Valley National Gases Reports Record Quarter & Six Month Earnings

WASHINGTON, Pa., Feb. 1  /PRNewswire-FirstCall/ -- Valley National Gases Incorporated  (AMEX:VLG) reported today that net earnings for the second quarter and six months ended December 31, 2005 were $.45 and $.66 per diluted share, respectively, compared to $.36 and $.53 per diluted share for the same periods last year. Sales for the second quarter were $56.4 million, a 30.6% increase over the same quarter last year. Sales for the first half year were $98.1 million, a 23.5% increase over the same period last year.

Valley National Gases' Vice Chairman and Chief Executive Officer, William A. Indelicato, commented, "Sales growth in both the quarter just completed and the first half of our fiscal year was realized as a result of both strong same store sales and the effect of our recently completed acquisitions."  Valley National Gases acquired United Propane Services, Inc. in December, Reynolds Welding Supply Company, Inc. and its subsidiaries in October and Plymouth Wayne Welding Supplies, Inc. in June of this year.

Mr. Indelicato further commented: "Both same store hard-goods and industrial cylinder gases increased quarter over comparable quarter by 7.9% and 11.4% respectively. Our same store propane sales were higher in the second quarter this year than last year by approximately 9.1%, due primarily to new business and to a lesser degree slightly colder weather in this year's second quarter compared to last year's second quarter." Same store sales are sales from those locations that have been operated for the full three month and six month comparative periods.

Net sales (including sales from the acquisitions) increased $13.2 million for the quarter, compared to the prior year quarter. Hard-goods sales increased by $4.3 million, or 28.3%, while industrial gases, cylinder rent and other increased by $4.5 million or 30.6%.  Propane sales increased $4.4 million, or 33.2%. Net sales for the six months ended December 31, 2005 increased $18.7 million compared to the prior year period. Hard-goods sales increased by $6.8 million or 22.6% while industrial gases, cylinder rent and other sales increased by $6.4 million or 21.6%.  Propane sales increased $5.5 million, or 27.7%, reflecting $3.5 million in price escalation combined with $2.0 million increase in volume.

Operating, distribution and administrative expenses increased $3.8 million for the quarter and $5.7 million year to date, compared to the same period last year. As a percentage of sales, operating, distribution and administrative expenses decreased from 31.6% in last year's second quarter to 30.9% this year.  For the six month period, operating distribution and administrative expenses decreased from 34.3% to 33.5%.

Depreciation and amortization expense increased $.2 million and $0.3 million for the quarter and fiscal year to date respectively, compared to the prior year period principally due to recent acquisitions affecting the current period.

Income from operations increased $1.5 million or 22.4% and was 14.8% of net sales for the quarter, compared to 15.8% for the same quarter last year. Year to date, operating income increased $2.0 million or 18.7% and was $12.9% of net sales, compared to $13.4% for the same period last year.

Interest expense increased slightly in the current quarter and decreased $0.3 million year to date, respectively due to changes in outstanding debt resulting primarily from acquisitions partially offset by positive cash flow from operations.

The Company's effective tax rate for the current quarter and year to date was 38.1% and 38.4% compared to 38.0% for both prior year periods.

Valley National Gases, with headquarters in Washington, Pennsylvania, is a leading packager and distributor of industrial, medical and specialty gases, welding equipment and supplies, propane and fire protection equipment.  Valley National Gases operates seventy three locations in fourteen states, with eight production and distribution centers in the eastern United States.  The Company will host a conference call on February 2, 2006 at 11:00 a.m.  The teleconference will be available by calling 800-633-8467. Ask to be connected to the Valley National Gases conference call. A replay of the teleconference will be available for one week. To listen, call 800-633-8284 and enter reservation number 21281944. The second quarter earnings release will be available on the Investor Information page on the Company's website at http://www.vngas.com/

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements regarding Valley National Gases Incorporated contained in this release that are not historical in nature, particularly those that utilize terminology such as "may," "will," "should," "likely," "expects," "anticipates," "estimates," "believes" or "plans," or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to Valley that could cause such material differences are identified and discussed from time to time in Valley's filings with the Securities and Exchange Commission, including Valley's ability to evaluate, negotiate, complete and integrate acquisitions, finance and manage future growth, maintain supply and customer relationships, retain key employees and comply with financial covenants in its credit facility; the prices and markets for gases, including propane; economic factors such as the level of economic activity nationally and in the regions Valley serves and political and economic conditions generally; the continued execution of operating improvements; competition; the outcome of litigation relating to product liability, employment law and other claims.

Valley undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any future disclosure Valley makes on related subjects in future reports to the SEC.

                    VALLEY NATIONAL GASES INCORPORATED
                    CONSOLIDATED STATEMENT OF EARNINGS
               (Amounts in thousands except per share data)
                               (Unaudited)

                                  Three Months Ended    Six Months Ended
                                     December 31,          December 31,
                                    2005      2004        2005      2004

  Net Sales                      $56,418   $43,203     $98,081   $79,404
  Cost of products sold,
   excluding depreciation         28,427    20,635      48,379    37,549
  Operating, distribution and
   administrative (1)             17,443    13,672      32,881    27,208
  Depreciation                     2,006     1,752       3,798     3,324
  Amortization of intangibles        219       278         458       622
  Loss (Gain) on disposal of
   assets                            (27)       43         (65)       61
  Total costs and expenses        48,068    36,380      85,451    68,764
  Income from operations           8,350     6,823      12,630    10,640
  Interest expense                 1,182     1,148       2,073     2,348
  Other income, net                  116       138         321       240
  Earnings before minority
   interest                        7,284     5,813      10,878     8,532
  Minority interest                  187       179         444       377
  Net earnings before taxes        7,097     5,634      10,434     8,155
  Provision for income taxes       2,706     2,141       4,008     3,099
  Net earnings                    $4,391    $3,493      $6,426    $5,056


      Basic earnings per share     $0.46     $0.37       $0.67     $0.53
      Diluted earnings per share   $0.45     $0.36       $0.66     $0.53
      Weighted average shares
        Basic                      9,596     9,493       9,586     9,489
        Diluted                    9,753     9,655       9,738     9,631

  (1)  Operating, distribution and administrative expenses for the three and
       six months ended December 31, 2005 include an intercompany
       elimination of $0.6 million and $1.2 million, respectively in rent
       expense, partially offset by other expenses of $0.2 million and $0.4
       million, respectively, as a result of consolidating under FIN46R,
       Variable Interest Entities owned by a related party that leases
       properties to Valley.

       Operating, distribution and administrative expenses for the three and
       six months ended December 31, 2004 include an intercompany
       elimination of $0.5 million and $1.0 million, respectively in rent
       expense, partially offset by other expenses of $0.2 million and $0.4
       million, respectively, as a result of consolidating under FIN46R,
       Variable Interest Entities owned by a related party that leases
       properties to Valley.


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DATASOURCE: Valley National Gases Incorporated



CONTACT:  James P. Hart of Valley National Gases, [phone], or





Web site:  http://www.vngas.com/

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