FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the quarterly period ended June 26, 2004

OR

Commission file number 000-50325

DREYER’S GRAND ICE CREAM HOLDINGS, INC.

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 þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

Yes þ No o

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

See accompanying Notes to Consolidated Financial Statements.

DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

See accompanying Notes to Consolidated Financial Statements.

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DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

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DREYER’S GRAND ICE CREAM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. Description of Business and Basis of Presentation

Description of Business

     Dreyer’s Grand Ice Cream Holdings, Inc. and its subsidiaries (the Company) are engaged primarily in the business of manufacturing and distributing premium and superpremium ice cream and other frozen snacks 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.

Financial Statement Form and Content

     The Consolidated Financial Statements for the quarter and half-year periods ended June 26, 2004 and June 28, 2003 have not been audited by an independent registered public accounting firm, but include all adjustments consisting of 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. 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 (U.S. GAAP) 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 27, 2003, appearing in the Company’s 2003 Annual Report on Form 10-K.

Dreyer’s Nestlé Transaction

     The Company is the successor entity to the Nestlé Ice Cream Company, LLC (NICC) business. The Company was formed as a result of the combination of Dreyer’s Grand Ice Cream, Inc. (DGIC) and NICC (the Dreyer’s Nestlé Transaction). The Dreyer’s Nestlé Transaction closed on June 26, 2003 (the Merger Closing Date) and was accounted for as a reverse acquisition under the purchase method of accounting as required by Statement of Financial Accounting Standards No. 141, “Accounting for Business Combinations” (Note 7). For this purpose, NICC was deemed to be the acquirer and DGIC was deemed to be the acquiree.

     The purchase price and related allocation were recorded in two components reflecting the two primary transactions pursuant to which Nestlé Holdings, Inc. (Nestlé) and NICC Holdings, Inc. (NICC Holdings) acquired, or will acquire, all of the DGIC shares. The first component of the purchase accounting was based on Nestlé’s original ownership of 9,563,016 shares, representing 27.2 percent (the Nestlé Original Equity Investment) of the 35,101,634 total DGIC shares outstanding on the Merger Closing Date. The second component of the purchase accounting was based on Nestlé’s future purchase of the remaining 25,538,618 shares, representing 72.8 percent (the Non-Nestlé Ownership) of the 35,101,634 total DGIC shares outstanding on the Merger Closing Date.

The Divestiture Transaction

     As a condition to the closing of the Dreyer’s Nestlé Transaction, the United States Federal Trade Commission (FTC) required that DGIC and NICC divest certain assets. On March 3, 2003, New December, Inc. (the former name of the Company), DGIC, NICC and Integrated Brands, Inc. (Integrated Brands), a subsidiary of CoolBrands International, Inc. (CoolBrands), entered into an Asset Purchase and Sale Agreement, which was amended and restated on June 4, 2003 (the APA). The APA provided for the sale of DGIC’s Dreamery^® and Whole Fruit™ Sorbet brands and the assignment of its license to the Godiva^® ice cream brand (the Dreamery, Whole Fruit and Godiva brands are referred to as the Divested Brands) and the transfer and sale by NICC of leases, warehouses, equipment and vehicles and related distribution assets (the Purchased Assets) in certain states and territories (the Territories) to Eskimo Pie Frozen Distribution, Inc. (Eskimo Pie), a subsidiary of Integrated Brands. On July 5, 2003 (the

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Divestiture Closing Date), the parties closed the transaction (the Divestiture Transaction) (Note 7 and Note 10) and the Company received $10,000,000 in consideration for the sale of the Divested Brands.

     On July 2, 2004, the FTC approved a request made by the Company and Integrated Brands to amend certain agreements between the parties and thereby modify the Decision and Order issued by the FTC on June 25, 2003 in In the Matter of Nestlé Holdings, Inc. et al., Docket No. C-40 (the Order) authorizing the Divestiture Transaction, in order to facilitate the manufacture of the Divested Brands and the sale and distribution of certain DGIC products.

The Häagen-Dazs Shoppe Company

     On February 17, 2004, DGIC acquired all of the equity interest of The Häagen-Dazs Shoppe Company, Inc. (the Shoppe Company) from The Pillsbury Company (Pillsbury). The Shoppe Company has been the franchisor of the United States Häagen-Dazs parlor business since the early 1980’s. As of June 26, 2004, there were approximately 238 franchised Häagen-Dazs parlors in the United States.

Note 2. Significant Accounting Policies

Fiscal Year

     Effective upon the closing of the Dreyer’s Nestlé Transaction, the Company changed its fiscal periods from NICC’s calendar year ending on December 31st with interim periods based on a four- or five-week month (13 weeks per quarter) to a 52-week or 53-week year ending on the last Saturday in December with fiscal quarters ending on the Saturday closest to the end of the calendar quarter. This change in fiscal periods did not have a material impact on the Consolidated Financial Statements.

     The accompanying Consolidated Financial Statements and related notes that are as of a date, or for a period ended, before June 27, 2003, represent the accounts of NICC or its predecessor entities. The operating results for interim periods are not necessarily indicative of the results to be expected for an entire year.

     The Consolidated Financial Statements for the second quarter of 2004 include the results of operations of DGIC and NICC for the period from March 28, 2004 to June 26, 2004 (91 days). The Consolidated Financial Statements for the second quarter of 2003 include the results of operations of DGIC for the period following the Merger Closing Date to June 28, 2003 (two days), and of NICC for the period from March 31, 2003 to June 28, 2003 (90 days).

     The Consolidated Financial Statements for the first half of 2004 include the results of operations of DGIC and NICC for the entire period from December 28, 2003 to June 26, 2004 (182 days). The Consolidated Financial Statements for the first half of 2003 include the results of operations of DGIC for the period following the Merger Closing Date to June 28, 2003 (two days), and of NICC for the period from January 1, 2003 to June 28, 2003 (179 days).

Significant Accounting Assumptions and Estimates

     The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions include, among others, assessing the following: the adequacy of liabilities for trade promotion expenses; the adequacy of the provision for retail freezer cabinet retirements; the recoverability of goodwill; the adequacy of liabilities for employee bonuses and profit-sharing plan contributions; the adequacy of liabilities for self-insured health, workers compensation and vehicle plans; the recoverability and estimated useful lives of property, plant and equipment; and the recoverability of trade accounts receivable. 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 these estimates and assumptions.

     In the second quarter of 2004, the Company completed a project which implemented a new system to inventory and track its retail freezer cabinets. Previously, the Company had estimated freezer retirements using a sampling methodology. The new system allows for the specific identification of freezers and the recording of retirements when they occur. The change in the methodology for recording retail freezer cabinet retirements did not have a material impact on the Company’s results of operations.

Financial Statement Presentation

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     Certain reclassifications have been made to prior year financial statements to conform to the current period presentation.

New Accounting Pronouncements

     In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (FIN 46). This interpretation, which was subsequently revised in December 2003 (FIN 46-R), clarifies certain issues related to Accounting Research Bulletin No. 51, “Consolidated Financial Statements” and addresses consolidation by business enterprises of the assets, liabilities, and results of the activities of a variable interest entity. The Company has determined that it does not hold a significant variable interest in a variable interest entity under FIN 46-R at June 26, 2004.

Note 3. Inventories

     Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories at June 26, 2004 and December 27, 2003 consisted of the following:

     Inventories on consignment with retailers and distributors included in the above balances at June 26, 2004 and December 27, 2003 totaled $11,064,000 and $10,674,000, respectively.

     Upon the closing of the Dreyer’s Nestlé Transaction, the DGIC inventory was adjusted to fair value to the extent of the 72.7 percent Non-Nestlé Ownership. This increase in fair value of $116,000 was expensed as the inventory was sold. The inventory of the Divested Brands, however, was recorded at the selling price of the Divested Brands, which approximated $8,182,000. The inventory of the Divested Brands was considered held for sale at June 28, 2003 and was sold to Integrated Brands in the third quarter of 2003 on the Divestiture Closing Date.

Note 4. 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 proactively mitigate the effects of butter price volatility, the Company will periodically purchase butter or butter futures contracts with the intent of reselling or settling its positions in order to reduce its exposure to the price volatility of this market. Since the Company’s investment in butter does not qualify as a hedge for accounting purposes, it “marks to market” its investment at the end of each quarter and records any resulting gain or loss as a decrease or increase in Other expense (income), net.

     Investments in butter, included in Prepaid expenses and other in the Consolidated Balance Sheet, had a market value totaling $5,579,000 and $6,277,000 at June 26, 2004 and December 27, 2003, respectively. During the quarters ended June 26, 2004, and June 28, 2003, losses from butter investments, included as a component of Other expense (income), net, totaled $4,100,000 and $43,000, respectively. During the half-year periods ended June 26, 2004 and June 28, 2003, (gains) losses from butter investments, included as a component of Other expense (income), net, totaled $(974,000) and $43,000, respectively.

Note 5. Other Assets — Deferred Compensation Plan

     In April 2004, the Company implemented an unfunded, non-qualified deferred compensation plan (the Plan). The Plan allows a select group of management, as determined by the Deferred Compensation Plan Committee, to defer payment of a portion of their compensation. The deferred compensation will later be paid to the participants or their designated beneficiaries upon retirement, death or separation from the Company. To support the Plan, the

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Company has elected to purchase Company-owned life insurance. The cash surrender value of the Company-owned life insurance related to deferred compensation, included in Other assets, was $1,889,000 at June 26, 2004. The liability for the deferred compensation, included in Other long-term obligations, was $1,908,000 at June 26, 2004. For the quarter and half-year periods ended June 26, 2004, participant contributions totaled $1,906,000. The difference between the cumulative participant contributions at June 26, 2004 and the deferred compensation represents the change in market value during the quarter and half-year periods ended June 26, 2004.

Note 6. Other Intangibles, Net

     The gross carrying amount and related accumulated amortization of other intangibles at June 26, 2004 and December 27, 2003 consisted of the following: