##### 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 September 29, 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
|                           |  | November 11, 2001 
|                           |  |                   
|Common stock, $1 par value |  |                    | 34,469,000 | 





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TABLE OF CONTENTS



|                              |                                                                                                             |  |  |  |  |  |  | 
|----------------------------- | ----------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | ITEM 1. 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 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                                  
|SIGNATURE                    
|INDEX TO EXHIBITS            
|EXHIBIT 10.1                 



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##### Table of Contents






PART I: FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS.

DREYERS GRAND ICE CREAM, INC.

CONSOLIDATED BALANCE SHEET

|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |        |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------- | -------------- | ------- | ------------- | ------- | ------ | ------- | 
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         | Sept. 29, 2001 |         | Dec. 30, 2000
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |              
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         | (Unaudited)    |         |               |         |       
|($ in thousands, except per share amounts)                                                                                                                                  
|                                                                                                                                                                            
|                                                                                                                                                                            
|Assets                                                                                                                                                                       |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Current Assets:                                                                                                                                                              |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|                                                                                                                                                                             |                                                                                                                                                          | Cash and cash equivalents                                                                              |         | $              | 2,529   |               |         | $      | 2,721   | 
|                                                                                                                                                                             |                                                                                                                                                          | Trade accounts receivable, net of allowance for doubtful accounts of
$1,278 in 2001 and $2,611 in 2000 |         |                | 129,551 |               |         |        | 77,310  | 
|                                                                                                                                                                             |                                                                                                                                                          | Other accounts receivable                                                                              |         |                | 19,659  |               |         |        | 17,702  | 
|                                                                                                                                                                             |                                                                                                                                                          | Inventories                                                                                            |         |                | 81,489  |               |         |        | 68,801  | 
|                                                                                                                                                                             |                                                                                                                                                          | Deferred income taxes                                                                                  |         |                | 3,614   |               |         |        | 4,584   | 
|                                                                                                                                                                             |                                                                                                                                                          | Prepaid expenses and other                                                                             |         |                | 6,731   |               |         |        | 6,950   | 
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|                                                                                                                                                                             |                                                                                                                                                          | Total current assets                                                                                   |         |                | 243,573 |               |         |        | 178,068 | 
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Property, plant and equipment, net                                                                                                                                           |                                                                                                                                                          |                                                                                                        | 195,387 |                |         |               | 190,833 |       
|Goodwill, distribution rights and other intangibles, net                                                                                                                     |                                                                                                                                                          |                                                                                                        | 94,903  |                |         |               | 92,892  |       
|Other assets                                                                                                                                                                 |                                                                                                                                                          |                                                                                                        | 5,842   |                |         |               | 6,658   |       
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Total assets                                                                                                                                                                 |                                                                                                                                                          | $                                                                                                      | 539,705 |                |         | $             | 468,451 |       
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |        |        
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |        |        
|Liabilities and Stockholders Equity                                                                                                                                         |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Current Liabilities:                                                                                                                                                         |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|                                                                                                                                                                             | Accounts payable and accrued liabilities                                                                                                                 |                                                                                                        | $       | 123,832        |         |               | $       | 80,260 |        
|                                                                                                                                                                             | Accrued payroll and employee benefits                                                                                                                    |                                                                                                        |         | 24,335         |         |               |         | 24,759 |        
|                                                                                                                                                                             | Current portion of long-term debt                                                                                                                        |                                                                                                        |         |                |         |               |         | 15,043 |        
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|                                                                                                                                                                             |                                                                                                                                                          | Total current liabilities                                                                              |         |                | 148,167 |               |         |        | 120,062 | 
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Long-term debt, less current portion                                                                                                                                         |                                                                                                                                                          |                                                                                                        | 156,771 |                |         |               | 121,214 |       
|Deferred income taxes                                                                                                                                                        |                                                                                                                                                          |                                                                                                        | 26,322  |                |         |               | 26,263  |       
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Total liabilities                                                                                                                                                            |                                                                                                                                                          |                                                                                                        | 331,260 |                |         |               | 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;
34,466,000 shares and 28,268,000 shares issued and outstanding
in 2001 and 2000, respectively |                                                                                                        |         | 34,466         |         |               |         | 28,268 |        
|                                                                                                                                                                             | Capital in excess of par                                                                                                                                 |                                                                                                        |         | 158,838        |         |               |         | 58,396 |        
|                                                                                                                                                                             | Notes receivable from stockholders                                                                                                                       |                                                                                                        |         | (3,103         | )       |               |         | (2,284 | )      
|                                                                                                                                                                             | Retained earnings                                                                                                                                        |                                                                                                        |         | 18,244         |         |               |         | 15,992 |        
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Total stockholders equity                                                                                                                                                   |                                                                                                                                                          |                                                                                                        | 208,445 |                |         |               | 100,372 |       
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       
|Total liabilities and stockholders equity                                                                                                                                   |                                                                                                                                                          | $                                                                                                      | 539,705 |                |         | $             | 468,451 |       
|                                                                                                                                                                             |                                                                                                                                                          |                                                                                                        |         |                |         |               |         |       

See accompanying Notes to Consolidated Financial Statements.

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##### Table of Contents



DREYERS GRAND ICE CREAM, INC.

CONSOLIDATED STATEMENT OF INCOME
(Unaudited)

|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |         |     | 
|------------------------------------------------ | ------------------------------------ | ------- | ------- | -------------------- | --- | ----------------------- | ------- | -------------- | --- | -------------- | --------- | --------- | --- | - | ------- | ------- | --- | 
|                                                 |                                      |         |         | Thirteen Weeks Ended |     | Thirty-nine Weeks Ended
|                                                 |                                      |         |         |                      |     |                        
|                                                 |                                      |         |         | Sept. 29, 2001       |     | Sept. 23, 2000          |         | Sept. 29, 2001 |     | Sept. 23, 2000
|                                                 |                                      |         |         |                      |     |                         |         |                |     |               
|($ in thousands,
except per share amounts)      
|Revenues:                                        |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 | Sales                                |         | $       | 419,911              |     |                         | $       | 345,017        |     |                | $         | 1,076,773 |     |   | $       | 909,256 |    
|                                                 | Other income                         |         |         | 1,029                |     |                         |         | 531            |     |                |           | 2,198     |     |   |         | 3,660   |    
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 |                                      |         | 420,940 |                      |     |                         | 345,548 |                |     |                | 1,078,971 |           |     |   | 912,916 |        
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|Costs and expenses:                              |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 | Cost of goods sold                   |         |         | 321,167              |     |                         |         | 251,777        |     |                |           | 832,496   |     |   |         | 669,780 |    
|                                                 | Selling, general and administrative  |         |         | 87,012               |     |                         |         | 72,596         |     |                |           | 223,144   |     |   |         | 191,801 |    
|                                                 | Interest, net of amounts capitalized |         |         | 2,814                |     |                         |         | 3,420          |     |                |           | 9,092     |     |   |         | 9,053   |    
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 |                                      |         | 410,993 |                      |     |                         | 327,793 |                |     |                | 1,064,732 |           |     |   | 870,634 |        
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|Income before income tax provision               |                                      |         | 9,947   |                      |     |                         | 17,755  |                |     |                | 14,239    |           |     |   | 42,282  |        
|                                                 |                                      |         |         |                      |     |                         |         |                |    
|Income tax provision                             |                                      |         | 3,899   |                      |     |                         | 6,765   |                |     |                | 5,582     |           |     |   | 16,110  |        
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|Net income                                       |                                      |         | 6,048   |                      |     |                         | 10,990  |                |     |                | 8,657     |           |     |   | 26,172  |        
|                                                 |                                      |         |         |                      |     |                         |         |               
|Accretion of preferred stock to redemption value |                                      |         |         |                      |     |                         | 106     |                |     |                | 212       |           |     |   | 318     |        
|Preferred stock dividends                        |                                      |         |         |                      |     |                         | 174     |                |     |                | 348       |           |     |   | 522     |        
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|Net income available to common stockholders      |                                      | $       | 6,048   |                      |     | $                       | 10,710  |                |     | $              | 8,097     |           |     | $ | 25,332  |        
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 |                                      |         |         |                      |     |                         |         |                |    
|                                                 |                                      |         |         |                      |     |                         |         |                |    
|                                                 |                                      |         |         |                      |     |                         |         |                |    
|                                                 |                                      |         |         |                      |     |                         |         |                |    
|Net income per common share:                     |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 |                                      | Basic   |         | $                    | .18 |                         |         | $              | .38 |                |           | $         | .26 |   |         | $       | .90 | 
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|                                                 |                                      | Diluted |         | $                    | .17 |                         |         | $              | .31 |                |           | $         | .24 |   |         | $       | .75 | 
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        
|Dividends per common share                       |                                      | $       | .06     |                      |     | $                       | .03     |                |     | $              | .18       |           |     | $ | .09     |        
|                                                 |                                      |         |         |                      |     |                         |         |                |     |                |           |           |     |   |         |        

See accompanying Notes to Consolidated Financial Statements.

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DREYERS GRAND ICE CREAM, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)

|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        |        |   |   |         |         |  
|------------------------------ | -------------------------------------------------------------------------------- |  | ------------ | ----- | ---------- | - | ------------- | ----- | ------------ | - | -------- | ------ | ----- | - | ------ | ---- | -------- | - | ------ | ------ | - | - | ------- | ------- | -
|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   | Notes  |      | Retained |   |        |        |  
|                               |                                                                                  |  | Common Stock |       |            |   |               |       | Receivable   |   | Earnings |        |       |   |       
|                               |                                                                                  |  |              |       | Capital in |   | From          |       | (Accumulated |   |          |        |      
|                               |                                                                                  |  | Shares       |       | Amount     |   | Excess of Par |       | Stockholders |   | Deficit) |        | Total
|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |      
|(In thousands)                 |                                                                                  |  |              |       |            |   |               |      
|Balances at December 25, 1999  |                                                                                  |  | 27,871       |       |            | $ | 27,871        |       |              | $ | 53,172   |        |       | $ | (2,501 | )    |          | $ | (4,848 | )      |   | $ | 73,694  |        
|                               | Net income                                                                       |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | 26,172 |   |   |         | 26,172  |  
|                               | Accretion of preferred stock to
redemption value                                 |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | (318   | ) |   |         | (318    | )
|                               | Preferred stock dividends declared                                               |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | (522   | ) |   |         | (522    | )
|                               | Common stock dividends declared                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | (2,533 | ) |   |         | (2,533  | )
|                               | Issuance of common stock under
employee stock plans, net                         |  |              | 365   |            |   |               | 365   |              |   |          | 4,892  |       |   |        | (482 | )        |   |        |        |   |   |         | 4,775   |  
|                               | Repurchases and retirements of
common stock                                      |  |              | (15   | )          |   |               | (15   | )            |   |          | (328   | )     |   |        | 70   |          |   |        |        |   |   |         | (273    | )
|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        |        |   |   |         |        
|Balances at September 23, 2000 |                                                                                  |  | 28,221       |       |            | $ | 28,221        |       |              | $ | 57,736   |        |       | $ | (2,913 | )    |          | $ | 17,951 |        |   | $ | 100,995 |        
|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        |        |   |   |         |        
|                              
|                               |                                                                                  |  |              |       |            |   |               |       |             
|                               |                                                                                  |  |              |       |            |   |               |       |             
|Balances at December 30, 2000  |                                                                                  |  | 28,268       |       |            | $ | 28,268        |       |              | $ | 58,396   |        |       | $ | (2,284 | )    |          | $ | 15,992 |        |   | $ | 100,372 |        
|                               | Net income                                                                       |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | 8,657  |   |   |         | 8,657   |  
|                               | Accretion of preferred stock to
redemption value                                 |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | (212   | ) |   |         | (212    | )
|                               | Preferred stock dividends declared                                               |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | (348   | ) |   |         | (348    | )
|                               | Common stock dividends declared                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        | (5,845 | ) |   |         | (5,845  | )
|                               | 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                         |  |              | 480   |            |   |               | 480   |              |   |          | 7,739  |       |   |        | (819 | )        |   |        |        |   |   |         | 7,400   |  
|                               | Repurchases and retirements of
common stock                                      |  |              | (82   | )          |   |               | (82   | )            |   |          | (2,249 | )     |   |        |      |          |   |        |        |   |   |         | (2,331  | )
|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        |        |   |   |         |        
|Balances at September 29, 2001 |                                                                                  |  | 34,466       |       |            | $ | 34,466        |       |              | $ | 158,838  |        |       | $ | (3,103 | )    |          | $ | 18,244 |        |   | $ | 208,445 |        
|                               |                                                                                  |  |              |       |            |   |               |       |              |   |          |        |       |   |        |      |          |   |        |        |   |   |         |        

See
accompanying Notes to Consolidated Financial Statements.

4



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DREYERS GRAND ICE CREAM, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |          |        |         |  
|-------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ----------------------------------------------------------- | ---------------------------------------- | ------- | ----------------------- | ------- | -------------- | -------- | ------ | ------- | -
|                                                                     |                                                                                |                                                             |                                          |         | Thirty-nine Weeks Ended
|                                                                     |                                                                                |                                                             |                                          |         |                        
|                                                                     |                                                                                |                                                             |                                          |         | Sept. 29, 2001          |         | Sept. 23, 2000
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |               
|(In thousands)                                                      
|                                                                    
|Cash flows from operating activities:                                |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     | Net income                                                                     |                                                             | $                                        | 8,657   |                         |         | $              | 26,172   |       
|                                                                     | Adjustments to reconcile net income to cash from operations:                   |                                                             |                                          |         |                         |         |                |          |       
|                                                                     |                                                                                | Depreciation and amortization                               |                                          |         | 26,940                  |         |                |          | 28,078 |        
|                                                                     |                                                                                | Deferred income taxes                                       |                                          |         | 1,029                   |         |                |          | 5,799  |        
|                                                                     |                                                                                | Changes in assets and liabilities, net of amounts acquired: |                                          |         |                         |         |                |          |        |        
|                                                                     |                                                                                |                                                             | Trade accounts receivable                |         |                         | (52,241 | )              |          |        | (39,327 | )
|                                                                     |                                                                                |                                                             | Other accounts receivable                |         |                         | (1,957  | )              |          |        | (13,802 | )
|                                                                     |                                                                                |                                                             | Inventories                              |         |                         | (12,688 | )              |          |        | (16,182 | )
|                                                                     |                                                                                |                                                             | Prepaid expenses and other               |         |                         | 219     |                |          |        | 398     |  
|                                                                     |                                                                                |                                                             | Accounts payable and accrued liabilities |         |                         | 42,353  |                |          |        | 26,175  |  
|                                                                     |                                                                                |                                                             | Accrued payroll and employee benefits    |         |                         | (424    | )              |          |        | (12,750 | )
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     |                                                                                |                                                             | 11,888                                   |         |                         |         | 4,561          |         
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|Cash flows from investing activities:                                |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     | Acquisition of property, plant and equipment                                   |                                                             |                                          | (29,218 | )                       |         |                | (19,663  | )     
|                                                                     | Retirement of property, plant and equipment                                    |                                                             |                                          | 1,662   |                         |         |                | 1,423    |       
|                                                                     | Purchase of common stock of Cherokee Cream Company, Inc., net of cash
acquired |                                                             |                                          |         |                         |         |                | (7,651   | )     
|                                                                     | Increase in goodwill, distribution rights and other intangibles, net           |                                                             |                                          | (5,646  | )                       |         |                | (1,385   | )     
|                                                                     | Increase in other assets                                                       |                                                             |                                          | 513     |                         |         |                | (3,171   | )     
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     |                                                                                |                                                             | (32,689                                  | )       |                         |         | (30,447        | )       
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|Cash flows from financing activities:                                |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     | Proceeds from long-term debt, net                                              |                                                             |                                          | 42,700  |                         |         |                | 172,795  |       
|                                                                     | Repayments of long-term debt                                                   |                                                             |                                          | (22,186 | )                       |         |                | (149,421 | )     
|                                                                     | Issuance of common stock under employee stock plans, net                       |                                                             |                                          | 7,400   |                         |         |                | 4,775    |       
|                                                                     | Repurchases and retirements of common stock                                    |                                                             |                                          | (2,331  | )                       |         |                | (273     | )     
|                                                                     | Cash dividends paid                                                            |                                                             |                                          | (4,974  | )                       |         |                | (3,041   | )     
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     |                                                                                |                                                             | 20,609                                   |         |                         |         | 24,835         |         
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|Decrease in cash and cash equivalents                                |                                                                                |                                                             | (192                                     | )       |                         |         | (1,051         | )       
|Cash and cash equivalents, beginning of period                       |                                                                                |                                                             | 2,721                                    |         |                         |         | 3,158          |         
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|Cash and cash equivalents, end of period                             |                                                                                | $                                                           | 2,529                                    |         |                         | $       | 2,107          |         
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                    
|                                                                    
|                                                                    
|                                                                    
|Supplemental cash flow information:                                  |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     | Cash paid during the period for:                                               |                                                             |                                          |         |                         |         |                |          |       
|                                                                     |                                                                                |                                                             | Interest (net of amounts capitalized)    |         | $                       | 8,848   |                |          | $      | 8,615   |  
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|                                                                     |                                                                                |                                                             | Income taxes (net of refunds)            |         | $                       | 261     |                |          | $      | 5,726   |  
|                                                                     |                                                                                |                                                             |                                          |         |                         |         |                |         
|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.

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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 thirty-nine
weeks ended September 29, 2001 and September 23, 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 September 29, 2001 and December
30, 2000 consisted of the following:

|               |  |                |        |               |  |   |        | 
|-------------- |  | -------------- | ------ | ------------- |  | - | ------ | 
|               |  | Sept. 29, 2001 |        | Dec. 30, 2000
|               |  |                |        |              
|(In thousands)
|Raw materials  |  | $              | 10,086 |               |  | $ | 8,368  | 
|Finished goods |  |                | 71,403 |               |  |   | 60,433 | 
|               |  |                |        |               |  |   |        | 
|               |  | $              | 81,489 |               |  | $ | 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.

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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 |     | Thirty-nine Weeks Ended
|                                                    |         |   |                      |     |                        
|                                                    |         |   | Sept. 29, 2001       |     | Sept. 23, 2000          |   | Sept. 29, 2001 |     | Sept. 23, 2000
|                                                    |         |   |                      |     |                         |   |                |     |               
|(In thousands, except per share amounts)            |         |   |                      |    
|                                                   
|                                                   
|Net income available to common
stockholders-basic   |         | $ | 6,048                |     |                         | $ | 10,710         |     |                | $ | 8,097  |     |  | $ | 25,332 |    
|Add: preferred dividends and accretion              |         |   |                      |     |                         |   | 280            |     |                |   | 560    |     |  |   | 840    |    
|                                                    |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    
|Net income available to common
stockholders-diluted |         | $ | 6,048                |     |                         | $ | 10,990         |     |                | $ | 8,657  |     |  | $ | 26,172 |    
|                                                    |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    
|                                                   
|                                                   
|Weighted-average shares-basic                       |         |   | 34,420               |     |                         |   | 28,173         |     |                |   | 30,688 |     |  |   | 28,077 |    
|Dilutive effect of options                          |         |   | 1,801                |     |                         |   | 1,434          |     |                |   | 1,897  |     |  |   | 1,215  |    
|Dilutive effect of preferred stock                  |         |   |                      |     |                         |   | 5,800          |     |                |   | 3,633  |     |  |   | 5,800  |    
|                                                    |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    
|Weighted-average shares-diluted                     |         |   | 36,221               |     |                         |   | 35,407         |     |                |   | 36,218 |     |  |   | 35,092 |    
|                                                    |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    
|                                                   
|                                                   
|Net income per common share:                        |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    
|                                                    | Basic   |   | $                    | .18 |                         |   | $              | .38 |                |   | $      | .26 |  |   | $      | .90 | 
|                                                    |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    
|                                                    | Diluted |   | $                    | .17 |                         |   | $              | .31 |                |   | $      | .24 |  |   | $      | .75 | 
|                                                    |         |   |                      |     |                         |   |                |     |                |   |        |     |  |   |        |    

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 753,000 and 75,000 stock options during the
thirteen weeks ended September 29, 2001 and September 23, 2000, respectively,
and 753,000 and 693,000 stock options during the thirty-nine weeks ended
September 29, 2001 and September 23, 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.

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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 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 selling, general and
administrative expenses.

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 retailers store shelves (slotting fees) and amounts paid
to retailers to advertise a companys products (fixed trade promotion expenses) be recorded as a reduction of
revenue. At the present time, the Company classifies these costs as selling, general and
administrative expenses.

The expenses defined in EITF 00-14 and EITF 00-25 totaled approximately
$58,400,000 and $45,900,000, for the thirteen weeks ended September 29, 2001
and September 23, 2000, respectively. For the thirty-nine weeks ended
September 29, 2001 and September 23, 2000, these expenses totaled approximately
$139,900,000 and $112,300,000, 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 June 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.

Accounting for Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142). This pronouncement continues to require recognition of goodwill and
other unidentifiable intangible assets with indeterminate lives (these
assets) as assets, but amortization as currently required by APB Opinion No.
17, Intangible Assets, is no longer permitted. In lieu of amortization,
these assets 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 these assets. Amortization of these assets
totaled approximately $1,100,000 and $800,000, for the thirteen weeks ended
September 29, 2001 and September 23, 2000, respectively, and approximately
$3,200,000 and $2,700,000, for the thirty-nine weeks ended September 29, 2001
and September 23, 2000, respectively. The Company will implement SFAS No. 142
in the first quarter of 2002.

Accounting for the Impairment or Disposal of Long-Lived Assets

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144). This pronouncement clarifies
certain issues related to SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of and develops a
single accounting model for long-lived assets to be disposed of. The
Company will implement SFAS No. 144 in the first quarter of 2002
and does not expect that it will have a significant impact on its
financial position or results of operations.

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##### 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, and in press releases, conference
calls, webcasts, and annual 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 determined 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:

|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |       |  
|------------------------------------------------ | ------------------------------------ |  | ------------------- | ----- | ----------------------------------------------- |  | ------------------ | ----- | ------------------ |  | -------- | ----- | -------- |  | ----- | ----- | - |  | ----- | ----- | - |  | ----- | ----- | -
|                                                 |                                      |  | Percentage of Sales |       | Period-to-PeriodVarianceFavorable
(Unfavorable)
|                                                 |                                      |  |                     |       |                                                
|                                                 |                                      |  | ThirteenWeeksEnded  |       | Thirty-nineWeeksEnded                           |  | ThirteenWeeksEnded |       | ThirteenWeeksEnded
|                                                 |                                      |  |                     |       |                                                 |  | 2001               |       | 2001              
|                                                 |                                      |  | Sept. 29,           |       | Sept. 23,                                       |  | Sept. 29,          |       | Sept. 23,          |  | Compared |       | Compared
|                                                 |                                      |  | 2001                |       | 2000                                            |  | 2001               |       | 2000               |  | To 2000  |       | To 2000 
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |         
|Revenues:                                        |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|                                                 | Sales                                |  |                     | 100.0 | %                                               |  |                    | 100.0 | %                  |  |          | 100.0 | %        |  |       | 100.0 | % |  |       | 21.7  | % |  |       | 18.4  | %
|                                                 | Other income                         |  |                     | 0.2   |                                                 |  |                    | 0.2   |                    |  |          | 0.2   |          |  |       | 0.4   |   |  |       | 93.8  |   |  |       | (40.0 | )
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|                                                 |                                      |  | 100.2               |       |                                                 |  | 100.2              |       |                    |  | 100.2    |       |          |  | 100.4 |       |   |  | 21.8  |       |   |  | 18.2  |      
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Costs and expenses:                              |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|                                                 | Cost of goods sold                   |  |                     | 76.4  |                                                 |  |                    | 73.0  |                    |  |          | 77.2  |          |  |       | 73.7  |   |  |       | (27.6 | ) |  |       | (24.3 | )
|                                                 | Selling, general and administrative  |  |                     | 20.7  |                                                 |  |                    | 21.0  |                    |  |          | 20.7  |          |  |       | 21.1  |   |  |       | (19.9 | ) |  |       | (16.3 | )
|                                                 | Interest, net of amounts capitalized |  |                     | 0.7   |                                                 |  |                    | 1.0   |                    |  |          | 1.0   |          |  |       | 1.0   |   |  |       | (17.7 | ) |  |       | (0.4  | )
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|                                                 |                                      |  | 97.8                |       |                                                 |  | 95.0               |       |                    |  | 98.9     |       |          |  | 95.8  |       |   |  | (25.4 | )     |   |  | (22.3 | )    
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Income before income tax provision               |                                      |  | 2.4                 |       |                                                 |  | 5.2                |       |                    |  | 1.3      |       |          |  | 4.6   |       |   |  | (44.0 | )     |   |  | (66.3 | )    
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Income tax provision                             |                                      |  | 1.0                 |       |                                                 |  | 2.0                |       |                    |  | 0.5      |       |          |  | 1.7   |       |   |  | 42.4  |       |   |  | 65.4  |      
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Net income                                       |                                      |  | 1.4                 |       |                                                 |  | 3.2                |       |                    |  | 0.8      |       |          |  | 2.9   |       |   |  | (45.0 | )     |   |  | (66.9 | )    
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Accretion of preferred stock to redemption value |                                      |  |                    |       |                                                 |  |                   |       |                    |  |         |       |          |  |      |       |   |  |      |       |   |  |      |      
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Preferred stock dividends                        |                                      |  |                    |       |                                                 |  | 0.1                |       |                    |  |         |       |          |  | 0.1   |       |   |  |      |       |   |  |      |      
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      
|Net income available to common stockholders      |                                      |  | 1.4                 | %     |                                                 |  | 3.1                | %     |                    |  | 0.8      | %     |          |  | 2.8   | %     |   |  | (43.5 | )     |   |  | (68.0 | )    
|                                                 |                                      |  |                     |       |                                                 |  |                    |       |                    |  |          |       |          |  |       |       |   |  |       |       |   |  |       |      

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Thirteen Weeks ended September 29, 2001 Compared with Thirteen Weeks ended
September 23, 2000

Consolidated sales for the third quarter of 2001 increased $74,894,000, or 22
percent, to $419,911,000 from $345,017,000 for the same quarter last year.

Sales of the Companys branded products, including licensed and joint
venture products (company brands), increased $20,533,000, or nine percent, to
$259,930,000 from $239,397,000 for the same quarter last year. The increase
was led by sales of premium Dreyers and Edys Grand Ice Cream, sales of the
Companys superpremium portfolio, most notably Dreamery and Whole Fruit Sorbet,
and Whole Fruit Bars. Company brands represented 62 percent of consolidated
sales in 2001 compared with 69 percent in the same quarter last year. Gallon
sales of the Companys branded products, including novelties, increased
approximately 1,100,000 gallons, or four percent, to approximately 32,100,000
gallons. The average price of the Companys branded products increased five
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 $54,361,000,
or 51 percent, to $159,981,000 from $105,620,000 for the same quarter last
year. This increase continues to be driven largely by the acquisition of
independent distributors in 2000 along with increased sales of Ben & Jerrys
superpremium products. 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. Sales of partner brands represented 38 percent of
consolidated sales compared with 31 percent in the same quarter last year. Unit
sales of partner brands increased by 39 percent over the same quarter last
year. Average wholesale prices for partner brands increased approximately nine
percent.

Cost of goods sold increased $69,390,000, or 28 percent, over the same
quarter last year. The Companys gross profit increased $5,504,000 to
$98,744,000, representing a 24 percent gross margin for the third quarter of
2001 compared with a 27 percent gross margin for the third quarter of 2000. The
cost of cream, the Companys primary ingredient, continued to rise during the
quarter. This increase in dairy raw material costs unfavorably impacted gross
profit by approximately $12,000,000 as compared to the third quarter of 2000.
Since the end of the third quarter, the price of butter, which determines the
Companys cream costs, has dropped, but there can be no assurance that this
trend will continue.

Other income increased $498,000 primarily due to an increase in earnings
from joint ventures accounted for under the equity method.

Selling, general and administrative expenses increased $14,416,000, or 20
percent, to $87,012,000 from $72,596,000. The increase primarily reflects
increased trade promotion expenses for both new and existing products and
increased administrative expenses. Selling, general and administrative expenses
remained relatively unchanged at 21 percent of consolidated sales in 2001 and
2000.

Interest expense decreased $606,000, or 18 percent, to $2,814,000,
primarily due to lower interest rates.

The effective income tax rate was 39.2 percent for the third quarter of
2001 and 38.1 percent for the same quarter last year.



Thirty-nine Weeks ended September 29, 2001 Compared with Thirty-nine Weeks
ended September 23, 2000

Consolidated sales for the first thirty-nine weeks of 2001 increased $167,517,000,
or 18 percent, to $1,076,773,000 from $909,256,000 for the same period last
year.

Sales of the Companys branded products, including licensed and joint
venture products (company brands), increased $34,886,000, or five percent, to
$676,889,000 from $642,003,000 for the same period last year. The increase was
led by sales of premium Dreyers and Edys Grand Ice Cream, Whole Fruit Bars,
and Whole Fruit Sorbet. Company brands represented 63 percent of consolidated
sales in 2001 compared with 71 percent in the same period last year. Gallon
sales of the Companys branded products, including novelties, increased
approximately 2,000,000 gallons, or two percent, to approximately 85,100,000
gallons. The average price of the Companys branded products increased three
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 $132,631,000,
or 50 percent, to $399,884,000 from $267,253,000 for the same
period last year. This increase continues to be

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driven largely by the acquisition of independent
distributors in 2000 along with increased sales of Ben & Jerrys superpremium
products. 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. Sales of partner brands represented 37 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. Average
wholesale prices for partner brands increased approximately eight percent.

Cost of goods sold
increased $162,716,000, or 24 percent, over the same period last
year. The Company's gross profit increased $4,801,000 to $244,277,000, representing a 23 percent gross margin for the first thirty-nine
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, continued to rise
during the first thirty-nine weeks of 2001. This increase in dairy raw material
costs unfavorably impacted gross profit by approximately $27,000,000 as
compared to the same period of 2000. Since the end of the third quarter, the
price of butter, which determines the Companys cream costs, has dropped, but
there can be no assurance that this trend will continue. 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 ongoing rollout of additional distribution territories for Ben & Jerrys
products.

Other income decreased $1,462,000 primarily due to a decrease in earnings
from joint ventures accounted for under the equity method.

Selling, general and administrative expenses increased $31,343,000, or 16
percent, to $223,144,000 from $191,801,000. 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 remained relatively unchanged at 21 percent of
consolidated sales in 2001 and 2000.

Interest expense remained relatively unchanged compared with the same
period last year.

The effective income tax rate was 39.2 percent and 38.1 percent for the
thirty-nine weeks ended 2001 and 2000, respectively.



LIQUIDITY AND CAPITAL RESOURCES

The Companys cash flows provided by operating activities increased to
$11,888,000 from $4,561,000 for the same period last year. This
increase in operating cash flows was provided by improved working
capital management, offset in part by a reduction in net income.

Cash flows used in investing activities totaled $32,689,000 and
$30,447,000, in 2001 and 2000, respectively. Cash flows used in investing
activities during the first thirty-nine weeks of 2001 consisted primarily of
purchases of $29,218,000 in property, plant and equipment. Cash flows used in
investing activities during the first thirty-nine weeks of 2000 consisted
primarily of purchases of $19,663,000 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 $20,609,000 and $24,835,000,
in 2001 and 2000, respectively. Cash flows from financing activities for the
first thirty-nine weeks of 2001 primarily consisted of a net increase of
$42,700,000 in the Companys long-term debt, partially offset by repayments of
long-term debt totaling $22,186,000. Cash flows from financing activities for
the first thirty-nine weeks of 2000 primarily consisted of a net increase of
$172,795,000 in long-term debt, partially offset by repayments of long-term
debt totaling $149,421,000, reflecting the issuance
of a new revolving line of credit and the repayment of the former revolver,
respectively.

Working capital at September 29, 2001 increased $37,400,000 from year-end 2000.
This increase was primarily caused by increases in trade accounts
receivable and inventories, along with a decrease in the current portion
of long-term debt, partially offset by increases in accounts payable and accrued liabilities (resulting from both seasonality
and the additional Ben & Jerrys business).

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 September 29, 2001, the Company had $2,529,000 in cash and cash
equivalents, and an unused credit line of $111,800,000. 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 selling, general and
administrative expenses.

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 retailers store shelves (slotting fees) and amounts paid
to retailers to advertise a companys products (fixed trade promotion expenses) be recorded as a reduction of
revenue. At the present time, the Company classifies these costs as selling, general and
administrative expenses.

The expenses defined in EITF 00-14 and EITF 00-25 totaled approximately
$58,400,000 and $45,900,000, for the thirteen weeks ended September 29, 2001
and September 23, 2000, respectively. For the thirty-nine weeks ended
September 29, 2001 and September 23, 2000, these expenses totaled approximately
$139,900,000 and $112,300,000, 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 June 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.

Accounting for Goodwill and Other Intangible Assets

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(SFAS No. 142). This pronouncement continues to require recognition of goodwill and
other unidentifiable intangible assets with indeterminate lives (these
assets) as assets, but amortization as currently required by APB Opinion No.
17, Intangible Assets, is no longer permitted. In lieu of amortization,
these assets 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 these assets. Amortization of these assets
totaled approximately $1,100,000 and $800,000, for the thirteen weeks ended
September 29, 2001 and September 23, 2000, respectively, and approximately
$3,200,000 and $2,700,000, for the thirty-nine weeks ended September 29, 2001
and September 23, 2000, respectively. The Company will implement SFAS No. 142
in the first quarter of 2002.

Accounting for the Impairment or Disposal of Long-Lived Assets

In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (SFAS No. 144). This pronouncement clarifies
certain issues related to SFAS 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of and develops a
single accounting model for long-lived assets to be disposed of. The
Company will implement SFAS No. 144 in the first quarter of 2002
and does not expect that it will have a significant impact on its
financial position or results of operations.




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.

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PART II: OTHER INFORMATION




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

(a)  The following exhibit is filed herewith:

|            |  |                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                      
|10.1        |  | Second Amendment dated as of September 26, 2001 to Note
Purchase Agreements dated as of June 6, 1996 between Dreyers
Grand Ice Cream, Inc. and each of The Prudential Insurance
Company of America, Pruco Life Insurance Company, and
Transamerica Life Insurance and Annuity Company amending
Exhibit 10.16 to the 2000 Annual Report on Form 10-K.

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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:  November 13, 2001 | By:                            | /s/ Timothy F. Kahn                                                                                                      
|                          |                                |                                                                                                                          
|                          |                                | Timothy F. Kahn
Vice President  Finance and Administration
    and Chief Financial Officer (Principal Financial Officer)

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DREYERS GRAND ICE CREAM, INC.




INDEX TO EXHIBITS

|            |  |                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                                                                      
|10.1        |  | Second Amendment dated as of September 26, 2001 to Note
Purchase Agreements dated as of June 6, 1996 between Dreyers
Grand Ice Cream, Inc. and each of The Prudential Insurance
Company of America, Pruco Life Insurance Company, and
Transamerica Life Insurance and Annuity Company amending
Exhibit 10.16 to the 2000 Annual Report on Form 10-K.

15