<PAGE>
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           -------------------------

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

                FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2002

                                       OR

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                 FOR THE TRANSITION PERIOD FROM _____TO ______


                        COMMISSION FILE NUMBER: 0-24287

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


          DELAWARE                                               56-1870472
(State of other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              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 [  ]

                      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.


<TABLE>
<CAPTION>
                 Class                         Outstanding at February 28, 2002
--------------------------------------         --------------------------------
<S>                                            <C>
Common stock, par value $.001 per share                  9,383,581 Shares
</TABLE>


                                       1
<PAGE>


                             BLUE RHINO CORPORATION

                                     INDEX

                         PART I: FINANCIAL INFORMATION


Item 1:  Financial Statements (unaudited):

           Condensed consolidated balance sheets as of January 31, 2002 and
           July 31, 2001.

           Condensed consolidated statements of operations for the three- and
           six-month periods ended January 31, 2002 and 2001.

           Condensed consolidated statements of cash flows for the six-month
           periods ended January 31, 2002 and 2001.

           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.


                           PART II: OTHER INFORMATION

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

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

SIGNATURES


                                       2
<PAGE>


                                     PART I

                             FINANCIAL INFORMATION


ITEM 1:  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                             BLUE RHINO CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                    AS OF JANUARY 31, 2002 AND JULY 31, 2001
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                           JANUARY 31,                    JULY 31,
                                                                                              2002                         2001
                                                                                          ------------                   ---------
                                                                                          (unaudited)
<S>                                                                                        <C>                           <C>
                                     ASSETS
Current assets:
  Cash and cash equivalents ...................................................            $   1,431                     $   1,044
  Accounts receivable, net ....................................................               12,694                        19,619
  Inventories .................................................................                6,057                         7,960
  Prepaid expenses and other current assets ...................................                2,630                         9,402
                                                                                           ---------                     ---------
    Total current assets ......................................................               22,812                        38,025

Cylinders leased under operating lease agreements, net ........................               32,311                        31,466
Property, plant, and equipment, net ...........................................               30,043                        23,636
Intangibles, net ..............................................................               32,165                        32,282
Other Assets ..................................................................                2,871                         1,935
                                                                                           ---------                     ---------
    Total assets ..............................................................            $ 120,202                     $ 127,344
                                                                                           =========                     =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable ............................................................            $   8,184                     $  13,314
  Current portion of long-term debt and capital lease obligations .............                3,750                         2,333
  Accrued liabilities .........................................................                2,998                         3,617
                                                                                           ---------                     ---------
  Current liabilities exclusive of credit facility ............................               14,932                        19,264
  Credit facility .............................................................               36,364                            --
                                                                                           ---------                     ---------
    Total current liabilities .................................................               51,296                        19,264
Long-term debt and capital lease obligations, less current maturities .........               15,101                        53,171
                                                                                           ---------                     ---------
    Total liabilities .........................................................               66,397                        72,435

Stockholders' equity:
  Common stock, $0.001 par value; 100,000,000 shares authorized, 9,383,581 and
    9,221,703 shares issued and outstanding at January 31, 2002 and
    July 31, 2001, respectively ...............................................                    9                             9
  Preferred stock, $0.001 par value; 20,000,000 shares
    authorized, 2,850,000 shares issued and outstanding at January 31, 2002 and
    July 31, 2001; liquidation value $18,976
    at January 31, 2002 .......................................................                    3                             3
  Capital in excess of par ....................................................               78,888                        77,567
  Common stock warrants .......................................................                3,221                         3,221
  Accumulated deficit .........................................................              (25,190)                      (24,789)
  Accumulated other comprehensive loss ........................................               (3,126)                       (1,102)
                                                                                           ---------                     ---------
    Total stockholders' equity ................................................               53,805                        54,909
                                                                                           ---------                     ---------
    Total liabilities and stockholders' equity ................................            $ 120,202                     $ 127,344
                                                                                           =========                     =========
</TABLE>

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


                                       3
<PAGE>


                             BLUE RHINO CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2002 AND 2001
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                         SIX MONTHS ENDED
                                                                    JANUARY 31,                              JANUARY 31,
                                                           -----------------------------             -----------------------------
                                                             2002                 2001                 2002                 2001
                                                           --------             --------             --------             --------
                                                                   (Unaudited)                                (Unaudited)

<S>                                                        <C>                  <C>                  <C>                  <C>
Net revenues ..................................            $ 39,062             $ 31,668             $ 75,901             $ 65,489

Operating costs and expenses:
   Cost of sales ..............................              30,913               25,606               57,716               51,363
   Selling, general, and administrative .......               4,499                4,578               10,307                9,388
   Depreciation and amortization ..............               1,955                2,177                3,792                3,814
                                                           --------             --------             --------             --------
     Total operating costs and expenses .......              37,367               32,361               71,815               64,565
                                                           --------             --------             --------             --------
     Income (loss) from operations ............               1,695                 (693)               4,086                  924

Interest and other expenses (income):
   Interest expense ...........................               1,386                1,105                2,928                2,314
   Loss on investee ...........................                 340                  727                  677                1,297
   Other, net .................................                 (65)                 (93)                (251)                 (73)
                                                           --------             --------             --------             --------
         Income (loss) before income taxes ....                  34               (2,432)                 732               (2,614)

Income taxes ..................................                  13                   33                   26                   35
                                                           --------             --------             --------             --------
          Net income (loss) ...................            $     21             $ (2,465)            $    706             $ (2,649)
Preferred dividends ...........................                 641                  214                1,107                  342
                                                           --------             --------             --------             --------
        (Loss) available to common stockholders            $   (620)            $ (2,679)            $   (401)            $ (2,991)
                                                           ========             ========             ========             ========


Basic and diluted (loss) per common share .....            $  (0.05)            $  (0.22)            $  (0.03)            $  (0.27)
                                                           ========             ========             ========             ========

Shares used in per share calculations:
   Basic and diluted ..........................              12,182               12,079               12,159               11,186
                                                           ========             ========             ========             ========
</TABLE>

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


                                       4
<PAGE>


                             BLUE RHINO CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE SIX MONTHS ENDED JANUARY 31, 2002 AND 2001
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                                   SIX MONTHS ENDED
                                                                                                     JANUARY 31,
                                                                                            -----------------------------
                                                                                              2002                 2001
                                                                                            --------             --------
                                                                                                     (unaudited)

<S>                                                                                         <C>                  <C>
Cash flows from operating activities:
  Net income (loss)                                                                         $    706             $ (2,649)
  Adjustments to reconcile net income (loss) to net cash provided
    by operating activities:
      Depreciation and amortization                                                            3,792                3,814
      Loss on investee                                                                           677                1,297
      Other non-cash expenses                                                                    295                  146
      Changes in operating assets and liabilities, net of business acquisitions:
        Accounts receivable                                                                    6,925                7,862
        Inventories                                                                            1,748                1,668
        Other current assets                                                                     189               (1,873)
        Accounts payable and accrued liabilities                                              (6,555)             (10,053)
                                                                                            --------             --------

          Net cash provided by operating activities                                            7,777                  212
                                                                                            --------             --------

Cash flows from investing activities:
  Business acquisitions                                                                         (203)              (1,279)
  Purchases of property, plant, and equipment                                                 (1,562)              (2,459)
  Net advances to joint venture                                                               (1,524)              (1,609)
  Purchases of cylinders held under operating leases, net                                     (1,673)              (1,107)
  Collections on notes receivable                                                                 20                  350
                                                                                            --------             --------

          Net cash used in investing activities                                               (4,942)              (6,104)
                                                                                            --------             --------

Cash flows from financing activities:
  Proceeds from issuance of equity, net of expenses                                              213                9,617
  Proceeds from notes payable to bank                                                         37,807               20,586
  Payments on notes payable to bank                                                          (39,063)             (19,361)
  Payments on long-term debt and capital lease obligations                                    (1,405)              (1,033)
                                                                                            --------             --------

          Net cash (used in) provided by financing activities                                 (2,448)               9,809
                                                                                            --------             --------

Net increase in cash and cash equivalents                                                        387                3,917
Cash and cash equivalents at beginning of period                                               1,044                1,079
                                                                                            --------             --------

Cash and cash equivalents at end of period                                                  $  1,431             $  4,996
                                                                                            ========             ========
</TABLE>

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


                                       5
<PAGE>


                             BLUE RHINO CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                          JANUARY 31, 2002 (UNAUDITED)
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


1.       BASIS OF PRESENTATION

         The condensed consolidated financial statements of Blue Rhino
Corporation (the "Company") include the accounts of its wholly owned
subsidiaries: Rhino Services, L.L.C.; CPD Associates, Inc.; USA Leasing,
L.L.C.; Uniflame Corporation ("Uniflame") and QuickShip, Inc. ("QuickShip").
All material intercompany transactions and balances have been eliminated in
consolidation.

         The accompanying unaudited interim condensed consolidated financial
statements of the Company have been prepared by the Company in accordance with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and,
accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of items of a normal
recurring nature) considered necessary for a fair presentation have been
included. Operating results for the three- and six-month periods ended January
31, 2002 are not necessarily indicative of the results that may be expected for
the year ending July 31, 2002.

         The balance sheet at July 31, 2001 has been derived from the audited
financial statements of the Company as of July 31, 2001 but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.

         These financial statements should be read in conjunction with the
audited consolidated financial statements of Blue Rhino Corporation as of and
for the year ended July 31, 2001.

2.       DERIVATIVE INSTRUMENTS

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

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

         The net derivative 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.

         A summary of changes in OCI for the three and six months ended January
31, 2002 and 2001 is presented below:


<TABLE>
<CAPTION>
                                                                             THREE MONTHS ENDED             SIX MONTHS ENDED
                                                                                 JANUARY 31,                  JANUARY 31,
                                                                            ---------------------         ---------------------
                                                                              2002          2001           2002           2001
                                                                            -------         -----         -------         -----

<S>                                                                         <C>             <C>           <C>             <C>
Beginning balance deferred in OCI ..................................        $ 2,319         $ 227         $ 1,102         $ 131
Net change associated with current period hedge transactions .......          2,002           307           3,660           422

Net amount reclassified into earnings during the period ............         (1,195)          (19)         (1,636)          (38)
                                                                            -------         -----         -------         -----
Ending balance deferred in OCI .....................................        $ 3,126         $ 515         $ 3,126         $ 515
                                                                            =======         =====         =======         =====
</TABLE>


                                       6
<PAGE>


         Total comprehensive loss for the three and six months ended January
31, 2002 was ($786) and ($1,318), respectively. Total comprehensive loss for
the three and six months ended January 31, 2001 was ($2,753) and ($3,164),
respectively.

3.       INVESTMENT IN JOINT VENTURE

         The Company has a 49% ownership interest in a joint venture, R4
Technical Center North Carolina, LLC ("R4 Tech"). 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 is being accounted
for under the equity method of accounting. The Company recognized its portion
of the loss in the joint venture for the three and six months ended January 31,
2002 of $340 and $677, respectively. For the three and six months ended January
31, 2001, the Company recognized its portion of the loss in the joint venture
of $727 and $1,297, respectively. During the six months ended January 31, 2002
and January 31, 2001, the Company provided net advances to R4 Tech of $1,524
and $1,609, respectively. At January 31, 2002, the Company had advances
outstanding of $399 to R4 Tech.

         Effective September 30, 2001, the Company entered into a sale and
leaseback transaction with R4 Tech. The Company purchased all of the land,
buildings and equipment associated with the propane bottling and cylinder
refurbishing operation for $7,599. The purchase price was used by R4 Tech to
repay outstanding advances made by the Company. Contemporaneously with the
sale, R4 Tech leased back the land, buildings and equipment from the Company
under the terms of a three-year operating lease agreement. The sale and
leaseback transaction is not expected to have a material impact on the
Company's consolidated results of operations or financial position.

         Summary financial information for R4 Tech for the three and six months
ended January 31, 2002 and January 31, 2001 is as follows:


<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED                      SIX MONTHS ENDED
                                        JANUARY 31,                            JANUARY 31,
                                ---------------------------             ---------------------------
                                 2002                2001                2002                2001
                                -------             -------             -------             -------

<S>                             <C>                 <C>                 <C>                 <C>
Net revenues .......            $ 1,700             $ 2,457             $ 4,399             $ 4,068
Gross (loss) .......               (527)             (1,241)               (676)             (2,096)
Net loss ...........               (693)             (1,485)             (1,374)             (2,649)
</TABLE>

4.       GOODWILL AND OTHER INTANGIBLE ASSETS

         In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations,
and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill (and
intangible assets deemed to have indefinite lives) will no longer be amortized
but will be subject to impairment tests on at least an annual basis (and more
often in certain circumstances) in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful lives.
Application of the nonamortization provisions of the Statements is expected to
result in an increase in net income of approximately $2.6 million in fiscal
2002. At January 31, 2002, the Company had unamortized intangibles of $30.7
million that were subject to the transition provisions of the Statements.

         The Company applied the new rules for accounting for goodwill and
other intangible assets beginning in the first quarter of fiscal 2002. In
accordance with the requirements of SFAS 142, the Company has identified three
reporting units: the cylinder exchange segment, Uniflame, and QuickShip. The
forecasts, valuations and impairment analyses under the Statement were made at
these reporting unit levels. The fair values of the cylinder exchange segment
and Uniflame were based on discounted cash flow projections over ten fiscal
years. The Company projected positive cash flows for cylinder exchange and
Uniflame in all periods. The valuations indicated that the fair value of the
reporting units exceeded the carrying value of the reporting units by a
substantial margin.

         Negative indicators currently exist for QuickShip, including operating
losses and negative cash flows. As a result, management deemed it appropriate
to obtain an independent valuation of QuickShip to determine if goodwill
impairment existed as of August 1, 2001. The valuation is based on projected
cash flows over ten fiscal years with significant growth in the number of
locations and revenue in years three through seven. Capital expenditures range
from $100 to $750 each year. The Company projected negative cash flows in years
one and two and steadily increasing positive cash flows in years three through
ten. The valuation uses a discount rate of 25%. The independent valuation
concluded that the fair value of QuickShip exceeded its carrying value at
August 1, 2001.


                                       7
<PAGE>


         Based on the foregoing, the Company determined there to be no
impairment of goodwill upon adoption of SFAS 142. Future goodwill impairment
tests may, however, result in a charge to earnings.

         The following table presents the impact of SFAS 142 on net (loss) and
net (loss) per share had the standard been in effect for the three and six
months ended January 31, 2002 and 2001 (in thousands, except per share
amounts):


<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                                    JANUARY 31,                          JANUARY 31,
                                                            --------------------------           --------------------------
                                                              2002              2001               2002               2001
                                                            --------           -------           --------           -------
                                                                     (unaudited)                         (unaudited)

<S>                                                         <C>                <C>               <C>                <C>
Reported (loss) available to common shareholders .....      $   (620)          $(2,679)          $   (401)          $(2,991)
Adjustments:
   Amortization of goodwill ..........................            --               656                 --               938
                                                            --------           -------           --------           -------
Adjusted (loss) available to common shareholders .....      $   (620)          $(2,023)          $   (401)          $(2,053)
                                                            ========           =======           ========           =======

Reported basic and diluted loss per common share .....      $  (0.05)          $ (0.22)          $  (0.03)          $ (0.27)
                                                            ========           =======           ========           =======
Adjusted basic and diluted loss per common share .....      $  (0.05)          $ (0.17)          $  (0.03)          $ (0.18)
                                                            ========           =======           ========           =======
</TABLE>

5.       EARNINGS (LOSS) PER SHARE

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


<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                                   JANUARY 31,                           JANUARY 31,
                                                          ---------------------------           ---------------------------
                                                            2002               2001               2002               2001
                                                          --------           --------           --------           --------
                                                                   (Unaudited)                         (Unaudited)

<S>                                                       <C>                <C>                <C>                <C>
Net income (loss) ..............................          $     21           $ (2,465)          $    706           $ (2,649)
Less: Preferred stock dividends ................               641                214              1,107                342
                                                          --------           --------           --------           --------
(Loss) applicable to common stockholders .......          $   (620)          $ (2,679)          $   (401)          $ (2,991)
                                                          ========           ========           ========           ========

(Loss) applicable to common stockholders .......          $   (620)          $ (2,679)          $   (401)          $ (2,991)
Weighted average number of common shares
 outstanding (in thousands) ....................            12,182             12,079             12,159             11,186
                                                          --------           --------           --------           --------
Basic and diluted (loss) per common share ......          $  (0.05)          $  (0.22)          $  (0.03)          $  (0.27)
                                                          ========           ========           ========           ========
</TABLE>

         The shares related to common stock options and common stock warrants
listed below were not included in the computation of diluted earnings per share
for the three and six months ended January 31, 2002 and January 31, 2001,
respectively, because their inclusion would have been anti-dilutive.


<TABLE>
<CAPTION>
                                            THREE AND SIX MONTHS
                                              ENDED JANUARY 31,
                                    ------------------------------------
                                      2002                        2001
                                    ---------                  ---------
                                                (unaudited)

<S>                                 <C>                        <C>
Common stock options                3,247,756                  2,461,235
                                    =========                  =========
Common stock warrants               2,910,295                  1,207,110
                                    =========                  =========
</TABLE>

6.       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, fireplace accessories and garden products. In addition, the
financial information related to QuickShip, a retail shipping service company
acquired in October 2000, is included within the products segment as it is not
currently material on a stand-alone basis. For the three and six months ended
January 31, 2002, QuickShip had a loss before interest, taxes, depreciation and
amortization of ($362) and ($687), respectively.


                                       8
<PAGE>


         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").

         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 majority
of the products business segment was acquired in the Uniflame acquisition in
April 2000. The Company's selected segment information as of and for the three
and six months ended January 31, 2002 and January 31, 2001 is as follows:


<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED                   SIX MONTHS ENDED
                                                  JANUARY 31,                         JANUARY 31,
                                          --------------------------            --------------------------
                                            2002               2001              2002               2001
                                          -------            -------            -------            -------
<S>                                       <C>                <C>                <C>                <C>
Net revenues:
  Cylinder exchange ..........            $19,214            $16,759            $40,638            $33,719
  Products and other .........             19,848             14,909             35,263             31,770
                                          -------            -------            -------            -------
                                          $39,062            $31,668            $75,901            $65,489
                                          =======            =======            =======            =======
  Segment EBITDA:
  Cylinder exchange ..........            $ 2,524            $   826            $ 5,451            $ 1,487
  Products and other .........              1,126                658              2,427              3,251
                                          -------            -------            -------            -------
                                          $ 3,650            $ 1,484            $ 7,878            $ 4,738
                                          =======            =======            =======            =======
</TABLE>


<TABLE>
<CAPTION>
                                                AS OF JANUARY 31,
                                          ----------------------------
                                            2002                2001
                                          --------            --------
<S>                                       <C>                 <C>
Total assets:
  Cylinder exchange ..........            $ 87,851            $ 82,663
  Products and other .........              32,351              31,461
                                          --------            --------
                                          $120,202            $114,124
                                          ========            ========
</TABLE>


                                       9
<PAGE>


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," "PREDICTS," "POTENTIAL," "CONTINUE" AND SIMILAR WORDS
OR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH
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 STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ARE INHERENTLY
UNCERTAIN AND SUBJECT TO RISKS, AND SHOULD BE VIEWED WITH CAUTION. THE
COMPANY'S BUSINESS IS SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES INCLUDING, IN
PARTICULAR, THE COMPANY'S ABILITY TO PLACE BLUE RHINO CYLINDER EXCHANGE AT
ADDITIONAL RETAIL LOCATIONS, TO INTEGRATE ACQUISITIONS, TO LAUNCH NEW PRODUCTS
AND SERVICES AND TO MITIGATE THE EFFECTS OF HIGH PROPANE COMMODITY PRICES
SUCCESSFULLY. THESE AND OTHER RISKS AND UNCERTAINTIES, INCLUDING THOSE DETAILED
IN THE COMPANY'S REGISTRATION STATEMENT ON FORM S-3/A DATED OCTOBER 29, 2001
AND ITS MOST RECENT ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, COULD CAUSE ACTUAL RESULTS, PERFORMANCE AND DEVELOPMENTS
TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY ANY OF THESE
FORWARD-LOOKING STATEMENTS. 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 and QuickShip, Inc. (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, 2001, on file with the Securities and
Exchange Commission. The results of operations for the three- and six-month
periods ended January 31, 2002 are not necessarily indicative of results that
may be expected for the fiscal year ending July 31, 2002 or any other period,
in part due to the seasonality of our business.

         Blue Rhino was founded in March 1994 and we believe we have become the
leading national provider of gas grill cylinder exchange and a leading provider
of other branded products and services to retailers, with Blue Rhino cylinder
displays at more than 26,000 retail locations in 46 states and Puerto Rico.
Cylinder exchange provides consumers with a convenient means to exchange empty
grill cylinders for clean, safe, precision-filled cylinders. We offer our
cylinder exchange at many major home improvement centers, mass merchants,
hardware, grocery and convenience stores, including Home Depot, Lowe's,
Wal*Mart, Sears, Kmart, Kroger, Food Lion, Winn-Dixie, SuperAmerica, Circle K
and ExxonMobil. The number of retail locations we report in any period is net
of any retail locations at which we have discontinued our cylinder exchange
service, whether due to closings, relocations, poor performance, competitive,
regulatory or other factors.

         We partner with retailers and independent distributors to provide
consumers with a nationally branded alternative to traditional grill cylinder
refill. We dedicate our efforts and capital to brand development, value-added
marketing, customer service, cylinders, displays, distributor network
development and management information systems. Our 43 independent distributors
invest in the vehicles and other operational infrastructure necessary to operate
cylinder exchange businesses. We believe that our distributor network affords
us the opportunity to service approximately 90% of the cylinder exchange
markets in the United States.

         Uniflame's revenues are derived from products that use propane
cylinders as their fuel source, principally patio heaters and grills, and
non-propane products such as charcoal grills, fireplace accessories and garden
products. The majority of Uniflame's sales occur in the fall and winter months,
which is counterseasonal to our cylinder exchange segment. QuickShip, Inc., a
retail shipping services company acquired in October 2000, is included within
the products segment as it is not currently material on a stand-alone basis.


                                      10
<PAGE>


RESULTS OF OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED JANUARY 31, 2002 WITH THE THREE MONTHS
ENDED JANUARY 31, 2001

         Net revenues. Net revenues increased 23% to $39.1 million for the
three months ended January 31, 2002 from $31.7 million for the three months
ended January 31, 2001. Net revenues consisted of $19.2 million from cylinder
exchange and $19.9 million from the products and other segment. Cylinder
exchange revenues increased 15% due primarily to an approximately 10% increase
in the number of cylinder transactions to 1.2 million units in the three months
ended January 31, 2002 from 1.1 million units during the same period in the
prior year, reflecting the positive trend in consumer acceptance of cylinder
exchange over refill. Approximately one-third of the increase in cylinder
exchange revenues was due to price increases to retailers and approximately
two-thirds was due to increases in the number of cylinder transactions. Product
revenues increased 33% due principally to a shift in the timing of shipments to
retailers from our first fiscal quarter to the second quarter. We continue to
anticipate double-digit revenue growth for both our cylinder exchange and
products segments for fiscal years 2002 and 2003. We expect the new National
Fire Protection Association requirement that all propane cylinders refilled
after April 1, 2002 be fitted with an overfill prevention device to contribute
to our cylinder exchange revenue growth.

         Gross margin. Our overall gross margin percentage increased to 20.9%
in the second quarter of fiscal 2002 from 19.1% in the second quarter of fiscal
2001. Gross margin percentage increased 432 basis points in cylinder exchange
to 28.6% from 24.3% in the same period of the prior year due primarily to price
increases to retailers. We believe that our propane hedges and modified
distributor payment structure will protect our future cylinder exchange gross
margin from exposure to volatility in propane prices. The products segment
gross margin remained unchanged at 13.4% compared to the same period in the
prior year.

         Selling, general and administrative expenses. Selling, general and
administrative expenses decreased slightly to $4.5 million for the three months
ended January 31, 2002 from $4.6 million for the three months ended January 31,
2001 and, as a percentage of net revenues, decreased to 11.5% for the three
months ended January 31, 2002 from 14.5% for the three months ended January 31,
2001. The decrease in selling, general and administrative expenses as a
percentage of net revenues was due predominantly to the fact that a significant
portion of such expenses are fixed and increased at a slower rate than did net
revenues.

         Depreciation and amortization. Depreciation and amortization decreased
to $2.0 million for the second quarter of fiscal 2002 from $2.2 million for the
second quarter of fiscal 2001. This decrease was primarily due to a reduction
in amortization expense to $77,000 in the second quarter of fiscal 2002 from
$753,000 in the second quarter of fiscal 2001 as a result of the elimination of
goodwill amortization from the implementation of SFAS No. 142, Goodwill and
Other Intangible Assets. The decrease was partially offset by an increase in
depreciation expense resulting from an increase in the number of cylinders held
under operating lease agreements and from our acquisition, effective September
30, 2001, of machinery and equipment from R4 Technical Center North Carolina,
LLC, the Company's joint venture ("R4 Tech").

         Interest expense. Interest expense increased to $1.4 million in the
second quarter of fiscal 2002 from $1.1 million in the second quarter of fiscal
2001 primarily due to $15 million of subordinated debt that we obtained on June
15, 2001.

         Loss on investee. Loss on investee decreased to $340,000 in the second
quarter of fiscal 2002 from $727,000 in the second quarter of fiscal 2001. This
charge represents our share of the loss related to our 49% ownership interest
in R4 Tech. We expect this venture to continue to experience losses, which we
believe are typical in a start-up manufacturing operation, until volumes
increase, which we currently believe will occur during our fourth quarter. We
cannot, however, predict with certainty when this will occur, if ever. R4 Tech
is subject to significant seasonal fluctuations in revenues and net income
(loss). We expect R4 Tech's revenues to be the highest in our third and fourth
quarters, which include the majority of the grilling season, and lowest in our
first and second quarters.

         Other, net. Other, net decreased to $65,000 of income in the second
quarter of fiscal 2002 from $93,000 of income in the second quarter of fiscal
2001. Other income consists primarily of interest income from advances made to
R4 Tech and distributors.


                                      11
<PAGE>


COMPARISON OF THE SIX MONTHS ENDED JANUARY 31, 2002 WITH THE SIX MONTHS ENDED
JANUARY 31, 2001

         Net revenues. Net revenues increased 16% to $75.9 million for the six
months ended January 31, 2002 from $65.5 million for the six months ended
January 31, 2001. Net revenues consisted of $40.6 million from cylinder
exchange and $35.3 million from the products and other segment. Cylinder
exchange revenue increased 21% due primarily to an approximately 15% increase
in cylinder transactions to 2.8 million for the six months ended January 31,
2002 from 2.4 million in the six months ended January 31, 2001. Approximately
one-third of the increase in cylinder exchange revenues was due to price
increases to retailers and approximately two-thirds was due to increases in the
number of cylinder transactions. Product revenues increased 11% due principally
to the increase in the number of Endless Summer(R) patio heaters sold.

         Gross margin. Our overall gross margin increased to 24.0% for the
first six months of fiscal 2002 from 21.6% for the first six months of fiscal
2001. Gross margin percentage increased 485 basis points in cylinder exchange
to 29.4% from 24.6% in the same period of the prior year due primarily to price
increases to retailers. We believe that our propane hedges and modified
distributor payment structure will protect our future cylinder exchange gross
margin from exposure to volatility in propane prices. The products segment
gross margin decreased slightly to 17.7% from 18.4% for the six months ended
January 31, 2001 due primarily to a slight decrease in prices and a shift in
sales mix.

         Selling, general and administrative expenses. Selling, general and
administrative expenses increased 10% to $10.3 million for the six months ended
January 31, 2002 from $9.4 million for the six months ended January 31, 2001
due primarily to an increase in costs to support growth at Uniflame and
additional costs related to QuickShip, which was acquired in October 2000.
Selling, general, and administrative expenses decreased as a percentage of net
revenues to 13.6% for the six months ended January 31, 2002 from 14.3% for the
six months ended January 31, 2001 due primarily to the fact that a significant
portion of such expenses are fixed and increased at a slower rate than did net
revenues. In our cylinder exchange segment, selling, general and administrative
expenses decreased slightly, with an increase in reserves for bad debt caused
by uncertain economic conditions entirely offset primarily by a reduction in
marketing costs.

         Depreciation and amortization. Depreciation and amortization was flat
at $3.8 million in the six months ended January 31, 2002 and in the six months
ended January 31, 2001. Depreciation expense increased primarily due to the
increase in the number of installed cylinder displays, the increase in the
number of cylinders held under operating lease agreements, and the acquisition,
effective September 30, 2001, of machinery and equipment from R4 Tech.
Amortization expense decreased to $161,000 from $1.1 million due to the
elimination of goodwill amortization related to the implementation of SFAS No.
142, Goodwill and Other Intangible Assets.

         Interest expense. Interest expense increased to $2.9 million in the
six months ended January 31, 2002 from $2.3 million in the six months ended
January 31, 2001 primarily due to $15 million of subordinated debt that we
obtained on June 15, 2001.

         Loss on investee. Loss on investee decreased to $677,000 in the six
months ended January 31, 2002 from $1.3 million in the six months ended January
31, 2001. This charge represents our share of the loss related to our 49%
ownership interest in R4 Tech.

         Other, net. Other, net increased to $251,000 of income in the six
months ended January 31, 2002 from $73,000 of income in the six months ended
January 31, 2001. Other income consists primarily of interest income from
advances made to R4 Tech and distributors.

LIQUIDITY AND CAPITAL RESOURCES

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

         Net cash provided by operations was $7.8 million for the six months
ended January 31, 2002 while cash provided by operations was $212,000 for the
six months ended January 31, 2001. The increase in cash provided by operations
is primarily due to the $3.4 million increase in net income and $4.7 million
decrease in working capital needs.

         Net cash used in investing activities was $4.9 million for the six
months ended January 31, 2002 and $6.1 million for the six months ended January
31, 2001. The decrease is principally due to reduced cash used for acquisitions
and property, plant, and equipment, as we acquired QuickShip in October 2000,
which was partially offset by the increase in cash used for cylinders held
under operating leases.


                                      12
<PAGE>


         Net cash used in financing activities was $2.4 million for the six
months ended January 31, 2002 while net cash provided by financing activities
was $9.8 million for the six months ended January 31, 2001. Cash used in
financing activities for the six months ended January 31, 2002 included
payments on long-term debt and capital lease obligations and net payments on
notes payable to our bank. Cash provided by financing activities for the six
months ended January 31, 2001 included net proceeds of $9.6 million from a
preferred stock private placement.

         On April 28, 2000, we entered into a joint venture agreement to
operate and manage the automated propane bottling and cylinder refurbishing
plant in North Carolina then owned by R4 Tech, which began operations in May
2000. We received a 49% ownership interest in the joint venture in exchange for
our net contribution of approximately $3.4 million. The joint venture is being
accounted for using the equity method of accounting. Effective September 30,
2001, we entered into a sale and leaseback transaction with R4 Tech. We
purchased all of the land, buildings and equipment associated with the propane
bottling and cylinder refurbishing operation for $7.6 million. The purchase
price was used by R4 Tech to repay outstanding advances made by us.
Contemporaneously with the sale, R4 Tech leased back the land, buildings and
equipment from us under the terms of a three-year operating lease agreement.
The sale and leaseback transaction is not expected to have a material impact on
our consolidated results of operations or financial position. During the six
months ended January 31, 2002 and January 31, 2001, we provided net advances of
$1.5 million and $1.6 million, respectively, to R4 Tech. At January 31, 2002,
we had advances outstanding of $399,000 to R4 Tech.

         On September 7, 2000, we completed a private placement of 1,716,667
shares of our Series A Convertible Preferred Stock to two institutional
investors under common management and three individuals, including Billy D.
Prim, our Chairman, Chief Executive Officer and President, and Andrew J.
Filipowski, our Vice Chairman, for an aggregate purchase price of approximately
$10.3 million. The Series A Convertible Preferred Stock accrues a cumulative
dividend on the 20th day of December, March, June, and September of each year
based on an annual rate of 5% through September 7, 2003; 12% from September 8,
2003 through September 7, 2004; and 15% thereafter. Effective September 7,
2001, the annual dividend rate increased to 15% because a registration
statement covering the shares of common stock into which the Series A
Convertible Preferred Stock is convertible was not yet effective. The 15% rate
will continue until the registration statement becomes effective, which we
currently expect to occur in the third quarter of this fiscal year. At our
election, the dividend may be paid in cash, in shares of common stock, or a
combination of cash and shares of common stock. If we elect to pay the dividend
in shares of common stock, the shares will be valued based on a 30-day trailing
average ending three business days prior to the date the shares are authorized
to be issued. As of January 31, 2002, we had accrued dividends on the
outstanding shares of Series A Convertible Preferred Stock of $1,876,000. We
currently intend to pay the accrued dividends in shares of common stock.

         On October 26, 2000, we completed the acquisition of QuickShip, Inc.,
a retail shipping service company and our wholly owned subsidiary. QuickShip
provides consumers with a convenient, full-service, in-store postal and parcel
shipping depot and provides retailers with an additional revenue source. The
aggregate purchase price, including certain acquisition costs, was
approximately $9.8 million, comprised of approximately $1.0 million in cash and
deferred payments, $86,000 in a five-year warrant to purchase 100,000 shares of
common stock with an exercise price of $6.00 per share, $2.0 million in
liabilities assumed and $6.8 million paid in the form of 1,133,333 shares of
Series A Convertible Preferred Stock valued at $6.00 per share. We currently
project QuickShip, which currently offers its service at over 300 retail
locations in 31 states, to be dilutive to earnings before interest, taxes,
depreciation, and amortization (EBITDA) by approximately $1.5 million and $1.0
million in fiscal 2002 and 2003, respectively, and to be further dilutive to
earnings as a result of expected depreciation and amortization expense.

         Each share of Series A Convertible Preferred Stock is currently
convertible into common stock at the option of the holder. We may convert the
Series A Convertible Preferred Stock into common stock at any time after
September 7, 2002 if the average of the closing prices of our common stock over
a ten trading day period ending shortly before we give notice of conversion
exceeds 160% of the then-existing conversion price for the Series A Convertible
Preferred Stock. Each share of Series A Convertible Preferred Stock is
initially convertible into one share of common stock. The Series A Convertible
Preferred Stock has a liquidation preference over our common stock.

         In June 2001, we amended and extended our existing bank credit
facility (the "Credit Facility"). The amended Credit Facility consists of two
separate facilities --a $38 million revolving line of credit for general
corporate purposes, inclusive of payments made under letters of credit issued
for the benefit of the Company, and a $3.247 million seasonal line for general
corporate purposes. No further borrowings may be made against the seasonal
line. The Credit Facility requires us to meet certain covenants, including
minimum net worth and cash flow requirements. The Credit Facility is
collateralized by a lien on substantially all of our assets. The Credit
Facility bears interest at the prime rate plus 3% per annum. The Credit
Facility matures on December 31, 2002. At January 31, 2002 the interest rate on
both the revolving line of credit and seasonal line was 7.75%. At January 31,
2002, the balance on the Credit


                                      13
<PAGE>


Facility was $36.4 million, and we were in compliance with all covenants. We
currently expect to replace the Credit Facility before its maturity date.

         On June 15, 2001, we completed a $15 million private placement of
subordinated debt to an institutional investor. The agreement requires us to
meet certain cash flow and other covenants and contains restrictions on capital
expenditures and the payment of cash dividends. At January 31, 2002, we were in
compliance with all covenants. The debenture bears interest at the annual rate
of 13%, payable quarterly. The principal balance matures on August 31, 2006.

         We do not have any material capital commitments outstanding. We
currently anticipate that our total capital expenditures for fiscal 2002,
excluding acquisitions, will be approximately $8.0 million, and will include
primarily cylinders, cylinder displays and computer technology. Our capital
expenditure and working capital requirements in the foreseeable future will
change depending on the rate of our expansion, our operating results and any
other adjustments in our operating plan as needed 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 capital expenditure and working
capital requirements through fiscal 2002. However, we may seek or require
additional capital in the future as a result of expansion, to refinance our
existing debt, or otherwise, and such additional capital may not be available
on terms that are not dilutive to our stockholders or at all.

SEASONALITY

         We have experienced and expect to continue to experience significant
seasonal fluctuations in our revenues and net income (loss). Historically, our
revenues have been highest in our third and fourth quarters, which include the
majority of the grilling season, and lowest in our first and second quarters,
which include the winter months. Our acquisition of Uniflame in April 2000 has,
however, resulted in increased revenues for our first quarter, which includes
the months in which Uniflame historically has shipped the majority of its
products to retailers. Sustained periods of poor weather, particularly in the
spring and summer seasons, can negatively impact our revenues. Accordingly, the
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

         During the fiscal year ended July 31, 2001, there were dramatic
increases in fuel costs and propane reached unusually high levels. During the
fourth quarter of fiscal 2001 and continuing through the first quarter of
fiscal 2002, propane prices returned to a range more consistent with historical
levels. On March 1, 2001, we initiated a propane price hedging strategy that
has reduced, and we 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
total cylinder exchange volume. If propane costs rise for an extended period
and our hedging strategy is unsuccessful, our gross margins and results of
operations could be negatively affected due to additional costs that may not be
fully recovered through an increase in our price to our customers.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business Combinations,
and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years
beginning after December 15, 2001. Under the new rules, goodwill (and
intangible assets deemed to have indefinite lives) will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives.

         We applied the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal year 2002.
Application of the nonamortization provisions of the Statements is expected to
result in an increase in net income of approximately $2.6 million in fiscal
2002.

         At January 31, 2002, we had unamortized intangibles of $30.7 million
that were subject to the transition provisions of the Statements. There was no
impairment of goodwill upon adoption of SFAS 142. We are required to perform
goodwill impairment


                                      14
<PAGE>


tests on an annual basis and between annual tests in certain circumstances.
There can be no assurance that future goodwill impairment tests will not result
in a charge to earnings.

         In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 143, Accounting for Asset
Retirement Obligations. The Statement requires entities to record the fair
value of a liability for an asset retirement obligation in the period in which
it is incurred. The Statement is effective for fiscal years beginning after
June 15, 2002. We do not expect the adoption of Statement No. 143 to have a
material impact on our consolidated results of operations or financial
position.

         In May 2000, the Emerging Issues Task Force ("EITF") issued EITF No.
00-14, Accounting for Certain Sales Incentives, which addresses the
recognition, measurement, and income statement classification for certain sales
incentives including rebates, coupons, and free products or services. In
November 2000, the EITF revised the effective date of EITF No. 00-14 to be
December 15, 2001. Cooperative advertising costs were $595,000 and $397,000 for
the six months ended January 31, 2002 and 2001, respectively. We expense
cooperative advertising costs as selling, general, and administrative expenses.
We do not expect the adoption to have a material impact on our consolidated
results of operations or financial position.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to market risk related to changes in interest rates on
borrowings under our Credit Facility. The Credit Facility bears interest based
on the prime rate and is collateralized by cylinders held under operating
leases with our independent distributors. The operating leases currently yield
1% of the cylinder value monthly (approximately 12% annually) and continue
until either party terminates upon 60 days written notice to the other party.
Upon any significant increase in the prime rate, we would attempt to
renegotiate the operating leases with our independent distributors with the
intent of mitigating our interest rate exposure on the Credit Facility.
However, in such event, we may not be successful in such renegotiations or be
able to mitigate any or all of the interest rate risk. To quantify our exposure
to interest rate risk, a 100 basis point increase in interest rates would have
increased interest expense for the six months ended January 31, 2002 and 2001
by approximately $141,000 and $178,000, 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. These derivative
financial instruments, which are generally swap agreements, are not entered
into for trading purposes. A swap agreement is a contract to exchange a
floating rate for a fixed rate without the exchange of the underlying notional
amount. In fiscal 2000, we entered into an interest rate swap agreement with a
notional amount of $10 million as a hedge of our variable interest rate debt
represented by the Credit Facility. Under the swap agreement, which expires in
July 2003, we pay a fixed rate of 7.36% and receive a rate equivalent to the
one-month LIBOR. In February 2001, the interest rate on the Credit Facility was
changed to a rate based on the prime rate and was no longer based on the
benchmark interest rate of LIBOR. However, for the six-month period ending
January 31, 2002, the interest rate swap was still an effective cash flow
hedge.

         We are exposed to commodity price risk related to changes in the price
of propane. If propane prices rise for an extended period, our gross margins
and results of operations could 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 to retailers, a $.01 increase in the
price per gallon of propane would reduce the gross margin in our cylinder
exchange segment by approximately .2% or 20 basis points. Actual changes in
margins may differ materially from the hypothetical assumptions used in
computing this exposure. We have restructured our payment obligations to
distributors and 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 cylinder exchange volume.

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


                                      15
<PAGE>


                          PART II -- OTHER INFORMATION


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:

         On December 18, 2001, we held our 2001 annual meeting of stockholders
in Clemmons, North Carolina. The following three matters were submitted to a
vote of the stockholders:

         1.       The election of Billy D. Prim and Andrew J. Filipowski to
                  serve three-year terms on our board of directors;

         2.       The amendment to our 1998 Stock Incentive Plan to increase
                  the number of shares of common stock reserved for
                  distribution thereunder from 2,200,000 to 3,200,000.

         3.       The ratification of the appointment of Ernst & Young LLP as
                  the Company's independent accountants for the fiscal year
                  ending July 31, 2002.

         The holders of our common stock and our Series A Convertible Preferred
Stock voted together as a single voting group on all of these items. All of
these items were approved.

         The results of the stockholder voting were as follows:


<TABLE>
<CAPTION>
                                                        FOR          WITHHELD      TOTAL VOTES
                                                     ---------       --------      -----------
<S>                                                  <C>              <C>           <C>
1.   Election of Directors
     Billy D. Prim                                   7,881,466        53,986        7,935,452
     Andrew J. Filipowski                            7,882,266        53,186        7,935,452
</TABLE>

<TABLE>
<CAPTION>
                                                                                                        BROKER
                                                          FOR            AGAINST         ABSTAIN       NON-VOTES    TOTAL VOTES
                                                       ---------         -------         -------       ---------    ----------
<S>                                                    <C>               <C>             <C>           <C>          <C>
2.   Amendment to the 1998 Stock Incentive Plan        7,754,724         175,092          5,636            0         7,935,452
3.   Ratification of Appointment of Accountants        7,924,312           7,640          3,500            0         7,935,452
</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K:

         (a)      Exhibit:

         10.1     Executive Incentive Plan for the fiscal year ending
                  July 31, 2002

         (b) Reports on Form 8-K:

         On November 14, 2001, the Company filed an 8-K/A amending its Current
Report on Form 8-K filed on November 13, 2000, as amended on Form 8-K/A filed
January 12, 2001, to include under Item 7 the following financial statements in
respect of the acquisition of QuickShip, Inc. on October 26, 2000:

QuickShip, Inc. - Audited Financial Statements
         Balance Sheets as of December 31, 1999 and 1998
         Statements of Operations for the years ended December 31, 1999 and
         1998
         Statements of Shareholders' Deficit for the years ended December 31,
         1999 and 1998
         Statements of Cash Flows for the years ended December 31, 1999 and 1998

QuickShip, Inc. - Unaudited Financial Statements
         Balance Sheets as of September 30, 2000 and 1999
         Statements of Operations for the nine-month periods ended September
         30, 2000 and 1999
         Statements of Cash Flows for the nine-month periods ended September 30,
         2000 and 1999

Pro Forma Financial Information - Blue Rhino Corporation, QuickShip (on a
         consolidated basis)
         Unaudited Pro Forma Information
         Unaudited Pro Forma Statement of Operations for the twelve months ended
         July 31, 2001


                                      16
<PAGE>


                                   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 hereunto duly authorized.


                                    Blue Rhino Corporation

Date: March 14, 2002                By: /s/ Billy D. Prim
                                       ----------------------------------------
                                       Chairman, President and
                                       Chief Executive Officer

Date: March 14, 2002                By: /s/ Mark Castaneda
                                       ----------------------------------------
                                       Chief Financial Officer


                                      17