<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, 2001
                                       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. [ X ]

     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 4, 2001, as reported on the American Stock Exchange, was $10,624,656.

     As of September 13, 2001, 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 23, 2001 are incorporated
by reference in response to Part III.

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<PAGE>   2

                       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 11
states in the eastern United States. The Company's net sales have grown 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 $141.3 million in
fiscal 2001. In fiscal 2001, gases accounted for approximately 44% of net sales,
welding equipment and supplies accounted for approximately 40% of net sales, and
cylinder and tank rental accounted for approximately 16% of net sales.

     The Company'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 66 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
486,000 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 25,000 bulk propane tanks and 367 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 67
acquisitions. Since July 1, 2000, the Company has acquired five independent
distributors, adding approximately $16 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.

                                        1
<PAGE>   4

     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.

     This segment of the industry is estimated to have sales of $8 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 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 67 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
                                        3
<PAGE>   6

that Airgas will continue to selectively acquire distributors in the future, and
in some situations will compete with the 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.

                                        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 places responsibility of 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 2001, the Company sold approximately twenty one million gallons
of propane to approximately 32,000 residential, commercial and industrial users.
The Company believes that it is now the twenty-ninth largest distributor of
propane in an industry comprised of approximately 7,500 companies. Propane sales
accounted for approximately 21% of net sales in fiscal 2001. 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 facilities in West
Mifflin, Pennsylvania and Canton, Ohio. 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 2001, acetylene
accounted for approximately 3% of net sales.

     The following table sets forth the percentage of the Company's net sales
for the fiscal years ended June 30, 1999, 2000 and 2001 for each of the
following products and services:

<Table>
<Caption>
                                                              YEARS ENDED JUNE 30,
                                                              --------------------
                                                              1999    2000    2001
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Gases.......................................................  39.8%   39.3%   44.3%
Welding equipment and supplies..............................  44.5    45.1    40.3
Cylinder rental and other...................................  15.7    15.6    15.4
</Table>

CUSTOMERS

     The Company currently has more than 132,000 customers, none of which
accounted for more than 1% of net sales in fiscal 2001. In fiscal 2001,
approximately 10% 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 15%, industrial at 10%,
construction at 9%, services at 7%, health care at 5%, mining, oil and chemicals
at 4% 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 $8 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 $25 million. The Company solicits and maintains business primarily
through a direct selling effort using an experienced sales force of
approximately 85 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, Wisconsin and Florida. 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 57% of the
Company's gas purchases in fiscal 2001. 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 69 primary vendors, of which purchases from the top five vendors
represented approximately 59% of total purchases in fiscal 2001. 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, 2001, the Company employed 697 people, of whom approximately
13% were covered by collective bargaining agreements. Historically, the Company
has not been adversely affected by strikes or work stoppages. Approximately 61%
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 at the Company's various locations.

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 486,000 cylinders, 25,000 bulk propane tanks
and 367 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

                                        7
<PAGE>   10

expects will 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 66 industrial gas and welding supply distribution locations
in 11 states, 29 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, 2001.

                                        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, 2000 to June 30, 2001 was:

<Table>
<Caption>
YEAR ENDED JUNE 30, 2001:                                      HIGH      LOW
-------------------------                                      ----      ---
<S>                                                           <C>       <C>
Fourth quarter..............................................  $4.950    $4.250
Third quarter...............................................  $4.750    $3.750
Second quarter..............................................  $4.250    $3.625
First quarter...............................................  $5.000    $3.875
</Table>

<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>

     The reported last sale price of the company's common stock on the American
Stock Exchange on September 20, 2001 was $5.50.

     On September 13, 2001, there were 103 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,
                                            --------------------------------------------------
                                            1997(1)    1998       1999       2000       2001
                                            -------    ----       ----       ----       ----
                                              (AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA):
<S>                                         <C>       <C>       <C>        <C>        <C>
Operating Results:
  Net sales...............................  $73,905   $95,031   $102,271   $126,080   $141,342
  Depreciation and amortization (2).......    6,673     9,086      8,328      9,386     10,173
  Operating income........................    4,493     7,848      9,458     11,263     12,928
  Interest expense (3)....................    2,158     3,116      4,114      5,334      6,619
  Income taxes (4)........................    3,655     2,052      2,350      2,836      3,059
  Net income (loss).......................     (845)    2,953      3,245      3,610      3,893
  Basic earnings per share................            $  0.31   $   0.32   $   0.39   $   0.42
  Diluted earnings per share..............            $  0.31   $   0.32   $   0.39   $   0.42
Pro forma basic earnings (loss) per share
  (5).....................................  $ (0.30)
Pro forma diluted earnings (loss) per
  share (5)...............................  $ (0.27)
Weighted average shares
  Basic...................................              9,620      9,531      9,348      9,348
  Diluted.................................              9,667      9,531      9,353      9,368
Pro forma weighted average shares (6)
  Basic...................................    7,573
  Diluted.................................    8,506
Balance Sheet Data:
  Working capital.........................    9,685     7,183      9,613     11,268     14,384
  Total assets............................   67,806    97,059    108,526    131,943    144,976
  Current portion of long-term debt.......    3,928     5,612      6,294      7,065      6,715
  Long-term debt..........................   28,787    48,656     56,242     68,818     76,415
  Other non-current liabilities (4).......    5,317     7,302      9,528     12,169     15,851
  Stockholders' equity....................   21,230    24,183     27,045     30,654     33,604
</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) Effective July 1, 2000, the Company adopted Statement of Financial
    Accounting Standards No. 133. Interest expense for fiscal year 2001
    increased $0.5 million to record changes in the fair market value of the
    Company's interest rate swap agreements.

(4) 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.

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

(6) 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 11 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 $141.3 million in fiscal 2001. In
fiscal 2001, gases accounted for approximately 44% of net sales, welding
equipment and supplies accounted for approximately 40% of net sales, and
cylinder and tank rental accounted for approximately 16% of net sales.

     The Company believes it has been successful in executing its strategy of
growth through acquisitions, having completed 51 acquisitions since 1990. Some
acquisitions have had, and the Company expects some future acquisitions will
have, a dilutive effect upon the Company's income from operations and income
before tax for a short period following consummation. This temporary dilution
occurs because some of the benefits of acquisitions, such as leveraging of
operating and administrative expenses, improved product gross margins and real
sales growth, occur over a period ranging from two to eight quarters, depending
upon the complexity of integrating each acquisition into the Company's existing
operations. The consideration for most acquisitions includes a combination of a
cash payment at closing, seller financing and payments under covenants not to
compete and consulting agreements. In most cases, operating cash flow of an
acquired business is positive in a relatively short period of time. For many
acquisitions, the Company believes that projections of future cash flows justify
payment of amounts in excess of the book or market value of the assets acquired,
resulting in goodwill being recorded.

     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.

                                        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
                                                              -----------------------------
                                                               1999       2000       2001
                                                               ----       ----       ----
<S>                                                           <C>        <C>        <C>
Net sales...................................................   100.0%     100.0%     100.0%
Cost of products sold, excluding depreciation and
  amortization..............................................    45.3       48.8       48.1
                                                               -----      -----      -----
Gross profit................................................    54.7       51.2       51.9
Operating and administrative expenses.......................    37.3       34.9       35.6
Depreciation and amortization...............................     8.2        7.4        7.2
                                                               -----      -----      -----
Income from operations......................................     9.2        8.9        9.1
Interest expense(1).........................................     4.0        4.2        4.7
Other income................................................     0.3        0.4        0.5
                                                               -----      -----      -----
Earnings before income taxes................................     5.5        5.1        4.9
Provision for income taxes..................................     2.3        2.2        2.2
                                                               -----      -----      -----
Net earnings................................................     3.2%       2.9%       2.7%
                                                               =====      =====      =====
</Table>

---------------

(1) Effective July 1, 2000, the Company adopted Statement of Financial
    Accounting Standards No. 133. Interest expense for fiscal year 2001
    increased $0.5 million to record changes in the fair market value of the
    Company's interest rate swap agreements.

  COMPARISON OF YEARS ENDED JUNE 30, 2001 AND 2000

     Net sales increased 12.1%, or $15.2 million, to $141.3 million from $126.1
million for the years ended June 30, 2001 and 2000, respectively. Acquisitions
made during the preceding twelve months contributed $8.4 million of the increase
in net sales, while same store sales growth contributed $6.8 million of the
increase. Same store sales increased 5.4% over the prior year, reflecting the
increase in sale of propane products as a result of internal growth and higher
demand, partially offset by reduced demand for hard goods. Gases and cylinder
income represented 59.7% of net sales for the year, with hard goods representing
the remaining 40.3%. In comparison, net sales for the prior year reflected gases
and cylinder income as 54.9% and hard goods as 45.1%.

     Gross profit, which excludes depreciation and amortization, increased
13.7%, or $8.9 million, to $73.4 million for the year, compared to $64.5 million
for the prior year. Acquisitions made during the preceding twelve months
contributed $4.5 million of the increase in gross profit, while same stores
contributed $4.4 million of the increase. Gross profit as a percentage of net
sales was 51.9% for the year, compared to 51.2% for the prior year.

     Operating and administrative expenses increased 14.6%, or $6.4 million, to
$50.3 million for the year, compared to $43.9 million for the prior year. Of
this increase, $3.5 million was related to acquired businesses, with the balance
of the change, or $2.9 million, attributable to same store expenses.
Depreciation and amortization expense increased $0.8 million for the year,
primarily as a result of acquisitions made during the last twelve months.

     Interest expense increased 24.1%, or $1.3 million, to $6.6 million for the
year, compared to $5.3 million for the prior year. This increase reflects the
impact of additional borrowings related to acquisitions and the effect of
adopting SFAS No. 133, which increased interest expense $0.5 million to record
the changes in fair market value of the Company's interest rate swap agreements.

                                        12
<PAGE>   15

     The Company's effective tax rate was 44% for both fiscal year 2001 and
2000.

     Net earnings for the year were $3.9 million, compared to $3.6 million for
the fiscal year ended June 30, 2000.

     Earnings before interest, taxes, depreciation, amortization and other
noncash charges increased 12.2%, or $2.6 million, to $23.7 million for the year,
compared to $21.1 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, 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.

     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.

LIQUIDITY AND CAPITAL RESOURCES

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

     At June 30, 2001, the Company had working capital of approximately $14.4
million. Funds provided by operations for the twelve months ended June 30, 2001
were approximately $13.5 million. Funds used for

                                        13
<PAGE>   16

investing activities were approximately $20.3 million for the twelve months
ended June 30, 2001, consisting primarily of capital spending and financing for
acquisitions. Sources of funds from financing activities for the twelve months
ended June 30, 2001 were approximately $6.6 million from net borrowings. The
Company's cash balance decreased $0.2 million during the twelve months to $0.5
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 5.7% as of June 30, 2001. As of June 30, 2001, availability
under the revolving loan was approximately $29.0 million, with outstanding
borrowings of approximately $65.6 million and outstanding letters of credit of
approximately $5.4 million. The credit facility is secured by all of the
Company's assets. The revolving loan is used primarily to fund acquisitions. The
Company is not required to make principal payments on outstanding balances of
the revolving loan as long as certain covenants are satisfied. Interest is
charged on both the term loan and the revolving loan at either the lender's
prime rate or various LIBOR rates, at the Company's discretion, plus an
applicable spread.

     The loan agreement for the credit facility contains various financial
covenants applicable to the Company, including covenants requiring minimum fixed
charge coverage, maximum funded debt to EBITDA, and minimum net worth. As of
April 30, 2001, the Company was not in compliance with the capital spending
covenant and obtained a waiver for the non-compliance. As of June 30, 2001, the
Company is in compliance with these covenants and believes that it will continue
to be in compliance through at least the next twelve months.

     The Company is obligated under various promissory notes related to the
financing of acquisitions that have various rates of interest, ranging from 3.7%
to 10.0% per annum, and maturities through 2010. The outstanding balance of
these notes as of June 30, 2001 was $11.9 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, 2001, the Company had $60 million in notional amounts
outstanding under interest rate swap agreements. These swaps have an average pay
rate of 5.9% versus a receive rate of 3.8%.

     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 August 1, 2001, the Company acquired substantially all of the assets of
Buckeye Corporation and Mansfield Oxygen Corporation, welding supply
distributors having approximately $2.5 million in combined annualized sales.
These transactions were financed through the Company's credit facility.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. The Company does
not believe that the prospective adoption of this standard will have a material
impact on its consolidated results for 2002.

     SFAS No. 142 changes the accounting for goodwill and certain other
intangible assets from an amortization method to an impairment only approach.
The Company adopted SFAS No. 142 effective July 1, 2001 and therefore, all
goodwill will no longer be amortized to earnings. The Company will continue to
amortize all non-goodwill intangible assets (i.e. non-compete agreements) over
their existing remaining useful lives. The Company is required to complete a
transitional goodwill impairment test for all goodwill, at the reporting unit
level, by December 31, 2001 and is currently preparing for this test. The
Company recorded goodwill amortization expense of $2.1 million in fiscal year
2001.

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 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

                                        15
<PAGE>   18

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
                             2002      2003      2004      2005     2006   AFTER    TOTAL     VALUE
                             ----      ----      ----      ----     ----   -----    -----     -----
                                                         (IN THOUSANDS)
<S>                         <C>       <C>       <C>       <C>       <C>    <C>     <C>       <C>
Liabilities
Long term debt
  Fixed rate..............  $ 4,157   $ 3,154   $ 2,004   $   743   $751   $964    $11,773   $ 9,694
  Average interest rate...     3.05%     3.99%     4.91%     6.23%  6.38%  4.76%
  Variable rate...........  $ 2,558   $68,160   $   640        --     --     --    $71,358   $71,358
  Average interest rate...     5.71%     5.71%     5.71%     5.71%    --     --
Interest rate swaps
  Fixed to variable.......  $60,000   $60,000   $55,000   $20,000     --     --              $(2,095)
  Average pay rate........     5.94%     5.45%     5.45%     5.25%    --     --
  Average receive rate....     3.83%     3.83%     3.83%     3.83%    --     --
</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......................  64        31        Chairman of the Board of Directors
Lawrence E. Bandi.................  47        27        President, Chief Executive Officer, Director
John R. Bushwack..................  50        25        Executive Vice President, Secretary, Director
Robert D. Scherich................  41         5        Chief Financial Officer
Ben Exley, IV.....................  54         5        Director
James P. Hart.....................  47         5        Director
William A. Indelicato.............  62        32        Director
August E. Maier...................  72         8        Director
F. Walter Riebenack...............  62         2        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 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, is a director of Special Wish
Foundation and serves on the Board of Governors for West Virginia Northern
Community College. 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. He served as a Marketing Specialist for the Ohio Valley
Industrial and Business Development Corporation from April 1998 to May 2000 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. 1994
through 2000, BankOne Wheeling-Steubenville N.A. 1991 through 2000 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 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, Ohio, Maryland, 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 23, 2001, 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 23, 2001, 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 23, 2001, 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 23, 2001, 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, 2001.

                                        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 21, 2001
                                          /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 21, 2001
----------------------------------
Gary E. West

/s/ LAWRENCE E. BANDI                 President, Chief Executive           September 21, 2001
----------------------------------    Officer, Director
Lawrence E. Bandi

/s/ JOHN R. BUSHWACK                  Executive Vice President,            September 21, 2001
----------------------------------    Secretary, Director
John R. Bushwack

/s/ ROBERT D. SCHERICH                Chief Financial Officer              September 21, 2001
----------------------------------
Robert D. Scherich

/s/ BEN EXLEY, IV                     Director                             September 21, 2001
----------------------------------
Ben Exley, IV

/s/ JAMES P. HART                     Director                             September 21, 2001
----------------------------------
James P. Hart

/s/ WILLIAM A. INDELICATO             Director                             September 21, 2001
----------------------------------
William A. Indelicato

/s/ AUGUST E. MAIER                   Director                             September 21, 2001
----------------------------------
August E. Maier

/s/ F. WALTER RIEBENACK               Director                             September 21, 2001
----------------------------------
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, 2000 and 2001....  F-2
Consolidated Statements of Operations for the years ended
  June 30, 1999, 2000 and 2001..............................  F-3
Consolidated Statements of Changes in Stockholders' Equity
  for the years ended June 30, 1999, 2000 and 2001..........  F-4
Consolidated Statements of Cash Flows for the years ended
  June 30, 1999, 2000 and 2001..............................  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, 2000 and 2001, 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, 2001. 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, 2000 and 2001, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 2001, in conformity with accounting principles generally accepted
in the United States.

     As explained in Note 2 to the financial statements, effective July 1, 2000,
the Company changed its method of accounting for derivative instruments and
hedging activities.

/s/ Arthur Andersen LLP
Pittsburgh, Pennsylvania
  July 31, 2001

                                       F-1
<PAGE>   24

                       VALLEY NATIONAL GASES INCORPORATED

                          CONSOLIDATED BALANCE SHEETS

                             JUNE 30, 2000 AND 2001

<Table>
<Caption>
                                                                  2000            2001
                                                                  ----            ----
<S>                                                           <C>             <C>
                           ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................  $    769,564    $    542,720
  Accounts receivable, net of allowance for doubtful
    accounts of $586,698 and $597,898, respectively.........    16,131,425      16,263,030
  Inventory.................................................    13,748,347      16,303,257
  Prepaids and other........................................       920,159       1,380,950
                                                              ------------    ------------
       Total current assets.................................    31,569,495      34,489,957
                                                              ------------    ------------
PROPERTY, PLANT AND EQUIPMENT:
  Land......................................................        88,000          88,000
  Buildings and improvements................................     5,026,630       5,344,429
  Equipment.................................................    65,774,656      75,229,048
  Transportation equipment..................................    11,654,109      13,023,381
  Furniture and fixtures....................................     4,579,751       5,177,088
                                                              ------------    ------------
       Total property, plant and equipment..................    87,123,146      98,861,946
Accumulated depreciation....................................   (32,901,262)    (37,123,059)
                                                              ------------    ------------
       Net property, plant and equipment....................    54,221,884      61,738,887
                                                              ------------    ------------
OTHER ASSETS:
  Intangibles, net of accumulated amortization of
    $14,752,111 and $16,164,468, respectively...............    44,348,795      46,979,165
                                                              ------------    ------------
  Deposits and other assets.................................     1,803,118       1,768,251
                                                              ------------    ------------
       Total other assets...................................    46,151,913      48,747,416
                                                              ------------    ------------
TOTAL ASSETS................................................  $131,943,292    $144,976,260
                                                              ============    ============
            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term debt......................  $  7,064,877    $  6,715,209
  Bank overdraft............................................     1,460,492         259,852
  Accounts payable..........................................     5,751,892       6,958,922
  Accrued compensation and employee benefits................     3,346,283       3,508,931
  Other current liabilities.................................     2,678,345       2,662,632
                                                              ------------    ------------
       Total current liabilities............................    20,301,889      20,105,546
LONG-TERM DEBT, less current maturities.....................    68,818,457      76,415,134
DEFERRED TAX LIABILITY......................................    10,624,109      11,612,787
OTHER LONG-TERM LIABILITIES.................................     1,544,525       3,238,607
                                                              ------------    ------------
       Total liabilities....................................   101,288,980     111,372,074
                                                              ------------    ------------
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.........................................    13,638,782      17,531,623
  Accumulated other comprehensive loss......................            --        (942,967)
  Treasury stock at cost, 272,500 shares....................    (2,263,428)     (2,263,428)
                                                              ------------    ------------
    Total stockholders' equity..............................    30,654,312      33,604,186
                                                              ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................  $131,943,292    $144,976,260
                                                              ============    ============
</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, 1999, 2000 AND 2001

<Table>
<Caption>
                                                        1999           2000           2001
                                                        ----           ----           ----
<S>                                                 <C>            <C>            <C>
NET SALES.........................................  $102,270,600   $126,080,048   $141,341,862
COST OF PRODUCTS SOLD, excluding depreciation and
  amortization....................................    46,332,129     61,547,537     67,941,623
                                                    ------------   ------------   ------------
       Gross profit...............................    55,938,471     64,532,511     73,400,239
                                                    ------------   ------------   ------------
EXPENSES:
  Operating and administrative....................    38,152,200     43,883,623     50,299,202
  Depreciation and amortization...................     8,328,309      9,385,625     10,173,078
                                                    ------------   ------------   ------------
       Total expenses.............................    46,480,059     53,269,248     60,472,280
                                                    ------------   ------------   ------------
       Income from operations.....................     9,457,962     11,263,263     12,927,959
                                                    ------------   ------------   ------------
INTEREST EXPENSE..................................     4,113,823      5,333,760      6,618,827
                                                    ------------   ------------   ------------
OTHER INCOME/(EXPENSE):
  Interest and dividend income....................       135,101        171,258        226,169
  Gain (loss) on disposal of assets...............       (37,750)       120,386         60,371
  Other income....................................       154,153        224,688        355,830
                                                    ------------   ------------   ------------
       Total other income.........................       251,504        516,332        642,370
                                                    ------------   ------------   ------------
EARNINGS BEFORE INCOME TAXES......................     5,595,643      6,445,835      6,951,502
PROVISION FOR INCOME TAXES........................     2,350,170      2,836,167      3,058,661
                                                    ------------   ------------   ------------
NET EARNINGS......................................  $  3,245,473   $  3,609,668   $  3,892,841
                                                    ============   ============   ============
Accretion of redeemable common stock..............       227,178             --             --
NET EARNINGS AVAILABLE FOR COMMON STOCK...........     3,018,295      3,609,668      3,892,841
                                                    ============   ============   ============
BASIC EARNINGS PER SHARE..........................          0.32           0.39           0.42
DILUTED EARNINGS PER SHARE........................          0.32           0.39           0.42
WEIGHTED AVERAGE SHARES:
  Basic...........................................     9,530,961      9,347,584      9,347,584
  Diluted.........................................     9,530,961      9,353,209      9,368,396
</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, 1999, 2000 AND 2001

<Table>
<Caption>
                                                                                   ACCUMULATED
                          COMMON STOCK         TREASURY STOCK                         OTHER                         TOTAL
                       ------------------   ---------------------    PAID-IN-     COMPREHENSIVE    RETAINED     STOCKHOLDERS'
                        SHARES     AMOUNT   SHARES      AMOUNT        CAPITAL         LOSS         EARNINGS        EQUITY
                        ------     ------   ------      ------       --------         ----         --------        ------
<S>                    <C>         <C>      <C>       <C>           <C>           <C>             <C>           <C>
BALANCE, June 30,
  1998...............  9,385,084   $9,385        --            --   $17,162,396             --    $ 7,010,819    $24,182,600
  Net income.........         --      --         --            --            --             --      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 income.........         --      --         --            --            --             --      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
  Net income.........         --      --         --            --            --             --      3,892,841      3,892,841
Cumulative effect of
  change in
  accounting
  principle, net of
  tax................         --      --         --            --            --        213,300             --        213,300
                       ---------   ------   -------   -----------   -----------    -----------    -----------    -----------
Unrealized losses on
  derivatives
  designated and
  qualified as cash
  flow hedges, net of
  tax................         --      --         --            --            --     (1,528,904)            --     (1,528,904)
                       ---------   ------   -------   -----------   -----------    -----------    -----------    -----------
Reclassification of
  unrealized losses
  on derivatives, net
  of tax.............                                                                  372,637                       372,637
                       =========   ======   =======   ===========   ===========    ===========    ===========    ===========
BALANCE, June 30,
  2001...............  9,620,084   $9,620   272,500   $(2,263,428)  $19,269,338    $  (942,967)   $17,531,623    $33,604,186
                       =========   ======   =======   ===========   ===========    ===========    ===========    ===========
</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, 1999, 2000 AND 2001

<Table>
<Caption>
                                                        1999           2000           2001
                                                        ----           ----           ----
<S>                                                 <C>            <C>            <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net earnings....................................  $  3,245,473   $  3,609,668   $  3,892,841
  Adjustments to reconcile net earnings to net
     cash provided by operating activities--
       Amortization of SFAS No. 133 transition
          amount..................................            --             --        372,637
       Depreciation...............................     4,093,826      4,889,807      5,282,817
       Amortization...............................     4,234,368      4,495,818      4,890,261
       Loss (gain) on disposal of assets..........        37,750       (120,386)       (21,320)
       Change in deferred taxes...................     1,931,469      1,393,310        735,462
       Other long-term assets and liabilities.....      (565,043)      (544,349)       828,607
       Changes in operating assets and
          liabilities--
          Accounts receivable.....................       700,360     (2,160,664)       153,431
          Inventory...............................    (1,443,161)    (1,726,502)    (1,124,108)
          Prepaids and other......................      (797,498)       643,884       (802,508)
          Accounts payable........................      (785,546)     1,223,155       (131,384)
          Accrued compensation and employee
            benefits..............................       (73,578)      (214,039)        82,610
          Other current liabilities...............       369,520     (1,309,878)      (686,850)
                                                    ------------   ------------   ------------
            Net cash provided by operating
               activities.........................    10,947,940     10,179,824     13,472,496
                                                    ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from disposal of assets................        72,222        655,195        194,356
  Purchases of property and equipment.............    (7,471,569)    (6,390,650)    (6,769,469)
  Business acquisitions, net of cash acquired.....    (7,553,299)    (9,756,924)   (13,718,862)
                                                    ------------   ------------   ------------
            Net cash used by investing
               activities.........................   (14,952,646)   (15,492,379)   (20,293,975)
                                                    ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from borrowings........................    19,688,470     25,421,215     52,317,102
  Principal payments on loans.....................   (13,784,798)   (19,563,804)   (45,722,467)
  Purchase of treasury shares.....................    (2,263,428)            --             --
                                                    ------------   ------------   ------------
            Net cash provided by financing
               activities.........................     3,640,244      5,857,411      6,594,635
                                                    ------------   ------------   ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS...........      (364,462)       544,856       (226,844)
CASH AND CASH EQUIVALENTS, beginning of period....       589,170        224,708        769,564
                                                    ------------   ------------   ------------
CASH AND CASH EQUIVALENTS, end of period..........  $    224,708   $    769,564   $    542,720
                                                    ============   ============   ============
</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, 2000 AND 2001

1.  ORGANIZATION:

     Valley National Gases Incorporated, a Pennsylvania corporation (the
Company), produces, packages and resells industrial gases, specialty gases and
propane; and resells welding hard goods 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>
                                                               2000           2001
                                                               ----           ----
<S>                                                         <C>            <C>
Hard goods................................................  $11,943,855    $14,571,219
Gases.....................................................    1,804,492      1,732,038
                                                            -----------    -----------
                                                            $13,748,347    $16,303,257
                                                            ===========    ===========
</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.

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

                                       F-6
<PAGE>   29

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.

CHANGE IN ACCOUNTING PRINCIPLE

     On July 1, 2000, Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was adopted
resulting in the recording of current assets of $476,500, noncurrent assets of
$1,175,800, current liabilities of $365,400, noncurrent liabilities of $931,500
and other comprehensive income of $213,300, net of tax.

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).

COMPREHENSIVE INCOME

     Comprehensive income includes net income and unrealized gains and losses on
derivatives designated and qualified as cash flow hedges. The components of
comprehensive income consist of the following for the fiscal years ending June
30:

<Table>
<Caption>
                                                    1999          2000          2001
                                                    ----          ----          ----
<S>                                              <C>           <C>           <C>
Net Income.....................................  $3,245,473    $3,609,668    $3,892,841
Cumulative effect of change in accounting
  principle, net of tax........................          --            --       213,300
Unrealized losses on derivatives, net of tax...          --            --    (1,156,267)
                                                 ----------    ----------    ----------
Other comprehensive loss.......................          --            --      (942,967)
                                                 ----------    ----------    ----------
Comprehensive Income...........................  $3,245,473    $3,609,668    $2,949,874
                                                 ==========    ==========    ==========
</Table>

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

                                       F-7
<PAGE>   30

        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, 2001 are as follows:

<Table>
<Caption>
                                                             CARRYING         FAIR
                                                              AMOUNT          VALUE
                                                             --------         -----
<S>                                                         <C>            <C>
Cash and cash equivalents.................................  $   542,720    $   542,720
Long-term debt............................................  $83,130,343    $81,052,047
</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, 2001 and 2000 the Company had interest rate swap agreements outstanding that
effectively convert a notional amount of $60.0 million and $55.0 million,
respectively, from floating rates to fixed rates. The agreements outstanding at
June 30, 2001 mature at various times between December 2002 and January 2006.
The Company would have paid $2,095,366 and received $355,482 to settle its
interest rate swap agreements at June 30, 2001 and 2000, respectively, which
represents the fair value of these agreements. Due to the adoption of SFAS No.
133 effective July 1, 2000, the carrying value equals the fair value for these
contracts at June 30, 2001. Fair value was estimated based on the mark-to market
value of the contracts which closely approximates the amount the Company could
receive or pay to terminate the agreements at year end.

     Based upon interest rates at June 30, 2001, the Company expects to
recognize into earnings in the next 12 months net current liabilities of
$292,431 related to outstanding derivative instruments and net losses of
$185,852 recorded in accumulated other comprehensive loss, related to the
classification of unrealized losses on derivatives that were not designated as
cash flow hedges upon the adoption of SFAS No. 133.

     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 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. The Company does
not believe that the prospective adoption of this standard will have a material
impact on its consolidated results for 2002.

     SFAS No. 142 changes the accounting for goodwill and certain other
intangible assets from an amortization method to an impairment only approach.
The Company adopted SFAS No. 142 effective July 1, 2001 and therefore, all
goodwill will no longer be amortized to earnings. The Company will continue to
amortize all non-goodwill intangible assets (i.e. non-compete agreements) over
their existing remaining useful lives. The Company is required to complete a
transitional goodwill impairment test for all goodwill, at the reporting unit
level, by December 31, 2001 and is currently preparing for this test. The
Company recorded goodwill amortization expense of $2.1 million in fiscal year
2001.

USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the 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.

                                       F-8
<PAGE>   31

SUPPLEMENTAL CASH FLOW INFORMATION

<Table>
<Caption>
                                                      FOR THE YEAR ENDED JUNE 30,
                                                 --------------------------------------
                                                    1999          2000          2001
                                                    ----          ----          ----
<S>                                              <C>           <C>           <C>
Cash paid for certain items--
  Cash payments for interest...................  $3,143,083    $5,535,565    $6,324,734
  Cash payments for income taxes...............   1,323,545       905,280     1,755,075
</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 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 2001, the Company purchased five businesses. The largest of
these acquisitions was Air Liquide America Corporation which was effective May
2001. The aggregate purchase price for all acquisitions amounted to
approximately $14,384,000.

     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.

     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>
                                                 1999           2000           2001
                                                 ----           ----           ----
<S>                                           <C>            <C>            <C>
Cash paid...................................  $ 5,578,952    $ 9,861,746    $13,731,500
Notes issued to sellers.....................    2,198,360      2,000,000        161,000
Notes payable and capital leases assumed....        7,027      2,239,789         31,722
Other liabilities assumed and acquisition
  costs.....................................    2,368,857      3,150,000        459,650
                                              -----------    -----------    -----------
Total purchase price allocated to assets
  acquired..................................  $10,153,196    $17,251,535    $14,383,872
                                              ===========    ===========    ===========
</Table>

     The following summarized unaudited pro forma results of operations for the
fiscal years ended June 30, 2000 and 2001, illustrate the estimated effects of
the 2000 and 2001 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            2001
                                                 ----           ----            ----
<S>                                          <C>            <C>             <C>
Net sales..................................  $107,205,000   $130,717,000    $154,110,000
Net earnings before income taxes...........     5,130,000      5,743,000       7,429,000
Pro forma net earnings.....................     2,975,000      3,216,000       4,160,000
Pro forma diluted earnings per share.......          0.31           0.34            0.44
</Table>

                                       F-9
<PAGE>   32

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 1999, 2000
and 2001.

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, 2001   JUNE 30, 2000
                              ------------    --------     ------------   -------------   -------------
<S>                           <C>            <C>           <C>            <C>             <C>
Non-competition
  agreements................    2-7 years    $15,567,774   $ 8,433,905     $ 7,133,869     $ 9,106,316
Consulting agreements.......    1-5 years      1,063,771       739,981         323,790         413,233
Goodwill....................  15-20 years     45,182,400     6,628,567      38,553,833      33,938,660
Other.......................   2-15 years      1,329,688       362,015         967,673         890,586
                                             -----------   -----------     -----------     -----------
                                             $63,143,633   $16,164,468     $46,979,165     $44,348,795
                                             ===========   ===========     ===========     ===========
</Table>

6.  LONG-TERM DEBT:

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

<Table>
<Caption>
                                                               2000           2001
                                                               ----           ----
<S>                                                         <C>            <C>
Revolving note, interest at LIBOR plus 2.125% and 1.875%
  as of 2000 and 2001, respectively payable monthly
  through April 2003. Secured by the assets of the
  Company.................................................  $51,880,202    $65,601,201
Term note, interest at LIBOR plus 2.125% and 1.875% as of
  2000 and 2001, respectively payable monthly through
  October 2003. Secured by the assets of the Company......    8,314,565      5,756,225
Note payable, interest at 6.6% payable annually through
  October 2003. Secured by certain assets of the
  Company.................................................    2,732,298      2,049,224
Individuals and corporations, mortgages and notes,
  interest at 3.7% to 10.00%, payable at various dates
  through 2010............................................   13,090,893      9,837,125
                                                            -----------    -----------
                                                             76,017,958     83,243,775
Original issue discount...................................     (134,624)      (113,432)
Current maturities........................................   (7,064,877)    (6,715,209)
                                                            -----------    -----------
  Total long-term debt....................................  $68,818,457    $76,415,134
                                                            ===========    ===========
</Table>

     The prime rate was 9.50% and 6.75% at June 30, 2000 and 2001, respectively.
The libor rate was 6.68% and 3.83% at June 30, 2000 and 2001, 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 remained unchanged and has a scheduled
maturity date of 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 5.7% as of June 30, 2001. As of
June 30, 2001, availability under the revolving loan was approximately $29.0
million, with outstanding borrowings of approximately $65.6 million and
outstanding letters of credit of approximately $5.4 million. The credit facility
is secured by all of the Company's assets.

                                       F-10
<PAGE>   33

     The loan agreement for the credit facility contains various financial
covenants applicable to the Company, including covenants requiring minimum fixed
charge coverage, maximum funded debt to EBITDA, and minimum net worth. As of
April 30, 2001, the Company was not in compliance with the capital spending
covenant and obtained a waiver for the non-compliance.

     The schedule of maturities as amended for the credit agreements for the
next five years and thereafter is as follows as of June 30, 2001:

<Table>
<Caption>
FISCAL YEAR ENDING JUNE 30,
---------------------------
<S>                                                            <C>
       2002.................................................   $ 6,715,209
       2003.................................................    71,313,608
       2004.................................................     2,643,544
       2005.................................................       742,653
       2006.................................................       750,808
       Thereafter...........................................       964,521
                                                               -----------
       Total................................................   $83,130,343
                                                               ===========
</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
$624,272, $719,126 and $892,849 respectively, in fiscal year 1999, 2000 and
2001.

     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 1999, 2000 and 2001, the amount of additional contributions to be distributed
to the employees' pension plan amounted to $55,964, $149,888 and $142,604
respectively.

     Certain management employees are 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 supplemental retirement
benefits plans charged to expense were $32,000, $67,583 and $44,304
respectively, in fiscal year 1999, 2000 and 2001.

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.

                                       F-11
<PAGE>   34

<Table>
<Caption>
                                                           YEAR ENDED JUNE 30,
                                                   ------------------------------------
                                                      1999         2000         2001
                                                      ----         ----         ----
<S>                                                <C>          <C>          <C>
Net earnings available for common stock..........  $3,018,295   $3,609,668   $3,892,841
                                                   ==========   ==========   ==========
Basic earnings per common share:
Weighted average common shares...................   9,530,961    9,347,584    9,347,584
                                                   ==========   ==========   ==========
Basic earnings per common share..................  $     0.32   $     0.39   $     0.42
                                                   ==========   ==========   ==========
Diluted earnings per common share:
Weighted average common shares...................   9,530,961    9,347,584    9,347,584
Shares issuable from assumed conversion of common
  stock Equivalents..............................          --        5,625       20,812
                                                   ----------   ----------   ----------
Weighted average common and common equivalent
  shares.........................................   9,530,961    9,353,209    9,368,396
                                                   ==========   ==========   ==========
Diluted earnings per common share................  $     0.32   $     0.39   $     0.42
                                                   ==========   ==========   ==========
</Table>

     Options to purchase 177,000, 222,750 and 221,375 shares of common stock
were outstanding during fiscal years 1999, 2000 and 2001, 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 $3,416,233, $3,844,848 and 4,047,918 respectively, in fiscal
year 1999, 2000 and 2001.

     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>
       2002.....................................  $ 3,156,835   $136,584    $ 3,293,419
       2003.....................................    3,134,231    135,684      3,269,915
       2004.....................................    2,686,702    125,784      2,812,486
       2005.....................................    2,591,500    125,784      2,717,284
       2006.....................................    2,334,679    125,784      2,460,463
                                                  -----------   --------    -----------
       Totals...................................  $13,903,947   $649,620    $14,553,567
                                                  ===========   ========    ===========
</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>
                                                      1999         2000         2001
                                                      ----         ----         ----
<S>                                                <C>          <C>          <C>
Transactions--
  Lease of buildings and equipment...............  $2,212,887   $2,252,065   $2,261,257
  Rental of aircraft.............................      87,432       85,884       85,884
</Table>

                                       F-12
<PAGE>   35

     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 $1,988,487 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 $4,352, 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, 2000 and 2001 totaled $239,984, $181,607 and $226,270
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 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, 1998..................................    $8.03       177,000
                                                                =====       =======
  Granted...................................................    5.625        66,400
  Vested....................................................     8.00        25,000
  Exercised.................................................       --            --
  Expired or terminated.....................................     7.78        11,000
                                                                -----       -------
Outstanding, June 30, 1999..................................     7.36       232,400
                                                                =====       =======
Exercisable, June 30, 1999..................................    $8.00        25,000
  Granted...................................................     3.13        62,500
  Vested....................................................     8.00       118,500
  Exercised.................................................       --            --
  Expired or terminated.....................................     6.86         9,650
                                                                -----       -------
Outstanding, June 30, 2000..................................     6.45       285,250
                                                                -----       -------
Exercisable, June 30, 2000..................................    $8.00       143,500
  Granted...................................................     3.75        64,000
  Vested....................................................     8.29        14,000
  Exercised.................................................       --            --
  Expired or terminated.....................................     7.49         1,375
                                                                -----       -------
Outstanding, June 30, 2001..................................     5.26       347,875
                                                                -----       -------
Exercisable, June 30, 2001..................................    $8.03       157,500
                                                                -----       -------
</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

                                       F-13
<PAGE>   36

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>
                                                      1999         2000         2001
                                                      ----         ----         ----
<S>                                                <C>          <C>          <C>
Net income
  As reported....................................  $3,018,295   $3,609,668   $3,892,841
  Pro forma......................................   2,747,208    3,340,243    3,820,839
Earnings per share assuming dilution
  As reported....................................  $     0.32   $     0.39   $     0.42
  Pro forma......................................  $     0.29   $     0.36   $     0.41
</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>
                                                             1999      2000      2001
                                                             ----      ----      ----
<S>                                                         <C>       <C>       <C>
Risk-Free Interest Rate...................................     4.75%     6.65%     5.50%
Expected Lives............................................  7 years   7 years   7 years
Expected Dividend Yield...................................     0.00%     0.00%     0.00%
Expected Volatility.......................................    41.00%    44.00%    25.63%
</Table>

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>
                                                                     1999
                                                              ------------------
                                                                AMOUNT     RATE
                                                                ------     ----
<S>                                                           <C>          <C>
Federal statutory rate......................................  $1,902,969   34.00%
State taxes, net of federal benefit.........................     335,818    6.00%
Nondeductible goodwill......................................     114,870    2.05%
Other.......................................................      (3,487)   (.05)%
                                                              ----------   -----
Provision for income taxes..................................  $2,350,170   42.00%
                                                              ==========   =====
</Table>

<Table>
<Caption>
                                                                     2000
                                                              ------------------
                                                                AMOUNT     RATE
                                                                ------     ----
<S>                                                           <C>          <C>
Federal statutory rate......................................  $2,191,584   34.00%
State taxes, net of federal benefit.........................     386,750    6.00%
Nondeductible goodwill......................................     199,404    3.10%
Other.......................................................      58,429     .90%
                                                              ----------   -----
Provision for income taxes..................................  $2,836,167   44.00%
                                                              ==========   =====
</Table>

                                       F-14
<PAGE>   37

<Table>
<Caption>
                                                                     2001
                                                              ------------------
                                                                AMOUNT     RATE
                                                                ------     ----
<S>                                                           <C>          <C>
Federal statutory rate......................................  $2,363,511   34.00%
State taxes, net of federal benefit.........................     417,090    6.00%
Nondeductible goodwill......................................     272,979    3.93%
Other.......................................................       5,081     .07%
                                                              ----------   -----
Provision for income taxes..................................  $3,058,661   44.00%
                                                              ==========   =====
</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>
                                                      1999         2000         2001
                                                      ----         ----         ----
<S>                                                <C>          <C>          <C>
Current provision--
  Federal........................................  $  512,027   $1,157,045   $1,084,772
  State..........................................      90,358      204,184      191,430
                                                   ----------   ----------   ----------
Total current provision..........................  $  602,385   $1,361,229   $1,276,202
                                                   ==========   ==========   ==========
Deferred provision
  Federal provision..............................   1,485,618    1,253,697    1,515,090
  State provision................................     262,167      221,241      267,369
                                                   ----------   ----------   ----------
Total deferred provision.........................   1,747,785    1,474,938    1,782,459
                                                   ----------   ----------   ----------
Provision for income taxes.......................  $2,350,170   $2,836,167   $3,058,661
                                                   ==========   ==========   ==========
</Table>

     The components of the deferred tax assets and liabilities recorded in the
accompanying consolidated balance sheets at June 30, 1999, 2000 and 2001 were as
follows:

<Table>
<Caption>
                                                 1999           2000           2001
                                                 ----           ----           ----
<S>                                           <C>           <C>            <C>
Deferred tax assets.........................  $ 1,968,781   $  2,446,183   $  3,162,840
Deferred tax liabilities....................   (9,833,442)   (13,070,292)   (14,753,680)
                                              -----------   ------------   ------------
Net deferred tax liability..................  $(7,864,661)  $(10,624,109)  $(11,590,840)
                                              ===========   ============   ============
Consisting of--
  Basis difference of property..............  $(9,466,506)  $(12,703,355)  $(14,998,570)
  Basis difference of inventory.............      190,321        236,609        312,911
  Derivatives designated as cash flow
     hedges.................................           --             --        562,154
  Financial reserves not currently
     deductible for tax purposes............      182,929        283,277        285,866
  Amortization of intangibles...............      874,453      1,131,803      1,712,622
  Unearned revenue..........................      354,142        427,557        534,177
                                              -----------   ------------   ------------
                                              $(7,864,661)  $(10,624,109)  $(11,590,840)
                                              ===========   ============   ============
</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

                                       F-15
<PAGE>   38

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 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:

     Subsequent to June 30, 2001, the Company acquired substantially all of the
assets of Buckeye Corporation and Mansfield Oxygen Corporation, welding supply
distributors having approximately $2.5 million in combined annualized sales.
These transactions were financed through the Company's credit facility.

                                       F-16
<PAGE>   39

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 2001--
  Net sales..............................    $31,357        $36,120     $41,060    $32,805
  Gross profit...........................     16,608         18,426      20,619     17,747
  Net earnings...........................        813          1,185       1,277        618
  Basic earnings per share...............       0.09           0.13        0.14       0.07
  Diluted earnings per share.............       0.09           0.13        0.14       0.07
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
</Table>

                                       F-17
<PAGE>   40

                                INDEX TO EXHIBITS
--------------------------------------------------------------------------------
 3.1      Articles of Amendment. (Incorporated by reference to Exhibit 3.1
          to the Company's Registration Statement on Form S-1,
          Reg. No. 333-19973).

 3.2      Bylaws. (Incorporated by reference to Exhibit 3.2 to the Company's
          Registration Statement on Form S-1, Reg. No. 333-19973).

 4.1      Form of Certificate for Common Stock. (Incorporated by reference to
          Exhibit 4.1 to the Company's Registration Statement on Form S-1,
          Reg. No. 333-19973).

10.1      Amended and Restated Credit Agreement dated January 23, 1998 between
          the Company and Bank One, Indiana NA, as agent. (Incorporated by
          reference to Exhibit 10.1 to the Company's Quarterly Report on
          Form 10-Q filed February 13, 1998).

10.2      Master Lease Agreement dated as of May 1, 2001 between the Company
          and West Rentals, Inc. (filed herewith).

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.
          (Incorporated by reference to Exhibit 10.3 to the Company's
          Registration Statement on Form S-1, Reg. No. 333-19973).

10.4      Agreement dated October 5, 1992 between the Company and Lawrence E.
          Bandi providing for death, disability and retirement benefits.
          (Incorporated by reference to Exhibit 10.6 to the Company's
          Registration Statement on Form S-1, Reg. No. 333-19973).*

10.5      Agreement dated October 5, 1992 between the Company and John R.
          Bushwack providing for death, disability and retirement benefits.
          (Incorporated by reference to Exhibit 10.7 to the Company's
          Registration Statement on Form S-1, Reg. No. 333-19973).*

10.6      Lease Agreement dated as of April 1, 1998 between the Company and
          Acetylene Products, Inc. (filed herewith).

10.7      1997 Stock Option Plan, as amended effective August 1, 2000.
          (filed herewith).

10.8      Agreement dated July 1, 2000 between the Company and William A.
          Indelicato providing for certain consulting payments. (Incorporated
          by reference to Exhibit 10.16 to the Company's Annual Report on
          Form 10-K filed September 25, 2000).*

10.9      First Amendment to Amended and Restated Credit Agreement dated
          September 15, 1999, between the Company and Bank One, Indiana NA,
          as agent. (Incorporated by reference to Exhibit 10.17 to the
          Company's Annual Report on Form 10-K filed September 28,1999).

10.10     Second Amendment and Restated Credit Agreement dated May 1, 2000
          between the Company and Bank One, Indiana NA, as agent. (Incorporated
          by reference to Exhibit 10.18 to the Company's Quarterly Report on
          Form 10-Q filed May 15, 2000).

10.11     Agreement dated July 1, 2001 between the Company and William A.
          Indelicato providing for certain consulting payments.
          (filed herewith).*

10.12     Lease Agreement dated as of April 1, 2000 between the Company and
          Real Equip-Lease, LLC. (filed herewith).

21.1      Subsidiaries of Registrant. (Incorporated by reference to
          Exhibit 21.1 to the Company's Registration Statement on Form S-1,
          Reg. No. 333-19973).
--------------------------------------------------------------------------------

* 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>   41

                                   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

June 30, 2001     Allowance for uncollectible accounts      $586,698       $574,057       $(562,857)      $597,898
</TABLE>



S-1