<PAGE>
===============================================================================

                       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 DECEMBER 31, 2001

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

                          COMMISSION FILE NO. 000-29226

                       VALLEY NATIONAL GASES INCORPORATED
             (Exact name of registrant as specified in its charter)


           PENNSYLVANIA                                  23-2888240
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
  incorporation or organization)

                                 67 43RD STREET
                          WHEELING, WEST VIRGINIA 26003
                    (Address of principal executive offices)

                                 (304) 234-4460
              (Registrant's telephone number, including area code)

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

           Class                                Outstanding at February 13, 2002
           -----                                --------------------------------
Common stock, $0.001 par value                               9,347,584

===============================================================================




<PAGE>


                       Valley National Gases Incorporated

                                TABLE OF CONTENTS


                                                                            Page
                                                                            ----

PART I    FINANCIAL INFORMATION

 ITEM 1   Condensed Consolidated Balance Sheets as of June 30, 2001
          and December 31, 2001                                              3

          Condensed Consolidated Statements of Operations for the
          Three Months Ended December 31, 2000 and 2001                      5

          Condensed Consolidated Statements of Operations for the
          Six Months Ended December 31, 2000 and 2001                        6

          Condensed Consolidated Statements of Cash Flows for the
          Six Months Ended December 31, 2000 and 2001                        7

          Notes to Condensed Consolidated Financial Statements               8

 ITEM 2   Management's Discussion and Analysis of Financial
          Condition and Results of Operations                               13

 ITEM 3   Quantitative and Qualitative Disclosures About Market Risk        18


PART II   OTHER INFORMATION

 ITEM 6   Exhibits and Reports on Form 8-K                                  19

 SIGNATURES                                                                 20





                                     - 2 -
<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM I.  FINANCIAL STATEMENTS

                       VALLEY NATIONAL GASES INCORPORATED

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                              A S S E T S
<TABLE>
<CAPTION>
                                                                             June 30,            December 31,
                                                                               2001                 2001
                                                                          -------------         -------------
                                                                                                 (Unaudited)
<S>                                                                       <C>                   <C>
CURRENT ASSETS:
    Cash and cash equivalents                                             $     542,720         $   2,239,573
    Accounts receivable, net of allowance for doubtful accounts of
       $597,898 and $684,898, respectively                                   16,263,030            15,707,436
    Inventory                                                                16,303,257            16,455,870
    Prepaids and other                                                        1,380,950             1,940,670
                                                                          -------------         -------------

                  Total current assets                                       34,489,957            36,343,549
                                                                          -------------         -------------

PROPERTY, PLANT AND EQUIPMENT:
    Land                                                                         88,000                90,000
    Buildings and improvements                                                5,344,429             5,742,668
    Equipment                                                                75,229,048            80,834,844
    Transportation equipment                                                 13,023,381            13,879,009
    Furniture and fixtures                                                    5,177,088             6,384,256
                                                                          -------------         -------------

                  Total property, plant and equipment                        98,861,946           106,930,777

    Accumulated depreciation                                                (37,123,059)          (39,195,757)
                                                                          -------------         -------------

                  Net property, plant and equipment                          61,738,887            67,735,020
                                                                          -------------         -------------

OTHER ASSETS:
    Non-compete agreements and consulting
      agreements, net of amortization of
      $9,173,886 and $8,888,407, respectively                                 8,425,332             7,008,639
    Goodwill, net of amortization of $6,990,582 and 6,930,855,
       respectively                                                          38,553,833            40,426,387
    Deposits and other assets                                                 1,768,251             1,595,868
                                                                          -------------         -------------

                  Total other assets                                         48,747,416            49,030,894
                                                                          -------------         -------------

TOTAL ASSETS                                                              $ 144,976,260         $ 153,109,463
                                                                          =============         =============
</TABLE>


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


                                     - 3 -
<PAGE>



                       VALLEY NATIONAL GASES INCORPORATED

                      CONDENSED CONSOLIDATED BALANCE SHEETS


                      LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                     June 30,             December 31,
                                                                                       2001                  2001
                                                                                   -------------         -------------
                                                                                                          (Unaudited)
<S>                                                                               <C>                   <C>
CURRENT LIABILITIES:
    Current maturities of long-term debt                                           $   6,715,209         $   6,570,247
    Bank overdraft                                                                       259,852                    --
                                                                                                         -------------
    Accounts payable, trade                                                            6,958,922             6,091,493
    Accrued compensation and employee benefits                                         3,508,931             2,477,356
    Other current liabilities                                                          2,662,632             4,536,175
                                                                                   -------------         -------------

                  Total current liabilities                                           20,105,546            19,675,271

LONG-TERM DEBT, less current maturities                                               76,415,134            83,816,464
DEFERRED TAX LIABILITY                                                                11,612,787            11,449,801
OTHER LONG-TERM LIABILITIES                                                            3,238,607             3,859,867
                                                                                   -------------         -------------

                  Total liabilities                                                  111,372,074           118,801,403
                                                                                   -------------         -------------

STOCKHOLDERS' EQUITY:
    Common stock, par value, $.001 per share- Authorized, 30,000,000 shares
    Issued, 9,620,084 shares, outstanding 9,347,584 shares
                                                                                           9,620                 9,620
    Paid-in-capital                                                                   19,269,338            19,269,338
    Retained earnings                                                                 17,531,623            19,171,524
  Accumulated other comprehensive loss                                                  (942,967)           (1,878,994)
  Treasury stock at cost, 272,500 shares                                              (2,263,428)           (2,263,428)
                                                                                   -------------         -------------

                  Total stockholders' equity                                          33,604,186            34,308,060
                                                                                   -------------         -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $ 144,976,260         $ 153,109,463
                                                                                   =============         =============

</TABLE>



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



                                     - 4 -
<PAGE>


                       VALLEY NATIONAL GASES INCORPORATED

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                               December 31,
                                                                      ------------------------------
                                                                         2000               2001
                                                                      -----------        -----------
<S>                                                                   <C>                <C>
NET SALES                                                             $36,119,757        $34,930,247
COST OF PRODUCTS SOLD, excluding depreciation
   and amortization                                                    17,693,426         16,100,140
                                                                      -----------        -----------
                  Gross profit                                         18,426,331         18,830,107
                                                                      -----------        -----------

EXPENSES:
    Operating and administrative                                       12,293,122         14,408,100
    Depreciation                                                        1,402,600          1,182,679
  Amortization of intangibles                                           1,241,508            652,026
                                                                      -----------        -----------
                  Total expenses                                       14,937,230         16,242,805
                                                                      -----------        -----------
                  Income from operations                                3,489,101          2,587,302

INTEREST EXPENSE                                                        1,519,139          1,721,926
OTHER INCOME, NET                                                         157,252             76,368
                                                                      -----------        -----------
EARNINGS BEFORE INCOME TAXES                                            2,127,214            941,744

PROVISION FOR INCOME TAXES                                                942,624            390,824
                                                                      -----------        -----------
NET EARNINGS                                                          $ 1,184,590        $   550,920
                                                                      ===========        ===========

BASIC EARNINGS PER SHARE                                              $      0.13        $      0.06
DILUTED EARNINGS PER SHARE                                            $      0.13        $      0.06
WEIGHTED AVERAGE SHARES:
   Basic                                                                9,347,584          9,347,584
   Diluted                                                              9,359,656          9,410,000


</TABLE>


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


                                     - 5 -
<PAGE>


                       VALLEY NATIONAL GASES INCORPORATED

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                               December 31,
                                                                      ------------------------------
                                                                         2000              2001
                                                                      -----------        -----------
<S>                                                                   <C>                <C>
NET SALES                                                             $67,477,036        $68,626,020
COST OF PRODUCTS SOLD, excluding depreciation
   and amortization                                                   32,442,801         31,579,475
                                                                      -----------        -----------
                  Gross profit                                         35,034,235         37,046,545
                                                                      -----------        -----------

EXPENSES:
    Operating and administrative                                       23,824,368         27,655,684
    Depreciation                                                        2,615,200          2,335,279
    Amortization of intangibles                                         2,474,760          1,299,027
                                                                      -----------        -----------
                  Total expenses                                       28,914,328         31,289,990
                                                                      -----------        -----------
                  Income from operations                                6,119,907          5,756,555

INTEREST EXPENSE                                                        2,806,774          3,130,553
OTHER INCOME, NET                                                         254,324            177,247
                                                                      -----------        -----------
EARNINGS BEFORE INCOME TAXES                                            3,567,457          2,803,249

PROVISION FOR INCOME TAXES                                              1,569,681          1,163,348
                                                                      -----------        -----------

NET EARNINGS                                                          $ 1,997,776        $ 1,639,901
                                                                      ===========        ===========

BASIC EARNINGS PER SHARE                                              $      0.21        $      0.18
DILUTED EARNINGS PER SHARE                                                   0.21               0.17
WEIGHTED AVERAGE SHARES:
   Basic                                                                9,347,584          9,347,584
   Diluted                                                              9,363,593          9,400,116

</TABLE>




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



                                     - 6 -
<PAGE>




                       VALLEY NATIONAL GASES INCORPORATED

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                Six Months Ended
                                                                    December 31,
                                                       ---------------------------------
                                                           2000                 2001
                                                       ------------         ------------
<S>                                                    <C>                  <C>
Net cash provided by operating activities              $  2,223,622         $  5,511,392
                                                       ------------         ------------

Cash flows from investing activities:
    Proceeds from disposal of assets                        180,366              112,635
    Purchases of property and equipment                  (4,652,125)          (4,479,710)
    Business acquisitions, net of cash acquired          (1,050,000)          (5,462,636)
                                                       ------------         ------------

     Net cash used by investing activities               (5,521,759)          (9,829,711)

Cash flows from financing activities:
    Proceeds from borrowings                             22,463,405           34,345,760
    Principal payments on loans                         (19,365,284)         (28,330,588)
                                                       ------------         ------------

     Net cash provided by financing activities            3,098,121            6,015,172
                                                       ------------         ------------

Net change in cash and cash equivalents                    (200,016)           1,696,853

Cash and cash equivalents, beginning of period              769,564              542,720
                                                       ------------         ------------

Cash and cash equivalents, end of period               $    569,548         $  2,239,573
                                                       ============         ============

Supplemental cash flow information:
    Cash payments for interest                         $  3,436,325         $  2,872,988
                                                       ============         ============
    Cash payments for income taxes                     $    777,475         $    170,027
                                                       ============         ============


</TABLE>

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



                                     - 7 -
<PAGE>


                       Valley National Gases Incorporated


              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION:
   ----------------------

   The financial statements of Valley National Gases Incorporated (the Company)
presented herein are unaudited. Certain information and footnote disclosures
normally prepared in accordance with generally accepted accounting principles
have been either condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. Although the Company believes that all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included or incorporated by reference in the Company's audited financial
statements for the period ending June 30, 2001.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   ------------------------------------------

INVENTORY

   Inventory is carried at the lower of cost or market using the first-in,
first-out (FIFO) method.

The components of inventory are as follows:

<TABLE>
<CAPTION>
                            June 30,        December 31,
                             2001               2001
                         -----------        -----------
                                            (Unaudited)
<S>                      <C>                <C>
        Hardgoods        $14,571,219        $14,336,642
        Gases              1,732,038          2,119,228
                         -----------        -----------
                         $16,303,257        $16,455,870
                         ===========        ===========
</TABLE>

PLANT AND EQUIPMENT

   Plant and equipment are stated at cost. Depreciation is provided on the
straight-line basis over the estimated useful lives of the related assets.

   Effective July 1, 2001, the Company changed its estimate of the useful lives
of its delivery vehicles from 3 to 7 years. This change was made to better
reflect the estimated periods during which these assets will remain in service.
The change had the effect of reducing depreciation expense for the quarter and
six months ended December 31, 2001 by approximately $124,000 and $248,000 and
increasing net earnings by $73,000 and $145,000 or $0.01 and $0.02 per diluted
share, respectively.

   The Company changed the estimated useful life of delivery vehicles as a
result of thorough studies and analyses. The studies considered empirical data
obtained from truck manufacturers and other industry experts and experience
gained from the Company's maintenance of a delivery vehicle population of
approximately 200 delivery vehicles.


                                     - 8 -
<PAGE>

3.  ACQUISITIONS:
    -------------

   The Company acquires businesses engaged in the distribution of industrial,
medical and specialty gases and related welding supplies and accessories.
Acquisitions have been recorded using the purchase method of accounting and,
accordingly, results of their operations have been included in the Company's
financial statements since the effective dates of the respective acquisitions.

   During the six months ended December 31, 2001, the Company purchased three
businesses. These acquisitions and their effective dates were Buckeye
Corporation (August 2001), Mansfield Oxygen Corp. (August 2001) and Gas Arc,
Inc. (December 2001). These acquisitions had approximately $7.0 million in
combined annualized sales. These transactions were financed through the
Company's credit facility.

   In connection with these acquisitions, the total purchase price, fair value
of assets acquired, cash paid and liabilities assumed were as follows:

<TABLE>
<CAPTION>
                                                      Six Months Ended
                                                      December 31, 2001
                                                      -----------------
                                                         (Unaudited)
<S>                                                      <C>
Cash paid                                                $5,967,630
Notes issued to sellers                                          --
Notes payable and capital leases assumed                    391,198
Other liabilities assumed and acquisition
    costs including non-competes                            850,000
                                                         ----------

Total purchase price allocated to assets
    acquired                                             $7,208,828
                                                         ==========
</TABLE>

   As part of these acquisitions, the Company recorded $856,000 for goodwill and
$850,000 for non-compete agreements having an amortization period of 3 years.

4. LONG-TERM DEBT:
   ---------------

   Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                      June 30, 2001       December 31, 2001
                                                                                      -------------       -----------------
                                                                                                            (Unaudited)
<S>                                                                                    <C>                  <C>
Revolving note, interest at LIBOR plus 1.875% payable monthly through April
    2003. Secured by the assets of the Company                                         $ 65,601,201         $ 76,090,324

Termnote, interest at LIBOR plus 1.875% payable monthly through October 2003
    Secured by the assets of the Company                                                  5,756,225            4,477,054

Notepayable, interest at 6.6% payable annually through October 2003. Secured by
    certain assets of the Company                                                         2,049,224            1,366,149

Individuals and corporations, mortgages and notes, interest at 3.7% to 10.00%,
    payable at various dates through 2010                                                 9,837,125            8,556,496
                                                                                       ------------         ------------

                                                                                         83,243,775           90,490,023
                  Original issue discount                                                  (113,432)            (103,312)
                  Current maturities                                                     (6,715,209)          (6,570,247)
                                                                                       ------------         ------------

Total long-term debt                                                                   $ 76,415,134         $ 83,816,464
                                                                                       ============         ============
</TABLE>

    Prime rate was 4.75% and LIBOR was 1.93% at December 31, 2001.


                                     - 9 -
<PAGE>

    On May 1, 2000 the Company entered into an amended and restated credit
facility with Bank One, as agent. The credit facility increased the maximum
revolving note borrowings to $100.0 million, including a letter of credit
sublimit of $25.0 million. The term note continued at the existing balance of
$7.7 million. The scheduled maturity date of the term note is October 4, 2003.
The scheduled maturity date of the revolving note is April 30, 2003. The Company
pays a fee for the unused portion of the revolving loan. The revolving loan is
used primarily to fund acquisitions. The Company is not required to make
principal payments on outstanding balances of the revolving loan as long as
certain covenants are satisfied. Interest is charged on both the term loan and
the revolving loan at either the lender's prime rate or various LIBOR rates, at
the Company's discretion, plus an applicable spread. The weighted average
interest rate for substantially all of the borrowings under the credit facility
was 3.96% as of December 31, 2001. As of December 31, 2001, availability under
the revolving loan was approximately $19.3 million, with outstanding borrowings
of approximately $76.1 million and outstanding letters of credit of
approximately $4.6 million. The credit facility is secured by all of the
Company's assets.

    The loan agreement for the credit facility contains various financial
covenants applicable to the Company, including covenants requiring minimum fixed
charge coverage, maximum funded debt to EBITDA, and minimum net worth.

5.  EARNINGS PER SHARE
    ------------------

   Basic earnings per share were computed based on the weighted average number
of common shares issued and outstanding during the relevant periods. Diluted
earnings per common share were computed based on the weighted average number of
common shares issued and outstanding plus additional shares assumed to be
outstanding to reflect the dilutive effect of common stock equivalents using the
treasury stock method.

   Options to purchase 154,500 and 228,850 shares of common stock were
outstanding during the quarter and six months ended December 31, 2001 and 2000
respectively, but were not included in the computation of diluted earnings per
common share as the options' exercise price was greater than the average market
price of the common stock for the respective periods.

<TABLE>
<CAPTION>
                                                                Three Months Ended                   Six Months Ended
                                                                    December 31,                        December 31,
                                                            ----------------------------        ----------------------------
                                                               2000              2001              2000              2001
                                                            ----------        ----------        ----------        ----------
<S>                                                         <C>               <C>               <C>               <C>
Net earnings available for common stock                     $1,184,590        $  550,920        $1,997,776        $1,639,901
                                                            ==========        ==========        ==========        ==========

Basic earnings per common share:

Weighted average common shares                               9,347,584         9,347,584         9,347,584         9,347,584
                                                            ==========        ==========        ==========        ==========

Basic earnings per common share                             $     0.13        $     0.06        $     0.21        $     0.18
                                                            ==========        ==========        ==========        ==========

Diluted earnings per common share:

Weighted average common shares                               9,347,584         9,347,584         9,347,584         9,347,584

Shares issuable from assumed conversion of common
stock equivalents                                               12,072            62,416            16,009            52,532
                                                            ----------        ----------        ----------        ----------

Weighted average common and common equivalent shares         9,359,656         9,410,000         9,363,593         9,400,116
                                                            ==========        ==========        ==========        ==========
Diluted earnings per common share                           $     0.13        $     0.06        $     0.21        $     0.17
                                                            ==========        ==========        ==========        ==========
</TABLE>



                                     - 10 -
<PAGE>


6.   COMPREHENSIVE INCOME
     --------------------

     The components of comprehensive income, net of tax, were as follows:

<TABLE>
<CAPTION>
                                                            Six Months Ended
                                                              December 31,
                                                    -------------------------------
                                                        2000                2001
                                                    -----------         -----------
<S>                                                 <C>                 <C>
Net earnings                                        $ 1,997,776         $ 1,639,901

Cumulative effect of change in accounting
  principle, net of tax                                 213,300                  --

Unrealized losses on derivatives, net of tax           (847,931)           (936,027)
                                                    -----------         -----------

Comprehensive income (loss)                         $ 1,363,145         $   703,874
                                                    -----------         -----------
</TABLE>

   Accumulated other comprehensive loss presented in the accompanying condensed
consolidated balance sheets consists of the accumulated other net unrealized
loss on derivatives designated as cash flow hedges.

7. DERIVATIVES AND HEDGING ACTIVITIES
   ----------------------------------

   On July 1, 2000, Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was adopted
resulting in the recording of current assets of $476,500, noncurrent assets of
$1,175,800, current liabilities of $365,400, noncurrent liabilities of $931,500
and other comprehensive income of $213,300, net of tax. The December 2001
quarter and six months results include an increase in interest expense of
$195,741 and $43,393, respectively, to record changes in the fair market value
of the Company's interest rate swap agreements, compared to a reduction of
interest expense in the prior year quarter and six months of $56,648 and
$222,886, respectively.

   Floating to fixed rate interest swap agreements, designated as cash flow
hedges, hedge the Company's floating rate debt and expire at various dates
through January 2006. The fair value of these contracts is recorded in the
Company's balance sheet, with the offset to accumulated other comprehensive
loss, net of tax. The Company expects to recognize net current liabilities of
$362,000 into earnings in the next 12 months.

8. ADOPTION OF NEW ACCOUNTING STANDARDS
   ------------------------------------

  In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," which establishes new accounting and reporting
standards for business combinations. The Company adopted the new standard on
July 1, 2001.

9. INTANGIBLE ASSETS
   -----------------

  On July 1, 2001, the Company adopted SFAS No. 142, "Goodwill and Other
Intangible Assets," under which goodwill and other intangible assets with
indefinite lives are not amortized. Such intangibles were evaluated for


                                     - 11 -
<PAGE>

impairment as of July 1, 2001 and no impairment existed. In addition, each year,
the Company will evaluate the intangible assets for impairment with any
resulting impairment reflected as an operating expense. The Company's only
intangibles, other than goodwill, are its noncompete agreements and consulting
agreements, which the Company currently believes have finite lives. As of
December 31, 2001, the Company's noncompete agreements and consulting agreements
are summarized as follows:

<TABLE>
<CAPTION>
                                                                                Weighted
                                                              Balance at         Average
                         Original          Accumulated       December 31,      Amortization
                           Cost           Amortization          2001          Period (years)
                       -----------        ------------       -----------      --------------
<S>                   <C>                <C>                <C>                 <C>
Non-competition
   agreements          $14,833,275        $ 8,051,565        $ 6,781,710          4.8
Consulting
   agreements            1,063,771            836,842            226,929          5.5
</TABLE>


   Amortization expense for the six months ended December 31, 2001 totaled
$1,241,508. Estimated amortization expense for the remainder of fiscal 2002 and
the next five fiscal years is summarized as follows:

             Fiscal year Ending June 30,
             ---------------------------
                  Remainder of 2002                $ 1,332,173
                         2003                      $ 2,014,617
                         2004                      $ 1,490,856
                         2005                      $   923,905
                         2006                      $   507,635
                         2007                      $   299,302

   The changes in the carrying amount of goodwill for the six months ended
December 31, 2001, are as follows:

           Balance as of June 30, 2001                          $ 39,521,506
           Goodwill acquired during the current
             fiscal year                                        $  1,009,194
           Goodwill written off related to sale
             of assets                                              (104,312)
                                                                ------------
           Balance as of December 31, 2001                      $ 40,426,388
                                                                ------------

   The following table reports pro forma information as if SFAS No. 142 had been
adopted for all periods presented:





                                     - 12 -
<PAGE>

<TABLE>
<CAPTION>
                                                      Three Months Ended           Six Months Ended
                                                          December 31,               December 31,
                                                   ------------------------    ------------------------
                                                       2000          2001         2000         2001
                                                   ----------     ---------    ----------    ----------
<S>                                                <C>            <C>          <C>           <C>
Reported net earnings                              $1,184,590     $ 550,920    $1,997,776    $1,639,901
Goodwill amortization, net of
  tax                                                 363,629            --       694,412            --
                                                   ----------     ---------    ----------    ----------
Adjusted net earnings                              $1,548,219     $ 550,920    $2,692,188    $1,639,901

Basic earnings per share                           $     0.13     $    0.06    $     0.21    $     0.18
Goodwill amortization                                    0.04            --          0.08            --
                                                   ----------     ---------    ----------    ----------
Adjusted basic earnings per
  share                                            $     0.17     $    0.06    $     0.29    $     0.18

Diluted earnings per share                         $     0.13     $    0.06    $     0.21    $     0.17
Goodwill amortization                                    0.04            --          0.08            --
                                                   ----------     ---------    ----------    ----------
Adjusted diluted earnings
  per share                                        $     0.17     $    0.06    $     0.29    $     0.17

</TABLE>


ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS


   The following discussion should be read in conjunction with, and is qualified
in its entirety by, the Financial Statements and the Notes thereto.


OVERVIEW

    The Company is a leading packager and distributor of industrial, medical and
specialty gases, welding equipment and supplies, and propane in 11 states in the
eastern United States. The Company's net sales have grown, primarily as a result
of acquisitions, at a compound annual rate of approximately 17% per year since
the Company started business in 1958, increasing from $190,000 in that year to
$142.5 million for the last twelve months. In fiscal 2001, gases accounted for
approximately 44% of net sales, welding equipment and supplies accounted for
approximately 40% of net sales, and cylinder and tank rental accounted for
approximately 16% of net sales.

    The Company believes it has been successful in executing its strategy of
growth through acquisitions, having completed 52 acquisitions since 1990. Some
acquisitions have had, and the Company expects some future acquisitions will
have, a dilutive effect upon the Company's income from operations and income
before tax for a short period following consummation. This temporary dilution
occurs because some of the benefits of acquisitions, such as leveraging of
operating and administrative expenses, improved product gross margins and real
sales growth, occur over a period ranging from two to eight quarters, depending
upon the complexity of integrating each acquisition into the Company's existing
operations. The consideration for most acquisitions includes a combination of a
cash payment at closing, seller financing and payments under covenants not to
compete and consulting agreements. In most cases, operating cash flow of an
acquired business is positive in a relatively short period of time. For many
acquisitions, the Company believes that projections of future cash flows justify
payment of amounts in excess of the book or market value of the assets acquired,
resulting in goodwill being recorded.



                                     - 13 -
<PAGE>

    The Company's results are subject to moderate seasonality, primarily due to
fluctuations in the demand for propane, which is highest during winter months
falling in the Company's second and third fiscal quarters. Seasonality of total
sales has increased as propane sales as a percentage of total sales have
increased.

    Operating and administrative expenses are comprised primarily of salaries,
benefits, transportation equipment operating costs, facility lease expenses and
general office expenses. These expenses are generally fixed on a
quarter-to-quarter basis. The Company believes that changes in these expenses as
a percentage of sales should be evaluated over the long term rather than on a
quarter-to-quarter basis due to the moderate seasonality of sales mentioned
above and the generally fixed nature of these expenses.

    Historically, the Company's gross profit margins as a percentage of sales
have been higher on the sale of gases than on the sale of welding equipment and
supplies ("hard goods"). As a result of recent acquisitions of some distributors
with a higher proportion of hard goods to gas sales, the Company's average gross
profit as a percentage of sales has decreased in comparison to prior years.
Future acquisitions may affect this pattern depending upon the product mix of
the acquired businesses.

RESULTS OF OPERATIONS

Comparison of Three Months Ended December 31, 2001 and 2000

   Net sales decreased 3.3%, or $1.2 million, to $34.9 million from $36.1
million for the three months ended December 31, 2001 and 2000, respectively.
Acquisitions made during the preceding twelve months contributed $3.9 million of
the increase in net sales, while same store sales decreased $5.1 million. Same
store sales decreased 14.0% versus the same quarter last year. Propane sales
declined $2.8 million on a same store basis, reflecting $1.2 million in price
deflation and $1.6 million decline due to the decline in the volume of propane
sold. Bulk propane gallons sold decreased 22% for the quarter reflecting the
effect of heating degree-days being down 32% in comparison to the prior year.
Hard good sales decreased $1.9 million from the prior year quarter on a same
store basis, reflecting the effect of the softness in the economy during the
quarter. Gases and cylinder revenue represented 60.5% of national net sales for
the three months ended December 31, 2001, with hard goods representing 39.5%. In
comparison, net sales for the three months ended December 31, 2000 reflected
gases and cylinder revenue as 60.7% and hard goods as 39.3%.

   Gross profit, which excludes depreciation and amortization, increased 2.2%,
or $0.4 million, to $18.8 million from $18.4 million for the three months ended
December 31, 2001 and 2000, respectively. Acquisitions made during the last
twelve months contributed $2.1 million of the change with same stores gross
profit decreasing $1.7 million. Gross profit as a percentage of net sales was
53.9% for the three months ended December 31, 2001, compared to 51.0% for the
three months ended December 31, 2000, reflecting primarily the change in product
mix, with propane being a lesser portion of total gas sales, along with improved
margins related to propane sales.

   Operating and administrative expenses increased 17.2%, or $2.1 million, to
$14.4 million from $12.3 million for the three months ended December 31, 2001
and 2000, respectively. Of this increase, $1.7 million was related to acquired
businesses while base business increased $0.4 million. The $0.4 million increase
in same store expenses consisted primarily of higher insurance costs and
increased bad debt. Operating and administrative expenses as a percentage of
sales were 41.2% for the three months ended December 31, 2001, as compared to
34.0% for the same quarter in 2000, reflecting primarily the effect of the
decline in same store sales, partially offset by the Company's expense reduction
efforts.


                                     - 14 -
<PAGE>

   Depreciation and amortization expense decreased $0.8 million for the quarter,
compared to the prior year quarter. The Company changed its method of accounting
for goodwill on July 1, 2001 to comply with SFAS No. 142 whereby it discontinued
amortization of goodwill. In the prior year, goodwill amortization expense of
$0.5 million was recorded. Under the new standard, pro forma diluted earnings
per share for the prior year first quarter would have been $0.17. As a result of
a study on the useful life of delivery vehicles, the Company changed its
estimate of useful lives for delivery vehicles, effective July 1, 2001, from
three years to seven years. Depreciation and amortization would have been $0.1
million higher for the quarter before this change. This change increased net
earnings $0.01 million for the current quarter or $0.01 per diluted share.

   Interest expense increased $0.2 million with $0.3 million attributable to
acquisitions completed in the last twelve months. Interest expense included an
increase of $195,741 for the quarter ended December 31, 2001 compared to a
reduction in interest expense of $56,648 in the prior year quarter to record
changes in the fair market value of the Company's interest rate swap agreements
under SFAS No. 133.

   The Company's effective tax rate decreased from 44.0% for the prior year
quarter to 41.5% for the current year as a result of decreased nondeductible
goodwill under SFAS No. 142.

   Net earnings decreased 53.5% to $0.6 million after the effect of SFAS No. 133
and SFAS No. 142 for the three months ended December 31, 2001 compared to $1.2
for the prior year quarter.

Comparison of Six Months Ended December 31, 2001 and 2000

   Net sales increased 1.7%, or $1.1 million, to $68.6 million from $67.5
million for the six months ended December 31, 2001 and 2000, respectively.
Acquisitions made during the preceding twelve months contributed $7.1 million of
the increase in net sales, while same store sales decreased $6.0 million. Same
store sales decreased 8.9% versus the same period last year. Propane sales
declined $2.7 million on a same store basis, reflecting $1.4 million in price
deflation and $1.3 million decline due to the decline in the volume of propane
sold. Bulk propane gallons sold were off 11% for the six months reflecting the
effect of heating degree-days being down 32% in comparison to the prior year.
Gases and cylinder revenue represented 58.2% of net sales for the six months
ended December 31, 2001, with hard goods representing 41.8%. In comparison, net
sales for the six months ended December 31, 2000 reflected gases and cylinder
revenue as 58.1% and hard goods as 41.9%.

   Gross profit, which excludes depreciation and amortization, increased 5.7%,
or $2.0 million, to $37.0 million from $35.0 million for the six months ended
December 31, 2001 and 2000, respectively. Acquisitions made during the last
twelve months contributed $3.8 million of the change with same stores gross
profit decreasing $1.8 million. Gross profit as a percentage of net sales was
54.0% for the six months ended December 31, 2001, compared to 51.9% for the six
months ended December 31, 2000, reflecting primarily the change in product mix,
with propane being a lesser portion of total gas sales, along with improved
margins related to propane sales.

   Operating and administrative expenses increased 16.1%, or $3.8 million, to
$27.6 million from $23.8 million for the six months ended December 31, 2001 and
2000, respectively. Of this increase, $3.2 million was related to acquired
businesses while base business increased $0.6 million. The $0.6 million



                                     - 15 -
<PAGE>

increase in same store expenses consisted primarily of higher insurance costs
and increased bad debt. Operating and administrative expenses as a percentage of
sales were 40.3% for the six months ended December 31, 2001, as compared to
35.3% for the same quarter in 2000, reflecting primarily the effect of the
decline in same store sales, partially offset by the Company's expense reduction
efforts.

   Depreciation and amortization expense decreased $1.5 million for the six
months ended December 31, 2001, compared to the same period in 2000. The Company
changed its method of accounting for goodwill on July 1, 2001 to comply with
SFAS No. 142 whereby it discontinued amortization of goodwill. In the prior
year, goodwill amortization expense of $1.0 million was recorded. Under the new
standard, pro forma diluted earnings per share for the prior year would have
been $0.29. As a result of a study on the useful life of delivery vehicles, the
Company changed its estimate of useful lives for delivery vehicles, effective
July 1, 2001, from three years to seven years. Depreciation and amortization
would have been $0.2 million higher for the year before this change. This change
increased net earnings $0.2 million for the year or $0.02 per diluted share.

   Interest expense increased $0.3 million with $0.6 million attributable to
acquisitions completed in the last twelve months. Interest expense included an
increase of $43,393 and a reduction of $222,886 for the six months ended
December 31, 2001 and 2000, respectively, to record changes in the fair market
value of the Company's interest rate swap agreements.

   The Company's effective tax rate decreased from 44.0% for the prior year to
41.5% for the current year as a result of decreased nondeductible goodwill under
SFAS No. 142.

   Net earnings decreased 17.9% to $1.6 million after the effect of SFAS No. 133
and SFAS No. 142 for the six months ended December 31, 2001 compared to $2.0
million for the prior year.

LIQUIDITY AND CAPITAL RESOURCES

   Historically, the Company has financed its operations, capital expenditures
and debt service with funds provided from operating activities. Acquisitions
have been financed by a combination of seller financing, bank borrowings and
funds generated from operations.

   At December 31, 2001, the Company had working capital of approximately $16.7
million. Funds provided by operations for the six months ended December 31, 2001
were approximately $5.5 million. Funds used for investing activities were
approximately $9.8 million for the six months ended December 31, 2001,
consisting primarily of capital spending and financing for acquisitions. Sources
of funds from financing activities for the six months ended December 31, 2001
were approximately $6.0 million from net borrowings. The Company's cash balance
increased $1.7 million during the six months to $2.2 million.

   On May 1, 2000, the Company entered into a second amended and restated credit
agreement with Bank One, as agent. This agreement increased the maximum
revolving note borrowings to $100 million, from the previous maximum borrowings
level of $75.3 million, and extended the maturity of the revolving note to April
30, 2003. The agreement permits the Company, on an annual basis, to request that
the maturity be extended one year. No significant changes were made to pricing
and the covenant requirements when compared to the original agreement. The
weighted average interest rate for substantially all of the borrowings under the
credit facility was 3.96% as of December 31, 2001. As of December 31, 2001,
availability under the revolving loan was approximately $19.3 million, with
outstanding borrowings of approximately $76.1 million and


                                     - 16 -
<PAGE>

outstanding letters of credit of approximately $4.6 million. The credit
facility is secured by all of the Company's assets. The revolving loan is used
primarily to fund acquisitions. The Company is not required to make principal
payments on outstanding balances of the revolving loan as long as certain
covenants are satisfied. Interest is charged on both the term loan and the
revolving loan at either the lender's prime rate or various LIBOR rates, at the
Company's discretion, plus an applicable spread.

   The loan agreement for the credit facility contains various financial
covenants applicable to the Company, including covenants requiring minimum fixed
charge coverage, maximum funded debt to EBITDA, and minimum net worth. As of
December 31, 2001, the Company is in compliance with these covenants and
believes that it will continue to be in compliance through at least the next
twelve months.

    The Company is obligated under various promissory notes related to the
financing of acquisitions that have various rates of interest, ranging from 3.7%
to 10.0% per annum, and maturities through 2010. The outstanding balance of
these notes as of December 31, 2001 was $8.6 million. Some of these notes are
secured by assets related to the applicable acquisition, some are unsecured, and
some are backed by bank letters of credit issued under the Company's credit
facility.

    The Company enters into contractual agreements in the ordinary course of
business to hedge its exposure to interest rate risks. Counterparties to these
agreements are major financial institutions. Management believes the risk of
incurring losses related to credit risk is remote and any losses would be
immaterial.

    Interest rate swap agreements are used to reduce interest rate risks and
costs inherent in the Company's debt portfolio. The Company enters into these
agreements to change the fixed/variable interest rate mix of the debt portfolio
in order to maintain the percentage of fixed and variable debt within certain
parameters set by management. Accordingly, the Company enters into agreements to
effectively convert variable-rate debt to fixed-rate debt.

    As of December 31, 2001, the Company had $60.0 million in notional amounts
outstanding under interest rate swap agreements. These swaps have an average pay
rate of 5.9% versus a receive rate of 1.93%.

    The Company has previously entered into a put/call option agreement with an
independent distributor for the purchase of its business. This option becomes
exercisable beginning in the year 2002 and ending in the year 2008. The Company
believes that it will have adequate capital resources available to fund this
acquisition at such time that the option is exercised.

    The Company believes that cash generated from operations, borrowing
availability under its credit facility and the ability to obtain financing with
sellers of businesses will be sufficient to satisfy the Company's requirements
for operating funds, capital expenditures and future acquisitions for at least
the next twelve months. The Company has no plans at this time to issue
additional shares of common stock.

FLUCTUATIONS IN QUARTERLY RESULTS

    The Company generally has experienced higher sales activity during its
second and third quarters as a result of seasonal sales of propane, with
corresponding lower sales for the first and fourth quarters. As a result, income
from operations and net income typically are higher for the second and third
quarters than for the first and fourth quarters of the fiscal year. The timing
of acquisitions may also have an appreciable effect on quarter to quarter
earnings.


                                     - 17 -
<PAGE>

INFLATION

    The impact of inflation on the Company's operating results has been moderate
in recent years, reflecting generally low rates of inflation in the economy and
the Company's historical ability to pass purchase price increases to its
customers in the form of sales price increases. While inflation has not had, and
the Company does not expect that it will have, a material impact upon operating
results, there is no assurance that the Company's business will not be affected
by inflation in the future.

NEW ACCOUNTING STANDARDS

   In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" was issued. SFAS No. 144 addresses financial accounting and
reporting for the impairment of long-lived assets and for long-lived assets to
be disposed of and supersedes SFAS No. 121. This statement retains the
fundamental provisions of SFAS No. 121 for recognition and measurement of the
impairment of long-lived assets to be held and used and measurement of
long-lived assets to be disposed of by sale. The provisions of this standard
must be applied for fiscal years beginning after December 15, 2001. The Company
is currently evaluating the effects of SFAS No. 144 and is preparing a plan for
its implementation.

CAUTIONARY STATEMENTS

   This form 10-Q contains forward-looking statements within the meaning of
federal securities laws that may include statements regarding intent, belief or
current expectations of the Company and its management. These forward-looking
statements are not guarantees of future performance and involve a number of
risks and uncertainties that may cause the Company's actual results to differ
materially from the results discussed in these statements. Important factors
that may affect the Company's ability to achieve the results expressed in the
forward-looking statements include, but are not limited to, the Company's
ability to (i)accurately identify attractive acquisition targets and make
accurate predictions regarding the performance of those businesses if integrated
into the Company's operations, (ii) successfully negotiate agreements for the
acquisition of those businesses, (iii) integrate the operations of the acquired
businesses as anticipated, (iv) secure financing necessary to make acquisitions,
including maintaining and/or expanding its line of credit, negotiating seller
financing, or securing other financing methods, (v) manage rapid growth, (vi)
effectively compete, (vii) attract and retain key personnel, (viii) maintain
good relationships with suppliers and locate alternative suppliers if needed,
and other risks and uncertainties detailed from time to time in the Company's
filings with the Securities and Exchange Commission. We do not intend to update
any of the forward-looking statements after the date of this Form 10-Q to
conform them to actual results.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   No change has occurred since the filing by the Registrant on Form 10-K for
the year ended June 30, 2001. Reference is made to Part II, Item 7A,
Quantitative and Qualitative Disclosures About Market Risk, in the Registrant's
Annual Report on Form 10-K for the year ended June 30, 2001.

   There was no change to the composition of the Company's fixed and variable
rate long-term debt or interest rate swaps during the six months ended December
31, 2001. As of December 30, 2001 the Company's average pay rate for these swaps
was 5.49% compared to its average receive rate of 1.93%.


                                     - 18 -
<PAGE>


                           PART II. OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)       Exhibits:

                  None.

        (b)      Reports on Form 8-K:

                 No reports on Form 8-K were filed during the quarter ended
                 December 31, 2001.




                                     - 19 -
<PAGE>


                                   SIGNATURES



   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.



                                         VALLEY NATIONAL GASES INCORPORATED



February 14, 2002                        /s/ Robert D. Scherich
                                         -----------------------------------
                                         Robert D. Scherich
                                         Chief Financial Officer



                                     - 20 -