VALLEY NATIONAL GASES (VLG)

 

Energy costs, which are to a large extent subject to factors beyond our control, impact our business in several respects. Because the production of industrial gases requires significant amounts of electrical energy, industrial gas prices have historically increased as the cost of electric energy has increased. Shortages of energy may cause energy prices to continue to rise and, as a result, increase the cost of industrial gases. Historically, we have not entered into hedging agreements to protect us from increases in energy costs. In addition, a portion of our distribution costs consists of diesel fuel costs, which have recently increased to record levels. Furthermore, the price of propane is influenced significantly by the cost of crude oil, largely because propane competes with crude oil-based fuels. As the price of propane continues to reflect the rising price of crude oil, our sales of propane may decrease and adversely affect our financial results. Although we have historically been able to pass most of the increases in the above-referenced costs to our customers, we may not be able to continue to do so in the future. Increases in energy costs and other costs that we are unable to pass on to our customers could significantly reduce our profitability.