##### 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



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|      |  |                                                                                          | 
|----- |  | ---------------------------------------------------------------------------------------- | 
|      |  | 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 APRIL 30, 2003                                           
|      |  |                                                                                         
|      |  | OR                                                                                      
|      |  |                                                                                         
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|      |  |                                                                                         
|      |  | FOR THE TRANSITION PERIOD FROM ____________ TO ____________                             

COMMISSION FILE NUMBER: 0-24287

BLUE RHINO CORPORATION
(Exact name of registrant as specified in its charter)

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State of other jurisdiction of
incorporation or organization) |  | 56-1870472
(I.R.S. Employer
Identification No.)

104 CAMBRIDGE PLAZA DRIVE
WINSTON-SALEM, NORTH CAROLINA 27104
(Address of principal executive offices)

(336) 659-6900
(Registrants telephone number, including area code)

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

|                               
|-------------------------------
|Yes [X]
               No [
  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

|                               
|-------------------------------
|Yes [X]
               No
[   ]

APPLICABLE ONLY TO CORPORATE ISSUERS

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

|                                        |  |                            
|--------------------------------------- |  | ---------------------------
|Class                                   |  | Outstanding at May 31, 2003
|                                        |  |                            
|Common stock, par value $.001 per share |  | 17,760,461 Shares          





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##### 



BLUE RHINO CORPORATION

INDEX

|                              |  |                                                                                        |  |                                                                                                                     
|----------------------------- |  | -------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------
|PART I: FINANCIAL INFORMATION
|                              |  |                                                                                        |  |                                                                                                                     
|Item 1:                       |  | Financial Statements (unaudited):                                                     
|                              |  |                                                                                        |  |                                                                                                                     
|                              |  |                                                                                        |  | Condensed consolidated balance sheets as of
April 30, 2003 and July 31, 2002.                                       
|                              |  |                                                                                        |  |                                                                                                                     
|                              |  |                                                                                        |  | Condensed consolidated statements of operations for
the three- and nine-month periods ended April 30, 2003
and 2002.
|                              |  |                                                                                        |  |                                                                                                                     
|                              |  |                                                                                        |  | Condensed consolidated statements of cash flows for
the nine-month periods ended April 30, 2003 and 2002.           
|                              |  |                                                                                        |  |                                                                                                                     
|                              |  |                                                                                        |  | Notes to condensed consolidated financial statements.                                                               
|                              |  |                                                                                        |  |                                                                                                                     
|Item 2:                       |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations.
|                              |  |                                                                                        |  |                                                                                                                     
|Item 3:                       |  | Quantitative and Qualitative Disclosures about Market Risk.                           
|                              |  |                                                                                        |  |                                                                                                                     
|Item 4:                       |  | Controls and Procedures.                                                              
|                              |  |                                                                                        |  |                                                                                                                     
|PART II: OTHER INFORMATION   
|                              |  |                                                                                        |  |                                                                                                                     
|Item 1:                       |  | Legal Proceedings.                                                                    
|                              |  |                                                                                        |  |                                                                                                                     
|Item 2:                       |  | Changes in Securities and Use of Proceeds.                                            
|                              |  |                                                                                        |  |                                                                                                                     
|Item 6:                       |  | Exhibits and Reports on Form 8-K.                                                     
|                              |  |                                                                                        |  |                                                                                                                     
|SIGNATURES                   
|                              |  |                                                                                        |  |                                                                                                                     
|CERTIFICATIONS               

1



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##### 



PART I

FINANCIAL INFORMATION

Item 1:Condensed Consolidated Financial Statements

BLUE RHINO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
As of April 30, 2003 and July 31, 2002
(In thousands)

|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |         |         | 
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ------ | ----------- | ------- | -------- | ------ | ------- | ------- | 
|                                                                      |                                                                                                                                                                          |                                            |        | April 30,   |         | July 31,
|                                                                      |                                                                                                                                                                          |                                            |        | 2003        |         | 2002    
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |         
|                                                                      |                                                                                                                                                                          |                                            |        | (unaudited) |         |          |        |        
|ASSETS                                                                |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|Current assets:                                                       |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      | Cash and cash equivalents                                                                                                                                                |                                            | $      | 2,745       |         |          | $      | 1,563   |        
|                                                                      | Accounts receivable, net                                                                                                                                                 |                                            |        | 24,279      |         |          |        | 25,329  |        
|                                                                      | Inventories                                                                                                                                                              |                                            |        | 26,906      |         |          |        | 11,035  |        
|                                                                      | Prepaid expenses and other current assets                                                                                                                                |                                            |        | 7,766       |         |          |        | 3,081   |        
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          | Total current assets                       |        |             | 61,696  |          |        |         | 41,008  | 
|Cylinders, net                                                        |                                                                                                                                                                          |                                            | 51,029 |             |         |          | 37,004 |        
|Property, plant and equipment, net                                    |                                                                                                                                                                          |                                            | 36,733 |             |         |          | 30,477 |        
|Intangibles, net                                                      |                                                                                                                                                                          |                                            | 62,311 |             |         |          | 31,988 |        
|Other assets                                                          |                                                                                                                                                                          |                                            | 1,511  |             |         |          | 2,896  |        
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          | Total assets                               |        | $           | 213,280 |          |        | $       | 143,373 | 
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                  |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|Current liabilities:                                                  |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      | Accounts payable                                                                                                                                                         |                                            | $      | 25,683      |         |          | $      | 19,969  |        
|                                                                      | Current portion of long-term debt and capital lease obligations                                                                                                          |                                            |        | 5,418       |         |          |        | 2,013   |        
|                                                                      | Accrued liabilities                                                                                                                                                      |                                            |        | 4,770       |         |          |        | 3,770   |        
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          | Total current liabilities                  |        |             | 35,871  |          |        |         | 25,752  | 
|Long-term debt and capital lease obligations, less current maturities |                                                                                                                                                                          |                                            | 54,397 |             |         |          | 39,259 |        
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          | Total liabilities                          |        |             | 90,268  |          |        |         | 65,011  | 
|Stockholders equity:                                                 |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      | Preferred stock, $0.001 par value, 20,000,000 shares authorized,
no and 1,850,000 shares issued and outstanding at
April 30, 2003 and July 31, 2002, respectively        |                                            |        |            |         |          |        | 2       |        
|                                                                      | Common stock, $0.001 par value, 100,000,000 shares authorized,
17,748,297 and 12,058,542 shares issued and outstanding at
April 30, 2003 and July 31, 2002, respectively |                                            |        | 18          |         |          |        | 12      |        
|                                                                      | Capital in excess of par                                                                                                                                                 |                                            |        | 131,758     |         |          |        | 95,901  |        
|                                                                      | Accumulated deficit                                                                                                                                                      |                                            |        | (11,132     | )       |          |        | (17,527 | )      
|                                                                      | Accumulated other comprehensive income
(loss)                                                                                                                            |                                            |        | 2,368       |         |          |        | (26     | )      
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          | Total stockholders equity                 |        |             | 123,012 |          |        |         | 78,362  | 
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                          | Total liabilities and stockholders equity |        | $           | 213,280 |          |        | $       | 143,373 | 
|                                                                      |                                                                                                                                                                          |                                            |        |             |         |          |        |        

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

2



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##### 



BLUE RHINO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended April 30, 2003 and 2002
(In thousands, except per share data)

|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |         |         |       | 
|-------------------------------------- | ------------------------------------ | ---------------------------------- | --------------------------------------- | ------ | ------------------ | ----- | ----------------- | ------ | ------ | ----- | ------- | ------- | ------- | ----- | ------- | ------- | ------- | ----- | 
|                                       |                                      |                                    |                                         |        | Three months ended |       | Nine months ended
|                                       |                                      |                                    |                                         |        | April 30,          |       | April 30,        
|                                       |                                      |                                    |                                         |        |                    |       |                  
|                                       |                                      |                                    |                                         |        | 2003               |       | 2002              |        | 2003   |       | 2002   
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |        
|                                       |                                      |                                    |                                         |        | (Unaudited)        |       | (Unaudited)      
|                                      
|Net revenues                           |                                      | $                                  | 59,900                                  |        |                    | $     | 58,933            |        |        | $     | 172,770 |         |         | $     | 134,238 |        
|Operating costs and expenses:          |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       | Cost of sales                        |                                    |                                         | 47,078 |                    |       |                   | 48,091 |        |       |         | 135,531 |         |       |         | 105,808 |        
|                                       | Selling, general, and administrative |                                    |                                         | 6,311  |                    |       |                   | 4,975  |        |       |         | 21,103  |         |       |         | 14,687  |        
|                                       | Depreciation and amortization        |                                    |                                         | 2,342  |                    |       |                   | 2,021  |        |       |         | 6,767   |         |       |         | 5,812   |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      | Total operating costs and expenses |                                         |        | 55,731             |       |                   |        | 55,087 |       |         |         | 163,401 |       |         |         | 126,307 |      
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      | Income from operations             |                                         |        | 4,169              |       |                   |        | 3,846  |       |         |         | 9,369   |       |         |         | 7,931   |      
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|Interest and other expenses (income):  |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       | Interest expense                     |                                    |                                         | 2,308  |                    |       |                   | 1,585  |        |       |         | 4,943   |         |       |         | 4,736   |        
|                                       | Loss on investee                     |                                    |                                         |       |                    |       |                   | 11     |        |       |         | 455     |         |       |         | 689     |        
|                                       | Other, net                           |                                    |                                         | (2,444 | )                  |       |                   | (114   | )      |       |         | (2,540  | )       |       |         | (366    | )      
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      |                                    | Income before income taxes              |        |                    | 4,305 |                   |        |        | 2,364 |         |         |         | 6,511 |         |         |         | 2,872 | 
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|Income taxes                           |                                      |                                    | 15                                      |        |                    |       | 10                |        |        |       | 45      |         |         |       | 36      |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      |                                    | Net income                              |        | $                  | 4,290 |                   |        | $      | 2,354 |         |         | $       | 6,466 |         |         | $       | 2,836 | 
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|Preferred dividends                    |                                      |                                    |                                        |        |                    |       | 537               |        |        |       | 71      |         |         |       | 1,644   |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      |                                    | Income available to common
stockholders |        | $                  | 4,290 |                   |        | $      | 1,817 |         |         | $       | 6,395 |         |         | $       | 1,192 | 
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|Earnings per common share:             |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       | Basic                                |                                    | $                                       | 0.24   |                    |       | $                 | 0.15   |        |       | $       | 0.40    |         |       | $       | 0.10    |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       | Diluted                              |                                    | $                                       | 0.22   |                    |       | $                 | 0.12   |        |       | $       | 0.34    |         |       | $       | 0.09    |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|Shares used in per share calculations: |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       | Basic                                |                                    |                                         | 17,740 |                    |       |                   | 12,431 |        |       |         | 15,985  |         |       |         | 12,248  |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        
|                                       | Diluted                              |                                    |                                         | 19,723 |                    |       |                   | 14,752 |        |       |         | 18,999  |         |       |         | 13,731  |        
|                                       |                                      |                                    |                                         |        |                    |       |                   |        |        |       |         |         |         |       |         |        

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

3



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BLUE RHINO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended April 30, 2003 and 2002
(In thousands)

|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |         |       |        |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ---------------------------------------- | --------------------------------------------------- | ----- | ----------------- | ------- | ------- | ----- | ------ | ------- | -
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       | Nine Months Ended
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       | April 30,        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                  
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       | 2003              |         | 2002   
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       | (unaudited)      
|Cash flows from operating activities:            |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 | Net income                                                                                  |                                                                            | $                                        | 6,466                                               |       |                   | $       | 2,836   |      
|                                                 | Adjustments to reconcile net income to net cash provided by
(used in) operating activities: |                                                                            |                                          |                                                     |       |                   |         |         |      
|                                                 |                                                                                             | Depreciation and amortization                                              |                                          |                                                     | 6,767 |                   |         |         | 5,812 |       
|                                                 |                                                                                             | Loss on investee                                                           |                                          |                                                     | 455   |                   |         |         | 689   |       
|                                                 |                                                                                             | Accretion of the discount on notes                                         |                                          |                                                     | 1,233 |                   |         |         | 538   |       
|                                                 |                                                                                             | Other non-cash expenses                                                    |                                          |                                                     | 578   |                   |         |         | 259   |       
|                                                 |                                                                                             | Changes in operating assets and liabilities, net of business
acquisitions: |                                          |                                                     |       |                   |         |         |       |       
|                                                 |                                                                                             |                                                                            | Accounts receivable                      |                                                     |       | 1,682             |         |         |       | (2,244 | )      
|                                                 |                                                                                             |                                                                            | Inventories                              |                                                     |       | (21,569           | )       |         |       | 1,611  |        
|                                                 |                                                                                             |                                                                            | Other current assets                     |                                                     |       | (1,214            | )       |         |       | (1,604 | )      
|                                                 |                                                                                             |                                                                            | Accounts payable and accrued liabilities |                                                     |       | 335               |         |         |       | 6,161  |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          | Net cash provided by (used in) operating activities |       |                   | (5,267  | )       |       |        | 14,058  |  
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|Cash flows from investing activities:            |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 | Business acquisitions                                                                       |                                                                            |                                          | (5,916                                              | )     |                   |         | (207    | )    
|                                                 | Purchases of property, plant, and equipment                                                 |                                                                            |                                          | (8,811                                              | )     |                   |         | (2,972  | )    
|                                                 | Net advances to and investment in joint venture                                             |                                                                            |                                          | (1,086                                              | )     |                   |         | (1,850  | )    
|                                                 | Purchases of cylinders, net                                                                 |                                                                            |                                          | (7,050                                              | )     |                   |         | (5,318  | )    
|                                                 | (Issuance of) collections on notes receivable and advances
to distributors                  |                                                                            |                                          | (2,356                                              | )     |                   |         | (491    | )    
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          | Net cash (used in) investing activities             |       |                   | (25,219 | )       |       |        | (10,838 | )
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|Cash flows from financing activities:            |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 | Proceeds from (payments on) credit facility, net                                            |                                                                            |                                          | 22,757                                              |       |                   |         | (11,220 | )    
|                                                 | Proceeds from issuance of equity, net of expenses                                           |                                                                            |                                          | 17,589                                              |       |                   |         | 10,392  |      
|                                                 | Payments on long-term debt and capital lease obligations                                    |                                                                            |                                          | (7,374                                              | )     |                   |         | (1,721  | )    
|                                                 | Debt issuance costs                                                                         |                                                                            |                                          | (1,304                                              | )     |                   |         |        |      
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          | Net cash provided by (used in) financing activities |       |                   | 31,668  |         |       |        | (2,549  | )
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|Net increase in cash and cash equivalents        |                                                                                             |                                                                            | 1,182                                    |                                                     |       |                   | 671     |        
|Cash and cash equivalents at beginning of period |                                                                                             |                                                                            | 1,563                                    |                                                     |       |                   | 1,044   |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        
|                                                 |                                                                                             |                                                                            |                                          | Cash and cash equivalents at end of period          |       | $                 | 2,745   |         |       | $      | 1,715   |  
|                                                 |                                                                                             |                                                                            |                                          |                                                     |       |                   |         |        

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

4



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##### 



BLUE RHINO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 2003 (Unaudited)
(In thousands, except share and per share data)

1. Basis of Presentation

The condensed consolidated financial statements of Blue Rhino Corporation
(the Company) include the accounts of its wholly owned subsidiaries: Uniflame
Corporation (Uniflame); QuickShip, Inc. (QuickShip); Rhino Services,
L.L.C., CPD Associates, Inc.; USA Leasing, L.L.C.; Blue Rhino Global Sourcing,
LLC; Platinum Propane, L.L.C. (Platinum); Ark Holding Company LLC (Ark);
and Blue Rhino Consumer Products, LLC. As a result of the Companys
acquisition of Platinum in November 2002, the Company increased its ownership
interest in R4 Technical Center North Carolina, LLC (R4 Tech) on a
consolidated basis by 1% to 50%. The Company consolidated the results of R4
Tech beginning in the second quarter of fiscal 2003 as a result of its
increased ownership and financial control (Note 8). All material intercompany
transactions and balances have been eliminated in consolidation.

The accompanying unaudited interim condensed consolidated financial
statements of the Company have been prepared by the Company in accordance with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and,
accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of items of a normal
recurring nature) considered necessary for a fair presentation have been
included. Operating results for the three- and nine-month periods ended April
30, 2003 are not necessarily indicative of the results that may be expected for
the year ending July 31, 2003 or for any other period.

The balance sheet at July 31, 2002 has been derived from the audited
financial statements of the Company as of July 31, 2002 but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

These financial statements should be read in conjunction with the audited
consolidated financial statements of Blue Rhino Corporation as of and for the
year ended July 31, 2002.

2. Derivative Instruments

The Company accounts for derivative instruments in accordance with
Statement of Financial Accounting Standard No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement specifies that all
derivatives, whether designated in hedging relationships or not, are required
to be recorded on the balance sheet at fair value. If the derivative is
designated as a cash flow hedge, the effective portions of changes in the fair
value of the derivative are recorded in other comprehensive income (OCI) and
are recognized in the income statement when the hedged item affects earnings.
Ineffective portions of changes in the fair value of cash flow hedges are
recognized in earnings.

The Company uses derivative instruments, which are designated as cash flow
hedges, to manage exposure to interest rate fluctuations and wholesale propane
price volatility. The Companys objective for holding derivatives is to
minimize risks by using the most effective methods to eliminate or reduce the
impacts of these exposures.

The net derivative income (loss) recorded in OCI will be reclassified into
earnings over the term of the underlying cash flow hedges. The amount that
will be reclassified into earnings will vary depending upon the movement of the
underlying interest rates and propane prices. As interest rates and propane
prices decrease, the charge to earnings will increase. Conversely, as interest
rates and propane prices increase, the charge to earnings will decrease.

5



---



##### 



A summary of changes in OCI for the three and nine months ended April 30,
2003 and 2002 is presented below:

|                                                             |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                             |  | Three months ended |        | Nine months ended
|                                                             |  | April 30,          |        | April 30,        
|                                                             |  |                    |        |                  
|                                                             |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                             |  |                    |        |                   |  |      |        |     
|Beginning balance
deferred in
accumulated
OCI                |  | $                  | 3,537  |                   |  | $    | (3,126 | )    |  | $ | (26    | ) |  | $ | (1,102 | )
|Net change
associated with
current period
hedge
transactions |  |                    | (122   | )                 |  |      | 3,040  |      |  |   | 3,960  |   |  |   | (621   | )
|Net amount
reclassified into
earnings during the
period      |  |                    | (1,047 | )                 |  |      | 656    |      |  |   | (1,566 | ) |  |   | 2,293  |  
|                                                             |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  
|Ending balance
deferred in
accumulated
OCI                   |  | $                  | 2,368  |                   |  | $    | 570    |      |  | $ | 2,368  |   |  | $ | 570    |  
|                                                             |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |        |  

Total comprehensive income for the three and nine months ended April 30,
2003 was $3,121 and $8,860, respectively. Total comprehensive income for the
three and nine months ended April 30, 2002 was $6,050 and $4,508, respectively.

3. Stock-Based Compensation

The Company has three active stock-based compensation plans (the Plans)
for outside directors, officers and certain employees to receive stock options
and other equity-based awards. Under the Plans, the Company may, at its
discretion, issue incentive or non-qualified stock options, stock appreciation
rights, restricted stock or deferred stock. The Company accounts for the 1994
Stock Incentive Plan, the 1998 Stock Incentive Plan and the Director Option
Plan in accordance with the provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees(APB 25). Under APB 25, no
compensation expense is recognized for stock options issued with an exercise
price equivalent to the fair value of the Companys common stock on the date of
grant.

The Company also has a Distributor Stock Option Plan (the Distributor
Option Plan) for Blue Rhino distributors and their stockholders, partners,
members, directors, general partners, managers, officers, employees and
consultants. In general, stock options and other equity instruments granted or
issued under the Distributor Stock Option Plan are accounted for in accordance
with Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation(SFAS 123).

Had compensation expense for the 1994 Stock Incentive Plan, the 1998 Stock
Incentive Plan or the Director Option Plan been determined for options granted
since August 1, 1995 in accordance with SFAS No. 123, the Companys pro forma
net income and earnings per share for the three and nine months ended April 30,
2003 and 2002 would have been as follows:

|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |       | 
|------------------------------------------------------------------------- | -------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | ----- | ----- |  |  | --- | ----- | 
|                                                                          |                      |  | Three months ended |       | Nine months ended
|                                                                          |                      |  | April 30,          |       | April 30,        
|                                                                          |                      |  |                    |       |                  
|                                                                          |                      |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                                                                          |                      |  |                    |       |                   |  |      |       |     
|Net income available for common stockholders:                             |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|                                                                          | As reported          |  | $                  | 4,290 |                   |  | $    | 1,817 |      |  | $     | 6,395 |  |  | $   | 1,192 | 
|Less:                                                                     |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|Compensation expense determined using Black-
Scholes Option Pricing Model |                      |  | 1,051              |       |                   |  | 393  |       |      |  | 2,340 |       |  |  | 990 |      
|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|                                                                          | Pro forma net income |  | $                  | 3,239 |                   |  | $    | 1,424 |      |  | $     | 4,055 |  |  | $   | 202   | 
|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|Earnings per common share:                                                |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|Basic:                                                                    |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|                                                                          | As reported          |  | $                  | 0.24  |                   |  | $    | 0.15  |      |  | $     | 0.40  |  |  | $   | 0.10  | 
|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|                                                                          | Pro forma            |  | $                  | 0.18  |                   |  | $    | 0.11  |      |  | $     | 0.25  |  |  | $   | 0.02  | 
|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|Diluted:                                                                  |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|                                                                          | As reported          |  | $                  | 0.22  |                   |  | $    | 0.12  |      |  | $     | 0.34  |  |  | $   | 0.09  | 
|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      
|                                                                          | Pro forma            |  | $                  | 0.16  |                   |  | $    | 0.10  |      |  | $     | 0.21  |  |  | $   | 0.01  | 
|                                                                          |                      |  |                    |       |                   |  |      |       |      |  |       |       |  |  |     |      

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for all grants: expected lives ranging from five to
six years; expected volatility ranging from 30% to 91%; expected dividends of
zero and a risk-free interest rate ranging from 1.7% to 5.8%.

6



---



##### 



4. Earnings Per Share

The following table sets forth a reconciliation of the numerators and
denominators in computing earnings per common share in accordance with
Statement of Financial Accounting Standards No. 128.

|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |     | 
|---------------------------------------------------------------------- | --------------------- | - | ------------------ | ----- | ----------------- | - | ------ | ----- | ---- | - | ------ | ----- |  | - | ------ | --- | 
|                                                                       |                       |   | Three months ended |       | Nine months ended
|                                                                       |                       |   | April 30,          |       | April 30,        
|                                                                       |                       |   |                    |       |                  
|                                                                       |                       |   | 2003               |       | 2002              |   | 2003   |       | 2002
|                                                                       |                       |   |                    |       |                   |   |        |       |     
|Net income                                                             |                       | $ | 4,290              |       |                   | $ | 2,354  |       |      | $ | 6,466  |       |  | $ | 2,836  |    
|Less: Preferred stock dividends                                        |                       |   |                   |       |                   |   | 537    |       |      |   | 71     |       |  |   | 1,644  |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|Income applicable to common stockholders                               |                       | $ | 4,290              |       |                   | $ | 1,817  |       |      | $ | 6,395  |       |  | $ | 1,192  |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|Income applicable to common stockholders                               |                       | $ | 4,290              |       |                   | $ | 1,817  |       |      | $ | 6,395  |       |  | $ | 1,192  |    
|Weighted average number of common shares
outstanding (in thousands)    |                       |   | 17,740             |       |                   |   | 12,431 |       |      |   | 15,985 |       |  |   | 12,248 |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|Basic earnings per common share                                        |                       | $ | 0.24               |       |                   | $ | 0.15   |       |      | $ | 0.40   |       |  | $ | 0.10   |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|Income applicable to common stockholders                               |                       | $ | 4,290              |       |                   | $ | 1,817  |       |      | $ | 6,395  |       |  | $ | 1,192  |    
|Weighted average number of common shares
outstanding (in thousands)    |                       |   | 17,740             |       |                   |   | 12,431 |       |      |   | 15,985 |       |  |   | 12,248 |    
|Effect of potentially dilutive securities:                             |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|                                                                       | Common stock options  |   |                    | 1,388 |                   |   |        | 1,058 |      |   |        | 1,705 |  |   |        | 666 | 
|                                                                       | Common stock warrants |   |                    | 595   |                   |   |        | 1,263 |      |   |        | 1,309 |  |   |        | 817 | 
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|Weighted average number of common shares
outstanding assuming dilution |                       |   | 19,723             |       |                   |   | 14,752 |       |      |   | 18,999 |       |  |   | 13,731 |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    
|Diluted earnings per common share                                      |                       | $ | 0.22               |       |                   | $ | 0.12   |       |      | $ | 0.34   |       |  | $ | 0.09   |    
|                                                                       |                       |   |                    |       |                   |   |        |       |      |   |        |       |  |   |        |    

Common stock options and common stock warrants listed below for the three
and nine months ended April 30, 2003 and 2002 were not included in the
computation of diluted earnings per share because the exercise prices are
greater than the average market price of the Companys common stock during
those periods such that the effect would be anti-dilutive.

|                                     |  |                    |       |                   |  |      |     |      |  |  |       |  |  |  |       | 
|------------------------------------ |  | ------------------ | ----- | ----------------- |  | ---- | --- | ---- |  |  | ----- |  |  |  | ----- | 
|                                     |  | Three months ended |       | Nine months ended
|                                     |  | April 30,          |       | April 30,        
|                                     |  |                    |       |                  
|                                     |  | 2003               |       | 2002              |  | 2003 |     | 2002
|                                     |  |                    |       |                   |  |      |     |     
|Common stock options
(in thousands)  |  |                    | 1,873 |                   |  |      | 745 |      |  |  | 1,050 |  |  |  | 1,294 | 
|                                     |  |                    |       |                   |  |      |     |      |  |  |       |  |  |  |       | 
|Common stock warrants
(in thousands) |  |                    | 330   |                   |  |      | 343 |      |  |  | 330   |  |  |  | 560   | 
|                                     |  |                    |       |                   |  |      |     |      |  |  |       |  |  |  |       | 

5. Other, net

In March 2003, pursuant to a negotiated settlement agreement, the Company
dismissed its lawsuit against PricewaterhouseCoopers alleging violations of
professional standards and failure to comply with contractual obligations
during its engagement as the Companys auditor. The net proceeds to the
Company in the settlement, after attorneys fees and other third quarter
litigation expenses, were $2,466 and were reflected in other, net in the
Condensed Consolidated Statements of Operations. The specific terms of the
settlement are confidential.

6. Long-Term Debt

On November 20, 2002, the Company completed the syndication of a new and
expanded bank credit facility (the Credit Facility). The Credit Facility
consists of a $45,000 revolving line of credit and a $15,000 term loan, both
for general corporate purposes, inclusive of payments made under letters of
credit. The Credit Facility has a maturity date of November 30, 2005 and, as
amended, requires the Company to utilize the approximately $14,900 in net
proceeds from a private placement of common stock completed December 20, 2002
to repay the term loan or its subordinated debt, in such proportion as the
Company elects, by July 31, 2003. In April 2003, the Company repaid $5,000 of
the subordinated debt and incurred a $931 non-cash charge that was reflected in
interest expense. The Company intends to prepay the remaining $10,000 of its
subordinated debt in the fourth quarter of fiscal 2003 and will incur
additional non-cash charges of approximately $1,700. Advances under the Credit
Facility are collateralized by a lien on substantially all of the Companys
assets.

Advances under the Credit Facility may be made as either base rate (prime
rate) loans or London Interbank Offered Rate (LIBOR) loans at the Companys
election. Interest rates are based upon either the LIBOR or prime rate plus an
applicable margin dependent upon a total leverage ratio. The applicable LIBOR
margins range from 200 to 300 basis points, and the applicable prime rate
margins range from 50 to 150 basis points. The Company incurred fees of
approximately $1,300 in connection with the Credit

7



---



##### 



Facility. The fees will be amortized over the life of the Credit
Facility, through November 30, 2005. The Company incurred a charge of $96 in
November 2002 resulting from unamortized fees related to its prior credit
facility. On April 30, 2003 the Company had $48,500 (including a $11,900
balance on the term loan) in LIBOR loans outstanding at a weighted-average
interest rate of 4.07% and $900 in prime rate loans outstanding at a
weighted-average interest rate of 5.50%.

Principal payments on the outstanding term loan began on December 31, 2002
and continue quarterly until September 30, 2005. The initial principal
payments are $1,000 per calendar quarter beginning December 31, 2002, will
increase to $1,250 per calendar quarter beginning December 31, 2003 and will
further increase to $1,500 per calendar quarter beginning December 31, 2004.
In accordance with the terms of the Credit Facility, $1,100 of the net proceeds
of the March 2003 litigation settlement (Note 5) were applied against the term
loan as a reduction. The Credit Facility includes a .50% commitment fee on the
average daily unused amount for each fiscal quarter. The Credit Facility
requires the Company to meet certain covenants, including minimum net worth and
cash flow requirements, restricts the payment of cash dividends and permits
early extinguishment of up to $15,000 of the Companys subordinated debt. At
April 30, 2003, the Company was in compliance with all covenants.

The Company is currently party to an interest rate swap agreement with a
notional amount of $10,000. Under the existing swap agreement, which expires
in July 2003, the Company pays a fixed rate of 7.36% and receives a rate
equivalent to the thirty-day LIBOR, adjusted quarterly. In May 2003, the
Company entered into a new swap agreement with an effective date of August 1,
2003 and an expiration date of October 3, 2005. The initial notional amount is
$20,000 beginning August 1, 2003, will decrease to $15,000 on June 1, 2004,
will decrease to $10,000 on March 1, 2005 and will further decrease to $5,000
on September 1, 2005. Under the new swap agreement, the Company pays a fixed
rate of 1.85% and receives a rate equivalent to the thirty-day LIBOR, adjusted
monthly.

7. Platinum Propane and Ark Acquisitions

In November 2002, the Company acquired Platinum Propane, L.L.C.
(Platinum) and Ark Holding Company LLC (Ark) and their respective
subsidiaries, representing ten of the Companys 46 distributors. Platinums
five subsidiary distributors operate in Southern California, including Los
Angeles and San Diego, Chicago, the Carolinas, Georgia and Florida. Arks five
subsidiary distributors operate in New Jersey, Seattle, Kansas City, Denver and
Salt Lake City. Collectively, the territories served by the acquired
distributors have historically represented approximately 45% of the Companys
cylinder exchange revenues. The condensed consolidated statements of
operations include the results of Platinum and Ark effective November 1, 2002.

The aggregate purchase price for the two acquisitions was approximately
$32,000. The consideration paid by the Company in the two acquisitions
consisted of approximately 1.1 million restricted shares of common stock
valued, based on the closing price of the Companys common stock on the Nasdaq
National Market on November 22, 2002, at approximately $19,000, $3,100 in
assumed debt satisfied at closing, $4,900 in advances, and $5,000 in
liabilities assumed. On a preliminary basis, approximately $28,200 of the
purchase price was allocated to goodwill, $2,800 was allocated to current
assets and $1,200 was allocated to equipment, vehicles and other assets.

The following unaudited pro forma summary presents the financial
information as if the acquisition of Platinum and Ark had occurred on the
beginning of the period of each of the respective fiscal years presented.
These pro forma results have been prepared for comparative purposes and do not
purport to be indicative of what would have occurred had the acquisition been
made on August 1, 2001, nor are they indicative of future results. See
Managements Discussion and Analysis of Financial Condition and Results of
Operations.

|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|-------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | --------- | ------ | --------- |  | - | ------- |  |  | - | ------- | -
|                                                   |  | Three months ended |        | Nine months ended
|                                                   |  | April 30,          |        | April 30,        
|                                                   |  |                    |        |                  
|                                                   |  | Actual             |        | Pro forma         |  | Pro forma |        | Pro forma
|                                                   |  | 2003               |        | 2002              |  | 2003      |        | 2002     
|                                                   |  |                    |        |                   |  |           |        |          
|Net revenues                                       |  | $                  | 59,900 |                   |  | $         | 57,701 |           |  | $ | 170,442 |  |  | $ | 132,196 |  
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|Net income                                         |  | $                  | 4,290  |                   |  | $         | 1,981  |           |  | $ | 3,316   |  |  | $ | 1,305   |  
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|Net income (loss)
available to common
stockholders |  | $                  | 4,290  |                   |  | $         | 1,444  |           |  | $ | 3,245   |  |  | $ | (339    | )
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|Basic earnings
(loss) per common
share             |  | $                  | 0.24   |                   |  | $         | 0.11   |           |  | $ | 0.20    |  |  | $ | (0.03   | )
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  
|Diluted earnings
(loss) per common
share           |  | $                  | 0.22   |                   |  | $         | 0.09   |           |  | $ | 0.17    |  |  | $ | (0.03   | )
|                                                   |  |                    |        |                   |  |           |        |           |  |   |         |  |  |   |         |  

8



---



##### 



8. Investment in Joint Venture

As a result of the acquisition of Platinum, the Company increased its
ownership interest in R4 Technical Center North Carolina, LLC (R4 Tech) on a
consolidated basis by 1% to 50%. The Company consolidated the results of R4
Tech beginning in the second quarter of fiscal 2003 as a result of its
increased ownership and financial control. R4 Tech was established in April
2000 to operate and manage an automated propane bottling and cylinder
refurbishing plant. R4 Tech began operations in May 2000 and was accounted for
under the equity method of accounting through the first quarter of fiscal 2003.
During the first quarter of fiscal 2003, the Company recognized 100% of the
loss of R4 Tech as a result of advances made without a corresponding advance
from the other joint venture partners. The Company recognized a loss in the
joint venture for the three months ended April 30, 2002 of $11 and a loss in
the joint venture for the nine months ended April 30, 2003 and 2002 of $455 and
$689, respectively.

9. Common Stock

On December 20, 2002, the Company completed a private placement of 1.0
million shares of its common stock at a purchase price of $15.79 per share to
two institutional investors for gross proceeds of $15,800. In conjunction with
the private placement, the Company issued Additional Investment Rights to the
investors exercisable for, collectively, up to an additional 330,000 shares of
its common stock at an exercise price of $15.79 per share. Each Additional
Investment Right is exercisable by the holder for a period that began on the
effective date of the related registration statement filed by the Company with
the Securities and Exchange Commission with respect to the resale of the shares
and ending initially 90 trading days thereafter and now reset to October 1,
2003.

10. Commitments and Contingencies

The Company and four of its officers and directors have been named as
defendants in a shareholder class action lawsuit filed in the U.S. District
Court for the Central District of California on May 19, 2003. The plaintiff
seeks to represent a class of individuals who purchased the Companys common
stock between August 15, 2002 and February 5, 2003. The plaintiff alleges
violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5
promulgated under Section 10(b), and Section 20(a) of the Exchange Act. In
particular, among other claims, the plaintiff has alleged that the Company and
the individual defendants made materially false and misleading statements
and/or concealed material adverse facts throughout the class period relating to
the Companys financial position, the impact of overfill prevention device
regulations on the Companys business, the financial position of distributors
Ark and Platinum, and the Companys acquisition of Ark and Platinum. The
complaint seeks unspecified damages, plus reasonable costs and expenses,
including attorneys fees and experts fees. Since the filing of the initial
lawsuit, the Company has been made aware of five additional shareholder class
action lawsuits filed against the Company in the same court. The Company
understands that these additional actions assert essentially the same claims
and seek the same relief as the original complaint. The Company anticipates
that all of the existing shareholder class action lawsuits, and any additional
similar shareholder class action suits that may be filed, ultimately will be
consolidated into a single action.

On May 22, 2003, Richard Marcoux filed a shareholder derivative action in
the Superior Court of California, Los Angeles County, naming all directors and
certain officers of the Company as individual defendants and the Company as a
nominal defendant. In this derivative action, the plaintiff makes substantially
similar allegations to those made in the above-described shareholder class
action lawsuits and identifies the relevant time period from August of 2002
through the present. In this derivative action, the claims are for violation
of the California Corporations Code, breach of fiduciary duty, abuse of
control, gross mismanagement, waste of corporate assets and unjust enrichment.

The Company believes that all of the foregoing claims are without merit
and intends to vigorously defend itself.

11. Segment Information

The Company has two reportable segments: cylinder exchange and products
and other. The cylinder exchange segment relates to cylinder exchange
transactions and lease income from cylinders and cylinder displays. The
products and other segment includes the activities required to sell patio
heaters, grills, mosquito elimination devices and other complementary propane
products, fireplace accessories and garden products. In addition, financial
information related to QuickShip, a retail shipping service company acquired in
October 2000, is included within the products and other segment as it is not
currently material on a stand-alone basis. For the three and nine months ended
April 30, 2003, QuickShip had a loss from operations of ($331) and ($1,109),
respectively. For the three and nine months ended April 30, 2002, QuickShip
had a loss from operations of ($487) and ($1,429), respectively.

The Company evaluates performance and allocates resources based on several
factors, of which the primary financial measure is

9



---



##### 



business segment operating income, defined as earnings before interest,
taxes, depreciation and amortization before other non-operating expenses
(EBITDA). Management of the Company believes that EBITDA is a useful measure
of operating performance at a segment level as it is an important indicator of
the ability of each segment to provide cash flows to service debt and fund
working capital requirements and eliminates the uneven effect between our
segments of noncash depreciation of tangible assets and amortization of certain
intangible assets. In addition, management uses EBITDA performance objectives
at a segment level as the basis for determining incentive compensation. EBITDA
as presented may not be comparable to similarly titled measures used by other
entities. EBITDA should not be considered in isolation from, or as a
substitute for, net income or cash flows from operating activities prepared in
accordance with generally accepted accounting principles as an indicator of
operating performance or as a measure of liquidity.

The Companys reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and operational strategies. The
Companys selected segment information as of and for the three and nine months
ended April 30, 2003 and 2002 is as follows:

|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |        | 
|--------------------------- | ------------------ | - | ------------------ | ------- | ----------------- | - | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------ | 
|                            |                    |   | Three Months Ended |         | Nine Months Ended
|                            |                    |   | April 30,          |         | April 30,        
|                            |                    |   |                    |         |                  
|                            |                    |   | 2003               |         | 2002              |   | 2003    |         | 2002
|                            |                    |   |                    |         |                   |   |         |         |     
|Net revenues:               |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            | Cylinder exchange  |   | $                  | 36,331  |                   |   | $       | 27,283  |      |   | $       | 103,096 |  |   | $       | 67,325 | 
|                            | Products and other |   |                    | 23,569  |                   |   |         | 31,650  |      |   |         | 69,674  |  |   |         | 66,913 | 
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            |                    | $ | 59,900             |         |                   | $ | 58,933  |         |      | $ | 172,770 |         |  | $ | 134,238 |       
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|Segment EBITDA:             |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            | Cylinder exchange  |   | $                  | 5,937   |                   |   | $       | 4,060   |      |   | $       | 14,952  |  |   | $       | 9,510  | 
|                            | Products and other |   |                    | 574     |                   |   |         | 1,807   |      |   |         | 1,184   |  |   |         | 4,233  | 
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            |                    | $ | 6,511              |         |                   | $ | 5,867   |         |      | $ | 16,136  |         |  | $ | 13,743  |       
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|Depreciation
&
amortization |                    |   | 2,342              |         |                   |   | 2,021   |         |      |   | 6,767   |         |  |   | 5,812   |       
|Interest expense            |                    |   | 2,308              |         |                   |   | 1,585   |         |      |   | 4,943   |         |  |   | 4,736   |       
|Loss on investee            |                    |   |                   |         |                   |   | 11      |         |      |   | 455     |         |  |   | 689     |       
|Other, net                  |                    |   | (2,444             | )       |                   |   | (114    | )       |      |   | (2,540  | )       |  |   | (366    | )     
|Income taxes                |                    |   | 15                 |         |                   |   | 10      |         |      |   | 45      |         |  |   | 36      |       
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|Net income                  |                    | $ | 4,290              |         |                   | $ | 2,354   |         |      | $ | 6,466   |         |  | $ | 2,836   |       
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            |                    |   | As of April 30,   
|                            |                    |   |                   
|                            |                    |   | 2003               |         | 2002             
|                            |                    |   |                    |         |                  
|Total assets:               |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            | Cylinder exchange  |   | $                  | 157,263 |                   |   | $       | 101,391 |      |   |         |         |  |   |         |        | 
|                            | Products and other |   |                    | 56,017  |                   |   |         | 35,107  |      |   |         |         |  |   |         |        | 
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       
|                            |                    | $ | 213,280            |         |                   | $ | 136,498 |         |      |   |         |         |  |   |         |       
|                            |                    |   |                    |         |                   |   |         |         |      |   |         |         |  |   |         |       

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

Certain statements in this section and elsewhere in this Quarterly Report on
Form 10-Q are forward-looking in nature and relate to the Companys plans,
objectives, estimates, goals and future financial performance. The terms
may, will, should, expects, intends, plans, anticipates,
believes, estimates, projects, predicts, potential, continue and
similar words or expressions are intended to identify forward-looking
statements. These statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995 and speak only as of
the date of this report. The Companys business is subject to numerous risks
and uncertainties including: that its significant retail relationships are
generally nonexclusive and terminable at will; that it relies on a limited
number of distributors; its ability to manage growth; its ability to place Blue
Rhino cylinder exchange at additional retail locations; its ability to protect
its intellectual property and to strengthen its brand; its ability to maintain
an adequate supply of cylinders that comply with applicable guidelines; its
ability to mitigate the effects of high propane commodity prices; its ability
to integrate its distributor acquisitions and manage its distributor
operations; its ability to launch new products and services; the effect of
safety guidelines on consumer demand for cylinder exchange; contingencies
associated with the shareholder class action and shareholder derivative
lawsuits recently filed against the Company; and consumer confidence and
spending patterns, retailer inventory policies and the price of propane. These
and other risks and uncertainties, including those detailed in the Companys
Registration Statement on Form S-3 dated January 7, 2003 and in its most recent
Annual Report on Form 10-K and other filings with the Securities and Exchange
Commission under Risk Factors or Business  Additional Factors that May
Affect our Business or Future Results, could cause actual results and
experience to be materially different from those expressed or implied by any of
these forward-looking statements. To the extent permitted by law, the Company
makes no commitment to update any forward-looking statement or to disclose any
facts, events, or circumstances after the date hereof that may affect the
accuracy of any forward-looking statement.

Overview

The following discussion and analysis should be read in conjunction with
the accompanying Condensed Consolidated Financial Statements and related notes
of Blue Rhino Corporation and its wholly owned subsidiaries, Rhino Services,
L.L.C., CPD Associates, Inc., USA Leasing, L.L.C., Uniflame Corporation,
QuickShip, Inc., Blue Rhino Global Sourcing, LLC, Platinum Propane, L.L.C.
(Platinum), Ark Holding Company LLC (Ark) and Blue Rhino Consumer Products,
LLC (collectively, the Company, Blue Rhino, us or we), and with our
audited consolidated financial statements as of and for the fiscal year ended
July 31, 2002, on file with the Securities and Exchange Commission. As a
result of our acquisition of Platinum in November 2002, we increased our
ownership interest in R4 Technical Center North Carolina, LLC (R4 Tech) on a
consolidated basis by 1% to 50%. We consolidated the results of R4 Tech
beginning in the second quarter of fiscal 2003 as a result of our increased
ownership and financial control. The results of operations for the three- and
nine-month periods ended April 30, 2003 are not necessarily indicative of
results that may be expected for the fiscal year ending July 31, 2003 or any
other period, in part due to the seasonality of our business.

Blue Rhino was founded in March 1994. We believe we have become the
leading national provider of propane grill cylinder exchange and a leading
provider of complementary propane and non-propane products to consumers through
many of the worlds greatest retailers. Our branded propane grill cylinder
exchange service is offered at more than 27,000 retail locations in 48 states
and Puerto Rico, including leading home improvement centers, mass merchants,
hardware, grocery and convenience stores. Our retail partners include Home
Depot, Lowes,
Wal-Mart, Sears, Kroger, Food Lion, Winn-Dixie, SuperAmerica,
Circle K and ExxonMobil. Propane grill cylinder exchange provides consumers
with a safe and convenient alternative to traditional propane tank refilling.

Our cylinder exchange segment partners with retailers and distributors to
provide consumers with a nationally-branded alternative to traditional grill
cylinder refill. We dedicate our efforts and capital to brand development,
value-added marketing, customer service, cylinders, displays, account growth,
distributor network development and management information systems. Our
distributors invest in the vehicles and other operational infrastructure
necessary to operate cylinder exchange businesses. In November 2002, we
acquired ten distributors whose territories have historically represented
approximately forty-five percent of our revenues. We believe that our
distributor network affords us the opportunity to service approximately 90% of
the cylinder exchange markets in the United States.

Our products and other segment includes the design and import of consumer
products sold through mass retailers. The segments revenues are derived from
products that use propane cylinders as their fuel source, principally patio
heaters, grills and mosquito elimination devices and non-propane products such
as charcoal grills, fireplace accessories and garden products. The segments
revenues have historically been strongest in the fall and winter months, which
is counterseasonal to the strongest months for our cylinder exchange segment.
QuickShip, Inc., a retail shipping services company that we acquired in October
2000, is included within the products and other segment as it is not currently
significant on a stand-alone basis.

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Results of Operations

Comparison of the three months ended April 30, 2003 with the three months ended
April 30, 2002

Net revenues.Net revenues increased 1.6% to $59.9 million for the three
months ended April 30, 2003 from $58.9 million for the three months ended April
30, 2002. Net revenues consisted of $36.3 million from the cylinder exchange
segment and $23.6 million from the products and other segment. Cylinder
exchange revenues increased 33.2%, primarily due to an approximately 36%
increase in the number of total cylinder transactions to 2.3 million units for
the third quarter of fiscal 2003 from 1.7 million units for the third quarter
of fiscal 2002. This increase reflects the positive trend toward consumer
acceptance of cylinder exchange versus refill and the impact of National Fire
Protection Association (NFPA) guidelines adopted by many states that mandate
that all propane cylinders refilled after April 1, 2002 be fitted with an
overfill prevention device (OPD). Products and other revenues decreased
25.5% due principally to a shift in sales of grills to the second quarter of
this year from the third quarter a year ago, as a major customer took delivery
earlier this year. We currently anticipate double-digit revenue growth for our
cylinder exchange segment through the end of fiscal year 2004 and that the NFPA
guidelines will continue to contribute to our cylinder exchange revenue growth
through the end of fiscal 2005.

Gross margin. Our overall gross margin increased to 21.4% for the third
quarter of fiscal 2003 from 18.4% for the third quarter of fiscal 2002. Gross
margin percentage increased 80 basis points in cylinder exchange to 27.6% for
the three months ended April 30, 2003 from 26.8% for the three months ended
April 30, 2002 due primarily to the reduced cost of valves and cylinders,
partially offset by an increase in the mix of lower-margin sales transactions
and increased fuel costs on unhedged volumes. The products and other segment
gross margin increased to 11.8% for the third quarter of fiscal 2003 from 11.1%
for the third quarter of fiscal 2002 due primarily to a greater percentage of
higher-margin products in the mix of products sold.

Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses increased 26.9% to $6.3 million for the three
months ended April 30, 2003 from $5.0 million for the three months ended April
30, 2002 and, as a percentage of net revenues, increased to 10.5% for the third
quarter of fiscal 2003 from 8.4% for the third quarter of fiscal 2002. SG&A
expenses in the cylinder exchange segment increased 25.8% to $4.1 million for
the third quarter of fiscal 2003 from $3.3 million for the third quarter of
fiscal 2002 due primarily to increased personnel costs associated with managing
distributor operations. SG&A expenses in the products and other segment
increased 28.9% to $2.2 million from $1.7 million in the same period in the
prior year primarily due to start up and development costs related to the
introduction of new products. We currently expect SG&A expenses for the fourth
quarter of fiscal 2003 to decrease as a percentage of net revenues as compared
to the first three quarters.

Depreciation and amortization. Depreciation and amortization increased to
$2.3 million for the third quarter of fiscal 2003 from $2.0 million for the
third quarter of fiscal 2002 due primarily to the increase in depreciation
expense resulting from an increase in the number of cylinders and displays used
in the cylinder exchange segment.

Interest expense.Interest expense increased to $2.3 million in the third
quarter of fiscal 2003 from $1.6 million in the third quarter of fiscal 2002
due to a $931,000 non-cash charge resulting from the prepayment of $5 million
of our 13% subordinated debt that was partially offset by lower interest rates
on our credit facility. We intend to prepay the remaining $10 million of our
outstanding subordinated debt in the fourth quarter of fiscal 2003 and will
incur additional non-cash charges of approximately $1.7 million.

Loss on investee.Loss on investee was $11,000 in the third quarter of
fiscal 2002. This charge represented the loss related to our 49% ownership
interest in R4 Tech, which has since increased to 50% as a result of our
acquisition of Platinum. The increased ownership interest and financial
control resulted in the consolidation of the financial statements of R4 Tech
beginning in the second quarter of fiscal 2003.

Other, net. Other, net increased to $2.4 million in the third quarter of
fiscal 2003 from $114,000 in the third quarter of fiscal 2002 due primarily to
net proceeds of $2.5 million received in a litigation settlement in March 2003.
In addition to the proceeds of the litigation settlement, other, net consists
primarily of interest income from advances made to independent distributors and
losses from the disposal of assets.

Preferred dividends.Preferred dividends accrued on our outstanding
shares of Series A convertible preferred stock were $537,000 for the three
months ended April 30, 2002. All shares of Series A Convertible preferred
stock were converted into common stock prior to the second quarter of fiscal
2003.

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Comparison of the nine months ended April 30, 2003 with the nine months ended
April 30, 2002

Net revenues.Net revenues increased 28.7% to $172.8 million for the nine
months ended April 30, 2003 from $134.2 million for the nine months ended April
30, 2002. Net revenues consisted of $103.1 million from the cylinder exchange
segment and $69.7 million from the products and other segment. Cylinder
exchange revenues increased 53.1%, with approximately three-fourths of the
increase due to a 42% increase in the number of cylinder transactions to 6.4
million units for the first nine months of fiscal 2003 from 4.5 million units
for the first nine months of fiscal 2002 and approximately one-fourth of the
increase due to price increases to retailers, enabled by a higher mix of
upgrade transactions. Products and other revenues increased 4.1% due
principally to an increase in the number of grills sold.

Gross margin.Our overall gross margin increased to 21.6% for the first
nine months of fiscal 2003 from 21.2% for the first nine months of fiscal 2002.
Gross margin percentage decreased 67 basis points in cylinder exchange to 27.1%
from 27.7% in the same period of the prior year due primarily to an increase in
the mix of lower margin upgrade and sale transactions as well as to increased
fuel costs on unhedged volumes, partially offset by price increases to
retailers and the reduced cost of valves and cylinders. The products and other
segment gross margin decreased to 13.4% from 14.6% for the nine months ended
April 30, 2002 due primarily to lower margins on patio heaters.

Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses increased 43.7% to $21.1 million for the nine
months ended April 30, 2003 from $14.7 million for the nine months ended April
30, 2002 and, as a percentage of net revenues, increased to 12.2% for the first
nine months of fiscal 2003 from 10.9% for the first nine months of fiscal 2002.
SG&A expenses in the cylinder exchange segment increased 41.4% to $13.0
million for the first nine months of fiscal 2003 from $9.2 million for the
first nine months of fiscal 2002 due primarily to increased personnel costs
associated with managing distributor operations and increased professional
fees. SG&A expenses in the products and other segment increased 47.5% to $8.1
million from $5.5 million in the same period in the prior year due primarily to
special charges, consisting primarily of relocation expenses associated with
consolidating many products segment employees based in Zion, Illinois with the
cylinder exchange employee base in Winston-Salem, North Carolina and start-up
and development costs related to the introduction of new products.

Depreciation and amortization.Depreciation and amortization increased to
$6.8 million in the nine months ended April 30, 2003 from $5.8 million in the
nine months ended April 30, 2002 due primarily to the increase in depreciation
expense resulting from an increase in the number of cylinders and displays used
in the cylinder exchange segment.

Interest expense.Interest expense increased to $4.9 million in the nine
months ended April 30, 2003 from $4.7 million in the nine months ended April
30, 2002 due to a $931,000 non-cash charge resulting from the prepayment of $5
million of our 13% subordinated debt that was partially offset by both lower
interest rates and reduced borrowings on our credit facility. We intend to
prepay the remaining $10 million of our outstanding subordinated debt in the
fourth quarter of fiscal 2003 and will incur additional non-cash charges of
approximately $1.7 million.

Loss on investee.Loss on investee decreased to $455,000 in the nine
months ended April 30, 2003 from $689,000 in the nine months ended April 30,
2002. This charge represented the loss related to our 49% ownership interest
in R4 Tech, which has since increased to 50% as a result of our acquisition of
Platinum. The increased ownership interest and financial control resulted in
the consolidation of the financial statements of R4 Tech in the second quarter
of fiscal 2003.

Other, net. Other, net increased to $2.5 million in the nine months ended
April 30, 2003 from $366,000 in the nine months ended April 30, 2002 due
primarily to net proceeds of $2.5 million received in a litigation settlement
in March 2003. In addition to the proceeds of the litigation settlement,
other, net consists primarily of interest income from advances made to R4 Tech
and independent distributors and losses from the disposal of assets.

Preferred dividends.Preferred dividends accrued on our outstanding
shares of Series A convertible preferred stock decreased to $71,000 for the
nine months ended April 30, 2003 from $1.6 million for the nine months ended
April 30, 2002 due to the conversion of the Series A Convertible preferred
stock to common stock in March, April, May and September 2002.

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Liquidity and Capital Resources

Our primary sources of funds have been the incurrence of debt, the
issuance of stock and cash flow from operations.

Net cash used in operations was $5.3 million for the nine months ended
April 30, 2003 and net cash provided by operations was $14.1 million for the
nine months ended April 30, 2002. The decrease in cash provided by operations
for the first nine months of fiscal 2003 over the first nine months of fiscal
2002 was primarily due to a significant increase in inventory in primarily the
cylinder exchange segment and, to a lesser extent, the products and other
segment partially offset by the increase in net income. The inventory increase
in the cylinder exchange segment was primarily to prepare for the rise in
demand associated with the grilling season, as we made a significant effort to
build inventory levels to keep our major customers supplied with product during
heavy promotional periods. The increase in inventory in the products and other
segment was primarily associated with the launch of new products. On April 30,
2003, we had $19.7 million in inventory related to the cylinder exchange
segment and $7.2 million in inventory related to the products and other
segment.

Net cash used in investing activities was $25.2 million for the nine
months ended April 30, 2003 and $10.8 million for the nine months ended April
30, 2002. The primary components of cash used in investing activities for both
periods included investments in property, plant and equipment, investments in
cylinders and advances to R4 Tech and, in the case of the nine months ended
April 30, 2003, acquisitions and advances to independent distributors. During
the nine months ended April 30, 2003 and April 30, 2002, we provided net
advances of $1.1 million and $1.9 million, respectively, to R4 Tech. As a
result of the acquisitions of Platinum and Ark and the consolidation of R4 Tech
resulting from the acquisition of Platinum (Note 7 of Notes to Condensed
Consolidated Financial Statements), advances to R4 Tech, Platinum and Ark in
the second and third quarters of fiscal 2003 were not reflected in net cash
used in investing activities.

Net cash provided by financing activities was $31.7 million for the nine
months ended April 30, 2003, while cash used in financing activities was $2.5
million for the nine months ended April 30, 2002. Cash provided by financing
activities for the nine months ended April 30, 2003 included $14.9 million in
net proceeds from the sale of common stock, $22.8 million in net proceeds from
our credit facility and net proceeds from exercises of warrants and stock
options partially offset by payments on long-term debt including the prepayment
on $5 million of our subordinated debt. Cash used in financing activities for
the nine months ended April 30, 2002 included net payments on our credit
facility and payments on long-term debt and capital lease obligations partially
offset by net proceeds of $10.4 million from the sale of common stock.

In November 2002, we completed the syndication of a new and expanded bank
credit facility (the Credit Facility). The Credit Facility consists of a $45
million revolving line of credit and a $15 million term loan, both for general
corporate purposes, inclusive of payments made under letters of credit. The
Credit Facility has a maturity date of November 30, 2005 and, as amended,
requires us to utilize the approximately $14.9 million in net proceeds from a
private placement of common stock completed December 20, 2002 to repay the term
loan or our subordinated debt, in such proportion as we elect, by July 31,
2003. In April 2003, we prepaid $5 million of our subordinated debt and we
plan to repay the remaining $10 million of our subordinated debt by July 31,
2003 using availability from the credit facility and cash provided by
operations. Advances under the Credit Facility are collateralized by a lien on
substantially all of our assets.

Advances under the Credit Facility may be made as either base rate (prime
rate) loans or London Interbank Offered Rate (LIBOR) loans at our election.
Applicable interest rates are based upon either the LIBOR or prime rate plus an
applicable margin dependent upon a total leverage ratio. The applicable LIBOR
margins range from 200 to 300 basis points, and the applicable prime rate
margins range from 50 to 150 basis points. We incurred fees of approximately
$1.3 million in connection with the Credit Facility. The fees will be
amortized over the life of the agreement through November 30, 2005. We
incurred a charge of $96,000 in November 2002 resulting from unamortized fees
related to our prior credit facility. On April 30, 2003 we had $48.5 million
(including a $11.9 million balance on the term loan) in LIBOR loans outstanding
at a weighted-average interest rate of 4.07% and $900,000 in prime rate loans
outstanding at a weighted-average interest rate of 5.50%.

Principal payments on the outstanding term loan began on December 31, 2002
and continue quarterly until September 30, 2005. The initial principal
payments are $1 million per calendar quarter beginning December 31, 2002, will
increase to $1.25 million per calendar quarter beginning December 31, 2003 and
will further increase to $1.5 million per calendar quarter beginning December
31, 2004. The Credit Facility includes a .50% commitment fee on the average
daily unused amount for each fiscal quarter. The Credit Facility requires us
to meet certain covenants, including minimum net worth and cash flow
requirements, restricts the payment of cash dividends and permits early
extinguishment of up to $15 million in our subordinated debt. At April 30,
2003, we were in compliance with all covenants.

14



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We are currently party to an interest rate swap agreement with a notional
amount of $10 million. Under the existing swap agreement, which expires in
July 2003, we pay a fixed rate of 7.36% and receive a rate equivalent to the
thirty-day LIBOR, adjusted quarterly. In May 2003, we entered into a new swap
agreement with an effective date of August 1, 2003 and an expiration date of
October 3, 2005. The initial notional amount is $20 million beginning August
1, 2003, will decrease to $15 million on June 1, 2004, will decrease to $10
million on March 1, 2005 and will further decrease to $5 million on September
1, 2005. Under the new swap agreement, we pay a fixed rate of 1.85% and
receive a rate equivalent to the thirty-day LIBOR, adjusted monthly.

On June 15, 2001, we completed a $15 million private placement of
subordinated debt to an institutional investor. The agreement requires us to
meet certain cash flow and other covenants and contains restrictions on capital
expenditures and the payment of cash dividends. At April 30, 2003, we were in
compliance with all covenants. The debenture bears interest at the annual rate
of 13%, payable quarterly. The principal balance matures on August 31, 2006.
In conjunction with the subordinated debt, we issued a warrant to the investor
to purchase 1,372,071 shares of common stock, with an exercise price of $3.8685
per share (subject to adjustment for organic changes in our common stock and
for certain future issuances below the then-existing exercise price). The
warrant was converted by the investor into 1,070,179 shares of common stock
effective January 6, 2003. In April 2003, we prepaid $5 million of our
subordinated debt. We plan to prepay the remaining $10 million of our
subordinated debt by July 31, 2003.

In November 2002, we acquired Platinum and Ark and their respective
subsidiaries, representing ten of our distributors. Collectively, the
territories served by the acquired distributors have historically represented
approximately 45% of our cylinder exchange revenues. The aggregate purchase
price for the two acquisitions was approximately $32 million. The
consideration paid by Blue Rhino in the acquisitions consisted of approximately
1.1 million restricted shares of common stock valued, based on the closing
price of our common stock on the Nasdaq National Market on November 22, 2002,
at approximately $19 million, $3.1 million in assumed debt satisfied at
closing, $4.9 million in advances, and $5.0 million in liabilities assumed. On
a preliminary basis, approximately $28.2 million of the purchase price was
allocated to goodwill, $2.8 million was allocated to current assets and $1.2
million was allocated to equipment, vehicles and other assets.

On December 20, 2002, we completed a private placement of 1.0 million
shares of our common stock at a purchase price of $15.79 per share to two
institutional investors for gross proceeds of $15.8 million. We initially
utilized the proceeds to pay down the revolving line of credit under the Credit
Facility and subsequently used the increased availability under the revolving
line to repay $5 million in subordinated debt in our third fiscal quarter of
2003. We intend to repay the remaining $10 million in subordinated debt before
the end of fiscal 2003 using availability from the credit facility and cash
provided by operations. In conjunction with the private placement, we issued
Additional Investment Rights to the investors exercisable for, collectively, up
to an additional 330,000 shares of our common stock at an exercise price of
$15.79 per share. Each Additional Investment Right is exercisable by the
holder for a period that began on the effective date of the related
registration statement filed by us with the Securities and Exchange Commission
with respect to the resale of the shares and ending initially 90 trading days
thereafter and now reset to October 1, 2003.

In March 2003, pursuant to a negotiated settlement agreement, we dismissed
our lawsuit against PricewaterhouseCoopers alleging violations of professional
standards and failure to comply with contractual obligations during its
engagement as our auditor. The net proceeds to us in the settlement, after
attorneys fees and other third quarter litigation expenses, were approximately
$2.5 million and were reflected in other, net in the Condensed Consolidated
Statements of Operations. In accordance with the terms of the Credit Facility,
$1.1 million of the net proceeds were applied against the term loan as a
reduction. The specific terms of the settlement are confidential.

We currently have capital commitments outstanding of approximately $2.3
million relating to machinery and equipment associated with new cylinder
refilling and refurbishing facilities in Los Angeles, Chicago and Denver.
These commitments must be satisfied by the end of calendar year 2003. We
currently anticipate that our total capital expenditures for fiscal 2003,
excluding acquisitions, will be approximately $19.0 million, and will relate
primarily to cylinders, cylinder displays, computer technology and distribution
infrastructure. Our capital expenditure and working capital requirements in
the foreseeable future will change depending on many factors including, but not
limited to, the rate of our expansion, our operating results and any other
adjustments in our operating plan made in response to competition, acquisition
opportunities or unexpected events. We believe that our existing borrowing
capacity under the Credit Facility, together with cash provided by operations,
will be sufficient to meet our expected capital expenditure and working capital
requirements, including the repayment required by our Credit Facility, through
fiscal 2004. Moreover, if we experience an unexpected change in demand for our
cylinder exchange service or our products, we may need additional funds to meet
our capital requirements and, in that event, we may seek additional debt or
equity financing. We cannot be sure that any additional equity or debt
financing will be available on favorable terms or on terms that are not
dilutive to our stockholders.

15



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Related Party Transactions

Blue Rhino Corporation, QuickShip, Inc. and Blue Rhino Global Sourcing,
LLC lease their respective facilities from Rhino Real Estate, LLC, a company
affiliated with Billy D. Prim, our Chairman and Chief Executive Officer, and
Andrew J. Filipowski, our Vice Chairman. The leases expire on December 31,
2003, April 30, 2003 and October 31, 2007, respectively. Blue Rhinos rent
expense for the three and nine months ended April 30, 2003 was $85,000 and
$248,000, respectively, and QuickShips rent expense for the three and nine
months ended April 30, 2003 was $2,000 and $13,000, respectively. Blue Rhinos
rent expense for the three and nine months ended April 30, 2002 was $58,000 and
$166,000, respectively, and QuickShips rent expense for the three and nine
months ended April 30, 2002 was $8,000 and $18,000, respectively. Blue Rhino
Global Sourcings lease became effective November 1, 2002 and its rent expense
for the three and nine months ended April 30, 2003 was $24,000 and $48,000,
respectively. Management has received an independent third-party determination
to the effect that the Blue Rhino and Blue Rhino Global Sourcing leases are
fair and within typical market conditions and believes that the terms of all of
these leases are comparable to those that could have been obtained from
unrelated third parties.

Uniflame Corporation leases its facility from H & M Enterprises, LLC, a
company affiliated with Mac McQuilkin, the president of Uniflame. The lease
terminates on March 31, 2005. Uniflames rent expense for three and nine
months ended April 30, 2003 was $79,000 and $236,000, respectively. Uniflames
rent expense for three and nine months ended April 30, 2002 was $79,000 and
$238,000, respectively. Management believes that the terms of this lease are
comparable to those that could have been obtained from unrelated third parties.

Platinum and subsequently R4 Tech leased an office facility and storage
tank in Booneville, NC from Billy D. Prim, our Chairman and Chief Executive
Officer. Platinums lease expense was $6,000 for the three months ended
January 31, 2003. R4 Techs lease expense was $6,000 for the three months
ended April 30, 2003. Management received an independent third-party
determination to the effect that this lease was fair and within typical market
conditions and believes that the terms of the lease were comparable to those
that could have been obtained from an unrelated third party.

Blue Rhino has paid fees for software development and Internet hosting
services provided by divine, inc. Andrew J. Filipowski is the Chairman of
divine, inc. and our Vice Chairman. For the three and nine months ended April
30, 2003, Blue Rhino paid fees to divine, inc. in the amount of $90,000 and
$325,000, respectively. For the three and nine months ended April 30, 2002,
Blue Rhino paid fees to divine, inc. in the amount of $6,000 and $6,000,
respectively. Management believes that the terms of these services were
comparable to those that could have been obtained from an unrelated third
party.

Seasonality

We have experienced and currently expect to continue to experience
seasonal fluctuations in our revenues and operating income. Our revenues and
operating income have been highest in the spring and summer, which includes the
majority of the grilling season, and lowest in the fall and winter. Our
cylinder exchange segment, which generally enjoys higher margins than our
products and other segment, experiences higher revenues and operating income in
the spring and summer. Conversely, our products and other segment experiences
higher revenues and operating income in the fall and winter. Sustained periods
of poor weather, particularly in the spring and summer, can negatively impact
our revenues. Accordingly, our results of operations in any quarter will not
necessarily be indicative of the results that we may achieve for a full fiscal
year or any future quarter.

Inflation

We do not believe that inflation has had a material adverse effect on our
revenues, cost of sales or our results of operations. There can be no assurance
that our business will not be materially adversely affected by inflation in the
future.

Price of Propane

Beginning with the third quarter of fiscal 2000 and continuing through the
third quarter of fiscal 2001, there were dramatic increases in fuel costs and
propane reached unusually high levels. During the fourth quarter of fiscal
2001 and continuing through the first quarter of fiscal 2002, propane prices
returned to a range more consistent with historical levels, but during the
winter and spring months of fiscal 2003, again reached unusually high levels.
On March 1, 2001, we initiated a propane price hedging strategy that

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reduced, and we currently believe will continue to reduce, our gross
margin risk resulting from fluctuations in the price of propane. Our strategy
is designed to reduce exposure to the fuel cost component of a significant
portion of our expected total cylinder exchange volume, approximately 65% for
calendar year 2003. If propane costs rise, our gross margins and results of
operations would be negatively affected due to additional costs on unhedged
volumes (both within and, if applicable, in excess of our expected volumes)
that we may not be able to recover fully through an increase in our price to
retailers.

Off-Balance Sheet Arrangements

We do not have any transactions, agreements or other contractual
arrangements that constitute off-balance sheet arrangements.

Impact of New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 143, Accounting for
Asset Retirement Obligations.The Statement requires entities to record the
fair value of a liability for an asset retirement obligation in the period in
which it is incurred. As required by SFAS No. 143, we have adopted this new
accounting standard for fiscal year 2003. The adoption of SFAS No. 143 did not
have a material impact on our consolidated results of operations or financial
position.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This Statement establishes a
single accounting model for the impairment or disposal of long-lived assets.
As required by SFAS No. 144, we have adopted this new accounting standard for
fiscal year 2003. The adoption of SFAS No. 144 did not have a material impact
on our consolidated results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This Statement eliminates an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions and establishes that gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria for treatment as extraordinary. We have adopted this
standard for fiscal year 2003. The adoption of SFAS No. 145 did not have a
material impact on our consolidated results of operations or financial
position.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Statement requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. SFAS No. 146 also establishes that fair value
is the objective for initial measurement of the liability. We have adopted
this standard for fiscal year 2003. The adoption of SFAS No. 146 did not have
a material impact on our consolidated results of operations or financial
position.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions-An Amendment of FASB Statements No. 72 and 144 and FASB
Interpretation No. 9. SFAS No. 147 is an industry specific standard and is not
applicable to us; therefore, it will not have an impact on our consolidated
results of operations or financial position.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition to SFAS No. 123s fair value method of accounting for stock-based
employee compensation. SFAS No. 148 also amends the disclosure provisions in
SFAS No. 123 and Accounting Principles Board Opinion No. 28, Interim Financial
Reporting, to require disclosure in the summary of significant accounting
policies of the effects of an entitys accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements. We adopted the interim financial
reporting for interim periods beginning after December 15, 2002. The adoption
of SFAS No. 148 did not have a significant impact on our consolidated results
of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. In particular, this Statement clarifies under what circumstances a
contract with an initial net investment meets the characteristic of a
derivative and when a derivative contains a financing component that warrants
special reporting in the statement of cash flows. This Statement is generally
effective for contracts entered into or modified after June 30, 2003. We do
not currently expect the adoption of SFAS No. 149 to have a material impact on
our consolidated results of operations or financial position.

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In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
This Statement requires certain financial instruments that embody obligations
of the issuer and have characteristics of both liabilities and equity to be
classified as liabilities. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. We do not
currently expect the adoption of SFAS No. 150 to have a material impact on our
consolidated results of operations or financial position.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates on
borrowings under our Credit Facility, which are based upon either the LIBOR or
prime rate plus an applicable margin dependent upon a total leverage ratio. To
quantify our exposure to interest rate risk, a 100 basis point increase in
interest rates would have increased interest expense for the nine months ended
April 30, 2003 and 2002 by approximately $183,000 and $199,000, respectively.
Actual changes in interest expense may differ materially from those based on
hypothetical assumptions used in computing this exposure.

We use derivative financial instruments to manage exposure to fluctuations
in interest rates on our Credit Facility (Note 2 of Notes to Condensed
Consolidated Financial Statements). These derivative financial instruments,
which are generally swap agreements, are not entered into for trading purposes.
A swap agreement is a contract to exchange a floating rate for a fixed rate
without the exchange of the underlying notional amount. In fiscal 2000, we
entered into an interest rate swap agreement with a notional amount of $10
million as a hedge of our variable interest rate debt represented by the Credit
Facility. Under the swap agreement, which expires in July 2003, we pay a fixed
rate of 7.36% and receive a rate equivalent to the thirty-day LIBOR, adjusted
quarterly. At April 30, 2003, we had $48.5 million in LIBOR-based loans
outstanding at a weighted-average interest rate of 4.07% and the interest rate
swap was an effective cash flow hedge. In May 2003, we entered into a new swap
agreement with an effective date of August 1, 2003 and an expiration date of
October 3, 2005. The initial notional amount is $20 million beginning August
1, 2003, will decrease to $15 million on June 1, 2004, will decrease to $10
million on March 1, 2005 and will further decrease to $5 million on September
1, 2005. Under the new swap agreement, we will pay a fixed rate of 1.85% and
receive a rate equivalent to the thirty-day LIBOR, adjusted monthly.

We are exposed to commodity price risk related to changes in the price of
propane. If propane prices rise, our gross margins and results of operations
would be negatively affected due to additional costs that may not be fully
recovered through an increase in our price to retailers. Assuming that propane
prices are not hedged and any increase cannot be recovered through an increase
in our price, a $.01 increase in the price per gallon of propane would reduce
the gross margin in our cylinder exchange segment by approximately .3% or 30
basis points. Actual changes in cylinder exchange margins may differ
materially from that based on the hypothetical assumptions used in computing
this exposure. We have entered into a series of monthly option contracts that
are designed to reduce exposure to the propane cost component of a significant
portion of our total projected cylinder exchange volume (Note 2 of Notes to
Condensed Consolidated Financial Statements). These monthly option contracts
are not entered into for trading purposes.

We invest our cash and cash equivalents in investment grade, highly liquid
investments consisting of money market instruments, bank certificates of
deposit and overnight investments in commercial paper. All of our transactions
are conducted and accounts are denominated in U.S. dollars, and, as such, we do
not currently have exposure to foreign currency risk.

Item 4. Controls and Procedures

Within 90 days prior to the date of this report, our Chief Executive
Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934, as amended (the Exchange Act)) in
accordance with Rule 13a-14 under the Exchange Act. The Chief Executive
Officer and the Chief Financial Officer concluded that, as of the date of
evaluation, our disclosure controls and procedures were effective to enable us
to record, process, summarize and report in a timely manner the information
that we are required to disclose in our Exchange Act reports.

There have been no significant changes in our internal controls or in
other factors that could significantly affect these internal controls
subsequent to their most recent evaluation.

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PART II  OTHER INFORMATION

Item 1.Legal Proceedings

The Company and four of its officers and directors have been named as
defendants in a shareholder class action lawsuit filed in the U.S. District
Court for the Central District of California on May 19, 2003. The plaintiff
seeks to represent a class of individuals who purchased the Companys common
stock between August 15, 2002 and February 5, 2003. The plaintiff alleges
violations of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5
promulgated under Section 10(b), and Section 20(a) of the Exchange Act. In
particular, among other claims, the plaintiff has alleged that the Company and
the individual defendants made materially false and misleading statements
and/or concealed material adverse facts throughout the class period relating to
the Companys financial position, the impact of overfill prevention device
regulations on the Companys business, the financial position of distributors
Ark and Platinum, and the Companys acquisition of Ark and Platinum. The
complaint seeks unspecified damages, plus reasonable costs and expenses,
including attorneys fees and experts fees. Since the filing of the initial
lawsuit, the Company has been made aware of five additional shareholder class
action lawsuits filed against the Company in the same court. The Company
understands that these additional actions assert essentially the same claims
and seek the same relief as the original complaint. The Company anticipates
that all of the existing shareholder class action lawsuits, and any additional
similar shareholder class action suits that may be filed, ultimately will be
consolidated into a single action.

On May 22, 2003, Richard Marcoux filed a shareholder derivative action in
the Superior Court of California, Los Angeles County, naming all directors and
certain officers of the Company as individual defendants and the Company as a
nominal defendant. In this derivative action, the plaintiff makes substantially
similar allegations to those made in the above-described shareholder class
action lawsuits and identifies the relevant time period from August of 2002
through the present. In this derivative action, the claims are for violation
of the California Corporations Code, breach of fiduciary duty, abuse of
control, gross mismanagement, waste of corporate assets and unjust enrichment.

The Company believes that all of the foregoing claims are without merit
and intends to vigorously defend itself.

On March 7, 2003, pursuant to a negotiated settlement agreement, we
dismissed our lawsuit against PricewaterhouseCoopers (PwC) by filing a
Voluntary Dismissal with Prejudice in the Superior Court of Forsyth County,
North Carolina. This lawsuit had alleged violations of professional standards
by PwC and failure to comply with contractual obligations during PwCs
engagement as our auditor. The net proceeds to us in the settlement were
recognized in our fiscal third quarter and, after attorneys fees and other
third quarter litigation expenses, were approximately $2.5 million. The
specific terms of the settlement are confidential.

Item 2. Changes in Securities and Use of Proceeds

Effective February 4, 2003, we issued 11,864 shares of our common stock
upon exercise of a warrant to purchase common stock at an exercise price of
$8.48 per share by a single warrant holder whom we believe to be an accredited
investor. We issued the shares in reliance on Section 4(2) of the Securities
Act of 1933, as amended, based on the isolated nature of the transaction and
the warrant holders access to material information and knowledge and
experience in business and financial matters.

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Item 6.Exhibits And Reports On Form 8-K

(a)  Exhibits:

|     |  |                                                                                                                                                                                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Second Amendment to Credit Agreement dated as of April 29, 2003
by and among the Company, as the Borrower, the Lenders referred to in
the Credit Agreement as of November 20, 2002, as amended, and Bank of
America, N.A., as Administrative Agent for the Lenders.
|     |  |                                                                                                                                                                                                                                                                    
|10.2 |  | Release and Settlement Agreement dated as of February 26, 2003
by and between the Company and PricewaterhouseCoopers LLP.
*                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                    
|99.1 |  | Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of The
Sarbanes-Oxley Act of 2002.                                                                                                             
|     |  |                                                                                                                                                                                                                                                                    
|99.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act
of 2002.                                                                                                             

*Confidential treatment has been requested with respect to specified portions
of this exhibit.

(b)  Reports on Form 8-K filed in the quarter ended April 30, 2003:

On February 5, 2003, the Company filed an 8-K/A amending its Current Report on
Form 8-K filed on November 27, 2002, to include under Item 7 the following
financial statements in respect of the acquisition of Platinum Propane, L.L.C.
and Ark Holding Company LLC and their respective subsidiaries on November 22,
2002.

(a)  Financial Statements of Businesses Acquired

COMBINED FINANCIAL STATEMENTS OF PLATINUM PROPANE HOLDING, L.L.C. AND
SUBSIDIARIES AND ARK HOLDING COMPANY LLC AND SUBSIDIARIES

Independent Auditors Report

Combined Balance Sheet as of December 31, 2001

Combined Statement of Operations for the year ended December 31, 2001

Combined Statement of Members Deficit for the year ended December 31, 2001

Combined Statement of Cash Flows for the year ended December 31, 2001

Notes to Combined Financial Statements

UNAUDITED COMBINED FINANCIAL STATEMENTS OF PLATINUM PROPANE HOLDING,
L.L.C. AND SUBSIDIARIES AND ARK HOLDING COMPANY LLC AND SUBSIDIARIES

Unaudited Condensed Combined Balance Sheets as of October 31, 2002 and
December 31, 2001

Unaudited Condensed Combined Statements of Operations for the ten months
ended October 31, 2002 and 2001

Unaudited Condensed Combined Statements of Cash Flows for the ten months
ended October 31, 2002 and 2001

Notes to Unaudited Condensed Combined Financial Statements

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(b)  Pro Forma Financial Information.

BLUE RHINO CORPORATION, PLATINUM PROPANE HOLDING, L.L.C. AND SUBSIDIARIES
AND ARK HOLDING COMPANY LLC AND SUBSIDIARIES (on a consolidated basis)

Unaudited Pro Forma Information

Unaudited Pro Forma Balance Sheet as of October 31, 2002

Notes to Unaudited Pro Forma Balance Sheet as of October 31, 2002

Unaudited Pro Forma Statement of Operations for the year ended July 31,
2002

Unaudited Pro Forma Statement of Operations for the three months ended
October 31, 2002

Notes to Unaudited Pro Forma Statements of Operations

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SIGNATURES

Pursuant to the requirement 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.

|      |  |              |  |                        |  |                                     
|----- |  | ------------ |  | ---------------------- |  | ------------------------------------
|      |  |              |  | Blue Rhino Corporation
|      |  |              |  |                        |  |                                     
|Date: |  | June 9, 2003 |  | By:                    |  | /s/ Billy D. Prim                   
|      |  |              |  |                        |  |                                     
|      |  |              |  |                        |  | Chairman and Chief Executive Officer
|      |  |              |  |                        |  |                                     
|Date: |  | June 9, 2003 |  | By:                    |  | /s/ Mark Castaneda                  
|      |  |              |  |                        |  |                                     
|      |  |              |  |                        |  | Chief Financial Officer             

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Billy D. Prim, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Blue Rhino
Corporation;

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

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

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                                     
|------------------ |  | ------------------------------------
|Date: June 9, 2003 |  |                                     
|                   |  |                                     
|                   |  | /s/ Billy D. Prim                   
|                   |  |                                     
|                   |  | Billy D. Prim                       
|                   |  | Chairman and Chief Executive Officer

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CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Mark Castaneda, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Blue Rhino
Corporation;

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

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

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                   |  |                        
|------------------ |  | -----------------------
|Date: June 9, 2003 |  |                        
|                   |  |                        
|                   |  | /s/ Mark Castaneda     
|                   |  |                        
|                   |  | Mark Castaneda         
|                   |  | Chief Financial Officer

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