<PAGE>
  
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                           _________________________
                                        
                                 FORM 10-K/A-2
                                        
[ X ]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                                        
         For the fiscal year ended              Commission File Number
                July 31, 1998                          0-24287
                                        
                            BLUE RHINO CORPORATION
            (Exact name of registrant as specified in its charter)
                                        
          Delaware                                           56-1870472
(State or 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
                                        
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      Name of each exchange
     Title of each class              on which registered
     -------------------              -------------------
            None                              None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.   [ X ]

     At September 30, 1998, the aggregate market value of the registrant's
Common Stock held by non-affiliates of the registrant was approximately
$46,572,185.
<PAGE>
  
     The Nonrecurring charge figure for the Fiscal Year ended July 31, 1998 as
reported in Item 6-Selected Consolidated Financial Data was not updated in the
Registrant's Form 10-K/A-1 filed on February 10, 1999 from the 563 previously
reported to conform with the 476 as set forth in the revised audited financials
contained in the Form 10-K/A-1. This Form 10-K/A-2 is being filed to update the
Nonrecurring charge item for the Fiscal Year ended July 31, 1998. No other
amendments are being reported in connection with this report.

Item 6--Selected Consolidated Financial Data

  The following selected consolidated income statement and balance sheet data of
the Company as of and for the fiscal years ended July 31, 1994, July 31, 1995,
July 28, 1996, July 31, 1997 and July 31, 1998 have been derived from the
Company's audited consolidated financial statements. The financial data set
forth below should be read in conjunction with ''Item 7--Management's Discussion
and Analysis of Financial Condition and Results of Operations'' and ''Item 8--
Financial Statements and Supplemental Data--Consolidated Financial Statements of
the Company and Related Notes Thereto'' included elsewhere herein.



<TABLE>
<CAPTION>
                                                   Predecessor
                                                    Company(1)                              Fiscal Year
                                                 ----------------  --------------------------------------------------------------
                                                     June 30,       July 31,    July 31,     July 28,     July 31,     July 31,
                                                       1994           1994        1995         1996         1997         1998
                                                 ----------------  ----------  -----------  -----------  -----------  -----------
                                                          (in thousands, except per share and selected operating data)
<S>                                              <C>               <C>         <C>          <C>          <C>          <C>
Consolidated Statement of Operations Data:
  Net sales--distributors.......................         $  --        $   --      $    --     $  2,386     $ 13,060      $27,372
  Net sales--direct.............................           393            56        2,728        5,830        1,151           --
                                                         -----        ------      -------     --------     --------      -------
     Total net sales............................           393            56        2,728        8,216       14,211       27,372
                                                         -----        ------      -------     --------     --------      -------
  Cost of sales--distributors...................            --            --           --        1,811        9,873       20,525
  Cost of sales--direct.........................           126            59        3,523        6,089        1,771           --
                                                         -----        ------      -------     --------     --------      -------
     Total cost of sales........................           126            59        3,523        7,900       11,644       20,525
                                                         -----        ------      -------     --------     --------      -------
Gross profit (loss).............................           267            (3)        (795)         316        2,567        6,847
                                                         -----        ------      -------     --------     --------      -------
Operating expenses (income):
  Sales and marketing...........................            --            --          532        1,112        1,950        2,392
  General and administrative....................           228           374        2,787        3,192        3,022        3,461
  Lease income, net.............................            --            --           --          (89)        (143)         (81)
  Depreciation and amortization.................            25             3          284          868          873        1,278
  Nonrecurring charges(2).......................            --            --           --        1,363          970          476
                                                         -----        ------      -------     --------     --------      -------
     Total operating expenses...................           253           377        3,603        6,446        6,672        7,526
                                                         -----        ------      -------     --------     --------      -------
Income (loss) from operations...................            14          (380)      (4,398)      (6,130)      (4,105)        (679)
Other expense (income):
  Interest expense..............................             5            --          287        1,469        1,665        1,707
  Loss on investee..............................            --            --           --           --           --          324
  Other (income) expense, net...................            (2)           --          (25)        (168)        (186)        (234)
                                                         -----        ------      -------     --------     --------      -------
     Net income (loss)..........................         $  11        $ (380)     $(4,660)    $ (7,431)    $ (5,584)     $(2,476)
                                                         =====        ======      =======     ========     ========      =======
     Loss applicable to common
       stockholders(3)..........................            --        $ (380)     $(5,055)    $ (8,067)    $ (6,271)     $(3,072)
                                                         =====        ======      =======     ========     ========      =======
Loss per common share:
  Basic and diluted.............................            --        $(0.25)      $(3.09)      $(4.96)      $(3.74)      $(1.04)
  Pro forma diluted(4)..........................            --            --       $(1.08)      $(1.72)      $(1.27)      $(0.61)
Weighted average common shares used in
 computing loss per common share:
  Basic and diluted.............................            --         1,517        1,638        1,628        1,678        2,945
  Pro forma diluted(4)..........................            --            --        4,303        4,313        4,406        5,077
Selected Operating Data:
  Retail locations (at period end)..............            --           331        1,608        2,981        4,400        9,500
  Cylinder transactions (000's).................            --             5          306          769        1,239        2,201

                                                                   July 31,     July 31,     July 28,     July 31,     July 31,
                                                                   ---------   ----------   ----------   ----------   ----------
                                                                        1994         1995         1996         1997         1998
                                                                      ------      -------     --------     --------      -------
                                                                                          (in thousands)
Consolidated Balance Sheet Data:
  Cash and cash equivalents.....................                      $  150      $   209     $  1,126     $    325      $ 5,908
  Working capital...............................                         109       (3,264)       1,580          737       11,819
  Total assets..................................                         631       10,424       11,897        9,974       30,470
  Long-term obligations, less current
    maturities..................................                         518        1,361       14,174       16,110          260
  Total stockholders' (deficit) equity..........                        (179)      (5,149)     (13,217)     (18,488)      24,816
</TABLE>
----------------

(1) Effective June 30, 1994, the assets of American Cylinder Exchange (the
    ''Predecessor Company'') were contributed to the Company in exchange for
    approximately 98,000 shares of Common Stock which were distributed to the
    Predecessor Company's shareholders.

(2) See Note 11 of Notes to Consolidated Financial Statements for an explanation
    of the nonrecurring charges.

(3) Includes net loss less redeemable preferred stock dividends of $395, $636,
    $687 and $596 for fiscal 1995, 1996, 1997 and 1998, respectively.

(4) The unaudited pro forma information assumes the conversion of Preferred
    Stock, Preferred Stock dividends and the exercise of warrants outstanding
    (other than the 1998 Warrants) were effective as of the beginning of the
    first year presented.

  The Company's cost of sales are comprised of a fixed charge per cylinder
transacted which is paid to distributors based upon the type of transaction and
determined on a contractual basis. Cylinder sales have the




                                       2
<PAGE>
 
                                   SIGNATURE



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



                              BLUE RHINO CORPORATION
                              (Registrant)


                              By: /s/ Mark Castaneda
                                  ----------------------------
                                  Chief Financial Officer

DATED: March 18, 1999