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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 2000
COMMISSION FILE NUMBER 0-14133
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
(336) 659-6900
(Address of principal executive offices)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE 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 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. |_|
At September 30, 2000, the aggregate market value of the registrant's common
stock held by non-affiliates of the registrant was approximately $19,785,630.
At September 30, 2000, the number of shares outstanding of registrant's
common stock was 9,226,497.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's proxy statement with respect to the
2000 annual meeting of stockholders of the registrant have been incorporated by
reference in Part III of this Annual Report on Form 10-K.
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FORWARD LOOKING STATEMENTS
CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K ARE FORWARD-LOOKING IN
NATURE AND RELATE TO TRENDS AND FUTURE EVENTS THAT MAY AFFECT THE COMPANY'S
FUTURE FINANCIAL POSITION AND OPERATING RESULTS INCLUDING, IN PARTICULAR, THE
COMPANY'S ABILITY TO PLACE BLUE RHINO CYLINDER EXCHANGE AT ADDITIONAL RETAIL
LOCATIONS, TO INTEGRATE ACQUISITIONS AND TO LAUNCH NEW PRODUCTS AND SERVICES.
SUCH STATEMENTS ARE MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. THE TERMS "EXPECT," "ANTICIPATE,"
"BELIEVE," "INTEND," "ESTIMATE," AND "PROJECT" AND SIMILAR WORDS OR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS SPEAK ONLY
AS OF THE DATE OF THIS REPORT. THE STATEMENTS ARE BASED ON CURRENT EXPECTATIONS,
ARE INHERENTLY UNCERTAIN, ARE SUBJECT TO RISKS, AND SHOULD BE VIEWED WITH
CAUTION. ACTUAL RESULTS AND EXPERIENCE MAY DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS INCLUDING THOSE DETAILED
IN THE SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" OR IN THE COMPANY'S REGISTRATION STATEMENT
ON FORM S-3 DATED SEPTEMBER 25, 2000 OR IN OTHER FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION. IT IS NOT POSSIBLE TO FORESEE OR IDENTIFY ALL SUCH FACTORS.
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.
ADDITIONAL INFORMATION
Blue Rhino(R), the rhino logo, RhinoTUFF(R), Bison(R), the bison design,
Uniflame(R), Unigrill(R) and Tri-Safe(R) are registered trademarks of the
registrant. The registrant has trademark applications pending, among others, for
Endless Summer(TM) and Endless Summer Comfort(TM) . This Annual Report on Form
10-K also includes trademarks of companies other than the registrant.
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The registrant files this Form 10-K/A to amend Item 8 and Item 14 of its Annual
Report on Form 10-K for the fiscal year ended July 31, 2000 to include the
separate audited financial statements of R4 Technical Center - North Carolina,
LLC, its 50% or less owned subsidiary accounted for by the equity method. The
fiscal year end for R4 Technical Center - North Carolina, LLC was December 31,
2000.
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PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Auditors
Board of Managers
R4 Technical Center - North Carolina, LLC
We have audited the accompanying balance sheet of R4 Technical Center - North
Carolina, LLC (the "Company") as of December 31, 2000, and the related
statements of operations and changes in members' capital, and cash flows for the
period from April 28, 2000 (date of inception) to December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R4 Technical Center - North
Carolina, LLC at December 31, 2000, and the results of its operations and its
cash flows for the period from April 28, 2000 (date of inception) to December
31, 2000, in conformity with accounting principles generally accepted in the
United States.
The accompanying financial statements have been prepared assuming that R4
Technical Center - North Carolina, LLC will continue as a going concern. As more
fully described in Notes 1 and 11, the Company has incurred operating losses
since inception and has a working capital deficiency. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regards to these matters are also described in Notes 1 and
11. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
/s/ Ernst & Young LLP
Winston-Salem, North Carolina
March 14, 2001
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R4 Technical Center - North Carolina, LLC
Balance Sheet
December 31, 2000
ASSETS
Current assets:
Cash and cash equivalents $ 235,551
Accounts receivable 171,575
Accounts receivable from related parties 568,517
Inventories 170,449
Prepaid expenses and other current assets 186,300
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Total current assets 1,332,392
Property, plant and equipment, net 7,404,507
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Total assets $8,736,899
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LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Accounts payable $ 914,082
Accrued expenses 321,936
Amounts due to Blue Rhino Corporation 3,253,650
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Total current liabilities 4,489,668
Capital lease obligations, less current maturities 26,275
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Total liabilities 4,515,943
Members' capital 4,220,956
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Total liabilities and members' capital $8,736,899
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The accompanying notes are an integral part of the financial statements.
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R4 Technical Center - North Carolina, LLC
Statement of Operations and
Changes in Members' Capital
For the Period from April 28, 2000 (date of inception) to December 31, 2000
Net revenues $ 3,871,065
Costs and expenses:
Cost of sales 5,453,824
Selling, general and administrative 590,206
Depreciation and amortization 308,536
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Operating loss (2,481,501)
Other income (expense):
Start up expenses (172,299)
Interest expense (125,244)
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Net loss (2,779,044)
Issuance of member units 7,000,000
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Members' capital at December 31, 2000 $ 4,220,956
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The accompanying notes are an integral part of the financial statements.
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R4 Technical Center - North Carolina, LLC
Statement of Cash Flows
Period from April 28, 2000 (date of inception) to December 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,779,044)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 308,536
Non-cash start up expenses 172,299
Changes in operating assets and liabilities:
Accounts receivable (740,092)
Inventories (163,693)
Prepaid expenses and other current assets (181,903)
Accounts payable 914,082
Accrued expenses 314,680
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Net cash used in operating activities (2,155,135)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,224,281)
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Net cash used in investing activities (1,224,281)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from Blue Rhino Corporation 3,253,650
Proceeds from the issuance of member units, net 363,177
Principal payments on capital lease obligation (1,860)
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Net cash provided by financing activities 3,614,967
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Increase in cash and cash equivalents 235,551
Cash and cash equivalents at beginning of period --
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Cash and cash equivalents at end of period $ 235,551
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The accompanying notes are an integral part of the financial statements.
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R4 Technical Center - North Carolina, LLC
Notes to Financial Statements
December 31, 2000
1. DESCRIPTION OF BUSINESS AND ECONOMIC DEPENDENCY
R4 Technical Center - North Carolina, LLC (the "Company") was formed on April
28, 2000 as a joint venture to operate and manage an automated propane bottling
and cylinder refurbishing plant. Membership units of the Company are owned by
Manchester Tank & Equipment Co. ("Manchester") - 50%, Blue Rhino Corporation
("Blue Rhino") - 49%, and Platinum Propane, LLC ("Platinum") - 1%. The Company
began operations in May 2000 and provides services to Blue Rhino and its
distributors.
The Company experienced a loss from operations of $2,779,044 for the period from
April 28, 2000 (date of inception) through December 31, 2000. Blue Rhino
provided operating and financing advances totaling approximately $3,270,000 for
the same period. Additionally, all customers of the Company are distributors of
Blue Rhino. Platinum is the largest customer of the Company, comprising
approximately 68% of revenues for the period from April 28, 2000 (date of
inception) to December 31, 2000. See Notes 8 and 11.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying value of cash
and cash equivalents approximates fair value.
INVENTORIES
Inventories are valued at the lower of cost or market on a first-in, first-out
(FIFO) basis and consist primarily of propane, paint, sleeves and costs incurred
to refill and refurbish cylinders.
REVENUE RECOGNITION
Revenues are recognized when goods are shipped to customers.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation and amortization
is provided for on the straight-line method over the estimated useful lives
ranging from three to 30 years.
In the event that facts and circumstances indicate that the cost of property,
plant and equipment, or other long-lived assets may not be recoverable, the
estimated future undiscounted cash flows is compared to the asset's carrying
value and, if less, an impairment loss is recognized in an amount by which the
carrying amount exceeds its fair value.
INCOME TAXES
The Company is considered a partnership for federal and state income tax
reporting purposes. As a result, the Company's results of operations are
included in the income tax returns of its members. Accordingly, the financial
statements do not include a provision for income taxes.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which was
effective for fiscal years beginning after June 15, 2000. SFAS No. 133 was
amended by SFAS No. 138, "Accounting for Derivative Instruments and Hedging
Activities." The provisions of the statements require the recognition of all
derivatives as either assets or liabilities in the statement of financial
position and the measurement of those instruments at fair value. Changes in the
fair market value of derivatives are recorded each period in current earnings or
comprehensive income, depending on whether a derivative is designed as part of a
hedge transaction and, if so, the type of hedge transaction. The Company was
required to and adopted the standards effective January 1, 2001. As the Company
does not currently have any derivative instruments, the adoption of SFAS No. 133
will not have an impact on its results of operations or financial position. The
Company may enter into derivative instruments in the future.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC. SAB No. 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. SAB No. 101
was implemented in the fourth quarter of fiscal 2000. Application of SAB No. 101
did not have any impact on its results of operations or financial position.
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3. CONCENTRATIONS OF CREDIT RISK
Financial investments that potentially subject the Company to concentrations of
credit risk consist primarily of customer receivables and deposits in excess of
federally insured limits with financial institutions.
As of and for the period ended December 31, 2000, related party customers
accounted for 77% of accounts receivables and 68% of revenues.
4. INVENTORIES
Inventories at December 31, 2000, consist of the following:
Raw materials $114,352
Work in process 5,284
Finished goods 50,813
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$170,449
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5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2000, consist of the following:
Land and improvements $ 922,838
Buildings 2,061,323
Machinery and equipment 4,460,281
Vehicles 24,220
Furniture and fixtures 95,031
Computer equipment and software 149,350
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7,713,043
Less accumulated depreciation and amortization (308,536)
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$ 7,404,507
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6. MEMBERS' CAPITAL
The initial capital contribution to the Company consisted of $3,500,000 in cash
from Manchester and $70,000 in cash from Platinum. Blue Rhino's contribution
consisted of $6,453,371 in property, plant and equipment, $172,299 in start-up
expenses, $106,000 in cash, and $11,153 in other assets. The joint venture
agreement provided for the excess amounts contributed, of $3,312,823, to be
repaid to Blue Rhino, resulting in a net capital contribution by Blue Rhino of
$3,430,000.
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7. CAPITAL LEASE OBLIGATION
The Company obtained equipment through a capital lease obligation amounting to
$35,391, which is payable in monthly installments of principal and interest of
$801, through January 2005. This obligation is secured by equipment with a net
book value of $36,578. The aggregate amounts the capital lease obligation
maturing in each of the next five years are as follows: $7,256 in 2001; $7,842
in 2002; $8,476 in 2003; $9,161 in 2004; and $796 in 2005. The current portion
of the capital lease obligation of $7,256 is included in accrued expenses at
December 31, 2000.
Cash paid for interest for the period from April 28, 2000 (date of inception) to
December 31, 2000 was $79,559.
8. RELATED PARTY TRANSACTIONS
The Company had the following transactions with related parties for the period
from April 28, 2000 (date of inception) to December 31, 2000:
BLUE RHINO PLATINUM TOTAL
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Amounts due to affiliates at beginning of period $ -- $ -- $ --
Transactions during the period:
Sales -- (2,638,349) (2,638,349)
Insurance 57,733 -- 57,733
Interest expense 99,991 -- 99,991
Cylinder lease expense 91,504 -- 91,504
Valve requalification service revenue (138,465) -- (138,465)
Rental income -- (52,177) (52,177)
Rent expense -- 37,542 37,542
Inventory purchases 362,233 -- 362,233
Administrative services 254,516 -- 254,516
Payments, nets 2,526,138 2,084,467 4,610,605
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Amounts due to (from) affiliates at end of period $ 3,253,650 $ (568,517) $ 2,685,133
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The Company has notes payable totaling $2,978,500 plus $24,557 accrued interest
due to Blue Rhino as of December 31, 2000. Interest accrues at the rate of 10.0%
per annum. These notes are payable upon demand. Blue Rhino has also made
operating advances in the amount of $250,593 at December 31, 2000.
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8. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company enters into operating lease agreements with Blue Rhino for cylinders
for use within its business. Under these leases, the Company, as lessee, is
obligated for all maintenance, taxes and insurance related to the cylinders. The
terms of the leases continue until either party terminates upon 60 days written
notice to the other party. As of December 31, 2000, estimated future minimum
rental payments to be paid are approximately $119,796 per year through the year
2005.
The Company has entered into an agreement with Blue Rhino to provide
administrative services including operations management, information systems,
accounting and human resources. The agreement is for a one year term ending
April 1, 2001. The agreement provides for automatic one-year renewal options
unless either party provides written notice terminating the agreement thirty
days prior to termination.
Through December 31, 2000, the Company was operating under oral agreements with
entities related to Platinum to lease office facilities, production facilities
and equipment in Boonville, North Carolina and Zellwood, Florida on a
month-to-month basis.
Also, through December 31, 2000, the Company leases office facilities to
Platinum. The lease agreement calls for monthly rental of $2,832, expiring in
February 2003. The lease has renewal options for an additional two-year term.
The Company also has an oral agreement with Platinum under which the Company
receives rent for additional office, warehouse, and storage facilities for
$5,371 per month. Estimated future minimum lease receipts under noncancelable
leases are $33,894 in 2001; $33,894 in 2002; and $2,832 in 2003.
9. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution 401(k) plan (the "Plan"), covering
substantially all employees who are at least 18 years of age and have completed
60 days of employment. The Company is required to provide matching contributions
of 50% of each participant's contributions, up to 3% of compensation. The
Company incurred expenses in the amount of $6,744 under the Plan during the
period from April 28, 2000 through December 31, 2000.
10. COMMITMENTS
The Company has various agreements with propane vendors to provide agreed upon
quantities of propane at market prices over scheduled periods.
11. GOING CONCERN
The financial statements have been prepared on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As disclosed in Note 1, the Company is currently
economically dependent upon Blue Rhino to provide operating and financing
advances and on a significant customer for the majority of its revenue. While
the members of the Company are committed and believe that the Company will
become a successful enterprise, uncertainty exists when the Company will be able
to become self-sustaining. Management plans to seek additional financing to
provide additional permanent and working capital. The Company's ability to
continue as a going concern is, among others, dependent upon its ability to
successfully obtain additional capital. However, although no assurances can be
given, management remains confident that the Company will be able to continue
operating as a going concern.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Consolidated Financial Statements of the Company are included
in Part II, Item 8:
Reports of Independent Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Statements of R4 Technical Center - North Carolina,
LLC are included in Part II, Item 8
Report of Independent Accountants
Balance Sheet
Statement of Operations and Changes in Members' Capital
Statement of Cash Flow
The balance of Item 14 is unchanged.
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SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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
By: /s/ BILLY D. PRIM
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Billy D. Prim
Chairman of the Board, President and
Chief Executive Officer
Date: March 30, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ BILLY D. PRIM Chairman of the Board, March 30, 2001
- ------------------------------------ President and Chief
Billy D. Prim Executive Officer
(Principal Executive
Officer)
/s/ MARK CASTANEDA Secretary, Chief Financial March 30, 2001
- ------------------------------------ Officer and Director
Mark Castaneda (Principal Financial
and Accounting Officer)
/s/ ANDREW J. FILIPOWSKI Vice Chairman of the Board March 30, 2001
- ------------------------------------
Andrew J. Filipowski
/s/ CRAIG J. DUCHOSSOIS Director March 30, 2001
- ------------------------------------
Craig J. Duchossois
/s/ STEVEN D. DEVICK Director March 30, 2001
- ------------------------------------
Steven D. Devick
/s/ JOHN H. MUEHLSTEIN Director March 30, 2001
- ------------------------------------
John H. Muehlstein
/s/ RICHARD A. BRENNER Director March 30, 2001
- ------------------------------------
Richard A. Brenner
/s/ ROBERT J. LUNN Director March 30, 2001
- ------------------------------------
Robert J. Lunn
/s/ DAVID L. WARNOCK Director March 30, 2001
- ------------------------------------
David L. Warnock
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EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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23.3 -- Consent of Ernst & Young LLP.
The balance of exhibits remain unchanged.