FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~(Mark One)~~


(Mark One)




[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 30,~~September 28, 2002


		OR




[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-14190

DREYER’S GRAND ICE CREAM, INC.

(Exact name of registrant as specified in its charter)


	Delaware		No. 94-2967523




(State or other jurisdiction of		(I.R.S. Employer




incorporation or organization)		Identification No.)

5929 College Avenue, Oakland, California 94618
(Address of principal executive offices) (Zip Code)

(510) 652-8187
(Registrant’s telephone number, including area code)

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for 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 latest practicable date.


	Shares Outstanding
	~~May~~November 11, 2002

Common stock, $1 par value	~~34,699,000~~	34,911,000

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

~~CONSOLIDATED BALANCE SHEET~~

~~CONSOLIDATED STATEMENT OF OPERATIONS~~

~~CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY~~

~~CONSOLIDATED STATEMENT OF CASH FLOWS~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS~~OPERATIONS.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

ITEM 4. CONTROLS AND PROCEDURES.

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM ~~8-K~~8-K.

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DREYER’S GRAND ICE CREAM, INC.

CONSOLIDATED BALANCE SHEET


			Mar. 30, 2002			Dec. 29, 2001					Sept. 28, 2002			Dec. 29, 2001

($ in thousands, except per share amounts)	($ in thousands, except per share amounts)		(Unaudited)						($ in thousands, except per share amounts)		(Unaudited)

Assets	Assets								Assets
Current Assets:	Current Assets:								Current Assets:
		Cash and cash equivalents	$	1,596		$	1,650			Cash and cash equivalents	$	1,859		$	1,650
		Trade accounts receivable, net of allowance for doubtful accounts of $1,699 in 2002 and $1,024 in 2001		118,438			89,721			Trade accounts receivable, net of allowance for doubtful accounts of $1,584 in 2002 and $1,024 in 2001		116,640			89,721
		Other accounts receivable		17,515			16,116			Other accounts receivable		14,384			16,116
		Inventories		90,499			81,298			Inventories		85,533			81,298
		Deferred income taxes		3,443			3,547			Deferred income taxes		1,698			3,547
		Prepaid expenses and other		18,201			8,849			Prepaid expenses and other		17,253			8,849

		Total current assets		249,692			201,181			Total current assets		237,367			201,181

Property, plant and equipment, net	Property, plant and equipment, net			204,144			198,565		Property, plant and equipment, net			210,665			198,565
Goodwill	Goodwill			84,382			39,114		Goodwill			84,701			39,114
Other intangibles, net	Other intangibles, net			2,188			55,354		Other intangibles, net			1,849			55,354
Other assets	Other assets			5,736			4,475		Other assets			3,364			4,475

Total assets	Total assets		$	546,142		$	498,689		Total assets		$	537,946		$	498,689





Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity								Liabilities and Stockholders’ Equity
Current Liabilities:	Current Liabilities:								Current Liabilities:
	Accounts payable and accrued liabilities		$	109,883		$	91,794			Accounts payable and accrued liabilities	$	109,673		$	91,794
	Accrued payroll and employee benefits			21,270			25,369			Accrued payroll and employee benefits		32,194			25,369
										Current portion of long-term debt		2,143
	Total current liabilities			131,153			117,163
										Total current liabilities		144,010	��		117,163
Long-term debt				190,871			148,671









Long-term debt, less current portion									Long-term debt, less current portion			146,429			148,671
Deferred income taxes	Deferred income taxes			14,333			24,490		Deferred income taxes			14,468			24,490

Total liabilities	Total liabilities			336,357			290,324		Total liabilities			304,907			290,324

Commitments and contingencies	Commitments and contingencies								Commitments and contingencies

Stockholders’ Equity:	Stockholders’ Equity:								Stockholders’ Equity:
	Preferred stock, $1 par value — 10,000,000 shares authorized; no shares issued or outstanding in 2002 and 2001									Preferred stock, $1 par value - 10,000,000 shares authorized; no shares issued or outstanding in 2002 and 2001
	Common stock, $1 par value — 60,000,000 shares authorized; 34,625,000 shares and 34,461,000 shares issued and outstanding in 2002 and 2001, respectively			34,625			34,461			Common stock, $1 par value - 60,000,000 shares authorized; 34,883,000 shares and 34,461,000 shares issued and outstanding in 2002 and 2001, respectively		34,883			34,461
	Capital in excess of par			162,250			160,103			Capital in excess of par		166,962			160,103
	Notes receivable from stockholders			(2,670	)		(2,546	)		Notes receivable from stockholders		(2,228	)		(2,546	)
	Retained earnings			15,580			16,347			Retained earnings		33,422			16,347

Total stockholders’ equity	Total stockholders’ equity			209,785			208,365		Total stockholders’ equity			233,039			208,365

Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity		$	546,142		$	498,689		Total liabilities and stockholders’ equity		$	537,946		$	498,689

See accompanying Notes to Consolidated Financial Statements.

DREYER’S GRAND ICE CREAM, INC.

CONSOLIDATED STATEMENT OF ~~OPERATIONS~~
INCOME

(Unaudited)

Thirteen Weeks Ended

($ in thousands, except per share amounts)
Mar. 30, 2002 Mar. 31, 2001

Revenues:
Net sales $ 290,414 $ 239,413
Other income 1,138 239

291,552 239,652

Costs and expenses:
Cost of goods sold 262,161 216,790
Selling, general and administrative 25,558 27,007
Interest, net of amounts capitalized 1,786 3,014

289,505 246,811

Income (loss) before income tax provision (benefit) 2,047 (7,159 )

Income tax provision (benefit) 737 (2,727 )

Net income (loss) 1,310 (4,432 )

Accretion of preferred stock to redemption value 106
Preferred stock dividends 348

Net income (loss) available to common stockholders $ 1,310 $ (4,886 )

Net income (loss) per common share:

Basic $ .04 $ (.17 )

Diluted $ .04 $ (.17 )

Dividends per common share
$ .06 $ .06


		Thirteen Weeks Ended						Thirty-nine Weeks Ended

($ in thousands, except per share amounts)		Sept. 28, 2002			Sept. 29, 2001			Sept. 28, 2002			Sept. 29, 2001

















Net sales		$	383,598		$	361,636		$	1,050,823		$	936,473

Costs and expenses:




	Cost of goods sold		327,624			321,020			912,650			831,136




	Selling, general and administrative		35,632			28,884			90,560			84,204




	Interest, net of amounts capitalized		1,947			2,814			5,835			9,092




	Other income, net		(575	)		(1,029	)		(386	)		(2,198	)




	Merger transaction expenses		2,823						5,711

			367,451			351,689			1,014,370			922,234

Income before income tax provision			16,147			9,947			36,453			14,239




























Income tax provision			5,813			3,899			13,123			5,582

Net income			10,334			6,048			23,330			8,657




























Accretion of preferred stock to redemption value												212




Preferred stock dividends												348

Net income available to common stockholders		$	10,334		$	6,048		$	23,330		$	8,097

Net income per common share:




	Basic	$	.30		$	.18		$	.67		$	.26

	Diluted	$	.27		$	.17		$	.62		$	.24

Dividends per common share		$	.06		$	.06		$	.18		$	.18

See accompanying Notes to Consolidated Financial Statements.

DREYER’S GRAND ICE CREAM, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


											Notes																			Notes
		Common Stock									Receivable										Common Stock									Receivable
								Capital in			From			Retained													Capital in			From			Retained
(In thousands)	(In thousands)	Shares			Amount			Excess of Par			Stockholders			Earnings			Total			(In thousands)	Shares			Amount			Excess of Par			Stockholders			Earnings			Total


Balances at December 30, 2000	Balances at December 30, 2000		28,268		$	28,268		$	58,396		$	(2,284	)	$	15,992		$	100,372		Balances at December 30, 2000		28,268		$	28,268		$	58,396		$	(2,284	)	$	15,992		$	100,372
	Net loss														(4,432	)		(4,432	)	Net income														8,657			8,657
	Accretion of preferred stock to redemption value														(106	)		(106	)	Accretion of preferred stock to redemption value														(212	)		(212	)
	Preferred stock dividends declared														(348	)		(348	)	Preferred stock dividends declared														(348	)		(348	)
	Common stock dividends declared														(1,714	)		(1,714	)	Common stock dividends declared														(5,845	)		(5,845	)
	Issuance of common stock under employee stock plans, net		347			347			4,636			(299	)					4,684		Conversion of mandatorily redeemable convertible preferred stock to common stock		5,800			5,800			94,952									100,752
	Repurchases and retirements of common stock		(46	)		(46	)		(604	)								(650	)	Issuance of common stock under employee stock plans, net		480			480			7,739			(819	)					7,400
																				Repurchases and retirements of common stock		(82	)		(82	)		(2,249	)								(2,331	)

Balances at March 31, 2001			28,569		$	28,569		$	62,428		$	(2,583	)	$	9,392		$	97,806
Balances at September 29, 2001																				Balances at September 29, 2001		34,466		$	34,466		$	158,838		$	(3,103	)	$	18,244		$	208,445


Balances at December 29, 2001	Balances at December 29, 2001		34,461		$	34,461		$	160,103		$	(2,546	)	$	16,347		$	208,365		Balances at December 29, 2001		34,461		$	34,461		$	160,103		$	(2,546	)	$	16,347		$	208,365
	Net income														1,310			1,310		Net income														23,330			23,330
	Common stock dividends declared														(2,077	)		(2,077	)	Common stock dividends declared														(6,255	)		(6,255	)
	Issuance of common stock under employee stock plans, net		196			196			3,444			(380	)					3,260		Issuance of common stock under employee stock plans, net		477			477			8,952			(78	)					9,351
	Repurchases and retirements of common stock		(32	)		(32	)		(1,297	)		256						(1,073	)	Repurchases and retirements of common stock		(55	)		(55	)		(2,093	)		396						(1,752	)

Balances at September 28, 2002																				Balances at September 28, 2002		34,883		$	34,883		$	166,962		$	(2,228	)	$	33,422		$	233,039

Balances at March 30, 2002			34,625		$	34,625		$	162,250		$	(2,670	)	$	15,580		$	209,785

See accompanying Notes to Consolidated Financial Statements.

DREYER’S GRAND ICE CREAM, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


				Thirteen Weeks Ended									Thirty-nine Weeks Ended

(In thousands)				Mar. 30, 2002			Mar. 31, 2001

($ in thousands)										($ in thousands)			Sept. 28, 2002			Sept. 29, 2001

Cash flows from operating activities:	Cash flows from operating activities:									Cash flows from operating activities:




										Net income			$	23,330		$	8,657
	Net income (loss)			$	1,310		$	(4,432	)	Adjustments to reconcile net income to cash flows from operations:
	Adjustments to reconcile net income (loss) to cash from operations:										Depreciation and amortization			26,067			26,940
		Depreciation and amortization			8,477			9,169			Deferred income taxes			1,993			1,029
		Deferred income taxes			113			(502	)		Impairment of investment in Momentx Corporation			1,093
		Changes in assets and liabilities, net of amounts acquired:									Changes in assets and liabilities, net of amounts acquired:
			Trade accounts receivable		(28,717	)		(30,327	)			Trade accounts receivable		(26,919	)		(52,241	)
			Other accounts receivable		(1,399	)		(4,100	)			Other accounts receivable		1,732			(1,957	)
			Inventories		(9,201	)		(9,555	)			Inventories		(4,235	)		(12,688	)
			Prepaid expenses and other		(9,352	)		(51	)			Prepaid expenses and other		(8,404	)		219
			Accounts payable and accrued liabilities		18,080			22,012				Accounts payable and accrued liabilities		17,854			42,353
			Accrued payroll and employee benefits		(4,099	)		(6,385	)			Accrued payroll and employee benefits		6,825			(424	)

					(24,788	)		(24,171	)					39,336			11,888

Cash flows from investing activities:	Cash flows from investing activities:									Cash flows from investing activities:
	Acquisition of property, plant and equipment				(13,985	)		(7,178	)	Acquisition of property, plant and equipment				(37,927	)		(29,218	)
	Retirement of property, plant and equipment				188			372		Retirement of property, plant and equipment				536			1,662
	Purchase of independent distributors and other intangibles				(2,438	)		(2,000	)	Purchase of independent distributors and other intangibles				(2,757	)		(5,646	)
	Increase in other assets				(1,350	)		(797	)	Increase in other assets				(249	)		513

					(17,585	)		(9,603	)					(40,397	)		(32,689	)

Cash flows from financing activities:	Cash flows from financing activities:									Cash flows from financing activities:
	Proceeds from long-term debt, net				42,200			33,900		Net (repayments of) proceeds from long-term debt				(99	)		42,700
	Repayments of long-term debt							(3,400	)	Repayments of long-term debt							(22,186	)
	Issuance of common stock under employee stock plans, net				3,260			4,684		Issuance of common stock under employee stock plans, net				9,351			7,400
	Repurchases and retirements of common stock				(1,073	)		(650	)	Repurchases and retirements of common stock				(1,752	)		(2,331	)
	Cash dividends paid				(2,068	)		(1,022	)	Cash dividends paid				(6,230	)		(4,974	)

					42,319			33,512						1,270			20,609


Decrease in cash and cash equivalents					(54	)		(262	)
Increase (decrease) in cash and cash equivalents										Increase (decrease) in cash and cash equivalents				209			(192	)

Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period				1,650			2,721		Cash and cash equivalents, beginning of period				1,650			2,721


Cash and cash equivalents, end of period	Cash and cash equivalents, end of period			$	1,596		$	2,459		Cash and cash equivalents, end of period			$	1,859		$	2,529



Supplemental cash flow information:	Supplemental cash flow information:									Supplemental cash flow information:
	Cash paid during the period for:									Cash paid during the period for:
			Interest (net of amounts capitalized)	$	1,320		$	1,391				Interest (net of amounts capitalized)	$	5,511		$	8,848

			Income taxes (net of refunds)	$	140		$	2				Income taxes (net of refunds)	$	6,653		$	261

Supplemental schedule of noncash investing and financing activities:										Supplemental schedule of noncash investing and financing activities:




										Conversion of redeemable convertible preferred stock to common stock						$	100,752

See accompanying Notes to Consolidated Financial Statements.

DREYER’S GRAND ICE CREAM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — Operations and Financial Statement Presentation

Dreyer’s Grand Ice Cream, Inc. and its subsidiaries (the Company) are engaged primarily in the business of manufacturing and distributing premium and superpremium ice cream and other frozen dessert products to grocery and convenience stores, foodservice accounts and independent distributors in the United States.

The Company accounts for its operations geographically for management reporting purposes. These geographic segments have been aggregated for financial reporting purposes due to similarities in the economic characteristics of the geographic segments and the nature of the products, production processes, customer types and distribution methods throughout the United States.

The consolidated financial statements for the ~~thirteen-week periods~~thirteen and thirty-nine weeks ended ~~March 30,~~September 28, 2002 and ~~March 31,~~September 29, 2001 have not been audited by independent public accountants, but include all adjustments, such as normal recurring accruals, which management considers necessary for a fair presentation of the consolidated operating results for the interim periods. The statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange ~~Commission.~~Commission (SEC). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The operating results for interim periods are not necessarily indicative of results to be expected for an entire year. The aforementioned statements should be read in conjunction with the Consolidated Financial Statements for the year ended December 29, 2001, appearing in the Company’s ~~2001 Annual~~ Report on Form ~~10-K.~~8-K filed on November 5, 2002. Certain reclassifications have been made to prior years’ financial statements to conform to the current year presentation.

NOTE 2 — Significant Accounting Assumptions and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates include assessing the recoverability of accounts ~~receivable,~~receivable; the adequacy of the valuation allowance for deferred tax ~~assets,~~assets; the recoverability of ~~goodwill,~~goodwill; the adequacy of the Company’s liabilities for self-insured health, workers compensation and vehicle ~~plans,~~plans; and the adequacy of the Company’s liabilities for employee bonuses and profit-sharing plan contributions, among others. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from ~~those~~these estimates.

NOTE 3 — Merger and Contribution Agreement

On June 16, 2002, the Company entered into an Agreement and Plan of Merger and Contribution (the Merger Agreement) with New December, Inc. (New Dreyer’s), December Merger Sub, Inc., Nestlé Holdings, Inc. (Nestlé) and NICC Holdings, Inc. (NICC Holdings), a wholly-owned subsidiary of Nestlé, to combine the Company with Nestlé’s United States frozen dessert business. The combination will result in both the Company and Nestlé Ice Cream Company, LLC (NICC), which holds Nestlé’s United States frozen dessert business, becoming wholly-owned subsidiaries of New Dreyer’s, a newly formed Delaware corporation. This transaction will be recorded under the purchase method of accounting and will be treated as a reverse acquisition. Under reverse acquisition accounting, NICC will be deemed to be the acquirer for accounting purposes only, and the Company will be treated as the acquiree. As a result, the Company is expensing all merger transaction expenses as incurred. These expenses totaled $2,823,000 and $5,711,000 for the thirteen and thirty-nine weeks ended September 28, 2002, respectively.

If the transactions contemplated by the Merger Agreement are completed, each non-Nestlé stockholder who holds shares of the Company’s common stock at the effective time of the merger will receive one share of class A callable puttable common stock of New Dreyer’s. Under the amended and restated certificate of incorporation of New Dreyer’s, subject to the terms set forth therein, the holders of New Dreyer’s class A callable puttable stock will be permitted to sell (put) some or all of their shares to New Dreyer’s for $83.00 per share during two periods, the first beginning on December 1, 2005 and ending on January 13, 2006, and the second beginning on April 3, 2006 and ending on May 12, 2006. New Dreyer’s class A callable puttable common stock will also be subject to redemption (call) by New Dreyer’s at the request of Nestlé at $88.00 per share during a six-month period beginning on January 1, 2007. For the contribution of its ownership interest of NICC Holdings, Nestlé will receive approximately 55 million shares of class B common stock of New Dreyer’s. The class B common shares are similar to the class A common shares, except that they lack the call and put features. The shares of the Company’s common stock currently held by Nestlé will be converted into the same number of shares of class B common stock of New Dreyer’s. As of September 28, 2002, Nestlé owned approximately 23 percent of the Company’s common stock on a diluted basis. If the transactions contemplated by the Merger Agreement are completed, Nestlé will own approximately 67 percent of the diluted common stock of New Dreyer’s.

Each outstanding option to purchase the Company’s common stock under the Company’s existing stock option plans will, at the completion of the transactions, be converted into an option to acquire:

• prior to the date New Dreyer’s class A callable puttable common stock is redeemed under the call right, that number of shares of New Dreyer’s class A callable puttable common stock equal to the number of shares of the Company’s common stock subject to options immediately prior to the completion of the transactions, at the price or prices per share in effect immediately prior to the completion of the transactions; and
• at or after the date New Dreyer’s class A callable puttable common stock is redeemed under the call right or to the consummation of a short-form merger of New Dreyer’s with Nestlé or an affiliate of Nestlé S.A., pursuant to the terms of the governance agreement in the form attached as an exhibit to the Merger Agreement, the same consideration which the holder of the options would have received had he or she exercised such option prior to such redemption and received consideration pursuant to the redemption at the price or prices in effect at that time.

The options will otherwise be subject to the same terms and conditions applicable to the original options to purchase the Company’s common stock immediately prior to the completion of the transactions.

Certain regulatory requirements must be complied with before the transactions contemplated by the Merger Agreement are completed. The Company and Nestlé are not aware of any material governmental consents or approvals that are required prior to the completion of the transactions other than those described below:

• Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), and the rules promulgated thereunder by the United States Federal Trade Commission (the FTC), the transactions cannot be completed until notifications have been given and information has been furnished to the FTC and the Antitrust Division of the United States Department of Justice, and the specified waiting periods have expired or have been terminated. The Company and Nestlé filed notification and report forms under the HSR Act with the FTC and the Antitrust Division on July 3, 2002. On August 2, 2002, the FTC made a request for additional information and documentary material, thereby extending the statutory waiting period until 30 days after the Company and Nestlé each substantially comply with this request, unless the waiting period is terminated earlier or extended with the consent of the Company and Nestlé. The Company and Nestlé are continuing to work closely with the FTC staff on its request.
• On November 6, 2002, New Dreyer’s filed with the SEC a Registration Statement on Form S-4 which included a proxy statement/prospectus pertaining to the transactions contemplated by the Merger Agreement. The SEC may choose to review the filing, and if it does so, it will typically provide comments within 30 days.
• If the registration statement is declared effective by the SEC, and if the transactions contemplated by the Merger Agreement are completed, then all shares of New Dreyer’s class A callable puttable common stock received by the Company’s stockholders in the merger will be freely transferable, except that shares of New Dreyer’s class A callable

puttable common stock received by persons who are deemed to be “affiliates” of the Company under the Securities Act of 1933, as amended (the 1933 Act), at the time of the special meeting of the Company’s stockholders, may be resold by such affiliates only in transactions permitted by Rule 145 under the 1933 Act or as otherwise permitted under the 1933 Act. Persons who may be deemed to be affiliates of the Company for such purposes generally include individuals or entities that control, are controlled by or are under common control with the Company and include the members of the Company’s board of directors.

Several of the Company’s joint venture partners and partner brand manufacturers have rights to terminate their arrangements with the Company upon consummation of the transactions contemplated by the Merger Agreement, subject to various other terms and conditions. While the Company intends to continue in these ventures and partner brand relationships, it can provide no assurance as to the potential actions of its business partners. Should any of the Company’s significant partners or suppliers choose to exit these arrangements in accordance with their rights to do so following the consummation, the Company may incur significant decreases in gross profit or be required to write-off certain assets as a result of the loss of these business partners.

NOTE 4 — Inventories

Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories at ~~March 30,~~September 28, 2002 and December 29, 2001 consisted of the following:


(In thousands)	Mar. 30, 2002		Dec. 29, 2001		Sept. 28, 2002		Dec. 29, 2001

Raw materials	$	9,018	$	9,099	$	9,173	$	9,099
Finished goods		81,481		72,199		76,360		72,199

	$	90,499	$	81,298	$	85,533	$	81,298

NOTE 45 — Butter Investments

Under current federal and state regulations and industry practice, the price of cream, a primary ingredient in ice cream, is linked to the price of butter. In an effort to mitigate the effects of butter price volatility, the Company periodically purchases butter or butter futures contracts with the intent of reselling or settling its positions in order to lower its cream cost and overall exposure to the volatility of this market. The Company has elected to not treat its investment in butter as a hedge for accounting purposes. Consequently, it “marks to market” its investment at the end of each quarter and records any resulting gain or loss in other income, net. The Company typically holds its butter investments for periods of up to four months.

Investments in butter, included in prepaid expenses and other at September 28, 2002 consisted of the following:


(In thousands)	Sept. 28, 2002

Butter	$	3,501




Butter futures contracts		155

	$	3,656

During the thirteen and thirty-nine weeks ended September 28, 2002, the Company recorded losses of $746,000 and $2,065,000, respectively. During 2001, the Company made no investments in butter.

NOTE 6 — Net Income ~~(Loss)~~ Per Common Share

The denominator for basic net income ~~(loss)~~ per share includes the number of weighted-average common shares outstanding. The denominator for diluted net income ~~(loss)~~ per share includes the number of weighted-average shares outstanding plus the ~~effect~~

effects of potentially dilutive securities which include stock options and redeemable convertible preferred stock. The following table reconciles the numerators and denominators of the basic and diluted net income per common share calculations:

Thirteen Weeks Ended

(In thousands, except per share amounts)
Mar. 30, 2002 Mar. 31, 2001

Net income (loss) available to common
stockholders — basic and diluted $ 1,310 $ (4,886 )

Weighted-average shares — basic 34,510 28,370
Dilutive effect of options 2,643

Weighted-average shares — diluted 37,153 28,370

Net income (loss) per common share:
Basic $ .04 $ (.17 )

Diluted $ .04 $ (.17 )


		Thirteen Weeks Ended				Thirty-nine Weeks Ended

(In thousands, except per share amounts)		Sept. 28, 2002		Sept. 29, 2001		Sept. 28, 2002		Sept. 29, 2001

Net income available to common stockholders-basic		$	10,334	$	6,048	$	23,330	$	8,097




Add: preferred dividends and accretion									560

Net income available to common stockholders-diluted		$	10,334	$	6,048	$	23,330	$	8,657


Weighted-average shares-basic			34,814		34,420		34,670		30,688




Dilutive effect of options			3,358		1,801		3,020		1,897




Dilutive effect of preferred stock									3,633

Weighted-average shares-diluted			38,172		36,221		37,690		36,218


Net income per common share:




	Basic	$	.30	$	.18	$	.67	$	.26

	Diluted	$	.27	$	.17	$	.62	$	.24

Each outstanding and unvested option to purchase the Company’s common stock under the Company’s existing stock option plans became fully vested on June 14, 2002, the date that the Company’s board of directors approved the Merger Agreement and the transactions contemplated by the Merger Agreement (Note 3). In connection with the execution of the Merger Agreement, certain executive officers waived their rights to accelerated vesting of their unvested stock options in conjunction with entering into Employment Agreements with New Dreyer’s. The employment agreements are effective if and when the transactions contemplated by the Merger Agreement are completed. Under the Merger Agreement, the Company can have no more than 41,393,348 outstanding or issuable shares of common stock if and when the transactions contemplated by the Merger Agreement are completed. This total includes shares issuable upon exercise of options, whether vested or unvested.

Anti-dilutive securities

Potentially dilutive securities are excluded from the calculations of diluted net income ~~(loss)~~ per common share when their inclusion would have an anti-dilutive effect. There were no potentially dilutive securities to be excluded during the ~~first quarter of~~thirteen and thirty-nine weeks ended September 28, 2002. ~~During the first quarter of 2001, potentially~~Potentially dilutive securities, ~~included 2,129,000~~stated in absolute equivalent shares of common stock, consisted of 753,000 stock options during the thirteen and 5,800,0000 equivalent common shares relating to redeemable convertible preferred stock (which was converted to common stock in the second quarter of 2001); these securities were excluded from the calculation of diluted net loss per common share in the first quarter 2001 net loss period due to their anti-dilutive effects.

thirty-nine weeks ended September 29, 2001.

NOTE ~~5 —~~7 – Adoption of New Accounting Pronouncements

Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)

In November 2001, the Emerging Issues Task Force of the Financial Accounting Standards Board (EITF) issued EITF 01-9, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)” (EITF 01-9). This pronouncement requires that discounts (off-invoice promotion and coupons), amounts paid to retailers to advertise a company’s products (fixed trade promotion) and fees paid to retailers to obtain shelf space (slotting fees) be recorded as a reduction of revenue.

respectively. The retroactive reclassification of these expenses resulted in a decrease in total sales and gross profit, along with a corresponding decrease in selling, general and administrative expenses, with no effect on net ~~loss~~income as previously reported.

Accounting for Goodwill and Other Intangible Assets

amortization, these assets are now ~~being~~ tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company adopted SFAS No. 142 at the beginning of fiscal 2002 and completed its transitional impairment test during the first quarter of ~~2002 and did~~2002; the Company has not ~~record~~recorded any impairment ~~charges.~~charges under SFAS No. 142.

~~A reconciliation of~~The following table reconciles reported net income ~~(loss)~~available to common stockholders and the related per common share amounts to the corresponding adjusted net income and related per common share amounts. Adjusted net income and net income ~~(loss)~~ per common share ~~to the~~ amounts ~~adjusted for~~reflecting the exclusion of ~~first quarter 2001~~ goodwill amortization of ~~$1,113,000,~~$655,000 ($1,100,000 net of tax of $445,000) and $1,942,000 ($3,193,000 net of tax of $1,251,000), respectively, for the ~~related income tax effect of $424,000, follows:~~thirteen and thirty-nine weeks ended September 29, 2001, respectively, follow:

Thirteen Weeks Ended

(In thousands, except per share amounts)
Mar. 30, 2002 Mar. 31, 2001

Reported net income (loss) $ 1,310 $ (4,886 )
Goodwill amortization, net of tax 689

Adjusted net income (loss) $ 1,310 $ (4,197 )

Net income (loss) per common share:
Reported basic $ .04 $ (.17 )
Goodwill amortization, net of tax .02

Adjusted basic $ .04 $ (.15 )

Reported diluted $ .04 $ (.17 )
Goodwill amortization, net of tax .02

Adjusted diluted $ .04 $ (.15 )


		Thirteen Weeks Ended				Thirty-nine Weeks Ended

(In thousands, except per share amounts)		Sept. 28, 2002		Sept. 29, 2001		Sept. 28, 2002		Sept. 29, 2001






As reported		$	10,334	$	6,048	$	23,330	$	8,097




Goodwill amortization, net of tax					655				1,942

As adjusted		$	10,334	$	6,703	$	23,330	$	10,039

Per common share:




	As reported-basic	$	.30	$	.18	$	.67	$	.26




	Goodwill amortization, net of tax				.02				.06

	As adjusted-basic	$	.30	$	.20	$	.67	$	.32


	As reported-diluted	$	.27	$	.17	$	.62	$	.24




	Goodwill amortization, net of tax				.02				.05

	As adjusted-diluted	$	.27	$	.19	$	.62	$	.29

In accordance with SFAS No. 142, the Company reclassified the long-term deferred income tax liability associated with nondeductible goodwill, resulting in a noncash reduction in goodwill and a corresponding reduction in the deferred income tax liability of $10,166,000. Also in accordance with SFAS No. 142, the Company now presents goodwill separately from other intangibles in the Consolidated Balance Sheet. In addition, the Company reclassified ~~its~~$52,997,000 of acquisition-related intangibles ~~(e.g. distribution rights)~~with indefinite lives to goodwill at the beginning of the first quarter of 2002. ~~Fiscal~~In accordance with this pronouncement, the corresponding prior year amounts were not retroactively reclassified. The remaining change in goodwill since December 29, 2001 ~~acquisition-related intangibles are included in Other Intangibles, net, in the Consolidated Balance Sheet.~~consists of acquisition goodwill.

Accounting for the Impairment or Disposal of Long-Lived Assets

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (SFAS No. 144). This pronouncement clarifies certain issues related to SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of” and develops a single accounting model for long-lived assets to be disposed of. The Company adopted SFAS No. 144 in the first quarter of 2002. The adoption of SFAS No. 144 did not impact the Company’s financial position, results of operations or cash flows.

NOTE ~~6-Investment~~8-Investment in Momentx Corporation

~~The~~At December 29, 2001, the Company ~~has~~had a ~~$1,100,000~~$1,093,000 investment in Momentx Corporation (Momentx), ~~which~~included in long-term Other Assets. Momentx is an e-market solution provider for the dairy, food and beverage industries. The Company ~~follows~~followed the ~~“cost method”~~cost method in accounting for this investment since its ownership interest iswas less than three percent. ~~Momentx~~During the second quarter of 2002, the Company determined that Momentx’s shortfalls to its business plan, which plan called for a substantial acceleration of its sales growth which did not occur, negatively impacted the recovery of the Company’s investment and recognized a $1,093,000 loss which is ~~currently~~included as a ~~development stage enterprise and its future success is uncertain at this time. The Company continues to monitor~~component of Other income, net, in the ~~recoverability~~Consolidated Statement of ~~this investment.~~Income.

811

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited)~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Unaudited).

FORWARD-LOOKING STATEMENTS

~~The Company may from time to time make written or oral forward-looking statements. Written or oral~~This report contains forward-looking statements ~~may appear in documents filed with~~within the ~~Securities and Exchange Commission, and in press releases, conference calls and webcasts (whether live or recorded), and in reports to stockholders. The~~meaning of the Private Securities Litigation Reform Act of 1995, which contains a “safe harbor” for forward-looking statements upon which the Company relies in making such disclosures. ~~In accordance with this “safe harbor” provision, we have determined that~~These forward-looking statements are ~~contained in this Management’s Discussion~~based on the Company’s current expectations and ~~Analysis of Consolidated Financial Condition and Results of Operations. The Company undertakes no obligation to publicly revise these~~projections about future events. These forward-looking statements are subject to ~~reflect subsequent events or circumstances.~~

~~Also, in connection with this “safe harbor” provision,~~risks, uncertainties and assumptions about the Company, ~~identifies important~~including, but not limited to:

• uncertainty regarding the Company’s future operating results;
• the Company’s ability to achieve efficiencies in its manufacturing and distribution operations without negatively affecting sales;
• the cost of energy used in manufacturing and distribution;
• the cost of dairy raw materials and other commodities used in the Company’s products;
• competitors’ marketing and promotion responses;
• market conditions affecting the prices of the Company’s products;
• the Company’s ability to increase sales of its own branded products;
• responsiveness of both the trade and consumers to the Company’s new products and marketing and promotional programs; and
• uncertainty regarding the completion and effect of the proposed transactions described under “MERGER AND CONTRIBUTION AGREEMENT” below.

Other factors that could cause ~~the Company’s~~ actual results to differ ~~materially~~ from ~~those contained in any forward-looking statement made by or on behalf of the Company. Any such statement is qualified by reference to the cautionary statements set forth~~expectations are discussed in this ~~and other filings with the Securities and Exchange Commission.~~

~~This~~“Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations~~Operations” and “Item 3 – Qualitative and Quantitative Disclosures About Market Risk” below. The Company’s actual results could differ substantially from those anticipated in these forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events.

The following discussion should be read together with the Company’s consolidated financial statements and related notes thereto included elsewhere in ~~conjunction with~~this document and in “Item 5 – Management’s Discussion and Analysis ~~for~~of Financial Condition and Results of Operations” appearing in the ~~year ended December 29, 2001,~~Company’s Report on Form 8-K filed on November 5, 2002 and in “Item 7A – Qualitative and Quantitative Disclosures About Market Risk” appearing in the Company’s 2001 Annual Report on Form 10-K.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

~~Critical Accounting Policies~~

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. The Company believes that the following critical accounting policies, which the Company’s senior management has discussed with the audit committee of the board of directors, represent the most significant judgments and estimates used in the preparation of the consolidated financial statements:

• The Company assesses the recoverability of trade accounts receivable based on estimated losses resulting from the inability of customers to make required payments. The Company’s estimates are based on the aging of accounts receivable balances and historical write-off experience, net of recoveries. The Company reviews trade accounts receivable for recoverability regularly and whenever events or circumstances, such as deterioration in the financial condition of a customer, indicate that additional allowances might be required. Changes in the financial condition of the Company’s major customers could result in significant accounts receivable write-offs.

• The Company records a valuation allowance related to deferred tax assets ~~when~~if, based on the weight of the available evidence, the Company concludes that it is ~~determined~~more likely than not that some portion or all of the deferred tax assets will

not be ~~utilized to offset~~realized. While the Company has considered future taxable ~~income.~~income and prudent and feasible tax planning strategies in assessing the need for the valuation allowance, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the carrying value of the deferred tax assets would be charged to income in the period in which such determination is made.

• The Company has goodwill related to business acquisitions. The Company tests goodwill for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying ~~amount. The assessment~~value. If the fair value of a reporting unit is less than its carrying value, then an impairment ~~is based on~~loss would be recognized equal to the ~~estimated undiscounted future cash flows from operating activities compared with~~excess of the carrying value of the ~~assets. If the undiscounted future cash flows are less than the carrying value, a write-down is recorded, measured by the amount of the difference between the carrying value and~~reporting unit goodwill over the fair value of ~~the asset.~~that goodwill. The fair value of goodwill is based on estimates that carry a degree of uncertainty.

• The Company’s liabilities for self-insured health, workers compensation and vehicle plans are developed from actuarial valuations that rely on various key assumptions. Changes in key assumptions may occur in the future, which could result in changes to related self-insurance costs.
• The Company’s liabilities for employee bonuses and profit-sharing plan contributions are based primarily on estimated full-year profitability at the end of each quarter. Changes in the performance of the business and in estimated full-year profitability could result in significant interim adjustments to the cost of these programs.

The Company’s liabilities for employee bonuses and profit-sharing plan contributions are based primarily on estimated full-year profitability at the end of each quarter. Changes in the performance of the business and in estimated full-year profitability could result in significant interim adjustments to the cost of these programs.

These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from ~~those~~these estimates.

~~Adoption~~MERGER AND CONTRIBUTION AGREEMENT

On June 16, 2002, the Company entered into an Agreement and Plan of Merger and Contribution (the Merger Agreement) with New December, Inc. (New Dreyer’s), December Merger Sub, Inc., Nestlé Holdings, Inc. (Nestlé) and NICC Holdings, Inc. (NICC Holdings), a wholly-owned subsidiary of Nestlé, to combine the Company with Nestlé’s United States frozen dessert business. The combination will result in both the Company and Nestlé Ice Cream Company, LLC (NICC), which holds Nestlé’s United States frozen dessert business, becoming wholly-owned subsidiaries of a newly formed Delaware corporation. This transaction will be recorded under the purchase method of accounting and will be treated as a reverse acquisition. Under reverse acquisition accounting, NICC will be deemed to be the acquirer for accounting purposes only, and the Company will be treated as the acquiree. As a result, the Company is expensing all merger transaction expenses as incurred. These expenses totaled $2,823,000 and $5,711,000 for the thirteen and thirty-nine weeks ended September 28, 2002, respectively.

If the transactions contemplated by the Merger Agreement are completed, each non-Nestlé stockholder who holds shares of the Company’s common stock at the effective time of the merger will receive one share of class A callable puttable common stock of New ~~Accounting Pronouncements~~Dreyer’s. Under the amended and restated certificate of incorporation of New Dreyer’s, subject to the terms set forth therein, the holders of New Dreyer’s class A callable puttable stock will be permitted to sell (put) some or all of their shares to New Dreyer’s for $83.00 per share during two periods, the first beginning on December 1, 2005 and ending on January 13, 2006, and the second beginning on April 3, 2006 and ending on May 12, 2006. New Dreyer’s class A callable puttable common stock will also be subject to redemption (call) by New Dreyer’s at the request of Nestlé at $88.00 per share during a six-month period beginning on January 1, 2007. For the contribution of its ownership interest of NICC Holdings, Nestlé will receive approximately 55 million shares of class B common stock of New Dreyer’s. The class B common shares are similar to the class A common shares, except that they lack the call and put features. The shares of the Company’s common stock currently held by Nestlé will be converted into the same number of shares of class B common stock of New Dreyer’s. As of September 28, 2002, Nestlé owned approximately 23 percent of the Company’s common stock on a diluted basis. If the transactions contemplated by the Merger Agreement are completed, Nestlé will own approximately 67 percent of the diluted common stock of New Dreyer’s.

Each outstanding option to purchase the Company’s common stock under the Company’s existing stock option plans will, at the completion of the transactions, be converted into an option to acquire:

• Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), and the rules promulgated thereunder by the United States Federal Trade Commission (the FTC), the transactions cannot be completed until notifications have been given and information has been furnished to the FTC and the Antitrust Division of the United States Department of Justice, and the specified waiting periods have expired or have been terminated. The Company and Nestlé filed notification and report forms under the HSR Act with the FTC and the Antitrust Division on July 3, 2002. On August 2, 2002, the FTC made a request for additional information and documentary material, thereby extending the statutory waiting period until 30 days after the Company and Nestlé each substantially comply with this request, unless the waiting period is terminated earlier or extended with the consent of the Company and Nestlé. The Company and Nestlé are continuing to work closely with the FTC staff on its request.
• On November 6, 2002, New Dreyer’s filed with the Securities and Exchange Commission (SEC) a Registration Statement on Form S-4 which included a proxy statement/prospectus pertaining to the transactions contemplated by the Merger Agreement. The SEC may choose to review the filing, and if it does so, it will typically provide comments within 30 days.
• If the registration statement is declared effective by the SEC, and if the transactions contemplated by the Merger Agreement are completed, then all shares of New Dreyer’s class A callable puttable common stock received by the Company’s stockholders in the merger will be freely transferable, except that shares of New Dreyer’s class A callable puttable common stock received by persons who are deemed to be “affiliates” of the Company under the Securities Act of 1933, as amended (the 1933 Act), at the time of the special meeting of the Company’s stockholders, may be resold by such affiliates only in transactions permitted by Rule 145 under the 1933 Act or as otherwise permitted under the 1933 Act. Persons who may be deemed to be affiliates of the Company for such purposes generally include individuals or entities that control, are controlled by or are under common control with the Company and include the members of the Company’s board of directors.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)

The Company adopted EITF 01-9 inat the ~~first quarter~~beginning of fiscal 2002. For the thirteen and thirty-nine weeks ended September 28, 2002, the Company presented ~~$47,670,000~~the expenses described above of ~~first quarter 2002 expenses~~$65,881,000 and $176,589,000, respectively, as a reduction of net sales in accordance with this ~~pronouncement~~pronouncement. For the thirteen and thirty-nine weeks ended September 29, 2001, the Company retroactively reclassified ~~$32,616,000~~expenses of ~~first quarter 2001 expenses on a retroactive basis.~~$58,274,000 and $140,300,000, respectively. The retroactive reclassification of these expenses resulted in a decrease in total sales and gross profit, along with a corresponding decrease in selling, general and administrative expenses, with no effect on net ~~loss~~income as previously reported.

Accounting for Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). This pronouncement ~~which the Company adopted at the beginning of the first quarter of 2002,~~ requires recognition of goodwill and other unidentifiable intangible assets with indeterminate lives as long-term ~~assets, however, amortization~~assets. Amortization as previously required by Accounting Principles Board Opinion No. 17, “Intangible Assets”, is no longer ~~permitted beginning with the first quarter of 2002.~~permitted. In lieu of amortization, these assets are now ~~being~~ tested for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company adopted SFAS No. 142 at the beginning of fiscal 2002 and completed its transitional impairment test during the first quarter of ~~2002 and did~~2002; the Company has not ~~record~~recorded any impairment ~~charges.~~

charges under SFAS No. 142.


		Thirteen Weeks Ended				Thirty-nine Weeks Ended

(In thousands, except per share amounts)		Sept. 28, 2002		Sept. 29, 2001		Sept. 28, 2002		Sept. 29, 2001






As reported		$	10,334	$	6,048	$	23,330	$	8,097




Goodwill amortization, net of tax					655				1,942

As adjusted		$	10,334	$	6,703	$	23,330	$	10,039

Per common share:




	As reported-basic	$	.30	$	.18	$	.67	$	.26




	Goodwill amortization, net of tax				.02				.06

	As adjusted-basic	$	.30	$	.20	$	.67	$	.32


	As reported-diluted	$	.27	$	.17	$	.62	$	.24




	Goodwill amortization, net of tax				.02				.05

	As adjusted-diluted	$	.27	$	.19	$	.62	$	.29

of acquisition-related intangibles ~~(e.g. distribution rights)~~with indefinite lives to goodwill at the beginning of the first quarter of 2002. ~~Fiscal~~In accordance with this pronouncement, the corresponding prior year amounts were not retroactively reclassified. The remaining change in goodwill since December 29, 2001 ~~acquisition-related intangibles are included in Other Intangibles, net, in the Consolidated Balance Sheet.~~consists of acquisition goodwill.

Accounting for the Impairment or Disposal of Long-Lived Assets

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percent which the items in the Consolidated Statement of ~~Operations~~Income bear to net sales and the percentage change of such items compared to the indicated prior period:

Period-to-Period
Variance
Percentage of Net Sales Favorable (Unfavorable)

Thirteen Weeks Ended

Thirteen Weeks Ended
Mar. 30, 2002 Mar. 31, 2001 2002 Compared to 2001

Revenues:
Net sales 100.0 % 100.0 % 21.3 %
Other income 0.4 0.1 376.2

100.4 100.1 21.7

Costs and expenses:
Cost of goods sold 90.3 90.6 (20.9 )
Selling, general and administrative 8.8 11.3 5.4
Interest, net of amounts capitalized 0.6 1.2 40.7

99.7 103.1 (17.3 )

Income (loss) before income tax provision (benefit) 0.7 (3.0 ) 128.6

Income tax provision (benefit) 0.2 (1.1 ) (127.0 )

Net income (loss) 0.5 (1.9 ) 129.6

Accretion of preferred stock to redemption value (100.0 )

Preferred stock dividends 0.1 (100.0 )

Net income (loss) available to common stockholders 0.5 % (2.0 )% 126.8 %


														Period-to-Period
														Variance
		Percentage of Sales												Favorable (Unfavorable)

														Thirteen			Thirty-nine
														Weeks			Weeks
		Thirteen Weeks Ended						Thirty-nine Weeks Ended						Ended			Ended
														2002			2002
		Sept. 28,			Sept. 29,			Sept. 28,			Sept. 29,			Compared			Compared
		2002			2001			2002			2001			To 2001			To 2001

Net sales			100.0	%		100.0	%		100.0	%		100.0	%		6.1	%		12.2	%

Costs and expenses:




	Cost of goods sold		85.4			88.7			86.9			88.8			(2.1	)		(9.8	)




	Selling, general and administrative		9.3			8.0			8.6			9.0			(23.4	)		(7.5	)




	Interest, net of amounts capitalized		0.5			0.8			0.5			1.0			30.8			35.8




	Other expense (income)		(0.1	)		(0.3	)		—			(0.3	)		(44.1	)		(82.4	)




	Merger transaction expenses		0.7						0.5					NM			NM

			95.8			97.2			96.5			98.5			(4.5	)		(10.0	)

Income before income tax provision			4.2			2.8			3.5			1.5			62.3			156.0




Income tax provision			1.5			1.1			1.3			0.6			(49.1	)		(135.1	)

Net income			2.7			1.7			2.2			0.9			70.9			169.5




Accretion of preferred stock to redemption value												—						NM




Preferred stock dividends												—						NM

Net income available to common stockholders			2.7	%		1.7	%		2.2	%		0.9	%		70.9			188.1

Thirteen Weeks ended ~~March 30,~~September 28, 2002 Compared with Thirteen Weeks ended ~~March 31,~~September 29, 2001

Consolidated net sales for the ~~first~~third quarter of 2002 increased ~~$51,001,000,~~$21,962,000, or 21six percent, to ~~$290,414,000~~$383,598,000 from ~~$239,413,000~~$361,636,000 for the same quarter last year.

~~Sales~~Net sales of the Company’s branded products, including licensed and joint venture products (company brands), increased ~~$20,217,000,~~$4,929,000, or 14two percent, to ~~$166,616,000~~$209,739,000 from ~~$146,399,000~~$204,810,000 for the same quarter last year. Company brands represented 5755 percent of consolidated net sales in 2002 compared with 6157 percent in the same quarter last year. ~~Gallon sales of the Company’s branded products, including novelties, increased approximately 3,400,000 gallons, or 15 percent, to approximately 26,300,000 gallons.~~ The products that led this increase were Dreyer’s and Edy’s® Grand Ice Cream ~~Grand Light~~ and Whole Fruit™ Bars. The average price of ~~the Company’s branded products,~~company brands, net of the effect of trade promotion expenses, ~~(which are now classified as a reduction~~increased by five percent. Gallon sales of ~~sales),~~

company brands, including novelties, decreased byapproximately 600,000 gallons, or two ~~percent.~~percent, to approximately 31,400,000 gallons.

~~Sales~~Net sales of products distributed for other manufacturers (partner brands), including Ben & Jerry’s Homemade, Inc. (Ben & Jerry’s), increased ~~$30,784,000,~~$17,033,000, or 3311 percent, to ~~$123,798,000~~$173,859,000 from ~~$93,014,000~~$156,826,000 for the same quarter last year. This increase was driven ~~largely~~primarily by increased sales of distributed novelty products (including a significant increase in sales of Silhouette Brands, Inc. (Silhouette) novelty products) and Ben & Jerry’s superpremium products and by the acquisition of independent distributors in 2000. The Company began distributing Ben & Jerry’s products to a larger distribution territory in March 2001 and distributes Ben & Jerry’s products for the grocery channel in all of the Company’s company-owned distribution markets across the country.products. Sales of partner brands represented 4345 percent of consolidated net sales compared with 3943 percent in the same quarter last year. Average wholesale prices for partner brands increased approximately 1114 percent. Unit sales of partner brands ~~increased~~decreased by 22three percent over the same quarter last year.

Cost of goods sold increased ~~$45,371,000,~~$6,604,000, or 21two percent, to ~~$262,161,000~~$327,624,000 from ~~$216,790,000~~$321,020,000 for the same quarter last year. The Company’s gross profit increased by ~~$5,630,000,~~$15,358,000, or 2538 percent, to ~~$28,253,000~~$55,974,000 from ~~$22,623,000,~~$40,616,000, representing a ~~9.7~~14.6 percent gross margin compared with ~~a 9.4~~an 11.2 percent gross margin for the same quarter last year. The improvement in gross profit was primarily attributable to ~~strong company brand sales growth, increased sales of Ben & Jerry’s products, and~~ lower dairy raw material ~~costs. These improvements were~~costs and higher volume, partially offset by ~~an increase~~increases in ~~slotting expenses and other expenses related to the introduction of new products and a new package size for the Company’s premium brands.~~distribution expenses. During the ~~first~~third quarter of 2002, the decrease in dairy raw material costs ~~favorably impacted gross profit by approximately $1,600,000 (net of~~accounted for a $16,200,000 pre-tax benefit (excluding the results of butter trading ~~activities)~~activities, which are included in other income, net and discussed below) as compared to the same quarter last year.

~~Other income~~Selling, general and administrative expenses increased ~~$899,000,~~$6,748,000, or ~~376~~23 percent, to ~~$1,138,000~~$35,632,000 from ~~$239,000~~$28,884,000 for the same quarter last year. The increase in expenses from 2001 reflects higher marketing expenses and higher administrative expenses, partially offset by a $1,100,000 reduction in amortization of goodwill as a result of the adoption of SFAS No. 142. Selling, general and administrative expenses represented nine and eight percent of consolidated net sales in the third quarters of 2002 and 2001, respectively.

Interest expense decreased $867,000, or 31 percent, to $1,947,000 from $2,814,000 for the same quarter last year, primarily due to lower interest rates.

Other income, net, decreased $454,000, or 44 percent, to $575,000 from $1,029,000 for the same quarter last year. Other income, net, includes $746,000 of losses from butter trading activities. Decreases in other income, net, were partially offset by an increase in earnings from joint ventures accounted for under the equity method.

~~Selling, general and administrative~~Nestlé merger transaction expenses ~~decreased $1,449,000,~~(discussed earlier) totaled $2,823,000 during the third quarter of 2002. The Company currently estimates that it will incur total merger transaction expenses, including costs to be incurred to close the transactions, in the range of $28,000,000 to $30,000,000.

The income tax provision increased $1,914,000, or ~~five~~49 percent, to ~~$25,558,000~~$5,813,000 from $27,007,000 for the same quarter last year. The decrease primarily reflects lower marketing expenses and a $1,113,000 reduction in amortization of goodwill. These decreases were partially offset by increased administrative expenses including the recording of a $300,000 bad debt provision as a result of a bankruptcy filing by a major customer. Selling, general and administrative expenses represented nine percent of consolidated net sales in the first quarter of 2002 and 11 percent in the same quarter last year.

~~Interest expense decreased $1,228,000, or 41 percent, to $1,786,000 from $3,014,000, due to lower interest rates, partially offset by higher borrowings.~~

~~Income taxes increased to a provision of $737,000 from a benefit of $(2,727,000)~~$3,899,000 for the same quarter last year. The effective tax rate decreased to 36.0 percent ~~for the first quarter of 2002~~ from ~~38.1~~39.2 percent for the ~~first~~same quarter ~~of 2001~~last year due primarily to the reversal of income taxes provided in prior periods, the elimination of certain permanent differences in connection with the adoption of SFAS No. 142 and the utilization of certain income tax credits.

Thirty-nine Weeks ended September 28, 2002 Compared with Thirty-nine Weeks ended September 29, 2001

Consolidated net sales for the first thirty-nine weeks of 2002 increased $114,350,000, or 12 percent, to $1,050,823,000 from $936,473,000 for the same period last year.

Net sales of the Company’s branded products, including licensed and joint venture products (company brands), increased $36,801,000, or seven percent, to $580,235,000 from $543,434,000 for the same period last year. Company brands represented 55 percent of consolidated net sales in 2002 compared with 58 percent in the same period last year. The ~~Company has~~products that led this increase were Dreyer’s and Edy’s® Grand Ice Cream, Whole Fruit™ Bars and the Company’s superpremium portfolio. The average price of company brands, net of the effect of trade promotion expenses, increased by three percent. Gallon sales of company brands, including novelties, increased approximately 3,500,000 gallons, or four percent, to approximately 88,600,000 gallons.

Net sales of products distributed for other manufacturers (partner brands), including Ben & Jerry’s, increased $77,549,000, or 20 percent, to $470,588,000 from $393,039,000 for the same period last year. This increase was driven largely by increased sales of distributed novelty products (including a ~~$1,100,000~~significant increase in sales of Silhouette novelty products), Ben & Jerry’s superpremium products and Healthy Choice ice cream. Sales of partner brands represented 45 percent of consolidated net sales compared with 42 percent in the same period last year. Average wholesale prices for partner brands increased approximately 13 percent. Unit sales of partner brands increased by six percent over the same period last year.

Cost of goods sold increased $81,514,000, or ten percent, to $912,650,000 from $831,136,000 for the same period last year. The Company’s gross profit increased by $32,836,000, or 31 percent, to $138,173,000 from $105,337,000, representing a 13.1 percent gross margin compared with an 11.2 percent gross margin for the same period last year. The improvement in gross profit was primarily attributable to lower dairy raw material costs and higher volume, partially offset by increases in distribution expenses. During the first thirty-nine weeks of 2002, the decrease in dairy raw material costs accounted for a $29,500,000 pre-tax benefit (excluding the results of butter trading activities, which are included in other income, net, and are discussed below) as compared to the same period last year.

Selling, general and administrative expenses increased $6,356,000, or eight percent, to $90,560,000 from $84,204,000 for the same period last year. The increase in expenses from 2001 reflects higher administrative expenses and higher marketing expenses, partially offset by a $3,193,000 reduction in amortization of goodwill as a result of the adoption of SFAS No. 142. Selling, general and administrative expenses represented nine percent of consolidated net sales in each of the first thirty-nine weeks of 2002 and 2001.

Interest expense decreased $3,257,000, or 36 percent, to $5,835,000 from $9,092,000 for the same period last year, primarily due to lower interest rates.

Other income, net, decreased $1,812,000, or 82 percent, to $386,000 from $2,198,000 for the same period last year. Other income, net, includes $2,065,000 of losses from butter trading activities and a $1,093,000 impairment of an investment in Momentx Corporation (Momentx), ~~which is~~ an e-market solution provider for the dairy, food and beverage industries. During the second quarter of 2002, the Company determined that Momentx’s shortfalls to its business plan, which plan called for a substantial acceleration of its sales growth which did not occur, negatively impacted the recovery of the Company’s investment. Decreases in other income, net, were partially offset by an increase in earnings from joint ventures accounted for under the equity method.

Nestlé merger transaction expenses (discussed earlier) totaled $5,711,000 during the first thirty-nine weeks of 2002. The Company ~~follows~~currently estimates that it will incur total merger transaction expenses, including costs to be incurred to close the ~~“cost method”~~transactions, in ~~accounting~~the range of $28,000,000 to $30,000,000.

The income tax provision increased $7,541,000, or 135 percent, to $13,123,000 from $5,582,000 for ~~this investment since its ownership interest is less than three percent. Momentx is currently a development stage enterprise~~the same period last year. The effective tax rate decreased to 36.0 percent from 39.2 percent for the same period last year due primarily to the reversal of income taxes provided in prior periods, the elimination of certain permanent differences in connection with the adoption of SFAS No. 142 and ~~its future success is uncertain at this time. The Company continues to monitor~~ the ~~recoverability~~utilization of ~~this investment.~~

income tax credits.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at ~~March 30,~~September 28, 2002 increased ~~$34,521,000~~$9,339,000 from year-end 2001. The Company’s cash flows ~~used in~~from operating activities increased to ~~$24,788,000~~$39,336,000 from ~~$24,171,000~~$11,888,000 for the same period last year. ~~These increases were~~Cash flows from operating activities for 2002 primarily ~~comprised~~consisted of ~~increases in accounts receivable~~net income of $23,330,000, depreciation and ~~inventories, partially offset by increases~~amortization of $26,067,000, and an increase in accounts payable and accrued liabilities of $17,854,000, partially offset by an increase in trade accounts receivable of $26,919,000. Cash flows from operating activities for 2001 primarily consisted of net income of $8,657,000, depreciation and ~~resulted from both seasonality~~amortization of $26,940,000, and ~~the additional Ben & Jerry’s business.~~an increase in accounts payable and accrued liabilities of $42,353,000, partially offset by an increase in trade accounts receivable of $52,241,000.

Cash flows used in investing activities totaled ~~$17,585,000~~$40,397,000 and ~~$9,603,000,~~$32,689,000, in 2002 and 2001, respectively. Cash flows used in investing activities primarily consisted ~~primarily~~ of property, plant and equipment purchases of ~~$13,985,000~~$37,927,000 and ~~$7,178,000,~~$29,218,000, in 2002 and 2001, respectively.

Cash flows from financing activities totaled ~~$42,319,000~~$1,270,000 and ~~$33,512,000,~~$20,609,000, in 2002 and 2001, respectively. Cash flows from financing activities for ~~the first quarter of~~ 2002 primarily consisted of ~~a net increase~~issuance of ~~$42,200,000 in the Company’s revolving line~~common stock of ~~credit.~~$9,351,000 partially offset by cash dividends paid of $6,230,000 and repurchases and retirements of common stock of $1,752,000. Cash flows from financing activities for ~~the first quarter of~~ 2001 primarily consisted of a net increase of ~~$33,900,000~~$42,700,000 in the revolving line of credit, partially offset by repayments of debt totaling ~~$3,400,000.~~$22,186,000.

At ~~March 30,~~September 28, 2002, the Company had ~~$1,596,000~~$1,859,000 in cash and cash equivalents, and an unused credit line of ~~$77,700,000.~~$120,000,000. As discussed earlier, the Company currently estimates that it will incur total merger transaction expenses, including costs to be incurred to close the transactions, in the range of $28,000,000 to $30,000,000. The Company believes that its credit line, along with its liquid resources, internally-generated cash and financing capacity, are adequate to meet both short-term and long-term operating and capital ~~requirements.~~requirements, including the merger transaction expenses. In connection with the transactions contemplated by the Merger Agreement, the Company is currently in the process of negotiating modifications to its revolving line of credit agreement, including modifications relating to dividends permitted under such credit agreement.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

This Item 3 should be read in conjunction with Item 7A of the Company’s 2001 Annual Report on Form ~~10-K.~~10-K and in conjunction with Item 2 above.

Under current federal and state regulations and industry practice, the price of cream, a primary ingredient in ice cream, is linked to the price of butter. In an effort to mitigate the effects of butter price volatility, the Company periodically purchases butter or butter futures contracts with the intent of reselling or settling its positions in order to lower its cream cost and overall exposure to the volatility of this market. The Company has elected to not treat its investment in butter as a hedge for accounting purposes. Consequently, it “marks to market” its investment at the end of each quarter and records any resulting gain or loss in Other income, net. During the thirteen and thirty-nine weeks ended September 28, 2002, the Company marked its butter investments to market and recorded losses of $746,000 and $2,065,000, respectively.

During the ~~first quarter of~~thirteen and thirty-nine weeks ended September 28, 2002, the decrease in dairy raw material costs ~~favorably impacted gross profit by approximately $1,600,000 (net of~~accounted for a $16,200,000 pre-tax benefit and a $29,500,000 pre-tax benefit (excluding the results of butter trading activities), respectively, as compared to the ~~first quarter of 2001.~~thirteen and thirty-nine weeks ended September 29, 2001, respectively.

1319

ITEM 4. CONTROLS AND PROCEDURES.

(a) Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), within 90 days prior to the filing date of this report. Based on their evaluation, our principal executive officer and principal accounting officer concluded that our disclosure controls and procedures are effective.
(b) There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

PART II: OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM ~~8-K~~8-K.

(a) The following exhibits are filed herewith:

		~~None.~~
Exhibit No.		Description

10.1		Second Amendment dated October 18, 2002 to Credit Agreement dated as of July 25, 2000 among Dreyer’s Grand Ice Cream, Inc., the banks party to this agreement, Bank of America, N.A. as Agent for the Banks, as Swing Line Bank and as Letter of Credit Issuing Bank; Union Bank of California, N.A. as Syndication Agent and Banc of America Securities LLC as Lead Arranger and Book Manager.




99.1		Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




99.2		Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) A Report on Form 8-K was filed on ~~January 30,~~August 7, 2002, reporting ~~a letter agreement dated January 28, 2002, between~~ the Company and General Electric Pension Trust, GE Investment Private Placement Partners I, Limited Partnership, and General Electric Capital Corporation (collectively the “GE Entities”), which among other things confirms certain understandings between the parties with respect to registration rights heldsubmission of sworn statements by the ~~GE Entities~~Company’s Principal Executive Officer and ~~removal~~Principal Financial Officer to the SEC pursuant to SEC Order No. 4-460.
A Report on Form 8-K was filed on October 25, 2002, reporting an amendment to the Merger and Contribution Agreement dated June 16, 2002, to change the name of ~~restrictive legends~~the holding company resulting from ~~stock owned~~the transactions contemplated by the ~~GE Entities. Concurrently therewith, Jack O. Peiffer resigned~~Merger and Contribution Agreement from “Dreyer’s Grand Ice Cream, Inc.” to “Dreyer’s Grand Ice Cream Holdings, Inc.” and to report the anticipated filing of the proxy statement/prospectus.
A Report on Form 8-K was filed on November 5, 2002 which includes the information in Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8-Financial Statements and Supplementary Data appearing in the Company’s ~~board~~Form 10-K for the fiscal year ended December 29, 2001, giving effect to the adoption of ~~directors.~~the provisions of certain new accounting pronouncements.

1421

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 thereunto duly authorized.


		DREYER’S GRAND ICE CREAM, INC.

Dated: ~~May 14,~~November 12, 2002 By: /s/ Timothy F. Kahn
Timothy F. Kahn
Vice President — Finance and Administration
and Chief Financial Officer (Principal Financial Officer)

CERTIFICATIONS

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, T. Gary Rogers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dreyer’s Grand Ice Cream, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Corporation as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls;

6. The registrant’s other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

/s/ T. Gary Rogers
T. Gary Rogers
Chairman of the Board of Directors and
Chief Executive Officer

Dated: November 12, 2002

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Timothy F. Kahn, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dreyer’s Grand Ice Cream, Inc.;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls;

/s/ Timothy F. Kahn
Timothy F. Kahn
Vice President — Finance and Administration and
Chief Financial Officer

Dated: November 12, 2002

DREYER’S GRAND ICE CREAM, INC.

INDEX OF EXHIBITS


Exhibit No.		Description

10.1		Second Amendment dated October 18, 2002 to Credit Agreement dated as of July 25, 2000 among Dreyer’s Grand Ice Cream, Inc., the banks party to this agreement, Bank of America, N.A. as Agent for the Banks, as Swing Line Bank and as Letter of Credit Issuing Bank; Union Bank of California, N.A. as Syndication Agent and Banc of America Securities LLC as Lead Arranger and Book Manager.




99.1		Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




99.2		Chief Financial Officer ~~(Principal Financial Officer)~~Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

1525

•		prior to the date New Dreyer’s class A callable puttable common stock is redeemed under the call right, that number of shares of New Dreyer’s class A callable puttable common stock equal to the number of shares of the Company’s common stock subject to options immediately prior to the completion of the transactions, at the price or prices per share in effect immediately prior to the completion of the transactions; and

•		at or after the date New Dreyer’s class A callable puttable common stock is redeemed under the call right or to the consummation of a short-form merger of New Dreyer’s with Nestlé or an affiliate of Nestlé S.A., pursuant to the terms of the governance agreement in the form attached as an exhibit to the Merger Agreement, the same consideration which the holder of the options would have received had he or she exercised such option prior to such redemption and received consideration pursuant to the redemption at the price or prices in effect at that time.

•		Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), and the rules promulgated thereunder by the United States Federal Trade Commission (the FTC), the transactions cannot be completed until notifications have been given and information has been furnished to the FTC and the Antitrust Division of the United States Department of Justice, and the specified waiting periods have expired or have been terminated. The Company and Nestlé filed notification and report forms under the HSR Act with the FTC and the Antitrust Division on July 3, 2002. On August 2, 2002, the FTC made a request for additional information and documentary material, thereby extending the statutory waiting period until 30 days after the Company and Nestlé each substantially comply with this request, unless the waiting period is terminated earlier or extended with the consent of the Company and Nestlé. The Company and Nestlé are continuing to work closely with the FTC staff on its request.

•		On November 6, 2002, New Dreyer’s filed with the SEC a Registration Statement on Form S-4 which included a proxy statement/prospectus pertaining to the transactions contemplated by the Merger Agreement. The SEC may choose to review the filing, and if it does so, it will typically provide comments within 30 days.

•		If the registration statement is declared effective by the SEC, and if the transactions contemplated by the Merger Agreement are completed, then all shares of New Dreyer’s class A callable puttable common stock received by the Company’s stockholders in the merger will be freely transferable, except that shares of New Dreyer’s class A callable

	•		uncertainty regarding the Company’s future operating results;

	•		the Company’s ability to achieve efficiencies in its manufacturing and distribution operations without negatively affecting sales;

	•		the cost of energy used in manufacturing and distribution;

	•		the cost of dairy raw materials and other commodities used in the Company’s products;

	•		competitors’ marketing and promotion responses;

	•		market conditions affecting the prices of the Company’s products;

	•		the Company’s ability to increase sales of its own branded products;

	•		responsiveness of both the trade and consumers to the Company’s new products and marketing and promotional programs; and

	•		uncertainty regarding the completion and effect of the proposed transactions described under “MERGER AND CONTRIBUTION AGREEMENT” below.

•		The Company assesses the recoverability of trade accounts receivable based on estimated losses resulting from the inability of customers to make required payments. The Company’s estimates are based on the aging of accounts receivable balances and historical write-off experience, net of recoveries. The Company reviews trade accounts receivable for recoverability regularly and whenever events or circumstances, such as deterioration in the financial condition of a customer, indicate that additional allowances might be required. Changes in the financial condition of the Company’s major customers could result in significant accounts receivable write-offs.

•		The Company records a valuation allowance related to deferred tax assets ~~when~~if, based on the weight of the available evidence, the Company concludes that it is ~~determined~~more likely than not that some portion or all of the deferred tax assets will

		not be ~~utilized to offset~~realized. While the Company has considered future taxable ~~income.~~income and prudent and feasible tax planning strategies in assessing the need for the valuation allowance, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the carrying value of the deferred tax assets would be charged to income in the period in which such determination is made.

•		The Company has goodwill related to business acquisitions. The Company tests goodwill for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying ~~amount. The assessment~~value. If the fair value of a reporting unit is less than its carrying value, then an impairment ~~is based on~~loss would be recognized equal to the ~~estimated undiscounted future cash flows from operating activities compared with~~excess of the carrying value of the ~~assets. If the undiscounted future cash flows are less than the carrying value, a write-down is recorded, measured by the amount of the difference between the carrying value and~~reporting unit goodwill over the fair value of ~~the asset.~~that goodwill. The fair value of goodwill is based on estimates that carry a degree of uncertainty.

•		The Company’s liabilities for self-insured health, workers compensation and vehicle plans are developed from actuarial valuations that rely on various key assumptions. Changes in key assumptions may occur in the future, which could result in changes to related self-insurance costs.

•		The Company’s liabilities for employee bonuses and profit-sharing plan contributions are based primarily on estimated full-year profitability at the end of each quarter. Changes in the performance of the business and in estimated full-year profitability could result in significant interim adjustments to the cost of these programs.


								Period-to-Period
								Variance
		Percentage of Net Sales						Favorable (Unfavorable)


		Thirteen Weeks Ended
								Thirteen Weeks Ended
		Mar. 30, 2002			Mar. 31, 2001			2002 Compared to 2001

Revenues:
	Net sales		100.0	%		100.0	%		21.3	%
	Other income		0.4			0.1			376.2


			100.4			100.1			21.7

Costs and expenses:
	Cost of goods sold		90.3			90.6			(20.9	)
	Selling, general and administrative		8.8			11.3			5.4
	Interest, net of amounts capitalized		0.6			1.2			40.7


			99.7			103.1			(17.3	)


Income (loss) before income tax provision (benefit)			0.7			(3.0	)		128.6

Income tax provision (benefit)			0.2			(1.1	)		(127.0	)


Net income (loss)			0.5			(1.9	)		129.6

Accretion of preferred stock to redemption value									(100.0	)

Preferred stock dividends						0.1			(100.0	)


Net income (loss) available to common stockholders			0.5	%		(2.0	)%		126.8	%

(a)		Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), within 90 days prior to the filing date of this report. Based on their evaluation, our principal executive officer and principal accounting officer concluded that our disclosure controls and procedures are effective.

(b)		There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

(b)		A Report on Form 8-K was filed on ~~January 30,~~August 7, 2002, reporting ~~a letter agreement dated January 28, 2002, between~~ the Company and General Electric Pension Trust, GE Investment Private Placement Partners I, Limited Partnership, and General Electric Capital Corporation (collectively the “GE Entities”), which among other things confirms certain understandings between the parties with respect to registration rights heldsubmission of sworn statements by the ~~GE Entities~~Company’s Principal Executive Officer and ~~removal~~Principal Financial Officer to the SEC pursuant to SEC Order No. 4-460.

		A Report on Form 8-K was filed on October 25, 2002, reporting an amendment to the Merger and Contribution Agreement dated June 16, 2002, to change the name of ~~restrictive legends~~the holding company resulting from ~~stock owned~~the transactions contemplated by the ~~GE Entities. Concurrently therewith, Jack O. Peiffer resigned~~Merger and Contribution Agreement from “Dreyer’s Grand Ice Cream, Inc.” to “Dreyer’s Grand Ice Cream Holdings, Inc.” and to report the anticipated filing of the proxy statement/prospectus.

		A Report on Form 8-K was filed on November 5, 2002 which includes the information in Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8-Financial Statements and Supplementary Data appearing in the Company’s ~~board~~Form 10-K for the fiscal year ended December 29, 2001, giving effect to the adoption of ~~directors.~~the provisions of certain new accounting pronouncements.




















Dated: ~~May 14,~~November 12, 2002	By:	/s/ Timothy F. Kahn

		Timothy F. Kahn
		Vice President — Finance and Administration and Chief Financial Officer (Principal Financial Officer)