<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 quarter ended June 30, 2001

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

                             Commission File Number
                                    0-24439

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


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

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

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

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

                                Yes (X)  No(  )

As of July 31, 2001 there were 22,072,549 shares of Common Stock, par value
$0.01 per share, outstanding.
===============================================================================
<PAGE>

                            HINES HORTICULTURE, INC.


                                     Index

                         Part I. Financial Information
<TABLE>
<CAPTION>


Item 1.   Financial Statements                                          Page No.
                                                                        --------
<S>       <C>                                                           <C>
          Consolidated Balance Sheets as of
          June 30, 2001 and December 31, 2000                                1

          Consolidated Statements of Operations for the Three
          Months and Six Months Ended June 30, 2001 and 2000                 2

          Consolidated Statements of Cash Flows for the
          Six Months Ended June 30, 2001 and 2000                            3

          Notes to the Consolidated Financial Statements                     4

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                                16

Item 3.   Quantitative and Qualitative Disclosures About Market Risk         26

                           Part II. Other Information

Item 4.   Submission of Matters to a Vote of Security Holders                27

Item 6.   Exhibits and Reports on Form 8-K                                   27

          Signatures                                                         28


</TABLE>
Note:  Items 1, 2, 3 and 5 of Part II are omitted because they are not
applicable.
<PAGE>

                           HINES HORTICULTURE, INC.
                          CONSOLIDATED BALANCE SHEETS
                      June 30, 2001 and December 31, 2000
                   (Dollars in thousands, except share data)

<TABLE>
<CAPTION>

ASSETS                                                    June 30,         December 31
------                                                      2001              2000
                                                        -------------       -----------
                                                        (Unaudited)
<S>                                                     <C>                 <C>
CURRENT ASSETS:
       Cash                                                  $      -          $      -
       Accounts receivable, net of allowance for
        doubtful accounts of $2,034 and $2,204                 96,720            49,102
       Inventories                                            149,220           168,575
       Prepaid expenses and other current assets                6,783             5,542
                                                             --------          --------
                               Total current assets           252,723           223,219

FIXED ASSETS, net of accumulated depreciation
   and depletion of $56,807 and $49,273                       215,912           208,719

DEFERRED FINANCING EXPENSES, net of
   accumulated amortization of $5,780 and $3,503               10,204            12,085

GOODWILL, net of accumulated amortization
   of $9,594 and $7,474                                       141,791           143,950
                                                             --------          --------
                                                             $620,630          $587,973
                                                             ========          ========

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

CURRENT LIABILITIES:
       Accounts payable                                      $ 25,089          $ 13,665
       Accrued liabilities                                     11,367            15,976
       Accrued payroll and benefits                            13,347             9,350
       Accrued interest                                         4,038             1,732
       Long-term debt, current portion                         32,729            26,513
       Borrowings on revolving credit facility                 67,500            79,500
       Deferred income taxes                                   74,991            61,585
                                                             --------          --------
                          Total current liabilities           229,061           208,321

LONG-TERM DEBT                                                274,004           288,907
                                                             --------          --------

DERIVATIVE LIABILITY                                            4,997                 -
                                                             --------          --------

DEFERRED INCOME TAXES                                           4,128             3,338
                                                             --------          --------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
       Common Stock
        Authorized - 60,000,000 shares  $.01 par value;
        Issued and outstanding - 22,072,549 shares
        at June 30, 2001 and December 31, 2000                    221               221
       Additional paid-in capital                             128,781           128,781
       Notes receivable from stock sales                            -               (30)
       Deficit                                                (13,433)          (36,707)
       Accumulated other comprehensive loss                    (7,129)           (4,858)
                                                             --------          --------

                         Total shareholders' equity           108,440            87,407
                                                             --------          --------

                                                             $620,630          $587,973
                                                             ========          ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements

                                       1
<PAGE>

                           HINES HORTICULTURE, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
           Three Months and Six Months Ended June 30, 2001 and 2000
                   (Dollars in thousands, except share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                     Three Months Ended June 30,   Six Months Ended June 30,
                                                        2001           2000           2001          2000
                                                     -----------    -----------    -----------   -----------
<S>                                                  <C>            <C>            <C>           <C>
Sales, net                                           $   204,774    $   198,402    $   305,527   $   287,012
Cost of goods sold                                        95,749         91,579        146,734       135,661
                                                     -----------    -----------    -----------   -----------
  Gross profit                                           109,025        106,823        158,793       151,351
                                                     -----------    -----------    -----------   -----------

Selling and distribution expenses                         51,226         49,369         79,575        73,973
General and administrative expenses                       11,902         12,458         20,561        20,895
Amortization of goodwill                                   1,081          1,026          2,113         1,711
Gain on receipt of insurance claims proceeds              (2,500)             -         (7,500)            -
Other                                                       (404)           331            660           228
                                                     -----------    -----------    -----------   -----------
  Total operating expenses                                61,305         63,184         95,409        96,807
                                                     -----------    -----------    -----------   -----------

  Operating income                                        47,720         43,639         63,384        54,544
                                                     -----------    -----------    -----------   -----------

Other expenses
  Interest                                                 9,580          9,842         20,080        16,926
  Interest rate swap agreement (income) expense             (472)             -          1,520             -
  Amortization of deferred financing expense               1,138            381          2,277           623
                                                     -----------    -----------    -----------   -----------
                                                          10,246         10,223         23,877        17,549
                                                     -----------    -----------    -----------   -----------

Income before provision for income taxes                  37,474         33,416         39,507        36,995

Income tax provision                                      15,402         10,324         16,233        11,573
                                                     -----------    -----------    -----------   -----------

Net income                                           $    22,072    $    23,092    $    23,274   $    25,422
                                                     ===========    ===========    ===========   ===========

Basic and diluted earnings per share:

  Net income per common share                              $1.00          $1.05          $1.05         $1.15
                                                     ===========    ===========    ===========   ===========

Weighted average shares outstanding--Basic            22,072,549     22,072,549     22,072,549    22,072,549
                                                     ===========    ===========    ===========   ===========
Weighted average shares outstanding--Diluted          22,079,234     22,072,549     22,090,284    22,072,549
                                                     ===========    ===========    ===========   ===========
</TABLE>

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

                                       2
<PAGE>

                           HINES HORTICULTURE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Six Months Ended June 30, 2001 and 2000
                            (Dollars in thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                                      2001           2000
                                                                    --------      ---------
<S>                                                                 <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                      $ 23,274      $  25,422
    Adjustments to reconcile net income to
    net cash provided by operating activities -
     Depreciation, depletion and amortization                          8,828          8,268
     Amortization of deferred financing costs                          2,277            623
     Interest rate swap agreement expense                              1,520              -
     Gain on sale of fixed assets                                        (11)           (92)
     Deferred income taxes                                            15,676         10,937
                                                                    --------      ---------
                                                                    $ 51,564      $  45,158

Change in working capital accounts:
    Accounts receivable                                              (47,618)       (64,316)
    Inventories                                                       19,355         19,922
    Prepaid expenses and other current assets                         (1,241)           158
    Accounts payable and accrued liabilities                          21,468         (2,105)
                                                                    --------      ---------
     Net cash provided by (used in) operating activities              43,528         (1,183)
                                                                    --------      ---------


CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of fixed assets                                         (12,953)       (20,016)
    Proceeds from sale of fixed assets                                    70            395
    Purchase of fixed assets with insurance claims proceeds           (1,796)             -
    Acquisitions, net of cash acquired                                (8,311)      (112,034)
                                                                    --------      ---------
     Net cash used in investing activities                           (22,990)      (131,655)
                                                                    --------      ---------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on revolving line of credit                            76,900         98,465
    Repayments on revolving line of credit                           (88,900)       (77,965)
    Proceeds from the issuance of long-term debt                           -        119,416
    Repayments of long-term debt                                      (9,084)        (3,472)
    Deferred financing costs                                               -         (3,743)
    Penalty on early payment of subordinated notes                         -              -
    Proceeds from stock sales notes receivable                            30            143
                                                                    --------      ---------
     Net cash (used in) provided by financing activities             (21,054)       132,844
                                                                    --------      ---------

    Effect of exchange rate changes on cash and cash equivalents         516             (6)
                                                                    --------      ---------

NET DECREASE IN CASH                                                       -              -

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

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


Supplemental disclosure of cash flow information:
    Cash paid for interest, net of capitalized interest of $613     $ 17,774      $  15,813
     and $389
    Cash paid for income taxes                                      $    404      $     578

</TABLE>

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

                                       3
<PAGE>

                           HINES HORTICULTURE, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            (Dollars in thousands)
                                  (UNAUDITED)

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

          Hines Horticulture, Inc. ("Hines" or the "Company"), a Delaware
     corporation, produces and distributes horticultural products through three
     operating divisions: (i) its Nursery division, (ii) its Color division and
     (iii) its Growing Media division. The Nursery division and Color division
     make up the green goods business. The green goods business is conducted
     through Hines Nurseries, Inc. ("Hines Nurseries"), a wholly owned
     subsidiary of Hines, and the business of the Growing Media division is
     conducted through Sun Gro Horticulture, Inc. ("Sun Gro-U.S."), a wholly
     owned subsidiary of Hines Nurseries, Sun Gro-U.S.'s wholly owned
     subsidiary, Sun Gro Horticulture Canada Ltd. ("Sun Gro-Canada"), and Sun
     Gro Canada's direct and indirect Canadian subsidiaries. Unless otherwise
     specified, references to "Hines" or the "Company" refer to Hines
     Horticulture, Inc. and its subsidiaries.

          Hines Nurseries is a leading national supplier of ornamental shrubs,
     color plants and container-grown plants with commercial nursery facilities
     located in Arizona, California, Florida, Georgia, New York, Oregon,
     Pennsylvania, South Carolina and Texas. Hines Nurseries markets its
     products to retail and commercial customers throughout the United States.

          Sun Gro produces and markets sphagnum peat moss and peat and bark-
     based growing media horticulture products for both professional and retail
     customers. Sun Gro markets its products in North America and various
     international markets with 14 production facilities located in Canada and
     the United States.

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

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

                                       4
<PAGE>

     Accordingly, footnote and other disclosures, which would substantially
     duplicate the disclosures contained in the Form 10-K, filed on March 27,
     2001 by Hines Horticulture, Inc. under the Securities Exchange Act of 1934,
     as amended (the "Exchange Act"), have been omitted. The financial
     information herein is not necessarily representative of a full year's
     operations.

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

          Earnings per share are calculated in accordance with SFAS No. 128,
     "Earnings per Share", which requires the Company to report both basic
     earnings per share, based on the weighted-average number of common shares
     outstanding, and diluted earnings per share, based on the weighted-average
     number of common shares outstanding adjusted to include the potentially
     dilutive effect of outstanding stock options and warrants. For the three
     and six months ended June 30, 2001, shares related to 2,889,000 options
     were excluded from the calculation of diluted earnings per share because
     they would have been anti-dilutive. For the three and six months ended June
     30, 2001, the incremental shares related to 440,000 warrants outstanding
     did not result in a difference between basic and diluted earnings per
     share.

4.   Adoption Of Accounting Pronouncement:
     -------------------------------------

          In July 2001, the Financial Accounting Standards Board issued
     Statements on Financial Accounting Standards (SFAS) Nos. 141 (Business
     Combinations) and 142 (Goodwill and Other Intangible Assets).  SFAS No.
     141, among other things, eliminates the use of the pooling of interests
     method of accounting for business combinations.  Under the provisions of
     SFAS No. 142 goodwill will no longer be amortized, but will be subject to a
     periodic test for impairment based upon fair values.  During the year ended
     December 31, 2000 and for the six months ended June 30, 2001, the Company
     reported goodwill amortization of $3,801 and $2,113, respectively.  SFAS
     No. 141 is effective for all business combinations initiated after June 30,
     2001.  SFAS No. 142 will be effective for the Company beginning January 1,
     2002.  Given the recent issuance of these standards, the Company has not
     yet determined the impact of adoption on the financial statements.

          Effective January 1, 2001 Hines adopted the provisions of Statement of
     Financial Accounting Standards No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" ("SFAS No. 133"), as amended. SFAS No.
     133 requires companies to record derivatives on the balance sheet as assets
     and liabilities, measured at fair value. The accounting for the gain or
     loss due to changes in fair value of the derivative instrument depends on
     whether the derivative qualifies as a hedge.

          The accounting for the gain or loss due to changes in fair value of
     the derivative instrument depends on whether the derivative qualifies as a
     hedge.

                                       5
<PAGE>

          If the derivative instrument does not qualify as a hedge, the gains or
     losses are reported in earnings when they occur. If the derivative
     instrument qualifies as a hedge, the accounting varies based upon the type
     of risk being hedged.

          As of January 1, 2001 the Company held an interest rate cap and swap
     agreement designed to convert the variable rate interest payments on
     certain debt to fixed rate interest rate payments.  This agreement had
     previously been designated as a cash flow hedging relationship but did not
     qualify as a hedge under SFAS No. 133.  Adopting the provisions of SFAS No.
     133 on January 1, 2001 resulted in a cumulative after-tax charge to
     Accumulated Other Comprehensive Income as of January 1, 2001 of $2,334,
     representing the fair value of the interest rate agreement, net of tax.
     This amount is being amortized as interest rate agreement expense over the
     term of the debt.

          For the three months ended June 30, 2001, the Company recognized a
     pre-tax gain of $472 and for the six months ended June 30, 2001, the
     Company recognized a pre-tax loss of $1,520 reported as Interest rate
     agreement expense in the Consolidated Statement of Operations related to
     the change in the fair value of the interest rate agreement.

5.   Shipping and Handling Fees and Costs:
     ------------------------------------

          In September 2000, the Emerging Issues Task Force ("EITF") reached a
     final consensus on Issue No. 00-10, "Accounting for Shipping and Handling
     Fees and Costs" ("EITF 00-10"). EITF 00-10 addresses the income statement
     classification of amounts charged to customers for shipping and handling,
     as well as costs related to shipping and handling. The EITF concluded that
     amounts billed to a customer in a sale transaction related to shipping and
     handling should be classified as revenue. The Company adopted EITF 00-10 in
     the fourth quarter of 2000. Prior to adopting EITF 00-10, the Company
     classified certain shipping and handling fees as an offset to selling and
     distribution expenses. Shipping and handling fees reclassified to revenues
     totaled $18,900 for the three months ended June 30, 2000 and $22,610 for
     the six months ended June 30, 2000.

6.   Gain On Receipt Of Insurance Claims Proceeds:
     ---------------------------------------------

          On November 4, 2000, the Company's Seba Beach growing media production
     facility located in Alberta, Canada was substantially destroyed by fire.
     The facility and its operations are covered by replacement and business
     interruption insurance.

          The Company recorded a gain of $2,500 for the three months ended June
     30, 2001 and $7,500 for the six months ended June 30, 2001 representing
     insurance proceeds received to cover business interruption expenses related
     to the fire.

                                       6
<PAGE>

7.   Inventories
     -----------

     Inventories consisted of the following:

                                        June 30,      December 31,
                                        --------      -----------
                                          2001           2000
                                        --------         --------
     Nursery stock                      $130,019         $146,924
     Finished goods                        5,491            8,213
     Materials and supplies               13,710           13,438
                                        --------         --------
                                        $149,220         $168,575
                                        ========         ========

8.   Comprehensive Income
     --------------------

          Comprehensive income includes all changes in equity during a period
     except those resulting from investments by and distributions to the
     Company's stockholders. The Company's comprehensive income is composed of
     cumulative foreign currency translation adjustments. The components of
     comprehensive income during the three and six months ended June 30, 2001
     and 2000, were as follows:

<TABLE>
<CAPTION>
                                                          Three Months Ended June 30,               Six Months Ended June 30,
                                                        ------------------------------            -------------------------------
                                                          2001                 2000                2001                   2000
                                                        -------               -------             -------                -------
     <S>                                                <C>                   <C>                 <C>                    <C>

     Net income                                         $22,072               $23,092             $23,274                $25,422
    Cumulative foreign currency translation
      adjustments                                         1,143                  (387)               (216)                  (312)

    Cumulative effect of adoption of FAS 133
                                                             --                    --              (2,334)                    --
    Loss on derivatives reclassified to
      earnings                                              140                    --                 279                     --
                                                        -------               -------             -------                -------
     Comprehensive income                               $23,355               $22,705             $21,003                $25,110
</TABLE>

 9.  Acquisitions:
     -------------

          The following acquisitions have been accounted for under the purchase
     method for accounting purposes. The consolidated financial statements
     include the operating results of each acquisition from the date of
     acquisition.

          On January 14, 2000, the Company completed its acquisition of certain
     assets (primarily land and buildings) and all of the outstanding capital
     stock of Willow Creek Greenhouses, Inc. ("Willow Creek"), a producer of
     quality annual bedding plants and holiday plants.  The total acquisition
     price was approximately $18,800, which resulted in goodwill of
     approximately $9,700.

          In accordance with the terms of the purchase agreement, and as a
     result of Willow Creek achieving certain operating results relating to the
     year ended December 31, 2000, the Company made an additional purchase price
     payment of $850 in fiscal 2001.  At December 31, 2000, the Company recorded
     this amount as goodwill.

                                       7
<PAGE>

          In addition, contingent upon Willow Creek achieving certain operating
     results for the year ending December 31, 2001, the Company may be required
     to make additional purchase price payments of up to $665 in fiscal 2002.

          On March 3, 2000, the Company completed its acquisition of (i)
     substantially all of the assets and certain liabilities of Lovell Farms,
     Inc. and Botanical Farms, Inc.; (ii) the capital stock of Enviro-Safe
     Laboratories, Inc. and (iii) the partnership interest of Lovell Properties
     (collectively referred to as "Lovell").

          Lovell is a producer of quality annual bedding and holiday plants.
     The total acquisition price was approximately $92,000, which resulted in
     goodwill of approximately $72,200.  In accordance with the terms of the
     purchase agreement, and as a result of Lovell achieving certain operating
     results relating to the year ended December 31, 2000, the Company made an
     additional purchase price payment of $7,500 in fiscal 2001.

          At December 31, 2000, the Company recorded this amount as goodwill.
     In addition, contingent upon Lovell achieving certain operating results for
     the year ending December 31, 2001, the Company may be required to make
     additional purchase price payments of up to $5,000 in fiscal 2002.

     Pro Forma Operating Data

          The following summary of condensed unaudited pro forma results of
     operations for the six months ended June 30, 2000 gives effect to the
     acquisitions of Willow Creek and Lovell as if they had occurred on January
     1, 2000 (in thousands, except per share data):
                                                                  2000
                                                                --------
     Sales, net                                                 $294,175
     Net income                                                 $ 25,372
     Basic and diluted earnings per share:                      $   1.15

10.  Subsequent Event
     ----------------

          On August 13, 2001, the Company announced that it has retained Credit
     Suisse First Boston to explore strategic and financial alternatives for Sun
     Gro, its growing media subsidiary. Sun Gro's sales for the year ended
     December 31, 2000 totaled $122 million. There are no assurances that any
     transaction will be completed.

11.  Segment Information and Guarantor/Non-Guarantor Disclosures
     -----------------------------------------------------------

          The Senior Subordinated Notes issued by Hines Nurseries (the issuer)
     have been guaranteed by Hines (the parent guarantor) and by Sun Gro-U.S.
     (the subsidiary guarantor). The issuer and the subsidiary guarantor are
     wholly owned subsidiaries of the parent guarantor and the parent and
     subsidiary guarantees are

                                       8
<PAGE>

     full, unconditional and joint and several. Separate financial statements of
     Hines Nurseries and Sun Gro-U.S. are not presented, and Hines Nurseries and
     Sun Gro-U.S. are not filing separate reports under the Exchange Act because
     management believes that they would not be material to investors. The
     Senior Subordinated Notes are not guaranteed by Sun Gro-Canada or its
     present or future subsidiaries.

          The following information provides the required disclosures with
     respect to the Company's segments pursuant to Statement of Financial
     Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an
     Enterprise and Related Information." The Company operates in two segments:
     1) the nursery segment and 2) the growing media segment.

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

     .  Consolidating balance sheets as of June 30, 2001 (unaudited) and
        December 31, 2000;

     .  Consolidating statements of operations for the three months and six
        months ended June 30, 2001 and 2000 (unaudited); and

     .  Consolidating statements of cash flows for the six months ended June 30,
        2001 and 2000 (unaudited).

                                       9
<PAGE>

Guarantor / Non-guarantor Disclosures

  Consolidating Balance Sheet
  As of June 30, 2001
  (Dollars in thousands)
<TABLE>
<CAPTION>
                                  --------------------------------------------------------------------------------------------
                                                 Nursery
                                                 Segment            Growing Media Segment
                                  --------------------------------------------------------------------------------------------
                                                                            Sun Gro
                                     Hines                    Sun Gro       Canada
                                  Horticulture     Hines       U.S.       (Subsidiary
                                    (Parent      Nurseries  (Subsidiary      Non-         Sun Gro                 Consolidated
                                   Guarantor)    (Issuer)   Guarantor)    Guarantors)    Sub-total  Eliminations     Total
                                  --------------------------------------------------------------------------------------------
<S>                                <C>            <C>          <C>         <C>           <C>        <C>             <C>
          ASSETS
          ------
Current assets:
    Cash                              $      -    $      -      $     -        $     -    $      -    $        -      $      -
    Accounts receivable, net                 -      70,674       22,959          3,087      26,046             -        96,720
    Inventories                              -     136,598        6,315          6,307      12,622             -       149,220
    Prepaid expenses and other
     current assets                          -       3,467        2,114          1,202       3,316             -         6,783
    Deferred income taxes                  149         122        1,238            607       1,845        (2,116)            -
                                  --------------------------------------------------------------------------------------------
        Total current assets          $    149    $210,861      $32,626        $11,203    $ 43,829       ($2,116)     $252,723
                                  --------------------------------------------------------------------------------------------

Fixed assets, net                            -     150,002       11,117         54,793      65,910             -       215,912
Deferred financing expenses, net           524       9,680            -              -           -             -        10,204
Goodwill, net                                -     122,339       18,799            653      19,452             -       141,791
Deferred income taxes                        -      20,828            -              -           -       (20,828)            -
Investments in subsidiaries            115,437      11,601            -              -           -      (127,038)            -
                                  --------------------------------------------------------------------------------------------
                                      $116,110    $525,311      $62,542        $66,649    $129,191     ($149,982)     $620,630
                                  ============================================================================================

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

Current liabilities:
    Accounts payable                  $      -    $ 18,653      $ 2,915        $ 3,521    $  6,436    $        -      $ 25,089
    Accrued liabilities                      -       9,850        1,027            490       1,517             -        11,367
    Accrued payroll and benefits             -      11,241        1,130            976       2,106             -        13,347
    Accrued interest                         -       4,038            -              -           -             -         4,038
    Long-term debt, current
     portion                                 -      22,159        4,523          6,047      10,570             -        32,729
    Revolving line of credit                 -      67,500            -              -           -             -        67,500
    Deferred income taxes                    -      77,107            -              -           -        (2,116)       74,991
    Intercompany accounts                7,670     (51,496)      29,383         14,443      43,826             -             -
                                  --------------------------------------------------------------------------------------------
        Total current liabilities        7,670     159,052       38,978         25,477      64,455        (2,116)      229,061
                                  --------------------------------------------------------------------------------------------

Long-term debt                               -     242,207       22,612          9,185      31,797             -       274,004
Derivative liability                         -       4,997            -              -           -             -         4,997
Deferred income taxes                        -       9,877       (1,767)        16,846      15,079       (20,828)        4,128
Shareholders' equity:
    Common stock                           221      17,971       11,413          4,501      15,914       (33,885)          221
    Additional paid in capital         128,781      21,362        5,889              -       5,889       (27,251)      128,781
    Notes receivable from stock
     sales                                   -           -            -              -           -             -             -
    Retained earnings (deficit)        (13,433)     71,900        1,131              -       1,131       (73,031)      (13,433)
    Accumulated other
     comprehensive income               (7,129)     (2,055)      (5,074)             -      (5,074)        7,129        (7,129)
                                  --------------------------------------------------------------------------------------------
        Total shareholders'
         equity                        108,440     109,178       13,359          4,501      17,860      (127,038)      108,440
                                  --------------------------------------------------------------------------------------------

                                      $116,110    $525,311      $73,182        $56,009    $129,191     ($149,982)     $620,630
                                  ============================================================================================

</TABLE>

                                       10
<PAGE>

Guarantor / Non-guarantor Disclosures - (Continued)
  Consolidating Balance Sheet
  As of December 31, 2000
  (Dollars in thousands)
<TABLE>
<CAPTION>

                                  ---------------------------------------------------------------------------------------------
                                                  Nursery
                                                  Segment            Growing Media Segment
                                  ---------------------------------------------------------------------------------------------
                                                                           Sun Gro
                                     Hines                    Sun Gro      Canada
                                  Horticulture     Hines       U.S.      (Subsidiary
                                    (Parent      Nurseries  (Subsidiary     Non-         Sun Gro                 Consolidated
                                   Guarantor)    (Issuer)   Guarantor)   Guarantors)    Sub-total  Eliminations     Total
                                  ---------------------------------------------------------------------------------------------
<S>                                <C>            <C>          <C>        <C>           <C>        <C>             <C>
            ASSETS
            ------
Current assets:
    Cash                           $      -     $      -        $     -    $     -     $      -     $        -      $      -
    Accounts receivable, net              -       26,754         19,681      2,667       22,348               -          49,102
    Inventories                           -      153,125          7,881      7,569       15,450               -         168,575
    Prepaid expenses and other
     current assets                       -        1,880          2,060      1,602        3,662               -           5,542
    Deferred income taxes                 -          122          1,239        608        1,847          (1,969)              -
                                  ----------------------------------------------------------------------------------------------
        Total current assets       $      -     $181,881        $30,861    $12,446     $ 43,307         ($1,969)       $223,219
                                  ---------------------------------------------------------------------------------------------

Fixed assets, net                         -      141,210         12,819     54,690       67,509               -         208,719
Deferred financing expenses, net        797       11,288              -          -            -               -          12,085
Goodwill, net                             -      124,196         19,082        672       19,754               -         143,950
Deferred income taxes                    37       20,828              -      1,538        1,538         (22,403)              -
Investments in subsidiaries          94,057        9,211          7,283          -        7,283        (110,551)              -
                                  ----------------------------------------------------------------------------------------------
                                   $ 94,891     $488,614        $70,045    $69,346     $139,391       ($134,923)       $587,973
                                  ==============================================================================================

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

Current liabilities:
    Accounts payable               $      -     $  8,919        $ 1,836    $ 2,910     $  4,746      $        -        $ 13,665
    Accrued liabilities                   -       13,151          2,294        531        2,825               -          15,976
    Accrued payroll and benefits          -        7,339            916      1,095        2,011               -           9,350
    Accrued interest                      -        1,732              -          -            -               -           1,732
    Long-term debt, current
     portion                              -       18,196          3,769      4,548        8,317               -          26,513
    Revolving line of credit              -       79,500              -          -            -               -          79,500
    Deferred income taxes                 -       63,554              -          -            -          (1,969)         61,585
    Intercompany accounts             7,484      (54,698)        27,738     19,476       47,214               -               -
                                  ----------------------------------------------------------------------------------------------
        Total current liabilities     7,484      137,693         36,553     28,560       65,113          (1,969)        208,321
                                  ----------------------------------------------------------------------------------------------

Long-term debt                            -      251,823         24,875     12,209       37,084               -         288,907
Deferred income taxes                     -       11,300         (2,353)    16,794       14,441         (22,403)          3,338
Shareholders' equity:
    Common stock                        221       17,971         11,414      4,500       15,914         (33,885)            221
    Additional paid in capital      128,781       21,362          5,889      1,778        7,667         (29,029)        128,781
    Notes receivable from stock
     sales                              (30)           -              -          -            -               -             (30)
    Retained earnings (deficit)     (36,707)      48,465         (1,475)     5,505        4,030         (52,495)        (36,707)
    Accumulated  other
     comprehensive loss              (4,858)           -         (4,858)         -       (4,858)          4,858          (4,858)
                                  ----------------------------------------------------------------------------------------------
        Total shareholders' equity   87,407       87,798         10,970     11,783       22,753        (110,551)         87,407
                                  ----------------------------------------------------------------------------------------------

                                   $ 94,891     $488,614        $70,045    $69,346     $139,391       ($134,923)       $587,973
                                  ==============================================================================================
</TABLE>

                                       11
<PAGE>

Guarantor / Non-guarantor Disclosures - (Continued)
Consolidating Statement of Operations
For the six month period ended June 30, 2001
(Dollars in thousands)
<TABLE>
<CAPTION>

                                    -----------------------------------------------------------------------------------------------
                                                   Nursery
                                                   Segment           Growing Media Segment
                                    -----------------------------------------------------------------------------------------------
                                                                            Sun Gro
                                       Hines                  Sun Gro       Canada
                                    Horticulture    Hines       U.S.      (Subsidiary
                                      (Parent     Nurseries  (Subsidiary     Non-          Sun Gro                     Consolidated
                                     Guarantor)   (Issuer)   Guarantor)   Guarantors)     Sub-total    Eliminations       Total
                                    -----------------------------------------------------------------------------------------------
<S>                                 <C>           <C>        <C>            <C>           <C>           <C>             <C>
    Sales, net                      $      -       $241,938   $ 58,561      $20,187       $78,748        ($15,159)       $305,527
    Cost of goods sold                     -        112,008     34,461       15,424        49,885         (15,159)        146,734
                                    -----------------------------------------------------------------------------------------------

      Gross Profit                         -        129,930     24,100        4,763        28,863               -         158,793
    Operating expenses                     -         77,486     19,784       (1,861)       17,923               -          95,409
                                    -----------------------------------------------------------------------------------------------

      Operating income                     -         52,444      4,316        6,624        10,940               -          63,384
                                    -----------------------------------------------------------------------------------------------

    Other expenses:
    Interest                               -         17,834      1,511          735         2,246               -          20,080
    Interest - intercompany                -         (2,064)     1,415          649         2,064               -               -
    Interest rate swap agreement
     expense                               -          1,520          -            -             -               -           1,520
    Amortization of deferred
     financing expenses, other       (23,162)        (1,845)         -            -             -          27,284           2,277
                                    -----------------------------------------------------------------------------------------------

                                     (23,162)        15,445      2,926        1,384         4,310          27,284          23,877
                                    -----------------------------------------------------------------------------------------------


    Income before provision for
     (benefit from income taxes       23,162         36,999      1,390        5,240         6,630         (27,284)         39,507
    Income tax provision (benefit)      (112)        13,564        586        2,195         2,781               -          16,233
                                    -----------------------------------------------------------------------------------------------

    Net income                      $ 23,274       $ 23,435   $    804      $ 3,045       $ 3,849        ($27,284)       $ 23,274
</TABLE>

Guarantor / Non-guarantor Disclosures - (Continued)

Consolidating Statement of Operations
For the three month period ended June 30, 2001
(Dollars in thousands)

<TABLE>
<CAPTION>
                                    -----------------------------------------------------------------------------------------------
                                                   Nursery
                                                   Segment           Growing Media Segment
                                    -----------------------------------------------------------------------------------------------
                                                                            Sun Gro
                                       Hines                  Sun Gro       Canada
                                    Horticulture    Hines       U.S.      (Subsidiary
                                      (Parent     Nurseries  (Subsidiary     Non-          Sun Gro                     Consolidated
                                     Guarantor)   (Issuer)   Guarantor)   Guarantors)     Sub-total    Eliminations       Total
                                    -----------------------------------------------------------------------------------------------
<S>                                 <C>           <C>        <C>            <C>           <C>           <C>             <C>
    Sales, net                       $       -     $174,181   $ 27,641      $ 8,280        $35,921       ($5,328)       $ 204,774
    Cost of goods sold                       -       79,294     15,361        6,422         21,783       ($5,328)          95,749
                                    -----------------------------------------------------------------------------------------------
      Gross Profit                           -       94,887     12,280        1,858         14,138             -          109,025
    Operating expenses                       -       52,256      9,494         (445)         9,049             -           61,305
                                    -----------------------------------------------------------------------------------------------
      Operating income                       -       42,631      2,786        2,303          5,089             -           47,720
                                    -----------------------------------------------------------------------------------------------
    Other expenses:
      Interest                               -        8,515        729          336          1,065             -            9,580
      Interest - intercompany                -         (933)       623          310            933             -                -
      Interest rate swap agreement
       expense                               -         (472)         -            -              -             -             (472)
      Amortization of deferred
       financing expenses, other       (22,016)        (755)     2,114            -          2,114        21,795            1,138
                                    -----------------------------------------------------------------------------------------------
                                       (22,016)       6,355      3,466          646          4,112        21,795           10,246
                                    -----------------------------------------------------------------------------------------------


    Income (loss) before provision
     for (benefit from) income
     taxes                              22,016       36,276       (680)       1,657            977       (21,795)          37,474
    Income tax provision (benefit)         (56)      14,124        608          726          1,334             -           15,402
                                    -----------------------------------------------------------------------------------------------

    Net income (loss)                 $ 22,072     $ 22,152    ($1,288)     $   931          ($357)     ($21,795)        $ 22,072
</TABLE>

                                       12
<PAGE>

Guarantor / Non-guarantor Disclosures - (Continued)

Consolidating Statement of Operations
For the six month period ended June 30, 2000
(Dollars in thousands)
<TABLE>
<CAPTION>

                                    -----------------------------------------------------------------------------------------------
                                                   Nursery
                                                   Segment           Growing Media Segment
                                    -----------------------------------------------------------------------------------------------
                                                                            Sun Gro
                                       Hines                  Sun Gro       Canada
                                    Horticulture    Hines       U.S.      (Subsidiary
                                      (Parent     Nurseries  (Subsidiary     Non-          Sun Gro                     Consolidated
                                     Guarantor)   (Issuer)   Guarantor)   Guarantors)     Sub-total    Eliminations       Total
                                    -----------------------------------------------------------------------------------------------
<S>                                 <C>           <C>        <C>          <C>             <C>           <C>             <C>
    Sales, net                       $      -     $218,044      $59,558      $22,179       $81,737        ($12,769)       $287,012
    Cost of goods sold                      -      100,203       36,172       12,055        48,227         (12,769)        135,661
                                    -----------------------------------------------------------------------------------------------
     Gross Profit                           -      117,841       23,386       10,124        33,510               -         151,351
    Operating expenses                      -       69,791       21,186        5,830        27,016               -          96,807
                                    -----------------------------------------------------------------------------------------------
     Operating income                       -       48,050        2,200        4,294         6,494               -          54,544
                                    -----------------------------------------------------------------------------------------------
    Other expenses:
     Interest                             (10)      14,538        1,638          760         2,398               -          16,926
     Interest - intercompany                -       (1,937)       1,248          689         1,937               -               -
     Amortization of deferred
      financing expenses, other       (25,416)      (2,817)           -            -             -          28,856             623
                                    -----------------------------------------------------------------------------------------------
                                      (25,426)       9,784        2,886        1,449         4,335          28,856          17,549
                                    -----------------------------------------------------------------------------------------------

    Income before provision for
     (benefit from) income taxes       25,426       38,266         (686)       2,845         2,159         (28,856)         36,995
    Income tax provision (benefit)          4       12,850       (2,645)       1,364        (1,281)              -          11,573
                                    -----------------------------------------------------------------------------------------------
    Net income                       $ 25,422     $ 25,416      $ 1,959      $ 1,481       $ 3,440        ($28,856)       $ 25,422

</TABLE>
Guarantor / Non-guarantor Disclosures - (Continued)

Consolidating Statement of Operations
For the three month period ended June 30, 2000
(Dollars in thousands)

<TABLE>
<CAPTION>
                                    -----------------------------------------------------------------------------------------------
                                                   Nursery
                                                   Segment           Growing Media Segment
                                    -----------------------------------------------------------------------------------------------
                                                                            Sun Gro
                                       Hines                  Sun Gro       Canada
                                    Horticulture    Hines       U.S.      (Subsidiary
                                      (Parent     Nurseries  (Subsidiary     Non-          Sun Gro                     Consolidated
                                     Guarantor)   (Issuer)   Guarantor)   Guarantors)     Sub-total    Eliminations       Total
                                    -----------------------------------------------------------------------------------------------
<S>                                 <C>           <C>        <C>          <C>             <C>          <C>              <C>
    Sales, net                       $      -     $165,041      $27,435      $ 9,309       $36,744         ($3,383)       $198,402
    Cost of goods sold                      -       73,970       15,931        5,061        20,992          (3,383)         91,579
                                    -----------------------------------------------------------------------------------------------

     Gross Profit                           -       91,071       11,504        4,248        15,752               -         106,823
    Operating expenses                      -       48,942       10,938        3,304        14,242               -          63,184
                                    -----------------------------------------------------------------------------------------------

     Operating income                       -       42,129          566          944         1,510               -          43,639
                                    -----------------------------------------------------------------------------------------------

    Other expenses:
     Interest                              (7)       8,625          842          382         1,224               -           9,842
     Interest - intercompany                -       (1,098)         706          392         1,098               -               -
     Amortization of deferred
      financing expenses, other       (23,088)      (1,141)       1,704            -         1,704          22,906             381
                                    -----------------------------------------------------------------------------------------------
                                      (23,095)       6,386        3,252          774         4,026          22,906          10,223
                                    -----------------------------------------------------------------------------------------------


    Income before provision for
     (benefit from) income taxes       23,095       35,743       (2,686)         170        (2,516)        (22,906)         33,416
    Income tax provision (benefit)          3       12,655       (2,750)         416        (2,334)              -          10,324
                                    -----------------------------------------------------------------------------------------------

    Net income (loss)                $ 23,092     $ 23,088      $    64        ($246)        ($182)       ($22,906)       $ 23,092

 </TABLE>

                                       13
<PAGE>

Guarantor / Non-guarantor Disclosures - (Continued)

Consolidating Statement of Cash Flows
For the six months ended June 30, 2001
(Dollars in thousands)

<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                          Nursery
                                                          Segment           Growing  Media Segment
                                           -----------------------------------------------------------------------------------------
                                               Hines                  Sun Gro   Sun Gro Canada
                                            Horticulture   Hines        U.S.     (Subsidiary
                                              (Parent    Nurseries  (Subsidiary      Non-       Sun Gro                 Consolidated
                                             Guarantor)   (Issuer)   Guarantor)   Guarantors)   Sub-total  Eliminations    Total
                                           -----------------------------------------------------------------------------------------
<S>                                         <C>           <C>        <C>        <C>             <C>        <C>          <C>
Cash provided by operating activities          $    -     $ 34,647    $  5,571    $ 3,310        $ 8,881       $   -      $ 43,528
                                           -----------------------------------------------------------------------------------------

Cash flows from investing activities:
    Purchase of fixed assets, net                   -      (12,948)        509     (2,310)        (1,801)          -       (14,749)
    Proceeds from sales of fixed assets             -            -          60         10             70           -            70
    Acquisitions, net of cash                       -       (8,311)          -          -              -           -        (8,311)
                                           -----------------------------------------------------------------------------------------
    Net cash (used in) provided by                  -      (21,259)        569     (2,300)        (1,731)          -       (22,990)
     investing activities                  -----------------------------------------------------------------------------------------

Cash flows from financing activities:
    Borrowings on revolving line of credit          -       76,900           -          -              -           -        76,900
    Repayments on revolving line of credit          -      (88,900)          -          -              -           -       (88,900)
    Intercompany advances (repayments)            (30)       3,418      (3,388)         -         (3,388)          -             -
    Repayments of long-term debt                    -       (6,049)     (1,509)    (1,526)        (3,035)          -        (9,084)
    Dividends received (paid)                       -        1,243      (1,243)         -         (1,243)          -             -
    Repayments of notes receivables from
     stock sales                                   30            -           -          -              -           -            30
                                           -----------------------------------------------------------------------------------------
    Net cash used in financing activities           -      (13,388)     (6,140)    (1,526)        (7,666)          -       (21,054)
                                           -----------------------------------------------------------------------------------------

    Effect of exchange rate changes on
     cash and cash equivalents                      -            -           -        516            516           -           516
                                           -----------------------------------------------------------------------------------------
Net increase in cash                                -            -           -          -              -           -             -
Cash, beginning of year                             -            -           -          -              -           -             -
                                           -----------------------------------------------------------------------------------------
Cash, end of period                            $    -     $      -    $      -    $     -        $     -       $   -      $      -
                                           =========================================================================================

</TABLE>

                                       14
<PAGE>

Guarantor / Non-guarantor Disclosures - (Continued)

Consolidating Statement of Cash Flows
For the six months ended June 30, 2000
(Dollars in thousands)

<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------------------------------
                                                          Nursery
                                                          Segment           Growing  Media Segment
                                           -----------------------------------------------------------------------------------------
                                               Hines                  Sun Gro   Sun Gro Canada
                                            Horticulture   Hines        U.S.     (Subsidiary
                                              (Parent    Nurseries  (Subsidiary      Non-       Sun Gro                 Consolidated
                                             Guarantor)   (Issuer)   Guarantor)   Guarantors)   Sub-total  Eliminations    Total
                                           -----------------------------------------------------------------------------------------
<S>                                         <C>          <C>        <C>         <C>             <C>        <C>          <C>
Cash provided by (used in) operating
  activities                                    $  10   $     (10)    $ (4,626)   $ 3,443        $(1,183)      $   -      $ (1,183)
                                           -----------------------------------------------------------------------------------------

Cash flows from investing activities:
    Purchase of fixed assets, net                   -     (15,656)      (1,556)    (2,804)        (4,360)          -       (20,016)
    Proceeds from sales of fixed assets             -           -            -        395            395           -           395
    Acquisitions, net of cash                       -    (112,034)           -          -              -           -      (112,034)
                                           -----------------------------------------------------------------------------------------
    Net cash used in investing activities           -    (127,690)      (1,556)    (2,409)        (3,965)          -      (131,665)
                                           -----------------------------------------------------------------------------------------


Cash flows from financing activities:
    Borrowings on revolving line of credit          -      98,465            -          -              -           -         98,465
    Repayments on revolving line of credit          -     (77,965)           -          -              -           -        (77,965)
    Intercompany advances (repayments)           (153)     (7,587)       7,740          -          7,740           -              -
    Proceeds from the issuance of long-
     term debt                                      -     119,416            -          -              -           -        119,416
    Repayments of long-term debt                    -      (2,444)           -     (1,028)        (1,028)          -         (3,472)
    Deferred financing costs                        -      (3,743)           -          -              -           -         (3,743)
    Dividends received ( paid )                     -       1,558       (1,558)         -         (1,558)          -              -
    Repayments of notes receivables
     from stock sales                             143           -            -          -              -           -            143
                                           -----------------------------------------------------------------------------------------
    Net cash provided by (used in)
     financing activities                         (10)    127,700        6,182     (1,028)         5,154           -        132,844
                                           -----------------------------------------------------------------------------------------

    Effect of exchange rate changes on
    cash and cash equivalents                       -           -            -         (6)            (6)          -             (6)
                                           -----------------------------------------------------------------------------------------

Net increase in cash                                -           -            -          -              -           -              -
Cash, beginning of year                             -           -            -          -              -           -              -
                                           -----------------------------------------------------------------------------------------
Cash, end of period                             $   -   $       -      $     -    $     -        $     -       $   -      $       -
                                           =========================================================================================


</TABLE>

                                       15
<PAGE>

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

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

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

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

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



                                       16
<PAGE>

Overview

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

         Seasonality.  The Company's green goods business, like that of its
     competitors, is highly seasonal.  In 2000, approximately 72% of Hines
     Nurseries' net sales and approximately 101% of Hines Nurseries' operating
     income occurred in the first half of the year.  Approximately 54% of Hines
     Nurseries' net sales and approximately 88% of Hines Nurseries' operating
     income occurred in the second quarter of 2000. The Company has experienced
     and expects to continue to experience significant seasonality in net sales,
     operating income and net income.  This quarterly variability is primarily
     the result of the consumer gardening cycle, which is closely aligned to
     seasonal weather patterns, particularly weekend weather during the peak
     growing season, as well as other factors.  Sun Gro's sales, because they
     are more heavily weighted towards the professional markets, typically do
     not experience the large seasonal variances present in the retail market,
     and are only slightly weighted towards the first half of the year.

         Acquisitions. The Company has completed a number of recent acquisitions
     to expand and diversify its operations. In the three years ended December
     31, 2000, the Company completed six acquisitions, all of which have been
     accounted for under the purchase method. Accordingly, the purchase prices
     were allocated to certain assets and liabilities based on their respective
     fair market values. The excess of the purchase price over the estimated
     fair market value of the net assets acquired relating to each transaction
     was accounted for as goodwill. Amounts allocated to goodwill are being
     amortized on a straight-line basis over an estimated life of thirty-five
     years.

         The funds used for the acquisitions were provided by the Company's
     existing acquisition facility. The consolidated financial statements
     include the operating results of each acquisition from the date of
     acquisition. These acquisitions have and will

                                       17
<PAGE>

     continue to affect the period-to-period comparability of the operating
     results discussed below. The Company has historically pursued strategic
     acquisitions from time to time that increase its production capacity,
     broaden or complement its existing product lines, expand its geographic
     presence or offer operating synergies.

         While the Company continues to believe that the highly fragmented
     nature of the nursery industry presents it with a number of opportunities
     to make such acquisitions, management's current priority is to increase its
     operating cash flows and financial flexibility. Accordingly, the Company is
     not currently in discussions to consummate any further acquisitions,
     although it may later decide to do so.

         Tax Matters. The Company derives significant benefits (for its nursery
     operations) under the U.S. federal tax code by qualifying to use the cash
     method of accounting for federal income tax purposes. Under the cash
     method, sales are included in taxable income when payments are received and
     expenses are deducted as they are paid. The primary benefit the Company
     receives is the ability to deduct the cost of inventory as it is incurred.
     As a result of the Company's ability to deduct its growing costs under the
     farming exception, the Company has generally not been required to pay cash
     income taxes and has generated net operating losses for federal income tax
     purposes.  In 2000, the Company has generated a taxable loss for federal
     income tax purposes.  During the same period, the Company has continued to
     show a tax provision relating to the recording of deferred taxes.  At
     December 31, 2000, the Company had approximately $52.4 million in net
     operating loss carry forwards for federal income tax reporting purposes.

     Results of Operations

      Three Months Ended June 30, 2001 compared to Three Months Ended June 30,
      2000

         Net sales.  Net sales of $204.8 million for the three months ended
     June 30, 2001 increased $6.4 million, or 3.2%, from net sales of $198.4
     million for the comparable period in 2000 primarily due to increased sales
     from the Company's green goods business as discussed below.

         Sales from the Company's green goods business increased by more than
     5.5% as both the nursery and color divisions had strong performances.  The
     strong early sales performance this year proved to be a significant
     competitive advantage in a challenging retail environment for the lawn and
     garden industry.  During this period, the effects of the soft economy and
     increasingly aggressive inventory management programs by customers were
     exacerbated by unfavorable weather conditions in May and June.  Despite
     these challenges, the nursery division posted solid sales results with
     outstanding results in its southern sunbelt markets.  The sales force
     reorganization implemented during 2000, along with its strong New Products
     Program, has enabled Hines to bring about a resurgence in sales growth to
     independent garden centers.  This performance complements consistently high
     growth rates in sales to mass retail customers, which have been supported
     by the

                                       18
<PAGE>

     Company's extremely successful store service programs. The color division
     was the strongest performer for the quarter with outstanding results by its
     southern operations. In the color division, the Company continues to
     benefit from substantial sales being generated through its store service
     programs nationwide.

         Net sales of the Company's growing media business decreased by 7.5%
     from the comparable period in 2000.  The growing media business has been
     negatively affected by the same economic and weather-related market
     phenomena as the green goods businesses.

         For the growing media division, the impact of more aggressive
     inventory management practices has become increasingly evident among
     professional growers and in the Company's retail oriented businesses such
     as co-packing.

         The Company continues to operate without the use of its Seba Beach
     plant, which accounts for approximately 14% of its growing media production
     capacity.  Seba Beach is being rebuilt after having been destroyed by fire
     in late 2000. During the quarter, the Company continued to work diligently
     to fill product orders from other plant locations while the rebuilding is
     underway.  Internally, in addition to its focus on rebuilding the Seba
     Beach production facility, Hines is working to increase gross margins in
     its major growing media lines.  To meet these margin objectives, it has
     continued to emphasize higher margin professional lines and exercise
     increased discipline in pricing decisions on retail products.  Growers
     continue to take advantage of labor and equipment cost savings by switching
     to the Company's value-added mixes.

         Gross profit.  Gross profit of $109.0 million for the three months
     ended June 30, 2001 increased $2.2 million, or 2.1%, from gross profit of
     $106.8 million for the comparable period in 2000.  The increase was
     primarily attributable to higher sales at the Company's green goods
     business as discussed above.

         As a percent of sales, gross margin decreased from 53.8% to 53.2% of
     net sales primarily due to the impact of the Seba Beach facility fire,
     which accounted for $1.4 million of additional costs.  Excluding these
     additional costs, the gross margins would have increased by 0.1%, from
     53.8% to 53.9%, primarily due to production improvements in the growing
     media business.

         Operating expenses.  Operating expenses of $61.3 million for the three
     months ended June 30, 2001 decreased $1.9 million, from $63.2 million for
     the comparable period in 2000.  Included in operating expenses is a gain of
     $2.5 million representing insurance proceeds received during the quarter
     relating to the Seba Beach facility fire.  Excluding this gain, operating
     expenses as a percentage of net sales decreased from 31.8% to 31.2% for the
     three months ended, June 30, 2001, primarily due to lower general and
     administrative expenses.  Included in the prior year's general and
     administrative expenses was the reduction of the carrying value of the
     Company's investment in NeoInformatics, Inc. in the amount of $0.8 million.

                                       19
<PAGE>

         Operating income.  Operating income of $47.7 million for the three
     months ended June 30, 2001 increased $4.1 million, or 9.4%, from $43.6
     million for the comparable period in 2000.  Excluding the $1.1 million
     positive impact of the receipt of the Seba Beach insurance proceeds, net of
     the incremental costs, operating income of $46.6 million increased $3.0
     million, or 6.9% from $43.6 million for the comparable period in 2000.
     Excluding this $1.1 million positive impact, as a percentage of net sales,
     operating income improved 0.8% to 22.8% from 22.0%, due primarily to
     increased gross margins and lower general and administrative expenses as
     discussed above.

         Interest expense.  Interest and financing expenses of $10.2 million
     for the three months ended June 30, 2001 remained the same from $10.2
     million for the comparable period in 2000.  Excluding the non-cash $0.5
     million gain with respect to the Company's interest rate swap agreement
     resulting from the adoption of FAS 133, interest and financing expenses
     were $10.7 million for the three months ended June 30, 2001 compared to
     $10.2 million for the comparable period in 2000.  The increase was
     primarily attributable to increased borrowing rates.

         Provision for income taxes.  The Company's effective income tax rate
     was 41.1% and 30.9% for the three months ended June 30, 2001 and 2000,
     respectively. The increase in the effective income tax rate was mainly due
     to the prior year's release of tax reserves management determined were no
     longer necessary.

         Net income.  Net income of $22.1 million for the three months ended
     June 30, 2001 decreased $1.0 million from net income of $23.1 million for
     the comparable period in 2000.  The decrease was primarily due to the
     Company's return to a normalized tax rate of 41% versus a rate of 31% last
     year as discussed above.

         Six Months Ended June 30, 2001 compared to Six Months Ended June 30,
         2000

         Net sales.  Net sales of $305.5 million for the six months ended June
     30, 2001 increased $18.5 million, or 6.5%, from net sales of $287.0 million
     for the comparable period in 2000 primarily due to increased sales from the
     Company's green goods business as discussed below.

     Sales from the Company's green goods business increased by almost 11% as
     both the nursery and color divisions had strong performances.  The strong
     early sales performance this year proved to be a significant competitive
     advantage in a challenging retail environment for the lawn and garden
     industry.  During this period, the effects of the soft economy and
     increasingly aggressive inventory management programs by customers were
     exacerbated by unfavorable weather conditions in May and June.  Despite
     these challenges, both the nursery and color divisions posted solid sales
     results with outstanding results in their southern sunbelt markets.  The
     sales force reorganization implemented during 2000, along with its strong
     New Products Program, has enabled Hines to bring about a resurgence in
     sales growth

                                       20
<PAGE>

     to independent garden centers. This performance complements consistently
     high growth rates in sales to mass retail customers, which have been
     supported by the Company's extremely successful store service programs.

     Net sales of the Company's growing media business decreased by 7% from the
     comparable period in 2000.  The growing media business has been subject to
     the same economic and weather-related market phenomena as the green goods
     businesses.  For the growing media division, the impact of more aggressive
     inventory management practices has become increasingly evident among
     professional growers and in the Company's retail oriented businesses such
     as co-packing.  In addition, the Company continues to operate without the
     use of its Seba Beach plant, which accounts for approximately 14% of its
     growing media production capacity.  Seba Beach is being rebuilt after
     having been destroyed by fire in late 2000. The Company continued to work
     diligently to fill product orders from other plant locations while the
     rebuilding is underway.  Internally, in addition to its focus on rebuilding
     the Seba Beach production facility, the business is working to increase
     gross margins in its major growing media lines.  To meet these margin
     objectives, it has continued to emphasize higher margin professional lines
     and exercise increased discipline in pricing decisions on retail products.
     Growers continue to take advantage of labor and equipment cost savings by
     switching to the Company's value-added mixes.

         Gross profit.  Gross profit of $158.8 million for the six months ended
     June 30, 2001 increased $7.4 million, or 4.9%, from gross profit of $151.4
     million for the comparable period in 2000.  The increase was primarily
     attributable to higher sales at the Company's green goods business as
     discussed above.

         As a percent of sales, gross margin decreased from 52.7% to 52.0% of
     net sales primarily due to the impact of the Seba Beach facility fire,
     which accounted for $3.8 million of additional costs.  Excluding these
     additional costs, the gross margins would have increased by 0.9% from 52.7%
     to 53.2% primarily due to product mix and pricing increases in the green
     goods business and production improvements in the growing media business.

         Operating expenses.  Operating expenses of $95.4 million for the six
     months ended June 30, 2001 decreased $1.4 million, or 1.4%, from $96.8
     million for the comparable period in 2000.  Included in operating expenses
     are $0.2 million of incremental costs relating to the Seba Beach facility
     fire and a gain of $7.5 million representing insurance proceeds received
     during the six months ended June 30, 2001.  Excluding these incremental
     costs and gain, operating expenses as a percentage of net sales decreased
     from 33.7% to 33.6% in first six months of 2001, primarily attributable to
     lower general and administrative expenses.  Included in the prior year's
     general and administrative expenses was the reduction of the carrying value
     of the Company's investment in NeoInformatics, Inc. in the amount of $0.8
     million.

                                       21
<PAGE>

         Operating income.  Operating income of $63.4 million for the six
     months ended June 30, 2001 increased $8.9 million, or 16.3%, from $54.5
     million for the comparable period in 2000.

         Excluding the $3.5 million positive impact of the receipt of the Seba
     Beach insurance proceeds, net of the incremental costs, operating income of
     $59.9 million increased $5.4 million, or 9.9% from $54.5 million for the
     comparable period in 2000.  Excluding this $3.5 million positive impact, as
     a percentage of net sales, operating income improved 0.6% to 19.6% from
     19.0%, due primarily to increased gross margins and lower general and
     administrative expenses as discussed above.

         Interest expense.  Interest and financing expenses of $23.9 million
     for the six months ended June 30, 2001 increased $6.3 million, or 36.1%,
     from $17.5 million for the comparable period in 2000.  Excluding the non-
     cash $1.5 million charge with respect to the Company's interest rate swap
     agreement resulting from the adoption of FAS 133, interest and financing
     expenses were $22.4 million for the six months ended June 30, 2001 compared
     to $17.5 million for the comparable period in 2000.  The increase was
     primarily attributable to increased borrowing levels due to the
     acquisitions made in early fiscal 2000 and increased borrowing rates.

         Provision for income taxes.  The Company's effective income tax rate
     was 41.1% and 31.3% for the six months ended June 30, 2001 and 2000,
     respectively. The increase in the effective income tax rate was mainly due
     to the prior year's release of tax reserves management determined were no
     longer necessary.

         Net income.  Net income of $23.3 million for the six months ended June
     30, 2001 decreased $2.1 million from a net income of $25.4 million for the
     comparable period in 2000.  The decrease was primarily due to the higher
     interest and financing expenses, the non-cash charge of $1.5 million
     representing the impact of adopting FAS 133 and the return to a normalized
     tax rate of 41% versus 31% a year ago as discussed above.

     Liquidity and Capital Resources
     -------------------------------

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

         In 1998, the Company entered into a senior credit facility (the
     "Senior Credit Facility") which provided for a $50.0 million term loan and
     a $200.0 million revolving credit facility, comprised of a $100.0 million
     working capital facility and a $100.0 million acquisition facility.  The
     Senior Credit Facility has a five-year term.  The revolving credit facility
     and all other obligations under the Senior Credit Facility are secured by
     substantially all of the assets and common stock of Hines Nurseries and Sun
     Gro-U.S., as well as a pledge of 65% of the common stock of Sun Gro-Canada.

                                       22
<PAGE>

         In connection with the Lovell acquisition on March 3, 2000, the
     Company entered into an amendment to its existing senior credit facility
     (the "Amended Senior Credit Facility") to provide for a new $100.0 million
     term loan and a $15.0 million increase in the Company's existing working
     capital revolving credit facility.

         The term loan and revolving credit facility interest rate is a
     percentage spread over the U.S. prime rate and the Eurodollar rate,
     depending upon the Company's quarterly leverage and interest rate coverage
     ratios as defined in the Amended Senior Credit Facility. The Lovell
     acquisition was financed with proceeds from the Amended Senior Credit
     Facility.

         Effective November 28, 2000 the Company's Amended Senior Credit
     Facility was amended to (i) provide the Company with additional revolving
     loan commitments in the amount of $30.0 million guaranteed by its majority
     shareholder, MDCP, which can only be borrowed and can only be outstanding
     between March 15 and June 15 of 2001 and 2002, (ii) increase the interest
     rate on all loans by  1/4% to  1/2%, (iii) reset the financial covenants
     that establish minimum interest coverage ratios and net worth levels, and
     maximum leverage ratios and capital expenditure amounts, (iv) add a minimum
     EBITDA covenant, (v) amend the clean down requirement for working capital
     revolving loans and (vi) provide for additional restrictions on the
     Company's ability to make acquisitions and reinvest proceeds from asset
     sales.  In consideration for its guarantee on the additional revolving loan
     commitments, MDCP received a fee of $600,000 and warrants to purchase
     440,000 shares of the common stock of Hines.  These warrants are
     exercisable at any time prior to December 31, 2005 at an exercise price of
     $3.50.   All other significant terms and conditions of the Amended Senior
     Credit Facility remain unchanged.  If MDCP is required to make any payment
     with respect to its guaranty of new revolver, the Company would be required
     to issue to MDCP an additional warrant to purchase a number of shares of
     the Company's common stock equal to the amount of such payment divided by
     the then current market price of the Company's common stock.

         In October 1995, Hines Nurseries issued $120.0 million in aggregate
     principal amount of 11 3/4% senior subordinated notes due 2005 (the "Senior
     Subordinated Notes") to refinance certain indebtedness incurred in
     connection with the acquisition of Hines by MDCP and certain members of
     management. As of June 30, 2001, $78.0 million in aggregate principal
     amount remains outstanding. The indenture pursuant to which the Senior
     Subordinated Notes were issued imposes a number of restrictions on Hines
     Nurseries and Sun Gro-U.S. The indenture limits, among other things, their
     ability to incur additional indebtedness, to make certain restricted
     payments (including dividends to Hines), to make certain asset
     dispositions, to incur certain liens and to enter into certain significant
     transactions.

         In addition, breach of a material term of the indenture or any other
     material indebtedness that results in the acceleration of such indebtedness
     would trigger an

                                       23
<PAGE>

     event of default under the Senior Credit Facility, causing all amounts
     owing thereunder to become immediately due and payable. The Senior Credit
     Facility imposes a number of similar and certain additional restrictions
     (including financial covenants) on Hines Nurseries and Sun Gro-U.S. and its
     subsidiaries.

         Effective November 28, 2000, Hines Nurseries also received the approval
     of its noteholders to amend the Indenture governing the Senior Subordinated
     Notes for the purpose of amending the definition of "Permitted
     Indebtedness" within the Indenture to include (i) all indebtedness that may
     be incurred under the Amended Senior Credit Facility in an aggregate
     principal amount to not exceed $365.0 million (less the amount of all
     mandatory principal repayments and required permanent reductions made
     thereunder) plus(ii) up to an additional $35.0 million in indebtedness
     under the additional revolving loan commitments, provided that such
     borrowings may only be borrowed and may only be outstanding between March
     15 and June 15 of 2001 and 2002. In consideration for the amendment, Hines
     Nurseries agreed to (i) pay a fee of $35 per $1,000 of the principal amount
     of Notes, (ii) increase the interest rate thereon from 11 3/4% to 12 3/4%
     per annum, (iii) increase the optional redemption price to 106.00% of the
     principal amount thereof, (iv) increase the purchase price upon a change of
     control from 101.00% to 105.00% of the principal amount thereof and add to
     the events that constitute a change of control and (v) pay a premium at
     maturity equal to 5.00% of the principal amount to be repaid. All other
     terms of the Notes remain unchanged.

         Net cash provided by (used in) operating activities for the six months
     ended June 30, 2001 of $43.5 million improved by $44.7 million from net
     cash used of $1.2 million for the comparable period in 2000. The higher
     cash level generated was primarily due to the lower levels of accounts
     receivable and the higher levels of accounts payable and accrued
     liabilities.

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

         Net cash used in investing activities during the six months ended June
     30, 2001 decreased $108.7 million to $23.0 million from $131.7 million for
     the comparable period in 2000.  The decrease was primarily due to the
     Company's prior year's acquisitions of Willow Creek and Lovell and lower
     capital expenditures this year.

         Net cash provided by (used in) financing activities during the six
     months ended June 30, 2001 decreased $153.9 million to net cash used of
     $21.1 million from net cash provided of $132.8 million for the comparable
     period in 2000.  The decrease was directly related to the prior year's
     advances under the acquisition facility to finance the acquisitions
     completed in the prior year and to lower borrowings under the Company's
     revolving line of credit.

                                       24
<PAGE>

         The Company typically draws under its revolving credit facilities in
     the first and fourth quarters to fund its seasonal inventory buildup of
     green goods products and seasonal operating expenses.  Approximately 75% of
     the sales of Hines Nurseries occur in the first half of the year, generally
     allowing the Company to reduce borrowings under its revolving credit
     facilities in the second and third quarters. Working capital requirements
     for the Company's growing media operations are less seasonal in nature,
     with slight inventory buildups generally occurring in the third and fourth
     quarters.

         On July 31, 2001, the Company had unused borrowing capacity of $55.1
     million and $30.0 million under its working capital revolver and the
     additional $30.0 million revolving loan commitment, respectively, within
     the Amended Senior Credit Facility.

         As a result of the Company's ability to deduct its growing costs under
     the farming exception, the Company has generally not been required to pay
     cash income taxes in recent years and has generated net operating losses
     for federal income tax purposes.  Even with the benefits of the farming
     exception, the Company may nonetheless be required to pay cash income taxes
     in future years after use, loss or expiration of its tax net operating loss
     carryforwards.  Such cash income taxes could also result from increased
     taxable income due to, among other reasons: (i) any slowdown in, or
     elimination of, future growth in the Company's inventory of growing plants
     or (ii) limits on the Company's ability to use net operating loss
     carryforwards to offset all of its tax liability under the alternative
     minimum tax system.

         The Company's capital expenditures were approximately $12.9 million
     for the six months ended June 30, 2001.  The capital expenditures for the
     green goods business ($12.1 million) related primarily to the purchase of
     land at our Fallbrook site, which the Company had been obligated to acquire
     as part of that acquisition completed in 1996, the completion of acreage
     expansion plans, which the Company began in late 2000, at its South
     Carolina and Miami facilities, the continued implementation of the ERP
     information system, which will standardize systems and processes throughout
     the Company, and the purchase of nursery-related structures, vehicles,
     machinery and equipment.  The capital expenditures for the growing media
     business ($0.8 million) related primarily to peat bog development and the
     purchase of peat bog harvesting and processing equipment. The Company's
     capital expenditures for 2001 are expected to be approximately $19.0
     million.

                                       25
<PAGE>

     Principal repayments due under the Company's various borrowings agreements
     total $26.5 million in 2001, $64.3 million in 2002, $49.4 million in 2003
     and $175.3 million thereafter.  Management believes that cash generated by
     operations and borrowings available under the Amended Senior Credit
     Facility will be sufficient to meet the Company's anticipated working
     capital, capital expenditures and debt service requirements through 2001.

         Management is currently evaluating a series of financial alternatives
     to facilitate the refinancing or repayments of amounts due in 2002 under
     the Amended Senior Credit Facility.  These alternatives include a number of
     financing options to restructure its portfolio of outstanding debt as well
     as exploring strategic and financial alternatives for Sun Gro, its growing
     media subsidiary.  Management believes at this time that the Company will
     be able to successfully refinance or repay amounts due under the Amended
     Senior Credit Facility in accordance with its terms; however, there is no
     assurance that the Company will be able to do so.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

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

          In May 2000, the Company entered into an interest rate swap and cap
     agreement (interest rate agreement) to hedge $75.0 million of its loan
     facility.  The interest rate agreement effectively changes the Company's
     exposure on its variable rate interest payments to fixed rate interest
     payments of 7.13% based on the 3-month LIBOR rate in effect at the
     beginning of each quarterly period, with a maximum rate of 8%.  The
     interest rate agreement matures in February 2005.  At June 30, 2001, the
     estimated fair value of the interest rate agreement was $5.0 million.

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

                                       26
<PAGE>

                          PART II.  OTHER INFORMATION

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

     The Company held its Annual Meeting of Stockholders on May 31, 2001 at
     which the stockholders of the Company elected six directors and ratified
     the appointment of PricewaterhouseCoopers LLP as the Company's independent
     public accountants for the 2001 fiscal year.

     The following individuals were elected as directors and received the number
     of votes indicated below:

     Name of Nominee         Votes For    Against   Abstentions
     ----------------        ----------   -------   -----------
     Douglas D. Allen        20,884,741    12,680             0
     G. Ronald Morris        20,884,741    12,680             0
     Thomas R. Reusche       20,871,425    25,996             0
     James R. Tennant        20,884,741    12,680             0
     Stephen P. Thigpen      20,871,425    25,996             0
     Paul R. Wood            20,871,425    25,996             0

     For the ratification of PricewaterhouseCoopers LLP as the Company's
     independent public accountants, 20,866,635 votes were cast in favor, 2,700
     votes were cast against and there were 28,086 abstentions.

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

         None

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

                                       27
<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
                                         (Principal financial officer
                                         and duly authorized officer)



Date:  August 13, 2001

                                       28