FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

(Mark One)

For the quarterly period ended March 26, 2005

OR

Commission file number 000-50325

DREYER’S GRAND ICE CREAM HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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.

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)

See accompanying Notes to Consolidated Financial Statements.

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

See accompanying Notes to Consolidated Financial Statements.

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DREYER’S GRAND ICE CREAM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN CLASS A CALLABLE
PUTTABLE COMMON STOCK AND STOCKHOLDERS’ EQUITY
(Unaudited)

See accompanying Notes to Consolidated Financial Statements.

4

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

See accompanying Notes to Consolidated Financial Statements.

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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 quarters ended March 26, 2005 and March 27, 2004 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. 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 25, 2004, appearing in the Company’s 2004 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 NICC and Dreyer’s Grand Ice Cream, Inc. (DGIC) (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”. For this purpose, NICC was deemed to be the acquirer and DGIC was deemed to be the acquiree.

     The estimated purchase price and related preliminary 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 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 Sorbet 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

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Territories) to Eskimo Pie Frozen Distribution, Inc. (Eskimo Pie), a subsidiary of CoolBrands. On July 5, 2003 (the Divestiture Closing Date), the parties closed the transaction (the Divestiture Transaction) and the Company received $10,000,000 in consideration for the sale of the Divested Brands and the Purchased Assets.

     On July 9, 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 November 12, 2003 in In the Matter of Nestlé Holdings, Inc. et al., Docket No. C-40 (the Decision and Order) authorizing the Divestiture Transaction, in order to facilitate the manufacture of the Divested Brands and the sale and distribution of certain DGIC products.

     On September 7, 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 in order to facilitate the distribution of certain Integrated Brands and DGIC products as well as extend the license from Integrated Brands to DGIC for use of the Whole Fruit name for DGIC’s line of fruit bars to January 2006.

Note 2. Significant Accounting Policies

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 recoverability of goodwill; the adequacy of liabilities for employee bonuses and pension and 401(k) 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; the adequacy of the valuation allowance for deferred tax assets; 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.

Financial Statement Presentation

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

New Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board (FASB) issued FASB Staff Position Statement of Financial Accounting Standards No. 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction Provided to U.S.-Based Manufacturers by the American Jobs Creation Act of 2004” (FSP SFAS 109-1), which clarifies that the tax deduction for domestic manufacturers under the American Jobs Creation Act of 2004 should be accounted for as a special deduction in accordance with FASB Statement No. 109, Accounting for Income Taxes (SFAS 109). These requirements were effective immediately. The adoption of this pronouncement did not impact the Company’s financial position, results of operations or cash flows.

     In December 2004, and as subsequently revised in April 2005, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and its related implementation guidance. SFAS 123R eliminates the alternative to use APB 25’s intrinsic value method of accounting and requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. The Company early adopted SFAS 123R in the first quarter of 2005. The Company did not grant stock options in 2005. As such, the adoption of this pronouncement did not impact the Company’s financial position, results of operations or cash flows.

     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs” (SFAS 151). This Statement amends the guidance in Accounting Research Bulletin No. 43, Chapter 4, “Inventory Pricing” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. This Statement requires that those items be recognized as current-period charges regardless of whether

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they meet the criterion of abnormal, and that allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. The Company early adopted SFAS 151 in the first quarter of 2005. The adoption of this pronouncement did not have a material impact on the Company’s financial position, results of operations or cash flows.

     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary Assets” (SFAS 153), an amendment to Accounting Principles Board Opinion No. 29, “Accounting for Nonmonetary Transactions” (APB No. 29). The guidance in APB No. 29, which is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged, included certain exceptions to that principle, and SFAS 153 amends APB No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. The Company early adopted SFAS 153 in the first quarter of 2005. The Company did not have exchanges of nonmonetary assets in 2005. As such, the adoption of this pronouncement did not impact the Company’s financial position, results of operations or cash flows.

Note 3. Inventories

     Inventories are stated at the lower of cost (determined by the first-in, first-out method) or market. Inventories at March 26, 2005 and December 25, 2004 consisted of the following:

     Inventories on consignment with retailers and distributors included in the above balances at March 26, 2005 and December 25, 2004 totaled $13,120,000 and $12,843,000, respectively.

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 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 loss or gain in Other expense (income), net. The Company typically holds its butter investments for up to one month.

     Investments in butter, included in Prepaid expenses and other, had a current market value of $6,899,000 and $410,000 at March 26, 2005 and December 25, 2004, respectively. During the quarters ended March 26, 2005 and March 27, 2004, losses (gains) from butter investments, included as a component of Other expense (income), net, totaled $1,511,000 and $(5,074,000), respectively.

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Note 5. Other Intangibles, Net

     The gross carrying amount and related accumulated amortization of other intangibles at March 26, 2005 and December 25, 2004 consisted of the following: