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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 March 31, 2010ORo

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 o

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 o

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

Smaller reporting company ý


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 April 20, 2010 was 22,754,214.



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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED MARCH 31, 2010

TABLE OF CONTENTS



PagePART IFINANCIAL INFORMATIONItem 1.

Condensed Consolidated Financial Statements


2Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009 (unaudited)


2Condensed Consolidated Statements of Operations for the three months ended March 31, 2010 and 2009 (unaudited)


3Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the three months ended March 31, 2010 (unaudited)


4Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and 2009 (unaudited)


5Notes to the Condensed Consolidated Financial Statements


6Item 2.

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


23Item 3.

Quantitative and Qualitative Disclosures about Market Risk


37Item 4.

Controls and Procedures


38PART IIOTHER INFORMATIONItem 1.

Legal Proceedings


38Item 1A.

Risk Factors


41Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds


43Item 3.

Defaults Upon Senior Securities


43Item 4.

Submission of Matters to a Vote of Security Holders


43Item 5.

Other Information


43Item 6.

Exhibits


43SIGNATURES


44INDEX TO EXHIBITS


45


1

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PART IFINANCIAL INFORMATION

Item 1.    Financial Statements



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

March 31,
2010

December 31,
2009(in thousands, except
share data)ASSETSCURRENT ASSETS:Cash and cash equivalents

$
54,387

$
44,649Accounts receivable, net


17,121


26,289Inventories, parts and supplies


12,404


11,057Prepaid expenses and other current assets


3,922


3,840Deferred tax assets


1,744


1,744Total current assets


89,578


87,579RESTRICTED CASH


12,292


PROPERTY AND EQUIPMENT, net


217,417


215,853GOODWILL


79,590


79,493OTHER INTANGIBLES, net


69,071


70,429INVESTMENTS


2,148


1,648OTHER ASSETS, net


11,515


663TOTAL

$
481,611

$
455,665LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT LIABILITIES:Current portion of long-term obligations

$
1

$
1Revolving credit facility





Accounts payable


12,463


13,536Accrued expenses


14,042


13,620Total current liabilities


26,506


27,157LONG-TERM OBLIGATIONS


450,605


390,601DEFERRED TAXES AND OTHER LIABILITIES, net


17,957


29,111STOCKHOLDERS' EQUITY (DEFICIT):Preferred stock: 25,000,000 share authorized; no shares issued or outstanding





Common stock, $0.01 par value; 75,000,000 shares authorized; 22,754,214 and 22,579,016 shares issued and outstanding at March 31, 2010 and
December 31, 2009, respectively


228


226Additional paid-in capital


223,654


223,312Accumulated deficit


(237,339
)

(214,742
)Total stockholders' equity (deficit)


(13,457
)

8,796TOTAL

$
481,611

$
455,665


See
notes to condensed consolidated financial statements.

2

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

Three Months Ended March 31,2010

2009(in thousands, except
per share amounts)Revenues

$
35,894

$
42,246Cost of sales (excluding depreciation)


34,908


35,480Depreciation expense related to cost of sales


5,314


5,128Gross (loss) profit


(4,328
)

1,638Operating expenses


13,119


12,177Depreciation and amortization expense


1,876


1,709Loss (gain) on dispositions of assets


227


(4
)Acquisition expenses


2


Loss on diesel hedge





356Cost of antitrust investigations and related litigation (Note 11)


913


2,882Loss from operations


(20,465
)

(15,482
)Interest expense


(7,259
)

(7,221
)Interest income


4


70Debt refinance costs


(6,108
)

Loss before income taxes


(33,828
)

(22,633
)Income tax benefit


11,231


10,666Net loss

$
(22,597
)
$
(11,967
)Basic and diluted net loss per share:Net loss

$
(1.01
)
$
(0.54
)Weighted average common shares outstanding


22,406


22,064


See
notes to condensed consolidated financial statements.

3

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

Common StockNumber
of
Shares

Par
Value

Additional
Paid-In
Capital

Accumulated
Deficit

TotalBalance at January 1, 2010


22,579

$
226

$
223,312

$
(214,742
)
$
8,796Compensation expense related to stock-based awards







$
327




$
327Issuance of restricted stock


174


2


(2
)




Forfeiture of restricted stock


(6
)










Common stock issued upon exercise of stock options


7





17





17Comprehensive loss:Net loss











(22,597
)

(22,597
)Total comprehensive loss














(22,597
)Balance at March 31, 2010


22,754

$
228

$
223,654

$
(237,339
)
$
(13,457
)


See
notes to condensed consolidated financial statements.

4

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

Three Months Ended
March 31,2010

2009(in thousands)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(22,597
)
$
(11,967
)Adjustments to reconcile net loss to net cash provided by operating activities (excluding working capital from acquisitions):Depreciation and amortization expense


7,190


6,837Amortization of debt issue costs and accretion of tender premium


425


364Debt refinance cost


6,108


Deferred tax benefit


(11,231
)

(10,666
)Loss (gain) on dispositions of assets


227


(4
)Decrease in fair value of diesel hedge





254Stock-based compensation expense


327


397Change in assets and liabilities:Accounts receivable


9,167


3,369Inventory, parts and supplies


(1,347
)

(1,453
)Prepaid expenses and other current assets


(224
)

(3,080
)Accounts payable, accrued expenses and other


(264
)

(2,697
)Net cash used in operating activities


(12,219
)

(18,646
)CASH FLOWS FROM INVESTING ACTIVITIES:Property and equipment additions


(10,020
)

(4,586
)Proceeds from dispositions of property and equipment


261


48Reimbursement of the cost of equipment placed under operating leases


2,000


Cost of acquisitions, net of cash acquired


(763
)

Restricted cash


(12,292
)

Issuance of note receivable





(150
)Collection of note receivable





23Purchase of investments


(500
)

Net cash used in investing activities


(21,314
)

(4,665
)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from the exercise of employee stock options


17


Issuance of debt


300,000


Debt issuance costs


(16,745
)

Repayment of long-term obligations


(240,001
)

Net cash provided by financing activities


43,271


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


9,738


(23,311
)CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD


44,649


39,684CASH AND CASH EQUIVALENTS, END OF PERIOD

$
54,387

$
16,373SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash payments for interest

$
6,708

$
4,878Cash receipts of interest income

$
4

$
70Cash payments for income taxes

$
93


Increase in fair value of interest rate hedges




$
602Additions to property and equipment included in accounts payable

$
1,549

$
878


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 MONTHS ENDED MARCH 31, 2010
AND 2009

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, 2009
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, 2009. Operating results for the three months ended March 31, 2010 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", manufacture and
distribute packaged ice products. The Company consists of a single operating segment. The common stock of Reddy Holdings is publicly traded on the New York Stock Exchange under the ticker symbol
"FRZ".

2. Recently Adopted and New Accounting Pronouncements

In December 2009, the Financial Accounting Standards Board ("FASB") issued ASU 2009-17, "Consolidations (Topic 810)Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities." ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through
voting (or similar rights) should be consolidated. ASU 2009-17 also requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and
any significant changes in risk exposure due to that involvement. ASU 2009-17 is effective for fiscal years beginning after November 15, 2009 and for interim periods within the
first annual reporting period. The adoption of ASU 2009-17 on January 1, 2010 did not have a material effect on the Company's results of operations and financial position.

3. Acquisitions

During the three months ending March 31, 2010, the Company purchased two ice companies in connection with its ongoing program of acquiring ice businesses. The total purchase price
was allocated to the acquired assets and assumed liabilities based upon estimates of their respective fair values as of the closing dates using valuations and other studies. No acquisitions were
completed during the three months ended March 31, 2009. The following table summarizes the aggregate purchase prices,

6

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

3. Acquisitions (Continued)

estimated
aggregate fair values of the assets acquired and the liabilities assumed and direct acquisition costs expensed:

Three months
ended
March 31,2010

2009(in millions)Purchase price

$
0.8

$
Assets acquired:Property and equipment


0.1


Goodwill


0.1


Other intangible assets


0.6


Total assets acquired


0.8


Total liabilities assumednone





Net assets acquired

$
0.8


Direct acquisition costs expensed

$


$



The
amount of tax deductible goodwill recognized in connection with the transactions described above is $0.1 million. Other intangible assets were comprised of customer lists,
which are being amortized over useful lives of eight to 30 years. The acquisitions were funded out of the Company's operating cash flows and proceeds from debt offerings.

Unaudited
pro forma information has not been presented as the pro forma information for the three months ended March 31, 2010 and 2009 does not differ materially from the
Company's actual financial information presented herein.

4. 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.

March 31,
2010

December 31,
2009(in thousands)Raw materials

$
5,680

$
5,190Finished goods


3,329


2,494Parts and supplies


3,395


3,373Total

$
12,404

$
11,057


7

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

5. Accrued Expenses

March 31,
2010

December 31,
2009(in thousands)Accrued interest

$
3,036

$
2,839Accrued compensation and employee benefits, including payroll taxes and workers compensation insurance


4,507


4,171Accrued utilities


1,017


1,924Accrued property, sales and other taxes


2,063


1,488Other accrued insurance


1,814


1,704Other


1,605


1,494Total

$
14,042

$
13,620


6. Revolving Credit Facility and Long-Term Obligations

At March 31, 2010 and December 31, 2009, long-term obligations consisted of the following:

March 31,
2010

December 31,
2009(in thousands)Old credit facilitiesTerm Loan

$


$
240,00011.25% Senior Secured Notes


300,000


13.25% Senior Secured Notes


139,407


Less: Unamortized early tender premium on 13.25% Senior Secured Notes


(638
)

101/2% Senior Discount Notes


11,736


150,500Other Notes Payable


101


102Total long-term obligations


450,606


390,602Less: Current maturities


1


1Long-term obligations, net

$
450,605

$
390,601


11.25% Senior Secured Notes.On March 15, 2010, Reddy Corp issued $300 million in aggregate principal amount of 11.25%
Senior Secured
Notes due 2015 (the "First Lien Notes") in a private placement offering. Cash interest accrues on the First Lien Notes at a rate of 11.25% per annum and is payable semi-annually in arrears
on March 15 and September 15. The proceeds of the offering were used to repay certain of Reddy Corp's preexisting debt (see "Old Senior Credit Facilities" below), pay fees and expenses
related to the transactions and provide the Company with cash for future use.

The
First Lien Notes are senior secured obligations of Reddy Corp and are:



8

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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



The
First Lien Notes include customary covenants that restrict, among other things, Reddy Corp's and its future subsidiaries' 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
subsidiaries, merge or sell all or substantially all of its assets or enter into various transactions with affiliates. From and after March 15, 2013, Reddy Corp may redeem any or all of the
First Lien Notes by paying a redemption premium, which is initially 5.625% of the principal amount of the First Lien Notes and declines to 0% for the period commencing on March 15, 2014 and
thereafter. Prior to March 15, 2013, Reddy Corp may redeem any or all of the First Lien Notes by paying a "make-whole" redemption premium. If Reddy Corp experiences a change of
control, Reddy Corp will be required to make an offer to repurchase the First Lien Notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of
purchase. Reddy Corp may also be required to make an offer to purchase the First Lien 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 First Lien Notes restricts the amount of dividends, distributions and other restricted payments Reddy Corp may make. Under the indenture, Reddy Corp is
restricted from paying dividends to Reddy Holdings unless, at the time of such payment:



The
first lien leverage ratio under the indenture governing the First Lien Notes means the ratio of EBITDA (as defined in the indenture) for the most recent four fiscal quarters to first
lien indebtedness (as defined in the indenture) as of the end of such four quarter period. Reddy Corp is generally required to calculate its first lien leverage 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 the consolidated net income of Reddy Corp accrued during the period (treated as one accounting period) from April 1, 2010 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 to Reddy Corp of
the issuance of capital stock, subject to certain exceptions, and any cash capital contribution received by Reddy Corp from its stockholders, in each case after April 1, 2010, plus the amount
by which Reddy Corp 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 Corp, less the amount of certain restricted payments made from time to time, including, among other

9

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

things,
the payment of cash dividends. Reddy Corp is not currently permitted to pay dividends under this provision.

In
addition, regardless of the leverage ratio or whether Reddy Corp could make any restricted payments under the buildup amount provision referred to above, Reddy Corp is permitted to
make certain restricted payments including (1) dividend payments at any time in an aggregate amount of up to $25.0 million if no default has occurred and is continuing under the
indenture, (2) the payment of interest when due on the remaining 101/2% Senior Discount Notes and the repayment, redemption or retirement of remaining 101/2%
Senior Discount Notes from the proceeds of certain indebtedness of Reddy Corp incurred after the date of issuance of the First Lien Notes, (3) the payment of dividends to Reddy Holdings in an
amount per year not to exceed $1.0 million to pay franchise taxes and overhead expenses of Reddy Holdings and (4) the payment of dividends to Reddy Holdings in an amount per year not to
exceed 6.0% of the aggregate net cash proceeds received by Reddy Corp from all public equity offerings after the date of issuance of the First Lien Notes subject to specified conditions. 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.

13.25% Senior Secured Notes.On March 15, 2010, Reddy Corp issued $137.6 million in aggregate principal amount of
13.25% Senior Secured
Notes due 2015 (the "Second Lien Notes") in the initial settlement of a private placement exchange offer for the outstanding Discount Notes (the "Exchange Offer"). On March 24, 2010, Reddy Corp
issued an additional $1.8 million in aggregate principal amount of Second Lien Notes in the final settlement of the Exchange Offer. Reddy Corp received no cash proceeds from the issuance of the
Second Lien Notes. Cash interest accrues on the Second Lien Notes at a rate of 13.25% per annum and is payable semi-annually in arrears on May 1 and November 1, with the
first payment occurring on November 1, 2010. In connection with the Exchange Offer, the Company issued $0.6 million of Second Lien Notes to certain bondholders as an early tender premium
(see "101/2% Senior Discount Notes" below for further information). These additional Second Lien Notes were not reflected in the Company's condensed consolidated balance sheet upon
issuance, but will be recognized as additional debt through interest expense over the term of the Second Lien Notes.

The
Second Lien Notes are senior secured obligations of Reddy Corp and are:



The
Second Lien Notes include customary covenants that restrict, among other things, Reddy Corp's and its future subsidiaries' 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

10

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

investments,
create liens, enter into arrangements that restrict dividends from its subsidiaries, merge or sell all or substantially all of its assets or enter into various transactions with
affiliates. From and after March 1, 2013, Reddy Corp may redeem any or all of the Second Lien Notes by paying a redemption premium, which is initially 6.625% of the principal amount of the
Second Lien Notes and declines to 0% for the period commencing on March 1, 2014 and thereafter. Prior to March 1, 2013, Reddy Corp may redeem any or all of the Second Lien Notes by
paying a "make-whole" redemption premium. If Reddy Corp experiences a change of control, Reddy Corp will be required to make an offer to repurchase the Second Lien Notes at a price equal
to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of purchase. Reddy Corp may also be required to make
an offer to purchase the Second Lien 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 Second Lien Notes restricts the amount of dividends, distributions and other restricted payments Reddy Corp may make. Under the indenture, Reddy Corp is
restricted from paying dividends to Reddy Holdings unless, at the time of such payment:



The
secured leverage ratio under the indenture governing the Second Lien Notes means the ratio of EBITDA (as defined in the indenture) for the most recent four fiscal quarters to secured
indebtedness (as defined in the indenture) as of the end of such four quarter period. Reddy Corp is generally required to calculate its secured leverage 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 the consolidated net income of Reddy Corp accrued during the period (treated as one accounting period) from April 1, 2010 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 to Reddy Corp of
the issuance of capital stock, subject to certain exceptions, and any cash capital contribution received by Reddy Corp from its stockholders, in each case after April 1, 2010, plus the amount
by which Reddy Corp 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 Corp, less the amount of certain restricted payments made from time to time, including, among other things, the payment of cash dividends. Reddy Corp is not currently
permitted to pay dividends under this provision.

In
addition, regardless of the leverage ratio or whether Reddy Corp could make any restricted payments under the buildup amount provision referred to above, Reddy Corp is permitted to
make certain restricted payments including (1) dividend payments at any time in an aggregate amount of up to $25.0 million if no default has occurred and is continuing under the
indenture, (2) the payment of interest when due on the remaining Discount Notes and the repayment, redemption or retirement of remaining Discount Notes from the proceeds of certain indebtedness
of Reddy Corp incurred after the

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

date
of issuance of the Second Lien Notes, (3) the payment of dividends to Reddy Holdings in an amount per year not to exceed $1.0 million to pay franchise taxes and overhead expenses of
Reddy Holdings and (4) the payment of dividends to Reddy Holdings in an amount per year not to exceed 6.0% of the aggregate net cash proceeds received by Reddy Corp from all public equity
offerings after the date of issuance of the Second Lien Notes subject to specified conditions. 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.

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.

On
February 22, 2010, Reddy Corp launched the Exchange Offer, offering $1,000 in aggregate principal amount of Second Lien Notes for each $1,000 of Discount Notes exchanged. In
addition, for Discount Notes exchanged on or prior to March 5, 2010, Reddy Corp offered an early tender premium of $5 in aggregate principal amount of Second Lien Notes for each $1,000 of
Discount Notes exchanged. In conjunction with the Exchange Offer, Reddy Corp solicited consents to eliminate substantially all of the restrictive covenants from the indenture governing the Discount
Notes. At the expiration of the Exchange Offer on March 19, 2010, approximately 92.2% of the aggregate principal amount of the Discount Notes had been tendered into the Exchange Offer.
Following the final settlement of the Exchange Offer, $11.7 million in aggregate principal amount of the Discount Notes remain outstanding.

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



From
and after November 1, 2008, Reddy Holdings may redeem any or all of the Discount Notes by paying a redemption premium, which was 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. For the period from November 1, 2009 to October 31, 2010,
the redemption premium is 2.625%.

12

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Table of Contents

REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

New Senior Credit Facility.On March 15, 2010, Reddy Corp entered into a revolving credit facility with a syndicate of
banks, financial
institutions and other entities as lenders, including JPMorgan Chase Bank, N.A., as Administrative Agent (the "New Credit Facility"). The New Credit Facility provides for a $35 million
revolving credit facility. Under the New Credit Facility, Reddy Corp has the right to request
the aggregate commitments to be increased to $50 million provided certain conditions are met. None of the lenders are obligated to provide such additional commitments.

The
New Credit Facility is an obligation of Reddy Corp and is guaranteed by Reddy Holdings. The New Credit Facility will mature on January 31, 2014.

At
March 31, 2010, the Company had $35 million of availability under the New Credit Facility as no amounts were outstanding.

Principal
balances outstanding under the New Credit Facility bear interest per annum, at the Company's option, at the sum of the base rate or LIBOR plus the applicable margin. The
applicable margin for base rate loans was initially 3.75% and for LIBOR loans was initially 4.75%, with such applicable margins subject to reduction based upon the Company's net leverage ratio (as
defined in the New Credit Facility). The base rate is defined as the greatest of the prime rate (as announced from time to time by the Administrative Agent), the federal funds rate plus 0.5% or the
one-month LIBOR rate plus 1.0%. 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
0.875%, with such availability fee subject to reduction based upon the Company's net leverage ratio. Amounts may be drawn under the New Credit Facility so long as no default or event of default
exists.

The
New Credit Facility does not require any scheduled principal payments prior to its stated maturity date. Subject to certain conditions, mandatory repayments of the New Credit
Facility (and mandatory commitment reductions of the New 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 New Credit Facility, an event of default will occur under the
New Credit Facility.

The
New Credit Facility contains affirmative and negative covenants applicable to Reddy Corp and its future subsidiaries, subject to materiality and other qualifications, baskets and
exceptions. The negative covenants, among other things, restrict the ability of Reddy Corp to:



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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

Under
the restricted payments covenant in the New Credit Facility, Reddy Corp is generally 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 cash interest on the Discount Notes, in an amount not greater than Reddy Corp's
Cumulative Available Cash (as defined in the New Credit Facility) for the period (taken as one accounting period)
from April 1, 2010 to the end of its most recently ended fiscal quarter for which a covenant compliance certificate under the New Credit Facility has been delivered to the lenders. As of
March 31, 2010, the initial amount of Cumulative Available Cash was $65.0 million. The New Credit Facility precludes Reddy Corp from declaring any dividends if an event of default under
the credit facility has occurred and is continuing. In particular, it will be an event of default if Reddy Corp's leverage ratio exceeds the level specified in the credit agreement, which is 7.75:1.00
for periods ending through December 31, 2010, or Reddy Corp's fixed charge coverage ratio is less than the level specified in the credit agreement, which is 1.00:1.00 for periods ending through
September 30, 2011. The maximum leverage ratio declines to 7.25:1.00 for periods ending from March 31, 2011 to September 30, 2011, 5.75:1:00 for periods ending from
December 31, 2011 to September 30, 2012 and 5.00:1.00 for periods ending from December 31, 2012 to September 30, 2013. The minimum fixed charge coverage ratio increases to
1.2:1.00 for periods ending from December 31, 2011 to September 30, 2013.

The
New Credit Facility contains financial covenants, which include the maintenance of the leverage ratio and fixed charge coverage ratio noted above and are collateralized by
substantially all of the Company's assets. At March 31, 2010, Reddy Corp was in compliance with these covenants. Reddy Holdings guarantees the Credit Facilities and such guarantee is
collateralized by a pledge of substantially all of the assets of Reddy Holdings.

Obligations
under the New Credit Facility may be declared immediately due and payable upon the occurrence of certain events of default as defined in the credit agreement, including
failure to pay any principal when due and payable, failure to pay interest within five (5) days after due, failure to comply with any covenant, representation or condition of any loan document,
any change of control, cross-defaults, and certain other events as set forth in the credit agreement, with grace periods in some cases.

An
acceleration of the indebtedness under the New Credit Facility would be an event of default under the First Lien Notes and Second Lien Notes if the outstanding balance of the New
Credit Facility at the time of acceleration is over $10 million.

Letters of Credit.The New Credit Facility does not provide for the issuance of standby letters of credit. In March 2010, Reddy
Corp entered into a
separate letter of credit facility with JPMorgan Chase Bank, N.A. and Wells Fargo Bank, National Association (the "LC Facility"). Letters of credit issued under the LC Facility are cash collateralized
at 102% of the amount of the letter of credit. The cash collateral provided under the LC Facility is maintained in a restricted account at JP Morgan Chase Bank, N.A. and is reported as "Restricted
cash" in the condensed consolidated balance sheets.

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Table of Contents

REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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

Old 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., JPMorgan Chase Bank, N.A., Wachovia Bank N.A.,
Bear Stearns Corporate Lending Inc. and Lehman Commercial Paper, Inc. (the "Old Credit Facilities"). The Old Credit Facilities provided for a $60 million revolving credit facility
and a $240 million term loan. The Old Credit Facilities were obligations of Reddy Corp and were guaranteed by Reddy Holdings. On March 15, 2010, the Old Credit Facilities were terminated
and all amounts owed thereunder were repaid from the proceeds of the sale of the First Lien Notes.

Fair Value of Debt Instruments.At March 31, 2010 and December 31, 2009, the fair value of the Company's debt, was
$469.4 million and $353.0 million, respectively, while the book value was $450.6 million and $390.6 million, respectively. The fair value of the Company's debt is primarily
based on quoted market prices for the debt.

7. Financial Derivative Instruments

Interest Rate Hedging Agreement.Effective September 12, 2005, the Company entered into an interest rate hedging agreement
(the "2005 Hedge")
to fix 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 notional balance decreased by $20 million on October 12 of each of the next three years, beginning on October 12, 2006. The Company paid a fixed rate of
4.431%
on the notional balance outstanding and received an amount equal to 1 or 3 month LIBOR. Any net payable or receivable amount was settled quarterly. The 2005 Hedge was accounted for as a cash
flow hedge.

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 had a term of 10 months and expired 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 paid a fixed rate of 1.165% on the notional balance outstanding and received an amount equal to
1-month LIBOR. Any net payable or receivable amount was settled monthly. The Company used the interest rate hedges to minimize the risk of increases in floating interest rates. The
interest rate hedges were not for trading purposes and were accounted for as cash flow hedges.

The
Company considered its own credit risk in the valuation of the interest rate hedges. Payments made or received under the interest rate hedges were included in the caption "Interest
Expense" in the consolidated statements of operations and in the operating activities section of the statements of cash flows.

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 expired on December 28, 2009. The notional amount of gallons hedged changed on a monthly basis
to match the Company's anticipated utilization. The Company paid a fixed rate of $1.55 per gallon (wholesale basis) and received an amount equal to a wholesale index rate. Any net payable or
receivable amount was settled monthly. The Company used

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Table of Contents

REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

7. Financial Derivative Instruments (Continued)

the
Diesel Hedge to minimize the risk of rising fuel prices. The hedge was not for trading purposes and was accounted for as an economic hedge and was not designated as a hedging instrument.

There
were no derivative instruments outstanding during the three months ended March 31, 2010.

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

Derivatives designated as Cash Flow HedgesThree Months Ended
March 31, 2010

Three Months Ended
March 31, 2009(in thousands)

(in thousands)Amount of Gain Recognized in Accumulated Other Comprehensive Income (Loss)(a)

$


$
1,673Amount of Loss Reclassified from Accumulated Other Comprehensive Income (Loss) into Interest Expense(a)

$


$
(1,071
)Amount of Loss Recognized in Interest Expense (Ineffective Portion)(a)

$


$
(310
)


(a)Amounts
are pre-tax.


Derivatives
not designated as Hedging Instruments:

Amount of Loss
Recognized in
the Consolidated
Statements of
Operations
Three Months
Ended
March 31,Location of Loss Recognized in
Condensed Consolidated
Statements of Operations2010

2009Diesel hedge:Non-cash change in fair value

$


$
(254
)Cash settlements





(102
)Total recognized loss

$


$
(356
)
Loss on diesel hedge


Collateral Requirements and Counterparty Risk.The Diesel Hedge and the 2009 Interest Rate Hedge required the Company to provide
collateral in a
minimum amount of $0.8 million to $1.2 million at various times during 2009. As of December 31, 2009 all hedges had expired and all collateral held by the counterparty had been
returned to the Company.

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

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

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.

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 the three months ended March 31, 2010, the Company granted 174,034 restricted
shares to employees with a weighted average grant date fair value of $4.29. 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, 2011, January 1, 2012, and January 1, 2013. The fair value of each restricted share is equal 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.

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 permitted to be longer than ten years from the date of grant of the options. Stock options for 355,446
shares of common stock were granted during the three months ended March 31, 2010. 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, 2011, January 1, 2012, and January 1, 2013. The options were granted with a weighted
exercise price of $4.29 per share.

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 three months ended March 31, 2010 and the weighted average assumptions used for such grants.

Three Months Ended
March 31, 2010Weighted average grant date fair value

$
3.05Weighted average assumptions used:Expected volatility


124
%Expected lives


3 yearsRisk-free interest rates


1.84
%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 exercise
patterns. Risk-free

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

8. Stock-based Compensation (Continued)

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.

During
the three months ended March 31, 2010, the Company granted 106,666 shares of restricted stock and 217,854 stock options, contingent upon stockholder approval of an
amendment to the Plan to increase the number of shares available for issuance under the Plan by 2,000,000. The Company's stockholders will vote upon the amendment at the Company's annual meeting of
stockholders scheduled for April 29, 2010.

Total
compensation expense associated with the Plan was $0.3 million and $0.4 million during the three months ended March 31, 2010 and 2009, respectively. Such
compensation expense was recorded in "Operating Expenses" in the consolidated statements of operations. As of March 31, 2010, 120,808 shares were available for grant under the Plan.

9. Net Loss Per Share

The computation of net loss per share is based on net 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. Since restricted shares do not include an obligation to share in losses,
they are excluded from the basic net loss per share calculation. For the three months ended March 31, 2010 and 2009, there were approximately 1.4 million and 0.3 million shares,
respectively, of dilutive securities not included in the computation of diluted net loss per share as their effect would be anti-dilutive.

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.

The
amount of gross unrecognized tax benefits related to uncertain tax positions was $3.0 million at March 31, 2010 and $3.1 million at December 31, 2009,
which included accrued interest and penalties of $1.3 million as of March 31, 2010 and $1.2 million as of December 31, 2009. The total amount of interest
and penalties, net of federal benefit, recognized in the statement of operations for the three months ended March 31, 2010 and 2009 was immaterial.

As
a result of net operating loss carryforwards, the Company's tax years from 1997 through 2009 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 $1.7 million reduction of the $3.0 million total unrecognized tax benefit as of March 31, 2010 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.

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

11. Commitments and Contingencies

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 March 31, 2010 and December 31,
2009, 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. Current and former employees have also been
subpoenaed to testify before a federal grand jury in the Eastern District of Michigan and, more recently, before a federal grand jury in the Southern District of Ohio. The search warrant and subpoenas
that the Company and our employees received are connected with a broader industry inquiry by the Antitrust Division of the DOJ. The Home City Ice Company, Arctic Glacier International, Inc.,
and three former employees of Arctic Glacier have entered guilty pleas regarding a conspiracy to allocate customers and territories in southeastern Michigan and the Detroit, Michigan, metropolitan
area. Sentencing of the three former Arctic Glacier employees took place on February 2, 3 and 4, 2010, sentencing of Arctic Glacier occurred on February 11, 2010, and Home City was
sentenced on March 2, 2010.

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 market for 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
were included in the Florida CID and the Arizona CID states that it will be satisfied by the production of information which had been and would be provided to Florida in response to the Florida CID.
On or 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 we 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 has complied with all requests for documents and information regarding these matters. 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.

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

11. Commitments and Contingencies (Continued)

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. The Company has substantially completed its production of documents and information to the Antitrust Division of
the DOJ and to the states. The Company 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. Certain of the Company's current and former employees have testified before the grand juries. 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.

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 the Company's 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

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

11. Commitments and Contingencies (Continued)

and
indirect purchaser classes. On September 15, 2009, the lead plaintiffs for each of the putative direct and indirect purchaser classes filed consolidated amended complaints. The Company has
filed motions to dismiss both of these complaints. The motion relating to the direct purchaser claims is set for hearing on June 24, 2010.

On
March 1, 2010, a putative class action Statement of Claim was filed against the Company in the Ontario Superior Court of Justice in Canada alleging violations of Part VI
of the Competition Act and seeking general damages, punitive and exemplary damages, pre-judgment and post-judgment interest, and costs. An agreement has been reached with
counsel for the plaintiff that no response to the Statement of Claim is due at this time.

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 tortuous 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, the Company filed an answer to the reinstated claim.
Discovery is ongoing in that matter.

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 our Board of Directors. The Company is cooperating with the informal inquiry and has not received any recent
communications regarding this matter.

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. On July 17, 2009, the Court consolidated the actions and appointed a
lead plaintiff and interim lead plaintiff's counsel. The lead plaintiff filed a consolidated amended

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REDDY ICE HOLDINGS, INC. AND SUBSIDIARY

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

FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009

11. Commitments and Contingencies (Continued)

complaint
on November 2, 2009. The Company filed a motion to dismiss the consolidated amended complaint on December 17, 2009. Plaintiffs filed a response to that motion to dismiss on
January 18, 2010, and the Company filed a reply in support of the motion on February 17, 2010.

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, certain current and former
officers and members of the Company's Board of Directors. 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 stayed
and administratively closed, with the parties required to submit monthly joint status letters regarding the stockholder actions pending in the Eastern District of Michigan. A status conference in this
matter is scheduled for May 17, 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.



The Company is also involved in various other claims, lawsuits and proceedings arising in the ordinary course of business, including
intellectual property matters. 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.

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Table of Contents

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, 2009, 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 33 states and the District of Columbia under the Reddy Ice® brand name.

At
March 31, 2010, we owned or operated 55 ice manufacturing facilities, 70 distribution centers and approximately 3,500 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:



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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 33
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%, 69% and 68% of our annual revenues occurred during the second and third calendar quarters in each of 2009, 2008 and 2007.
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 ISB equipment. There is no
right of return with
respect to these products. A portion of our revenues also represents fees earned under management agreements for ISB systems located outside our primary territories that are recognized as earned under
contract terms.

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



Depreciation Expense Related to Cost of Sales and Depreciation and Amortization.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.

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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 20% and 15% of revenues in the three months ended
March 31, 2010 and 2009, 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 March 31, 2010, we owned or operated 55 ice manufacturing facilities, 70 distribution centers and
approximately 3,500 Ice
Factories. As of the same date, we had an aggregate daily ice manufacturing capacity of approximately 18,000 tons.

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Three Months Ended
March 31,

Change from Last
Year2010

2009

Dollars

%(in thousands)Revenues

$
35,894

$
42,246

$
(6,352
)

(15.0
)Cost of sales (excluding depreciation)


34,908


35,480


(572
)

(1.6
)Depreciation expense related to cost of sales


5,314


5,128


186


3.6Gross (loss) profit


(4,328
)

1,638


(5,966
)

(364.2
)Operating expenses


13,119


12,177


942


7.7Depreciation and amortization expense


1,876


1,709


167


9.8Loss (gain) on dispositions of assets


227


(4
)

231


5775.0Acquisition expenses


2





2


Loss on diesel hedge





356


(356
)

(100.0
)Cost of antitrust investigations and related litigation


913


2,882


(1,969
)

(68.3
)Loss from operations


(20,465
)

(15,482
)

(4,983
)

(32.2
)Interest expense, net


(7,255
)

(7,151
)

(104
)

(1.5
)Debt refinance costs


(6,108
)




(6,108
)

Loss before income taxes


(33,828
)

(22,633
)

(11,195
)

(49.5
)Income tax benefit


11,231


10,666


(565
)

(5.3
)Net loss

$
(22,597
)
$
(11,967
)
$
(10,630
)

(88.8
)


Revenues:Revenues decreased $6.4 million from the three months ended March 31, 2009 to the three months ended
March 31, 2010.
This decrease is primarily due to a percentage decline in packaged ice volume sales in the low to mid-teens related primarily to significant adverse weather patterns in most of our markets and lower
average sales prices primarily related to changes in product mix.

Cost of sales (excluding depreciation):Cost of sales (excluding depreciation) decreased $0.6 million from the three months
ended
March 31, 2009 to the three months ended March 31, 2010. This decrease in cost of sales is due to lower volume sales, although costs did not decrease proportionally with revenues due to
the significant amount of costs that are fixed during this period.

Labor
costs, including associated payroll taxes and benefit costs (including health insurance), accounted for approximately 40% and 36% of revenues in the three months ended
March 31, 2010 and

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2009,
respectively. Operating leases, including vehicles, plant equipment and ISB equipment, accounted for approximately 11% and 7% of revenues in the three months ended March 31, 2010 and
2009, respectively. Cost of plastic bags represented approximately 6% and 7% of revenues in the three months ended March 31, 2010 and 2009, respectively. The ratio of fuel expenses to revenues
increased
from 3% in the three months ended March 31, 2009 to 5% in the three months ended March 31, 2010. Expenses for independent third party distribution services were 6% of revenues in the
three months ended March 31, 2010 and 2009. Electricity expense accounted for approximately 7% of revenues in the three months ended March 31, 2010 and 2009.

Depreciation expense related to cost of sales:Depreciation expense related to cost of sales increased $0.2 million as a
result of new
production and distribution equipment placed in service in 2009 and the first three months of 2010, partially offset by dispositions and assets becoming fully depreciated.

Operating expenses:Operating expenses increased $0.9 million from the three months ended March 31, 2009 to the three
months ended
March 31, 2010. This increase is primarily due to $1.2 million increase in labor and benefits due to additional headcount at the senior management level and higher health insurance costs. All
other operating expenses decreased $0.3 million, primarily due to a $1.0 million decrease in professional services, which was partially offset by increases in various other expenses, including
bad debt expense.

Depreciation expense and amortization expense:Depreciation and amortization expense increased $0.2 million as a result of
new equipment
placed in service in 2009 and the first three months of 2010, partially offset by dispositions and assets becoming fully depreciated.

Loss on diesel hedge:A loss of $0.4 million was incurred during the three months ended March 31, 2009 in connection
with a derivative
used to hedge the cost of diesel used in our delivery operations. The loss was composed of a $0.3 million non-cash change in the fair value of the derivative and $0.1 million
of cash settlements as the floating amount received from the counterparty was less than the fixed price we were obligated to pay.

Costs of antitrust investigations and related litigation:During the three months ended March 31, 2010 and 2009, we
incurred
$0.9 million and $2.9 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.

Interest expense, net:Net interest expense increased $0.1 million from the three months ended March 31, 2009 to the
three months ended
March 31, 2010. This change is related to increased interest costs associated with our new 11.25% senior secured notes and 13.25% senior secured notes, partially offset by decreased interest
expense related to the 101/2% senior discount notes that were exchanged for 13.25% senior secured notes and lower interest rates on the term loan that was repaid in March 2010.

Debt refinance costs:Costs of $6.1 million were incurred in the three months ended March 31, 2010 in connection with
the refinancing
of substantially all of our outstanding debt and consists of certain fees and expenses paid to third parties in connection with the transactions, as well as the write-off of
$0.3 million of deferred debt issue costs associated with debt that was repaid in the transactions.

Income tax expense:The effective tax rate decreased from 47.1% during the three months ended March 31, 2009 to 33.2% during
the three months
ended March 31, 2010 as a result of the effects of state income taxes based on margin and the Company's projected book loss before income taxes.

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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, the net proceeds resulting from the refinance of substantially of all our debt in March 2010, borrowings under our credit facility
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, (e) acquisitions and
(f) investments. 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 three months ended March 31, 2010, capital expenditures totaled $10.0 million, excluding $2.0 million related to the reimbursement of the cost of
equipment placed under operating leases. As we have consolidated acquisitions into the existing company 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 three months ended March 31, 2010. Our net capital expenditures during the three months
ended March 31, 2010 were $9.7 million.

During
the three months ended March 31, 2010, we completed the acquisition of two ice companies for a total cash purchase price of approximately $0.8 million. 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 facility, mandatory
principal repayments under our debt agreements and availability of other capital resources.

Cash Flows for the Three Months Ended March 31, 2010 and 2009

Net cash used in operating activities was $12.2 million in the three months ended March 31, 2010 versus net cash used in
operating activities of $18.6 million in the three months ended March 31, 2009. The decrease in cash used by operating activities of $6.4 million was primarily the result of a
$11.2 million increase in cash provided by working capital as accounts receivable, prepaid and other assets, accounts payable and accrued expenses were managed more favorably in the three
months ended March 31, 2010 as compared to the comparable period in 2009, partially offset by a $4.8 million decrease in net income, adjusted for non-cash and non-operating items.

Net
cash used in investing activities was $21.3 million and $4.7 million for the three months ended March 31, 2010 and 2009, respectively. The increase in cash used
in investing activities is primarily due to a $12.3 million use of cash to fund a restricted cash account that collateralizes our outstanding standby letters of credit subsequent to the
termination of our old credit facilities, a $5.4 million increase in property and equipment additions, a $0.8 million increase in the cost of acquisitions and a $0.5 million
increase in purchases of investments, partially offset by $2.0 million increase in cash receipts from the reimbursement of the cost of equipment placed under operating leases.

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Net
cash provided by financing activities was $43.3 million in the three months ended March 31, 2010 as the refinancing of substantially all of our debt resulted in the net
issuance of $60.0 million of additional debt. Approximately $16.7 million of the proceeds were used to pay fees and expenses associated with the refinancing transactions. During the
three months ended March 31, 2009, there were no cash flows associated with financing activities.

Long-term Debt and Other Obligations

Overview.At March 31, 2010, we had $450.6 million of total debt outstanding as follows:



There
was no balance outstanding under Reddy Corp's revolving credit facility as of March 31, 2010.

11.25% Senior Secured Notes.On March 15, 2010, Reddy Corp issued $300 million in aggregate principal amount of 11.25%
Senior Secured
Notes due 2015 (the "First Lien Notes") in a private placement offering. Cash interest accrues on the First Lien Notes at a rate of 11.25% per annum and is payable semi-annually in arrears
on March 15 and September 15. The proceeds of the offering were used to repay certain of Reddy Corp's preexisting debt (see "Old Senior Credit Facilities" below), pay fees and expenses
related to the transactions and provide the Company with cash for future use.

The
First Lien Notes are senior secured obligations of Reddy Corp and are:



The
First Lien Notes include customary covenants that restrict, among other things, Reddy Corp's and its future subsidiaries' 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
subsidiaries, merge or sell all or substantially all of its assets or enter into various transactions with affiliates. From and after March 15, 2013, Reddy Corp may redeem any or all of the
First Lien Notes by paying a redemption premium, which is initially 5.625% of the principal amount of the First Lien Notes and declines to 0% for the period commencing on March 15, 2014 and
thereafter. Prior to March 15, 2013, Reddy Corp may redeem any or all of the First Lien Notes by paying a "make-whole" redemption premium. If Reddy Corp experiences a change of
control, Reddy Corp will be required to make an offer to repurchase the First Lien Notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of
purchase. Reddy Corp may also be required to make an offer to purchase the First Lien Notes with proceeds of asset sales that are not reinvested in the Company's business or used to repay other
indebtedness.

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The
indenture governing the First Lien Notes restricts the amount of dividends, distributions and other restricted payments Reddy Corp may make. Under the indenture, Reddy Corp is
restricted from paying dividends to Reddy Holdings unless, at the time of such payment:



The
first lien leverage ratio under the indenture governing the First Lien Notes means the ratio of EBITDA (as defined in the indenture) for the most recent four fiscal quarters to first
lien indebtedness (as defined in the indenture) as of the end of such four quarter period. Reddy Corp is generally
required to calculate its first lien leverage 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 the consolidated net income of Reddy Corp accrued during the period (treated as one accounting period) from April 1, 2010 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 to Reddy Corp of
the issuance of capital stock, subject to certain exceptions, and any cash capital contribution received by Reddy Corp from its stockholders, in each case after April 1, 2010, plus the amount
by which Reddy Corp 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 Corp, less the amount of certain restricted payments made from time to time, including, among other things, the payment of cash dividends. Reddy Corp is not currently
permitted to pay dividends under this provision.

In
addition, regardless of the leverage ratio or whether Reddy Corp could make any restricted payments under the buildup amount provision referred to above, Reddy Corp is permitted to
make certain restricted payments including (1) dividend payments at any time in an aggregate amount of up to $25.0 million if no default has occurred and is continuing under the
indenture, (2) the payment of interest when due on the remaining 101/2% Senior Discount Notes and the repayment, redemption or retirement of remaining 101/2%
Senior Discount Notes from the proceeds of certain indebtedness of Reddy Corp incurred after the date of issuance of the First Lien Notes and (3) the payment of dividends to Reddy Holdings in
an amount per year not to exceed $1.0 million to pay franchise taxes and overhead expenses of Reddy Holding and (4) the payment of dividends to Reddy Holdings in an amount per year not
to exceed 6.0% of the aggregate net cash proceeds received by Reddy Corp from all public equity offerings after the date of issuance of the First Lien Notes subject to specified conditions. 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.

13.25% Senior Secured Notes.On March 15, 2010, Reddy Corp issued $137.6 million in aggregate principal amount of
13.25% Senior Secured
Notes due 2015 (the "Second Lien Notes") in the initial settlement of a private placement exchange offer for the outstanding Discount Notes (the "Exchange Offer"). On March 24, 2010, Reddy Corp
issued an additional $1.8 million in aggregate principal amount of Second Lien Notes in the final settlement of the Exchange Offer. Reddy Corp received no cash proceeds from the issuance of the
Second Lien Notes. Cash interest accrues on the Second Lien Notes at a rate of 13.25% per annum and is payable semi-annually in arrears on May 1 and November 1, with the
first payment occurring on November 1, 2010. In connection with the Exchange

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Offer,
the Company issued $0.6 million of Second Lien Notes to certain bondholders as an early tender premium (see "101/2% Senior Discount Notes" below for further information).
These additional Second
Lien Notes were not reflected in our condensed consolidated balance sheet upon issuance, but will be recognized as additional debt through interest expense over the term of the Second Lien Notes.

The
Second Lien Notes are senior secured obligations of Reddy Corp and are:



The
Second Lien Notes include customary covenants that restrict, among other things, Reddy Corp's and its future subsidiaries' 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
subsidiaries, merge or sell all or substantially all of its assets or enter into various transactions with affiliates. From and after March 1, 2013, Reddy Corp may redeem any or all of the
Second Lien Notes by paying a redemption premium, which is initially 6.625% of the principal amount of the Second Lien Notes and declines to 0% for the period commencing on March 1, 2014 and
thereafter. Prior to March 1, 2013, Reddy Corp may redeem any or all of the Second Lien Notes by paying a "make-whole" redemption premium. If Reddy Corp experiences a change of
control, Reddy Corp will be required to make an offer to repurchase the Second Lien Notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of
purchase. Reddy Corp may also be required to make
an offer to purchase the Second Lien 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 Second Lien Notes restricts the amount of dividends, distributions and other restricted payments Reddy Corp may make. Under the indenture, Reddy Corp is
restricted from paying dividends to Reddy Holdings unless, at the time of such payment:



The
secured leverage ratio under the indenture governing the Second Lien Notes means the ratio of EBITDA (as defined in the indenture) for the most recent four fiscal quarters to secured
indebtedness (as defined in the indenture) as of the end of such four quarter period. Reddy Corp is generally required to calculate its secured leverage 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 the consolidated net income of Reddy Corp accrued during the period (treated as one accounting period) from April 1, 2010 to the end of the most
recent fiscal quarter for which internal financial statements are available (or, if such consolidated net income is a

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deficit,
minus 100% of such deficit), plus, the net cash proceeds to Reddy Corp of the issuance of capital stock, subject to certain exceptions, and any cash capital contribution received by Reddy
Corp from its stockholders, in each case after April 1, 2010, plus the amount by which Reddy Corp 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 Corp, less the amount of certain restricted payments made from time to time, including, among
other things, the payment of cash dividends. Reddy Corp is not currently permitted to pay dividends under this provision.

In
addition, regardless of the leverage ratio or whether Reddy Corp could make any restricted payments under the buildup amount provision referred to above, Reddy Corp is permitted to
make certain restricted payments including (1) dividend payments at any time in an aggregate amount of up to $25.0 million if no default has occurred and is continuing under the
indenture, (2) the payment of interest when due on the remaining Discount Notes and the repayment, redemption or retirement of remaining Discount Notes from the proceeds of certain indebtedness
of Reddy Corp incurred after the date of issuance of the Second Lien Notes, (3) the payment of dividends to Reddy Holdings in an amount per year not to exceed $1.0 million to pay
franchise taxes and overhead expenses of Reddy Holding and (4) the payment of dividends to Reddy Holdings in an amount per year not to exceed 6.0% of the aggregate net cash proceeds received by
Reddy Corp from all public equity offerings after the date of issuance of the Second Lien Notes subject to specified conditions. 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.

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.

On
February 22, 2010, Reddy Corp launched the Exchange Offer, offering $1,000 in aggregate principal amount of Second Lien Notes for each $1,000 of Discount Notes exchanged. In
addition, for Discount Notes exchanged on or prior to March 5, 2010, Reddy Corp offered an early tender premium of $5 in aggregate principal amount of Second Lien Notes for each $1,000 of
Discount Notes exchanged. In conjunction with the Exchange Offer, Reddy Corp solicited consents to eliminate substantially all of the restrictive covenants from the indenture governing the Discount
Notes. At the expiration of the Exchange Offer on March 19, 2010, approximately 92.2% of the aggregate principal amount of the Discount Notes had been tendered into the Exchange Offer.
Following the final settlement of the Exchange Offer, $11.7 million in aggregate principal amount of the Discount Notes remain outstanding.

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



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From
and after November 1, 2008, Reddy Holdings may redeem any or all of the Discount Notes by paying a redemption premium, which was 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. For the period from November 1, 2009 to October 31, 2010,
the redemption premium is 2.625%.

New Senior Credit Facility.On March 15, 2010, Reddy Corp entered into a revolving credit facility with a syndicate of
banks, financial
institutions and other entities as lenders, including JPMorgan Chase Bank, N.A., as Administrative Agent (the "New Credit Facility"). The New Credit Facility provides for a $35 million
revolving credit facility. Under the New Credit Facility, Reddy Corp has the right to request the aggregate commitments to be increased to $50 million provided certain conditions are met. None
of the lenders are obligated to provide such additional commitments.

The
New Credit Facility is an obligation of Reddy Corp and is guaranteed by Reddy Holdings. The New Credit Facility will mature on January 31, 2014.

At
March 31, 2010, the Company had $35 million of availability under the New Credit Facility as no amounts were outstanding.

Principal
balances outstanding under the New Credit Facility bear interest per annum, at the Company's option, at the sum of the base rate or LIBOR plus the applicable margin. The
applicable margin for base rate loans was initially 3.75% and for LIBOR loans was initially 4.75%, with such applicable margins subject to reduction based upon the Company's net leverage ratio (as
defined in the New Credit Facility). The base rate is defined as the greatest of the prime rate (as announced from time to time by the Administrative Agent), the federal funds rate plus 0.5% or the
one-month LIBOR rate plus 1.0%. 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
0.875%, with such availability fee subject to reduction based upon the Company's net leverage ratio. Amounts may be drawn under the New Credit Facility so long as no default or event of default
exists.

The
New Credit Facility does not require any scheduled principal payments prior to its stated maturity date. Subject to certain conditions, mandatory repayments of the New Credit
Facility (and mandatory commitment reductions of the New 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 New Credit Facility, an event of default will occur under the
New Credit Facility.

The
New Credit Facility contains affirmative and negative covenants applicable to Reddy Corp and its future subsidiaries, subject to materiality and other qualifications, baskets and
exceptions. The negative covenants, among other things, restrict the ability of Reddy Corp to:



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Under
the restricted payments covenant in the New Credit Facility, Reddy Corp. is generally 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 cash interest on the Discount Notes, in an amount not greater than Reddy Corp's
Cumulative Available Cash (as defined in the New Credit Facility) for the period (taken as one accounting period) from April 1, 2010 to the end of its most recently ended fiscal quarter for
which a covenant compliance certificate under the New Credit Facility has been delivered to the lenders. As of March 31, 2010, the initial amount of Cumulative Available Cash was
$65.0 million. The New Credit Facility precludes Reddy Corp from declaring any dividends if an event of default under the credit facility has occurred and is continuing. In particular, it will
be an event of default if Reddy Corp's leverage ratio exceeds the level specified in the credit agreement, which is 7.75:1.00 for periods ending through December 31,
2010, or Reddy Corp's fixed charge coverage ratio is less than the level specified in the credit agreement, which is 1.00:1.00 for periods ending through September 30, 2011. The maximum
leverage ratio declines to 7.25:1.00 for periods ending from March 31, 2011 to September 30, 2011, 5.75:1:00 for periods ending from December 31, 2011 to September 30, 2012
and 5.00:1.00 for periods ending from December 31, 2012 to September 30, 2013. The minimum fixed charge coverage ratio increases to 1.2:1.00 for periods ending from December 31,
2011 to September 30, 2013.

The
New Credit Facility contains financial covenants, which include the maintenance of leverage ratio and fixed charge coverage ratio noted above and are collateralized by substantially
all of the Company's assets. At March 31, 2010, Reddy Corp. was in compliance with these covenants. Reddy Holdings guarantees the Credit Facilities and such guarantee is collateralized by a
pledge of substantially all of the assets of Reddy Holdings.

Obligations
under the New Credit Facility may be declared immediately due and payable upon the occurrence of certain events of default as defined in the credit agreement, including
failure to pay any principal when due and payable, failure to pay interest within five (5) days after due, failure to comply with any covenant, representation or condition of any loan document,
any change of control, cross-defaults, and certain other events as set forth in the credit agreement, with grace periods in some cases.

An
acceleration of the indebtedness under the New Credit Facility would be an event of default under the First Lien Notes and Second Lien Notes if the outstanding balance of the New
Credit Facility at the time of acceleration is over $10 million.

At
March 31, 2010, Reddy Holdings had $9.7 million of cash on hand that was not subject to restrictions under our New Credit Facility.

EBTIDA
as defined in our New Credit Facility is hereafter referred to as "Adjusted EBITDA".

The
following table presents Adjusted EBITDA for the twelve month period ended March 31, 2010 on a pro forma basis after giving effect to the adjustments related to the
acquisition or disposal of businesses which are permitted under the description of the definition of Leverage Ratio as set forth in the New Credit Facility. 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.

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

Twelve Months
Ended March 31,
2010(unaudited,
in thousands)Pro forma Adjusted EBITDA


$59,798Total leverage ratio


7.55 : 1.0Fixed charge coverage ratio


1.51 : 1.0


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

Twelve Months
Ended March 31,
2010(In thousands)Net loss

$
(6,396
)Depreciation expense related to cost of sales


21,592Depreciation and amortization expense


7,233Interest expense


26,840Interest income


(67
)Income tax benefit


3,093EBITDA


52,295Other non-cash items:Stock-based compensation expense


1,881Loss on dispositions of assets


2,560Increase in fair value of derivative


(254
)Gain on bargain purchase, net of acquisition expenses


(580
)Debt refinance costs


6,108Reddy Holdings items:Cost of antitrust investigations and related litigation(a)


(2,860
)Adjusted EBITDA


59,150Acquisition adjustments(b)


648Pro forma adjusted EBITDA

$
59,798


(a)Represents
the elimination of the costs incurred in connection with the ongoing antitrust investigations and related litigation. The costs related to the
antitrust investigations and related civil litigation are excluded from the calculation of Adjusted EBITDA as these 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 Capital Partners LP in February
2008 in connection with the termination of a merger agreement and insurance proceeds related to the antitrust investigations and related litigation.(b)Represents
the incremental Adjusted EBITDA of acquired businesses as if each acquisition had been consummated on the first day of the period presented. All
acquisitions included herein were consummated on or before March 31, 2010.


Letters of Credit.The New Credit Facility does not provide for the issuance of standby letters of credit. In March 2010, Reddy
Corp entered into a
separate letter of credit facility with JPMorgan

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Chase
Bank, N.A. and Wells Fargo Bank, National Association (the "LC Facility"). Letters of credit issued under the LC Facility are cash collateralized at 102% of the amount of the letter of credit.
The cash collateral provided under the LC Facility is maintained in a restricted account at JP Morgan Chase Bank, N.A. and is reported as "Restricted cash" in the condensed consolidated balance
sheets.

Old 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., JP Morgan Chase Bank, N.A., Wachovia Bank, N.A.,
Bear Stearns Corporate Lending Inc. and Lehman Commercial Paper, Inc. (the "Old Credit Facilities"). The Old Credit Facilities provided for a $60 million revolving credit facility
and a $240 million term loan. The Old Credit Facilities were obligations of Reddy Corp and were guaranteed by Reddy Holdings. On March 15, 2010, the Old Credit Facilities were terminated
and all amounts owed thereunder were repaid from the proceeds of the sale of the First Lien Notes.

Financial Derivative Instruments

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. The 2009 Hedge
had a term of 10 months and expired 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 paid a fixed rate of 1.165% on the notional balance outstanding and received an amount equal to 1-month LIBOR.
Any net payable or receivable amount was settled
monthly. We used interest rate hedges to minimize the risk of increases in floating interest rates. The interest rate hedges were not for trading purposes and were 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 expired on December 28, 2009. The notional amount of gallons hedged changed on a monthly basis to match our
anticipated utilization. We paid a fixed rate of $1.55 per gallon (wholesale basis) and received an amount equal to a wholesale index rate. Any net payable or receivable amount was settled monthly. We
used the Diesel Hedge to minimize the risk of rising fuel prices. The hedge was not for trading purposes and was accounted for as an economic hedge and was not designated as a hedging instrument.

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 expect to fully utilize the excess cash generated from our 2009 selling season during the
winter and spring of 2010 to fund our operations, debt service, capital expenditures and acquisitions. In March 2010, we refinanced substantially all of our outstanding debt. The refinance provided us
with additional cash proceeds of $43.5 million, net of transaction costs, which will allow for additional acquisitions and capital expenditures.

Our
capital expenditures are used to maintain and expand our traditional ice and ISB 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. We currently estimate that our capital

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expenditures
for 2010 will be approximately $19 million to $21 million net of dispositions and operating leases; however, due to the availability of additional liquidity resulting from
the refinance of our debt, we expect capital expenditures to increase in order to accelerate our strategic growth. However, at this time we cannot estimate the amount of the additional expenditures.

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 April 20, 2010, we had approximately $9.7 million of cash on hand at Reddy Holdings, approximately
$38.6 million of unrestricted cash and $12.3 million of restricted cash at Reddy Corp and $35.0 million of availability under our revolving credit facility. Depending on our level
of capital expenditures and acquisitions over the next twelve months, a limited amount of borrowings under our revolving credit facility may occur in the spring of 2011 as our cash flows from
operations decline to their lowest point during March and April due to reduced sales in
January and February. We incur a substantial portion of our annual capital expenditures prior to the summer selling season and we need to finance seasonal increases in accounts receivable and
inventories as temperatures and sales volumes begin to increase in April and May. We have the ability to increase the capacity of the revolving credit facility from $35 million to
$50 million if certain conditions are met. We will evaluate opportunities to increase the size of the facility in order to provide additional liquidity to the business. We will also monitor
opportunities to repay or refinance the $11.7 million of remaining discount notes which are due in 2012.

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, by which time, we expect to have repaid all amounts borrowed under our revolving credit facility in the spring, 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 covenant violation under Reddy Corp.'s
credit facility, we could contribute Reddy Holdings' cash to Reddy Corp., take operational actions such as deferring capital expenditures and reducing controllable expenses to maintain compliance.

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 April 20, 2010, our cash on hand at Reddy Holdings, net of accrued expenses related the antitrust investigations and related civil litigation, was approximately
$8.8 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 on an annual basis and Reddy Holdings has no
restrictions on its ability to raise additional debt. We have received reimbursements of $7.2 million to date from one of our insurance carriers as reimbursements of certain legal expenses and
are working to maximize any additional potential reimbursements. The amount of any future reimbursements cannot be estimated at this time.

Recently Adopted Accounting Pronouncements

In December 2009, the FASB issued ASU 2009-17, "Consolidations (Topic 810)Improvements to Financial Reporting
by Enterprises Involved with Variable Interest Entities." ASU 2009-17 changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled
through voting (or similar rights) should be consolidated. ASU 2009-17 also requires a reporting entity to provide additional disclosures about its involvement with variable interest
entities and any significant changes in risk exposure due to that involvement. ASU 2009-17 is effective for fiscal years beginning after November 15, 2009 and for interim periods
within the first annual reporting period. The adoption

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of
ASU 2009-17 on January 1, 2010 did not have a material effect on our results of operations and financial position.

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.

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 facility. Principal balances outstanding under the credit facility bear interest per annum,
at our option,

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at
the sum of the base rate or LIBOR plus the applicable margin. The applicable margin for base rate loans was initially 3.75% and for LIBOR loans was initially 4.75%, with such applicable margins
subject to reduction based upon the Company's net leverage ratio. The base rate is defined as the greater of the prime rate (as announced from time to time by the Administrative Agent), the federal
funds rate plus 0.5% or the one-month LIBOR rate plus 1.0%.

As
of March 31, 2010, there were no balances outstanding our credit facility.

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
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 March 31, 2010 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 March 31, 2010 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.

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 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. Current and former employees have also been subpoenaed to testify before a
federal grand jury in the Eastern District of Michigan and, more recently, before a federal grand jury in the Southern District of Ohio. The search warrant and subpoenas that we and our employees
received are connected with a broader industry inquiry by the Antitrust Division of the DOJ. The Home City Ice Company, Arctic Glacier International, Inc., and three former employees of Arctic
Glacier have entered guilty pleas regarding a conspiracy to allocate customers and territories in southeastern Michigan and the Detroit, Michigan, metropolitan area.

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Sentencing
of the three former Arctic Glacier employees took place on February 2, 3 and 4, 2010, sentencing of Arctic Glacier occurred on February 11, 2010, and Home City was sentenced
on March 2, 2010.

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 market for 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 were included in the Florida CID and the Arizona CID
states that it will be satisfied by the production of information which had been and would 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 have complied with all requests for
documents and information regarding these matters. 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. We have substantially completed our production of documents and information 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. Certain of our current and former employees have testified before the grand juries. We expect to 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

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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
September 15, 2009, the lead plaintiffs for each of the putative direct and indirect purchaser classes filed consolidated amended complaints. We have filed motions to dismiss both of these
complaints. The motion relating to the direct purchaser claims is set for hearing on June 24, 2010.

On
March 1, 2010, a putative class action Statement of Claim was filed against us in the Ontario Superior Court of Justice in Canada alleging violations of Part VI of the
Competition Act and seeking general damages, punitive and exemplary damages, pre-judgment and post-judgment interest, and costs. An agreement has been reached with counsel for
the plaintiff that no response to the Statement of Claim is due at this time.

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. Discovery is
ongoing in that matter.

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 and have not received any recent communications
regarding this matter.

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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. On July 17, 2009, the Court consolidated the actions and appointed a lead plaintiff and interim lead plaintiff's counsel. The lead plaintiff filed a consolidated amended
complaint on November 2, 2009. We filed a motion to dismiss the consolidated amended complaint on December 17, 2009. Plaintiffs filed a response to that motion to dismiss on
January 18, 2010, and we filed a reply in support of the motion on February 17, 2010.

Two
stockholder derivative actions have been filed on our behalf in state district court in Dallas County, Texas, naming as defendants, among others, certain current and former officers
and members of our Board of Directors. 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 stayed and
administratively closed, with the parties required to submit monthly joint status letters regarding the stockholder actions pending in the Eastern District of Michigan. A status conference in this
matter is scheduled for May 17, 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, including
intellectual property matters. 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

As a result of the refinancing of substantially all of our indebtedness in March 2010, certain of the risk factors described in our
Annual Report on Form 10-K for the year ended December 31, 2009 have changed as set forth below.

Despite our current indebtedness levels, we may still incur significant additional indebtedness. Incurring more indebtedness could increase the risks associated with our
substantial indebtedness.

We may be able to incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the
indentures governing the First Lien Notes, the Second Lien Notes, and our New Credit Facility do not limit Reddy Holdings' ability to incur additional indebtedness. The terms of the indentures
governing the First Lien Notes, the Second Lien Notes, and our New Credit Facility limit, but do not prohibit, Reddy Corp from incurring additional indebtedness. In addition, the indentures allow us
to issue additional First Lien Notes and Second Lien Notes under certain circumstances. Such additional notes will also be guaranteed by Reddy Holdings and will share in the collateral that secures
the First Lien Notes, the Second Lien Notes and the New Credit Facility.

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The
indentures also allow Reddy Corp to incur certain other additional secured debt and allow any future foreign subsidiaries to incur additional debt. In addition, the indentures do not prevent Reddy
Corp from incurring other liabilities that do not constitute indebtedness. If we incur new debt or other liabilities, the related risks that we now face could intensify.

We may not be able to generate sufficient cash to service our indebtedness and we may be forced to take other actions to satisfy our payment obligations under our
indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our future performance, which will be
affected by financial, business and economic conditions and other factors. We will not be able to control many of these factors, such as economic conditions in the industry in which we operate and
competitive pressures. Our cash flow may not be sufficient to allow us to pay principal and interest on our debt and to meet our other obligations. If our cash flows and capital resources are
insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our
indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements,
including our New Credit Facility and the indentures relating to the First Lien Notes and the Second Lien Notes, may restrict us from pursuing any of these alternatives.

Our New Credit Facility and the indentures governing the First Lien Notes and the Second Lien Notes impose significant operating and financial restrictions on us and our
future subsidiaries, which may prevent us from capitalizing on business opportunities and taking some actions.

The agreements that govern the terms of our debt, including the indentures that govern the First Lien Notes and the Second Lien Notes
and our New Credit Facility, impose significant operating and financial restrictions on us. These restrictions limit our ability to, among other things:



In
addition, under our New Credit Facility we are required to satisfy and maintain specified financial ratios and other financial condition tests. Our ability to meet those financial
ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests. A breach of any of these covenants could result in a default under our
New Credit Facility. Upon the occurrence of an event of default under our New Credit Facility, our lenders could elect to declare all amounts outstanding under our New Credit Facility to be
immediately due and payable and terminate all commitments to extend further credit. If more than $10.0 million of indebtedness is outstanding under our New Credit Facility at the time of any
such acceleration, an event of default will occur under the indentures governing the First Lien Notes and the Second Lien Notes.

As
a result of these covenants and restrictions, we are limited in how we conduct our business and we may be unable to raise additional debt or equity financing to compete effectively or
to take advantage of new business opportunities. The terms of any future indebtedness we may incur could

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include
more restrictive covenants. A breach of any of these covenants could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to
declare the indebtedness, together with accrued interest and other fees, to be due and payable immediately and proceed against any Collateral securing that indebtedness.

This,
in turn, could cause our other debt to become due and payable as a result of cross-acceleration provisions contained in the agreements governing such other debt. In the event that
some or all of our debt is accelerated and becomes immediately due and payable, we may not have the funds to repay, or the ability to refinance, such debt.

Except
as set forth above, there have been no material changes to the factors described in our Annual Report on Form 10-K for the year ended December 31, 2009.

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 45.

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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: April 22, 2010

By:

/s/ GILBERT M. CASSAGNE Gilbert M. Cassagne
Chief Executive OfficerDate: April 22, 2010

By:

/s/ STEVEN J. JANUSEK Steven J. Janusek
Chief 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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