drink products (bottled, canned and bulk) by Seven-Up Services to 7UP Developers increased in 1976 as Developers supplemented their mix of needed 7UP and Sugar Free 7UP packages. Sales were also influenced positively by aggressive Developer participation in the special Bicentennial can promotion. Seven-Up performance in international markets showed gratifying improvement in 1976. Seven-Up International, Inc. achieved increased unit sales volume despite unsettled conditions in several Central and South American markets where sales declined. During 1976, 7UP was introduced in twelve new territories including the important markets of London, England; Sydney, Australia; and M&1aga, Spain. Seven-Up Canada Limited reached record unit extract sales in 1976. This was achieved even though the Company was subjected to intensive competitive factors and uncertainties resulting from pending restrictive packaging legislation in the province of Ontario, Nevertheless, 7UP continues to be Number I in food stores in British Columbia and is pushing hard for Number 2 in Quebec, where an estimated 40 percent of all of the soft drinks in Canada are consumed. Warner-Jenkinson Company achieved record
Page 6: iym26e00
-i o Uur bohareholders: (continued) sales and profits in 1976. Significantly higher food color sales were of major importance in these results, since dollar and unit sales of food flavors were below 1975 levels. In the food flavor business Warner-Jenkinson gained major customers with highly specialized flavor needs that could be fulfilled by few, if any, other flavor producers. Prospects for further break- throughs in the development of new flavor products brighten the outlook for Warner-Jenkinson. The January 28, 1977, announcement of the Warner-Jenkinson agreement with Dynapol of Palo Alto, California, to collaborate in the development of polymer food colors is evidence of your Company's continued commitment to research and development. Under the terms of this agreement, Warner- Jenkinson's share of the expenses for the research and development and toxicological testing of the food dyes and their lake pigments will be on the basis of one million dollars annually for three years subject to earlier termination under certain circumstances. Following anticipated FDA approval, Warner-Jenkinson will participate in marketing these new colorants. Polymer food colors are viewed as a major breakthrough in food additives because they are not metabolized, The colors are of a larger molecular size and, as such, are not absorbed in the alimentary canal and do not pass into the blood stream, Depressed crop conditions impacted some- what on the Company's lemon products business in 1976. Ventura Coastal Corporation continued to operate profitably, but not at the record pace of a year ago, In the meantime, there has been extensive ranch development to provide more abundant crops of lemons in future years. Prospects for 1977 are improved and the lemon products group is expected to enjoy a year on a par with 1975. Golden Crown Citrus Corporation, which produces reconstituted lemon and lime juices, showed marked sales improvement in 1976. A portion of this improvement is attributable to the successful introduction of a lemonade- flavored powdered soft drink mix in selected markets, Golden Crown is expected to continue strengthening your Company's position in the lemon products industry. An important corporate objective in 1976 has been to continue the development and refinement of our organizational structure. In March, John R. Kidwell was appointed senior vice president and director of marketing. Mr, Kidwell, president of Seven-Up Canada Limited from 1970 through 1976, has outstanding experience in ctll facets `of the soft drink business. In Canada, he distinguished himself as a capable, versatile executive with excellent qualifications for directing and implementing the Company's marketing programs. He has held various positions in St. Louis and in Canada since joining the firm in 1965, Colin B. Scarfe, previously vice president and general manager of Seven-Up Montreal, succeeded Mr. Kidwell as president of the Toronto-based Seven-Up Canada Limited. Mr. Scarfe brings to his new assignment an excep- tional record of proven performance. In September, Michael Baker was appointFid vice president and director of market develcrp- ment, reporting to Mr. Kidwell. He had been director of marketing for Seven-Up Canada Limited. July 1, Ben H. Wells stepped down as chief executive officer of The Seven-Up Company. William E. Winter, who had been president and chief operating officer since 1974, assumed the position of president and chief executive officer, Mr. Wells continues to serve as chairman of the board, is chairman of the Executive Committee, and represents the Company in many key trade, civic and philanthropic involvements. Mr. Wells, who joined the Company in 1938, became chief executive officer in 1965. He was elected chairman in 1974. Mr. Winter joined Seven-Up in 1946 and has served in a number of executive positions over the years. In September 1976, 250,000 shares of common stock were sold to the public on a secondary offering basis. All of the shares were from the estate of Graves Gladney, late son of a founder of the Company. None of the proceeds accrued to The Seven-Up Company. There has been a decided spirit of coopera- tion toward achievement of mutual objectives between the Company and the nationwide network of 7UP Developers. During the year, key committees of the Association of 7UP Developers worked closely with Company marketing, legal and public affairs personnel. Established in 1974, the Association has represented its constituents well. It has helped solidfy Company-Developer relationships, while enhancing Developer input and participation in important considerations involved in development of the total 7UP business. L048iB9fb0
Page 7: iym26e00
Ben H. Wells Management's main objective for 1977 and beyond is to maintain the solid sales and profit growth trends of the total corporation while assuring the restoration of the sales volume and market share of regular 7UP in the U. S. to its historic growth rates, During 1976, your Board of Directors approved a long-range growth strategy and plans that include increasing volume through existing businesses, new product development and acquisition of new businesses. Increased volume will be achieved by growth in unit sales, improved share in existing markets, and the introduction of Company products into new international markets, Long-range development of new products, new brands and new flavors is planned. We will also continue to seek out companies for acquisition that meet approved criteria and whose product lines reflect favorably on 7UP quality. 1976 has demanded our best. 1977 will demand that and even more, In 1977 we expect that first and second quarter comparisons with the same periods of the previous year may be substandard because of an exceptionally strong first six months in 1976, We are highly optimistic about 1977 as a whole, however, and also the years to come.... Just as the 7UP success of the past has been the result of a strong, enthusiastic 7UP Developer organization supported by the efforts and dedication of all the people of The Seven-Up Company, we believe the success of our future will be achieved in the same manner. Sincerely, Ben H. Wells Chairman of the Board William E. Winter President and Chief Executive Officer February 17, 1977 Willican E. Winter
Page 8: iym26e00
Soft Drinks Today, 7UP is the largest-selling lemon-lime flavored soft drink, the third-largest selling soft drink brand in the United States and Canada, and is a major factor in many foreign markets. Aggressive brand development has been the key to 7UP growth. This aggressiveness has been characterized by innovation, flexibility and the support of a quality network of 7UP Developers (bottlers). This has resulted in the 7UP brand in all of its forms ... regular, sugar-free and fountain 7UP ... showing record sales growth in 1976. This was due to the strong performance of 7UP in many U.S., Canadian and international markets and the sharply higher sales of Sugar Free 7UP and Fountain 7UP in the United States. The 7UP brand is currently marketed through 473 7UP Developers in the United States, 80 in Canada and 191 in 81 nations overseas. Seven-Up United States By far the most important development domestically in 1976 was the reorganization and restructuring of the 7UP marketing organization, followed by the October introduction of a new, comprehensive marketing and advertising program for 7UP, The reorganization followed the appointment of John R. Kidwell, formerly president of Seven-Up Canada Limited, as senior vice president and director of marketing. Prefaced by a compre- hensive analysis of the marketplace, the marketing department was subdivided into five units with distinct, clearly defined functions and responsibilities-each headed by experienced persons who report to the director of marketing. The five new operating units are Market Develop- ment, Marketing Services, Marketing Research, Sales and Fountain Sales. The new marketing strategy for 7UP, "UNdo it," is a direct unmistakable extension of the highly successful program for "The Uncolall" first introduced in 1968. It is aimed principally at soft drink users who consume multiple soft drink brands, including 7UP regularly and irregularly. Built upon a solid foundation of marketing research and thoroughly pretested for consumer impact, the "UNdo it" strategy is designed to make the consumer conscious of his cola-drinking habit, encouraging him to "UNdo it" in favor of 7UP. While attacking the cola consumption habit, the new "UNdo it" advertising message also provides a reason for change, communicating that 7UP is a soft drink with unique taste and adaptability to all consumption occasions. The "UNdo it" campaign was launched nationally in October with a dynamic introductory thrust that reached an estimated 95 percent of the principal target audience more than six times on the average during the introductory period. 6
Page 9: iym26e00
Gompletely distinct marketing plans have been developed for each of the three segments of the soft drink business in which The Seven-Up Company participates-regular 7UP, Sugar Free 7UP and Fountain 7UP. This philosophy acknowledges that 7UP and Sugar Free 7UP have separate target consumers. It also acknowledges that despite the extraordin- ary growth of Sugar Free 7UP, many consumers have yet to taste the brand. For this reason, the new "Taste More Taste" marketing concept has been created for Sugar Free 7UP. It was presented to 7UP Developers in early January 1977, In support of the "Taste More Taste" marketing rationale, a nationwide consumer sampling program will be conducted in supermarkets between April and September, aimed at acquainting more than 6.6 million consumers with the superior taste characteristics of Sugar Free 7UP, Spot television media plans will support the program, In another marketing area, the Company will embark on a more intensively competitive series of planned price-off sales promotions during the four key consumption periods of 1977, 7UP in metric-sized packages increased in availability during 1976. Since April 1975, when 7UP and Sugar Free 7UP became the first U.S. soft drinks to be bottled in liter and half-liter sizes, 7UP and Sugar Free 7UP metric packages have been introduced in 100 domestic markets including nearly the entire State of Indiana, The brands are now available in metric form to nearly 65 million consumers. 7UP and Sugar Free 7UP were also the first U.S. soft drinks in the non- returnable, two-liter bottle which was introduced simultaneously by 17 7UP Developers throughout the Greater Boston market in February 1976, Metric packaging has generated a significant amount of favorable national publicity for the 7UP brand. However, its principal benefit is in the added value it represents to consumers. The half- liter (16.8 ounces), liter (33.8 ounces) and two- liter (67.6 ounces) bottles are sold in most participating markets at the same price as competing brands in conventional pint, quart and half-gallon containers which contain less beverage. Sugar Free Fountain 7UP was available in 3,300 of the 3,500 McDonald's restaurants coast to coast by the end of 1976, up from 2,800 stores at year-end 1975. This accounted for over 100 million servings during 1976. In addition, Sugar Free Fountain 7UP was approved for sale by the Burger Chef system in 1976 as well as by many other leading regional fast-food organizations. On a related, but broader front, the Company has retained a leading management consulting firm to study all aspects of the bulk soft drink business from both the 7UP Developer and the national perspective to map plans for future strategic direction and development of this increasingly important segment of the soft drink market. In 1976, 7UP participated for the third year in
Page 10: iym26e00
sott Dnnks (continuecL) the Jerry Lewis Muscular Dystrophy campaign as a late surrimer national sales promotion. More than $442,000 was contributed to muscular dystrophy on behalf of The Seven-Up Company and participating 7UP Developers. Seven-Up Services, Inc. The mission of Seven-Up Services, Inc, is to provide and supplement production of canned and bottled 7UP products for those 7UP Developers who are unable to produce them within their own plant facilities. Through the facilities of Seven-Up Services, all 7UP Developers are assured access to the wide range of 7UP packages required to serve their respective markets. Seven-Up Services produces "finished" 7UP products-in cans and bottles and also fountain syrups-through a network of nearly three dozen independent production centers, nationwide. One of the important factors enabling Seven-Up Services to achieve record unit sales in 1976 was successful participation in The Seven-Up Company's unique national Bicentennial can promotion. Special 7UP cans with a patriotic motif were produced, representing each state in the union. When consumers acquired cans of all 50 states, their collection could be arranged in pyramid fashion to form the likeness of Uncle Sam, During the year, Seven-Up Services also gave strong support to the introduction of the new two-liter, non-returnable bottles in several major markets, again helping Developers broaden their packaging mix with these larger-size containers. Seven-Up Bottling Company of Phoenix The Seven-Up Bottling Company of Phoenix, Arizona, posted an increase in unit sales of 7UP products in 1976. The gain was led by substantial growth of the new liter-size package, first introduced in Phoenix in 1975. Sugar Free 7UP, now in its third full year of distribution in the Phoenix market, continued to show significant increases. During the first quarter of 1977, the Seven-Up Bottling Company of Phoenix, the only Company- owned bottling operation in the U.S., will begin production in its modern, new bottling and canning plant in southeast Phoenix. Designed to accommodate future expansion at minimum cost, the all-metal building is located on an eight-acre, landscaped tract in a newly developed industrial park area. The structure has 80,000 square feet of production and warehouse space, four times more than the plant it replaces. Highly functional and fullly-automated, the plant is equipped with all-new machinery, including a high-speed 60-valve bottle filler capable of producing 1,050 12-liter-bottle cases per hour. Production on the 40-valve canning line is scheduled for 1,400 24-can cases per hour. Overall, the new bottling/canning complex 8
Page 11: iym26e00
places 7UP in excellent position to capitalize on the expanding soft drink market in the Greater Phoenix Area which now serves 1,300,000 consumers. Seven-Up Canada Limited In Canada, 7UP is even more fully developed than in the U,S., based on overall per capita consumption and food store market share. The performance of Seven-Up Canada Limited was influenced by intense competition in the form of unprecedented levels of media weight and price discounting. Added beverage product dislocations from restrictive container legislation have occurred in the province of Ontario. Seven-Up Canada reports further progress in the introduction of a 1.5-liter bottle during 1976, especially in Canadci s most populous market, Montreal. Sugar Free 7UP, introduced in Canada in early 1975, continues to exhibit strong growth, particularly in Ontario, Sugar Free Fountain 7UP, introduced to McDonald's restaurants in Canada later in 1975, is now firmly established from coast to coast. Despite a slight erosion of market share in Canada in 1976, 7UP continues as the market leader in the province of British Columbia with a 19 percent share of market in food store sales, In the province of Quebec, where soft drink per capita consumption is one of the highest in the world, 7UP is holding an impressive 14 percent share of market. Colin B. Scarfe became the president of Seven-Up Canada Limited in mid-1976. Since that time, marketing priorities have been established with the objective of containing market share erosion in the face of extreme competitive pressure and legislative uncertainty, Seven-Up International, Inc. Seven-Up International achieved record sales in 1976, as sales increased in many of the overseas markets. Important new markets were opened and established territories continued productive development programs. 7UP was given a major launch in London during 1976 through the Cadbury Schweppes organization. Initial sales results, which exceeded projection, were aided by a warm, dry summer. Distribution of the brand will be extended to other important parts of the United Kingdom in 1977. The 7UP brand was also introduced successfully in 1976 in Sydney, Australia. Other new overseas markets for 7UP include: Malaga on the south coast of Spain, Nicaragua, Mauritius, and several newly franchised bottling plants to enable expansion of existing 7UP territories in Argentina, Iran, Pakistan and the Philippines. Exceptional gains were achieved in 1976 in certain markets in Southeast Asia, the Middle East and in Holland, where 7UP is vying for brand leadership, Management's objective in 1977 will emphasize further brand penetration within existing markets. 9
Page 12: iym26e00
10 Food Colors & Flavors Warner-Jenkinson Company Warner-Jenkinson Company achieved all- a time-high sales in 1976, the result primarily of a positive showing in the Company's food color and specialty products divisions. A subsidiary of The Seven-Up Company since 1970, Warner-Jenkinson is a leading producer of flavors and colors for food products. It is the producer of extracts and flavor compounds for 7UP, Sugar Free 7UP and other 7UP soft drink products for the U.S. and a number of foreign markets. The record performance of Wamer-Jenkinson in 1976 stemmed from excellent sales volume gains. Surplus food color inventories in customers' hands, which reduced 1975 earnings, were normalized in 1976, creating a greatly improved demand. Warner-Jenkinson's new food color plant opened in St. Louis during 1976, substantially increasing the Company's production capacity. New business in 1976 was obtained in focused market areas, with Wamer-Jenkinson's specialized flavors being accepted by a number of major accounts in the fields of beverages, liqueurs, desserts and cake mixes. Warner-Jenkinson East, Inc. Plans were finalized late in 1976 for a central production and distribution facility in Carlstadt, New ` Jersey This will permit more efficient manufacture -_ Y° and marketing of fragrances and flavors produced byWamer-Jenkinsons two New York-based affiliates. ~ The new location will allow Warner-Jenkinson and its affiliates to improve customer service and pro- vide additional manufacturing and warehouse space to supplement plants in St. Louis, Missouri, Santa Ana, California and Lerma, Mexico. Warner-Jenkinson of California The Specialty Products Division of Warner- Jenkinson on the West Coast enjoyed an exceptional year in 1976. Sales of Flavor Milll~ brand gourmet flavors and Chefmaster~ cake decorating colors were the highest in the Company's history. The Santa Ana manufacturing facility, which was expanded significantly in 1976, also produces the Warner-Jenkinson line of Red Seal-I flavors and food colors, and markets these products to customers in the western part of the U. S. Warner-Jenkinson S. A de C.V. Warner-Jenkinson S.AA de C.V., with offices in Mexico City and plant in Lerma, Mexico, shipped record quantities of food colors in 1976, resulting in record sales. Excellent earnings, though adversely affected by the devaluation of the peso in the fall of the year, were the second-highest in this Company's 11 -year history, Sales prospects continue to be excellent for Warner-Jenkinson products in Mexico, and in Central and South America which are served by the Wamer-Jenkinson Lerma plant.
Page 13: iym26e00
Lemon Products Ventura Coastal Corporation Sales of Ventura Coastal Corporation in 1976 reached record new highs. The subsidiary also made its second-best contribution to corporate profits since affiliating with Seven-Up in 1974-in part a measure of management progress in reducing Ventura Coastal's vulnerability to crop fluctuations and other uncertainities. Ventura Coastal sales of frozen concentrate for lemonade and lemon oil, a principal ingredient in 7UP extract, exceeded 1975 volume. Ventura Coastal earnings were impacted by a January-July drought and excessive early summer heat which reduced lemon crops by approxi- mately 40 percent from record 1975 output. Nevertheless, Ventura Coastal, a leading U.S. producer for frozen concentrate for lemonade, acquired some significant new business. The Company will begin supplying private label frozen lemonade concentrate requirements for two major supermarket chains, the full impact of which is expected to be evident in 1977. Ventura Coastal now produces 64 brands of frozen concentrate for lemonade, Additionally, a$2 million expansion of Ventura Coastal's fruit processing facilities is underway which will double the Company's fruit processing capacity by early 1977, Further, a new waste water recycling system will reduce operating expenses in 1977. Preliminary forecasts indicate lemon output will improve significantly in 1977 and should almost approximate record 1975 production levels, Golden Crown Citrus Corporation Golden Crown Citrus Corporation of Evanston, Illinois, became part of Ventura Coastal Corp. in November 1974. A leading producer of recon- stituted lemon and lime juice, Golden Crown has plants in Evanston and Bridgeton, N.J. In 1976, Golden Crown introduced a lemonade- flavored powdered drink mix on a test market basis in Boston, New York City, St. Louis, Chicago and Los Angeles. As a result of the test market success, Golden Crown powdered lemonade and other soft drink mixes will be introduced nationally in 1977, with the line expanded to include cherry, grape, orange and tropical punch flavors. Late in 1975, Golden Crown products were introduced on the West Coast. Sales growth of these products in the western market have been so successful the past 12 months that plans are now underway to open a West Coast bottling facility during 1977. The new production unit will permit expanded distribution of Golden Crown products on the West Coast and in adjoining states. 11
Page 14: iym26e00
The Seven-Up Company and Subsidiaries Financial Review Business Description The Seven-Up Company is engaged in the manufacture and sale of extract to independently- owned franchised bottlers (Developers) in the United States, Canadian and international markets. The Company also supplies finished soft drink products manufactured by independent contract canners to some of these bottlers for resale and provides all bottlers with marketing, advertising, management and financial services. The Company owns and operates two bottling plants. The Company also manufactures other extracts, food flavors, and food, drug and cosmetic dyes and pigments for sale to various producers of foods and pharmaceuticals. It also manufactures fragrances and other specialty products. The Company manufactures frozen con- centrate for lemonade and packs fresh lemons for domestic and export markets, some of which are grown on Company-owned acreage. In addition, the Company collects fees for processing fruit for other growers. In each of the three product groups (soft drinks, food colors and flavors, and lemon products) competition is intense, with major competitors normally having substantially greater sales and financial resources. From time to time, raw materials essential in the manufacture of these products are difficult to acquire. The Company attempts to protect itself against such problems by maintaining adequate inventories, Management's Discussion and Analysis of Operations Consolidated sales of The Seven-Up Company and subsidiaries reached record levels of $233,282,664 for 1976 and increased 9.2 percent from 1975 sales of $213,622,918. Sales of $233,282,664 in 1976 continued the trend of unbroken yearly sales improvement since the Company's first publicly released sales for the year 1962, which were $28,365,283, 12 The Seven-Up Company 1976 Annual Report The distribution of net sales by division for the current and previous two years has been: 1976 1975 Percent Change Percent 1974 Change (000) (000) 1976/1975 (000) 1975/1974 The Seven- Up Co. and Sub- sidiaries $184,134 171,433* 7.4 154,098* 11.2 Wo.rner- Jenldnson and Sub- sidiarles 20,755 15,284* +35,8 17,995* -15.1 Ventura Coastal Corp, and Sub- sidiaty 8,394 6,906 5.5 8,786 43.2 . Total ... $233,283 S213,623 + 9.2 S 190,879 + 11.9 *1974 and 1975 sales reclassified to reflect change in scles responsibilities between divisions The distribution of dollar sales by major product groups are as follows: Year Ended December 31 1976 1975 1974 Percent Change In Dollar Sales 1976/1975 Soft Drink Extracts, Flavoring Compounds and Certain Syrups ......... 9.4% 7.0% 3.7% 16.3 Finished Products (Canned and Bottled Soft Drinks and Fountain Syrup) ......... 9.5% 3.2% 6.9% 0.2 Subtotal Soft Drinks .... 78.9% 80,2% 80.6% + 7.4 Lemon Products.. 12.6% 12.9% 10.5% + 6.3 Flavors, Colors, Fragrances and Other Specialty Products ....... .5% .9% .9% 34.6 100.0% 100.0% 100.0% + 9.2 In 1976, dollar sales growth was influenced more by real growth in product unit sales and tonnage shipped than increased product prices. Average 1976 selling prices of finished goods, particularly soft drinks and frozen concentrate for lemonade, which comprise almost 50 percent of total sales, were below 19751evels. Consolidated unit sales of both regular and sugar-free soft drink extracts set new records in 1976. Annual sales of regular 7UP extract were modestly ahead of year-ago levels in both the U. S. and Canadian markets and at 19751evels in the international markets. Both Sugar Free 7UP and Fountain 7UP extract sales were up sharply in 1976 in both the U. S. and Canadian markets, 2048iS91b$
Page 15: iym26e00
influencing significantly the combined 7UP brand results, Unit sales of finished soft drink products were at a higher level in 1976, but the rate of unit growth was below the results achieved in the sales of soft drink extracts, reflecting the expansion of bottler canning facilities. For 1976, U. S. bottler case sales reported to the Company, converted to equivalent 8-ounce cases, indicated the following distribution of sales: " Cans ...................... Non-retumable Bottles ..... . Subtotal ................ R~,tumable Bottles. . . ....... BuL'cSales .................. Percent to Total Case Sales 1976 28.3 25.7 54.0 34.5 11.5 1 100.0 1975 27.3 26.3 53.6 35.8 10.6 100.0 U nit sales of lemon products, primarily frozen conc~.ntrate for lemonade and lemon oil, were up significantly for the year, but sales of fresh fruit and fruit processed for resale were below year-ago levels, A new product, Golden Crown powdered lemonade mix, was successfully introduced in selected U, S, test market areas, TOTAL CORPORATE NET SALES (Millions of Dollars) 233.3 146.7 132.5 1972 1973 ~ 190.9 1974 213.6 1975 1976 Combined unit sales of food flavor and color reflected a strong recovery from the depressed 1975 levels, with significantly higher product tonnages shipped in 1976. Unit sales of FD&C Red #40, a food color replacing FD&C Red #2, were particularly significant during the first and second quarters although these levels were not sustained in the second half of the year, During 1976, there were no price increases initiated on soft drink extract products in either the U. S, or Canadian markets, Extract price increases were taken in selected international markets to offset changes in local currency relationships, List prices of finished soft drinks were reduced during the year, reflecting lower raw material prices, List prices were reduced for frozen concentrate for lemonade and food colors, also, to meet severe competitive pressures. Canadian dollar sales in 1976 represented approximately 1 I percent of total consolidated sales. Canadian unit extract sales reached record levels in 1976, however, consolidated Canadian dollar sales were below 1975 results, This result was influenced by lower selling prices caused by intensive competitive pressures and reduced finished soft drink case sales in the Company's Toronto bottling operation, Continued government regulations on wages and prices are expected to influence both sales and net income results of these operations in the 1977 fiscal year. The translation of Canadian financial statements into U. S, currency had no significant effect on reported annual results, although the Canadian dollar did weaken in the fourth quarter. In 1976, Seven-Up International contributed approximately 8 percent of consolidated dollar sales or about the same level as in 1975. Significantly higher sales in continental and northern Europe, as well as in Asia, helped to minimize the effect of sales declines in Argentina and Mexico, two of the Company's largest international markets, The re-introduction of 7UP in Great Britain, as well as new market introductions in Spain and Australia, were also important in reducing the impact of Latin American operations on the Company's results Introductory marketing support funds expensed in the current year reduced initial year's profitability but provide for future development of the 7UP brand in terms of both sales and net income. Warner-Jenkinson's consolidated sales, excluding intercompany sales, were $20,754,741 and increased 35.8 percent from sales of $15,283,699 (restated) in 1975. The 1976 result was at the highest dollar sales level ever reported for this company and equaled 8.9 percent of total consolidated sales. Net income The Seven-Up Company 1976 Annual Report 13
Page 16: iym26e00
The Seven-Up Company and Subsidiaries Financial Review (continued) increased sharply to $2,207,632 from the 1975 result of $1,062,275 (restated), Although 1975 income results were impacted unfavorably by inventory adjustments necessi- tated by the Food and Drug Administration's ban on Red #2, 1976 sales and income were favorably influenced by the capacity of this company to produce Red #40 used as a replacement for Red #2. During the first quarter of 1976 and a portion of the second quarter, sales order backlogs required extensive use of available manufacturing plant facilities and hence some abnormal and non recurring peak sales results. Currently Red #40 inventories and sales are at more normal levels and sudden action by a regulatory agency to ban its use would have a temporary, but not material, impact on corporate earnings. Ventura Coastal Corporation and its subsidiary had consolidated sales of $28,393,959, an increase of 5.5 percent from the 1975 result of $26,905,786. Net income of $564,825 declined from the record 1975 net income of $985,349. Ventura Coastal's results reflected lower ship- ments of fresh fruit and processing fees due to a significantly reduced 1976 lemon crop. Unit sales of frozen concentrate for lemonade and other lemon products were up measurably from 1975 levels, but were subjected to intense price competition beginning in the second quarter, reducing sales margins below normal for the remaining nine months of the 1976 fiscal year. The powdered lemonade mix test-marketed by Golden Crown Citrus Corp., produced sales in excess of objectives, however, introductory promotional expenses reduced reported net income. Income Before Taxes 1976 1975 1974 1973 1972 Soft Drink Extracts Flavoring Compounds and Certain Syrups, Finished Products (Canned and Bottled Soft Drinks and Fountain Syrup)* ........ . . .5% .5% .5% .2% .5% Lemon Products .... 2.5% 5.6% 2.0% 2 8% 3.8% Flavors, Colofs Fragrances and Other Specialty ! Products ......... 8.0% 4.9% 13,5% 11.0% 10.7% 100.0% 100.0% 100.0% 100.0% 100.0% *Includes vending equipment sales, which constituted less than one percent of the Companys net sales in each year The contribution by product group to income before taxes was influenced in 1976 by the increased importance of higher-margined sof t drink extract sales. Reported income was also affected by the reduced importance of finishF,d soft drink product sales. Profitability of the lemon products group was reduced because of competitive pricing pressures. Food flavor and color product profitability significantly increased from depressed 19751evels, returning to more normal pre-recession levels. COMPARISON OF HOW THE DOLLAR WAS SPENT 1976 In summary, the contribution of the three Cost of major product classifications to consolidated products sold 50.2 sales and net income before taxes for 1976 and prior years has been: Net Sales 1976 1975 1974 1973 1972 Soft Drink Extracts Flavoring Compounds and Certain Syrups, arketing Finished Products services (Canned and Bottled Soft Drinks and Fountoin Syrup)* .......... 8.9% 0.2% 0.6% 1.8% 2.7% Payroll Lemon Products .... 12.6% 12.9% 10.5% 10.7% 10.4% All other . Flavors, Colors Fragrances and Other Specialty Products ......... .5% .9% .9% .5% .9% expense, net Taxes Paid to 100.0% 100.0% 100.0% 100.0% 100.0% shareholders Reinvested in the business 14 The Seven-Up Company 1976 Annual Report 18.6 5.9 5.1 9.6 5.3 5,3 - $1.00 v 1975 52.6 16.8 5.8 6.2 9.1 3.9 5.6 $1.00 2D4a1S9170
Page 17: iym26e00
Quarterly Review Highlights Consolidated sales for The Seven-Up Company and its subsidiaries by fiscal quarters were: Percent Percent Percent Change__ Change -. Change 1976 1976/ 1975 1975/ 1974 1974/ (000) 1975 (000) 1974 (000) 1973 First Quarter $ 49,030 + 17.8 S 41,617 +25.4 S 33,179 + 12.3 Second Quarter 67,783 +11.9 60,574 +15.7 52,349 +28A Six Months 116,813 + 14.3 102,191 + 19.5 85,528 +21.9 Third Quarter 64,374 + 4.3 61,734 + 7.3 57,509 +40.8 Nine Months 181,187 +10.5 163,925 +14.6 143,037 +28.9 Fot'rth 6ZL;arter 52,096 + 4.8 49,698 + 3.9 47,842 +33.8 Year :, . . . $233,283 + 9.2 $213,623 + 11.9 $190,879 _,. . _ +30,1 i First 6tuarter (January-March) Dollar sales of $49,029,685 in the first quarter of 1976 increased 17.8 percent, with net income of $4,898,163 increasing 56.9 percent over the comparable period of the previous year, exceed- ing management's objectives. Soft drink extract sales in the U. S. and international markets were significantly higher than the first quarter 1975, with Canadian sales at approximately year-ago levels, Domestic extract unit sales were influenced favorably by the threat of a transportation strike, abnormally inflating earnings by about 5 cents per share during this quarter, Both unit and dollar sales of food flavor and color were also up sharply during this quarter. Food color sales benefited by some abnormal sales stimulus of food dye, Red #40, the replace- ment for food dye, Red #2, banned by the Food and Drug Administration, Adjustments for translation and foreign exchange transactions were not material in 1976, but in 1975 currency losses reduced reported earnings for the quarter by about 3 cents. Earnings per share reported for this quarter were 45 cents in 1976 versus 29 cents in 1975. Second Quarter (April-June) For the quarter ended June 30, 1976, consolidated net sales were $67,783,687, an increase of 11.9 percent from the previous year, again exceeding management's objectives for the quarter. Net income of $7,340,212 increased 39.4 percent from the 1975 second quarter results. Despite the fact that strike-related U. S. extract sales were shifted into the first quarter 1976, the sales volume in this quarter was the largest dollar volume ever transacted in a three-month period in the Company's history. This quarter's sales benefited from a successful U. S. Bicentennial can promotion, bottler preparation for Bicentennial events, sharply higher sales of frozen concentrate for lemonade and continued strong food color unit sales. Sales of food dye, Red #40, during this quarter were significant in the food flavor and color products group, but at more normal levels than in the first quarter of 1976. In 1976, adjustments for translation and foreign exchange transactions were not material in this quarter, but in 1975 currency losses reduced quarterly earnings approximately 5 cents per share. Earnings per share for the quarter were 68 cents in 1976, as compared with 48 cents in 1975. Third Quarter (July- September) Consolidated sales of $64,374,469 for this quarter increased 4.3 percent from the 1975 results of $61,733,923 and net income was $6,840,745, compared with 1975 results of $6,714,714. In contrast to the experience in the two previous 1976 quarters, sales and net income results did not meet management's objectives for the third quarter. Although soft drink extract unit sales for the U. S. and international markets increased for the third quarter, Canadian unit sales were below 19751evels. The impact of lower average selling prices for finished soft drinks, as well as frozen concentrate for lemonade, reduced the contribu- tion of these product groups to total consolidated sales. For the third quarter, unit sales of finished soft drinks, at lower prices, were up significantly, with unit sales of frozen concentrate for lemonade at approximately 19751evels. Third quarter 1976 sales margins continued to reflect lower raw material costs and a changing sales mix, however, the improved margins were offset during the quarter by higher operating expenses which increased $2,513,912 from the third quarter 1975. Of the total dollar increase in expenses, approximately three-fourths repre- sented increased marketing support expenditures for advertising and promotional programs. Higher operating expenses reduced operating profit in 1976 to $11,814,473 as compared with $12,803,760 in 1975. Adjustments for translations and foreign exchange transactions increased net income and earnings per share in 1976 approximately 3 cents, reflecting primarily a gain in the Mexican peso adjustment. In the 1975 comparable quarter, currency losses reduced earnings per share approximately 4 cents. Per share earnings for the third quarter were 63 cents for both the 1976 and 1975 periods. The Seven-Up CompanY 1976 Annual Report 15
Page 18: iym26e00
The Seven-Up Company and Subsidiaries Financial Review (continued) Fourth Quarter (October-December) Total sales for the fourth quarter of 1976 were $52,094,823 an increase of 4.8 percent from sales of $49,698,193 in the comparable 1975 quarter, Net income for the quarter was $5,671,885, compared with $5,238,619 earned the previous year, an increase of 8,3 percent. Consolidated soft drink extract unit sales for the fourth quarter modestly exceeded record fourth quarter 1975 results and represented the highest unit sales of any quarter of the Company's history. Unit sales in international markets were up significantly, with unit gains in the U. S. and Canadian markets exceeding comparable record 1975 sales, Finished soft drink unit sales, at lower selling prices, declined below year-ago levels as did unit sales of food flavor and color products, Sales of lemon products, although of minimal importance during this quarter, also registered significant unit gains at lower selling prices for the period, Gross profit on sales improved during the fourth quarter 1976, reflecting the sales mix contribution of higher margin soft drink extract NET INCOME sales. Operating expenses increased 8,4 percent (Millions of Dollars) to $17,745,090, or 34,1 percent of sales, compared with 33,0 percent in 1975, Of the total fourth quarter dollar increase in expenses, advertising expenditures to support the introduction in the U, S. of the new "UNdo it" marketing strategy were up sharply for the period, with promotional expenditures at approximate year-ago levels. In addition to marketing support funds, increased employment costs and travel represented other significant increases in expenses. Net other income for the quarter was 5735,100 in 1976, compared with $44,558 in 1975. In 1975, the fourth quarter had been unfavorably impacted by inventory adjustments taken to reflect the Food and Drug Administration ban on Red #2, - The net effect of adjustments for currency translations and foreign exchange transactions, affected primarily by the weakened Canadian dollar, decreased per share earnings by approximately i cent for the fourth quarter 1976, In 1975, currency transactions increased fourth quarter earnings by approximately 2 cents. Earnings per share were 52 cents in the 1976 final quarter versus 48 cents in 1975, drinks and lemon products, which were approxi- mately 56.1 percent of total sales in 1975, represented approximately 52.1 percent in 1976, The change in sales mix between extracts and finished products by quarter during the fiscal year, tended to lower gross profit to sales ratios in the second and third quarters from the final reported gross profit for the year, Intense pricing competition decreased sales margins in Company-owned bottling plants, as well as in the sale of food color and frozen concentrate for lemonade, Gross profit on sales in 1976 was $116,116,432 or 49,8 percent of sales, compared with $101,201,687 or 47.4 percent of sales in 1975. Offsetting the improved gross profit, which increased 14.8 percent over 1975, were increased operating costs totaling $71,482,245 ' for selling, general and administrative expenses in 1976. Operating expenses for the year increased 16.7 percent from the previous year and were 30,6 percent of sales, compared vrith 28.7 percent of sales in 1975. 16,6 14.1 12.0 Operating Results In 1976, consolidated gross profit on sales was influenced favorably by a larger proportion of total sales being made in higher-margin soft drink extract units. Finished product sales of soft 1972 1973 1974 20.3 248 1975 1976 2{3481S917': 16 The Seven-Up Company 1976 Annual Report
Page 19: iym26e00
Consolidated expenditures for marketing services, which include advertising and promo- tional programs, increased 20.7 percent, to a record level of $43,306,814 or 18,6 percent of sales, compared with $35,859,917 or 16.8 percent in 1975. The increase of $7,446,897 for marketing programs accounted for the most significant portion of the $10,218,529 increase in 1976 operating expenses. In the two-year period 1975-1976, marketing support funds increased 514,866,791, employment costs $3,164,488, and all other expenses $2,238,329 over 1974 levels, In key U. S, markets, 1976 soft drink marketing funds increased over 50 percent from 1974 levels, in line with programs developed to support 7UP t,brand development, In 1976, media advertising 6*.nd promoTional programs increased at about the same percentage over 1975, with dollars utiliy°ed in promotional support programs representing the larger of the expenditures, ' 1'otal selling and administrative payroll, excluding fringe benefits, was equal to 5,9 cents of evely sales dollar in 1976, compared with 5.8 cents of every dollar in 1975, Total employment costs, including salaries, wages, and fringe benefits, increased $1,623,069 or 10,4 percent over 1975 expenses and were the second-largest factor in the total operating expense dollar increase. Also increasing at more modest rates were travel expenses, warehousing charges, freight, local taxes and utility bills, which exceeded 1975 expenditures by $879,035, Estimated annual sales productivity of personnel in 1976 was $143,820, compared with $133,935 in 1975. Individual sales productivity of personnel employed in each of the companies major product groups increased over year-ago levels. Consolidated operating profit was $44,634,187 or 19.1 percent of sales in 1976, an increase of 11,8 percent over $39,937,971 or 18,7 percent of sales in 1975. Both dollar operating profit and the profitability ratios from operations were at all- tirrle h}ghs. Qpprating profit ratios Iq sqles ir} the last six rnonttA of 1g76, yaere 19 percent of sales, comparing favorably with the ratio of 19.2 percent achieved in the first six months of the 1976 fiscal year. For the year, the Company exceeded consolidated sales and income objectives. Interest income (net of interest expense) increased to $1,907,738 from $1,769,827. Foreign source net interest income declined, with domestic income increasing over the previous year on a larger volume of dollar investments, Yields on short-term U. S. investments trended lower throughout the year, with the exception of a brief strengthening during June and July, - - Miscellaneous other income totaled $1,611,117 in 1976, compared with $690,961 a year ago. These amounts are principally composed of revenues from royalties, rentals, sales of assets and currency gains. Miscellaneous deductions were $1,008,037 in 1976 and $2,554,296 in 1975. These amounts include certain non recurring charges. Included in 1976, is the settlement approved by the court of the Bubble Up International suit commenced in 1968. The year 1975 included fees paid in settlement of legal action with respect to the production of food color, adjustments made in connection with the Food and Drug Administration's ban on FD&C Red #2, and foreign currency losses, In 1976, net translation and currency gains net of tax increased net income for the year $297,607 or approximately 2,8 cents per share, compared with net currency losses in 1975 of $1,146,574, which reduced earnings per share 10,8 cents, Earnings After preferred dividends of $215,280, consolidated earnings per share were $2.28, compared with $1,88 in 1975, an increase of 21.3 percent. The increase in 1976 net income per share over 1975 is explained by: ' Increased sales ................................ $1.64 Adjusted by other factors: Increased marketing expenses ......... 0.67 Increased cost of sales ................. 0.33 Increased employment costs ........... 0.14 Increased other operating expense ..... 0.09 Increased tax on higher income ........ 0.24 Increased net miscellaneous income .... (0.09) 1.38 0.26 Currency exchange and translation gains or loss 1975 10.80 loss, 1976 2,8c gain .............. 0.14 Increase in net income per share ................. $0.40 Earnings per share by quarter for the current and previous two years were: 1976 1975 1974 Percent Change 1976 from Previous Year First Quarter. . , . . . $ .45 S .29 S ,25 +55.2 Second 9.uarter.. . .68 .48 .43 -1-41,7 Third Quarter. . . . . .63 .63 .46 0 Fourth Quarter.. . . .52 .48 .40 + 8.3 $2.28 $1.88 $1,54 +2L3 After preferred dividends, earnings per share by company unit were: 1976 1975 1974 The Seven-Up Co. and Subsidiaries .............. $2.02 S 1.70 S 1.32 Wamer-Jenkinson and Subsidiaries .............. .21 .09 .22 Ventura Coastal Corp. 4~% and Subsidiaries .............. .05 .09 ,00 $2.2$ 51.88 51.54 The Seven-Up Company 1976 Annual Report 17
Page 20: iym26e00
The Seven-Up Company and Subsidiaries ® Financial Review (continued) Dividends Total dividends paid in 1976 to holders of both preferred and common shares amounted to $12,321,524, compared with $8,279,296 in 1975. The distribution of dividends by quarter was: 1976 1975 1974 First Quarter .................. .. $0.21 S0.18 $0.11 Second Quarter ....... . ....... 0.21 0.18 0.16 Third Quarter ............. _ ... 0.21 0.18 0.16 Fourth Quarter ........ . ....... 0.30 0.21 0.18 December Extra Dividend ....... 0.20 - - $1.13 $0.75 50.61 During the fourth quarter 1976, the Dividend Policy Committee recommended, and the Board of Directors approved, an increase of 9 cents in the quarterly rate per share and the disburse- ment of an extra dividend on common stock. In 1976, dividends paid on common were equal to 49.3 percent of per share earnings, compared with 39.9 percent in 1975. The current quarterly rate is at an annual rate of $1,20 per share. The 1976 extra dividend should not be considered a basic change in dividend policy. EARNINGS AND DIVIDENDS PER SHARE* 2.28 1.88 $1.10 $.41G 1972 1.30 .4325 1973 Earnings Per Share Dividends Per Share 1.54 1974 1975 1.13 1976 *Based on weighted average shares outstanding during the Year Market Price Common Stock During the year, the market price of The Seven-Up Company stock declined modestly in quoted value on the Over-the-Counter market. In general, the market value of stocks in the soft drink industry did not increase in value for the year in comparison with the generally accepted popular indexes of stock market performance. As reported by NASDAQ, the high and low bid prices for 1976 and the previous two years were: 1976 1975 1974 First Quarter .... $41 -$32~/a $31 1ia-S 14~/4 S303,a-S24 1,a Second Quarter ...... - 37~/.- 32V4 36 - 291/2 28 -• 19i/x Third Quarter ... 38y4- 333/4 351/4 - 253.a 261ia- 12?/z Fourth Quarter .. 35 - 29~/ 351/a- 28 18 - 101/z On December 31, the closing bid price for the last three years, 1974-1976, was 514,75, $32.50 and $31.75, respectively. Balance Sheets Total assets on December 31, 1976, were $131,242,300, compared with $125,994,634 the previous year. Current assets were $86,845,565, compared with $86,594,829 in the previous year. Current liabilities on December 31, 1976, were $26,243,965, compared with $34,815,728, a decline of $8,571,763. The decline in current liabilities primarily reflected a reduction of $7,152,933 in notes payable to foreign banks. Net working capital, the difference between current assets and current liabilities, was $60,601,600, compared with $51,779,101 on December 31, 1975. The ratio of current assets to current liabilities was 3.3 in 1976 and 2.5 in 1975. During 1976, trade accounts receivable increased, in line with expanded dollar sales volume. Inventories at year end were approxi- mately 8.6 percent higher than on December 31, 1975, and are considered adequate to support current sales levels. Inventory turnover for the year was 4.7 in 1976 and 4.8 in 1975. Short-term investments earned $2,196,870 before tcxes in 1976, compared with $2,025,275 in 1975. In 1976, $347,864 originated from countries outside of the U. S., which was below the $472,411 earned last year. During the year, these funds were invested in commercial paper and tax-free municipal bonds in the United States and in money market investments in Canada and other foreign countries. In 1976, tax-free interest on U, S. municipal bonds was modestly higher than in 1975. 18 The Seven-Up Company 1976 Annual Report
Page 21: iym26e00
Capital Expenditures Capital expenditures for property plant, equipment and orchard development totaled $8,449,923 in 1976, compared with $6,839,430 in 1975 and $7,110,033 in 1974. Major expenditures - in 1976 include: • A new bottling plant and canning line for Seven-Up Bottling of Phoenix, Inc., to be completed in March 1977; • A 275-car parking garage at Seven-Up World Headquarters in St. Louis to be completed in September 1977; • Expansion of food color manufacturing facilities at Warner-Jenkinson Co., St. Louis, begun in 1974, were completed and placed in operation. Expansion of Warner-Jenkinson s C.alifornia plant facilities was also completed in i976; • Cont,~nuation of citrus orchards development at Vent ira Coastal Corp., as well as initiation of a majcr expansion of Ventura Coastal's manufacturing facilities to be accomplished over a period of several years. In 1976, approximately 80 percent of the capital expenditures were allocated to the development of soft drink product group facilities, with the most significant portion of the expenditures in the United States. The carry-over of projects started in 1976, plus 1977 capital projects to be submitted to the Board of Directors, would indicate a requirement of approximately $10,375,000 for 1977, exclusive of capital investment for acquisitions or other projects not included in initial plans. No external financing should be required during the 1977 fiscal year. Employees On December 31, 1976, employees of The Seven-Up Company and its subsidiaries totaled 1,622, compared with 1,595 at the close of the previous year. Employment in the soft drink and food flavor and color manufacturing groups increased, with the number of people employed at Ventura Coastal Corporation below 1975 levels. For the year just ended, total employment costs for salaries, wages, and benefit programs were in excess of $24,200,000. Employee benefits offered by the Company, which are largely Company-paid, include life insurance coverage, health and accident benefits, retirement benefits, profit-sharing and incentive awards, as well as education tuition grants. In 1976, such Company- sponsored fringe benefits were approximately 34 percent of productive payroll. International Investments The Corporation operates in international markets through three of its companies and sells its products in Canada and 81 nations overseas. The companies operating outside of the United States are Seven-Up Canada Limited, Seven-Up International, Inc., and Warner-Jenkinson S.AA de C.V, At December 31, 1976, approximately 20 percent of total corporate assets were invested in non-domestic companies, primarily Canada and Mexico. International sales in 1976, after translation to U, S. currency, amounted to approximately 19 percent of total consolidated sales, with net income contributed by these operations at a slightly lower percentage. Gains from translation and foreign exchange transactions, net of taxes, increased 1976 reported income $297,607 or 2.8 cents per share. In 1975, losses from translation and foreign exchange transactions reduced net income by $1,146,574 or 10.8 cents per share. It should be recognized that the Company is not in a position to forecast the magnitude or potential exposure of international currency fluctuations. Every effort is made to minimize this business cost of expansion into international markets. The Seven-Up Company 1976 Annual Report 19
Page 22: iym26e00
The Seven-Up Company and Subsidiaries Consolidated Balance Sheets December 31 ASSETS 1976 1975 Current Assets Cash ................................................. $ 5,461,895 $ 6,132,831 Short-term investments-at cost and accrued interest (approximates market) ............................. 34,588,971 37,457,068 Receivables .. . . . . Trade and other accounts ........................ 16,840,070 15,800,277 Installment contracts (equipment pledged as collateral) including estimated installments due after one year- 1976, $880,000; 1975, $900,000 ..................... 1,628,J63 1,661,938 Allowances for doubtful accounts ..................... (275,000) (275,000) 18,193,623 17,187,215 Inventories-Note A Finished products ................................... 12,029,210 9,777,578 Extract and raw materials ........................... 14,024,769 14,222,532 26,053,979 24,000,110 Prepaid expenses and other current assets ................. 2,547,097 1,817,605 Total Current Assets 86,845,565 86,594,829 Other Assets .............................................. 2,670,932 2,454,842 Property, Plant and Eqv.ipment-on the basis of cost-Note A Land .........................................:... 6,526,401 6,223,195 Orchards .......................................... 1,989,048 1,439,197 Buildings and improvements ......................... 15,739,082 15,122,766 Machinery and equipment .......................... 23,942,119 20,356,864 Orchards under development ........................ 1,534,665 1,763,489 Construction in progress (estimated cost to complete $3,755,000) ............................ 3,782,285 1,652,357 Allowances for depreciation ......................... (15,932,071) (13,818,038) 37,581,529 32,739,830 Intangibies-Note A Trademarks-at cost .................................... 917,434 915,712 Formulas and trademark protection expense-at cost, less accumulated amortization ($96,215) .................. 403,226 602,290 Cost in excess of net assets of subsidiaries acquired, less accumulated amortization (S 152,727) ................. 2,823,614 2,687,131 4,144,274 4,205,133 $131,242,300 $125,994,634 20 The Seven-Up Company 1976 Annual Report
Page 23: iym26e00
LdABILiT1ES AND STOCKiOLDERS' EQiTITY 1976 1975 Current Liabilities I Notes payable to foreign banks .......................... $ 488,506 $ 7,641,433 Accounts payable ...................................... 7,932,519 7,305,346 Employee compensation ................................ 1,980,952 1,812,929 Accrued advertising ..................................... 8,774,180 8,522,150 Other accrued liabilities ................................. 2,316,902 3,547,958 Income taxes .......................................... 4,396,451 5,463,190 Current portion of long-term debt ......................... 354,455 522,722 Tbtal Current Liabilities 26,243,965 34,815,728 . Other Liabilities Long-term debt, less portion classified as current liability-Note D ................................... 942,603 2,129,352 Deferred income taxes-Note A .......................... 2,504,296 596,131 3,446,899 2,725,483 Commitments and Contingencies-Note G Stockholders' Equity-Note B 6% Cumulative Preferred Stock .................... . ...... 3,588,000 3,588,000 Common Stock ........................................ 10,719,501 10,695,451 Additional capital ...................................... 11,150,275 10,505,793 Retained earnings ..................................... 76,093,660 63,664,179 101,551,436 88,453,423 $131,242,300 $125,994,634 See notes to consolidated financial statements 21
Page 24: iym26e00
The Seven-Up Company and Subsidiaries Consolidated Statements of Income Year Ended December 31 1976 1975 Net sales ................................................. $233,282,664 $213,622,918 Cost of products sold ....................................... 117,166,232 112,421,231 116,116,432 101,201,687 Selling, administrative and general expenses .................. 71,482,245 61,263,716 44,634,187 39,937,971 Other income Interest earned ...... . ................................. 2,196,870 2,025,275 Miscellaneous-Note C ................................. 1,611,117 690,961 3,807,987 2,716,236 48,442,174 42,654,207 Other deductions Interest expense ....................................... 289,132 255,448 Miscellaneous-Note C ................................. 1,008,037 2,554,296 1,297,169 2,809,744 Income Before Income'IL-o{es 47,145,005 39,844,463 Income taxes-Note F ...................................... 22,394,000 19,504,000 Net Income $ 24,751,005 $ 20,340,463 Net income per share of Common Stock-Note A ............... $2.28 $1,88 See notes to consolidated financial statements M, 22 The Seven-Up Company 1976 Annual Report
Page 25: iym26e00
The Seven-Up Company and Subsidiaries Consolidated Statements of Changes in Financial Positi®n Year Ended December 31 1976 1975 Funds Provided Net income for the year ................................. $24,751,005 $20,340,463 Provision for depreciation and amortization ................ 3,263,252 2,899,639 Provision for deferred income taxes ....................... 1,908,165 206,732 Funds Provided From Operations 29,922,422 23,446,834 Proceeds from foreign long-term borrowings ............... 295,085 Conversion of $5, 71 Series 1 Convertible Class A Preferred Stock to Common Stock .............................. 4,615,100 Proceeds from exercise of Common Stock options ........... 627,325 628,653 Disposals of property, plant and equipment ................ 414,921 390,197 Sale of equipment to foreign developer (bottler) ............ 1,099,314 Tbtal Funds Provided 31,259,753 30,180,098 Funds Used Additions to property, plant and equipment ................ 8,449,923 6,839,430 Reduction of long-term debt ............................. 1,481,834 523,508 Retirement of $5.71 Series 1 Convertible Class A Preferred Stock by conversion ........................ 4,615,100 Cash dividends ........................................ 12,321,524 8,279,296 Other-net ............................................ 183,973 541,299 Total Funds Used 22,437,254 20,798,633 Increase in Working Capital $ 8,822,499 $ 9,381,465 Changes in Components of Working Capital- Increase (Decrease) Cash and short-term investments ......................... $ (3,539,033) $20,210,952 Receivables ........................................... 1,006,408 (2,172,109) Inventories ............................................ 2,053,869 1,412,992 Prepaid expenses and other current assets ................. 729,492 (188,102) Notes payable ......................................... 7,152,927 (6,844,166) Accounts payable and accrued liabilities .................. 183,830 (867,742) Income taxes .......................................... 1,066,739 (2,391,025) Current portion of long-term debt ......................... 168,267 220,665 Increase in Working Capital $ 8,822,499 $ 9,381,465 See notes to consolidated financial statements 23
Page 26: iym26e00
The Seven-Up Company and Subsidiaries Consolidated Statements of Stockholders' Equity Year Ended December 31 6% Cumulative Preferred Stock-Note B No change during either year ........................... 1976 $ 3,588,000 1975 $ 3,588,000 $5.71 Series 1 Convertible Class A Preferred Stock-Note B Balance at beginning of year ............................ Conversion of 46,151 shares into Common Stock ............. $ -0- $ 4,615,100 (4,615,100) Balance at End of Year $ -0- $ -0- Common Stock-Note B Balance at beginning of year ............................ $10,695,451 $10,472,271 Shares sold under stock option plan ....................... 24,050 26,300 Shares issued upon conversion of $5.71 Series 1 Convertible Class A Preferred Stock .............................. 196,880 Balance at End of Year $10,719,501 $10,695,45 ]. Additional Capital Balance at beginning of year ............................ $10,505,793 $ 5,428,388 Excess of proceeds over par value of Common Stock sold under stock option plan ......................... 603,275 602,353 Tax benefits arising from Common Stock options ............ 41,207 56,832 Excess of stated value of $5.71 Series 1 Convertible Class A Preferred Stock over par value of Common Stock issued upon conversion ................................... 4,418,220 Balance at End of Year $11,150,275 $10,505,793 Retained Earnings Balance at beginning of year ............................ $63,664,179 $51,603,012 Net income for the year ................................. 24,751,005 20,340,463 Dividends paid 6% Cumulative Preferred Stock- $6.00 a share .......... (215,280) (215,280) $5.71 Series 1 Convertible Class A Preferred Stock- $2.855 a share in 1975 ........................... (114,910) Common Stock- $1.13 a share in 1976 and $, 75 a share in 1975 ................................... (12,106,244) (7,949,106) Balance at End of Year $76,093,660 $63,664,179 ts 0 _P_ ~ [o See notes to consolidated financial statements ~ 24 The Seven-Up Company 1976 Annual Report
Page 27: iym26e00
The Seven-Up Company and Subsidiaries Notes to Consolidated Financial Statements Note A-Principles of Reporting and Accounting Consolidation The consolidated financial statements include the accounts of The Seven-Up Company and all subsidiaries. All significant intercompany accounts and transactions are eliminated. Inventories Inventories are valued at the lower of cost or market. Cost is determined principally under the first-in, first-out (FIFO) and average cost methods e.ecept for sugar inventories where cost is determined on the last-in, first-out (LIFO) method, Current replacement cost of sugar inventories exceed their LIFO value by $71,000 and $550,000 at December 31, 1976 and 1975, respectively. Property, Plant and Equipment Depreciation of property, plant and equip- ment is provided on the basis of their estimated useful lives, generally at annual rates as follows: building and improvements 2-10%, machinery and equipment 5-33%. Depreciation rates are principally applied on the straight-line method except that Canadian facilities acquired before 1968 are depreciated on the declining balance method. Costs associated with orchard development are deferred until economic production has commenced (normally after four to five years) at which time they are amortized over the productive life of the orchard or the remaining term of leased premises. These costs include lease rental, real estate taxes, interest, deprecia- tion and other costs applicable to orchard development. Expenditures for maintenance and repairs are charged to costs or expenses; renewals and improvements are capitalized. At the time of retirement or other disposition of properties, the assets and related allowance accounts are relieved of the amounts included therein and the resulting profit or loss is included in income. Intangible Assets Cost in excess of net assets acquired arising from acquisition of companies before December 31, 1970 are not being amortized because, in the opinion of management, there has been no diminution in value. Intangible assets arising from subsequent acquisitions are being amortized on the straight-line method, generally over a period of forty years (unamortized amount at December 31, 1976-51,483,027). 'Irademarks are not being amortized because, in the opinion of management, there is no decrease in value. Pension Plans Prior service costs of the Company's pension plans are being amortized over approximately 10-25 years, Income Taxes Investment tax credits, which are not material, are recorded as a reduction of the provision for federal income taxes in the year earned. Deferred income taxes are provided for certain items, principally depreciation, which are recognized for financial statement purposes in years different from the years in which such items are recognized for income tax purposes. Net Income Per Share Net income per share of Common Stock is based on the weighted average number of shares outstanding during each year adjusted for dilutive stock options. Recognition is given to the dividend requirements of the Preferred Stock. Note B-Capital'Stock Information relating to the Company's capital stock at December 31, 1976 and 1975 is presented below: Shares Outstanding Authorized 1976 1975 6% Cumulative Preferred Stock. S 100 par value (callable at par) ... 5,888 5,880 5.880 C1ass A Preferred Stock, without par value . . 325,000 $5.71 Series 1 Convertible, stated value $ 100 a share ... 0- 0- Common Stock. $I par value ...... 24,000,000 10,719.501 10,695,451 The Seven-Up Company 1976 Annual Report 25
Page 28: iym26e00
The Seven-Up Company and Subsidiaries Notes to Consolidated Financial Statements (continued) In 1975, pursuant to a conversion provision, 46,151 outstanding shares of 55.71 Series 1 Convertible Class A Preferred Stock were converted into 196,880 shares of Common Stock. Under a stock option plan, certain employees, including directors and officers, hold five-year options to purchase shares of Common Stock of the Company. Options become exercisable one year after the date granted. Following is a summary of transactions under the plan for the two years ended December 31, 1976: Number of Shozes Option Price Options outstanding at January 1, 1975....... ... 146,300 519.88-535.44 Exercised .................. (26,300) 19,88- 35.44 Terminated .................. (3,150) 19.88- 35.44 Options outstanding at December 31, 1975 ....... 116,850 19.88- 35.44 Exercised .................. (24,050) 19.88- 35.44 Terminated ... . ............... (250) 19.88- 35.44 Options outstanding at December 31, 1976 ....... 92,550 19.88- 35.44 At December 31, 1976, all the outstanding options are exercisable and 137,600 shares of Common Stock are reserved for future options. No charges or credits are made to income with respect to stock options. Note C-Foreign Operations Net current assets, total assets and total liabilities of consolidated foreign subsidiaries are approximately $10,850,000, $26,600,000 and $6,300,000, respectively, at December 31, 1976. Net sales attributable to foreign operations amounted to approximately 19% and 20% of consolidated net sales for 1976 and 1975, respectively. The aggregate exchange gain (loss) arising from currency exchanges and financial statement translations included in the income statements (miscellaneous other income in 1976 and deductions in 1975) is approximately $477,000 and ($1,147,000), respectively. The amount of undistributed earnings con- sidered to be indefinitely reinvested in foreign operations (principally in Canada) is approxi- mately $15,200,000. Income taxes on earnings expected to be distributed in the future have been provided for in the financial statements. Note D-Lonq'Ibrm Debt Long-term debt, after reduction for current maturities, is comprised of various notes and contracts payable bearing interest ranging principally from 5% to 7%. Maturities during the next five years are as follows: 1977-$354,455; 1978-$258,877; 1979-$153,833; 1980-$153,833; 1981-$153,835. Note E-Pension and Profit Sharing Plans The Company has pension plans covering substantially all employees, including certain employees in foreign countries, The total pen:;ion expense was $1,050,000 in 1976 and $1,036,000 in 1975. The Company's policy is to fund pension costs accrued. At December 31, 1976, the un- funded past service liability is approximately $1,200,000, In 1976, the Company made certain amend- ments 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. In addition, employees of certain domestic companies participate in the Company's profit sharing trust fund. The companies provided $692,000 in 1976 and $610,000 in 1975 in contributions to the fund. Note F-Income'Iaces The composition of the income tax provision is presented below: Year Ended December 31 1976 1975 Currently payable Federal and state ........ $18,355,237 $17,124,849 Foreign ............ . .... 2,130,598 2,172,419 Deferred ................... 1,908,165 206,732 $22,394,000 S 19,504,000 t 26 The Seven-Up Company 1976 Annual Report
Page 29: iym26e00
Report of Ernst & Ernst, Independent Auditors Note G-Commitments and Contingencies Commitments The Company has guaranteed borrowings of a foreign bottler in the amount of $1,000,000, The Company has obtained a security interest in land, buildings, equipment and other assets with an appraised value in excess of the related ,-ruarantees. In connection with the acquisition of a business in '1974, the Company has agreed to pay, as additional consideration, an amount not to exceed $1,750,000 based upon net income of the business through December 31, 1979. Any intang;ble asset which may result from such contingent payments will be amortized over periods then estimated to be benefited. Renta~~ expense, principally for office space, orchards and equipment, and future lease commitments, are less than 1°h of consolidated net sales, The present value of noncapitalized financing leases and the impact on net income if such leases had been capitalized are not material, Contingencies At December 31, 1976, the Company was involved in several matters of litigation, none of which, in the opinion of management, will have a material effect upon the conduct of its operations or upon the consolidated financial position of the Company. Note H-Summcay of Quozterly Results of Operations (Unaudited) The following is a summary of unaudited quarterly results of operations for the year ended December 31, 1976, This information has been subjected to a limited review by our independent accountants in accordance with standards established by the American Institute of Certified Public Accountants. However, a limited review does not constitute an audit, and, accordingly, the independent accountants do not express an opinion on this information. Quarter Ended Mar.-31 Jun.-30 Sep.-30 Dec.-31 (Thousands of dollars, except per share data) Net sales .......... 549,030 $67,783 564,374 S52,096 Gross profit . . . ..... 26,095 31,005 30,841 28.175 Net income ........ 4,898 7,340 6,841 5,672 Net income per common share . .45 .68 ,63 .52 r, Stockholders and Board of Directors The Seven-Up Company St. Louis, Missouri We have examined the consolidated balance sheets of The Seven-Up Company and sub- sidiaries as of December 31, 1976 and December 31, 1975, and the related consolidated statements of income, changes in financial position and stockholders' equity for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, include such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the consolidated financial position of The Seven-Up Company and subsidiaries at December 31, 1976 and December 31, 1975, and the consolidated results of their operations and changes in their financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis, St. Louis, Missouri February 14, 1977 The Seven-Up Company 1976 Annual Report 27
Page 30: iym26e00
The Seven-Up Company and Subsidiaries Seven-Year Statistical Summcsry 1970-1976 Year Ended December 31 1976 1975 Net Sales ........................................ $233,282,664 $213,622,918 Cost of Products Sold .............................. 117,166,232 112,421,231 Gross Profit ....................................... 116,116,432 101,201,687 Selling, Administrative and General Expenses ......... 71,482,245 61,263,716 Operating Profit .................................. 44,634,187 39,937,971 Net Miscellaneous Income (deductions) .............. 2,510,818 (93,508) Income Before Income Taxes ....................... 47,145,005 39,844,463 Federal, State and Foreign Income Taxes ............. 22,394,000 19,504,000 Net Income ...................................... $ 24,751,005 $ 20,340,463 Net Income as a Percent of Sales . ................... 10.6% 9.5% Per Share of Common Stock Net Incomet ................................. ' $2.28 $1.88 Dividends* ................................... 1.13 .75 Book Value* .................................. 9.14 7,93 Market Price Range (OTC) Common (high-low bid prices) * ...................... 41-293/4 36-143/~ Depreciation and Amortization ..................... 3,263,252 2,899,639 Capital Expenditures ........................ . ..... 8,449,923 6,839,430 Working Capital-Current assets .................... $ 86,845,565 $ 86,594,829 Current liabilities ................. 26,243,965 34,815,728 Total working capital .............. 60,601,600 51,779,101 Current ratio ..................... 3.3 to 1 2,5 to 1 Other Assets -Land, building and equipment ..... 37,581,529 32,739,830 Miscellaneous investments ......... 2,670,932 2,454,842 Intangibles ...................... 4,144,274 4,205,133 Total Other Assets ................. 44,396,735 39,399,805 Total ............................ $104,998,335 $ 91,178,906 Capitalization and Reserves -Long-term debt ................... $ 942,603 $ 2,129,352 Other liabilities ................... 2,504,296 596,131 6% Cumulative Preferred Stock ...... 3,588,000 3,588,000 $5.71 Convertible Class A Preferred Stock ........................ Common shareholders' equity ...... 97,963,436 84,865,423 Total ............................ ; $104,998,335 $ 91,178,906 Return on common equity-at end ` of year ...................... ~ 25.0% 23.6% r•f Average shares of common stock CI 4h outstanding :. ................. 10,741,116 10,636,841 ~ ~ co 28 The Seven-Up Company 1976 Annual Report
Page 31: iym26e00
1974 $190,879,628 110,046,723 1973 $146,748,362 75,783,214 1972 $132,519,867 69,722,488 1971 $124,379,262 66,247,562 1970 $111,648,288 60,047,748 80,832,905 51,212,637 70,965,148 45,164,104 62,797,379 40,153,791 58,131,700 36,550,453 51,600,540 32,461,502 29,620,268 2,456,835 25,801,044 1,304,302 22,643,588 606,197 21,581,247 661,145 _ 19,139,038 457,011 .32,077,103 1 15,489,000 27,105,346 13,023,000 23,249,785 11,205,265 22,242,392 10,914,386 19,596,049 9,779,390 $ 15,588,103 $ 14,082,346 $ 12,044,520 $ 11,328,006 $ 9,816,659 8.7% { ~ $1.54 .61 6.45 9.6% $1.30 .4325 5.50 9.1 % $1.10 .416 4.62 9.1 % $1.03 .40 3.72 8.8% $ .89 .325 3.08 303/4-101/2 371/4-213/4 50i/a-333/s 36iI8-263/4 ' 303/4-173/4 2,347,569 1,750,273 1,339,384 1,129,534 1,189,705 . 6,819,836 7,506,958 3,086,443 2,565,297 1,902,143 $ 67,331,096 $ 58,761,951 $ 52,329,788 $ 45,845,959 $ 40,674,266 24,933,460 20,054,165 17,711,046 15,944,106 15,164,446 42,397,636 38,707,786 34,618,742 29,901,853 25,509,820 2.7to 1 2.9 to 1 3.0 to 1 2.9 to 1 2.7 to 1 29,101,568 24,626,482 19,310,765 17,155,484 15,976,359 2,953,990 1,800,626 ' 2,298,733 1,930,319 1,926,520 4,295,836 4,388,420 3,539,410 2,499,686 2,522,549 36,351,394 30,815,528 25,148,908 21,585,489 `2Qt4~5,428 $ 78,749,030 $ 69,523,314 $ 59,767,650 $ 51,487,342 $ 45,935,248 $ 2,652,860 $ 3,140,984 $ 2,447,818 S 1,735,063 $ 2,805,964 389,399 442,043 379,122 364,788 353,440 3,588,000 3,588,000 3,588,000 3,588,000 3,588,800 4,615,100 4,860,600 5,079,900 7,307,900 7,390,400 67,503,671 57,491,687 48,272,810 38,491,591 31,796,644 $ 78,749,030 $ 69,523,314 S 59,767,650 S 51,487,342 $ 45,935,248 23.9% 23,6% ' 23.7% 27.8% 28.9% 10,467, 739 10,457,812 10,378,538 10,345,034 10,335,038 iBased on weighted average number of shares outstanding during each year, adjusted to reflect shares issuable upon exercise of stock options and for stock split in 1972 *Adjusted for two-for-one stock split in 1972 All data have been restated on a pooling of interest basis to include the operations of Warner-Jenldnson Company acquired in 1970 and Ventura Coastal Corporation acquired in 1973. 29
Page 32: iym26e00
The Seven-Up Company Board of Directors H. C. Grigg Chairman emeritus, The Seven-Up Company Ben H. Wells Chairman of the board, The Seven-Up Company William E. Winter President and chief executive officer, The Seven-Up Company Paul H. Young, Jr. Executive vice president and treasurer, The Seven-Up Company Dr. B. C. Cole Vice president, technical director, The Seven-Up Company Maurice R. Chambers Chairman of the executive committee and member of the board, Interco, Inc., a manufacturer and retailer of consumer products Fred L. Kuhlmann Senior vice president-administration and services and member of the board, Anheuser-Busch, Inc., a manufacturer of beer, baker's yeast and corn products Garret F. Meyer, Sr. Chairman of the board, Wamer-Jenkinson Company, a manufacturer of food colors and flavors David H. Morey Retired chairman of the board and chief executive officer, The Boatmen's National Bank of St. Louis, a national bank and trust company Harold E. Thayer Chairman of the board and chief executive officer, Mallinckrodt, Inc., a manufacturer of chemicals and pharmaceuticals Fred W. Wenzel Chairman of the board and chief executive officer, Kellwood Company, a manufacturer of wearing apparel and recreational equipment 30 The Seven-Up Company 1976 Annual Report H. C. Grigg Dr. B. C. Cole Fred L Kuhlmann David H. Morey Fred W Wenzel I Paul H. Young, Jr. Maurice R, Chmnbers Garret E Meyer, Sr. Harold E. Thayer -ZQ4Ei89286
Page 33: iym26e00
The Seven-Up Company Corporate Officers J. Stewart Bakula John R. Kidwell David M. Haffner Robert A Ridgway Robert W. Simpson Michael Baker William P. Hebron Mildred E. Stiebel Ben H. Wells Chairman of the board William E. Winter President and chief executive officer Paul H. Young, Jr. Executive vice president and treasurer Michael Baker Vice president, director of market development J. Stewart Bakula Vice president and general counsel Dr. B. C. Cole Vice president, technical director David M. Haffner Vice president, director of 7UP market development William P. Hebron Vice president, director of sales John R. Kidwell Senior vice president, director of marketing Robert A Ridgwap Vice president, director of corporate real estate Robert W. Simpson Vice president and secretary Mildred E. Stiebel Assistant treasurer Committees Executive Committee: Messrs. Wells (Chairman), Winter, Young Dividend Policy Committee: Messrs. Thayer (Chairman), Morey, Wenzel, Kuhlmann Compensation Committee: Messrs. Wenzel (Chairman), Chambers, Thayer Audit Committee: Messrs. Morey (Chairman), Wenzel, Winter Stock Option Committee: Messrs. Wenzel (Chairman), Chambers, Thayer The Seven-Up Company 1976 Annual Report 31
Page 34: iym26e00
Principal Subsidiaries of The Seven-Up Company f. Seven-Up Services, Inc. (canning and services subsidiary) 121 South Meramec Avenue St, Louis, Missouri Arnold F. Larson, Vice president and general manager Seven-Up Canada Limited 12 Cranfield Road Toronto, Ontario, Canada Colin B. Scarfe, President Bottling Division 6525 Viscount Tdad Malton, Ontario, Canada Philip M. Campbell, General manager Seven-Up International, Inc. 121 South Meramec Avenue -- St. Louis, Missouri Charles B. Thies, President Seven-Up Andino S. A Seven-Up Argentina S. A Seven-Up Asia, Inc. Seven-Up do Brasil S. A Seven-Up Great Britain, Inc. Seven-Up Ireland Ltd. Seven-Up Mexicana S. A Seven-Up Nederland B. V. Seven-Up Southern Hemisphere, Inc. Seven-Up Taiwan Corporation S.P.I. Corporation Dev-Vend Corporation (equipment sales subsidiary) 121 South Meramec Avenue St. Louis, Missouri Paul H. Young, Jr., President Warner-Jenki.nson Company 2526 Baldwin Street St. Louis, Missouri O. W Hickel, Jr., President Warner-Jenkinson Company of California 17500 Gillette Avenue Santa Ana, California D. K. Wright, President Warner-Jenkinson, SA de C.V. Hacienda de.la Gavia, 35 Echegaray Naucalpan Estado de Mexico Mexico B. R. Erdmann, President Warner-Jenkinson East, Inc. 40 Broad Street Carlstadt, New Jersey John O. Everson, General manager Seven-Up Bottling of Phoenix, Inc. 3830 East Wier Avenue Phoenix, Arizona John C. Furnas, President and general manager Ventvra Coastal Corporation 2325 Vista Del Mar Drive Ventura, California - Frank J. Leforgeais, President Golden Crown Citrus Corporation 2113 Greenleaf Street Evanston, Illinois Paul Hansfield, President 32
Page 35: iym26e00
Transfer Agents The Boatmen's National Bank of St. Louis 300 North Broadway St. Louis, Missouri 63102 The Chase Manhattan Bank 1 Chase Manhattan Plaza New York, New York 10015 Registrars Bankers Trust Company 280 Park Avenue New York, New York 10017 St. Louis Union Trust Company 510 Locust Street St. Louis, Missouri 63101 33
Page 36: iym26e00
The Seven-Up Company 121 South Meramec Avenue, St. Louis, Missouri 63105 Telephone: (314) 863-7777 TWX 1-910-761-0513 Cable SEVENUPCO

Text Control

Highlight Text:

OCR Text Alignment:

Image Control

Image Rotation:

Image Size: