<PAGE>

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

                                    FORM 10-Q

                                   (Mark One)

(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 OR

()       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
                                    000-24439

                            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 Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                  Yes(X) No( )

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer ( )     Accelerated filer ( )  Non-accelerated filer (X)

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

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

     As of May 11, 2006, there were 22,072,549 shares of Common Stock, par value
$0.01 per share, outstanding.
================================================================================

                                     Page 1
<PAGE>



                            HINES HORTICULTURE, INC.
                                      INDEX

                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)                               Page No.
                                                                        --------

         Condensed Consolidated Balance Sheets as of March 31, 2006
         and December 31, 2005                                                 3

         Condensed Consolidated Statements of Operations for the
         Three Months Ended March 31, 2006 and 2005                            4

         Condensed Consolidated Statements of Cash Flows for the
         Three Months Ended March 31, 2006 and 2005                            5

         Notes to the Condensed Consolidated Financial Statements              6

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            13

Item 3.  Quantitative and Qualitative Disclosures About Market Risk           20

Item 4.  Controls and Procedures                                              20

                           PART II. OTHER INFORMATION


Item 1.  Legal Proceedings                                                    21

Item 1A. Risk Factors                                                         21

Item 6.  Exhibits                                                             21

         Signature                                                            22

         Index to Exhibits                                                    23


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


                                     Page 2
<PAGE>
PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements
<TABLE>
<S>            <C>

                                  HINES HORTICULTURE, INC.
                           CONDENSED CONSOLIDATED BALANCE SHEETS
                            MARCH 31, 2006 AND DECEMBER 31, 2005
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                        (UNAUDITED)

ASSETS                                                          March 31,     December 31,
                                                                 2006             2005
                                                              ------------    ------------
CURRENT ASSETS:
        Cash                                                  $         60    $         62
        Accounts receivable, net                                    38,358          16,444
        Inventories                                                201,685         183,281
        Consigned inventories                                        2,181           1,350
        Prepaid expenses and other current assets                    3,411           2,666
        Assets held for sale                                           484             484
                                                              ------------    ------------

                 Total current assets                              246,179         204,287
                                                              ------------    ------------

FIXED ASSETS, net                                                  120,503         122,234

DEFERRED FINANCING EXPENSES, net                                     5,986           6,207
DEFERRED INCOME TAXES                                               11,481          11,481
GOODWILL                                                            43,926          43,926
                                                              ------------    ------------

                                                              $    428,075    $    388,135
                                                              ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
        Accounts payable                                      $     26,545    $     12,624
        Accrued liabilities                                         12,381          11,474
        Accrued payroll and benefits                                 4,532           4,453
        Accrued interest                                             9,332           4,711
        Borrowings on revolving credit facility                     38,059          10,080
        Deferred income taxes                                       63,052          66,127
                                                              ------------    ------------

                 Total current liabilities                         153,901         109,469
                                                              ------------    ------------

LONG-TERM DEBT                                                     175,000         175,000
DEFERRED GAIN ON LAND SALE                                          39,880          39,880
OTHER LIABILITIES                                                    5,310           5,378
                                                              ------------    ------------

                 Total liabilities                                 374,091         329,727
                                                              ------------    ------------


SHAREHOLDERS' EQUITY
        Preferred stock
           Authorized - 2,000,000 shares, $0.01 par value;
           none outstanding                                             --              --
        Common stock
           Authorized - 60,000,000 shares, $0.01 par value;
           Issued and outstanding - 22,072,549 shares
           at March 31, 2006 and December 31, 2005                     221             221
        Additional paid-in capital                                 128,781         128,781
        Accumulated deficit                                        (75,018)        (70,594)
                                                              ------------    ------------

                 Total shareholders' equity                         53,984          58,408
                                                              ------------    ------------

                                                              $    428,075    $    388,135
                                                              ============    ============


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

                                           Page  3

<PAGE>


                               HINES HORTICULTURE, INC.
                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      Three Months Ended March 31, 2006 and 2005
                       (Dollars in thousands, except share data)
                                      (Unaudited)

                                                           Three Months Ended March 31,

                                                             2006            2005
                                                         ------------    ------------


Sales, net                                               $     56,902    $     63,990
Cost of goods sold                                             30,885          32,766
                                                         ------------    ------------
    Gross profit                                               26,017          31,224
                                                         ------------    ------------

Selling and distribution expenses                              21,441          22,564
General and administrative expenses                             5,805           5,945
Other operating expenses (income), net                            742            (115)
                                                         ------------    ------------
    Total operating expenses                                   27,988          28,394
                                                         ------------    ------------

    Operating (loss) income                                    (1,971)          2,830

Other expenses (income)
   Interest, net                                                5,157           6,240
   Interest rate swap agreement income                             --            (895)
   Amortization of deferred financing expenses                    371             445
                                                         ------------    ------------
                                                                5,528           5,790
                                                         ------------    ------------

Loss before income tax benefit                                 (7,499)         (2,960)

Income tax benefit                                             (3,075)         (1,214)
                                                         ------------    ------------

Net loss                                                 $     (4,424)   $     (1,746)
                                                         ============    ============


Basic and diluted earnings per share:
Net loss per common share                                $      (0.20)   $      (0.08)
                                                         ============    ============

Weighted average shares outstanding--basic and diluted     22,072,549      22,072,549
                                                         ============    ============



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

                                       Page 4
<PAGE>


                              HINES HORTICULTURE, INC.
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Three Months Ended March 31, 2006 and 2005
                               (Dollars in thousands)
                                     (Unaudited)

                                                        Three Months Ended March 31,

                                                           2006             2005
                                                       ------------    ------------

CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                           $     (4,424)   $     (1,746)
    Adjustments to reconcile net loss to net cash
      used in operating activities:
         Depreciation                                         2,830           2,628
         Accretion of asset retirement obligations                2              31
         Amortization of deferred financing expenses            371             445
         Interest rate swap agreement income                     --            (895)
         Gain on sale of assets                                 (20)           (115)
         Deferred income taxes                               (3,075)         (1,214)

Change in working capital accounts:
    Accounts receivable                                     (21,914)        (27,442)
    Inventories                                             (19,303)        (26,236)
    Prepaid expenses and other current assets                  (752)         (1,091)
    Accounts payable and accrued liabilities                 19,317          18,422
                                                       ------------    ------------

        Net cash used in operating activities               (26,968)        (37,213)
                                                       ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of fixed assets                                   (963)         (2,472)
    Proceeds from sale of fixed assets                          100             132
    Proceeds from land sale option                               --           1,100
                                                       ------------    ------------

        Net cash used in investing activities                  (863)         (1,240)
                                                       ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Net borrowings on revolving line of credit               27,979          38,232
    Repayments of long-term debt                                 --              (5)
    Deferred financing expenses incurred                       (150)             --
                                                       ------------    ------------

        Net cash provided by financing activities            27,829          38,227
                                                       ------------    ------------


NET CHANGE IN CASH                                               (2)           (226)

CASH, beginning of period                                        62             600
                                                       ------------    ------------

CASH, end of period                                    $         60    $        374
                                                       ============    ============


Supplemental disclosure of cash flow information:
    Cash paid for interest                             $        478    $     10,689
    Cash paid for income taxes                         $      1,046    $         22


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

                                       Page 5
</TABLE>

<PAGE>


                            HINES HORTICULTURE, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
             (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


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

          Hines Horticulture, Inc. ("Hines Horticulture" or the "Company"), a
     Delaware corporation, produces and distributes horticultural products
     through its wholly owned subsidiaries, Hines Nurseries, Inc. ("Hines
     Nurseries") and Hines Fertilizer, Inc. ("Hines Fertilizer"), formerly known
     as Enviro-Safe Laboratories, Inc., which no longer actively conducts
     business. Unless otherwise specified, references to "Hines" or the
     "Company" refer to Hines Horticulture, Inc. and its subsidiaries.

          Hines 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 markets its products to
     retail and commercial customers throughout the United States and Canada.

          The Condensed Consolidated Financial Statements include the accounts
     of Hines Horticulture and its wholly owned subsidiaries after elimination
     of intercompany accounts and transactions.

     Significant Accounting Policies
     -------------------------------

          In March 2005, the Financial Accounting Standards Board ("FASB")
     issued FASB Interpretation No. 47, "Accounting for Conditional Asset
     Retirement Obligations" (FIN 47). FIN 47 clarifies the accounting for
     conditional asset retirement obligations as used in SFAS No. 143,
     "Accounting for Asset Retirement Obligations." A conditional asset
     retirement obligation is an unconditional legal obligation to perform an
     asset retirement activity in which the timing and (or) method of settlement
     are conditional on a future event that may or may not be within the control
     of the entity. Therefore, an entity is required to recognize a liability
     for the fair value of a conditional asset retirement obligation under SFAS
     No. 143 if the fair value of the liability can be reasonably estimated. The
     Company has identified and recorded a liability of approximately $400 in
     connection with its known conditional asset retirement obligations. As the
     Company continues to evaluate and identify additional asset retirement
     obligations, additional liabilities will be recorded when the future
     obligations can be reasonably estimated.

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 for a fair statement of 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, may be determined in that context.

          Accordingly, footnotes and other disclosures, which would
     substantially duplicate the disclosures contained in the Company's Form
     10-K for the year ended December 31, 2005, as amended, filed on May 12,
     2006 by Hines under the Securities Exchange Act of 1934, as amended, have
     been omitted. The financial information herein is not necessarily
     representative of a full year's operations. The year-end condensed balance
     sheet was derived from audited financial statements, but does not include
     all disclosures required by accounting principles generally accepted in the
     United States of America.

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

          Earnings per share are calculated in accordance with Statement of
     Financial Accounting Standard ("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 using the treasury method. For the
     three months ended March 31, 2006 and 2005, shares related to the employee
     stock options in the amount of 868,415 and 1,070,445, respectively, were
     excluded from the computation of diluted earnings per share because they
     would have been anti-dilutive. In addition, for the three months ended
     March 31, 2006 and March 31, 2005, the incremental shares related to zero
     and 440,000 warrants outstanding, respectively, were excluded from the
     computation of diluted earnings per share because they would have been
     anti-dilutive. The 440,000 warrants expired on December 31, 2005.

                                     Page 6
<PAGE>

4.   Stock-Based Compensation:
     -------------------------

          The Company's 1998 Long-Term Equity Incentive Plan (the "1998 Stock
     Plan"), which is shareholder-approved, permits the grant of stock options,
     stock appreciation rights, restricted stock, performance awards and any
     combination of the foregoing to certain directors, officers and employees
     of the Company and its subsidiaries. Option awards are generally granted
     with an exercise price equal to or greater than the market price of the
     Company's stock at the date of grant; those option awards generally vest
     over a period of four years subject to continuous service and have 10-year
     contractual terms.

          Effective the beginning of the first quarter of fiscal year 2006, the
     Company adopted the provisions of SFAS No. 123(R) using the modified
     prospective transition method. Under this method, prior periods are not
     restated. The provisions of SFAS 123(R) apply to new stock options and
     stock options outstanding, but not yet vested, on the effective date. As of
     December 31, 2005, all outstanding options were fully vested.

          Prior to January 1, 2006, the Company measured stock compensation
     expense using the intrinsic value method of accounting in accordance with
     Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
     Issued to Employees, and related interpretations (APB No. 25). Thus,
     expense was generally not recognized for the Company's employee stock
     option plans. Results for prior periods have not been restated.

     PRO FORMA IMPACT IN Q1 2005 HAD THE COMPANY APPLIED THE FAIR VALUE
     PROVISIONS OF SFAS NO. 123

          The following table shows net income and EPS had the Company applied
     the fair value method of accounting for stock-based compensation in
     accordance with SFAS No. 123 during the first quarter of 2005 (in
     thousands, except per share data).

                                                              Three months ended
                                                                March 31, 2005
                                                              ------------------
Net loss, as reported                                         $          (1,746)
Stock-based compensation expense, net of tax                                (11)
                                                              ------------------
Pro forma net loss                                            $          (1,757)
                                                              ==================

Net loss per share:

Basic and diluted - as reported                                $          (0.08)
                                                               =================
Basic and diluted - pro forma                                  $          (0.08)
                                                               =================

          The weighted-average assumptions used in estimating the fair value of
     stock options granted during the period, along with the weighted-average
     grant date fair values, were as follows:

                                                       2006           2005
                                                       ----           ----
          Dividend Yield                                  N/A             0%
          Expected volatility                             N/A         83.86%
          Risk-free interest rate                         N/A          3.48%
          Expected life                                   N/A     Four years
          Forfeiture Rate                                 N/A             0%

          Valuation Method - The Company estimates the fair value of stock
     options granted using the Black-Scholes option-pricing model and a single
     option award approach.

          Expected Dividend - No dividends are expected to be paid.

          Expected Volatility - The computation of expected volatility is based
     on the historical volatility.


                                     Page 7
<PAGE>

          Risk-Free Interest Rate - The risk-free interest rate used in the
     Black-Scholes valuation method is based on the implied yield currently
     available on U.S. Treasury securities with an equivalent remaining term.

          Expected Term - The expected term represents the period the Company's
     stock-based awards are expected to be outstanding and was determined based
     on historical experience with similar awards, giving consideration to the
     contractual terms of the stock-based awards, vesting schedules and
     expectations of future employee behavior as influenced by changes to the
     terms of its stock-based awards.

          Forfeiture rate - The forfeiture rate is an estimate of the percentage
     of granted stock options that will be cancelled prior to becoming vested.
     The Company has estimated this to be 0% because of the historically small
     amount of forfeitures in prior periods with the exception of the stock
     option exchange that took place in 2002. In the exchange a large number of
     options were cancelled and reissued to the same individuals.

          There were no stock option grants during the three months ended March
     31, 2006; accordingly, there was no determination of fair value during this
     period.

          A summary of the status of the Company's stock option plan as of March
     31, 2006:

<TABLE>
<S>       <C>
                                                   2006
                                     --------------------------------

                                                     Weighted Average       Aggregate
                                        Shares        Exercise Price      Intrinsic Value
                                     -------------   -----------------    ---------------

Outstanding at December 31, 2005           869,110       $     6.22
Granted                                         --               --
Exercised                                       --               --
Cancelled                                   (1,750)           10.21
                                     -------------
Outstanding - March 31, 2006               867,360       $     6.21        $           2
                                     =============                        ===============

Exercisable                                867,360       $     6.21        $           2
                                     =============                        ===============


Weighted average fair value
  of options granted during period                       $      --


          The aggregate intrinsic value represents the difference between the
     exercise prices of the underlying awards and the quoted price of the
     Company's common stock for those awards that have an exercise price below
     the quoted price on March 31, 2006. The Company had options outstanding on
     March 31, 2006 to purchase an aggregate of 12,000 shares with an exercise
     price below the quoted price of the Company's common stock resulting in an
     aggregate intrinsic value of $2.

          The weighted average remaining contractual life was five years at
     March 31, 2006. As of March 31, 2006, expiration dates ranged from June 22,
     2008 to February 18, 2013.

                                                       OUTSTANDING                              EXERCISABLE
                                      ----------------------------------------------   ------------------------------

                                                         Average        Weighted                           Weighted
                                        Number of      Remaining       Average of         Number of       Average of
          Range of exercise price        Options      Contract Life   Exercise Price       Options      Exercise Price
          -----------------------     -------------   -------------   -------------      -------------   -------------
          $3.32 to $5.00                     81,000        5.31       $      4.53               81,000    $     4.53

          $5.50                             632,660        6.15              5.50              632,660          5.50

          $6.00 to $8.00                     34,200        3.57              6.71               34,200          6.71

          $11.00                            119,500        2.33             11.00              119,500         11.00
          -----------------------     -------------   -------------   -------------      -------------   -------------

          Total                             867,360        5.46              6.21              867,360          6.21
                                      =============                                      =============
</TABLE>


                                       Page 8
<PAGE>


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

          Inventories consisted of the following:


                                                    March 31,      December 31,
                                                      2006             2005
                                                  -------------   -------------
          Nursery stock                           $     186,706   $     172,845
          Material and supplies                          14,979          10,436
                                                  -------------   -------------
               Subtotal                                 201,685         183,281
          Consigned inventory                             2,181           1,350
                                                  -------------   -------------
                                                  $     203,866   $     184,631
                                                  =============   =============

6.   New Accounting Standards:
     -------------------------

         In November 2004, the FASB issued SFAS No. 151, "Inventory Costs,"
     which clarifies the accounting for abnormal amounts of idle facility
     expense, freight, handling costs, and wasted material. The Company adopted
     SFAS No. 151 on January 1, 2006. The adoption of SFAS No. 151 did not have
     a material impact on the Company's consolidated financial position, results
     of operations or cash flows.

          In December 2004, the FASB issued SFAS No. 153, "Exchange of
     Non-Monetary Assets - An Amendment of ARB Opinion No. 29," which requires
     non-monetary asset exchanges to be accounted for at fair value. The Company
     is required to adopt the provisions of SFAS No. 153 for non-monetary
     exchanges occurring in fiscal periods beginning after June 15, 2005. The
     Company adopted SFAS No. 153 on January 1, 2006. The adoption of SFAS No.
     153 did not have an impact on the Company's consolidated financial
     position, results of operations or cash flows.

          In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
     Error Corrections." SFAS No. 154 replaces APB Opinion No. 20, "Accounting
     Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim
     Financial Statements," and changes the requirements for the accounting and
     reporting of a change in an accounting principle. This statement applies to
     all voluntary changes in an accounting principle. It also applies to
     changes required by an accounting pronouncement in the unusual instance
     that the pronouncement does not include specific transition provisions.
     When a pronouncement includes specific transition provisions, those
     provisions should be followed. APB Opinion No. 20 previously required that
     most voluntary changes in an accounting principle be recognized by
     including in net income of the period of the change the cumulative effect
     of changing to the new accounting principle. This statement requires
     retrospective application to prior periods' financial statements of changes
     in an accounting principle. The Company adopted SFAS No. 154 on January 1,
     2006. The adoption of SFAS No. 154 did not have an impact on the Company's
     consolidated financial position, results of operations or cash flows.

          In February 2006, the FASB issued SFAS No. 155, "Accounting for
     Certain Hybrid Financial Instruments - An Amendment of FASB Statement No.
     133 and 140." SFAS No. 155 simplifies the accounting for certain hybrid
     financial instruments that contain an embedded derivative that otherwise
     would have required bifurcation. SFAS No. 155 also eliminates the interim
     guidance in SFAS No. 133, "Accounting for Derivative Instruments and
     Hedging Activities," which provides that beneficial interest in securitized
     financial assets is not subject to the provisions of SFAS No. 133. SFAS No.
     155 is effective for all financial instruments acquired or issued in fiscal
     years beginning after September 15, 2006. The Company does not believe that
     the adoption of SFAS No. 155 will have a material impact on its
     consolidated financial position, results of operations or cash flows.

7.   Senior Credit Facility:
     -----------------------

          On September 30, 2003, the Company amended and restated its Senior
     Credit Facility. Hines Nurseries and its domestic operating subsidiaries
     are borrowers under the Senior Credit Facility. The Senior Credit Facility
     currently consists of a revolving loan with availability of up to $120,000
     (subject to borrowing base limits). The revolving loan also permits the
     ability to obtain letters of credit up to a sub-limit.


                                     Page 9
<PAGE>

          The Senior Credit Facility was amended by the First Amendment to
     Credit Agreement dated as of June 30, 2005 (the "First Amendment"), then
     again pursuant to a Waiver Regarding Financial Covenants dated as of
     October 13, 2005 (the "Waiver"), and by the Second Amendment to Credit
     Facility dated as of February 3, 2006 (the "Second Amendment"). On November
     8, 2005, in accordance with the Waiver, at the Company's request the
     availability of the revolving loan was reduced from $145,000 to $120,000
     (subject to borrowing base limits).

          GUARANTEES; COLLATERAL. Obligations under the Senior Credit Facility
     are guaranteed by Hines and any of its domestic subsidiaries that are not
     borrowers under the Senior Credit Facility. Borrowings under the Senior
     Credit Facility are collateralized by substantially all of the Company's
     assets.

          RESTRICTIONS; COVENANTS. The Senior Credit Facility places various
     restrictions on Hines Nurseries and its subsidiaries, including, but not
     limited to, limitations on the Company's ability to incur additional debt,
     pay dividends or make distributions, sell assets or make investments. The
     Senior Credit Facility specifically restricts Hines Nurseries and its
     subsidiaries from making distributions to Hines Horticulture. Distributions
     to Hines Horticulture are limited to (i) payments covering customary
     general and administrative expenses, not to exceed $500 in any fiscal year,
     (ii) payments to discharge any consolidated tax liabilities, (iii) and
     payments, not to exceed as much as $8,300 in any fiscal year or $9,300 over
     the term of the Senior Credit Facility, to enable Hines Horticulture to
     repurchase its own outstanding common stock from holders other than its
     majority shareholder. Dividends to Hines Horticulture are disallowed under
     the Senior Credit Facility.

          The Senior Credit Facility requires Hines Nurseries and its
     subsidiaries to meet specific covenants and financial ratios, including a
     minimum fixed charge coverage test, a maximum leverage test and a maximum
     capital expenditure test. The new Senior Credit Facility contains customary
     representations and warranties and customary events of default and other
     covenants. As of March 31, 2006, the Company was in compliance with its
     covenants.

          FIRST AMENDMENT TO SENIOR CREDIT FACILITY. Effective June 30, 2005,
     Hines Nurseries negotiated and entered into the First Amendment to the
     Senior Credit Facility. The First Amendment amended the Senior Credit
     Facility to require that the proceeds from the sale of 122 acres of
     unimproved property in Miami, Florida on November 7, 2005 ("Miami Land
     Sale") be used to pay down the term loan. In accordance with the First
     Amendment, the Company repaid the term loan in its entirety on November 8,
     2005 with the completion of the Miami Land Sale. The First Amendment also
     amended the calculation of the fixed charge coverage ratio and the leverage
     ratio to allow as an addition to Earnings Before Income Taxes, Depreciation
     and Amortization ("EBITDA") certain adjustments related to work force
     reductions and requires Hines to meet less restrictive minimum fixed charge
     coverage ratio for the last fiscal quarter of 2005, for each fiscal quarter
     of 2006 and for the first fiscal quarter of 2007 and maximum leverage
     ratios for the last fiscal quarter of 2005, for each fiscal quarter of 2006
     and the first and second fiscal quarters of 2007.

          SECOND AMENDMENT TO SENIOR CREDIT FACILITY. In February 2006, Hines
     Nurseries negotiated and entered into the Second Amendment to the Senior
     Credit Facility dated as of September 30, 2003. The Second Amendment amends
     the calculation of the minimum fixed charge coverage ratio for the first
     quarter of 2006 and thereafter. The Second Amendment also eliminates the
     maximum leverage ratio.

          INTEREST RATE; FEES. The interest rate on the loans under the Senior
     Credit Facility may be, at the Company's option, Prime rate loans or LIBOR
     rate loans. Prime rate loans under the revolving loan bear interest at the
     Prime lending rate plus an additional amount that ranges from 0.75% to
     1.75%, depending on its consolidated leverage ratio. Currently, the
     applicable margin for Prime rate loans is 1.75% for the revolving loan.

          LIBOR rate loans under the revolving loan bear interest at the LIBOR
     rate plus an additional amount that ranges from 1.75% to 2.75%, depending
     on its consolidated leverage ratio. Currently, the applicable margin for
     LIBOR rate loans is 2.75% for the revolving loan. In addition to paying
     interest on outstanding principal, the Company is required to pay a
     commitment fee on the daily average unused portion of the revolving loan
     which accrues based on the utilization of the revolving loan.

          BORROWING BASE. Availability of borrowings under the revolving loan
     are subject to a borrowing base consisting of the sum of (i) 85% of
     eligible accounts receivable plus (ii) the lesser of (x) up to 55% of
     eligible inventory or (y) 85% of the appraised net orderly liquidation
     value of eligible inventory.

          The Company must deliver borrowing base certificates and reports at
     least monthly. The borrowing base also may be subject to certain other
     adjustments and reserves to be determined by the agent. Eligible accounts
     receivable of both The Home Depot, the Company's largest customer, and
     Lowe's Companies, Inc., its second largest customer, may not exceed 30% of
     total eligible accounts receivable at any time. At March 31, 2006, the
     Company had $73,133 of available credit.


                                     Page 10
<PAGE>

8.   Long-Term Debt:
     ---------------

     SENIOR NOTES. On September 30, 2003, Hines Nurseries issued $175,000 of
     senior subordinated notes that mature on October 1, 2011 (the "Senior
     Notes"). The Senior Notes bear interest at the rate of 10.25% per annum and
     will be payable semi-annually in arrears on each April 1 and October 1,
     which commenced on April 1, 2004.

          GUARANTEES. Hines Horticulture and each of its subsidiaries, subject
     to certain exceptions, have jointly and severally, fully and
     unconditionally guaranteed, on a senior unsecured basis, the obligations of
     Hines Nurseries under the Senior Notes.

          REDEMPTION. Prior to October 1, 2006, up to 35% of the aggregate
     principal amount of the Senior Notes may be redeemed with the net cash
     proceeds from one or more public equity offerings, at the Company's option,
     at a redemption price of 110.250% of the principal amount thereof plus
     accrued interest, if any, to the date of redemption. On or after October 1,
     2007, the Company is entitled, at its option, to redeem all or a portion of
     the Senior Notes at redemption prices ranging from 100.000% to 105.125%,
     depending on the redemption date plus accrued and unpaid interest.

          RESTRICTIONS. The indenture pursuant to which the Senior Notes were
     issued imposes a number of restrictions on Hines Nurseries and its
     subsidiaries. Subject to certain exceptions, the Company may not incur
     additional indebtedness, make certain restricted payments, make certain
     asset dispositions, incur additional liens or enter into significant
     transactions. A breach of a material term of the indenture or other
     material indebtedness that results in acceleration of the indebtedness
     under the Senior Notes also constitutes an event of default under its
     Senior Credit Facility.

          REPURCHASE OR A CHANGE OF CONTROL. The Senior Notes contain a put
     option whereby the holders have the right to put the Senior Notes back to
     Hines at 101.000% of the principal amount thereof on the date of purchase
     plus accrued and unpaid interest if a change of control occurs.

9.   Assets Held for Sale:
     ---------------------

          On March 1, 2006, the Company received notice that Triad Communities,
     L.P. exercised its option to purchase, pursuant to the previously disclosed
     Option Agreement dated April 30, 2003, the Company's 168-acre property in
     Vacaville, California. The total book value of assets related to the sale
     of the land was approximately $484. The Option Agreement provides that the
     gross purchase price of the property be $15,100. On April 3, 2006, the
     Company successfully completed the sale of the land and received net
     proceeds of $14,300. Total proceeds from the Option Agreement and sale of
     the land were approximately $16,900, which include approximately $2,600 in
     option payments already received.

          Under the terms of the Option Agreement, the Company is able to
     transition off the land in three phases from 2006 to 2008. The three phases
     of transition will be July 1, 2006, July 1, 2007 and July 1, 2008, and will
     consist of approximately 24 acres, 88 acres and 56 acres, respectively. The
     Company is continuing to develop replacement acreage and infrastructure at
     its 842-acre Winters South facility in Northern California.

          The entire gain will be deferred, due to our continuing involvement,
     as defined in SFAS No. 98, "Accounting for Leases," in the property.

10.  Deferred Gain on Land Sale
     --------------------------

          On November 7, 2005, the Company successfully completed the sale of
     122 acres of unimproved property in Miami, Florida and received net
     proceeds of approximately $47,000. The Company entered into a two-year
     lease agreement with the buyer to lease the property while transitioning
     operations to other locations. The Company will lease the entire property
     for a one-year period, with a thirty-day extension right, and will then
     vacate approximately 33 acres. The Company will lease the remaining 89
     acres for an additional one-year period, with extension rights for an
     additional ninety days, and will then vacate the remaining acreage. The
     Company will pay the buyer rent of five hundred dollars per outstanding
     acre, annually, during the lease term. The entire gain has been deferred
     due to our continuing involvement, as defined in SFAS No. 98, "Accounting
     for Leases," in the property.


                                     Page 11
<PAGE>


11.  Guarantor/Non-guarantor Disclosures:
     ------------------------------------

          The Senior Notes issued by Hines Nurseries (the "issuer") have been
     guaranteed by the Company (the "parent guarantor") and by both Hines SGUS
     and Hines Fertilizer, (collectively, Hines SGUS and Hines Fertilizer are
     the "subsidiary guarantors"). The issuer is a 100% owned subsidiary of the
     parent guarantor. The subsidiary guarantors are 100% owned subsidiaries of
     the issuer. The parent and subsidiary guaranties are full, unconditional
     and joint and several. The parent guarantor has no independent assets,
     liabilities or operations and subsidiary guarantors are minor with no
     material assets, liabilities or operations. In addition, under the Senior
     Notes, the parent guarantor is unable to obtain dividends or loans from the
     issuer or subsidiary guarantors. As a result of the foregoing, separate
     financial statements of Hines Nurseries, Hines SGUS and Hines Fertilizer
     are not presented.



                                    Page 12
<PAGE>


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

     Unless the context otherwise requires, the term (1) "Hines Horticulture"
means Hines Horticulture, Inc., a Delaware corporation, (2) the term "Hines
Nurseries" means Hines Nurseries, Inc., a California corporation, and a wholly
owned subsidiary of Hines Horticulture, (3) the term "Hines Fertilizer" means
Hines Fertilizer, Inc., formerly known as Enviro-safe Laboratories, Inc., a
Florida Corporation, and a wholly owned subsidiary of Hines Nurseries and (4)
the terms "we," "us" and "our" mean, collectively, the combined entity of Hines
Horticulture and its wholly owned subsidiaries.

     FORWARD LOOKING STATEMENTS AND RISK FACTORS

     Except for historical information contained herein, this quarterly report
on Form 10-Q contains 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, as amended, which involve certain risks and uncertainties.
Forward-looking statements are included with respect to, among other things, the
company's current business plan and strategy and strategic operating plan. These
forward-looking statements are identified by their use of such terms and phrases
as "intends," "intend," "intended," "goal," "estimate," "estimates," "expects,"
"expect," "expected," "project," "projected," "projections," "plans,"
"anticipates," "anticipated," "should," "designed to," "foreseeable future,"
"believe," "believes" and "scheduled" and similar expressions. Our actual
results or outcomes may differ materially from those anticipated. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made. We undertake no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. For any forward-looking statements,
we claim the protection of the safe harbor for forward-looking statements in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.

     There are a number of risks, uncertainties and important factors that might
cause actual results to differ from any results expressed or implied by such
forward looking statements. In addition to the risks, uncertainties and other
factors discussed elsewhere in this Form 10-Q, the risks, uncertainties and
other factors that could cause or contribute to actual results differing
materially from those expressed or implied in the forward looking statements
include, without limitation, those set forth under Part II. Item 1A - Risk
Factors in the Company's Annual Report on Form 10-K (together with any changes
thereto contained in this Form 10-Q and any subsequent files of quarterly
reports on Form 10-Q), those contained in the Company's other filings with the
Securities and Exchange Commission, and those set forth below.

     Factors which could cause actual results to differ materially from any
forward looking information contained herein include, but are not limited to,
general economic trends and seasonality, including those specifically impacting
the nursery business, general agricultural risks beyond our control including
risks associated with disease and pests, including sudden oak death, adverse
weather conditions, increases in prices for water, petroleum and raw materials,
our substantial leverage and ability to service our debt, restrictive covenants
under our debt facilities, competitive practices in the industry in which we
compete, fluctuations in our operating costs, revenues and cash flows from
operations, our dependence on a limited number key customers, increases in
transportation and fuel costs, factors with regard to the challenges associated
with pay by scan and other factors.

     OVERVIEW

     We are a leading national supplier of ornamental shrubs, color plants and
container-grown plants with 13 commercial nursery facilities located in Arizona,
California, Florida, Georgia, New York, Oregon, Pennsylvania, South Carolina and
Texas. We produce approximately 5,700 varieties of ornamental shrubs and color
plants and we sell to more than 2,400 retail and commercial customers,
representing more than 8,750 outlets throughout the United States and Canada. As
of March 31, 2006, Hines Horticulture produced and distributed horticultural
products through its wholly owned subsidiary, Hines Nurseries.

     UNITED STATES TAX MATTERS

     As a result of our business activities, we qualify for a special exception
under the U.S. federal tax code that allows us 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. We derive significant tax benefits by being able to deduct the
cost of inventory as the cost is incurred. As a result of our ability to utilize
the cash method of accounting, we have historically generated net operating
losses for federal income tax purposes and have not been required to pay cash
income taxes. During 2005, we were required to pay federal cash income taxes in
the form of alternative minimum tax as a result of the sale of land in Miami,
Florida ("Miami Land Sale"). At December 31, 2005, we had $2.6 million in net
operating loss carryforwards for federal income tax purposes, which begin to
expire in 2024. In addition, we had approximately $6.9 million in net operating
loss carryforwards for state income tax reporting purposes. Our state net
operating losses in certain states begin expiring in 2008.

                                    Page 13
<PAGE>

     Based on our current projections, we anticipate that we will pay cash
income taxes for federal purposes in 2006. We are currently paying cash income
taxes for state income tax purposes in certain states due to the differing rules
regarding the utilization of net operating losses.

     The use of the cash method of accounting for federal income tax purposes
results in a current deferred tax liability for accounting purposes. At March
31, 2006, we had a current deferred liability for deferred income taxes of $63.1
million related to the use of the cash method of accounting. The deferred tax
liability is deemed current for accounting purposes because the majority of the
items to which this liability relates are comprised of current assets and
current liabilities in our balance sheet (such as inventory, accounts receivable
and accounts payable). The classification of this liability as a current item,
however, does not mean that it is required to be paid within the next twelve
months.

     SEASONALITY

     Our business is highly seasonal. The seasonal nature of our operations
results in a significant increase in our working capital between the growing and
selling cycles. As a result, operating activities in the first and fourth
quarters use significant amounts of cash, and in contrast, operating activities
in the second and third quarters generate substantial cash as we ship inventory
and collect accounts receivable. We have experienced, and expect to continue to
experience, significant variability in net sales, operating income and net
income on a quarterly basis.

     SALE OF 168 ACRES IN VACAVILLE, CALIFORNIA

     On March 1, 2006, we received notice that Triad Communities, L.P. exercised
its option to purchase, pursuant to the previously disclosed Option Agreement
dated April 30, 2003, our 168-acre property in Vacaville, California. The total
book value of assets related to the sale of the land was approximately $0.5
million. The Option Agreement provides that the gross purchase price of the
property be $15.1 million. On April 3, 2006, we successfully completed the sale
of the land and received net proceeds of $14.3 million. Total proceeds from the
Option Agreement and sale of the land were approximately $16.9 million, which
include approximately $2.6 million in option payments already received.

     Under the terms of the Option Agreement, we are able to transition off the
land in three phases from 2006 to 2008. The three phases of transition will be
July 1, 2006, July 1, 2007 and July 1, 2008, and will consist of approximately
24 acres, 88 acres and 56 acres, respectively. We are continuing to develop
replacement acreage and infrastructure at its 842-acre Winters South facility in
Northern California.

     The entire gain will be deferred, due to our continuing involvement, as
defined in SFAS No. 98, "Accounting for Leases," in the property.

     PAY BY SCAN

     In January 2005, we entered into an agreement with our largest customer to
sell a portion of our product under a pay by scan program. Under this program,
our customer does not take ownership of the inventory at its stores until the
product is scanned at the check out register. Sales under this program began in
February 2005. Revenue is recorded at the point the store sells our product to
its customer. Annuals, perennials and groundcovers are our only products
impacted by this agreement.

     Despite the implementation of the new pay by scan program, we did not
encounter any material variances with the quality and variability of our
earnings and cash flows during 2005. However, we believe that pay by scan has
had an impact on our 2006 first quarter earnings. For the first time, we are
experiencing a material timing difference in revenue recognition when comparing
year over year shipments. We believe this timing difference has been amplified
by the combination of our spring seasonality, the expansion of the program to
more store locations, and the late March rains that resulted in reduced consumer
demand at the end of the quarter. The result of this was an increase in our
consigned inventory held at our customer's store locations at quarter end as
well as increased shrink as a result of the lower sell-thru of product.


                                    Page 14
<PAGE>

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED MARCH 31, 2006 COMPARED TO THREE MONTHS ENDED MARCH 31, 2005

     NET SALES. Net sales of $56.9 million for the three months ended March 31,
2006 decreased $7.1 million, or 11.1%, from net sales of $64.0 million for the
comparable period in 2005. The decline in net sales was due to adverse weather
conditions in the West along with the full effect of pay by scan. Persistent
rain in the Pacific Northwest, northern California and Southwest reduced first
quarter consumer demand and delayed certain product availability until the
second quarter. The conversion to pay by scan has also negatively impacted net
sales, with less than anticipated sell thru of product at customer's store
locations.

     During the month of April, we have continued to feel the impact of the
weather conditions which have adversely affected our first quarter net sales and
product availability. If these unfavorable conditions persist throughout the
second quarter, our net sales, earnings and minimum fixed charge debt covenant
could be impacted.

     GROSS PROFIT. Gross profit of $26.0 million for the three months ended
March 31, 2006 decreased $5.2 million, or 16.7%, from gross profit of $31.2
million for the comparable period in 2005. Gross profit as a percentage of sales
for the quarter decreased to 45.7% from 48.8% for the comparable period in 2005.
The decline in gross profit and gross profit margin was mainly due to the
decline in sales, as discussed above, as well as higher cost inventory, which
was produced during 2005.

      SELLING AND DISTRIBUTION EXPENSES. Selling and distribution expenses of
$21.4 million for the three months ended March 31, 2006 decreased $1.1 million,
or 5.0%, from $22.6 million for the comparable period in 2005. As a percentage
of net sales, selling and distribution expenses for the quarter increased to
37.7% from 35.3% in the first quarter of 2005. Selling expenses of $7.2 million
for the three months ended March 31, 2006 decreased by $0.7 million, or 9.0%,
from $7.9 million a year ago. The decrease in selling expense resulted from the
reduction in work force due to the strategic reorganization which occurred in
the second quarter of 2005. In addition, there was a decrease in sales
commissions as a result of lower net sales. Distribution expenses of $14.3
million for the three months ended March 31, 2006 decreased by $0.4 million, or
2.8%, from $14.7 million for the comparable period in 2005. The decrease in
distribution expenses was mainly due to the decline in sales, as discussed
above. As a percentage of sales, distribution costs increased due to higher
diesel fuel costs and increased third party carrier charges, which were
primarily driven by more expensive diesel fuel.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses of
$5.8 million for the three months ended March 31, 2006 decreased by $0.1
million, or 2.4%, from $5.9 million for the comparable period in 2005. The
decline in general and administrative expenses was due to lower compensation and
benefit expenses, which mainly resulted from the reduction in work force due to
the strategic reorganization which occurred in the second quarter of 2005.

     OTHER OPERATING EXPENSE (INCOME), NET. Other operating expenses (net) of
$0.7 million for the three months ended March 31, 2006 increased by $0.9 million
from other operating income (net) of $0.1 million for the comparable period in
2005. The increase in other operating expenses was primarily due to $0.8 million
in consulting fees relating to our productivity improvement initiatives.

     OPERATING (LOSS) INCOME. Operating loss of for the three months ended March
31, 2006 of $2.0 million is $4.8 million less than operating income of $2.8
million for the comparable period in 2005. The shift from operating income to
operating loss resulted from a decline in gross profit for the period of $5.2
million and an increase in other operating expenses including consulting fees
relating to our productivity improvement initiatives. The gross profit decline
and unfavorable operating expenses were partially offset by decreased selling
and distribution expense.

     OTHER EXPENSES. Other expenses of $5.5 million for the three months ended
March 31, 2006 decreased $0.3 million, or 4.5%, from $5.8 million for the
comparable period in 2005 due primarily to lower interest expense, offset by the
decrease in interest rate swap agreement income from our $75.0 million interest
rate swap agreement which terminated in February 2005. Interest expense for the
three months ended March 31, 2006 declined $1.1 million, or 17.4%, primarily as
a result of lower overall debt.

     INCOME TAX BENEFIT. Our effective income tax rate was 41.0% for the three
months ended March 31, 2005, unchanged from the comparable period a year ago.
Benefit from income taxes was $3.1 million for the three months ended March 31,
2006 compared to $1.2 million for the comparable period in 2005.


                                    Page 15
<PAGE>

     NET LOSS. Net loss of $4.4 million for the three months ended March 31,
2006 increased by $2.7 million, or 153.4%, from a net loss of $1.7 million for
the comparable period in 2005. The increase in net loss was due to the increase
in operating loss, partially offset by the decrease in other expenses and a
higher benefit from income taxes.

     LIQUIDITY AND CAPITAL RESOURCES

     Our primary sources of liquidity are funds generated by operations and
borrowings under our Senior Credit Facility. Our Senior Credit Facility expires
in 2008 and consists of a revolving loan with availability of up to $120.0
million (subject to certain borrowing base limits). Additional information
pertaining to our Senior Credit Facility is provided below and in Note 7 to the
Condensed Consolidated Financial Statements (unaudited) included in Part I, Item
1 of this Quarterly Report on Form 10-Q.

     The seasonal nature of our operations results in a significant fluctuation
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 we ship inventory and collect accounts receivable.

     Net cash used in operating activities was $27.0 million for the three
months ended March 31, 2006 compared to $37.2 million for the comparable period
in 2005. The decrease in cash used in operating activities was mainly due to the
timing of our $9.0 million semi-annual interest payment on our Senior Notes and
improved customer collections as a result of favorable terms, offset by lower
earnings driven by lower gross profit. In 2006, we paid our April 1st interest
payment in the second quarter, while last year's payment was paid during the
first quarter.

     Net cash used in investing activities was $0.9 million for the three months
ended March 31, 2006 compared to $1.2 million for the same period a year ago.
The decrease in cash used in investing activities was mainly due to a decrease
in capital expenditures of $1.5 million, offset by a decrease in proceeds
received from land sale option of $1.1 million.

     Net cash provided by financing activities was $28.0 million for the three
months ended March 31, 2006 compared to $38.2 million for the same period in
2005. The decrease in cash provided by financing activities was due to the
timing of our $9.0 million semi-annual interest payment on our senior notes, as
discussed above.

     We typically draw down our revolving loan in the first and fourth quarters
to fund our seasonal inventory buildup and seasonal operating expenses. Based on
past history, approximately 72-74% of our sales generally occur in the first
half of the year, generally allowing us to reduce borrowing under our revolving
loan in the second and third quarters. On March 31, 2006, we had $38.1 million
of borrowings under our revolving loan, resulting in unused borrowing capacity
of approximately $73.1 million after applying the borrowing base limitations and
letters of credits to our available borrowings.

     At March 31, 2006, we had total outstanding bank indebtedness of $213.1
million.

     We do not have any off balance sheet financing or any financial
arrangements with related parties, other than operating leases. The following
table discloses aggregate information about our contractual obligations and
commercial commitments as of March 31, 2006.

<TABLE>
<S>            <C>
                                                             Payments Due by Period
                                                -------------------------------------------------
                                                 Less than     (Dollars in millions)      After
Contractual Cash Obligations          Total       1 year      1-3 years    4-5 years    5 years
----------------------------       ----------   ----------   ----------   ----------   ----------
Revolving Facility.............    $     38.1   $     38.1   $       --   $       --   $       --
Senior Notes...................         175.0           --           --           --        175.0
Interest.......................         103.9         19.1         56.4         28.4           --
Operating Leases...............          17.9          4.4          5.9          1.7          5.9
                                   ----------   ----------   ----------   ----------   ----------
Total                              $    334.9   $     61.6   $     62.3   $     30.1   $    180.9
                                   ==========   ==========   ==========   ==========   ==========
</TABLE>


                                    Page 16
<PAGE>

     We believe that cash generated by operations and from borrowings, expected
to be available under our Senior Credit Facility, will be sufficient to meet our
anticipated working capital, capital expenditures and debt service requirements
for at least the next twelve months.

     The following is a summary of certain material terms of our Senior Credit
Facility and Hines Nurseries' 10.25% senior subordinated notes due 2011.

     OUR SENIOR CREDIT FACILITY

     We entered into our Senior Credit Facility on September 30, 2003. Hines
Nurseries and its domestic operating subsidiaries are borrowers under the Senior
Credit Facility. The credit facility currently consists of a revolving loan with
availability of up to $120.0 million (subject to borrowing base limits). The
revolving loan also permits us to obtain letters of credit up to a sub-limit.

     The Senior Credit Facility was amended by the First Amendment to Credit
Agreement dated as of June 30, 2005 (the "First Amendment"), then again pursuant
to a Waiver Regarding Financial Covenants dated as of October 13, 2005 (the
"Waiver"), and by the Second Amendment to Credit Facility dated as of February
3, 2006 (the "Second Amendment"). On November 8, 2005, in accordance with the
Waiver, at our request the availability of the revolving loan was reduced from
$145.0 million to $120.0 million (subject to borrowing base limits).

     GUARANTEES; COLLATERAL. Obligations under the Senior Credit Facility are
guaranteed by us and any of our domestic subsidiaries that are not borrowers
under the credit facility. Borrowings under the Senior Credit Facility are
collateralized by substantially all of our assets.

     RESTRICTIONS; COVENANTS. The Senior Credit Facility places various
restrictions on Hines Nurseries and its subsidiaries, including, but not limited
to, limitations on our ability to incur additional debt, pay dividends or make
distributions, sell assets or make investments. The Senior Credit Facility
specifically restricts Hines Nurseries and its subsidiaries from making
distributions to Hines Horticulture. Distributions to Hines Horticulture are
limited to (i) payments covering customary general and administrative expenses,
not to exceed $0.5 million in any fiscal year, (ii) payments to discharge any
consolidated tax liabilities, (iii) and payments, not to exceed as much as $8.3
million in any fiscal year or $9.3 million over the term of the Senior Credit
Facility, to enable Hines Horticulture to repurchase its own outstanding common
stock from holders other than our majority shareholder. Dividends to Hines
Horticulture are disallowed under the Senior Credit Facility.

     The Senior Credit Facility requires Hines Nurseries and its subsidiaries to
meet specific covenants and financial ratios, including a minimum fixed charge
coverage test, a maximum leverage test and a maximum capital expenditure test.
The Senior Credit Facility contains customary representations and warranties and
customary events of default and other covenants. As of March 31, 2006, we were
in compliance with our covenants.

     FIRST AMENDMENT TO SENIOR CREDIT FACILITY. Effective June 30, 2005, Hines
Nurseries negotiated and entered into the First Amendment to the Senior Credit
Facility. The First Amendment amended the Senior Credit Facility to require that
the proceeds from the Miami Land Sale be used to pay down the term loan. In
accordance with the First Amendment, we repaid the term loan in its entirety on
November 8, 2005 with the completion of the Miami Land Sale. The First Amendment
also amended the calculation of the fixed charge coverage ratio and the leverage
ratio to allow as an addition to Earnings Before Income Taxes, Depreciation and
Amortization ("EBITDA") certain adjustments related to work force reductions and
requires Hines to meet less restrictive minimum fixed charge coverage ratios for
the last fiscal quarter of 2005, for each fiscal quarter of 2006 and for the
first fiscal quarter of 2007 and maximum leverage ratios for the last fiscal
quarter of 2005, for each fiscal quarter of 2006 and the first and second fiscal
quarters of 2007.

     SECOND AMENDMENT TO SENIOR CREDIT FACILITY. In February 2006, Hines
Nurseries entered into Second Amendment to the Senior Credit Facility dated as
of September 30, 2003. The Second Amendment amends the calculation of the
minimum fixed charge coverage ratio for the first quarter of 2006 and
thereafter. The Second Amendment also eliminates the maximum leverage ratio.

     INTEREST RATE; FEES. The interest rate on the loans under the Senior Credit
Facility may be, at our option, prime rate loans or London Inter Bank Offering
Rate ("LIBOR") rate loans. Prime rate loans under the revolving loan bear
interest at the prime lending rate plus an additional amount that ranges from
0.75% to 1.75%, depending on our consolidated leverage ratio. Currently, the
applicable margin for prime rate loans is 1.75% for the revolving loan.


                                    Page 17
<PAGE>

     LIBOR rate loans under the revolving loan bear interest at the LIBOR rate
plus an additional amount that ranges from 1.75% to 2.75%, depending on our
consolidated leverage ratio. Currently, the applicable margin for LIBOR rate
loans is 2.75% for the revolving loan. In addition to paying interest on
outstanding principal, we are required to pay a commitment fee on the daily
average unused portion of the revolving loan which accrues based on the
utilization of the revolving loan.

     BORROWING BASE. Availability of borrowing under the revolving loan are
subject to a borrowing base consisting of the sum of (i) 85% of eligible
accounts receivable plus (ii) the lesser of (x) up to 55% of eligible inventory
or (y) 85% of the appraised net orderly liquidation value of eligible inventory.

     We must deliver borrowing base certificates and reports at least monthly.
The borrowing base also may be subject to certain other adjustments and reserves
to be determined by the agent. Eligible accounts receivable of both The Home
Depot, our largest customer, and Lowe's Companies, Inc., our second largest
customer, may not exceed 30% of total eligible accounts receivable at any time.

     OUR SENIOR NOTES

     On September 30, 2003, Hines Nurseries issued $175.0 million of senior
subordinated notes that mature on October 1, 2011 (the "Senior Notes"). The
Senior Notes bear interest at the rate of 10.25% per annum and will be payable
semi-annually in arrears on each April 1 and October 1, which commenced on April
1, 2004.

     GUARANTEES. Hines Horticulture and each of its domestic subsidiaries,
subject to certain exceptions, has, jointly and severally, fully and
unconditionally guaranteed, on a senior unsecured basis, the obligations of
Hines Nurseries under the Senior Notes.

     REDEMPTION. Prior to October 1, 2006, up to 35% of the aggregate principal
amount of the Senior Notes may be redeemed with the net cash proceeds from one
or more public equity offerings, at our option, at a redemption price of
110.250% of the principal amount thereof plus accrued interest, if any, to the
date of redemption. On or after October 1, 2007, we are entitled, at our option,
to redeem all or a portion of the Senior Notes at redemption prices ranging from
100.000% to 105.125%, depending on the redemption date, plus accrued and unpaid
interest.

     RESTRICTIONS. The indenture pursuant to which the Senior Notes were issued
imposes a number of restrictions on Hines Nurseries and our other subsidiaries.
Subject to certain exceptions, we may not incur additional indebtedness, make
certain restricted payments, make certain asset dispositions, incur additional
liens or enter into significant transactions. A breach of a material term of the
indenture or other material indebtedness that results in acceleration of the
indebtedness under the Senior Notes also constitutes an event of default under
our Senior Credit Facility.

     REPURCHASE ON A CHANGE IN CONTROL. The Senior Notes contain a put option
whereby the holders have the right to put the Senior Notes back to us at
101.000% of the principal amount thereof on the date of purchase, plus accrued
and unpaid interest if a change of control occurs.

     CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us 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.
We believe that the following areas represent our most critical accounting
policies related to actual results that may vary from those estimates.

     REVENUE RECOGNITION.

     We record revenue, net of sales discounts and allowances, when all of the
following have occurred: an agreement of sale exists, product delivery and
acceptance has occurred and collection is reasonably assured.

     Sales with pay by scan arrangements are recognized when the products are
sold by the retailers.


                                    Page 18
<PAGE>


     SALES RETURNS AND ALLOWANCES.

     Amounts accrued for sales returns and allowances are maintained at a level
believed adequate by management to absorb probable losses in the trade
receivables 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. The rate is
re-evaluated on a quarterly basis. Provisions for sales discounts and allowances
charged against income increase the allowance. We record revenue, net of sales
discounts and allowances, when the risk of ownership is transferred to the
customer. Allowances are provided at the time 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 by management
to adequately reflect the probable losses in the trade receivable 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. The provision is re-evaluated
on a quarterly basis. Provisions to bad debt expense charged against income
increase the allowance. All recoveries on trade receivables previously charged
off are credited to the 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, we adopted SFAS No. 142, "Goodwill and Other Intangible
Assets." 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, we must determine if the carrying amount of equity exceeds
the fair value based upon the quoted market price of our common stock. If we
determine that goodwill may be impaired, we compare the "implied fair value" of
the goodwill, as defined by SFAS No. 142, to its carrying amount to determine
the impairment loss, if any.

     ACCRUED LIABILITIES.

     The accrued liabilities include amounts accrued for expected claims costs
relating to our insurance programs for workers compensation and auto liability.
We have large deductibles for these lines of insurance, which means we must pay
the portion of each claim that falls below the deductible amount. Our expected
claims costs are based on an actuarial analysis that considers our current
payroll and automobile profile, recent claims history, insurance industry loss
development factors and the deductible amounts. We accrue our expected claims
costs for each year on a ratable monthly basis with a corresponding charge
against income. Management reviews the adequacy of the accruals at the end of
each quarter. The accruals for the expected costs relating to our insurance
programs for workers compensation and auto liability are maintained at levels
believed by our management to adequately reflect our probable claims
obligations.

     In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for
Conditional Asset Retirement Obligations" (FIN 47). FIN 47 clarifies the
accounting for conditional asset retirement obligations as used in SFAS No. 143,
"Accounting for Asset Retirement Obligations." A conditional asset retirement
obligation is an unconditional legal obligation to perform an asset retirement
activity in which the timing and (or) method of settlement are conditional on a
future event that may or may not be within the control of the entity. Therefore,
an entity is required to recognize a liability for the fair value of a
conditional asset retirement obligation under SFAS No. 143 if the fair value of
the liability can be reasonably estimated. We have identified and recorded a
liability of approximately $0.4 million in connection with its known conditional
asset retirement obligations. As we continue to evaluate and identify additional
asset retirement obligations, additional liabilities will be recorded.

     NEW ACCOUNTING STANDARDS.

     In November 2004, The FASB issued SFAS No. 151, "Inventory Costs," which
clarifies the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material. We have adopted SFAS No. 151 on January 1,
2006. The adoption of SFAS No. 151 did not have a material impact on our
consolidated financial position, results of operations or cash flows.


                                    Page 19
<PAGE>

     In December 2004, the FASB issued SFAS No. 153, "Exchange of Non-Monetary
Assets - An Amendment of ARB Opinion No. 29," which requires non-monetary asset
exchanges to be accounted for at fair value. The Company is required to adopt
the provisions of SFAS No. 153 for non-monetary exchanges occurring in fiscal
periods beginning after June 15, 2005. We have adopted SFAS No. 153 on January
1, 2006. The adoption of SFAS No. 153 did not have an impact on our consolidated
financial position, results of operations or cash flows.

     In May 2005, the FASB issued Statement No. 154, "Accounting Changes and
Error Corrections." FASB No. 154 replaces APB Opinion No. 20, "Accounting
Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements," and changes the requirements for the accounting and reporting of a
change in an accounting principle. This statement applies to all voluntary
changes in an accounting principle. It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement does not
include specific transition provisions. When a pronouncement includes specific
transition provisions, those provisions should be followed. APB Opinion No. 20
previously required that most voluntary changes in an accounting principle be
recognized by including in net income of the period of the change the cumulative
effect of changing to the new accounting principle. This statement requires
retrospective application to prior periods' financial statements of changes in
an accounting principle. We have adopted SFAST No. 154 on January 1, 2006. The
adoption of Statement No. 154 did not have an impact on our financial position,
results of operations or cash flows.

     In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain
Hybrid Financial Instruments - An Amendment of FASB Statement No. 133 and 140."
SFAS No. 155 simplifies the accounting for certain hybrid financial instruments
that contain an embedded derivative that otherwise would have required
bifurcation. SFAS No. 155 also eliminates the interim guidance in SFAS No. 133,
which provides that beneficial interest in securitized financial assets is not
subject to the provisions of SFAS No. 133. SFAS No. 155 is effective for all
financial instruments acquired or issued in fiscal years beginning after
September 15, 2006. We do not believe that the adoption of SFAS No. 155 will
have a material impact on our financial position, results of operations or cash
flows.

     ACCOUNTING STANDARDS ADOPTED

     Effective the beginning of the first quarter of fiscal year 2006, the
Company adopted the provisions of SFAS No. 123(R) using the modified prospective
transition method. Under this method, prior periods are not restated. The
provisions of SFAS 123(R) apply to new stock options and stock options
outstanding, but not yet vested, on the effective date. As of December 31, 2005,
all outstanding options were fully vested.

     EFFECTS OF INFLATION

     Management believes our results of operations have not been materially
impacted by inflation over the past three years.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As part of our ongoing business, we are exposed to certain market risks,
including fluctuations in interest rates, commodity prices and Hines
Horticulture's common stock price. We do not enter into transactions designed to
mitigate market risks for trading or speculative purposes.

     We also manage our interest rate risk by balancing the amount of our 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. At March 31, 2006 the carrying
amount and estimated fair value of our long-term debt was $213.1 million and
$208.2 million, respectively. Given the current balance of our fixed rate and
variable rate debt, we estimate a change in interest costs of approximately $0.4
million for every one-percentage point change in applicable interest rates.

ITEM 4.  CONTROLS AND PROCEDURES

     Based on the evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended), our principal executive officer and our
principal financial officer have concluded that such controls and procedures
were effective as of the end of the period covered by this report. There was no
change in our internal control over financial reporting that occurred during the
fiscal quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


                                    Page 20
<PAGE>


PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     From time to time, the Company is involved in various disputes and
litigation matters, which arise in the ordinary course of business. The
litigation process is inherently uncertain and it is possible that the
resolution of these disputes and lawsuits may adversely affect the Company's
financial position. Management believes, however, that the ultimate resolution
of such matters will not have a material adverse impact on the Company's
consolidated financial position, results of operations or cash flows.

ITEM 1A.  RISK FACTORS

     There have been no material changes to the risk factors as disclosed in the
Company's 2005 annual report on Form 10-K, as amended, filed with the Securities
and Exchange Commission except that the Company hereby updates the following
risk factor with regard to the cost estimates contained therein:

OUR NURSERY FACILITY IN IRVINE, CALIFORNIA IS ENTIRELY ON LEASED LAND AND WE DO
NOT EXPECT THE LEASES TO BE EXTENDED BEYOND THEIR CURRENT TERMS.

     Our 542-acre nursery facility and headquarters in Irvine, California are
entirely on leased land. In 2003, we entered into an amended lease agreement for
this facility in which 63 new acres were added and the lease expiration schedule
was changed. Under the amended lease agreement, the lease on 114 acres expires
on June 30, 2006, the lease on 140 acres expires on December 31, 2006, and the
lease on the remaining 288 acres expires on December 31, 2010. We do not expect
these leases to be extended beyond their current terms. For the 254 acres that
will expire in 2006, we are developing plans to transition a majority of the
production to our Winters South facility and the remaining production to the
parcel recently added to our facility in Irvine. For the 288 acres that will
expire at the end of 2010, we will be required to establish new production
facilities or transition production to existing facilities. We may incur
substantial costs in connection with the establishment of these new production
facilities or the transition of production to existing facilities.

     We may not be successful in executing our transition plan or establishing
suitable replacement production facilities. If we are unsuccessful in these
efforts, our net sales, cash flows and operating income could be materially
adversely affected. In addition, as of March 31, 2006, we estimate that we will
incur approximately a total of $0.2 million of removal and remediation costs
when we vacate 254 acres in 2006 and $0.2 million of removal and remediation
costs when we vacate 288 acres in 2010. We may incur significant expenses beyond
what we have forecasted if additional remedial action is required. Significant
costs in excess of our estimates could have a material adverse effect on our
business, financial position, results of operations and operating cash flow.

ITEM 6.  EXHIBITS

See index to Exhibits at page 23 for a list of exhibits included herewith.


                                    Page 21
<PAGE>


                                    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,
                                              Secretary and Treasurer
                                              (Principal financial officer
                                              and duly authorized officer)

Date: May 15, 2006



                                    Page 22
<PAGE>


                            HINES HORTICULTURE, INC.
                          QUARTERLY REPORT ON FORM 10-Q
                   FOR THE FISCAL QUARTER ENDED MARCH 31, 2006

                                INDEX TO EXHIBITS

Exhibit No.                          Description
------------    ----------------------------------------------------------------

     10.1       Second Amendment to Credit Agreement dated as of February 3,
                2006 by and among Hines Nurseries, Inc., a subsidiary of Hines
                Horticulture, Inc., Hines SGUS Inc., the financial institutions
                party thereto, Deutsche Bank Trust Company Americas, as
                administrative agent for the Lenders, Fleet Capital Corporation
                and LaSalle Bank National Association, as co-syndication agents,
                and Harris Trust and Savings Bank and Wells Fargo Bank, N.A., as
                co-documentation agents. (1)

     10.2       Exercise of Option Agreement, dated March 1, 2006, by and
                between Hines Nurseries, Inc. and Triad Communities, L.P. (1)

     10.3       Offer Letter between Hines Horticulture, Inc. and Steven C.
                Avery dated May 1, 2006. (2)(*)

     31.1       Certification of Chief Executive Officer Pursuant To Rules
                13a-14(a) and 15d-14(a) under the Securities Exchange Act of
                1934, as amended. (+)

     31.2       Certification of Chief Financial Officer Pursuant To Rules
                13a-14(a) and 15d-14(a) under the Securities Exchange Act of
                1934, as amended. (+)

     32.1       Certification of Chief Executive Officer Pursuant To 18 U.S.C.
                Section 1350. Rule 13a-14(d)/15d-14(d) (+)

     32.2       Certification of Chief Financial Officer Pursuant To 18 U.S.C.
                Section 1350. Rule 13a-14(d)/15d-14(d) (+)


----------------

+ Filed herewith

* Management contract or compensatory arrangement.

(1) Incorporated by reference to Hines Horticulture, Inc.'s Form 10-K filed on
March 28, 2006.

(2) Incorporated by reference to Hines Horticulture, Inc.'s Form 8-K filed on
May 5, 2006.



                                    Page 23