<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q/A

                                   (Mark One)
           (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                      For the quarter ended March 31, 2002

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

                             Commission File Number
                                     0-24439

                            HINES HORTICULTURE, INC.
             (Exact name of registrant as specified in its charter)


              Delaware                                         33-0803204
   (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                        Identification Number)

                               12621 Jeffrey Road
                            Irvine, California 92620
               (Address of principal executive offices) (Zip Code)

                                 (949) 559-4444
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                  Yes (X) No( )

As of April 30, 2002 there were 22,072,549 shares of Common Stock, par value
$0.01 per share, outstanding.

================================================================================


<PAGE>

                         EXPLANATORY NOTE - RESTATEMENT

Hines Horticulture, Inc. (the "Company") is filing this amendment to its
quarterly report on Form 10-Q in order to restate its consolidated financial
statements for the first quarter of fiscal 2002. This restatement reflects (i)
an adjustment in the amount of $5,236,000 to the loss from discontinued
operations net of tax as a result of a reclassification of the cumulative
foreign currency translation adjustment in accumulated other comprehensive
income to the loss from discontinued operations and (ii) an adjustment in the
amount of $3,198,000 to the loss from discontinued operations, net of tax that
had been previously recorded in the quarter ended June 30, 2002 and will now be
recorded in the quarter ended March 31, 2002. This adjustment resulted from
changes in estimates related to working capital and other adjustments, which
occurred subsequent to the sale. The net effect of these adjustments for the
first quarter of fiscal 2002 is an $8,434,000 decrease to the income from
discontinued operations, from an income of $1,456,000 as previously reported to
a restated loss of $6,978,000. The impact of this restatement on the financial
statements for the fiscal quarter ended March 31, 2002, is summarized in Note 8
to the consolidated financial statements contained herein.

In addition, effective January 1, 2002, Hines adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142"). Under SFAS No. 142, goodwill will no
longer be amortized, but will be subject to a periodic test for impairment based
upon fair values. SFAS No. 142 requires that goodwill be tested annually for
impairment using a two-step process. The first step is to identify a potential
impairment. The second step is to measure the amount of the impairment loss. In
the year of adoption, the initial testing must be done as of the beginning of
the fiscal year. For this transition testing, the first step must be completed
within six months and the second step must be completed by the end of the
Company's fiscal year.

The Company completed the first step of the transition testing by June 30, 2002
and completed the second step by December 31, 2002. As a result, the pre-tax
impairment charge related to goodwill as of January 1, 2002 was determined to be
$78,757,000. As required by SFAS No. 142, the impairment charge was recorded net
of its associated $23,609,000 tax benefit in the first quarter as a cumulative
change in accounting principle, effective as of January 1, 2002. Net income has
been reduced by the amount of the after-tax impairment charge.

                                     Page 2

<PAGE>

                                      INDEX

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements                                           Page No.
                                                                        --------

            Consolidated Balance Sheets as of
            March 31, 2002 (unaudited) and December 31, 2001                 4

            Consolidated Statements of Operations for the Three
            Months Ended March 31, 2002 and 2001 (unaudited)                 5

            Consolidated Statements of Cash Flows for the
            Three Months Ended March 31, 2002 and 2001 (unaudited)           6

            Notes to the Consolidated Financial Statements                   7

Item 2.  Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                        18

Item 3.  Quantitative and Qualitative Disclosures About Market Risk          32

                     PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                                    33

         Signature                                                           33

Note: Items 1, 2, 3, 4 and 5 of Part II are omitted because they are not
applicable.

                                     Page 3

<PAGE>

<TABLE>
                                    HINES HORTICULTURE, INC.
                                  CONSOLIDATED BALANCE SHEETS
                              March 31, 2002 and December 31, 2001
                           (Dollars in thousands, except share data)
<CAPTION>

ASSETS                                                            March 31,       December 31,
------                                                               2002             2001
                                                                -------------     -------------
<S>                                                             <C>               <C>
                                                                 (Restated)
                                                                (Unaudited)

                      CURRENT ASSETS:
        Cash                                                    $         --      $         --
        Accounts receivable, net of allowance for
           doubtful accounts of $1,269 and $1,303                     60,134            28,182
        Inventories                                                  182,960           164,675
        Prepaid expenses and other current assets                      9,527             2,322
        Assets of discontinued operations                                 --            40,134
                                                                -------------     -------------

                                       Total current assets          252,621           235,313

FIXED ASSETS, net of accumulated depreciation
   and depletion of $31,794 and $30,106                              141,132           142,387
DEFERRED FINANCING EXPENSES, net of
   accumulated amortization of $9,511 and $8,357                       9,831             8,317
ASSETS OF DISCONTINUED OPERATIONS                                         --            95,029
DEFFERED INCOME TAX                                                   18,059             7,727

GOODWILL                                                              42,784           121,371
                                                                -------------     -------------

                                                                $    464,427      $    610,144
                                                                =============     =============

LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------

                   CURRENT LIABILITIES:
        Accounts payable                                        $     23,579      $     12,824
        Accrued liabilities                                           20,740             8,450
        Accrued payroll and benefits                                   6,693             7,091
        Accrued interest                                               3,240             2,904
        Long-term debt, current portion                                   84            43,159
        Borrowings on revolving credit facility                      121,250           100,000
        Liabilities of discontinued operations                            --            37,097
        Deferred income taxes                                         68,167            64,874
                                                                -------------     -------------

                                  Total current liabilities          243,753           276,399
                                                                -------------     -------------

LONG-TERM DEBT                                                       181,857           209,639

DERIVATIVE LIABILITY                                                   5,865             7,117


LIABILITIES OF DISCONTINUED OPERATIONS                                    --            28,244

COMMITMENTS AND CONTINGENCIES                                             --                --

SHAREHOLDERS' EQUITY
        Common Stock
           Authorized - 60,000,000 shares  $.01 par value;
           Issued and outstanding - 22,072,549 shares
           at March 31, 2002 and December 31, 2001                       221               221

        Additional paid in capital                                   128,781           128,781
        Notes receivable from stock sales
        Deficit                                                      (94,415)          (33,282)
        Accumulated other comprehensive loss                          (1,635)           (6,975)
                                                                -------------     -------------

                                 Total shareholders' equity           32,952            88,745
                                                                -------------     -------------

                                                                $    464,427      $    610,144
                                                                =============     =============

    The accompanying notes are an integral part of these consolidated financial statements.

                                            Page 4
</TABLE>

<PAGE>

<TABLE>
                                 HINES HORTICULTURE, INC.
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                        Three Months Ended March 31, 2002 and 2001
                         (Dollars in thousands, except share data)
                                        (Unaudited)
<CAPTION>

                                                                2002              2001
                                                           -------------     -------------
                                                            (Restated)
<S>                                                        <C>               <C>
Sales, net                                                 $     68,723      $     67,757
Cost of goods sold                                               34,316            32,714
                                                           -------------     -------------
    Gross profit                                                 34,407            35,043
                                                           -------------     -------------

Selling and distribution expenses                                20,736            19,253
General and administrative expenses                               5,501             5,092
Other operating income                                           (2,103)               --
Amortization of goodwill                                             --               885
                                                           -------------     -------------
    Total operating expenses                                     24,134            25,230
                                                           -------------     -------------

    Operating income                                             10,273             9,813

Other expenses
   Interest                                                       6,711             8,188
   Interest rate swap agreement (income) expense                 (1,014)            1,992
   Amortization of deferred financing expenses                    1,154             1,139
                                                           -------------     -------------
                                                                  6,851            11,319
                                                           -------------     -------------
Income (loss) before provision for income taxes,
  discontinued operations, extraordinary item
  and cumulative change in accounting principle                   3,422            (1,506)
Income tax provision (benefit)                                    1,403              (616)
                                                           -------------     -------------

Income (loss) from continuing operations                          2,019              (890)
                                                           -------------     -------------

(Loss) income from discontinued operations, net of tax
     expense of $13,081 and $1,447                               (6,978)            2,092
                                                           -------------     -------------
Extraordinary item, net of tax benefit of $713                   (1,026)               --
                                                           -------------     -------------
Cumulative effect of change in accounting
   principle, net of tax benefit of $23,609                     (55,148)               --
                                                           -------------     -------------

Net (loss) income                                          $    (61,133)     $      1,202
                                                           =============     =============


Basic and diluted earnings per share:

Income (loss) per common share from
  continuing operations                                    $       0.09      $      (0.04)
(Loss) income per common share from
  discontinued operations                                  $      (0.32)     $       0.09
Extraordinary item                                         $      (0.05)     $       0.00
Cumulative effect of change in accounting principle        $      (2.49)     $       0.00
                                                           -------------     -------------

Net (loss) income per common share                         $      (2.77)     $       0.05
                                                           =============     =============

Weighted average shares outstanding--Basic                   22,072,549        22,072,549
                                                           =============     =============
Weighted average shares outstanding--Diluted                 22,104,455        22,072,549
                                                           =============     =============

  The accompanying notes are an integral part of these consolidated financial statements.

                                          Page 5
</TABLE>

<PAGE>

<TABLE>
                                    HINES HORTICULTURE, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                           Three Months Ended March 31, 2002 and 2001
                           (Dollars in thousands, except share data)
                                           (Unaudited)
<CAPTION>

                                                                      2002              2001
                                                                 -------------     -------------
                                                                   (Restated)
<S>                                                              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net (loss) income                                            $    (61,133)     $      1,202
    Income (loss) from discontinued operations                          6,978            (2,092)
    Adjustments to reconcile net income to
      net cash provided by operating activities -
         Cumulative effect of change in accounting principle           55,148                --
         Depreciation, depletion and amortization                       2,208             2,910
         Amortization of deferred financing costs                       1,154             1,139
         Interest rate swap agreement (income) expense                 (1,014)            1,992
         Gain on sale of assets                                        (2,103)               --
         Extraordinary item (net of tax)                                1,026                --
         Deferred income taxes                                          1,402              (616)
                                                                 -------------     -------------
                                                                        3,666             4,535
Change in working capital accounts
    Accounts receivable                                               (31,952)          (31,994)
    Inventories                                                       (18,285)          (17,312)
    Prepaid expenses and other current assets                            (558)             (343)
    Accounts payable and accrued liabilities                           11,783            18,504
                                                                 -------------     -------------
      Change in working capital accounts                              (39,012)          (31,145)
                                                                 -------------     -------------

Net cash used in operating activities                                 (35,346)          (26,610)

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of fixed assets                                           (1,730)           (4,089)
    Net cash used in discontinued operations                           (6,520)             (782)
    Proceeds from sale of discontinued operations                     131,538                --
    Proceeds from sale of fixed assets                                  3,116                --
    Acquisitions, adjusted                                               (170)               --
                                                                 -------------     -------------
        Net cash provided by (used in) investing activities           126,234            (4,871)
                                                                 -------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on revolving line of credit                             76,432            42,400
    Repayments on revolving line of credit                            (55,182)          (10,900)
    Repayments of long-term debt                                     (107,938)              (19)
    Deferred financing costs incurred                                  (4,200)               --
                                                                 -------------     -------------
        Net cash (used in) provided by financing activities           (90,888)           31,481
                                                                 -------------     -------------


NET DECREASE IN CASH                                                       --                --

CASH, beginning of period                                                  --                --
                                                                 -------------     -------------

CASH, end of period                                              $         --      $         --
                                                                 =============     =============


Supplemental disclosure of cash flow information:
    Cash paid for interest                                       $      7,625      $      5,709
    Cash paid for income taxes                                   $         --      $        203

     The accompanying notes are an integral part of these consolidated financial statements.

                                             Page 6
</TABLE>

<PAGE>

                            HINES HORTICULTURE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (DOLLARS IN THOUSANDS)
                             MARCH 31, 2002 AND 2001
                                   (UNAUDITED)

1.       Description of Business:
         ------------------------

               As of March 31, 2002, Hines Horticulture, Inc. ("Hines" or the
         "Company"), a Delaware corporation, produces and distributes
         horticultural products through two operating divisions: (i) its Nursery
         division, and (ii) its Color division. The Nursery division and Color
         division make up the green goods business. The green goods business is
         conducted through Hines Nurseries, Inc. ("Hines Nurseries"), a wholly
         owned subsidiary of Hines. Hines Nurseries is a leading national
         supplier of ornamental shrubs, color plants and container-grown plants
         with commercial nursery facilities located in Arizona, California,
         Florida, Georgia, New York, Oregon, Pennsylvania, South Carolina and
         Texas. Hines Nurseries markets its products to retail and commercial
         customers throughout the United States.

               As of December 31, 2001, the Company also had a third division,
         the Growing Media business. The Growing Media business was conducted
         through Sun Gro Horticulture, Inc. ("Sun Gro-U.S."), a wholly owned
         subsidiary of Hines Nurseries, Sun Gro-U.S.'s wholly owned subsidiary,
         Sun Gro Horticulture Canada Ltd. ("Sun Gro-Canada"), and Sun
         Gro-Canada's direct and indirect Canadian subsidiaries.

               During December 2001, the Company's Board of Directors approved
         and authorized management to proceed with a planned sale of Sun Gro
         Horticulture Canada, Ltd. and the assets of Sun Gro Horticulture, Inc.
         to a Canadian income fund (the "Fund"). On March 27, 2002, the Company
         sold the assets of Sun Gro Horticulture, Inc. and the stock of Sun Gro
         Horticulture Canada Ltd., its growing media business, to the Sun Gro
         Horticulture Income Fund, a newly established Canadian income fund. The
         assets sold included 14 facilities located across Canada and the United
         States and control of approximately 50,000 acres of peat bogs in
         Canada. Hines will no longer harvest, produce or sell peat moss or have
         the rights to the Sunshine, Parkland Fairway, Black Gold, Lakeland
         Grower, Alberta Rose, Nature's and Gardener's Gold trade names. Hines
         received net proceeds of approximately $119,000 from the sale, which
         were used to pay down outstanding bank debt. The Company recognized a
         loss from discontinued operations of $6,978, net of tax, related to the
         sale of its growing media business for the three months ended March 31,
         2002. The Company's current operations consist solely of its Nursery
         and Color divisions.

               The consolidated financial statements include the accounts of
         Hines and its wholly owned subsidiaries after elimination of
         intercompany accounts and transactions. The Company has adopted the
         provisions of Statement of Financial Accounting Standards ("SFAS") No.
         144 (Accounting for the Impairment or Disposal of Long-Lived Assets),
         and accordingly, the Company's consolidated financial statements have
         been restated to reflect the financial position, results of operations
         and cash flows of the Sun Gro business as "Discontinued Operations."

                                             Page 7

<PAGE>

         Refer to Note 9 "Guarantor/ Non-guarantor Disclosures" for information
         about the Company's guarantors and segments for the three months ended
         March 31, 2002.

2.       Unaudited Financial Information:
         --------------------------------

               The unaudited financial information furnished herein, in the
         opinion of management, reflects all adjustments (consisting of only
         normal recurring adjustments), which are necessary to state fairly the
         consolidated financial position, results of operations and cash flows
         of the Company as of and for the periods indicated. The Company
         presumes that users of the interim financial information herein have
         read or have access to the Company's audited consolidated financial
         statements for the preceding fiscal year and that the adequacy of
         additional disclosure needed for a fair presentation, except in regard
         to material contingencies or recent significant events, may be
         determined in that context.

               Accordingly, footnote and other disclosures which would
         substantially duplicate the disclosures contained in the Form 10-K
         filed on April 1, 2002 by Hines Horticulture, Inc. under the Securities
         Exchange Act of 1934, as amended (the "Exchange Act"), have been
         omitted. The financial information herein is not necessarily
         representative of a full year's operations.

3.       Earnings Per Share:
         -------------------

               Earnings per share are calculated in accordance with SFAS No. 128
         (Earnings per Share), which requires the Company to report both basic
         earnings per share, based on the weighted-average number of common
         shares outstanding, and diluted earnings per share, based on the
         weighted-average number of common shares outstanding adjusted to
         include the potentially dilutive effect of outstanding stock options
         and warrants. For the three months ended March 31, 2002, the
         incremental 440 shares related to the warrants outstanding did not
         result in a difference between basic and diluted earnings per share.
         Additionally, for the three months ended March 31, 2002, shares related
         to the underlying employee stock options in the amount of 2,747 were
         excluded from the computation of diluted earnings per share because
         they would have been anti-dilutive.

4.       Adoption Of Accounting Pronouncements:
         --------------------------------------

               Effective January 1, 2002, Hines adopted the provisions of SFAS
         No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). Under
         SFAS No. 142, goodwill will no longer be amortized, but will be subject
         to a periodic test for impairment based upon fair values. SFAS No. 142
         requires that goodwill be tested annually for impairment using a
         two-step process. The first step is to identify a potential impairment.
         The second step is to measure the amount of the impairment loss. In the
         year of adoption, the initial testing must be done as of the beginning
         of the fiscal year. For this transition testing, the first step must be
         completed within six months and the second step must be completed by
         the end of the Company's fiscal year.

                                             Page 8

<PAGE>

               The Company completed the first step of the transition testing by
         June 30, 2002 and completed the second step by December 31, 2002. As a
         result, the pre-tax impairment charge related to goodwill as of January
         1, 2002 was determined to be $78,757. As required by SFAS No. 142, the
         impairment charge was recorded net of its associated $23,609 tax
         benefit in the first quarter as a cumulative change in accounting
         principle, effective as of January 1, 2002. Net income has been reduced
         by the amount of the after-tax impairment charge.

               In October 2001, the FASB issued SFAS No. 144 (Accounting for the
         Impairment or Disposal of Long-Lived Assets). SFAS No. 144 addresses
         financial accounting and reporting for the impairment or disposal of
         long-lived assets and supercedes SFAS No. 121 (Accounting for the
         Impairment of Long-Lived Assets and for Long-Lived Assets to Be
         Disposed Of), and the accounting and reporting provisions of Accounting
         Principles Board ("APB") Opinion No. 30 (Reporting the Results of
         Operations--Reporting the Effects of Disposal of a Segment of a
         Business, and Extraordinary, Unusual and Infrequently Occurring Events
         and Transactions), for the disposal of a segment of a business. SFAS
         No. 144 shall be effective for financial statements issued for fiscal
         year beginning after December 15, 2001, but early adoption is
         encouraged. The Company has chosen to early adopt SFAS No. 144.

               Effective January 1, 2001, Hines adopted the provisions of SFAS
         No. 133, (Accounting for Derivative Instruments and Hedging
         Activities), as amended. Adopting the provisions of SFAS No. 133 on
         January 1, 2001 resulted in a cumulative after-tax charge to
         Accumulated Other Comprehensive Income as of January 1, 2001 of $2,334,
         representing the fair value of the interest rate agreement, net of tax.
         This amount is being amortized as interest rate agreement expense over
         the term of the debt. For the three months ended March 31, 2002, the
         Company recognized a pre-tax gain of $1,014 reported as Interest rate
         swap agreement income in the Consolidated Statements of Operations
         related to the change in the fair value of the interest rate agreement.
         For the twelve months ending December 31, 2002, the Company anticipates
         that $560, net of tax, will be charged to the Other Comprehensive
         Income account related to the interest rate swap agreement.

5.       Inventories:
         ------------

                  Inventories consisted of the following:

                                                  March 31,   December 31,
                                                     2002         2001
                                                  ---------    ---------

         Nursery stock                            $171,495     $155,096
         Material and supplies                      11,465        9,579
                                                  ---------    ---------
         Inventory from continuing operations      182,960      164,675
         Discontinued operations                        --       14,054
                                                  ---------    ---------
         Total inventory                          $182,960     $178,729
                                                  =========    =========

                                     Page 9

<PAGE>

6.       Comprehensive Income:
         ---------------------

                  Comprehensive income includes all changes in equity during a
         period except those resulting from investments by and distributions to
         the Company's stockholders. The Company's comprehensive income is
         composed of cumulative foreign currency translation adjustments and the
         change in valuation of derivative instruments. The components of
         comprehensive income during the three months ended March 31, 2002 and
         2001, were as follows:

                                           Three Months Ended March 31,
                                           ----------------------------
                                              2002              2001
                                          ------------     ------------
                                           (Restated)

         Net (loss) income                $   (61,133)     $     1,202
         Cumulative foreign currency
             translation adjustments               --           (1,359)
         Transaction impact upon
             adoption of FAS 133                   --           (2,334)
         Loss on derivatives
             reclassified to earnings             140              139
                                          ------------     ------------
         Comprehensive loss               $   (60,993)     $    (2,352)
                                          ============     ============


7.       New Accounting Pronouncements:
         ------------------------------

               In August 2001, Financial Accounting Standards Board ("FASB")
         issued SFAS No. 143 (Accounting for Asset Retirement Obligations). SFAS
         No. 143 addresses financial accounting and reporting for obligations
         associated with the retirement of tangible long-lived assets and the
         associated asset retirement costs. It would be effective for the
         Company beginning with its 2003 financial statements. The Company is in
         the process of evaluating the impact of SFAS No. 143 on its financial
         statements and will adopt the provisions of this statement in the first
         quarter of fiscal year 2003.

               In April 2002, Financial Accounting Standards Board issued SFAS
         No. 145 (Rescission of FASB Statements No. 4, 44, and 64, Amendment of
         FASB Statement No. 13, and Technical Corrections). SFAS No. 145
         addresses financial accounting and reporting for the extinguishments of
         debt, leases, and intangible assets of motor carriers. It would be
         effective for the Company beginning with its 2003 financial statements.
         The Company is in the process of evaluating the impact of SFAS No. 145
         on its financial statements and will adopt the provisions of this
         statement in the first quarter of fiscal year 2003.

8.       Restatement:
         ------------

               The Company has restated its consolidated financial statements
          for the first quarter of fiscal 2002. This restatement reflects an
          adjustment in the amount of $5,236 to the loss from discontinued
          operations net of tax as a result of a reclassification of the
          cumulative foreign currency translation adjustment in accumulated
          other comprehensive income to the loss from discontinued operations,
          and an adjustment in the amount of $3,198 to the loss from
          discontinued operations, net of tax that had been previously recorded
          in the quarter ended June 30, 2002 and will now be recorded in the
          quarter ended March 31, 2002. The net effect of these adjustments for
          the first quarter of fiscal 2002 is a $8,434 decrease to the income
          from discontinued operations, from a income of $1,456 as previously
          reported to a restated loss of $6,978.

                                    Page 10

<PAGE>

               In addition, effective January 1, 2002, Hines adopted the
         provisions of SFAS No. 142, "Goodwill and Other Intangible Assets"
         ("SFAS No. 142"). Under SFAS No. 142, goodwill will no longer be
         amortized, but will be subject to a periodic test for impairment based
         upon fair values. SFAS No. 142 requires that goodwill be tested
         annually for impairment using a two-step process. The first step is to
         identify a potential impairment. The second step is to measure the
         amount of the impairment loss. In the year of adoption, the initial
         testing must be done as of the beginning of the fiscal year. For this
         transition testing, the first step must be completed within six months
         and the second step must be completed by the end of the Company's
         fiscal year.

               The Company completed the first step of the transition testing by
         June 30, 2002 and completed the second step by December 31, 2002. As a
         result, the pre-tax impairment charge related to goodwill as of January
         1, 2002 was determined to be $78,757. As required by SFAS No. 142, the
         impairment charge was recorded net of its associated $23,609 tax
         benefit in the first quarter as a cumulative change in accounting
         principle, effective as of January 1, 2002. Net income has been reduced
         by the amount of the after-tax impairment charge.

<TABLE>
<CAPTION>
                                                        Three Months Ended March 31, 2002
                                                        ---------------------------------
                                                         (As Reported)     (As Restated)
                                                         -------------     -------------
<S>                                                      <C>               <C>
         Sales, net                                      $     68,723      $     68,723
         Cost of goods sold                                    34,316            34,316
                                                         -------------     -------------
            Gross profit                                       34,407            34,407

         Total operating expenses                              24,134            24,134
                                                         -------------     -------------

         Operating income                                      10,273            10,273
         Other expenses                                         6,851             6,851
                                                         -------------     -------------

         Income before provision for income taxes               3,422             3,422
         Income tax provision                                   1,403             1,403
                                                         -------------     -------------
         Income from continuing operations                      2,019             2,019
         Income (loss) from discontinued
            operations, net of tax                              1,456            (6,978)
         Extraordinary item, net of tax benefit                (1,026)           (1,026)
         Cumulative effect of change in accounting
            principle, net of tax                                  --           (55,148)
                                                         -------------     -------------

         Net income (loss)                               $      2,449      $    (61,133)
                                                         =============     =============

                                         Page 11

<PAGE>

         Basic and diluted earnings per share:
           Income per common share from
             continuing operations                       $       0.09      $       0.09
           Income (loss) per common share from
             discontinued operations                     $       0.07      $      (0.32)
           Extraordinary item                            $      (0.05)     $      (0.05)
           Cumulative effect of change in accounting
             Principle                                   $       0.00      $      (2.49)
                                                         -------------     -------------
         Net income (loss) per common share              $       0.11      $      (2.77)
                                                         =============     =============


                                                                 March 31, 2002
                                                         -------------------------------
                                                         (As Reported)     (As Restated)
                                                         -------------     -------------

         Total current assets                            $    252,621      $    252,621
         Fixed assets, net                                    141,132           141,132
         Deferred financing expenses, net                       9,831             9,831
         Deferred income taxes                                     --            18,059
         Goodwill, net                                        121,541            42,784
                                                         -------------     -------------
         Total assets                                    $    525,125      $    464,427
                                                         =============     =============

         Total current liabilities                       $    238,553      $    243,753
         Long-term debt                                       181,857           181,857
         Interest rate swap agreement                           5,865             5,865
         Deferred income taxes                                  7,552                --
         Shareholder's Equity
           Common stock                                           221               221
           Additional paid-in capital                         128,781           128,781
           Deficit                                            (30,833)          (94,415)
           Accumulated other comprehensive loss                (6,871)           (1,635)
                                                         -------------     -------------
         Total shareholders' equity                            91,298            32,952
                                                         -------------     -------------
         Total liabilities and shareholders' equity      $    525,125      $    464,427
                                                         =============     =============
</TABLE>

9.       Segment Information and Guarantor/Non-Guarantor Disclosures:
         ------------------------------------------------------------

                  Prior to the sale of the growing media business on March 27,
         2002, the Senior Subordinated Notes issued by Hines Nurseries ("the
         issuer") were guaranteed by Hines ("the parent guarantor") and by Sun
         Gro-U.S. ("the subsidiary guarantor"). Pursuant to Third Amendment to
         the Credit Agreement and Consent issued on February 1, 2002 and the
         sale of the growing media business, the issuer is the wholly owned
         subsidiary of the parent guarantor and the parent and subsidiary
         guarantees are full, unconditional and joint and several. As of March
         27, 2002, the Senior Subordinated Notes are guaranteed solely by Hines
         Nurseries, Inc. and its parent guarantor. Separate financial statements
         of Hines Nurseries and Sun Gro-U.S. are not presented and Hines
         Nurseries and Sun Gro-U.S. are not filing separate reports under the
         Exchange Act because management believes that they would not be
         material to investors.

                  The following information provides the required disclosures
         with respect to the Company's segments pursuant to SFAS No. 131,
         (Disclosures about Segments of an Enterprise and Related Information).
         For the period ending March 31, 2002, the Company operates in two
         segments: 1) the nursery segment and 2) the growing media segment.

                                    Page 12

<PAGE>

                  The following consolidating information shows (a) Hines on a
         parent company basis only as the parent guarantor (carrying its
         investment in its subsidiary under the equity method), (b) Hines
         Nurseries as the issuer (carrying its investment in its subsidiary
         under the equity method), (c) For periods prior to March 27, 2002, Sun
         Gro-U.S. as subsidiary guarantor (carrying its investment in Sun
         Gro-Canada under the equity method), (d) For periods prior to March 27,
         2002, Sun Gro-Canada and its direct and indirect subsidiaries, as
         subsidiary non guarantors, (e) eliminations necessary to arrive at the
         information for the parent guarantor and its direct and indirect
         subsidiaries on a consolidated basis and (f) the parent guarantor on a
         consolidated basis, as follows:

         o        Consolidating balance sheets as of March 31, 2002 (unaudited)
                  and December 31, 2001;

         o        Consolidating statements of operations for the three months
                  ended March 31, 2002 and 2001 (unaudited); and

         o        Consolidating statements of cash flows for the three months
                  ended March 31, 2002 and 2001 (unaudited).

                                    Page 13

<PAGE>

<TABLE>
                                            GUARANTOR / NON-GUARANTOR DISCLOSURES
                                                 Consolidating Balance Sheet
                                                     As of March 31, 2002
                                                    (Dollars in thousands)
<CAPTION>

                                                -----------------------------------------------------------------------------
                                                                  Nursery      Growing Media
                                                                  Segment         Segment
                                                                              (DISCONTINUED
                                                                                OPERATIONS)
                                                -----------------------------------------------------------------------------
                                                    Hines
                                                Horticulture       Hines
                                                   (Parent       Nurseries        Sun Gro                       Consolidated
                                                 Guarantor)       (Issuer)      Horticulture    Eliminations        Total
                                                -----------------------------------------------------------------------------
       ASSETS                                    (Restated)       (Restated)                     (Restated)       (Restated)
<S>                                             <C>             <C>             <C>             <C>             <C>
Current assets:
    Cash                                        $         --    $         --    $         --    $         --    $         --
    Accounts receivable, net                              --          60,134              --              --          60,134
    Inventories                                           --         182,960              --              --         182,960
    Prepaid expenses and other current assets             --           9,527           8,214          (8,214)          9,527
    Deferred income taxes                                 --              --              --              --              --
                                                -----------------------------------------------------------------------------
                        Total current assets    $         --    $    252,621    $      8,214    ($     8,214)   $    252,621
                                                -----------------------------------------------------------------------------

Fixed assets, net                                         --         141,132              --              --         141,132
Deferred financing expenses, net                         113           9,718              --              --           9,831
Goodwill, net                                             --          42,784              --              --          42,784
Deferred income taxes                                  2,875          46,476              --         (31,292)         18,059
Investments in subsidiaries                           37,796              --              --         (37,796)             --
                                                -----------------------------------------------------------------------------
                                                $     40,784    $    492,731    $      8,214    ($    77,302)   $    464,427
                                                =============================================================================

    LIABILITIES AND SHAREHOLDERS' EQUITY
    ------------------------------------

Current liabilities:
    Accounts payable                            $         --    $     23,579    $         --    $         --    $     23,579
    Accrued liabilities                                   --          20,740           8,214          (8,214)         20,740
    Accrued payroll and benefits                          --           6,693              --              --           6,693
    Accrued interest                                      --           3,240              --              --           3,240
    Long-term debt, current portion                       --              84              --              --              84
    Borrowings on revolving credit facility               --         121,250              --              --         121,250
    Deferred income taxes                                 --          62,512              --           5,655          68,167
    Intercompany accounts                              7,832          (7,832)             --              --              --
                                                -----------------------------------------------------------------------------
                   Total current liabilities           7,832         230,266           8,214          (2,559)        243,753
                                                -----------------------------------------------------------------------------

Long-term debt                                            --         181,857              --              --         181,857
Derivative liability                                      --           5,865              --              --           5,865
Deferred income taxes                                     --          36,947              --         (36,947)             --
Shareholders' equity
    Common stock                                         221          17,971              --         (17,971)            221
    Additional paid in capital                       128,781          21,362              --         (21,362)        128,781
    Retained earnings (deficit)                      (94,415)             98              --             (98)        (94,415)
    Accumulated other comprehensive loss              (1,635)         (1,635)             --           1,635          (1,635)
                                                -----------------------------------------------------------------------------
                  Total shareholders' equity          32,952          37,796              --         (37,796)         32,952
                                                -----------------------------------------------------------------------------

                                                $     40,784    $    492,731    $      8,214    ($    77,302)   $    464,427
                                                =============================================================================

                                                           Page 14
</TABLE>

<PAGE>

<TABLE>
                                     GUARANTOR / NON-GUARANTOR DISCLOSURES - (CONTINUED)
                                                 Consolidating Balance Sheet
                                                   As of December 31, 2001
                                                    (Dollars in thousands)
<CAPTION>

                                                -----------------------------------------------------------------------------
                                                                  Nursery      Growing Media
                                                                  Segment         Segment
                                                                               (DISCONTINUED
                                                                                OPERATIONS)
                                                -----------------------------------------------------------------------------
                                                   Hines
                                                Horticulture       Hines
                                                  (Parent         Nurseries        Sun Gro                      Consolidated
                                                 Guarantor)       (Issuer)       Horticulture   Eliminations        Total
                                                -----------------------------------------------------------------------------
<S>                                             <C>             <C>             <C>             <C>             <C>
       ASSETS

Current assets:
    Cash                                        $         --    $         --    $         --    $         --    $         --
    Accounts receivable, net                              --          28,182          22,878              --          51,060
    Inventories                                           --         164,675          14,054              --         178,729
    Prepaid expenses and other current assets             --           2,322           3,202              --           5,524
    Deferred income taxes                                 --              --             384            (384)             --
                                                -----------------------------------------------------------------------------
                     Total current assets       $         --    $    195,179    $     40,518    ($       384)   $    235,313
                                                -----------------------------------------------------------------------------

Fixed assets, net                                         --         150,638          67,651              --         218,289
Deferred financing expenses, net                         250           8,067              --              --           8,317
Goodwill, net                                             --         121,371          19,127              --         140,498
Deferred income taxes                                    253          28,417           3,153         (24,096)          7,727
Investments in subsidiaries                           96,038           4,115          12,308        (112,461)             --
                                                -----------------------------------------------------------------------------
                                                $     96,541    $    507,787    $    142,757    ($   136,941)   $    610,144
                                                =============================================================================
    LIABILITIES AND SHAREHOLDERS' EQUITY
    ------------------------------------

Current liabilities:
    Accounts payable                            $         --    $     12,824    $      5,840    $         --    $     18,664
    Accrued liabilities                                   --           8,450             879              --           9,329
    Accrued payroll and benefits                          --           7,091           2,139              --           9,230
    Accrued interest                                      --           2,904              --              --           2,904
    Long-term debt, current portion                       --          43,159          21,113              --          64,272
    Borrowings on revolving credit facility               --         100,000              --              --         100,000
    Deferred income taxes                                 --          64,874           7,510            (384)         72,000
    Intercompany accounts                              7,796         (58,993)         51,197              --              --
                                                -----------------------------------------------------------------------------
                Total current liabilities              7,796         180,309          88,678            (384)        276,399
                                                -----------------------------------------------------------------------------

Long-term debt                                            --         209,639          15,959              --         225,598
Interest rate swap agreement                              --           7,117              --              --           7,117
Deferred income taxes                                     --          20,943          15,438         (24,096)         12,285
Shareholders' equity
    Common stock                                         221          17,971          15,914         (33,885)            221
    Additional paid in capital                       128,781          21,362           7,666         (29,028)        128,781
    Retained earnings (deficit)                      (33,282)         52,221           4,302         (56,523)        (33,282)
    Accumulated other comprehensive loss              (6,975)         (1,775)         (5,200)          6,975          (6,975)
                                                -----------------------------------------------------------------------------
               Total shareholders' equity             88,745          89,779          22,682        (112,461)         88,745
                                                -----------------------------------------------------------------------------

                                                $     96,541    $    507,787    $    142,757    ($   136,941)   $    610,144
                                                =============================================================================

                                                           Page 15
</TABLE>

<PAGE>

<TABLE>
                                          GUARANTOR / NON-GUARANTOR DISCLOSURES - CONTINUED
                                                Consolidating Statement of Operations
                                                For the quarter ended March 31, 2002
                                                       (Dollars in thousands)
<CAPTION>

                                                       -----------------------------------------------------------------------------
                                                                         Nursery     Growing Media
                                                                         Segment        Segment
                                                                                     (DISCONTINUED
                                                                                       OPERATIONS)
                                                       -----------------------------------------------------------------------------
                                                           Hines
                                                        Horticulture      Hines
                                                          (Parent       Nurseries        Sun Gro                       Consolidated
                                                         Guarantor)      (Issuer)      Horticulture    Eliminations        Total
                                                       -----------------------------------------------------------------------------
                                                         (Restated)     (Restated)      (Restated)      (Restated)      (Restated)
<S>                                                    <C>             <C>             <C>             <C>             <C>
Sales, net                                             $         --    $     68,723    $     31,150    ($     1,583)   $     98,290
Cost of goods sold                                               --          34,316          16,929          (1,583)         49,662
                                                       -----------------------------------------------------------------------------
    Gross Profit                                                 --          34,407          14,221              --          48,628
Operating expenses                                            6,259          33,461         (10,720)             --          29,000
                                                       -----------------------------------------------------------------------------
    Operating (loss) income                                  (6,259)            946          24,941              --          19,628
                                                       -----------------------------------------------------------------------------
Other expenses:
   Interest                                                      --           6,419             528              --           6,947
   Interest - intercompany                                       --            (722)            722              --              --
  Amortization of deferred financing expenses, other         57,496          (1,200)             --         (55,142)          1,154
                                                       -----------------------------------------------------------------------------
                                                             57,496           4,497           1,250         (55,142)          8,101
                                                       -----------------------------------------------------------------------------
Income (loss) before provision for income taxes             (63,755)         (3,551)         23,691          55,142          11,527
Income tax (benefit) provision                               (2,622)         (2,366)         21,474                          16,486
                                                       -----------------------------------------------------------------------------
(Loss) income before extraordinary item                     (61,133)         (1,185)          2,217          55,142          (4,959)
Extraordinary item                                               --           1,026              --              --           1,026
Cumulative effect of change in accounting
   principle, net of tax                                         --          55,148              --              --          55,148
                                                       -----------------------------------------------------------------------------
Net (loss) income                                      ($    61,133)   ($    57,359)   $      2,217    $     55,142    ($    61,133)
                                                       =============================================================================


                                          GUARANTOR / NON-GUARANTOR DISCLOSURES - CONTINUED
                                                Consolidating Statement of Operations
                                                FOR THE QUARTER ENDED MARCH 31, 2001
                                                       (Dollars in thousands)

                                                       -----------------------------------------------------------------------------
                                                                         Nursery     Growing Media
                                                                         Segment        Segment
                                                                                     (DISCONTINUED
                                                                                       OPERATIONS)
                                                       -----------------------------------------------------------------------------
                                                           Hines
                                                        Horticulture      Hines
                                                          (Parent       Nurseries        Sun Gro                       Consolidated
                                                         Guarantor)      (Issuer)      Horticulture    Eliminations        Total
                                                       -----------------------------------------------------------------------------

Sales, net                                             $         --    $     67,757    $     42,827    ($     9,831)   $    100,753
Cost of goods sold                                               --          32,714          28,102          (9,831)         50,985
                                                       -----------------------------------------------------------------------------
    Gross Profit                                                 --          35,043          14,725              --          49,768
Operating expenses                                               --          25,230           8,874              --          34,104
                                                       -----------------------------------------------------------------------------
    Operating income                                             --           9,813           5,851              --          15,664
                                                       -----------------------------------------------------------------------------
Other expenses:
   Interest                                                     137          11,509           1,181              --          12,827
   Interest - intercompany                                       --          (1,131)          1,131              --              --
  Amortization of deferred financing expenses, other         (1,283)         (1,288)         (2,114)          5,489             804
                                                       -----------------------------------------------------------------------------
                                                             (1,146)          9,090             198           5,489          13,631
                                                       -----------------------------------------------------------------------------
Income before provision for income taxes                      1,146             723           5,653          (5,489)          2,033
Income tax provision                                            (56)           (560)          1,447              --             831
                                                       -----------------------------------------------------------------------------
Net income                                             $      1,202    $      1,283    $      4,206    ($     5,489)   $      1,202
                                                       =============================================================================

                                                              Page 16
</TABLE>

<PAGE>
<TABLE>
                                       GUARANTOR / NON-GUARANTOR DISCLOSURES - CONTINUED
                                             Consolidating Statement of Cash Flows
                                              For the quarter ended March 31, 2002
                                                     (Dollars in thousands)
<CAPTION>
                                                    ---------------------------------------------------------------------------
                                                                      Nursery     Growing Media
                                                                      Segment        Segment
                                                                                  (DISCONTINUED
                                                                                   OPERATIONS)
                                                    ---------------------------------------------------------------------------
                                                        Hines
                                                     Horticulture      Hines
                                                       (Parent       Nurseries       Sun Gro                      Consolidated
                                                      Guarantor)      (Issuer)     Horticulture    Eliminations       Total
                                                    ---------------------------------------------------------------------------
<S>                                                 <C>            <C>             <C>             <C>            <C>
Cash used in operating activities                   $         --   ($    36,157)   ($     3,235)   $         --   ($    39,392)
                                                    ---------------------------------------------------------------------------
Cash flows from investing activities:
     Purchase of fixed assets, net                            --          1,386          (2,503)             --         (1,117)
     Sales proceeds                                           --             --         131,538              --        131,538
     Acquistions, adjusted                                    --           (170)             --              --           (170)
                                                    ---------------------------------------------------------------------------
         Net cash used in investing activities                --          1,216         129,035              --        130,251
                                                    ---------------------------------------------------------------------------
Cash flows from financing activities:
     Proceeds from revolving line of credit                   --         21,250              --              --         21,250
     Intercompany advances (repayments)                       --         92,840         (92,840)             --             --
     Repayments of long-term debt                             --        (95,938)        (12,000)             --       (107,938)
     Deferred financing costs                                 --         (4,200)             --              --         (4,200)
     Dividends received (paid)                                --         20,989         (20,989)             --             --
                                                    ---------------------------------------------------------------------------
         Net cash provided by (used in) financing
           activities                                         --         34,941        (125,829)             --        (90,888)
                                                    ---------------------------------------------------------------------------
     Effect of exchange rate changes on cash and
       cash equivalents                                       --             --              29              --             29
                                                    ---------------------------------------------------------------------------
Net decrease in cash                                          --             --              --              --             --
Cash, beginning of year                                       --             --              --              --             --
                                                    ---------------------------------------------------------------------------
Cash, end of year                                   $         --   $         --    $         --    $         --   $         --
                                                    ===========================================================================


                                       GUARANTOR / NON-GUARANTOR DISCLOSURES - CONTINUED
                                             Consolidating Statement of Cash Flows
                                              For the quarter ended March 31, 2001
                                                     (Dollars in thousands)
                                                    ---------------------------------------------------------------------------
                                                                      Nursery     Growing Media
                                                                      Segment        Segment
                                                                                  (DISCONTINUED
                                                                                   OPERATIONS)
                                                    ---------------------------------------------------------------------------
                                                        Hines
                                                     Horticulture      Hines
                                                       (Parent       Nurseries       Sun Gro                      Consolidated
                                                      Guarantor)      (Issuer)     Horticulture    Eliminations       Total
                                                    ---------------------------------------------------------------------------
Cash used in operating activities                   $         --   ($    26,610)   ($     1,156)   $         --   ($    27,766)
                                                    ---------------------------------------------------------------------------

Cash flows from investing activities:
     Purchase of fixed assets, net                            --         (4,089)           (805)             --         (4,894)
                                                    ---------------------------------------------------------------------------
         Net cash used in investing activities                --         (4,089)           (805)             --         (4,894)
                                                    ---------------------------------------------------------------------------
Cash flows from financing activities:
     Proceeds from revolving line of credit                   --         31,500              --              --         31,500
     Intercompany advances (repayments)                       --           (782)            782              --             --
     Repayments of long-term debt                             --            (19)            (24)             --            (43)
                                                    ---------------------------------------------------------------------------
         Net cash provided by (used in) financing
           activities                                         --         30,699             758              --         31,457
                                                    ---------------------------------------------------------------------------
     Effect of exchange rate changes on cash and
       cash equivalents                                       --             --           1,203              --          1,203
                                                    ---------------------------------------------------------------------------
Net decrease in cash                                          --             --              --              --             --
Cash, beginning of year                                       --             --              --              --             --
                                                    ---------------------------------------------------------------------------
Cash, end of year                                   $         --   $         --    $         --    $         --   $         --
                                                    ===========================================================================

                                                            Page 17
</TABLE>
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

         CAUTIONARY STATEMENT FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
         PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

               This report contains forward-looking statements. Hines desires
         to take advantage of the safe harbor provisions of the Private
         Securities Litigation Reform Act of 1995 and is including this
         statement for the express purpose of availing itself of the protections
         of the safe harbor with respect to all forward-looking statements.
         Several important factors, in addition to the specific factors
         discussed in connection with such forward-looking statements
         individually, could affect the future results of the Company and could
         cause those results to differ materially from those expressed in the
         forward-looking statements contained herein.

               The Company's estimated or anticipated future results,
         products and service performance or other non-historical facts are
         forward-looking and reflect Hines' current perspective of existing
         trends and information. These statements involve risks and
         uncertainties that cannot be predicted or quantified and, consequently,
         actual results may differ materially from those expressed or implied by
         such forward-looking statements. Such risks and uncertainties include,
         among others, the continued ability of Hines to access water, the
         impact of growing conditions, risks associated with customer
         concentration, future acquisitions and the ability to integrate such
         acquisitions in a timely and cost effective manner, the ability to
         manage growth, the impact of competition, the ability to obtain future
         financing or to satisfy payment obligations under existing financing,
         limitations of Hines' substantial leverage and debt restrictions,
         government regulations and other risks and uncertainties described from
         time to time in Hines' Securities and Exchange Commission filings.

               Therefore, the Company wishes to caution each reader of this
         report to consider carefully these factors as well as the specific
         factors discussed with each forward-looking statement in this report
         and disclosed in the Company's filings with the Securities and Exchange
         Commission as such factors, in some cases, have affected, and in the
         future (together with other factors) could affect, the ability of the
         Company to implement its business strategy and may cause actual results
         to differ materially from those contemplated by the statements
         expressed herein.

         RESTATEMENT

               Hines Horticulture, Inc. (the "Company") is filing this amendment
         to its quarterly report on Form 10-Q in order to restate its
         consolidated financial statements for the first quarter of fiscal 2002.
         This restatement reflects (i) an adjustment in the amount of $5,236,000
         to the loss from discontinued operations net of tax as a result of a
         reclassification of the cumulative foreign currency translation
         adjustment in accumulated other comprehensive income to the loss from
         discontinued operations and (ii) an adjustment in the amount of
         $3,198,000 to the loss from discontinued operations, net of tax that
         had been previously recorded in the quarter ended June 30, 2002 and
         will now be recorded in the quarter ended March 31, 2002. This
         adjustment resulted from changes in estimates related to working
         capital and other adjustments, which occurred subsequent to the sale.
         The net effect of these adjustments for the first quarter of fiscal
         2002 is an $8,434,000 decrease to the income from discontinued
         operations, from an income of $1,456,000 as previously reported to a
         restated loss of $6,978,000. The impact of this restatement on the
         financial statements for the fiscal quarter ended March 31, 2002, is
         summarized in Note 8 to the consolidated financial statements contained
         herein.

               In addition, effective January 1, 2002, Hines adopted the
         provisions of Statement of Financial Accounting Standards ("SFAS") No.
         142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"). Under
         SFAS No. 142, goodwill will no longer be amortized, but will be subject
         to a periodic test for impairment based upon fair values. SFAS No. 142
         requires that goodwill be tested annually for impairment using a
         two-step process. The first step is to identify a potential impairment.
         The second step is to measure the amount of the impairment loss. In the
         year of adoption, the initial testing must be done as of the beginning
         of the fiscal year. For this transition testing, the first step must be
         completed within six months and the second step must be completed by
         the end of the Company's fiscal year.

               The Company completed the first step of the transition testing by
         June 30, 2002 and completed the second step by December 31, 2002. As a
         result, the pre-tax impairment charge related to goodwill as of January
         1, 2002 was determined to be $78,757,000. As required by SFAS No. 142,
         the impairment charge was recorded net of its associated $23,609,000
         tax benefit in the first quarter as a cumulative change in accounting
         principle, effective as of January 1, 2002. Net income has been reduced
         by the amount of the after-tax impairment charge.

                                    Page 18

<PAGE>

         SALE OF SUN GRO BUSINESS

               On March 27, 2002, the Company completed the sale of its growing
         media business to Sun Gro Horticulture Income Fund (the "Fund"), a
         newly established Canadian income fund. The assets sold included 14
         facilities located across Canada and the United States and control of
         approximately 50,000 acres of peat bogs in Canada. Hines will no longer
         harvest, produce or sell peat moss or have the rights to the Sunshine,
         Parkland Fairway, Black Gold, Lakeland Grower, Alberta Rose, Nature's
         and Gardener's Gold trade names. Hines received net proceeds of
         approximately $119.0 million from the sale, which were used to pay down
         outstanding bank debt.

               In connection with the sale of the Sun Gro growing media
         business, Hines entered into a supply agreement with a subsidiary of
         the Fund to purchase peat moss and other growing media products to be
         used in the Company's green goods business.

               The Company's Consolidated Financial Statements included in this
         Form 10-Q reflect the financial position, results of operations and
         cash flows of the Sun Gro business as "discontinued operations." In
         accordance with SFAS No. 144 (Accounting for the Impairment or Disposal
         of Long-lived Assets), the Company's consolidated financial statements
         have been restated to reflect the financial position, results of
         operations and cash flows of the Sun Gro business as "discontinued
         operations."

         OVERVIEW

               GENERAL. Hines is one of the largest commercial nursery
         operations in North America, producing one of the broadest assortments
         of container-grown plants in the industry. The Company sells its
         nursery products primarily to the retail segment, which includes
         premium independent garden centers, as well as leading home centers and
         mass merchandisers, such as Home Depot, Lowe's, Wal-Mart and Target.
         The Company believes that sales of its nursery products have been
         positively affected by societal and demographic trends, such as greater
         levels of homeownership, the aging of the American population and the
         increasing popularity of gardening. Recent trends in the retail
         distribution channel, such as the expansion of large "big box"
         retailers and their growing emphasis on the lawn and garden category,
         have increased consumer exposure to lawn and garden products.
         Management believes these trends provide opportunities for improved
         operating performance.

               SEASONALITY. The Company's nursery business, like that of its
         competitors, is highly seasonal. The Company has experienced, and
         expects to continue to experience, significant variability in net
         sales, operating income and net income on a quarterly basis.

               ACQUISITIONS. In the three years ended December 31, 2001, the
         Company completed, in connection with its nursery business, one
         acquisition in 1999 and two acquisitions in 2000, all of which have
         been accounted for under the purchase method. Accordingly, the purchase
         prices were allocated to certain assets and liabilities based on their
         respective fair market values. The excess of the purchase price over
         the estimated fair market value of the net assets acquired relating to
         each transaction was accounted for as goodwill. Beginning January 1,
         2002, goodwill will no longer be amortized, but will be subject to a
         periodic test for impairment based upon fair values. The consolidated
         financial statements include the operating results of each acquisition
         from the date of acquisition.

                                    Page 19

<PAGE>

               TAX MATTERS. The Company derives significant benefits under the
         U.S. federal tax code by qualifying to use the cash method of
         accounting for federal income tax purposes. Under the cash method,
         sales are included in taxable income when payments are received and
         expenses are deducted as they are paid. The primary benefit the Company
         receives is the ability to deduct the cost of inventory as it is
         incurred. As a result of the Company's ability to deduct its growing
         costs under the farming exception, the Company has generally not been
         required to pay cash income taxes and has generated net operating
         losses for federal income tax purposes. If the Company's ability to use
         the cash method of accounting for federal income tax purposes was
         limited or eliminated, the Company's cash income tax payments could
         increase significantly. At December 31, 2001, the Company had
         approximately $51.6 million in net operating loss carryforwards for
         federal income tax reporting purposes. As a result of the sale of the
         Sun Gro business, the Company expects to utilize a significant amount
         of these net operating loss carryforwards in 2002 for federal income
         tax reporting purposes.

         CRITICAL ACCOUNTING POLICIES

               The preparation of financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and disclosure of contingent assets and liabilities at
         the date of the financial statements and the reported amounts of
         revenues and expenses during the reporting period. Actual results could
         differ from those estimates. Management believes that the following
         areas represent its most critical accounting policies related to actual
         results that may vary from those estimates.

               SALES RETURNS AND ALLOWANCES: Amounts accrued for sales returns
         and allowance are maintained at a level believed adequate by management
         to absorb probable losses in the trade receivable due to sales
         discounts and allowances. The provision rate is established by
         management using the following criteria: past sales returns experience,
         current economic conditions and other relevant factors, and is
         re-evaluated on a quarterly basis. The allowance is increased by
         provisions for sales discounts and allowances charged against income.
         The Company records revenue, net of sales discounts and allowances,
         when the risk of ownership is transferred to the customer. Allowances
         are provided at the time of revenue is recognized in accordance with
         SFAS No. 48 (Revenue Recognition When Right of Return Exists).

               ALLOWANCE FOR DOUBTFUL ACCOUNTS: The allowance for bad debts is
         maintained at a level believed adequate by management to reflect the
         probable losses in the trade receivables due to customer defaults,
         insolvencies or bankruptcies. The provision is established by
         management using the following criteria: customer credit history,
         customer current credit rating and other relevant factors, and is
         re-evaluated on a quarterly basis. The allowance is increased by
         provisions to bad debt expense charged against income. All recoveries
         on trade receivables previously charged off are credited to the

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         accounts receivable recovery account charged against income, while
         direct charge-offs of trade receivables are deducted from the
         allowance.

               ACCOUNTING FOR GOODWILL IMPAIRMENT: On January 1, 2002, the
         Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets"
         ("SFAS No. 142"). In accordance with this standard, goodwill has been
         classified as indefinite-lived assets no longer subject to
         amortization. Indefinite-lived assets are subject to impairment testing
         upon adoption of SFAS No. 142 and at least annually thereafter. In
         accordance with SFAS No. 142, this involves a two step process. First,
         the Company must determine if the carrying amount of equity exceeds the
         fair value based upon the quoted market price of the Company's common
         stock. If the Company determines that goodwill may be impaired, the
         Company compares the "implied fair value" of the goodwill, as defined
         by SFAS No. 142, to its carrying amount to determine the impairment
         loss, if any. The initial impairment analysis was completed in the
         fourth quarter of 2002. The Company recorded a one-time, non-cash
         charge of $55.1 million to reduce the carrying value of its goodwill.
         The Company has recognized this impairment charge as a cumulative
         effect of change in accounting principle.

         RESULTS OF OPERATIONS

         THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS
         ENDED MARCH 31, 2001

               NET SALES. Net sales of $68.7 million for the three months ended
         March 31, 2002 increased $0.9 million, or 1.3%, from net sales of $67.8
         million for the comparable period in 2001 due primarily to strong sales
         in the Company's northeast and southwest markets. This was somewhat
         offset by sluggish sales in the southeast markets due to the late
         emergence of spring in those markets. Sales in the Company's northeast
         color region were strong due to the impact of newly established store
         service programs. These programs enable us to offer a broader selection
         of green goods and streamline ordering and in-store merchandising
         activities with our customers.

               GROSS PROFIT. Gross profit of $34.4 million for the three months
         ended March 31, 2002 decreased $0.6 million, or 1.7%, from gross profit
         of $35.0 million for the comparable period in 2001. As a percent of net
         sales, gross margins decreased to 50.1% from 51.7% of net sales
         primarily due to the lower sales in our southeast markets, which
         typically carry higher margins.

               SELLING AND DISTRIBUTION EXPENSES. Selling and distribution
         expenses of $20.7 million for the three months ended March 31, 2002
         increased $1.4 million, or 7.3%, from $19.3 million for the comparable
         period in 2001. The increase was primarily due to the higher sales, the
         additional sales and merchandising personnel in place to support the
         peak spring selling season and higher distribution costs. The higher
         distribution costs are primarily due to the purchase of palletized
         shipping racks in anticipation of the peak shipping period, which
         enable us to make unitized shipments, a preferred delivery mode for
         nursery products.

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               GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
         expenses of $5.5 million for the three months ended March 31, 2002
         increased $0.4 million, or 7.8%, from $5.1 million for the comparable
         period in 2001. The increase is primarily attributable to normal cost
         of living increases and the implementation of the Company's Enterprise
         Resource Platform ("ERP") information system at its Fallbrook facility.

               OTHER OPERATING INCOME. Other operating income of $2.1 million
         for the three months ended March 31, 2002 represents primarily the net
         gain from the sale of our property in Hillsboro, Oregon.

               OPERATING INCOME. Operating income of $10.3 million for the three
         months ended March 31, 2002 increased $0.5 million, or 5.1%, from $9.8
         million for the comparable period in 2001. As a percentage of net
         sales, operating income improved to 15.0% from 14.5% of net sales, due
         primarily to other operating income of $2.1 million as discussed above.

               OTHER EXPENSE. Other expense of $6.9 million for the three months
         ended March 31, 2002 decreased $4.4 million, or 38.9%, from $11.3
         million for the comparable period in 2001. The decrease was primarily
         attributable to lower interest rates and $1.0 million of interest rate
         swap income as compared to a charge of $2.0 million for the comparable
         period in 2001. As a result of the Company using the net proceeds from
         the sale of the Sun Gro business and of the sale of an additional 22.5
         acres of land to reduce debt, interest expense is expected to be lower
         in 2002 when compared to 2001.

               PROVISION FOR INCOME TAXES. The Company's effective income tax
         rate was 41.0% and 40.9% for the three months ended March 31, 2002 and
         2001, respectively.

               INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from
         continuing operations of $2.0 million for the three months ended March
         31, 2002 increased $2.9 million from a loss of $0.9 million for the
         comparable period in 2001. The increase was primarily due to higher
         operating income and lower interest expense as discussed above.

               (LOSS) INCOME FROM DISCONTINUED OPERATIONS. The restated loss
          from discontinued operations of $7.0 million includes a loss of $7.1
          million, net of tax, from the sale of the Sun Gro business and income
          of $0.1 million from the operations of Sun Gro through the date of
          sale.

               EXTRAORDINARY ITEM. The extraordinary item of $1.0 million, net
          of tax, represents the write-off of unamortized financing costs
          resulting from the early extinguishment of debt which occurred as a
          result of using the net proceeds received from the sale of the Sun Gro
          business to pay down outstanding debt before its maturity.

               CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. The
          cumulative effect of change in accounting principle of $55.1 million
          for the three months ended March 31, 2002 represents the goodwill
          impairment charge, net of tax, resulting from the Company's adoption
          of

                                    Page 22

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         SFAS No. 142. The Company valued both the tangible and intangible
         assets and liabilities as of January 1, 2002. The difference between
         the implied fair value of goodwill and the book value goodwill led to a
         pre-tax charge of $78.8 million. A $23.6 million tax benefit was
         recorded in connection with the loss.

                  NET (LOSS) INCOME. The restated net loss increased to $61.1
         million for the three months ended March 31, 2002 compared to a net
         income of $1.2 million in the comparable period in 2001 for the reasons
         indicated above.

         LIQUIDITY AND CAPITAL RESOURCES

                  The Company has historically satisfied its working capital
         requirements through operating cash flow and seasonal borrowings under
         its revolving credit facilities. Due to the highly seasonal nature of
         its operations, the Company historically borrows under its revolving
         credit facilities to fund peak needs.

                  On March 27, 2002, the Company completed the sale of the Sun
         Gro business and received net proceeds of approximately $119.0 million,
         which were used to pay down outstanding bank debt. In addition, in
         March 2002, the Company completed the sale of 22.5 acres of land
         located in Hillsboro, Oregon and used the net proceeds of approximately
         $2.9 million to pay down outstanding bank debt. The Company used $107.9
         million of the proceeds from the sale of the Sun Gro business and the
         sale of land to reduce long-term debt with the remaining amount of
         $15.0 million used to reduce the amount outstanding under its working
         capital revolver.

                  The Company's net debt position (short and long term-debt) at
         March 31, 2002 was $303.2 million compared to net debt of $389.9
         million at December 31, 2001, which included long-term debt from
         discontinued operations. The decrease in debt compared to December 31,
         2001 was due to the Company using the net proceeds from the sale of the
         Sun Gro business and the sale of 22.5 acres in Hillsboro, Oregon to
         reduce debt.

                  Net cash used in operating activities was $35.3 million for
         the three months ended March 31, 2002 compared to a net use of cash of
         $26.6 million for the comparable period in 2001. The beginning of the
         implementation of the Company's working capital improvement plan
         impacted the 2001comparable period. As part of the plan, the Company
         sought and obtained extended payment terms from a significant number of
         vendors. The Company also increased its peak season inventory levels to
         match expected sales growth. These factors thereby increased its
         accounts payable and accrued liabilities amounts.

                  The seasonal nature of the Company's operations results in a
         significant increase in certain components of working capital
         (primarily accounts receivable and inventory) during the growing and
         selling cycles. As a result, operating activities during the first and
         fourth quarters use significant amounts of cash and in contrast,
         operating activities for the second and third quarters generate
         substantial cash as the Company ships inventory and collects accounts
         receivable.

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<PAGE>

                  Net cash provided by investing activities was $126.2 million
         for the three months ended March 31, 2002 compared to a net use of cash
         of $4.9 million for the comparable period in 2001. The increase was
         primarily due to the proceeds received from the sale of the Sun Gro
         business and the sale of our property in Hillsboro, Oregon.

                  Net cash used in financing activities was $90.9 million for
         the three months ended March 31, 2002 compared to net cash provided by
         financing activities of $31.5 million for the comparable period in
         2001. The decrease was primarily related to the use of the proceeds
         from the sale of the Sun Gro business and the sale of the Oregon
         property to pay down outstanding bank debt in the amount of $107.9
         million and incurring financing costs of $4.2 million.

                  The Company typically draws under its revolving credit
         facilities in the first and fourth quarters to fund its seasonal
         inventory buildup of green goods products and seasonal operating
         expenses. Approximately 74% of the Company's sales of nursery products
         occur in the first half of the year, generally allowing the Company to
         reduce borrowings under its revolving credit facilities in the second
         and third quarters. On May 13, 2002, the Company had fully utilized its
         $115.0 million of borrowing capacity under its working capital revolver
         facility and had unused borrowing capacity of $15.0 million under the
         additional seasonal $30.0 million revolving loan commitment within the
         Amended Senior Credit Facility.

                  The Company's capital expenditures were approximately $1.7
         million for the three months ended March 31, 2002 and included the
         continued implementation of the ERP information system, the completion
         of acreage expansion plans at our South Carolina facility which we
         began in 2001 and the purchase of nursery related structures, machinery
         and equipment. The Company's capital expenditures for 2002 are expected
         to be approximately $8.0 to $9.0 million.

                  The Company's primary sources of liquidity are funds generated
         by operations and borrowings under its Amended Senior Credit Facility,
         which matures on December 31, 2004, as amended. As at March 31, 2002,
         this facility is comprised of a $115.0 million working capital
         revolver, a $30.0 million seasonal revolving loan commitment, which can
         only be utilized for the period between February 1 and June 15, a New
         Term Loan in the amount of $51.4 million and a Tranche B Term Loan in
         the amount of $51.1 million. Borrowings under the Amended Senior Credit
         Facility are secured by substantially all the Company's assets. The
         Amended Senior Credit Facility places various restrictions on the
         Company, including, but not limited to, limitations on the Company's
         ability to incur additional debt, limitations on capital expenditures
         and limitations on dividends the Company can pay to shareholders. The
         Amended Senior Credit Facility requires the Company to meet specific
         covenants and financial ratios. At the Company's option, the interest
         rate on the loans under the Amended Senior Credit Facility may be base
         rate loans, which is the higher of the prime rate or the rate which is
         1/2% of 1% in excess of the federal funds effective rate, or Eurodollar
         rate loans. Base rate loans under the working capital revolving loan

                                    Page 24

<PAGE>

         and the New Term Loan bear interest at the base rate plus an additional
         amount which ranges from 1.00% to 3.00%, depending on the Company's
         consolidated leverage ratio. Base rate loans under the seasonal working
         capital revolver bear interest at the base rate plus 2.25% and under
         the Tranche B Term Loan at the base rate plus an additional amount
         between 2.75% and 3.00%, depending on the Company's consolidated
         leverage ratio. Currently, the applicable margin for base rate loans is
         (i) 2.50% for working capital revolving loans, (ii) 2.50% for the New
         Term Loan and (iii) 2.75% for the Tranche B Term Loan.

                  Eurodollar rate loans under the working capital revolving loan
         and the New Term Loan bear interest at the Eurodollar rate plus an
         additional amount which ranges from 2.00% to 4.00%, depending on the
         Company's consolidated leverage ratio. Eurodollar rate loans under the
         seasonal working capital revolver bear interest at the Eurodollar rate
         plus 3.25% and under the Tranche B Term Loan at the Eurodollar rate
         plus an additional amount between 3.75% and 4.00%, depending on the
         Company's consolidated leverage ratio. Currently, the applicable margin
         for Eurodollar rate loans is (i) 3.50% for working capital revolving
         loans, (ii) 3.50% for the New Term Loan and (iii) 3.75% for the Tranche
         B Term Loan.

                  Principal repayments due under the Company's Amended Senior
        Credit Facility total $17.5 million in 2003 and $84.9 million in 2004.
        Madison Dearborn Capital Partners, L.P. ("MDCP"), our principal
        shareholder, provided a guarantee for the $30 million seasonal revolving
        loan commitment under the Amended Senior Credit Facility. If MDCP is
        required to make any payment with respect to its guarantee on the
        seasonal revolving loan commitment, the Company would be required to
        issue to MDCP an additional warrant to purchase a number of shares of
        the Company's common stock equal to the amount of such payment divided
        by the then-current market price of the Company's common stock.

                  Effective February 1, 2002 the Company's Amended Senior Credit
         Facility was amended to, among other things:

(i)      Permit the sale of the Sun Gro business upon receipt of minimum net
         cash proceeds of $105.0 million (which was completed in March 2002),
(ii)     To the extent net cash proceeds from the sale of the Sun Gro business
         exceeded $105.0 million, allow the Company to retain up to $8.25
         million for capital expenditure reinvestment over the 2002 fiscal year,
(iii)    Permit the property sale of Minter Bridge so long as all the net cash
         proceeds were applied to the permanent prepayment of debt,
(iv)     Amend the mandatory prepayment provisions of the existing Amended
         Senior Credit Facility to allow the application of the net proceeds
         from the sale of the Sun Gro business to prepay amortization payments
         under the Term Loans in direct (or forward) rather than inverse order
         of maturities,
(v)      Combine the post pay-down Acquisition Term Loan and the Domestic Term
         Loan into one term loan facility, the New Term Loan, and reset the
         amortization schedule,
(vi)     Extend to December 31, 2004 maturities under the existing working
         capital revolving loans and the New Term Loan,
(vii)    Reset the financial covenants that establish minimum EBITDA levels,
         minimum interest coverage ratios and net worth levels and maximum
         leverage ratios and capital expenditure amounts,

                                    Page 25

<PAGE>

(viii)   Extend through June 15, 2004 the Company's ability to utilize the
         seasonal revolving loan commitments in the amount of $30.0 million
         guaranteed by its majority shareholder, MDCP, and alter the
         availability period for the seasonal revolving loans to make them
         available the period between February 1 and June 15 for each year until
         maturity,
(ix)     Increase the sub-limit for letters of credit that may be issued under
         the working capital revolver from $3.0 million to $7.5 million,
(x)      Shorten the maturity of the Tranche B Term Loan to December 31, 2004,
(xi)     Increase the interest rate on the New Term Loan and working capital
         revolver by 1/2%, and
(xii)    Pay amendment fees of 3/4% to extending lenders under the New Term
         Loan, the working capital revolver and the seasonal revolver and 1/4%
         to the lenders under the Tranche B Term Loan

                  All other significant terms and conditions of the Amended
         Senior Credit Facility remain unchanged.

                  In addition, Hines Nurseries (the issuer and our wholly owned
         subsidiary) has outstanding $78.0 million of Senior Subordinated Notes
         (the "Notes") due 2005. The Company has fully and unconditionally
         guaranteed the issuer's obligations under the Notes and the Notes are
         redeemable, in whole or in part, at the option of the Company, on or
         after October 15, 2000 at a redemption price of 106.00% of the
         principal amount thereof plus accrued interest, if any, to the date of
         redemption. Upon a change of control, each holder will have the right
         to require the Company to repurchase such holder's Notes at a price
         equal to 105.00% of the principal amount thereof plus accrued interest,
         if any, to the date of repurchase. The Notes currently bear interest at
         12.75% per annum and the indenture pursuant to which the Notes were
         issued imposes a number of restrictions on our operating subsidiaries,
         including their ability to incur additional indebtedness, to make
         certain restricted payments (including dividends to the Company), to
         make certain asset dispositions, to incur additional liens and to enter
         into significant transactions. A breach of a material term of the
         indenture for the Notes or other material indebtedness that results in
         the acceleration of the indebtedness under the Notes also constitutes
         an event of default under the Amended Senior Credit Facility. In
         addition, the Company is obligated to pay a premium at maturity equal
         to 5.00% of the principal amount of the Notes to be repaid. The Company
         is accreting this premium over the term of the maturity of the Notes.
         At March 31, 2002, the amount of the premium was $1.2 million and,
         based on the $78.0 million of Notes outstanding, is expected to be $3.9
         million upon maturity.

                  At March 31, 2002, the Company had the following contractual
         obligations (payments due by period, in millions):

                                      2003     2004     2005     Total
                                    -------- -------- -------- ---------
         Tranche B Term Loan        $  --    $  51.1  $  --    $   51.1
         New Term Loan                 17.5     33.8     --        51.3
         Senior Subordinated Notes     --       --       81.9      81.9
         Other obligations              0.1      0.1     --         0.2
                                    -------- -------- -------- ---------
         Total                      $  17.6  $  85.0  $  81.9  $  184.5
                                    ======== ======== ======== =========

                                    Page 26

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                  Hines does not have any off balance sheet financing or any
         financial arrangements with any related parties, except for operating
         leases, which are disclosed in the Notes to Consolidated Financial
         Statements included in the Company's Annual Report on Form 10-K.

                  In our opinion, cash generated by operations and from
         borrowings available under the Amended Senior Credit Facility will be
         sufficient to meet the Company's anticipated working capital, capital
         expenditures and debt service requirements through 2002 and thereafter
         for the foreseeable future. However, we cannot ensure that we will
         generate sufficient cash flow from operations, anticipated operating
         improvements will be realized on schedule or at all or that future
         borrowings will be available under our credit facility in amounts
         sufficient to pay indebtedness or fund our liquidity needs. Actual
         results of operations will depend on numerous factors, many of which
         are beyond our control. We cannot ensure that we will be able to
         refinance any indebtedness, including our amended credit facility, on
         commercially reasonable terms, or at all.

         FORWARD LOOKING STATEMENTS AND RISK FACTORS

                  We have made and will make "forward-looking statements" within
         the meaning of Section 27A of the Securities Act of 1933 and Section
         21E of the Securities Exchange Act of 1934 in our Annual Report, Forms
         10-K and 10-Q and in other contexts relating to our future prospects,
         our operations and our strategies. Forward-looking statements include,
         but are not limited to, information regarding our future economic
         performance and financial condition, the plans and objectives of our
         management and our assumptions regarding our performance and these
         plans and objectives.

                  The forward-looking statements that we make in our Annual
         Report, Forms 10-K and 10-Q and in other contexts represent challenging
         goals for our company, and the achievement of these goals and our
         operations are subject to a variety of risks and assumptions and
         numerous factors beyond our control. Important factors that could cause
         actual results to differ materially from the forward-looking statements
         we make are described below. The following risk factors should not be
         considered a definitive list of all risks associated with our
         operations and should be read in conjunction with the risks and
         uncertainties contained in our other filings with the Securities and
         Exchange Commission.

         WEATHER; GENERAL AGRICULTURAL RISKS

                  Adverse weather or production difficulties occurring at a time
         of peak production or sales (in the first half of the calendar year),
         particularly on weekends during the peak gardening season, could cause
         declines in net sales and operating income that could have a material
         adverse effect on the Company. The Company's operations may also be
         adversely affected by disease, freezing conditions, snow, drought or
         other inclement weather. There can be no assurance that future weather
         conditions will not have a material adverse effect on the Company.
         Agricultural production is highly dependent upon the availability of

                                    Page 27

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         water. The Company's facilities receive their water from a variety of
         sources, including on-site wells, reservoirs and holding ponds,
         municipal water districts and irrigation water supplied to local
         districts by facilities owned and operated by the United States acting
         through the Department of Interior Bureau of Reclamation. The loss or
         reduction of access to water at any of the company's facilities could
         have a material adverse effect on the Company.

         SEASONALITY; VARIABILITY OF QUARTERLY RESULTS AND CERTAIN CHANGES

                  The Company's business, like that of its competitors, is
         highly seasonal. In 2001, approximately 74% of net sales and
         approximately 108% of operating profits occurred in the first half of
         the year, with approximately 53% of net sales and approximately 88% of
         operating profits occurring in the second quarter of 2001. The Company
         has experienced, and expects to continue to experience, significant
         variability in net sales, operating income and net income on a
         quarterly basis. The principal factor contributing to this variability
         is weather, particularly on weekends during the peak gardening season,
         which could cause declines in net sales and operating income that could
         have a material adverse effect on the Company. Other factors that may
         contribute to this variability include:

                  -        weather conditions during peak growing and gardening
                           seasons;
                  -        shifts in demand for live plant products;
                  -        changes in product mix, service levels and pricing by
                           the Company and its competitors;
                  -        the effect of acquisitions;
                  -        the economic stability of the retail customers; and
                  -        the Company's relationship with each of its retail
                           customers.

         CUSTOMER CONCENTRATION; DEPENDENCE ON HOME DEPOT

         Our top 10 customers together accounted for approximately 74% of our
         fiscal year 2001 net sales. Our largest customer, Home Depot, accounted
         for approximately 44% of our fiscal year 2001 net sales. These
         customers hold significant positions in the retail lawn and garden
         market. Management expects that a small number of customers will
         continue to account for a substantial portion of the Company's net
         sales for the foreseeable future. The Company does not have long-term
         contracts with any of its retail customers, and there can be no
         assurance that they will continue to purchase its products. The loss
         of, or significant adverse change in, the Company's relationship with
         Home Depot or any other major customer could have a material adverse
         effect on the Company. The loss of, or reduction in orders from, any
         significant retail customers, losses arising from retail customers'
         disputes regarding shipments, fees, merchandise condition or related
         matters, or the Company's inability to collect accounts receivable from
         any major retail customer could have a material adverse effect on the
         Company. In addition, there can be no assurance that revenue from
         customers that have accounted for significant revenue in past periods,
         individually or as a group, will continue, or if continued, will reach
         or exceed historical levels in any period.

                                    Page 28

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         KMART BANKRUPTCY

                  Kmart, one of our top customers, filed for bankruptcy relief
         under Chapter 11 of the bankruptcy code on January 22, 2002. Following
         such filing, we recommenced shipping products to Kmart, and we intend
         to continue shipping products to Kmart for the foreseeable future. If
         Kmart does not successfully emerge from its bankruptcy reorganization,
         the loss of, or reduction in, orders or the Company's inability to
         collect accounts receivables from Kmart, could have a material adverse
         effect on the Company, its business and operations.

         SUBSTANTIAL LEVERAGE

                  We have a significant amount of debt. Our substantial
         indebtedness could have important consequences for you. For example, it
         could:

                  -        make it more difficult for us to satisfy our
                           obligations;
                  -        increase our vulnerability to general adverse
                           economic and industry conditions;
                  -        require us to dedicate a substantial portion of cash
                           flows from operations to payments on our
                           indebtedness, which would reduce cash flows available
                           to fund working capital, capital expenditures, and
                           other general corporate requirements;
                  -        limit our flexibility in planning for, or reacting
                           to, changes in our business and the industry in which
                           we operate;
                  -        place us at a competitive disadvantage compared to
                           our competitors that have less debt;
                  -        limit our ability to borrow additional funds; and
                  -        expose us to risks inherent in interest rate
                           fluctuations because some of our borrowings are at
                           variable rates of interest, which could result in
                           higher interest expense in the event of increases in
                           interest rates.

                  Our ability to make payments on and to refinance our
         indebtedness and to fund planned capital expenditures will depend on
         our ability to generate cash in the future. This, to some extent, is
         subject to general economic, financial, competitive, legislative,
         regulatory and other factors that are beyond our control.

                  We may need to refinance all or a portion of our indebtedness
         on or before maturity. We cannot assure that we will be able to
         refinance any of our indebtedness on commercially reasonable terms or
         at all.

         COVENANT RESTRICTIONS

                  Our credit facility and the indenture governing our
         outstanding Notes contain restrictive covenants that require us to
         maintain specified financial ratios and satisfy 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 tests. A breach of any of these covenants could
         result in a default under our credit facility and/or the Notes, the
         lenders and/or noteholders could elect to declare all of our
         outstanding indebtedness to be immediately due and payable and

                                    Page 29

<PAGE>

         terminate all commitments to extend further credit. We cannot be sure
         that our lenders or the noteholders would waive a default or that we
         could pay the indebtedness in full if it were accelerated.

         GOVERNMENTAL REGULATIONS; MINIMUM WAGE

                  The Company is subject to certain federal, state and local
         health, safety and environmental laws and regulations regarding the
         production, storage and transportation of certain of its products and
         the disposal of its waste. Certain of the Company's operations and
         activities, such as water runoff from its production facilities and the
         use of certain pesticides, are subject to regulation by the United
         States Environmental Protection Agency (the "EPA") and similar state
         and local agencies. These agencies may regulate or prohibit the use of
         such products, procedures or operations, thereby affecting the
         Company's operations and profitability. In addition, the Company must
         comply with a broad range of environmental laws and regulations.
         Additional or more stringent environmental laws and regulations may be
         enacted in the future and such changes could have a material adverse
         effect on the Company. The Company uses reclamation water as one of the
         sources of water for a few of its production facilities. Federal
         reclamation laws and regulations govern the use and pricing of
         reclamation water, including availability of subsidized water rates.
         Changes in the law could have a material adverse effect on the Company.

                  In addition, the Company is subject to the Fair Labor
         Standards Act as well as various federal, state and local regulations
         that govern matters such as minimum wage requirements, overtime and
         working conditions. A large number of the Company's seasonal employees
         are paid at or slightly above the applicable minimum wage level and,
         accordingly, changes in such laws and regulations could have a material
         adverse effect on the Company by increasing its costs.

         MADISON DEARBORN CAPITAL PARTNERS, L.P. OWNS APPROXIMATELY 54% OF
             THE OUTSTANDING COMMON SHARES OF HINES ON A FULLY DILUTED BASIS.

                  Madison Dearborn Capital Partners, L.P. ("MDCP") owns
         approximately 54% of the outstanding commons shares of Hines on a fully
         diluted basis and has sufficient voting power to significantly
         influence the election of directors and the approval of other actions
         requiring the approval of our shareholders.

         COMPETITION

                  The wholesale nursery industry is highly competitive.
         Competition in the nursery products segment of the lawn and garden
         industry is based principally on the breadth of product offering,
         consistent product quality and availability, customer service and
         price. The nursery products segment is highly fragmented. According to
         the 1997 Census of Agriculture released by the USDA's National
         Agricultural Statistics Service, the nursery business is comprised of
         approximately 30,000 primarily small and regionally based growers, with
         the top 100 growers accounting for approximately 22% of the industry
         volume. Management believes Hines Nurseries is one of only two growers
         able to serve every major regional market in North America; the

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<PAGE>

         Company's only national competitor being Monrovia Nursery Company. In
         each of its markets, Hines competes with regional growers such as Color
         Spot Nurseries, Inc. in the West, Clinton Nurseries in the Northeast,
         Zelenka Nurseries in the Midwest, Wight Nurseries in the South and many
         other smaller regional and local growers. Hines Nurseries' key
         competitive advantages are its ability to provide consistent, high
         quality products in large volumes, its nationwide distribution and its
         value-added services.

         DEPENDENCE ON MANAGEMENT

                  The Company's success is largely dependent on the skills,
         experience and efforts of its senior management. The loss of services
         of one or more members of the Company's senior management could have a
         material adverse effect on the Company. The Company does not maintain
         key-man life insurance policies on any members of management. No
         members of senior management are bound by non-compete agreements, and
         if any such members were to depart and subsequently compete with the
         Company, such competition could have a material adverse effect on the
         Company.

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<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                  As part of its ongoing business, the Company is exposed to
         certain market risks, including fluctuations in interest rates, foreign
         exchange rates, commodity prices and its common stock price. The
         Company does not enter into transactions designed to mitigate its
         market risks for trading or speculative purposes.

                  In May 2000, the Company entered into an interest rate swap
         and cap agreement ("interest rate agreement") to hedge $75.0 million of
         its loan facility. The interest rate agreement effectively changes the
         Company's exposure on its variable rate interest payments to fixed rate
         interest payments of 7.13% based on the 3-month LIBOR rate in effect at
         the beginning of each quarterly period, with a maximum rate of 8%. The
         interest rate agreement matures in February 2005. At March 31, 2002,
         the estimated fair value of the interest rate agreement was $5.7
         million.

                  The Company also manages its interest rate risk by balancing
         the amount of its fixed and variable long-term debt. For fixed-rate
         debt, interest rate changes affect the fair market value of such debt
         but do not impact earnings or cash flows. Conversely, for variable rate
         debt, interest rate changes generally do not affect the fair market
         value of such debt but do impact future earnings and cash flows,
         assuming other factors are held constant.

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<PAGE>

                           PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

         Exhibit  99.1 Certification of Chief Operating Officer Pursuant To 18
                  U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The
                  Sarbanes-Oxley Act of 2002. *

         Exhibit  99.2 Certification of Chief Financial Officer Pursuant To 18
                  U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The
                  Sarbanes-Oxley Act of 2002. *

         (b) Reports on Form 8-K

         Current Report on form 8-K dated April 10, 2002, setting forth the
         completion of the sale of all the issued and outstanding shares of Sun
         Gro Horticulture Canada Ltd. and certain rights and assets of Sun Gro
         Horticulture, Inc.

* Pursuant to Commission Release No. 33-8212, this certification will be treated
as "accompanying" this Quarterly Report on Form 10-Q/A and not "filed" as part
of such report for purposes of Section 18 of the Exchange Act, or otherwise
subject to the liability of Section 18 of the Exchange Act and this
certification will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Exchange Act, except to the
extent that the registrant specifically incorporates it by reference.


Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.


                                    SIGNATURE

               PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

                                                 HINES HORTICULTURE, INC.
                                                 (REGISTRANT)



                                           By:   /s/ Claudia M. Pieropan
                                                 ----------------------------
                                                 Claudia M. Pieropan
                                                 Chief Financial Officer
                                                 (Principal financial officer
                                                 and duly authorized officer)

Date: April 11, 2003
                                    Page 33

<PAGE>

Date:  April 11, 2003
                                 CERTIFICATIONS

I, Robert A. Ferguson, certify that:

1.       I have reviewed this quarterly report on Form 10-Q/A of Hines
         Horticulture, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report; and

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report.




Date: April 11, 2003                       By: /S/ ROBERT A. FERGUSON
                                               ---------------------------------
                                                   Robert A. Ferguson
                                                   Chief Operating Officer
                                                   (Principal Executive Officer)


I, Claudia M. Pieropan, certify that:

1.       I have reviewed this quarterly report on Form 10-Q/A of Hines
         Horticulture, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report; and

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report.


Date: April 11, 2003                       By: /S/ CLAUDIA M. PIEROPAN
                                               ---------------------------------
                                                   Claudia M. Pieropan
                                                   Chief Financial Officer,
                                                   Secretary and Treasurer
                                                   (Principal Financial Officer)

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