Tobacco Documents Online

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1977 Commission File No. 0-2992 THE SEVEN-UP COMPANY Exact name o registrant as speci ied i.n its charter MISSOURI 43-0513480 (State o Incorporation) (IRS Employer I enti s.cation No.) 121 South Meramec St. Louis, Missouri 63105 . A ress of principal executive o ices) (Z.ip oC de) Registrant's telephone number, including area code (314) 889-7777 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered (NOT APPLICABLE) Securities registered pursuant to Section 12(g) of the Act: Common Stock -- $1.00 Par Value (Title o class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days. Yes X No Indicate the number of Shares outstanding of each of the Issuer's classes of Common Stock, as of the close of the period covered by this report. _ _ __- -_ - - - -~_ Class Outstanding at Decembe"r-31, 1977 Common Stock, $1.00 Par Value 10,722,501

-2- PART I ITEM 1., (a) Business: GENERAL The Seven-Up Company together with its subsidiaries ("Company") is basically engaged in two business segments: beverages and food flavor and colors. The beverage segment is engaged in the manufacture and sale of extract to independently owned franchised 7UP Developers (bottlers) in United States, Canadian and international markets. The beverage segment also supplies finished soft drink products manufactured by independent contract canners to some Developers for resale and provides all Developers with marketing, advertising, management and financial ser- vices. In addition, this segment includes two bottling plant operat:ions and the manufacture and sale of frozen concentrate for lemonade, re- constituted lemon and lime juice and powdered soft drink mixes. 7UP, the principal finished product of the beverage segment, is the third largest selling soft drink in the United States and Canada and is a major factor in many foreign markets for soft drinks. The food flavor and color segment of The Seven-Up Company includes the manufacture of food flavors and colors for sale to various producers of foods and pharmaceuticals. It also includes the manufacture ar.;i sale of cake decorating colors and gourmet flavor specialty products. In each of the two product groups (beverages and food flavors and colors) competition is intense. The Company's major competitors have substantially greater sales and financial resources. From time to time, raw materials essential in the manufacture of products in these groups are difficult to acquire. The Company attempts to protect itself against such problems by maintaining adequate inventories.

-3- BEVERAGE SEGMENT General. In the United States, the Company manufacturers and sells extracts for soft drinks,.principally 7UP, to approximately 473 franchised developers (bottlers) in all 50 states. Through indepen- dent contracts, the Company is also engaged in the manufacture and sale of canned and bottled 7UP and Sugar Free 7UP and fountain syrup for 7UP and Sugar Free 7UP to many of its franchised bottlers and to the United States Government primarily for consumption by its foreign- based armed forces. The Company's franchised developers (bottlers) sell 7UP and Sugar Free 7UP to retailers in bottles, cans and pre-mix tanks for resale principally in food stores, drive-in and other restaurants, soda fountains, bars and other retail establishments. Retail sales of 7UP and Sugar Free 7UP are also made through vending machines, some of which are owned by franchised developers (bottlers) and some of which are owned or leased by their customers. In addition, the Company's franchised developers (bottlers) sell 7UP fountain syrup to retailers for resale in soda fountains, vending machines and bulk dispensers. The only domestic manufacturing facility owned by the Company for the manufacture of bottled soft drinks for sale to retailers is in Phoenix, Arizona. In March 1977, Seven-Up Bottling Company of Phoenix commenced production in its modern new bottling and canning plant which includes approximately 80,000 square feet of production and warehouse space and is designed to accommodate future expansion at minimal cost. The soft drink business is seasonal in character. Sales of soft drinks are higher during the warm summer months and during the Thanksgi.ving-- New Year's holiday season.

-4- International. The Company manufactures 7UP and Diet 7UP ex- tracts in Canada for sale to approximately 75 franchised developers (bottlers) operating throughout all the provinces. Sales in Canada account for approximately 9% and 11% of the Company's net sales in 1977 and 1976, respectively. The Company also operates one bottling plant and related facilities in Ontario through which it sells 7UP and Diet 7UP directly to retailers. The Company sells 7UP extract to approximately 195 franchised devel- opers (bottlers) in 85 foreign countries other than Canada. Sales in foreign countries other than Canada accounted for approximatd~ly 7% and 6% of the Company's net sales for 1977 and 1976, respectively. The products sold in these foreign countries are manufactured in Argentina, Brazil, Great Britain, Ireland, Japan, Mexico and the Republic of South Africa. In addition, during 1977, approximatd!ly 3% of the Company's net sales was exported from the United States. Marketing and Other Services. The Company provides a broad range of marketing services to its franchised developers (bottlers) in the United States, including advertising, sales and management training, vending machine sales and engineering assistance, special events and promotion plans and convention planning. The Company believes such services are essential to the successful merchandising of its soft drinks. The retail sale of 7UP and Sugar Free 7UP is actively promoted in the United States by the Company through national and local television, radio, billboard and newspaper advertising, promotional events, and point-of-purchase displays. Local campaigns are planned and financed cooperatively with the Company's franchised bottlers. Many of the packaging, sales promotion and point-of-purchase display graphics are designed and created by the Company. Its adver- tising agencies are principally responsible for television and radio advertising of 7UP and Sugar Free 7UP. Expenditures for advertising

-5- a and promotional programs constituted approximately 59% and 61% of the Company's total selling, administrative and general expenses in 1977 and 1976, respectively. The Company provides specialized marketing and management services to its franchised bottlers in its international markets. The Company maintains a trained technical staff of approximately 12 persons which develops quality control and sanitary standards for the Company's franchised bottlers. Competition. The soft drink beverage industry is highly competitive. The Company's brands compete with other extensively advertised soft drink beverages and also with lesser known soft drinks of regional and local'bottlers, as well as private brand soft drinks. The Company's major product, 7UP, ranks third in retail sales in the United States and Canadian markets. Two of the Company's competitors have substan- tially greater sales and resources than the Company. In the so-called "cold drink" market, serviced by cup and bottle vending machines, fountains and other on-premise dispensers, the Company's two major competitors account for a large proportion of vending machine installations. Soft drinks similar to 7UP have been extensively marketed through vending machines. Since 1973 the Company has increased its efforts in the "cold drink" market with particular emphasis on the marketing of fountain syrup. Vending Equipment Sales. In conjunction with its soft drink business, the Company sells to its domestic and Canadian franchised developers (bottlers) vending equipment, purchased from various manufacturers, as part of a continuous program to increase distribution through coin-operated machines and soda fountain dispensers. Sales are generally made on an installment basis, with payment extending over a period of

-6- up to five years. These sales accounted for less than 1% of the Company's net sales in both 1977 and 1976. Lemon Products. Ventura Coastal Corporation ("Ventura"), a wholly owned subsidiary, is engaged in the business of processing and packaging frozen concentrate for lemonade, lemon oil (a principal ingredient in the production of 7UP Extract) and the growing, processing and selling of fresh lemons and lemon products. Ventura sales account for appro- ximately 14.0% and 12.2% of the Company's net sales in 1977 and 1976, respectively. Ventura sells the principal portion of its frozen lemonade concentrate under numerous "brand names" to large grocery chains. Ventura competes with numerous domestic processors and packers of fresh lemons and lemon products in California and Arizona, many of which are larger than Ventura and control a greater amount of lemon producing acreage. Ventura's principal competitor for the processing and sale of fresh fruit sells approximately 85% of the lemons pro- duced in the United States. Ventura, which supplies approximately 40% of the domestically produced frozen concentrate for lemonade, is in competition with numerous domestic producers of this product. Golden Crown Citrus Corporation ("Golden Crown"), an affiliate of Ventura Coastal Corporation, is a leading producer of reconstituted lemon and lime juice. In 1977, Golden Crown commenced marketing nationally its lemonade flavored powdered mix and four other flavored powdered mixes, covering nearly 65% of the potential domestic market.

-7- FOOD FLAVORS AND COLORS Through its subsidiary, Warner-Jenkinson Company ("W-J"), the Com- pany manufactures food flavors and colors ("FD&C colors") for sale to various producers of foods and pharmaceuticals. W-J produces more than 1,000 different flavors by the blending of various ingredients purchased from importers and distributors or directly from domestic and foreign regional cooperatives. Food colors, which constitute substantially all the FD&C colors sold by W-J, are made from chemical processing of synthetic organic chemicals and are marketed as primary colors or 400 different blends. The FD&C colors are subject to gov- ernmantal regulation in the form of certification by the Federal Food and Drug Administration. W-J markets its products to various pro- ducers of beverages, foods, and pharmaceuticals, using its own sales force of approximately 14 persons and through five distributors in Mexico. W-J has a majority ownership interest in a Mexican subsidiary engaged principally in the manufacture of FD&C colors. W-J owns a domestic perfume and fragrance manufacturer which accounts for less than 1% of the Company's net sales for 1977 and 1976. The FD&C color and food flavor markets are highly competitive in the Unitect States. W-1T has five principal competitors in the FD&C color market. There are several hundred competitors selling food flavors. FD&C.colars are produced from basic chemicals purchased from independent sources. W-J has in the.past experienced some difficulty irt acquiring certain raw materials. See "Raw Materials and Other Supglies•. W-J' s new Elyde Park food color plant completed its first full year of operation in 1377. This nevr masufacturing facility, consisting of 125,000 square feet, increases W-J's food dye and lake pigment pro- duction capacity by 75%.

-8- RAW MATERIALS AND OTHER SUPPLIES Beverages The principal materials used by the Company in the manfuacture of 7UP extract are essential oils of lemon and lime and ethyl alcohol blended in a highly concentrated form. In 1977, approximately 68% of the lemon oil used by W-J was purchased from one large cooperative. In addition, sugar, citric acid, sodium citrate, carbonated water and packaging materials are required for the manufacture of the Company's finished soft drink products. The principal materials used by Ventura in the production of lemon products, primarily frozen concentrate for lemonade, are fresh or concentrated lemon juice, lemon oil flavor, sugar solids or sweeteners, such as corn syrup and packaging materials. Ventura's lemon source is presently California, where in 1977, Ventura attained the largest lemon harvest in history. Supplies of fruit in 1976 were adversely affected by inclement weather and other adverse conditions. Ventura is generally dependent on other citrus growers for approximately 75% of its lemon supply. (Next Page -9-)

Fuel shortages could pose a problem in the future for the Company's franchised developers who deliver by truck. However, the Company does not know of any significant problems experienced to date by its franchised developers in obtaining adequate fuel supplies. The Company has not experienced any serious disruption of service because of insufficient fuel supplies. See Government Regulations for a discussion relating to the Food and Drug Administration announcement of March 9, 1977 on the prohibition of utilizing saccharin in foods and beverages. Food Flavors and Colors The principal materials used by W-J in the manufacture of food colors are benzene and naphthalene derivatives. From time to time these materials may be in short supply. However in 1976 and 1977 supplies were adequate to meet the requirements of W-J. At times of short supply, W-J has in the past always maintained adequate inventories for continuing operations. Except as otherwise indicated under Business - Food Flavors and Colors above, the principal raw materials and other supplies used by the Com- pany are available from a number of different sources. EMPLOYEES The Company had at December 31, 1977, 1,621 employees, including 1,183 in the United States, 231 in Canada and 207 in other countries. Of the Company's employees, less than 5% are represented by unions.

-10- A11 employees of the Company and of four of its domestic subsidiaries (approximately 525 salaried and hourly employees) participate in profit sharing plans, under which substantially all of the contribu- tions are made by the employers. Most of the Company's employees in the United States and Canada are covered by pension plans. The Company also has a comprehensive employee security program, including life and disability insurance, major medical care and hospitalization for employees and their dependents and other employee benefits. Most of the costs of these benefits is borne by the Company. See Note E to Consolidated Financial Statements. In 1976, the Company made cer- tain amendments to their domestic pension plans to conform to the Employee Retirement Income Security Act of 1974. These amendments did not significantly change pension costs or unfunded vested benefits. TRADEMARKS The Company's principal trademarks include 7UP, SEVEN-UP, THE UNCOLA and HOWDY, all of which are registered in the United States and Canada, and one or more of which are registered in certain other countries. The Company is the sole owner of these trademarks. GOVERNMENT REGULATION Production and distribution of a number of the Company's products are subject to the Federal Food, Drug and Cosmetic Act and to vaLious other Federal and State statutes regulating safety and labelling of products. On March 9, 1977, the Food and Drug Administration announced that it intended to prohibit the use of saccharin in foods and beverages. Saccharin is the non-nutritive sweetener used in Sugar Free 7UP and virtually all other dietary soft drinks.

On November 23, 1977, the Saccharin Study and Labeling Act became law. It provided for an 18 month moratorium on the FDA proposed ban of saccharin as a food ingredient, during which time, additional scientific evidence and information will be gathered to determine whether saccharin is in fact a carcinogen. in addition, the law requires that labeling of foods containing saccharin label. bear a warning Saccharin is the last known artificial sweetener approved for sale by the FDA following their ban of cyclamates in 1969. Although no artificial sweetener currently has FDA approval, the Company has an alternative formulation that is reduced in calories. On October 1, 1977, a ban on saccharin similar to that proposed by the FDA went into effect in Canada, necessitating the withdrawl of Sugar Free 7UP from all Canadian markets. In anticipation of this ban, Seven-Up Canada Limited, on August 29, 1977, introduced a reformulated, calorie reduced soft drink called Diet 7UP, containing less than half the calories of 7UP. Since its introduction, in August, Diet 7UP has achieved the number two position in the diet segment of the Canadian soft drink market. Substantially all of the Company's plants in the United States are subject to Federal, state and local laws or regulations regarding discharges into the environment. Compliance by the Company with these laws and regulations has not had, and is not expected to have, a'ilrect material effect on the Company's financial position or its results of operations. Although the Company has not been appreciably affected by the applicability of such laws and regulations to its franchised bottlers, it is impossible to ascertain any future effect on the rv ~ -~ Company, in part because of the variation in legislative proposals m m 13 and actions in the different states and in the sizes and resources ~ ~ of the franchised bottlers.

-12- ~ ~ Several states and local jurisdictions have enacted laws designed ~ .,~ to reduce litter due to discarding of bottles, cans and other packagisi f: material, and it is likely that other jurisdictions will enact sirilAr laws. The Company is unable at this time to determine what impact, if any, such laws will have in the future on the Company or its franchised Developers. Item 1., (b) Business z 4 On February 16, 1978, the Company consummated, through a wholly owned subsidiary, the acquisition of Oregon Freeze Dry Foods, Inc., ("Oregon through a merger transaction for cash of approximately $io,000,000. ~ Oregon produces a broad product line of freeze-dried and convenience foods including complete meals for industrial, geriatric, military and outdoor/sporting goods markets. The acquisition is representative of the Company's efforts to expand and broaden both markets and pro- ducts, where consistent with corporate goals and Seven-Up quality standards. This transaction was deemed not to be a material acquisition. Like- wise, Oregon was not deemed to be a significant subsidiary. The acquisition will be accounted for on the purchase method. For the year ended December 31, 1977, unaudited sales and net income of Oregon were $11,631,673 and $692,629, respectively. Item 1., Cc) (1). Information as to Lines of Business The following tables set forth the respective contributions of each of the Company's two business segments to its net sales and income before taxes for the periods shown: t 1977 1976 1975 1974 1973 (expressed in thousands of dollars) 27et Sales r•y Q 4h Qz I.- Beverages $228,840 $212,528 $198,196 $172,749 $134,471 . ~ Food Flavors & Colors 22,158 20,755 15,427 18,131 12,277 0 ~ Totals $250,998 $23,3,283 $213,623 $190,880 $146,748

-13'- 1977 1976 1975 1974 1973 (expressed in thousands of dollars) Income Before Income Tax Beverages $48,464 $46,152 $41,579 $30,017 $26,505 Food Flavors & Colors 327 1,717 433 2,850 1,695 Operating Profit $48,791 $47,869 $42,012 $32,867 $28,200 Corporate expense (3,360) (3,109) (2,834) (2,793) (2,533) Interest Income (net) 2,009 1,908 1,770 1,982 1,406 Currency gains (losses) (231) 477 (1,104) 21 32 Totals $47,209 $47,145 $39,844 $32,077 $27,105 Item 1., (c) (2). Information as to Classes of Similar Products The following table sets forth the approximately percentage contri- butions to the Company's net sales for each of the Company's principal classes of products, constituting the Beverage segment under "net sales" in the above table: 1977 1976 1975 1974 1973 Soft Drink Extracts, Certain Syrups and Flavoring Compounds 42.7% 43.3% 39.9% 37.3% 43.8% Finished Products (Canned and Bottled Soft Drinks and Fountain Syrup) 1.9% 3.3% 6.5% 1.8% 5.4% Lemon Products 15.4% 13.4% 13.6% 10.9% 10.8% Totals 100.0% 100.0% 100.0% 100.0% 100.0% Item 1., (d) Foreign Operations Reference is made to Note C - "Foreign Operations" to the Consolidated Financial Statements of The Seven-Up Company's Annual Report for 1977. J

CONSOLIDATED SUMMARY OF OPERATIONS THE SEVEN-UP COMPANY AND SUBSIDIARIES EAR ENDED DECEMBER 31 1973 1974 1975 1976 1977 Net sales $146,748,362 $190,879,628 $213,622,918 $233,282,664 $250,998,056 Cost of products sold 75,783,214 110,046,723 112,421,231 117,166,232 129,039,611 70,965,148 80,832,905 101,201,687 116,116,432 121,958,445 Selling, administrative and general expenses 45,164,104 51,212,637 61,263,716 71,482,245 76,814,537 25,801,044 29,620,268 39,937,971 44,634,187 45,143,908 Other income (deductions): Interest earned 1,844,231 2,298,505 2,025,275 2,196,870 2,344,685 Interest expense (438,406) (316,243) (255,448) (289,132) (335,487) Miscellaneous - net (101,523) 474,573 (1,863,335) 603,080 56,178 1,304,302 2,456,835 (93,508) 2,510,818 2,065,376 Income before income taxes 27,105,346 32,077,103 39,844,463 47,145,005 47,209,284 ~ r a / Income taxes 13,023,000 15,489,000 19,504,000 22,394,000 21,420,000 Net income (2) 14,082,346 16,588,103 20,340,463 24,751,005 25,789,284 Preferred dividend requirements: 67c Cumulative Preferred Stock 215,280 215,280 215,280 215,280 192,240 $5. 71 Convertible Class A Preferred Stock 284,485 269,191 114,910 499,765 484,471 330,190 215,280 192,240 Net income applicable to Common Stock $ 13,582,581 $ 16,103,632 $ 20,010,273 $ 24,535,725 $ 25,597,044 Weighted average number of shares of Common Stock outstanding (3) 10,457,812 10,467,739 10,636,841 10,741,116 10,745,100 Per share of Common Stock (3): Net income $1.30 $1.54 $1.88 $2.28 $2.38 Cash dividends declared $ .4325 $ .61 $ .75 $1.13 3 $1' 25 ~4iOT$V4}Z

-14a- I NOTES TO CONSOLIDATED SUMMARY OF OPERATIONS (1) This summary should be read in conjunction with the related financial statements and notes thereto incorporated by reference under Item 13(a)(1). (2) The Company values its inventory at the lower of cost or market. • Effective January 1, 1974, the Company changed its method of determining cost of sugar inventories from the first-in, first-out (FIFO) method to the last-in, first-out (LIFO) method. The change had the effect of reducing net income by $582, 000 ($. 056 per share) for the year ended December 31, 1974. (3) 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 and dividends on Preferred Stock.

-15- MANAGEMENT'S DISCUSSION 1977 Compared with 1976 Consolidated Sales, Gross Profit and Net Income. Dollar sales in 1977 increased by $17.7 million or 7.6% over 1976. In 1977, dollar sales growth was influenced more by real growth in product unit sales and tonnage shipped than increased product prices. Average 1977 selling prices were below 1976 levels, although some higher prices were experienced in the latter months of the year. In 1977 over 31% of the $17.7 million dollar annual sales increase occurred in the higher margin soft drink extract product classifi- cations which equaled 38.9% of total consolidated sales in 1977 and 39.4% in 1976. Gross profit on sales in 1977 was $121,958,445 or 48.6% compared with $116,116,432 or 49.8% of sales in 1976. In summary, net income for 1977 increased $1.0 million or 4.0% from 1976 results. Net income of the Company was 10.3% of sales in 1977 compared with 10.6% of sales in 1976. Beverage Segment Unit sales of soft drink extract (both 7UP and Sugar Free 7UP) in the United States were modestly ahead of last year. Soft drink ex- tract unit sales in international and Canadian markets grew at rates higher than those in the United States. Unit sales of lemon products primarily frozen concentrate for lemonade, reconstituted lemon juice and lemon oil, were up sharply for the vear. In addition, sales of fresh fruit processed for resale reached record levels. Food Flavor & Color Se ment Lower food flavor unit sales for 1977 were offset by significantly higher food color and specialty product sales. Dollar sales did not reflect the growth of unit sales due to lower selling prices.

-16- s . Selling, Administrative and General Expenses Selling, administrative and general expenses increased $5.3 million, totaling $76.8 million in 1977 and $71.5 million in 1976. Expendi- tures for marketing services, which include advertising and promo- tional programs, accounted for $2.0 million dollars of the annual increase. Marketing support funds have increased over the previous year as follows: 4.7 percent 1977/1976; 20.7 percent 1976/1975; and 26.1 percent 1975/1974. The relationship of advertising and promotional expense to total selling, administrative and general expenses for the last three years has been: ear 0 Advertising & Promotion Selling Administrative & General Advertising & Promotion As a Percentage of Total Selling, Administrative and General 1975 $35,859,917 $61,263,716 59% 1976 $43,306,814 $71,482,245 61% 1977 $45,328,529 $76,814,537 59% Total employment costs, payroll and fringe benefits, and travel increased only 0.6 million (or 1.2%) in 1977 as compared with 1976, reflecting primarily a decrease in personnel resulting from a change in the distribution system in the Canadian subsidiary. Also charges for outside warehousing, freight, travel and entertainment accelerated sharply in 1977 and exceeded 1976 cost by $0.8 million. Depreciation charged to operations in 1977, included in both cost of goods and selling, general and administrative expenses, was $3.7 million as compared with $3.3 million in 1976. 0 4 Expenditures for research and development in 1977 were sharply in- ~ w cn creased from previous levels. This increase was of such magnitude .a as to reduce earnin s er shar i l ~ g p e approx mate y 6 cents. -4 "0

-1T- The most significant portion of the increase represents Warner- Jenkinson's continuing participation in the development of non- absorbable food colors. These products are undergoing long-term safety tests necessary to obtain marketing approval from the Food and Drug Administration. Evaluation of these new food colors by major food companies continues to confirm their viability in food products. In addition to the development of polymer food colors, Warner- Jenkinson is engaged with other manufacturers in the retesting of all food, drug and cosmetic colors. A newly staffed Company research and development effort was initiated in 1977. A prime objective of this centralized activity is the improvement of existing product lines and the expansion into new product areas. It will also coordinate and support research and development efforts at the subsidiary company level. Interest Income Interest income (net of interest expense) increased to $2,009,198 in 1977 from $1,907,738 in 1976. Foreign source net interest ex- pense increased sharply as did domestic net interest income for year 1977. Yields on short-term U.S. investments were modestly below 1976 levels. the Other Income & Expense Miscellaneous other income totaled $1,322,932 in 1977, compared wizh $1,611,117 a year ago. These amounts are principally composed of revenues from royalties, rentals, sales of assets and currency gains. Miscellaneous deductions were $1,266,754 in 1977 and $1,008,037 in 1976. These amounts include certain non-recurring charges. Included in 1977 were non-recurring termination charges in Canada relating to changes in the distribution system and the write-off of Sugar Free 7UP containers made obsolete by the saccharin ban. The amount for 1976 included the settlement approved by the court of the Bubble Up International suit commenced in 1968.

-i8- In 1977, net translation and currency losses (net of tax) decreased net income for the year $224,189 (or approximately 2.1 cents per share), compared with net currency gains in 1976 of $297,607, which increased earnings approximately 2.8 cents per share. 1976 Compared with 1975 Consolidated Sales, Gross Profit and Net Income. Dollar sales in 1976 increased by $19.7 million or 9.2% over 1975. 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, which comprise almost 50% of total sales - particularly soft drinks and frozen concentrate for lemonade, were below 1975 levels. In 1976 over 65% of the 19.7 million dollar annual sales increase occurred in the higher margin soft drink extract product classifi- cations which equaled 39.4% of total consolidated sales in 1976 and 37.0% in 1975. Gross profit on sales in 1976 was $116,116,432 or 49.8% compared with $101,201,697 or 47.4% of sales in 1975. In summary, net income for 1976 increased $4.4 million or 21.7% from 1975 results. Sales of higher marginal product classifications with resulting improved gross profit offset increased dollar operating expense. Increased interest and miscellaneous income not impacted in 1976 by unfavorable foreign currency adjustments was up signifi- cantly from year ago levels. Net income of the Company was 10.6% of sales in 1976 compared with 9.5% in 1975. Beverage Segment Unit sales of regular 7UP extract were modestly ahead of year-ago levels in both U.S. and Canadian markets and at 1975 levels in the international markets. Bath Sugar Free and Fountain 7UP extract sales were up sharply in both the U.S. and Canadian markets. Unit sales of lemon products, primarily frozen concentrate for lemonade and lemon oil, were up significantly for the year, but sales of fresh fruit and fruit processing fees were below year-ago levels. V1

-19- Food Flavor & Color Segment Combined unit sales of food flavor and color reflected a strong recovery for 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. Selling, Administrative and General Expenses. Selling, administrative and general expenses increased $10.1 million, totaling $71.4 million in 1976 and $61.3 million in 1975. Expendi- tures for marketing services, which include advertising and promotional programs, accounted for $7.4 million dollars of the annual increase. Marketing support funds have increased over the previous year as follows: 20.7 percent 1976/1975; 26.1 percent 1975/1974; and 12.9 percent 1974/1973. The relationship of advertising and promotional expense to total selling, administrative and general expenses for the last three years has been: ear Advertising & Promotion Selling Administrative & General Advertising & Promotion As a Percentage of Total Selling, Administrative And General 1974 $28,440,023 $51,212,637 56% 1975 $35,859,917 $61,263,716 59% 1976 $43,306,814 - -$71,482,245 61% Total employment costs, payroll and fringe benefits, and travel increased $1.8 million in 1976 as compared with 1975, reflecting salary adjustments, increased personnel and higher travel costs. Higher warehouse charges, freight expense, local taxes and utility costs reflected the most significant remaining increased dollar expenses. Depreciation charged to operations in 1976, included in both cost of goods and selling, general and administrative expenses, was $3.3 million as compared with $2.9 million in 1975.

-2 0- 4 Interest Income 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 tended lower throughout the year, with the exception of a brief strengthening during June and July. Other Income & Expense 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. (Next Page -21-) ®

-21- ITEM 3. Properties. The principal United States and Canadian properties of the Company are the following: Location Facilities St. Louis, Missouri ........ World headquarters; W-J's offices; extract and color manufacturing plant; and warehouses Los Angeles, California Ventura County, California. Flavor Manufacturing Plant Ventura's offices; lemon groves*; and lemon product manufacturing plant Phoenix . . . . . . . . . . . . . . Offices and bottling plant Toronto . . . . . . . . . . . . . . Canadian headquarters Ontario . . . . . . . . . . . . . . Bottling plant Oregon . . . . . . . . . . . . . . . Freeze Dry Food Manufacturing Plant** *Approximately 50% of Ventura's lemon groves are leased. **Acquired as of February 16, 1978. In addition to the properties included in the above table, the Company owns extract manufacturing plants in Brazil, Ireland and Argentina, and the Company owns extract manufacturing equipment and leases offices in Japan, Mexico and the Republic of South Africa. The Company purchased in 1978 a plant site in Puerto Rico and plans to construct an extract manufacturing plant in that Commonwealth in the near future. The Company maintains offices in Great Britain, Egypt, the Netherlands and the Philippines. It is anticipated that

-22- S . , an increasing percentage of the extract manufactured by the Company in the near future outside the United States will be manufactured at its Ireland and Puerto Rico facilities. The Company also owns or leases warehouse space in various locations in the United States, Canada and a number of other countries. The Company also owns a five-story commercial office building next to its World Headquarters, acquired in February 1974 for $1,550,000 in cash, which is approximately 70% leased to a number of tenants for terms of up to five years. ITEM 4. Parents and Subsidiaries The registrant is the parent company of the subsidiaries indicated below. Various descendants of C. L. Grigg, E. G. Ridgway and Frank Y. Gladney, who founded the Company and trusts in which they have interests, owned at March 1, 1978, approximately 48% of the outstanding common stock of the Company. Some or all of these persons and entities may be deemed a"parent" of the Company under the rules and regulations of the Securities and Exchange Commission. Subsidiaries of Registrant Name of Company Place of Incorporation Seven-Up Canada Limited Seven-Up Bottling of Phoenix, Inc. Seven-Up International, Inc. Seven-Up Great Britain, Inc. Seven-Up Southern Hemisphere, Inc. Seven-Up Asia, Inc. Seven-Up U.S.A., Inc. Ventura Coastal Corporation Golden Crown Citrus Corporation Warner-Jenkinson Company Warner-Jenkinson Company of California Warner-Jenkinson East, Inc. Cheer Up Company Seven-Up Flavor Mfg. Co. Oregon Freeze Dry Foods, Inc. Ontario, Canada Arizona Delaware Missouri Missouri Missouri Missouri California Illinois Missouri California New York Missouri Missouri Oregon* *As of February 16, 1978

-2 3- The registrant or the indicated subsidiary owns 100% of the voting securities of each of the above named subsidiaries. The names and places of incorporation of subsidiaries other than those incorporated in the United States and Canada have been omitted. The omitted sub- sidiaries considered in the aggregate as a single subsidiary would not constitute a significant subsidiary. All subsidiaries, including those whose names are omitted, are included in the consolidated financial statements for all periods during which they were owned by the registrant or a subsidiary of the registrant. ITEM 5(a). Legal Proceedings 1. Complaint by the Federal Trade Commission (FTC) served on the Company in 1971 remains substantially unchanged as previously re- ported on Form 10-K for the year ended December 31, 1976. 2. Litigation re-initiated against Allied Chemical Company in 1976 remains substantially unchanged as previously reported on Form 10-K for the year ended December 31, 1976. Reference is made to Item 1(a), Business, "Government Regulation", reported above.

ITEM 6(a) Increases and Decreases in Outstanding Equity Securities Number of Shares Number of Shares Title of Outstanding on Date of Amount Description of Outstanding on Class January 1, 1977 Transaction Involved Transaction December 31, 1977 6% Cumulative Preferred Stock $100 Par Value (Callable at Par) 35,880 2/8/77 (5,120) (2) 30,760 Common Stock 10,719,501 Various 3,000 (1) 10,722,501 (1) At various times during 1977, the registrant issued shares of common stock pursuant to the Seven-Up Qualified Stock Option Plan. The shares issued are registered under the Securities Exchange Act of 1934, on Form S-8. (2) On February 8, 1977, Registrant purchased 5,120 shares of its 6% Cumulative Preferred Stock, for $76.4333 per share, as reported on Form 8-K for the month of February 1977. Number of shares outstanding as of March 29, 1978 is 30,760. 5u6s13t4z

-25- Item 7., Changes in the Rights of the Company's Security Hol e rs and C anges in Assets Securing any of the Company s Registered Securities Not Applicable Item 8., Defaults by the Company on its Senior Securities_ Not Applicable ITEM 9. Approximate Number of Equity Security Holders Number of Record Holders Title of Class March 1, 1978 6% Cumulative Preferred Stock, $100.00 Par Value (non-voting) 19 Common Stock, $1.00 Par Value 5,852 ITEM 10. Results of Votes of Security Holders Not Applicable ITEM 11. Executive Officers of the Registrant (a) None of the following executive officers are related to each other. Each officer serves from year to year, subject to annual election by the Board of Directors in April of each year. Name Position Age* Ben H. Wells Chairman of the Board 71 William E. Winter President, Chief Executive Officer and Director 57 Paul H. Young, Jr. Executive Vice President, Treasurer and Director 53 Dr. B. C. Cole Senior Vice President, Corporate Technical Director and Director 68 Michael Baker Vice President, Director of Market Development 32

J. Stewart Bakula Vice President, General Counsel and Assistant Secretary 49 William A. Fagot Assistant Treasurer 34 David M. Haffner Vice President, Director of Market Development - packaged goods 34 John R. Kidwell Senior Vice President, Director of Marketing 51 Robert W. Simpson Vice President and Secretary 68 *As of March 1, 1978 (b) With the exception of Mr. Michael Baker, all of the foregoing officers have been employed by the Company in various management capacities for more than five years. Mr. Baker commenced employ- ment with the Company on August 9, 1976 upon transfer from Seven- Up Canada Limited. Mr. Baker was initially employed by Seven-Up Canada on July 2, 1975 and for the three years prior thereto was employed by Warner Lambert Canada Limited in the capacity of Group Product Manager. ITEM 12. Indemnification of Directors and Officers Provisions remain unchanged from those reported on Form 10-K for year ended December 31, 1976. ITEM 13. Financial Statements and Exhibits Filed (a) 1. Index of Financial Statements and Exhibits 2. The response to this item is submitted as a separate section of this report. Exhibits 1. Computation of Earnings Per Share. -26- (Next page is Exhibit 1)

THE SEVEN-UP COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE EAR ENDED DECEMBER 31 1973 1974 1975 1976 1977 Prima Average shares outstanding 10,454,387 10,467,739 10,615,255 10,713,126 10,720,710 Dilutive stock options - based upon the treasury stock method using average market prices 3,425 21,586 27,990 24,390 TOTALS 10,457,812 10,467,739 10,636,841 10,741,116 10,745,100 Net income applicable to Common Stock $13,582,581 $16,103,632 $20,010,273 $24,535,725 $25,597,044 Per share amount $1.30 1. 54 $1.88 $2.28 $2.38 N ~ Fully diluted: r• tr r• rt Average shares outstanding after stock options from above 10,457,812 10,467,739 (1) (1) 1) r Assumed conversion of $5.71 Convertible Class A Preferred Stock into Common Stock 207,407 199,932 TOTALS 10,5, 219 10i~7,i71 Net Lncome applicable to Common Stock $13,582,581 $16,103,632 Add dividend requirements on $5.71 Convertible Class A Preferred Stock 284,485 269,191 $13,867,066 $16,372,823 Per share amount $1.30 $1.54 (1) In 1975, pursuant to a conversion rrovision, the outstanding shares of $5.71 Series 1 Convertible Class A Preferred Stock (46,151 shares) were converted into 196,880 shares of Common Stock.

-27- PART II ITEMS 14 to 18 Items 14 through 18, inclusive, are omitted because the registrant has filed with the Commission a definitive proxy statement pursuant to Regulation 14A, which involves the election of Directors and Auditors at the annual meeting of shareholders of registrant to be held on April 10, 1978. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE SEVEN-UP COMPANY (Registrant) By : kAGJA Paul H. Young, Jr. Executive Vice President Treasurer March 29, 1978

FORM 10-K ITEM 13(a) 1 FINANCIAL STATEMENTS AND SCHEDULES THE SEVEN-UP COMPANY AND SUBSIDIARIES The following consolidated financial statements of the registrant and its subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 1977, are incor- porated herein by reference: Consolidated Balance Sheets - December 31, 1977 and December 31, 1976 Consolidated Statements of Income - Years ended December 31, 1977 and December 31, 1976 Consolidated Statements of Changes in Financial Position Years ended December 31, 1977 and December 31, 1976 Consolidated Statements of Stockholders' Equity Years ended December 31, 1977 and December 31, 1976 Notes to Consolidated Financial Statement The following consolidated financial information for the years 1977 and 1976 is submitted herewith: Page No. Accountants' Report F-3 Additional Notes to Consolidated Financial F-4 through Statements F-6 Schedule I - Marketable Securities - Oth er F-7 through Investments (1977 only) F-9 Schedule II - Amounts receivable from Underwriters, Promotors, Directors, Officers, Em- ployees, and Principal Holders (other than Affi- liates) of Equity Securitie s of the Person and its Affiliates F-10 Schedule V - Property Plant and Equipmen t F-il + F-12 Schedule VI - Accumulated Depreciation an d Amortization of Property, F-13 + Plant and Equipment F-14 t3 -p Ott t~ m ~ f,7 ns F-1

Schedule VII - Intangible Assets, Deferred Research and Development Ex- penses, Pre-opearting Expenses and Similar Deferrals F-15 Schedule IX - Schedule XII - Schedule XIII - Bonds, Mortgages and similar Debt F-16 Valuation and Qualifying Accounts and Reserves F-17 Capital Share (1977 only) F-18 Schedules III, IV, VIII, X, XI, XIV, XV, XVI, XVII, XVIII, and XIX for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. With respect to Schedule XIII, the information applicable to the consolidated subsidiaries has been omitted as they are wholly- owned and the answers to Column G would be "none". Individual financialstatements of the registrant have been omitted as the registrant is primarily an operating company and all subsidiaries included in the consolidated financial statements filed, in the aggre- gate, do not have minority equity interests and/or indebtedness to any person other than the registrant or its consolidated subsidiaries in amounts which together (excepting indebtedness incurred in the ordinary course of business which is not overdue and matures within one year from the date of its creation, whether or not evidenced by securities, and indebtedness of subsidiaries which is collateralized by the registrant by guarantee, pledge, assignment, or otherwise) exceed 5 percent of the total assets as shown by the most recent year-end consolidated balance sheet.

ACCOUNTANTS' REPORT Ernst Ernst 11 I~r-uiway - St Louis, M ssourr 63102 • Phone 314J231-7700 REPORT OF INDEPENDENT ACCOUNTANTS Shareholders and Board of Directors The Seven-Up Company St. Louis, Missouri We have examined the consolidated balance sheets of The Seven-Up Company and subsidiaries as of December 31, 1977 and 1976, and the related consoli- dated statements of income, changes in financial position and shareholders' equity for the years then ended included in the annual report to shareholders of The Seven-Up Company for the year ended December 31, 1977, and the addi- tional notes to consolidated financial statements and the schedules listed in the index on a preceding page. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the consolidated financial position of The Seven-Up Company and subsidi- aries at December 31, 1977 and 1976, 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. Further, it is our opinion that the additional notes to consolidated financial statements and schedules referred to above present fairly the information set forth therein in compliance with the applicable accounting regulations of the Securities and Exchange Commission. St. Louis, Missouri February 10, 1978, except for Note I - Acquisition of Oregon Freeze Dry Foods, Inc., as to which the date is February 16, 1978 LE~E

ADDi'1'IONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THE SEVEN-UP COMPANY AND SUBSIDIARIES December 31, 1977 and December 31, 1976 Note K - INVENTORIES Inventories used in computing cost of products sold were as follows: January 1, 1976 $24,000,110 December 31, 1976 $26, 053, 979 December 31, 1977 $27,154,398 Note L - SHORT-TERM FINANCING All current notes payabie, $2, 188, 738 at December 31, 1977 and $488, 506 at December 31, 1976 are loans to foreign subsidiaries from foreign banks in the countries where the subsidiaries are located (principally in Canada and Brazil). 11ic notes bear interest rates from 8.25% to 40.307c. There are no formal pro- visions for the extension of the maturities of the notes. Interest expense on aggregate short-term debt was $276, 735 in 1977 and $137, 157 in 1976, and the weighted average interest rate was 15. 1T, and 18.47c respectively. 'Ilie maximum outstanding balances was $2, 358, 761. Under a revolving line of credit with two banks, the Company may borrow up to $3,500,000 in 1977 and $1,500,000 in 1976 at the banks prime interest rate. The C:ompany`s financing arrangements require maintenance of compensating balances which are not material. Note M - INTEREST EXPENSE Interest expense on long-term debt was $58,752 and $151,975 in 1977 and 1976, respectively. Interest capitalized with regard to orchard development costs (see Note A to Consolidated Financial Statements incorporated herein by reference) was $34,879 and $45,000 in 1977 and 1976, respectively.

Norc N - ADDITIONAL STOCK OPTION INFORMATION Reference is made to Note B to Consolidated Financial Statements incorporated herein by reference. Information as of December 31, 1977 and for the two years then ended with respect to options granted under the Company's stock option plan is as follows: NUMBER OF OPTION PRICE MARKET VALUE SHARES PER SHARE TOTAL PER SHARE TOTAL Shares under option at December 31: 1976 92,550 $19.88 to $35.14 $2,394,400 $19.88 to $35.44(a) $2,394,400 1977 221,150 $19.88 to $33.12 $5,423,731 $19.88 to $33.12(a) $5,423,731 Options which became ex- ercisable during year ended December 31: 1976 -0- 1977 -0- Options exercised during the year ended December 31: 1976 24,050 $19. 88 to $35. 44 $ 627,325 $30. 38 to $41. 38(b) $ 919,720 1977 3,000 $19. 88 to $33. 12 $ 63,600 $26. 88 to $29.13(b) $ 84,641 (a) At the dates options were granted. (b) At the dates options were exercised. At December 31, 1977 and December 31, 1976, there were 6,000 shares and 137,600 shares, respectively, of Common Stock reserved for future options.

:.vlhS [V l.V:.SVLillAlhll t-1NANt_'1-P~L. S1AlEM):,N'TS Note O- SUPPLEMENTARY INCOME STATEMENT INFORMATION Reference is made to Note A to Consolidated Financial Statements incorporated herein by reference. YEAR ENDED DECEMBER 31 Depreciation and amortization 1977 1976 Property, plant and equipment $ 3, 574, 8-12 $ 3,193,303 Amortization of intangible assets: Formulas and trademark protection expense 54,545 33,016 Cost in excess of net assets of subsidiaries acquired 53,917 36,933 108,462 69,949 $ 3,683,304 $ 3,263,252 Advertising and promotion $45,.328,529 $43, 306, 814 Amounts for maintenance and repairs, taxes (other than income taxes), rents and royalties are nnt presented as such amounts are less than 1W of consolidated net sales in each year. Note P - INCENTIVE COMPENSATION Under tlte Company's Challenge Fund Incentive Plan, certain executives receive additional compensation upon the achievement of profit goals. The amount charged to expense is $324,711 and $322,500 for 1977 and 1976, respectively. NOTE Q - INCOME TAX EXPENSE 'i'he effective tax rate for the year ended December 31, 1977 is less than the statutory rate because of the following: $ Amount ~ of Pre-tax Income ('c rnputed "expected" tax expense $22,660,456 48.07, Increases (reductions) in taxes resulting from: Differences in foreign tax rates (904,000) (1.9) Ilrvesmient tax credit on assets purchased in 1977 (413,274) (0.9) State and local taxes, net of Vecleral income tax benefit 498, 142 1. 1 All other (421, 324) (0.9) Actual tax expense $21,420,000 45.47,

SCHEDULE I-MARKET.-1BLE SECURITIES - OTHER SECURITY INVESTMENTS THE SEVEN-UP COMPANY AND SLBSIDIARIES December 31, 1977 COL. A COL. B COL. C COL. D Number of Shares or Units Value Based on Market \A-ME OF ISSUER AND TITLE OF EACH ISSUE Principal Amount of Amount at Which Shown Quotations at Balance Bonds and Notes in the Balance Sheet Sheet Date Commercial Paper: Allis Chalmers Credit Corporation 6. 50T, due 1/4/78 400 000 783 $ 399 $ 399 783 ~ i American General Leasing 6. 05% due 1 /4/78 , 1,000,000 , 999,496 , 999,496 J Allis Chalmers Credit Corporation 6. 625% due 1/11/78 250,000 249,494 249,494 General Telephone of Pennsylvania 6. 55% due 1/11/78 200,000 199,598 199,598 First Pennsylvania Corporation 6. 25(Y, due 1/12/78 1, 000, 000 998,090 998, 090 Safeco Credit Company Inc. 6. 625% due 1/23/78 600,000 597,460 597,460 Banker's Trust 6.20°/w due 1/24/78 750,000 747,029 747,029 Chrysler Financial Corporation 6. 45% due 1/24/78 1,000,000 995,879 995,879 Allis Chalmers Credit Corporation 6. 75% due 1/26/78 200,000 199,025 199,025 Ohio Pbwer Company 6. 70°c due 1/30/78 200,000 198,883 198,883 International Harvester 6.707, due 1/30/78 1,000,000 994,603 994,603 I. T. T. Financial Corporation 6. 70% due 1/30/78 1,000,000 994,663 994,663 Case Equipment Credit 6. 8017, due 1/30/78 1,000,000 994,522 994,522 PL-nnzo il 6. 75% due 1/30/78 1,000,000 994,563 994,563 Massey Ferguson 6. 875% due 1/30/78 1,000,000 994,462 994,462 Del Monte 6. 75% due 1/30/78 1, 000, 000 994,563 994,563 Louisiana Pacific 6. 75% due 1/30/78 1,000,0100 994,563 994,563 Credit Thrift Financial Corporation 6.8757, due 1/30/78 1,000,000 994,462 994,462 Electricite De France 5.75 due 1/31/78 350,000 347,966 347,966 Massey Ferguson 6. 75T, due 2/3/78 1,000,000 993,813 993,813 Connecticut Light & Power 6.707, due 2/14/78 1,000,000 991,811 991,811 9ZZ6?T'"d~~Z

SCHEDULE I-`I ARKETABLE SECURITIES - OTHER SECURITY INVEST\IENTS THE SEVEN-UP COJIPA-N~Y :L\D SLTiSIDI3RIES December 31, 1977 COL. A COL. B COL. C COL. D Number of Shares or Units Value Based on Market NAME OF ISSUER AND TITLE OF EACH ISSUE - Principal Amount of Amount at Which Shown Quotations at Balance Bonds and Notes in the Balance Sheet Sheet Date ~ Commercial Paper (cont'd): First Security Bank of Utah 6.625% due 2/28/78 1,000,000 989,326 989,326 t ~ Trojan Fuel Trust 6.65% due 3/15/78 1,000,000 986,516 986,516 Chrysler Financial Corporation 6.8757c due 4/17/78 1,000,000 979,757 979,757 Tax Exempt State & Municipal Bonds: Pennsylvania State G.O. 3.05Tc due 2/1/78 205, 000 $ 209,700 $ 209,700 Oswego, New York 3.25% due 2/15/78 1,190,000 1,204,585 1,204,585 Monroe County, New York 3.13257c due 2/24/78 1, 000, 000 1,014,896 1,014,896 Erie County, New York 4. 05% due 3/16/78 1, 000, 000 1,016,791 1,016,791 Philadelphia, Pennsylvania 4.00% due 3/30/78 1,000,000 1,021,603 1,021,603 Puerto Rico Government Notes 3. 80% due 3/30/78 1, 000, 000 1, 000, 106 1, 000, 106 Erie County, New York 4.057c due 4/14/78 1,000,000 1,038,937 1,038,937 Minnesota H.F.A. 3.74% due 5/15/78 500,000 497,509 497,509 Minneapolis, Minnesota 3. 00% due 6/1/78 1, 000, 000 1,007,895 1,007,895 Massachusetts H. F. A. 3. 25% due 6/15/78 1, 000, 000 1,019,745 1,019,745 Kentucky Housing Corporation 3.50% due 5/14/79 1,000,000 1,004,375 1,004,375 Other: Mexican Telephone Company 3 $ 396 $ 396 Bank Acceptances 76,923 77,436 77,436 U.S. Treasury Note 7.007c due 1/3/78 230 230 LZ; fa31'33toz

j1W SCHEDULE I-MARI:ET_U3LE SECURITIES - OTHER SECURITY INVESTMENTS THE SEVEN-UP CO\iP_A-\Y :IL\D SUBSIDIARIES December 31, 1977 COL. A COL. B COL. C COL. D Number of Shares or Units Value Based on Market NAME OF ISSUER AND TITLE OF EACH ISSUE - Principal Amount of Amount at Which Shown Quotations at Balance Bonds and Notes in the Balance Sheet Sheet Date ,~ Government Bonds: ,o Argentine Government External Bonds 9th Sertes 1976 Deposit Accounts: Toronto Dominion Bank Bankers Trust Banque Nationale de Parts Crocker National Bank Bank of America Barclay's International Chase Manhattan Fuji Bank Banco Descuento Banco del Pacifico Bankers Trust - Great Britain Citibank - Great Britain Citibank - Switzerland Citibank - Ireland Banamex Amro Bank - Netherlands dZZ62IW? 159,000 3,596,541 1,011,353 1,000,193 1,025,153 1,025,500 1, 006, 005 1,012,833 143,609 1,972 1,972 132,390 49,059 2,152, 934 513,177 1,348 803,891 $ 193,602 3,596,541 1,011,353 1,000,193 1,025,153 1,025,500 1, 006, 005 1,012,833 143,609 1,972 1,972 132,390 49,059 2,152,934 513,177 1,348 803,891 $ 1p3, 602 3,596,541 1,011,353 1,000,193 1,025,153 1,025,500 1, 006, 005 1,012,833 143,609 1,972 ' 1, 972 132,390 49,059 2,152, 934 513,177 ''1,348 803,891 TOTALS $ 42, 616, 063 $ 42,616.063 ~o~ ~r~

t SCHEDULE II - AMOUNTS RECEIVABLE FROM C1DERWRITERS, PROMOTERS, DIRECTORS, OFFICERS, EMPLOYEES, AND PRINCIPAL HOLDERS (OTHER THAN AFFILIATES) OF EQUITY SECURITIES CF THE PERSON AND ITS AFFILIATES THE SEVEN-UP COMPANY AND SL;BSIDLIRIES December 31, 1977 COL. A COL. B COL. C COL. D COL. E DEDUCTIONS BALANCE AT END OF PERIOD Balance at Beginning Additions (1) (2) (1) () NAME OF DEBTOR of Period Amounts Collected Amounts Written Off Current \ot Current Year ended December 31, 1977 „q Willis R. Ballard $ 64,650 $ 15,000 - A $ 15,000 $ 34,650 Paul Hansfield and Jullan Coleman 295,000 295,000 $ 359,650 $ 15,000 $ 15,000 $ 329,650 Year ended December 31, 1976 W illis R. Ballard $ 79,650 $ 15,000 - A $ 15,000 $ 49,650 Paul Hansfield and Julian Coleman 295, 000 295, 000 $ 374,650 $ 15,000 $ 15,000 $ 344,650 A-'lhe Company resolved ln August, 1972, to pay the officer (currently a director of a subsidiary) $15,000 per year for ten years of services to be rendered. The payments are used to offset those due the Company on indebtedness.

SCHEDULE V - PROPERTY, PL.-L\T AND EQ(:IP,%fE\T THE SEVEN-UP COMPANY AND SUBSIDIARIES December 31, 1977 COL. A COL. B COL. C COL. D COL. E COL. F Other Charges - CLASSIFICATION Balance at Beginning Additions at Cost Retirements Add (Deduct) - Balance at End of Period Describe of Period Year ended December 31, 1977 Land $ 6,526,401 $ 17,869 $ 94,674 $ (42, 301) - C $ 6,407,295 Orchards 1,989,048 3,659 36,505 156,501 - C 2,112,703 ~ 117 - D 7 i Building and Improvements ~ 15,739,082 873,040 331,278 , 2 578 370 - C 18 866 331 r , , , , (248, 601) - A Furniture & Equipment 23,942,119 5,591,801 1,428,281 (14, 326) B 29, 289, 476 1,446,764 - C Orchards Under Development 1,534,665 327,748 (156,501) - C 1,705,912 Construction In Progress 3,782,285 3,050,510 (4, 382, 946) - C 2,449,849 $ 53,513,600 $ 9,864,627 $ 1,890,738 $ (655,923) $ 60 831,566 i , ~ Year ended December 31, 1976 Land $ 6,223,195 $ 303,206 $ $ $ 6,526,401 Orchards 1,439,197 80,596 630,447 - C 1,989,048 Building & Improvements 15,122,766 360,225 21,352 310,282 - C 15,739,082 (32, 839) - A Furniture & Equipment 20,356,864 3,211,481 1,216,535 1,732,680 - C 23,942,119 (142,371) - A Orchards Under Development 1,763,489 401,623 (630,447) - C 1,534,665 Construction In Progress 1,652,357 4,173, 388 (2,043,460) - C 3,782,285 $ 46,557,868 $ 8,449,923 $ 1,318,483 $ (175,708) $ 53,513,600 ~

SCHEDULE V - PROPERTY, PL--',NT AND EQUIPMENT THE SEVEN-UP CO\IP"LYT AND SUBSIDIARIES December 31, 1977 COL. A COL. B COL. C COL. D COL. E COL. F Other Charges - CLASSIFICATION Balance at Beginning Additions at Cost Retirements Add (Deduct) - Balance at End of Period Describe of Period A- Write-off of fully-cjepreciated assets. B- Adjustment fox prjos year additions. C - Miscellaneous reclassifications. D- Adjustment for assets wxitten-off as fully-depreciated in 1974, not yet fully depreciated.

SCHEDULE VI ->CCt'\IE-L--1TED DEPRECI_,TIO\, DEi'LETIO\ AND aMORTIZ_-~TION OF PROPERTI', PLANT -A\D EQUIPMENT THE SEVE\-CP CO31PA\1' AND SUBSIDIARIES Decem ber 31, 1977 COL. A COL. B COL. C COL. D COL. E COL. F DESCRIPTION Balance at Beginning of Period Additions Charged to Costs and Expenses Retirements Other Changes-Add (Deduct)-Describe Balance at End of Period Year ended December 31, 1977 Orchards $ 387,205 $ 112,522 $ 34,029 $ $ 465,698 7, 117 - B Buildings & Improvements 5,070,849 635,927 45,712 (28, 267) - C 5,639,358 (556) - D ~ (248, 601) - A N w Furniture & Equipment 10,474,017 2,890,126 940,634 374,831 - C 12,526,475 (23, 264) - D Depreciation expense charged to amount due growers for fruit processed and orchards under development (63, 733) 63,733 $ 15,932,071 $ 3,574,842 $ 1,020,375 $ 144,993 $ 18,631,531 Year ended December 31, 1976 Orchards $ 322,030 $ 110,182 $ 45,007 $ $ 387,205 (32, 839) - A Buildings & Improvements 4,586,910 530,912 14,134 (142, 371) - A 5,070,849 189,425 - C Furniture & Equipment 8,909,098 2,611,153 1,051,069 (42, 219) - D 10, 474, 017 ed to amount due Depreciation expense char g growers for fruit processed and orchards under development (58, 944) 58,944 $ 13,818,038 $ 3,193 303 $ 1 110 210 $ 30 940 932 $ 15 071 , , , , ~ , , ~

SCHEDULE VI -ACCC\IUL_-~Tr.D DEPRECI _T'.O\, DEPLETIO\ _1.\D a\IORT?Z aTIO\ OF PROPERTY, PLANT _A-ND EQt'IPME\T THE SEVEN-UP COMPA\l' AND SUBSIDIARIES December 31, 1977 COL. A COL. B COL. C COL. D COL. E COL. F Balance at Beginning Additions Charged to Other Changes-Add Balance at DESCRIPTIO\ of Period Costs and Expenses Retirements (Deduct)-Describe End of Period A- Write-off of fully-depreciated assets. B- Adjustment for assets written-off as fully depreciated in 1974; not yet fully depreciated. C- Miscellaneous reclassifications and corrections. 1„ D- Charge for major repair expenditures.

SCHEDL'LE V`II - INTANGIBLE ASSETS, DEFERRED RESEARCH AND DE\'ELOP\lE\TEXPE\SES, PREOPER-1TI\G EXPENSES AND SIMILAR DEFERRALS THE SEVE\-C'P CO\IP:1\Y AND SL'BSIDIARIES December 31, 1977 COL. A COL. B ~ COL. C COL. D COL. E COL. F l t B Additions at DEDUCTIONS Other Changes DESCRIPTION ance a a Beginning Cost- - Charged to Costs (2) Charged to Other Add (Deduct) Balance at Close of Period of Period Describe (Describe) and Expenses Accounts--Describe Year ended December 31, 1977 Trademarks $ 917,434 $ $ $ (900) - G $ 916,534 Formulas and Trademark Protection expense 403,226 54,545 - C 900 - 349,581 Cost in excess of net assets 1,949 - E of subsidiaries acquired 2,823,614 53, 917 - C 24, 942 - F 2,742,806 $ 4,144,274 $ 110,411 $ 24,9-12 $ 4,008,921 Year ended December 31, 1976 Trademarks $ 915,712 $ 1, 772 - A $ 50 - C 917,434 F l d d k as an ormu Tra emar Protection expense 602,290 166,098 - D 403,226 32, 966 - C Cost in excess of net assets of subsidiaries acquired 2,687,131 173, 416 - B 36, 933 - C 2,823,614 $ 4,205,133 $ 175,188 $ 236,047 $ 4,144,274 A- Represents cost of trademark to be used in foreign country. B- Represents portion of purchase price of acquired business. C- Amortization for the year. D- Write-off of formulas no longer considered to be of value. E- Write-off of cost in excess of net assetf of subsidiaries acquired no longer considered to be of value. F- Recovery from escrow agreement. G - Miscellaneous reclassification.

SCHEDULE IX - BONDS: !.'.C3-GAGES AND SIMILAR DEBT THE SEVE\-L'? CC':F A\1" A\D SUBSIDIARIES Decem~_er 31, 1977 COL. A COL. B COL. C ''0-1. D COL. E COL. F COL. G COL. H A.%iGL"YT :`:C_i.-DED IN Amount Included Amount in AMOUNT HELD Amount COLtM\ ,_„ :NHICH IS in Sum Extended Sinking Amount BY AFFILIATES Amount Issued (1, (2) Under Caption and Other Pledged FOR WHICH STATEMENTS NAME OF ISSUER AND TITLE OF EACH ISSUE Authorized and Not Held b: or 1 Not Held by "Bonds, Mort- Special by ARE FILED HEREWITH by Indenture Retired or or Accou:::, orfor Acc- gages & Similar Funds of Issuer Persons Included Cancelled of Issuer ount of Iss- Debt" in Related Issuer Thereof in Consolidated Others Thereof ; uerThereof Balance Sheet Thereof Statement 6% Promissory notes, payable to 1981, unsecured $ 184,601 S 184,601 $ 184,601 t-i i N 7% Mortgage notes, payable to 1983 461, 500 -161, 500 461,500 rn 5% Loan on life insurance policy on subsidiary officer 42,380 42,380 42,380 $ 688,481

• SCHEDULE XII - VALUATION AND QliALIFYI\G ACCOI,'\TS AND RESERVES THE SEVEN-UP COhiPA.\1' AND SCBSIDI ARIES December 31, 1977 ® COL. A COL. B COL. C COL. D COL. E ADDITIONS Balance at Beginning (1) (2) Deductions Balance at Ei DESCRIPTION of Period Charged to Costs Charged to Other (Describe) of Period and Ex nses Accounts-Describe Year ended December 31, 1977 Reserves deducted from asset account: Allowance for doubtful accounts V• r.+ ; . , . . .. . n _~ ~. ~.. ...JIY..J._ar $ 275,000 $ 132,253 $ 207,253 - A $ 200,000 Year ended December 31, 1976 Reserves deducted from asset account: Allowance for doubtful accounts $ 275, 000 $ 81,282 $ 81,282 - A $ 275, 000 Other Reserves: Reserve for foreign operations $ 300, 000 A - Represents accounts written-off. B- Written-off in accordance with FASB #5 9CU3M4t $ 300,000 - B $ -0- ~~ ~~

SCHEDULE XIII - CAPITAL SHARES THE SEVEN-UP COMPANY AND SUBSIDIARIES December 31, 1977 COL. A COL. B COL. C COL. D COL. E COL. F COL. G Number of Shares Inc u e Shares Issued or Outstanding Number of Shares Held by Number of Shares Reserved Number of Number of in Column C Which are as Shown on or Included in Affiliates for Which State- for Options, Narr-ants, NAME OF ISSUER AND TITLE Shares Shares (1) (2) Related Balance Sheet Under ments are Filed Herewith Conversions & Other Ri ht< OF ISSUE Authorized Issued and Held by or Not Held by or Ca tion "Ca ital S'hares" (1) (1) (2) by Not Retired for Account for Account (1) (2) Persons Includ- (2) Directors, Charter or Cancelled of Issuer of Issuer at ed inConsolida- Others Officers and Others Number r Thereof Thereof Which Shown ted Statements Em lo ees The Seven-Up Company - A 67c Cumulative Preferred ~ Stock, par value $100 35,888 30,760 None 30,760 30,760 3,076,000 None None ~ Go Class A Preferred Stock without par value Common Stock, par 325,000 -0- None None value $1 24,000,000 10,722,501 None 10,722,501 10,722,501 10,722,501 227,150-B None A- See Note B to Consolidated Financial Stateme_its incorporated herein by reference. B- Reserved for Issuance of stock options.