<PAGE>   1

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K

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

       For the fiscal year ended June 30, 2000
                                       or

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

       For the transition period from ________________ to ________________

                        COMMISSION FILE NUMBER 000-29226

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

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

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

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

     Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                                               NAME OF EXCHANGE
           TITLE OF EACH CLASS                ON WHICH REGISTERED
------------------------------------------  -----------------------
<S>                                         <C>
 Common stock, $.001 par value per share    American Stock Exchange
</TABLE>

     Securities registered pursuant to Section 12(g) of the Act:  None

     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 the 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. [   ]

     The aggregate market value of voting stock held by non-affiliates of the
registrant, computed by reference to the closing sales price of such stock on
September 1, 2000, as reported on the American Stock Exchange, was $9,246,208.

     As of September 15, 2000, the Company had outstanding 9,347,584 shares of
common stock.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Certain specified portions of the Company's definitive proxy statement for
the annual meeting of shareholders to be held October 24, 2000 are incorporated
by reference in response to Part III.

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                       VALLEY NATIONAL GASES INCORPORATED

                               TABLE OF CONTENTS

                                     PART I

<TABLE>
<CAPTION>
ITEM                                                                 PAGE NO.
----                                                                 --------
<C>    <S>                                                           <C>
 1.    Business....................................................      1
 2.    Properties..................................................      7
 3.    Legal Proceedings...........................................      8
 4.    Submission of Matters to a Vote of Security Holders.........      8

                                   PART II
 5.    Market for the Company's Common Stock and Related
       Stockholder Matters.........................................      9
 6.    Selected Financial Data.....................................     10
 7.    Management's Discussion and Analysis of Financial Condition
       and Results of Operations...................................     11
7A.    Quantitative and Qualitative Disclosures About Market
       Risk........................................................     16
 8.    Financial Statements and Supplementary Data.................     16
 9.    Changes in and Disagreements with Accountants on Accounting
       and Financial Disclosures...................................     16

                                  PART III
10.    Directors and Executive Officers of the Company.............     17
11.    Executive Compensation......................................     18
12.    Security Ownership of Certain Beneficial Owners and
       Management..................................................     19
13.    Certain Relationships and Related Transactions..............     19

                                   PART IV
14.    Exhibits, Financial Statements, Schedules and Reports on
       Form 8-K....................................................     19
</TABLE>
<PAGE>   3

                                     PART I
ITEM 1.  BUSINESS

OVERVIEW

     Valley National Gases, Incorporated ("the Company") is a leading packager
and distributor of cylinder and bulk industrial, medical and specialty gases,
welding equipment and supplies, propane and fire protection equipment in ten
states in the mid-Atlantic and midwestern regions of the 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 $126.1 million in
fiscal 2000. In fiscal 2000, gases accounted for approximately 39% of net sales,
welding equipment and supplies accounted for approximately 45% of net sales, and
cylinder and tank rental accounted for approximately 16% of net sales.

     The Company's gas operations consist primarily of the packaging and mixing
of industrial, medical and specialty gases, such as oxygen, nitrogen and argon,
in pressurized cylinders and the transportation of these cylinders to customers
from one of the Company's 59 distribution and retail locations. The Company also
distributes propane to industrial and residential customers. Customers pay a
rental fee for use of the Company's cylinders. The Company owns approximately
475,000 cylinders, which require minimal maintenance and have useful lives that
the Company expects will extend on average for 30 years or longer. The Company
selectively participates in the small bulk gas market through the delivery of
gases in cryogenic transports and the storage of gases in cryogenic tanks and
propane tanks which are also rented to bulk gas customers. The Company owns
approximately 18,000 bulk propane tanks and 360 bulk cryogenic tanks, which have
useful lives generally less than those of cylinders. In connection with the
distribution of gases, the Company sells welding equipment and supplies,
including welding machines, wire, fluxes and electrodes and a wide variety of
supporting equipment.

     The Company's principal business strategy is to aggressively pursue growth
through the acquisition of other independent distributors and also through
internally generated growth. Since the Company was founded, it has completed 62
acquisitions. Since July 1, 1999, the Company has acquired five independent
distributors, adding approximately $12 million in annualized sales. Management
believes there will continue to be numerous attractive acquisition candidates
available to the Company as a result of the consolidation trend in the industry
and that the Company will be able to successfully integrate acquired operations
into its base business, generating growth and operational synergies.
Acquisitions will be financed primarily with borrowings under the Company's
credit facility and seller financing. While highly focused on external growth,
management believes that the Company's competitive strengths will allow it to
increase sales and improve market share in existing markets, while maintaining
acceptable levels of profitability.

INDUSTRY OVERVIEW

  GENERAL

     Historically, the industrial gas distribution business had a base of
customers engaged primarily in metal fabrication. In order to better serve these
customers, industrial gas distributors have also traditionally sold welding
equipment and supplies. As certain sectors of the economy have grown, such as
the electronics and chemicals industries, and as new applications for gases have
developed, the customer base of the industry has significantly broadened to
include almost every major industry, including health care, electronics,
chemicals, aerospace, beverages, environmental remediation, food processing, oil
and gas, and primary metals, as well as metal fabrication.

     The industrial, medical and specialty gas industry consists of two major
segments, the bulk segment and the packaged gas segment. The bulk segment
supplies gases to customers with large volume requirements, generally by truck
or pipeline to a customer's facility, or in some cases by the actual
construction of a gas production plant at a customer's facility. This segment is
primarily supplied by the major gas producers in the United States, although
some large distributors, such as the Company, selectively participate in the
small bulk gas market.

     The Company competes primarily in the packaged gas segment, which consists
of the packaging, mixing and distribution of gases to customers with smaller
volume needs or requirements for specially blended or purified gases.
                                        1
<PAGE>   4

     This segment of the industry is estimated to have sales of $6 billion in
the United States, including sales of welding equipment and supplies.
Participants in this segment can be further divided into two groups, large
multi-state distributors with annual sales exceeding $25 million, and smaller,
privately owned companies with few or single locations and annual sales below
$25 million. Management believes that large, multi-state distributors, including
the Company, account for approximately 50% of sales in the packaged gas segment.
Management estimates that the remaining sales are generated by approximately 750
smaller distributors, many of which it believes are potential candidates for
acquisition by larger distributors in the current wave of industry
consolidation.

     The Company believes that the following characteristics make the
distribution of packaged gases attractive and different from ordinary industrial
distribution: (i) the production, packaging and mixing of gases, as well as the
logistics of a large distribution network, require significant knowledge and
expertise; (ii) customers expect technical support and assistance in a wide
variety of gas applications; and (iii) the currently existing logistical
framework is unlikely to change significantly because of the economics
associated with the delivery and exchange of cylinders.

  INDUSTRY CONSOLIDATION

     The industry is undergoing significant consolidation, a trend which began
in the early 1980's. The Company believes there are many reasons for this trend,
including:

     - Many of the owners who started welding supply distributors after World
       War II are reaching retirement age without qualified succession.

     - Small distributors are facing increasing competition from large
       distributors who generally operate with lower cost structures due to
       economies of scale.

     - Rapid changes in technology in recent years are providing opportunities
       for more efficient order entry, inventory and distribution management.
       Larger distributors are more likely to have the capital and human
       resources to take advantage of these opportunities, thereby creating
       greater cost and service reliability advantages.

     - Larger customers are demanding additional services from their suppliers
       in such areas as automated order entry, automated restocking and
       applications technology support. These services require an investment in
       technology and equipment that many smaller distributors are incapable or
       unwilling to make.

     - The number and complexity of government regulations is increasing,
       especially for distributors who produce or package gas products.
       Complying with new regulations requires human resource expertise, which
       is difficult for the smaller distributor to access and maintain.

     - The acquisition of a distributor generally requires greater financial
       resources than in the past because the businesses are generally larger,
       sellers often demand full payment in cash, and sellers and major
       industrial gas producers appear to be less willing to provide financing.

     The Company believes this consolidation trend will continue, providing
opportunities for those distributors, such as the Company, who have the
financial and human resources to acquire and effectively assimilate acquisitions
into their base business. The Company believes that distributors who fail to
successfully participate in this consolidation trend and achieve a strong or
leading position in their market areas will be at a cost disadvantage in the
long term.

     In recent years, the propane industry has also been undergoing
consolidation for many of the same reasons as the industrial gas industry. The
Company has been taking advantage of this consolidation trend through selective
acquisitions. Except for a few large companies, the propane distribution
industry is highly fragmented. Industry sources indicate there are approximately
7,000 retail propane companies operating 13,500 local distribution centers
nationwide. The Company believes that the 50 largest propane distributors have
less than a 50% share of the approximately nine billion gallon annual market.

                                        2
<PAGE>   5

  ECONOMIC CHARACTERISTICS OF THE INDUSTRY

     The industrial gas industry is mature with real growth consistent with
growth in the overall economy. Gas sales tend to be less adversely impacted by a
decline in general economic conditions than the sale of welding equipment and
supplies. Management believes that the industrial gas distribution business is
relatively resistant to downturns in the business cycle due to the following
factors: (i) the industry has a broad and diverse customer base; (ii) gases
frequently represent a fixed component of operating costs which does not decline
with production levels; (iii) gases are required for maintenance and renovation
activities, which tend to increase during economic downturns; (iv) industries
less impacted by economic downturns are major purchasers of industrial gases;
and (v) gas purchases represent a small portion of operating expenses and,
therefore, are not a large cost cutting item. The total market for industrial
gases has continued to expand due to strong growth in certain segments, such as
electronics, food processing and health care, and significant growth from new
applications for industrial gases. However, other activities which use
industrial gases, such as metal fabrication, have declined in recent years.

BUSINESS STRATEGY

     The Company has implemented a strategic plan designed to (i) sustain
profitable growth through the acquisition of key distributors in selected
markets, (ii) achieve and maintain a low-cost supplier position in each market
segment where the Company participates and (iii) build a unified, cohesive
organization, staffed by skilled employees who are responsive to changing
customer requirements.

  GROWTH THROUGH ACQUISITIONS

     Prior Acquisitions. Since the formation of the Company in 1958, the Company
has completed the acquisition of 62 distributors. The Company's acquisitions
historically have been financed, and the Company expects that future
acquisitions will be financed, primarily with borrowings under the Company's
credit facility and seller financing. The Company does not currently intend to
issue shares of its common stock or other securities in order to consummate its
acquisitions, but may in the future elect to do so.

     Acquisition Strategy. The Company intends to continue to focus its
acquisition efforts both on market areas where the Company has an existing
presence and on new areas where it believes it can achieve a leading presence.
The Company believes there are many potential acquisition candidates with
operations in these market areas. The Company seeks to achieve operating
efficiencies when it acquires a distributor in an overlapping or contiguous
market area by closing redundant locations, eliminating a significant portion of
the acquired distributor's overhead and consolidating distribution routes.
Acquisitions in new markets allow the Company to achieve operating efficiencies
through volume discounts on purchases, lower administrative and professional
expenses and the purchase of new equipment to replace inefficient equipment and
equipment previously leased at relatively expensive lease rates.

     The Company believes that its principal competitive advantages in acquiring
distributors are (i) its flexibility in structuring acquisitions to meet the
concerns of sellers, (ii) its ability to offer sellers a continuing role in
management and (iii) its methodology in assimilating acquisitions. The Company
also believes it has a well organized acquisition program which utilizes
individuals who are well respected in the industry and who have extensive
experience in evaluating and negotiating transactions with distributor owners.
Based upon the Company's experience, price is not always the primary determining
factor in a selling distributor's choice of a buyer. Most owners of independent
distributors are sensitive as to whom they sell their business and have concern
for the well being of their employees after the acquisition. The Company has
found that relationships, existing competitive rivalry and reputation are key
elements in the success of acquiring most small, privately-owned distributors.
The Company believes it has earned an excellent reputation for treating fairly
the employees of businesses it has acquired, providing them with competitive
wages and benefits and opportunities for advancement within the scope of the
Company's operations.

     Competition for Acquisitions. In seeking to acquire distributors, the
Company competes with the major industrial gas producers and national and
regional gas distributors. The largest national distributor is Airgas, Inc.
("Airgas") which has been growing through acquisitions since the mid-1980's. The
Company expects that Airgas will continue to selectively acquire distributors in
the future, and in some situations will compete with the
                                        3
<PAGE>   6

Company for acquisitions. The Company believes that Praxair, Inc. and AGA Gas,
Inc. are the only major industrial gas producers who are actively soliciting
independent distributors for purchase at this time, but that each have
self-imposed size and geographic constraints. The Company also believes that
some major industrial gas producers have limited their acquisition efforts due
primarily to the difficulty of resolving management differences, cultural
differences and cost structure differences between the small, privately-held
business and the large multinational corporation. The smaller, independent
distributors with which the Company competes for acquisitions generally do not
seek acquisitions beyond their immediate geographic region.

     Acquisition Process. The Company has established formal procedures for
locating, investigating and valuing potential distributor acquisitions. Criteria
used by the Company in evaluating potential acquisitions include (i) a history
of profitability, (ii) realistic projections of future performance, (iii) a
sales mix which is or has the potential to become weighted towards the sale of
gases, which generally have higher profit margins than welding equipment and
supplies, (iv) a cylinder gas market which is serviced primarily by independent
distributors, as opposed to industrial gas producers and (v) availability of
qualified management and key personnel.

     Assimilation of Acquired Businesses. The Company believes that the
effective assimilation of acquired businesses into the Company's existing
operations is critical to the success of the Company's acquisition strategy. The
Company has established a transition team under the direction of a Vice
President of Acquisitions comprised of selected personnel with technical
expertise in various areas, such as purchasing, accounting, operations and
sales. This team has primary responsibility for converting the acquired business
from its existing methods and practices to those used by the Company. A primary
goal of the assimilation process is to instill the Company's culture into the
new operations. The Company believes the ability to instill its culture provides
a distinct and key competitive advantage. This is partly accomplished by
requiring the adoption of uniform policies and procedures which support the
Company's operational strategies.

  ACHIEVE AND MAINTAIN POSITION AS A LOW-COST SUPPLIER

     The Company strives to produce, package and market the Company's products
and services at costs which are lower than its local market competitors. This is
achieved by optimizing branch size and location, requiring adherence to the
Company's uniform policies and procedures, taking advantage of volume discount
purchases not available to smaller competitors and utilizing the Company's
management information systems. Where branch size is suboptimal, the Company has
developed alternatives to increase size or profitability through growth or
product diversification. The Company has implemented a "best practices" program
involving the identification of the most effective method of performing a
specific activity, such as inventory control, and has adopted procedures and
training to implement the practice as a standard throughout the Company's
operations.

     The Company has made a significant investment in its management information
systems as part of its strategy to be a low cost supplier. The Company has
installed an integrated company-wide point-of-sale data entry system that
provides current information on inventory levels and account status. The Company
believes significant costs savings have resulted from the increased ability to
efficiently manage inventory levels and accounts payable.

     The Company believes the selective addition of complementary product
offerings will enable it to better serve its diverse, expanding customer base,
reach new customers, increase sales in existing locations and leverage its
distribution system. For this reason, the Company has focused in recent years on
expanding its propane business. The addition of propane distribution at existing
Company locations has proven to be advantageous by providing the opportunity to
leverage fixed costs at existing locations, thereby creating economies of scale.
Certain Company locations are more attractive than others for propane
distribution, due primarily to residential growth potential and existing branch
size. In addition to propane, the Company believes that fire safety equipment,
currently a very small component of total sales, may be suitable for
distribution to portions of the Company's existing customer base.

                                        4
<PAGE>   7

  ENHANCE ORGANIZATIONAL STRENGTH

     The Company believes that to be competitive in attracting and maintaining
customers it must have a skilled and responsive work force dedicated to
providing excellent service. The Company works to instill a service culture
through various operational policies. The Company places special emphasis on
customer service, including the ability to quickly respond to technical
questions on products and applications. The Company believes this is a key value
provided to its customers. The Company commits significant resources to the
training and education of its employees through various programs.

     The Company strives to utilize to the fullest extent its existing
management resources. The Company restructured certain management reporting
relationships and areas of responsibility to place operating and financial
responsibility at the local market level, thereby eliminating a layer of
management and improving communication. These changes also allowed the Company
to redirect the focus of certain key management members on important operating
issues, such as system logistics, training, budgeting and overall operating
performance, that are vital to managing the Company's growth.

PRODUCTS

     Gases packaged and distributed by the Company include oxygen, nitrogen,
hydrogen, argon, helium, acetylene, carbon dioxide, nitrous oxide, specialty
gases and propane. Specialty gases include rare gases, high-purity gases and
blended, multi-component gas mixtures. In connection with the distribution of
gases, the Company sells welding equipment and supplies, including welding
machines, wire, fluxes and electrodes and a wide variety of supporting
equipment.

     In fiscal 2000, the Company sold approximately seventeen million gallons of
propane to approximately 26,000 residential, commercial and industrial users.
Propane sales accounted for approximately 15% of net sales in fiscal 2000.
Typical residential and commercial uses include conventional space heating,
water heating and cooking. Typical industrial uses include engine fuel for
forklifts and other vehicles, metal cutting, brazing and heat treating. The
distribution of propane is seasonal in nature and sensitive to variations in
weather with consumption as a heating fuel peaking sharply in winter months.

     While primarily a packager and distributor of gases, the Company also
manufactures a portion of its acetylene requirements at its facility in West
Mifflin, Pennsylvania. Acetylene is produced through a combination of calcium
carbide and water at relatively high temperatures. The reaction of these
elements also produces lime as a by-product, which is sold in bulk to customers
for a variety of applications. In fiscal 2000, acetylene accounted for
approximately 2% of net sales.

     The following table sets forth the percentage of the Company's net sales
for the fiscal years ended June 30, 1998, 1999 and 2000 for each of the
following products and services:

<TABLE>
<CAPTION>
                                                         YEARS ENDED JUNE 30,
                                                         --------------------
                                                         1998    1999    2000
                                                         ----    ----    ----
<S>                                                      <C>     <C>     <C>
Gases..................................................  38.5%   39.8%   39.3%
Welding equipment and supplies.........................  46.3    44.5    45.1
Cylinder rental and other..............................  15.2    15.7    15.6
</TABLE>

CUSTOMERS

     The Company currently has more than 84,000 customers, none of which
accounted for more than 1% of net sales in fiscal 2000. In fiscal 2000,
approximately 13% of the Company's net sales were to metal production and
fabrication customers. Other major industry categories represented by the
Company's customer base include manufacturing at 16%, services at 10%,
construction at 8%, health care at 6%, mining at 2%, and oil and chemicals at 2%
of net sales. The customer base also includes smaller distributors who are in
close proximity to one of the Company's larger packaging facilities and find it
economically advantageous to source certain products from the Company.

                                        5
<PAGE>   8

     The Company believes the industry has been characterized by relatively high
customer loyalty because of the importance of quality service and personal
relations. This characteristic has made it difficult for new entrants in a
market to acquire existing customers. However, service requirements for certain
large customers are becoming more demanding and sophisticated and the Company
expects that this will result in more account turnover in the future.

     For some larger volume customers, bulk cryogenic products are delivered in
transports to cryogenic tanks at the customer location. The Company serves small
bulk customers only where it can compete effectively with producers, primarily
on the basis of service and the supply of other products, such as cylinder gases
and hard goods.

SALES AND MARKETING

     The distribution of most packaged gases is most economically performed
within approximately a thirty-mile radius of the product packaging or inventory
location due primarily to the costs associated with the delivery of cylinders.
Therefore, the estimated aggregate national market of $6 billion consists of
hundreds of regional markets with an estimated size of $5 million to $100
million in annual sales. The Company believes the average market size is
approximately $20 million. The Company solicits and maintains business primarily
through a direct selling effort using an experienced sales force of
approximately 98 sales representatives. Sales representatives receive continuous
training so that they are knowledgeable about gas and product performance
characteristics and current application technology. On average, the Company's
sales representatives have more than ten years of industry experience. Sales
representatives are paid a base salary and commissions based upon account profit
margin. Efforts are focused on accounts generating sales of high margin
products. Occasionally, sales representatives make joint sales calls with the
Company's suppliers to address difficult or innovative customer application
requirements. The Company has been testing both telemarketing and catalog
solicitation at selected locations to attract new accounts. The Company believes
that electronic commerce conducted through the internet, ("e-commerce"), will
become an important method in attracting as well as maintaining some customers
in the future. The Company plans to continue developments in this area.

     Smaller accounts are usually served from "walk in" retail locations, where
the gases and hard goods are picked up rather than delivered. Each retail
location contains a showroom to allow the customer easy access to equipment and
supplies. Branch locations are chosen on the basis of local market distribution
logistics rather than suitability for "walk in" retail sales. The Company's
advertising efforts are limited primarily to the residential propane market as
management does not consider advertising to be a significant factor in
generating sales in other markets.

COMPETITION

     Competition is almost always on a regional market basis and is based
primarily on customer loyalty, service and, to a lesser extent, price. Most
regional markets have between three and six competitors, the majority of whom
are small independent companies, with one or two competitors having a
significantly higher market share than the others. The Company competes in many
markets throughout West Virginia, Pennsylvania, Kentucky, Ohio, Virginia,
Tennessee, Maryland, Delaware, New Jersey and Wisconsin. The Company believes it
has a strong or leading position in most of the markets it serves.

     While the Company competes with the distribution subsidiaries of the major
industrial gas producers, the Company does not believe that the production of
industrial gas provides these producers with a significant competitive advantage
because in most cases, the cost for base gases represents a relatively minor
component of the total selling price in comparison to the packaging and
distribution expenses.

SUPPLIERS

     The Company purchases industrial gases pursuant to short-term supply
arrangements and open purchase orders with three of the five major gas producers
in the United States. One such producer accounted for approximately 62% of the
Company's gas purchases in fiscal 2000. If any of these arrangements were
terminated, the Company believes it would be able to readily secure an alternate
source of supply.
                                        6
<PAGE>   9

     The Company purchases welding equipment and consumable supplies from
approximately 64 primary vendors, of which purchases from the top five vendors
represented approximately 63% of total purchases in fiscal 2000. Purchases from
major vendors are made pursuant to purchase orders that are cancelable by the
Company upon minimal notice. With supplier overcapacity in most product lines
and high competitive rivalry for volume purchasers, large distributors such as
the Company are generally able to purchase welding equipment and supplies from
the vendor of their choice. This enables the Company to participate in vendor
discount and rebate programs and obtain products at competitive costs.

     The Company purchases propane from pipeline sources at various supply
points in its market areas, generally on a short-term basis at prevailing market
prices. The Company historically has been able to adjust prices to customers to
reflect changes in product cost, which varies with season and availability. The
Company is not dependent upon any single supplier for propane and supplies have
historically been readily available. A significant portion of the Company's
propane sales are made to industrial customers. As a result, the Company's sales
are less seasonal than those of many competitors in the propane market who focus
on the residential segment. Because of the Company's off-peak season demand, the
Company believes that it would be less likely than some distributors to be
placed on allocation by suppliers during a period of tight supply and
accordingly would receive adequate supplies to meet customer demand.

EMPLOYEES

     At June 30, 2000, the Company employed 660 people, of whom approximately
14% were covered by collective bargaining agreements. Historically, the Company
has not been adversely affected by strikes or work stoppages. Approximately 58%
of the Company's employees are hourly workers. The Company believes it has a
skilled and motivated work force and that its relationship with employees is
good. The Company believes that its wages and benefits, which reflect local
conditions, are competitive with those provided by major competitors. All of the
Company's hourly employees are currently paid wages at a rate that exceeds the
current, and federally mandated increases in, the minimum wage. The Company
believes it would not be materially impacted by future increases in the minimum
wage.

     The Company believes that continuing education is necessary for its
employees to achieve and maintain the skills required to be effective in today's
competitive environment. The Company provides a variety of training programs to
its employees through modules maintained on the internet. This provides
consistent, low-cost training across the entire organization. Key suppliers also
provide employees product training relating primarily to welding and gas
application technology.

REGULATORY MATTERS

     The Company is subject to federal and state laws and regulations adopted
for the protection of the environment, and the health and safety of employees
and users of its products. In addition, the Company voluntarily complies with
applicable industry safety standards. Management believes that the Company is in
substantial compliance with all such laws, regulations and standards currently
in effect and that the cost of compliance with such laws, regulations and
standards will not have a material adverse effect on the Company.

PRODUCT LIABILITY AND INSURANCE

     The Company maintains insurance coverage which it believes to be adequate.
The nature of the Company's business may subject it to product liability
lawsuits. To the extent that the Company is subject to claims which exceed or
are outside of its liability insurance coverage, such suits could have a
material adverse effect on the Company. The Company has not suffered any
material losses from such lawsuits in the past.

ITEM 2.  PROPERTIES

     The Company owns approximately 475,000 cylinders, 18,000 bulk propane tanks
and 360 bulk cryogenic tanks, generally ranging in size from 250 gallons to
11,000 gallons. Most cylinders and storage tanks are located at customer sites.
Cylinders require minimal maintenance and have useful lives that the Company
expects will

                                        7
<PAGE>   10

extend on average for 30 years or longer. Bulk tanks have useful lives generally
less than those of cylinders, however, if well maintained their useful life can
be over 30 years.

     The Company has 59 industrial gas and welding supply distribution locations
in ten states, twenty-five of which also package and distribute propane. A
typical location has two acres of property, 5,000 square feet of space used to
warehouse hard goods, 5,000 square feet of space used for gas filling and
cylinder storage and 2,000 square feet of space used for a retail showroom. The
Company's headquarters are located in 20,000 square feet of leased space in
Wheeling, West Virginia.

     Most of the specialty gas products sold by the Company are purified,
packaged and mixed at a facility operated by the Company in Evans City,
Pennsylvania. This facility normally processes approximately 25,000 cylinders
per month, but has capacity to process approximately 100% more volume, which the
Company believes would be sufficient to meet increased volume requirements in
the future.

     All of the Company's facilities are leased on terms which the Company
believes are consistent with commercial rental rates prevailing in the
surrounding rental market. All of the Company's major facilities are leased
under long-term arrangements. The Company believes that its facilities are
adequate for its needs and that its properties are generally in good condition,
well maintained and suitable for their intended use.

ITEM 3.  LEGAL PROCEEDINGS

     Some industrial gases and propane are flammable, explosive products.
Serious personal injury and property damage can occur in connection with their
transportation, storage, production or use. The Company, in the ordinary course
of business, is threatened with or is named as a defendant in various lawsuits
which, among other items, seek actual and punitive damages for product
liability, personal injury and property damage. The Company has not to date
suffered any material loss as a result of any lawsuit. The Company maintains
liability insurance policies with insurers in such amounts and with such
coverages and deductibles as the Company believes is reasonable and prudent.
However, there can be no assurance that such insurance will be adequate to
protect the Company from material expenses related to such personal injury or
property damage or that such levels of insurance will continue to be available
in the future at economical prices. Management is of the opinion that there are
no known claims or known contingent claims that are likely to have a material
adverse effect on the results of operations or financial condition of the
Company.

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

     No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended June 30, 2000.

                                        8
<PAGE>   11

                                    PART II

ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     The Company's Common Stock began trading on April 10, 1997 on the Nasdaq
National Market under the symbol "VNGI". On July 27, 1999, the Company's common
stock began trading on the American Stock Exchange under the symbol "VLG".

     The range of daily closing prices per share for the Company's common stock
from July 1, 1999 to June 30, 2000 was:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 2000:                                   HIGH       LOW
-------------------------                                  -------    ------
<S>                                                        <C>        <C>
Fourth quarter...........................................  $ 6.000    $3.313
Third quarter............................................  $ 4.250    $3.125
Second quarter...........................................  $ 4.000    $3.000
First quarter............................................  $ 4.625    $3.125
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999:                                   HIGH       LOW
-------------------------                                  -------    ------
<S>                                                        <C>        <C>
Fourth quarter...........................................  $ 4.625    $3.094
Third quarter............................................  $ 6.000    $4.625
Second quarter...........................................  $ 7.250    $5.625
First quarter............................................  $11.250    $7.125
</TABLE>

     The reported last sale price of the company's common stock on the American
Stock Exchange on September 15, 2000 was $4.25.

     On September 15, 2000, there were 114 record holders of the Company's
common stock.

     The Company has not paid any cash dividends since its initial public
offering, and does not anticipate that it will pay dividends in the foreseeable
future. The Company currently intends to retain future earnings, if any, to
provide funds for the growth and development of the Company's business.

     In addition, the Company's existing credit facilities prohibit the payment
of cash or stock dividends on the company's capital stock without the bank's
prior written consent. See Item 7 - "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
and Note 6 of Notes to Consolidated Financial Statements contained in Item 14.

                                        9
<PAGE>   12

ITEM 6.  SELECTED FINANCIAL DATA

     Selected consolidated financial data for the Company is presented in the
table below and should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in Item 7 and
the Company's consolidated financial statements included in Item 14 herein.

<TABLE>
<CAPTION>
                                                           YEARS ENDED JUNE 30,
                                             -------------------------------------------------
                                              1996     1997(1)    1998       1999       2000
                                             -------   -------   -------   --------   --------
                                               (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA):
<S>                                          <C>       <C>       <C>       <C>        <C>
Operating Results:
  Net sales................................  $53,612   $73,905   $95,031   $102,271   $126,080
  Depreciation and amortization (2)........    4,700     6,673     9,086      8,328      9,386
  Operating income.........................    5,000     4,493     7,848      9,458     11,263
  Interest expense.........................    1,561     2,158     3,116      4,114      5,334
  Income taxes (3).........................       --     3,655     2,052      2,350      2,836
  Net income (loss)........................    4,101      (845)    2,953      3,245      3,610
  Basic earnings per share.................                      $  0.31   $   0.32   $   0.39
  Diluted earnings per share...............                      $  0.31   $   0.32   $   0.39
Pro forma basic earnings (loss) per share
  (4)......................................  $  0.35   $ (0.30)
Pro forma diluted earnings (loss) per share
  (4)......................................  $  0.34   $ (0.27)
Weighted average shares
  Basic....................................                        9,620      9,531      9,348
  Diluted..................................                        9,667      9,531      9,353
Pro forma weighted average shares (5)
  Basic....................................    7,000     7,573
  Diluted..................................    7,267     8,506
Balance Sheet Data:
  Working capital..........................    7,218     9,685     7,183      9,613     11,268
  Total assets.............................   45,491    67,806    97,059    108,526    131,943
  Current portion of long-term debt........    2,737     3,928     5,612      6,294      7,065
  Long-term debt...........................   19,507    28,787    48,656     56,242     68,818
  Other non-current liabilities (3)........      590     5,317     7,302      9,528     12,169
  Stockholders' equity.....................   16,371    21,230    24,183     27,045     30,654
</TABLE>

---------------
(1) Fiscal year 1997 includes special noncash charges of $1.9 million ($1.1
    million net of taxes) related to the issuance of stock in conjunction with
    the Company's initial public offering to executives and a director to
    satisfy deferred compensation and consulting agreements.

(2) Effective July 1, 1998, the Company changed its estimate of useful lives for
    cylinders and tanks for depreciation purposes from 12 years to 30 years.
    Depreciation for fiscal year 1999 would have been $2.3 million higher
    without this change, which resulted in an increase in net earnings of $1.3
    million or $0.14 per share.

(3) Until April 10, 1997, the Company was treated as an S Corporation for
    federal and state income tax purposes. As a result, the Company was not
    subject to federal and state income taxes. The Company terminated its S
    Corporation election in connection with the initial public offering of its
    common stock and became a C Corporation. Upon termination of the S
    Corporation election, the Company was required to recognize $3.9 million of
    deferred income taxes in the final quarter of fiscal year 1997.

(4) Reflects pro forma income taxes at 40% for periods prior to April 10, 1997.

(5) Fiscal year 1997 pro forma shares include shares assumed to be issued to
    cover the excess of S corporation distributions over current period
    earnings.

                                       10
<PAGE>   13

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

     The Company is a leading packager and distributor of industrial, medical
and specialty gases, welding equipment and supplies, and propane in eleven
states in the mid-Atlantic and midwestern regions of the 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 $126.1 million in
fiscal 2000. In fiscal 2000, gases accounted for approximately 39% of net sales,
welding equipment and supplies accounted for approximately 45% 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 45 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 net 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.

     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.

     Effective July 1, 1998, the Company changed its estimate of the useful
lives of its cylinders and tanks from 12 to 30 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 in 1999 by
approximately $2.3 million and increasing net earnings by $1.3 million or $.14
per share.

                                       11
<PAGE>   14

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of operations as a percentage of net
sales. Results for any one or more periods are not necessarily indicative of
continuing trends.

<TABLE>
<CAPTION>
                                                      AS A PERCENTAGE OF NET SALES
                                                           YEARS ENDED JUNE 30
                                                      -----------------------------
                                                       1998       1999       2000
                                                      -------    -------    -------
<S>                                                   <C>        <C>        <C>
Net sales...........................................   100.0%     100.0%     100.0%
Cost of products sold, excluding depreciation and
  amortization......................................    46.7       45.3       48.8
                                                       -----      -----      -----
Gross profit........................................    53.3       54.7       51.2
Operating and administrative expenses...............    35.4       37.3       34.9
Depreciation and amortization(1)....................     9.6        8.2        7.4
                                                       -----      -----      -----
Income from operations..............................     8.3        9.2        8.9
Interest expense....................................     3.3        4.0        4.2
Other income........................................     0.3        0.3        0.4
                                                       -----      -----      -----
Earnings before income taxes........................     5.3        5.5        5.1
Provision for income taxes..........................     2.2        2.3        2.2
                                                       -----      -----      -----
Net earnings........................................     3.1%       3.2%       2.9%
                                                       =====      =====      =====
</TABLE>

---------------
(1) Effective July 1, 1998, the Company changed its estimate of useful lives for
    cylinders and tanks for depreciation purposes from 12 years to 30 years.
    Depreciation for fiscal year 1999 would have been $2.3 million higher
    without this change, resulting in an increase in net earnings of $1.3
    million or $0.14 per share.

  COMPARISON OF YEARS ENDED JUNE 30, 2000 AND 1999

     Net sales increased 23.3%, or $23.8 million, to $126.1 million from $102.3
million for the years ended June 30, 2000 and 1999, respectively. Acquisitions
made during the preceding twelve months contributed $13.0 million of the
increase in net sales, while same store sales growth contributed $10.8 million
of the increase. Gases and cylinder income represented 54.9% of net sales for
the year, with hard goods representing the remaining 45.1%. In comparison, net
sales for the prior year reflected gases and cylinder income as 55.5% and hard
goods as 44.5%.

     Gross profit, which excludes depreciation and amortization, increased
15.4%, or $8.6 million, to $64.5 million for the year, compared to $55.9 million
for the prior year. Acquisitions made during the preceding twelve months
contributed $6.8 million of the increase in gross profit, while same stores
contributed $1.8 million of the increase. Gross profit as a percentage of net
sales was 51.2% for the year, compared to 54.7% for the prior year. This change
reflects primarily the inflationary effect of resale propane costs and the
increased proportion of hardgood sales.

     Operating and administrative expenses increased 15.0%, or $5.7 million, to
$43.9 million for the year, compared to $38.2 million for the prior year. Of
this increase, $4.7 million was related to acquired businesses, with the balance
of the change, or $1.0 million, attributable to same store expenses.
Depreciation and amortization expense increased $1.1 million for the year,
primarily as a result of acquisitions made during the last twelve months.

     Interest expense increased 29.7%, or $1.2 million, to $5.3 million for the
year, compared to $4.1 million for the prior year. This increase reflects the
impact of additional borrowings related to acquisitions, partially offset by
reduced average interest rates resulting from the expansion of the Company's
credit facility.

                                       12
<PAGE>   15

     The Company's effective tax rate increased from 42% to 44% during the year
as a result of increased nondeductible goodwill amortization, negatively
impacting net earnings $0.01 per diluted share. Other income increased for the
quarter and year, reflecting, primarily, gains on sale of assets.

     Net earnings for the year were $3.6 million, compared to $3.2 million for
the fiscal year ended June 30, 1999.

     Earnings before interest, taxes, depreciation, amortization and other
noncash charges increased 17.3%, or $3.1 million, to $21.1 million for the year,
compared to $18.0 million for the prior year. Earnings before interest, taxes,
depreciation, amortization and other noncash charges is an important measurement
of the Company's ability to repay debt through operations and provides the
Company with the ability to pursue investment alternatives.

  COMPARISON OF YEARS ENDED JUNE 30, 1999 AND 1998

     Net sales increased 7.6%, or $7.3 million, to $102.3 million from $95.0
million for the years ended June 30, 1999 and 1998, respectively. Acquisitions
contributed $11.5 million of the increase in net sales, while same store sales
declined $4.2 million. Same store sales for the year were negatively impacted as
compared to the same period last year reflecting reduced sales to steel related
businesses, reflecting reduced capacity utilization in the steel industry as a
result of the high level of imports and reduced sales at its branches in
Southwest Ohio impacted by the actions of former employees who, in the Company's
opinion, acted in violation of covenants not to compete. Gases and cylinder
income represented 55.5% of net sales for the year, with hard goods representing
the remaining 44.5%. In comparison, net sales for the prior year reflected gases
and cylinder income as 53.7% and hard goods as 46.3%.

     Gross profit, which excludes depreciation and amortization, increased
10.5%, or $5.3 million, to $55.9 million for the year, compared to $50.6 million
for the prior year. Acquisitions made during the preceding twelve months
contributed $5.4 million of the increase in gross profit, while same stores
declined $0.1 million. Gross profit as a percentage of net sales was 54.7% for
the year, compared to 53.3% for the prior year. This change reflects an increase
in the proportion of gases and cylinder rent sales, which have a higher gross
profit margin as a percentage of net sales than hard goods.

     Operating and administrative expenses increased 13.3%, or $4.5 million, to
$38.2 million for the year, compared to $33.7 million for the prior year. Of
this increase, $3.5 million was related to acquired businesses, with the balance
of the change, or $1.0 million, attributable to same store expenses.
Depreciation and amortization expense decreased $.8 million for the year,
primarily as a result of a decrease of $2.3 million due to the Company's change
in its estimate of useful lives related to cylinders and tanks from twelve to
thirty years offset by acquisitions made during the last twelve months.

     Interest expense increased 32.0%, or $1.0 million, to $4.1 million for the
year, compared to $3.1 million for the prior year. This increase reflects the
impact of additional borrowings related to acquisitions and the purchase of
treasury stock.

     Net earnings for the year were $3.2 million, compared to $3.0 million for
the fiscal year ended June 30, 1998. The change in the estimate of useful lives
related to cylinders and tanks had the effect of increasing net earnings by $1.3
million in 1999.

     Earnings before interest, taxes, depreciation, amortization and other
noncash charges increased 4.5%, or $0.8 million, to $18.0 million for the year,
compared to $17.2 million for the prior year. Earnings before interest, taxes,
depreciation, amortization and other noncash charges is an important measurement
of the Company's ability to repay debt through operations and provides the
Company with the ability to pursue investment alternatives.

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.

                                       13
<PAGE>   16

     At June 30, 2000, the Company had working capital of approximately $11.3
million. Funds provided by operations for the twelve months ended June 30, 2000
were approximately $10.2 million. Funds used for investing activities were
approximately $15.5 million for the twelve months ended June 30, 2000,
consisting primarily of capital spending and financing for acquisitions. Sources
of funds from financing activities for the twelve months ended June 30, 2000
were approximately $5.9 million from net borrowings. The Company's cash balance
increased $0.5 million during the twelve months to $0.8 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 8.8% as of June 30, 2000. As of June 30, 2000, availability
under the revolving loan was approximately $40.9 million, with outstanding
borrowings of approximately $51.9 million and outstanding letters of credit of
approximately $7.2 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. 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 June 30, 2000 was $15.7 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 June 30, 2000, the Company had $55 million in notional amounts
outstanding under interest rate swap agreements. These swaps have an average pay
rate of 6.1% versus a receive rate of 6.7%.

     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.

                                       14
<PAGE>   17

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.

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.

SUBSEQUENT EVENTS

     On September 14, 2000, the Company acquired the assets of Titan Welding
Supply, Ltd., a welding supply distributor having approximately $1.3 million in
annualized sales. The acquisition was financed through the Company's credit
facility and notes with the sellers.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) which establishes accounting
and reporting standards requiring all derivative instruments (including certain
derivative instruments imbedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at their fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133 will eliminate hedge accounting for
the Company's interest rate swaps, requiring the Company to account for the
interest rate swaps at their fair value with all prospective changes reported in
earnings. SFAS No. 133 provides that the Company report a transition adjustment
as part of a cumulative effect type of adjustment of accumulated other
comprehensive income. SFAS No. 133 was adopted on July 1, 2000 resulting in the
recording of current assets of $175,100, long-term assets of $499,600, current
liabilities of $56,800, long-term liabilities of $228,300 and an increase in
other comprehensive income of $233,700, net of tax. The company expects to
recognize net current assets of $120,300 into earnings in the next 12 months.

     In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition ("SAB No. 101"), to provide
guidance on the recognition, presentation and disclosure of revenue in financial
statements. SAB No. 101 explains the SEC staff's general framework for revenue
recognition. SAB No. 101 does not change existing literature on revenue
recognition, but rather clarifies the SEC's position on pre-existing literature.
SAB No. 101 did not require the Company to change existing revenue recognition
policies and, therefore, had no impact on the Company's financial position or
results of operations at June 30, 2000.

FORWARD LOOKING STATEMENTS AND RISK FACTORS

     This report includes statements that are forward-looking as that term is
defined by the Private Securities Litigation and Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases,
including statements regarding the Company's ability to identify attractive
acquisition targets and to successfully acquire new businesses and assimilate
the operations of those businesses into its operations, its ability to finance
such acquisitions, its plans to develop e-commerce capabilities, its ability to
secure alternative sources of supply if needed, its ability to maintain its
supply of propane and its ability to meet increased demand
                                       15
<PAGE>   18

for specialty gas products. The Company intends that such forward-looking
statements be afforded the protections provided by the safe harbor created by
the Private Securities Litigation and Reform Act of 1995.

     All forward-looking statements are based upon current expectations
regarding important factors. Accordingly, actual results may differ materially
from those expressed in the forward-looking statements and the making of such
statements should not be regarded as a representation by the Company or any
other person that the results expressed will be achieved. Important risk 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 business 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 and (viii) maintain
good relationships with suppliers and locate alternative suppliers if needed. In
addition, the Company's ability to achieve the results expressed by the
forward-looking statements may be affected by litigation or other claims arising
out of accidents involving the Company's products, changes in the economy,
monetary or fiscal policies, changes in laws and regulations affecting the
Company's business, inflation and fluctuations in interest rates.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including interest rate swaps and debt obligations.
For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. For interest rate
swaps, the table presents notional amounts and weighted average interest rates
by expected (contractual) maturity dates. Notional amounts are used to calculate
the contractual payments to be exchanged under the contract. Weighted average
variable rates are based on the one month LIBOR rate in effect at the reporting
date. No assumptions have been made for future changes in the one month LIBOR
rate.

<TABLE>
<CAPTION>
                                          EXPECTED MATURITY DATE
                                       FOR PERIODS ENDING JUNE 30,
                              ----------------------------------------------   THERE               FAIR
                               2001      2002      2003      2004      2005    AFTER     TOTAL     VALUE
                               ----      ----      ----      ----      ----    -----     -----     -----
                                                            (IN THOUSANDS)
<S>                           <C>       <C>       <C>       <C>       <C>      <C>      <C>       <C>
Liabilities
Long term debt
  Fixed rate................  $ 4,507   $ 4,027   $ 3,023   $ 1,902   $  679   $1,550   $15,688   $12,627
  Average interest rate.....     2.85%     3.09%     4.10%     5.07%    6.61%    6.37%
  Variable rate.............  $ 2,558   $ 2,558   $54,439   $   640       --       --   $60,195   $60,195
  Average interest rate.....     6.68%     6.68%     6.68%     6.68%      --       --
Interest rate swaps
  Fixed to variable.........  $55,000   $55,000   $40,000   $35,000       --       --             $   390
  Average pay rate..........     6.06%     6.06%     6.29%     6.41%      --       --
  Average receive rate......     6.68%     6.68%     6.68%     6.68%      --       --
</TABLE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of the Company and the Report of
Independent Public Accountants listed in the accompanying Index to Consolidated
Financial Statements are incorporated herein by reference.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURES

     None.

                                       16
<PAGE>   19

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

     The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
                                                 YEARS
                                               EXPERIENCE
                NAME                    AGE   IN INDUSTRY                     POSITION
                ----                    ---   ------------                    --------
<S>                                     <C>   <C>            <C>
Gary E. West.........................   63         30        Chairman of the Board of Directors
Lawrence E. Bandi....................   46         26        President, Chief Executive Officer,
                                                             Director
John R. Bushwack.....................   49         24        Executive Vice President, Secretary,
                                                             Director
Robert D. Scherich...................   40          4        Chief Financial Officer
Ben Exley, IV........................   53          4        Director
James P. Hart........................   46          4        Director
William A. Indelicato................   61         31        Director
August E. Maier......................   71          7        Director
F. Walter Riebenack..................   61          1        Director
</TABLE>

     GARY E. WEST, CHAIRMAN OF THE BOARD. Mr. West has served as Chairman of the
Board of Directors of the Company since 1984. From 1970, when he purchased the
Company, to March 1995, Mr. West served as President of the Company. Mr. West is
primarily responsible for the growth and success of the Company. Mr. West has
also served as President of West Rentals, Inc. and Equip Lease Corp. and Vice
President of Acetylene Products Corp. since 1992, 1988 and 1985, respectively.
Since June 1993, he has served as a director of WesBanco Wheeling, and since
June 1990 he has served as a director of H.E. Neumann Co., a plumbing, heating
and mechanical contracting company. Mr. West received his Bachelor of Science
degree in Business Administration from West Liberty State College.

     LAWRENCE E. BANDI, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. Bandi has
served as President and Chief Executive Officer of the Company since March 1995
and April 1991, respectively, and as a director of the Company since March 1984.
Mr. Bandi has held various positions with the Company since joining it in 1974.
Mr. Bandi is a Director of the Ohio Valley Industrial and Business Development
Corporation, a private corporation established for the purpose of attracting
various business entities to West Virginia and serves on the Ohio County
Development Authority Board, United Way Board and is a director of Special Wish
Foundation. Mr. Bandi received his Bachelor of Science degree in Accounting from
Wheeling College and his Masters in Business Administration degree from Wheeling
Jesuit College.

     JOHN R. BUSHWACK, EXECUTIVE VICE PRESIDENT AND SECRETARY. Mr. Bushwack has
served as the Executive Vice President, Secretary and a director of the Company
since January 1997. From 1991 to 1996, Mr. Bushwack served in various positions
with the Company, including Executive Vice President of Sales and Acquisitions,
Vice President of Sales and Acquisitions, Vice President of Sales and General
Manager. From 1987 to 1990, Mr. Bushwack served as President of the Harvey
Company, a gas distributor, and from 1990 to 1991 he served as Vice President
and director of Linde Gases of the Great Lakes, also a gas distributor. In
addition, Mr. Bushwack has been a director of Convenient Care Products Group,
Ltd., a division of Westmoreland Health System, since 1991 and Westmoreland
Holding Company, Inc., since 1999.

     ROBERT D. SCHERICH, CHIEF FINANCIAL OFFICER. Mr. Scherich has served as the
Company's Chief Financial Officer since May 1996. From January 1993 to April
1996, he served as Controller and General Manager of Wheeling Pittsburgh Steel
Corporation, a subsidiary of WHX Corporation, and from January 1988 to December
1993 he served as Division Controller of such corporation. Mr. Scherich was an
accountant with Ernst & Whinney from 1981 to 1984. Mr. Scherich received his
Bachelor of Science degree in Accounting from The Pennsylvania State University
and is a Certified Public Accountant.

                                       17
<PAGE>   20

     BEN EXLEY, IV, DIRECTOR. Mr. Exley was elected a Director of the Company in
January 1997. Since April 1998, he has served as a Marketing Specialist for the
Ohio Valley Industrial and Business Development Corporation and served as
Interim Executive Director during 1999. He served as the President of Ohio
Valley Clarksburg, Inc. since 1987 and Bailey Drug Company from 1993 through
1997, both of which are pharmaceutical distributors and wholly-owned
subsidiaries of Cardinal Health Inc. Mr. Exley has also served on the board of
directors of several companies, including BankOne West Virginia N.A. since 1994,
BankOne Wheeling-Steubenville N.A. since 1991 and Stone & Thomas, a chain of
clothing department stores, from 1991 through 1997. Mr. Exley is a graduate of
West Virginia Wesleyan College with a Bachelor of Science degree in Business
Administration. He also holds a Masters in Business Administration degree from
Northern Illinois University.

     JAMES P. HART, DIRECTOR. Mr. Hart was elected a director of the Company in
January 1997. He has been Vice President and Chief Financial Officer of
Industrial Scientific Corporation ("ISC"), a manufacturer of portable
instruments used for detecting and monitoring a variety of gases, since August
1994. From March 1984 to August 1994, Mr. Hart was Treasurer and Controller of
ISC. Mr. Hart holds a Bachelor of Science degree in Accounting from the
University of Scranton.

     WILLIAM A. INDELICATO, DIRECTOR. Mr. Indelicato was elected a director of
the Company in January 1997. Mr. Indelicato has been President of ADE Vantage,
Inc., a business consulting firm which provides certain services to the Company,
since July 1992. From 1988 to 1991, Mr. Indelicato served as General Business
Director of Union Carbide Industrial Gases Inc. Mr. Indelicato is also an
associate professor of strategic management at Pace University in New York. Mr.
Indelicato received his Bachelor of Science degree in Electrical Engineering
from the University of Notre Dame and his Masters in Business Administration
degree from Pace University.

     AUGUST E. MAIER, DIRECTOR. Mr. Maier was elected a Director of the Company
in January 1997. In September 1997, Mr. Maier became an employee of the Company
and served as Corporate Director of Field Operations until his retirement in
July 1999. He currently is Chief Operating Officer of TrackAbout Inc., a Venture
Capital Firm specializing in the tracking of assets via the internet. He served
as Chief Executive Officer of Houston Fearless 76, a manufacturer of digital
imaging and film processing equipment, from May 1995 to August 1997. From
October 1987 to May 1997, Mr. Maier was Chief Executive Officer of Holox, Inc.,
a large distributor of industrial gases and welding equipment. Mr. Maier
received his Bachelor of Science degree in Mechanical Engineering from the
Indiana Institute of Technology and his Masters in Business Administration
degree from the Harvard Business School.

     F. WALTER RIEBENACK, DIRECTOR. Mr. Riebenack was elected a Director of the
Company in January 1999. He has served as the Chief Financial Officer, General
Counsel and as a member of the Board of Site-Blauvelt Engineers, Inc. since
1990, a multi-disciplinary consulting engineering firm offering transportation
design, geotechnical engineering, subsurface exploration, construction
inspection and materials testing services to a wide range of clients in both the
public and private sectors of the marketplace, with offices in New Jersey,
Pennsylvania, New York, Delaware, Virginia, South Carolina and West Virginia.
Mr. Riebenack received his law degree along with his Bachelor of Business
Administration degree in Finance and Accounting from the University of Notre
Dame. Mr. Riebenack has served as an instructor of Business Law at Indiana
University and University of St. Francis in Fort Wayne, Indiana.

     The information called for by item 405 of Regulation S-K is contained in
the Company's definitive proxy statement relating to the annual meeting of
shareholders to be held October 24, 2000, in the section titled "Section 16(a)
Beneficial Ownership Reporting Compliance" and is incorporated herein by
reference.

ITEM 11.  EXECUTIVE COMPENSATION

     The information called for by this item is contained in the Company's
definitive proxy statement relating to the annual meeting of shareholders to be
held October 24, 2000, in the section titled "Executive Compensation" and is
incorporated herein by reference.

                                       18
<PAGE>   21

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information called for by this item is contained in the Company's
definitive proxy statement relating to the annual meeting of shareholders to be
held October 24, 2000, in the section titled "Common Stock Ownership of
Directors, Nominees and Officers" and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this item is contained in the Company's
definitive proxy statement relating to the annual meeting of shareholders to be
held October 24, 2000, in the section titled "Certain Relationships and Related
Transactions" and is incorporated herein by reference.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

  (a)(1) Financial Statements

     The consolidated financial statements of the Company required by this item
are listed in the Index to Consolidated Financial Statements set forth on page
F-1.

  (a)(2) Financial Statements Schedules

     The financial statement schedules required by this item are set forth
beginning on page S-1. Schedules not filed herewith have been omitted as
inapplicable, or not required, or the information is included in the Company's
consolidated financial statements or the notes thereto.

  (a)(3) Exhibits

     The exhibits required by this item are listed in the Index to Exhibits set
forth on page E-1.

  (b) Reports on Form 8-K

     The Company did not file any reports on Form 8-K during the fourth quarter
of the year ended June 30, 2000.

                                       19
<PAGE>   22

                                   SIGNATURES

     Pursuant to the requirements 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.

                                          VALLEY NATIONAL GASES INCORPORATED
September 25, 2000
                                          /s/ LAWRENCE E. BANDI
                                          --------------------------------------
                                          Lawrence E. Bandi
                                          President and Chief Executive Officer

     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 and on the dates indicated.

<TABLE>
<CAPTION>
             SIGNATURE                              TITLE                        DATE
             ---------                              -----                        ----
<S>                                  <C>                                  <C>

/s/ Gary E. West                     Chairman of the Board                September 25, 2000
-----------------------------------
(Gary E. West)

/s/ Lawrence E. Bandi                President, Chief Executive Officer,  September 25, 2000
-----------------------------------  Director
(Lawrence E. Bandi)

/s/ John R. Bushwack                 Executive Vice President,            September 25, 2000
-----------------------------------  Secretary, Director
(John R. Bushwack)

/s/ Robert D. Scherich               Chief Financial Officer              September 25, 2000
-----------------------------------
(Robert D. Scherich)

/s/ Ben Exley, IV                    Director                             September 25, 2000
-----------------------------------
(Ben Exley, IV)

/s/ James P. Hart                    Director                             September 25, 2000
-----------------------------------
(James P. Hart)

/s/ William A. Indelicato            Director                             September 25, 2000
-----------------------------------
(William A. Indelicato)

/s/ August E. Maier                  Director                             September 25, 2000
-----------------------------------
(August E. Maier)

/s/ F. Walter Riebenack              Director                             September 25, 2000
-----------------------------------
(F. Walter Riebenack)
</TABLE>

                                       20
<PAGE>   23

                       VALLEY NATIONAL GASES INCORPORATED

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................  F-1
Consolidated Balance Sheets as of June 30, 1999 and 2000....  F-2
Consolidated Statements of Operations for the years ended
  June 30, 1998, 1999 and 2000..............................  F-3
Consolidated Statements of Changes in Stockholders' Equity
  for the years ended June 30, 1998, 1999 and 2000..........  F-4
Consolidated Statements of Cash Flows for the years ended
  June 30, 1998, 1999 and 2000..............................  F-5
Notes to Consolidated Financial Statements..................  F-6
</TABLE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors,
Valley National Gases Incorporated:

     We have audited the accompanying consolidated balance sheets of Valley
National Gases Incorporated (a Pennsylvania corporation) and subsidiary as of
June 30, 1999 and 2000, and the related consolidated statements of operations,
changes in stockholders' equity and cash flows for each of the three years in
the period ended June 30, 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 audits.

     We conducted our audits 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 audits provide 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 Valley National Gases
Incorporated and subsidiary as of June 30, 1999 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 2000, in conformity with accounting principles generally accepted
in the United States.

/s/ Arthur Andersen LLP
Pittsburgh, Pennsylvania,
  July 31, 2000

                                       F-1
<PAGE>   24

                       VALLEY NATIONAL GASES INCORPORATED

                          CONSOLIDATED BALANCE SHEETS

                             JUNE 30, 1999 AND 2000

<TABLE>
<CAPTION>
                                                                  1999            2000
                                                                  ----            ----
<S>                                                           <C>             <C>
                           ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $    224,708    $    769,564
  Accounts receivable, net of allowance for doubtful
    accounts of $454,981 and $586,698, respectively.........    11,960,059      16,131,425
  Inventory.................................................    11,173,995      13,748,347
  Prepaids and other........................................     1,965,966         920,159
                                                              ------------    ------------
       Total current assets.................................    25,324,728      31,569,495
                                                              ------------    ------------
PROPERTY, PLANT AND EQUIPMENT:
  Land......................................................        49,786          88,000
  Buildings and improvements................................     4,413,900       5,026,630
  Equipment.................................................    56,906,554      65,774,656
  Transportation equipment..................................    10,172,945      11,654,109
  Furniture and fixtures....................................     4,102,422       4,579,751
                                                              ------------    ------------
       Total property, plant and equipment..................    75,645,607      87,123,146
Accumulated depreciation....................................   (29,857,130)    (32,901,262)
                                                              ------------    ------------
       Net property, plant and equipment....................    45,788,477      54,221,884
                                                              ------------    ------------
OTHER ASSETS:
  Intangibles, net of accumulated amortization of
    $10,268,270 and $14,752,111, respectively...............    35,773,717      44,348,795
  Deposits and other assets.................................     1,638,801       1,803,118
                                                              ------------    ------------
       Total other assets...................................    37,412,518      46,151,913
                                                              ------------    ------------
TOTAL ASSETS................................................  $108,525,723    $131,943,292
                                                              ------------    ------------
            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term debt......................  $  6,294,130    $  7,064,877
  Bank overdraft............................................            --       1,460,492
  Accounts payable, trade...................................     4,418,974       5,751,892
  Accrued compensation and employee benefits................     3,198,918       3,346,283
  Other current liabilities.................................     1,799,297       2,678,345
                                                              ------------    ------------
       Total current liabilities............................    15,711,319      20,301,889
LONG-TERM DEBT, less current maturities.....................    56,242,003      68,818,457
DEFERRED TAX LIABILITY......................................     7,864,661      10,624,109
OTHER LONG-TERM LIABILITIES.................................     1,663,096       1,544,525
                                                              ------------    ------------
       Total liabilities....................................    81,481,079     101,288,980
                                                              ------------    ------------
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.........................................    10,029,114      13,638,782
  Treasury stock at cost, 272,500 shares....................    (2,263,428)     (2,263,428)
                                                              ------------    ------------
    Total stockholders' equity..............................    27,044,644      30,654,312
                                                              ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................  $108,525,723    $131,943,292
                                                              ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-2
<PAGE>   25

                       VALLEY NATIONAL GASES INCORPORATED

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                FOR THE YEARS ENDED JUNE 30, 1998, 1999 AND 2000

<TABLE>
<CAPTION>
                                                        1998           1999           2000
                                                        ----           ----           ----
<S>                                                  <C>           <C>            <C>
NET SALES..........................................  $95,030,926   $102,270,600   $126,080,048
COST OF PRODUCTS SOLD, excluding depreciation and
  amortization.....................................   44,413,606     46,332,129     61,547,537
                                                     -----------   ------------   ------------
       Gross profit................................   50,617,320     55,938,471     64,532,511
                                                     -----------   ------------   ------------
EXPENSES:
  Operating and administrative.....................   33,683,926     38,152,200     43,883,623
  Depreciation and amortization....................    9,085,611      8,328,309      9,385,625
                                                     -----------   ------------   ------------
       Total expenses..............................   42,769,537     46,480,059     53,269,248
                                                     -----------   ------------   ------------
       Income from operations......................    7,847,783      9,457,962     11,263,263
                                                     -----------   ------------   ------------
INTEREST EXPENSE...................................    3,115,927      4,113,823      5,333,760
                                                     -----------   ------------   ------------
OTHER INCOME/(EXPENSE):
  Interest and dividend income.....................      166,879        135,101        171,258
  Gain (loss) on disposal of assets................      (20,977)       (37,750)       120,386
  Other income.....................................      127,335        154,153        224,688
                                                     -----------   ------------   ------------
       Total other income..........................      273,237        251,504        516,332
                                                     -----------   ------------   ------------
EARNINGS BEFORE INCOME TAXES.......................    5,005,093      5,595,643      6,445,835
PROVISION FOR INCOME TAXES.........................    2,052,088      2,350,170      2,836,167
                                                     -----------   ------------   ------------
NET EARNINGS.......................................  $ 2,953,005   $  3,245,473   $  3,609,668
                                                     ===========   ============   ============
Accretion of redeemable common stock...............                     227,178
NET EARNINGS AVAILABLE FOR COMMON STOCK............    2,953,005      3,018,295      3,609,668
                                                     ===========   ============   ============
BASIC EARNINGS PER SHARE...........................         0.31           0.32           0.39
DILUTED EARNINGS PER SHARE.........................         0.31           0.32           0.39
WEIGHTED AVERAGE SHARES:
  Basic............................................    9,620,084      9,530,961      9,347,584
  Diluted..........................................    9,667,088      9,530,961      9,353,209
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-3
<PAGE>   26

                       VALLEY NATIONAL GASES INCORPORATED

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                FOR THE YEARS ENDED JUNE 30, 1998, 1999 AND 2000

<TABLE>
<CAPTION>
                                       COMMON STOCK         TREASURY STOCK                                       TOTAL
                                    ------------------   ---------------------    PAID-IN-      RETAINED     STOCKHOLDERS'
                                     SHARES     AMOUNT   SHARES      AMOUNT        CAPITAL      EARNINGS        EQUITY
                                     ------     ------   ------      ------       --------      --------     -------------
<S>                                 <C>         <C>      <C>       <C>           <C>           <C>           <C>
BALANCE, June 30, 1997............  9,385,084   $9,385        --            --   $17,162,396   $ 4,057,814    $21,229,595
  Net earnings....................         --      --         --            --            --     2,953,005      2,953,005
                                    ---------   ------   -------   -----------   -----------   -----------    -----------
BALANCE, June 30, 1998............  9,385,084   9,385         --            --    17,162,396     7,010,819     24,182,600
  Net earnings....................         --      --         --            --            --     3,245,473      3,245,473
  Purchase of treasury shares.....         --      --    272,500    (2,263,428)           --            --     (2,263,428)
  Retirement of redeemable common
    stock.........................    235,000     235         --            --     2,106,942      (227,178)     1,879,999
                                    ---------   ------   -------   -----------   -----------   -----------    -----------
BALANCE, June 30, 1999............  9,620,084   9,620    272,500    (2,263,428)   19,269,338    10,029,114     27,044,644
  Net earnings....................         --      --         --            --            --     3,609,668      3,609,668
                                    ---------   ------   -------   -----------   -----------   -----------    -----------
BALANCE, June 30, 2000............  9,620,084   $9,620   272,500   $(2,263,428)  $19,269,338   $13,638,782    $30,654,312
                                    =========   ======   =======   ===========   ===========   ===========    ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-4
<PAGE>   27

                       VALLEY NATIONAL GASES INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                FOR THE YEARS ENDED JUNE 30, 1998, 1999 AND 2000

<TABLE>
<CAPTION>
                                                         1998           1999           2000
                                                         ----           ----           ----
<S>                                                  <C>            <C>            <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net earnings.....................................  $  2,953,005   $  3,245,473   $  3,609,668
  Adjustments to reconcile net earnings to net cash
     provided by operating activities--
       Depreciation................................     5,530,670      4,093,826      4,889,807
       Amortization................................     3,554,941      4,234,368      4,495,818
       Loss (gain) on disposal of assets...........        20,977         37,750       (120,386)
       Change in deferred taxes....................     2,667,894      1,931,469      1,393,310
       Other long-term assets and liabilities......    (2,343,445)      (565,043)      (544,349)
       Changes in operating assets and
          liabilities--
          Accounts receivable......................       824,165        700,360     (2,160,664)
          Inventory................................      (639,639)    (1,443,161)    (1,726,502)
          Prepaids and other.......................       460,317       (797,498)       643,884
          Accounts payable, trade..................       562,416       (785,546)     1,223,155
          Accrued compensation and employee
            benefits...............................       148,060        (73,578)      (214,039)
          Other current liabilities................      (116,185)       369,520     (1,309,878)
                                                     ------------   ------------   ------------
            Net cash provided by operating
               activities..........................    13,623,176     10,947,940     10,179,824
                                                     ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from disposal of assets.................       775,709         72,222        655,195
  Purchases of property and equipment..............    (5,326,294)    (7,471,569)    (6,390,650)
  Business acquisitions, net of cash acquired......   (25,501,498)    (7,553,299)    (9,756,924)
                                                     ------------   ------------   ------------
            Net cash used by investing
               activities..........................   (30,052,083)   (14,952,646)   (15,492,379)
                                                     ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings.........................    23,716,037     19,688,470     25,421,215
  Principal payments on loans......................    (8,249,909)   (13,784,798)   (19,563,804)
  Purchase of treasury shares......................            --     (2,263,428)            --
                                                     ------------   ------------   ------------
            Net cash provided by financing
               activities..........................    15,466,128      3,640,244      5,857,411
                                                     ------------   ------------   ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS............      (962,779)      (364,462)       544,856
CASH AND CASH EQUIVALENTS, beginning of period.....     1,551,949        589,170        224,708
                                                     ------------   ------------   ------------
CASH AND CASH EQUIVALENTS, end of period...........  $    589,170   $    224,708   $    769,564
                                                     ============   ============   ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-5
<PAGE>   28

                       VALLEY NATIONAL GASES INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 AND 2000

1.  ORGANIZATION:

     Valley National Gases Incorporated, a Pennsylvania corporation (the
Company), produces, packages and resells industrial gases, specialty gases and
propane; and resells welding hardgoods and equipment. The Company, through its
consolidated subsidiaries has been in operation since 1958 and currently
operates in ten states.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH EQUIVALENTS

     For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.

INVENTORY

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

     The components of inventory for the year ended June 30 were as follows:

<TABLE>
<CAPTION>
                                                       1999           2000
                                                       ----           ----
<S>                                                 <C>            <C>
Hardgoods.........................................  $ 9,753,794    $11,943,855
Gases.............................................    1,420,201      1,804,492
                                                    -----------    -----------
                                                    $11,173,995    $13,748,347
                                                    ===========    ===========
</TABLE>

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the properties
while leasehold improvements are amortized over the shorter of their useful life
or the term of the lease as follows:

<TABLE>
<CAPTION>
                                                              YEARS
                                                              -----
<S>                                                           <C>
Buildings and improvements..................................  10-25
Cylinders...................................................  12-30
Equipment other than cylinders..............................   5-7
Transportation equipment....................................   3-7
Furniture and fixtures......................................   3-7
</TABLE>

     The cost of maintenance and repairs is charged to operations as incurred.
Major renewals and betterments are capitalized.

     Effective July 1, 1998, the Company changed its estimate of the useful
lives of its acetylene and high pressure cylinders from 12 to 30 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 in 1999 by approximately $2.3 million and increasing net
earnings by $1.3 million or $.14 per share.

     The Company changed the estimated useful life of cylinders as a result of
thorough studies and analyses. The studies considered technological advances in
cylinders, empirical data obtained from cylinder manufacturers and other
industry experts and experience gained from the Company's maintenance of a
cylinder population of approximately four hundred thousand cylinders.

                                       F-6
<PAGE>   29

INTANGIBLES

     Intangibles consist of non-competition agreements, goodwill, consulting
agreements and deferred loan origination costs. Costs pursuant to
non-competition agreements entered into in connection with business acquisitions
are amortized over the terms of the arrangements. Goodwill represents costs in
excess of net assets of businesses acquired and is amortized on a straight-line
basis over 15 to 20 years. The Company assesses the recoverability of goodwill
by determining whether it can be recovered through projected undiscounted cash
flows. Consulting agreements are entered into with the owners of various
businesses acquired by the Company and require such owners to be available to
perform services upon the Company's request. Consulting payments are made
regardless of the number of hours of service performed and are payable to the
consultant's successor upon death. Consulting costs are amortized over the term
of the agreement. Deferred loan origination costs are amortized over the term of
the related debt.

INCOME TAXES

     Income taxes are accounted for in accordance with the liability method,
under which deferred tax assets or liabilities are computed based on the
difference between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. These differences are
classified as current or non-current based upon the classification of the
related asset or liability. For temporary differences that are not related to an
asset or liability, classification is based upon the expected reversal date of
the temporary difference.

EARNINGS PER SHARE

     Basic earnings per share is computed by dividing net earnings by the number
of weighted-average common shares outstanding during the year. Diluted earnings
per share is computed by dividing net earnings by the number of weighted-average
common and common equivalent shares outstanding during the year (See Note 8).

REVENUE RECOGNITION

     Revenues are recognized for product sales when such goods are received by
the customer. Additionally, revenues from cylinder leases are reported ratably
over the terms of the leases.

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate fair value of
each class of financial instrument for which it is practicable to estimate that
value:

        Cash and Cash Equivalents -- The carrying amount approximates fair value
        because of the short maturity of those instruments.

        Long-Term Debt -- The fair value of long-term debt bearing interest at
        floating rates is estimated based on the quoted market prices for the
        same or similar issues or on the current rates offered to the Company
        for debt of the same remaining maturities. The fair value of the notes
        payable are not practical to estimate due to a lack of a ready market
        and certain restrictions associated with these instruments.

     The estimated fair values of the Company's financial instruments as of June
30, 2000 are as follows:

<TABLE>
<CAPTION>
                                                     CARRYING         FAIR
                                                      AMOUNT          VALUE
                                                     --------         -----
<S>                                                 <C>            <C>
Cash and cash equivalents.........................  $   769,564    $   769,564
Long-term debt....................................  $75,883,334    $74,613,147
</TABLE>

     The fair values and carrying amounts of the Company's term notes and
revolving note are deemed to be approximately equivalent as they bear interest
at floating rates which are based upon current market rates.

     The Company utilizes interest rate swap agreements to reduce the potential
impact of increases in interest rates on floating-rate long-term debt. At June
30, 2000 and 1999 the Company had interest rate swap agreements

                                       F-7
<PAGE>   30

outstanding that effectively convert a notional amount of $55.0 million and
$35.0 million, respectively, from floating rates to fixed rates. These
agreements mature from December 2001 through June 2005. The Company would have
received $389,517 and $486,265 to settle its interest rate swap agreements at
June 30, 2000 and 1999, respectively, representing the excess of fair value over
the carrying cost of these agreements. Fair value was estimated by obtaining
quotes from brokers.

     The net payments or receipts under interest rate swap agreements are
recorded as part of interest expense and are not significant.

     It is not practicable to estimate the fair value of the notes payable of
the Company as no ready market exists for these instruments and comparable
instruments available from outside the Company are not available.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133) which establishes accounting
and reporting standards requiring all derivative instruments (including certain
derivative instruments imbedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at their fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133 will eliminate hedge accounting for
the Company's interest rate swaps, requiring the Company to account for the
interest rate swaps at their fair value with all prospective changes reported in
earnings. SFAS No. 133 provides that the Company report a transition adjustment
as part of a cumulative effect type of adjustment of accumulated other
comprehensive income. SFAS No. 133 was adopted on July 1, 2000 resulting in the
recording of current assets of $175,100, long-term assets of $499,600, current
liabilities of $56,800, long-term liabilities of $228,300 and an increase in
other comprehensive income of $233,700, net of tax. The company expects to
recognize net current assets of $120,300 into earnings in the next 12 months.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                              FOR THE YEAR ENDED JUNE 30,
                                         --------------------------------------
                                            1998          1999          2000
                                            ----          ----          ----
<S>                                      <C>           <C>           <C>
Cash paid for certain items--
  Cash payments for interest...........  $3,480,336    $3,143,083    $5,535,565
  Cash payments for income taxes.......   1,927,755     1,323,545       905,280
</TABLE>

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant inter-company balances have
been eliminated.

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

                                       F-8
<PAGE>   31

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 fiscal 2000, the Company purchased five businesses. The largest of
these acquisitions was Lee's Gas Supply, Inc. which was effective December 1999.
The aggregate purchase price for all acquisitions amounted to approximately
$11,862,000.

     During fiscal 1999, the Company purchased five businesses. The largest of
these acquisitions and their effective dates included Altoona Welding Supply,
Inc. (September 1998), Keen Welding Supply, Inc (January 1999), Dlouhy Welding
Supply, Inc. (January 1999) and Holshoy Welding Supply, Inc. (March 1999). The
aggregate purchase price for all acquisitions amounted to approximately
$7,777,000.

     During fiscal 1998, the Company purchased nine businesses. The largest of
these acquisitions and their effective dates included Goss Brothers Welding
Supply, Inc. (September 1997), Buckeye Welder Services, Inc (December 1997) and
Miller's LP Gas, Inc. (May 1998). The aggregate purchase price for all
acquisitions amounted to approximately $25,508,000.

     In connection with these acquisitions, the total purchase price, fair value
of assets acquired, cash paid and liabilities assumed for the year ended June 30
were as follows:

<TABLE>
<CAPTION>
                                                 1998           1999           2000
                                                 ----           ----           ----
<S>                                           <C>            <C>            <C>
Cash paid...................................  $22,779,806    $ 5,578,952    $ 9,861,746
Notes issued to sellers.....................    2,727,800      2,198,360      2,000,000
Notes payable and capital leases assumed....      847,530          7,027      2,239,789
Other liabilities assumed and acquisition
  costs.....................................    6,867,803      2,368,857      3,150,000
                                              -----------    -----------    -----------
Total purchase price allocated to assets
  acquired..................................  $33,222,939    $10,153,196    $17,251,535
                                              ===========    ===========    ===========
</TABLE>

     The following summarized unaudited pro forma results of operations for the
fiscal years ended June 30, 1999 and 2000, illustrate the estimated effects of
the 1999 and 2000 acquisitions, as if the transactions were consummated as of
the beginning of each fiscal year presented. These pro forma results have been
prepared for comparable purposes only and do not purport to be indicative of
what would have occurred had the acquisitions been made as of the beginning of
each fiscal year, or of results which may occur in the future.

<TABLE>
<CAPTION>
                                                              YEAR ENDED JUNE 30,
                                                          ----------------------------
                                                              1999            2000
                                                              ----            ----
<S>                                                       <C>             <C>
Net sales...............................................  $107,205,000    $130,717,000
Net earnings before income taxes........................     5,130,000       5,743,000
Pro forma net earnings..................................     2,975,000       3,216,000
Pro forma diluted earnings per share....................          0.31            0.34
</TABLE>

4.  MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:

     The Company markets its products to a diverse customer base in unrelated
industries and, as such, does not have any significant concentrations of credit
risk. No one customer accounted for greater than 10% of revenues in 1998, 1999
and 2000.

                                       F-9
<PAGE>   32

5.  INTANGIBLE ASSETS:

     Intangible assets were recorded at the date of acquisition at their
allocated cost. Amortization is provided over the estimated useful lives of the
assets as disclosed below:

<TABLE>
<CAPTION>
                              AMORTIZATION    ORIGINAL     ACCUMULATED     BALANCE AT      BALANCE AT
                                 PERIOD         COST       AMORTIZATION   JUNE 30, 2000   JUNE 30, 1999
                              ------------    --------     ------------   -------------   -------------
<S>                           <C>            <C>           <C>            <C>             <C>
Non-competition
  agreements................    2-7 years    $16,663,291   $ 7,556,975     $ 9,106,316     $ 8,257,423
Consulting agreements.......    1-5 years      2,721,135     2,307,902         413,233         706,683
Goodwill....................  15-20 years     38,549,348     4,610,688      33,938,660      26,000,966
Other.......................   2-15 years      1,167,132       276,546         890,586         808,645
                                             -----------   -----------     -----------     -----------
                                             $59,100,906   $14,752,111     $44,348,795     $35,773,717
                                             ===========   ===========     ===========     ===========
</TABLE>

6.  LONG-TERM DEBT:

     Long-term debt consists of the following as of June 30:

<TABLE>
<CAPTION>
                                                               1999           2000
                                                               ----           ----
<S>                                                         <C>            <C>
Revolving note, interest at LIBOR plus 1.875% and 2.125%
  as of 1999 and 2000, respectively payable monthly
  through April 2003. Secured by the assets of the
  Company.................................................  $36,756,726    $51,880,202
Term note, interest at LIBOR plus 1.875% and 2.125% as of
  1999 and 2000, respectively payable monthly through
  October 2003. Secured by the assets of the Company......   10,872,905      8,314,565
Note payable, interest at 6.6% payable annually through
  October 2003. Secured by certain assets of the
  Company.................................................    3,415,372      2,732,298
Individuals and corporations, mortgages and notes,
  interest at 3.7% to 10.00%, payable at various dates
  through 2010............................................   11,648,116     13,090,893
                                                            -----------    -----------
                                                             62,693,119     76,017,958
Original issue discount...................................     (156,986)      (134,624)
Current maturities........................................   (6,294,130)    (7,064,877)
                                                            -----------    -----------
  Total long-term debt....................................  $56,242,003    $68,818,457
                                                            ===========    ===========
</TABLE>

     The prime rate was 7.75% and 9.50% at June 30, 1999 and 2000, respectively.
The LIBOR rate was 5.21% and 6.68% at June 30, 1999 and 2000, respectively.

     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 continues at the existing balance of
$8.3 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 8.8% as of June 30, 2000. As of June 30, 2000, availability under the
revolving loan was approximately $40.9 million, with outstanding borrowings of
approximately $51.9 million and outstanding letters of credit of approximately
$7.2 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.

                                      F-10
<PAGE>   33

     The schedule of maturities as amended for the credit agreements for the
next five years and thereafter is as follows as of June 30, 2000:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30,
---------------------------
<S>                                                      <C>
     2001..............................................  $ 7,064,877
     2002..............................................    6,585,177
     2003..............................................   57,461,996
     2004..............................................    2,542,114
     2005..............................................      678,710
     Thereafter........................................    1,550,460
                                                         -----------
     Total.............................................  $75,883,334
                                                         ===========
</TABLE>

7.  PENSION PLANS:

     The Company sponsors a defined contribution pension plan for employees. All
employees are eligible to participate in the Company-sponsored plan after
meeting the age and service requirements. Contributions to the plan are based on
a percentage of employees' compensation. Pension expense for this plan was
$532,345, $624,272 and $670,663 respectively, in fiscal year 1998, 1999 and
2000.

     The Company also maintains a profit sharing plan for its employees. Profit
sharing payments are based on a discretionary amount determined annually by the
Board of Directors and are paid as additional contributions to the pension plan.
In 1998, 1999 and 2000, the amount of additional contributions to be distributed
to the employees' pension plan amounted to $49,180, $55,964 and $149,888
respectively.

     Certain management employees were covered by unfunded deferred compensation
agreements. These deferred compensation agreements were terminated in connection
with the initial public offering. Additionally, certain management employees are
also provided supplemental retirement benefits. The cost of these contracts is
being accrued over the period of active employment of the covered employees. The
costs of the deferred compensation and supplemental retirement benefits plans
charged to expense were $34,929, $32,000 and $67,583 respectively, in fiscal
year 1998, 1999 and 2000.

8.  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 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.

<TABLE>
<CAPTION>
                                                          YEAR ENDED JUNE 30,
                                                 --------------------------------------
                                                    1998          1999          2000
                                                    ----          ----          ----
<S>                                              <C>           <C>           <C>
Net earnings available for common stock........  $2,953,005    $3,018,295    $3,609,668
                                                 ==========    ==========    ==========
Basic earnings per common share:
Weighted average common shares.................   9,620,084     9,530,961     9,347,584
                                                 ==========    ==========    ==========
Basic earnings per common share................  $     0.31    $     0.32    $     0.39
                                                 ==========    ==========    ==========
Diluted earnings per common share:
Weighted average common shares.................   9,620,084     9,530,961     9,347,584
Shares issuable from assumed conversion of
  common stock equivalents.....................      47,004            --         5,625
                                                 ----------    ----------    ----------
Weighted average common and common equivalent
  shares.......................................   9,667,088     9,530,961     9,353,209
                                                 ==========    ==========    ==========
Diluted earnings per common share..............  $     0.31    $     0.32    $     0.39
                                                 ==========    ==========    ==========
</TABLE>

                                      F-11
<PAGE>   34

     Options to purchase 177,000 and 222,750 shares of common stock were
outstanding during fiscal years 1999 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.

9.  LEASE OBLIGATIONS:

     The Company leases real estate at several locations for use as branch
stores and warehouses. Certain equipment is also leased. All of the leases,
which are with related and unrelated parties, are classified as operating
leases. The lease terms expire at various dates through the year 2010, with
options to renew for periods of three to five years. Lease expenses charged to
operations were $3,077,938, $3,416,233 and $3,844,848 respectively, in fiscal
year 1998, 1999 and 2000.

     Minimum future rental payments under noncancelable operating leases for
each of the next five years are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING JUNE 30,                     REAL ESTATE    EQUIPMENT       TOTAL
---------------------------                     -----------    ---------       -----
<S>                                             <C>            <C>          <C>
     2001.....................................  $ 2,969,594    $136,584     $ 3,106,178
     2002.....................................    2,912,724     136,584       3,049,308
     2003.....................................    2,764,892     135,684       2,900,576
     2004.....................................    2,466,996     125,784       2,592,780
     2005.....................................    2,400,476     125,784       2,526,260
                                                -----------    --------     -----------
     Totals...................................  $13,514,682    $660,420     $14,175,102
                                                ===========    ========     ===========
</TABLE>

10.  RELATED PARTY TRANSACTIONS:

     The Company leases buildings and equipment, rents cylinders and has sales
and purchase transactions with related parties, including the sole shareholder
prior to the initial public offering and corporations owned by such sole
shareholder and officers of the Company. These transactions and balances for the
year ended June 30 are summarized as follows:

<TABLE>
<CAPTION>
                                                    1998          1999          2000
                                                    ----          ----          ----
<S>                                              <C>           <C>           <C>
Transactions--
  Lease of buildings and equipment.............  $2,111,633    $2,212,887    $2,252,065
  Rental of aircraft...........................      98,402        87,432        85,884
Sales of material and services.................       1,821            --            --
</TABLE>

     The Company has entered into a master lease agreement for virtually all of
its operating properties with a related party. The term of this master lease
agreement is ten years with annual minimum lease payments of $2,058,912 with
renewal options and have been accounted for as operating leases in the
accompanying financial statements.

     Pursuant to a Consulting Agreement, the Company retained ADE Vantage, Inc.
("ADE"), a consulting company wholly-owned by Mr. Indelicato, a director of the
company to support Mr. Indelicato in providing consulting services. The Company
pays Mr. Indelicato a monthly retainer fee of $4,225, reimburses for out-of-
pocket expenses, retains ADE for related acquisition services and provides a
variable payment for each acquisition completed based on the purchase price and
the annual sales of the acquired business. Payments to Mr. Indelicato and ADE
during fiscal year 1999 and 2000 totaled $239,984 and $181,607 respectively.
This agreement has a one year term and can be renewed upon the agreement of both
parties.

11.  STOCK OPTIONS:

     The Company adopted a stock option plan during fiscal year 1997 (the 1997
Plan). A total of 650,000 shares are authorized and have been reserved for
issuance under the 1997 Plan. These options are incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The
1997 Plan is administered by the Nominating and Compensation Committee of the
Board of Directors who determines, among

                                      F-12
<PAGE>   35

other things, those individuals who shall receive options, the time period
during which the options may be exercised, the number of shares of common stock
that may be purchased under each option, and the option price.

     The following summarizes the activity under the 1997 Plan:

<TABLE>
<CAPTION>
                                                              EXERCISE      NUMBER OF
                                                                PRICE        SHARES
                                                              PER SHARE    OUTSTANDING
                                                              ---------    -----------
<S>                                                           <C>          <C>
Outstanding, June 30, 1997..................................   $  8.00       175,000
                                                               =======      ========
  Granted...................................................    10.375         2,500
  Vested....................................................        --            --
  Exercised.................................................        --            --
  Expired or terminated.....................................      8.00           500
                                                               -------      --------
Outstanding, June 30, 1998..................................      8.03       177,000
                                                               =======      ========
  Granted...................................................     5.625        66,400
  Vested....................................................        --            --
  Exercised.................................................        --            --
  Expired or terminated.....................................      7.78        11,000
                                                               -------      --------
Outstanding, June 30, 1999..................................      7.36       232,400
                                                               =======      ========
  Granted...................................................      3.13        62,500
  Vested....................................................        --            --
  Exercised.................................................        --            --
  Expired or terminated.....................................      6.86         9,650
                                                               -------      --------
Outstanding, June 30, 2000..................................   $  6.48       285,250
                                                               -------      --------
Exercisable, June 30, 2000..................................   $  8.00       160,500
                                                               -------      --------
</TABLE>

     The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123) in October 1995. This statement establishes a fair value based method
of financial accounting and related reporting standards for stock-based employee
compensation plans. SFAS No. 123 became effective for fiscal year 1997 and
provides for adoption in the income statement or through footnote disclosure
only. The Company has continued to account for the 1997 Plan under APB No. 25,
"Accounting for Stock Issued to Employees", as permitted by SFAS No. 123.

     Had compensation cost of the 1997 Plan been determined based on the fair
value at the grant dates for awards consistent with the method of SFAS No. 123,
the Company's net income and earnings per share would have been the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                      1998         1999          2000
                                                      ----         ----          ----
<S>                                                <C>          <C>           <C>
Net earnings
  As reported....................................  $2,953,005   $3,018,295    $3,609,668
  Pro forma......................................   2,714,048    2,747,208     3,340,243
Earnings per share assuming dilution
  As reported....................................  $     0.31   $     0.32    $     0.39
  Pro forma......................................  $     0.28   $     0.29    $     0.36
</TABLE>

     The fair value of each option grant was estimated on the date of grant
using an option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                           1998       1999       2000
                                                           ----       ----       ----
<S>                                                       <C>        <C>        <C>
Risk-Free Interest Rate.................................     6.00%      4.75%      6.65%
Expected Lives..........................................  7 years    7 years    7 years
Expected Dividend Yield.................................     0.00%      0.00%      0.00%
Expected Volatility.....................................    31.00%     41.00%     44.00%
</TABLE>

                                      F-13
<PAGE>   36

12.  INCOME TAXES:

     The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. Although there can be no assurance that the Company will generate
any earnings or specific level of continuing earnings in future periods,
management believes that it is more likely than not that the net deductible
differences will reverse during periods when the Company generates sufficient
net taxable income.

     The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes follows:

<TABLE>
<CAPTION>
                                                                     1998
                                                              ------------------
                                                                AMOUNT      RATE
                                                                ------      ----
<S>                                                           <C>           <C>
Federal statutory rate......................................  $1,701,732    34.0%
State taxes, net of federal benefit.........................     300,306     6.0%
Nondeductible goodwill......................................      86,907     1.8%
Other.......................................................     (36,357)   (0.8)%
                                                              ----------    ----
Provision for income taxes..................................  $2,052,088    41.0%
                                                              ==========    ====
</TABLE>

<TABLE>
<CAPTION>
                                                                     1999
                                                              ------------------
                                                                AMOUNT      RATE
                                                                ------      ----
<S>                                                           <C>           <C>
Federal statutory rate......................................  $1,902,969    34.0%
State taxes, net of federal benefit.........................     335,818     6.0%
Nondeductible goodwill......................................     114,870    2.05%
Other.......................................................      (3,487)   (.05)%
                                                              ----------    ----
Provision for income taxes..................................  $2,350,170    42.0%
                                                              ==========    ====
</TABLE>

<TABLE>
<CAPTION>
                                                                     2000
                                                              ------------------
                                                                AMOUNT      RATE
                                                                ------      ----
<S>                                                           <C>           <C>
Federal statutory rate......................................  $2,191,584    34.0%
State taxes, net of federal benefit.........................     386,750     6.0%
Nondeductible goodwill......................................     199,404     3.1%
Other.......................................................      58,429      .9%
                                                              ----------    ----
Provision for income taxes..................................  $2,836,167    44.0%
                                                              ==========    ====
</TABLE>

     The provision for income taxes as shown in the accompanying consolidated
statement of operations, includes the following components for the year ended
June 30:

<TABLE>
<CAPTION>
                                                    1998          1999          2000
                                                    ----          ----          ----
<S>                                              <C>           <C>           <C>
Current provision--
  Federal......................................  $  896,295    $  512,027    $1,157,045
  State........................................      73,904        90,358       204,184
                                                 ----------    ----------    ----------
Total current provision........................  $  970,199    $  602,385    $1,361,229
                                                 ==========    ==========    ==========
Deferred provision
  Federal provision............................     919,606     1,485,618     1,253,697
  State provision..............................     162,283       262,167       221,241
                                                 ----------    ----------    ----------
Total deferred provision.......................   1,081,889     1,747,785     1,474,938
                                                 ----------    ----------    ----------
Provision for income taxes.....................  $2,052,088    $2,350,170    $2,836,167
                                                 ==========    ==========    ==========
</TABLE>

                                      F-14
<PAGE>   37

     The components of the deferred tax assets and liabilities recorded in the
accompanying consolidated balance sheets at June 30, 1998, 1999 and 2000 were as
follows:

<TABLE>
<CAPTION>
                                                 1998           1999            2000
                                                 ----           ----            ----
<S>                                           <C>            <C>            <C>
Deferred tax assets.........................  $ 1,499,920    $ 1,968,781    $  2,446,183
Deferred tax liabilities....................   (7,433,112)    (9,833,442)    (13,070,292)
                                              -----------    -----------    ------------
Net deferred tax liability..................  $(5,933,192)   $(7,864,661)   $(10,624,109)
                                              ===========    ===========    ============
Consisting of--
  Basis difference of property..............  $(6,829,178)   $(9,466,506)   $(12,703,355)
  Basis difference of inventory.............      138,645        190,321         236,609
  Financial reserves not currently
     deductible for tax purposes............     (110,290)       182,929         283,277
  Amortization of intangibles...............      630,476        874,453       1,131,803
  Unearned revenue..........................      237,155        354,142         427,557
                                              -----------    -----------    ------------
                                              $(5,933,192)   $(7,864,661)   $(10,624,109)
                                              ===========    ===========    ============
</TABLE>

13.  CONTINGENCIES AND COMMITMENTS:

     Some industrial gases and propane are flammable, explosive products.
Serious personal injury and property damage can occur in connection with its
transportation, storage, production or use. The Company, in the ordinary course
of business, is threatened with or is named as a defendant in various lawsuits
which, among other items, seek actual and punitive damages for product
liability, personal injury and property damage. The Company maintains liability
insurance policies with insurers in such amounts and with such coverages and
deductibles as the Company believes is reasonable and prudent. However, there
can be no assurance that such insurance will be adequate to protect the Company
from material expenses related to such personal injury or property damage or
that such levels of insurance will continue to be available in the future at
economical prices. Management is of the opinion that there are no known claims
or known contingent claims that are likely to have a material adverse effect on
the results of operations, financial condition or cash flows of the Company.

     The Company has 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.

     In September 1991, in connection with the purchase by the Company of
certain assets of Praxair, Inc. (Praxair), the Company, Gary E. West and certain
of his affiliates entered into a Right of First Refusal Agreement with Praxair.
In March 1997, the parties to such agreement entered into an Amended and
Restated Right of First Refusal Agreement (the Right of First Refusal Agreement)
in connection with the Company's reorganization. Pursuant to this agreement, if
at any time during the term of the agreement the Company wishes to accept a
third party offer to purchase all or a material part of the assets of the
Company, or Mr. West and his affiliates wish to accept an offer to purchase
shares of capital stock of the Company (the Capital Stock) owned by them in a
transaction that would result in Mr. West and his affiliates collectively owning
less than 51% of the Company's issued and outstanding shares of Capital Stock on
a fully diluted basis or owning less than 51% of the combined voting power of
all outstanding voting securities of the Company, Praxair will have a right of
first refusal to match the offer. In addition, in the absence of a third party
offer, if (a) Mr. West and his affiliates wish to sell shares of Common Stock
which would result in their owning collectively less than 51% or more of the
Company's issued and outstanding shares of Common Stock, (b) the Company wishes
to sell all or a material part of its assets, or (c) the Company wishes to issue
additional shares or options or securities exercisable or convertible into
shares of Common Stock, pursuant to employee stock options, a public offering,
private placement, merger, share exchange or otherwise, which in the aggregate
on a fully diluted basis would result in Mr. West and his affiliates
collectively owning less than 51% of all the issued outstanding shares of Common
Stock, then Praxair will have the right to purchase from Mr. West and his
affiliates up to all of the issued and outstanding shares of Common Stock held
by them (but not less than 51% of all of the issued and outstanding

                                      F-15
<PAGE>   38

shares of the Company's Common Stock on a fully diluted basis) at the then
prevailing market price. If Praxair does purchase shares of Capital Stock from
Mr. West and his affiliates as described in this paragraph, then Mr. West and
his affiliates will be bound by certain non-compete provisions, as described in
the Right of First Refusal Agreement, for a period of three years from such
purchase.

14.  SUBSEQUENT EVENTS:

     On September 14, 2000, the Company acquired the assets of Titan Welding
Supply, Ltd., a welding supply distributor having approximately $1.3 million in
annualized sales. The acquisition was financed through the Company's credit
facility and notes with the sellers.

15.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

<TABLE>
<CAPTION>
                                                                  QUARTER ENDED
                                                --------------------------------------------------
                                                SEPTEMBER 30    DECEMBER 31    MARCH 31    JUNE 30
                                                ------------    -----------    --------    -------
                                                                  (IN THOUSANDS)
<S>                                             <C>             <C>            <C>         <C>
Fiscal 2000--
  Net sales...................................    $26,447         $30,381      $36,823     $32,429
  Gross profit................................     13,868          15,464       18,169      17,032
  Net earnings................................        655             935        1,271         749
  Basic earnings per share....................       0.07            0.10         0.14        0.08
  Diluted earnings per share..................       0.07            0.10         0.14        0.08

Fiscal 1999--
  Net sales...................................    $23,209         $24,617      $28,027     $26,417
  Gross profit................................     12,939          13,413       15,316      14,271
  Net earnings................................        841             732        1,065         380
  Basic earnings per share....................       0.09            0.08         0.11        0.04
  Diluted earnings per share..................       0.09            0.08         0.11        0.04
</TABLE>

                                      F-16
<PAGE>   39

                               INDEX TO EXHIBITS

<TABLE>
<S>      <C>
 3.1     Articles of Amendment.*
 3.2     Bylaws.*
 4.1     Form of Certificate for Common Stock.*
10.1     Amended and Restated Credit Agreement dated January 23, 1998 between
         the Company and Bank One, Indiana NA, as agent.**
10.2     Master Lease Agreement dated as of November 1, 1996 between the Company and West
         Rentals, Inc.*
10.3     Amended and Restated Right of First Refusal Agreement dated March 12, 1997 among the
         Company, Valley National Gases Delaware, Inc., Valley National Gases, Inc., West
         Rentals, Inc., Gary E. West, Phyllis J. West, The Gary E. West Grantor Retained
         Annuity Trust #1, The Gary E. West Grantor Retained Annuity Trust #2, The Gary E.
         West Grantor Retained Annuity Trust #3, The Gary E. West Grantor Retained Annuity
         Trust #4, The Gary E. West Grantor Retained Annuity Trust #5, The Gary E. West
         Grantor Retained Annuity Trust #6 and Praxair, Inc.*
10.4     Deferred Compensation Agreement dated April 3, 1995 by and between the Company and
         Lawrence E. Bandi.*+
10.5     Deferred Compensation Agreement dated April 3, 1995 by and between the Company and
         John R. Bushwack.*+
10.6     Agreement dated October 5, 1992 between the Company and Lawrence E. Bandi providing
         for death, disability and retirement benefits.*+
10.7     Agreement dated October 5, 1992 between the Company and John R. Bushwack providing
         for death, disability and retirement benefits.*+
10.8     Agreement dated March 16, 1994 between the Company and William A. Indelicato
         providing for certain consulting payments.*+
10.9     Purchase and Sale Agreement made as of September 27, 1996 by and between Weldco,
         Inc., R.H. Kraemer, R. Bruce Kraemer, William Bott, Linda Bott, Krabo Limited, Ltd.,
         the Company and West Rentals, Inc.*
10.10    Lease Agreement dated as of November 1, 1995 between the Company and Acetylene
         Products, Inc.*
10.11    1997 Stock Option Plan.*
10.12    Real Estate Sale Agreement dated April 24, 1996 between the Company and West
         Rentals, Inc.*
10.13    Trailer Lease Agreement dated November 20, 1995 between the Company and West
         Rentals, Inc.*
10.14    Trailer Lease Agreement dated September 8, 1992 between the Company and West
         Rentals, Inc.*
10.15    Trailer Lease Agreement dated May 29, 1996 between the Company and West Rentals,
         Inc.*
10.16    Agreement dated July 1, 2000 between the Company and William A. Indelicato providing
         for certain consulting payments.+
10.17    First Amendment to Amended and Restated Credit Agreement dated September 15, 1999,
         between the Company and Bank One, Indiana NA, as agent.***
10.18    Second Amendment and Restated Credit Agreement dated May 1, 2000 between the Company and
         Bank One, Indiana NA, as agent.****
21.1     Subsidiaries of Registrant.*
27.1     Financial Data Schedule for the year ended June 30, 2000.
</TABLE>

---------

*    Incorporated by reference to the same numbered exhibit to the Company's
     Registration Statement on Form S-1, Reg. No. 333-19973.

**   Incorporated by reference to the same numbered exhibit on the Company's
     Quarterly Report on Form 10-Q filed February 13, 1998.

***  Incorporated by reference to the same numbered exhibit on the Company's
     Annual Report on Form 10-K filed September 28, 1999.

**** Incorporated by reference to the same numbered exhibit on the Company's
     Quarterly Report on Form 10-Q filed May 15, 2000.

+    A management or compensatory plan or arrangement required to be filed as an
     exhibit pursuant to Item 14(c) of Form 10-K.

                                       E-1
<PAGE>   40

                                  SCHEDULE II

                          VALLEY NATIONAL GASES, INC.

                       VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                                         Balance at    Charged to                  Balance at
                                                          beginning     costs and                    end of
 Period Ending                 Description                of period     expenses      Deductions      period
--------------------------------------------------------------------------------------------------------------
<S>               <C>                                     <C>           <C>           <C>           <C>
June 30, 1998     Allowance for uncollectible accounts    $200,750      $516,591      $(372,341)    $345,000
June 30, 1999     Allowance for uncollectible accounts    $345,000      $379,053      $(269,072)    $454,981
June 30, 2000     Allowance for uncollectible accounts    $454,981      $468,833      $(337,116)    $586,698
</TABLE>


                                      S-1