##### 



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



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FORM 10-Qx   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2003

OR

o
  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 or 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
o

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

Yes
x   No
o

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 November 30, 2003
|                                        |  |                                 
|Common stock, par value $.001 per share |  | 17,854,052 Shares               





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##### 



BLUE RHINO CORPORATION

INDEX

PART I: FINANCIAL INFORMATION

|                           |  |                                                                                        |  |                                                                                                      
|-------------------------- |  | -------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------
|Item 1:                    |  | Financial Statements (unaudited):                                                     
|                           |  |                                                                                        |  |                                                                                                      
|                           |  |                                                                                        |  | Condensed consolidated balance sheets as of
October 31, 2003 and July 31, 2003.                      
|                           |  |                                                                                        |  |                                                                                                      
|                           |  |                                                                                        |  | Condensed consolidated statements of operations for
the three months ended October 31, 2003 and 2002.
|                           |  |                                                                                        |  |                                                                                                      
|                           |  |                                                                                        |  | Condensed consolidated statements of cash flows for
the three months ended October 31, 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 6:                    |  | Exhibits and Reports on Form 8-K.                                                     
|                           |  |                                                                                        |  |                                                                                                      
|SIGNATURES                

1



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##### 



PART I

FINANCIAL INFORMATION

Item 1:Condensed Consolidated Financial Statements

BLUE RHINO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
As of October 31, 2003 and July 31, 2003
(In thousands)

|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |         |         | 
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ----------- | ------- | -------- | ------ | ------- | ------- | 
|                                                                      |                                                                                                                                                                            |                                            |        | October 31, |         | July 31,
|                                                                      |                                                                                                                                                                            |                                            |        | 2003        |         | 2003    
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |         
|                                                                      |                                                                                                                                                                            |                                            |        | (unaudited) |         |          |        |        
|ASSETS                                                                |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|Current assets:                                                       |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      | Cash and cash equivalents                                                                                                                                                  |                                            | $      | 2,553       |         |          | $      | 2,495   |        
|                                                                      | Accounts receivable, net                                                                                                                                                   |                                            |        | 12,053      |         |          |        | 25,809  |        
|                                                                      | Inventories                                                                                                                                                                |                                            |        | 19,643      |         |          |        | 20,372  |        
|                                                                      | Prepaid expenses and other current assets                                                                                                                                  |                                            |        | 5,062       |         |          |        | 7,055   |        
|                                                                      | Deferred income taxes                                                                                                                                                      |                                            |        | 2,266       |         |          |        | 2,266   |        
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            | Total current assets                       |        |             | 41,577  |          |        |         | 57,997  | 
|Cylinders, net                                                        |                                                                                                                                                                            |                                            | 48,509 |             |         |          | 50,917 |        
|Property, plant and equipment, net                                    |                                                                                                                                                                            |                                            | 38,098 |             |         |          | 37,765 |        
|Intangibles, net                                                      |                                                                                                                                                                            |                                            | 62,843 |             |         |          | 62,862 |        
|Other assets                                                          |                                                                                                                                                                            |                                            | 1,177  |             |         |          | 1,264  |        
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            | Total assets                               |        | $           | 192,204 |          |        | $       | 210,805 | 
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                  |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|Current liabilities:                                                  |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      | Accounts payable                                                                                                                                                           |                                            | $      | 11,525      |         |          | $      | 19,193  |        
|                                                                      | Current portion of long-term debt and capital lease obligations                                                                                                            |                                            |        | 6,144       |         |          |        | 6,433   |        
|                                                                      | Accrued liabilities                                                                                                                                                        |                                            |        | 4,054       |         |          |        | 5,679   |        
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            | Total current liabilities                  |        |             | 21,723  |          |        |         | 31,305  | 
|Long-term debt and capital lease obligations, less current maturities |                                                                                                                                                                            |                                            | 32,262 |             |         |          | 42,800 |        
|Deferred income taxes                                                 |                                                                                                                                                                            |                                            | 4,767  |             |         |          | 4,232  |        
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            | Total liabilities                          |        |             | 58,752  |          |        |         | 78,337  | 
|Stockholders equity:                                                 |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      | Common stock, $0.001 par value, 100,000,000 shares authorized,
17,853,652 and 17,838,027 shares issued and outstanding at
October 31, 2003 and July 31, 2003, respectively |                                            |        | 18          |         |          |        | 18      |        
|                                                                      | Capital in excess of par                                                                                                                                                   |                                            |        | 132,812     |         |          |        | 132,704 |        
|                                                                      | Retained earnings (deficit)                                                                                                                                                |                                            |        | 427         |         |          |        | (1,068  | )      
|                                                                      | Accumulated other comprehensive
income                                                                                                                                     |                                            |        | 195         |         |          |        | 814     |        
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            | Total stockholders equity                 |        |             | 133,452 |          |        |         | 132,468 | 
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        
|                                                                      |                                                                                                                                                                            | Total liabilities and stockholders equity |        | $           | 192,204 |          |        | $       | 210,805 | 
|                                                                      |                                                                                                                                                                            |                                            |        |             |         |          |        |        

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 Months Ended October 31, 2003 and 2002
(In thousands, except per share data)

|                                       |                                      |   |                                         |        |                    |        |        |        |   |        | 
|-------------------------------------- | ------------------------------------ | - | --------------------------------------- | ------ | ------------------ | ------ | ------ | ------ | - | ------ | 
|                                       |                                      |   |                                         |        | Three months ended
|                                       |                                      |   |                                         |        | October 31,       
|                                       |                                      |   |                                         |        |                   
|                                       |                                      |   |                                         |        | 2003               |        | 2002  
|                                       |                                      |   |                                         |        |                    |        |       
|                                       |                                      |   |                                         |        | (Unaudited)       
|                                      
|Net revenues                           |                                      | $ | 49,269                                  |        |                    | $      | 54,815 |       
|                                       |                                      |   |                                         |        |                    |        |        |       
|Operating costs and expenses:          |                                      |   |                                         |        |                    |        |        |       
|                                       | Cost of sales                        |   |                                         | 36,120 |                    |        |        | 41,351 |  
|                                       | Selling, general, and administrative |   |                                         | 7,310  |                    |        |        | 8,393  |  
|                                       | Depreciation and amortization        |   |                                         | 2,616  |                    |        |        | 2,157  |  
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   | Total operating costs and expenses      |        |                    | 46,046 |        |        |   | 51,901 | 
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   | Income from operations                  |        |                    | 3,223  |        |        |   | 2,914  | 
|                                       |                                      |   |                                         |        |                    |        |        |       
|Interest and other expenses (income):  |                                      |   |                                         |        |                    |        |        |       
|                                       | Interest expense                     |   |                                         | 655    |                    |        |        | 1,256  |  
|                                       | Loss on investee                     |   |                                         |       |                    |        |        | 455    |  
|                                       | Other, net                           |   |                                         | 117    |                    |        |        | (71    | )
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   | Income before income taxes              |        |                    | 2,451  |        |        |   | 1,274  | 
|                                       |                                      |   |                                         |        |                    |        |        |       
|Income taxes                           |                                      |   | 956                                     |        |                    |        | 15     |       
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   | Net income                              |        |                    | 1,495  |        |        |   | 1,259  | 
|                                       |                                      |   |                                         |        |                    |        |        |       
|Preferred dividends                    |                                      |   |                                        |        |                    |        | 71     |       
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   | Income available to common stockholders |        | $                  | 1,495  |        |        | $ | 1,188  | 
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   |                                         |        |                    |        |        |       
|Earnings per common share:             |                                      |   |                                         |        |                    |        |        |       
|                                       | Basic                                |   | $                                       | 0.08   |                    |        | $      | 0.08   |  
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       | Diluted                              |   | $                                       | 0.08   |                    |        | $      | 0.07   |  
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       |                                      |   |                                         |        |                    |        |        |       
|Shares used in per share calculations: |                                      |   |                                         |        |                    |        |        |       
|                                       | Basic                                |   |                                         | 17,842 |                    |        |        | 14,121 |  
|                                       |                                      |   |                                         |        |                    |        |        |       
|                                       | Diluted                              |   |                                         | 19,853 |                    |        |        | 17,701 |  
|                                       |                                      |   |                                         |        |                    |        |        |       

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 Three Months Ended October 31, 2003 and 2002
(In thousands)

|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |        |   |       |        |  
|------------------------------------------------ | --------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------- | --------------------------------------------------- | - | ------------------ | ------- | ------ | - | ----- | ------ | -
|                                                 |                                                                                   |  |                                                                            |                                                     |   | Three Months Ended
|                                                 |                                                                                   |  |                                                                            |                                                     |   | October 31,       
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                   
|                                                 |                                                                                   |  |                                                                            |                                                     |   | 2003               |         | 2002  
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            |                                                     |   | (unaudited)       
|Cash flows from operating activities:            |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 | Net income                                                                        |  | $                                                                          | 1,495                                               |   |                    | $       | 1,259  |  
|                                                 | Adjustments to reconcile net income to net cash provided by
operating activities: |  |                                                                            |                                                     |   |                    |         |        |  
|                                                 |                                                                                   |  | Depreciation and amortization                                              |                                                     |   | 2,616              |         |        |   | 2,157 |       
|                                                 |                                                                                   |  | Loss on investee                                                           |                                                     |   |                   |         |        |   | 455   |       
|                                                 |                                                                                   |  | Non-cash interest expense                                                  |                                                     |   | 113                |         |        |   | 268   |       
|                                                 |                                                                                   |  | Deferred income taxes                                                      |                                                     |   | 941                |         |        |   |      |       
|                                                 |                                                                                   |  | Other non-cash expenses                                                    |                                                     |   | 175                |         |        |   | 145   |       
|                                                 |                                                                                   |  | Changes in operating assets and liabilities,
net of business acquisitions: |                                                     |   |                    |         |        |   |       |       
|                                                 |                                                                                   |  |                                                                            | Accounts receivable                                 |   |                    | 13,755  |        |   |       | 6,394  |  
|                                                 |                                                                                   |  |                                                                            | Inventories                                         |   |                    | 729     |        |   |       | (3,185 | )
|                                                 |                                                                                   |  |                                                                            | Other current assets                                |   |                    | 949     |        |   |       | 309    |  
|                                                 |                                                                                   |  |                                                                            | Accounts payable and accrued liabilities            |   |                    | (8,993  | )      |   |       | (6,406 | )
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            | Net cash provided by operating activities           |   |                    | 11,780  |        |   |       | 1,396  |  
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|Cash flows from investing activities:            |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 | Purchases of property, plant, and equipment                                       |  |                                                                            | (2,630                                              | ) |                    |         | (2,412 | )
|                                                 | Net advances to and investment in joint venture                                   |  |                                                                            |                                                    |   |                    |         | (1,086 | )
|                                                 | Purchases of cylinders, net                                                       |  |                                                                            | 1,710                                               |   |                    |         | 107    |  
|                                                 | (Issuance of) collections on notes receivable and advances
to distributors, net   |  |                                                                            | 9                                                   |   |                    |         | (2,437 | )
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            | Net cash used in investing activities               |   |                    | (911    | )      |   |       | (5,828 | )
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|Cash flows from financing activities:            |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 | Proceeds from (payments on) revolving line of credit, net                         |  |                                                                            | (9,300                                              | ) |                    |         | 2,576  |  
|                                                 | Proceeds from issuance of equity, net of expenses                                 |  |                                                                            | 108                                                 |   |                    |         | 2,395  |  
|                                                 | Payments on long-term debt and capital lease obligations                          |  |                                                                            | (1,619                                              | ) |                    |         | (396   | )
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            | Net cash provided by (used in) financing activities |   |                    | (10,811 | )      |   |       | 4,575  |  
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|Net increase in cash and cash equivalents        |                                                                                   |  | 58                                                                         |                                                     |   |                    | 143     |       
|Cash and cash equivalents at beginning of period |                                                                                   |  | 2,495                                                                      |                                                     |   |                    | 1,563   |       
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       
|                                                 |                                                                                   |  |                                                                            | Cash and cash equivalents at end of period          |   | $                  | 2,553   |        |   | $     | 1,706  |  
|                                                 |                                                                                   |  |                                                                            |                                                     |   |                    |         |       

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
October 31, 2003 (Unaudited)
(In thousands, except share and per share data)

1. Basis of Presentation

The 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 3). 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-month period ended October 31, 2003
are not necessarily indicative of the results that may be expected for any
other period.

The balance sheet at July 31, 2003 has been derived from the audited
financial statements of the Company as of July 31, 2003 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 the Company as of and for the year ended
July 31, 2003.

2. Stock-Based Compensation

The Company has three stock-based compensation plans (the Plans) for
outside directors, officers and certain employees to receive stock options and
other equity-based awards: the Blue Rhino Corporation Stock Incentive Plan
(the 1994 Stock Incentive Plan), the Blue Rhino Corporation 1998 Stock
Incentive Plan (the 1998 Stock Incentive Plan) and the Blue Rhino Corporation
Stock Option Plan for Non-Employee Directors (the Director Option Plan).
Under the 1998 Stock Incentive Plan and the Director Option Plan, the Company
may issue only non-qualified stock options. Under the 1994 Stock Incentive
Plan, the Company was authorized to issue incentive or non-qualified stock
options, stock appreciation rights, restricted stock or deferred stock, at its
discretion. The Company no longer makes grants under the 1994 Stock Incentive
Plan. The Company accounts for the Plans 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 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).

5



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##### 



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 months ended October 31, 2003
and 2002 would have been as follows:

|                                                                         |                      |  |                    |       |      |  |     |       | 
|------------------------------------------------------------------------ | -------------------- |  | ------------------ | ----- | ---- |  | --- | ----- | 
|                                                                         |                      |  | Three months ended
|                                                                         |                      |  | October 31,       
|                                                                         |                      |  |                   
|                                                                         |                      |  | 2003               |       | 2002
|                                                                         |                      |  |                    |       |     
|Net income available for common stockholders:                            |                      |  |                    |       |      |  |     |      
|                                                                         | As reported          |  | $                  | 1,495 |      |  | $   | 1,188 | 
|Less:                                                                    |                      |  |                    |       |      |  |     |      
|Compensation expense determined using
Black-Scholes Option Pricing Model |                      |  | 1,120              |       |      |  | 504 |      
|                                                                         |                      |  |                    |       |      |  |     |      
|                                                                         | Pro forma net
income |  | $                  | 375   |      |  | $   | 684   | 
|                                                                         |                      |  |                    |       |      |  |     |      
|Earnings per common share:                                               |                      |  |                    |       |      |  |     |      
|Basic:                                                                   |                      |  |                    |       |      |  |     |      
|                                                                         | As reported          |  | $                  | 0.08  |      |  | $   | 0.08  | 
|                                                                         |                      |  |                    |       |      |  |     |      
|                                                                         | Pro forma            |  | $                  | 0.02  |      |  | $   | 0.05  | 
|                                                                         |                      |  |                    |       |      |  |     |      
|Diluted:                                                                 |                      |  |                    |       |      |  |     |      
|                                                                         | As reported          |  | $                  | 0.08  |      |  | $   | 0.07  | 
|                                                                         |                      |  |                    |       |      |  |     |      
|                                                                         | Pro forma            |  | $                  | 0.02  |      |  | $   | 0.04  | 
|                                                                         |                      |  |                    |       |      |  |     |      

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 1.1% to 5.8%.

3. Investment in Joint Venture

As a result of the acquisition of Platinum, the Company increased its
ownership interest in 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 October 31,
2002 of $455.

4. Income taxes

Income tax expense in fiscal 2004 primarily reflects the federal statutory
tax rate and state taxes net of the federal benefit. Income tax expense in
fiscal 2003 differed from the statutory federal and state tax rates due to
changes in the valuation reserve for deferred tax assets.

6



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##### 



5. 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
|                                                                       |                       |   | October 31,       
|                                                                       |                       |   |                   
|                                                                       |                       |   | 2003               |       | 2002
|                                                                       |                       |   |                    |       |     
|Net income                                                             |                       | $ | 1,495              |       |      | $ | 1,259  |      
|Less: Preferred stock dividends                                        |                       |   |                   |       |      |   | 71     |      
|                                                                       |                       |   |                    |       |      |   |        |      
|Income applicable to common stockholders                               |                       | $ | 1,495              |       |      | $ | 1,188  |      
|                                                                       |                       |   |                    |       |      |   |        |      
|Income applicable to common stockholders                               |                       | $ | 1,495              |       |      | $ | 1,188  |      
|Weighted average number of common shares
outstanding (in thousands)    |                       |   | 17,842             |       |      |   | 14,121 |      
|                                                                       |                       |   |                    |       |      |   |        |      
|Basic earnings per common share                                        |                       | $ | 0.08               |       |      | $ | 0.08   |      
|                                                                       |                       |   |                    |       |      |   |        |      
|                                                                       |                       |   |                    |       |      |   |        |      
|Income applicable to common stockholders                               |                       | $ | 1,495              |       |      | $ | 1,188  |      
|Weighted average number of common shares
outstanding (in thousands)    |                       |   | 17,842             |       |      |   | 14,121 |      
|Effect of potentially dilutive securities:                             |                       |   |                    |       |      |   |        |      
|                                                                       | Common stock options  |   |                    | 1,399 |      |   |        | 1,748 | 
|                                                                       | Common stock warrants |   |                    | 612   |      |   |        | 1,832 | 
|                                                                       |                       |   |                    |       |      |   |        |      
|Weighted average number of common shares
outstanding assuming dilution |                       |   | 19,853             |       |      |   | 17,701 |      
|                                                                       |                       |   |                    |       |      |   |        |      
|Diluted earnings per common share                                      |                       | $ | 0.08               |       |      | $ | 0.07   |      
|                                                                       |                       |   |                    |       |      |   |        |      

Common stock options listed below for the three months ended October 31,
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
|                                    |  | October 31,       
|                                    |  |                   
|                                    |  | 2003               |       | 2002
|                                    |  |                    |       |     
|Common stock options (in thousands) |  |                    | 2,267 |      |  |  | 49 | 

6. 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.

7



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##### 



A summary of changes in OCI for the three months ended October 31, 2003
and 2002 is presented below:

|                                                                                                                                                                  |  |                    |      |      |  |   |       |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | ---- |  | - | ----- | -
|                                                                                                                                                                  |  | Three Months Ended
|                                                                                                                                                                  |  | October 31,       
|                                                                                                                                                                  |  |                   
|                                                                                                                                                                  |  | 2003               |      | 2002
|                                                                                                                                                                  |  |                    |      |     
|Beginning balance deferred in OCI                                                                                                                                 |  | $                  | 814  |      |  | $ | (26   | )
|Net change associated with current period hedge
transactions, net of tax of ($53) and $0 in the
three-month period ending October 31, 2003
and 2002, respectively |  |                    | 81   |      |  |   | 1,074 |  
|Net amount reclassified into earnings during the
period, net of tax of $458 and $0, respectively                                                                  |  |                    | (700 | )    |  |   | (133  | )
|                                                                                                                                                                  |  |                    |      |      |  |   |       |  
|Ending balance deferred in OCI                                                                                                                                    |  | $                  | 195  |      |  | $ | 915   |  
|                                                                                                                                                                  |  |                    |      |      |  |   |       |  

Total comprehensive income for the three months ended October 31, 2003 and
2002 was $876 and $2,200, respectively.

7. Commitments and Contingencies

Patent Lawsuit and Related Proceedings

On August 8, 2003, American Biophysics Corporation (ABC) filed a patent
infringement suit against the Company in the U.S. District Court for the
District of Rhode Island. ABC alleges that the SkeeterVac® mosquito
elimination product infringes certain patents of ABC. The complaint seeks
treble damages and attorneys fees. Also on August 8, 2003, ABC filed a
complaint against the Company with the United States International Trade
Commission (ITC) pursuant to Section 337 of the Tariff Act of 1930, as
amended (Section 337). That complaint requests that the ITC institute an
investigation regarding alleged violations of Section 337 based upon the
importation into the United States by the Company and/or the offer for sale and
sale within the United States after importation of SkeeterVac® products that
allegedly infringe certain ABC patents. ABC also requested that the ITC issue
a permanent exclusion order pursuant to Section 337, which would exclude
further entry into the United States of the allegedly infringing products, and
a permanent cease and desist order under Section 337, which would prohibit the
importation into the United States, the sale for importation, and/or sale
within the United States after importation, of allegedly infringing products.
The ITC has instituted an investigation and the parties are currently
conducting discovery. On August 13, 2003, the Companys subsidiary, Blue Rhino
Consumer Products, LLC (BRCP), filed suit against ABC in the U.S. District
Court for the Middle District of North Carolina seeking a declaration that
BRCPs SkeeterVac® product does not infringe ABCs patents. On August 14,
2003, BRCP and another Company subsidiary, CPD Associates, Inc. (CPD), filed
a lawsuit in the Superior Court of North Carolina, Forsyth County, against ABC
asserting unfair and deceptive trade practices, unfair competition under North
Carolina common law, tortious interference with business relations and
prospective economic advantage, violations of Section 43(a) of the Lanham Act,
and violation of the Anticybersquatting Consumer Protection Act. The complaint
seeks, among other relief against ABC, a permanent injunction, treble damages,
punitive damages, attorneys fees and other costs and expenses. This case has
been removed to the U.S. District Court for the Middle District of North
Carolina. Motions are pending to consolidate the North Carolina federal court
actions and stay these actions pending the outcome of the ITC proceeding. The
parties have also filed motions seeking to transfer the North Carolina and
Rhode Island federal court actions to a single court, either in Rhode Island or
North Carolina. The federal court action in Rhode Island has been stayed
pending the outcome of the ITC proceeding; however, the federal court in Rhode
Island has agreed to decide whether the pending action should be transferred to
North Carolina. The Company believes that ABCs claims against it are without
merit and intends to vigorously defend itself.

Securities Class Actions and Shareholder Derivative Actions

On May 19, 2003, George Schober filed a shareholder securities class
action lawsuit in the United States District Court for the Central District of
California, naming the Company, along with four of its officers and directors,
as defendants. Six tag-along securities class actions arising out of the same
alleged facts and circumstances as the original action were subsequently filed
in the same court. The cases have been consolidated into a single action and
Andy Lee, Charles Anderberg and Steven Lendeman have been designated as lead
plaintiffs. Plaintiffs filed a consolidated complaint on December 3, 2003.
The plaintiffs seek to represent a class of investors who purchased the
Companys publicly-traded securities between August 2002 and February 2003.
The plaintiffs allege violations of Section 10(b) of the Securities Exchange
Act of 1934 (the Exchange Act) and Rule 10b-5 promulgated thereunder, and
Section 20(a) of the Exchange Act. In particular, the plaintiffs have alleged
that the Company and the individual defendants violated the federal securities
laws by, among other things, improperly failing to consolidate distributors Ark
and Platinum for financial reporting purposes prior to the date of their being
acquired by the Company, making materially false and misleading statements
and/or

8



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##### 



failing to disclose material facts related to the financial performance and
prospects of the Company and distributors Ark and Platinum, and making
materially false and misleading statements and/or failing to disclose material
facts relating to the Companys acquisition of Ark and Platinum. The complaint
seeks unspecified damages, plus reasonable costs and expenses, including
attorneys fees and experts fees. 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. On June 19, 2003, Randy
Gish filed a substantially similar derivative action in the same court. Both
the Marcoux and Gish actions were removed to the U.S. District Court for the
Central District of California. The Marcoux case was subsequently remanded to
Los Angeles Superior Court, but has been stayed pending resolution of the
federal actions. The derivative actions arise out of substantially similar
facts and circumstances as the securities class actions, and allege violations
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 securities class actions and
derivative actions are without merit and intends to vigorously defend itself
against these actions.

Other Litigation

The Company is also a party to other litigation which it considers routine
and incidental to its business. Management does not expect the results of any
of these other actions to have a material adverse effect on the Companys
business, results of operations or financial condition.

8. 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 months ended October
31, 2003 and 2002, QuickShip had a loss from operations of ($229) and ($451),
respectively.

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

9



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##### 



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 months ended
October 31, 2003 and 2002 is as follows:

|                              |                    |   |                    |         |      |   |         |         |  
|----------------------------- | ------------------ | - | ------------------ | ------- | ---- | - | ------- | ------- | -
|                              |                    |   | Three Months Ended
|                              |                    |   | October 31,       
|                              |                    |   |                   
|                              |                    |   | 2003               |         | 2002
|                              |                    |   |                    |         |     
|Net revenues:                 |                    |   |                    |         |      |   |         |        
|                              | Cylinder exchange  |   | $                  | 38,796  |      |   | $       | 36,949  |  
|                              | Products and other |   |                    | 10,473  |      |   |         | 17,866  |  
|                              |                    |   |                    |         |      |   |         |        
|                              |                    | $ | 49,269             |         |      | $ | 54,815  |        
|                              |                    |   |                    |         |      |   |         |        
|Segment EBITDA:               |                    |   |                    |         |      |   |         |        
|                              | Cylinder exchange  |   | $                  | 6,922   |      |   | $       | 5,550   |  
|                              | Products and other |   |                    | (1,083  | )    |   |         | (479    | )
|                              |                    |   |                    |         |      |   |         |        
|                              |                    | $ | 5,839              |         |      | $ | 5,071   |        
|                              |                    |   |                    |         |      |   |         |        
|Depreciation and amortization |                    |   | 2,616              |         |      |   | 2,157   |        
|Interest expense              |                    |   | 655                |         |      |   | 1,256   |        
|Loss on investee              |                    |   |                   |         |      |   | 455     |        
|Other, net                    |                    |   | 117                |         |      |   | (71     | )      
|Income taxes                  |                    |   | 956                |         |      |   | 15      |        
|                              |                    |   |                    |         |      |   |         |        
|Net income                    |                    | $ | 1,495              |         |      | $ | 1,259   |        
|                              |                    |   |                    |         |      |   |         |        
|                             
|                              |                    |   | As of October 31, 
|                              |                    |   |                   
|                              |                    |   | 2003               |         | 2002
|                              |                    |   |                    |         |     
|Total assets:                 |                    |   |                    |         |      |   |         |        
|                              | Cylinder exchange  |   | $                  | 146,336 |      |   | $       | 103,062 |  
|                              | Products and other |   |                    | 45,868  |      |   |         | 40,799  |  
|                              |                    |   |                    |         |      |   |         |        
|                              |                    | $ | 192,204            |         |      | $ | 143,861 |        
|                              |                    |   |                    |         |      |   |         |        

10



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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 prices for its products and
services may decline due to competitive or other factors; 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; risks that it will be found to have infringed the intellectual
property rights of others; its ability to mitigate the effects of high propane
commodity prices; its ability to integrate acquisitions; its ability to manage
its distributor operations; its ability to launch new products and services;
the effect of safety guidelines on consumer demand for cylinder exchange; its
ability to successfully defend certain lawsuits, including without limitation
contingencies associated with the shareholder class action, shareholder
derivative and patent infringement lawsuits 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 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, 2003, 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-month
period ended October 31, 2003 are not necessarily indicative of results that
may be expected for 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 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 cylinder exchange service
is offered at more than 28,000 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 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 cylinder
refill. We dedicate our efforts and capital to brand development, value-added
marketing, customer service, cylinders, displays, account growth, distributor
network management and management information systems. Our distributor network
is comprised of independent and company-owned distributorships that 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 45% of our cylinder
exchange revenues. We believe that our distributor network affords us the
opportunity to service approximately 90% of the consumer 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.

11



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##### 



We announced on November 25, 2003 that we are changing our fiscal year end
from July 31 to January 31; accordingly, fiscal 2004 will consist of the two
quarters ending on January 31, 2004, and fiscal 2005 will commence on February
1, 2004

Results of Operations

Comparison of the three months ended October 31, 2003 with the three months
ended October 31, 2002

Net revenues.Net revenues decreased 10.1% to $49.3 million for the three
months ended October 31, 2003 from $54.8 million for the three months ended
October 31, 2002. Cylinder exchange revenues increased 5.0% to $38.8 million
from $36.9 million primarily due to an approximately 8% increase in the number
of total cylinder transactions to 2.4 million units for the first quarter of
fiscal 2004 from 2.3 million units for the first quarter of fiscal 2003. 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. Products and others revenues decreased 41.4% to $10.5 million from
$17.9 million due principally to an expected shift in sales to a major retailer
from the first quarter of fiscal 2004 to the second quarter of fiscal 2004 and the first
quarter of fiscal 2005. We currently anticipate annual revenue growth between
10% and 15% for both our cylinder exchange and products and other segments and
we currently expect the new NFPA guidelines to continue to contribute to our
cylinder exchange revenue growth at a decreasing rate through July 2005. We
expect to lower cylinder exchange pricing over the next three fiscal
quarters primarily due to the declining number of costlier upgrade
transactions.

Gross margin. Our overall gross margin increased to 26.7% for the first
quarter of fiscal 2004 from 24.6% for the first quarter of fiscal 2003. Gross
margin percentage in cylinder exchange increased 220 basis points to 30.5% for
the three months ended October 31, 2003 from 28.3% for the three months ended
October 31, 2002 due primarily to the reduced cost of valves and cylinders.
The products and other segment gross margin decreased to 12.4% for the first
quarter of fiscal 2004 from 16.9% for the first quarter of fiscal 2003 due
primarily to lower margins on SkeeterVac® mosquito eradication products, which
began selling in March 2003. We currently expect cylinder exchange margins to
be between 25% and 28% over the next three fiscal
quarters, primarily due to lower unit pricing related to reduced upgrade transactions.
We expect this lower margin to be offset by
increased unit sales. We currently anticipate products gross margins to be
between 13% and 17% over the next three fiscal quarters.

Selling, general and administrative expenses. Selling, general and
administrative (SG&A) expenses decreased 12.9% to $7.3 million for the three
months ended October 31, 2003 from $8.4 million for the three months ended
October 31, 2002. As a percentage of net revenues, SG&A expenses decreased to
14.8% for the first quarter of fiscal 2004 from 15.3% for the first quarter of
fiscal 2003. SG&A expenses in the cylinder exchange segment remained constant
at $4.9 million for both the first quarter of fiscal 2004 and the first quarter
of fiscal 2003. SG&A expenses in the products and other segment decreased
31.6% to $2.4 million from $3.5 million in the same period in the prior year.
The decrease primarily results from special charges incurred in the prior year,
which consisted primarily of relocation expenses associated with the
consolidation of many products segment employees based in Zion, Illinois with
the cylinder exchange employee base in Winston-Salem, North Carolina. We
currently expect SG&A expenses to continue to decrease as a percentage of net
revenues over the next three fiscal quarters as compared to fiscal 2003.

Depreciation and amortization. Depreciation and amortization increased
21.3% to $2.6 million for the first quarter of fiscal 2004 from $2.2 million
for the first quarter of fiscal 2003. Depreciation and amortization in the
cylinder exchange segment increased 19.7% to $2.4 million for the first three
months of fiscal 2004 from $2.0 million in the same period of the prior year
due primarily to the increase in depreciation expense resulting from assets
acquired in the Platinum and Ark acquisitions in November 2002 and an increase
in the number of cylinders and displays. Depreciation and amortization in the
products and other segment increased 38.0% to $258,000 for the first quarter of
fiscal 2004 from $187,000 for the first quarter of fiscal 2003 due primarily to
the increase in depreciation expense related to machinery and equipment and
computer software costs. We currently expect depreciation and amortization to
increase approximately 15% over the next three fiscal quarters as compared to
fiscal 2003.

Interest expense.Interest expense decreased to $655,000 in the first
quarter of fiscal 2004 from $1.3 million in the first quarter of fiscal 2003
due primarily to the absence of subordinated debt, which was prepaid in the
third and fourth quarters of fiscal 2003, partially offset by higher average
borrowings on our credit facility at lower interest rates. We currently expect
interest expense to continue to decrease by approximately 50% over the next
three fiscal quarters as compared to fiscal 2003.

12



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##### 



Loss on investee.There was no loss on investee in the first quarter of
fiscal 2004. Loss on investee was $455,000 in the first quarter of fiscal
2003. We recognized 100% of the loss of R4 Tech in the first quarter of fiscal
2003 as a result of advances made without a corresponding advance from the
other joint venture partners. 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 expense was $117,000 in the first quarter of fiscal
2004 compared to other income of $71,000 in the first quarter of fiscal 2003.
Other, net consists primarily of interest income from advances made to
independent distributors and losses from the disposal of assets.

Income taxes.The provision for income taxes increased to $956,000 in the
first quarter of fiscal 2004 from $15,000 for the first quarter of fiscal 2003.
The provision reflects the transition to fully recognizing deferred tax assets
during the fourth quarter of fiscal 2003. We currently expect to report income
taxes at a fully taxed rate of approximately 39% going forward.

Preferred dividends.Preferred dividends accrued on outstanding Series A
Preferred Stock was $71,000 for the three months ended October 31, 2002. The
remaining outstanding shares of Series A Convertible preferred stock were
converted to shares of common stock in September 2002.

Liquidity and Capital Resources

Our primary sources of funds have been the incurrence of debt, the
issuance of stock, and cash flow from operations. The primary source of cash
for the first quarter of fiscal 2004 was cash provided by operations. The
primary sources of cash for the first quarter of fiscal 2003 were cash provided
by the issuance of stock and net proceeds from the credit facility and, to a
lesser extent, cash provided by operations.

Net cash provided by operations was $11.8 million for the three months
ended October 31, 2003 and $1.4 million for the three months ended October 31,
2002. The increase in cash provided by operations for the first quarter of
fiscal 2004 over the first quarter of fiscal 2003 was primarily due to the
increase in accounts receivable collections and the decrease in inventory
purchases.

Net cash used in investing activities was $911,000 for the three months
ended October 31, 2003 and $5.8 million for the three months ended October 31,
2002. The primary components of cash used in investing activities for both
periods included investments in property, plant and equipment and, in the case
of the three months ended October 31, 2002, advances to distributors and
advances to R4 Tech. During the three months ended October 31, 2002, we
provided net advances of $1.1 million to R4 Tech. As a result of the
acquisitions of Platinum and Ark on November 22, 2002 and the consolidation of
R4 Tech resulting from the acquisition of Platinum (Note 3 of Notes to
Condensed Consolidated Financial Statements), advances to R4 Tech, Platinum and
Ark in the first quarter of fiscal 2004 were not reflected in net cash used in
investing activities.

Net cash used in financing activities was $10.8 million for the three
months ended October 31, 2003, while cash provided by financing activities was
$4.6 million for the three months ended October 31, 2002. Cash used in
financing activities for the three months ended October 31, 2003 included
payments on our credit facility and, to a lesser extent, payments on long-term
debt and capital lease obligations. Cash provided by financing activities for
the three months ended October 31, 2002 included net proceeds from our credit
facility and net proceeds from exercises of warrants and stock options.

In November 2002, we completed the syndication of a new and expanded bank
credit facility (the Credit Facility). The Credit Facility consists of a
$45.0 million revolving line of credit and a $15.0 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. 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. On October 31, 2003 we had $34.9
million (including a $9.9 million balance on the term loan) in LIBOR loans
outstanding at a weighted-average interest rate of 3.62% and $1.7 million in
prime rate loans outstanding at a weighted-average interest rate of 5.00%.

Principal payments on the outstanding term loan began on December 31, 2002
and continue quarterly until September 30, 2005.

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The initial principal payments are $1.0 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, and restricts the payment of cash
dividends. At October 31, 2003, we were in compliance with all covenants.

In May 2003, we entered into an interest-rate swap agreement with an
effective date of August 1, 2003 and an expiration date of October 3, 2005.
The initial notional amount was $20.0 million beginning August 1, 2003, will
decrease to $15.0 million on June 1, 2004, will decrease to $10.0 million on
March 1, 2005 and will further decrease to $5.0 million on September 1, 2005.
Under the swap agreement, we pay a fixed rate of 1.85% and receive a rate
equivalent to the thirty-day LIBOR, adjusted monthly.

We currently have capital purchase commitments outstanding of
approximately $2.0 million relating to machinery and equipment associated with
three new cylinder refilling and refurbishing facilities that are being
constructed in Los Angeles, Chicago and Denver and two mobile filling and
refurbishing facilities. We expect that these commitments will be satisfied by
the spring of 2004. We currently anticipate that our total capital
expenditures for
the twelve months ending July 31, 2004, excluding acquisitions, will be approximately
$14.0 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 for the next four
fiscal quarters. We expect to pay down a portion of our Credit Facility over
the next four fiscal quarters. However, 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
not pay down any of our Credit Facility and might 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.

Contractual Obligations

The following table summarizes our contractual payment obligations and
other commercial commitments at October 31, 2003 (in thousands):

|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |       |     |  |  |   |     |  |  |   |       |  |  |   |        | 
|---------------------------------- |  | --------------------------------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ------ | ---------- |  | ----- | --- |  |  | - | --- |  |  | - | ----- |  |  | - | ------ | 
|                                   |  | Payment obligations by
twelve-month period ended July 31,
|                                   |  |                                                          
|Contractual obligations            |  | 2004                                                      |       | 2005 |  | 2006 |       | 2007 |  | 2008 |        | Thereafter |  | Total
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |      
|Long-term debt                     |  | $                                                         | 900   |      |  | $    | 49    |      |  | $    | 48     |            |  | $     | 32  |  |  | $ | 16  |  |  | $ | 161   |  |  | $ | 1,206  | 
|Capital lease obligations          |  |                                                           | 193   |      |  |      | 242   |      |  |      | 126    |            |  |       | 17  |  |  |   | 14  |  |  |   | 8     |  |  |   | 600    | 
|Operating leases                   |  |                                                           | 1,576 |      |  |      | 1,361 |      |  |      | 908    |            |  |       | 499 |  |  |   | 359 |  |  |   | 1,605 |  |  |   | 6,308  | 
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |       |     |  |  |   |     |  |  |   |       |  |  |   |        | 
|Total contractual cash obligations |  | $                                                         | 2,669 |      |  | $    | 1,652 |      |  | $    | 1,082  |            |  | $     | 548 |  |  | $ | 389 |  |  | $ | 1,774 |  |  | $ | 8,114  | 
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |       |     |  |  |   |     |  |  |   |       |  |  |   |        | 
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |       |     |  |  |   |     |  |  |   |       |  |  |   |        | 
|Other commercial
commitments       |  | 2004                                                      |       | 2005 |  | 2006 |       | 2007 |  | 2008 |        | Thereafter |  | Total
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |      
|Line of credit                     |  | $                                                         | 3,750 |      |  | $    | 5,750 |      |  | $    | 27,100 |            |  | $     |    |  |  | $ |    |  |  | $ |      |  |  | $ | 36,600 | 
|Standby letters of credit          |  |                                                           | 1,073 |      |  |      |      |      |  |      |       |            |  |       |    |  |  |   |    |  |  |   |      |  |  |   | 1,073  | 
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |       |     |  |  |   |     |  |  |   |       |  |  |   |        | 
|Total commercial commitments       |  | $                                                         | 4,823 |      |  | $    | 5,750 |      |  | $    | 27,100 |            |  | $     |    |  |  | $ |    |  |  | $ |      |  |  | $ | 37,673 | 
|                                   |  |                                                           |       |      |  |      |       |      |  |      |        |            |  |       |     |  |  |   |     |  |  |   |       |  |  |   |        | 

Related Party Transactions

We lease some of our facilities from Billy D. Prim, our Chairman and Chief
Executive Officer, and from Rhino Real Estate, LLC, a company affiliated with
Billy D. Prim and Andrew J. Filipowski, our Vice Chairman. The leases expire
on December 31, 2003, April 30, 2004 and October 31, 2007, respectively. Our
rent expense for the three months ended October 31, 2003 and 2002 was $126,000
and $87,000, respectively. Management has received an independent third-party
determination from Lincoln Harris, LLC to the effect that these leases are fair
and within typical market conditions for comparable properties and that the
terms of all of these leases are within the range of terms that could have been
obtained from unrelated third parties for comparable properties.

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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 the three months
ended October 31, 2003 and 2002 was $81,000 and $79,000, respectively.
Management believes that the terms of this lease are comparable to those that
could have been obtained from unrelated third parties.

We have paid fees for software development and Internet hosting services
provided by divine, inc. Andrew J. Filipowski, our Vice Chairman, was the
chairman and chief executive officer of divine, inc. prior to February 2003.
 For the three months ended October 31, 2002, we paid fees to divine, inc. in
the amount of $198,000. Management believes that the terms of these services
were comparable to those that could have been obtained from an unrelated third
party.

We have paid fees for maintenance and support services provided
by Silkroad Technology, Inc. Andrew J. Filipowski, our Vice Chairman, is the
Chairman of Silkroad Technology, Inc. For the three months ended October 31,
2003, we paid fees to Silkroad Technology, Inc. in the amount of $28,000.
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 prices reached unusually high levels. During the fourth quarter of
fiscal 2001 and continuing through the first quarter of fiscal 2003, propane
prices returned to a range more consistent with historical levels, but during
the balance of fiscal 2003 and the first quarter of fiscal 2004, again reached
unusually high levels. On March 1, 2001, we initiated a propane price hedging
strategy that 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. 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, obligations or relationships that we
consider to be off-balance sheet arrangements.

Impact of New Accounting Pronouncements

In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, which addresses the consolidation
of business enterprises (variable interest entities), to which the usual
condition of consolidation, a controlling financial interest, does not apply.
FIN 46 requires an entity to assess its business relationships to determine if
they are variable interest entities. As defined in FIN 46, variable interests
are contractual, ownership or other interests in an entity that change with
changes in the entitys net asset value. Variable interests in an entity may
arise from financial instruments, service contracts, guarantees, leases or
other arrangements with the variable interest entity. An entity that will
absorb a majority of the variable interest entitys expected losses or expected
residual returns, as defined in FIN 46, is considered the primary beneficiary
of the variable interest entity. The

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primary beneficiary must include the variable interest entitys assets,
liabilities and results of operations in its consolidated financial statements.
FIN 46 is immediately effective for all variable interest entities created
after January 31, 2003. For variable interest entities created prior to this
date, the provisions of FIN 46 were originally required to be applied no later
than our first quarter of fiscal 2004. On October 8, 2003, the FASB issued
FASB Staff Position (FSP) FIN 46-6, Effective Date of FASB Interpretation No.
46, Consolidation of Variable Interest Entities. The FSP provides a limited
deferral (until the end of our second quarter of fiscal 2004) of the effective
date of FIN 46 for certain interests of a public entity in a variable interest
entity or a potential variable interest entity. We will continue to
evaluate FIN 46, but due to the complex nature of the analysis required by FIN
46, we have not determined the 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. The Credit Facility bears interest based
on LIBOR and the 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
three months ended October 31, 2003 and 2002 by approximately $50,000 and
$21,000, respectively. Actual changes in interest rates may differ materially
from the 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 6 of Notes to Consolidated
Financial Statements). These derivative financial instruments, which are all
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 May 2003, we entered into an interest
rate swap agreement with an effective date of August 1, 2003 and an expiration
date of October 3, 2005. The initial notional amount was $20.0 million
beginning August 1, 2003, will decrease to $15.0 million on June 1, 2004, will
decrease to $10.0 million on March 1, 2005 and will further decrease to $5.0
million on September 1, 2005. Under the swap agreement, we pay a fixed rate of
1.85% and receive a rate equivalent to the thirty-day LIBOR, adjusted monthly.
At October 31, 2003, we had $34.9 million in LIBOR-based loans outstanding at a
weighted-average interest rate of 3.62% and the interest rate swap was an
effective cash flow hedge.

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 6 of Notes to
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. Substantially all of
our transactions are conducted and accounts are denominated in U.S. dollars,
and, as such, we do not currently have material exposure to foreign currency
risk.

Item 4. Controls and Procedures

As of the end of the period covered by this report, our Chief Executive
Officer and Chief Financial Officer evaluated the effectiveness of our
disclosure controls and procedures in accordance with Rule 13a-15 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 were no changes in our internal control over financial reporting
that occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

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PART II  OTHER INFORMATION

Item 1.Legal Proceedings

Patent Lawsuit and Related Proceedings

On August 8, 2003, American Biophysics Corporation (ABC) filed a patent
infringement suit against the Company in the U.S. District Court for the
District of Rhode Island. ABC alleges that the SkeeterVac® mosquito
elimination product infringes certain patents of ABC. The complaint seeks
treble damages and attorneys fees. Also on August 8, 2003, ABC filed a
complaint against the Company with the United States International Trade
Commission (ITC) pursuant to Section 337 of the Tariff Act of 1930, as
amended (Section 337). That complaint requests that the ITC institute an
investigation regarding alleged violations of Section 337 based upon the
importation into the United States by the Company and/or the offer for sale and
sale within the United States after importation of SkeeterVac® products that
allegedly infringe certain ABC patents. ABC also requested that the ITC issue
a permanent exclusion order pursuant to Section 337, which would exclude
further entry into the United States of the allegedly infringing products, and
a permanent cease and desist order under Section 337, which would prohibit the
importation into the United States, the sale for importation, and/or sale
within the United States after importation, of allegedly infringing products.
The ITC has instituted an investigation and the parties are currently
conducting discovery. On August 13, 2003, the Companys subsidiary, Blue Rhino
Consumer Products, LLC (BRCP), filed suit against ABC in the U.S. District
Court for the Middle District of North Carolina seeking a declaration that
BRCPs SkeeterVac® product does not infringe ABCs patents. On August 14,
2003, BRCP and another Company subsidiary, CPD Associates, Inc. (CPD), filed
a lawsuit in the Superior Court of North Carolina, Forsyth County, against ABC
asserting unfair and deceptive trade practices, unfair competition under North
Carolina common law, tortious interference with business relations and
prospective economic advantage, violations of Section 43(a) of the Lanham Act,
and violation of the Anticybersquatting Consumer Protection Act. The complaint
seeks, among other relief against ABC, a permanent injunction, treble damages,
punitive damages, attorneys fees and other costs and expenses. This case has
been removed to the U.S. District Court for the Middle District of North
Carolina. Motions are pending to consolidate the North Carolina federal court
actions and stay these actions pending the outcome of the ITC proceeding. The
parties have also filed motions seeking to transfer the North Carolina and
Rhode Island federal court actions to a single court, either in Rhode Island or
North Carolina. The federal court action in Rhode Island has been stayed
pending the outcome of the ITC proceeding; however, the federal court in Rhode
Island has agreed to decide whether the pending action should be transferred to
North Carolina. The Company believes that ABCs claims against it are without
merit and intends to vigorously defend itself.

Securities Class Actions and Shareholder Derivative Actions

On May 19, 2003, George Schober filed a shareholder securities class
action lawsuit in the United States District Court for the Central District of
California, naming the Company, along with four of its officers and directors,
as defendants. Six tag-along securities class actions arising out of the same
alleged facts and circumstances as the original action were subsequently filed
in the same court. The cases have been consolidated into a single action and
Andy Lee, Charles Anderberg and Steven Lendeman have been designated as lead
plaintiffs. Plaintiffs filed a consolidated complaint on December 3, 2003.
The plaintiffs seek to represent a class of investors who purchased the
Companys publicly-traded securities between August 2002 and February 2003.
The plaintiffs allege violations of Section 10(b) of the Securities Exchange
Act of 1934 (the Exchange Act) and Rule 10b-5 promulgated thereunder, and
Section 20(a) of the Exchange Act. In particular, the plaintiffs have alleged
that the Company and the individual defendants violated the federal securities
laws by, among other things, improperly failing to consolidate distributors Ark
and Platinum for financial reporting purposes prior to the date of their being
acquired by the Company, making materially false and misleading statements
and/or failing to disclose material facts related to the financial performance
and prospects of the Company and distributors Ark and Platinum, and making
materially false and misleading statements and/or failing to disclose material
facts relating to the Companys acquisition of Ark and Platinum. The complaint
seeks unspecified damages, plus reasonable costs and expenses, including
attorneys fees and experts fees. 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. On June 19, 2003, Randy
Gish filed a substantially similar derivative action in the same court. Both
the Marcoux and Gish actions were removed to the U.S. District Court for the
Central District of California. The Marcoux case was subsequently remanded to
Los Angeles Superior Court, but has been stayed pending resolution of the
federal actions. The derivative actions arise out of substantially similar
facts and circumstances as the securities class actions, and allege violations
of the California Corporations Code, breach of fiduciary duty, abuse of
control, gross mismanagement, waste of corporate assets and unjust enrichment.
The

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Company believes that all of the foregoing securities class actions and
derivative actions are without merit and intends to vigorously defend itself
against these actions.

Other Litigation

The Company is also a party to other litigation which it considers routine
and incidental to its business. Management does not expect the results of any
of these other actions to have a material adverse effect on the Companys
business, results of operations or financial condition.

Item 6.Exhibits And Reports On Form 8-K

(a)  Exhibits:

|     |  |   |  |                                                                                                                                                                                
|---- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  |  |  | Lease dated October 21, 2003 between Platinum Propane of Los
Angeles, LLC and BR Partners Three, LLC.                                                                          
|     |  |   |  |                                                                                                                                                                                
|10.2 |  |  |  | Guaranty dated July 29, 2003 by Blue Rhino Corporation in favor of
BR Partners Three, LLC.                                                                                     
|     |  |   |  |                                                                                                                                                                                
|31.1 |  |  |  | Certification of the Chief Executive Officer pursuant to Rule
13a-15(e) or 15d-15(e) of the Exchange Act, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|     |  |   |  |                                                                                                                                                                                
|31.2 |  |  |  | Certification of the Chief Financial Officer pursuant to Rule
13a-15(e) or 15d-15(e) of the Exchange Act, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|     |  |   |  |                                                                                                                                                                                
|32.1 |  |  |  | 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.                         
|     |  |   |  |                                                                                                                                                                                
|32.2 |  |  |  | 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.                         

(b)  Reports on Form 8-K filed in the first quarter of fiscal 2004:

During the quarter ended October 31, 2003, the Company filed the following
reports on Form 8-K:

On September 16, 2003, a Form 8-K was filed pursuant to Item 12 to
disclose that on September 16, 2003, the Company issued a press release
regarding its financial results for the fiscal year ended July 31, 2003.

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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: |  | December 10, 2003 |  | By:                    |  | /s/ Billy D. Prim                   
|      |  |                   |  |                        |  |                                     
|      |  |                   |  |                        |  | Chairman and Chief Executive Officer
|      |  |                   |  |                        |  |                                     
|Date: |  | December 10, 2003 |  | By:                    |  | /s/ Mark Castaneda                  
|      |  |                   |  |                        |  |                                     
|      |  |                   |  |                        |  | Chief Financial Officer             

19