##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K




|  |                                                                                         
|- | ----------------------------------------------------------------------------------------
|þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934







|  |                                                                                             
|- | --------------------------------------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934




Commission File Number 000-15191


VALLEY NATIONAL GASES INCORPORATED




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

200 West Beau Street, Suite 200


Washington, Pennsylvania 15301




(724) 228-3000






|                                        |  |                        
|--------------------------------------- |  | -----------------------
|                                        |  | Name of exchange       
|Title of each class                     |  | on which registered    
|                                        |  |                        
|Common stock, $.001 par value per share |  | American Stock Exchange





þ o


þ




o þ




o þ






DOCUMENTS INCORPORATED BY REFERENCE












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VALLEY NATIONAL GASES INCORPORATED


TABLE OF CONTENTS


PART I


|         |      |                                                                                           |  |            |          |  |    | 
|-------- | ---- | ----------------------------------------------------------------------------------------- |  | ---------- | -------- |  | -- | 
|         | Item |                                                                                           |  |            | Page No.
|         |      |                                                                                           |  |            |         
|1.       |      | Business                                                                                  |  |            | 2        | 
|2.       |      | Properties                                                                                |  |            | 9        | 
|3.       |      | Legal Proceedings                                                                         |  |            | 9        | 
|4.       |      | Submission of Matters to a Vote of Security
    Holders                                   |  |            | 9        | 
|        
|PART II 
|        
|5.       |      | Market for Valleys Common Stock and
    Related Stockholder Matters                      |  |            | 10       | 
|6.       |      | Selected Financial Data                                                                   |  |            | 11       | 
|7.       |      | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |  |            | 12       | 
|7A.      |      | Quantitative and Qualitative Disclosures
    About Market Risk                            |  |            | 28       | 
|8.       |      | Financial Statements and Supplementary
    Data                                           |  |            | 28       | 
|9.       |      | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosures |  |            | 28       | 
|9A.      |      | Controls and Procedures                                                                   |  |            | 29       | 
|9B.      |      | Other Information                                                                         |  |            | 29       | 
|        
|PART III
|        
|10.      |      | Management                                                                                |  |            | 30       | 
|11.      |      | Executive Compensation                                                                    |  |            | 32       | 
|12.      |      | Security Ownership of Certain Beneficial
    Owners and Management                        |  |            | 32       | 
|13.      |      | Certain Relationships and Related
    Transactions                                        |  |            | 32       | 
|14.      |      | Principal Accounting Fees and Services                                                    |  |            | 32       | 
|        
|PART IV 
|        
|15.      |      | Exhibits, Financial Statements and
    Schedules                                          |  |            | 32       | 
|         |      |                                                                                           |  | Signatures |          |  | 33 | 
|EX-10.46
|EX-10.47
|EX-23.2 
|EX-31.1 
|EX-31.2 
|EX-32.1 
|EX-32.2 





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Cautionary Statements






1



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PART I







|        |         
|------- | --------
|ITEM 1. | BUSINESS

Overview












Our Industry




| |        
| | -------
| | Markets

Industrial, Medical and Specialty Gases.






2



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| |   |                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the industry has a broad and diverse customer base;                                                                                              
|
| |  | gases frequently represent a fixed component of operating costs,
    which does not decline with production levels;                              
|
| |  | gases are required for maintenance and renovation activities,
    which tend to increase during economic downturns; and                          
|
| |  | gas purchases represent a small portion of operating expenses
    and, therefore, are not typically a large cost-cutting item for
    purchasers.

Propane.








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| |                       
| | ----------------------
| | Industry Consolidation





| |   |                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changes in technology are providing opportunities for more
    efficient and effective pricing, 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 margin, 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 expertise
    and expense, which is difficult for smaller distributors to
    access, maintain and afford. Several major gas producers no
    longer provide full service support to distributors.





Growth Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Grow through acquisitions. Prior to fiscal 2003,
    acquisitions were the principal means of our growth. From 1997,
    the year of our initial public offering, through 2002, we
    completed over 30 acquisitions and grew from approximately
    $74 million in annual revenue to approximately
    $141 million in annual revenue. We believe our size and
    geographic reach, along with the fragmented competition in both
    the packaged gas and propane markets, position us well for
    continued growth. To implement this strategy we:



| |   |                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Focus on tuck-in acquisitions. We focus our
    acquisition efforts on small packaged gas and propane
    distributors that operate in, or adjacent to, the geographic
    markets we serve. We believe that the numerous remaining small
    distributors of both packaged gas and propane in these markets
    present significant opportunities for additional acquisitions.



| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As part of this strategy, we completed during the fourth quarter
    of fiscal 2005, the acquisition of Plymouth Wayne Welding
    Supplies, Inc., a distributor of packaged industrial gases with
    whom we

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | previously entered into a put/call option agreement. Plymouth
    Wayne, which operates from four locations in Southeastern
    Michigan adjacent to our current markets, generated annual
    revenue of approximately $11.9 million in its fiscal year
    ended August 31, 2004. We acquired all of the common stock
    of Plymouth Wayne for $7.8 million, including
    $1.0 million we paid when we signed the put/call agreement
    in May 1998, and we assumed and refinanced approximately
    $3.6 million of debt.



| |   |                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pursue selective acquisitions to expand geographic reach.
    We selectively consider acquisitions of larger, independent,
    regional packaged gas and non-pipeline propane distributors
    where such an acquisition would enable us to expand our presence
    into a new region of the United States and where the acquisition
    meets our criteria.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consistent with this strategy, on August 18, 2005, we
    signed a binding agreement to acquire Reynolds Welding Supply
    Company, a distributor of packaged industrial gases and welding
    supplies from five locations in Minnesota and one in
    southeastern South Dakota. We expect to acquire all of the
    common stock of Reynolds and its wholly owned subsidiaries,
    Welders Supply Company, Inc. and Twin Cities Oxygen Company, for
    a purchase price of $18 million, subject to adjustment
    based upon outstanding indebtedness and cash balances on the
    closing date. For its fiscal year ended December 31, 2004,
    Reynolds reported aggregate sales of $19.5 million,
    approximately 53% of which was from packaged industrial gases in
    cylinder rental and 47% was from hard goods and welding supplies.



| |   |                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Grow operating profits. We believe that the continued
    implementation of our process improvement strategy affords us
    the opportunity to increase our profitability by taking the
    following actions:



| |   |                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | standardizing our marketing, pricing, staffing and operating
    practices throughout our network to offer consistent levels of
    service, gain economies of scale and achieve operating
    efficiencies; and
|
| |  | improving our workforce through technical training and creating
    an environment emphasizing a high level of customer service.                                                                                



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Enhance internal revenue growth. We believe that we can
    supplement our growth through acquisitions by selling a broader
    range of products to existing customers, by expanding our sales
    of small bulk gases to new and existing customers and by taking
    advantage of our size and geographic reach to gain market share
    with some multi-location accounts through better coordination of
    our marketing and distribution system.

Products








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|                                                 |                                |                     |       |      |      |  |       |      |      |  |       |      |      | 
|------------------------------------------------ | ------------------------------ | ------------------- | ----- | ---- | ---- |  | ----- | ---- | ---- |  | ----- | ---- | ---- | 
|                                                 |                                | Year Ended June 30, |      
|                                                 |                                |                     |      
|                                                 |                                | 2003                |       |      | 2004 |  |       | 2005 |     
|                                                 |                                |                     |       |      |      |  |       |      |     
|Packaged industrial, medical and specialty gases |                                |                     |       |      |      |  |       |      |      |  |       |     
|                                                 | Gases and rental               |                     |       | 39.2 | %    |  |       | 38.6 | %    |  |       | 36.6 | %   
|                                                 | Welding equipment and supplies |                     |       | 36.3 |      |  |       | 35.0 |      |  |       | 36.4 |     
|                                                 |                                |                     |       |      |      |  |       |      |     
|                                                 |                                | Total               |       |      | 75.5 |  |       |      | 73.6 |  |       |      | 73.0 | 
|                                                 |                                |                     |       |      |      |  |       |      |     
|Propane                                          |                                |                     | 24.5  |      |      |  | 26.4  |      |      |  | 27.0  |     
|                                                 |                                |                     |       |      |      |  |       |      |     
|                                                 |                                |                     | 100.0 | %    |      |  | 100.0 | %    |      |  | 100.0 | %   
|                                                 |                                |                     |       |      |      |  |       |      |     

Customers











Sales and Marketing




6



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Competition






Suppliers








Employees




7



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Regulatory Matters




Product Liability and Insurance




Business Segments




Valley.


Variable Interest Entities.


8



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Segment Information









|        |           
|------- | ----------
|ITEM 2. | PROPERTIES












|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS








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



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PART II







|        |                                                                     
|------- | --------------------------------------------------------------------
|ITEM 5. | MARKET FOR VALLEYS COMMON STOCK AND RELATED STOCKHOLDER
    MATTERS





|                          |  |      |       |  |     |   |       | 
|------------------------- |  | ---- | ----- |  | --- | - | ----- | 
|Year Ended June 30, 2005: |  | High |       |  | Low |  
|                          |  |      |       |  |     |  
|Fourth quarter            |  | $    | 16.90 |  |     | $ | 13.36 | 
|Third quarter             |  | $    | 17.69 |  |     | $ | 14.05 | 
|Second quarter            |  | $    | 18.99 |  |     | $ | 9.06  | 
|First quarter             |  | $    | 11.45 |  |     | $ | 9.00  | 

|                          |  |      |       |  |     |   |      | 
|------------------------- |  | ---- | ----- |  | --- | - | ---- | 
|Year Ended June 30, 2004: |  | High |       |  | Low |  
|                          |  |      |       |  |     |  
|Fourth quarter            |  | $    | 10.65 |  |     | $ | 8.81 | 
|Third quarter             |  | $    | 10.30 |  |     | $ | 6.90 | 
|Second quarter            |  | $    | 7.01  |  |     | $ | 5.30 | 
|First quarter             |  | $    | 6.09  |  |     | $ | 4.91 | 









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|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA



|                         |                                                                |                                      |   |         |      |  |   |         |  |  |      |         |  |      |   |         |  |  |   |         | 
|------------------------ | -------------------------------------------------------------- | ------------------------------------ | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  | ---- | - | ------- |  |  | - | ------- | 
|                         |                                                                | Years Ended June 30,                 |  
|                         |                                                                |                                      |  
|                         |                                                                | 2001                                 |   |         | 2002 |  |   | 2003    |  |  | 2004 |         |  | 2005 |  
|                         |                                                                |                                      |   |         |      |  |   |         |  |  |      |         |  |      |  
|                         |                                                                | (in thousands except per share data) |  
|Operating Results:       |                                                                |                                      |   |         |      |  |   |         |  |  |      |         |  |      |   |         |  |  |   |        
|                         | Net sales                                                      |                                      | $ | 141,342 |      |  | $ | 144,523 |  |  | $    | 151,232 |  |      | $ | 154,456 |  |  | $ | 167,699 | 
|                         | Cost of products sold, excluding depreciation and amortization |                                      |   | 67,942  |      |  |   | 67,906  |  |  |      | 73,143  |  |      |   | 71,558  |  |  |   | 78,345  | 
|                         | Operating, distribution and administrative(1)                  |                                      |   | 50,299  |      |  |   | 56,188  |  |  |      | 62,368  |  |      |   | 57,231  |  |  |   | 56,874  | 
|                         | Depreciation and amortization(2)                               |                                      |   | 10,173  |      |  |   | 7,708   |  |  |      | 8,900   |  |      |   | 7,474   |  |  |   | 7,819   | 
|                         | Income from operations                                         |                                      |   | 12,988  |      |  |   | 12,728  |  |  |      | 6,793   |  |      |   | 18,418  |  |  |   | 24,669  | 
|                         | Interest expense                                               |                                      |   | 6,619   |      |  |   | 5,947   |  |  |      | 6,623   |  |      |   | 5,657   |  |  |   | 4,306   | 
|                         | Provision for income taxes                                     |                                      |   | 3,059   |      |  |   | 2,994   |  |  |      | 151     |  |      |   | 4,520   |  |  |   | 7,443   | 
|                         | Net income                                                     |                                      |   | 3,893   |      |  |   | 4,220   |  |  |      | 236     |  |      |   | 7,680   |  |  |   | 12,371  | 
|                         | Basic earnings per share                                       |                                      | $ | 0.42    |      |  | $ | 0.45    |  |  | $    | 0.03    |  |      | $ | 0.82    |  |  | $ | 1.30    | 
|                         | Diluted earnings per share                                     |                                      | $ | 0.42    |      |  | $ | 0.45    |  |  | $    | 0.03    |  |      | $ | 0.81    |  |  | $ | 1.28    | 
|Weighted Average Shares: |                                                                |                                      |   |         |      |  |   |         |  |  |      |         |  |      |   |         |  |  |   |        
|                         | Basic                                                          |                                      |   | 9,348   |      |  |   | 9,348   |  |  |      | 9,350   |  |      |   | 9,381   |  |  |   | 9,525   | 
|                         | Diluted                                                        |                                      |   | 9,368   |      |  |   | 9,399   |  |  |      | 9,393   |  |      |   | 9,444   |  |  |   | 9,689   | 
|Balance Sheet Data:      |                                                                |                                      |   |         |      |  |   |         |  |  |      |         |  |      |   |         |  |  |   |        
|                         | Working capital                                                |                                      | $ | 14,384  |      |  | $ | 15,410  |  |  | $    | 10,702  |  |      | $ | 9,881   |  |  | $ | 10,858  | 
|                         | Total assets                                                   |                                      |   | 144,976 |      |  |   | 154,613 |  |  |      | 149,215 |  |      |   | 157,335 |  |  |   | 175,086 | 
|                         | Current portion of long-term debt                              |                                      |   | 6,715   |      |  |   | 6,319   |  |  |      | 5,916   |  |      |   | 2,652   |  |  |   | 3,674   | 
|                         | Long-term debt, less current maturities                        |                                      |   | 76,415  |      |  |   | 74,659  |  |  |      | 67,642  |  |      |   | 62,286  |  |  |   | 60,926  | 
|                         | Other non-current liabilities                                  |                                      |   | 14,851  |      |  |   | 22,484  |  |  |      | 23,057  |  |      |   | 24,017  |  |  |   | 27,606  | 
|                         | Total stockholders equity                                     |                                      |   | 33,604  |      |  |   | 36,634  |  |  |      | 36,143  |  |      |   | 46,108  |  |  |   | 59,862  | 






|    |                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Operating, distribution and administrative expenses for the year
    ended June 30, 2005 include a reduction of
    $2.1 million in rent expense, partially offset by other
    expenses of $0.8 million as a result of consolidating under
    FIN 46R, Variable Interest Entities owned by a related
    party that leases properties to Valley.



| |                                                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Operating, distribution and administrative expenses for the year
    ended June 30, 2004 include a reduction of
    $0.8 million in rent expense, partially offset by other
    expenses of $0.3 million, as a result of consolidating
    under FIN 46R, Variable Interest Entities owned by a
    related party that leases properties to Valley.



|    |                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Effective July 1, 2001, Valley changed its estimate of the
    useful lives of its delivery vehicles from
    3 to 7 years. This change was made to better
    reflect the estimated periods during which these assets will
    remain in service.



| |                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Effective July 1, 2001, Valley changed its method of
    accounting for goodwill to comply with SFAS No. 142
    whereby it discontinued amortization of goodwill. In fiscal year
    ended June 30, 2001, goodwill amortization expense of
    $2.1 million was recorded.

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis
together with the Selected Consolidated Financial
Data and the consolidated financial statements and related
notes included elsewhere in this report. This discussion
contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from
those expressed or implied in these forward-looking statements
as a result of various factors, including those discussed under
the headings Risk Factors and Special
Note Regarding Forward-Looking Statements.


Overview




| |           
| | ----------
| | Operations











| |             
| | ------------
| | Acquisitions



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| |                           
| | --------------------------
| | Variable Interest Entities





| |                             
| | ----------------------------
| | Critical Accounting Policies





| |                  
| | -----------------
| | Trade Receivables



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| |            
| | -----------
| | Inventories





| |                                     
| | ------------------------------------
| | Goodwill and Other Intangible Assets





| |                                      
| | -------------------------------------
| | Employee Health Care Benefit Reserves





| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets





| |             
| | ------------
| | Income Taxes



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Results of Operations




|                                                               |  |                              |       |   |      |  |       |      |  |  |       |  
|-------------------------------------------------------------- |  | ---------------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                               |  | As a Percentage of Net Sales |      
|                                                               |  | Year Ended June 30,          |      
|                                                               |  |                              |      
|                                                               |  | 2003                         |       |   | 2004 |  |       | 2005 | 
|                                                               |  |                              |       |   |      |  |       |      | 
|Net sales                                                      |  |                              | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|Cost of products sold, excluding depreciation and amortization |  |                              | 48.4  |   |      |  | 46.3  |      |  |  | 46.7  |  
|Operating, distribution and administrative expenses            |  |                              | 41.2  |   |      |  | 37.0  |      |  |  | 33.9  |  
|Depreciation and amortization                                  |  |                              | 5.9   |   |      |  | 4.8   |      |  |  | 4.7   |  
|                                                               |  |                              |       |   |      |  |       |      | 
|Income from operations                                         |  |                              | 4.5   |   |      |  | 11.9  |      |  |  | 14.7  |  
|Interest expense                                               |  |                              | 4.3   |   |      |  | 3.6   |      |  |  | 2.6   |  
|Other income                                                   |  |                              | 0.1   |   |      |  | 0.1   |      |  |  | 0.3   |  
|                                                               |  |                              |       |   |      |  |       |      | 
|Earnings before minority interest                              |  |                              | 0.3   |   |      |  | 8.4   |      |  |  | 12.4  |  
|Minority interest                                              |  |                              |      |   |      |  | 0.5   |      |  |  | 0.6   |  
|                                                               |  |                              |       |   |      |  |       |      | 
|Earnings before taxes                                          |  |                              | 0.3   |   |      |  | 7.9   |      |  |  | 11.8  |  
|Provision for income taxes                                     |  |                              | 0.1   |   |      |  | 2.9   |      |  |  | 4.4   |  
|                                                               |  |                              |       |   |      |  |       |      | 
|Net earnings                                                   |  |                              | 0.2   | % |      |  | 5.0   | %    |  |  | 7.4   | %
|                                                               |  |                              |       |   |      |  |       |      | 



| |                                                     
| | ----------------------------------------------------
| | Comparison of Years Ended June 30, 2005 and
    2004





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| |                                                     
| | ----------------------------------------------------
| | Comparison of Years Ended June 30, 2004 and
    2003





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Quarterly Operating Results




|                           |  |                                   |        |  |               |   |        |          |  |   |         |  |  |          |        |  |         |   |        |          |  |   |         |  |  |   |        |  |  |   |        | 
|-------------------------- |  | --------------------------------- | ------ |  | ------------- | - | ------ | -------- |  | - | ------- |  |  | -------- | ------ |  | ------- | - | ------ | -------- |  | - | ------- |  |  | - | ------ |  |  | - | ------ | 
|                           |  | Fiscal 2004                       |        |  | Fiscal 2005   |  
|                           |  | Quarter Ended                     |        |  | Quarter Ended |  
|                           |  |                                   |        |  |               |  
|                           |  | Sept. 30                          |        |  | Dec. 31       |   |        | March 31 |  |   | June 30 |  |  | Sept. 30 |        |  | Dec. 31 |   |        | March 31 |  |   | June 30 | 
|                           |  |                                   |        |  |               |   |        |          |  |   |         |  |  |          |        |  |         |   |        |          |  |   |         | 
|                           |  | (Unaudited)                       |       
|                           |  | (thousands except per share data) |       
|Net sales                  |  | $                                 | 32,435 |  |               | $ | 39,120 |          |  | $ | 47,926  |  |  | $        | 34,975 |  |         | $ | 36,201 |          |  | $ | 43,203  |  |  | $ | 50,488 |  |  | $ | 37,807 | 
|Income from operations     |  |                                   | 2,409  |  |               |   | 4,815  |          |  |   | 7,556   |  |  |          | 3,638  |  |         |   | 3,711  |          |  |   | 6,927   |  |  |   | 10,080 |  |  |   | 3,951  | 
|Net earnings               |  |                                   | 614    |  |               |   | 2,087  |          |  |   | 3,766   |  |  |          | 1,213  |  |         |   | 1,563  |          |  |   | 3,493   |  |  |   | 5,540  |  |  |   | 1,775  | 
|Basic earnings per share   |  |                                   | 0.07   |  |               |   | 0.22   |          |  |   | 0.40    |  |  |          | 0.13   |  |         |   | 0.16   |          |  |   | 0.37    |  |  |   | 0.58   |  |  |   | 0.19   | 
|Diluted earnings per share |  |                                   | 0.07   |  |               |   | 0.22   |          |  |   | 0.40    |  |  |          | 0.12   |  |         |   | 0.16   |          |  |   | 0.37    |  |  |   | 0.57   |  |  |   | 0.18   | 



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|               |  |                     |       |   |      |  |       |      |  |  |       |  
|-------------- |  | ------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|               |  | Year Ended June 30, |      
|               |  |                     |      
|               |  | 2003                |       |   | 2004 |  |       | 2005 | 
|               |  |                     |       |   |      |  |       |      | 
|First quarter  |  |                     | 22.1  | % |      |  | 21.1  | %    |  |  | 21.6  | %
|Second quarter |  |                     | 25.6  | % |      |  | 25.3  | %    |  |  | 25.8  | %
|Third quarter  |  |                     | 30.3  | % |      |  | 31.0  | %    |  |  | 30.1  | %
|Fourth quarter |  |                     | 22.0  | % |      |  | 22.6  | %    |  |  | 22.5  | %
|               |  |                     |       |   |      |  |       |      | 
|               |  |                     | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|               |  |                     |       |   |      |  |       |      | 



Liquidity and Capital Resources








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|                                                   |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |        |  |  |   |       | 
|-------------------------------------------------- |  | ---------------------- | ------ | --------- | ------ | - | ----- | --------- | --------- | - | --------- |  |  | ------- | ------ |  |  | - | ----- | 
|                                                   |  | Payments Due By Period |       
|                                                   |  |                        |       
|                                                   |  |                        |        | Less Than |        |   |       |           | More Than |  
|Contractual Obligations                            |  | Total                  |        |           | 1 Year |   |       | 1-3 Years |           |   | 4-5 Years |  |  | 5 Years |       
|                                                   |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |       
|                                                   |  | (In Thousands)         |       
|Long-Term Debt                                     |  | $                      | 64,640 |           |        | $ | 3,671 |           |           | $ | 2,312     |  |  | $       | 55,637 |  |  | $ | 3,020 | 
|Estimated Interest Payments                        |  |                        | 14,585 |           |        |   | 2,991 |           |           |   | 6,000     |  |  |         | 5,466  |  |  |   | 128   | 
|Interest Rate Swap Payments                        |  |                        | 713    |           |        |   | 713   |           |           |   |          |  |  |         |       |  |  |   |      | 
|Interest Rate Swap Receipts                        |  |                        | (400   | )         |        |   | (400  | )         |           |   |          |  |  |         |       |  |  |   |      | 
|Capital Lease Obligation                           |  |                        | 3      |           |        |   | 3     |           |           |   |          |  |  |         |       |  |  |   |      | 
|Operating Leases, net of intercompany eliminations |  |                        | 9,060  |           |        |   | 1,436 |           |           |   | 2,953     |  |  |         | 3,075  |  |  |   | 1,596 | 
|Purchase Obligations                               |  |                        | 1,427  |           |        |   | 1,427 |           |           |   |          |  |  |         |       |  |  |   |      | 
|                                                   |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |       
|Total Obligations                                  |  | $                      | 90,028 |           |        | $ | 9,841 |           |           | $ | 11,265    |  |  | $       | 64,178 |  |  | $ | 4,744 | 
|                                                   |  |                        |        |           |        |   |       |           |           |   |           |  |  |         |       



plus






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per annum




|                            |  |        |            |          |                   |   |           |         |  |   |            | 
|--------------------------- |  | ------ | ---------- | -------- | ----------------- | - | --------- | ------- |  | - | ---------- | 
|                            |  |        |            | Variable |                   |   |          
|Fiscal Year Ending June 30, |  | Valley |            |          | Interest Entities |   |           | Company | 
|                            |  |        |            |          |                   |   |           |         | 
|2006                        |  | $      | 1,434,427  |          |                   | $ | 2,240,017 |         |  | $ | 3,674,444  | 
|2007                        |  |        | 546,551    |          |                   |   | 777,261   |         |  |   | 1,323,812  | 
|2008                        |  |        | 189,580    |          |                   |   | 798,121   |         |  |   | 987,701    | 
|2009                        |  |        | 54,002,909 |          |                   |   | 821,606   |         |  |   | 54,824,515 | 
|2010                        |  |        | 61,708     |          |                   |   | 751,004   |         |  |   | 812,712    | 
|Thereafter                  |  |        | 75,041     |          |                   |   | 2,944,994 |         |  |   | 3,020,035  | 
|                            |  |        |            |          |                   |   |           |         | 
|Total                       |  | $      | 56,310,216 |          |                   | $ | 8,333,003 |         |  | $ | 64,643,219 | 
|                            |  |        |            |          |                   |   |           |         | 







Inflation




New Accounting Standards




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Risk Factors


n investment in our common stock involves a high degree of
risk. You should carefully consider the following risks and the
other information contained in this prospectus before purchasing
our common stock. The risks and uncertainties described below
are those that we currently believe may materially affect us.
Additional risks and uncertainties not presently known to us or
that we currently believe are immaterial also may impair our
business operations.




| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | We may not be able to identify, consummate and integrate
    suitable acquisitions or achieve the benefits we expect from
    acquisitions.



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| |                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may need additional capital to finance our
    acquisitions, which may limit our ability to successfully grow
    through acquisitions or require us to accept unfavorable
    financing terms in connection with a potential
    acquisition.





| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | An impairment of goodwill or other intangible assets could
    have a material adverse effect on our results of
    operations.





| |                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to effectively manage our growth, our
    financial and managerial resources may be stressed and our
    business may be harmed.



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| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | We might not be able to achieve continued improvements in,
    or avoid deterioration in, our operating results through our
    process improvement plan.





| |                                                                                                             
| | ------------------------------------------------------------------------------------------------------------
| | We face competition in our industry and may have
    difficulty expanding and maintaining our customer base.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | Failure to retain our key employees or attract and retain
    qualified technical personnel could harm our competitive
    position.





| |                                                                     
| | --------------------------------------------------------------------
| | Increased energy and other costs could reduce our
    profitability.



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| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | General economic and business factors that are largely out
    of our control may adversely affect our results of
    operations.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | Because the distribution and sale of propane is
    weather-related, changes in the weather could adversely affect
    our revenues.





| |                                                                      
| | ---------------------------------------------------------------------
| | We could be adversely affected by increases in health care
    costs.





| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | The unionization of part of our workforce may adversely
    affect our operating results.





| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent upon relatively few suppliers and if one
    or more of these suppliers discontinued sales to us, our
    operations might be temporarily interrupted.



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| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our inability to comply with certain financial covenants
    in our revolving credit facility could have an adverse effect on
    our business and the price of our common stock.





| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Our business is subject to product liability claims, any
    of which could have a material adverse effect on our
    business.





| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We have been subject to litigation on other matters that
    could, if resolved unfavorably, adversely impact our operating
    results.





| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | There are transactions with related parties that may
    result in conflicts of interest.



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| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our financial statements reflect assets, liabilities and
    results of several entities controlled by our Chairman and in
    which we have no economic interest.





| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | less operating, distribution and administrative expense because
    the rent expense we pay to these entities is reduced in
    consolidation;
|
| |  | more interest and depreciation expense because the properties
    these entities hold are financed and generate considerable
    depreciation;
|
| |  | more other income because we report the rental income that these
    entities generate;                                                       
|
| |  | higher balances of buildings and equipment representing the
    principal asset of these entities; and                                        
|
| |  | higher indebtedness because of the outstanding mortgage loans on
    those properties.                                                        





| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | We are subject to a right of first refusal agreement which
    may delay or restrict future equity financings and
    transactions.





| |   |                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to match any third party offer to purchase all or a material
    part of our assets;                                                                                                                                                                                                                                                                          
|
| |  | to match any offer to purchase shares from Mr. West and his
    affiliates that would cause their ownership of our common stock
    to drop below 51% on a fully-diluted basis; and                                                                                                                                                                           
|
| |  | to purchase all of the shares held by Mr. West and his
    affiliates if Mr. West proposes to dispose of his shares in
    a transaction prior to the expiration of the agreement that
    would result in his controlling less than 51% of our shares, or
    if we issue additional shares that would cause his ownership to
    drop below that percentage.



| |                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of our charter documents and Pennsylvania law
    could restrict certain actions that you may consider favorable
    and could deprive you of opportunities to sell your shares of
    our common stock at prices higher than prevailing market
    prices.



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| |                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we fail to maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results or prevent fraud. As a result, current and potential
    stockholders could lose confidence in our financial reporting,
    which would harm our business and the trading price of our
    stock.



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|         |                                                           
|-------- | ----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



|                                   |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |        |  
|---------------------------------- | ------------------------ | ---- | - | ------ | ---- |  | - | -------------- | - |  | ---- | ------ | - | ---- | - | ------ | ---------- |  | - | ------ | - |  | ---------- | ------ | - |  | - | ------- | - |  | - | ------ | -
|                                   |                          | 2006 |   |        | 2007 |  |   | 2008           |   |  | 2009 |        |   | 2010 |   |        | Thereafter |  |   | Total  |   |  | Fair Value |       
|                                   |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |       
|                                   |                          |      |   |        |      |  |   | (In Thousands) |   |  |      |        |   |      |  
|Liabilities                        |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |       
|Long-term debt  Valley            |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |       
|                                   | Fixed rate               |      | $ | 1,434  |      |  | $ | 547            |   |  | $    | 190    |   |      | $ | 134    |            |  | $ | 62     |   |  | $          | 75     |   |  | $ | 2,442   |   |  | $ | 2,218  |  
|                                   | Average interest rate    |      |   | 4.82   | %    |  |   | 7.33           | % |  |      | 6.28   | % |      |   | 4.65   | %          |  |   | 4.78   | % |  |            | 4.90   | % |  |   |         |   |  |   |        |  
|                                   | Variable rate            |      |   |       |      |  |   |               |   |  |      |       |   |      | $ | 53,868 |            |  |   |       |   |  |            |       |   |  | $ | 53,868  |   |  | $ | 53,868 |  
|                                   | Average interest rate    |      |   |       |      |  |   |               |   |  |      |       |   |      |   | 4.73   | %          |  |   |       |   |  |            |       |   |  |   |         |   |  |   |        |  
|Long-term debt  Variable interest |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |       
|Entities mortgage debt             |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |       
|                                   | Fixed rate               |      | $ | 2,240  |      |  | $ | 777            |   |  | $    | 798    |   |      | $ | 821    |            |  | $ | 751    |   |  | $          | 2,945  |   |  | $ | 8,333   |   |  | $ | 7,053  |  
|                                   | Average interest rate    |      |   | 3.92   | %    |  |   | 5.35           | % |  |      | 4.40   | % |      |   | 4.43   | %          |  |   | 4.46   | % |  |            | 4.33   | % |  |   |         |   |  |   |        |  
|Interest rate swaps                |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |       
|                                   | Variable to fixed        |      | $ | 25,000 |      |  |   |               |   |  |      |       |   |      | $ | 25,000 |            |  |   |       |   |  |            |       |   |  |   |         |   |  | $ | (197   | )
|                                   | Average pay rate         |      |   | 5.70   | %    |  |   |               |   |  |      |       |   |      |   | 6.50   | %          |  |   |       |   |  |            |       |   |  |   |         |   |  |   |        |  
|                                   | Average receive rate     |      |   | 3.20   | %    |  |   |               |   |  |      |       |   |      |   | 2.40   | %          |  |   |       |   |  |            |       |   |  |   |         |   |  |   |        |  
|Commitments                        |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |        |   |  |   |         |   |  |   |       
|                                   | Operating leases         |      | $ | 3,865  |      |  | $ | 3,961          |   |  | $    | 4,034  |   |      | $ | 4,135  |            |  | $ | 4,238  |   |  | $          | 4,344  |   |  | $ | 24,577  |   |  |   |        |  
|                                   | Intercompany elimination |      |   | (2,429 | )    |  |   | (2,490         | ) |  |      | (2,552 | ) |      |   | (2,616 | )          |  |   | (2,681 | ) |  |            | (2,748 | ) |  |   | (15,516 | ) |  |   |        |  
|                                   |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |       
|                                   | Company total            |      | $ | 1,436  |      |  | $ | 1,471          |   |  | $    | 1,482  |   |      | $ | 1,519  |            |  | $ | 1,557  |   |  | $          | 1,596  |   |  | $ | 9,061   |   |  |   |        |  
|                                   |                          |      |   |        |      |  |   |                |   |  |      |        |   |      |   |        |            |  |   |        |   |  |            |       






|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA








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



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|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES



Changes In Internal Control Over Financial Reporting









|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION



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PART III







|         |           
|-------- | ----------
|ITEM 10. | MANAGEMENT



|                      |  |     |    |             |  |          |    |  |  |                                                                        
|--------------------- |  | --- | -- | ----------- |  | -------- | -- |  |  | -----------------------------------------------------------------------
|                      |  |     |    | Years       |  |         
|                      |  |     |    | Experience  |  |         
|Name                  |  | Age |    | In Industry |  | Position
|                      |  |     |    |             |  |         
|Gary E. West          |  |     | 68 |             |  |          | 35 |  |  | Chairman of the Board of Directors                                     
|William A. Indelicato |  |     | 66 |             |  |          | 36 |  |  | Vice Chairman of the Board of Directors and Chief Executive
    Officer
|James P. Hart         |  |     | 51 |             |  |          | 9  |  |  | President, Chief Financial Officer and Director                        
|Gerald W. Zehala      |  |     | 59 |             |  |          | 28 |  |  | Executive Vice President and Chief Operating Officer                   
|August E. Maier       |  |     | 76 |             |  |          | 12 |  |  | Director                                                               
|Ben Exley, IV         |  |     | 58 |             |  |          | 9  |  |  | Director                                                               
|F. Walter Riebenack   |  |     | 66 |             |  |          | 6  |  |  | Director                                                               
|Robert P. Hespe       |  |     | 56 |             |  |          | 14 |  |  | Director                                                               

Background and Experience of Directors and Executive
Officers










30



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31



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|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION








|         |                                                                   
|-------- | ------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT





|                                                           |  |                      |         |  |                   |   |      |                      |  |  |         | 
|---------------------------------------------------------- |  | -------------------- | ------- |  | ----------------- | - | ---- | -------------------- |  |  | ------- | 
|                                                           |  | Number of securities |         |  | Weighted-average  |   |      | Number of securities | 
|                                                           |  | to be issued upon    |         |  | exercise price of |   |      | remaining available  | 
|                                                           |  | exercise of          |         |  | outstanding       |   |      | for future issuance  | 
|                                                           |  | outstanding options, |         |  | options, warrants |   |      | under equity         | 
|Plan category                                              |  | warrants and rights  |         |  | and rights        |   |      | compensation plans   | 
|                                                           |  |                      |         |  |                   |   |      |                      | 
|Equity compensation plans approved by security holders     |  |                      | 359,460 |  |                   | $ | 8.57 |                      |  |  | 290,540 | 
|Equity compensation plans not approved by security holders |  |                      |        |  |                   |   |     |                      |  |  |        | 
|Total                                                      |  |                      | 359,460 |  |                   | $ | 8.57 |                      |  |  | 290,540 | 






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS








|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES






PART IV







|         |                                             
|-------- | --------------------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES













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SIGNATURES






| |                                   
| | ----------------------------------
| | VALLEY NATIONAL GASES INCORPORATED



| |                          
| | -------------------------
| | /s/ William A. Indelicato



| |                        
| | -----------------------
| |                        
| | William A. Indelicato  
| | Chief Executive Officer



|                                                         |  |                                                                                               |  |                    |  | 
|-------------------------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | ------------------ |  | 
|Signature                                                |  | Title                                                                                         |  | Date              
|                                                         |  |                                                                                               |  |                   
|                                                        
|/s/ Gary E. West(Gary
    E. West)                       |  | Chairman of the Board (principal executive officer)                                           |  | September 28, 2005
|                                                        
|/s/ William A.
    Indelicato(William
    A. Indelicato) |  | Vice Chairman, Chief Executive Officer, Director                                              |  | September 28, 2005
|                                                        
|/s/ James P. Hart(James
    P. Hart)                     |  | President, Director, Chief Financial Officer (principal
    financial and accounting officer) |  | September 28, 2005
|                                                        
|/s/ August E. Maier(August
    E. Maier)                 |  | Director                                                                                      |  | September 28, 2005
|                                                        
|/s/ Ben Exley, IV(Ben
    Exley, IV)                     |  | Director                                                                                      |  | September 28, 2005
|                                                        
|/s/ F. Walter Riebenack(F.
    Walter Riebenack)         |  | Director                                                                                      |  | September 28, 2005
|                                                        
|/s/ Robert Hespe(Robert
    Hespe)                       |  | Director                                                                                      |  | September 28, 2005

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VALLEY NATIONAL GASES INCORPORATED


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                    |  |      |     | 
|------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                    |  | Page
|                                                                                                                    |  |     
|Report of Independent Registered Public
    Accounting Firm                                                         |  |      | F-1 | 
|Consolidated Balance Sheets as of
    June 30, 2004 and 2005                                                        |  |      | F-2 | 
|Consolidated Statements of Operations for
    the years ended June 30, 2003, 2004 and 2005                          |  |      | F-3 | 
|Consolidated Statements of Changes in
    Stockholders Equity for the years ended June 30,
    2003, 2004 and 2005 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for
    the years ended June 30, 2003, 2004 and 2005                          |  |      | F-5 | 
|Notes to Consolidated Financial
    Statements                                                                      |  |      | F-6 | 



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM










|                               | 
|------------------------------ | 
|/s/ PricewaterhouseCoopers LLP | 
|                               | 
|PricewaterhouseCoopers LLP     | 





F-1



---



##### Table of Contents



VALLEY NATIONAL GASES INCORPORATED





CONSOLIDATED BALANCE SHEETS


June 30, 2004 and 2005


|                                                |                                                                                                                                                                                  |                                     |             |            |             |   |             |             |             | 
|----------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------- | ---------- | ----------- | - | ----------- | ----------- | ----------- | 
|                                                |                                                                                                                                                                                  | 2004                                |             |            | 2005        |  
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|ASSETS                                          |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|CURRENT ASSETS:                                 |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|                                                | Cash and cash equivalents                                                                                                                                                        |                                     | $           | 549,002    |             |   | $           | 1,322,397   |            
|                                                | Accounts receivable, net of allowance for doubtful accounts of
    $747,309 and $672,822, respectively                                                                           |                                     |             | 15,043,640 |             |   |             | 16,956,510  |            
|                                                | Inventory                                                                                                                                                                        |                                     |             | 9,415,875  |             |   |             | 9,868,974   |            
|                                                | Prepaids and other                                                                                                                                                               |                                     |             | 883,681    |             |   |             | 1,036,410   |            
|                                                | Current deferred tax asset                                                                                                                                                       |                                     |             | 2,346,484  |             |   |             | 1,774,379   |            
|                                                | Refundable taxes                                                                                                                                                                 |                                     |             | 1,183,324  |             |   |             | 1,471,519   |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Total current assets                |             |            | 29,422,006  |   |             |             | 32,430,189  | 
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|PROPERTY, PLANT AND EQUIPMENT:                  |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|                                                | Land                                                                                                                                                                             |                                     |             | 2,183,176  |             |   |             | 2,099,915   |            
|                                                | Buildings and improvements                                                                                                                                                       |                                     |             | 18,529,827 |             |   |             | 21,416,658  |            
|                                                | Equipment                                                                                                                                                                        |                                     |             | 89,084,662 |             |   |             | 100,332,506 |            
|                                                | Transportation equipment                                                                                                                                                         |                                     |             | 18,058,515 |             |   |             | 19,249,082  |            
|                                                | Furniture and fixtures                                                                                                                                                           |                                     |             | 7,961,202  |             |   |             | 8,756,310   |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Total property, plant and equipment |             |            | 135,817,382 |   |             |             | 151,854,471 | 
|Accumulated depreciation                        |                                                                                                                                                                                  |                                     | (53,148,410 | )          |             |   | (57,737,096 | )          
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Net property, plant and equipment   |             |            | 82,668,972  |   |             |             | 94,117,375  | 
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|OTHER ASSETS:                                   |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|                                                | Intangible assets, net of accumulated amortization of $8,796,725
    and $7,329,315, respectively                                                                                |                                     |             | 2,711,337  |             |   |             | 2,607,058   |            
|                                                | Goodwill                                                                                                                                                                         |                                     |             | 40,997,738 |             |   |             | 45,482,910  |            
|                                                | Deposits and other assets                                                                                                                                                        |                                     |             | 1,534,989  |             |   |             | 448,429     |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Total other assets                  |             |            | 45,244,064  |   |             |             | 48,538,397  | 
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|TOTAL ASSETS                                    |                                                                                                                                                                                  | $                                   | 157,335,042 |            |             | $ | 175,085,961 |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                               
|LIABILITIES AND STOCKHOLDERS EQUITY            |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|CURRENT LIABILITIES:                            |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|                                                | Current maturities of long-term debt                                                                                                                                             |                                     | $           | 2,651,934  |             |   | $           | 3,674,444   |            
|                                                | Bank overdraft.                                                                                                                                                                  |                                     |             | 668,046    |             |   |             |            |            
|                                                | Accounts payable                                                                                                                                                                 |                                     |             | 8,235,193  |             |   |             | 8,679,057   |            
|                                                | Accrued compensation and employee benefits                                                                                                                                       |                                     |             | 3,734,967  |             |   |             | 4,181,792   |            
|                                                | Interest rate derivatives                                                                                                                                                        |                                     |             | 1,760,338  |             |   |             | 196,741     |            
|                                                | Other current liabilities                                                                                                                                                        |                                     |             | 2,491,451  |             |   |             | 4,840,217   |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Total current liabilities           |             |            | 19,541,929  |   |             |             | 21,572,251  | 
|LONG-TERM DEBT, less current maturities         |                                                                                                                                                                                  |                                     | 62,286,040  |            |             |   | 60,925,763  |            
|DEFERRED TAX LIABILITY                          |                                                                                                                                                                                  |                                     | 21,977,647  |            |             |   | 26,935,848  |            
|OTHER LONG-TERM LIABILITIES                     |                                                                                                                                                                                  |                                     | 1,681,696   |            |             |   | 670,615     |            
|INTEREST RATE DERIVATIVES                       |                                                                                                                                                                                  |                                     | 358,105     |            |             |   |            |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Total liabilities                   |             |            | 105,845,417 |   |             |             | 110,104,477 | 
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|COMMITMENTS AND CONTINGENCIES                   |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|MINORITY INTEREST IN VARIABLE INTEREST ENTITIES |                                                                                                                                                                                  |                                     | 5,381,500   |            |             |   | 5,118,999   |            
|STOCKHOLDERS EQUITY:                           |                                                                                                                                                                                  |                                     |             |            |             |   |             |            
|                                                | Preferred stock, par value, $.01 per share 
    Authorized, 5,000,000 shares, none Issued or Outstanding                                                                        |                                     |             |           |             |   |             |            |            
|                                                | Common stock, par value, $.001 per share 
    Authorized, 30,000,000 shares; Issued,
    9,620,084 shares; Outstanding, 9,464,584 shares and
    9,574,999 shares, respectively |                                     |             | 9,620      |             |   |             | 9,620       |            
|                                                | Paid-in-capital                                                                                                                                                                  |                                     |             | 18,905,761 |             |   |             | 19,160,327  |            
|                                                | Retained earnings                                                                                                                                                                |                                     |             | 29,668,686 |             |   |             | 41,185,428  |            
|                                                | Accumulated other comprehensive loss                                                                                                                                             |                                     |             | (1,184,309 | )           |   |             | (118,806    | )          
|                                                | Treasury stock at cost, 155,500 and 45,085 shares,
    respectively                                                                                                              |                                     |             | (1,291,633 | )           |   |             | (374,084    | )          
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|                                                |                                                                                                                                                                                  | Total stockholders equity          |             |            | 46,108,125  |   |             |             | 59,862,485  | 
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                                                                                                                  | $                                   | 157,335,042 |            |             | $ | 175,085,961 |            
|                                                |                                                                                                                                                                                  |                                     |             |            |             |  



F-2



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##### Table of Contents



VALLEY NATIONAL GASES INCORPORATED





CONSOLIDATED STATEMENTS OF OPERATIONS


For the years ended June 30, 2003, 2004 and 2005


|                                  |                                                                |                          |             |            |             |   |             |            |             |   |             |            |             | 
|--------------------------------- | -------------------------------------------------------------- | ------------------------ | ----------- | ---------- | ----------- | - | ----------- | ---------- | ----------- | - | ----------- | ---------- | ----------- | 
|                                  |                                                                | 2003                     |             |            | 2004        |   |             | 2005       |            
|                                  |                                                                |                          |             |            |             |   |             |            |            
|NET SALES                         |                                                                | $                        | 151,231,830 |            |             | $ | 154,455,606 |            |             | $ | 167,698,695 |           
|COSTS AND EXPENSES                |                                                                |                          |             |            |             |   |             |            |             |   |             |           
|                                  | Cost of products sold, excluding depreciation and amortization |                          |             | 73,142,617 |             |   |             | 71,557,747 |             |   |             | 78,345,074 |            
|                                  | Operating, distribution and administrative                     |                          |             | 62,368,366 |             |   |             | 57,231,034 |             |   |             | 56,873,856 |            
|                                  | Depreciation                                                   |                          |             | 5,699,115  |             |   |             | 5,811,143  |             |   |             | 6,711,035  |            
|                                  | Amortization of intangibles                                    |                          |             | 3,201,025  |             |   |             | 1,662,980  |             |   |             | 1,108,275  |            
|                                  | Loss (gain) on disposal of assets                              |                          |             | 28,171     |             |   |             | (225,419   | )           |   |             | (8,420     | )          
|                                  |                                                                |                          |             |            |             |   |             |            |            
|                                  |                                                                | Total costs and expenses |             |            | 144,439,294 |   |             |            | 136,037,485 |   |             |            | 143,029,820 | 
|                                  |                                                                |                          |             |            |             |   |             |            |            
|                                  |                                                                | INCOME FROM OPERATIONS   |             |            | 6,792,536   |   |             |            | 18,418,121  |   |             |            | 24,668,875  | 
|INTEREST EXPENSE                  |                                                                |                          | 6,623,266   |            |             |   | 5,657,066   |            |             |   | 4,305,575   |           
|OTHER INCOME:                     |                                                                |                          |             |            |             |   |             |            |             |   |             |           
|                                  | Interest and dividend income                                   |                          |             | 199,419    |             |   |             | 225,716    |             |   |             | 202,690    |            
|                                  | Other income                                                   |                          |             | 18,802     |             |   |             | 93,250     |             |   |             | 319,102    |            
|                                  |                                                                |                          |             |            |             |   |             |            |            
|                                  |                                                                | Total other income       |             |            | 218,221     |   |             |            | 318,966     |   |             |            | 521,792     | 
|                                  |                                                                |                          |             |            |             |   |             |            |            
|EARNINGS BEFORE MINORITY INTEREST |                                                                |                          | 387,491     |            |             |   | 13,080,021  |            |             |   | 20,885,092  |           
|MINORITY INTEREST                 |                                                                |                          |            |            |             |   | 880,235     |            |             |   | 1,070,588   |           
|                                  |                                                                |                          |             |            |             |   |             |            |            
|NET EARNINGS BEFORE TAXES         |                                                                |                          | 387,491     |            |             |   | 12,199,786  |            |             |   | 19,814,504  |           
|PROVISION FOR INCOME TAXES        |                                                                |                          | 151,121     |            |             |   | 4,519,927   |            |             |   | 7,443,834   |           
|                                  |                                                                |                          |             |            |             |   |             |            |            
|NET EARNINGS                      |                                                                | $                        | 236,370     |            |             | $ | 7,679,859   |            |             | $ | 12,370,670  |           
|BASIC EARNINGS PER SHARE          |                                                                | $                        | 0.03        |            |             | $ | 0.82        |            |             | $ | 1.30        |           
|DILUTED EARNINGS PER SHARE        |                                                                | $                        | 0.03        |            |             | $ | 0.81        |            |             | $ | 1.28        |           
|WEIGHTED AVERAGE SHARES:          |                                                                |                          |             |            |             |   |             |            |             |   |             |           
|                                  | Basic                                                          |                          |             | 9,350,068  |             |   |             | 9,381,447  |             |   |             | 9,524,598  |            
|                                  | Diluted                                                        |                          |             | 9,392,885  |             |   |             | 9,444,086  |             |   |             | 9,689,267  |            



F-3



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##### Table of Contents



VALLEY NATIONAL GASES INCORPORATED





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
EQUITY


For the years ended June 30, 2003, 2004 and 2005


|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |            |   |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------ | --------- |  | -------------- | - | ----- | ----------- |  | ----- | ------------- | - |  | -------- | ---------- | - | ------------- | - | ---------- | ------------- |  | - | ---------- | - |  | ------ | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                                     |  |              |           |  |                |   |       | Accumulated |  |       |               |   |  |          |           
|                                                                                                                     |  | Common Stock |           |  | Treasury Stock |   |       |             |  | Other |               |   |  |          | Total      |   |               |  
|                                                                                                                     |  |              |           |  |                |   |       | Paid-in-    |  |       | Comprehensive |   |  | Retained |            |   | Stockholders |   |            | Comprehensive | 
|                                                                                                                     |  | Shares       |           |  | Amount         |   |       | Shares      |  |       | Amount        |   |  | Capital  |            |   | Loss          |   |            | Earnings      |  |   | Equity     |   |  | Income |           
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           
|BALANCE, June 30, 2002                                                                                               |  |              | 9,620,084 |  |                | $ | 9,620 |             |  |       | 272,500       |   |  | $        | (2,263,428 | ) |               | $ | 19,269,338 |               |  | $ | (2,134,362 | ) |  | $      | 21,752,457 |   |  | $ | 36,633,625 |   |  | $ |           |  
|Net earnings                                                                                                         |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   |           |   |  |        | 236,370    |   |  |   | 236,370    |   |  |   | 236,370    |  
|Exercise of stock options                                                                                            |  |              |          |  |                |   |      |             |  |       | (9,250        | ) |  |          | 76,867     |   |               |   | (47,960    | )             |  |   |           |   |  |        |           |   |  |   | 28,907     |   |  |   |           |  
|Unrealized (losses) on derivatives designated and qualified as
    cash flow hedges, net of tax benefit of $578,139  |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   | (867,208   | ) |  |        |           |   |  |   | (867,208   | ) |  |   | (867,208   | )
|Reclassification of unrealized gains on derivatives, net of tax
    provision of $74,340                             |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   | 111,511    |   |  |        |           |   |  |   | 111,511    |   |  |   | 111,511    |  
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           
|BALANCE, June 30, 2003                                                                                               |  |              | 9,620,084 |  |                |   | 9,620 |             |  |       | 263,250       |   |  |          | (2,186,561 | ) |               |   | 19,221,378 |               |  |   | (2,890,059 | ) |  |        | 21,988,827 |   |  |   | 36,143,205 |   |  | $ | (519,327   | )
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           
|Net earnings                                                                                                         |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   |           |   |  |        | 7,679,859  |   |  |   | 7,679,859  |   |  | $ | 7,679,859  |  
|Exercise of stock options                                                                                            |  |              |          |  |                |   |      |             |  |       | (107,750      | ) |  |          | 894,928    |   |               |   | (315,617   | )             |  |   |           |   |  |        |           |   |  |   | 579,311    |   |  |   |           |  
|Unrealized gains on derivatives designated and qualified as cash
    flow hedges, net of tax provision of $1,080,357 |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   | 1,620,535  |   |  |        |           |   |  |   | 1,620,535  |   |  |   | 1,620,535  |  
|Reclassification of unrealized gains on derivatives, net of tax
    provision of $56,810                             |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   | 85,215     |   |  |        |           |   |  |   | 85,215     |   |  |   | 85,215     |  
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           
|BALANCE, June 30, 2004                                                                                               |  |              | 9,620,084 |  |                |   | 9,620 |             |  |       | 155,500       |   |  |          | (1,291,633 | ) |               |   | 18,905,761 |               |  |   | (1,184,309 | ) |  |        | 29,668,686 |   |  |   | 46,108,125 |   |  | $ | 9,385,609  |  
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           
|Net earnings                                                                                                         |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   |           |   |  |        | 12,370,670 |   |  |   | 12,370,670 |   |  | $ | 12,370,670 |  
|Dividend paid, per share $0.09                                                                                       |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   |           |   |  |        | (853,928   | ) |  |   | (853,928   | ) |  |   |           |  
|Exercise of stock options                                                                                            |  |              |          |  |                |   |      |             |  |       | (110,415      | ) |  |          | 917,549    |   |               |   | (142,575   | )             |  |   |           |   |  |        |           |   |  |   | 774,974    |   |  |   |           |  
|Tax benefit from exercise of stock options                                                                           |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   | 397,141    |               |  |   |           |   |  |        |           |   |  |   | 397,141    |   |  |   |           |  
|Unrealized gains on derivatives designated and qualified as cash
    flow hedges, net of tax provision of $665,159   |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   | 997,739    |   |  |        |           |   |  |   | 997,739    |   |  |   | 997,739    |  
|Reclassification of unrealized gains on derivatives, net of tax
    provision of $45,176                             |  |              |          |  |                |   |      |             |  |       |              |   |  |          |           |   |               |   |           |               |  |   | 67,764     |   |  |        |           |   |  |   | 67,764     |   |  |   | 67,764     |  
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           
|BALANCE, June 30, 2005                                                                                               |  |              | 9,620,084 |  |                | $ | 9,620 |             |  |       | 45,085        |   |  | $        | (374,084   | ) |               | $ | 19,160,327 |               |  | $ | (118,806   | ) |  | $      | 41,185,428 |   |  | $ | 59,862,485 |   |  | $ | 13,436,173 |  
|                                                                                                                     |  |              |           |  |                |   |       |             |  |       |               |   |  |          |            |   |               |   |            |               |  |   |            |   |  |        |           



F-4



---



##### Table of Contents



VALLEY NATIONAL GASES INCORPORATED





CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended June 30, 2003, 2004 and 2005


|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |           |             |            |             |           |            |             |  
|-------------------------------------------- | -------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------------------------------ | ----------------------------------------- | ---------- | ---------- | ---------- | ----------- | --------- | ----------- | ---------- | ----------- | --------- | ---------- | ----------- | -
|                                             |                                                                                        | 2003                                           |                                                  |                                           | 2004       |            |            | 2005        |          
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                                                        |                                                |                                                  |                                           |            |            |            |             |           |             |            |            
|                                             | Net income                                                                             |                                                | $                                                | 236,370                                   |            |            | $          | 7,679,859   |           |             | $          | 12,370,670  |          
|                                             | Adjustments to reconcile net income to net cash provided by
    operating activities  |                                                |                                                  |                                           |            |            |            |             |           |             |            |             |          
|                                             |                                                                                        | Amortization of SFAS No. 133 transition amount |                                                  |                                           | 111,511    |            |            |             | 85,215    |             |            |             | (145,864  | )         
|                                             |                                                                                        | Depreciation                                   |                                                  |                                           | 5,699,115  |            |            |             | 5,524,489 |             |            |             | 6,711,035 |           
|                                             |                                                                                        | Amortization                                   |                                                  |                                           | 2,418,783  |            |            |             | 1,662,980 |             |            |             | 1,108,275 |           
|                                             |                                                                                        | Minority interest                              |                                                  |                                           |           |            |            |             | 880,235   |             |            |             | 1,070,588 |           
|                                             |                                                                                        | Loss (gain) on disposal of assets              |                                                  |                                           | 28,171     |            |            |             | 107,565   |             |            |             | (8,420    | )         
|                                             |                                                                                        | Tax benefit from exercise of stock options     |                                                  |                                           |           |            |            |             |          |             |            |             | 397,141   |           
|                                             |                                                                                        | Provision for allowance on doubtful accounts   |                                                  |                                           | 1,364,672  |            |            |             | 640,554   |             |            |             | 377,444   |           
|                                             |                                                                                        | Disposition of doubtful accounts               |                                                  |                                           | (1,234,724 | )          |            |             | (708,091  | )           |            |             | (451,931  | )         
|                                             |                                                                                        | Disposition of inventory                       |                                                  |                                           | 1,387,654  |            |            |             | 143,421   |             |            |             |          |           
|                                             |                                                                                        | Write-off of non-compete agreements            |                                                  |                                           | 782,242    |            |            |             |          |             |            |             |          |           
|                                             |                                                                                        | Deferred taxes                                 |                                                  |                                           | 2,146,296  |            |            |             | 1,911,411 |             |            |             | 2,065,415 |           
|                                             |                                                                                        | Changes in operating assets and liabilities   |                                                  |                                           |            |            |            |             |           |             |            |             |           |           
|                                             |                                                                                        |                                                | Accounts receivable                              |                                           |            | 598,095    |            |             |           | 554,008     |            |             |           | (515,417   | )          
|                                             |                                                                                        |                                                | Inventory                                        |                                           |            | 4,258,375  |            |             |           | 454,413     |            |             |           | 515,222    |            
|                                             |                                                                                        |                                                | Prepaids and other                               |                                           |            | 682,993    |            |             |           | 165,241     |            |             |           | (152,729   | )          
|                                             |                                                                                        |                                                | Refundable taxes                                 |                                           |            | (1,112,378 | )          |             |           | 404,357     |            |             |           | (288,195   | )          
|                                             |                                                                                        |                                                | Deposits and other assets                        |                                           |            | (465,180   | )          |             |           | 1,871,790   |            |             |           | 86,459     |            
|                                             |                                                                                        |                                                | Accounts payable                                 |                                           |            | (360,623   | )          |             |           | 1,244,408   |            |             |           | (607,812   | )          
|                                             |                                                                                        |                                                | Accrued compensation and employee benefits       |                                           |            | 449,793    |            |             |           | 193,473     |            |             |           | 259,599    |            
|                                             |                                                                                        |                                                | Other current liabilities                        |                                           |            | 676,379    |            |             |           | (273,559    | )          |             |           | 2,211,714  |            
|                                             |                                                                                        |                                                | Other long-term liabilities                      |                                           |            | (1,152,887 | )          |             |           | (1,998,303  | )          |             |           | (1,011,081 | )          
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|                                             |                                                                                        |                                                |                                                  | Net cash provided by operating activities |            |            | 16,514,657 |             |           |             | 20,543,466 |             |           |            | 23,992,113  |  
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|CASH FLOWS FROM INVESTING ACTIVITIES:        |                                                                                        |                                                |                                                  |                                           |            |            |            |             |           |             |            |            
|                                             | Proceeds from disposal of assets                                                       |                                                |                                                  | 228,770                                   |            |            |            | 51,229      |           |             |            | 1,163,011   |          
|                                             | Cash from consolidation of variable interest entities                                  |                                                |                                                  |                                          |            |            |            | 443,303     |           |             |            | 249,368     |          
|                                             | Purchases of property and equipment                                                    |                                                |                                                  | (6,303,488                                | )          |            |            | (7,334,486  | )         |             |            | (10,206,302 | )        
|                                             | Business acquisitions, net of cash acquired                                            |                                                |                                                  | (1,273,794                                | )          |            |            | (272,617    | )         |             |            | (6,744,630  | )        
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|                                             |                                                                                        |                                                |                                                  | Net cash used by investing activities     |            |            | (7,348,512 | )           |           |             | (7,112,571 | )           |           |            | (15,538,553 | )
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|CASH FLOWS FROM FINANCING ACTIVITIES:        |                                                                                        |                                                |                                                  |                                           |            |            |            |             |           |             |            |            
|                                             | Proceeds from borrowings                                                               |                                                |                                                  | 48,342,520                                |            |            |            | 32,764,775  |           |             |            | 59,596,676  |          
|                                             | Principal payments on borrowings                                                       |                                                |                                                  | (56,971,527                               | )          |            |            | (48,676,738 | )         |             |            | (65,618,126 | )        
|                                             | Repayment of bank overdraft                                                            |                                                |                                                  |                                          |            |            |            | 668,046     |           |             |            | (668,046    | )        
|                                             | Dividend paid                                                                          |                                                |                                                  |                                          |            |            |            |            |           |             |            | (853,928    | )        
|                                             | Proceeds from exercise of stock options                                                |                                                |                                                  | 28,907                                    |            |            |            | 579,311     |           |             |            | 774,974     |          
|                                             | Variable interest entity distribution                                                  |                                                |                                                  |                                          |            |            |            |            |           |             |            | (911,715    | )        
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|                                             |                                                                                        |                                                | Net cash provided (used) by financing activities |                                           |            | (8,600,100 | )          |             |           | (14,664,606 | )          |             |           | (7,680,165 | )          
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|NET CHANGE IN CASH AND CASH EQUIVALENTS      |                                                                                        |                                                | 566,045                                          |                                           |            |            | (1,233,711 | )           |           |             | 773,395    |            
|CASH AND CASH EQUIVALENTS, beginning of year |                                                                                        |                                                | 1,216,668                                        |                                           |            |            | 1,782,713  |             |           |             | 549,002    |            
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          
|CASH AND CASH EQUIVALENTS, end of year       |                                                                                        | $                                              | 1,782,713                                        |                                           |            | $          | 549,002    |             |           | $           | 1,322,397  |            
|                                             |                                                                                        |                                                |                                                  |                                           |            |            |            |             |          





F-5



---



##### Table of Contents






VALLEY NATIONAL GASES INCORPORATED


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


June 30, 2004 and 2005




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





|   |              
|-- | -------------
|2. | ORGANIZATION:





|   |                                            
|-- | -------------------------------------------
|3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation




Use of Estimates




Cash Equivalents




Trade Receivables




F-6



---



##### Table of Contents





|                      |  |      |            |   |      |   |          |      |  |   |          |  
|--------------------- |  | ---- | ---------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                      |  | 2003 |            |   | 2004 |   |          | 2005 | 
|                      |  |      |            |   |      |   |          |      | 
|Beginning of the year |  | $    | 684,898    |   |      | $ | 814,846  |      |  | $ | 747,309  |  
|Charges               |  |      | 1,364,672  |   |      |   | 640,554  |      |  |   | 302,957  |  
|Deductions            |  |      | (1,234,724 | ) |      |   | (708,091 | )    |  |   | (377,444 | )
|                      |  |      |            |   |      |   |          |      | 
|End of the year       |  | $    | 814,846    |   |      | $ | 747,309  |      |  | $ | 672,822  |  
|                      |  |      |            |   |      |   |          |      | 

Inventory






|           |  |      |           |   |      |   |           |  
|---------- |  | ---- | --------- | - | ---- | - | --------- | -
|           |  | 2004 |           |   | 2005 |  
|           |  |      |           |   |      |  
|Hard goods |  | $    | 7,530,414 |   |      | $ | 8,258,169 |  
|Gases      |  |      | 2,239,543 |   |      |   | 2,010,299 |  
|Reserves   |  |      | (354,082  | ) |      |   | (399,494  | )
|           |  |      |           |   |      |  
|           |  | $    | 9,415,875 |   |      | $ | 9,868,974 |  
|           |  |      |           |   |      |  

Property, Plant and Equipment




|                               |  |       |       | 
|------------------------------ |  | ----- | ----- | 
|                               |  | Years |      
|                               |  |       |      
|Buildings and improvements     |  |       | 10-25 | 
|Cylinders                      |  |       | 12-30 | 
|Equipment other than cylinders |  |       | 5-7   | 
|Transportation equipment       |  |       | 3-7   | 
|Furniture fixtures             |  |       | 3-7   | 



Goodwill and Other Intangible Assets




F-7



---



##### Table of Contents





Valuation of Long-Lived Assets




Employee Health Care Benefits Reserves




Income Taxes




Segments








F-8



---



##### Table of Contents





Earnings Per Share




Accounting for Stock-Based Compensation






|                                     |                                                                                                                                       |      |   |         |      |  |   |           |  |  |   |            | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ------- | ---- |  | - | --------- |  |  | - | ---------- | 
|                                     |                                                                                                                                       | 2003 |   |         | 2004 |  |   | 2005      | 
|                                     |                                                                                                                                       |      |   |         |      |  |   |           | 
|Net earnings                         |                                                                                                                                       |      |   |         |      |  |   |           |  |  |   |           
|                                     | As reported                                                                                                                           |      | $ | 236,370 |      |  | $ | 7,679,859 |  |  | $ | 12,370,670 | 
|                                     | Deduct: Total stock-based employee compensation expense based on
    the fair value method for all awards, net of related tax effects |      |   | 66,391  |      |  |   | 84,879    |  |  |   | 100,184    | 
|                                     |                                                                                                                                       |      |   |         |      |  |   |           | 
|                                     | Pro forma                                                                                                                             |      | $ | 169,979 |      |  | $ | 7,594,980 |  |  | $ | 12,270,486 | 
|                                     |                                                                                                                                       |      |   |         |      |  |   |           | 
|Earnings per share assuming dilution |                                                                                                                                       |      |   |         |      |  |   |           |  |  |   |           
|                                     | As reported                                                                                                                           |      | $ | 0.03    |      |  | $ | 0.82      |  |  | $ | 1.28       | 
|                                     | Stock option adjustment                                                                                                               |      |   | 0.01    |      |  |   | 0.01      |  |  |   | 0.01       | 
|                                     |                                                                                                                                       |      |   |         |      |  |   |           | 
|                                     | Pro forma                                                                                                                             |      | $ | 0.02    |      |  | $ | 0.81      |  |  | $ | 1.27       | 
|                                     |                                                                                                                                       |      |   |         |      |  |   |           | 

Comprehensive Income




Major Customers and Concentrations of Credit Risk:






F-9



---



##### Table of Contents



Revenue Recognition




Shipping and Handling Fees and Distribution Costs








Disclosures About Fair Value of Financial Instruments






| |                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and Cash Equivalents  The carrying amount
    approximates fair value due to 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.



|                          |  |                     |            |  |                     |   |            |          |  |   |            |  |  |   |            | 
|------------------------- |  | ------------------- | ---------- |  | ------------------- | - | ---------- | -------- |  | - | ---------- |  |  | - | ---------- | 
|                          |  | As of June 30, 2004 |            |  | As of June 30, 2005 |  
|                          |  |                     |            |  |                     |  
|                          |  | Carrying            |            |  | Fair                |   |            | Carrying |  |   | Fair       | 
|                          |  | Amount              |            |  | Value               |   |            | Amount   |  |   | Value      | 
|                          |  |                     |            |  |                     |   |            |          |  |   |            | 
|Cash and cash equivalents |  | $                   | 549,002    |  |                     | $ | 549,002    |          |  | $ | 1,322,397  |  |  | $ | 1,322,397  | 
|Debt                      |  | $                   | 64,937,974 |  |                     | $ | 64,179,693 |          |  | $ | 64,600,207 |  |  | $ | 63,139,483 | 





F-10



---



##### Table of Contents







New Accounting Standards














F-11



---



##### Table of Contents





Supplemental Cash Flow Information


|                                            |                                                                             |                             |   |           |      |  |   |            |   |  |   |           | 
|------------------------------------------- | --------------------------------------------------------------------------- | --------------------------- | - | --------- | ---- |  | - | ---------- | - |  | - | --------- | 
|                                            |                                                                             | For the Year Ended June 30, |  
|                                            |                                                                             |                             |  
|                                            |                                                                             | 2003                        |   |           | 2004 |  |   | 2005       |  
|                                            |                                                                             |                             |   |           |      |  |   |            |  
|Cash paid for certain items                |                                                                             |                             |   |           |      |  |   |            |   |  |   |          
|                                            | Cash payments for interest                                                  |                             | $ | 6,565,120 |      |  | $ | 5,698,788  |   |  | $ | 4,116,584 | 
|                                            | Cash payments for income taxes, net of income tax refunds                   |                             |   |          |      |  |   | 820,966    |   |  |   | 5,334,512 | 
|Non-cash financing and investing activity  |                                                                             |                             |   |           |      |  |   |            |   |  |   |          
|                                            | Issuance of seller notes                                                    |                             |   | 855,000   |      |  |   |           |   |  |   |          | 
|                                            | Issuance of non-compete agreements                                          |                             |   | 300,000   |      |  |   |           |   |  |   |          | 
|                                            | Issuance of consulting agreement                                            |                             |   |          |      |  |   | 150,000    |   |  |   |          | 
|                                            | Adjustment of seller notes                                                  |                             |   |          |      |  |   | (82,080    | ) |  |   |          | 
|                                            | Notes payable and capital lease assumed                                     |                             |   | 54,045    |      |  |   |           |   |  |   |          | 
|                                            | Fixed asset purchases in accounts payable                                   |                             |   |          |      |  |   | 196,169    |   |  |   | 355,378   | 
|                                            | Deposits used for business acquisition                                      |                             |   |          |      |  |   |           |   |  |   | 1,000,000 | 
|                                            | Debt assumed through acquisition                                            |                             |   |          |      |  |   |           |   |  |   | 3,584,675 | 
|                                            | Debt assumed through the VIE consolidation                                  |                             |   |          |      |  |   | 6,755,078  |   |  |   | 2,099,008 | 
|                                            | Net property, plant and equipment assumed through the VIE
    consolidation |                             |   |          |      |  |   | 11,744,710 |   |  |   | 1,428,266 | 

Reclassifications






|   |              
|-- | -------------
|4. | ACQUISITIONS:





F-12



---



##### Table of Contents





|                                                                |  |   |        |  
|--------------------------------------------------------------- |  | - | ------ | -
|Cash and cash equivalents                                       |  | $ | 61     |  
|Accounts receivable                                             |  |   | 1,323  |  
|Inventory                                                       |  |   | 968    |  
|Fixed assets including cylinders bulk tanks and other equipment |  |   | 7,324  |  
|Customer lists                                                  |  |   | 1,004  |  
|Goodwill                                                        |  |   | 4,485  |  
|Accounts payable                                                |  |   | (696   | )
|Accrued compensation                                            |  |   | (187   | )
|Other                                                           |  |   | (137   | )
|Deferred income taxes                                           |  |   | (2,755 | )
|Debt                                                            |  |   | (3,585 | )
|                                                                |  |   |       
|Net assets acquired                                             |  | $ | 7,805  |  









|   |                                      
|-- | -------------------------------------
|5. | GOODWILL AND OTHER INTANGIBLE ASSETS:



|                           |  |               |            |  |               |   |           |               |  |   |               |  |  |                |           |  |  |  |      | 
|-------------------------- |  | ------------- | ---------- |  | ------------- | - | --------- | ------------- |  | - | ------------- |  |  | -------------- | --------- |  |  |  | ---- | 
|                           |  | Gross         |            |  | Accumulated   |   |           | Gross         |  |   | Accumulated   |  |  | Weighted       |          
|                           |  | Amount        |            |  | Amortization  |   |           | Amount        |  |   | Amortization  |  |  | Average        |          
|                           |  | as of         |            |  | as of         |   |           | as of         |  |   | as of         |  |  | Amortization   |          
|                           |  | June 30, 2004 |            |  | June 30, 2004 |   |           | June 30, 2005 |  |   | June 30, 2005 |  |  | Period (years) |          
|                           |  |               |            |  |               |   |           |               |  |   |               |  |  |                |          
|Non-competition Agreements |  | $             | 10,811,651 |  |               | $ | 8,528,931 |               |  | $ | 8,443,480     |  |  | $              | 7,196,332 |  |  |  | 9.3  | 
|Consulting agreements      |  |               | 357,411    |  |               |   | 228,244   |               |  |   | 150,000       |  |  |                | 70,833    |  |  |  | 3.0  | 
|Customer lists             |  |               | 339,000    |  |               |   | 39,550    |               |  |   | 1,342,893     |  |  |                | 62,150    |  |  |  | 17.5 | 
|                           |  |               |            |  |               |   |           |               |  |   |               |  |  |                |          
|Total                      |  | $             | 11,508,062 |  |               | $ | 8,796,725 |               |  | $ | 9,936,373     |  |  | $              | 7,329,315 |  |  |  |      | 
|                           |  |               |            |  |               |   |           |               |  |   |               |  |  |                |          

F-13



---



##### Table of Contents





|                            |  |   |         | 
|--------------------------- |  | - | ------- | 
|Fiscal Year Ending June 30, |  |  
|                            |  |  
|2006                        |  | $ | 638,763 | 
|2007                        |  | $ | 401,263 | 
|2008                        |  | $ | 360,013 | 
|2009                        |  | $ | 167,632 | 
|2010                        |  | $ | 104,261 | 



|                                                       |  |   |            | 
|------------------------------------------------------ |  | - | ---------- | 
|Balance as of June 30, 2004                            |  | $ | 40,997,738 | 
|Goodwill acquired and final purchase price adjustments |  |   | 4,485,172  | 
|                                                       |  |   |           
|Balance as of June 30, 2005                            |  | $ | 45,482,910 | 
|                                                       |  |   |           



|                                                       |  |   |            |  
|------------------------------------------------------ |  | - | ---------- | -
|Balance as of June 30, 2003                            |  | $ | 41,209,615 |  
|Goodwill acquired and final purchase price adjustments |  |   | (211,877   | )
|                                                       |  |   |           
|Balance as of June 30, 2004                            |  | $ | 40,997,738 |  
|                                                       |  |   |           





|   |                
|-- | ---------------
|6. | LONG-TERM DEBT:



|                                                                                                                                                                           |                         |      |            |            |      |   |            |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ---- | ---------- | ---------- | ---- | - | ---------- | ---------- | -
|                                                                                                                                                                           |                         | 2004 |            |            | 2005 |  
|                                                                                                                                                                           |                         |      |            |            |      |  
|Revolving note, interest at LIBOR plus 1.5% and 1.0% as of 2004
    and 2005, respectively, payable monthly through April 2009,
    collateralized by the assets of Valley |                         | $    | 55,400,000 |            |      | $ | 53,868,241 |           
|Individuals and corporations, mortgages and notes, interest at
    3.75% to 11.0%, payable at various dates through 2010                                                   |                         |      | 2,890,371  |            |      |   | 2,441,975  |           
|                                                                                                                                                                           |                         |      |            |            |      |  
|                                                                                                                                                                           |                         |      | 58,290,371 |            |      |   | 56,310,216 |           
|                                                                                                                                                                           | Original issue discount |      |            | (58,164    | )    |   |            | (43,012    | )
|                                                                                                                                                                           | Current maturities      |      |            | (1,105,622 | )    |   |            | (1,434,427 | )
|                                                                                                                                                                           |                         |      |            |            |      |  
|Total long-term debt before Variable Interest Entities mortgage
    debt                                                                                                   |                         |      | 57,126,585 |            |      |   | 54,832,777 |           
|Total Variable Interest Entities mortgage debt                                                                                                                             |                         |      | 6,705,767  |            |      |   | 8,333,003  |           
|                                                                                                                                                                           | Current maturities      |      |            | (1,546,312 | )    |   |            | (2,240,017 | )
|                                                                                                                                                                           |                         |      |            |            |      |  
|Total Variable Interest Entities long-term debt                                                                                                                            |                         |      | 5,159,455  |            |      |   | 6,092,986  |           
|                                                                                                                                                                           |                         |      |            |            |      |  
|Total long-term debt                                                                                                                                                       |                         | $    | 62,286,040 |            |      | $ | 60,925,763 |           
|                                                                                                                                                                           |                         |      |            |            |      |  



F-14



---



##### Table of Contents















|                            |  |        |            |          |                   |   |           |         |  |   |            | 
|--------------------------- |  | ------ | ---------- | -------- | ----------------- | - | --------- | ------- |  | - | ---------- | 
|                            |  |        |            | Variable |                   |   |          
|Fiscal Year Ending June 30, |  | Valley |            |          | Interest Entities |   |           | Company | 
|                            |  |        |            |          |                   |   |           |         | 
|2006                        |  | $      | 1,434,427  |          |                   | $ | 2,240,017 |         |  | $ | 3,674,444  | 
|2007                        |  |        | 546,551    |          |                   |   | 777,261   |         |  |   | 1,323,812  | 
|2008                        |  |        | 189,580    |          |                   |   | 798,121   |         |  |   | 987,701    | 
|2009                        |  |        | 54,002,909 |          |                   |   | 821,606   |         |  |   | 54,824,515 | 
|2010                        |  |        | 61,708     |          |                   |   | 751,004   |         |  |   | 812,712    | 
|Thereafter                  |  |        | 75,041     |          |                   |   | 2,944,994 |         |  |   | 3,020,035  | 
|                            |  |        |            |          |                   |   |           |         | 
|Total                       |  | $      | 56,310,216 |          |                   | $ | 8,333,003 |         |  | $ | 64,643,219 | 
|                            |  |        |            |          |                   |   |           |         | 



|   |               
|-- | --------------
|7. | PENSION PLANS:



F-15



---



##### Table of Contents





|   |                    
|-- | -------------------
|8. | EARNINGS PER SHARE:



|                                                                        |  |                     |           |  |      |   |           |      |  |   |            | 
|----------------------------------------------------------------------- |  | ------------------- | --------- |  | ---- | - | --------- | ---- |  | - | ---------- | 
|                                                                        |  | Year Ended June 30, |          
|                                                                        |  |                     |          
|                                                                        |  | 2003                |           |  | 2004 |   |           | 2005 | 
|                                                                        |  |                     |           |  |      |   |           |      | 
|Net earnings available for common stock                                 |  | $                   | 236,370   |  |      | $ | 7,679,859 |      |  | $ | 12,370,670 | 
|                                                                        |  |                     |           |  |      |   |           |      | 
|Basic earnings per common share:                                        |  |                     |           |  |      |   |           |      |  |   |            | 
|Weighted average common shares                                          |  |                     | 9,350,068 |  |      |   | 9,381,447 |      |  |   | 9,524,598  | 
|                                                                        |  |                     |           |  |      |   |           |      | 
|Basic earnings per common share                                         |  | $                   | 0.03      |  |      | $ | 0.82      |      |  | $ | 1.30       | 
|                                                                        |  |                     |           |  |      |   |           |      | 
|Diluted earnings per common share:                                      |  |                     |           |  |      |   |           |      |  |   |            | 
|Weighted average common shares                                          |  |                     | 9,350,068 |  |      |   | 9,381,447 |      |  |   | 9,524,598  | 
|Shares issuable from assumed conversion of common stock
    equivalents |  |                     | 42,817    |  |      |   | 62,639    |      |  |   | 164,669    | 
|                                                                        |  |                     |           |  |      |   |           |      | 
|Weighted average common and common equivalent shares                    |  |                     | 9,392,885 |  |      |   | 9,444,086 |      |  |   | 9,689,267  | 
|                                                                        |  |                     |           |  |      |   |           |      | 
|Diluted earnings per common share                                       |  | $                   | 0.03      |  |      | $ | 0.81      |      |  | $ | 1.28       | 
|                                                                        |  |                     |           |  |      |   |           |      | 





|   |                   
|-- | ------------------
|9. | LEASE OBLIGATIONS:







F-16



---



##### Table of Contents





|                            |        |             |           |            |           |   |        |          |  |   |                |            |  |             |           |            |  |   |           |           | 
|--------------------------- | ------ | ----------- | --------- | ---------- | --------- | - | ------ | -------- |  | - | -------------- | ---------- |  | ----------- | --------- | ---------- |  | - | --------- | --------- | 
|Fiscal Year Ending June 30, |        | Real Estate |           |            | Equipment |   |        | SubTotal |  |   | Elimination(1) |            |  | Final Total |          
|                            |        |             |           |            |           |   |        |          |  |   |                |            |  |             |          
|2006                        |        | $           | 3,839,379 |            |           | $ | 26,100 |          |  | $ | 3,865,479      |            |  | $           | 2,429,067 |            |  | $ | 1,436,411 |          
|2007                        |        |             | 3,935,363 |            |           |   | 26,100 |          |  |   | 3,961,463      |            |  |             | 2,489,794 |            |  |   | 1,471,669 |          
|2008                        |        |             | 4,033,747 |            |           |   |       |          |  |   | 4,033,747      |            |  |             | 2,552,039 |            |  |   | 1,481,708 |          
|2009                        |        |             | 4,134,591 |            |           |   |       |          |  |   | 4,134,591      |            |  |             | 2,615,840 |            |  |   | 1,518,751 |          
|2010                        |        |             | 4,237,956 |            |           |   |       |          |  |   | 4,237,956      |            |  |             | 2,681,236 |            |  |   | 1,556,720 |          
|Thereafter                  |        |             | 4,343,905 |            |           |   |       |          |  |   | 4,343,905      |            |  |             | 2,748,267 |            |  |   | 1,595,638 |          
|                            |        |             |           |            |           |   |        |          |  |   |                |            |  |             |          
|                            | Totals |             | $         | 24,524,941 |           |   | $      | 52,200   |  |   | $              | 24,577,141 |  |             | $         | 15,516,244 |  |   | $         | 9,060,897 | 
|                            |        |             |           |            |           |   |        |          |  |   |                |            |  |             |          






|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reflects the elimination of intercompany rent as a result of
    FIN 46R, Consolidation of Variable Interest
    Entities at March 31, 2004.



|    |                            
|--- | ---------------------------
|10. | RELATED PARTY TRANSACTIONS:



|               |                                  |      |   |           |      |  |   |           |  |  |   |           | 
|-------------- | -------------------------------- | ---- | - | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|               |                                  | 2003 |   |           | 2004 |  |   | 2005      | 
|               |                                  |      |   |           |      |  |   |           | 
|Transactions  |                                  |      |   |           |      |  |   |           |  |  |   |          
|               | Lease of buildings and equipment |      | $ | 2,254,345 |      |  | $ | 2,774,824 |  |  | $ | 2,030,784 | 
|               | Rental of aircraft.              |      |   | 338,599   |      |  |   |          |  |  |   |          | 







|    |               
|--- | --------------
|11. | STOCK OPTIONS:



F-17



---



##### Table of Contents







|                           |  |                  |         |  |                         |                  |                  |                |  |   |       | 
|-------------------------- |  | ---------------- | ------- |  | ----------------------- | ---------------- | ---------------- | -------------- |  | - | ----- | 
|                           |  |                  |         |  |                         | Weighted Average |                 
|                           |  | Number of Shares |         |  | Range of Exercise Price |                  |                  | Exercise Price | 
|                           |  |                  |         |  |                         |                  |                  |                | 
|Outstanding, June 30, 2002 |  |                  | 351,500 |  |                         |                  | $3.125 - $10.750 |                |  | $ | 6.19  | 
|Granted                    |  |                  | 140,000 |  |                         |                  | $5.700 - $8.000  |                |  |   | 7.20  | 
|Exercised                  |  |                  | 9,250   |  |                         |                  | $3.125           |                |  |   | 3.13  | 
|Cancelled                  |  |                  | 500     |  |                         |                  | $10.750          |                |  |   | 10.75 | 
|                          
|Outstanding, June 30, 2003 |  |                  | 481,750 |  |                         |                  | $3.125 - $10.750 |                |  | $ | 6.54  | 
|Granted                    |  |                  | 50,000  |  |                         |                  | $8.000           |                |  |   | 8.00  | 
|Exercised                  |  |                  | 107,750 |  |                         |                  | $3.125 - $8.00   |                |  |   | 5.38  | 
|Cancelled                  |  |                  | 5,825   |  |                         |                  | $3.75 - $6.85    |                |  |   | 6.85  | 
|                          
|Outstanding, June 30, 2004 |  |                  | 418,175 |  |                         |                  | $3.125 - $10.750 |                |  | $ | 6.09  | 
|Granted                    |  |                  | 60,000  |  |                         |                  | $16.000          |                |  |   | 16.00 | 
|Exercised                  |  |                  | 110,415 |  |                         |                  | $3.750 - $10.750 |                |  |   | 7.02  | 
|Cancelled                  |  |                  | 8,300   |  |                         |                  | $3.750 - $6.85   |                |  |   | 6.85  | 
|                          
|Outstanding, June 30, 2005 |  |                  | 359,460 |  |                         |                  | $3.125 - $16.000 |                |  | $ | 8.57  | 

|                        |  |                  |         |                  |                |   |      | 
|----------------------- |  | ---------------- | ------- | ---------------- | -------------- | - | ---- | 
|                        |  |                  |         | Weighted Average |               
|Options Exercisable at: |  | Number of Shares |         |                  | Exercise Price |  
|                        |  |                  |         |                  |                |  
|June 30, 2003           |  |                  | 244,700 |                  |                | $ | 6.79 | 
|June 30, 2004           |  |                  | 192,175 |                  |                | $ | 6.73 | 
|June 30, 2005           |  |                  | 113,460 |                  |                | $ | 6.49 | 



|                          |        |                   |                           |  |                  |                  |  |          |                |  |                   |             |        |  |  |  |         | 
|------------------------- | ------ | ----------------- | ------------------------- |  | ---------------- | ---------------- |  | -------- | -------------- |  | ----------------- | ----------- | ------ |  |  |  | ------- | 
|As of June 30, 2005       |       
|                          |       
|Stock Options Outstanding |        |                   | Stock Options Exercisable | 
|                          |        |                   |                           | 
|                          |        | Shares Underlying |                           |  | Weighted Average |                  |  | Weighted |                |  | Shares Underlying |            
|                          |        | Options           |                           |  | Remaining        |                  |  | Average  |                |  | Options           |            
|Exercise Price            |        |                   | Outstanding               |  |                  | Contractual Life |  |          | Exercise Price |  |                   | Outstanding |       
|                          |        |                   |                           |  |                  |                  |  |          |                |  |                   |             |       
|$                         | 3.125  |                   |                           |  | 14,000           |                  |  |          | 4.5            |  |                   | $           | 3.125  |  |  |  | 14,000  | 
|                          | 3.750  |                   |                           |  | 11,750           |                  |  |          | 5.5            |  |                   |             | 3.750  |  |  |  | 11,750  | 
|                          | 5.625  |                   |                           |  | 13,710           |                  |  |          | 3.5            |  |                   |             | 5.625  |  |  |  | 13,710  | 
|                          | 5.700  |                   |                           |  | 4,000            |                  |  |          | 7.6            |  |                   |             |       |  |  |  |        | 
|                          | 6.200  |                   |                           |  | 50,000           |                  |  |          | 7.3            |  |                   |             |       |  |  |  |        | 
|                          | 6.500  |                   |                           |  | 2,000            |                  |  |          | 7.1            |  |                   |             |       |  |  |  |        | 
|                          | 6.850  |                   |                           |  | 19,500           |                  |  |          | 6.5            |  |                   |             | 6.85   |  |  |  | 19,500  | 
|                          | 8.000  |                   |                           |  | 184,000          |                  |  |          | 6.3            |  |                   |             | 8.000  |  |  |  | 54,000  | 
|                          | 10.750 |                   |                           |  | 500              |                  |  |          | 2.3            |  |                   |             | 10.750 |  |  |  | 500     | 
|                          | 16.000 |                   |                           |  | 60,000           |                  |  |          | 9.6            |  |                   |             |       |  |  |  |        | 
|                          |        |                   |                           |  |                  |                  |  |          |                |  |                   |             |       
|$                         | 8.573  |                   |                           |  | 359,460          |                  |  |          | 6.8            |  |                   | $           | 6.486  |  |  |  | 113,460 | 



F-18



---



##### Table of Contents









|                        |  |      |         |   |      |  |         |      |  |  |         |  
|----------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | -
|                        |  | 2003 |         |   | 2004 |  |         | 2005 | 
|                        |  |      |         |   |      |  |         |      | 
|Risk-Free Interest Rate |  |      | 3.1     | % |      |  | 3.8     | %    |  |  | 3.8     | %
|Expected Lives          |  |      | 7 years |   |      |  | 7 years |      |  |  | 7 years |  
|Expected Dividend Yield |  |      | 0.00    | % |      |  | 0.00    | %    |  |  | 0.00    | %
|Expected Volatility     |  |      | 23.72   | % |      |  | 22.43   | %    |  |  | 23.78   | %



|    |              
|--- | -------------
|12. | INCOME TAXES:





|                                    |  |        |         |  |      |  |      |  
|----------------------------------- |  | ------ | ------- |  | ---- |  | ---- | -
|                                    |  | 2003   |        
|                                    |  |        |        
|                                    |  | Amount |         |  | Rate | 
|                                    |  |        |         |  |      | 
|Federal statutory rate              |  | $      | 131,747 |  |      |  | 34.0 | %
|State taxes, net of federal benefit |  |        | 17,437  |  |      |  | 4.5  | %
|Other                               |  |        | 1,937   |  |      |  | 0.5  | %
|                                    |  |        |         |  |      | 
|Provision for income taxes          |  | $      | 151,121 |  |      |  | 39.0 | %
|                                    |  |        |         |  |      | 

|                                    |  |        |           |   |      |  |      |   
|----------------------------------- |  | ------ | --------- | - | ---- |  | ---- | --
|                                    |  | 2004   |          
|                                    |  |        |          
|                                    |  | Amount |           |   | Rate | 
|                                    |  |        |           |   |      | 
|Federal statutory rate              |  | $      | 4,147,927 |   |      |  | 34.0 | % 
|State taxes, net of federal benefit |  |        | 617,939   |   |      |  | 5.0  | % 
|Other                               |  |        | (245,939  | ) |      |  | (2.0 | )%
|                                    |  |        |           |   |      | 
|Provision for income taxes          |  | $      | 4,519,927 |   |      |  | 37.0 | % 
|                                    |  |        |           |   |      | 

F-19



---



##### Table of Contents



|                                    |  |        |           |   |      |  |      |   
|----------------------------------- |  | ------ | --------- | - | ---- |  | ---- | --
|                                    |  | 2005   |          
|                                    |  |        |          
|                                    |  | Amount |           |   | Rate | 
|                                    |  |        |           |   |      | 
|Federal statutory rate              |  | $      | 6,736,931 |   |      |  | 34.0 | % 
|State taxes, net of federal benefit |  |        | 990,725   |   |      |  | 5.0  | % 
|Other                               |  |        | (283,822  | ) |      |  | (1.4 | )%
|                                    |  |        |           |   |      | 
|Provision for income taxes          |  | $      | 7,443,834 |   |      |  | 37.6 | % 
|                                    |  |        |           |   |      | 





|                                  |                   |      |            |            |      |   |           |           |  |   |           |           | 
|--------------------------------- | ----------------- | ---- | ---------- | ---------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                  |                   | 2003 |            |            | 2004 |   |           | 2005      | 
|                                  |                   |      |            |            |      |   |           |           | 
|Current provision                |                   |      |            |            |      |   |           |           |  |   |           |          
|                                  | Federal           |      | $          | (1,587,681 | )    |   | $         | 773,714   |  |   | $         | 4,423,091 | 
|                                  | State             |      |            | (233,482   | )    |   |           | 106,605   |  |   |           | 955,328   | 
|                                  |                   |      |            |            |      |   |           |           | 
|Total current provision (benefit) |                   | $    | (1,821,163 | )          |      | $ | 880,319   |           |  | $ | 5,378,419 |          
|                                  |                   |      |            |            |      |   |           |           | 
|Deferred provision                |                   |      |            |            |      |   |           |           |  |   |           |          
|                                  | Federal provision |      | $          | 1,663,381  |      |   | $         | 3,172,992 |  |   | $         | 1,755,603 | 
|                                  | State provision   |      |            | 308,903    |      |   |           | 466,616   |  |   |           | 309,812   | 
|                                  |                   |      |            |            |      |   |           |           | 
|Total deferred provision          |                   |      | 1,972,284  |            |      |   | 3,639,608 |           |  |   | 2,065,415 |          
|                                  |                   |      |            |            |      |   |           |           | 
|Provision for income taxes        |                   | $    | 151,121    |            |      | $ | 4,519,927 |           |  | $ | 7,443,834 |          
|                                  |                   |      |            |            |      |   |           |           | 



|                           |                                                              |      |             |             |      |   |             |             |   |   |             |             |  
|-------------------------- | ------------------------------------------------------------ | ---- | ----------- | ----------- | ---- | - | ----------- | ----------- | - | - | ----------- | ----------- | -
|                           |                                                              | 2003 |             |             | 2004 |   |             | 2005        |  
|                           |                                                              |      |             |             |      |   |             |             |  
|Deferred tax assets        |                                                              | $    | 5,527,045   |             |      | $ | 2,346,484   |             |   | $ | 1,774,379   |            
|Deferred tax liabilities   |                                                              |      | (20,726,545 | )           |      |   | (21,977,647 | )           |   |   | (26,935,848 | )          
|                           |                                                              |      |             |             |      |   |             |             |  
|Net deferred tax liability |                                                              | $    | (15,199,500 | )           |      | $ | (19,631,163 | )           |   | $ | (25,161,469 | )          
|                           |                                                              |      |             |             |      |   |             |             |  
|Consisting of             |                                                              |      |             |             |      |   |             |             |   |   |             |            
|                           | Basis difference of property                                 |      | $           | (20,726,545 | )    |   | $           | (22,554,826 | ) |   | $           | (26,388,142 | )
|                           | Basis difference of inventory                                |      |             | 270,083     |      |   |             | 289,686     |   |   |             | 182,366     |  
|                           | Derivatives designated as cash flow hedges                   |      |             | 1,926,706   |      |   |             | 789,539     |   |   |             | 79,202      |  
|                           | Financial reserves not currently deductible for tax purposes |      |             | 2,040,661   |      |   |             | 1,253,536   |   |   |             | 1,291,565   |  
|                           | Amortization of intangibles                                  |      |             | 842,932     |      |   |             | 143,744     |   |   |             | (730,072    | )
|                           | Unearned revenue                                             |      |             | 446,663     |      |   |             | 447,158     |   |   |             | 403,612     |  
|                           |                                                              |      |             |             |      |   |             |             |  
|                           |                                                              | $    | (15,199,500 | )           |      | $ | (19,631,163 | )           |   | $ | (25,161,469 | )          
|                           |                                                              |      |             |             |      |   |             |             |  



|    |                              
|--- | -----------------------------
|13. | COMMITMENTS AND CONTINGENCIES



F-20



---



##### Table of Contents













F-21



---



##### Table of Contents





|    |                           
|--- | --------------------------
|14. | VARIABLE INTEREST ENTITIES







Revenue Recognition




Property, Plant and Equipment




|                           |  |       |       | 
|-------------------------- |  | ----- | ----- | 
|                           |  | Years |      
|                           |  |       |      
|Buildings and improvements |  |       | 15-40 | 
|Equipment                  |  |       | 5-10  | 
|Furniture and fixtures     |  |       | 7     | 

F-22



---



##### Table of Contents





|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |             |             | 
|----------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------- | ---------- | ----------- | - | ---------- | ------------ | ---------- | - | --------- | ---------- | ---------- | - | ----------- | ----------- | ----------- | 
|                                                |                                                                                                                                          | As of June 30, 2005                 |            
|                                                |                                                                                                                                          |                                     |            
|                                                |                                                                                                                                          |                                     |             | Variable   |             |   |           
|                                                |                                                                                                                                          |                                     |             | Interest   |             |   |           
|                                                |                                                                                                                                          | Valley                              |             |            | Entities    |   |            | Eliminations |            |   | Company   |           
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|ASSETS                                          |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|CURRENT ASSETS:                                 |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|                                                | Cash and cash equivalents                                                                                                                |                                     | $           | 548,925    |             |   | $          | 773,472      |            |   | $         |           |            |   | $           | 1,322,397   |            
|                                                | Accounts receivable, net of allowance for doubtful accounts of
    $672,822                                                              |                                     |             | 16,825,355 |             |   |            | 248,851      |            |   |           | (117,696   | )          |   |             | 16,956,510  |            
|                                                | Inventory                                                                                                                                |                                     |             | 9,868,974  |             |   |            |             |            |   |           |           |            |   |             | 9,868,974   |            
|                                                | Prepaids and other current assets                                                                                                        |                                     |             | 1,026,410  |             |   |            | 10,000       |            |   |           |           |            |   |             | 1,036,410   |            
|                                                | Deferred tax assets                                                                                                                      |                                     |             | 1,774,379  |             |   |            |             |            |   |           |           |            |   |             | 1,774,379   |            
|                                                | Refundable taxes                                                                                                                         |                                     |             | 1,471,519  |             |   |            |             |            |   |           |           |            |   |             | 1,471,519   |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total current assets                |             |            | 31,515,562  |   |            |              | 1,032,323  |   |           |            | (117,696   | ) |             |             | 32,430,189  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|PROPERTY, PLANT AND EQUIPMENT:                  |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|                                                | Land                                                                                                                                     |                                     |             | 75,000     |             |   |            | 2,024,915    |            |   |           |           |            |   |             | 2,099,915   |            
|                                                | Buildings and improvements                                                                                                               |                                     |             | 7,512,593  |             |   |            | 13,904,065   |            |   |           |           |            |   |             | 21,416,658  |            
|                                                | Equipment                                                                                                                                |                                     |             | 99,138,620 |             |   |            | 1,193,886    |            |   |           |           |            |   |             | 100,332,506 |            
|                                                | Transportation equipment                                                                                                                 |                                     |             | 19,075,833 |             |   |            | 173,249      |            |   |           |           |            |   |             | 19,249,082  |            
|                                                | Furniture and fixtures                                                                                                                   |                                     |             | 8,581,988  |             |   |            | 174,322      |            |   |           |           |            |   |             | 8,756,310   |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total property, plant and equipment |             |            | 134,384,034 |   |            |              | 17,470,437 |   |           |            |           |   |             |             | 151,854,471 | 
|Accumulated depreciation                        |                                                                                                                                          |                                     | (53,073,285 | )          |             |   | (4,663,811 | )            |            |   |          |            |            |   | (57,737,096 | )          
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Net property, plant and equipment   |             |            | 81,310,749  |   |            |              | 12,806,626 |   |           |            |           |   |             |             | 94,117,375  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|OTHER ASSETS:                                   |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|                                                | Non-compete agreements, consulting agreements and customer
    lists, net of accumulated amortization of $7,329,315                      |                                     |             | 2,607,058  |             |   |            |             |            |   |           |           |            |   |             | 2,607,058   |            
|                                                | Goodwill                                                                                                                                 |                                     |             | 45,482,910 |             |   |            |             |            |   |           |           |            |   |             | 45,482,910  |            
|                                                | Deposits and other assets                                                                                                                |                                     |             | 434,687    |             |   |            | 13,742       |            |   |           |           |            |   |             | 448,429     |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total other assets                  |             |            | 48,524,655  |   |            |              | 13,742     |   |           |            |           |   |             |             | 48,538,397  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|TOTAL ASSETS                                    |                                                                                                                                          | $                                   | 161,350,966 |            |             | $ | 13,852,691 |              |            | $ | (117,696  | )          |            | $ | 175,085,961 |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                               
|LIABILITIES AND STOCKHOLDERS EQUITY            |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|CURRENT LIABILITIES:                            |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|                                                | Current maturities of long-term debt                                                                                                     |                                     | $           | 1,434,427  |             |   | $          | 2,240,017    |            |   | $         |           |            |   | $           | 3,674,444   |            
|                                                | Bank overdraft.                                                                                                                          |                                     |             |           |             |   |            |             |            |   |           |           |            |   |             |            |            
|                                                | Accounts payable                                                                                                                         |                                     |             | 8,390,239  |             |   |            | 288,818      |            |   |           |           |            |   |             | 8,679,057   |            
|                                                | Accrued compensation and employee benefits                                                                                               |                                     |             | 4,181,792  |             |   |            |             |            |   |           |           |            |   |             | 4,181,792   |            
|                                                | Interest rate derivatives                                                                                                                |                                     |             | 196,741    |             |   |            |             |            |   |           |           |            |   |             | 196,741     |            
|                                                | Other current liabilities                                                                                                                |                                     |             | 4,846,043  |             |   |            | 111,870      |            |   |           | (117,696   | )          |   |             | 4,840,217   |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total current liabilities           |             |            | 19,049,242  |   |            |              | 2,640,705  |   |           |            | (117,696   | ) |             |             | 21,572,251  | 
|LONG-TERM DEBT, less current maturities         |                                                                                                                                          |                                     | 54,832,776  |            |             |   | 6,092,987  |              |            |   |          |            |            |   | 60,925,763  |            
|DEFERRED TAX LIABILITIES                        |                                                                                                                                          |                                     | 26,935,848  |            |             |   |           |              |            |   |          |            |            |   | 26,935,848  |            
|OTHER LONG-TERM LIABILITIES                     |                                                                                                                                          |                                     | 670,615     |            |             |   |           |              |            |   |          |            |            |   | 670,615     |            
|INTEREST RATE DERIVATIVES                       |                                                                                                                                          |                                     |            |            |             |   |           |              |            |   |          |            |            |   |            |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total liabilities                   |             |            | 101,488,481 |   |            |              | 8,733,692  |   |           |            | (117,696   | ) |             |             | 110,104,477 | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|COMMITMENTS AND CONTINGENCIES                   |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|MINORITY INTEREST IN VARIABLE INTEREST ENTITIES |                                                                                                                                          |                                     |            |            |             |   |           |              |            |   | 5,118,999 |            |            |   | 5,118,999   |            
|STOCKHOLDERS EQUITY:                           |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            
|                                                | Preferred stock, par value $.01 per share 
    Authorized, 5,000,000 shares; none Issued or Outstanding                                 |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |             |            
|                                                | Common stock, par value $.001 per share 
    Authorized, 30,000,000 shares; Issued,
    9,620,084 shares, Outstanding, 9,574,999 shares |                                     |             | 9,620      |             |   |            | 3,800        |            |   |           | (3,800     | )          |   |             | 9,620       |            
|                                                | Paid-in-capital                                                                                                                          |                                     |             | 19,160,327 |             |   |            | 335,985      |            |   |           | (335,985   | )          |   |             | 19,160,327  |            
|                                                | Retained earnings                                                                                                                        |                                     |             | 41,185,428 |             |   |            | 4,779,214    |            |   |           | (4,779,214 | )          |   |             | 41,185,428  |            
|                                                | Accumulated other comprehensive loss                                                                                                     |                                     |             | (118,806   | )           |   |            |             |            |   |           |           |            |   |             | (118,806    | )          
|                                                | Treasury stock at cost, 45,085 shares                                                                                                    |                                     |             | (374,084   | )           |   |            |             |            |   |           |           |            |   |             | (374,084    | )          
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total stockholders equity          |             |            | 59,862,485  |   |            |              | 5,118,999  |   |           |            | (5,118,999 | ) |             |             | 59,862,485  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                                                                          | $                                   | 161,350,966 |            |             | $ | 13,852,691 |              |            | $ | (117,696  | )          |            | $ | 175,085,961 |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           

F-23



---



##### Table of Contents





|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |            |             | 
|----------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------- | ---------- | ----------- | - | ---------- | ------------ | ---------- | - | --------- | ---------- | ---------- | - | ----------- | ---------- | ----------- | 
|                                                |                                                                                                                                          | As of June 30, 2004                 |            
|                                                |                                                                                                                                          |                                     |            
|                                                |                                                                                                                                          |                                     |             | Variable   |             |   |           
|                                                |                                                                                                                                          |                                     |             | Interest   |             |   |           
|                                                |                                                                                                                                          | Valley                              |             |            | Entities    |   |            | Eliminations |            |   | Company   |           
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|ASSETS                                          |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|CURRENT ASSETS:                                 |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|                                                | Cash and cash equivalents                                                                                                                |                                     | $           | 105,699    |             |   | $          | 443,303      |            |   | $         |           |            |   | $           | 549,002    |            
|                                                | Accounts receivable, net of allowance for doubtful accounts of
    $747,309                                                              |                                     |             | 14,726,848 |             |   |            | 316,792      |            |   |           |           |            |   |             | 15,043,640 |            
|                                                | Inventory                                                                                                                                |                                     |             | 9,415,875  |             |   |            |             |            |   |           |           |            |   |             | 9,415,875  |            
|                                                | Prepaids and other current assets                                                                                                        |                                     |             | 873,681    |             |   |            | 10,000       |            |   |           |           |            |   |             | 883,681    |            
|                                                | Deferred tax assets                                                                                                                      |                                     |             | 2,346,484  |             |   |            |             |            |   |           |           |            |   |             | 2,346,484  |            
|                                                | Refundable taxes                                                                                                                         |                                     |             | 1,183,324  |             |   |            |             |            |   |           |           |            |   |             | 1,183,324  |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total current assets                |             |            | 28,651,911  |   |            |              | 770,095    |   |           |            |           |   |             |            | 29,422,006  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|PROPERTY, PLANT AND EQUIPMENT:                  |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|                                                | Land                                                                                                                                     |                                     |             | 55,000     |             |   |            | 2,128,176    |            |   |           |           |            |   |             | 2,183,176  |            
|                                                | Buildings and improvements                                                                                                               |                                     |             | 6,330,221  |             |   |            | 12,199,606   |            |   |           |           |            |   |             | 18,529,827 |            
|                                                | Equipment                                                                                                                                |                                     |             | 88,479,962 |             |   |            | 604,700      |            |   |           |           |            |   |             | 89,084,662 |            
|                                                | Transportation equipment                                                                                                                 |                                     |             | 17,912,966 |             |   |            | 145,549      |            |   |           |           |            |   |             | 18,058,515 |            
|                                                | Furniture and fixtures                                                                                                                   |                                     |             | 7,830,225  |             |   |            | 130,977      |            |   |           |           |            |   |             | 7,961,202  |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total property, plant and equipment |             |            | 120,608,374 |   |            |              | 15,209,008 |   |           |            |           |   |             |            | 135,817,382 | 
|Accumulated depreciation                        |                                                                                                                                          |                                     | (49,360,206 | )          |             |   | (3,788,204 | )            |            |   |          |            |            |   | (53,148,410 | )         
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Net property, plant and equipment   |             |            | 71,248,168  |   |            |              | 11,420,804 |   |           |            |           |   |             |            | 82,668,972  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|OTHER ASSETS:                                   |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|                                                | Non-compete agreements, consulting agreements and customer
    lists, net of accumulated amortization of $8,796,725                      |                                     |             | 2,711,337  |             |   |            |             |            |   |           |           |            |   |             | 2,711,337  |            
|                                                | Goodwill                                                                                                                                 |                                     |             | 40,997,738 |             |   |            |             |            |   |           |           |            |   |             | 40,997,738 |            
|                                                | Deposits and other assets                                                                                                                |                                     |             | 1,523,532  |             |   |            | 11,457       |            |   |           |           |            |   |             | 1,534,989  |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total other assets                  |             |            | 45,232,607  |   |            |              | 11,457     |   |           |            |           |   |             |            | 45,244,064  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|TOTAL ASSETS                                    |                                                                                                                                          | $                                   | 145,132,686 |            |             | $ | 12,202,356 |              |            | $ |          |            |            | $ | 157,335,042 |           
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                               
|LIABILITIES AND STOCKHOLDERS EQUITY            |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|CURRENT LIABILITIES:                            |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|                                                | Current maturities of long-term debt                                                                                                     |                                     | $           | 1,105,622  |             |   | $          | 1,546,312    |            |   | $         |           |            |   | $           | 2,651,934  |            
|                                                | Bank overdraft.                                                                                                                          |                                     |             | 918,046    |             |   |            | (250,000     | )          |   |           |           |            |   |             | 668,046    |            
|                                                | Accounts payable                                                                                                                         |                                     |             | 7,982,973  |             |   |            | 252,220      |            |   |           |           |            |   |             | 8,235,193  |            
|                                                | Accrued compensation and employee benefits                                                                                               |                                     |             | 3,734,967  |             |   |            |             |            |   |           |           |            |   |             | 3,734,967  |            
|                                                | Interest rate derivatives                                                                                                                |                                     |             | 1,760,338  |             |   |            |             |            |   |           |           |            |   |             | 1,760,338  |            
|                                                | Other current liabilities                                                                                                                |                                     |             | 2,378,582  |             |   |            | 112,869      |            |   |           |           |            |   |             | 2,491,451  |            
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total current liabilities           |             |            | 17,880,528  |   |            |              | 1,661,401  |   |           |            |           |   |             |            | 19,541,929  | 
|LONG-TERM DEBT, less current maturities         |                                                                                                                                          |                                     | 57,126,585  |            |             |   | 5,159,455  |              |            |   |          |            |            |   | 62,286,040  |           
|DEFERRED TAX LIABILITIES                        |                                                                                                                                          |                                     | 21,977,647  |            |             |   |           |              |            |   |          |            |            |   | 21,977,647  |           
|OTHER LONG-TERM LIABILITIES                     |                                                                                                                                          |                                     | 1,681,696   |            |             |   |           |              |            |   |          |            |            |   | 1,681,696   |           
|INTEREST RATE DERIVATIVES                       |                                                                                                                                          |                                     | 358,105     |            |             |   |           |              |            |   |          |            |            |   | 358,105     |           
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total liabilities                   |             |            | 99,024,561  |   |            |              | 6,820,856  |   |           |            |           |   |             |            | 105,845,417 | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|COMMITMENTS AND CONTINGENCIES                   |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|MINORITY INTEREST IN VARIABLE INTEREST ENTITIES |                                                                                                                                          |                                     |            |            |             |   |           |              |            |   | 5,381,500 |            |            |   | 5,381,500   |           
|STOCKHOLDERS EQUITY:                           |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |            |            |   |             |           
|                                                | Preferred stock, par value $.01 per share 
    Authorized, 5,000,000 shares; none Issued or Outstanding                                 |                                     |             |           |             |   |            |             |            |   |           |           |            |   |             |           |            
|                                                | Common stock, par value $.001 per share 
    Authorized, 30,000,000 shares; Issued,
    9,620,084 shares, Outstanding, 9,464,584 shares |                                     |             | 9,620      |             |   |            | 3,800        |            |   |           | (3,800     | )          |   |             | 9,620      |            
|                                                | Paid-in-capital                                                                                                                          |                                     |             | 18,905,761 |             |   |            | 335,985      |            |   |           | (335,985   | )          |   |             | 18,905,761 |            
|                                                | Retained earnings                                                                                                                        |                                     |             | 29,668,686 |             |   |            | 5,041,715    |            |   |           | (5,041,715 | )          |   |             | 29,668,686 |            
|                                                | Accumulated other comprehensive loss                                                                                                     |                                     |             | (1,184,309 | )           |   |            |             |            |   |           |           |            |   |             | (1,184,309 | )          
|                                                | Treasury stock at cost, 155,500 shares                                                                                                   |                                     |             | (1,291,633 | )           |   |            |             |            |   |           |           |            |   |             | (1,291,633 | )          
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|                                                |                                                                                                                                          | Total stockholders equity          |             |            | 46,108,125  |   |            |              | 5,381,500  |   |           |            | (5,381,500 | ) |             |            | 46,108,125  | 
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY      |                                                                                                                                          | $                                   | 145,132,686 |            |             | $ | 12,202,356 |              |            | $ |          |            |            | $ | 157,335,042 |           
|                                                |                                                                                                                                          |                                     |             |            |             |   |            |              |            |   |           |           

F-24



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##### Table of Contents





|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |            |            |   |             |            |             | 
|--------------------------------- | -------------------------------------------------------------- | -------------------------------- | ----------- | ---------- | ----------------- | - | --------- | ------------ | --------- | - | ---------- | ---------- | ---------- | - | ----------- | ---------- | ----------- | 
|                                  |                                                                | For the Year Ended June 30, 2005 |            
|                                  |                                                                |                                  |            
|                                  |                                                                |                                  |             | Variable   |                   |   |          
|                                  |                                                                | Valley                           |             |            | Interest Entities |   |           | Eliminations |           |   | Company    |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|NET SALES                         |                                                                | $                                | 167,698,695 |            |                   | $ | 2,135,677 |              |           | $ | (2,135,677 | )          |            | $ | 167,698,695 |           
|COSTS AND EXPENSES:               |                                                                |                                  |             |            |                   |   |           |              |           |   |            |            |            |   |             |           
|                                  | Cost of products sold, excluding depreciation and amortization |                                  |             | 78,345,074 |                   |   |           |             |           |   |            |           |            |   |             | 78,345,074 |            
|                                  | Operating, distribution and administrative                     |                                  |             | 58,201,287 |                   |   |           | 808,246      |           |   |            | (2,135,677 | )          |   |             | 56,873,856 |            
|                                  | Depreciation                                                   |                                  |             | 6,278,804  |                   |   |           | 432,231      |           |   |            |           |            |   |             | 6,711,035  |            
|                                  | Amortization of intangibles                                    |                                  |             | 1,108,172  |                   |   |           | 103          |           |   |            |           |            |   |             | 1,108,275  |            
|                                  | Loss (gain) on disposal of assets                              |                                  |             | 126,284    |                   |   |           | (134,704     | )         |   |            |           |            |   |             | (8,420     | )          
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|                                  |                                                                | Total costs and expenses         |             |            | 144,059,621       |   |           |              | 1,105,876 |   |            |            | (2,135,677 | ) |             |            | 143,029,820 | 
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|INCOME FROM OPERATIONS            |                                                                |                                  | 23,639,074  |            |                   |   | 1,029,801 |              |           |   |           |            |            |   | 24,668,875  |           
|INTEREST EXPENSE                  |                                                                |                                  | 4,066,401   |            |                   |   | 239,174   |              |           |   |           |            |            |   | 4,305,575   |           
|OTHER INCOME/(EXPENSE):           |                                                                |                                  |             |            |                   |   |           |              |           |   |            |            |            |   |             |           
|                                  | Interest and dividend income                                   |                                  |             | 186,098    |                   |   |           | 16,592       |           |   |            |           |            |   |             | 202,690    |            
|                                  | Other income (expense)                                         |                                  |             | 55,733     |                   |   |           | 263,369      |           |   |            |           |            |   |             | 319,102    |            
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|                                  |                                                                | Total other income               |             |            | 241,831           |   |           |              | 279,961   |   |            |            |           |   |             |            | 521,792     | 
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|EARNINGS BEFORE MINORITY INTEREST |                                                                |                                  | 19,814,504  |            |                   |   | 1,070,588 |              |           |   |           |            |            |   | 20,885,092  |           
|MINORITY INTEREST                 |                                                                |                                  |            |            |                   |   | 1,070,588 |              |           |   |           |            |            |   | 1,070,588   |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|NET EARNINGS BEFORE TAXES         |                                                                |                                  | 19,814,504  |            |                   |   |          |              |           |   |           |            |            |   | 19,814,504  |           
|PROVISION FOR INCOME TAXES        |                                                                |                                  | 7,443,834   |            |                   |   |          |              |           |   |           |            |            |   | 7,443,834   |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           
|NET EARNINGS                      |                                                                | $                                | 12,370,670  |            |                   | $ |          |              |           | $ |           |            |            | $ | 12,370,670  |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |           |   |            |           

F-25



---



##### Table of Contents





|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |            |            |   |             |            |             | 
|--------------------------------- | -------------------------------------------------------------- | -------------------------------- | ----------- | ---------- | ----------------- | - | --------- | ------------ | ------- | - | ---------- | ---------- | ---------- | - | ----------- | ---------- | ----------- | 
|                                  |                                                                | For the Year Ended June 30, 2004 |            
|                                  |                                                                |                                  |            
|                                  |                                                                |                                  |             | Variable   |                   |   |          
|                                  |                                                                | Valley                           |             |            | Interest Entities |   |           | Eliminations |         |   | Company    |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|NET SALES                         |                                                                | $                                | 154,455,606 |            |                   | $ | 1,046,559 |              |         | $ | (1,046,559 | )          |            | $ | 154,455,606 |           
|COSTS AND EXPENSES:               |                                                                |                                  |             |            |                   |   |           |              |         |   |            |            |            |   |             |           
|                                  | Cost of products sold, excluding depreciation and amortization |                                  |             | 71,557,747 |                   |   |           |             |         |   |            |           |            |   |             | 71,557,747 |            
|                                  | Operating, distribution and administrative                     |                                  |             | 57,930,774 |                   |   |           | 346,819      |         |   |            | (1,046,559 | )          |   |             | 57,231,034 |            
|                                  | Depreciation                                                   |                                  |             | 5,713,067  |                   |   |           | 98,076       |         |   |            |           |            |   |             | 5,811,143  |            
|                                  | Amortization of intangibles                                    |                                  |             | 1,662,980  |                   |   |           |             |         |   |            |           |            |   |             | 1,662,980  |            
|                                  | Loss (gain) on disposal of assets                              |                                  |             | 69,783     |                   |   |           | (295,202     | )       |   |            |           |            |   |             | (225,419   | )          
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|                                  |                                                                | Total costs and expenses         |             |            | 136,934,351       |   |           |              | 149,693 |   |            |            | (1,046,559 | ) |             |            | 136,037,485 | 
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|INCOME FROM OPERATIONS            |                                                                |                                  | 17,521,255  |            |                   |   | 896,866   |              |         |   |           |            |            |   | 18,418,121  |           
|INTEREST EXPENSE                  |                                                                |                                  | 5,579,162   |            |                   |   | 77,904    |              |         |   |           |            |            |   | 5,657,066   |           
|OTHER INCOME/(EXPENSE):           |                                                                |                                  |             |            |                   |   |           |              |         |   |            |            |            |   |             |           
|                                  | Interest and dividend income                                   |                                  |             | 220,147    |                   |   |           | 5,569        |         |   |            |           |            |   |             | 225,716    |            
|                                  | Other income (expense)                                         |                                  |             | 37,546     |                   |   |           | 55,704       |         |   |            |           |            |   |             | 93,250     |            
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|                                  |                                                                | Total other income               |             |            | 257,693           |   |           |              | 61,273  |   |            |            |           |   |             |            | 318,966     | 
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|EARNINGS BEFORE MINORITY INTEREST |                                                                |                                  | 12,199,786  |            |                   |   | 880,235   |              |         |   |           |            |            |   | 13,080,021  |           
|MINORITY INTEREST                 |                                                                |                                  |            |            |                   |   | 880,235   |              |         |   |           |            |            |   | 880,235     |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|NET EARNINGS BEFORE TAXES         |                                                                |                                  | 12,199,786  |            |                   |   |          |              |         |   |           |            |            |   | 12,199,786  |           
|PROVISION FOR INCOME TAXES        |                                                                |                                  | 4,519,927   |            |                   |   |          |              |         |   |           |            |            |   | 4,519,927   |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           
|NET EARNINGS                      |                                                                | $                                | 7,679,859   |            |                   | $ |          |              |         | $ |           |            |            | $ | 7,679,859   |           
|                                  |                                                                |                                  |             |            |                   |   |           |              |         |   |            |           



|    |             
|--- | ------------
|15. | SEGMENT DATA







F-26



---



##### Table of Contents







|                           |  |      |             |  |      |   |             | 
|-------------------------- |  | ---- | ----------- |  | ---- | - | ----------- | 
|                           |  | 2004 |             |  | 2005 |  
|                           |  |      |             |  |      |  
|Valley                     |  | $    | 145,132,686 |  |      | $ | 161,350,966 | 
|Variable Interest Entities |  |      | 12,202,356  |  |      |   | 13,734,995  | 
|                           |  |      |             |  |      |  
|Total assets               |  | $    | 157,335,042 |  |      | $ | 175,085,961 | 
|                           |  |      |             |  |      |  



|    |                                             
|--- | --------------------------------------------
|16. | QUARTERLY FINANCIAL INFORMATION (UNAUDITED):

|              |                            |                |   |        |             |  |   |          |  |  |            |        |  |  |   |        | 
|------------- | -------------------------- | -------------- | - | ------ | ----------- |  | - | -------- |  |  | ---------- | ------ |  |  | - | ------ | 
|              |                            | Quarter Ended  |  
|              |                            |                |  
|              |                            | September 30   |   |        | December 31 |  |   | March 31 |  |  | June 30(1) |       
|              |                            |                |   |        |             |  |   |          |  |  |            |       
|              |                            | (In Thousands) |  
|Fiscal 2005  |                            |                |   |        |             |  |   |          |  |  |            |        |  |  |   |       
|              | Net sales                  |                | $ | 36,201 |             |  | $ | 43,203   |  |  | $          | 50,488 |  |  | $ | 37,807 | 
|              | Income from operations     |                |   | 3,711  |             |  |   | 6,927    |  |  |            | 10,080 |  |  |   | 3,951  | 
|              | Net earnings               |                |   | 1,563  |             |  |   | 3,493    |  |  |            | 5,540  |  |  |   | 1,775  | 
|              | Basic earnings per share   |                |   | 0.16   |             |  |   | 0.37     |  |  |            | 0.58   |  |  |   | 0.19   | 
|              | Diluted earnings per share |                |   | 0.16   |             |  |   | 0.37     |  |  |            | 0.57   |  |  |   | 0.18   | 
|Fiscal 2004  |                            |                |   |        |             |  |   |          |  |  |            |        |  |  |   |       
|              | Net sales                  |                | $ | 32,435 |             |  | $ | 39,120   |  |  | $          | 47,926 |  |  | $ | 34,975 | 
|              | Income from operations     |                |   | 2,409  |             |  |   | 4,815    |  |  |            | 7,556  |  |  |   | 3,638  | 
|              | Net earnings               |                |   | 614    |             |  |   | 2,087    |  |  |            | 3,766  |  |  |   | 1,213  | 
|              | Basic earnings per share   |                |   | 0.07   |             |  |   | 0.22     |  |  |            | 0.40   |  |  |   | 0.13   | 
|              | Diluted earnings per share |                |   | 0.07   |             |  |   | 0.22     |  |  |            | 0.40   |  |  |   | 0.12   | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Operating, distribution and administrative expenses for the
    three and twelve months ended June 30, 2005 include a
    reduction of $0.5 million and $2.1 million,
    respectively, in rent expense, partially offset by other
    expenses of $0.2 million and $0.8 million,
    respectively, as a result of consolidating under FIN46R the
    Variable Interest Entities owned by a related party that leases
    properties to Valley.



| |                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Operating, distribution and administrative expenses for the
    three and twelve months ended June 30, 2004 include a
    reduction of $0.8 million in rent expense, partially offset
    by other expenses of $0.3 million, as a result of
    consolidating under FIN46R the Variable Interest Entities owned
    by a related party that leases properties to Valley as of
    March 31, 2004.

F-27



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##### Table of Contents



3.1
    
    Articles of Amendment (a)3.2
    
    Bylaws (a)4.1
    
    Form of Certificate for Common Stock (a)10.2
    
    Master Lease Agreement dated as of May 1, 2001 between the Company and West Rentals, Inc. (d)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. (a)10.7
    
    Agreement dated October 5, 1992 between the Company and John R. Bushwack providing for death,
disability and retirement benefits (a)+10.10
    
    Lease Agreement dated as of April 1, 1998 between the Company and Acetylene Products, Inc. (d)10.11
    
    1997 Stock Option Plan as amended (d)+10.18
    
    Second Amendment and Restated Credit Agreement dated May 1, 2000 between the Company and Bank
One, Indiana NA, as agent (c)10.19
    
    Agreement dated July 1, 2001 between the Company and William A. Indelicato providing for certain
Consulting payments (d)+10.20
    
    Lease Agreement dated as of April 1, 2000 between the Company and Real Equip-Lease, LLC (d)10.22
    
    Amendment dated June 28, 2002 to Second Amendment and Restated Credit Agreement dated May 1,
2000 between the Company and Bank One, Indiana NA, as agent (f)10.23
    
    Agreement dated July 1, 2002 between the Company and William A. Indelicato providing for certain
Consulting payments (f)+10.24
    
    Agreement dated February 11, 2002 between the Company and August E. Maier providing for certain
Consulting payments (f)+10.25
    
    Agreement dated June 30, 2002 between the Company and John R. Bushwack relating to assignment of
life insurance policy (f)+10.26
    
    Agreement dated June 30, 2002 between the Company and Robert D. Scherich relating to assignment of
life insurance policy (f)+10.27
    
    Lease Agreement dated as of November 5, 1997 between the Company and EquipLease Corp (f)10.28
    
    Lease Agreement dated as of September 24, 2001 between the Company and GEW Realty LLC (f)10.29
    
    Amendment dated October 28, 2002 to Second Amendment and Restated Credit Agreement dated May 1,
2000 between the Company and Bank One, Indiana NA, as agent (g)10.30
    
    Agreement dated October 15, 2002 between the Company and Michael L. Tyler (g)+10.31
    
    Agreement dated November 22, 2002 between the Company and John R. Bushwack (h)+10.32
    
    Lease Agreement dated as of May 1, 2003 between the Company and EquipLease Corp (i)10.33
    
    Amendment dated May 13, 2003 to Lease Agreement dated as of November 5, 1997 between the Company
and West Rentals, Inc. (i)10.34
    
    Amendment dated June 30, 2003 to Second Amendment and Restated Credit Agreement dated May 1,
2000 between the Company and Bank One, Indiana NA, as agent (i)10.35
    
    Agreement dated June 1, 2003 between the Company and Michael L. Tyler (i)+




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##### Table of Contents



10.36
    
    Agreement dated June 1, 2003 between the Company and Gerald W. Zehala (i)+10.37
    
    Agreement dated June 1, 2003 between the Company and James P. Hart(i)+10.38
    
    Agreement dated July 1, 2003 between the Company and William A. Indelicato providing for certain
Consulting payments (i)+10.39
    
    Fourth Amendment dated October 23, 2003 to Second Amended and Restated Credit Agreement dated
May 1, 2000 between the Company and Bank One, Indiana NA, as agent10.40
    
    Addendum #19 dated March 31, 2004 to Lease Agreement dated as of November 5, 1997 between the
Company and West Rentals, Inc.10.41
    
    Third Amended and Restated Credit Agreement dated April 30, 2004 between the Company and Bank One,
Indiana NA, as agent10.42
    
    Agreement dated June 1, 2004 between the Company and Gerald W. Zehala +10.43
    
    Addendum #18 dated June 7, 2004 to Lease Agreement dated as of November 5, 1997 between the
Company and West Rentals, Inc.10.44
    
    Addendum #20 dated June 30, 2004 to Lease Agreement dated as of November 5, 1997 between the
Company and West Rentals, Inc.10.45
    
    Agreement dated July 1, 2004 between the Company and William A. Indelicato providing for certain
Consulting payments+10.46
    
    Agreement dated March 9, 2005 between the Company and James P. Hart (filed herewith) +10.47
    
    Agreement dated March 9, 2005 between the Company and Gerald W. Zehala (filed herewith)+14.1
    
    Code of Business Conduct and Ethics21.1
    
    Subsidiaries of Registrant (a)23.2
    
    Consent of PricewaterhouseCoopers
LLP (filed herewith)31.1
    
    Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)31.2
    
    Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith)32.1
    
    Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith)32.2
    
    Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(furnished herewith)(a)
    
    Incorporated by reference to the Companys Registration Statement on Form
S-1, Reg. No. 333-19973.(b)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K
filed September 28, 1999.(c)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q
filed May 15, 2000.(d)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K
filed September 28, 2001.(e)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q filed May 15,
2002.




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##### Table of Contents



(f)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K
filed September 27, 2002.(g)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q filed November 14,
2002.(h)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q filed February 13,
2003.(i)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K filed September 29, 2003.+
    
    A management or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item
14(c) of Form 10-K.