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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 000-29226
VALLEY NATIONAL GASES INCORPORATED
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2888240
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
67 43RD STREET
WHEELING, WEST VIRGINIA 26003
(Address of principal executive offices)
(304) 234-4460
(Registrant's telephone number, including area code)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ___x____ No _______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 14, 2000
----- --------------------------------
Common stock, $0.001 par value 9,347,584
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Valley National Gases Incorporated
TABLE OF CONTENTS
<TABLE>
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Page
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PART I FINANCIAL INFORMATION
ITEM 1 Condensed Consolidated Balance Sheets as of June 30, 2000
and September 30, 2000 3
Condensed Consolidated Statements of Operations for the
Three Months Ended September 30, 1999 and 2000 5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1999 and 2000 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 13
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
A S S E T S
----------- June 30, September 30,
2000 2000
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 769,564 $ 645,720
Accounts receivable, net of allowance for
doubtful accounts of $586,698 16,131,425 15,946,225
Inventory 13,748,347 14,790,582
Prepaids and other 920,159 1,773,316
------------- -------------
Total current assets 31,569,495 33,155,843
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land 88,000 88,000
Buildings and improvements 5,026,630 5,081,439
Equipment 65,774,656 67,273,714
Transportation equipment 11,654,109 12,236,155
Furniture and fixtures 4,579,751 4,707,623
------------- -------------
Total property, plant and equipment 87,123,146 89,386,931
Accumulated depreciation (32,901,262) (34,017,377)
------------- -------------
Net property, plant and equipment 54,221,884 55,369,554
------------- -------------
OTHER ASSETS:
Intangibles, net of amortization of
$14,752,111 and $12,620,096, respectively 44,348,795 43,562,393
Deposits and other assets 1,803,118 2,842,798
------------- -------------
Total other assets 46,151,913 46,405,191
------------- -------------
TOTAL ASSETS $ 131,943,292 $ 134,930,588
============= =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, September 30,
------------------------------------ 2000 2000
------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,064,877 $ 6,924,576
Bank overdraft 1,460,492 1,914,957
Accounts payable, trade 5,751,892 4,835,487
Accrued compensation and employee benefits 3,346,283 2,383,055
Other current liabilities 2,678,345 2,997,416
------------- -------------
Total current liabilities 20,301,889 19,055,491
LONG-TERM DEBT, less current maturities 68,818,457 71,285,344
DEFERRED TAX LIABILITY 10,624,109 10,915,880
OTHER LONG-TERM LIABILITIES 1,544,525 2,437,549
------------- -------------
Total liabilities 101,288,980 103,694,264
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, par value, $.001 per share-
Authorized, 30,000,000 shares
Issued, 9,620,084 shares, outstanding, 9,347,584 shares 9,620 9,620
Paid-in-capital 19,269,338 19,269,338
Retained earnings 13,638,782 14,451,967
Accumulated other comprehensive loss -- (231,173)
Treasury stock at cost, 272,500 shares (2,263,428) (2,263,428)
------------- -------------
Total stockholders' equity 30,654,312 31,236,324
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 131,943,292 $ 134,930,588
============= =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------
1999 2000
----------- -----------
<S> <C> <C>
NET SALES $26,447,077 $31,357,279
COST OF PRODUCTS SOLD, excluding depreciation
and amortization 12,579,421 14,749,375
----------- -----------
Gross profit 13,867,656 16,607,904
----------- -----------
EXPENSES:
Operating and administrative 9,519,643 11,531,246
Depreciation and amortization 2,178,323 2,445,852
----------- -----------
Total expenses 11,697,966 13,977,098
----------- -----------
Income from operations 2,169,690 2,630,806
INTEREST EXPENSE 1,116,958 1,287,635
OTHER INCOME NET 76,146 97,072
----------- -----------
EARNINGS BEFORE INCOME TAXES 1,128,878 1,440,243
PROVISION FOR INCOME TAXES 474,129 627,057
----------- -----------
NET EARNINGS $ 654,749 $ 813,186
=========== ===========
BASIC EARNINGS PER SHARE $ 0.07 $ 0.09
DILUTED EARNINGS PER SHARE 0.07 0.09
WEIGHTED AVERAGE SHARES:
Basic 9,347,584 9,347,584
Diluted 9,347,584 9,366,959
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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VALLEY NATIONAL GASES INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------------
1999 2000
------------ ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,607,985 $ 706,572
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of assets 12,050 25,428
Purchases of property and equipment (1,032,731) (2,082,430)
Business acquisitions, net of cash acquired -- (1,050,000)
------------ ------------
Net cash used by investing activities (1,020,681) (3,107,002)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 3,713,793 10,150,000
Principal payments on loans (4,149,793) (7,873,414)
------------ ------------
Net cash (used)provided by
financing activities (436,000) 2,276,586
------------ ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 151,304 (123,844)
CASH AND CASH EQUIVALENTS, beginning of period 224,708 769,564
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 376,012 $ 645,720
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments for interest $ 976,597 $ 1,373,077
============ ============
Cash payments for income taxes $ 162,902 $ 154,250
============ ============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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VALLEY NATIONAL GASES INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The financial statements of Valley National Gases Incorporated (the Company)
presented herein are unaudited. Certain information and footnote disclosures
normally prepared in accordance with generally accepted accounting principles
have been either condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission. Although the Company believes that all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the financial results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included or incorporated by reference in the Company's audited financial
statements for the period ending June 30, 2000.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY
Inventory is carried at the lower of cost or market using the first-in,
first-out (FIFO) method.
The components of inventory are as follows:
June 30, September 30,
2000 2000
----------- ------------
(Unaudited)
Hardgoods $11,943,855 $12,915,575
Gases 1,804,492 1,875,007
----------- -----------
$13,748,347 $14,790,582
=========== ===========
PLANT AND EQUIPMENT
Plant and equipment are stated at cost. Depreciation is provided on the
straight-line basis over the estimated useful lives of the related assets.
3. ACQUISITIONS:
The Company acquires businesses engaged in the distribution of industrial,
medical and specialty gases and related welding supplies and accessories.
Acquisitions have been recorded using the purchase method of accounting and,
accordingly, results of their operations have been included in the Company's
financial statements since the effective dates of the respective acquisitions.
During the three months ended September 30, 2000, the Company purchased Titan
Welding Supply, Ltd.
In connection with this acquisition, the total purchase price, fair value of
assets acquired, cash paid and liabilities assumed were as follows:
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Three Months Ended
September 30, 2000
------------------
(Unaudited)
Cash paid $1,050,000
Other liabilities assumed and
acquisition costs 50,000
----------
Total purchase price allocated to
assets acquired $1,100,000
==========
4. LONG-TERM DEBT:
Long-term debt consists of the following:
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June 30, 2000 September 30, 2000
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(Unaudited)
<S> <C> <C>
Revolving note, interest at LIBOR plus 1.875%
payable monthly through April 2003. Secured by
the assets of the Company $ 51,880,202 $ 55,930,202
Term note, interest at LIBOR plus 1.875%
payable monthly through October 2003. Secured
by the assets of the Company 8,314,565 7,674,980
Note payable, interest at 6.6% payable annually
through October 2003. Secured by certain assets
of the Company 2,732,298 2,732,298
Individuals and corporations, mortgages and
notes, interest at 3.7% to 10.00%, payable at
various dates through 2010 13,090,893 12,001,652
------------ ------------
76,017,958 78,339,132
Original issue discount (134,624) (129,212)
Current maturities (7,064,877) (6,924,576)
------------ ------------
Total long-term debt $ 68,818,457 $ 71,285,344
============ ============
</TABLE>
The prime rate was 9.50% and LIBOR was 6.62% at September 30, 2000.
On May 1, 2000 the Company entered into an amended and restated credit
facility with Bank One, as agent. The credit facility increased the maximum
revolving note borrowings to $100.0 million, including a letter of credit
sublimit of $25.0 million. The term note continued at the existing balance of
$7.7 million. The scheduled maturity date of the term note is October 4, 2003.
The scheduled maturity date of the revolving note is April 30, 2003. The Company
pays a fee for the unused portion of the revolving loan. The revolving loan is
used primarily to fund acquisitions. The Company is not required to make
principal payments on outstanding balances of the revolving loan as long as
certain covenants are satisfied. Interest is charged on both the term loan and
the revolving loan at either the lender's prime rate or various LIBOR rates, at
the Company's discretion, plus an applicable spread. The weighted average
interest rate for substantially all of the borrowings under the credit facility
was 8.5% as of September 30, 2000. As of September 30, 2000, availability under
the revolving loan was approximately $37.4 million, with outstanding borrowings
of approximately $55.9 million and outstanding letters of credit of
approximately $6.7 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.
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5. EARNINGS PER SHARE
Basic earnings per share were computed based on the weighted average number
of common shares issued and outstanding during the relevant periods. Diluted
earnings per common share were computed based on the weighted average number of
common shares issued and outstanding plus additional shares assumed to be
outstanding to reflect the dilutive effect of common stock equivalents using the
treasury stock method.
Options to purchase 228,850 and 222,750 shares of common stock were
outstanding during the quarter ended September 30, 1999 and 2000 respectively,
but were not included in the computation of diluted earnings per common share as
the options' exercise price was greater than the average market price of the
common stock for the period.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------
1999 2000
---------- ----------
<S> <C> <C>
Net earnings available for common stock $ 654,749 $ 813,186
========== ==========
Basic earnings per common share:
Weighted average common shares 9,347,584 9,347,584
========== ==========
Basic earnings per common share $ 0.07 $ 0.09
========== ==========
Diluted earnings per common share:
Weighted average common shares 9,347,584 9,347,584
Shares issuable from assumed conversion
of common stock equivalents -- 19,375
---------- ----------
Weighted average common and common equivalent shares 9,347,584 9,366,959
========== ==========
Diluted earnings per common share $ 0.07 $ 0.09
========== ==========
</TABLE>
6. COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, were as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------
1999 2000
--------- ----------
<S> <C> <C>
Net earnings $ 654,749 $ 813,186
Change in net unrealized losses on
derivatives designated as
cash flow hedges, net of tax -- (444,462)
--------- ---------
Comprehensive income $ 654,749 $ 368,724
--------- ---------
</TABLE>
Accumulated other comprehensive loss presented in the accompanying
condensed consolidated balance sheets consists of the accumulated other net
unrealized loss on derivatives designated as cash flow hedges.
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7. DERIVATIVES AND HEDGING ACTIVITIES
On July 1, 2000, Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities" was adopted
resulting in the recording of current assets of $476,500, noncurrent assets
of $1,175,800, current liabilities of $365,400, noncurrent liabilities of
$931,500 and other comprehensive income of $213,300, net of tax. The
current quarter's results include a reduction of interest expense of
$166,200 to reflect an increase in the fair market value of options related
to the Company's interest rate swap agreements.
Floating to fixed rate interest swap agreements, designated as cash flow
hedges, hedge the Company's floating rate debt and expire at various dates
through July 2005. The fair value of these contracts is recorded in the
Company's balance sheet, with the offset to accumulated other comprehensive
loss, net of tax. The Company expects to recognize net current liabilities
of $22,000 into earnings in the next 12 months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified
in its entirety by, the Financial Statements and the Notes thereto.
OVERVIEW
The Company is a leading packager and distributor of industrial, medical and
specialty gases, welding equipment and supplies, and propane in ten states in
the mid-Atlantic and midwestern regions of the United States. The Company's net
sales have grown, primarily as a result of acquisitions, at a compound annual
rate of approximately 17% per year since the Company started business in 1958,
increasing from $190,000 in that year to $131.0 million for the last twelve
months. In fiscal 2000, gases accounted for approximately 39% of net sales,
welding equipment and supplies accounted for approximately 45% of net sales, and
cylinder and tank rental accounted for approximately 16% of net sales.
The Company believes it has been successful in executing its strategy of
growth through acquisitions, having completed 46 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 consideration for most acquisitions includes a combination of a
cash payment at closing, seller financing and payments under covenants not to
compete and consulting agreements. In most cases, operating cash flow of an
acquired business is positive in a relatively short period of time. For many
acquisitions, the Company believes that projections of future cash flows justify
payment of amounts in excess of the book or market value of the assets acquired,
resulting in goodwill being recorded.
The Company's results are subject to moderate seasonality, primarily due to
fluctuations in the demand for propane, which is highest during winter months
falling in the Company's second and third fiscal quarters. Seasonality of total
sales has increased as propane sales as a percentage of total sales have
increased.
Operating and administrative expenses are comprised primarily of salaries,
benefits, transportation equipment operating costs, facility lease expenses and
general office expenses. These expenses are generally fixed on a quarter-
to-quarter
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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 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, in some cases, has decreased in comparison to
prior years. Future acquisitions may affect this pattern depending upon the
product mix of the acquired businesses.
RESULTS OF OPERATIONS
Comparison of Three Months Ended September 30, 2000 and 1999
Net sales increased 18.6%, or $4.9 million, to $31.3 million from $26.4
million for the three months ended September 30, 2000 and 1999, respectively.
Acquisitions made during the preceding twelve months contributed $3.1 million
of the increase in net sales, while same store sales increased $1.8 million.
Same store sales increased 6.8% versus the same quarter last year. Gases and
cylinder revenue represented 55.2% of net sales for the three months ended
September 30, 2000, with hard goods representing 44.8%. In comparison, net sales
for the three months ended September 30, 1999 reflected gases and cylinder
revenue as 52.7% and hard goods as 47.3%. The increase in gases and cylinder
revenue as a percentage of total net sales reflects, primarily, the improvement
in same store sales and the impact of the product mix of acquisitions made over
the last twelve months.
Gross profit, which excludes depreciation and amortization, increased 19.8%,
or $2.7 million, to $16.6 million from $13.9 million for the three months ended
September 30, 2000 and 1999, respectively. Acquisitions made during the last
twelve months contributed $1.8 million of the change with same stores gross
profit increasing $0.9 million. Gross profit as a percentage of net sales was
53.0% for the three months ended September 30, 2000, compared to 52.4% for the
three months ended September 30, 1999. This reflects a change in product mix,
partially offset by the effect of an increase in the cost of propane, which was
approximately 43% higher than for the same period last year.
Operating and administrative expenses increased 21.1%, or $2.0 million, to
$11.5 million from $9.5 million for the three months ended September 30, 2000
and 1999, respectively. Of this increase, $1.3 million was related to acquired
businesses while base business expenses increased $0.7 million. Operating and
administrative expenses as a percentage of sales was 36.8% for the three months
ended September 30, 2000, as compared to 36.0% for the same quarter in 1999.
Depreciation and amortization expense increased $0.3 million for the three
months ended September 30, 2000 compared to the same period in 1999, reflecting
the increase from acquisitions made during the last twelve months.
Interest expense increased $0.2 million for the quarter, reflecting primarily
the financing of acquisitions made during the last twelve months partially
offset by the Company's adoption of SFAS No. 133, which reduced interest expense
by $0.2 million.
Net earnings increased 24.0% to $813,000 after the effect of SFAS No. 133 for
the three months ended September 30, 2000 compared to $655,000 for the prior
year quarter.
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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.
At September 30, 2000, the Company had working capital of approximately $14.1
million. Funds provided by operations for the three months ended September 30,
2000 were approximately $0.7 million. Funds used for investing activities were
approximately $3.1 million for the three months ended September 30, 2000,
consisting primarily of capital spending and an acquisition. Sources of funds
from financing activities for the three months ended September 30, 2000 were
approximately $2.3 million from net borrowings. The Company's cash balance
decreased $0.1 million during the three months to $0.6 million.
On May 1, 2000, the Company entered into a second amended and restated credit
agreement with Bank One, as agent. This agreement increased the maximum
revolving note borrowings to $100 million, from the previous maximum borrowings
level of $75.3 million, and extended the maturity of the revolving note to April
30, 2003. The agreement permits the Company, on an annual basis, to request that
the maturity be extended one year. No significant changes were made to pricing
and the covenant requirements when compared to the original agreement. The
weighted average interest rate for substantially all of the borrowings under the
credit facility was 8.5% as of September 30, 2000. As of September 30, 2000,
availability under the revolving loan was approximately $37.4 million, with
outstanding borrowings of approximately $55.9 million and outstanding letters of
credit of approximately $6.7 million. The credit facility is secured by all of
the Company's assets. The revolving loan is used primarily to fund acquisitions.
The Company is not required to make principal payments on outstanding balances
of the revolving loan as long as certain covenants are satisfied. Interest is
charged on both the term loan and the revolving loan at either the lender's
prime rate or various LIBOR rates, at the Company's discretion, plus an
applicable spread.
The loan agreement for the credit facility contains various financial
covenants applicable to the Company, including covenants requiring minimum fixed
charge coverage, maximum funded debt to EBITDA, and minimum net worth. The
Company is in compliance with these covenants and believes that it will continue
to be in compliance through at least the next twelve months.
The Company is obligated under various promissory notes related to the
financing of acquisitions that have various rates of interest, ranging from 3.7%
to 10.0% per annum, and maturities through 2010. The outstanding balance of
these notes as of September 30, 2000 was $14.7 million. Some of these notes are
secured by assets related to the applicable acquisition, some are unsecured, and
some are backed by bank letters of credit issued under the Company's credit
facility.
The Company enters into contractual agreements in the ordinary course of
business to hedge its exposure to interest rate risks. Counterparties to these
agreements are major financial institutions. Management believes the risk of
incurring losses related to credit risk is remote and any losses would be
immaterial.
Interest rate swap agreements are used to reduce interest rate risks and
costs inherent in the company's debt portfolio. The company enters into these
agreements to change the fixed/variable interest rate mix of the debt portfolio
in order to maintain the percentage of fixed and variable debt within certain
parameters set by management. Accordingly, the company enters into agreements to
effectively convert variable-rate debt to fixed-rate debt.
As of September 30, 2000, the Company had $55 million in notional amounts
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<PAGE> 13
outstanding under interest rate swap agreements. These swaps have an average pay
rate of 6.1% versus a receive rate of 6.6%.
The Company has previously entered into a put/call option agreement with an
independent distributor for the purchase of its business. This option becomes
exercisable beginning in the year 2002 and ending in the year 2008. The Company
believes that it will have adequate capital resources available to fund this
acquisition at such time that the option is exercised.
The Company believes that cash generated from operations, borrowing
availability under its credit facility and the ability to obtain financing with
sellers of businesses will be sufficient to satisfy the Company's requirements
for operating funds, capital expenditures and future acquisitions for at least
the next twelve months. The Company has no plans at this time to issue
additional shares of common stock.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company generally has experienced higher sales activity during its second
and third quarters as a result of seasonal sales of propane, with corresponding
lower sales for the first and fourth quarters. As a result, income from
operations and net income typically are higher for the second and third quarters
than for the first and fourth quarters of the fiscal year.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No change has occurred since the filing by the Registrant on Form 10-K for
the year ended June 30, 2000. Reference is made to Part II, Item 7A,
Quantitative and Qualitative Disclosures About Market Risk, in the Registrant's
Annual Report on Form 10-K for the year ended June 30, 2000.
There was no change to the composition of the Company's fixed and variable
rate long term debt or interest rate swaps during the three months ended
September 30, 2000. As of September 30, 2000 the Company's average pay rate for
these swaps was 6.1% compared to its average receive rate of 6.6%.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See the Exhibit Index on page 15.
(b) Reports on Form 8-K:
No reports on Form 8-K were made during the quarter.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY NATIONAL GASES INCORPORATED
November 14, 2000 /s/ Robert D. Scherich
-----------------------------------
Robert D. Scherich
Chief Financial Officer
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EXHIBIT INDEX
Exhibit Number Description
-------------- -------------------------------------------------------------
3.1 Articles of Amendment of the Company, incorporated by reference
to Exhibit 3.1 to the Company's Registration Statement on Form
S-1 under the Securities Act of 1933, as amended, (File No.
333-19973)
3.2 Bylaws of the Company, incorporated by reference to Exhibit 3.2
to the Company's Registration Statement on Form S-1 under the
Securities Act of 1933, as amended, (File No. 333-19973)
27.1 Financial Data Schedule (provided for the information of the
U.S. Securities and Exchange Commission only)
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