UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from              to


Commission file number 001-32596

REDDY ICE HOLDINGS, INC.(Exact name of registrant as specified in its charter)

DELAWARE(State or other jurisdiction of
incorporation or organization)

56-2381368(I.R.S. Employer Identification No.)


8750 N. CENTRAL EXPRESSWAY, SUITE 1800
DALLAS, TEXAS 75231(Address of principal executive offices)

(214) 526-6740(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 Exchange Act 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 ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o    No ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer ý

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

The number of shares of registrant's common stock outstanding as of October 20, 2009 was 22,579,891.



---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED SEPTEMBER 30, 2009
TABLE OF CONTENTS

PagePART IFINANCIAL INFORMATIONItem 1.

Condensed Consolidated Financial Statements

2Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 (unaudited)

2Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2009
and 2008 (unaudited)

3Condensed Consolidated Statement of Stockholders' Equity for the nine months ended September 30, 2009
(unaudited)

4Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
(unaudited)

5Notes to the Condensed Consolidated Financial Statements

6Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

25Item 3.

Quantitative and Qualitative Disclosures about Market Risk

42Item 4.

Controls and Procedures

42PART IIOTHER INFORMATIONItem 1.

Legal Proceedings

44Item 1A.

Risk Factors

46Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47Item 3.

Defaults Upon Senior Securities

47Item 4.

Submission of Matters to a Vote of Security Holders

47Item 5.

Other Information

47Item 6.

Exhibits

47SIGNATURES

48INDEX TO EXHIBITS

49


1

---





PART IFINANCIAL INFORMATION

Item 1.    Financial Statements

REDDY ICE HOLDINGS, INC. AND SUBSIDIARY        CONDENSED CONSOLIDATED BALANCE SHEETS        (Unaudited)

September 30,
2009

December 31,
2008(in thousands, except
share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
46,567

$
39,684Accounts receivable, net


34,363


27,879Inventories, parts and supplies


11,748


12,323Prepaid expenses and other current assets


5,976


3,218Deferred tax assets


1,945


1,945Total current assets


100,599


85,049PROPERTY AND EQUIPMENT, net


216,032


213,015GOODWILL


79,493


79,493OTHER INTANGIBLES, net


71,682


76,640INVESTMENTS


1,105


OTHER ASSETS


415


362TOTAL

$
469,326

$
454,559LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES:Current portion of long-term obligations

$
1

$
Revolving credit facility





Accounts payable


12,340


19,106Accrued expenses


21,350


16,486Derivative liability


412


2,564Total current liabilities


34,103


38,156LONG-TERM OBLIGATIONS


390,601


390,500DEFERRED TAXES AND OTHER LIABILITIES, net


34,340


25,031COMMITMENTS AND CONTINGENCIES (Note 11)





STOCKHOLDERS' EQUITY:Preferred stock: 25,000,000 share authorized; no shares issued or outstanding





Common stock, $0.01 par value; 75,000,000 shares authorized; 22,579,891 and 22,114,116 shares issued and outstanding at September 30, 2009 and
December 31, 2008, respectively


226


221Additional paid-in capital


223,022


221,824Accumulated deficit


(212,717
)

(218,976
)Accumulated other comprehensive loss


(249
)

(2,197
)Total stockholders' equity


10,282


872TOTAL

$
469,326

$
454,559


See
notes to condensed consolidated financial statements.

2

---





REDDY ICE HOLDINGS, INC. AND SUBSIDIARY        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        (Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,2009

2008

2009

2008(in thousands, except per share amounts)Revenues

$
115,446

$
125,646

$
257,591

$
271,368Cost of sales (excluding depreciation)


64,851


72,659


157,554


172,444Depreciation expense related to cost of sales


5,494


5,223


15,788


15,670Gross profit


45,101


47,764


84,249


83,254Operating expenses


12,690


12,213


38,090


35,104Depreciation and amortization expense


1,772


1,653


5,211


4,950Loss on dispositions of assets


145


62


602


302Impairment of assets (Note 13)





149,905





149,905Loss (gain) on diesel hedge


144





(581
)

Cost of antitrust investigations and related litigation (Note 11)


735


6,125


4,075


11,927Transaction costs related to merger agreement (Note 1)











949Gain on property insurance settlement











(1,036
)Income (loss) from operations


29,615


(122,194
)

36,852


(118,847
)Interest expense


(6,231
)

(7,879
)

(20,709
)

(23,709
)Interest income


18


149


124


613Gain on termination of merger agreement (Note 1)











17,000Income (loss) before income taxes


23,402


(129,924
)

16,267


(124,943
)Income tax (expense) benefit


(13,414
)

16,934


(10,008
)

14,300Net income (loss)

$
9,988

$
(112,990
)
$
6,259

$
(110,643
)Basic net income (loss) per share:Net income (loss)

$
0.44

$
(5.13
)
$
0.28

$
(5.03
)Weighted average common shares outstanding


22,502


22,035


22,291


22,012Diluted net income (loss) per share:Net income (loss)

$
0.44

$
(5.13
)
$
0.28

$
(5.03
)Weighted average common shares outstanding


22,683


22,035


22,434


22,012Cash dividends declared per share

$


$


$


$
0.84


See
notes to condensed consolidated financial statements.

3

---





REDDY ICE HOLDINGS, INC. AND SUBSIDIARY        CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY        (Unaudited)

Common StockAccumulated
Other
Comprehensive
LossNumber
of
Shares

Par
Value

Additional
Paid-In
Capital

Accumulated
Deficit

Total(in thousands)Balance at January 1, 2009


22,114

$
221

$
221,824

$
(218,976
)
$
(2,197
)
$
872Compensation expense related to stock-based awards








1,662








1,662Issuance of restricted stock


373


4


(4
)







Vesting of restricted stock units


104


1


(1
)







Repurchase and retirement of common stock


(11
)




(27
)







(27
)Tax deficiency in connection with vesting of restricted stock units








(432
)







(432
)Comprehensive income:Net income











6,259





6,259Change in fair value of interest rate hedges, net of tax














1,948


1,948Total comprehensive income

















8,207Balance at September 30, 2009


22,580

$
226

$
223,022

$
(212,717
)
$
(249
)
$
10,282


See
notes to condensed consolidated financial statements.

4

---





REDDY ICE HOLDINGS, INC. AND SUBSIDIARY        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (Unaudited)

Nine Months Ended September 30,2009

2008(in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
6,259

$
(110,643
)Adjustments to reconcile net (loss) income to net cash provided by operating activities (excluding working capital from acquisitions):Depreciation and amortization expense


20,999


20,620Amortization of debt issue costs and debt discount


1,093


12,104Deferred tax expense (benefit)


9,835


(14,276
)Loss on dispositions of assets


602


302Impairment of assets





149,905Gain on property insurance settlement





(1,036
)Increase in fair value of diesel hedge


(290
)

Stock-based compensation expense


1,662


2,667Change in assets and liabilities:Accounts receivable


(6,484
)

(18,470
)Inventory, parts and supplies


574


(1,353
)Prepaid expenses and other current assets


(2,541
)

(324
)Accounts payable, accrued expenses and other


(3,401
)

4,125Net cash provided by operating activities


28,308


43,621CASH FLOWS FROM INVESTING ACTIVITIES:Property and equipment additions


(20,669
)

(15,449
)Proceeds from dispositions of property and equipment


343


1,653Cost of equipment placed under operating leases


(5,994
)

Reimbursement of the cost of equipment placed under operating leases


5,994


Cost of acquisitions, net of cash acquired





(3,934
)Proceeds from property insurance settlement





1,496Decrease in restricted cash and cash equivalents





17,262Issuance of note receivable


(450
)

Collection of note receivable


483


24Purchase of investments


(1,105
)

Net cash (used in) provided by investing activities


(21,398
)

1,052CASH FLOWS FROM FINANCING ACTIVITIES:Cash dividends paid





(27,733
)Repurchase and retirement of common stock


(27
)

(199
)Repayment of long-term obligations





(20
)Net cash used in financing activities


(27
)

(27,952
)NET INCREASE IN CASH AND CASH EQUIVALENTS


6,883


16,721CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


39,684


17,183CASH AND CASH EQUIVALENTS, END OF PERIOD

$
46,567

$
33,904SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash payments for interest

$
18,718

$
12,033Cash receipts of interest income

$
107

$
640Cash payments for income taxes

$
658

$
971Borrowings under the credit facility

$
6,667

$
55,000Repayments on the credit facility

$
(6,667
)
$
(55,000
)Increase in fair value of interest rate hedges

$
2,152

$
85Additions to property and equipment included in accounts payable

$
1,130

$
189


See notes to condensed consolidated financial statements.

5

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)        FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009 AND 2008

1. General

The condensed consolidated financial statements of Reddy Ice Holdings, Inc. and Subsidiary included herein are unaudited; however, the balance sheet as of December 31, 2008
has been derived from the audited financial statements for that date but does not include all disclosures required by accounting principles generally accepted in the United States of America. These
financial statements have been prepared by the Company pursuant to the applicable rules and regulations of the Securities and Exchange Commission ("SEC"). Under the SEC's regulations, certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed
or omitted. All significant intercompany balances and transactions have been eliminated upon consolidation, and all adjustments which, in the opinion of management, are necessary for a fair
presentation of the financial position, results of operations and cash flows for the periods covered have been made and are of a normal and recurring nature. The financial statements included herein
should be read in conjunction with the consolidated financial statements and the related notes thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2008. Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results to be achieved for the full year.

Reddy
Ice Holdings, Inc. ("Reddy Holdings"), and its wholly-owned subsidiary, Reddy Ice Corporation ("Reddy Corp."), referred to collectively as the "Company", manufactures and
distributes packaged ice products. The common stock of Reddy Holdings is publicly traded on the New York Stock Exchange under the ticker symbol "FRZ".

On
July 2, 2007, the Company announced that it had entered into an Agreement and Plan of Merger, dated as of July 2, 2007 (the "Merger Agreement"), by and among Reddy
Holdings and certain affiliates of GSO Capital Partners LP ("GSO"). On January 31, 2008, the Company reached an agreement with affiliates of GSO to terminate the Merger Agreement. A
settlement agreement (the "Settlement Agreement") was entered into which released all parties from any claims related to the contemplated acquisition and provided for a $21 million termination
fee to be paid by GSO. The Company agreed to pay up to $4 million of fees and expenses incurred by GSO and its third-party consultants in connection with the transaction. The Company received a
net payment of $17 million on February 5, 2008. During
the nine months ended September 30, 2008, the Company incurred $0.9 million of legal and other professional service expenses in connection with the transaction and the related
stockholder litigation. No expenses were incurred during the three months ended September 30, 2008. Such costs are included in the caption "Transaction costs related to merger agreement" in the
consolidated statements of operations.

2. New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued authoritative guidance on fair value measurements and disclosures. This guidance defines fair value,
establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value estimates. In February 2008, the FASB revised the authoritative
guidance on fair value measurements and disclosures to delay the effective date of the guidance for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis, to fiscal years beginning after November 15, 2008. The Company elected to defer the adoption of this guidance for its
nonfinancial assets and nonfinancial liabilities until

6

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

2. New Accounting Pronouncements (Continued)

January 1,
2009. Adoption of this guidance on January 1, 2009 had no impact on the Company's results of operations and financial position and the Company has included the required
disclosures (see Note 7).

In
December 2007, the FASB revised the authoritative guidance for business combinations. This guidance establishes principles and requirements for how the acquirer in a business
combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. This guidance significantly
changes the accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction costs and restructuring costs. In
addition, under the new guidance, changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. This guidance was
effective for fiscal years
beginning on or after December 15, 2008 and requires the immediate expensing of acquisition related costs associated with acquisitions completed after December 31, 2008. Adoption of this
guidance on January 1, 2009 had no impact on the Company's results of operations and financial position.

In
March 2008, the FASB issued authoritative guidance on disclosures about derivative instruments and hedging activities. This guidance requires enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items
affect an entity's financial position, financial performance and cash flows. The guidance was effective for fiscal years and interim periods beginning after November 15, 2008. The Company
adopted this guidance on January 1, 2009 and has included the required disclosures (see Note 6).

In
April 2008, the FASB issued authoritative guidance on the accounting requirements for goodwill and other intangible assets. This guidance amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This guidance was effective for fiscal years beginning on or after
December 15, 2008. The adoption of this guidance on January 1, 2009 did not impact the Company's results of operations and financial position as this standard is required to be
implemented prospectively; however, the guidance may impact the Company in future periods.

In
June 2008, the FASB issued authoritative guidance on the treatment of participating securities in the calculation of earnings per share ("EPS"). This guidance addresses whether
instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing EPS under the
two-class method. This guidance was effective for fiscal years beginning on or after December 15, 2008. All prior period EPS data presented after adoption has been adjusted
retrospectively to conform with this guidance. Adoption of this guidance on January 1, 2009 did not have a material impact on the Company's results of operations and financial position.

In
January 2009, the FASB issued authoritative guidance on disclosure requirements for financial instruments. This guidance requires disclosures about the fair value of financial
instruments in interim financial statements as well as in annual financial statements. This guidance was effective for interim periods ending after June 15, 2009, but early adoption was
permitted for interim periods ending after

7

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

2. New Accounting Pronouncements (Continued)

March 15,
2009. The Company adopted this guidance in the three months ended June 30, 2009 and has included the required disclosures (see Note 5).

In
May 2009, the FASB issued authoritative guidance on subsequent events. This guidance establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. This guidance is effective for
interim or annual financial periods ending after June 15, 2009, and the Company adopted this guidance during the three months ended June 30, 2009. The adoption of the guidance did not
have an impact on the Company's consolidated results of operations or financial position. The Company has performed an evaluation of subsequent events through October 22, 2009, which is the
date these financial statements were issued.

In
June 2009, the FASB issued the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the "Codification"). The Codification
became the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles ("GAAP"). The Codification did not change GAAP but reorganizes the literature. The
Codification is effective for interim and annual periods ending after September 15, 2009, and the Company adopted the Codification during the three months ended September 30, 2009.

3. Inventories, Parts and Supplies

Inventories consist of raw materials, finished goods and parts and supplies. Raw materials are composed of ice packaging material. Finished goods consist of packaged ice. Parts and
supplies consist of spare parts for production equipment and ice merchandisers and miscellaneous supplies. Inventories are valued at the lower of cost or market and include overhead allocations. Cost
is determined using the first-in, first-out method.

September 30,
2009

December 31,
2008(in thousands)Raw materials

$
6,020

$
6,510Finished goods


2,239


2,694Parts and supplies


3,489


3,119Total

$
11,748

$
12,323


8

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

4. Accrued Expenses

September 30,
2009

December 31,
2008(in thousands)Accrued interest

$
6,851

$
6,087Accrued compensation and employee benefits, including payroll taxes and workers compensation insurance


4,792


4,264Accrued utilities


2,177


1,433Accrued property, sales and other taxes


4,036


1,091Other accrued insurance


1,883


1,982Other


1,611


1,629Total

$
21,350

$
16,486


5. Revolving Credit Facility and Long-Term Obligations

At September 30, 2009 and December 31, 2008, long-term obligations consisted of the following:

September 30,
2009

December 31,
2008(in thousands)Credit facilityTerm Loan

$
240,000

$
240,000101/2% Senior Discount Notes


150,500


150,500Other Notes Payable


102


Total long-term obligations


390,602


390,500Less: Current maturities


1


Long-term obligations, net

$
390,601

$
390,500


101/2% Senior Discount Notes.On October 27, 2004, Reddy Holdings issued $151 million in
aggregate principal amount at
maturity of 101/2% Senior Discount Notes due 2012 (the "Discount Notes") in a private placement offering. The Discount Notes were subsequently registered with the SEC, effective
August 26, 2005. Each Discount Note had an initial accreted value of $663.33 per $1,000 principal amount at maturity. The accreted value of each Discount Note increased from the date of
issuance until November 1, 2008 at a rate of 101/2% per annum such that the accreted value equaled the stated principal amount on November 1, 2008. Thereafter, cash
interest began accruing November 1, 2008 and is payable semi-annually at a rate of 101/2% per annum.

The
Discount Notes are unsecured obligations of Reddy Holdings and are:



9

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

5. Revolving Credit Facility and Long-Term Obligations (Continued)



The
Discount Notes include customary covenants that restrict, among other things, Reddy Holdings' and its subsidiary's ability to incur additional debt or issue certain preferred stock,
pay dividends or redeem, repurchase or retire its capital stock or subordinated indebtedness, make certain investments, create liens, enter into arrangements that restrict dividends from its
subsidiary, merge or sell all or substantially all of its assets or enter into various transactions with affiliates. From and after November 1, 2008, Reddy Holdings may redeem any or all of the
Discount Notes by paying a redemption premium, which is initially 5.25% of the principal amount at maturity of the Discount Notes and declines annually to 0% for the period commencing on
November 1, 2010 and thereafter. If Reddy Holdings experiences a change of control, Reddy Holdings will be required to make an offer to
repurchase the Discount Notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of purchase. Reddy Holdings may also be required to make an offer
to purchase the Discount Notes with proceeds of asset sales that are not reinvested in the Company's business or used to repay other indebtedness.

The
indenture governing the Discount Notes restricts the amount of dividends, distributions and other restricted payments. Under the indenture, Reddy Holdings is restricted from paying
dividends on its common stock unless, at the time of such payment:



The
consolidated coverage ratio under the indenture governing the Discount Notes means the ratio of EBITDA (as defined in the indenture) for the most recent four fiscal quarters to
consolidated interest expense (as defined in the indenture) for such four quarter period. Reddy Holdings is generally required to calculate its consolidated coverage ratio on a pro forma basis to give
effect to the incurrence and repayment of indebtedness as well as acquisitions and dispositions.

The
buildup amount equals 50% of consolidated net income accrued during the period (treated as one accounting period) from July 1, 2003 to the end of the most recent fiscal
quarter for which internal financial statements are available (or, if such consolidated net income is a deficit, minus 100% of such deficit), plus, the net cash proceeds of the issuance of capital
stock, subject to certain exceptions, and any cash capital contribution received by us from the Company's stockholders, in each case after August 15, 2003, plus the amount by which Reddy
Holdings indebtedness is reduced on its balance sheet as a result of the conversion or exchange of such indebtedness for capital stock, plus the net reduction in certain restricted investments made by
Reddy Holdings, less the amount of certain restricted payments made from time to time, including, among other things, the payment of cash dividends. Reddy Holdings is not currently permitted to pay
dividends under this provision.

10

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

5. Revolving Credit Facility and Long-Term Obligations (Continued)

In
addition, regardless of whether Reddy Holdings could make any restricted payments under the buildup amount provision referred to above, Reddy Holdings may (1) make dividend
payments at any time in an aggregate amount of up to $15.0 million if no default has occurred and is continuing under the indenture and (2) following the initial public offering on
August 12, 2005, pay dividends on Reddy Holdings' capital stock of up to 6.0% per year of the cash proceeds (net of underwriters' fees, discounts, commissions or other expenses paid by us)
received by us from all such public equity offerings subject to specified conditions. Accordingly, Reddy Holdings is able to pay approximately $7.0 million annually in dividends under this 6.0%
provision. However, the amount of dividend payments permitted under this 6.0% provision will correspondingly reduce the amount otherwise available under the buildup amount for restricted payments,
including dividends.

Senior Credit Facilities.On August 12, 2005, the Company amended and restated its credit facilities with a syndicate of
banks, financial
institutions and other entities as lenders, including Credit Suisse, Cayman Islands Branch, as Administrative Agent, CIBC World Markets Corp., Bear Stearns Corporate Lending Inc. and
Lehman Commercial Paper, Inc. (the "Credit Facilities"). The Credit Facilities provide for a $60 million revolving credit facility (the "Revolving Credit Facility") and a
$240 million term loan (the "Term Loan"). The Credit Facilities are obligations of Reddy Corp. The Revolving Credit Facility and Term Loan mature on August 12, 2010 and August 12,
2012, respectively.

At
September 30, 2009, the Company had $49.3 million of availability under the Revolving Credit Facility, which was net of outstanding standby letters of credit of
$10.7 million. The standby letters of credit are used primarily to secure certain operating lease and insurance obligations. Lehman Commercial Paper, Inc. ("LCP") has a
$10 million commitment under the Revolving Credit Facility, all of which is unfunded. LCP filed for bankruptcy in October 2008. During the three months ended June 30, 2009, the Company
made borrowings under the Revolving Credit Facility. LCP failed to fund its commitments related to such borrowings and the Company does not believe LCP will fund borrowing requests made in the future.
As a result, the amount available to the Company under the Revolving Credit Facility has been effectively reduced by $10 million.

Principal
balances outstanding under the Credit Facility bear interest per annum, at the Company's option, at the sum of the base rate plus 0.75% or LIBOR plus 1.75%. The base rate is
defined as the greater of the prime rate (as announced from time to time by the Administrative Agent) or the federal funds rate plus 0.5%. At September 30, 2009, the weighted average interest
rate of borrowings outstanding under the Credit Facility was 2.0%, excluding the effect of the interest rate hedges (see Note 6 for further information regarding interest rate hedges). Interest
on base rate loans is payable on the last day of each quarter. Interest on LIBOR loans is payable upon maturity of the LIBOR loan or on the last day of the quarter if the term of the LIBOR loan
exceeds 90 days. The Company also pays a
quarterly fee on the average availability under the revolving credit facility at an annual rate of 0.5%. Amounts may be drawn under the Revolving Credit Facility so long as no event of default exists.

The
Revolving Credit Facility and Term Loan do not require any scheduled principal payments prior to their stated maturity dates. Subject to certain conditions, mandatory repayments of
the Revolving Credit Facility and Term Loan (and if the Term Loan is no longer outstanding, mandatory commitment reductions of the Revolving Credit Facility) are required to be made with portions of
the proceeds from (1) asset sales, (2) the issuance of debt securities and (3) insurance and condemnation

11

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

5. Revolving Credit Facility and Long-Term Obligations (Continued)

awards,
subject to various exceptions. In the event of a change in control, as defined in the Credit Facilities, an event of default will occur under the Credit Facilities.

The
Credit Facilities contain financial covenants, which include the maintenance of certain financial ratios, as defined in the Credit Facilities, and are collateralized by substantially
all of the Company's assets. At September 30, 2009, Reddy Corp. was in compliance with these covenants. Reddy Holdings guarantees the Credit Facilities and such guarantee is collateralized by a
pledge of the capital stock of Reddy Corp.

Under
the restricted payments covenant in the Credit Facilities, Reddy Holdings is generally restricted from paying dividends to its stockholders from funds received from Reddy Corp. and
Reddy Corp. is prohibited from paying dividends and otherwise transferring assets to Reddy Holdings. Reddy Corp. is permitted to pay certain limited dividends to Reddy Holdings, the proceeds of which
must be used to maintain Reddy Holdings' corporate existence.

Reddy
Corp. may also pay dividends to Reddy Holdings for specified purposes, including the payment of dividends by Reddy Holdings and the payment of cash interest and principal on the
Discount Notes, in an amount not greater than Reddy Corp.'s Cumulative Distributable Cash (as defined in the Credit Facilities) for the period (taken as one accounting period) from July 1, 2005
to the end of its most recently ended fiscal quarter for which a covenant compliance certificate under the Credit Facilities has been delivered to the lenders. As of September 30, 2009, the
amount of Cumulative Distributable Cash was $127.0 million. Such dividends may only be paid if Reddy Corp.'s leverage ratio for the most recently ended fiscal quarter is less than or equal to
3.75 to 1.0. In addition, the Credit Facilities preclude Reddy Corp. from declaring any dividends if an event of default under the credit facilities has occurred and is continuing. In particular, it
will be an event of default if Reddy Corp.'s leverage ratio exceeds 4.0 to 1.0 or Reddy Corp.'s interest coverage ratio is less than 3.25 to 1.0. If at the end of any fiscal quarter, Reddy Corp.'s
leverage ratio is greater than 3.75 to 1.0, and therefore Reddy Corp. is not permitted to pay dividends, Reddy Corp. will be required by the credit facilities to apply 50% of Reddy Corp.'s Available
Cash generated during each such quarter to make a mandatory prepayment of the loans under the credit facilities. If Reddy Corp. is not able to pay dividends to Reddy Holdings, Reddy Holdings may not
be able to pay the interest due under the Discount Notes, which would cause a default under the indenture governing the Discount Notes. A default under the Discount Notes would also result in a
default under the Credit Facilities.

Fair Value of Debt Instruments.At September 30, 2009 and December 31, 2008, the fair value of the Company's debt, was
$319.9 million and $198.2 million, respectively, while the book value was $390.6 million and $390.5 million, respectively. The fair value of the Company's debt is primarily
based on quoted market prices for the same or similar issues, or on the current rates that would be offered to the Company for debt of the same remaining maturities.

12

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

6. Financial Derivative Instruments

Interest Rate Hedging Agreements.Effective September 12, 2005, the Company entered into an interest rate hedging agreement
(the "2005 Hedge")
to lock the interest rate on a portion of its Term Loan. The 2005 Hedge had a term of three years and ten months and expired on July 12, 2009. The 2005 Hedge had an initial notional balance of
$220 million. The Company paid a fixed rate of 4.431% on the notional balance outstanding and received an amount equal to 3-month LIBOR.

Effective
February 17, 2009, the Company entered into a second interest rate hedging agreement (the "2009 Hedge") to lock the interest rate on a portion of its Term Loan. The 2009
Hedge has a term of 10 months and expires on December 17, 2009. The 2009 Hedge had a notional balance of $50 million from the inception date to July 17, 2009, at which time
the notional balance increased to $210 million for the remaining term. The Company pays a fixed rate of 1.165% on the notional balance outstanding and receives an amount equal to
1-month LIBOR. Any net payable or receivable amount is settled monthly. The Company uses interest rate hedges to minimize the risk of increases in floating interest rates. The interest
rate hedges are not for trading purposes and are accounted for as cash flow hedges.

Diesel Hedging Agreement.On February 2, 2009, the Company entered into a hedge to fix the price per gallon of a portion of
the Company's
diesel fuel requirements (the "Diesel Hedge"). The Diesel Hedge began February 2, 2009 and expires on December 28, 2009. The notional amount of gallons hedged changes on a monthly basis
to match the Company's anticipated utilization. The Company will pay a fixed rate of $1.55 per gallon (wholesale basis) and receive an amount equal to a wholesale index rate. Any net payable or
receivable amount is settled monthly. The Company uses the Diesel Hedge to minimize the risk of rising fuel prices. The hedge is not for trading purposes and is accounted for as an economic hedge and
is not designated as a hedging instrument.

Financial Statement Presentation.All cash flows associated with derivative activities, including collateral requirements, are
classified as
operating cash flows in the Condensed Consolidated

13

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

6. Financial Derivative Instruments (Continued)

Statements
of Cash Flows. The following table presents the location of all assets and liabilities associated with the Company's hedging instruments within the Condensed Consolidated Balance Sheet:

Asset Derivatives

Liability DerivativesBalance Sheet Location

Fair Value at
September 30,
2009(b)

Fair Value at
December 31,
2008(b)

Fair Value at
September 30,
2009(a)

Fair Value at
December 31,
2008(a)(in thousands)Derivatives designated as hedging instrumentsInterest rate hedges

Derivative liabilitiescurrent

$


$


$
412

$
2,564Derivatives not designated as hedging instrumentsDiesel hedge

Prepaid expenses and other current assets


290








Total derivatives



$
290

$


$
412

$
2,564


(a)Amounts
represent the unrealized loss associated with the hedges. The current amount of interest payable as of September 30, 2009 and interest
receivable as of December 31, 2008 related to the interest rate hedges was included in the captions "Accrued Interest" and "Accounts receivable, net", respectively, in the condensed
consolidated balance sheets.(b)The
current settlement receivable as of September 30, 2009 under the Diesel Hedge was included in the caption "Accounts receivable, net" in the
Condensed Consolidated Balance Sheet.


The
following tables present the impact of derivative instruments and their location within the Condensed Consolidated Financial Statements:

14

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

6. Financial Derivative Instruments (Continued)

Derivatives designated as Cash Flow HedgesAmount of Gain (Loss) Recognized in
Accumulated Other Comprehensive
Loss(a)(b)

Amount of Gain (Loss) Reclassified from
Accumulated Other Comprehensive Loss
into Interest Expense(a)

Amount of Gain (Loss) Recognized in
Interest Expense (Ineffective Portion)(a)Three Months
Ended September 30,

Nine Months
Ended September 30,

Three Months
Ended September 30,

Nine Months
Ended September 30,

Three Months
Ended September 30,

Nine Months
Ended September 30,2009

2008

2009

2008

2009

2008

2009

2008

2009

2008

2009

2008(in thousands)Interest rate hedges

$
(142
)
$
802

$
(951
)
$
(634
)
$
(590
)
$
(112
)
$
(3,103
)
$
(755
)
$
(35
)
$


$
(628
)
$



(a)Amounts
are pre-tax. Accumulated Other Comprehensive Loss in the Condensed Consolidated Statement of Stockholders' Equity is presented net of
tax.(b)For
the next twelve months, the amount of Accumulated Other Comprehensive Loss related to the interest rate hedges to be reclassified to earnings is
$0.4 million (pre-tax). Cash settlements made or received under the interest rate hedges are included in the caption "Interest Expense" in the Condensed Consolidated Statements of
Operations.


Derivatives not designated as Hedging InstrumentsAmount of Gain (Loss)
Recognized in
Condensed
Consolidated
Statements of
Operations

Amount of Gain (Loss)
Recognized in
Condensed
Consolidated
Statements of
OperationsThree months ended
September 30,

Nine months ended
September 30,

Location of Gain (Loss) Recognized in
Condensed Consolidated
Statements of Operations2009

2008

2009

2008(in thousands)Diesel hedge:Non-cash change in fair value

$
(480
)
$


$
290

$
Cash settlements


336





291


Total recognized (loss) gain

$
(144
)
$


$
581

$


Loss (gain) on diesel hedge


Collateral Requirements and Counterparty Risk.The Diesel Hedge and the 2009 Interest Rate Hedge require the Company to provide
collateral in a
minimum amount of $0.8 million. As of September 30, 2009, $1.2 million was held by the counterparty as collateral. The terms of the Credit Facilities limit the amount of cash
collateral that the Company can provide to a maximum of $5.0 million. In the event the cash collateral requirements exceed this amount, the Company will be forced to unwind all or a portion of
the hedges. As provided for in the Credit Facilities, the 2009 Interest Rate Hedge also shares in the collateral securing the Credit Facilities as the counterparty is also a lender under the Credit
Facilities.

The
Company is exposed to risk of loss in the event of non-performance by the counterparty to the diesel and interest rate hedges. The Company does not anticipate
non-performance by the counterparty; however, recent dislocations in the credit markets have resulted in greater uncertainty regarding counterparty performance.

15

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

7. Fair Value of Financial Instruments

The Fair Value Measurements and Disclosures Topic of the Codification establishes a hierarchy for
ranking the quality and reliability of the information used to determine fair values. The statement requires that assets and liabilities carried at fair value be classified and disclosed in one of the
following three categories:

Level 1:

Unadjusted quoted market prices in active markets for identical assets or liabilities.Level 2:

Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than
quoted prices that are observable for the asset or liability.Level 3:

Unobservable inputs for the asset or liability.


The
following tables present the assets and liabilities as of September 30, 2009 that are measured at fair value on a recurring basis and are categorized using the fair value
hierarchy.

Carrying
Value

Fair
Value

Quoted Prices in
Active Markets for
Identical Assets
or Liabilities
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)(in millions)Assets:Diesel fuel hedge

$
0.3

$
0.3




$
0.3


Liabilities:Interest rate hedges

$
0.4

$
0.4




$
0.4





The
interest rate hedges were valued using the income approach to calculate the present value of the future cash flows expected to be paid under the hedges. The value of the fixed legs
is the present value
of the known fixed coupon payments discounted at a market interest rate. The value of the floating legs are the present value of the projected floating coupon payments based on the forward LIBOR rates
discounted at a market interest rate.

The
Diesel Hedge was valued using the income approach to calculate the present value of the future cash flows expected to be paid under the hedge. The value of the fixed leg is the
present value of the known fixed payments discounted at a market interest rate. The value of the floating leg is the present value of the projected floating payments based on the forward diesel prices
discounted at a market interest rate.

The
Company considers its own and counterparty credit risk in the valuation of the interest rate hedges and Diesel Hedge. See Note 6 for information related to collateral
requirements related to the hedges.

8. Stock-Based Compensation

On August 8, 2005, the board of directors and stockholders of Reddy Holdings approved the Reddy Ice Holdings, Inc. Long-Term Incentive and Share Award Plan (the
"Plan"). On May 20, 2009 the stockholders of Reddy Holdings approved an amendment to the Plan, which increased the number

16

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

8. Stock-Based Compensation (Continued)

of
shares of common stock available to be issued to employees, directors and certain third parties in connection with various incentive awards, including stock options, restricted shares and
restricted share units to 2,750,000 shares.

Restricted
share units ("RSUs") provide for the grant of one share of unrestricted common stock on the date that the vesting terms of each RSU are satisfied. Time-vested RSUs
vest
provided that the recipient remains employed with the Company through the vesting dates. Performance-vested RSUs vest provided that the recipient remains employed with the Company through the vesting
dates and the applicable performance condition for the applicable vesting period is met. The performance condition for each vesting period is generally based on the Company's earned distributable cash
per share (as defined in the related restricted share unit agreement) for the related performance period. On April 14, 2009, certain employees voluntarily forfeited a total of 57,000
Performance-vested RSUs. On August 12, 2009, 89,963 time-vested RSUs vested as the recipients remained employed with the Company through the vesting date, 10,000 performance-vested
RSUs vested as the performance measure for such performance-vested RSUs had been met, and 69,404 performance-vested RSUs expired unvested as the performance measure for such performance-vested RSUs
had not been met. As of September 30, 2009, 70,000 RSUs awarded to an employee are outstanding. These RSUs consist of 35,000 time-vested RSUs and 35,000 performance-vested RSUs with
15,000 time-vested RSUs and 15,000 performance-vested RSUs that have an August 12, 2010 vesting date and 20,000 time-vested RSUs and 20,000 performance-vested RSUs that
have an August 12, 2011 vesting date. The performance targets for the Performance-vested RSUs granted to this employee were set by the compensation committee of the Company's Board of Directors
("Compensation Committee") in April 2009.

The
Plan provides for awards of restricted shares subject to restrictions on transferability and other restrictions, if any, imposed by the Compensation Committee. Such restrictions
lapse under circumstances as determined by the Compensation Committee, including based upon a specified period of continued employment or upon the achievement of established performance criteria.
Restricted shares have all of the rights of a stockholder, including the right to vote restricted shares and to receive dividends. Unvested restricted shares are generally forfeited upon termination
of employment during the applicable restriction period as provided for in the related grant documents. During 2008, certain employees were granted 50,000 shares of restricted stock, 20,000 and 50,000
of which vested during the three and nine months ended September 30, 2009, respectively. The Company granted 11,100 and 258,225 restricted shares to employees with a weighted average grant date
fair value of $3.09 and $1.89 during the three and nine months ended September 30, 2009, respectively. One-third of the restricted shares vest, contingent on the employee's
continuous service to the Company, on each of the following dates: January 1, 2010, January 1, 2011, and January 1, 2012. The fair value of each restricted share is the closing
price of the Company's common stock on the grant date. The aggregate grant date fair value is recognized as compensation expense using the straight-line method over the vesting period,
adjusted for estimated forfeitures. During the month of July 2009, 114,738 vested shares were granted to non-employee members of the Board of Directors.

The
Plan provides for option grants with terms, including exercise price and the time and method of exercise, set by the Compensation Committee. However, the exercise price of options is
not permitted to be less than the fair market value of the shares at the time of grant and the term is not

17

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

8. Stock-Based Compensation (Continued)

permitted
to be longer than ten years from the date of grant of the options. Stock options for 50,400 and 1,081,275 shares of common stock were granted during the three and nine months ended
September 30, 2009, respectively. The options have seven-year terms and one-third of the options vest, contingent on the employee's continuous service to the
Company, on each of the following dates: January 1, 2010, January 1, 2011, and January 1, 2012. The options have been granted with the following three exercise price tranches:



The
fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. Compensation expense is recognized using a straight-line
method over the shorter of the vesting period or required service period adjusted for estimated forfeitures. The following table sets forth the information about the weighted-average grant date fair
value of options granted during the nine months ended September 30, 2009 and the weighted-average assumptions used for such grants.

Nine Months Ended
September 30, 2009Weighted average grant date fair value


$1.19Weighted average assumptions used:Expected volatility


113.0
%Expected lives


3.0 yearsRisk-free interest rates


1.31
%Expected dividend yield


0.00
%


Expected
volatility is based on an analysis of historical volatility of the Company's common stock. Expected lives of options are determined based on projections of option exercises
patterns. Risk-free interest rates are determined using the implied yield currently available for zero coupon U.S. treasury issues with a remaining term equal to the expected life of the
options. The expected dividend yield is based on the September 15, 2008 announcement that the Company's quarterly cash dividends had been suspended indefinitely and the Company does not
currently anticipate paying dividends in the future.

Total
compensation expense associated with the Plan was $0.7 million and $0.9 million during the three months ended September 30, 2009 and 2008, respectively, and
$1.7 million and $2.7 million during the nine months ended September 30, 2009 and 2008, respectively. Such compensation expense was recorded in "Operating Expenses" in the
consolidated statements of operations. As of September 30, 2009, 516,951 shares were available for grant under the Plan.

18

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

9. Net Income (Loss) Per Share

The computation of net income (loss) per share is based on net income (loss) divided by the weighted average number of shares outstanding. Restricted shares include rights to receive
dividends that are not subject to the risk of forfeiture even if the underlying restricted shares on which the dividends were paid do not vest. Unvested share-based payment awards that contain
non-forfeitable rights to dividends are deemed participating securities and are included in the calculation of basic net income per share. Since restricted shares do not include an
obligation to share in losses, they are excluded from the basic net loss per share calculation. Accordingly, 33,478 and 12,117 restricted shares were excluded from the computation of basic net loss
per share for the three and nine months ended September 30, 2008.

Three Months Ended
September 30,

Nine Months Ended
September 30,2009

2008

2009

2008(in thousands, except per share amounts)Net income (loss) for basic and diluted computation

$
9,988

$
(112,990
)
$
6,259

$
(110,643
)Basic net income (loss) per share:Weighted average common shares outstanding


22,502


22,035


22,291


22,012Net income (loss)

$
0.44

$
(5.13
)
$
0.28

$
(5.03
)Diluted earnings per share:Weighted average common shares outstanding


22,502


22,035


22,291


22,012Shares issuable from assumed conversion of restricted stock units and options


181





143


Weighted average common shares outstanding, as adjusted


22,683


22,035


22,434


22,012Net income (loss)

$
0.44

$
(5.13
)
$
0.28

$
(5.03
)


10. Income Taxes

The Company's effective tax rate differs from the federal statutory income tax rate of 35% due to state income and margin taxes and the effect of permanent differences, primarily the
non-deductible portion of the interest expense recognized on the Discount Notes.

The
amount of gross unrecognized tax benefits related to uncertain tax positions was $3.6 million at September 30, 2009 and December 31, 2008, which included accrued
interest and penalties of $1.5 million as of September 30, 2009 and $1.4 million as of December 31, 2008. The total amount of interest and penalties, net of federal
benefit, recognized in the statement of operations for the three months ended September 30, 2009 and 2008 was immaterial.

As
a result of net operating loss carryforwards, the Company's tax years from 1997 through 2008 remain open and subject to examination by the Internal Revenue Service and/or certain
state taxing authorities. The Company is undergoing routine tax audits in certain U.S. state jurisdictions covering multiple years. The Company is not aware of any material proposed income tax
adjustments and expects the completion of the audits in the near term. A $2.2 million reduction of the $3.6 million total

19

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

10. Income Taxes (Continued)

unrecognized
tax benefit as of September 30, 2009 is possible in the next 12 months as a result of the settlement of certain current tax audits and other potential settlements with U.S.
state taxing authorities.

11. Commitments and Contingencies

In order to secure a long-term supply of plastic bags at favorable prices, the Company entered into a supply agreement with a plastic bag manufacturer (the "Bag Supply
Agreement") in which it committed to purchase 250 million bags per twelve-month period beginning March 1, 2008. The Bag Supply Agreement expires on March 1, 2013. On
March 9, 2009, the Bag Supply Agreement was amended to start on January 1, 2008 and end on December 31, 2012 and modify certain other provisions. The annual commitment to purchase
250 million bags remains in effect. The Company anticipates being in compliance with the terms of the contract at December 31, 2009.

The
following is a discussion of the Company's significant legal matters. The Company is involved in various claims, suits, investigations, and legal proceedings. The Company accrues a
liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. At September 30, 2009 and December 31,
2008, no accruals had been made in connection with the matters discussed below.

Antitrust Matters

In March 2008, the Company and certain of its employees, including members of its management, received subpoenas issued by a federal
grand jury in the Eastern District of Michigan seeking documents and information in connection with an investigation by the Antitrust Division of the United States Department of Justice ("DOJ") into
possible antitrust violations in the packaged ice industry. In addition, on March 5, 2008, federal officials executed a search warrant at the Company's corporate office in Dallas, Texas. On
August 28, 2008, the Company received a second subpoena for documents from the federal grand jury sitting in the Eastern District of Michigan. The DOJ has also issued subpoenas to Company
employees to appear in person before the federal grand jury in the Eastern District of Michigan. The search warrant and subpoenas that the Company and its employees received are part of a broader
industry inquiry by the Antitrust Division of the DOJ. The Home City Ice Company and three former employees of Arctic Glacier International, Inc. have entered guilty pleas regarding a
conspiracy to allocate customers and territories in southeastern Michigan and the Detroit, Michigan, metropolitan area, and Arctic Glacier has reached an agreement with the DOJ to enter a guilty plea
regarding a conspiracy to allocate customers and territories in southeastern Michigan and the Detroit, Michigan, metropolitan area.

On
March 25, 2008, the Company was served by the Office of the Attorney General of the State of Florida with an antitrust civil investigative demand (the "Florida CID") requesting
the production of documents and information relating to an investigation of agreements in restraint of trade and/or price-fixing with respect to the pricing or market allocation of packaged ice. On
June 11, 2008, the Company received a civil investigative demand from the Office of the Attorney General of the State of Arizona (the "Arizona CID"). All of the documents and information
requested by the Arizona CID are included in the Florida CID and the Arizona CID states that it will be satisfied by the production of information which has been and will be provided to Florida in
response to the Florida CID. On or

20

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

11. Commitments and Contingencies (Continued)

about
June 16, 2009, the Company was served by the State of Michigan, Department of the Attorney General, with a civil investigative demand requesting information and documents relating to
sales of ice to units of government in Michigan, sales of ice in Michigan for which the Company made or received payment, and contracts and agreements with Michigan entities (the "Michigan CID"). The
Company has been advised that the Florida CID, the Arizona CID and the Michigan CID are related to a multi-state antitrust investigation of the packaged ice industry and that the Attorneys General of
19 states and the District of Columbia are participating in the multi-state investigation. The states' investigation is related to the ongoing investigation of the packaged ice industry by the
Antitrust Division of the DOJ. The Company may in the future receive additional civil investigative demands or similar information requests from other states participating in the multi-state
investigation or conducting their own investigations.

On
November 19, 2008, the Company was notified by the Civil Fraud Division of the DOJ (the "Civil Fraud Division") that the Civil Fraud Division has opened an investigation with
respect to the Company. The Civil Fraud Division's investigation is expected to examine whether the Company may
have violated the federal False Claims Act by submitting, or causing to be submitted, false claims to the federal government by entering into allegedly anticompetitive agreements which may have
affected the sale of packaged ice to the government. On or about January 6, 2009, the Company received a request for documents in connection with that investigation. The Civil Fraud Division's
investigation is related to the investigation by the Antitrust Division of the DOJ.

The
Company is cooperating with the authorities in these investigations. It has substantially completed its production of documents to the Antitrust Division of the DOJ and to the
states. It has substantially completed providing information and documents requested by the Civil Fraud Division of the DOJ. The Company has also made employees available for interviews by the
Antitrust Division of the DOJ. The Company expects to continue to make available documents and other information in response to the investigating agencies' subpoenas, requests and civil investigative
demands. At this time, the Company is unable to predict the outcome of these investigations, the possible loss or possible range of loss, if any, associated with the resolution of these investigations
or any potential effect they may have on the Company, its employees or operations.

On
March 6, 2008, the Company's Board of Directors formed a special committee of independent directors to conduct an internal investigation of these matters. The special committee
retained counsel to assist in its investigation. In order to maintain the independence of the special committee's investigation, officers and employees who were employed by the Company at the time the
investigation commenced have not had access to information obtained in the special committee's investigation or the results of the investigation to date. The investigation by the special committee and
its counsel is substantially complete. The special committee's investigation will likely remain open until the conclusion of the investigation by the Antitrust Division of the DOJ because of the
possibility that additional information relevant to the special committee's investigation may become available to the special committee. At this time, the special committee has not reached a
determination whether any violations of the antitrust laws have occurred. The special committee does not believe any of the Company's active employees are a focus of the investigation by the Antitrust
Division of the DOJ. The Company and its employees are cooperating in the special committee's investigation.

21

---



REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

11. Commitments and Contingencies (Continued)

Effective
September 13, 2008, Ben D. Key, the Company's Executive Vice PresidentSales & Marketing, was placed on a paid leave of absence and relieved of his
duties at the direction of the special committee. The special committee has found that Mr. Key violated Company policies and is associated with matters that are under investigation.

Following
the announcement that the Antitrust Division of the DOJ had instituted an investigation of the packaged ice industry, a number of lawsuits, including putative class action
lawsuits, were filed in various federal courts in multiple jurisdictions alleging violations of federal and state antitrust laws and related claims and seeking damages and injunctive relief. Pursuant
to an Order from the Judicial Panel
on Multidistrict Litigation, the civil actions pending in federal courts have been transferred and consolidated for pretrial proceedings in the United States District Court for the Eastern District of
Michigan. On June 1, 2009, the Court appointed interim lead and liaison counsel for the putative direct and indirect purchaser classes. On July 17, 2009 the Court entered a case
management order requiring the lead plaintiffs for each class to file a consolidated amended complaint within 60 days of the order, and providing 45 days for the defendants to
respond to the direct purchaser consolidated amended complaint and 60 days for the defendants to respond to the indirect purchaser consolidated amended complaint. On September 15, 2009,
the lead plaintiffs for each of the putative direct and indirect purchaser classes filed consolidated amended complaints.

In
addition to the putative class action lawsuits filed in federal court, a putative class action lawsuit was filed in Kansas state court alleging violations of state antitrust laws and
related claims and seeking damages and injunctive relief. Defendants filed motions to dismiss and those motions to dismiss were granted on February 26, 2009.

One
direct action lawsuit has been filed against the Company in the United States District Court for the Eastern District of Michigan asserting claims based on alleged violations of
federal and state antitrust laws, RICO and tortious interference and seeking damages, civil penalties and injunctive relief. The defendants filed motions to dismiss that case. On May 29, 2009
the Court dismissed all claims against the Company in that lawsuit. On June 29, 2009, the plaintiff filed a motion for reconsideration, and on July 17, 2009 the Court reversed in part
its May 29, 2009 order, reinstating only the RICO claim against the Company. The dismissal of the remaining claims was not affected. On August 10, 2009, the Company filed an answer to
the reinstated claim.

The
Company intends to vigorously defend the pending lawsuits. At this time, the Company is unable to predict the outcome of these lawsuits, the possible loss or possible range of loss,
if any, associated with the resolution of these lawsuits or any potential effect they may have on the Company or its operations.

SEC Inquiry

On or about October 21, 2008, the Company received notice that the Securities and Exchange Commission has initiated an informal
inquiry into matters that are the subject of the investigation by the special committee of the Company's Board of Directors. The Company intends to cooperate with the informal inquiry.

22

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

11. Commitments and Contingencies (Continued)

Stockholder Litigation

Beginning on August 8, 2008, purported class action complaints have been filed in the United States District Court for the
Eastern District of Michigan asserting claims under the federal securities laws against the Company and certain of its current or former senior officers. The complaints, which are substantially
similar, allege that the defendants misrepresented and failed to disclose the existence of, and the Company's alleged participation in, an alleged antitrust conspiracy in the packaged ice industry.
The complaints purport to assert claims on behalf of various alleged classes of purchasers of the Company's common stock. Two motions for consolidation of the three actions and for appointment of lead
plaintiff and lead plaintiff's counsel were filed on October 7, 2008. Thereafter, one of the two proposed lead plaintiffs withdrew his motion. On July 17, 2009, the Court consolidated
the actions and appointed a lead plaintiff and interim lead plaintiff's counsel. Pursuant to a revised scheduling order filed on October 14, 2009, the lead plaintiff is required to
file a consolidated amended complaint on or before November 2, 2009. The Company is required to file a response to that consolidated amended complaint on or before
December 17, 2009.

Two
stockholder derivative actions have been filed on the Company's behalf in state district court in Dallas County, Texas, naming as defendants, among others, the members of the
Company's board of directors and certain current and former officers. Those cases have been consolidated in the 68th Judicial District Court of Dallas County, Texas. The petitions assert claims
for breach of fiduciary duty, unjust enrichment, insider selling, abuse of control, and gross mismanagement and seek damages, equitable relief, attorney fees and costs. The consolidated case is
currently administratively closed, with the parties required to submit monthly joint status letters regarding the stockholder actions pending in the Eastern District of Michigan. Status conferences
were held on August 13, 2009 and October 5, 2009, and another status conference is currently scheduled for February 1, 2010.

The
Company and the other defendants intend to vigorously defend the pending lawsuits. At this time, the Company is unable to predict the outcome of these lawsuits, the possible loss or
possible range of loss, if any, associated with the resolution of these lawsuits or any potential effect they may have on the Company or its operations.

Other Matters

The Company is also involved in various other claims, lawsuits and proceedings arising in the ordinary course of business. There are
uncertainties inherent in the ultimate outcome of such matters and it is difficult to determine the ultimate costs that the Company may incur. The Company believes the resolution of such other
ordinary course uncertainties and the incurrence of such costs will not have a material adverse effect on its consolidated financial position, results of operations or cash flows.

12. Investments

Investments in which the Company has significant influence over the investee are accounted for utilizing the equity method. If the Company does not have significant influence over the
investee, the cost method is utilized. The Company periodically evaluates whether declines in fair value of its investments are other-than-temporary. This evaluation consists
of several qualitative and quantitative

23

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

12. Investments (Continued)

factors
regarding the severity and duration of the unrealized loss as well as the Company's ability and intent to hold the investment.

On
August 7, 2009, the Company invested in the Series A Preferred Units of a privately held ice supply and service company. These Series A Preferred Units do not
meet the definition of a marketable security and the Company has accounted for the investment based upon the cost method. As of September 30, 2009, the investment balance was
$1.1 million.

13. Impairment of Assets

Company is required on at least an annual basis to perform a goodwill impairment assessment, which requires, among other things, a reconciliation of current equity market capitalization
to stockholders' equity. No asset impairments were recorded during the nine months ended September 30, 2009. As a result of the decline in the Company's stock price during the three months
ended September 30, 2008, the Company's total stockholders' equity exceeded its equity market capitalization (including the application of a reasonable control premium) as of
September 30, 2008 and, as a result, the Company performed a goodwill impairment assessment as of September 30, 2008. The Company's impairment assessment only considered the Company's
stock price and did not include management's long-range forecasts or any other valuation measures. Based on the evaluation of the Company's stock price and trading activity subsequent to
September 30, 2008 and the estimated amount by which the current fair value of the Company's fixed assets and intangible assets exceeds their book value, the Company concluded that its goodwill
was impaired. As a result, the Company recorded a $149.7 million non-cash charge (pretax) during the three months ended September 30, 2008 to reduce goodwill to its estimated
fair value as of September 30, 2008.

During
the three months ended September 30, 2008, the Company reviewed a parcel of real estate for impairment as a result of the pending sale of the property. As a result of this
review, an impairment charge of $0.2 million was recorded during the three months ended September 30, 2008.

24

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our
condensed consolidated financial statements and the related notes and other information included elsewhere in this Form 10-Q and our Annual Report on Form 10-K
for the year ended December 31, 2008, previously filed with the Securities and Exchange Commission ("SEC").

Reddy
Ice Holdings, Inc. ("Reddy Holdings"), and its wholly-owned subsidiary, Reddy Ice Corporation ("Reddy Corp."), manufacture and distribute packaged ice products. We are the
largest manufacturer of packaged ice products in the United States and serve a variety of customers in 32 states and the District of Columbia under the Reddy Ice® brand name.

At
September 30, 2009, we owned or operated 58 ice manufacturing facilities, 68 distribution centers and approximately 3,300 Ice Factories. As of the same date, we had an
aggregate daily ice manufacturing capacity of approximately 18,000 tons.

Uncertainty of Forward Looking Statements and Information

Other than statements of historical facts, statements made in this Form 10-Q, statements made by us in periodic
press releases, oral statements made by our management to analysts and stockholders and statements made in the course of presentations about our company constitute "forward- looking statements"
intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. We believe the expectations reflected in such forward-looking statements are
accurate. However, we cannot assure you that such expectations will occur. These forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual
results, performance or achievements to be materially different from future results expressed or implied by the forward- looking statements. Factors you should consider that could cause these
differences are:



25

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You
should not unduly rely on these forward-looking statements as they speak only as of the date of this report. Except as required by law, we are not obligated to publicly release any
revisions to these forward looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events. Important factors that
could cause our actual results to differ materially from our expectations are discussed elsewhere in this report.

General

Overview.We are the largest manufacturer and distributor of packaged ice in the United States and currently serve a variety of
customers in 32
states and the District of Columbia. Our business consists of:



Seasonality.The packaged ice business is highly seasonal, characterized by peak demand during the warmer months of May through
September, with an
extended peak selling season in the southern United States. Approximately 69%, 68% and 70% of our annual revenues occurred during the second and third calendar quarters in each of 2008, 2007 and 2006.
As a result of seasonal revenue declines and a less than proportional decline in expenses during the first and fourth quarters, we typically experience lower margins resulting in losses during these
periods.

Revenues.Our revenues primarily represent sales of packaged ice and packaged ice bags for use in our Ice Factory equipment.
There is no right of
return with respect to these products or services. A portion of our revenues are also generated by the leasing of Ice Factories to third parties.

Cost of Sales (Excluding Depreciation).Our cost of sales (excluding depreciation) consists of costs related to the manufacture
and distribution of
our products, including, in particular:



Depreciation Expense Related to Cost of Sales and Depreciation and Amortization Expense.Depreciation and amortization are
divided into two line
itemsdepreciation expense related to cost of sales
and depreciation and amortization expense. Depreciation expense related to cost of sales consists of depreciation expense for our production and distribution equipment. Depreciation and amortization
expense consists of depreciation and amortization expense for our selling, general and administrative functions.

26

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Operating Expenses.Our operating expenses are costs associated with selling, general and administrative functions. These costs
include executive
officers' compensation, office and administrative salaries, insurance, legal and other professional services and costs associated with leasing office space. Labor costs, including associated payroll
taxes and benefit costs but excluding non-cash stock-based compensation expense, included in operating expenses represented approximately 8% and 7% of revenues in the nine months ended
September 30, 2009 and 2008, respectively.

Cost of antitrust investigations and related litigation.Costs related to the current antitrust investigations and related
litigation, net of
insurance recoveries, are composed primarily of legal fees, document collection costs and the fees of other experts and consultants.

Facilities.At September 30, 2009, we owned or operated 58 ice manufacturing facilities, 68 distribution centers and
approximately 3,300 Ice
Factories. As of the same date, we had an aggregate daily ice manufacturing capacity of approximately 18,000 tons.

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

Three Months Ended
September 30,

Change from Last
Year2009

2008

Dollars

%(in thousands)Revenues

$
115,446

$
125,646

$
(10,200
)

(8.1
)Cost of sales (excluding depreciation)


64,851


72,659


(7,808
)

(10.7
)Depreciation expense related to cost of sales


5,494


5,223


271


5.2Gross profit


45,101


47,764


(2,663
)

(5.6
)Operating expenses


12,690


12,213


477


3.9Depreciation and amortization expense


1,772


1,653


119


7.2Loss on dispositions of assets


145


62


83


133.9Impairment of assets





149,905


(149,905
)

(100.0
)Loss on diesel hedge


144





144


Cost of antitrust investigations and related litigation


735


6,125


(5,390
)

(88.0
)Income (loss) from operations


29,615


(122,194
)

151,809


124.2Interest expense


(6,231
)

(7,879
)

1,648


20.9Interest income


18


149


(131
)

(87.9
)Income (loss) before income taxes


23,402


(129,924
)

153,326


118.0Income tax (expense) benefit


(13,414
)

16,934


(30,348
)

(179.2
)Net income (loss)

$
9,988

$
(112,990
)
$
122,978


108.8


Revenues:Revenues decreased $10.2 million from the three months ended September 30, 2008 to the three months ended
September 30, 2009. This decrease is primarily due to a decline in packaged ice volume sales related to the effect of various adverse economic trends on our customers and end users of our
products and a decline in hurricane-related demand, partially offset by higher average sales prices.

Cost of sales (excluding depreciation):Cost of sales (excluding depreciation) decreased $7.8 million from the three months
ended
September 30, 2008 to the three months ended September 30, 2009. This decrease in cost of sales is primarily due to lower volume sales and declines in the prices of fuel and plastic bags
related to lower market prices.

Labor
costs, including associated payroll taxes and benefit costs (including health insurance), accounted for approximately 20% of revenues in the three months ended September 30,
2009 and 2008, respectively. Cost of plastic bags represented approximately 6% and 7% of revenues in the three

27

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months
ended September 30, 2009 and 2008. Fuel expenses represented approximately 3% and 6% of revenues in the three months ended September 30, 2009 and 2008. The ratio of fuel expenses
to revenues decreased as a result of declines in the market prices of energy. Expenses for independent third party distribution services were 6% and 5% of revenues in the three months ended
September 30, 2009 and 2008. Electricity expense accounted for approximately 5% and 6% of revenues in the three months ended September 30, 2009 and 2008.

Depreciation expense related to cost of sales:Depreciation expense related to cost of sales increased $0.3 million as a
result of new
production and distribution equipment placed in service in 2009, partially offset by dispositions and assets becoming fully depreciated.

Operating expenses:Operating expenses increased $0.5 million from the three months ended September 30, 2008 to the
three months ended
September 30, 2009. This increase is primarily due to $0.7 million increase in labor and benefits, partially offset by a $0.2 million decrease in non-cash stock-based
compensation expense and a $0.2 million decrease in accrued incentive compensation. Labor and benefits increased due to additional headcount at the senior management level and higher health
insurance costs.

Impairment of assets:Due to a significant decline in the value of our common stock during 2008, an evaluation of our goodwill
and trade name was
performed as of September 30, 2008. Based on a market value approach, an impairment of $149.7 million was recorded to reduce the carrying value of our goodwill to its fair value.

During
the three months ended September 30, 2008, we reviewed a parcel of real estate for impairment as a result of the pending sale of the property. As a result of this review,
an impairment charge of $0.2 million was recorded during the three months ended September 30, 2008.

Loss on diesel hedge:A loss of $0.1 million was recognized during the three months ended September 30,
2009 in connection with a derivative used to hedge the cost of diesel used in our delivery operations. The loss was composed of a $0.4 million non-cash change in the fair value of
the derivative, partially offset by $0.3 million of cash settlements as the floating amount received from the counterparty was greater than the fixed price we were obligated to pay.

Costs of antitrust investigations and related litigation:During the three months ended September 30, 2009 and 2008, we
incurred
$0.7 million and $6.1 million, respectively, of legal fees and other expenses associated with the antitrust investigation being conducted by the Antitrust Division of the United States
Department of Justice and the related litigation. Costs for the three months ended September 30, 2009 are net of $0.1 million of costs paid directly by our insurance carriers. We became
aware of and began incurring expenses related to the investigation in March 2008.

Interest expense, net:Net interest expense decreased $1.5 million from the three months ended September 30, 2008 to
the three months
ended September 30, 2009. This decrease was primarily due to lower interest rates on the unhedged portion of our term loan, lower average outstanding balances under the revolving credit
facility, and lower interest rates on the hedged portion of the term loan as a result of entering into a new interest rate hedge in February 2009, partially offset by scheduled increases in the
interest expense associated with our 101/2% senior discount notes and decreases in interest income primarily related to the decline in market interest rates.

Income tax expense:The effective tax rate increased from 13.0% during the three months ended September 30, 2008 to 57.3%
during the three
months ended September 30, 2009 as a result of changes in the ratio of permanent differences and state taxes based on gross margin to projected annual pre-tax income (loss).

28

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Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

Nine Months Ended
September 30,

Change from Last
Year2009

2008

Dollars

%(in thousands)Revenues

$
257,591

$
271,368

$
(13,777
)

(5.1
)Cost of sales (excluding depreciation)


157,554


172,444


(14,890
)

(8.6
)Depreciation expense related to cost of sales


15,788


15,670


118


0.8Gross profit


84,249


83,254


995


1.2Operating expenses


38,090


35,104


2,986


8.5Depreciation and amortization expense


5,211


4,950


261


5.3Loss on dispositions of assets


602


302


300


99.3Impairment of assets





149,905


(149,905
)

(100.0
)Gain on diesel hedge


(581
)




(581
)

Cost of antitrust investigations and related litigation


4,075


11,927


(7,852
)

(65.8
)Transaction costs related to merger agreement





949


(949
)

(100.0
)Gain on property insurance settlement





(1,036
)

1,036


(100.0
)Income (loss) from operations


36,852


(118,847
)

155,699


131.0Interest expense


(20,709
)

(23,709
)

3,000


12.7Interest income


124


613


(489
)

(79.8
)Gain on termination of merger agreement





17,000


17,000


(100.0
)Income (loss) before income taxes


16,267


(124,943
)

141,210


113.0Income tax (expense) benefit


(10,008
)

14,300


(24,308
)

(170.0
)Net income (loss)

$
6,259

$
(110,643
)
$
116,902


105.7


Revenues:Revenues decreased $13.8 million from the nine months ended September 30, 2008 to the nine months ended
September 30,
2009. This decrease is primarily due to a decline in packaged ice volume sales related to the effect of various adverse economic trends on our customers and end users of our products and a decline in
hurricane-related demand, partially offset by higher average sales prices.

Cost of sales (excluding depreciation):Cost of sales (excluding depreciation) decreased $14.9 million from the nine months
ended
September 30, 2008 to the nine months ended September 30, 2009. This decrease
in cost of sales is primarily due to lower volume sales and declines in the prices of fuel and plastic bags related to lower market prices.

Labor
costs, including associated payroll taxes and benefit costs (including health insurance), accounted for approximately 24% and 23%% of revenues in the nine months ended
September 30, 2009 and 2008, respectively. Cost of plastic bags represented approximately 6% and 7% of revenues in the nine months ending September 30, 2009 and 2008, respectively. Fuel
expenses represented approximately 3% and 6% of revenues in the nine months ended September 30, 2009 and 2008, respectively. The ratio of plastic bag and fuel expenses to sales decreased as a
result of declines in the market prices of energy. Expenses for independent third party distribution services were 6% of revenues in the nine months ended September 30, 2009 and 2008.
Electricity expense represented approximately 5% and 6% of revenues in the nine months ended September 30, 2009 and 2008, respectively.

Depreciation expense related to cost of sales:Depreciation expense related to cost of sales increased $0.1 million as a
result of new
production and distribution equipment placed in service in 2009 and 2008, partially offset by dispositions and assets becoming fully depreciated.

Operating expenses:Operating expenses increased $3.0 million from the nine months ended September 30, 2008 to the
nine months ended
September 30, 2009. This increase is primarily due to a

29

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$1.8 million
increase in labor and benefits, a $1.4 million increase in professional services and a $0.3 million increase in accrued incentive compensation, partially offset by a
$1.0 million decrease in non-cash stock-based compensation expense. Labor and benefits increased due to additional headcount at the senior management level and higher health
insurance costs. Professional service expense increased primarily due to a change in independent registered public accounting firms in late 2008 and consulting fees related to our strategic review of
our business.

Impairment of assets:Due to a significant decline in the value of our common stock during 2008, an evaluation of our goodwill
and trade name was
performed as of September 30, 2008. Based on a market value approach, an impairment of $149.7 million was recorded to reduce the carrying value of our goodwill to its fair value.

During
the three months ended September 30, 2008, we reviewed a parcel of real estate for impairment as a result of the pending sale of the property. As a result of this review,
an impairment charge of $0.2 million was recorded during the three months ended September 30, 2008.

Gain on diesel hedge:A gain of $0.6 million was recognized during the nine months ended September 30, 2009 in
connection with a
derivative used to hedge the cost of diesel used in our delivery operations. The gain was composed of a $0.3 million non-cash change in the fair value of the derivative and
$0.3 million of cash settlements as the floating amount received from the counterparty was greater than the fixed price we were obligated to pay.

Costs of antitrust investigations and related litigation:During the nine months ended September 30, 2009 and 2008, we
incurred
$4.1 million and $11.9 million, respectively, of legal fees and other expenses associated with the antitrust investigation being conducted by the Antitrust Division of the United States
Department of Justice and the related litigation. Costs for the nine months ended September 30, 2009 are net of $0.6 million of cost reimbursements from our insurance carrier and
$0.2 million of costs paid directly by our insurance carrier to certain service providers. We became aware of and began incurring expenses related to the investigation in March 2008.

Transaction costs related to merger agreement:On July 2, 2007, we announced that we had entered into an Agreement and Plan
of Merger, dated
as of July 2, 2007 (the "Merger Agreement"), by and among Reddy Holdings and certain affiliates of GSO Capital Partners LP ("GSO"). Our stockholders approved the transaction at a special
stockholder meeting on October 12, 2007. We incurred $0.9 million of professional service expenses related to the proposed transaction and related stockholder litigation during the nine
months ended September 30, 2008.

Gain on property insurance settlement:During the nine months ended September 30, 2008, a property insurance claim related
to fire damage at
one of our manufacturing facilities was settled, which resulted in a gain of $1.0 million.

Interest expense, net:Net interest expense decreased $2.5 million from the nine months ended September 30, 2008 to
the nine months
ended September 30, 2009. This decrease was primarily due to lower interest rates on the unhedged portion of our term loan, lower average outstanding balances under the revolving credit
facility, and lower interest rates on the hedged portion of the term loan as a result of entering into a new interest rate hedge in February 2009, partially offset by scheduled
increases in the interest expense associated with our 101/2% senior discount notes and decreases in interest income primarily related to the decline in market interest rates.

Gain on termination of merger agreement:On January 31, 2008, we reached an agreement with affiliates of GSO to terminate
the Merger
Agreement. A settlement agreement was entered into which released all parties from any claims related to the contemplated acquisition and provided for a $21 million termination fee to be paid
by GSO. We agreed to pay up to $4 million of fees and expenses incurred by GSO and its third-party consultants in connection with the transaction. We received a net payment of
$17 million on February 5, 2008.

30

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Income tax benefit (expense):The effective tax rate increased from 11.4% during the nine months ending September 30, 2008
to 61.5% during the
nine months ended September 30, 2009 as a result of the effect of changes in the ratio of permanent differences and state taxes based on gross margin to projected annual pre-tax
income (loss).

Liquidity and Capital Resources

We intend to fund our ongoing capital and working capital requirements as well as debt service, including our internal growth and
acquisitions, through a combination of cash flows from operations, borrowings under our credit facilities and operating leases.

We
generate cash from the sale of packaged ice through traditional delivery methods, by which we manufacture, package and store ice at a central facility and transport it to our
customers' retail locations when needed, and through Ice Factories, which manufacture, package and store ice in our customers' retail locations. Our primary uses of cash are (a) cost of sales,
(b) operating expenses, (c) debt service, (d) capital expenditures related to replacing and modernizing the capital equipment in our traditional ice plants and acquiring and
installing additional Ice Factories, and (e) acquisitions. During 2008, we paid $27.7 million in cash dividends on our common stock; however, on September 15, 2008, we announced
that we were suspending the payment of quarterly cash dividends indefinitely. We have been and may continue to be required to use substantial amounts of cash to pay expenses relating to the ongoing
investigations by the Antitrust Division of the United States Department of Justice and various
other government agencies and related civil litigation. See Part II, Item 1. Legal Proceedings. Historically, we have financed our capital and working capital requirements, including our
acquisitions, through a combination of cash flows from operations, borrowings under our revolving credit facilities and operating leases.

During
the nine months ended September 30, 2009, capital expenditures totaled $20.7 million, which includes an offset of $6.0 million in cash inflows for the
reimbursement of the cost of equipment placed under operating leases. Capital expenditures were higher than anticipated during the nine months ended September 30, 2009 due to changes in the
timing of the planned closing of equipment operating leases and purchases of certain assets. As we have consolidated acquisitions into our existing infrastructure, we have identified
non-core and excess assets which can be disposed of, such as real estate and machinery and equipment. From time to time, we also dispose of other assets which are no longer useful in our
operations. As a result of dispositions of these non-core and excess assets, we realized proceeds of approximately $0.3 million during the nine months ended September 30,
2009. Our net capital expenditures during the nine months ended September 30, 2009 were $20.4 million.

In
2008, we completed the acquisition of seven ice companies for a total cash purchase price of approximately $4.0 million, including direct acquisition costs of
$0.1 million. We also purchased one manufacturing facility which had previously been leased for $0.4 million. We have not acquired any ice companies in 2009; however, we invested
$1.1 million in the Series A Preferred Units of a privately held ice supply and service company during the three months ended September 30, 2009. We will continue to evaluate
acquisition opportunities as they become available. In conjunction with these evaluations, we will consider our liquidity, availability under our credit facilities, mandatory principal repayments
under our debt agreements and availability of other capital resources.

Cash Flows for the Nine Months Ended September 30, 2009 and 2008

Net cash provided by operating activities was $28.3 million in the nine months ended September 30, 2009 versus net cash
provided by operating activities of $43.6 million in the nine months ended September 30, 2008. The decrease in cash provided by operating activities of $15.3 million was primarily
the result of a $17.0 million gain recognized in 2008 upon termination of the merger agreement, a $6.7 million increase in cash interest payments primarily due to the first scheduled
cash interest payment on the senior discount notes on May 1, 2009 and a $3.0 million increase in operating expenses. These decreases in operating cash flows were partially offset by a
$1.0 million increase in gross profit, net of depreciation, a $7.9 million decrease in the cost of the antitrust investigation and related litigation and a $4.2 million decrease
in cash used by changes in working capital.

31

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Net cash used in investing activities was $21.4 million for the nine months ended September 30, 2009 and net cash provided by investing activities was $1.0 million
in the nine months ended September 30, 2008. The increase in cash used in investing activities is primarily due to (i) the release of $17.2 million of restricted cash and cash
equivalents in 2008 as a result of the utilization of the net proceeds from the sale of our bottled water and cold storage businesses sold in 2007 to fund current capital expenditures and acquisition,
(ii) a $5.2 million increase in property and equipment additions (iii) a $1.5 million decrease in the proceeds from property insurance settlement, (iv) a
$1.3 million decrease in proceeds from dispositions of property and equipment, and (v) a $1.1 million increase in the purchase of investments. The net proceeds from the sale of
our bottled water and cold storage businesses in 2007 were $19.4 million. Our senior credit agreement required that the net proceeds from the sales be used either to repay term borrowings under
the credit facility or to make acquisitions and/or capital expenditures within twelve months of the receipt of such proceeds. Until used, the proceeds were on deposit in a restricted account with the
administrative agent under the senior credit facility. Partially offsetting these items was a decrease of $3.9 million in cash spent for acquisitions.

Net
cash used in financing activities was $28 million in the nine months ended September 30, 2008 as cash dividends paid to stockholders exceeded net borrowings under our
revolving credit facility. Net cash used in financing activities was $0.03 million in the nine months ended September 30, 2009 as a result of the repurchase and retirement of common
stock in connection with the payment of taxes by employees upon the vesting of restricted stock units.

Long-term Debt and Other Obligations

Overview.At September 30, 2009, we had $390.6 million of total debt outstanding as follows:



Senior Discount Notes.On October 27, 2004, Reddy Holdings issued $151.0 million in aggregate principal amount at
maturity of
101/2% senior discount notes due 2012 in a private placement offering. Each senior discount note had an initial accreted value of $663.33 per $1,000 principal amount at maturity. The
accreted value of each senior discount note increased from the date of issuance until November 1, 2008 at a rate of 101/2% per annum such that the accreted value equaled the
stated principal amount on November 1, 2008. Thereafter, cash interest accrues and is payable semi-annually beginning May 1, 2009 at a rate of 101/2% per
annum. The senior discount notes are unsecured obligations of Reddy Holdings and are:



The
senior discount notes include customary covenants that restrict, among other things, the ability to incur additional debt or issue certain preferred stock, pay dividends or redeem,
repurchase or retire our capital stock or subordinated indebtedness, make certain investments, incur liens, enter into arrangements that restrict dividends from our subsidiary, merge or sell all or
substantially all of the assets or enter into various transactions with affiliates. From and after November 1, 2008, we may redeem any or all of the senior discount notes by paying a redemption
premium which is initially 5.25%

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of
the principal amount at maturity of the senior discount notes, and will decline annually to zero commencing on November 1, 2010. If we experience a change of control we will be required to
make an offer to repurchase the senior discount notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of purchase. We may also be required to
make an offer to purchase the senior discount notes with proceeds of asset sales that are not reinvested in our business or used to repay other indebtedness. We registered the senior discount notes
with the SEC pursuant to a registration statement that was declared effective on August 26, 2005.

The
indenture governing our senior discount notes restricts the amount of dividends, distributions and other restricted payments we may pay. Under the indenture, we are restricted from
paying dividends on our common stock unless, at the time of such payment:



The
consolidated coverage ratio under the indenture governing our senior discount notes is defined as the ratio of our Adjusted EBITDA for the most recent four fiscal quarters to our
consolidated interest expense for such four quarter period. "Adjusted EBITDA" under the indenture governing our senior discount notes is defined as the sum of our consolidated net income plus our
income tax expense, our interest expense, our depreciation and amortization expense, unrealized non-cash gains or losses or non-cash charges in respect of hedging obligations
required to be taken under generally accepted accounting principles, unrealized foreign currency translation gains or losses and all other non-cash charges, except to the extent
representing an accrual or reserve for a future cash expenditure. "Consolidated net income" under the indenture governing our senior discount notes is defined as net income of Reddy Holdings and its
restricted subsidiary: plus or minus cash dividends received on investments or equity in net losses of persons other than the restricted subsidiary, respectively; provided that the following are not
included in consolidated net income: (i) net income or loss of the subsidiary acquired in pooling of interests transactions for any period prior to the date of their acquisition,
(ii) any net income of the subsidiary restricted in the payment of a dividend (other than certain permitted restrictions, including those under our credit facilities), (iii) gains or
losses from non-ordinary course asset sales, (iv) extraordinary gains or losses, (v) the cumulative effect of changes in accounting principles,
(vi) non-recurring fees and expenses and write offs of deferred financing costs related to the financing transactions in connection with the 2003 merger of Cube Acquisition Corp.
and Packaged Ice, Inc. and, (vii) any fees, charges, costs or expenses relating to our initial public offering and the related transactions and paid in cash, to the extent deducted in
the determination of consolidated net income. "Consolidated interest expense" under the indenture governing our senior discount notes is defined as total interest expense plus, to the extent not
included in total interest expense, (i) interest expense attributable to capital leases, (ii) amortization of debt discount and issuance costs, (iii) capitalized interest,
(iv) non-cash interest expense, (v) fees on letters of credit, (vi) net payments pursuant to hedging obligations, (vii) dividends accrued on certain
disqualified stock (viii) interest incurred in connection with investments in discontinued operations, (ix) interest on guaranteed indebtedness and (x) cash contributions to
employee stock ownership plans to the extent they are used to pay interest or fees on indebtedness incurred by such plans. We are generally required to calculate our consolidated coverage ratio on a
pro forma basis to give effect to the incurrence and repayment of indebtedness as well as acquisitions and dispositions.

The
buildup amount equals 50% of our consolidated net income accrued during the period (treated as one accounting period) from July 1, 2003 to the end of the most recent fiscal
quarter for which internal financial statements are available (or, if such consolidated net income is a deficit, minus

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100%
of such deficit), plus, the net cash proceeds of the issuance of capital stock, subject to certain exceptions, and any cash capital contribution received by us from our stockholders in each case
after August 15, 2003 plus the amount by which our indebtedness is reduced on our balance sheet as a result of the conversion or exchange of such indebtedness for our capital stock, plus the
net reduction in certain restricted investments made by us, less the amount of certain restricted payments we make from time to time, including, among other things, the payment of cash dividends. As
of September 30, 2009, the buildup amount was negative, primarily as a result of the $149.7 million non-cash
goodwill impairment charge recognized in the three months ended September 30, 2008. We are not currently permitted to pay dividends under this provision.

In
addition, regardless of whether we could make any restricted payments under the buildup amount provision referred to above, we may (1) make dividend payments at any time in an
aggregate amount of up to $15.0 million if no default has occurred and is continuing under the indenture and (2) following our initial public offering, pay dividends on our capital stock
of up to 6.0% per year of the cash proceeds (net of underwriters' fees, discounts, commissions or other expenses paid by us) received by us from all such public equity offerings subject to specified
conditions. Accordingly, we are able to pay approximately $7.0 million annually in dividends under this 6.0% provision. However, the amount of dividend payments permitted under this 6.0%
provision will correspondingly reduce the amount we would otherwise have available to us under the buildup amount for restricted payments, including dividends.

Credit Facilities.On August 12, 2005, Reddy Ice Group, Inc., our wholly-owned subsidiary, entered into new credit
facilities in an
aggregate principal amount of $300 million with a syndicate of banks, financial institutions and other entities as lenders, including Credit Suisse, Cayman Islands Branch, as Administrative
Agent, CIBC World Markets Corp., Bear Stearns Corporate Lending Inc. and Lehman Commercial Paper, Inc. The credit facilities provided for a seven-year term loan in the
amount of $240.0 million and a five-year revolving credit facility in the amount of $60.0 million. Proceeds of the term loan were used to repay our prior senior credit
facility.

On
January 1, 2007, Reddy Group merged with its wholly-owned subsidiary, Reddy Ice Corporation, with Reddy Corp. being the surviving entity. The credit facilities were amended on
that date to allow the merger and to provide for the assumption of the credit facilities by Reddy Corp.

At
September 30, 2009, the Company had $49.3 million of availability under the revolving credit facility, which was net of outstanding standby letters of credit of
$10.7 million. The standby letters of credit are used primarily to secure certain operating lease and insurance obligations. Lehman Commercial Paper, Inc. ("LCP") has a
$10 million commitment under the revolving credit facility, all of which is unfunded. LCP filed for bankruptcy in October 2008. During the three months ended June 30, 2009, the Company
made borrowings under the revolving credit facility. LCP failed to fund its commitments related to such borrowings and the Company does not believe LCP will fund borrowing requests made in the future.
As a result, the amount available to the Company under the revolving credit facility has been effectively reduced by $10 million.

Principal
balances outstanding under the revolving credit facility bear interest per annum, at our option, at the sum of the base rate plus 0.75% or LIBOR plus 1.75%. The base rate is
defined as the greater of the prime rate (as announced from time to time by the Administrative Agent) or the federal funds rate plus 0.5%. At September 30, 2009, the weighted average interest
rate of borrowings outstanding under the credit facilities was 2.0%, excluding the effect of our interest rate hedge. Interest on base rate loans is payable on the last day of each quarter. Interest
on LIBOR loans is payable upon maturity
of the LIBOR loan or on the last day of the quarter if the LIBOR loan exceeds 90 days. Reddy Corp. pays a quarterly fee on the average availability under the revolving credit facility based on
an annual rate of 0.5% except as described below.

In
addition, our credit facilities will allow us to incur up to an additional $80.0 million of incremental term loans under our credit facilities, subject to certain conditions.
No lenders have

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committed
to provide the incremental term loans. In the event that we incur incremental term loans that mature on or before the one year anniversary of the final maturity of the existing term loans
and that bear interest with margins higher than the margin applicable to any term loans outstanding under our credit facilities, the margins applicable to the existing term loans will be increased to
equal the margins applicable to the incremental term loans. In the event that we incur incremental term loans that mature after the one-year anniversary of the final maturity of the
existing term loans and that bear interest with margins more than 0.25% higher than the margins applicable to any term loans outstanding under our credit facilities, the margins applicable to the
existing term loans will be increased to equal the margins applicable to the incremental term loans, less 0.25%.

Our
credit facilities do not require any scheduled principal payments prior to the stated maturity dates. Subject to certain conditions, mandatory repayments of the revolving credit
facility and term loan (and if the term loan is no longer outstanding, mandatory commitment reductions of the revolving credit facility) are required to be made with portions of the proceeds from
(1) asset sales, (2) the issuance of debt securities and (3) insurance and condemnation awards, subject to various exceptions. In the event of a change in control, as defined in
the credit facilities, an event of default will occur under the credit facilities.

Our
credit facilities contain financial covenants, which include the maintenance of certain financial ratios, as defined in the credit facilities, and are collateralized by substantially
all of Reddy Corp.'s assets. At September 30, 2009, Reddy Corp. was in compliance with these covenants. Reddy Holdings guarantees Reddy Corp.'s credit facilities and such guarantee is
collateralized by a pledge of the capital stock of Reddy Corp.

Under
the restricted payments covenant in our credit facilities, we generally are restricted from paying dividends to our stockholders from funds received from Reddy Corp., and Reddy
Corp. is prohibited from paying dividends and otherwise transferring assets to Reddy Holdings. Reddy Corp. is permitted to pay certain limited dividends to Reddy Holdings, the proceeds of which must
be used to maintain Reddy Holdings' corporate existence. During 2008, Reddy Corp. transferred $1.0 million to Reddy Holdings under this provision.

Reddy
Corp. may also pay dividends to Reddy Holdings for certain other specified purposes, including the payment of cash dividends by Reddy Holdings to its stockholders and the payment
of cash interest
on our senior discount notes, in an amount not greater than our Cumulative Distributable Cash for the period (taken as one accounting period) from July 1, 2005 to the end of our most
recently-ended fiscal quarter for which a covenant compliance certificate under our credit facilities has been delivered to the lenders. As of September 30, 2009, the amount of Cumulative
Distributable Cash was $127.0 million. Such dividends may only be paid if Reddy Corp.'s leverage ratio for the most recently ended fiscal quarter is less than or equal to 3.75 to 1.0. In
addition, the credit facilities preclude Reddy Corp. from declaring or paying such dividends if a default or event of default under the credit facilities has occurred and is continuing. In particular,
it will be an event of default if Reddy Corp.'s leverage ratio exceeds 4.0 to 1.0 or Reddy Corp.'s interest coverage ratio is less than 3.25 to 1.0. If at the end of any fiscal quarter, Reddy Corp.'s
leverage ratio is greater than 3.75 to 1.0, and therefore Reddy Corp. is not permitted to pay dividends, Reddy Corp. will be required by our credit facilities to apply 50% of Reddy Corp.'s Available
Cash generated during each such quarter to make a mandatory prepayment of the loans under our credit facilities. If Reddy Corp. is not able to pay dividends to Reddy Holdings, Reddy Holdings may not
be able to pay the interest due under our senior discount notes, which would cause a default under the indenture governing our senior discount notes. A default under our senior discount notes would
also result in a default under our credit facilities.

At
September 30, 2009, Reddy Holdings had $4.5 million of cash on hand that was not subject to restrictions under our credit facilities.

"Cumulative
Distributable Cash" is defined under our credit facilities as:



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"Available
Cash" for any fiscal quarter is defined under our credit facilities as:



"Adjusted
EBITDA" is defined under our credit facilities to be the sum of:



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The following table presents Adjusted EBITDA for the twelve month period ended September 30, 2009 on a pro forma basis after giving effect to the adjustments permitted under the
description of the definition of Adjusted EBITDA set forth above. Adjusted EBITDA is different from EBITDA that is derived solely from GAAP components. Adjusted EBITDA should not be construed as an
alternative to net income (loss), cash flows from operations or net cash from operating or investing activities as defined by GAAP, and it is not necessarily indicative of cash available to fund our
cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and this presentation may not be comparable to similarly titled measures of other
companies. A reconciliation of net income to EBITDA and Adjusted EBITDA follows the table.

The
following table sets forth pro forma Adjusted EBITDA as calculated under our credit facilities and the financial ratio covenants contained in the credit facilities:

Twelve Months
Ended September 30,
2009(unaudited,
in thousands)Pro forma adjusted EBITDA

$
65,872Total leverage ratio


3.65 : 1.0Interest coverage ratio


5.73 : 1.0


The
following table sets forth a reconciliation of net loss to EBITDA and Adjusted EBITDA:

Twelve Months
Ended
September 30, 2009(In thousands)Net loss

$
(3,529
)Depreciation expense related to cost of sales


20,914Depreciation and amortization expense


6,976Interest expense


28,893Interest income


(336
)Income tax benefit


2,906EBITDA


55,824Other non-cash items:Stock-based compensation expense


606Loss on dispositions of assets


2,169Increase in fair value of derivative


(290
)Reddy Holdings items:Cost of antitrust investigations and related litigation(a)


7,672Insurance reimbursements and transaction costs related to merger agreement, net(a)


(114
)Adjusted EBITDA


65,867Elimination of lease expense(b)


5Pro forma adjusted EBITDA

$
65,872


(a)Represents
the elimination of (i) the costs incurred in connection with the ongoing antitrust investigations and related litigation and
(ii) the insurance reimbursements and transaction costs related to the GSO transaction and the related stockholder litigation. The costs related to the GSO merger agreement and the antitrust
investigations and related civil litigation are excluded from the calculation of Adjusted EBITDA as these


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costs
have been paid by Reddy Holdings. Reddy Holdings is currently paying these costs from the excess cash remaining from the initial public offering of its common stock in August 2005, the funds
paid to Reddy Holdings by affiliates of GSO in February 2008 in connection with the termination of the merger agreement, and insurance proceeds related to the antitrust investigations and related
litigation. (b)Represents
the elimination of lease expense on a manufacturing facility purchased in the fourth quarter of 2008, as if the purchase had been consummated on
the first day of the period presented.




Interest Rate Hedging Agreements.Effective September 12, 2005, we entered into an interest rate hedging agreement (the "2005
Hedge") to lock
the interest rate on a portion of our Term Loan. The 2005 Hedge had a term of three years and ten months and expired on July 12, 2009. The 2005 Hedge had an initial notional balance of
$220 million. We paid a fixed rate of 4.431% on the notional balance outstanding and received an amount equal to 3-month LIBOR.

Effective
February 17, 2009, we entered into a second interest rate hedging agreement (the "2009 Hedge") to lock the interest rate on a portion of our term loan facility. The 2009
Hedge has a term of 10 months and expires on December 17, 2009. The 2009 Hedge had a notional balance of $50 million from the inception date to July 17, 2009, at which time
the notional balance increased to $210 million for the remaining term. We pay a fixed rate of 1.165% on the notional balance outstanding and receive an amount equal to 1-month
LIBOR. Any net payable or receivable amount is settled monthly. We use interest rate hedges to minimize the risk of increases in floating interest rates. The interest rate hedges are not for trading
purposes and are accounted for as cash flow hedges.

Diesel Hedging Agreement.On February 2, 2009, we entered into a hedge to fix the price per gallon of a portion of our diesel fuel
requirements (the "Diesel Hedge"). The Diesel Hedge began February 2, 2009 and expires on December 28, 2009. The notional amount of gallons hedged changes on a monthly basis to match our
anticipated utilization. We will pay a fixed rate of $1.55 per gallon (wholesale basis) and
receive an amount equal to a wholesale index rate. Any net payable or receivable amount is settled monthly. We use the Diesel Hedge to minimize the risk of rising fuel prices. The hedge is not for
trading purposes and is accounted for as an economic hedge and is not designated as a hedging instrument under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities".

Collateral Requirements and Counterparty Risk.The Diesel Hedge and the 2009 Interest Rate Hedge require us to provide collateral in a
minimum amount
of $0.8 million. As of September 30, 2009, $1.2 million was held by the counterparty as collateral. The terms of the Credit Facilities limit the amount of cash collateral that we
can provide to a maximum of $5.0 million. In the event the cash collateral requirements exceed this amount, we will be forced to unwind all or a portion of the hedges. As provided for in the
Credit Facilities, the 2009 Interest Rate Hedge also shares in the collateral securing the Credit Facilities as the counterparty is also a lender under the Credit Facilities.

We
are exposed to risk of loss in the event of non-performance by the counterparties to the interest rate and diesel hedges. We do not anticipate non-performance
by the counterparties; however, recent dislocations in the credit markets have resulted in greater uncertainty regarding counterparty performance.

Liquidity Outlook.Due to the seasonal nature of our business, we record the majority of our revenues and profits during the
months of May through
September. The majority of the cash generated from those operations is received between July and November. We used the excess cash generated from our 2008 selling season during the winter and spring
of 2009 to fund our operations, debt service, capital expenditures and acquisitions.

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Our
ability to generate cash from our operations is subject to weather, general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
As a result, we cannot assure that our business will generate cash flow from operations in amounts sufficient to enable us to service our debt and to fund our other liquidity needs. If we do not have
sufficient liquidity, we will have to take actions such as reducing or delaying investments, capital expenditures or acquisitions. We may also have to consider joint ventures, selling assets,
restructuring or refinancing our debt or seeking additional equity capital. We cannot assure that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. In
addition, the terms of existing or future debt instruments, including the terms of the credit agreement governing our credit facilities and the indenture governing our senior discount notes, may
restrict us from adopting some of these alternatives.

Our
capital expenditures are used to maintain and expand our traditional ice and Ice Factory operations. In the normal course of our business, we dispose of obsolete,
worn-out and unneeded assets and have historically applied those funds against capital expenditures. For the nine months ended September 30, 2009, our net capital expenditures
totaled $20.4 million. We currently estimate that our capital expenditures for 2009 will be approximately $17 million to $19 million net of dispositions and operating leases.

Based
on our expected level of operations, we believe that cash flows from operations, together with available borrowings under our revolving credit facility, will be adequate to meet
our future liquidity needs for at least the next twelve months. As of October 20, 2009, we had approximately $4.4 million of cash on hand at Reddy Holdings, approximately
$46.7 million of cash at Reddy Corp. and approximately $39.3 million of availability under our revolving credit facility, which reflected outstanding standby letters of credit of
$10.7 million and a $10 million reduction based on the expected continuing non-performance by LCP of its commitment under our revolving credit facility. We expect
availability under our revolving credit facility to be no less than $33 million at all times during the remainder of 2009 and though the expiration of the facility on August 12, 2010. We
are managing our cash position and capital requirements over the next 12 months to allow us to operate without the revolving credit facility after the expiration date. We currently project
having sufficient cash on hand at the end of 2010 to allow us to safely operate throughout 2011, by which time we expect to refinance our indebtedness.

As
noted previously, we record the majority of our sales and any profits during the months of May through September and the majority of the cash generated from those operations is
received in July through November and will be used to fund current capital expenditures and debt service and build up cash balances. We expect to be in compliance with our debt covenants over the next
twelve months; however, in the event that we are in jeopardy of a dividend suspension period under Reddy Corp.'s credit facilities, or the margin of compliance with the leverage ratio financial
covenant in Reddy Corp.'s credit facilities narrows, we could use a portion of our excess cash or revolving credit facility availability to pay down principal on the term loan to maintain compliance.

Interest
expense on our senior discount notes (see "Senior Discount Notes"), became payable in cash on a semi-annual basis beginning May 1, 2009. The
annual cash obligation for this interest is $15.8 million. Expenses in connection with the antitrust investigations and related civil litigation may require the use of cash on hand at Reddy
Holdings or Reddy Corp. or borrowings under our revolving credit facility. As of October 20, 2009, our cash at Reddy Holdings, net of accrued expenses related the antitrust investigations and
related civil litigation, was approximately $4.4 million. Based on the current status of the investigation and related civil litigation and projected expenses, we believe Reddy Holdings' cash
balance will be sufficient to fund these expenses for the next twelve months; however, this expectation includes assumptions regarding matters beyond our control or knowledge. If Reddy Holdings were
to require additional cash to fund its expenses related to the antitrust investigations, Reddy Corp. has the ability under the credit facility to transfer $1.0 million to Reddy Holdings in each

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of
2009 and 2010 and Reddy Holdings is permitted to raise at least $10 million in additional debt. We are also evaluating our insurance coverage with regards to the costs of the investigations
and related civil litigation and are working to maximize any potential reimbursements. During the three months ended June 30, 2009, we received $0.6 million from our insurance carrier as
reimbursement of certain legal expenses and the carrier agreed to directly pay additional legal expenses totaling $0.2 million through September 30, 2009. On July 1, 2009, we
filed suit against the insurance carrier for the reimbursement of additional amounts. The suit was subsequently withdrawn and unsuccessfully mediated. We re-filed the suit on
October 21, 2009. The amount of any additional potential reimbursement cannot be estimated at this time.

Recently Adopted Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued authoritative guidance on fair value measurements and
disclosures. This guidance defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value estimates. In
February 2008, the FASB revised the authoritative guidance on fair value measurements and disclosures to delay the effective date of the guidance for nonfinancial assets and nonfinancial liabilities,
except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis, to fiscal years beginning after November 15, 2008. We elected to defer the
adoption of this guidance for its nonfinancial assets and nonfinancial liabilities until January 1, 2009. Adoption of this guidance on January 1, 2009 had no impact on our results of
operations and financial position and we have included the required disclosures (see Note 7 to the condensed consolidated financial statements).

In
December 2007, the FASB revised the authoritative guidance for business combinations, which establishes principles and requirements for how the acquirer in a business combination
recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree. This guidance significantly changes the
accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition
contingencies, transaction costs and restructuring costs. In addition, under the new guidance, changes in an acquired entity's deferred tax assets and uncertain tax positions after the measurement
period will impact income tax expense. This guidance was effective for fiscal years beginning on or after December 15, 2008 and requires the immediate expensing of acquisition related costs
associated with acquisitions completed after December 31, 2008. Adoption of this guidance on January 1, 2009 had no impact on our results of operations and financial position.

In
March 2008, the FASB issued authoritative guidance on disclosures about derivative instruments and hedging activities. This guidance requires enhanced disclosures about (a) how
and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and related hedged items
affect an entity's financial position, financial performance and cash flows. The guidance was effective for fiscal years and interim periods beginning after November 15, 2008. We adopted this
guidance on January 1, 2009 and have included the required disclosures (see Note 6 to the condensed consolidated financial statements).

In
April 2008, the FASB issued authoritative guidance on the accounting requirements for goodwill and other intangible assets. This guidance amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This guidance was effective for fiscal years beginning on or after
December 15, 2008. The adoption of this guidance on January 1, 2009 did not impact our results of operations and financial position as this standard is required to be implemented
prospectively; however, the guidance may impact us in future periods.

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In
June 2008, the FASB issued authoritative guidance on the treatment of participating securities in the calculation of earnings per share ("EPS"). This guidance addresses whether
instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing EPS under the
two-class method. This guidance was effective for fiscal years beginning on or after December 15, 2008. All prior period EPS data presented after adoption has been adjusted
retrospectively to conform with this guidance. Adoption of this guidance on January 1, 2009 did not have a material impact on our results of operations and financial position.

In
January 2009, the FASB issued authoritative guidance on disclosure requirements for financial instruments. This guidance requires disclosures about the fair value of financial
instruments in interim financial statements as well as in annual financial statements. This guidance was effective for interim periods ending after June 15, 2009, but early adoption was
permitted for interim periods ending after March 15, 2009. We adopted this guidance in the three months ended June 30, 2009 and have included the required disclosures (see Note 5
to the condensed consolidated financial statements).

In
May 2009, the FASB issued authoritative guidance on subsequent events. This guidance establishes general standards of accounting for and disclosure of events that occur after the
balance sheet date but before financial statements are issued or are available to be issued. This guidance is effective for interim or annual financial periods ending after June 15, 2009, and
we adopted this guidance during the three months ended June 30, 2009. The adoption of the guidance did not have an impact on our consolidated results of operations or financial position. We
have performed an evaluation of subsequent events through October 22, 2009, which is the date these financial statements were issued.

In
June 2009, the FASB issued the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the "Codification"). The Codification
became the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles ("GAAP"). The Codification did not change GAAP but reorganizes the literature. The
Codification is effective for interim and annual periods ending after September 15, 2009, and we adopted the Codification during the three months ended September 30, 2009.

New Accounting Pronouncements

None.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

General Economic Trends and Seasonality

Our results of operations are generally affected by the economic trends in our market area. We believe end users of our products use
packaged ice in many applications, including recreational activities, the construction industry, agriculture and special events. Weakness in the national economy combined with other factors including
inflation, interest rate fluctuations, increases in fuel and other energy costs, labor and healthcare costs and the availability of financing, may negatively
impact consumer confidence and the business prospects of our commercial customers. If consumer activities associated with the use of our products decline or the business activities of our commercial
customers decrease, our revenues and sales volumes may decline.

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Our
results to date have not been significantly impacted by inflation, other than costs directly related to energy prices, such as fuel, plastic bags and electricity. If we experience
high inflation in these costs in the future, or inflationary pressures have significant effects on other cost categories, we may not be able to pass on all of these higher costs to our customers in
the short term. We do believe that we will be able to pass on higher costs to our customers over longer periods of time; however, there can be no assurance that we will be successful in such efforts.

The
ice business is highly seasonal, with the bulk of demand coming in the warmer spring and summer months. Accordingly, we experience seasonal fluctuations in our net sales and
profitability. We make a disproportionate amount of our sales in the second and third calendar quarters. We also typically earn any net income in these same periods, whereas we typically experience
net losses in the first and fourth calendar quarters. We believe that approximately two-thirds of our revenues will occur during the second and third calendar quarters when the weather
conditions are generally warmer and demand is greater, while approximately one-third of our revenues will occur during the first and fourth calendar quarters when the weather is generally
cooler. This belief is consistent with historical trends. As a result of seasonal revenue declines and the lack of proportional corresponding expense decreases, we will most likely experience lower
profit margins and losses during the first and fourth calendar quarters. In addition, because our operating results depend significantly on sales during our peak season, our quarterly results of
operations may fluctuate significantly as a result of adverse weather during this peak selling period if the weather is unusually cool or rainy on a more national or regional basis.

Item 3.    Quantitative and Qualitative Disclosures About Market Risks

Market risk generally represents the risk that losses may occur in the value of financial instruments as a result of movements in
interest rates, foreign currency exchange rates and commodity prices. Our main market risk category is interest rate risk.

We
are exposed to some market risk due to the floating interest rates under our senior credit facilities. Principal balances outstanding under the term loan and the revolving credit
facility bear interest, at our
option, at the London Inter-Bank Offered Rate ("LIBOR") plus 1.75% or the prime rate (as announced from time to time by the administrative agent) plus 0.75%. Effective February 17,
2009, we entered into interest rate hedging agreements to lock the interest rate on a portion of the term loan outstanding under the senior credit facility. See "Liquidity and Capital
ResourcesInterest Rate Hedging Agreements".

As
of September 30, 2009, our credit facilities had an outstanding principal balance of $240.0 million at a weighted average interest rate of 2.0% per annum. At
September 30, 2009, the 1-month LIBOR rate was 0.3%. Including the effect of the interest rate hedges, the weighted average interest rate of balances outstanding under the credit
facilities was 2.8%. If LIBOR were to increase by 1% from that level, the annual increase in interest expense, given our principal balances at September 30, 2009 and the effect of the interest
rate hedges, would be approximately $0.3 million.

We
are exposed to risk of loss in the event of non-performance by the counterparty to our hedging arrangements. We do not anticipate non-performance by the
counterparty; however, recent dislocations in the credit markets have resulted in greater uncertainty regarding counterparty performance.

Item 4.    Controls and Procedures

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")). The Company, under the supervision and with the participation of its
management, including the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in

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Rules 13a-15(e)
and 15d-15(e) of the Exchange Act as of the end of the period covered by this report). Based on that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2009 to ensure that information relating to us and our consolidated subsidiary
required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussions regarding
required disclosure. It should be noted; however, that the design of any system of controls is limited in its ability to detect errors, and our system of controls has been designed to provide only
reasonable assurance of achieving the desired control objectives. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system's objectives will be met.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. There has
been no change in our internal control over financial reporting during the three months ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings

Antitrust Matters

In March 2008, we and certain of our employees, including members of its management, received subpoenas issued by a federal grand jury
in the Eastern District of Michigan seeking documents and information in connection with an investigation by the Antitrust Division of the United States Department of Justice ("DOJ") into possible
antitrust violations in the packaged ice industry. In addition, on March 5, 2008, federal officials executed a search warrant at the our corporate office in Dallas, Texas. On August 28,
2008, we received a second subpoena for documents from the federal grand jury sitting in the Eastern District of Michigan. The DOJ has also issued subpoenas to our employees to appear in person before
the federal grand jury in the Eastern District of Michigan. The search warrant and subpoenas that we and our employees received are part of a broader industry inquiry by the Antitrust Division of the
DOJ. The Home City Ice Company and three former employees of Arctic Glacier International, Inc. have entered guilty pleas regarding a conspiracy to
allocate customers and territories in southeastern Michigan and the Detroit, Michigan, metropolitan area, and Arctic Glacier has reached an agreement with the DOJ to enter a guilty plea regarding a
conspiracy to allocate customers and territories in southeastern Michigan and the Detroit, Michigan metropolitan area.

On
March 25, 2008, we were served by the Office of the Attorney General of the State of Florida with an antitrust civil investigative demand (the "Florida CID") requesting the
production of documents and information relating to an investigation of agreements in restraint of trade and/or price-fixing with respect to the pricing or market allocation of packaged ice. On
June 11, 2008, we received a civil investigative demand from the Office of the Attorney General of the State of Arizona (the "Arizona CID"). All of the documents and information requested by
the Arizona CID are included in the Florida CID and the Arizona CID states that it will be satisfied by the production of information which has been and will be provided to Florida in response to the
Florida CID. On or about June 16, 2009, we were served by the State of Michigan, Department of the Attorney General, with a civil investigative demand requesting information and documents
relating to sales of ice to units of government in Michigan, sales of ice in Michigan for which we made or received payment, and contracts and agreements with Michigan entities (the "Michigan CID").
We have been advised that the Florida CID, the Arizona CID and the Michigan CID are related to a multi-state antitrust investigation of the packaged ice industry and that the Attorneys General of 19
states and the District of Columbia are participating in the multi-state investigation. The states' investigation is related to the ongoing investigation of the packaged ice industry by the Antitrust
Division of the DOJ. We may in the future receive additional civil investigative demands or similar information requests from other states participating in the multi-state investigation or conducting
their own investigations.

On
November 19, 2008, we were notified by the Civil Fraud Division of the DOJ (the "Civil Fraud Division") that the Civil Fraud Division has opened an investigation with respect
to us. The Civil Fraud Division's investigation is expected to examine whether we may have violated the federal False Claims Act by submitting, or causing to be submitted, false claims to the federal
government by entering into allegedly anticompetitive agreements which may have affected the sale of packaged ice to the government. On or about January 6, 2009, we received a request for
documents in connection with that investigation. The Civil Fraud Division's investigation is related to the investigation by the Antitrust Division of the DOJ.

We
are cooperating with the authorities in these investigations. It has substantially completed its production of documents to the Antitrust Division of the DOJ and to the states. We
have substantially completed providing information and documents requested by the Civil Fraud Division of the DOJ. We have also made employees available for interviews by the Antitrust Division of the
DOJ. We expect to

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continue
to make available documents and other information in response to the investigating agencies' subpoenas, requests and civil investigative demands. At this time, we are unable to predict the
outcome of these investigations, the possible loss or possible range of loss, if any, associated with the resolution of these investigations or any potential effect they may have on us, our employees
or operations.

On
March 6, 2008, our Board of Directors formed a special committee of independent directors to conduct an internal investigation of these matters. The special committee retained
counsel to assist in its investigation. In order to maintain the independence of the special committee's investigation, officers and employees who were employed by us at the time the investigation
commenced have not had access to information obtained in the special committee's investigation or the results of the investigation to date. The investigation by the special committee and its counsel
is substantially complete. The special committee's investigation will likely remain open until the conclusion of the investigation by the Antitrust Division of the DOJ because of the possibility that
additional information relevant to the special committee's investigation may become available to the special committee. At this time, the special committee has not reached a determination whether any
violations of the antitrust laws have occurred. The special committee does not believe any of our active employees are a focus of the investigation by the Antitrust Division of the DOJ. We and our
employees are cooperating in the special committee's investigation.

Effective
September 13, 2008, Ben D. Key, our Executive Vice PresidentSales & Marketing, was placed on a paid leave of absence and relieved of his duties at
the direction of the special committee. The special committee has found that Mr. Key violated our policies and is associated with matters that are under investigation.

Following
the announcement that the Antitrust Division of the DOJ had instituted an investigation of the packaged ice industry, a number of lawsuits, including putative class action
lawsuits, were filed in various federal courts in multiple jurisdictions alleging violations of federal and state antitrust laws and related claims and seeking damages and injunctive relief. Pursuant
to an Order from the Judicial Panel on Multidistrict Litigation, the civil actions pending in federal courts have been transferred and consolidated for pretrial proceedings in the United States
District Court for the Eastern District of Michigan. On June 1, 2009, the Court appointed interim lead and liaison counsel for the putative direct and indirect purchaser classes. On
July 17, 2009 the Court entered a case management order requiring the lead plaintiffs for each class to file a consolidated amended complaint within 60 days of the order, and
providing 45 days for the defendants to respond to the direct purchaser consolidated amended complaint and 60 days for the defendants to respond to the indirect purchaser consolidated
amended complaint. On September 15, 2009, the lead plaintiffs for each of the putative direct and indirect purchaser classes filed consolidated amended complaints.

In
addition to the putative class action lawsuits filed in federal court, a putative class action lawsuit was filed in Kansas state court alleging violations of state antitrust laws and
related claims and seeking damages and injunctive relief. Defendants filed motions to dismiss and those motions to dismiss were granted on February 26, 2009.

One
direct action lawsuit has been filed against us in the United States District Court for the Eastern District of Michigan asserting claims based on alleged violations of federal and
state antitrust laws, RICO and tortious interference and seeking damages, civil penalties and injunctive relief. The defendants filed motions to dismiss that case. On May 29, 2009 the Court
dismissed all claims against us in that lawsuit. On June 29, 2009, the plaintiff filed a motion for reconsideration, and on July 17, 2009 the Court reversed in part its May 29,
2009 order, reinstating only the RICO claim against us. The
dismissal of the remaining claims was not affected. On August 10, 2009, we filed an answer to the reinstated claim.

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We
intend to vigorously defend the pending lawsuits. At this time, we are unable to predict the outcome of these lawsuits, the possible loss or possible range of loss, if any, associated
with the resolution of these lawsuits or any potential effect they may have on us or our operations.

SEC Inquiry

On or about October 21, 2008, we received notice that the Securities and Exchange Commission has initiated an informal inquiry
into matters that are the subject of the investigation by the special committee of our Board of Directors. We are cooperating with the informal inquiry.

Stockholder Litigation

Beginning on August 8, 2008, purported class action complaints have been filed in the United States District Court for the
Eastern District of Michigan asserting claims under the federal securities laws against us and certain of our current or former senior officers. The complaints, which are substantially similar, allege
that the defendants misrepresented and failed to disclose the existence of, and our alleged participation in, an alleged antitrust conspiracy in the packaged ice industry. The complaints purport to
assert claims on behalf of various alleged classes of purchasers of our common stock. Two motions for consolidation of the three actions and for appointment of lead plaintiff and lead plaintiff's
counsel were filed on October 7, 2008. Thereafter, one of the two proposed lead plaintiffs withdrew his motion. On July 17, 2009, the Court consolidated the actions and appointed a lead
plaintiff and interim lead plaintiff's counsel. Pursuant to a revised scheduling order filed on October 14, 2009, the lead plaintiff is required to file a consolidated amended complaint
on or before November 2, 2009. The Company is required to file a response to that consolidated amended complaint on or before December 17, 2009.

Two
stockholder derivative actions have been filed on our behalf in state district court in Dallas County, Texas, naming as defendants, among others, the members of our board of
directors and certain current and former officers. Those cases have been consolidated in the 68th Judicial District Court of Dallas County, Texas. The petitions assert claims for breach of
fiduciary duty, unjust enrichment, insider selling, abuse of control, and gross mismanagement and seek damages, equitable relief, attorney fees and costs. The consolidated case is currently
administratively closed, with the parties required to submit monthly joint status letters regarding the stockholder actions pending in the Eastern District of Michigan. Status conferences were held on
August 13, 2009 and October 5, 2009, and another status conference is currently scheduled for February 1, 2010.

We
and the other defendants intend to vigorously defend the pending lawsuits. At this time, we are unable to predict the outcome of these lawsuits, the possible loss or possible range of
loss, if any, associated with the resolution of these lawsuits or any potential effect they may have on us or our operations.



We are also involved in various other claims, lawsuits and proceedings arising in the ordinary course of business. There are
uncertainties inherent in the ultimate outcome of such matters and it is difficult to determine the ultimate costs that we may incur. We believe the resolution of such other ordinary course
uncertainties and the incurrence of such costs will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A.    Risk Factors

There have been no material changes to the factors described in our Annual Report on Form 10-K for the year ended
December 31, 2008.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Submission of Matters to a Vote of Security Holders

None.

Item 5.    Other Information

None.

Item 6.    Exhibits

See Index to Exhibits on page 49.

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SIGNATURES

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.

REDDY ICE HOLDINGS, INC.Date: October 22, 2009

By:

/s/ GILBERT M. CASSAGNEGilbert M. CassagneChief Executive OfficerDate: October 22, 2009

By:

/s/ STEVEN J. JANUSEKSteven J. JanusekChief Financial and Accounting Officer


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INDEX TO EXHIBITS

Exhibit No.

Description31.1

Rules 13a-14(a) and 15d-14(a) Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2

Rules 13a-14(a) and 15d-14(a) Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Section 1350 Certification of Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Section 1350 Certification of Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


Filed
herewith.


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