##### Table of Contents



FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(Mark One)

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

For the quarterly period ended June 30, 2001

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
            (State or other jurisdiction of 
            incorporation or organization) |  | No. 94-2967523
            (I.R.S. Employer 
            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
|                                     |  | August 12, 2001   
|                                     |  |                   
|Common
          stock, $1 par value |  |                    | 34,385,000 | 



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TABLE OF CONTENTS



|                              |                                                                                                             |                                                           |  |  |  |  |  | 
|----------------------------- | ----------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS.                                                                              
|                              |                                                                                                             | CONSOLIDATED BALANCE SHEET                               
|                              |                                                                                                             | CONSOLIDATED STATEMENT OF INCOME                         
|                              |                                                                                                             | 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.
|                              | ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.                                        
|PART II: OTHER INFORMATION   
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                               
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                                  
|SIGNATURE                    



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##### Table of Contents






PART I: FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS.

DREYERS GRAND ICE CREAM, INC.




CONSOLIDATED BALANCE SHEET

|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |               |         |         |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ------- | ------------- | ------- | ------------- | ------- | ------- | ------- | 
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         | June 30, 2001 |         | Dec. 30, 2000
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|($ in thousands, except
          per share amounts)                                                                                                                                                                   |                                                                                                                                                                              | (Unaudited)                                                                                                                |         |               |         |              
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Assets                                                                                                                                                                                                                
|Current Assets:                                                                                                                                                                                                        |                                                                                                                                                                              |                                                                                                                            |         |               |         |               |         |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Cash and cash equivalents                                                                                                  |         | $             | 5,251   |               |         | $       | 2,721   | 
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Trade
          accounts receivable, net of allowance for doubtful accounts of
          $1,102 in 2001 and $2,611 in 2000 |         |               | 134,929 |               |         |         | 77,310  | 
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Other accounts receivable                                                                                                  |         |               | 20,621  |               |         |         | 18,353  | 
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Inventories                                                                                                                |         |               | 84,866  |               |         |         | 68,801  | 
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Deferred income taxes                                                                                                      |         |               | 4,292   |               |         |         | 4,584   | 
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Prepaid expenses and other                                                                                                 |         |               | 7,629   |               |         |         | 6,950   | 
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|                                                                                                                                                                                                                       |                                                                                                                                                                              | Total
          current assets                                                                                             |         |               | 257,588 |               |         |         | 178,719 | 
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|Property, plant and equipment, net                                                                                                                                                                                     |                                                                                                                                                                              |                                                                                                                            | 196,328 |               |         |               | 190,833 |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|Goodwill, distribution rights and other intangibles, net                                                                                                                                                               |                                                                                                                                                                              |                                                                                                                            | 94,799  |               |         |               | 92,892  |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|Other assets                                                                                                                                                                                                           |                                                                                                                                                                              |                                                                                                                            | 6,240   |               |         |               | 6,007   |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Total
assets                                                                                                                                                                                                           |                                                                                                                                                                              | $                                                                                                                          | 554,955 |               |         | $             | 468,451 |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Liabilities
          and Stockholders Equity                                                                                                                                                                        
|Current Liabilities:                                                                                                                                                                                                   |                                                                                                                                                                              |                                                                                                                            |         |               |         |               |         |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Accounts payable and accrued liabilities                                                                                                                                     |                                                                                                                            | $       | 132,790       |         |               | $       | 80,260  |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Accrued payroll and employee benefits                                                                                                                                        |                                                                                                                            |         | 19,415        |         |               |         | 24,759  |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Current portion of long-term debt                                                                                                                                            |                                                                                                                            |         | 11,643        |         |               |         | 15,043  |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|                                                                                                                                                                                                                       | Total
          current liabilities                                                                                                                                          |                                                                                                                            |         | 163,848       |         |               |         | 120,062 |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|Long-term debt, less current portion                                                                                                                                                                                   |                                                                                                                                                                              |                                                                                                                            | 161,371 |               |         |               | 121,214 |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|Deferred income taxes                                                                                                                                                                                                  |                                                                                                                                                                              |                                                                                                                            | 26,281  |               |         |               | 26,263  |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Total
          liabilities                                                                                                                                                                                            |                                                                                                                                                                              |                                                                                                                            | 351,500 |               |         |               | 267,539 |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Commitments and contingencies                                                                                                                                                                                          |                                                                                                                                                                              |                                                                                                                            |         |               |         |               |         |        
|                                                                                                                                                                                                                      
|Redeemable
          convertible preferred stock, $1 par value - 1,008,000 shares 
          authorized; no shares issued or outstanding in 2001; 1,008,000 shares
          issued 
          and outstanding in 2000 |                                                                                                                                                                              |                                                                                                                            |         |               |         |               | 100,540 |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Stockholders
          Equity:                                                                                                                                                                                        |                                                                                                                                                                              |                                                                                                                            |         |               |         |               |         |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Preferred
          stock, $1 par value - 8,992,000 shares authorized;
          no shares issued or outstanding in 2001 and
2000                                           
|                                                                                                                                                                                                                       | Common stock, $1 par value - 60,000,000 shares authorized;
          34,385,000 shares and 28,268,000 shares issued and outstanding
          in 2001 and 2000, respectively |                                                                                                                            |         | 34,385        |         |               |         | 28,268  |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Capital in excess of par                                                                                                                                                     |                                                                                                                            |         | 157,110       |         |               |         | 58,396  |        
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Notes receivable from stockholders                                                                                                                                           |                                                                                                                            |         | (2,304        | )       |               |         | (2,284  | )      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                      
|                                                                                                                                                                                                                       | Retained earnings                                                                                                                                                            |                                                                                                                            |         | 14,264        |         |               |         | 15,992  |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Total
          stockholders equity                                                                                                                                                                                   |                                                                                                                                                                              |                                                                                                                            | 203,455 |               |         |               | 100,372 |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              
|Total
          liabilities and stockholders equity                                                                                                                                                                   |                                                                                                                                                                              | $                                                                                                                          | 554,955 |               |         | $             | 468,451 |        
|                                                                                                                                                                                                                       |                                                                                                                                                                              |                                                                                                                            |         |               |         |              

See accompanying Notes to Consolidated Financial Statements.

2



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##### Table of Contents



DREYERS GRAND ICE CREAM, INC.




CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |         |     |   |         |         |     | 
|---------------------------------------------------- | ------------------------------------ | ------- | ------- | -------------------- | --- | ---------------------- | ------- | ------------- | --- | ------------- | ------- | ------- | --- | - | ------- | ------- | --- | 
|                                                     |                                      |         |         | Thirteen Weeks Ended |     | Twenty-six Weeks Ended
|                                                     |                                      |         |         |                      |     |                       
|                                                     |                                      |         |         | June 30, 2001        |     | June 24, 2000          |         | June 30, 2001 |     | June 24, 2000
|                                                     |                                      |         |         |                      |     |                        |         |               |     |              
|($ in thousands, except per share
          amounts) |                                      |         |         |                      |     |                        |         |               |     |               |         |         |     |   |         |        
|Revenues:                                            |                                      |         |         |                      |     |                        |         |               |     |               |         |         |     |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sales                                |         | $       | 384,833              |     |                        | $       | 323,820       |     |               | $       | 656,862 |     |   | $       | 564,239 |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other income                         |         |         | 930                  |     |                        |         | 1,801         |     |               |         | 1,169   |     |   |         | 3,129   |    
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|                                                     |                                      |         | 385,763 |                      |     |                        | 325,621 |               |     |               | 658,031 |         |     |   | 567,368 |        
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|Costs and expenses:                                  |                                      |         |         |                      |     |                        |         |               |     |               |         |         |     |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cost of goods sold                   |         |         | 293,952              |     |                        |         | 234,799       |     |               |         | 511,329 |     |   |         | 418,003 |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Selling, general and administrative  |         |         | 77,096               |     |                        |         | 67,627        |     |               |         | 136,132 |     |   |         | 119,205 |    
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest, net of amounts capitalized |         |         | 3,264                |     |                        |         | 2,975         |     |               |         | 6,278   |     |   |         | 5,633   |    
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|                                                     |                                      |         | 374,312 |                      |     |                        | 305,401 |               |     |               | 653,739 |         |     |   | 542,841 |        
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|Income before income tax provision                   |                                      |         | 11,451  |                      |     |                        | 20,220  |               |     |               | 4,292   |         |     |   | 24,527  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Income tax provision                                 |                                      |         | 4,410   |                      |     |                        | 7,704   |               |     |               | 1,683   |         |     |   | 9,345   |        
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|Net income                                           |                                      |         | 7,041   |                      |     |                        | 12,516  |               |     |               | 2,609   |         |     |   | 15,182  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Accretion of preferred stock to redemption value     |                                      |         | 106     |                      |     |                        | 106     |               |     |               | 212     |         |     |   | 212     |        
|                                                    
|                                                    
|                                                    
|                                                    
|Preferred stock dividends                            |                                      |         |         |                      |     |                        | 174     |               |     |               | 348     |         |     |   | 348     |        
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|Net income available to common stockholders          |                                      | $       | 6,935   |                      |     | $                      | 12,236  |               |     | $             | 2,049   |         |     | $ | 14,622  |        
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|Net income per common share:                         |                                      |         |         |                      |     |                        |         |               |     |               |         |         |     |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                      | Basic   |         | $                    | .24 |                        |         | $             | .44 |               |         | $       | .07 |   |         | $       | .52 | 
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|                                                     |                                      | Diluted |         | $                    | .20 |                        |         | $             | .35 |               |         | $       | .07 |   |         | $       | .44 | 
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        
|Dividends per common share                           |                                      | $       | .06     |                      |     | $                      | .03     |               |     | $             | .12     |         |     | $ | .06     |        
|                                                     |                                      |         |         |                      |     |                        |         |               |     |               |         |        

See accompanying Notes to Consolidated Financial Statements.

3



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##### Table of Contents



DREYERS GRAND ICE CREAM, INC.




CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)

|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        |        |   |   |         |         |  
|----------------------------- | -------------------------------------------------------------------------------------------------------------- | ------ | ------------ | ------ | ---------- | ------------- | ------ | ------------ | ------------ | -------- | -------- | ------ | - | - | ------ | ---- | -------- | - | ------ | ------ | - | - | ------- | ------- | -
|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   | Notes  |      | Retained |   |        |        |  
|                              |                                                                                                                |        | Common Stock |        |            |               |        |              | Receivable   |          | Earnings |        |   |   |       
|                              |                                                                                                                |        |              |        | Capital in |               | From   |              | (Accumulated |          |          |        |  
|(In thousands)                |                                                                                                                | Shares |              | Amount |            | Excess of Par |        | Stockholders |              | Deficit) |          | Total 
|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |       
|Balances at December 25, 1999 |                                                                                                                |        | 27,871       |        |            | $             | 27,871 |              |              | $        | 53,172   |        |   | $ | (2,501 | )    |          | $ | (4,848 | )      |   | $ | 73,694  |        
|                             
|                             
|                             
|                             
|                              | Net income                                                                                                     |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | 15,182 |   |   |         | 15,182  |  
|                             
|                             
|                             
|                             
|                              | Accretion
          of preferred stock to
          redemption value                                           |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | (212   | ) |   |         | (212    | )
|                             
|                             
|                             
|                             
|                              | Preferred stock dividends declared                                                                             |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | (348   | ) |   |         | (348    | )
|                             
|                             
|                             
|                             
|                              | Common stock dividends declared                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | (1,688 | ) |   |         | (1,688  | )
|                             
|                             
|                             
|                             
|                              | Issuance
          of common stock under
          employee stock plans, net                                   |        |              | 266    |            |               |        | 266          |              |          |          | 3,560  |   |   |        | (597 | )        |   |        |        |   |   |         | 3,229   |  
|                             
|                             
|                             
|                             
|                              | Repurchases
          and retirements of 
          common stock                                               |        |              |        |            |               |        |              |              |          |          | (3     | ) |   |        |      |          |   |        |        |   |   |         | (3      | )
|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |  
|Balances at June 24, 2000     |                                                                                                                |        | 28,137       |        |            | $             | 28,137 |              |              | $        | 56,729   |        |   | $ | (3,098 | )    |          | $ | 8,086  |        |   | $ | 89,854  |        
|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |  
|Balances at December 30, 2000 |                                                                                                                |        | 28,268       |        |            | $             | 28,268 |              |              | $        | 58,396   |        |   | $ | (2,284 | )    |          | $ | 15,992 |        |   | $ | 100,372 |        
|                             
|                             
|                             
|                             
|                              | Net income                                                                                                     |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | 2,609  |   |   |         | 2,609   |  
|                             
|                             
|                             
|                             
|                              | Accretion
          of preferred stock to
          redemption value                                           |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | (212   | ) |   |         | (212    | )
|                             
|                             
|                             
|                             
|                              | Preferred stock dividends declared                                                                             |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | (348   | ) |   |         | (348    | )
|                             
|                             
|                             
|                             
|                              | Common stock dividends declared                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |   |        | (3,777 | ) |   |         | (3,777  | )
|                             
|                             
|                             
|                             
|                              | Conversion
          of mandatorily
          redeemable convertible preferred
          stock to common stock |        |              | 5,800  |            |               |        | 5,800        |              |          |          | 94,952 |   |   |        |      |          |   |        |        |   |   |         | 100,752 |  
|                             
|                             
|                             
|                             
|                              | Issuance
          of common stock under
          employee stock plans, net                                   |        |              | 391    |            |               |        | 391          |              |          |          | 5,858  |   |   |        | (20  | )        |   |        |        |   |   |         | 6,229   |  
|                             
|                             
|                             
|                             
|                              | Repurchases
          and retirements of
          common stock                                                |        |              | (74    | )          |               |        | (74          | )            |          |          | (2,096 | ) |   |        |      |          |   |        |        |   |   |         | (2,170  | )
|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |  
|Balances at June 30, 2001     |                                                                                                                |        | 34,385       |        |            | $             | 34,385 |              |              | $        | 157,110  |        |   | $ | (2,304 | )    |          | $ | 14,264 |        |   | $ | 203,455 |        
|                              |                                                                                                                |        |              |        |            |               |        |              |              |          |          |        |   |   |        |      |          |  

See accompanying Notes to Consolidated Financial Statements.

4



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##### Table of Contents









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

|                                                                     |                                                                                 |                                                             |                                          |               |                        |         |         |         |        |         |  
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------- | ---------------------------------------- | ------------- | ---------------------- | ------- | ------- | ------- | ------ | ------- | -
|                                                                     |                                                                                 |                                                             |                                          |               | Twenty-six Weeks Ended
|                                                                     |                                                                                 |                                                             |                                          |               |                       
|(In thousands)                                                       |                                                                                 | June 30, 2001                                               |                                          | June 24, 2000
|                                                                     |                                                                                 |                                                             |                                          |              
|Cash flows from operating activities:                                |                                                                                 |                                                             |                                          |               |                        |         |         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Net income                                                                      |                                                             | $                                        | 2,609         |                        |         | $       | 15,182  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Adjustments to reconcile net income to cash from operations:                    |                                                             |                                          |               |                        |         |         |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 | Depreciation and amortization                               |                                          |               | 17,953                 |         |         |         | 18,437 |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 | Deferred income taxes                                       |                                          |               | 310                    |         |         |         | 3,091  |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 | Changes in assets and liabilities, net of amounts acquired: |                                          |               |                        |         |         |         |        |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Trade accounts receivable                |               |                        | (57,619 | )       |         |        | (60,908 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Other accounts receivable                |               |                        | (2,268  | )       |         |        | (15,253 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Inventories                              |               |                        | (16,065 | )       |         |        | (26,695 | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Prepaid expenses and other               |               |                        | (679    | )       |         |        | (777    | )
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Accounts payable and accrued liabilities |               |                        | 51,315  |         |         |        | 67,745  |  
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Accrued payroll and employee benefits    |               |                        | (5,344  | )       |         |        | (10,567 | )
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|                                                                     |                                                                                 |                                                             | (9,788                                   | )             |                        |         | (9,745  | )      
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|Cash flows from investing activities:                                |                                                                                 |                                                             |                                          |               |                        |         |         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Acquisition of property, plant and equipment                                    |                                                             |                                          | (21,485       | )                      |         |         | (14,280 | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Retirement of property, plant and equipment                                     |                                                             |                                          | 703           |                        |         |         | 1,386   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Purchase of common stock of Cherokee Cream Company, Inc., net of cash acquired  |                                                             |                                          |               |                        |         |         | (7,651  | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | (Increase) decrease in goodwill, distribution rights and other intangibles, net |                                                             |                                          | (4,270        | )                      |         |         | 781     |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Increase in other assets                                                        |                                                             |                                          | (536          | )                      |         |         | (2,079  | )     
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|                                                                     |                                                                                 |                                                             | (25,588                                  | )             |                        |         | (21,843 | )      
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|Cash flows from financing activities:                                |                                                                                 |                                                             |                                          |               |                        |         |         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Proceeds from long-term debt, net                                               |                                                             |                                          | 47,300        |                        |         |         | 51,252  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Repayments of long-term debt                                                    |                                                             |                                          | (10,543       | )                      |         |         | (18,721 | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Issuance of common stock under employee stock plans, net                        |                                                             |                                          | 6,229         |                        |         |         | 3,229   |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Repurchases and retirements of common stock                                     |                                                             |                                          | (2,170        | )                      |         |         | (3      | )     
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Cash dividends paid                                                             |                                                             |                                          | (2,910        | )                      |         |         | (2,022  | )     
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|                                                                     |                                                                                 |                                                             | 37,906                                   |               |                        |         | 33,735  |        
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|Increase in cash and cash equivalents                                |                                                                                 |                                                             | 2,530                                    |               |                        |         | 2,147   |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Cash and cash equivalents, beginning of period                       |                                                                                 |                                                             | 2,721                                    |               |                        |         | 3,158   |        
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|Cash and cash equivalents, end of period                             |                                                                                 | $                                                           | 5,251                                    |               |                        | $       | 5,305   |        
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|Supplemental cash flow information:                                  |                                                                                 |                                                             |                                          |               |                        |         |         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Cash paid (refunded) during the period for:                                     |                                                             |                                          |               |                        |         |         |         |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     |                                                                                 |                                                             | Interest (net of amounts capitalized)    |               | $                      | 5,565   |         |         | $      | 5,855   |  
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|                                                                     |                                                                                 |                                                             | Income taxes (net of refunds)            |               | $                      | 46      |         |         | $      | 1,021   |  
|                                                                     |                                                                                 |                                                             |                                          |               |                        |        
|Supplemental schedule of noncash investing and financing activities: |                                                                                 |                                                             |                                          |               |                        |         |         |        
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Conversion of redeemable convertible preferred stock to common stock            |                                                             | $                                        | 100,752       |                        |         |         |         |       
|                                                                     |                                                                                 |                                                             |                                          |               |                        |         |        
|                                                                     | Fair value of assets acquired                                                   |                                                             |                                          |               |                        |         | $       | 19,052  |       
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|                                                                     | Cash paid for common stock                                                      |                                                             |                                          |               |                        |         |         | (7,855  | )     
|                                                                     |                                                                                 |                                                             |                                          |               |                        |         |        
|                                                                     | Liabilities assumed                                                             |                                                             |                                          |               |                        |         | $       | 11,197  |       
|                                                                     |                                                                                 |                                                             |                                          |               |                        |         |        

See accompanying Notes to Consolidated Financial Statements.

5



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##### Table of Contents



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 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 and twenty-six
weeks ended June 30, 2001 and June 24, 2000 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 disclosure normally included in financial statements
prepared in conformity with generally accepted accounting principles 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 30, 2000, appearing in the Companys 2000 Annual Report to
Stockholders. Certain reclassifications have been made to prior years
financial statements to conform to the current year presentation.

NOTE 2  Inventories

Inventories are stated at the lower of cost (determined by the first-in,
first-out method) or market. Inventories at June 30, 2001 and December 30,
2000 consisted of the following:

|               |  |               |        |               |  |   |        | 
|-------------- |  | ------------- | ------ | ------------- |  | - | ------ | 
|(In thousands) |  | June 30, 2001 |        | Dec. 30, 2000
|               |  |               |        |              
|Raw materials  |  | $             | 9,809  |               |  | $ | 8,368  | 
|              
|              
|              
|              
|Finished goods |  |               | 75,057 |               |  |   | 60,433 | 
|               |  |               |        |               |  |  
|               |  | $             | 84,866 |               |  | $ | 68,801 | 
|               |  |               |        |               |  |  

NOTE 3  Goodwill, distribution rights and other intangibles, net

On October 25, 2000, the Company announced that it signed a new, long-term
distribution agreement with Ben & Jerrys Homemade, Inc. (Ben & Jerrys), a
subsidiary of Unilever United States, Inc. Under this agreement, the Company
became the distributor of Ben & Jerrys products for the grocery channel in all
of its company-operated markets across the country as of the
effective date of March 5, 2001. The Company and Ben &
Jerrys are expanding the Companys role as a Ben & Jerrys distributor in
other non-grocery channels, such as convenience stores. The agreement has a term of five years, and automatically renews for
two additional five-year terms unless terminated by either party at the end of
each five-year term.

6



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##### Table of Contents



NOTE 4  Redeemable Convertible Preferred Stock

The Companys Series A redeemable convertible preferred stock, redemption value
$100,752,000, was converted by the holder into 5,800,000 shares of common stock
in June 2001.

NOTE 5  Net Income Per Common Share

The denominator for basic net income per share includes the number of
weighted-average common shares outstanding. The denominator for diluted net
income per share includes the number of weighted-average shares outstanding
plus the effect of potentially dilutive securities which include stock options
and redeemable convertible preferred stock.

|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |     |  |   |        |     |  | 
|----------------------------------------------------------------------- | ------- | ------------- | ------ | -------------------- |  | ---------------------- | ------ | ------------- |  | - | ------ | --- |  | - | ------ | --- |  | 
|                                                                        |         |               |        | Thirteen Weeks Ended |  | Twenty-six Weeks Ended
|                                                                        |         |               |        |                      |  |                       
|(In thousands, except per share amounts)                                |         | June 30, 2001 |        | June 24, 2000        |  | June 30, 2001          |        | June 24, 2000
|                                                                        |         |               |        |                      |  |                        |        |              
|Net income
          available to common
          stockholders-basic   |         | $             | 6,935  |                      |  | $                      | 12,236 |               |  | $ | 2,049  |     |  | $ | 14,622 |    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Add: preferred dividends and accretion                                  |         |               | 106    |                      |  |                        | 280    |               |  |   | 560    |     |  |   | 560    |    
|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |    
|Net income
          available to common
          stockholders-diluted |         | $             | 7,041  |                      |  | $                      | 12,516 |               |  | $ | 2,609  |     |  | $ | 15,182 |    
|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |    
|Weighted-average shares-basic                                           |         |               | 29,275 |                      |  |                        | 28,119 |               |  |   | 28,822 |     |  |   | 27,949 |    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Dilutive effect of options                                              |         |               | 1,733  |                      |  |                        | 1,535  |               |  |   | 1,923  |     |  |   | 1,106  |    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Dilutive effect of preferred stock                                      |         |               | 5,099  |                      |  |                        | 5,800  |               |  |   | 5,449  |     |  |   | 5,800  |    
|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |    
|Weighted-average shares-diluted                                         |         |               | 36,107 |                      |  |                        | 35,454 |               |  |   | 36,194 |     |  |   | 34,855 |    
|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |    
|Net income per common share:                                            |         |               |        |                      |  |                        |        |               |  |   |        |     |  |   |        |    
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                        | Basic   |               | $      | .24                  |  |                        | $      | .44           |  |   | $      | .07 |  |   | $      | .52 | 
|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |    
|                                                                        | Diluted |               | $      | .20                  |  |                        | $      | .35           |  |   | $      | .07 |  |   | $      | .44 | 
|                                                                        |         |               |        |                      |  |                        |        |               |  |   |        |    

Anti-dilutive securities

Potentially dilutive securities are excluded from the calculations of
diluted net income per common share when their inclusion would have an
anti-dilutive effect. These securities, stated in absolute equivalent shares
of common stock, consisted of 774,000 and 71,000 stock options during the
thirteen-weeks ended June 30, 2001 and June 24, 2000, respectively, and 753,000
and 689,000 stock options during the twenty-six weeks ended June 30, 2001 and
June 24, 2000, respectively.

Dividends per common share

On February 14, 2001, the Board of Directors, subject to compliance with
applicable law, contractual provisions, and future review of the condition of
the Company, declared its intention to increase the regular quarterly dividend
from $.03 per common share to $.06 per common share starting with the first
quarter of 2001.

NOTE 6  New Accounting Pronouncements

Accounting for Certain Sales Incentives and Vendor Consideration

In July 2000, the Emerging Issues Task Force of the
Financial Accounting Standards Board (EITF), issued EITF 00-14,
Accounting for Certain Sales Incentives (EITF 00-14). This pronouncement

7



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##### Table of Contents



requires that discounts and other sales incentives be recorded as a reduction
of revenue at the date of sale. At the present
time, the Company classifies these incentives (including variable trade
promotion expenses and coupon redemption costs) as a selling, general and
administrative expense.

In April 2001, the
EITF issued EITF
00-25, Vendor Income Statement Characterization of Consideration from a Vendor
to a Retailer (EITF 00-25). This pronouncement requires that fees paid to
retailers to obtain space for their products on the retailers store shelves
(slotting fees) and amounts paid to retailers to advertise a companys
products be recorded as a reduction of revenue. At the present time, the
Company classifies these costs (including fixed trade promotion expenses and
slotting fees) as a selling, general and administrative expense.

The expenses defined in EITF 00-14 and EITF 00-25 totaled approximately
$47,700,000 and $37,900,000, for the thirteen-weeks ended June 30, 2001 and
June 24, 2000, respectively. For the twenty-six weeks ended June 30, 2001 and
June 24, 2000, these expenses totaled approximately $78,900,000 and
$64,300,000, respectively. The reclassification of these expenses will result
in a decrease in total sales, company brand sales and gross profit, along with
a corresponding decrease in selling, general and administrative expenses and
will, therefore, have no effect on net income (loss) as previously reported.
The Company will implement EITF 00-14 and EITF 00-25 in the
first quarter of 2002. Reclassification of prior period financial statements
is required.

Accounting for Business Combinations

In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141).
This statement requires that all business combinations initiated
after June 30, 2001 be accounted for under
the purchase method of accounting.
Use of the pooling-of-interests method is no longer permitted.

In July 2001, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142). This statement continues to require
recognition of goodwill as an asset, but amortization of goodwill as currently
required by APB Opinion No. 17, Intangible Assets, is no longer permitted.
In lieu of amortization, goodwill must be tested for impairment using a
fair-value-based approach. The Company is currently assessing the impact
that this new pronouncement will have on the recorded amounts of goodwill and distribution
rights.
Amortization of goodwill and distribution rights totaled approximately $980,000
and $1,100,000, for the thirteen-weeks ended June 30, 2001 and June 24, 2000,
respectively, and approximately $2,100,000 and $1,900,000, for the twenty-six
weeks ended June 30, 2001 and June 24, 2000, respectively.
The Company will implement SFAS No. 141 and SFAS No. 142 in the first
quarter of 2002.

8



---



##### Table of Contents






|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 forward-looking statements may appear in documents filed
with the Securities and Exchange Commission, in press releases, and in reports
to stockholders. The Private Securities Litigation Reform Act of 1995 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 identified that forward-looking statements are contained in this
Managements Discussion and Analysis of Consolidated Financial Condition and
Results of Operations. The Company undertakes no obligation to publicly revise
these forward-looking statements to reflect subsequent events or circumstances.

Also, in connection with this safe harbor provision, the Company
identifies important 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 in this and other filings with the
Securities and Exchange Commission.

This Managements Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with Managements
Discussion and Analysis for the year ended December 30, 2000, appearing in the
Companys 2000 Annual Report to Stockholders.

RESULTS OF OPERATIONS

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

|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |       |  
|------------------------------------------------ | ------------------------------------ |  | -------------------- | ----- | ----------------------- |  | -------- | ----- | -------- |  | -------- | ----- | -------- |  | ----- | ----- | - |  | ---------------- | ----- | ---------- |  | ----- | ----- | -
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  | Period-to-Period
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  | Variance        
|                                                 |                                      |  | Percentage of Sales  |       | Favorable (Unfavorable)
|                                                 |                                      |  |                      |       |                        
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  | Thirteen         |       | Twenty-six
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  | Weeks            |       | Weeks     
|                                                 |                                      |  | Thirteen Weeks Ended |       | Twenty-six Weeks Ended  |  | Ended    |       | Ended   
|                                                 |                                      |  |                      |       |                         |  | 2001     |       | 2001    
|                                                 |                                      |  | June 30,             |       | June 24,                |  | June 30, |       | June 24, |  | Compared |       | Compared
|                                                 |                                      |  | 2001                 |       | 2000                    |  | 2001     |       | 2000     |  | To 2000  |       | To 2000 
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |         
|Revenues:                                        |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Sales                                |  |                      | 100.0 | %                       |  |          | 100.0 | %        |  |          | 100.0 | %        |  |       | 100.0 | % |  |                  | 18.8  | %          |  |       | 16.4  | %
|                                                
|                                                
|                                                
|                                                
|                                                 | Other income                         |  |                      | 0.2   |                         |  |          | 0.6   |          |  |          | 0.2   |          |  |       | 0.6   |   |  |                  | (48.4 | )          |  |       | (62.6 | )
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|                                                 |                                      |  | 100.2                |       |                         |  | 100.6    |       |          |  | 100.2    |       |          |  | 100.6 |       |   |  | 18.5             |       |            |  | 16.0  |      
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|Costs and expenses:                              |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 | Cost of goods sold                   |  |                      | 76.4  |                         |  |          | 72.6  |          |  |          | 77.8  |          |  |       | 74.1  |   |  |                  | (25.2 | )          |  |       | (22.3 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Selling, general and administrative  |  |                      | 20.0  |                         |  |          | 20.9  |          |  |          | 20.7  |          |  |       | 21.1  |   |  |                  | (14.0 | )          |  |       | (14.2 | )
|                                                
|                                                
|                                                
|                                                
|                                                 | Interest, net of amounts capitalized |  |                      | 0.9   |                         |  |          | 0.9   |          |  |          | 1.0   |          |  |       | 1.0   |   |  |                  | (9.7  | )          |  |       | (11.5 | )
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                      |  | 97.3                 |       |                         |  | 94.4     |       |          |  | 99.5     |       |          |  | 96.2  |       |   |  | (22.6            | )     |            |  | (20.4 | )    
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|Income before income tax provision               |                                      |  | 2.9                  |       |                         |  | 6.2      |       |          |  | 0.7      |       |          |  | 4.4   |       |   |  | (43.4            | )     |            |  | (83.0 | )    
|                                                
|                                                
|                                                
|                                                
|Income tax provision                             |                                      |  | 1.1                  |       |                         |  | 2.4      |       |          |  | 0.3      |       |          |  | 1.7   |       |   |  | 42.8             |       |            |  | (82.0 | )    
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|Net income                                       |                                      |  | 1.8                  |       |                         |  | 3.8      |       |          |  | 0.4      |       |          |  | 2.7   |       |   |  | (43.7            | )     |            |  | (82.8 | )    
|                                                
|                                                
|                                                
|                                                
|Accretion of preferred stock to redemption value |                                      |  |                     |       |                         |  |         |       |          |  |         |       |          |  |      |       |   |  |                 |       |            |  |      |      
|                                                
|                                                
|                                                
|                                                
|Preferred stock dividends                        |                                      |  |                     |       |                         |  | 0.1      |       |          |  | 0.1      |       |          |  | 0.1   |       |   |  |                 |       |            |  |      |      
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      
|Net income available to common stockholders      |                                      |  | 1.8                  | %     |                         |  | 3.7      | %     |          |  | 0.3      | %     |          |  | 2.6   | %     |   |  | (43.3            | )     |            |  | (86.0 | )    
|                                                 |                                      |  |                      |       |                         |  |          |       |          |  |          |       |          |  |       |       |   |  |                  |       |            |  |       |      

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Thirteen Weeks ended June 30, 2001 Compared with Thirteen Weeks ended June 24,
2000

Consolidated sales for the second quarter of 2001 increased $61,013,000, or 19
percent, to $384,833,000 from $323,820,000 for the same quarter last year.

Sales of the Companys branded products, including licensed and joint
venture products (company brands), increased $8,885,000, or four percent, to
$239,156,000 from $230,271,000 for the same quarter last year. Company brands
represented 62 percent of consolidated sales in 2001 compared with 71 percent
in the same quarter last year. Gallon sales of the Companys branded products,
including novelties, increased approximately 600,000 gallons, or two percent,
to approximately 30,200,000 gallons. The products that led this increase were
Dreyers and Edys Grand Ice Cream, Whole Fruit Bars, and the better for you
portfolio. Sales of the Companys superpremium portfolio declined slightly
compared to the same quarter last year. The average price of the Companys
branded products increased two percent before the effect of increased trade
promotion expenses, which are presently classified as selling, general and
administrative expenses.

Sales of products distributed for other manufacturers (partner brands),
including Ben & Jerrys Homemade, Inc. (Ben & Jerrys), increased $52,128,000,
or 56 percent, to $145,677,000 from $93,549,000 for the same quarter last year.
This increase was driven largely by the acquisition of independent
distributors in 2000 and by increased sales of Ben & Jerrys superpremium
products. Sales of partner brands represented 38 percent of consolidated sales
compared with 29 percent in the same quarter last year. Unit sales of partner
brands increased by 49 percent over the same quarter last year.
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 markets across the country.
Average wholesale prices for partner brands increased approximately five
percent.

Cost of goods sold increased $59,153,000, or 25 percent, over the same
quarter last year. The Companys gross profit increased by $1,860,000 to
$90,881,000, representing a 24 percent gross margin for the second quarter of
2001 compared with a 27 percent gross margin for the second quarter of 2000.
The cost of cream, the Companys primary ingredient, and the cost of certain
other ingredients, including vanilla and other flavorings, rose sharply during
the quarter. During the second quarter of 2001, the increase in dairy raw
material costs unfavorably impacted gross profit by approximately $10,000,000
as compared to the second quarter of 2000. Gross margin was also unfavorably
affected by integration and other costs associated with recent acquisitions,
higher energy costs and increased distribution expenses incurred in the rollout
of additional distribution territories for Ben & Jerrys products.

Other income decreased $871,000 primarily due to a decrease in earnings
from joint ventures accounted for under the equity method.

Selling, general and administrative expenses increased $9,469,000, or 14
percent, to $77,096,000 from $67,627,000. The increase primarily reflects
increased trade promotion expenses for both new and existing products and
increased administrative expenses. Selling, general and administrative
expenses represented 20 percent of consolidated sales in the second quarter of
2001 and 21 percent in 2000.

Interest expense increased $289,000, or 10 percent, to $3,264,000,
primarily attributable to higher average borrowings required for funding
acquisitions, slightly offset by lower interest rates.

The effective tax rate was 38.5 percent for the second quarter of 2001 and
38.1 percent for the same quarter last year.

Twenty-six Weeks ended June 30, 2001 Compared with Twenty-six Weeks ended June
24, 2000

Consolidated sales for first twenty-six weeks of 2001 increased $92,623,000, or
16 percent, to $656,862,000 from $564,239,000 for the same period last year.

Sales of the Companys branded products, including licensed and joint
venture products (company brands), increased $14,582,000, or four percent, to
$417,188,000 from $402,606,000 for the same period last year. Company brands
represented 64 percent of consolidated sales in 2001 compared with 71 percent
in the same quarter last year. Gallon sales of the Companys branded products,
including novelties, increased approximately 1,000,000 gallons, or two percent,
to approximately 53,100,000 gallons. The products that led this increase were
Dreyers and Edys Grand Ice Cream, Whole Fruit Bars, and the better for you
portfolio. Sales of the Companys superpremium portfolio declined slightly
compared to the same period last year. The average price of the Companys
branded products increased two

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percent before the effect of increased trade
promotion expenses, which are presently classified as selling, general and
administrative expenses.

Sales of products distributed for other manufacturers (partner brands),
including Ben & Jerrys Homemade, Inc. (Ben & Jerrys), increased $78,041,000,
or 48 percent, to $239,674,000 from $161,633,000 for the same period last year.
This increase was driven largely by the acquisition of independent
distributors in 2000 and by increased sales of Ben & Jerrys superpremium
products. Sales of partner brands represented 36 percent of consolidated sales
compared with 29 percent in the same period last year. Unit sales of partner
brands increased by 39 percent over the same period last year. The Company
began distributing Ben & Jerrys products to a larger distribution territory
during March 2001 and distributes Ben & Jerrys products for the grocery
channel in all of the Companys company-owned markets across the country.
Average wholesale prices for partner brands increased approximately seven
percent.

Cost of goods sold increased $93,326,000, or 22 percent, over the same
period last year. The Companys gross profit decreased by $703,000 to
$145,533,000, representing a 22 percent gross margin for the first twenty-six
weeks of 2001 compared with a 26 percent gross margin for the same period of
2000. The cost of cream, the Companys primary ingredient, rose and remained
high. During the first twenty-six weeks of 2001, the increase in dairy raw
material costs unfavorably impacted gross profit by approximately $15,000,000
as compared to the same period of 2000. Gross margin was also unfavorably
affected by integration and other costs associated with recent acquisitions,
higher energy costs and increased distribution expenses incurred in the rollout
of additional distribution territories for Ben & Jerrys products.

Other income decreased $1,960,000 primarily due to a decrease in earnings
from joint ventures accounted for under the equity method.

Selling, general and administrative expenses increased $16,927,000, or 14
percent, to $136,132,000 from $119,205,000. The increase primarily reflects
increased trade promotion expenses for both new and existing products and, to a
lesser extent, increased administrative expenses. Selling, general and
administrative expenses represented 21 percent of consolidated sales in 2001
and 2000.

Interest expense increased $645,000, or 11 percent, to $6,278,000,
primarily attributable to higher average borrowings required for funding
acquisitions, slightly offset by lower interest rates.

The effective tax rate was 39.2 percent and 38.1 percent for the
twenty-six weeks ended 2001 and 2000, respectively.

FINANCIAL CONDITION-LIQUIDITY AND CAPITAL RESOURCES

Working capital at June 30, 2001 increased $35,083,000 from year-end 2000. The
Companys cash flows used in operating activities increased slightly to
$9,788,000 from $9,745,000 for the same period last year. These increases were
primarily comprised of increases in accounts receivable and inventories,
partially offset by increases in accounts payable and accrued liabilities, and
resulted from both seasonality and the additional Ben & Jerrys business.

Cash flows used in investing activities totaled $25,588,000 and
$21,843,000, in 2001 and 2000, respectively. Cash flows used in investing
activities during the first twenty-six weeks of 2001 consisted primarily of
purchases of $21,485,000 in property, plant and equipment. Cash flows used in
investing activities during the first twenty six-weeks of 2000 consisted
primarily of purchases of $14,280,000 of property, plant and equipment and the
$7,651,000 payment for the purchase of the remaining 84 percent of the
outstanding common stock of Cherokee Cream Company, Inc.

Cash flows from financing activities totaled $37,906,000 and $33,735,000,
in 2001 and 2000, respectively. Cash flows from financing activities for the
first twenty-six weeks of 2001 primarily consisted of a net increase of
$47,300,000 in the Companys revolving line of credit, partially offset by
repayments of debt totaling $10,543,000. Cash flows from financing activities
for the first twenty-six weeks of 2000 primarily consisted of a net increase of
$51,252,000 in the revolving line of credit, partially offset by repayments of
debt totaling $18,721,000.

The Companys Series A redeemable convertible preferred stock, redemption
value $100,752,000, was converted by the holder into 5,800,000 shares of common
stock in June 2001.

On February 14, 2001, the Board of Directors, subject to compliance with
applicable law, contractual provisions, and future review of the condition of
the Company, declared its intention to increase the regular quarterly dividend
from $.03 per common share to $.06 per common share starting with the first
quarter of 2001.

At June 30, 2001, the Company had $5,251,000 in cash and cash equivalents,
and an unused credit line of $107,200,000. 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.

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New Accounting Pronouncements

Accounting for Certain Sales Incentives and Vendor Consideration

In July 2000, the Emerging Issues Task Force of the
Financial Accounting Standards Board (EITF), issued EITF 00-14,
Accounting for Certain Sales Incentives (EITF 00-14). This pronouncement
requires that discounts and other sales incentives be recorded as a reduction
of revenue at the date of sale. At the present time, the Company classifies
these incentives (including variable trade promotion expenses and coupon
redemption costs) as a selling, general and administrative expense.In April 2001,
the EITF issued EITF
00-25, Vendor Income Statement Characterization of Consideration from a Vendor
to a Retailer (EITF 00-25). This pronouncement requires that fees paid to
retailers to obtain space for their products on the retailers store shelves
(slotting fees) and amounts paid to retailers to advertise a companys
products be recorded as a reduction of revenue. At the present time, the
Company classifies these costs (including fixed trade promotion expenses and
slotting fees) as a selling, general and administrative expense.The expenses defined in EITF 00-14 and EITF 00-25 totaled approximately
$47,700,000 and $37,900,000, for the thirteen-weeks ended June 30, 2001 and
June 24, 2000, respectively. For the twenty-six weeks ended June 30, 2001 and
June 24, 2000, these expenses totaled approximately $78,900,000 and
$64,300,000, respectively. The reclassification of these expenses will result
in a decrease in total sales, company brand sales and gross profit, along with
a corresponding decrease in selling, general and administrative expenses and
will, therefore, have no effect on net income (loss) as previously reported.
The Company will implement EITF 00-14 and EITF 00-25 in the
first quarter of 2002. Reclassification of prior period financial statements
is required.Accounting for Business CombinationsIn July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141).
This statement requires that all business combinations initiated
after June 30, 2001 be accounted for under
the purchase method of accounting.
Use of the pooling-of-interests method is no longer permitted.In July 2001, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142). This statement continues to require
recognition of goodwill as an asset, but amortization of goodwill as currently
required by APB Opinion No. 17, Intangible Assets, is no longer permitted.
In lieu of amortization, goodwill must be tested for impairment using a
fair-value-based approach. The Company is currently assessing the
impact that
this new pronouncement will have on the recorded amounts of goodwill and distribution
rights.
Amortization of goodwill and distribution rights totaled approximately $980,000
and $1,100,000, for the thirteen-weeks ended June 30, 2001 and June 24, 2000,
respectively, and approximately $2,100,000 and $1,900,000, for the twenty-six
weeks ended June 30, 2001 and June 24, 2000, respectively. The Company will implement SFAS No. 141 and SFAS No. 142 in the first
quarter of 2002.



ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.Since December 30, 2000, there have been no material changes in the Companys
market risk exposure.12Table of Contents
PART II: OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS.An Annual Meeting of Stockholders was held in Oakland, California on May 9,
2001. A total of 25,624,908 shares (89.7 percent) of the outstanding common
shares and 1,007,522 shares (100.0 percent) of the outstanding Series A
convertible preferred shares (convertible into 5,800,000 common shares) were
represented at the meeting whether in person or by proxy. The following
matters were voted upon by the stockholders:(a)
        
        Election of three directors to Class I of the Board of DirectorsThe following persons, who were the only nominees, were re-elected as directors
of Class I of the Board of Directors until the 2004 Annual Meeting of
Stockholders or until their respective successors are elected and qualified,
and received the following number of votes:

|                |  |     |            |          |  |  |         | 
|--------------- |  | --- | ---------- | -------- |  |  | ------- | 
|Nominee         |  | For |            | Withheld
|                |  |     |            |         
|Jan L. Booth    |  |     | 31,140,240 |          |  |  | 284,668 | 
|               
|               
|               
|               
|John W. Larson  |  |     | 31,139,910 |          |  |  | 284,998 | 
|               
|               
|               
|               
|Jack O. Peiffer |  |     | 31,137,498 |          |  |  | 287,410 | 



|(b) |  | Approving the amendment to the Companys Stock Option Plan (1993) to
increase the number of shares reserved for issuance thereunder by 848,425
shares on the date of each annual meeting of stockholders, beginning in
2001 and ending with the 2005 annual meeting, for a total increase over
the five-year period of 4,242,125 shares:
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |       |            | 
|---------------- |  | ----- | ---------- | 
|                 |  | Votes
|                 |  |      
|For              |  |       | 19,450,370 | 
|                
|                
|                
|                
|Against          |  |       | 8,743,409  | 
|                
|                
|                
|                
|Abstain          |  |       | 21,103     | 
|                
|                
|                
|                
|Broker non-votes |  |       | 3,210,026  | 

and



|(c) |  | Approving the appointment of PricewaterhouseCoopers LLP as independent
public accountants for the fiscal year 2001 and thereafter until its
successor is appointed:
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                 |  |       |            | 
|---------------- |  | ----- | ---------- | 
|                 |  | Votes
|                 |  |      
|For              |  |       | 31,412,674 | 
|                
|                
|                
|                
|Against          |  |       | 4,539      | 
|                
|                
|                
|                
|Abstain          |  |       | 7,689      | 
|                
|                
|                
|                
|Broker non-votes |  |       | 6          | 




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



|(a) |  | The following exhibits are filed herewith:
|--- |  | ------------------------------------------

None.



|(b) |  | A Report on Form 8-K announcing that the Companys earnings for the
second quarter of 2001 and for fiscal year 2001 would be below
expectations was filed on April 2, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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: August 14, 2001 | By:                                    | /s/ Timothy F. Kahn                                                                                                                    
|                       |                                        |                                                                                                                                        
|                       |                                        | Timothy F. Kahn 
        Vice President  Finance and Administration 
        and Chief Financial Officer (Principal Financial Officer)

14