Valley National Gases Inc – IPO: ‘424B1’ on 4/10/97

As of:  Thursday, 4/10/97   ·   Accession #:  950114-97-194   ·   File #:  333-19973

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                            81    524K 

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                                              Filed Pursuant to Rule 424(b)(1)
                                        Registration No. 333-19973
2,000,000 SHARES  

[LOGO]   VALLEY(TM)   
  ----------------------------
  NATIONAL GASSES INCORPORATED
  ----------------------------
  COMMON STOCK

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

Of the 2,000,000 shares of common stock, par value $0.001 per share (the  
"Common Stock"), of Valley National Gases Incorporated (the "Company")          
offered hereby (the "Offering"), 1,918,000 shares are being sold by the         
Company and 82,000 shares are being sold by certain shareholders of the Company 
(the "Selling Shareholders"). The Company will not receive any of the           
proceeds from the sale of shares by the Selling Shareholders. See "Principal    
and Selling Shareholders."                                                      

Prior to the Offering, there has been no public market for the Company's
Common Stock. The initial public offering price will be $8.00 per share. See    
"Underwriting" for a discussion of the factors considered in determination of   
the initial public offering price. The Company has received approval for the    
trading of its Common Stock on the Nasdaq National Market under the symbol      
"VNGI" subject to official notice of issuance.                                  

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

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN      
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK 
OFFERED HEREBY.                                                                 
----------------  

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE                   
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES                  
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR          
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY          
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION          
TO THE CONTRARY IS A CRIMINAL OFFENSE.                

                                                        [Enlarge/Download Table]
=================================================================================================================================

                                                                            UNDERWRITING                             PROCEEDS TO 
                                                                            DISCOUNTS AND        PROCEEDS TO           SELLING   
                                                         PRICE TO PUBLIC   COMMISSIONS<F1>       COMPANY<F2>        SHAREHOLDERS 
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
  Per Share...........................................        $8.00             $0.56               $7.44               $7.44    
---------------------------------------------------------------------------------------------------------------------------------
  Total<F3>...........................................     $16,000,000       $1,120,000          $14,269,920          $610,080   
=================================================================================================================================
<FN>                                                                                                                             
<F1> The Company and the Selling Shareholders have agreed to indemnify the                                                       
     Underwriters against certain liabilities, including liabilities under the                                                   
     Securities Act of 1933, as amended. See "Underwriting."                                                                     
<F2> Before deducting offering expenses payable by the Company, estimated at                                                     
     $600,000.                                                                                                                   
<F3> The Company has granted the Underwriters a 30-day option to purchase up to                                                  
     an additional 300,000 shares of Common Stock solely to cover                                                                
     over-allotments, if any. If such option is exercised in full, the total                                                     
     Price to Public, Underwriting Discounts and Commissions and Proceeds to                                                     
     Company will be $18,400,000, $1,288,000 and $16,501,920, respectively.                                                      
     See "Underwriting."                                                                                                         

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

   The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them and subject to    
certain conditions. The Underwriters reserve the right to withdraw, cancel or   
modify such offer or to reject any orders in whole or in part. It is expected   
that delivery of the shares of Common Stock will be made on or about April 15,  
1997.                                                                           

A.G. EDWARDS & SONS, INC.                               OPPENHEIMER & CO., INC. 

The date of this Prospectus is April 10, 1997.    

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  [The map to be included in this space depicts the nine states in which the
Company operates: Delaware, Kentucky, Maryland, North Carolina, Ohio,           
Pennsylvania, Tennessee, Virginia and West Virginia. The Company's locations in 
those states are named and identified by a dot.]                                
[MAP]     
This discussion contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words    
"anticipate," "believe," "estimate," "expect" and similar expressions           
as they relate to the Company or its management are intended to identify such   
forward-looking statements. The Company's actual results, performance or        
achievements could differ materially from those expressed in, or implied by,    
these forward-looking statements as a result of, among other things, the        
factors set forth in the section entitled "Risk Factors."                       
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT  
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,         
INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID.  
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."                      

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PROSPECTUS SUMMARY  
 The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Financial Statements,    
including the Notes thereto, appearing elsewhere in this Prospectus. All        
references in this Prospectus to a fiscal year refer to the fiscal year ending  
on June 30 of that year. Unless otherwise indicated, the information in this    
Prospectus (i) assumes no exercise of the over-allotment option granted to the  
Underwriters and (ii) assumes the Company implements a holding company          
structure prior to the completion of the Offering. See "The Reorganization."    
Unless the context otherwise indicates, references to the Company include       
Valley National Gases Incorporated and its wholly-owned subsidiaries.           

THE COMPANY 

The Company is a leading packager and distributor of industrial, medical
and specialty gases, welding equipment and supplies, and propane in nine states 
in the mid-Atlantic and midwestern regions of the United States. The Company's  
net sales have grown, primarily as a result of acquisitions, at a compound      
annual rate of approximately 17% per year since the Company started business in 
1958, increasing from $190,000 in that year to $64.6 million on a pro forma     
combined basis in fiscal 1996. In fiscal 1996, gases accounted for              
approximately 46% of net sales, welding equipment and supplies accounted for    
approximately 40% of net sales, and cylinder and tank rental accounted for      
approximately 14% of net sales.                                                 

  The Company's gas operations consist primarily of the packaging and mixing
of industrial, medical and specialty gases, such as oxygen, nitrogen and argon, 
in pressurized cylinders and the transportation of these cylinders to customers 
from one of the Company's 40 distribution and retail locations. The Company     
also distributes propane to industrial and residential customers. Customers pay 
a rental fee for use of the Company's cylinders. The Company owns approximately 
290,000 cylinders, which require minimal maintenance and have useful lives that 
the Company expects will extend on average for 50 years or longer. The Company  
selectively participates in the small bulk gas market through the delivery of   
gases in cryogenic transports and the storage of gases in cryogenic tanks and   
propane tanks, which are also rented to bulk gas customers. The Company owns    
approximately 7,000 bulk propane tanks and 250 bulk cryogenic tanks, which have 
useful lives generally less than those of cylinders. In connection with the     
distribution of gases, the Company sells welding equipment and supplies,        
including welding machines, wire, fluxes and electrodes and a wide variety of   
supporting equipment.                                                           

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

  The Company's principal business strategy is to aggressively pursue growth
through the acquisition of other independent distributors and also through      
internally generated growth. Since the Company was founded, it has completed 38 
acquisitions. Since January 1, 1996, the Company has acquired four independent  
distributors, including Weldco, Inc. ("Weldco") with annual sales of            
approximately $11 million in its most recent fiscal year and operations in      
Cincinnati and Dayton, Ohio, and Weber Gas & Welding Supply Co., Inc. ("Weber") 
with annual sales of approximately $5 million in its most recent fiscal year and
operations in western Pennsylvania. The integration of Weldco and Weber into    
the Company's existing operations is currently in progress, with the benefits   
of integration expected to be realized in the next two to eight quarters.       
Management believes there will continue to be numerous attractive acquisition   
candidates available to the Company as a result of the consolidation trend in   
the industry and that the Company will be able to successfully integrate        
acquired operations into its base business, generating growth and operational   
synergies. Acquisitions will be financed primarily with borrowings under the    
Company's credit facility and seller financing. While highly focused on         
external growth, management believes that the Company's competitive strengths   
will allow it to increase sales and improve market share in existing markets,   
while maintaining acceptable levels of profitability.                           

The Company's principal executive offices are located at 67 43rd Street,
Wheeling, West Virginia 26003 and its telephone number is (304) 232-1541.       

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THE OFFERING  

                                                        [Enlarge/Download Table]
                                                                                             
Common Stock offered by:                                                                     
    The Company...............................  1,918,000 Shares                             
    Selling Shareholders......................  82,000 Shares                                
Common Stock to be outstanding                                                               
  after the Offering<F1>......................  9,320,084 Shares                             
Use of proceeds...............................  For repayment of indebtedness, payment of the
                                                S Corporation Distribution and for general   
                                                corporate purposes. See "Use of Proceeds" and
                                                "S Corporation Distribution."                
Nasdaq National Market symbol.................  VNGI                                         

<FN>                                                                                         
--------                                                                                     
<F1> Excludes 650,000 shares of Common Stock reserved for issuance under the                 
     Company's 1997 Stock Option Plan, of which options to purchase 175,000                  
     shares will be granted effective as of the closing of the Offering.                     
     Includes (i) 135,000 shares of Common Stock to be issued to Weldco or                   
     certain shareholders of Weldco immediately prior to the closing of the                  
     Offering pursuant to the purchase agreement among the Company, Weldco and               
     certain other parties, (ii) 170,718 shares of Common Stock to be issued to              
     two executive officers immediately prior to the closing of the Offering in              
     connection with the termination of certain deferred compensation                        
     agreements and (iii) 96,366 shares of Common Stock to be issued to a                    
     director immediately prior to the closing of the Offering pursuant to a                 
     right under a consulting agreement to convert deferred consulting payments              
     to Common Stock. See "Management--Benefit Plans" and "Certain                           
     Relationships and Related Transactions."                                                

RISK FACTORS  

  For a discussion of considerations relevant to an investment in the Common
Stock, see "Risk Factors."                                                      

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                                                        [Enlarge/Download Table]
                                  SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA                                                 

                                                                                                                         PRO      
                                                                                     PRO                                FORMA     
                                                                                    FORMA          SIX MONTHS            SIX      
                                                                                     YEAR            ENDED             MONTHS     
                                          YEARS ENDED JUNE 30,                      ENDED         DECEMBER 31,          ENDED     
                           ---------------------------------------------------     JUNE 30,    ------------------     DEC. 31,    
                            1992       1993       1994       1995       1996       1996<F1>     1995       1996       1996<F1>    
                           -------    -------    -------    -------    -------     --------    -------    -------     ---------   
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)                                   
                                                                                                                                  
STATEMENT OF                                                                                                                      
 OPERATIONS DATA:                                                                                                                 
    Net sales............  $30,789    $35,251    $39,166    $44,914    $53,612     $64,585     $24,138    $33,777      $37,079    
    Gross profit.........   17,672     20,340     22,322     24,983     29,995      33,903      13,460     18,273       19,632    
    Income from                                                                                                                   
     operations..........    2,982      3,281      3,828      4,183      5,000       4,446       2,265      2,772        2,515    
    Net income<F2>.......    2,020      2,419      3,061      3,555      4,101       3,139       1,896      1,929        1,661    
    Pro forma net                                                                                                                 
     income<F3>..........    1,212      1,451      1,837      2,133      2,461       1,884       1,138      1,157          998    
    Pro forma net income                                                                                                          
      per common                                                                                                                  
      share<F3>..........  $  0.17    $  0.20    $  0.25    $  0.29    $  0.30     $  0.23     $  0.16    $  0.14      $  0.12    
    Pro forma weighted                                                                                                            
      average shares                                                                                                              
      outstanding<F4>....    7,267      7,267      7,267      7,267      8,335<F5>   8,335<F5>   7,267      8,335<F5>    8,335<F5>

OTHER FINANCIAL DATA:                                                                                                             
    Depreciation and                                                                                                              
      amortization.......  $ 2,169    $ 2,324    $ 2,790    $ 3,112    $ 4,700     $ 5,756     $ 1,999    $ 2,934      $ 3,197    
    Capital                                                                                                                       
     expenditures........    1,055      1,218      2,908      4,426      3,647       4,151       1,288      1,377        1,464    
    Cash flow from                                                                                                                
      operating                                                                                                                   
      activities.........    4,224      4,479      5,971      6,317      7,423          --       2,415      1,187           --    
    Cash flow from                                                                                                                
      investing                                                                                                                   
      activities.........     (898)    (1,185)    (4,080)    (7,167)    (9,179)         --      (6,419)    (5,781)          --    
    Cash flow from                                                                                                                
      financing                                                                                                                   
      activities.........   (1,976)    (3,082)    (1,846)     1,624      2,450          --       3,754      3,852           --    

OTHER NON-GAAP FINANCIAL                                                                                                          
 DATA:                                                                                                                            
    EBITDA<F6>...........  $ 5,518    $ 5,947    $ 6,889    $ 7,739    $10,362     $10,864     $ 4,570    $ 5,856      $ 5,864    


                                                          DECEMBER 31, 1996                                                       
                                                     -------------------------                                                    
                                                                  PRO FORMA AS                                                    
                                                     ACTUAL       ADJUSTED<F7>                                                    
                                                     -------      ------------                                                    
                                                          (IN THOUSANDS)                                                          
                                                                                                                                  
BALANCE SHEET DATA:                                                                                                               
    Working capital...............................   $ 9,709        $ 9,966                                                       
    Total assets..................................    62,471         62,471                                                       
    Total debt including redeemable common                                                                                        
      stock.......................................    35,717         32,947                                                       
    Shareholders' equity..........................    17,911         17,489                                                       
<FN>                                                                                                                              
---------                                                                                                                         
<F1> The pro forma statement of operations data gives effect to the acquisition                                                   
     of Weldco as if it had occurred on July 1, 1995 and the application of                                                       
     the estimated net proceeds of the Offering.                                                                                  

<F2> For all periods shown, the Company elected to be treated as an S                                                             
     Corporation. As a result, the income of the Company was taxed for federal                                                    
     and state purposes directly to the Company's shareholders rather than to                                                     
     the Company.                                                                                                                 

<F3> The pro forma net income and pro forma net income per common share reflect                                                   
     federal and state income taxes, assuming a 40% statutory tax rate, as if                                                     
     the Company had been taxed as a C Corporation for all periods presented.                                                     

<F4> Pro forma weighted average number of shares outstanding used to calculate                                                    
     pro forma net income per share is based on the historical weighted average                                                   
     number of shares outstanding, as adjusted to reflect (i) the issuance of                                                     
     170,718 shares of Common Stock to two executive officers immediately prior                                                   
     to the closing of the Offering in connection with the termination of                                                         
     certain deferred compensation agreements and (ii) the issuance of 96,366                                                     
     shares of Common Stock to a director immediately prior to the closing of                                                     
     the Offering pursuant to a right under a consulting agreement to convert                                                     
     deferred consulting payments to Common Stock. See "Management--Benefit                                                       
     Plans" and "Certain Relationships and Related Transactions." In                                                              
     connection with these compensation and consulting arrangements, the                                                          
     Company will incur a one-time expense of $1.9 million in the period in                                                       
     which the closing of the Offering occurs.                                                                                    

<F5> Further adjusted to reflect the assumed issuance of 1,068,208 shares of                                                      
     Common Stock to fund the excess of dividends (including the estimated S                                                      
     Corporation Distribution) over net income for the six months ended                                                           
     December 31, 1996.                                                                                                           

<F6> EBITDA represents the earnings of the Company before income taxes, net                                                       
     interest expense, depreciation and amortization and other noncash items                                                      
     reducing net income. EBITDA is not a measure of financial performance                                                        
     under generally accepted accounting principles ("GAAP") and may not be                                                       
     comparable to other similarly titled measures by other companies.                                                            
     Accordingly, it does not represent net income or cash flows from                                                             
     operations as defined by GAAP and does not necessarily indicate that cash                                                    
     flows will be sufficient to fund cash needs. As a result, EBITDA should                                                      
     not be considered an alternative to net income as an indicator of                                                            
     operating performance or to cash flows as a measure of liquidity. The                                                        
     Company incurs significant capital expenditures and incurs debt, primarily                                                   
     related to acquisitions, which are not reflected in EBITDA. As such, the                                                     
     Company has provided above cash flows from operating, investing and                                                          
     financing activities, and capital expenditures which reflect these                                                           
     transactions. The Company has included information concerning EBITDA as it                                                   
     understands that it is used by certain investors as one measure of an                                                        
     issuer's historical ability to service its debt.                                                                             

<F7> Adjusted to give effect to (i) the payment of the S Corporation                                                              
     Distribution estimated to be $10.1 million at December 31, 1996, (ii) the                                                    
     recognition of a deferred tax liability of approximately $4.2 million upon                                                   
     termination of the Company's S Corporation status, (iii) the issuance of                                                     
     1,918,000 shares of Common Stock by the Company at an initial public                                                         
     offering price of $8.00 per share and the application of the net proceeds                                                    
     therefrom, (iv) the issuance of 135,000 shares of Common Stock to Weldco                                                     
     (or certain shareholders of Weldco), and the retirement of indebtedness                                                      
     payable to Weldco in the aggregate principal amount of $1,720,000, in each                                                   
     case immediately prior to the closing of the Offering pursuant to the                                                        
     purchase agreement among the Company, Weldco and certain other parties,                                                      
     (v) the issuance of 170,718 shares of Common Stock to two executive                                                          
     officers immediately prior to the closing of the Offering in connection                                                      
     with the termination of certain deferred compensation agreements, (vi) the                                                   
     issuance of 96,366 shares of Common Stock to a director immediately prior                                                    
     to the closing of the Offering pursuant to a right under a consulting                                                        
     agreement to convert deferred consulting payments to Common Stock, (vii)                                                     
     recognition of an expense of $1.9 million ($1.1 million after assumed                                                        
     taxes) in connection with the compensation and consulting arrangements and                                                   
     (viii) the cancellation of treasury stock. See "Use of Proceeds," "S                                                         
     Corporation Distribution," "Management--Benefit Plans" and "Certain                                                          
     Relationships and Related Transactions."                                                                                     

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RISK FACTORS  

In addition to the other information in this Prospectus, the following  
factors should be considered carefully by prospective investors in evaluating   
the Company before purchasing the Common Stock offered hereby. This Prospectus  
contains forward-looking statements that involve risks and uncertainties.       
Actual results could differ from those discussed in the forward-looking         
statements as a result of certain factors, including those set forth below and  
elsewhere in this Prospectus.                                                   

THE COMPANY MAY NOT BE SUCCESSFUL IN MAKING ACQUISITIONS                        

The Company has historically expanded its business primarily through    
acquisitions. A key part of the Company's business strategy is the continuation 
of growth through strategic acquisitions. The Company will consider and         
evaluate acquisitions on a continuing basis, although it currently has no       
material acquisitions under consideration. There can be no assurance that the   
Company will continue to be able to identify attractive or willing acquisition  
candidates, or that the Company will be able to acquire such candidates on      
economically acceptable terms. The Company will compete with other distributors 
for suitable acquisition candidates. The Company has a revolving loan in the    
amount of $25 million to finance acquisitions, of which $10 million was         
available for borrowing at December 31, 1996. The Company believes that it      
could increase the amount of the credit facility, or obtain financing from      
other sources, if necessary to finance an acquisition. To the extent cash and   
available borrowings are not adequate to finance acquisitions, there can be no  
assurance that the Company will be able to obtain adequate financing for any    
acquisition or that, if available, such financing would be on terms acceptable  
to the Company. See "Business--Business Strategy" and "Management's             
Discussion and Analysis of Financial Condition and Results of                   
Operations--Liquidity and Capital Resources."                                   

RISKS ASSOCIATED WITH THE SUCCESSFUL ASSIMILATION OF ACQUISITIONS               

  The success of the Company's acquisition strategy will depend, among other
factors, upon its ability to successfully integrate acquired businesses with    
existing operations in a timely manner, at reasonable costs. There can be no    
assurance that acquired companies would perform in accordance with management's 
expectations or that the Company would not encounter unanticipated problems or  
liabilities. Some acquisitions have had, and the Company expects some future    
acquisitions may have, a dilutive effect upon the Company's income from         
operations and net income before tax for a short period following consummation. 
This temporary dilution occurs because some of the benefits of acquisitions,    
such as leveraging of operating and administrative expenses, improved product   
gross margins and real sales growth, occur over a period ranging from two to    
eight quarters, depending upon the complexity of integrating each acquisition   
into the Company's existing operations.                                         

RISKS ASSOCIATED WITH MANAGING GROWTH                                           

   The Company has grown rapidly in recent years. A continuing period of rapid
growth could place a significant strain on the Company's management, operations 
and other resources. The Company's ability to manage its growth will require it 
to continue to invest in its operational, financial and management information  
systems, and to attract, retain, motivate and effectively manage its employees. 
The inability of the Company's management to manage growth effectively would    
have a material adverse effect on the financial condition, results of operation 
and business of the Company.                                                    

COMPETITION                                                                     

  The Company's profitability may be affected by competition, which is based
primarily on customer loyalty, service and to a lesser extent, price. The       
Company has several competitors in all of the markets in which it operates,     
some of which are substantially larger and have substantially greater resources 
than the Company. Many customers tend to develop long-term relationships with   
their distributor and, therefore, it may be difficult to obtain new customers   
other than through the acquisition of other distribution businesses.            

DEPENDENCE ON KEY PERSONNEL                                                     

The Company's businesses are managed by a small number of management and
operating personnel, the loss of certain of whom could have a material adverse  
effect on the Company. See "Management." The Company believes that its          
ability to manage its planned growth successfully will depend in large part on  
its continued ability to attract and retain highly skilled and qualified        
personnel. None of the Company's key executives has a written employment        

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agreement or non-compete agreement with the Company except for John R. Bushwack 
who has a non-compete agreement with the Company. The Company maintains key     
person life insurance on Gary E. West, Lawrence E. Bandi and John R. Bushwack.  
See "Management" for detailed information on the Company's management and       
directors.                                                                      

DEPENDENCE ON KEY SUPPLIERS                                                     
There are several competing suppliers of most of the products that the  
Company purchases. The Company purchases industrial gases pursuant to           
short-term supply arrangements and open purchase orders with three of the five  
major gas producers in the United States. One such producer accounted for       
approximately 80% of the Company's gas purchases in fiscal 1996. The Company    
purchases welding equipment and consumable supplies from approximately 85       
primary vendors, of which purchases from the top five vendors represented       
approximately 61% of total purchases in fiscal 1996. The Company purchases      
most of its propane from three suppliers. The Company is not dependent upon     
any single supplier for propane and supplies have historically been readily     
available. If a particular supplier were to unexpectedly discontinue sales      
of a product to the Company, the Company believes it would be able to           
readily secure alternate sources of supply. However, the Company could          
experience temporary decreases in its profit margins if its arrangements        
with such alternate sources of supply were less favorable to the Company        
than its current arrangements with suppliers.                                   

CONTROL BY PRINCIPAL SHAREHOLDER                                                

Upon completion of the Offering, Gary E. West, Chairman of the Board of 
Directors, will control approximately 75.1% of the outstanding shares of Common 
Stock (72.8% if the Underwriters' over-allotment option is exercised in full).  
If all outstanding options to purchase Common Stock were exercised (and none    
are currently vested), Mr. West would control approximately 73.7% of the        
outstanding shares of Common Stock (71.5% if the Underwriters' over-allotment   
option is exercised in full). Mr. West has the ability to exercise effective    
control over the election of the Company's Board of Directors and the outcome   
of corporate actions requiring shareholder approval. See "Management" and       
"Principal and Selling Shareholders."                                           

PRODUCT LIABILITY                                                               

 The Company's business entails an inherent risk of liability in the event
of product failure or claim of it caused by use of the Company's products. The  
Company has not had any material claims made nor is it aware of any material    
claims against it based upon the use or the failure of its products. The        
Company maintains product liability insurance against any such claims in        
amounts it believes to be adequate. There can be no assurance that the Company  
will not be subject to such claims, that any claim will be successfully         
defended, or if the Company is found liable, that the claim will not exceed the 
limits of the Company's insurance. There is also no assurance that the Company  
will be able to continue to obtain product liability insurance on acceptable    
terms. Product liability claims could have a material adverse effect on the     
Company.                                                                        

BLANK CHECK PREFERRED STOCK; CERTAIN ANTI-TAKEOVER PROVISIONS                   

The Company's Articles of Incorporation (the "Articles") give the Board 
of Directors the authority to issue up to 5,000,000 shares of preferred stock,  
$.01 par value per share (the "Preferred Stock"), and to determine the price,   
rights, preferences and privileges of those shares without any further vote or  
action by the shareholders. The rights of the holders of Common Stock will be   
subject to, and may be adversely affected by, the rights of the holders of any  
Preferred Stock that may be issued in the future. The issuance of shares of     
Preferred Stock, while potentially providing desirable flexibility in           
connection with possible acquisitions and other corporate purposes, could have  
the effect of making it more difficult for a third party to acquire a majority  
of the outstanding voting stock of the Company. The Company has no present      
intention to issue shares of Preferred Stock.                                   

Furthermore, certain provisions of the Articles, the Company's Bylaws   
(the "Bylaws") and the Pennsylvania Business Corporation Law, including         
a provision that provides for the Board of Directors to be divided into         
three classes to serve for staggered three-year terms, could limit the price    
that certain investors might be willing to pay in the future for shares of      
the Common Stock and may have the effect of delaying or preventing a            
change-in-control of the Company. These provisions may also reduce the          
likelihood of an acquisition of the Company at a premium price by               
another person or entity. See "Description of Capital Stock--Common Stock,"     
"--Anti-Takeover Effects of Provisions of the Company's Articles and            
Bylaws" and "--Pennsylvania Anti-Takeover Laws."                                
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SHARES ELIGIBLE FOR FUTURE SALE; POSSIBLE ADVERSE EFFECT ON FUTURE MARKET       
PRICES; PRAXAIR RIGHT OF FIRST REFUSAL                                          

Sales of substantial numbers of additional shares of Common Stock in the
public market could adversely affect the market price of the Common Stock and   
make it more difficult for the Company to raise funds through future equity     
offerings. Upon completion of the Offering, Gary E. West, the Company's         
Chairman, will control approximately 75.1% of the Common Stock (72.8% if the    
Underwriters' over-allotment option is exercised in full). See "Principal and   
Selling Shareholders." A sale by Mr. West of these shares could adversely       
affect the market price of the Common Stock. Mr. West and other shareholders    
holding, in the aggregate, 7,320,084 of the 9,320,084 shares to be outstanding  
immediately after the closing of the Offering (the "Previously Issued           
Shares") have agreed to enter into agreements under which they will agree,      
other than with the consent of A.G. Edwards & Sons, Inc., not to sell such      
shares for a period of 180 days following the completion of the Offering. At    
the expiration of such 180-day period, all of the Previously Issued Shares will 
be eligible for sale, subject to volume and other limitations of Rule 144 under 
the Securities Act of 1933, as amended (the "Securities Act"). See "Shares      
Eligible for Future Sale." Following effectiveness of the registration          
statement covering the shares offered hereby, the Company will register on Form 
S-8 under the Securities Act 650,000 shares of Common Stock issuable under the  
Company's 1997 Stock Option Plan, which registrations are expected to become    
effective upon filing. There will be options to purchase 175,000 shares of      
Common Stock outstanding effective as of the closing of the Offering, none of   
which will be exercisable at such time. See "Management--Benefit Plans,"        
"Description of Capital Stock" and "Shares Eligible for Future Sale."           

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

After completion of the Offering, after giving effect to the issuance of    
Common Stock to certain persons contemplated to take place immediately prior to 
the Offering, Mr. West will be the beneficial owner of approximately 75.1% of   
the Common Stock (72.8% if the Underwriters' over-allotment option is exercised 
in full). Under the Right of First Refusal Agreement, there is no limitation on 
the Company's ability to issue additional shares of Capital Stock, or options or
securities exercisable or convertible into shares of Capital Stock, as long as  
Mr. West and his affiliates own 51% or more of the issued and outstanding       
Capital Stock. However, such Agreement will effectively restrict the ability of 
the Company to issue such additional securities if the issuance would result in 
Mr. West and his affiliates owning less than 51% of the issued and outstanding  
Capital Stock. Therefore, the Right of First Refusal Agreement could in the     
future limit the ability of the Company to raise capital through the sale of    
stock to parties other than Praxair, may delay future offerings by the Company, 
may restrict the ability of the Company to consummate strategic transactions    
involving the issuance of stock, such as mergers, acquisitions, share exchanges 
and the like, and may limit the flexibility of the Company to incentivize       
employees through the issuance of stock options and other convertible           
securities. The Right of First Refusal Agreement expires in September 2006.     

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ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF COMMON STOCK PRICE             

Prior to the Offering, there has been no public market for the Common   
Stock, and there can be no assurance that an active trading market will develop 
or be sustained after the Offering or that investors will be able to sell the   
Common Stock should they desire to do so. The initial public offering price     
will be determined by negotiations between the Company and the representatives  
of the Underwriters and may bear no relationship to the price at which the      
Common Stock will trade upon completion of the Offering. There can be no        
assurance that the market price of the Common Stock after the Offering will not 
fall below the initial public offering price. The market price of the shares of 
Common Stock could be subject to significant fluctuations in response to        
variations in quarterly results, general market conditions and other factors.   
The stock market has experienced price and volume fluctuations that often have  
been unrelated or disproportionate to a company's operating performance. These  
market fluctuations, as well as general economic, political and market          
conditions such as recessions, may adversely affect the market price of the     
Common Stock. See "Underwriting" for a discussion of the factors considered in  
determining the initial public offering price.                                  

ABSENCE OF DIVIDENDS                                                            

The Company does not anticipate paying dividends on the Common Stock for
the foreseeable future. The payment of dividends is prohibited by certain       
covenants in the Company's credit facility. The Company anticipates that it     
will reinvest its net income, if any, in its businesses. See "Dividend          
Policy."                                                                        

S CORPORATION DISTRIBUTION  

Historically, the Company has been treated for federal and certain state
income tax purposes as an S Corporation under the Internal Revenue Code of      
1986, as amended (the "Code"), and comparable state tax laws. As a result,      
the Company's earnings have been taxed for federal and certain state income tax 
purposes directly to its shareholders. Immediately prior to the closing of the  
Offering, the Company's status as an S Corporation will be terminated and the   
Company will be taxed as a C corporation thereafter. The Company intends to     
declare a distribution (the "S Corporation Distribution") of all of its         
undistributed earnings through the date of termination of its S Corporation     
status to shareholders of record of the Company at such time. As of December    
31, 1996, the estimated amount of the S Corporation Distribution totaled        
approximately $10.1 million. The actual amount of the S Corporation             
Distribution will also include the taxable income of the Company for the period 
from January 1, 1997, through the date of the termination, less any other taxes 
payable by the Company. The S Corporation Distribution will be paid by the      
Company with a portion of the net proceeds of the Offering. See "Use of         
Proceeds." The purchasers of the Common Stock in the Offering will not receive  
any portion of the S Corporation Distribution.                                  

USE OF PROCEEDS 

The net proceeds to the Company from the sale of the 1,918,000 shares of
Common Stock offered by the Company hereby will be approximately $13.7 million  
(after deducting the underwriting discount and estimated offering expenses      
payable by the Company). The Company will not receive any proceeds from the     
sale of Common Stock by the Selling Shareholders.                               

The Company will use the net proceeds to repay outstanding indebtedness,
including interest thereon, under the Company's credit facility, pay the        
S Corporation Distribution and for general corporate purposes. The Company's    
credit facility had an outstanding balance of $22.9 million as of December 31,  
1996, and accrues interest at a weighted average interest rate of 7.6%.         
Following such reduction, the outstanding indebtedness under the credit         
facility will be approximately $21.0 million and the available borrowings       
thereunder will be approximately $11.8 million. The outstanding indebtedness    
under the credit facility has been used for various acquisitions by the         
Company. See "S Corporation Distribution" and "Management's Discussion and      
Analysis of Financial Condition and Results of Operations."                     

The Company anticipates that the borrowings available under the credit  
facility will be used for future acquisitions and general corporate purposes.   
The Company's business strategy contemplates that it will seek to complement    
internal growth with strategic investments and acquisitions. The Company has    
entered into two letters of intent with two third parties concerning the        
Company's purchase of two gas distribution businesses for a purchase price of   
approximately $3.5 million and $3.8 million, respectively, subject to certain   
adjustments. The parties are proceeding with due diligence and the negotiation  
of definitive purchase agreements. The Company has no other present             
understandings, agreements or commitments with respect to any acquisitions.     

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DIVIDEND POLICY 

The Company has not paid any cash dividends other than S Corporation    
distributions, and does not anticipate that it will pay dividends in the        
foreseeable future. The Company currently intends to retain future earnings, if 
any, to provide funds for the growth and development of the Company's business. 
The payment of dividends is prohibited by certain covenants in the Company's    
credit facility.                                                                

CAPITALIZATION  
The following table sets forth the short-term debt and capitalization of
the Company on an actual basis as of December 31, 1996 and as adjusted to give  
effect to the transactions described in the footnotes below. The information    
set forth below should be read in conjunction with "Management's Discussion     
and Analysis of Financial Condition and Results of Operations," the Company's   
Financial Statements and the related Notes thereto included elsewhere herein.   

                                                        [Enlarge/Download Table]

                                                                                                         AS OF DECEMBER 31, 1996   
                                                                                                      -----------------------------
                                                                                                                     PRO FORMA AS  
                                                                                                      ACTUAL         ADJUSTED<F1>  
                                                                                                      -------        ------------- 
                                                                                                             (IN THOUSANDS)        
                                                                                                                                   
Total short-term debt................................................................................ $ 4,182          $ 4,182     
                                                                                                      =======          =======     
Total long-term debt................................................................................. $31,535          $26,885     
Redeemable common stock<F2>..........................................................................      --            1,880     
Shareholders' equity<F3>:                                                                                                          
  Preferred stock, $.01 par value, 5,000,000 shares authorized, no shares issued and outstanding as                                
    adjusted.........................................................................................      --               --     
  Common stock, $.001 par value, 30,000,000 shares authorized, 7,000,000 shares issued and                                         
    outstanding excluding treasury stock and 9,320,084 shares issued and outstanding as adjusted....      18                9      
Paid in capital......................................................................................      96           15,100     
Treasury stock (11,300,653 shares)...................................................................  (3,705)              --     
Retained earnings....................................................................................  21,502            2,380     
                                                                                                      -------          -------     
    Total shareholders' equity.......................................................................  17,911           17,489     
                                                                                                      -------          -------     
    Total capitalization............................................................................. $49,446          $46,254     
                                                                                                      =======          =======     
<FN>                                                                                                                               
--------                                                                                                                           
<F1> Adjusted to give effect to (i) the payment of the S Corporation                                                               
     Distribution estimated to be $10.1 million at December 31, 1996, (ii) the                                                     
     recognition of a deferred tax liability of approximately $4.2 million upon                                                    
     termination of the Company's S Corporation status, (iii) the issuance of                                                      
     1,918,000 shares of Common Stock by the Company at an initial public                                                          
     offering price of $8.00 per share and the application of the net proceeds                                                     
     therefrom, (iv) the issuance of 135,000 shares of Common Stock to Weldco                                                      
     (or certain shareholders of Weldco), and the retirement of indebtedness                                                       
     payable to Weldco in the aggregate principal amount of $1,720,000, in each                                                    
     case immediately prior to the closing of the Offering pursuant to the                                                         
     purchase agreement among the Company, Weldco and certain other parties,                                                       
     (v) the issuance of 170,718 shares of Common Stock to two executive                                                           
     officers immediately prior to the closing of the Offering in connection                                                       
     with the termination of certain deferred compensation agreements, (vi) the                                                    
     issuance of 96,366 shares of Common Stock to a director immediately prior                                                     
     to the closing of the Offering pursuant to a right under a consulting                                                         
     agreement to convert deferred consulting payments to Common Stock, (vii)                                                      
     recognition of an expense of $1.9 million ($1.1 million after assumed                                                         
     taxes) in connection with the compensation and consulting arrangements and                                                    
     (viii) the cancellation of treasury stock. See "Use of Proceeds," "S                                                          
     Corporation Distribution," "Management--Benefit Plans" and "Certain                                                           
     Relationships and Related Transactions."                                                                                      

<F2> Reflects shares to be issued to former shareholders of Weldco who have                                                        
     the right to cause the Company to repurchase said shares. See "Certain                                                        
     Relationships and Related Transactions."                                                                                      

<F3> Excludes 650,000 shares of Common Stock reserved for issuance under the                                                       
     Company's 1997 Stock Option Plan. See "Management."                                                                           

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DILUTION  

  Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution in the net tangible book value of their Common Stock   
from the assumed initial public offering price. The net tangible book value of  
the Company at December 31, 1996 was approximately $2.8 million, or $0.39 per   
share. Net tangible book value per share is equal to net tangible assets        
(tangible assets of the Company less total liabilities) divided by the number   
of shares of Common Stock outstanding. Net tangible book value dilution per     
share represents the difference between the amount per share paid by purchasers 
of shares of Common Stock in the Offering and the pro forma net tangible book   
value per share of Common Stock immediately after completion of the Offering.   
After giving effect to the sale of the 1,918,000 shares of Common Stock         
issued in the Offering (after deducting the underwriting discount and           
estimated offering expenses), the pro forma net tangible book value of the      
Company as of December 31, 1996 would have been approximately $2.4 million,     
or $0.26 per share. This represents an immediate dilution of net tangible book  
value of $7.74 per share to purchasers of Common Stock in the Offering, as      
illustrated in the following table:                                             

                                                        [Enlarge/Download Table]
                                                                                                
Public offering price per share.................................................          $ 8.00
        Net tangible book value per share at December 31, 1996.................. $ 0.39         
        Decrease in net tangible book value per share attributable to new                       
          investors.............................................................  (0.13)        
                                                                                 ------         
Pro forma net tangible book value per share after the Offering..................            0.26
                                                                                          ------
Net tangible book value dilution per share to new investors.....................          $ 7.74
                                                                                          ======

The following table sets forth certain information with respect to the  
number of shares of Common Stock purchased from the Company, the total cash     
consideration paid and the average price per share paid by officers and         
directors who have purchased Common Stock during the prior five years and by    
new investors purchasing shares from the Company in the Offering:               

                                                        [Enlarge/Download Table]

                                                                                           AVERAGE 
                                                                                          PRICE PER
                                                   SHARES PURCHASED  TOTAL CONSIDERATION    SHARE  
                                                   ----------------  -------------------  ---------
                                                                                                   
Officers and directors............................       367,084         $ 1,237,483        $3.37  
New investors.....................................     1,918,000         $15,344,000        $8.00  

The foregoing table assumes no exercise of outstanding options. As of   
December 31, 1996, there were no options outstanding. There are options to      
purchase 175,000 shares of Common Stock outstanding effective as of the closing 
of the Offering, none of which will be exercisable within 60 days of the date   
of grant. See "Management--Benefit Plans" and "Shares Eligible for Future       
Sale."                                                                          

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SELECTED PRO FORMA FINANCIAL DATA 

The following sets forth the unaudited Pro Forma Condensed Statement of 
Operations of the Company and Weldco for the twelve months ended June 30, 1996  
and the six months ended December 31, 1996, after giving effect to the          
acquisition of Weldco by the Company (the "Acquisition"), which on October 10,  
1996 was purchased for approximately $11.1 million. Approximately $7.9 million  
of the purchase price was paid by promissory notes from the Company. Under the  
Weldco Purchase Agreement, Weldco shareholders have the right, in the event of  
an initial public offering of the Company's common stock, to convert a portion  
of the Company's promissory notes to shares of the Company's common stock at    
the initial public offering price. Under this provision, Weldco shareholders    
have the right to receive 350,000 shares of the common stock in exchange for the
cancellation of indebtedness in the amount of $2,800,000. The Company and Weldco
shareholders have agreed that rather than issuing 350,000 shares, the Company   
will prepay $1,720,000 under the Company's promissory notes and issue 135,000   
shares of common stock to Weldco shareholders immediately prior to the closing  
of the Offering. The Company understands that certain Weldco shareholders       
intend to purchase up to 100,000 shares of common stock in the Offering. The    
Weldco Purchase Agreement further grants Weldco shareholders the right to       
cause the Company to purchase shares of common stock issued to Weldco           
shareholders pursuant to the conversion of indebtedness for a period of three   
years following the closing of the Offering at the initial public offering      
price plus interest from the date of issuance at the rate of 6.6% per annum.    
The Company expects that 235,000 shares will be subject to this right           
following the closing of the Offering. Accordingly, such shares will not be     
classified as shareholders' equity. The Company's payment obligation is         
secured by a letter of credit.                                                  

   The Pro Forma Condensed Statement of Operations and other data gives effect
to the Acquisition as if it had occurred on July 1, 1995. The Pro Forma         
Condensed Balance Sheet and Pro Forma Condensed Statement of Operations         
information also give effect to the use of the estimated proceeds from the      
Offering. The unaudited pro forma financial information is presented for        
information purposes only and is not necessarily indicative of the results      
that actually would have occurred had the Acquisition been consummated on the   
dates indicated or the results that may occur or be obtained in the future. The 
following information is qualified in its entirety by reference to and should be
read in conjunction with "Management's Discussion and Analysis of Financial     
Condition and Results of Operations" and the Financial Statements of the Company
and Weldco, respectively, and related Notes thereto and other historical        
financial information included elsewhere in this Prospectus.                    

  The Acquisition was accounted for by the Company as a purchase whereby the
basis for accounting for Weldco's assets and liabilities was based upon their   
fair market values at the date of the Acquisition. Pro forma adjustments        
represent the Company's determination of these adjustments and are based upon   
available information and certain assumptions the Company considers reasonable  
under the circumstances.                                                        
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                                                        [Enlarge/Download Table]
                            PRO FORMA CONDENSED STATEMENT OF OPERATIONS                                                        
                                           (UNAUDITED)                                                                         

                                                                      TWELVE MONTHS ENDED JUNE 30, 1996                        
                                              ---------------------------------------------------------------------------------
                                                                           WELDCO                                              
                                                                         ACQUISITION                  PRO FORMA      PRO FORMA 
                                              COMPANY        WELDCO      ADJUSTMENTS     SUBTOTAL     ADJUSTMENTS   AS ADJUSTED
                                              --------      --------     -----------     --------     -----------   -----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)                           
STATEMENT OF OPERATIONS DATA:                                                                                                  
                                                                                                                               
  Net sales.................................. $ 53,612      $ 10,973                     $64,585                      $64,585  
  Cost of products sold, excluding                                                                                             
    depreciation and amortization............   23,617         7,065                      30,682                       30,682  
                                              --------      --------                     -------                      -------  
  Gross profit...............................   29,995         3,908                      33,903                       33,903  
  Operating and administrative expenses<F1>     20,295         3,406                      23,701                       23,701  
  Depreciation and amortization..............    4,700           204          852 <F2>     5,766                        5,756  
                                              --------      --------      -------        -------        -----         -------  
  Income from operations.....................    5,000           298         (852)        11,446                        4,446  
  Interest expense...........................    1,561            33          782 <F3>     2,376         (407)<F8>      1,969  
  Other income...............................      662                                       662                          662  
                                              --------      --------      -------        -------        -----         -------  
  Net income<F4>.............................    4,101           265       (1,634)         2,732          407           3,139  
  Pro forma income tax provision<F5>.........    1,640           106         (654)         1,092          163           1,255  
                                              --------      --------      -------        -------        -----         -------  
  Pro forma net income<F5>................... $  2,461      $    159      $  (980)       $ 1,640        $ 244 <F7>    $ 1,884  
                                              ========      ========      =======        =======        =====         =======  
  Pro forma net income per common share<F5>   $   0.30                                                                $  0.23  
  Pro forma weighted average shares                                                                                            
    outstanding<F6>..........................    8,335                                                                  8,335  

<FN>                                                                                                                           
--------                                                                                                                       

<F1> Operating and administrative expenses do not reflect the elimination of                                                   
     approximately $311,000 of salaries and benefits provided to former                                                        
     shareholders of Weldco whose employment by Weldco was terminated as part of                                               
     the acquisition.                                                                                                          

<F2> Reflects (i) $7.9 million related to goodwill amortized over twenty years,                                                
     (ii) $1.0 million related to consulting agreements amortized over the                                                     
     three-year service period and (iii) the fair market value of assets                                                       
     acquired depreciated over twelve years.                                                                                   

<F3> Reflects increased interest expense from acquisition debt of $3.2 million                                                 
     under the revolving credit facility at 7.2% and seller notes of $7.9                                                      
     million at 6.6%.                                                                                                          

<F4> The Company and Weldco elected to be treated as S Corporations for the                                                    
     periods presented. As a result, their income was taxed for federal and                                                    
     state purposes directly to their respective shareholders.                                                                 

<F5> The pro forma income tax provision, pro forma net income and pro forma net                                                
     income per common share reflect federal and state income taxes (assuming a                                                
     40% statutory tax rate) as if the Company and Weldco had been taxed as C                                                  
     Corporations for all periods presented.                                                                                   

<F6> Weighted average number of shares outstanding used to calculate pro forma                                                 
     net income per share is based on the historical weighted average number of                                                
     shares outstanding, as adjusted to reflect (i) the assumed issuance of                                                    
     1,068,208 shares of Common Stock to fund the excess of dividends (including                                               
     the estimated S Corporation Distribution) over net income for the six                                                     
     months ended December 31, 1996, (ii) the issuance of 170,718 shares of                                                    
     Common Stock to two executive officers immediately prior to the closing of                                                
     the Offering in connection with the termination of certain deferred                                                       
     compensation agreements and (iii) the issuance of 96,366 shares of Common                                                 
     Stock to a director immediately prior to the closing of the Offering                                                      
     pursuant to a right under a consulting agreement to convert deferred                                                      
     consulting payments to Common Stock. See "Management--Benefit Plans" and                                                  
     "Certain Relationships and Related Transactions." In connection with                                                      
     these compensation and consulting arrangements, the Company will incur a                                                  
     one-time expense of $1.9 million in the period in which the closing of the                                                
     Offering occurs.                                                                                                          

<F7> Excludes non-recurring charges of approximately $1.1 million, net of taxes                                                
     related to the compensation and consulting arrangements and approximately                                                 
     $4.2 million upon termination of the Company's S Corporation status.                                                      

<F8> Reflects a decrease to interest expense associated with debt repaid from                                                  
     the estimated Offering proceeds.                                                                                          

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                                                        [Enlarge/Download Table]
                              PRO FORMA CONDENSED STATEMENT OF OPERATIONS                                                        
                                             (UNAUDITED)                                                                         

                                                                            SIX MONTHS ENDED DECEMBER 31, 1996                   
                                                ---------------------------------------------------------------------------------
                                                                              WELDCO                                             
                                                                            ACQUISITION                PRO FORMA      PRO FORMA  
                                                COMPANY        WELDCO<F1>   ADJUSTMENTS   SUBTOTAL    ADJUSTMENTS    AS ADJUSTED 
                                                --------       ----------   -----------   --------    -----------    ----------- 
                                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)                  
                                                                                                                                 
STATEMENT OF OPERATIONS DATA:                                                                                                    
    Net sales................................   $33,777          $3,302                   $37,079                     $37,079    
    Cost of products sold, excluding                                                                                             
      depreciation and amortization..........    15,504           1,943                    17,417                       17,447   
                                                -------          ------                   -------                      -------   
    Gross profit.............................    18,273           1,359                    19,632                       19,632   
    Operating and administrative expenses<F2>    12,567           1,353                    13,920                       13,920   
    Depreciation and amortization............     2,934              50         213 <F3>    3,197                        3,197   
                                                -------          ------      ------       -------                      -------   
    Income from operations...................     2,772             (44)       (213)        2,515                        2,515   
    Interest expense.........................       993              20         196 <F4>    1,209      (203)<F9>         1,006   
    Other income.............................       150               2                       152                          152   
                                                -------          ------      ------       -------     -----            -------   
    Net income<F5>...........................     1,929             (62)       (409)        1,458       203              1,661   
    Pro forma income tax provision<F6>.......       772             (25)       (165)          582        81                663   
                                                -------          ------      ------       -------     -----            -------   
    Pro forma net income<F6>.................   $ 1,157          $  (37)     $ (244)      $   876     $ 122 <F8>       $   998   
                                                =======          ======      ======       =======     =====            =======   
    Pro forma net income per common share<F6>   $  0.14                                                                $  0.12   
    Pro forma weighted average shares                                                                                            
      outstanding<F7>........................     8,335                                                                  8,335   

<FN>                                                                                                                             
--------                                                                                                                         
<F1> Results from Weldco for the period from July 1, 1996 through October                                                        
     10, 1996 (the acquisition date) and includes a one-time charge of                                                           
     $333,000 reflecting bonuses paid by Weldco as a result of the                                                               
     acquisition.                                                                                                                

<F2> Operating and administrative expenses do not reflect the elimination                                                        
     of approximately $411,000 salaries and benefits provided to former                                                          
     shareholders of Weldco whose employment by Weldco was terminated as part                                                    
     of the acquisition and one-time bonuses declared by Weldco immediately                                                      
     prior to the acquisition.                                                                                                   

<F3> Reflects (i) $7.9 million related to goodwill amortized over twenty years,                                                  
     (ii) $1.0 million related to consulting agreements amortized over the                                                       
     three-year service period and (iii) the fair market value of assets                                                         
     acquired depreciated over twelve years.                                                                                     

<F4> Reflects increased interest expense from acquisition debt of $3.2 million                                                   
     under the revolving credit facility at 7.2% and seller notes of $7.9                                                        
     million at 6.6%.                                                                                                            

<F5> The Company and Weldco elected to be treated as S Corporations for the                                                      
     periods presented. As a result, their income was taxed for federal and                                                      
     state purposes directly to their respective shareholders.                                                                   

<F6> The pro forma income tax provision, pro forma net income and pro forma net                                                  
     income per common share reflect federal and state income taxes (assuming a                                                  
     40% statutory tax rate) as if the Company and Weldco had been taxed as C                                                    
     Corporations for all periods presented.                                                                                     

<F7> Weighted average number of shares outstanding used to calculate pro forma                                                   
     net income per share is based on the historical weighted average number of                                                  
     shares outstanding, as adjusted to reflect (i) the assumed issuance of                                                      
     1,068,208 shares of Common Stock to fund the excess of dividends (including                                                 
     the estimated S Corporation Distribution) over net income for the six                                                       
     months ended December 31, 1996, (ii) the issuance of 170,718 shares of                                                      
     Common Stock to two executive officers immediately prior to the closing of                                                  
     the Offering in connection with the termination of certain deferred                                                         
     compensation agreements and (iii) the issuance of 96,366 shares of Common                                                   
     Stock to a director immediately prior to the closing of the Offering                                                        
     pursuant to a right under a consulting agreement to convert deferred                                                        
     consulting payments to Common Stock. See "Management--Benefit Plans" and                                                    
     "Certain Relationships and Related Transactions." In connection with                                                        
     these compensation and consulting arrangements, the Company will incur a                                                    
     one-time expense of $1.9 million in the period in which the closing of the                                                  
     Offering occurs.                                                                                                            

<F8> Excludes non-recurring charges of approximately $1.1 million, net of taxes                                                  
     related to the compensation and consulting arrangements and approximately                                                   
     $4.2 million upon termination of the Company's S Corporation status.                                                        

<F9> Reflects a decrease to interest expense associated with debt repaid from                                                    
     the estimated Offering proceeds.                                                                                            

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                                                        [Enlarge/Download Table]
                                  PRO FORMA CONDENSED BALANCE SHEET                                     
                                            (UNAUDITED)                                                 


                                                                      AS OF DECEMBER 31, 1996           
                                                           ---------------------------------------------
                                                                                               PRO FORMA
                                                                          PRO FORMA               AS    
                                                           COMPANY      ADJUSTMENTS<F1>        ADJUSTED 
                                                           -------      --------------         ---------
                                                                          (IN THOUSANDS)                
                                                                                                        
Cash and cash equivalents..............................    $ 3,407                               $ 3,407
Accounts receivable, net...............................      9,954                                 9,954
Inventory..............................................      7,108                                 7,108
Other current assets...................................        798                                   798
                                                           -------      --------                 -------
        Total current assets...........................     21,267                                21,267
Property, plant and equipment, net.....................     25,747                                25,747
Intangibles............................................     15,061                                15,061
Other assets...........................................        396                                   396
                                                           -------      --------                 -------
        Total assets...................................    $62,471             0                 $62,471
                                                           =======      ========                 =======
Short-term debt........................................    $ 4,182                               $ 4,182
Accounts payable.......................................      3,607                                 3,607
Accrued liabilities....................................      3,768          (256)<F3>              3,512
Accrued distribution to shareholders...................         --        10,100 <F2>                  0
                                                                         (10,100)<F3>                   
                                                           -------      --------                 -------
        Total current liabilities......................     11,557          (256)                 11,301
Long-term debt (less current maturities)...............     31,535        (1,850)<F3>             26,885
                                                                          (2,800)<F3>                   
Deferred income taxes..................................         --         4,200 <F2>              3,448
                                                                            (752)<F3>                   
Other long-term liabilities............................      1,468                                 1,468
                                                           -------      --------                 -------
        Total liabilities..............................    $44,560      $ (1,458)                $43,102
Redeemable common stock................................         --         1,880 <F3>              1,880

Common stock, 7,000,000 and 9,320,084 shares issued                                                     
  respectively.........................................         18            (9)<F3>                  9
Paid-in-Capital........................................         96        15,004 <F3>             15,100
Treasury stock 11,300,653 and 0 shares issued                                                           
  respectively.........................................     (3,705)        3,705 <F3>                 --
Retained earnings......................................     21,502       (19,122)<F2><F3>          2,380
                                                           -------      --------                 -------
Total shareholders' equity.............................    $17,911      $   (422)                $17,489
                                                           -------      --------                 -------
Total liabilities and shareholders' equity.............    $62,471             0                 $62,471
                                                           =======      ========                 =======
<FN>                                                                                                    
--------                                                                                                
<F1> Reflects adjustments for the Offering and the intended application of the                          
     proceeds therefrom.                                                                                

<F2> Reflects (i) the recognition of the S Corporation Distribution estimated to be                     
     $10.1 million at December 31, 1996 and (ii) the recognition of a deferred                          
     tax liability of approximately $4.2 million upon termination of the                                
     Company's S Corporation status.                                                                    

<F3> Reflects (i) the offering of 1,918,000 shares of Common Stock by the                               
     Company at an initial public offering price of $8.00 per share for total                           
     net proceeds of $13.7 million and the application of the net proceeds                              
     therefrom to repay indebtedness of $3.6 million and payment of the S                               
     Corporation Distribution of $10.1 million, (ii) the issuance of 135,000                            
     shares of Common Stock to Weldco (or certain shareholders of Weldco), and                          
     the retirement of indebtedness payable to Weldco in the aggregate                                  
     principal amount of $1,720,000, in each case immediately prior to the                              
     closing of the Offering pursuant to the purchase agreement among the                               
     Company, Weldco and certain other parties, and the purchase by Weldco (or                          
     certain shareholders of Weldco) of 100,000 shares in the Offering. The                             
     owners of such 235,000 shares ($1,880,000) will have the right to require                          
     that the Company repurchase such shares for a period of three years                                
     following the closing of the Offering at the initial public offering price                         
     plus interest, (iii) the issuance of 170,718 shares of Common Stock at                             
     $8.00 per share to two executive officers immediately prior to the closing                         
     of the Offering in connection with the termination of certain deferred                             
     compensation agreements, (iv) the issuance of 96,366 shares of Common                              
     Stock at $8.00 per share to a director immediately prior to the closing of                         
     the Offering pursuant to a right under a consulting agreement to convert                           
     deferred consulting payments to Common Stock, (v) recognition of an                                
     expense net of related accruals of $0.3 million, of $1.9 million ($1.1                             
     million after assumed taxes) in connection with the compensation                                   
     arrangements of $0.7 million ($0.4 million after assumed taxes) and                                
     consulting arrangement of $1.2 million ($0.7 million after assumed taxes)                          
     and (vi) cancellation of treasury stock. See "Use of Proceeds," "S                                 
     Corporation Distribution," "Management--Benefit Plans" and "Certain                                
     Relationships and Related Transactions."                                                           

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SELECTED HISTORICAL FINANCIAL DATA  

   Set forth below is selected financial data for each of the five years ended
June 30, 1996 and for the six-month periods ended December 31, 1995 and 1996.   
The selected financial data for each of the three years ended June 30, 1996 has 
been derived from the Company's Financial Statements included elsewhere in this 
Prospectus which have been audited by Arthur Andersen LLP, independent public   
accountants. The selected financial data for the years ended June 30, 1992 and  
1993 has been derived from financial statements that are not included herein.   
The selected financial data for the six months ended December 31, 1995 and 1996 
has been derived from the Company's unaudited interim financial statements      
contained elsewhere in this Prospectus. In the opinion of management, the       
unaudited financial statements have been prepared on the same basis as the      
audited Financial Statements and include all adjustments, consisting of only    
normal recurring adjustments, necessary for a fair presentation of the          
financial position and results of operations for these periods. Results of      
operations for the six months ended December 31, 1996 are not necessarily       
indicative of results to be expected for the year ending June 30, 1997. The     
following data should be read in conjunction with "Management's Discussion and  
Analysis of Financial Condition and Results of Operations," "Business,"         
"Risk Factors" and the Financial Statements and the Notes thereto included      
elsewhere in this Prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                                                              SIX MONTHS ENDED      
                                                  YEARS ENDED JUNE 30,                          DECEMBER 31,        
                                 -------------------------------------------------------     -------------------    
                                  1992        1993        1994        1995        1996        1995        1996      
                                 -------     -------     -------     -------     -------     -------     -------    
                                                      (IN THOUSANDS, EXCEPT PER SHARE DATA)                         
                                                                                                                    
STATEMENT OF OPERATIONS DATA:                                                                                       
    Net sales.................   $30,789     $35,251     $39,166     $44,914     $53,612     $24,138     $33,777    
    Cost of products sold,                                                                                          
      excluding depreciation                                                                                        
      and amortization........    13,117      14,911      16,844      19,931      23,617      10,678      15,504    
                                 -------     -------     -------     -------     -------     -------     -------    
    Gross profit..............    17,672      20,340      22,322      24,983      29,995      13,460      18,273    
    Operating and                                                                                                   
      administrative                                                                                                
      expenses................    12,521      14,735      15,704      17,688      20,295       9,196      12,567    
    Depreciation and                                                                                                
      amortization............     2,169       2,324       2,790       3,112       4,700       1,999       2,934    
                                 -------     -------     -------     -------     -------     -------     -------    
    Income from operations....     2,982       3,281       3,828       4,183       5,000       2,265       2,772    
    Interest expense..........     1,329       1,204       1,038       1,072       1,561         675         993    
    Other income..............       367         342         271         444         662         306         150    
                                 -------     -------     -------     -------     -------     -------     -------    
    Net income<F1>............     2,020       2,419       3,061       3,555       4,101       1,896       1,929    
    Pro forma income tax                                                                                            
      provision<F2>...........       808         968       1,224       1,422       1,640         758         772    
                                 -------     -------     -------     -------     -------     -------     -------    
    Pro forma net                                                                                                   
      income<F2>..............   $ 1,212     $ 1,451     $ 1,837     $ 2,133     $ 2,461     $ 1,138     $ 1,157    
                                 =======     =======     =======     =======     =======     =======     =======    
    Pro forma net income per                                                                                        
      common share<F2>........   $  0.17     $  0.20     $  0.25     $  0.29     $  0.30     $  0.16     $  0.14    
    Pro forma weighted average                                                                                      
      shares outstanding<F3>..     7,267       7,267       7,267       7,267       8,335<F4>   7,267       8,335<F4>
OTHER FINANCIAL DATA:                                                                                               
    Capital expenditures......   $ 1,055     $ 1,218     $ 2,908     $ 4,426     $ 3,647     $ 1,288     $ 1,377    
    Cash flow from operating                                                                                        
      activities..............     4,224       4,479       5,971       6,317       7,423       2,415       1,187    
    Cash flow from                                                                                                  
      investing activities....      (898)     (1,185)     (4,080)     (7,167)     (9,179)     (6,419)     (5,781)   
    Cash flow from                                                                                                  
      financing activities....    (1,976)     (3,082)     (1,846)      1,624       2,450       3,754       3,852    
OTHER NON-GAAP FINANCIAL DATA:                                                                                      
    EBITDA<F5>................   $ 5,518     $ 5,947     $ 6,889     $ 7,739     $10,362     $ 4,570     $ 5,856    


                                                         JUNE 30,                               DECEMBER 31,        
                                 -------------------------------------------------------     -------------------    
                                  1992        1993        1994        1995        1996        1995        1996      
                                 -------     -------     -------     -------     -------     -------     -------    
                                                                 (IN THOUSANDS)                                     
                                                                                                                    
BALANCE SHEET DATA:                                                                                                 
    Working capital...........   $ 3,889     $ 4,376     $ 5,116     $ 6,327     $ 7,218     $ 9,194     $ 9,709    
    Total assets..............    26,600      25,268      27,133      33,421      45,491      41,791      62,471    
    Total debt................    15,145      12,835      11,931      15,099      22,244      21,047      35,717    
    Shareholders' equity......     7,848       9,529      11,648      13,796      16,371      15,375      17,911    

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<FN>                                                                                                                
--------                                                                                                            
<F1> For all periods shown, the Company elected to be treated as an S                                               
     Corporation. As a result, the income of the Company was taxed for federal                                      
     and state purposes directly to the Company's shareholders rather than to                                       
     the Company.                                                                                                   

<F2> The pro forma income tax provision, pro forma net income and pro forma net                                     
     income per common share reflect federal and state income taxes, assuming a                                     
     40% statutory tax rate, as if the Company had been taxed as a C                                                
     Corporation for all periods presented.                                                                         

<F3> Pro forma weighted average number of shares outstanding used to calculate                                      
     pro forma net income per common share is based on the historical weighted                                      
     average number of shares outstanding, as adjusted to reflect (i) the                                           
     issuance of 170,718 shares of Common Stock to two executive officers                                           
     immediately prior to the closing of the Offering in connection with the                                        
     termination of certain deferred compensation agreements and (ii) the                                           
     issuance of 96,366 shares of Common Stock to a director immediately prior                                      
     to the closing of the Offering pursuant to a right under a consulting                                          
     agreement to convert deferred consulting payments to Common Stock. See                                         
     "Management--Benefit Plans" and "Certain Relationships and Related                                             
     Transactions." In connection with these compensation and consulting                                            
     arrangements, the Company will incur a one-time expense of $1.9 million in                                     
     the period in which the closing of the Offering occurs.                                                        

<F4> Further adjusted to reflect the assumed issuance of 1,068,208 shares of                                        
     Common Stock to fund the excess of dividends (including the estimated S                                        
     Corporation Distribution) over net income for the six months ended                                             
     December 31, 1996.                                                                                             

<F5> EBITDA represents the earnings of the Company before income taxes, net                                         
     interest expense, depreciation and amortization and other noncash items                                        
     reducing net income. EBITDA is not a measure of financial performance                                          
     under GAAP and may not be comparable to other similarly titled measures by                                     
     other companies. Accordingly, it does not represent net income or cash                                         
     flows from operations as defined by GAAP and does not necessarily indicate                                     
     that cash flows will be sufficient to fund cash needs. As a result, EBITDA                                     
     should not be considered an alternative to net income as an indicator of                                       
     operating performance or to cash flows as a measure of liquidity. The                                          
     Company incurs significant capital expenditures and incurs debt, primarily                                     
     related to acquisitions, which are not reflected in EBITDA. As such, the                                       
     Company has provided above cash flows from operating, investing and                                            
     financing activities, and capital expenditures which reflect these                                             
     transactions. The Company has included information concerning EBITDA as it                                     
     understands that it is used by certain investors as one measure of an                                          
     issuer's historical ability to service its debt.                                                               

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION     
AND RESULTS OF OPERATIONS       
The following discussion should be read in conjunction with, and is     
qualified in its entirety by, the Financial Statements and the Notes thereto    
and the Selected Historical Financial Data included elsewhere in this           
Prospectus. This discussion contains certain forward-looking statements that    
involve substantial risks and uncertainties. When used in this section, the     
words "anticipate," "believe," "estimate," "expect" and similar                 
expressions as they relate to the Company or its management are intended to     
identify such forward-looking statements. The Company's actual results,         
performance or achievements could differ materially from those expressed in, or 
implied by, these forward-looking statements as a result of, among other        
things, the factors set forth in the section entitled "Risk Factors."           
Historical operating results are not necessarily indicative of the trends in    
operating results for any future period.                                        
OVERVIEW                                                                        

The Company is a leading packager and distributor of industrial, medical
and specialty gases, welding equipment and supplies, and propane in nine states 
in the mid-Atlantic and midwestern regions of the United States. The Company's  
net sales have grown, primarily as a result of acquisitions, at a compound      
annual rate of approximately 17% per year since the Company started business in 
1958, increasing from $190,000 in that year to $64.6 million on a pro forma     
combined basis in fiscal 1996. In fiscal 1996, gases accounted for              
approximately 46% of net sales, welding equipment and supplies accounted for    
approximately 40% of net sales, and cylinder and tank rental accounted for      
approximately 14% of net sales.                                                 

The Company believes it has been successful in executing its strategy of
growth through acquisitions, having completed 22 acquisitions since 1990. Some  
acquisitions have had, and the Company expects some future acquisitions may     
have, a dilutive effect upon the Company's income from operations and net       
income before tax for a short period following consummation. This temporary     
dilution occurs because some of the benefits of acquisitions, such as           
leveraging of operating and administrative expenses, improved product gross     
margins and real sales growth, occur over a period ranging from two to eight    
quarters, depending upon the complexity of integrating each acquisition into    
the Company's existing operations. The Company anticipates that the benefits of 
the Weldco and Weber acquisitions will be realized over a comparable period.    
The consideration for most acquisitions includes a combination of a cash        
payment at closing, seller financing and payments under covenants not to        
compete and consulting agreements. In most cases, operating cash flow of an     
acquired business is positive in a relatively short period of time. For many    
acquisitions, the Company believes that projections of future cash flows        
justify payment of amounts in excess of the book or market value of the assets  
acquired, resulting in goodwill being recorded.                                 

   The Company's results are subject to moderate seasonality, primarily due to
fluctuations in the demand for propane, which is highest during winter months   
falling in the Company's second and third fiscal quarters.                      

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

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

The Company has been an S Corporation for federal and state income tax  
purposes. As a result, the Company has not been subject to federal and state    
income taxes. The Company will terminate its S Corporation election in          
connection with the Offering and become a C Corporation. Upon termination of    
the S Corporation election, the Company will be required to recognize           
approximately $4.2 million of deferred income taxes in the period in which the  
closing of the Offering occurs.                                                 

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RESULTS OF OPERATIONS                                                           

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

                                                        [Enlarge/Download Table]

                                                                            AS A PERCENTAGE OF NET SALES              
                                                                ----------------------------------------------------- 
                                                                                                       SIX MONTHS     
                                                                                                          ENDED       
                                                                    YEARS ENDED JUNE 30,              DECEMBER 31,    
                                                                -----------------------------       ----------------- 
                                                                1994        1995        1996        1995        1996  
                                                                -----       -----       -----       -----       ----- 
                                                                                                                      
Net sales...................................................    100.0%      100.0%      100.0%      100.0%      100.0%
Cost of products sold, excluding depreciation and                                                                     
  amortization..............................................     43.0        44.4        44.1        44.2        45.9 
                                                                -----       -----       -----       -----       ----- 
Gross profit................................................     57.0        55.6        55.9        55.8        54.1 
Operating and administrative expenses.......................     40.1        39.4        37.8        38.1        37.2 
Depreciation and amortization...............................      7.1         6.9         8.8         8.3         8.7 
                                                                -----       -----       -----       -----       ----- 
Income from operations......................................      9.8         9.3         9.3         9.4         8.2 
Interest expense............................................      2.7         2.4         2.9         2.8         2.9 
Other income................................................      0.7         1.0         1.2         1.3         0.4 
                                                                -----       -----       -----       -----       ----- 
Net income<F1>..............................................      7.8%        7.9%        7.6%        7.9%        5.7%
                                                                =====       =====       =====       =====       ===== 
EBITDA<F2>..................................................     17.6%       17.2%       19.3%       18.9%       17.3%

<FN>                                                                                                                  
--------                                                                                                              
<F1> For all periods shown, the Company elected to be treated as an S                                                 
     Corporation. As a result, the income of the Company was taxed for federal                                        
     and state purposes directly to the Company's shareholders rather than to                                         
     the Company.                                                                                                     

<F2> EBITDA represents the earnings of the Company before income taxes, net                                           
     interest expense, depreciation and amortization and other noncash items                                          
     reducing net income. EBITDA is not a measure of financial performance                                            
     under GAAP and may not be comparable to other similarly titled measures by                                       
     other companies. See footnote 5 to the Selected Historical Financial Data.                                       

Comparison of Six Months Ended December 31, 1996 and 1995                       

Net sales increased 39.9%, or $9.7 million, to $33.8 million from $24.1 
million for the six months ended December 31, 1996 and 1995, respectively.      
Acquisitions made during the preceding twelve months contributed $7.9 million   
of the increase in net sales, while base business growth contributed $1.7       
million of the increase. Gases and cylinder income represented 57.3% of net     
sales for the six months ended December 31, 1996, with hard goods representing  
the remaining 42.7%. In comparison, net sales for the six months ended December 
31, 1995 reflected gases and cylinder income as 61.5% and hard goods as 38.5%.  
This change in sales mix reflects the effect of acquisitions made during the    
preceding twelve months that as a consolidated group have had a sales mix of    
36.5% gases and cylinder income and 63.5% hard goods. The Company believes that 
this base of hard good customers related to these acquisitions provides it the  
opportunity to build gas and cylinder business in the future.                   

    Gross profit, which excludes depreciation and amortization, increased 35.8%,
or $4.8 million, to $18.3 million from $13.5 million for the six months         
ended December 31, 1996 and 1995, respectively. Acquisitions made during the    
preceding twelve months contributed $3.9 million of the increase in gross       
profit, while the base business contributed $0.9 million of the increase. Gross 
profit as a percentage of net sales was 54.1% compared to 55.8% for the six     
months ended December 31, 1995. This change reflected an increase in the        
proportion of hard good sales, which have a lower gross profit margin as a      
percentage of net sales than gases, to 42.7% compared to 38.5% of net sales for 
the same six months in 1995. This increase in the proportion of hard good sales 
was primarily attributable to the two most recent acquisitions. Sharp increases 
in propane costs during the six month period reduced the total gases gross      
profit margin as a percentage of net sales as compared to the same six months in
1995. The Company implemented propane pricing policy changes during this period 
to help insure that future cost changes are passed to its customers.            

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  Operating and administrative expenses increased 36.7%, or $3.4 million, to
$12.6 million from $9.2 million for the six months ended December 31, 1996 and  
1995, respectively. Of this increase, $2.6 million was related to acquired      
businesses, $0.2 million was for employee benefits, and $0.4 million was for    
facility lease expenses. The increase in employee benefits reflects additional  
amounts accrued for hospitalization and profit sharing. The increase in         
facility lease expense was due to the commencement of lease payments on certain 
properties subsequent to the sale of those properties by the Company to West    
Rentals, Inc. See "Certain Relationships and Related Transactions." The         
remaining increase is primarily attributable to inflation and expenses          
associated with acquisitions made during the six month period. Depreciation and 
amortization expense increased $0.9 million for the six months ended December   
31, 1996 compared to the same period in 1995, primarily as a result of          
acquisitions made during the last twelve months.                                

 Net income of $1.9 million for the six months ended December 31, 1996 was
basically unchanged compared to the same period in 1995, although net income    
as a percent of net sales decreased from 7.9% to 5.7%, reflecting primarily the 
increase in depreciation, amortization and interest expense attributable to     
acquisitions.                                                                   

Earnings before interest, taxes, depreciation and amortization increased
28.1%, or $1.3 million, to $5.9 million for the six months ended December 31,   
1996 compared to the same period in 1995.                                       

Comparison of Years Ended June 30, 1996 and 1995                                

Net sales increased 19.4%, or $8.7 million, to $53.6 million from $44.9 
million in fiscal 1996 and fiscal 1995, respectively. Acquisitions contributed  
$7.7 million of the increase in net sales, while base business growth           
contributed $1.0 million of the increase, fiscal 1996 sales mix of 60.3% gases  
and cylinder income and 39.7% hard goods compared to fiscal 1995 sales mix of   
62.0% gases and cylinder income and 38.0% hard goods, reflecting the effect of  
acquisitions made during fiscal 1996 that had a sales mix of 42.2% gases and    
cylinder income and 57.8% hard goods.                                           

    Gross profit, which excludes depreciation and amortization, increased 20.1%,
or $5.0 million, to $30.0 million from $25.0 million in fiscal 1996 and fiscal  
1995, respectively. Acquisitions contributed $4.7 million of the increase in    
gross profit, while the base business contributed $0.3 million of the increase. 
Gross profit as a percentage of net sales improved to 55.9% in fiscal 1996,     
compared to 55.6% in fiscal 1995, with improvements in gross profit as a        
percentage of sales for each of the product groups being partially offset by    
sales of hard goods increasing to 39.7% of net sales compared to 38.0% of net   
sales in fiscal 1995.                                                           

  Operating and administrative expenses increased 14.7%, or $2.6 million, to
$20.3 million from $17.7 million in fiscal 1996 and fiscal 1995, respectively.  
Acquisitions contributed substantially all of this increase. Operating and      
administrative expenses as a percentage of net sales improved to 37.8% in fiscal
1996, compared to 39.4% in fiscal 1995, reflecting the leveraging of general and
administrative costs as net sales were added from acquisitions. Depreciation and
amortization expense increased $1.6 million in fiscal 1996 compared to fiscal   
1995, reflecting increased spending for acquisitions and capital expenditures.  
Interest expense increased $0.5 million in fiscal 1996 compared to fiscal 1995  
reflecting increased borrowings to finance acquisitions.                        

Net income increased 15.4%, or $0.5 million, to $4.1 million from $3.6  
million in fiscal 1996 and fiscal 1995, respectively.                           

Earnings before interest, taxes, depreciation and amortization increased
33.9%, or $2.7 million, to $10.4 million from $7.7 million in fiscal 1996 and   
fiscal 1995, respectively.                                                      

Comparison of Years Ended June 30, 1995 and 1994                                

Net sales increased 14.7%, or $5.7 million, to $44.9 million from $39.2 
million in fiscal 1995 and fiscal 1994, respectively. Acquisitions contributed  
$1.9 million of the increase in net sales, while base business growth           
contributed $3.8 million of the increase, reflecting the growth of propane and  
welding supplies sales at existing locations. The Company's net sales mix       
remained relatively unchanged between fiscal 1995 and fiscal 1994 with gases and
cylinder income representing 62.0% and 62.5% respectively.                      

    Gross profit, which excludes depreciation and amortization, increased 11.9%,
or $2.7 million, to $25.0 million from $22.3 million in fiscal 1995 and fiscal  
1994, respectively. Acquisitions contributed $1.2 million of the increase in    
gross profit in fiscal 1995, while the base business contributed $1.5 million of
the increase. Gross profit as a percentage of net sales declined to 55.6% in    
fiscal 1995, compared to 57.0% in fiscal 1994. The decline in gross profit as a 

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percentage of net sales reflects an increase in propane sales, which have a     
lower gross profit as a percentage of net sales than other gases, and an        
increase in product costs for hard goods. In fiscal 1995, the Company began     
directing vendors to ship hard goods directly to the Company's branch locations,
rather than to the Company's central warehouse as in prior years. Vendors       
increased purchase prices for hard goods to cover their additional shipping     
costs. This increase in product cost was more than offset by reduced internal   
distribution costs, which are reflected in operating expenses.                  

  Operating and administrative expenses increased 12.6%, or $2.0 million, to
$17.7 million in fiscal 1995, compared to $15.7 million in fiscal 1994.         
Acquisitions contributed $1.1 million of the increase in operating and          
administrative expenses, while the base business contributed $0.9 million of    
the increase.                                                                   

Net income increased 16.1%, or $0.5 million, to $3.6 million from $3.1  
million in fiscal 1995 and fiscal 1994, respectively.                           

Earnings before interest, taxes, depreciation and amortization increased
12.3%, or $0.8 million, to $7.7 million from $6.9 million in fiscal 1995 and    
fiscal 1994, respectively.                                                      

QUARTERLY RESULTS OF OPERATIONS                                                 

The following table sets forth certain unaudited quarterly financial    
information for each of the Company's last ten quarters. The Company believes   
that this information includes all adjustments, consisting of only normal       
recurring adjustments, necessary for a fair presentation of such quarterly      
information when read in conjunction with the Financial Statements and the      
Notes thereto included elsewhere in this Prospectus. The Company believes that  
quarter-to-quarter comparisons of its financial results are not necessarily     
meaningful and should not be relied upon as an indication of future             
performance.                                                                    

                                                        [Enlarge/Download Table]

                                                                   QUARTERS ENDED                                                 
                  ----------------------------------------------------------------------------------------------------------------
                  SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                    1994        1994       1995        1995       1995        1995       1996        1996       1996        1996  
                  ---------   --------   ---------   --------   ---------   --------   ---------   --------   ---------   --------
                                                                   (IN THOUSANDS)                                                 
                                                                                                                                  

Net sales.......   $10,341     $11,081    $12,028     $11,464    $11,323     $12,815    $14,934     $14,540    $14,514     $19,263
Cost of products                                                                                                                  
  sold,                                                                                                                           
  excluding                                                                                                                       
  depreciation                                                                                                                    
  and                                                                                                                             
  amortization..     4,546       5,123      5,294       4,968      4,942       5,737      6,598       6,341      6,331       9,173
                   -------     -------    -------     -------    -------     -------    -------     -------    -------     -------
Gross profit....     5,795       5,958      6,734       6,496      6,381       7,078      8,336       8,199      8,183      10,090
Operating and                                                                                                                     
  administrative                                                                                                                  
  expenses......     4,154       4,235      4,754       4,546      4,333       4,862      5,590       5,510      5,741       6,826
Depreciation and                                                                                                                  
  amortization..       676         726        780         929        827       1,171      1,309       1,392      1,373       1,561
                   -------     -------    -------     -------    -------     -------    -------     -------    -------     -------
Income from                                                                                                                       
  operations....       965         997      1,200       1,021      1,220       1,045      1,437       1,297      1,069       1,703
Interest                                                                                                                          
  expense.......       224         250        273         324        334         341        389         497        415         578
Other income....        67         111        154         112        177         128        181         175         74          76
                   -------     -------    -------     -------    -------     -------    -------     -------    -------     -------
Net                                                                                                                               
  income<F1>....   $   808     $   858    $ 1,081     $   809    $ 1,064     $   832    $ 1,229     $   975    $   728     $ 1,201
                   =======     =======    =======     =======    =======     =======    =======     =======    =======     =======
EBITDA<F2>......   $ 1,708     $ 1,834    $ 2,134     $ 2,062    $ 2,225     $ 2,344    $ 2,927     $ 2,864    $ 2,516     $ 3,340

<FN>                                                                                                                              
---------                                                                                                                         
<F1> For all periods shown, the Company elected to be treated as an S                                                             
     Corporation. As a result, the income of the Company was taxed for federal                                                    
     and state purposes directly to the Company's shareholders rather than to                                                     
     the Company.                                                                                                                 

<F2> EBITDA represents the earnings of the Company before income taxes, net                                                       
     interest expense, depreciation and amortization and other noncash items                                                      
     reducing net income. EBITDA is not a measure of financial performance                                                        
     under GAAP and may not be comparable to other similarly titled measures by                                                   
     other companies. See footnote 5 to the Selected Historical Financial Data.                                                   

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LIQUIDITY AND CAPITAL RESOURCES                                                 

   Historically, the Company has financed its operations, capital expenditures
and debt service with funds provided from operating activities. Acquisitions    
have been financed by a combination of seller financing, bank borrowings and    
funds generated from operations. Since April 1994, required debt service on     
borrowings from banks has been limited primarily to interest payments.          

   At December 31, 1996, the Company had working capital of approximately $9.7
million. Funds provided by operations for the six months ended December 31,     
1996 were approximately $1.2 million. Funds used for investing activities were  
approximately $5.8 million for the six months, consisting primarily of capital  
spending and financing for two acquisitions. Sources of funds from financing    
activities for the six months were approximately $4.3 million from net          
borrowings net of $0.4 million of S Corporation distribution for payment of     
shareholder taxes.                                                              

 Net cash provided by operating activities increased $1.1 million, to $7.4
million for fiscal 1996, compared to $6.3 million for fiscal 1995. Cash used    
for acquisitions was approximately $6.4 million and $2.8 million for fiscal     
1996 and fiscal 1995, respectively. Capital expenditures, made primarily for    
the purchase of cylinders, tanks and delivery trucks, were approximately $3.6   
million and $4.4 million for fiscal 1996 and fiscal 1995, respectively. The     
Company received proceeds of $0.9 million in fiscal 1996 from the sale of real  
estate. See "Certain Relationships and Related Transactions." The Company       
borrowed $6.5 million and $5.0 million, made debt service payments of $2.5      
million and $2.0 million, and made S Corporation distributions, principally for 
payment of taxes, of $1.6 million and $1.4 million during fiscal 1996 and       
fiscal 1995, respectively.                                                      

   On October 4, 1996, the Company entered into a new credit facility totaling
$38.0 million, consisting of a $13.0 million term loan, which matures in seven  
years and is amortized in equal monthly payments, and a $25.0 million revolving 
loan with a $15.0 million sublimit for letters of credit, which matures in      
October 1999. The revolving loan is used primarily to fund acquisitions. The    
Company is not required to make principal payments on outstanding balances of   
the revolving loan as long as certain covenants are satisfied. Interest is      
charged on both the term loan and the revolving loan at either the lender's     
prime rate or various LIBOR rates, at the Company's discretion, plus an         
applicable spread. The weighted average interest rate for substantially all of  
the borrowings under the credit facility was 7.62% as of December 31, 1996. The 
Company pays a fee for the unused portion of the revolving loan. As of December 
31, 1996, availability under the revolving loan was approximately $9.9 million, 
with outstanding borrowings of approximately $10.1 million and outstanding      
letters of credit of approximately $5.0 million. The credit facility is secured 
by all of the Company's assets.                                                 

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

The Company is obligated under various promissory notes related to the  
financing of acquisitions that have various rates of interest, ranging from     
3.0% to 10.0% per annum, and maturities through 2010. The outstanding balance   
of these notes as of June 30, 1996 and 1995 was $3.8 million and $1.1 million,  
respectively. The outstanding balance of these notes increased to $12.9 million 
as of December 31, 1996, reflecting notes added as a result of the Weber and    
Weldco acquisitions. Some of these notes are secured by assets related to the   
applicable acquisition, some are unsecured, and some are backed by bank letters 
of credit issued under the Company's credit facility. Outstanding letters of    
credit as of June 30, 1996 and 1995 were $1.9 million and $0.7 million,         
respectively.                                                                   

  The Company intends to use a portion of the net proceeds from the Offering
to reduce the balance of the revolving loan. The Company expects to use the     
increased borrowing availability to pay for future acquisitions.                

The Company believes that cash generated from operations, borrowing     
availability under its credit facility and the net proceeds of the Offering     
will be sufficient to satisfy the Company's requirements for operating funds,   
capital expenditures and future acquisitions for at least the next twelve       
months.                                                                         

FLUCTUATIONS IN QUARTERLY RESULTS                                               

The Company generally has experienced higher sales activity during its  
second and third quarters as a result of seasonal sales of propane, with        
corresponding lower sales for the first and fourth quarters. As a result,       
income from                                                                     

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operations and net income typically are higher for the second and third quarters
than for the first and fourth quarters of the fiscal year.                      

INFLATION                                                                       

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

SUBSEQUENT EVENTS                                                               

On January 30, 1997, the Company entered into a letter of intent for the
purchase of all the outstanding shares of an industrial gas and welding supply  
distributor for approximately $3.5 million. On February 28, 1997, the Company   
entered into another letter of intent for the purchase of substantially all     
the assets of an industrial gas and welding supply distributor for              
approximately $3.8 million. The Company is proceeding with due diligence and    
the negotiation of definitive purchase agreements. These acquisitions will be   
financed by borrowings under the Company's credit facility.                     

RECENT ACCOUNTING PRONOUNCEMENTS                                                

Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be         
Disposed of, was issued in March 1995. SFAS No. 121 requires that the carrying  
value of long-lived operating assets, when determined to be impaired, be        
adjusted so as not to exceed the estimated undiscounted cash flows provided by  
such assets. SFAS No. 121 also addresses the accounting for long-lived assets   
that are to be disposed of in future periods. The Company adopted the           
provisions of SFAS No. 121 in the first quarter of fiscal 1997. The adoption of 
SFAS No. 121 did not have any effect on the Company's financial position or     
results of operations for the six months ended December 31, 1996.               

Statement of Financial Accounting Standards No. 123, Accounting for     
Stock-Based Compensation, was issued in October 1995. The Company will be       
required to adopt the new standard no later than fiscal 1997, although early    
adoption is permitted. This standard establishes the fair value based method    
(the "SFAS 123 Method") rather than the intrinsic value based method as the     
preferred accounting methodology for stock-based compensation arrangements.     
Entities are allowed to either (i) continue to use the intrinsic value based    
methodology in their basic financial statements and provide in the footnotes    
pro forma net income and earnings per share information as if the SFAS 123      
Method had been adopted or (ii) adopt the SFAS 123 Method. Following adoption,  
the Company anticipates providing the required disclosures in the notes to its  
financial statements.                                                           

Financial Accounting Standard Board Statement No. 128, "Earnings Per Share" 
(SFAS No. 128) was issued in February 1997 and is effective for periods ending  
after December 15, 1997. This statement, upon adoption, will require all        
prior-period earnings per share (EPS) data to be restated, to conform to        
the provisions of the statement. This statement's objective is to simplify      
the computation of EPS and to make the U.S. standard for EPS computations       
more compatible with that of the International Accounting Standards             
Committee. The Company will adopt SFAS No. 128 in fiscal 1998 and does not      
anticipate that the statement will have a significant impact on its             
reported EPS.                                                                   

Financial Accounting Standard Board Statement No. 129, "Disclosure of       
Information about Capital Structure" (SFAS No. 129) was issued in February 1997 
and is effective for periods ending after December 15, 1997. This statement,    
upon adoption, will require all companies to provide specific disclosure        
regarding the entities capital structure. SFAS No. 129 will specify the         
disclosures, for all companies, including descriptions of the securities        
comprising the capital structure and the contractual rights of the              
holders of such securities. The Company will adopt SFAS No. 129 in fiscal       
1998 and does not anticipate that the statement will have a significant impact  
on its disclosure.                                                              

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BUSINESS  

OVERVIEW                                                                        

The Company is a leading packager and distributor of industrial, medical
and specialty gases, welding equipment and supplies, and propane in nine states 
in the mid-Atlantic and midwestern regions of the United States. The Company's  
net sales have grown, primarily as a result of acquisitions, at a compound      
annual rate of approximately 17% per year since the Company started business in 
1958, increasing from $190,000 in that year to $64.6 million on a pro forma     
combined basis in fiscal 1996. In fiscal 1996, gases accounted for              
approximately 46% of net sales, welding equipment and supplies accounted for    
approximately 40% of net sales, and cylinder and tank rental accounted for      
approximately 14% of net sales.                                                 

  The Company's gas operations consist primarily of the packaging and mixing
of industrial, medical and specialty gases, such as oxygen, nitrogen and argon, 
in pressurized cylinders and the transportation of these cylinders to customers 
from one of the Company's 40 distribution and retail locations. The Company     
also distributes propane to industrial and residential customers. Customers pay 
a rental fee for use of the Company's cylinders. The Company owns approximately 
290,000 cylinders, which require minimal maintenance and have useful lives that 
the Company expects will extend on average for 50 years or longer. The Company  
selectively participates in the small bulk gas market through the delivery of   
gases in cryogenic transports and the storage of gases in cryogenic tanks and   
propane tanks which are also rented to bulk gas customers. The Company owns     
approximately 7,000 bulk propane tanks and 250 bulk cryogenic tanks, which have 
useful lives generally less than those of cylinders. In connection with the     
distribution of gases, the Company sells welding equipment and supplies,        
including welding machines, wire, fluxes and electrodes and a wide variety of   
supporting equipment.                                                           

  The Company's principal business strategy is to aggressively pursue growth
through the acquisition of other independent distributors and also through      
internally generated growth. Since the Company was founded, it has completed 38 
acquisitions. Since January 1, 1996, the Company has acquired four independent  
distributors, including Weldco with annual sales of approximately $11 million   
in its most recent fiscal year and operations in Cincinnati and Dayton, Ohio,   
and Weber with annual sales of approximately $5 million in its most recent      
fiscal year and operations in western Pennsylvania. The integration of Weldco   
and Weber into the Company's existing operations is currently in progress, with 
the benefits of integration expected to be realized in the next two to eight    
quarters. Management believes there will continue to be numerous attractive     
acquisition candidates available to the Company as a result of the              
consolidation trend in the industry and that the Company will be able to        
successfully integrate acquired operations into its base business, generating   
growth and operational synergies. Acquisitions will be financed primarily with  
borrowings under the Company's credit facility and seller financing. While      
highly focused on external growth, management believes that the Company's       
competitive strengths will allow it to increase sales and improve market share  
in existing markets, while maintaining acceptable levels of profitability.      

INDUSTRY OVERVIEW                                                               

GENERAL                                                                     

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

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

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

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

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

INDUSTRY CONSOLIDATION                                                      

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

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

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

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

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

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

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

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

In recent years, the propane industry has also been undergoing          
consolidation for many of the same reasons as the industrial gas industry. The  
Company has been taking advantage of this consolidation trend through selective 
acquisitions. Except for a few large companies, the propane distribution        
industry is highly fragmented. Industry sources indicate there are              
approximately 8,000 retail propane companies operating 13,500 local             
distribution centers nationwide. The Company believes that the 50 largest       
propane distributors have less than a 50% share of the approximately nine       
billion gallon annual market.                                                   

ECONOMIC CHARACTERISTICS OF THE INDUSTRY                                    

The industrial gas industry is mature with real growth consistent with  
growth in the overall economy. Gas sales tend to be less adversely impacted by  
a decline in general economic conditions than the sale of welding equipment and 
supplies. Management believes that the industrial gas distribution business is  
relatively resistant to downturns in the                                        

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

BUSINESS STRATEGY                                                               

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

GROWTH THROUGH ACQUISITIONS                                                 

   Prior Acquisitions. Since the formation of the Company in 1958, the Company
has completed the acquisition of the 38 distributors identified below:          

                                                                [Download Table]

DISTRIBUTOR                              PRINCIPAL LOCATION  FISCAL YEAR ACQUIRED
-----------                              ------------------  --------------------
                                                                                 
Weldco, Inc.                             Cincinnati, OH              1997        
Weber Gas & Welding Supply Co., Inc.     Pittsburgh, PA              1997        
Gas & Oil, Inc.                          Croydon, PA                 1996        
U.S. Air & Supplies, Inc.                Chambersburg, PA            1996        
Wootten Industries, Inc.                 Salisbury, MD               1996        
Quest Welding Supply                     Columbus, OH                1996        
AL Compressed Gases                      Sharonville, OH             1995        
Ted's Bottled Gas, Inc.                  Tarentum, PA                1995        
Allegheny LP Gas                         Evans City, PA              1995        
Evans Welding Supply Co.                 Johnson City, TN            1995        
Ina Oil Co.                              Southport, NC               1995        
Smith LP Gases                           Bruceton Mills, WV          1995        
Green's LP Gases                         Carrollton, OH              1994        
Allegheny Air Gas                        Washington, PA              1994        
A-1 Welding Supply Co.                   Bluefield, VA               1994        
Big Sandy Welding Supply Co.             Paintsville, KY             1993        
Fort Pitt Paint and Glass                Pittsburgh, PA              1992        
Linde Gases of Western Pennsylvania      Greensburg, PA              1992        
Malanzak Bottled Gas Co.                 Uniontown, PA               1991        
Penn-Ohio Welding Supply Co.             New Castle, PA              1990        
Penn-Air Industrial Gases                New Castle, PA              1990        
Airco Rare and Specialty Gases           Pittsburgh, PA              1990        
Speedy Welding Supply Co.                Wilmington, NC              1989        
Safety Equipment Co.                     Wilmington, NC              1989        
A-B-C Fire Protection                    Wilmington, NC              1989        
Herdman Brothers Welding Supply Co.      Steubenville, OH            1989        
Dunlap Welding Supply                    Zanesville, OH              1989        
Airco Retail                             Leetsdale, PA               1988        

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DISTRIBUTOR                              PRINCIPAL LOCATION  FISCAL YEAR ACQUIRED
-----------                              ------------------  --------------------
                                                                                 
Interstate Welding Supply Co.            Huntington, WV              1985        
Welder's Products                        Connellsville, PA           1984        
Wood Brothers Propane Co.                Uniontown, PA               1983        
Home Bottled Gas Co.                     Uniontown, PA               1983        
Fayette Oxygen Co.                       Uniontown, PA               1983        
Cambridge Welding                        Cambridge, OH               1980        
Washington Welding Supply Co.            Washington, PA              1980        
Better Welding Supply                    Wheeling, WV                1978        
Fire Safety Service                      Wheeling, WV                1975        
Johnson Welder's Supply Co.              Friendly, WV                1973        

 The Company has entered into two letters of intent with two third parties
concerning the Company's purchase of two gas distribution businesses for a      
purchase price of approximately $3.5 million and $3.8 million, respectively,    
subject to certain adjustments. The parties are proceeding with due diligence   
and the negotiation of definitive purchase agreements.                          

The Company's acquisitions historically have been financed, and the Company 
expects that future acquisitions will be financed, primarily with borrowings    
under the Company's credit facility and seller financing. See "Management's     
Discussion and Analysis of Financial Condition and Results of Operations--      
Liquidity and Capital Resources." The Company does not currently intend to      
issue shares of its Common Stock or other securities in order to consummate     
its acquisitions, but may in the future elect to do so. Any such issuances      
may be limited by the Right of First Refusal Agreement. See "The Right of       
First Refusal Agreement."                                                       

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

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

Competition for Acquisitions. In seeking to acquire distributors, the   
Company competes with the major industrial gas producers and national and       
regional gas distributors. The largest national distributor is Airgas, Inc.     
("Airgas") which has been growing through acquisitions since the mid-1980's.    
The Company expects that Airgas will continue to selectively acquire            
distributors in the future, and in some situations will compete with the        
Company for acquisitions. The Company believes that Praxair and AGA Gas, Inc.   
are the only major industrial gas producers who are actively soliciting         
independent distributors for purchase at this time, but that both have          
self-imposed size and geographic constraints. The Company also believes that    
some major industrial gas producers have limited their acquisition efforts due  
primarily to the difficulty of resolving management differences, cultural       
differences and cost structure differences between the small, privately-held    
business and the large multinational corporation. The smaller independent       

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distributors with which the Company competes for acquisitions generally do not  
seek acquisitions beyond their immediate geographic region.                     
Acquisition Process. The Company has established formal procedures for  
locating, investigating and valuing potential distributor acquisitions.         
Criteria used by the Company in evaluating potential acquisitions include (i) a 
history of profitability, (ii) realistic projections of future performance,     
(iii) a sales mix which is or has the potential to become weighted towards the  
sale of gases, which generally have higher profit margins than welding          
equipment and supplies, (iv) a cylinder gas market which is serviced primarily  
by independent distributors, as opposed to industrial gas producers and (v)     
availability of qualified management and key personnel.                         

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

ACHIEVE AND MAINTAIN POSITION AS A LOW-COST SUPPLIER                        

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

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

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

ENHANCE ORGANIZATIONAL STRENGTH                                             

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

The Company strives to utilize to the fullest extent its existing       
management resources. The Company recently restructured certain management      
reporting relationships and areas of responsibility to place operating and      
financial responsibility at the local market level, thereby eliminating a layer 
of management and improving communication. These changes also allowed the       
Company to redirect the focus of certain key management members on important    

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operating issues, such as system logistics, training, budgeting and overall     
operating performance, that are vital to managing the Company's growth.         

PRODUCTS                                                                        

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

In fiscal 1996, the Company sold approximately eight million gallons of 
propane to approximately 2,000 residential, commercial and industrial users.    
Propane sales accounted for approximately 6% of net sales in fiscal 1996.       
Typical residential and commercial uses include conventional space heating,     
water heating and cooking. Typical industrial uses include engine fuel for fork 
lifts and other vehicles, metal cutting, brazing and heat treating. The         
distribution of propane is seasonal in nature and sensitive to variations in    
weather with consumption as a heating fuel peaking sharply in winter months.    

While primarily a packager and distributor of gases, the Company also   
manufactures a portion of its acetylene requirements at its facility in West    
Mifflin, Pennsylvania. Acetylene is produced through a combination of calcium   
carbide and water at relatively high temperatures. The reaction of these        
elements also produces lime as a by-product, which is sold in bulk to customers 
for a variety of applications. In fiscal 1996, acetylene accounted for          
approximately 3% of net sales.                                                  

The following table sets forth the percentage of the Company's net sales
for the fiscal years ended June 30, 1994, 1995 and 1996 and for the six months  
ended December 31, 1996 for each of the following products and services:        

                                                        [Enlarge/Download Table]

                                                      YEARS ENDED JUNE 30,        SIX MONTHS  
                                                   --------------------------       ENDED     
                                                   1994       1995       1996   DEC. 31, 1996 
                                                   ----       ----       ----   --------------
                                                                                              
Gases............................................. 47.5%      47.2%      45.9%       43.6%    
Welding equipment and supplies.................... 37.5       38.0       39.7        42.7     
Cylinder rental................................... 15.0       14.8       14.4        13.7     

CUSTOMERS                                                                       

The Company currently has more than 40,000 customers, none of which     
accounted for more than 1.5% of net sales in fiscal 1996. In fiscal 1996,       
approximately 23% of the Company's net sales were to metal production and       
fabrication customers. The second largest customer category was health care,    
which represented 9% of the Company's net sales in fiscal 1996 and is one of    
the Company's fastest growing categories. The customer base also includes       
smaller distributors who are in close proximity to one of the Company's larger  
packaging facilities and find it economically advantageous to source certain    
products from the Company.                                                      

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

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

SALES AND MARKETING                                                             

The distribution of most packaged gases is most economically performed  
within approximately a thirty-mile radius of the product packaging or inventory 
location due primarily to the costs associated with the delivery of cylinders.  
Therefore, the aggregate national market of $6 billion consists of hundreds of  
regional markets with an estimated size of $5 million to $100 million in annual 
sales. The Company believes the average market size is approximately $20        
million.                                                                        

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The Company solicits and maintains business primarily through a direct  
selling effort using an experienced sales force of approximately 60 sales       
representatives. Sales representatives receive continuous training so that they 
are knowledgeable about gas and product performance characteristics and current 
application technology. On average, the Company's sales representatives have    
more than ten years of industry experience. Sales representatives are paid a    
base salary and commissions based upon account profit margin. Efforts are       
focused on accounts generating sales of high margin products. Occasionally,     
sales representatives make joint sales calls with the Company's suppliers to    
address difficult or innovative customer application requirements. The Company  
has been testing both telemarketing and catalog solicitation at selected        
locations to attract new accounts.                                              

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

COMPETITION                                                                     

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

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

SUPPLIERS                                                                       

The Company purchases industrial gases pursuant to short-term supply    
arrangements and open purchase orders with three of the five major gas          
producers in the United States. One such producer accounted for approximately   
80% of the Company's gas purchases in fiscal 1996. If any of these arrangements 
were terminated, the Company believes it would be able to readily secure an     
alternate source of supply.                                                     

The Company purchases welding equipment and consumable supplies from    
approximately 85 primary vendors, of which purchases from the top five vendors  
represented approximately 61% of total purchases in fiscal 1996. Purchases from 
major vendors are made pursuant to purchase orders that are cancelable by the   
Company upon minimal notice. With supplier overcapacity in most product lines   
and high competitive rivalry for volume purchasers, large distributors such as  
the Company are generally able to purchase welding equipment and supplies from  
the vendor of their choice. This enables the Company to participate in vendor   
discount and rebate programs and obtain products at competitive costs.          

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

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EMPLOYEES                                                                       

At December 31, 1996, the Company employed 441 people, of whom          
approximately 19% were covered by collective bargaining agreements.             
Historically, the Company has not been adversely affected by strikes or work    
stoppages. Approximately 58% of the Company's employees are hourly workers. The 
Company believes it has a skilled and motivated work force and that its         
relationship with employees is good. The Company believes that its wages and    
benefits, which reflect local conditions, are competitive with those provided   
by major competitors. All of the Company's hourly employees are currently paid  
wages at a rate that exceeds the current, and federally mandated increases in,  
the minimum wage. The Company believes it would not be materially impacted by   
future increases in the minimum wage.                                           

The Company believes that continuing education is necessary for its     
employees to achieve and maintain the skills required to be effective in        
today's competitive environment. At its Wheeling, West Virginia training        
center, the Company provides a variety of programs and courses covering all     
phases of operations, sales, safety and distribution. Key suppliers also        
provide employees product training relating primarily to welding and gas        
application technology.                                                         

PROPERTIES                                                                      

  The Company owns approximately 290,000 cylinders, 7,000 bulk propane tanks
and 250 bulk cryogenic tanks, generally ranging in size from 250 gallons to     
11,000 gallons. Most cylinders and storage tanks are located at customer sites. 
Cylinders require minimal maintenance and have useful lives that the Company    
expects will extend on average for 50 years or longer. Bulk tanks have useful   
lives generally less than those of cylinders.                                   

   The Company has 40 industrial gas and welding supply distribution locations
in nine states, twelve of which also package and distribute propane. A typical  
location has two acres of property, 5,000 square feet of space used to          
warehouse hard goods, 5,000 square feet of space used for gas filling and       
cylinder storage and 2,000 square feet of space used for a retail showroom. The 
Company's headquarters are located in 20,000 square feet of space located in    
Wheeling, West Virginia.                                                        

Most of the specialty gas products sold by the Company are purified,    
packaged and mixed at a facility operated by the Company in Evans City,         
Pennsylvania. This facility normally processes approximately 30,000 cylinders   
per month, but has capacity to process approximately 50% more volume, which the 
Company believes would be sufficient to meet increased volume requirements in   
the future.                                                                     

All of the Company's facilities are leased on terms which the Company   
believes are consistent with commercial rental rates prevailing in the          
surrounding rental market. See "Certain Relationships and Related               
Transactions." The Company believes that its facilities are adequate for its    
needs and that its properties are generally in good condition, well maintained  
and suitable for their intended use.                                            

REGULATORY MATTERS                                                              

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

PRODUCT LIABILITY AND INSURANCE                                                 

  The Company maintains insurance coverage which it believes to be adequate.
The nature of the Company's business may subject it to product liability        
lawsuits. To the extent that the Company is subject to claims which exceed its  
liability insurance coverage, such suits could have a material adverse effect   
on the Company. No such lawsuits are pending against the Company and the        
Company has not suffered any material losses from such lawsuits in the past.    

LEGAL PROCEEDINGS                                                               

The Company is not a party to any material pending legal proceedings.   

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MANAGEMENT  

DIRECTORS AND EXECUTIVE OFFICERS                                                

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

                                                        [Enlarge/Download Table]

                                                            YEARS                                                  
                                                        EXPERIENCE IN                                              
                       NAME                        AGE    INDUSTRY                       POSITION                  
                       ----                        ---  -------------                    --------                  
                                                                                                                   
Gary E. West...................................... 60         27       Chairman of the Board of Directors          
Lawrence E. Bandi................................. 42         23       President, Chief Executive Officer, Director
John R. Bushwack.................................. 46         21       Executive Vice President, Chief Operating   
                                                                         Officer, Secretary, Director              
Robert D. Scherich................................ 36          1       Chief Financial Officer                     
Ben Exley, IV..................................... 50          1       Director                                    
James P. Hart..................................... 42          1       Director                                    
William A. Indelicato............................. 57         28       Director                                    
R. Bruce Kraemer.................................. 51         30       Director                                    
August E. Maier................................... 67         14       Director                                    


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

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

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

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

   BEN EXLEY, IV, DIRECTOR. Mr. Exley was elected a Director of the Company in
January 1997. He has served as the President of Ohio Valley-Clarksburg, Inc.    
since 1990 and Bailey Drug Company since 1993, both of which are pharmaceutical 
distributors and wholly-owned subsidiaries of Cardinal Health Inc. Mr. Exley    
has also served on the                                                          

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board of directors of several companies, including BankOne West Virginia N.A.   
since 1994, BankOne Wheeling-Steubenville N.A. since 1991 and Stone & Thomas, a 
chain of clothing department stores, since 1991. Mr. Exley is a graduate of     
West Virginia Wesleyan with a Bachelor of Science degree in Business            
Administration. He also holds a Masters in Business Administration degree from  
Northern Illinois University.                                                   

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

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

R. BRUCE KRAEMER, DIRECTOR. Mr. Kraemer was elected a Director of the   
Company in January 1997. He is the owner of Reading Supplies Inc., a            
distributor of pipe, valves and fittings. Mr. Kraemer was President of Weldco   
from 1985 to 1996 and a sales representative of Weldco from 1966 to 1985. Mr.   
Kraemer received a degree from the Ohio College of Applied Sciences.            

  AUGUST E. MAIER, DIRECTOR. Mr. Maier was elected a Director of the Company
in January 1997. He has served as Chief Executive Officer of Houston Fearless   
79, a manufacturer of film processing equipment, since May 1995. From October   
1987 to May 1995, Mr. Maier was Chief Executive officer of Holox, Inc., a       
manufacturer and distributor of industrial gases and welding equipment, which   
is wholly owned by Hoeklos Ltd. of Holland. Mr. Maier received his Bachelor of  
Science degree in Mechanical Engineering from the Indiana Institute of          
Engineering and his Masters in Business Administration degree from the Harvard  
Business School.                                                                

 Officers are elected annually and serve at the discretion of the Board of
Directors.                                                                      

BOARD OF DIRECTORS                                                              

Prior to the Offering, the Board of Directors will be divided into three
classes with terms expiring, respectively, at the annual meeting of             
shareholders in 1998 (Messrs. Bandi and Kraemer), 1999 (Messrs. Bushwack, Hart  
and West) and 2000 (Messrs. Exley, Indelicato and Maier).                       

   The Company's Board of Directors has established an Executive Committee, an
Audit and Finance Committee, and a Nominating and Compensation Committee. The   
Executive Committee is comprised of Messrs. West, Bandi and Indelicato. The     
Executive Committee has authority to exercise most of the powers of the full    
Board during the intervals between meetings. The Audit and Finance Committee is 
made up of a majority of independent directors comprised of Messrs. Hart,       
Bushwack, Kraemer and Maier. The Audit and Finance Committee reviews the        
Company's accounting practices, internal accounting controls and financial      
results and oversees the engagement of the Company's independent auditors. The  
Nominating and Compensation Committee is comprised of Messrs. West, Indelicato  
and Exley. The Nominating and Compensation Committee establishes salaries,      
incentives and other forms of compensation for directors, officers and other    
employees of the Company, administers the Company's benefit plans and           
recommends policies relating to such plans, and administers the issuance of     
stock options and other awards under the Company's 1997 Stock Option Plan to    
all Company employees and directors, other than the members of such committee,  
and recommends to the Board of Directors nominees for election as directors,    
and periodically reviews potential candidates, including incumbent directors.   

The Company intends to pay each outside director a $1,000 fee for each  
Board meeting attended and a $500 fee for each Committee meeting attended.      
Directors are also reimbursed for certain reasonable expenses incurred in       
attending Board meetings. Officers of the Company do not receive any additional 
compensation for serving as members of the Board of Directors or any of its     
Committees.                                                                     

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EXECUTIVE COMPENSATION                                                          

   The following table sets forth the compensation paid to the Chief Executive
Officer and the two other executive officers whose annual salary and bonus      
exceeded $100,000 for services rendered in all capacities to the Company for    
fiscal year 1996.                                                               

                                                        [Enlarge/Download Table]
                                        SUMMARY COMPENSATION TABLE                                

                                                             ANNUAL COMPENSATION<F1>              
                       NAME AND                              -----------------------   ALL OTHER  
                  PRINCIPAL POSITION                          SALARY         BONUS    COMPENSATION
                  ------------------                         --------       --------  ------------
                                                                                                  
Gary E. West...........................................      $ 61,159       $125,000   $ 9,712<F3>
Chairman of the Board<F2>                                                                         
Lawrence E. Bandi......................................        93,408        128,631    64,827<F3>
President and Chief Executive Officer                                                             
John R. Bushwack.......................................       110,238         46,500    32,260<F3>
Executive Vice President and Chief Operating Officer                                              

<FN>                                                                                              
--------                                                                                          
<F1> The named individuals did not receive any annual compensation not properly                   
     categorized as salary or bonus, except for certain perquisites and other                     
     personal benefits which are not shown because the value of such                              
     perquisites and other personal benefits provided by the Company did not                      
     exceed the lesser of $50,000 or 10% of the total of annual salary and                        
     bonus for the named executive officer for such year.                                         

<F2> In addition to salary, Mr. West received S Corporation distributions as a                    
     shareholder of the Company.                                                                  

<F3> Represents amounts accrued by the Company on behalf of Mr. Bandi and Mr.                     
     Bushwack in the amounts of $54,616 and $21,846, respectively, pursuant to                    
     deferred compensation agreements. Represents contributions by the Company                    
     to the pension and profit sharing plan accounts of Messrs. West, Bandi and                   
     Bushwack in the amount of $9,712 each. Represents premiums paid by the                       
     Company on behalf of Messrs. Bandi and Bushwack in the amounts of $499 and                   
     $702, respectively, for insurance to fund death, disability and retirement                   
     benefits under certain agreements.                                                           

BENEFIT PLANS                                                                   

1997 STOCK OPTION PLAN                                                      

The Company adopted the 1997 Stock Option Plan (the "Plan") in February 
1997. The Plan provides for the issuance of options to purchase up to 650,000   
shares of Common Stock to key employees, officers and directors of the Company  
and is administered by the Nominating and Compensation Committee of the Board   
of Directors.                                                                   

 The Company will grant to Lawrence E. Bandi, John R. Bushwack and each of
the five independent directors options to purchase 42,000, 26,000 and 5,000     
shares, respectively, of the Common Stock effective as of the closing of the    
Offering. The options vest three years after the date of the grant and have a   
term of ten years. The options are exercisable at a price equal to the fair     
market value of the shares of Common Stock on the date of the grant. In the     
case of key employees and officers, unexercised options granted under the Plan  
are subject to forfeiture upon termination of employment for any reason other   
than death, disability or normal retirement.                                    

401(K) PLAN                                                                 

The Company has a qualified 401(k) savings and retirement plan (the     
"401(k) Plan"). Eligibility to participate in the 401(k) Plan requires an       
employee to have been employed with the Company for twelve months ("Eligible    
Employees"). The 401(k) Plan allows Eligible Employees to defer into their      
plan account a certain dollar amount or stated percentage of their salary, not  
to exceed statutorily mandated annual limits (the "Employee Contributions").    
Eligible Employees are 100% vested in their Employee Contributions. The Company 
makes an annual contribution (the "Company Contribution") to all Eligible       
Employees' plan account in an amount equal to 5% of their salary or wages.      
Company Contributions vest over a term of seven years. The Company also makes a 
determination each year based upon performance as to the amount, if any, of     
additional contributions to be made to Eligible Employees' plan accounts. If a  
determination is made to make additional contributions in any year, such        
amounts are contributed on a pro rata basis to the plan accounts of Eligible    
Employees who made voluntary contributions during such year.                    

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Distributions under the 401(k) Plan may be made at retirement, death, permanent 
disability or other termination of employment, in a lump sum payment.           

CERTAIN AGREEMENTS WITH EXECUTIVE OFFICERS                                      

   Lawrence E. Bandi and John R. Bushwack have entered into long-term deferred
compensation agreements with the Company pursuant to which the Company has      
awarded units to Mr. Bandi and Mr. Bushwack having a value based upon a         
percentage of the value of the Company. For purposes of such agreements, the    
value of the Company is generally determined pursuant to a formula based upon a 
multiple of earnings before interest, income taxes, depreciation and            
amortization, subject to certain adjustments. The value of the units is         
adjusted annually. The interests of Mr. Bandi and Mr. Bushwack in their units   
vest either over a period of years or automatically upon the occurrence of      
certain transactions, including closing of the Offering. These agreements will  
be terminated immediately prior to the closing of the Offering and the Company  
will issue to Mr. Bandi and Mr. Bushwack 121,942 and 48,776 shares of Common    
Stock, respectively, in exchange for their units. In connection with the        
termination of these agreements, the Company will recognize a one-time,         
non-cash expense of $0.4 million in the period in which the closing of the      
Offering occurs.                                                                

Lawrence E. Bandi and John R. Bushwack have entered into agreements with
the Company whereby the Company has agreed to pay each of them, or their        
respective beneficiaries, certain death, disability and/or retirement benefits, 
provided that they are employed with the Company until their respective         
retirements or deaths, and that with respect to retirement benefits, they do    
not thereafter compete with the Company. In the event of the death or           
retirement of Mr. Bandi or Mr. Bushwack, the Company is obligated to make       
payments of $2,000 and $1,000 per month, respectively, for eighty-four months.  
In the event of disability, the Company is obligated to make payments of $2,000 
and $1,000 per month, respectively, for the duration of the disability, but not 
after 65 years of age.                                                          

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

In January, 1997, the Company established a Compensation Committee      
comprised of Messrs. West, Indelicato and Exley. The Company did not have a     
compensation committee or other board committee performing equivalent functions 
prior to 1997. Messrs. West and Bandi made all decisions relating to executive  
officer compensation in 1996. None of the Company's directors serve on any      
other board which relationship would be construed to constitute a compensation  
committee interlock.                                                            

INDEMNIFICATION OF OFFICERS AND DIRECTORS                                       

As permitted by the Pennsylvania Business Corporation Law of 1988, as   
amended (the "PBCL"), the Articles of the Company provide that (i) the Company  
is required to indemnify its directors and officers to the maximum extent       
permitted by Pennsylvania law, (ii) the Company may indemnify employees or      
agents to the maximum extent permitted by Pennsylvania law, (iii) the Company   
is required to advance expenses in defending a proceeding against its officers  
and directors and may advance such expenses to its employees and agents, upon   
receipt of an undertaking by such person to repay such amount if it is          
determined that such person is not entitled to indemnification, (iv) the        
rights conferred in the PBCL and in the Company's Articles are not exclusive,   
(v) the Company may enter into agreements with any director, officer, employee  
or agent to provide indemnification rights as it deems appropriate and (vi)     
the Company is authorized to maintain insurance on behalf of its officers and   
directors, employees and agents.                                                

The Company has also adopted in its Articles and Bylaws a provision     
limiting a director's personal liability for monetary damages unless (i) the    
director has breached or failed to perform his or her duties under applicable   
law and (ii) the breach or failure to perform constitutes self-dealing,         
willful misconduct or recklessness.                                             

  Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or controlling persons of the Company pursuant 
to the Company's Articles, Bylaws and the PBCL, the Company has been informed   
that in the opinion of the Securities and Exchange Commission such              
indemnification is against public policy as expressed in the Securities Act     
and is therefore unenforceable.                                                 
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PRINCIPAL AND SELLING SHAREHOLDERS  

   The following table sets forth certain information regarding the beneficial
ownership of the Common Stock immediately prior to the Offering and as adjusted 
to reflect the sale of shares offered hereby, for (i) each person known to the  
Company to own beneficially 5% or more of the outstanding shares of Common      
Stock, (ii) the Company's directors and named executive officers, (iii) each    
Selling Shareholder and (iv) all the Company's directors and executive officers 
as a group. Each named beneficial owner has sole voting and investment power.   

                                                        [Enlarge/Download Table]

                                          SHARES BENEFICIALLY        NUMBER OF   SHARES BENEFICIALLY   
                                            OWNED PRIOR TO            SHARES         OWNED AFTER       
                                               OFFERING               OFFERED       OFFERING<F1>       
                                        ------------------------     ---------  -----------------------
                                         NUMBER          PERCENT                 NUMBER         PERCENT
                                        ---------        -------                ---------       -------
                                                                                                       
Gary E. West<F2>...................     7,000,000         94.6             --   7,000,000         75.1 
Lawrence E. Bandi<F3>..............       121,942          1.6         37,000      84,942         <F*> 
John R. Bushwack<F3>...............        48,776         <F*>         15,000      33,776         <F*> 
William A. Indelicato<F4>..........        96,366          1.3         30,000      66,366         <F*> 
Ben Exley, IV......................           -0-           --             --          --           -- 
James P. Hart......................           -0-           --             --          --           -- 
R. Bruce Kraemer...................       100,000          1.4             --     100,000          1.1 
August E. Maier....................           -0-           --             --          --           -- 
All directors and executive                                                                            
  officers as a group..............     7,367,084         99.5         82,000   7,285,084         78.2 

<FN>                                                                                                   
--------                                                                                               
<F*> Less than 1%.                                                                                     

<F1> Assumes no exercise of the Underwriters' over-allotment option.                                   

<F2> Gary E. West beneficially owns and controls the shares indicated through                          
     six grantor retained annuity trusts.                                                              

<F3> Mr. Bandi is the President and Chief Executive Officer of the Company. Mr.                        
     Bushwack is the Executive Vice President and Chief Operating Officer of                           
     the Company. Each is also a director of the Company. See "Management."                            

<F4> Mr. Indelicato has been a director of the Company since January 1997 and                          
     provides consulting services to the Company through ADE Vantage, Inc. See                         
     "Certain Relationships and Related Transactions."                                                 

THE RIGHT OF FIRST REFUSAL AGREEMENT            

In September 1991, in connection with the purchase by the Company of        
certain assets of Praxair, Inc. (``Praxair''), the Company, Mr. West and certain
of his affiliates entered into a Right of First Refusal Agreement with Praxair. 
In March 1997, the parties to such agreement entered into an Amended and        
Restated Right of First Refusal Agreement (the ``Right of First Refusal         
Agreement'') in connection with the Company's reorganization. Pursuant to this  
agreement, if at any time during the term of the agreement the Company wishes to
accept a third party offer to purchase all or a material part of the assets     
of the Company, or Mr. West and his affiliates wish to accept an offer          
to purchase shares of Capital Stock owned by them in a transaction              
that would result in Mr. West and his affiliates collectively owning            
less than 51% of the Company's issued and outstanding shares of Capital Stock   
on a fully diluted basis or owning less than 51% of the combined voting         
power of all outstanding voting securities of the Company, then Praxair will    
have a right of first refusal to match the offer. If within 30 days of the      
notice, Praxair elects to exercise its right of first refusal, it must purchase 
the Company's assets or Mr. West's and his affiliates' shares of Capital        
Stock, as the case may be, at the same price and on the same terms              
as those offered by any third party. If within such 30 day period               
Praxair elects not to exercise such right, or fails to make any                 
election, Mr. West and his affiliates, or the Company, as the case may          
be, may consummate the proposed sale to such third party within 100 days        
of the expiration of such 30 day period. If such sale is not consummated        
within such 100 day period, Praxair will have a right of first refusal          
with respect to subsequent third party offers.                                  

In addition, in the absence of a third party offer, if (a) Mr. West         
and his affiliates wish to sell shares of Common Stock which would              
result in their owning collectively less than 51% or more of the                
Company's issued and outstanding shares of Common Stock, (b) the Company        
wishes to sell all or a material part of its assets, or (c) the Company wishes  

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to issue additional shares, or options or securities exercisable or convertible 
into shares of Common Stock, pursuant to employee stock options, a public       
offering, private placement, merger, share exchange or otherwise, which in the  
aggregate on a fully diluted basis would result in Mr. West and his affiliates  
collectively owning less than 51% of all the issued and outstanding shares of   
Common Stock, then, as a condition to that transaction Mr. West and his         
affiliates must give notice of the proposed sale or issuance to Praxair and     
Praxair will have the right within 30 days of such notice to elect to purchase  
from Mr. West and his affiliates up to all of the issued and outstanding shares 
of Common Stock held by them (but not less than 51% of all of the issued and    
outstanding shares of the Company's Common Stock on a fully diluted basis) at   
the then prevailing market price. If within such 30 day period Praxair elects   
not to exercise such right, or fails to make any election, Mr. West and his     
affiliates, or the Company, as the case may be, may consummate the proposed sale
or issuance within 100 days of the expiration of such 30 day period. If such    
sale is not consummated within such 100 day period, Praxair will have a right of
first refusal with respect to subsequent third party offers. If within two      
years of any such sale to Praxair, Praxair acquires the remaining shares        
of Common Stock in a second step transaction at a price per share               
greater than that initially paid to Mr. West and his affiliates, it must        
pay to Mr. West and his affiliates the difference between the average price     
per share of Common Stock paid in such second step transaction and the          
price per share initially paid to Mr. West and his affiliates. Additionally,    
if within two years of any such sale, Praxair resells the Company's shares      
at a price per share which exceeds the price per share paid by it to Mr. West   
and his affiliates, Praxair will be required to turn over to Mr. West and       
his affiliates 50% of the profit therefrom.                                     

Praxair has agreed that until such time, if ever, as it acquires at least   
51% of the issued and outstanding Capital Stock it will not acquire Capital     
Stock through public purchases or otherwise and will not seek to change the     
composition or the policies of the Company's Board of Directors. Mr. West       
has agreed with Praxair that he will not, nor will he cause or permit the       
Company to, take or permit any action which would result in his ceasing         
to be the beneficial owner of at least 51% of the issued and outstanding        
Capital Stock until September 1998. Mr. West has informed the Company that      
he does not currently intend to take, cause or permit the Company to take,      
any such action at any time during the term of the Right of First Refusal       
Agreement. The Right First Refusal Agreement expires in September 2006.         

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  

WELDCO, INC.                                                                

  On October 11, 1996, the Company purchased substantially all of the assets
of Weldco pursuant to a Purchase and Sale Agreement dated as of September 27,   
1996 among the Company, Weldco and certain other persons (the "Weldco Purchase  
Agreement"). Approximately $7.9 million of the purchase price was paid by the   
delivery of the Company's promissory notes. Under the Weldco Purchase           
Agreement, Weldco (or its shareholders following liquidation) has the right, in 
the event of an initial public offering of the Company's Common Stock, to       
convert a portion of the indebtedness evidenced by the Company's promissory     
notes to shares of the Company's Common Stock based upon the initial public     
offering price of the Common Stock. Under this provision, Weldco has the right  
to receive 350,000 shares of the Common Stock in exchange for the cancellation  
of indebtedness in the amount of $2,800,000. The Company and Weldco have agreed 
that rather than issuing 350,000 shares to Weldco, the Company will prepay      
$1,720,000 under the Company's promissory notes and issue 135,000 shares of     
Common Stock to Weldco (or its shareholders) immediately prior to the closing   
of the Offering. The Company understands that certain shareholders of Weldco    
intend to purchase up to 100,000 shares of Common Stock in the Offering and     
that the Underwriters have agreed to reserve such number of shares for purchase 
by Weldco (or its shareholders). See "Underwriting." The Weldco Purchase        
Agreement further grants Weldco (or its shareholders) the right to cause the    
Company to purchase shares of Common Stock issued to Weldco (or its             
shareholders) pursuant to the conversion of indebtedness. Such right shall be   
exercised, if at all, within three years following the closing of the Offering  
based upon the initial public offering price plus interest from the date of     
issuance at the rate of 6.6% per annum. The Company expects that 235,000 shares 
will be subject to this right following the closing of the Offering.            

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WEST RENTALS, INC.                                                          

The Company leases 38 buildings from West Rentals, Inc., a West Virginia
corporation ("West Rentals"), 35 of which are leased pursuant to a Master       
Lease Agreement (the "Master Lease") and three of which are leased pursuant     
to pass-through subleases. Gary E. West, the Company's Chairman of the Board,   
is the sole shareholder of West Rentals. The Master Lease terminates on October 
31, 2006 and may be renewed for an additional five-year term. Currently, the    
Company pays an aggregate of $132,118 a month to West Rentals as rent for all   
real property leased. In addition, the Company pays all utility bills and fees  
as well as all property and local taxes on the real property leased from West   
Rentals. In May 1996, the Company sold several of its properties to West        
Rentals for an aggregate purchase price of approximately $850,000, which        
purchase price was supported by a third-party appraisal.                        

   In addition, the Company rents cylinders and trailers from West Rentals and
currently pays approximately $7,860 a month to West Rentals for such rentals.   
Employees of the Company provide occasional construction, maintenance and       
clerical related services to West Rentals. The Company bills West Rentals for   
such services on an hourly basis. Aggregate expenditures by the Company under   
the Master Lease and for rental of cylinders and trailers, for the fiscal year  
ended June 30, 1996, was approximately $932,624. The Company believes that the  
amounts it has paid for rental of real property, cylinders and trailers have    
not been less favorable than could have been obtained in arms-length            
transactions with unaffiliated third parties.                                   

ACETYLENE PRODUCTS CORP.                                                    

  On December 31, 1996, the Company terminated an oral take-or-pay agreement
with Acetylene Products Corp. ("APC"), whose shareholders are all directors,    
officers or employees of the Company. The agreement obligated the Company to    
purchase a minimum quantity of acetylene on an annual basis regardless of       
whether it accepted delivery of the acetylene. During fiscal 1996 and the six   
months ended December 31, 1996, the Company paid APC $159,915 and $96,216,      
respectively. The Company also leases approximately 1,400 square feet of space  
located in Wheeling, West Virginia from APC for use as an employee training     
center at a cost of $700 per month. The lease has a one year term expiring in   
October 1997. Employees of the Company provide occasional construction,         
maintenance and clerical related services to APC. The Company bills APC for     
such services on an hourly basis and the amounts received in fiscal 1996 were   
$63,550. The Company believes that the current arrangements with APC are not    
less favorable than could be obtained in arms-length transactions with          
unaffiliated third parties.                                                     

   The Company and APC have formed a Pennsylvania business trust through which
the Company conducts its operations in Pennsylvania. The financial results of   
the business trust are consolidated in the Company's financial statements. The  
Company and APC hold a 99% and 1% interest in the trust, respectively. The      
Company realizes certain tax benefits as a result of this structure. In fiscal  
1996, a nominal amount of cash was distributed by the trust to APC.             

INDELICATO CONSULTING ARRANGEMENT                                           

The Company has entered into a consulting agreement (the "Consulting    
Agreement") with William A. Indelicato, a director of the Company, whereby Mr.  
Indelicato provides consulting services concerning all aspects of the Company's 
acquisition program. In return for his services, the Company accrues            
"credits" for Mr. Indelicato in amounts based upon hours worked and hourly      
rates that vary depending upon criteria related to each particular acquisition. 
Mr. Indelicato can redeem accrued credits for cash at any time within seven     
years from the date of accrual. The amount of the accrued, unredeemed credits   
is adjusted proportionately following the end of each fiscal year based upon    
the increase (but not any decrease) in the Company's net worth since the end of 
the last fiscal year. In addition, Mr. Indelicato has the right, in connection  
with a public offering of the Common Stock, to exchange all or a portion of his 
accrued credits (excluding credits accrued for annual adjustments) for shares   
of Common Stock based on the book value per share of Common Stock as of the end 
of the fiscal year for which the credits were accrued, in which case the        
accrued credits for annual adjustments are cancelled. As of June 30, 1996, the  
total amount of the accrued credits was approximately $158,000. Mr. Indelicato  
will exchange all the accrued credits for 96,366 shares of Common Stock, of     
which 30,000 shares are being sold in the Offering. See "Principal and Selling  
Shareholders." Pursuant to the Consulting Agreement, the Company also retains   
ADE Vantage, Inc. ("ADE"), a consulting company wholly-owned by Mr. Indelicato, 
to support Mr. Indelicato in providing consulting services. The Company pays Mr.
Indelicato a monthly retainer fee of $1,000 and reimburses his out-of-pocket    
expenses related to the performance of services. Payments to Mr. Indelicato and 
ADE for fiscal 1996 totaled $76,000. The term of the                            

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Consulting Agreement expires on March 16, 1999, but either party may terminate  
it at any time. The Company intends to continue using the consulting services of
Mr. Indelicato and ADE after the Offering.                                      

EQUIPLEASE, CORP.                                                           

EquipLease Corp. ("EquipLease"), a corporation wholly-owned by Gary E.  
West, rents its one airplane and helicopter to the Company at an hourly rate of 
$220 and $150, respectively. The Company paid a total of $18,800 to EquipLease  
for rental of the airplane and helicopter during fiscal 1996. The Company       
believes that the arrangements with EquipLease have not been less favorable     
than could have been obtained in arms-length transactions with unaffiliated     
third parties.                                                                  

SHARES ELIGIBLE FOR FUTURE SALE 

Upon completion of the Offering and assuming no exercise of outstanding 
options, the Company will have outstanding 9,320,084 shares of Common Stock     
(9,620,084 shares if the Underwriters' over allotment option is exercised in    
full). Of these shares, the 2,000,000 shares sold in the Offering will be       
immediately eligible for resale in the public market without restriction under  
the Securities Act, except for any shares purchased by an "Affiliate" (as       
that term is defined under the Securities Act) of the Company, which will be    
subject to the resale limitations of Rule 144 under the Securities Act. The     
remaining 7,320,084 shares of Common Stock outstanding following the Offering   
(the "Previously Issued Shares") are deemed to be "restricted securities"       
within the meaning of the Securities Act and may be publicly sold only if       
registered under the Securities Act or sold in accordance with an applicable    
exemption from registration, such as those provided by Rule 144 promulgated     
under the Securities Act.                                                       

All of the holders of the Previously Issued Shares have agreed to enter 
into agreements with the Company ("Lock-up Agreements") pursuant to which       
they will agree that, during the 180-day period after the date of this          
Prospectus, they will not, except with the prior consent of A.G. Edwards &      
Sons, Inc., offer, sell, contract to sell or grant an option to purchase any of 
such Previously Issued Shares. In addition, the Company has agreed that during  
such period it will not, without the prior consent of A.G. Edwards & Sons,      
Inc., offer, sell, contract to sell or grant an option to purchase any shares   
of Common Stock. See "Underwriting." At the expiration of such lock-up period   
all of the Previously Issued Shares will be eligible for sale, subject to the   
volume and other limitations of Rule 144.                                       

In general, under Rule 144, beginning 90 days after the date of this    
Prospectus, an Affiliate of the Company or other person (or persons whose       
shares are aggregated) who has beneficially owned Previously Issued Shares for  
at least one year, will be entitled to sell in any three-month period a number  
of shares that does not exceed the greater of (i) 1% of the then outstanding    
shares of the Company's Common Stock (approximately 9,620,084 shares            
immediately after the offering, if the Underwriters' over-allotment option is   
exercised in full) or (ii) the average weekly trading volume of the Company's   
Common Stock on the Nasdaq National Market during the four calendar weeks       
immediately preceding the date on which notice of the sale is filed with the    
Securities and Exchange Commission. Sales pursuant to Rule 144 are subject to   
certain requirements relating to manner of sale, notice and availability of     
current public information about the Company. A person (or persons whose shares 
are aggregated) who is not deemed to have been an Affiliate of the Company at   
any time during the 90 days immediately preceding the sale and who has          
beneficially owned Restricted Shares for at least two years is entitled to sell 
such shares pursuant to Rule 144(k) without regard to the limitations described 
above.                                                                          

   Previously Issued Shares may also be resold (i) to a person whom the seller
reasonably believes is a qualified institutional buyer within the meaning of    
Rule 144A under the Securities Act purchasing for its own account or for the    
account of a qualified institutional buyer in a transaction meeting the         
requirements of Rule 144A and (ii) in an off-shore transaction complying with   
Rules 903 or 904 of Regulation S under the Securities Act.                      

 An employee of the Company who purchased shares or was awarded options to
purchase shares pursuant to a written compensatory plan or contract meeting the 
requirements of Rule 701 under the Securities Act is entitled to rely on the    
resale provisions of Rule 701 under the Securities Act which permits Affiliates 
and non-Affiliates to sell their Rule 701 shares without having to comply with  
the holding period restrictions of Rule 144, in each case commencing 90 days    
after the date of this Prospectus. In addition, non-Affiliates may sell Rule 701
shares without complying with the public information, volume and notice         
provisions of Rule 144.                                                         

Following the effectiveness of the registration statement covering the  
shares of Common Stock offered hereby, the Company will register under the      
Securities Act the shares of Common Stock reserved for issuance under the       
Company's 1997 Stock Option Plan covering 650,000 shares. The Company expects   
that this registration will automatically become effective upon filing.         
Accordingly, shares registered under such registration statement and            

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acquired pursuant to the Plan will be available for sale in the open market     
upon the expiration of the public sale restrictions described below (see        
"Underwriting"), subject to Rule 144 volume limitations applicable to           
Affiliates, except to the extent such shares are subject to vesting             
restrictions with the Company.                                                  

   Prior to the Offering, there has been no public market for the Common Stock
of the Company. Future sales of substantial amounts of Common Stock in the      
public market could adversely affect market prices prevailing from time to      
time. Sales of substantial amounts of Common Stock of the Company in the public 
market after the restrictions lapse could adversely affect the prevailing       
market price and the ability of the Company to raise equity capital in the      
future.                                                                         

THE REORGANIZATION  

  The business of the Company historically has been conducted through Valley
National Gases, Inc., a West Virginia corporation (the "Operating Company").    
Prior to the closing of the Offering, a holding company structure will be       
implemented by having the shareholders of the Operating Company exchange their  
shares of common stock of the Operating Company for shares of Common Stock of   
the Company, which is a newly organized Pennsylvania corporation. The Company   
will then contribute all of the outstanding common stock of the Operating       
Company to its wholly owned subsidiary, Valley National Gases Delaware, Inc., a 
Delaware corporation.                                                           

DESCRIPTION OF CAPITAL STOCK  

AUTHORIZED CAPITAL STOCK                                                        

 The Company's Articles provide for authorized capital stock to consist of
30,000,000 shares of Common Stock, and 5,000,000 shares of Preferred Stock. The 
Company will have outstanding, immediately prior to the issuance and sale of    
shares of Common Stock pursuant to the Offering, 7,402,084 shares of Common     
Stock. Upon the closing of the Offering, assuming no exercise of the            
Underwriters' over-allotment option and no exercise of outstanding stock        
options, the Company will have outstanding 9,320,084 shares of Common Stock     
and no shares of Preferred Stock.                                               

COMMON STOCK                                                                    

   Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders, including the election of         
directors. Holders of Common Stock do not have cumulative voting rights in the  
election of directors or preemptive rights to purchase or subscribe for any     
stock or other securities. Subject to the prior rights of the holders of any    
shares of Preferred Stock, if any, which subsequently may be issued and         
outstanding, holders of Common Stock are entitled to receive dividends as and   
when declared by the Board of Directors out of funds legally available for the  
purpose. Such dividends shall not be cumulative. The holders of Common Stock    
shall share ratably in all assets remaining after payment of liabilities.       
Additional shares of authorized Common Stock may be issued without shareholder  
approval. All of the shares of Common Stock are, and the shares to be sold in   
the Offering will be, upon issuance and payment therefor, fully paid and        
non-assessable.                                                                 

PREFERRED STOCK                                                                 

   The Board has the authority to issue up to an aggregate of 5,000,000 shares
of Preferred Stock from time to time in one or more series, without shareholder 
approval. The Board has the authority to establish from time to time the number 
of shares to be included in each such series, dividend rate, redemption and     
liquidation rights and terms, sinking fund provisions, if any, for the          
redemption or purchase of shares, conversion terms and conditions, if any,      
voting rights, if any, and to set the designation of the series and to fix and  
determine the relative rights and preferences of the shares of each such series 
and any qualifications, limitations or restrictions thereof. Depending upon the 
rights of such Preferred Stock, the issuance of Preferred Stock could have an   
adverse effect on the holders of Common Stock by delaying or preventing a       
change of control of the Company, making removal of the present management of   
the Company more difficult, or resulting in restrictions upon the payment of    
dividends and other distributions to the holders of Common Stock. The Company   
has no current plans to issue any Preferred Stock.                              

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK                                

Upon the completion of the Offering, there will be 20,029,916 shares of 
Common Stock and 5,000,000 shares of Preferred Stock available for future       
issuance without shareholder approval, taking into consideration the 650,000    
shares of Common Stock reserved for issuance upon exercise of outstanding       
options. These additional shares may be issued for a variety of proper corporate
purposes, including raising additional capital, corporate acquisitions, and     
employee benefit plans. Except as contemplated by the 1997 Stock Option Plan and
other possible employee benefit                                                 

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or stock purchase plans, the Company does not currently have any plans to issue 
additional shares of Common Stock or Preferred Stock.                           

   One of the effects of the existence of unissued and unreserved Common Stock
and Preferred Stock may be to enable the Board of Directors to issue shares to  
persons friendly to current management, which could render more difficult or    
discourage an attempt to obtain control of the Company by means of a merger,    
tender offer, proxy contest, or otherwise, and thereby protect the continuity   
of the Company's management and possibly deprive the shareholders of            
opportunities to sell their shares of Common Stock at prices higher than the    
prevailing market prices. Such additional shares also could be used to dilute   
the stock ownership of persons seeking to obtain control of the Company         
pursuant to the operation of the 1997 Stock Option Plan, or otherwise.          

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S ARTICLES AND BYLAWS        

Certain provisions of the Articles could have an anti-takeover effect.  
These provisions are intended to enhance the likelihood of continuity and       
stability in the composition of the Board of Directors of the Company and in    
the policies formulated by the Board of Directors and to discourage an          
unsolicited takeover of the Company if the Board determines that such takeover  
is not in the best interests of the Company and its shareholders. The           
provisions are designed to reduce the vulnerability of the Company to an        
unsolicited proposal for a takeover of the Company that does not contemplate    
the acquisition of all of its outstanding shares or an unsolicited proposal for 
the restructuring or sale of all or part of the Company. However, the following 
provisions could have the effect of discouraging certain attempts to acquire    
the Company or remove incumbent management even if some or a majority of        
shareholders deemed such an attempt to be in their best interests.              

PENNSYLVANIA ANTI-TAKEOVER LAWS                                                 

The Company has elected to have the "anti-takeover" provisions of           
Subchapters 25E, F, G and H of the Pennsylvania Business Corporation Law        
("PBCL") relating to "business combinations" with "interested shareholders"     
not apply to the Company. However, other provisions of the PBCL provide that    
directors may, in discharging their duties, consider the interests of a number  
of different constituencies, including shareholders, employees, suppliers,      
customers, creditors and the community in which it is located. Directors are    
not required to consider the interests of shareholders to a greater degree      
than other constituencies' interests. The PBCL expressly provides that          
directors do not violate their fiduciary duties solely by relying on poison     
pills or the anti-takeover provisions of the PBCL.                              

ARTICLES OF INCORPORATION                                                       

Classified Board of Directors. The Articles provide for the Board of    
Directors to be divided into three classes of Directors serving three-year      
terms. The initial terms of the Class I, Class II and Class III directors are   
set to expire at the end of the 1998 annual shareholders meeting, the 1999      
annual shareholders meeting and the 2000 annual shareholders meeting,           
respectively. At each annual meeting of shareholders beginning in 1998,         
successors to the directors whose term expires at the annual meeting shall be   
elected to a three year term, with each director to hold office until a         
successor has been duly elected and qualified. As a result, approximately       
one-third of the Board of Directors will be elected each year. The Board of     
Directors believes that a classified Board of Directors will help to assure the 
continuity and stability of the Board of Directors and the business strategies  
and policies of the Company as determined by the Board of Directors.            

The classified board provision could have the effect of discouraging a  
third party from making a tender offer or otherwise attempting to obtain        
control of the Company and may maintain the incumbency of the Board even though 
such an attempt might be beneficial to the Company and its shareholders. The    
existence of a classified board could delay shareholders who do not agree with  
the policies of the Board of Directors from removing a majority of the Board    
for two years, unless they can show cause and obtain the requisite vote.        

Number of Directors; Removal. The Articles provide that the Board of    
Directors will consist of at least three (3) but not more than ten (10)         
directors with the exact number to be fixed from time to time by resolution     
adopted by a majority of the Board of Directors. Subject to the rights of the   
holders of any series of Preferred Stock then outstanding, the Articles provide 
that any director or the entire Board of Directors, may be removed only for     
cause and only by the affirmative vote of holders of two-thirds of the          
outstanding shares of the capital stock of the Company entitled to vote         
generally in the election of directors. This charter provision prevents a       
shareholder from removing incumbent directors without cause and                 
simultaneously gaining control of the Board of Directors by filling the         
vacancies created by such removal with its own nominees.                        

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Special Meetings of Shareholders. The Articles provide that special     
meetings of the shareholders of the Company may be called only by the Chairman, 
the President or a majority of the members of the Board of Directors.           

Amendment of Certain Provisions of the Articles. The Articles generally 
require the affirmative vote of the holders of at least two-thirds of the       
outstanding shares of the voting stock of the Company entitled to vote          
generally in the election of directors in order to amend charter provisions     
concerning (i) the classified Board of Directors, (ii) the removal of           
directors, (iii) the amendment of the Bylaws, (iv) the calling of special       
meetings of the shareholders, (v) indemnification of officers and directors,    
(vi) limitation of director liability, (vii) the opting out of certain          
anti-takeover provisions and (viii) the supermajority voting requirements       
described in this paragraph. These voting requirements make it more difficult   
for shareholders to make changes in the Articles designed to facilitate the     
exercise of control over the Company. However, this provision shall be          
inapplicable at any time at which the holders of at least a majority of the     
voting stock of the Company shall be Praxair, its subsidiaries and/or its       
affiliates (and in each case permitted successors and assigns thereof)          
if they shall have acquired such voting stock pursuant to a transaction         
required or permitted by the Right of First Refusal Agreement, and at           
any such time, any provisions contained in such Articles may be amended or      
repealed by the affirmative vote of the holders of at least a majority          
of the outstanding shares of the voting stock of the Company, at a regular      
or special meeting of shareholders or upon the written consent of the           
holders of at least a majority of such outstanding shares of voting stock.      

BYLAWS                                                                          

Advance Notice Requirements for Shareholder Proposals and Director      
Nominations. The Bylaws establish an advance notice procedure for the           
nomination, other than by or at the director of the Board of Directors or a     
committee thereof, of candidates for election as director and for other         
shareholder proposals to be considered at shareholder meetings.                 

Notice of shareholder proposals and director nominations must be timely 
given in writing to the secretary of the Company prior to the meeting at which  
the matters are to be acted upon or at which the directors are to be elected.   
To be timely, notice must be received at the principal executive offices of the 
Company not less than sixty (60) days prior to the shareholder meeting.         

A shareholder's notice to the secretary with respect to a shareholder   
proposal shall set forth as to each matter the shareholder proposes to bring    
before the meeting (i) a brief description of the business desired to be        
brought before the meeting and the reasons for conducting such business at the  
meeting, (ii) the name and address of the shareholder proposing such business,  
(iii) the class or series and number of shares of stock of the Company which    
are owned beneficially or of record by such shareholder and the name and        
address under which such stock is issued and (iv) a description of any material 
interest of such shareholder in such business. A shareholder's notice to the    
secretary with respect to a director nomination shall set forth (i) certain     
information about the nominee, (ii) the signed consent of the nominee to serve  
as a director of the Company if elected, (iii) the name and address of the      
nominating shareholder and (iv) the class or series and number of shares of     
stock of the Company which are beneficially owned by such shareholder and the   
name and address under which such stock is held.                                

   The purpose of requiring advance notice is to afford the Board of Directors
an opportunity to consider the qualifications of the proposed nominees or the   
merits of other shareholder proposals and, to the extent deemed necessary or    
desirable by the Board of Directors, to inform shareholders about those         
matters.                                                                        

SHARE OWNERSHIP                                                                 

  After the consummation of this Offering, Mr. West will be the beneficial
owner of approximately 75.1% of the Common Stock (72.8% if the Underwriters'    
over-allotment option is exercised in full). At such point in time as           
Mr. West would cease to be the beneficial owner of at least 51% of the          
Common Stock, Praxair will have the right to exercise its right of first        
refusal. See "The Right of First Refusal Agreement." Control by Mr. West or     
Praxair of a majority of the Common Stock will prevent third parties from       
acquiring control of the Company and may deter third parties from seeking to    
acquire large minority positions of the Company's Common Stock.                 

TRANSFER AGENT AND REGISTRAR                                                    

   The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer & Trust Company.                                                 

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UNDERWRITING  

  Subject to the terms and conditions of an Underwriting Agreement among the
Company, the Selling Shareholders, and A.G. Edwards & Sons, Inc. and            
Oppenheimer & Co., Inc. (the "Representatives"), the underwriters listed        
below (the "Underwriters") have severally agreed to purchase from the Company   
and the Selling Shareholders the aggregate number of shares of the Company's    
Common Stock set forth opposite their respective names below:                   

                                                        [Enlarge/Download Table]

                                                                            NUMBER OF
                                UNDERWRITER                                  SHARES  
                                -----------                                 ---------
                                                                                     
A.G. Edwards & Sons, Inc...................................................   685,000
Oppenheimer & Co., Inc.....................................................   685,000
Alex. Brown & Sons Incorporated............................................    40,000
Dillon, Read & Co. Inc.....................................................    40,000
Donaldson, Lufkin & Jenrette Securities Corporation........................    40,000
Lehman Brothers Inc........................................................    40,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.........................    40,000
PaineWebber Incorporated...................................................    40,000
Prudential Securities Incorporated.........................................    40,000
Fahnestock & Co. Inc.......................................................    20,000
First of Michigan Corporation..............................................    20,000
Interstate/Johnson Lane Corporation........................................    20,000
Janney Montgomery Scott Inc................................................    20,000
Legg Mason Wood Walker Incorporated........................................    20,000
McDonald & Company Securities, Inc.........................................    20,000
Morgan Keegan & Company, Inc...............................................    20,000
Neuberger & Berman, LLC....................................................    20,000
The Ohio Company...........................................................    20,000
Parker/Hunter Inc..........................................................    20,000
Pennsylvania Merchant Group Ltd............................................    20,000
Raymond James & Associates, Inc............................................    20,000
Tucker Anthony Incorporated................................................    20,000
Vector Securities International, Inc.......................................    20,000
Wheat, First Securities, Inc...............................................    20,000
Cleary Gull Reiland & McDevitt Inc.........................................    10,000
First Analysis Securities Corporation......................................    10,000
Hazlett, Burt & Watson, Inc................................................    10,000
Sands Brothers & Co., Ltd..................................................    10,000
Starr Securities, Inc......................................................    10,000
                                                                            ---------
        Total.............................................................. 2,000,000
                                                                            =========

  Pursuant to the terms of the Underwriting Agreement, the Underwriters will
acquire the shares of Common Stock offered hereby from the Company and the      
Selling Shareholders at the public offering price set forth on the cover page   
hereof less the underwriting discounts and commissions set forth on the cover   
page. The Underwriters propose to offer the shares to the public at the public  
offering price set forth on the cover page. Some of the shares offered to the   
public will be sold to certain dealers at the public offering price less a      
dealers' concession not in excess of $0.30 per share. The Underwriters and such 
dealers may allow a discount not in excess of $0.10 per share to other dealers. 
After the shares are released for sale to the public, the public offering price 
and other terms may be varied by the Representatives.                           

The nature of the obligations of the Underwriters is such that if any of
the shares offered hereby are purchased, all of such shares must be purchased.  

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The Company has granted to the Underwriters an option for 30 days to    
purchase (at the public offering price less the underwriting discounts and      
commissions shown on the cover page of this Prospectus) up to 300,000           
additional shares. The Underwriters may exercise such option only to cover      
over-allotments of shares made in connection with the sale of the shares        
offered hereby. To the extent the Underwriters exercise such option, each of    
the Underwriters will have a firm commitment, subject to certain conditions, to 
purchase approximately the same percentage of the option shares that the number 
of shares of Common Stock to be purchased by it shown in the above table bears  
to 2,000,000, and the Company will be obligated, pursuant to the option, to     
sell such shares to the Underwriters.                                           

The Company and holders of Previously Issued Shares have agreed to enter
into Lock-up Agreements pursuant to which they will agree that they will not,   
for 180 days from and after the date of this Prospectus, sell, offer to sell,   
or otherwise dispose of, directly or indirectly, any shares of capital stock of 
the Company (other than shares offered hereby, shares issuable pursuant to a    
plan for employees or shareholders in effect on the date of this Prospectus,    
and Common Stock issuable on conversion of securities or exercise of warrants   
or options outstanding on the date of this Prospectus) without the prior        
written consent of A.G. Edwards & Sons, Inc.                                    

Prior to the Offering, there has been no public market for the Common   
Stock. The initial public offering price of the shares of Common Stock will be  
negotiated among the Company and the Representatives. In addition to prevailing 
market conditions, among the factors that may be considered in determining the  
initial public offering price of the shares of Common Stock are the Company's   
historical financial performance, estimates of the business potential and       
earning prospects of the Company, an assessment of the Company's management and 
the consideration of the above factors in relation to the market valuations of  
companies in similar business.                                                  

The Company and the Selling Shareholders have agreed to indemnify the   
Underwriters against certain liabilities, including liabilities under the       
Securities Act of 1933, as amended, or to contribute to payments the            
Underwriters may be required to make in respect thereof.                        

In connection with the Offering, certain Underwriters and selling group 
members and their respective affiliates may engage in transactions that         
stabilize, maintain or otherwise affect the market price of the Common Stock.   
Such transactions may include stabilization transactions effected in accordance 
with Rule 104 of Regulation M, pursuant to which such persons may bid for or    
purchase Common Stock for the purpose of stabilizing its market price. The      
Underwriters also may create a short position for the account of the            
Underwriters by selling more Common Stock in connection with the Offering than  
they are committed to purchase from the Company and the Selling Shareholders,   
and in such case may purchase Common Stock in the open market following         
completion of the Offering to cover all or a portion of such short              
position. The Underwriters may also cover all or a portion of such short        
position, up to 300,000 shares of Common Stock, by exercising the Underwriters' 
over-allotment option referred to above. In addition, A.G. Edwards & Sons,      
Inc., on behalf of the Underwriters, may impose "penalty bids" under            
contractual arrangements with the Underwriters whereby it may reclaim from an   
Underwriter (or dealer participating in the offering) for the account of the    
other Underwriters, the selling concession with respect to Common Stock that is 
distributed in the Offering but subsequently purchased for the account of the   
Underwriters in the open market. Any of the transactions described in this      
paragraph may result in the maintenance of the price of the Common Stock at a   
level above that which might otherwise prevail in the open market. None of the  
transactions described in this paragraph is required, and, if they are          
undertaken, they may be discontinued at any time.                               

  The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary  
authority.                                                                      

   The Underwriters have reserved approximately 200,000 shares of Common Stock
for sale, at the initial public offering price, to employees of the Company and 
certain other individuals. The number of shares available for sale to the       
general public will be reduced to the extent such persons purchase such         
reserved shares. Any reserved shares not so purchased will be offered by the    
Underwriters to the general public on the same basis as the other shares        
offered hereby.                                                                 

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LEGAL MATTERS 

 The validity of the shares of Common Stock offered hereby has been passed
upon for the Company and the Selling Shareholders by Bryan Cave LLP, New York,  
New York. Certain legal matters will be passed upon for the Underwriters        
by Peper, Martin, Jensen, Maichel and Hetlage, St. Louis, Missouri.             

EXPERTS 

The audited financial statements and related schedules included in this 
Prospectus and elsewhere in the Registration Statement, to the extent and for   
the periods indicated in their reports, have been audited by Arthur Andersen    
LLP, independent public accountants, as indicated in their reports with respect 
thereto, and are included herein in reliance upon the authority of such firm as 
experts in accounting and auditing in giving said reports.                      

ADDITIONAL INFORMATION  

The Company has filed with the Securities and Exchange Commission,      
Washington, D.C. (the "Commission"), a Registration Statement (the              
"Registration Statement") on Form S-1 under the Securities Act, with respects   
to the Common Stock offered hereby. This Prospectus, which constitutes part of  
the Registration Statement, omits certain of the information contained in the   
Registration Statement and the exhibits and schedules thereto on file with the  
Commission pursuant to the Act and the rules and regulations of the Commission  
thereunder. The Registration Statement, including exhibits and schedules        
thereto, may be inspected at the principal offices of the Commission at 450     
Fifth Street, N.W., Washington, D.C., 20549, and at its regional offices at     
Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661,    
and at Seven World Trade Center, Suite 1300, New York, New York 10048, and      
copies may be obtained at the prescribed rates from the Public Reference        
Section of the Commission at its principal office in Washington, D.C. The       
Commission maintains an Internet Web site (http://www.sec.gov.) that contains   
such documents filed electronically by the Company with the Commission through  
its Electronic Data Gathering, Analysis and Retrieval System (EDGAR) filing     
system. Statements contained in this Prospectus as to the contents of any       
contract, agreement or other document referred to herein are not necessarily    
complete and in each instance reference is made to the copy of such contract,   
agreement or other document filed as an exhibit to the Registration Statement,  
each such statement being qualified in all respects by such reference.          

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                INDEX TO FINANCIAL STATEMENTS                                   

                                                                                            PAGE
                                                                                            ----

                                                                                                
VALLEY NATIONAL GASES, INC.                                                                     

    Condensed Balance Sheets as of June 30, 1996 and December 31, 1996 (unaudited)........   F-2

    Unaudited Condensed Statements of Operations for the six month periods ended December       
     31, 1995 and 1996....................................................................   F-4

    Statements of Changes in Shareholder's Equity for the year ended June 30, 1996 and the      
     six month period ended December 31, 1996 (unaudited).................................   F-5

    Unaudited Condensed Statements of Cash Flows for the six month periods ended December       
     31, 1995 and 1996....................................................................   F-6

    Notes to Unaudited Condensed Financial Statements.....................................   F-7

    Report of Independent Public Accountants..............................................  F-11

    Balance Sheets as of June 30, 1995 and 1996...........................................  F-12

    Statements of Operations for the three years ended June 30, 1994, 1995 and 1996.......  F-14

    Statements of Changes in Shareholder's Equity for the three years ended                     
      June 30, 1994, 1995 and 1996........................................................  F-15

    Statements of Cash Flows for the three years ended June 30, 1994, 1995 and 1996.......  F-16

    Notes to Financial Statements.........................................................  F-17

WELDCO, INC.                                                                                    

    Report of Independent Public Accountants..............................................  F-26

    Balance Sheets as of December 31, 1995 and September 30, 1996 (Unaudited).............  F-27

    Statements of Operations for the year ended December 31, 1995 and the nine month            
      period ended September 30, 1996 (Unaudited).......................................... F-29

    Statements of Changes in Shareholder's Equity for the year ended December 31, 1995          
      and the nine month period ended September 30, 1996 (Unaudited)......................  F-30

    Statements of Cash Flows for the year ended December 31, 1995 and the nine month            
      period ended September 30, 1996 (Unaudited).........................................  F-31

    Notes to Financial Statements.........................................................  F-32

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                               CONDENSED BALANCE SHEETS                                                

                                                                                                           PRO FORMA   
                                                                              JUNE 30,     DECEMBER 31,   DECEMBER 31, 
                                  ASSETS                                        1996          1996       1996 (NOTE 6) 
                                  ------                                      --------     ------------  --------------
                                                                                           (UNAUDITED)     (UNAUDITED) 
                                                                                                                       
CURRENT ASSETS:                                                                                                        
    Cash and cash equivalents..............................................  $ 4,148,546   $ 3,406,886   $  3,406,886  
    Restricted cash........................................................      400,000            --             --  
    Accounts receivable, net of allowance for doubtful accounts of $140,000                                            
      and $259,423, respectively...........................................    6,701,939     9,954,160      9,954,160  
    Inventory..............................................................    4,157,906     7,108,020      7,108,020  
    Prepaids and other.....................................................      832,899       797,719        797,719  
                                                                             -----------   -----------   ------------  
        Total current assets...............................................   16,241,290    21,266,785     21,266,785  
                                                                             -----------   -----------   ------------  
PROPERTY, PLANT AND EQUIPMENT:                                                                                         
    Land...................................................................        7,000         7,000          7,000  
    Buildings and improvements.............................................    2,664,460     3,379,283      3,379,283  
    Equipment..............................................................   30,788,676    35,737,114     35,737,114  
    Transportation equipment...............................................    5,758,581     6,367,548      6,367,548  
    Furniture and fixtures.................................................    1,937,110     2,037,860      2,037,860  
                                                                             -----------   -----------   ------------  
        Total property, plant and equipment................................   41,155,827    47,528,805     47,528,805  
    Accumulated depreciation...............................................  (18,029,419)  (21,782,406)   (21,782,406) 
                                                                             -----------   -----------   ------------  
        Net property, plant and equipment..................................   23,126,408    25,746,399     25,746,399  
                                                                             -----------   -----------   ------------  
OTHER ASSETS:                                                                                                          
    Intangibles, net of amortization of $1,745,353 and $2,368,920,                                                     
      respectively.........................................................    5,902,885    15,061,249     15,061,249  
    Deposits and other assets..............................................      220,265       396,294        396,294  
                                                                             -----------   -----------    -----------  
        Total other assets.................................................    6,123,150    15,457,543     15,457,543  
                                                                             -----------   -----------    -----------  
TOTAL ASSETS...............................................................  $45,490,848   $62,470,727    $62,470,727  
                                                                             ===========   ===========    ===========  

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                               CONDENSED BALANCE SHEETS                                                

                                                                                                           PRO FORMA   
                                                                              JUNE 30,     DECEMBER 31,   DECEMBER 31, 
                   LIABILITIES AND SHAREHOLDER'S EQUITY                         1996           1996      1996 (NOTE 6) 
                   ------------------------------------                       --------     -----------   --------------
                                                                                           (UNAUDITED)    (UNAUDITED)  
                                                                                                                       
CURRENT LIABILITIES:                                                                                                   
    Current maturities of long-term debt...................................  $ 2,736,814   $ 4,181,927    $ 4,181,927  
    Accounts payable, trade................................................    2,835,920     3,606,578      3,606,578  
    Accrued compensation and employee benefits.............................    2,970,987     3,037,794      3,037,794  
    Other current liabilities..............................................      479,126       731,071        731,071  
    Accrued distribution to shareholders...................................           --            --     10,100,000  
                                                                             -----------   -----------    -----------  
        Total current liabilities..........................................    9,022,847    11,557,370     21,657,370  

LONG-TERM DEBT, less current maturities....................................   19,506,728    31,534,974     31,534,974  

DEFERRED INCOME TAXES......................................................           --            --      4,200,000  

OTHER LONG-TERM LIABILITIES................................................      590,181     1,467,589      1,467,589  
                                                                             -----------   -----------    -----------  
        Total liabilities..................................................   29,119,756    44,559,933     58,859,933  
                                                                             -----------   -----------    -----------  
COMMITMENTS                                                                                                            
SHAREHOLDER'S EQUITY:                                                                                                  
    Preferred stock, par value, $.01 per share--5,000,000 shares                                                       
      authorized, no shares issued                                                                                     
    Common stock, par value, $.001 per share--Authorized, 30,000,000 shares                                            
      Issued, 18,300,653 shares............................................       18,301        18,301         18,301  
    Paid-in-capital........................................................       95,914        95,914         95,914  
    Treasury stock, 11,300,653 shares at cost..............................   (3,705,000)   (3,705,000)    (3,705,000) 
    Retained earnings......................................................   19,961,877    21,501,579      7,201,579  
                                                                             -----------   -----------    -----------  
        Total shareholder's equity.........................................   16,371,092    17,910,794      3,610,794  
                                                                             -----------   -----------    -----------  
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................  $45,490,848   $62,470,727    $62,470,727  
                                                                             ===========   ===========    ===========  

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                           UNAUDITED CONDENSED STATEMENTS OF OPERATIONS                                     

                                                                                    SIX MONTHS ENDED        
                                                                                      DECEMBER 31,          
                                                                             ------------------------------ 
                                                                                1995               1996     
                                                                             -----------        ----------- 
                                                                                                            
NET SALES..................................................................  $24,137,833        $33,777,288 

COST OF PRODUCTS SOLD, excluding depreciation and amortization.............   10,678,417         15,504,275 
                                                                             -----------        ----------- 
        Gross profit.......................................................   13,459,416         18,273,013 
                                                                             -----------        ----------- 
EXPENSES:                                                                                                   
    Operating and administrative...........................................    9,195,589         12,567,193 
    Depreciation and amortization..........................................    1,998,708          2,934,240 
                                                                             -----------        ----------- 
        Total expenses.....................................................   11,194,297         15,501,433 
                                                                             -----------        ----------- 
        Income from operations.............................................    2,265,119          2,771,580 
                                                                             -----------        ----------- 
INTEREST EXPENSE...........................................................      675,296            992,851 
                                                                             -----------        ----------- 
OTHER INCOME/(EXPENSE):                                                                                     
    Interest and dividend income...........................................      164,318            173,098 
    Rental income (expense)................................................       31,310            (10,080)
    Gain (loss) on disposal of assets......................................       (9,481)           (17,630)
    Other income (expense).................................................      119,890              4,628 
                                                                             -----------        ----------- 
        Total other income.................................................      306,037            150,016 
                                                                             -----------        ----------- 
NET INCOME.................................................................  $ 1,895,860        $ 1,928,745 
                                                                             ===========        =========== 


                                                                                 PRO FORMA INFORMATION      
                                                                                      (UNAUDITED)           
                                                                             ------------------------------ 
                                                                                                            
Net income.................................................................  $ 1,895,860        $ 1,928,745 
Pro forma income taxes.....................................................      758,344            771,498 
                                                                             -----------        ----------- 
Pro forma net income.......................................................  $ 1,137,516        $ 1,157,247 
                                                                             ===========        =========== 
Pro forma net income per share.............................................  $      0.16        $      0.14 
                                                                             ===========        =========== 
Pro forma weighted average number of shares outstanding....................    7,267,074          8,335,282 
                                                                             ===========        =========== 

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                     STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY                                            

                                        FOR THE YEAR ENDED JUNE 30, 1996 AND                                                  
                                       THE SIX MONTHS ENDED DECEMBER 31, 1996                                                 

                                     COMMON STOCK                           TREASURY STOCK                           TOTAL    
                                 ---------------------     PAID-IN-    -------------------------     RETAINED    SHAREHOLDER'S
                                   SHARES      AMOUNT      CAPITAL       SHARES        AMOUNT        EARNINGS       EQUITY    
                                 ----------    -------     --------    ----------    -----------   -----------   -------------
                                                                                                                              
BALANCE, June 30, 1995........   18,300,653    $18,301           --    11,300,653    $(3,705,000)  $17,482,478    $13,795,779 

    Net income................           --         --           --            --             --     4,100,928      4,100,928 

    Contribution of capital...           --         --      $95,914            --             --            --         95,914 

    Dividends paid............           --         --           --            --             --    (1,621,529)    (1,621,529)
                                 ----------    -------      -------    ----------    -----------   -----------    ----------- 

BALANCE, June 30, 1996........   18,300,653     18,301       95,914    11,300,653     (3,705,000)   19,961,877     16,371,092 

    Net income................           --         --           --            --             --     1,928,745      1,928,745 

    Dividends paid............           --         --           --            --             --      (389,043)      (389,043)
                                 ----------    -------      -------    ----------    -----------   -----------    ----------- 

BALANCE, December 31, 1996                                                                                                    
  (Unaudited).................   18,300,653    $18,301      $95,914    11,300,653    $(3,705,000)  $21,501,579    $17,910,794 
                                 ==========    =======      =======    ==========    ===========   ===========    =========== 

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS                                

                                                                                    SIX MONTHS ENDED        
                                                                                      DECEMBER 31,          
                                                                              ----------------------------- 
                                                                                 1995              1996     
                                                                              -----------       ----------- 
                                                                                                            
Net cash provided by operating activities..................................   $ 2,414,937       $ 1,186,735 
                                                                              -----------       ----------- 
Cash flows from investing activities:                                                                       
    Proceeds from disposal of assets.......................................        30,609            24,353 
    Purchases of property and equipment....................................    (1,288,438)       (1,377,456)
    Business acquisitions, net of cash acquired............................    (5,161,389)       (4,827,247)
    Change in restricted cash..............................................            --           400,000 
                                                                              -----------       ----------- 
Net cash used by investing activities......................................    (6,419,218)       (5,780,350)
                                                                              -----------       ----------- 
Cash flows from financing activities:                                                                       
    Proceeds from borrowings...............................................     5,524,087         5,511,102 
    Principal payments on loans............................................    (1,452,921)       (1,270,104)
    Dividends paid.........................................................      (316,845)         (389,043)
                                                                              -----------       ----------- 
Net cash provided (used) by financing activities...........................     3,754,321         3,851,955 
                                                                              -----------       ----------- 
Net change in cash and cash equivalents....................................      (249,960)         (741,660)

Cash and cash equivalents, beginning of period.............................     3,854,889         4,148,546 
                                                                              -----------       ----------- 
Cash and cash equivalents, end of period...................................   $ 3,604,929       $ 3,406,886 
                                                                              ===========       =========== 
Supplemental cash flow information:                                                                         

    Cash payments for interest.............................................   $   675,296       $   814,226 
                                                                              ===========       =========== 
  The accompanying notes are an integral part of these financial statements.                                

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VALLEY NATIONAL GASES, INC. 

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS 

1. BASIS OF PRESENTATION:                                                       

The financial statements of Valley National Gases, Inc. (the Company)   
presented herein are unaudited. Certain information and footnote disclosures    
normally prepared in accordance with generally accepted accounting principles   
have been either condensed or omitted pursuant to the rules and regulations of  
the Securities and Exchange Commission. Although the Company believes that all  
adjustments, consisting of only normal recurring adjustments, necessary for a   
fair presentation have been made, interim periods are not necessarily           
indicative of the financial results of operations for a full year. As such,     
these financial statements should be read in conjunction with the financial     
statements and notes thereto included or incorporated by reference in the       
Company's audited financial statements for the period ending June 30, 1996.     

2. INVENTORY:                                                                   

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

The components of inventory are as follows:                             

                                                                [Download Table]

                                                    JUNE 30,   DECEMBER 31,
                                                      1996         1996    
                                                   ----------  ------------
                                                                (UNAUDITED)
                                                                           
Hardgoods......................................... $3,529,294   $5,978,689 
Gases.............................................    628,612    1,129,331 
                                                   ----------   ---------- 
                                                   $4,157,906   $7,108,020 
                                                   ==========   ========== 

3. ACQUISITIONS:                                                                

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

  The Company purchased Weber Gas & Welding Supply Co. Inc. for an aggregate
purchase price of approximately $ 1,549,000 in August, 1996.                    

  On October 10, 1996, the Company purchased substantially all of the assets
of Weldco Inc. (Weldco) pursuant to a Purchase and Sale Agreement (the Weldco   
Purchase Agreement) for approximately $11.1 million. Approximately $7.9 million 
of the purchase price was paid by promissory notes from the Company. Under the  
Weldco Purchase Agreement, Weldco shareholders have the right, in the event of  
an initial public offering of the Company's common stock, to convert a portion  
of the Company's promissory notes to shares of the Company's common stock at    
the initial public offering price. Under this provision, Weldco shareholders    
have the right to receive 350,000 shares of the common stock in exchange for    
the cancellation of indebtedness in the amount of $2,800,000. The Company and   
Weldco shareholders have agreed that rather than issuing 350,000 shares, the    
Company will prepay $1,720,000 under the Company's promissory notes and issue   
135,000 shares of common stock to Weldco shareholders immediately prior to the  
closing of the Offering. The Company understands that certain Weldco            
shareholders intend to purchase up to 100,000 shares of common stock in the     
Offering. The Weldco Purchase Agreement further grants Weldco shareholders the  
right to cause the Company to purchase shares of common stock issued to Weldco  
shareholders pursuant to the conversion of indebtedness for a period of three   
years following the closing of the Offering at the initial public offering      
price plus interest from the date of issuance at the rate of 6.6% per annum.    
The Company expects that 235,000 shares will be subject to this right following 
the closing of the Offering. Accordingly, such shares will not be classified    
as shareholders' equity. The Company's payment obligation is secured by a       
letter of credit.                                                               
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VALLEY NATIONAL GASES, INC. 

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 

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

                                                        [Enlarge/Download Table]

                                                                                 FOR THE SIX 
                                                                                 MONTHS ENDED
                                                                                 DECEMBER 31,
                                                                                     1996    
                                                                                 ------------
                                                                                  (UNAUDITED)
                                                                                             
Cash paid....................................................................... $ 5,150,032 
Notes issued to sellers.........................................................   8,822,187 
Notes payable and capital leases assumed........................................     405,674 
Other liabilities assumed and acquisition costs.................................   4,921,766 
                                                                                 ----------- 
Total purchase price allocated to assets acquired............................... $19,299,659 
                                                                                 =========== 

4. LONG-TERM DEBT:                                                              

Long-term debt consists of the following:                               

                                                        [Enlarge/Download Table]

                                                                               JUNE 30,     DECEMBER 31,
                                                                                 1996           1996    
                                                                              -----------   ------------
                                                                                            (UNAUDITED) 
                                                                                                        
Revolving Note, interest at LIBOR plus 2% payable monthly through September                             
  2003. Secured by the assets of the Company................................  $        --   $10,162,514 
Term note, interest equal to Revolving Note, payable monthly through                                    
  September 1999. Secured by the assets of the Company......................           --    12,690,476 
Acquisitions offering revolving line of credit, interest at prime rate minus                            
  .125%, as defined, payable in full on November, 1997 or if notified by the                            
  bank in equal monthly installments. Secured by the assets of the                                      
  Company...................................................................    9,748,696            -- 
Term note, interest at prime rate, as defined, payable in monthly                                       
  installments through November 2000. Secured by the assets of the                                      
  Company...................................................................    7,000,010            -- 
Term note, interest at prime rate minus .125%, as defined, payable in                                   
  monthly installments through April 2002. Secured by the assets of the                                 
  Company...................................................................      833,330            -- 
Term note, interest at prime rate plus 1%, as defined, payable in monthly                               
  installments through April 2005. Secured by the assets of the Company.....    1,048,184            -- 
Convertible notes, interest at 6.6% payable annually through October 2003.                              
  Secured by letter of credit and certain assets of the Company.............           --     7,886,721 
Notes payable, interest at 7.0% payable monthly through July 2003. Secured                              
  by certain assets of the Company..........................................           --       910,657 
Individuals and corporations, mortgages and notes, interest at 2.978% to                                
  10.50%, payable at various dates through 2010.............................    3,843,591     4,283,839 
                                                                              -----------   ----------- 
                                                                               22,473,811    35,934,207 
Original issue discount.....................................................     (230,269)     (217,306)
Current maturities..........................................................   (2,736,814)   (4,181,927)
                                                                              -----------   ----------- 
Total long-term debt........................................................  $19,506,728   $31,534,974 
                                                                              ===========   =========== 

Prime rate was 8.25% and LIBOR was 5.625% at December 31, 1996.         

On October 4, 1996, the Company executed a three year revolving credit  
agreement with Bank One for the purpose of refinancing the then existing        
revolving credit agreement with NationsBank and to provide additional           
acquisition capital. This agreement provides for a term note of $13,000,000 at  
a variable interest rate based upon                                             

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VALLEY NATIONAL GASES, INC. 

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 

prime or LIBOR, depending on the Company's funded debt to EBITDA ratio, payable 
monthly through September of 2003. The agreement also provides for a revolving  
note with a maximum of $25,000,000 at a variable interest rate equal to that of 
the term note payable monthly through September of 1999. A commitment fee of    
$32,500 was paid upon acceptance of the agreement. These notes are secured by   
the Company's accounts receivable, equipment, inventory, and general            
intangibles, and the proceeds thereof. The agreement also contains various      
financial covenants including minimum fixed charge coverage, maximum of funded  
debt to EBITDA, and minimum net worth level.                                    

5. SUBSEQUENT EVENTS:                                                           

A. INITIAL PUBLIC OFFERING AND REORGANIZATION                                   

In connection with the initial public offering (the Offering) by the    
Company, the following transactions occurred on April 9, 1997:                  

a. Termination of the Company's S Corporation status. In connection with
     the termination of S Corporation status, the Company intends to declare
a distribution (the S Corporation Distribution) of all of its     
      undistributed earnings, estimated to be $10.1 million as of December 31,
      1996. In addition, the Company will be required to record a deferred tax
    liability with a corresponding one-time tax provision of approximately
$4.2 million in accordance with SFAS No. 109.                     

   b. The reorganization, whereby Valley National Gases, Inc., a West Virginia
  corporation has become an indirect wholly owned subsidiary of Valley
   Natural Gases Incorporated, a Pennsylvania corporation by exchange of
      stock. Valley National Gases Incorporated has authorized common stock of
  30,000,000 shares, par value $.001 and authorized preferred stock of
5,000,000 shares, par value $.01.                                 

c. Issuance of 267,084 shares of common stock as part of compensation   
     agreements with certain executive officers and directors. In connection
     with these compensation arrangements, the Company will incur an expense
     of approximately $1.9 million in the period in which the closing of the
Offering occurs.                                                  

d. The cancellation of treasury stock of Valley National Gases, Inc.    

  Accordingly, the Company's shareholders' equity accounts and the number of
shares in the accompanying financial statements have been retroactively         
restated to give effect to the reorganization and increase in authorized capital
stock.                                                                          

B. BUSINESS ACQUISITIONS                                                        

On January 30, 1997, the Company entered into a letter of intent for the
purchase of all the outstanding shares of an industrial gas and welding supply  
distributor for approximately $3.5 million. On February 28, 1997, the Company   
entered into another letter of intent for the purchase of substantially all     
of the assets of an industrial gas and welding supply distributor for           
approximately $3.8 million. The Company is proceeding with due diligence and    
the negotiation of definitive purchase agreements. These acquisitions will be   
financed by borrowings under the Company's credit facility. The Company does    
not anticipate consummation of these transactions prior to the closing of the   
Offering.                                                                       

C. 1997 STOCK OPTION PLAN                                                       

The Company adopted the 1997 Stock Option Plan (the "Plan") in February 
1997. The Plan provides for the issuance of options to purchase up to 650,000   
shares of Common Stock to key employees, officers and directors of the Company  
and is administered by the Nominating and Compensation Committee of the Board   
of Directors.                                                                   

 The Company will grant to two executives and each of the five independent
directors options to purchase 46,000, 26,000 and 5,000 shares, respectively,    
of the Common Stock effective as of the closing of the Offering. The options    
vest three years after the date of the grant and have a term of ten years. The  
options are exercisable at a price equal to the fair market value of the        
shares of Common Stock on the date of the grant. In the case of key employees   
and                                                                             

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VALLEY NATIONAL GASES, INC. 

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS (CONTINUED) 

officers, unexercised options granted under the Plan are subject to             
forfeiture upon termination of employment for any reason other than death,      
disability or normal retirement.                                                

D. Right of First Refusal                                                       

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

6. PRO FORMA INFORMATION (UNAUDITED):                                           

   The pro forma balance sheet as of December 31, 1996 reflects an anticipated
S Corporation Distribution, estimated to be approximately $10.1 million         
at that date, and the recording of a deferred tax liability of approximately    
$4.2 million upon termination of the Company's S Corporation status.            

The pro forma adjustments for income taxes included in the accompanying 
income statements are based upon the statutory rates in effect for C            
Corporations during the periods presented. Pro forma earnings per share were    
calculated by dividing pro forma net income by the weighted average shares      
outstanding for each period. The weighted average number of shares outstanding  
used to calculate the pro forma net income per share is based on the historical 
weighted average number of shares outstanding using an offering price of $8 per 
share as adjusted to reflect (i) the assumed issuance of 1,068,208 shares to    
fund the excess of dividends (including the estimated S Corporation             
Distribution) over net income for the six months ended December 31, 1996 (ii)   
the issuance of 170,718 shares of common stock to two executive officers        
immediately prior to the closing of the Offering in connection with the         
termination of certain deferred compensation agreements, and (iii) the issuance 
of 96,366 shares of common stock to a director immediately prior to the closing 
of the Offering, pursuant to a right under a consulting agreement to convert    
deferred consulting payments to common stock. In connection with these          
compensation arrangements, the Company will incur an expense of approximately   
$1.9 million ($2.2 million gross compensation net of related accruals of $0.3   
million) in the period in which the closing of the Offering occurs.             

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  

To Valley National Gases, Inc.:                                                 

 We have audited the accompanying balance sheets of Valley National Gases,
Inc. (an S corporation) as of June 30, 1995 and 1996, and the related           
statements of operations, changes in shareholder's equity and cash flows each   
of the three years in the period ended June 30, 1996. These financial           
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these financial statements based on  
our audits.                                                                     

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of         
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management as well as evaluating the overall financial        
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Valley National Gases, Inc. 
as of June 30, 1995 and 1996, and the results of their operations and their     
cash flows for each of the three years in the period ended June 30, 1996, in    
conformity with generally accepted accounting principles.                       

                                                     ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania,                                                       
August 13, 1996                                                             
(except for the matters discussed in                                        
Note 10 as to which the date is                                             
April 9, 1997)                                                              

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                            BALANCE SHEETS                                                       

                                                                                            JUNE 30,             
                                                                                 ------------------------------- 
                                     ASSETS                                          1995               1996     
                                     ------                                      ------------       ------------ 
                                                                                                                 
CURRENT ASSETS:                                                                                                  
    Cash and cash equivalents................................................... $  3,454,889       $  4,148,546 
    Restricted cash.............................................................      400,000            400,000 
    Accounts receivable, net of allowance for doubtful accounts of $140,000 in                                   
      1995 and 1996.............................................................    5,228,190          6,701,939 
    Inventory...................................................................    2,933,340          4,157,906 
    Prepaids and other..........................................................      493,819            832,899 
                                                                                 ------------       ------------ 
        Total current assets....................................................   12,510,238         16,241,290 
                                                                                 ------------       ------------ 
PROPERTY, PLANT AND EQUIPMENT:                                                                                   
    Land........................................................................      146,242              7,000 
    Buildings and improvements..................................................    3,533,507          2,664,460 
    Equipment...................................................................   26,182,328         30,788,676 
    Transportation equipment....................................................    4,448,081          5,758,581 
    Furniture and fixtures......................................................    1,228,580          1,937,110 
                                                                                 ------------       ------------ 
        Total property, plant and equipment.....................................   35,538,738         41,155,827 
    Accumulated depreciation....................................................  (16,632,432)       (18,029,419)
                                                                                 ------------       ------------ 
        Net property, plant and equipment.......................................   18,906,306         23,126,408 
                                                                                 ------------       ------------ 
OTHER ASSETS:                                                                                                    
    Intangibles, net of amortization of $552,560 and $1,745,353 respectively....    1,861,589          5,902,885 
    Deposits and other assets...................................................      142,714            220,265 
                                                                                 ------------       ------------ 
        Total other assets......................................................    2,004,303          6,123,150 
                                                                                 ------------       ------------ 
TOTAL ASSETS.................................................................... $ 33,420,847       $ 45,490,848 
                                                                                 ============       ============ 

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                           BALANCE SHEETS                                                      

                                                                                           JUNE 30,            
                                                                                 ----------------------------- 
                      LIABILITIES AND SHAREHOLDER'S EQUITY                          1995              1996     
                      ------------------------------------                       -----------       ----------- 
                                                                                                               
CURRENT LIABILITIES:                                                                                           
    Current maturities of long-term debt........................................ $ 2,134,583       $ 2,736,814 
    Accounts payable, trade.....................................................   1,919,682         2,835,920 
    Accrued compensation and employee benefits..................................   1,819,687         2,970,987 
    Other current liabilities...................................................     308,804           479,126 
                                                                                 -----------       ----------- 
            Total current liabilities...........................................   6,182,756         9,022,847 

LONG-TERM DEBT, less current maturities.........................................  12,964,092        19,506,728 

OTHER LONG-TERM LIABILITIES.....................................................     478,220           590,181 
                                                                                 -----------       ----------- 
            Total liabilities...................................................  19,625,068        29,119,756 
                                                                                 -----------       ----------- 
COMMITMENTS                                                                                                    
SHAREHOLDER'S EQUITY:                                                                                          
    Preferred stock, par value; $.01 per share-5,000,000 shares authorized; no                                 
      shares issued                                                                                            
    Common stock, par value, $.001 per share-Authorized, 30,000,000 shares;                                    
      Issued, 18,300,653 shares.................................................      18,301            18,301 
    Paid-in-capital.............................................................          --            95,914 
    Treasury stock, 11,300,653 shares at cost...................................  (3,705,000)       (3,705,000)
    Retained earnings...........................................................  17,482,478        19,961,877 
                                                                                 -----------       ----------- 
            Total shareholder's equity..........................................  13,795,779        16,371,092 
                                                                                 -----------       ----------- 
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY...................................... $33,420,847       $45,490,848 
                                                                                 ===========       =========== 

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                             STATEMENTS OF OPERATIONS                                                 

                                                                                 FOR THE YEARS ENDED JUNE 30,         
                                                                          ------------------------------------------- 
                                                                             1994            1995            1996     
                                                                          -----------     -----------     ----------- 
                                                                                                                      
NET SALES.............................................................    $39,166,027     $44,914,252     $53,611,979 

COST OF PRODUCTS SOLD, excluding depreciation and amortization........     16,844,386      19,931,377      23,617,062 
                                                                          -----------     -----------     ----------- 
        Gross profit..................................................     22,321,641      24,982,875      29,994,917 
                                                                          -----------     -----------     ----------- 
EXPENSES:                                                                                                             
    Operating and administrative......................................     15,704,048      17,688,338      20,295,254 
    Depreciation and amortization.....................................      2,789,657       3,111,516       4,699,608 
                                                                          -----------     -----------     ----------- 
        Total expenses................................................     18,493,705      20,799,854      24,994,862 
                                                                          -----------     -----------     ----------- 
        Income from operations........................................      3,827,936       4,183,021       5,000,055 
                                                                          -----------     -----------     ----------- 
INTEREST EXPENSE......................................................      1,037,845       1,071,794       1,561,081 
                                                                          -----------     -----------     ----------- 
OTHER INCOME/(EXPENSE):                                                                                               
    Interest and dividend income......................................        161,063         268,313         332,133 
    Rental income.....................................................         50,964          61,460          81,565 
    (Loss) gain on disposal of assets.................................         (1,491)         25,211          (5,095)
    Other income......................................................         60,510          88,753         253,351 
                                                                          -----------     -----------     ----------- 
        Total other income............................................        271,046         443,737         661,954 
                                                                          -----------     -----------     ----------- 
NET INCOME............................................................    $ 3,061,137     $ 3,554,964     $ 4,100,928 
                                                                          ===========     ===========     =========== 


                                                                                     PRO FORMA INFORMATION            
                                                                                          (UNAUDITED)                 
                                                                          ------------------------------------------- 
                                                                                                                      

Net Income............................................................    $ 3,061,137     $ 3,554,964     $ 4,100,928 
Pro forma income taxes................................................      1,224,455       1,421,986       1,640,371 
                                                                          -----------     -----------     ----------- 
Pro forma net income..................................................    $ 1,836,682     $ 2,132,978     $ 2,460,557 
                                                                          ===========     ===========     =========== 
Pro forma net income per share........................................    $      0.25     $      0.29     $      0.30 
                                                                          ===========     ===========     =========== 
Pro forma weighted average number of shares outstanding...............      7,267,074       7,267,074       8,335,282 
                                                                          ===========     ===========     =========== 

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY                                        
                               FOR THE YEARS ENDED JUNE 30, 1994, 1995 AND 1996                                      

                              COMMON STOCK                         TREASURY STOCK                           TOTAL    
                          ---------------------    PAID-IN-   -------------------------    RETAINED     SHAREHOLDER'S
                            SHARES      AMOUNT     CAPITAL      SHARES        AMOUNT       EARNINGS        EQUITY    
                          ----------    ------     --------   ----------    -----------   -----------   -------------
                                                                                                                     

BALANCE, June 30, 1993... 18,300,653    $18,301    $     --   11,300,653    $(3,705,000)  $13,216,073    $ 9,529,374 

    Net income...........         --         --          --           --             --     3,061,137      3,061,137 

    Dividends paid.......         --         --          --           --             --      (942,531)      (942,531)
                          ----------    -------    --------   ----------    -----------   -----------    ----------- 

BALANCE, June 30, 1994... 18,300,653     18,301          --   11,300,653     (3,705,000)   15,334,679     11,647,980 

    Net income...........         --         --          --           --             --     3,554,964      3,554,964 

    Dividends paid.......         --         --          --           --             --    (1,407,165)    (1,407,165)

BALANCE, June 30, 1995... 18,300,653     18,301          --   11,300,653     (3,705,000)   17,482,478     13,795,779 
                          ----------    -------    --------   ----------    -----------   -----------    ----------- 

    Net income...........         --         --          --           --             --     4,100,928      4,100,928 

    Contribution of                                                                                                  
      capital............         --         --      95,914           --             --            --         95,914 

    Dividends paid.......         --         --          --           --             --    (1,621,529)    (1,621,529)
                          ----------    -------    --------   ----------    -----------   -----------    ----------- 

BALANCE, June 30, 1996... 18,300,653    $18,301     $95,914   11,300,653    $(3,705,000)  $19,961,877    $16,371,092 
                          ==========    =======    ========   ==========    ===========   ===========    =========== 

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

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VALLEY NATIONAL GASES, INC. 

                                                        [Enlarge/Download Table]
                                        STATEMENTS OF CASH FLOWS                                               

                                                                         FOR THE YEAR ENDED JUNE 30,           
                                                               ----------------------------------------------- 
                                                                  1994              1995              1996     
                                                               -----------       -----------       ----------- 
                                                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                          
    Net income..............................................   $ 3,061,137       $ 3,554,964       $ 4,100,928 
    Adjustments to reconcile net income to net cash provided                                                   
      by operating activities--                                                                                
        Depreciation........................................     2,520,392         2,737,188         3,437,208 
        Amortization........................................       269,265           374,328         1,262,400 
        Loss (gain) on disposal of assets...................         1,491           (25,211)            5,095 
        Other long-term liabilities.........................         1,712            67,571           111,725 
        Changes in operating assets and liabilities--                                                          
            Accounts receivable.............................      (242,692)         (256,165)         (527,257)
            Inventory.......................................       (34,158)         (353,250)         (151,906)
            Prepaids and other..............................      (255,523)         (468,183)         (308,617)
            Accounts payable, trade.........................       372,551           233,207           421,667 
            Accrued compensation and employee benefits......       236,513           437,852          (462,280)
            Other current liabilities.......................       161,702          (103,541)           45,073 
            Deposits and other assets.......................      (121,871)          118,620          (511,465)
                                                               -----------       -----------       ----------- 
                Net cash provided by operating activities...     5,970,519         6,317,380         7,422,571 
                                                               -----------       -----------       ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                          
    Proceeds from disposal of assets........................        37,565            66,230           903,621 
    Purchases of property and equipment.....................    (2,907,967)       (4,426,384)       (3,646,899)
    Business acquisitions, net of cash acquired.............    (1,209,266)       (2,806,545)       (6,435,879)
                                                               -----------       -----------       ----------- 
                Net cash used by investing activities.......    (4,079,668)       (7,166,699)       (9,179,157)
                                                               -----------       -----------       ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                          
    Proceeds from borrowings................................     1,642,954         4,996,063         6,530,000 
    Principal payments on loans.............................    (2,546,626)       (1,965,495)       (2,458,228)
    Dividends paid..........................................      (942,531)       (1,407,165)       (1,621,529)
                                                               -----------       -----------       ----------- 
                Net cash provided by (used for) financing                                                      
                   activities...............................    (1,846,203)        1,623,403         2,450,243 
                                                               -----------       -----------       ----------- 
NET INCREASE IN CASH AND CASH EQUIVALENTS...................        44,648           774,084           693,657 
CASH AND CASH EQUIVALENTS, at beginning of year.............     2,636,157         2,680,805         3,454,889 
                                                               -----------       -----------       ----------- 
CASH AND CASH EQUIVALENTS, at end of year...................   $ 2,680,805       $ 3,454,889       $ 4,148,546 
                                                               ===========       ===========       =========== 

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

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS 

1. ORGANIZATION:                                                                

 Valley National Gases, Inc. (the Company), formerly Valley Welding Supply
Co., is an S corporation. The Company produces, packages and resells industrial 
gases, specialty gases and propane; and resells welding hardgoods and           
equipment. The Company has been in operation since 1958 and currently operates  
in nine states.                                                                 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                  

CASH EQUIVALENTS                                                                

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

  The Company holds a certificate of deposit of $400,000 which is restricted
cash. This certificate of deposit is pledged as collateral for a bank loan      
(original amount $1,250,000) and will be released as collateral when the        
principal balance of the loan is reduced to $850,000.                           

   The Company invested in certain repurchase agreements during the year ended
June 30.                                                                        

                                                                [Download Table]

                                                      1995        1996   
                                                   ----------  ----------
                                                                         
WestBanco Bank--principal......................... $2,377,990  $3,038,249
               --accrued interest.................     56,518      74,607
                                                   ----------  ----------
                                                   $2,434,508  $3,112,856
               --weighted average maturity........   144 days    133 days

Bank One--principal............................... $  691,811  $  476,479
        --accrued interest .......................      3,613         216
                                                   ----------  ----------
                                                   $  695,424  $  476,695
        --weighted average maturity...............     4 days       1 day

Balance as of June 30............................. $3,129,932  $3,589,551
Average amount outstanding........................  2,602,130   2,554,678
Maximum amount outstanding........................  3,129,932   3,589,551

Securities underlying the agreements exceed the repurchase liability and
consist primarily of certificates of deposit and U.S. government securities     
held on behalf of the Company. These agreements are collectible upon demand     
by the Company.                                                                 

INVENTORY                                                                       

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

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

                                                                [Download Table]

                                                      1995        1996   
                                                   ----------  ----------
                                                                         
Hardgoods......................................... $2,545,862  $3,529,294
Gases.............................................    387,478     628,612
                                                   ----------  ----------
                                                   $2,933,340  $4,157,906
                                                   ==========  ==========

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VALLEY NATIONAL GASES, INC. 

 NOTES TO FINANCIAL STATEMENTS (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT                                                   

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

                                                                [Download Table]

                                                      YEARS 
                                                     -------
                                                            
Buildings and improvements........................   10 - 25
Cylinders.........................................      12  
Equipment other than cylinders....................      7   
Transportation equipment..........................    3 - 7 
Furniture and fixtures............................    3 - 7 

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

INTANGIBLES                                                                     

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

INCOME TAXES                                                                    

   The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, the historical financial statements do  
not include a provision for income taxes because the Company does not incur     
federal or state income taxes. Instead, its earnings and losses are included in 
the shareholder's personal income tax return and are taxed based on the         
shareholder's personal tax strategy.                                            

Certain events, including the public offering of the Company's Common   
Stock, will automatically terminate its S Corporation status, thereby           
subjecting future income to federal and state income taxes at the corporate     
level. Due to temporary differences in recognition of revenue and expenses,     
income for financial reporting purposes has exceeded income for income tax      
purposes. Accordingly, the application of the provisions of SFAS No. 109,       
"Accounting for Income Taxes" will result in the recognition of deferred tax    
liabilities (and a corresponding one-time charge to expense) in the period in   
which the initial public offering occurs. If the S Corporation status had been  
terminated as of December 31, 1996, this liability would have been              
approximately $4,200,000.                                                       

REVENUE RECOGNITION                                                             

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

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS                           

The Company adopted the provisions of Statement of Financial Accounting 
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"     
during fiscal 1996.                                                             
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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

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

      CASH AND CASH EQUIVALENTS--The carrying amount approximates fair value
because of the short maturity of those instruments.                     

 LONG-TERM DEBT--The fair value of the Company's long-term debt is
  estimated based on the quoted market prices for the same or similar issues
or on the current rates offered to the Company for debt of the same     
remaining maturities.                                                   

   The estimated fair values of the Company's financial instruments as of June
30, 1996 are as follows:                                                        

                                                        [Enlarge/Download Table]

                                                                   CARRYING             
                                                                    AMOUNT    FAIR VALUE
                                                                  ----------  ----------
                                                                                        
Cash and cash equivalents........................................ $4,148,546  $4,148,546
Restricted cash..................................................    400,000     400,000
Term notes.......................................................  8,881,524   8,881,524
Acquisitions offering revolving line of credit...................  9,748,696   9,748,696

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

SUPPLEMENTAL CASH FLOW INFORMATION                                              

                                                        [Enlarge/Download Table]

                                                            FOR THE YEAR ENDED JUNE 30,         
                                                   ---------------------------------------------
                                                      1994              1995             1996   
                                                   -----------       ----------       ----------
                                                                                                
Cash paid for certain items:                                                                    
    Cash payments for interest.................... $   869,197       $1,082,625       $1,503,680
Noncash investing and financing activities:                                                     
    Retirement of long-term notes................. $10,289,547       $       --       $       --
    Payment of accrued interest on notes..........     123,055               --               --
Noncash portion of refinancing note issued........ $10,412,602       $       --       $       --

USE OF ESTIMATES                                                                

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

RECLASSIFICATIONS                                                               

   Certain reclassifications have been made to prior period amounts to conform
to the current period presentation.                                             

3. ACQUISITIONS:                                                                

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

 During fiscal 1996, the Company purchased four businesses. The largest of
these acquisitions and their effective dates included Quest Welding Supply      
(September 1995) and Wootten Industries, Inc. (December 1995). The aggregate    
purchase price for all acquisitions amounted to approximately $6,695,000.       

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

During fiscal 1995, the Company purchased six businesses. The largest of
these acquisitions and their effective dates included Evans Welding Supply Co.  
(December 1994), Allegheny LP Gas (February 1995). The aggregate purchase price 
for all acquisitions amounted to approximately $3,776,000.                      

   During fiscal 1994, the Company purchased three businesses for an aggregate
purchase price of approximately $1,643,000.                                     

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

                                                        [Enlarge/Download Table]

                                                      1994        1995        1996   
                                                   ----------  ----------  ----------
                                                                                     
Cash paid......................................... $1,060,847  $2,806,545  $6,435,879
Notes issued to sellers...........................    582,500     969,298     259,417
Notes payable and capital leases assumed..........         --     132,274     176,678
Other liabilities assumed and acquisition costs...         --     337,482     682,142
                                                   ----------  ----------  ----------
Total purchase price allocated to assets                                             
  acquired........................................ $1,643,347  $4,245,599  $7,554,116
                                                   ==========  ==========  ==========

 The following presents unaudited estimated pro forma operating results as
if the 1996 and 1995 acquisitions had been consummated on July 1, 1994. These   
pro forma results have been prepared for comparable purposes only and do not    
purport to be indicative of what would have occurred had the acquisitions been  
made as of July 1, 1994, or of results which may occur in the future. Pro forma 
net income includes an adjustment for income taxes as if the Company had been   
taxed as a C Corporation (see Note 11).                                         

                                                                [Download Table]

                                           YEARS ENDED JUNE 30,   
                                       ---------------------------
                                           1995            1996   
                                       -----------     -----------
                                                                  
Net sales..........................    $55,813,000     $57,816,000
Net income.........................      3,345,000       4,036,000
Pro forma net income...............      2,007,000       2,422,000
Pro forma net income per share.....           0.28            0.29

4. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:                           

The Company markets its products to a diverse customer base in unrelated
industries and, as such, does not have any significant concentrations of credit 
risk. No one customer accounted for greater than 10% of revenues in 1994, 1995  
and 1996.                                                                       

5. INTANGIBLE ASSETS:                                                           

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

                                                        [Enlarge/Download Table]

                               AMORTIZATION   ORIGINAL   ACCUMULATED    BALANCE AT     BALANCE AT  
                                  PERIOD        COST     AMORTIZATION  JUNE 30, 1996  JUNE 30, 1995
                               ------------  ----------  ------------  -------------  -------------
                                                                                                   
Noncompetition agreements.....  3-7 years    $4,242,161   $1,095,784     $3,146,377     $1,040,997 
Consulting agreements.........  1-3 years     1,556,077      503,687      1,052,390              - 
Goodwill......................   15 years     1,642,699      116,921      1,525,778        762,651 
Deferred financing and                                                                             
  organization costs..........  5-12 years      207,301       28,961        178,340         57,941 
                                             ----------   ----------     ----------     ---------- 
                                             $7,648,238   $1,745,353     $5,902,885     $1,861,589 
                                             ==========   ==========     ==========     ========== 

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

6. LONG-TERM DEBT:                                                              

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

                                                        [Enlarge/Download Table]

                                                                      1995          1996     
                                                                   -----------   ----------- 
                                                                                             
Acquisitions offering revolving line of credit, interest at prime                            
  rate minus .125%, as defined, payable in full on November, 1997                            
  or if notified by the bank in equal monthly installments.                                  
  Secured by the assets of the Company...........................  $ 3,218,696   $ 9,748,696 
Term note, interest at prime rate, as defined, payable in monthly                            
  installments through November 2000. Secured by the assets of                               
  the Company....................................................    8,615,390     7,000,010 
Term note, interest at prime rate minus .125%, as defined,                                   
  payable in monthly installments through April 2002. Secured by                             
  the assets of the Company......................................      976,190       833,330 
Term note, interest at prime rate plus 1%, as defined, payable in                            
  monthly installments through April 2005. Secured by the assets                             
  of the Company.................................................    1,118,300     1,048,184 
Individuals and corporations, mortgages and notes, interest at                               
  2.978% to 10.00%, payable at various dates through 2010........    1,139,266     3,843,591 
Wayne County Commission note, interest at 80% of prime, as                                   
  defined, payable at various dates through 1996.................       30,833            -- 
                                                                   -----------   ----------- 
                                                                    15,098,675    22,473,811 
Original issue discount..........................................           --      (230,269)
Current maturities...............................................   (2,134,583)   (2,736,814)
                                                                   -----------   ----------- 
Total long-term debt.............................................  $12,964,092   $19,506,728 
                                                                   ===========   =========== 

Prime rate was 8.25% at June 30, 1996.                                  

On April 15, 1994, the Company entered into a loan agreement with       
NationsBank. The agreement provides for borrowings in the form of a revolving   
operating line of credit, a term loan and an acquisitions offering line of      
credit.                                                                         

Combined borrowings under the agreement can amount to $31,000,000. As of
June 30, 1996, the Company's borrowings under the agreement amounted to         
$17,582,036. Borrowings bear interest at the bank's prime rate minus .125%. A   
commitment fee of $10,000 was paid upon acceptance of the agreement and .25% is 
payable upon each draw of the acquisitions offering line of credit. These fees  
totaled $16,325 for the year ended June 30, 1996. The agreement also contains   
various financial covenants including current ratio, working capital, tangible  
net worth, leverage, interest coverage and debt service.                        

A $400,000 certificate of deposit, accounts receivable, inventory,      
equipment and vehicles are pledged as collateral on the above notes and         
acquisitions offering line of credit used to finance or refinance the purchase  
of those assets. Additionally, letters of credit of $1,896,667 at June 30, 1996 
serve as collateral on the individual notes.                                    

On October 4, 1996, the Company executed a three year revolving credit  
agreement with Bank One for the purpose of refinancing the then existing        
revolving credit agreement with NationsBank and to provide additional           
acquisition capital. This agreement provides for a term note of $13,000,000 at  
a variable interest rate based upon prime or LIBOR, depending on the Company's  
funded debt to EBITDA ratio, payable monthly through September of 2003. The     
agreement also provides for a revolving note with a maximum of $25,000,000 at a 
variable interest rate equal to that of the term note payable monthly through   
September of 1999. A commitment fee of $32,500 was paid upon acceptance of the  
agreement. These notes are secured by the Company's accounts receivable,        
equipment, inventory, and general intangibles, and the proceeds thereof. The    
agreement also contains various financial covenants including minimum fixed     
charge coverage, maximum of funded debt to EBITDA, and minimum net worth level. 

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

   The schedule of maturities as amended for the new credit agreements for the
next five years and thereafter is as follows as of June 30, 1996:               

                                                                [Download Table]

FISCAL YEAR ENDING                          
    JUNE 30,                                
------------------                          
                                            
   1997.......................   $ 2,727,604
   1998.......................     2,715,913
   1999.......................     2,567,400
   2000.......................     2,271,295
   2001.......................     2,030,952
   Thereafter.................     9,930,378
                                 -----------
   Total......................   $22,243,542
                                 ===========

7. PENSION PLANS:                                                               

   The Company sponsors a defined contribution pension plan for employees. All
employees are eligible to participate in the Company-sponsored plan after       
meeting the age and service requirements. Contributions to the plan are based   
on a percentage of employees' compensation. Pension expense for this plan was   
$232,066, $337,139 and $413,077, respectively, in 1994, 1995 and 1996.          

Certain management employees are also covered by unfunded deferred      
compensation agreements which provide supplemental retirement benefits. The     
cost of these contracts is being accrued over the period of active employment   
of the covered employees. The costs of the deferred compensation plans charged  
to expense were $17,543, $83,206 and $78,203, respectively, in 1994, 1995 and   
1996.                                                                           

  The Company also maintains a profit sharing plan for its employees. Profit
sharing payments are based on a discretionary amount determined annually by the 
Board of Directors and are paid as additional contributions to the pension      
plan. In 1994, 1995 and 1996, the amount of additional contributions to be      
distributed to the employees' pension plan amounted to $61,233, $83,506 and     
$91,961, respectively.                                                          

8. LEASE OBLIGATIONS:                                                           

The Company leases real estate at several locations for use as branch   
stores and warehouses. Certain equipment is also leased. All of the leases,     
which are with related and unrelated parties, are classified as operating       
leases. The lease terms expire at various dates through the year 2006, with     
options to renew for periods of three to five years. Lease expenses charged to  
operations were $915,745, $1,330,394 and $1,541,898, respectively, in 1994,     
1995 and 1996.                                                                  

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

                                                                [Download Table]
FISCAL YEAR ENDING                                                            
    JUNE 30,                          REAL ESTATE     EQUIPMENT       TOTAL   
------------------                    -----------     ---------     ----------
                                                                              
   1997............................    $1,746,294     $105,549      $1,851,843
   1998............................     1,629,948       73,963       1,703,911
   1999............................     1,576,248       66,720       1,642,968
   2000............................     1,558,746       60,360       1,619,106
   2001............................     1,541,244       41,175       1,582,419
                                      -----------     ---------     ----------
   Totals..........................    $8,052,480     $347,767      $8,400,247
                                      ===========     =========     ==========

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

9. RELATED PARTY TRANSACTIONS:                                                  

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

                                                        [Enlarge/Download Table]

                                                                              1994      1995      1996  
                                                                            --------  --------  --------
                                                                                                        
Transactions--                                                                                          
    Lease of buildings and equipment....................................... $731,020  $857,205  $932,624
    Rental of aircraft.....................................................   26,100    26,100    18,800
Purchases of acetylene and services........................................  271,016   267,657   159,915
Sales of material and services.............................................  183,453       533       379
Balances--                                                                                              
    Accounts receivable--trade.............................................      280        --        --
    Noncurrent receivable..................................................   10,016        --        --

  During 1996, the Company realized a gain of $95,914 on the sale of various
operating properties to a related party for a total sale price of $850,000.     
This gain was reflected as additional paid-in-capital in the accompanying       
financial statements.                                                           

  The Company has entered into a master lease agreement for virtually all of
its operating properties, including those sold in 1996, with this related       
party. The terms of this master lease agreement are ten years with annual       
minimum lease payments of $1,278,600 with renewal options and have been         
accounted for as operating leases in the accompanying financial statements.     

The Company has entered into a consulting agreement (the "Consulting    
Agreement") with William A. Indelicato, a director of the Company, whereby Mr.  
Indelicato provides consulting services concerning all aspects of the Company's 
acquisition program. In return for his services, the Company accrues            
"credits" for Mr. Indelicato in amounts based upon hours worked and hourly      
rates that vary depending upon criteria related to each particular acquisition. 
Mr. Indelicato can redeem accrued credits for cash at any time within seven     
years from the date of accrual. The amount of the accrued, unredeemed credits   
is adjusted proportionately following the end of each fiscal year based upon    
the increase (but not any decrease) in the Company's net worth since the end of 
the last fiscal year. In addition, Mr. Indelicato has the right, in connection  
with a public offering of the Common Stock, to exchange all or a portion of his 
accrued credits (excluding credits accrued for annual adjustments) for shares   
of Common Stock based on the book value per share of Common Stock as of the end 
of the fiscal year for which the credits were accrued, in which case the        
accrued credits for annual adjustments are cancelled. As of June 30, 1996, the  
total amount of the accrued credits was approximately $158,000. Mr. Indelicato  
will exchange all the accrued credits for 96,366 shares of Common Stock, of     
which 30,000 shares are being sold in the Offering. Pursuant to the Consulting  
Agreement, the Company also retains ADE Vantage, Inc. ("ADE"), a consulting     
company wholly-owned by Mr. Indelicato, to support Mr. Indelicato in providing  
consulting services. The Company pays Mr. Indelicato a monthly retainer fee of  
$1,000 and reimburses his out-of-pocket expenses related to the performance of  
services. Payments to Mr. Indelicato and ADE for fiscal 1996 totaled $76,000.   
The term of the Consulting Agreement expires on March 16, 1999, but either      
party may terminate it at any time. The Company intends to continue using the   
consulting services of Mr. Indelicato and ADE after the Offering.               

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

10. SUBSEQUENT EVENTS:                                                          

A. INITIAL PUBLIC OFFERING AND REORGANIZATION                                   

In connection with the initial public offering (the Offering) by the    
Company, the following transactions occurred on April 9, 1997:                  

a. Termination of the Company's S Corporation status. In connection with
      the termination of S Corporation status the Company intends to declare a
distribution (the S Corporation Distribution) of all of its       
     undistributed earnings estimated to be $10.1 million as of December 31,
      1996. In addition, the Company will be required to record a deferred tax
    liability with a corresponding one-time tax provision of approximately
$4.2 million in accordance with SFAS No. 109.                     

   b. The reorganization, whereby Valley National Gases, Inc., a West Virginia
  corporation has become an indirect wholly owned subsidiary of Valley
   Natural Gases Incorporated, a Pennsylvania corporation by exchange of
      stock. Valley National Gases Incorporated has authorized common stock of
  30,000,000 shares, par value $.001 and authorized preferred stock of
5,000,000 shares, par value $.01.                                 

c. Issuance of 267,074 shares of Common Stock as part of compensation   
     agreements with certain executive officers and directors. In connection
     with these compensation arrangements, the Company will incur an expense
     of approximately $1.9 million in the period in which the closing of the
Offering occurs; and                                              

d. The cancellation of treasury stock of Valley National Gases, Inc.    

  Accordingly, the Company's shareholders' equity accounts and the number of
shares in the accompanying Financial Statements have been retroactively         
restated to give effect to the reorganization and increase in authorized capital
stock.                                                                          

B. WELDCO PURCHASE AGREEMENT                                                    

  On October 10, 1996, the Company purchased substantially all of the assets
of Weldco Inc. (Weldco) pursuant to a Purchase and Sale Agreement (the Weldco   
Purchase Agreement) for approximately $11.1 million. Approximately $7.9 million 
of the purchase price was paid by promissory notes from the Company. Under the  
Weldco Purchase Agreement, Weldco shareholders have the right, in the event of  
an initial public offering of the Company's common stock, to convert a portion  
of the Company's promissory notes to shares of the Company's common stock at    
the initial public offering price. Under this provision, Weldco shareholders    
have the right to receive 350,000 shares of the common stock in exchange for    
the cancellation of indebtedness in the amount of $2,800,000. The Company and   
Weldco shareholders have agreed that rather than issuing 350,000 shares, the    
Company will prepay $1,720,000 under the Company's promissory notes and issue   
135,000 shares of common stock to Weldco shareholders immediately prior to the  
closing of the Offering. The Company understands that certain Weldco            
shareholders intend to purchase up to 100,000 shares of common stock in the     
Offering. The Weldco Purchase Agreement further grants Weldco shareholders the  
right to cause the Company to purchase shares of common stock issued to Weldco  
shareholders pursuant to the conversion of indebtedness for a period of three   
years following the closing of the Offering at the initial public offering      
price plus interest from the date of issuance at the rate of 6.6% per annum.    
The Company expects that 235,000 shares will be subject to this right following 
the closing of the Offering. Accordingly, such shares will not be classified    
as shareholders' equity. The Company's payment obligation is secured by a       
letter of credit.                                                               

C. WEBER PURCHASE                                                               

   As of August 31, 1996, the Company consummated the acquisition of Weber Gas
& Welding Supply Co., Inc. (Weber), a business engaged in the distribution of   
industrial, medical and specialty gases and related welding supplies and        
accessories. Sales for the past fiscal year of the acquired business            
approximated 9% of the Company's net sales.                                     

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VALLEY NATIONAL GASES, INC. 

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

11. PRO FORMA INFORMATION (UNAUDITED):                                          

The pro forma adjustments for income taxes included in the accompanying 
income statements are based upon the statutory rates in effect for C            
Corporations during the period presented. Pro forma earnings per share were     
calculated by dividing pro forma net income by the weighted average shares      
outstanding for each period. The weighted average number of shares outstanding  
used to calculate the pro forma net income per share is based on the historical 
weighted average number of shares outstanding using an offering price of $8 per 
share as adjusted to reflect (i) the assumed issuance of 1,068,208 shares at $8 
per share to fund the excess of dividends (including the estimated S            
Corporation Distribution) over net income for the six months ended December     
31, 1996 of $10.1 million (ii) the issuance of 170,718 shares of common stock   
to two executive officers immediately prior to the closing of the Offering in   
connection with the termination of certain deferred compensation agreements,    
and (iii) the issuance of 96,366 shares of common stock to a director           
immediately prior to the closing of the Offering, pursuant to a right under a   
consulting agreement to convert deferred consulting payments to common stock.   
The Company will incur an expense of approximately $1.9 million ($2.2 million   
gross compensation net of related accruals of $0.3 million or $1.1 million      
after assumed taxes) in the period in which the closing of the Offering occurs  
in connection with the compensation arrangements of $0.7 million ($0.4 million  
after assumed taxes) and consulting arrangement of $1.2 million ($0.7 million   
after assumed taxes).                                                           

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  

To Valley National Gases, Inc.:                                                 

We have audited the accompanying balance sheet of Weldco, Inc. (an S    
corporation) as of December 31, 1995, and the related statement of operations,  
changes in shareholder's equity and cash flows for the year then ended. These   
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these financial statements based on  
our audit.                                                                      

We conducted our audit in accordance with generally accepted auditing   
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of         
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management as well as evaluating the overall financial        
statement presentation. We believe that our audit provides a reasonable basis   
for our opinion.                                                                

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Weldco, Inc. as of December 
31, 1995, and the results of its operations and its cash flows for the year     
then ended in conformity with generally accepted accounting principles.         

                                                           ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania,                                                       
December 20, 1996                                                           

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WELDCO, INC.

                                                        [Enlarge/Download Table]
                                       BALANCE SHEETS                                                        

                                                                                 DECEMBER 31,   SEPTEMBER 30,
                                     ASSETS                                          1995           1996     
                                     ------                                      ------------   -------------
                                                                                                 (UNAUDITED) 

                                                                                                             
CURRENT ASSETS:                                                                                              
    Cash and cash equivalents...................................................  $   115,642   $    92,684  
    Marketable securities.......................................................      106,851       117,090  
    Accounts receivable--trade, net of allowance for doubtful accounts of                                    
     $100,823 and $103,093, respectively........................................    1,596,759     1,444,223  
    Accounts receivable--shareholders...........................................       34,785        34,785  
    Inventory...................................................................      487,596       659,391  
    Prepaids and other..........................................................       14,781        10,676  
                                                                                  -----------   -----------  
        Total current assets....................................................    2,356,414     2,358,849  
                                                                                  -----------   -----------  
PROPERTY, PLANT AND EQUIPMENT:                                                                               
    Leasehold improvements......................................................      321,458       321,458  
    Equipment...................................................................    1,433,199     1,601,240  
    Transportation equipment....................................................      223,379       275,084  
    Furniture and fixtures......................................................      661,951       706,653  
                                                                                  -----------   -----------  
        Total property, plant and equipment.....................................    2,639,987     2,904,435  
    Accumulated depreciation....................................................   (1,225,450)   (1,376,651) 
                                                                                  -----------   -----------  
        Net property, plant and equipment.......................................    1,414,537     1,527,784  
                                                                                  -----------   -----------  
OTHER ASSETS....................................................................      132,210       136,812  
                                                                                  -----------   -----------  
TOTAL ASSETS....................................................................  $ 3,903,161   $ 4,023,445  
                                                                                  ===========   ===========  

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

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WELDCO, INC.  

                                                        [Enlarge/Download Table]
                                   BALANCE SHEETS                                                           

                                                                                 DECEMBER 31,  SEPTEMBER 30,
                      LIABILITIES AND SHAREHOLDER'S EQUITY                           1995          1996     
                      ------------------------------------                       ------------  -------------
                                                                                                (UNAUDITED) 
                                                                                                            
CURRENT LIABILITIES:                                                                                        
    Current maturities of long-term debt........................................  $  184,291     $  316,260 
    Accounts payable, trade.....................................................   1,515,559      1,304,874 
    Accrued compensation and employee benefits..................................      36,171        103,016 
    Other current liabilities...................................................      55,717         53,371 
                                                                                  ----------     ---------- 
            Total current liabilities...........................................   1,791,738      1,779,521 

LONG-TERM DEBT, less current maturities.........................................     265,940        373,923 
                                                                                  ----------     ---------- 
            Total liabilities...................................................   2,057,678      2,153,444 
                                                                                  ----------     ---------- 
COMMITMENTS                                                                                                 
SHAREHOLDER'S EQUITY:                                                                                       
    Common stock, no par value                                                                              
        Authorized, 35,000 shares                                                                           
        Issued, 25,000 shares...................................................         500            500 
    Paid-in-capital.............................................................      19,919         19,919 
    Unrealized gain on marketable securities....................................     106,851        117,090 
    Retained earnings...........................................................   1,718,213      1,732,492 
                                                                                  ----------     ---------- 
            Total shareholder's equity..........................................   1,845,483      1,870,001 
                                                                                  ----------     ---------- 
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                        $3,903,161     $4,023,445 
                                                                                  ==========     ========== 

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

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WELDCO, INC.  

                                                        [Enlarge/Download Table]
                                STATEMENTS OF OPERATIONS                                                     

                                                                                 FOR THE YEAR   FOR THE NINE 
                                                                                    ENDED       MONTHS ENDED 
                                                                                 DECEMBER 31,   SEPTEMBER 30,
                                                                                     1995           1996     
                                                                                 ------------   -------------
                                                                                                 (UNAUDITED) 
                                                                                                             
NET SALES.......................................................................  $10,973,421     $8,457,952 
COST OF PRODUCTS SOLD, excluding depreciation and amortization..................    7,064,773      5,355,557 
                                                                                  -----------     ---------- 
        Gross profit............................................................    3,908,648      3,102,395 
                                                                                  -----------     ---------- 
EXPENSES:                                                                                                    
    Operating and administrative................................................    3,406,556      2,642,033 
    Depreciation and amortization...............................................      203,610        151,200 
                                                                                  -----------     ---------- 
        Total expenses..........................................................    3,610,166      2,793,233 
                                                                                  -----------     ---------- 
        Income from operations..................................................      298,482        309,162 
                                                                                  -----------     ---------- 
INTEREST EXPENSE................................................................       33,704         42,647 
                                                                                  -----------     ---------- 
OTHER INCOME/(EXPENSE):                                                                                      
    Interest and dividend income................................................        6,886             -- 
    (Loss) on disposal of assets................................................       (6,806)        (1,485)
                                                                                  -----------     ---------- 
        Total other income......................................................           80         (1,485)
                                                                                  -----------     ---------- 
NET INCOME......................................................................  $   264,858     $  265,030 
                                                                                  ===========     ========== 

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

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WELDCO, INC.  

                                                        [Enlarge/Download Table]
                                STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY                                 
                                  FOR THE YEAR ENDED DECEMBER 31, 1995 AND                                    
                               THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1996                                 

                                               COMMON                   UNREALIZED                            
                                                STOCK                    GAIN ON                    TOTAL     
                                           ---------------  PAID-IN-    MARKETABLE   RETAINED    SHAREHOLDER'S
                                           SHARES   AMOUNT  CAPITAL     SECURITIES   EARNINGS       EQUITY    
                                           ------   ------  --------    ----------  ----------   -------------
                                                                                                              
BALANCE, December 31, 1994..............   25,000    $500    $19,919     $     --   $1,601,405    $1,621,824  

    Net income..........................       --     --          --           --      264,858       264,858  

    Unrealized gain on marketable                                                                             
      securities........................       --     --          --      106,851           --       106,851  

    Dividends paid......................       --     --          --           --     (148,050)     (148,050) 
                                           ------    ----    -------     --------   ----------    ----------  

BALANCE, December 31, 1995..............   25,000    $500    $19,919     $106,851   $1,718,213    $1,845,483  

    Net income..........................       --      --         --           --      265,030       265,030  

    Unrealized gain on marketable                                                                             
     securities.........................       --      --         --       10,239           --        10,239  

    Dividends paid......................       --      --         --           --     (250,751)     (250,751) 

BALANCE, September 30, 1996 (Unaudited).   25,000    $500    $19,919     $117,090   $1,732,492    $1,870,001  
                                           ======    ====    =======     ========   ==========    ==========  

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

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WELDCO, INC.  

                                                        [Enlarge/Download Table]
                            STATEMENTS OF CASH FLOWS                                                        

                                                                                 FOR THE YEAR  FOR THE NINE 
                                                                                    ENDED      MONTHS ENDED 
                                                                                 DECEMBER 31,  SEPTEMBER 30,
                                                                                     1995          1996     
                                                                                 ------------  -------------
                                                                                                (UNAUDITED) 
                                                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                       
    Net income..................................................................  $ 264,858      $ 265,030  
    Adjustments to reconcile net income to net cash provided by operating                                   
     activities--                                                                                           
        Depreciation and amortization...........................................    203,610        151,200  
        Loss on disposal of assets..............................................      6,806          1,485  
        Changes in operating assets and liabilities--                                                       
            Accounts receivable.................................................   (356,512)       152,536  
            Inventory...........................................................     21,842       (171,795) 
            Prepaids and other..................................................    (19,268)         4,105  
            Accounts payable and accrued expenses...............................    778,595       (144,186) 
            Other assets........................................................     25,995         (4,602) 
                                                                                  ---------      ---------  
                Net cash provided by operating activities.......................    925,926        253,773  
                                                                                  ---------      ---------  
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                       
    Proceeds from disposal of assets............................................      3,200          2,700  
    Purchases of property and equipment.........................................   (658,648)      (262,265) 
                                                                                  ---------      ---------  
                Net cash used by investing activities...........................   (655,448)      (259,565) 
                                                                                  ---------      ---------  
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                       
    Proceeds from borrowings....................................................      5,499        340,062  
    Principal payments on loans.................................................    (98,343)      (106,477) 
    Dividends paid..............................................................   (148,050)      (250,751) 
                                                                                  ---------      ---------  
                Net cash used by financing activities...........................   (240,894)       (17,166) 
                                                                                  ---------      ---------  
NET CHANGE IN CASH AND CASH EQUIVALENTS.........................................     29,584        (22,958) 
CASH AND CASH EQUIVALENTS, at beginning of period...............................     86,058        115,642  
                                                                                  ---------      ---------  
CASH AND CASH EQUIVALENTS, at end of period.....................................  $ 115,642      $  92,684  
                                                                                  =========      =========  
SUPPLEMENTAL CASH FLOW INFORMATION:                                                                         
    Cash paid for interest......................................................  $  33,704      $  42,646  
                                                                                  =========      =========  
  The accompanying notes are an integral part of these financial statements.                                

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WELDCO, INC.  

NOTES TO FINANCIAL STATEMENTS 

1. ORGANIZATION:                                                                

Weldco, Inc. (the Company) is an S corporation involved in the sale and 
distribution of industrial gases, welding equipment and supplies.               

The financial statements of the Company for the nine month period ended 
September 30, 1996 presented herein are unaudited. Certain information and      
footnote disclosures normally prepared in accordance with generally accepted    
accounting principles have been either condensed or omitted pursuant to the     
rules and regulations of the Securities and Exchange Commission. Although the   
Company believes that all adjustments, consisting of only normal recurring      
adjustments, necessary for a fair presentation have been made, interim periods  
are not necessarily indicative of the financial results of operations for a full
year.                                                                           

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                  

CASH EQUIVALENTS                                                                

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

MARKETABLE SECURITIES                                                           

Marketable securities consist of 4,090 shares of AllAmerica Financial   
Corporation common stock with a cost of $0 and a market value of $106,851 and   
$117,090 on December 31, 1995 and September 30, 1996, respectively.             

   The Company has adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 115. Under SFAS No. 115, the recorded cost of investments  
which are considered to be available for sale are adjusted to fair market       
value. The difference between cost and fair market value is classified as an    
unrealized gain in the shareholder's equity section of the balance sheet.       

INVENTORY                                                                       

  Inventory is carried at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method.                                           

The components of inventory are as follows:                             

                                                                [Download Table]

                                           DECEMBER 31,   SEPTEMBER 30,
                                               1995           1996     
                                           ------------   -------------
                                                           (UNAUDITED) 
                                                                       
Gross Inventory.........................    $ 862,596      $1,034,907  
LIFO Reserve............................     (375,000)       (575,516) 
                                            ---------      ----------  
Net Inventory...........................    $ 487,596      $  659,391  
                                            =========      ==========  

PROPERTY, PLANT AND EQUIPMENT                                                   

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

                                                                [Download Table]

                                                     YEARS
                                                     -----
                                                          
Leasehold improvements............................     15 
Equipment.........................................    7-10
Transportation equipment..........................      5 
Furniture and fixtures............................     10 

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WELDCO, INC.  

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

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

INCOME TAXES                                                                    

   The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, the financial statements do not include 
a provision for income taxes because the Company does not incur federal or      
state income taxes. Instead, its earnings and losses are included in the        
shareholder's personal income tax return and are taxed based on the             
shareholder's personal tax strategy.                                            

DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS                           

The Company adopted the provisions of Statement of Financial Accounting 
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"     
during fiscal year 1995.                                                        

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

      CASH AND CASH EQUIVALENTS--The carrying amount approximates fair value
because of the short maturity of those instruments.                     

 LONG-TERM DEBT--The fair value of the Company's long-term debt is
  estimated based on the quoted market prices for the same or similar issues
or on the current rates offered to the Company for debt of the same     
remaining maturities.                                                   

The estimated fair values of the Company's financial instruments as of  
December 31, 1995 are as follows:                                               

                                                        [Enlarge/Download Table]

                                                                  CARRYING            
                                                                   AMOUNT   FAIR VALUE
                                                                  --------  ----------
                                                                                      
Cash and cash equivalents........................................ $115,642   $115,642 
Long-term debt...................................................  450,231    450,231 

USE OF ESTIMATES                                                                

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

3. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:                           

The Company markets its products to a diverse customer base in unrelated
industries and, as such, does not have any significant concentrations of credit 
risk. No one customer accounted for greater than 10% of revenues in 1995.       

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WELDCO, INC.  

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

4. LONG-TERM DEBT:                                                              

Long-term debt consists of the following:                               

                                                        [Enlarge/Download Table]

                                                              DECEMBER 31,  SEPTEMBER 30,
                                                                  1995          1996     
                                                              ------------  -------------
                                                                              (UNAUDITED)
                                                                                         
Fixed rate note payable to bank at 8.5% interest rate,                                   
 payable in monthly installments through September 1999......   $192,761       $ 159,590 
Bank revolving credit line at prime rate (8.5% at                                        
 December 31, 1995) plus 0.5% maturing on July 1, 1997.......     70,014         162,560 
Notes payable at 5% and 6% on life insurance cash                                        
surrender value of life insurance............................     51,760          51,760 
Equipment obligation payable at 16.0% interest rate, payable                             
 in monthly installments through February 1997...............     11,233           2,978 
Variable rate note payable to bank at prime rate (8.5% at                                
 December 31, 1995) plus 1.25%, payable in monthly                                       
 installments through March 1997.............................     31,984          15,821 
Fixed rate note payable to bank at 7.125% interest rate,                                 
 payable in monthly installments through August 1998.........     92,479          68,309 
Fixed rate note payable to a bank at 8.5% interest rate,                                 
 payable in monthly installments through April 2001..........         --         229,165 
                                                                --------       --------- 
                                                                $450,231       $ 690,183 
Current maturities...........................................   (184,291)       (316,260)
                                                                --------       --------- 
Total long-term debt.........................................   $265,940       $ 373,923 
                                                                ========       ========= 

   The schedule of maturities as amended for the new credit agreements for the
next five years and thereafter as of December 31, 1995 is as follows:           

                                                                [Download Table]

FISCAL YEAR ENDING                       
   DECEMBER 31,                          
------------------                       
                                         
  1996........................   $184,291
  1997........................     91,959
  1998........................     79,009
  1999........................     43,212
  2000........................         --
  Thereafter..................     51,760
                                 --------
  Total.......................   $450,231
                                 ========

  These loans have certain covenants regarding current ratio, operating cash
flow to debt service, tangible net worth, total liabilities to tangible net     
worth, and capital expenditures. At December 31, 1995, the Company was in       
violation of certain covenants. These violations were waived as of December 31, 
1995 and the Company was in compliance with these covenants as of September     
30, 1996. Carrying value approximates fair value.                               

F-34  

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WELDCO, INC.  

NOTES TO FINANCIAL STATEMENTS (CONTINUED) 

5. PENSION PLANS:                                                               

   The Company sponsors a defined contribution pension plan for employees. All
employees are eligible to participate in the Company-sponsored plan after       
meeting the age and service requirements. Contributions to the plan are based   
on a percentage of employees' compensation. Pension expense for this plan was   
$26,890 for the year ended December 31, 1995 and $28,595 for the nine month     
period ended September 30, 1996.                                                

6. LEASE OBLIGATIONS:                                                           

 The Company leases certain office equipment and delivery vehicles. All of
the leases, which are with related and unrelated parties, are classified as     
operating leases. The lease terms expire at various dates through the year      
2002. Lease expenses charged to operations was $96,064 for the year ended       
December 31, 1995 and $72,680 for the nine month period ended September         
30, 1996.                                                                       

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

                                                                [Download Table]

FISCAL YEAR ENDING                         
  DECEMBER 31,                     TOTAL   
------------------               ----------
                                           
  1996........................   $  365,001
  1997........................      346,652
  1998........................      338,239
  1999........................      333,069
  2000........................      330,367
                                 ----------
  Totals......................   $1,713,328
                                 ==========

7. RELATED PARTY TRANSACTIONS:                                                  

   The Company leases office and warehouse facilities and rents equipment from
related parties who are shareholders of the Company. These transactions and     
balances are summarized as follows for the year ended December 31, 1995:        

Transactions--                                                                  
Lease of office and warehouse                                           
facilities.............................   $209,469                  
Rental of equipment......................     55,916                    

8. SUBSEQUENT EVENT:                                                            

 In October 1996, substantially all of the Weldco's assets and liabilities
were purchased by Valley National Gases, Inc. for an approximate purchase price 
of $11.1 million.                                                               

F-35  

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=============================================================================== 
------------------------------------------------------------------------------- 

  NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS   
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN   
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING  
BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY OF THE          
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE       
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON   
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A  
SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY    
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN    
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,   
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.     
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,      
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED  
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.                 
----------------  

                                                        [Enlarge/Download Table]
                                     TABLE OF CONTENTS                               

                                                                                 PAGE
                                                                                 ----
                                                                                     
Prospectus Summary..............................................................   3 

Risk Factors....................................................................   6 

S Corporation Distribution......................................................   9 

Use of Proceeds.................................................................   9 

Dividend Policy.................................................................  10 

Capitalization..................................................................  10 

Dilution........................................................................  11 

Selected Pro Forma Financial Data...............................................  12 

Selected Historical Financial Data..............................................  16 

Management's Discussion and Analysis of Financial Condition and Results of           
  Operations....................................................................  18 

Business........................................................................  24 

Management......................................................................  32 

Principal and Selling Shareholders..............................................  36 

The Right of First Refusal of Agreement.........................................  36 

Certain Relationships and Related Transactions..................................  39 

Shares Eligible for Future Sale.................................................  39 

The Reorganization..............................................................  40 

Description of Capital Stock....................................................  40 

Underwriting....................................................................  43 

Legal Matters...................................................................  45 

Experts.........................................................................  45 

Additional Information..........................................................  45 

Index to Financial Statements................................................... F-1 

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

UNTIL MAY 5, 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS       
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN     
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION 
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS             
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.      
--------------------------------------------------------------------------------
================================================================================

================================================================================
--------------------------------------------------------------------------------

2,000,000 SHARES  

 [LOGO]     VALLEY(TM)
----------------------------
NATIONAL GASSES INCORPORATED
----------------------------

COMMON STOCK  

------------------- 
P R O S P E C T U S 
------------------- 
A.G. EDWARDS & SONS, INC. 
OPPENHEIMER & CO., INC. 

April 10, 1997  

--------------------------------------------------------------------------------
======================================================================          

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B1’ Filing		Date		First		Last			Other Filings
		10/31/06		38					DEF 14A
		3/16/99		39		68
		12/15/97		23					8-K
		7/1/97		79
		6/30/97		16					10-K405
		5/5/97		81
		4/15/97		1
Filed on:		4/10/97		1		81			POS AM,  POS462C,  S-1/A
		4/9/97		54		69
		2/28/97		23		54
		1/30/97		23		54
		1/1/97		9
		12/31/96		5		70
		12/20/96		71
		10/11/96		37
		10/10/96		12		69
		10/4/96		22		66
		9/30/96		46		80
		9/27/96		37
		8/31/96		69
		8/13/96		56
		7/1/96		14
		6/30/96		12		68
		1/1/96		3		24
		12/31/95		16		80
		7/1/95		5		12
		6/30/95		20		65
		12/31/94		75
		7/1/94		65
		6/30/94		20		60
		4/15/94		66
		6/30/93		16		60
		6/30/92		16
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