UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2006

¨	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 333-102885

THE BRICKMAN GROUP, LTD.

(Exact name of registrant as specified in its charter)


Delaware		23-2949247
(State of incorporation)		(I.R.S. Employer Identification No.)

18227 Flower Hill Way, Suite D Gaithersburg, Maryland		20879
(Address of Principal Executive Offices)		(Zip Code)

(301) 987-9200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The Brickman Group, Ltd. is a wholly owned subsidiary of Brickman Group Holdings, Inc. None of its, or Brickman Group Holdings, Inc.’s, common equity is publicly traded.

TABLE OF CONTENTS


PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of December 31, 2005 and September 30, 2006	2
		Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2006	3
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2006	4
		Notes to Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
	Item 4.	Controls and Procedures	20

PART II.	OTHER INFORMATION		21
	Item 1.	Legal Proceedings	21
	Item 1A	Risk Factors	21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
	Item 3.	Defaults Upon Senior Securities	21
	Item 4.	Submission of Matters to a Vote of Security Holders	21
	Item 5.	Other Information	21
	Item 6.	Exhibits	22
SIGNATURES			23

PART I.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

THE BRICKMAN GROUP, LTD.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands except for share data)


	December 31, 2005			(Unaudited) September 30, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	7,999		$	9,954
Accounts receivable, net of allowance for doubtful accounts		55,530			47,391
Unbilled revenue		8,598			28,793
Deferred tax asset		8,614			9,001
Other current assets		3,111			3,363

Total current assets		83,852			98,502
Property and equipment, net of accumulated depreciation		38,572			43,571
Deferred tax asset		3,595			4,541
Deferred charges, net of accumulated amortization		5,392			4,314
Intangible assets, net of accumulated amortization		71,008			60,363
Goodwill		41,666			41,666
Restricted investments and other assets		2,284			2,996

Total	$	246,369		$	255,953

LIABILITIES AND SHAREHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	17,734		$	13,070
Deferred revenue		4,682			8,490
Revolving credit		7,000			4,000
Long-term debt - current portion		8,864			8,864
Accrued interest		737			5,147
Accrued expenses		24,736			33,619

Total current liabilities		63,753			73,190
Long-term debt and other liabilities
Long-term debt		169,500			163,738
Other liabilities		3,235			3,942

Total liabilities		236,488			240,870

Commitments and contingencies
Shareholder’s equity:
Class A voting common stock, $.01 par value; 51,317 authorized, issued and outstanding both periods		1			1
Class A non-voting common stock, $.01 par value; 283,548 authorized, issued and outstanding both periods		3			3
Class B non-voting common stock, $.01 par value; 117,517 authorized, issued and outstanding both periods		1			1
Class C non-voting common stock, $.01 par value; 75,000 authorized, issued and outstanding both periods		1			1
Paid-in capital		190,947			190,947
Retained earnings		9,928			15,130
Continuing shareholders’ basis adjustment		(191,000	)		(191,000	)

Total shareholder’s equity		9,881			15,083

Total liabilities and shareholder’s equity	$	246,369		$	255,953

The accompanying notes and the Company’s audited financial statements are an integral part of these financial statements.

THE BRICKMAN GROUP, LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(dollars in thousands)


	For the three months ended September 30,				For the nine months ended September 30,
	2005		2006		2005		2006
Net service revenues	$	114,114	$	126,844	$	343,202	$	359,296
Cost of services provided		75,452		83,520		237,941		248,533

Gross profit		38,662		43,324		105,261		110,763
General and administrative expenses		19,778		20,904		57,470		62,360
Amortization expense		4,620		3,885		13,704		11,653

Income from operations		14,264		18,535		34,087		36,750
Interest expense		5,016		4,957		15,010		14,839

Income before income taxes		9,248		13,578		19,077		21,911
Income tax provision		3,887		5,703		7,917		9,203

Net income	$	5,361	$	7,875	$	11,160	$	12,708

The accompanying notes and the Company’s audited financial statements are an integral part of these financial statements.

THE BRICKMAN GROUP, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)


	For the nine months ended September 30,
	2005			2006
Cash flows from operating activities:
Net income	$	11,160		$	12,708
Adjustments to reconcile net income to net change in cash from operating activities:
Depreciation		10,483			11,970
Amortization		13,704			11,653
Deferred taxes		(3,941	)		(1,333	)
Change in provision for doubtful accounts		1,047			(336	)
Loss (gain) on disposal of assets		9			(192	)
Changes in operating assets and liabilities, net of acquisitions		(7,042	)		1,180

Net change in cash from operating activities		25,420			35,650

Cash flows from investing activities:
Purchase of property and equipment		(21,880	)		(18,898	)
Cost of acquired businesses		(6,578	)		—
Proceeds from sale of property and equipment		1,562			2,121
Loans to executives		(500	)		(650	)

Net change in cash from investing activities		(27,396	)		(17,427	)

Cash flows from financing activities:
Payments on long-term debt		(4,432	)		(5,762	)
Net borrowings (payments) on revolving credit facility		3,000			(3,000	)
Distributions to Brickman Group Holdings, Inc.		(7,555	)		(7,506	)

Net change in cash from financing activities		(8,987	)		(16,268	)

Net change in cash		(10,963	)		1,955
Cash, beginning of period		11,339			7,999

Cash, end of period	$	376		$	9,954

The accompanying notes and the Company’s audited financial statements are an integral part of these financial statements.

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

1.	Business:

The Brickman Group, Ltd. (the “Company”) performs landscape maintenance, landscape construction and enhancement, and snow removal services for commercial customers in major metropolitan areas in 25 states throughout the United States. Landscape maintenance services are generally provided under cancelable contracts ranging from one to five years in length. The Company provides these services to a diverse set of customers with one or more sites, including regional and national commercial, retail, and industrial property owners, corporations, residential communities, schools and universities, hotels, hospitals, and municipal facilities. Services include grass mowing, planting and care of flower beds, tree and shrub pruning, bed edging, controlling weeds and pests, fertilizing, planting of grass, groundcovers, shrubs and trees, grading, and removing snow and ice.

2.	Summary of Significant Accounting Policies:

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements and on the same basis of presentation as the Company’s annual financial statements. Accordingly, they do not include all of the information required by GAAP for complete consolidated financial statements.

These consolidated financial statements have been prepared by management, are unaudited, and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2005. In the opinion of management, all adjustments (consisting of normal recurring accruals and other adjustments) considered necessary for a fair presentation have been included. Due to the seasonality of the Company’s business, the results for the interim periods are not necessarily indicative of the results for the year. Business seasonality results in higher revenues during the second and third quarters as compared with the first and fourth quarters of the year, while the methods of accounting for fixed costs, such as depreciation and amortization, are not significantly impacted by business seasonality.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. On an ongoing basis, management reviews its estimates, including those related to allowances for doubtful accounts, revenue recognition, valuation of operating supplies, self-insurance reserves, purchase accounting estimates, useful lives for depreciation and amortization, realizability of deferred tax assets, and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from estimates.

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

2.	Summary of Significant Accounting Policies, continued:

Accounting Change:

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R), “Shared-Based Payment Compensation” (“FAS 123(R)”) which requires compensation expense be recognized for all share-based payments made to employees based on the fair value of the award at the date of grant. The Company adopted FAS 123(R) using the prospective method in which compensation expense for all new or modified stock awards, measured by the grant-date fair value of the awards, will be charged to earnings prospectively over the remaining vesting period, based on the estimated number of awards that are expected to vest. Under this transition method, the results of operations of prior periods have not been restated. Accordingly, the Company will continue to provide pro forma financial information for prior periods to illustrate the impact on its results of operations (see note 6).

Recent Accounting Pronouncements:

In June 2006, the FASB issued Interpretation No. 48 (“FIN No. 48”) “Accounting for Uncertainty in Income Taxes: an interpretation of FASB Statement No. 109.” This interpretation clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is assessing the impact the adoption of FIN No. 48 will have on the Company’s consolidated financial position and results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements.” This statement clarifies the definition of fair value, establishes a framework for measuring fair value, and expands the disclosures on fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The company is currently evaluating the impact of its adoption on its consolidated financial statements.

In September 2006, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108). The Company believes that the impact of adoption will not be material on its consolidated financial statements.

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

3.	Accounts Receivable:

Components of accounts receivable are as follows:


	December 31, 2005			(Unaudited) September 30, 2006
Accounts receivable	$	58,868		$	48,917
Allowance for doubtful accounts		(3,338	)		(1,526	)

Accounts receivable, net	$	55,530		$	47,391

Accounts receivable amounts include retention on incomplete projects that will be completed within one year of $310 at December 31, 2005 and $395 at September 30, 2006. All other amounts are due currently.

4.	Accrued Expenses:

Accrued expenses consist of the following:


	December 31, 2005		(Unaudited) September 30, 2006
Payroll-related accruals	$	9,701	$	12,380
Self-insurance reserves		9,010		9,599
Accrued income taxes		3,261		7,757
Other		2,764		3,883

Total accrued expenses	$	24,736	$	33,619

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

Debt:

Debt consists of the following:


	December 31, 2005		(Unaudited) September 30, 2006
Revolving credit bearing interest at 8.00%	$	7,000	$	4,000
Current portion of long-term debt		8,864		8,864

Short-term debt		15,864		12,864

11.75% Senior subordinated notes due 2009		150,000		150,000
Senior credit facility, term loan portion, due 2008 currently bearing interest at 9.00%		19,500		13,738

Long-term debt		169,500		163,738

Total debt	$	185,364	$	176,602

As of September 30, 2006, there was $4,000 outstanding on the revolving portion of the Company’s senior credit facility. Interest rates on the term loan portion of the senior credit facility are set at 0.75% over the prevailing prime rate of interest or are established for periods of up to six months at 2.00% over LIBOR at the Company’s option. The term loan portion of the senior credit facility is fixed on monthly LIBOR contracts maturing in October 2006 and November 2006 at a rate of 9.00% for each month. In connection with an acquisition on October 31, 2006, the Company borrowed $40.0 million on the revolving credit portion of the facility. See the Subsequent Event Note 9, for more information on the transaction.

6.	Stock-based Compensation:

In March 2003, the Company adopted the 2003 Employee Stock Option Plan (the “Option Plan”). Under the Option Plan, the Company may grant options to purchase up to 13,156 shares of Holdings Class A Common stock. The table below summarizes options granted under the plan.


Year granted	Exercise Price per share		Vesting Period	Expiration Date	Weighted Average Remaining Life in Years
2003	$	1,000	5 years	March 30, 2013	6.50
2004	$	1,200	5 years	May 30, 2014	7.67
2005	$	1,650	5 years	June 15, 2015	8.71

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

6.	Stock-based Compensation, continued:

On January 1, 2006, the Company adopted FAS 123(R) using the prospective method. Under the prospective method, only new or modified stock awards are charged to earnings as compensation expense over the remaining vesting period. Because there have been no modifications or new issuances of awards since adoption, the Company has not recognized any compensation expense.

Through December 31, 2005, the Company accounted for stock-based compensation in accordance with the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, no compensation expense had been recognized for grants because the exercise price of the options granted equaled the fair market value of the underlying stock on the dates of grants. Had the Company applied the measurement provisions of FASB statement No. 123 to stock-based compensation, net income would have decreased as follows:


	For the three months ended September 30, 2005			For the nine months ended September 30, 2005
Net income, as reported	$	5,361		$	11,160
Deduct: Total stock-based compensation determined under the fair value based method for all grants, net of related tax effects		(49	)		(156	)

Pro forma net income	$	5,312		$	11,004

The Black-Scholes valuation model was used to establish the fair value of the options. Risk free rates of 3.8%, 3.7% and 3.9% at the date of grant were assumed in 2003, 2004 and 2005, respectively. No volatility factor was used in the valuation since Brickman Group Holdings, Inc. stock is not traded publicly. The expected option term was assumed to be the vesting period of 5 years.

7.	Related Party Transactions:

In the nine months ended September 30, 2006, the Company made distributions to its parent company, Brickman Group Holdings, Inc. (“Holdings”), totaling $7,506. The distributions to its parent company consisted of a distribution used for debt service totaling $6,825, distributions to fund parent company stock redemptions from terminated employees totaling $641 and a $40 distribution for the payment of professional fees. In the nine months ended September 30, 2005, the Company made distributions to Holdings totaling $7,555. The distributions to its parent company consisted of a distribution used for debt service totaling $5,863, and distributions to

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

7.	Related Party Transactions, continued:

fund parent company stock redemptions from terminated employees totaling $1,654 and a $38 distribution for the payment of professional fees.

In August 2006, the Company entered into an additional lease with Brickman Leasing, L.L.C., an entity owned by certain shareholders of Holdings, for land and buildings in Columbus, OH. The lease has a five-year term commencing on January 1, 2007 and terminating on December 31, 2011. The obligations under this lease agreement are $80 in 2007, $83 in 2008, $85 in 2009, $88 in 2010, and $90 in 2011.

During 2006, the Company loaned an executive $650 in connection with the executive’s relocation. The loan is expected to be paid in full by December 31, 2006. During 2005, the Company loaned an executive $500 in connection with the executive’s relocation. The note is a non-interest bearing loan to be forgiven on an annual basis over a ten-year period ending December 31, 2014 contingent upon the executive’s continued employment with the Company. The loan is secured by the executive’s primary residence.

The Company owns and operates an airplane that executives and employees use for business-related travel. Certain executives and shareholders use the airplane for personal travel and reimburse the Company for such use.

8.	Commitments and Contingencies:

Risk Management: The Company carries general liability, vehicle liability, workers’ compensation, professional liability, directors and officers’ liability, and employee health care insurance policies as well as umbrella liability insurance to cover claims over the liability limits contained in the primary policies.

The Company’s insurance programs for workers’ compensation, vehicle liability, general liability and employee health care contain self-insured retention amounts. Claims in excess of the self-insured retention amounts are insured at levels considered prudent by management. The Company’s accrual for unpaid and incurred but not reported claims under these programs were $9,599 and $9,010 at September 30, 2006 and December 31, 2005, respectively and is included with accrued expenses in the accompanying Consolidated Balance Sheets in accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. While the ultimate outcome of these claims is dependent on future developments, in management’s opinion, recorded accruals are adequate to cover these claims.

Other: There are no other significant commitments or contingencies as of September 30, 2006 that have not already been disclosed.

THE BRICKMAN GROUP, LTD.

Notes to Consolidated Financial Statements

(Unaudited)

(dollars in thousands except per share amounts)

9.	Subsequent Event:

On October 31, 2006, the Company, through a newly formed wholly-owned subsidiary, Brickman Bengals, LLC, purchased substantially all the assets of a landscaping business with operations in Ohio and Kentucky for total consideration of $52.8 million including an 8.00% Junior Subordinated Convertible Note of $5.0 million. The Company is in the process of allocating the purchase price to the acquired tangible and intangible assets.

The Company funded the cash portion of the purchase price through $40.0 million of borrowings under the revolving portion of the senior credit agreement which was amended in connection with the acquisition, with the remainder of the purchase price funded from working capital. The amendment to the senior credit agreement increased the aggregate revolving portion of the senior credit facility from $30.0 million to $65.0 million.

In connection with the acquisition, Brickman Bengals, LLC pledged its assets as collateral for the Company’s obligations under the senior credit facility and became a guarantor of the senior credit facility and the Company’s 11.75% senior subordinated notes.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

The Management’s Discussion and Analysis and other sections of this Form 10-Q may contain forward-looking statements that are based on current expectations, estimates and projections about the industries in which we operate and our management’s beliefs and assumptions. Forward-looking statements in this report include, but are not limited to: (1) statements regarding our belief that our internal cash flows and borrowings under our credit facility will provide us sufficient liquidity and capital resources and (2) statements regarding management’s expectation that various items would not reasonably be expected to have a material adverse effect on our financial position, results of operations or cash flows. We caution readers that all forward-looking statements are based on assumptions that we believe are reasonable, but are subject to a wide range of risks including, but not limited to, risks associated with the uncertainty of future financial results, acquisitions and dispositions, additional financing requirements, increased labor costs, increased fuel costs, loss of customers, ability to manage growth, the seasonal demand for our services and varying weather conditions, the effect of competitive services on pricing, reliance on key management personnel, the effect of changes in government regulations and immigration law, the outcome of legal proceedings and a variety of other factors. Due to these and other uncertainties, we cannot assure readers that any forward-looking statements will prove to have been correct. All forward-looking statements are subject to the safe harbor protections created by the Private Securities Litigation Reform Act of 1995. For further information on these and other risks, see the “Risk Factors” section of our report on Form 10-K filed on March 24, 2006, as well as our other filings with the Securities and Exchange Commission. We assume no obligation to update publicly our forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are one of the largest providers of commercial landscape services in the United States, serving commercial properties in 25 states. We were founded in 1939 and have been continually managed by members of the Brickman family.

We provide landscape maintenance services, including grass mowing, planting and maintaining flower beds, tree and shrub pruning, bed edging, controlling weeds and pests, fertilizing, installing and maintaining irrigation systems, planting of grass, groundcovers, shrubs and trees, grading, and removing snow and ice. The vast majority of our customers use our services at more than one property and include regional and national property owners and managers of office parks, hotels, corporate facilities, retail centers, schools and universities, hospitals, professionally-managed residential properties and municipal facilities. We also provide snow removal services to our landscape maintenance customers to leverage our infrastructure during the winter months. In addition, we provide our customers with landscape design/build services, which enhance our technical capabilities and brand recognition.

Results of Operations

The following table for the three-month and nine-month periods ended September 30, 2005 and 2006 depicts costs as a percentage of revenue.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2006		2005		2006
Net service revenues	100	%	100	%	100	%	100	%
Cost of services provided	66	%	66	%	69	%	69	%
Gross profit	34	%	34	%	31	%	31	%
General and administrative expenses	17	%	16	%	17	%	17	%
Amortization expense	4	%	3	%	4	%	3	%
Income from operations	13	%	15	%	10	%	11	%
Interest expense	5	%	4	%	5	%	4	%
Income before income taxes	8	%	11	%	5	%	7	%
Income tax provision	3	%	5	%	2	%	3	%
Net income	5	%	6	%	3	%	4	%

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

Revenue. Revenue for the three months ended September 30, 2006 increased $12.7 million, or 11.1%, to $126.8 million from $114.1 million for the same period in 2005. This increase was driven by an increase of $12.8 million or 11.2% in landscape services revenues. The increase in landscape maintenance revenues was primarily the result of new contract sales and growth in supplemental landscape maintenance services, including design build and work order projects. Landscape maintenance revenue was the largest component of revenue accounting for 92.0% of total revenue for the three months ended September 30, 2006.

Gross profit. Gross profit for the three months ended September 30, 2006 increased $4.6 million, or 11.9%, to $43.3 million from $38.7 million for the same period in 2005. The increase in gross profit resulted primarily from the increase in landscape maintenance revenue described above. Gross margin (gross profit as a percent of revenue) for the three months ended September 30, 2006 was 34.2% compared to 33.9% for the same period in 2005.

General and administrative expenses. General and administrative expenses for the three months ended September 30, 2006 increased $1.1 million, or 5.6%, to $20.9 million from $19.8 million for the same period in 2005. General and administrative expenses as a percentage of revenue decreased to 16.5% for the three months ended September 30, 2006 from 17.3% for the three months ended September 30, 2005 due to higher percentage growth rates in revenue compared to general and administrative expenses in the period.

Amortization expense. Amortization expense decreased for the three months ended September 30, 2006 by $0.7 million to $3.9 million from $4.6 million for the same period in 2005. Amortization expense relates to the customer contracts and relationships intangible asset. Customer contracts and relationships are being amortized on an accelerated basis over their useful lives of 1 to 14 years.

Income from operations. Income from operations increased for the three months ended September 30, 2006 by $4.2 million to $18.5 million from $14.3 million for the same period in 2005. The increase in gross profit from landscape maintenance revenue, described above, was principally responsible for the increase.

Interest expense. Interest expense for the three-month period ended September 30, 2006 was $5.0 million, unchanged from the same period in 2005. Average debt outstanding decreased to $182.5 million during the three months ended September 30, 2006 from $191.7 million during the three months ended September 30, 2005. The weighted average rate of interest on the borrowings increased to 10.9% for the three months ended September 30, 2006 from 10.5% for the same period in 2005.

Income taxes. An income tax provision was recorded for the three months ended September 30, 2006 and 2005 at an effective rate of 42.0%. This rate differs from the federal statutory rate of 35% primarily due to state taxes.

Net income. Net income increased for the three months ended September 30, 2006 by $2.5 million to $7.9 million from $5.4 million for the same period in 2005. This increase is primarily a result of increased revenues.

Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

Revenue. Revenue for the nine months ended September 30, 2006 increased by $16.1 million, or 4.7%, to $359.3 million from $343.2 million for the same period in 2005. The increase was driven by an increase of $36.9 million or 12.3% in total landscape services revenues, offset by a decrease of $20.8 million or 47.0% in snow removal revenues from the first nine months of 2005. The increase in landscape services was fueled by growth in new landscape maintenance contracts and supplemental landscape services. The decrease in snow removal revenues was primarily the result of significantly less snowfall amounts in many of our markets in 2006 compared to 2005. Landscape maintenance revenue was the largest component of revenues accounting for 86.3% of total revenue for the nine months ended September 30, 2006.

Gross profit. Gross profit for the nine months ended September 30, 2006 increased by $5.5 million, or 5.2%, to $110.8 million from $105.3 million for the same period in 2005. The increase in gross profit was the result of the additional landscape maintenance revenue offset by the lower snow removal volume described above. Gross margin (gross profit as a percent of revenue) was 30.8% compared to 30.7% for the same period in 2005.

General and administrative expenses. General and administrative expenses for the nine months ended September 30, 2006 increased $4.9 million or 8.5% to $62.4 million from $57.5 million for the same period in 2005. General and administrative expenses as a percentage of revenue increased to 17.4% for the nine months ended September 30, 2006 from 16.7% for the nine months ended September 30, 2005. Lower snow removal revenues, described above,

resulted in general and administrative expenses increasing at a faster rate than revenue in the nine months ended September 30, 2006 compared to the same period in 2005.

Amortization expense. Amortization expense decreased for the nine months ended September 30, 2006 by $2.0 million to $11.7 million from $13.7 million for the same period in 2005. Amortization expense relates to the customer contracts and relationships intangible asset. Customer contracts and relationships have estimated useful lives of 1 to 14 years.

Income from operations. Income from operations for the nine months ended September 30, 2006 increased $2.7 million to $36.8 million from $34.1 million for the same period in 2005. The increase in landscape services revenue described above was primarily responsible for the increase.

Interest expense. Interest expense for the nine months ended September 30, 2006 decreased $0.2 million to $14.8 million from $15.0 million for the same period in 2005. Average debt outstanding decreased to $181.0 million during the nine months ended September 30, 2006 from $184.7 million during the nine months ended September 30, 2005 as a result of scheduled payments of bank debt during the period. The weighted average rate of interest on the borrowings increased to 10.9% for the nine months ended September 30, 2006 from 10.8% for the same period in 2005.

Income taxes. An income tax provision was recorded for the nine months ended September 30, 2006 at an effective rate of 42.0%, as compared to an effective rate of 41.5% for the same period in 2005. This rate differs from the federal statutory rate of 35% primarily due to state taxes.

Net income. The net income of $12.7 million for the nine months ended September 30, 2006 represented an increase of $1.5 million from net income of $11.2 million in the same period in 2005.

Liquidity and Capital Resources

We have historically used internal cash flow from operations and borrowings under our existing credit facility to fund our operations, capital expenditures and working capital requirements. For the nine month periods ended September 30, 2006 and 2005, cash provided by operating activities was $35.7 million and $25.4 million, respectively. The increase is primarily attributed to increased collection of receivables in the first nine months of 2006 compared to the same period in 2005.

Our capital expenditure requirements are primarily comprised of landscape equipment, trucks and trailers. Our capital expenditures were $18.9 million and $21.9 million, for the nine months ended September 30, 2006 and 2005, respectively. The decrease in capital expenditures is attributable to the acquisition of an airplane for executive travel in 2005. Excluding the airplane acquisition, capital expenditures increased by $1.4 million reflecting the purchase of new equipment necessary to support new sales.

In the nine months ended September 30, 2006, net cash used in financing activities was $16.3 million, consisting of debt repayments of $5.8 million, and distributions to our parent company, Brickman Group Holdings, Inc., totaling $7.5 million and payments on our revolver of $3.0 million. The distributions to our parent company consisted of a distribution used by our

parent company for debt service totaling $6.8 million, distributions to fund parent company stock redemptions from terminated employees totaling $0.6 million and the balance of the distributions were for the payment of professional fees. In the nine months ended September 30, 2005, net cash used in financing activities was $9.0 million, consisting of draws on our revolver of $3.0 million offset by debt repayments of $4.4 million, and distributions to our parent company totaling $7.6 million. These distributions consisted of a distribution used by our parent company for debt service totaling $5.9 million, and distributions to fund parent company stock redemptions from terminated employees totaling $1.7 million.

As of September 30, 2006, we had a $4.0 million balance outstanding on the $30.0 million revolving portion of our senior credit facility and the term loan portion of our senior credit facility is fixed on 30-day LIBOR contracts expiring in October and November of 2006 at a rate of 9.00%. As of September 30, 2006, availability on the revolving credit facility, after deducting outstanding letters of credit, was $18.0 million.

On October 31, 2006, our wholly-owned subsidiary Brickman Bengals, LLC purchased substantially all of the assets of a landscaping business with operations in Ohio and Kentucky. The purchase price for the assets was $47.8 million in cash plus our issuance of a $5.0 million 8% junior subordinated convertible note and the assumption of specified liabilities. In connection with this acquisition, we amended our senior credit facility to, among other things, increase the maximum revolving loan portion of the facility to $65.0 million from $30.0 million and we funded the cash portion of the purchase price through a $40.0 million borrowing on this revolver and from working capital. The $5.0 million 8% junior subordinated convertible note is subordinated in right of payment, to the extent set forth in the convertible note, to the prior payment in full of all senior debt (as defined in the convertible note) including all of our indebtedness and obligations under our senior credit facility and under our senior subordinated notes. The convertible note matures no later than one year from the date of issuance and may be required to be repaid at an earlier date in specific circumstances as set forth in the convertible note. The holder may convert the outstanding principal balance of the convertible note into equity interests of our parent, Brickman Group Holdings, Inc., or its successor on the terms set forth in the convertible note. As of November 3, 2006 and after giving effect to this acquisition, we had a $29.0 million balance outstanding on the revolving portion of our senior credit facility.

In 2004, our parent company, Brickman Group Holdings, Inc. borrowed $45.0 million from a group of lenders. The loan, with a current balance of $34.5 million, bears interest at 5.25% over LIBOR, and amortizes through November 2009. Our parent company is a holding company and as such will rely on our cash flow to service this obligation. Principal is due on the note as follows: $1.5 million in the fourth quarter of 2006, $6.5 million in 2007, $7.5 million in 2008, and $19.0 million in 2009.

We believe that our internal cash flows and borrowings under the revolving portion of our credit facility will provide us with sufficient liquidity and capital resources to meet our current and future financial obligations for the next twelve months, including funding our operations, debt service and capital expenditures and making distributions to our parent company to enable it to meet its obligations under its loan described above. Our future operating performance will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. If our future cash flow from operations and other capital resources are insufficient to pay our obligations as they may mature or to fund our liquidity needs, including making distributions to our parent company, we may be forced to

reduce or delay our business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of our debt, including our senior subordinated notes, on or before maturity. We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of our existing and future indebtedness, including our senior subordinated notes and our senior credit facility, may limit our ability to pursue any of these alternatives.

Seasonality

Our landscape business is seasonal. Losses generally occur in the first quarter since, in most of our markets, there is limited landscape revenue to be recognized, however fixed costs (e.g., management and supervisory salaries and benefits, rent, amortization, depreciation) continue.

Effect of Inflation

Inflation has generally not been a material factor affecting our business. Our general operating expenses, such as wages and salaries, employee benefits and materials and facilities costs, are subject to normal inflationary pressures. During the nine month period ended September 30, 2006, fuel price increases adversely affected our profitability. Fuel prices have fluctuated widely and have generally increased in recent years. These price increases affect the cost of operating trucks, mowers and other power equipment. The fuel price increases also have an effect on cost of producing and shipping chemicals and materials used in our business. Typically, there is a delay in recovering increases in fuel prices through contract rate increases because most of our contracts renew annually or contain rate adjustments based on the Consumer Price Index that are only made annually.

Critical Accounting Policies

Certain of our accounting policies as discussed below require the application of significant judgment by management in selecting the appropriate estimates and assumptions for calculating amounts to record in our financial statements. Actual results could differ from those estimates and assumptions, impacting the reported results of operations and our financial position. Our significant accounting policies are more fully described in the notes to our 2005 Form 10-K. Certain accounting policies, however, are considered to be critical in that they are most important to the depiction of our financial condition and results of operations and their application requires management’s most subjective judgment in making estimates about the effect of matters that are inherently uncertain.

Goodwill: Goodwill, representing the excess of the cost over the net tangible and identifiable assets acquired in business combinations, is stated at cost. Goodwill and intangibles with indefinite lives are not amortized but tested for impairment no less frequently than annually. Impairment is measured by comparing the carrying value to fair value using quoted market prices, a discounted cash flow model, or a combination of both.

Impairment or Disposal of Long-lived Assets: In the event that facts and circumstances indicate that the carrying value of long-lived assets, primarily property and equipment and certain identifiable intangible assets with defined lives, may be impaired, we perform a recoverability evaluation. If the evaluation indicates that the carrying amount of the

asset is not recoverable from the undiscounted cash flows related to the asset, an impairment loss is recorded for the difference between the carrying amount of the asset and its fair value.

Net Service Revenues: We perform landscape maintenance, landscape construction and enhancement, and snow removal services. Revenue is recognized based upon the service provided and the contract terms.

Landscape maintenance:

We generally provide landscape maintenance services under annual contracts. We recognize revenue for these services as follows: each month, we divide the actual labor, material, and subcontractor costs incurred on each contract by the total labor, material, and subcontractor costs estimated to be incurred to complete the contract. The resulting ratio is multiplied by the contract price and the difference between this product and the revenue previously recognized on the contract is recognized as revenue in the month. In the event estimated total contract costs exceed total contract price, the estimated loss on the contract is accrued in the period in which the loss is identified.

Landscape construction and enhancement:

We generally provide landscape construction and enhancement services under contracts of less than one year. We recognize revenue for these services as follows: each month, we divide the actual labor, material, and subcontractor costs incurred on each contract by the total labor, material, and subcontractor costs estimated to be incurred to complete the contract. The resulting ratio is multiplied by the total contract price and the difference between this product and the revenue previously recognized on the contract is recognized as revenue in the month. In the event estimated total contract costs exceed total contract price, the estimated loss on the contract is accrued in the period in which the loss is identified.

Snow Removal:

We generally provide snow removal services under time and material contracts. We recognize revenue for these services in the period in which the services are performed.

The current asset, unbilled revenue, and the current liability, deferred revenue, result from differences between the timing of billings and the recognition of service revenues on uncompleted contracts.

Risk Management: We carry general liability, vehicle liability, workers compensation, professional liability, directors and officers’ liability, and employee health care insurance policies as well as umbrella liability insurance to cover claims over the liability limits contained in the primary policies.

Our insurance programs for general liability, vehicle liability, workers compensation and employee health care contain self-insured retention amounts. Claims in excess of the self-insurance retention amounts are insured at levels considered reasonable by management. Our accrual for unpaid and incurred but not reported claims under these programs at December 31,

2005 and September 30, 2006 was $9.0 million and $9.6 million, respectively and is included in accrued expenses in the accompanying Consolidated Balance Sheet in accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies. While the ultimate amount of these claims is dependent on future developments, in management’s opinion recorded accruals are adequate to cover these claims.

Recent Development

We have engaged financial advisors to assist our Company and our parent company, Brickman Group Holdings, Inc., in exploring and evaluating strategic alternatives. We can give no assurances that we will pursue any such strategic alternatives.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2006, there were no changes with regard to market risk that would require further quantitative or qualitative disclosure. For our quantitative and qualitative disclosures about market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about Market Risk, of our Annual Report on Form 10-K filed March 24, 2006.

ITEM 4.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective. There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are from time to time a party to litigation. Generally, such litigation involves claims for personal injury and property damage incurred in connection with operations. We are not currently involved in any litigation that we believe is likely to have a material adverse effect on our financial condition, results of operations or cash flows arising in the normal course of business.

ITEM 1A.

RISK FACTORS

Information related to our risk factors is disclosed in Item 1A to our Report on Form 10-K for the year ended December 31, 2005.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS


Number		Description
4.6		Second Supplemental Indenture, dated as of October 31, 2006, among Brickman Bengals, LLC, The Brickman Group, Ltd., the Existing Guarantors named therein and The Bank of New York Trust Company, N.A., as Trustee, under the Indenture dated as of December 20, 2002 (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed November 3, 2006).

10.26		Asset Purchase Agreement, dated October 31, 2006, by and among The Brickman Group, Ltd., Brickman Bengals, LLC, Groundmasters, Inc., Groundmasters, LLC and Michael G. Rorie (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed November 3, 2006).

10.27		The Brickman Group, Ltd. 8.00% Junior Subordinated Convertible Note, dated October 31, 2006, issued by The Brickman Group, Ltd. in favor of Groundmasters, Inc. and joined by Brickman Group Holdings, Inc (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed November 3, 2006).

10.28		Consent and Third Amendment to Credit Agreement, dated as of October 31, 2006, by and among The Brickman Group, Ltd., Brickman Group Holdings, Inc., the other Loan Parties named therein, Antares Capital Corporation as Agent and Lender and the other Lenders named therein (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed November 3, 2006).

10.29		Lease Agreement, dated as of August 23, 2006, between Brickman Leasing L.L.C. and The Brickman Group, Ltd. regarding property located in Columbus, Ohio.

31.1		Certification by Scott W. Brickman, Chief Executive Officer, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2		Certification by Timothy H. Pease, Chief Financial Officer, pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1		Certification by Scott W. Brickman, Chief Executive Officer, and Timothy H. Pease, Chief Financial Officer, pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized officer.


				The Brickman Group, Ltd.
				(Registrant)

Date: November 13, 2006				/s/ Timothy H. Pease
				Name: Timothy H. Pease
				Title: Chief Financial Officer
				Principal Financial and Principal Accounting Officer

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BRICKMAN GROUP LTD 10-Q