UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

|(Mark One)
|----------
|[X]       

For the period ended
 June 30, 2004

OR

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

Commission File Number:
1-14316

APRIA HEALTHCARE GROUP INC.
(Exact name of registrant as specified in its charter)

|                                                                                                                                                                 |                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------
|Delaware(State or other
      jurisdiction ofincorporation or organization)26220 Enterprise
      Court, Lake Forest, CA(Address of principal executive offices) | 33-0488566(I.R.S. Employer
      Identification Number)92630(Zip Code)

Registrants
telephone number: (949) 639-2000

Indicate by check mark 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 by check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No

As of July 26, 2004, there were outstanding 49,972,113
 shares of the Registrant's common stock, par value $.001, which is
the only class of common stock of the Registrant (not including 7,940,259 shares held in treasury).

---

APRIA HEALTHCARE GROUP INC.

FORM 10-Q

For the period ended June 30, 2004

|                                          |  |                                                                                                                                                                                                                                                      | 
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|PART I.    
        FINANCIAL INFORMATION | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 1.                                   |  | Financial Statements (unaudited)
       Condensed Consolidated Balance Sheets
       Condensed Consolidated Income Statements
       Condensed Consolidated Statements of Cash Flows
       Notes to Condensed Consolidated Financial Statements | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 2.                                   |  | Management's Discussion and Analysis ofFinancial
Condition and Results of Operations                                                                                                                                                                 | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 3.                                   |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                                           | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 4.                                   |  | Controls and Procedures                                                                                                                                                                                                                              | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|PART II.   
         OTHER INFORMATION    | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 1.                                   |  | Legal Proceedings                                                                                                                                                                                                                                    | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 2.                                   |  | Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities                                                                                                                                                                     | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 4.                                   |  | Submission of Matters to a Vote of Security Holders                                                                                                                                                                                                  | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|Item 6.                                   |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                     | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|SIGNATURES                                |  |                                                                                                                                                                                                                                                      | 
|                                          |  |                                                                                                                                                                                                                                                      | 
|EXHIBITS                                  |  |                                                                                                                                                                                                                                                      | 

---

PART I  FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS (unaudited)

APRIA HEALTHCARE GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)

|                                                                                                                             | June 30, |  | December 31,
|---------------------------------------------------------------------------------------------------------------------------- | -------- |  | ------------
|
|
|ASSETS                                                                                                                       |          |  |             
|CURRENT ASSETS                                                                                                               |          |  |             
|Cash and cash equivalents                                                                                                    |          |  | $           
|Accounts receivable, less allowance
for doubtful accounts of $40,781                                                         |          | 
|and $38,531 at June 30, 2004 and
December 31, 2003, respectively                                                             |          |  |             
|Inventories, net                                                                                                             |          |  |             
|Deferred income taxes                                                                                                        |          |  |             
|Prepaid expenses and other current assets                                                                                    |          |  |             
|                                                                                                                             |          |  |             
|TOTAL CURRENT ASSETS                                                                                                         |          |  |             
|                                                                                                                             |          | 
|PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $404,062                                                         |          | 
|and $392,297 at June 30, 2004 and December 31, 2003, respectively                                                            |          |  |             
|PROPERTY, EQUIPMENT AND IMPROVEMENTS, net                                                                                    |          |  |             
|DEFERRED INCOME TAXES                                                                                                        |          |  |             
|GOODWILL                                                                                                                     |          |  |             
|INTANGIBLE ASSETS, less accumulated amortization
of $7,557 and   $7,294 at June 30, 2004 and December 31, 2003, respectively |          |  |             
|DEFERRED DEBT ISSUANCE COSTS, net                                                                                            |          |  |             
|OTHER ASSETS                                                                                                                 |          |  |             
|                                                                                                                             |          |  |             
|                                                                                                                             |          |  | $           
|                                                                                                                             |          |  |             
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                         |          | 
|CURRENT LIABILITIES                                                                                                          |          | 
|Accounts payable                                                                                                             |          |  | $           
|Accrued payroll and related taxes and benefits                                                                               |          |  |             
|Accrued insurance                                                                                                            |          |  |             
|Income taxes payable                                                                                                         |          |  |             
|Other accrued liabilities                                                                                                    |          |  |             
|Current portion of long-term debt                                                                                            |          |  |             
|                                                                                                                             |          |  |             
|TOTAL CURRENT LIABILITIES                                                                                                    |          |  |             
|                                                                                                                             |          | 
|LONG-TERM DEBT, exclusive of current portion                                                                                 |          |  |             
|DEFERRED INCOME TAXES                                                                                                        |          |  |             
|OTHER NON-CURRENT LIABILITIES                                                                                                |          |  |             
|COMMITMENTS AND CONTINGENCIES (Note G)                                                                                       |          | 
|                                                                                                                             |          | 
|STOCKHOLDERS' EQUITY                                                                                                         |          | 
|Preferred stock, $.001 par value: 10,000,000 shares authorized;
     none issued                                             |          |  |             
|Common stock, $.001 par value: 150,000,000 shares authorized;                                                                |          | 
|57,899,040 and 57,317,094 shares issued at
June 30, 2004 and                                                                 |          | 
|December 31, 2003, respectively;
49,958,781 and 51,107,538                                                                   |          | 
|outstanding at June 30, 2004 and December 31, 2003, respectively                                                             |          |  |             
|Additional paid-in capital                                                                                                   |          |  |             
|Treasury stock, at cost; 7,940,259 and 6,209,556 shares
at June 30, 2004                                                     |          | 
|and December 31, 2003, respectively                                                                                          |          |  |             
|Retained earnings                                                                                                            |          |  |             
|Accumulated other comprehensive loss                                                                                         |          |  |             
|                                                                                                                             |          |  |             
|                                                                                                                             |          |  |             
|                                                                                                                             |          |  |             
|                                                                                                                             |          |  | $           
|                                                                                                                             |          |  |             

See notes to condensed
consolidated financial statements.

---

APRIA HEALTHCARE GROUP INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS 
(unaudited)

|                                         | Three Months EndedJune 30, |  | Six Months EndedJune 30,
|---------------------------------------- | -------------------------- |  | ------------------------
|
|
|
|Net revenues                             |                            |  | $                       
|Costs and expenses:                      |                            | 
|Cost of net revenues:                    |                            | 
|Product and supply costs                 |                            |  |                         
|Patient service equipment depreciation   |                            |  |                         
|Nursing services                         |                            |  |                         
|Other                                    |                            |  |                         
|                                         |                            |  |                         
|TOTAL COST OF NET REVENUES               |                            |  |                         
|                                        
|Provision for doubtful accounts          |                            |  |                         
|Selling, distribution and administrative |                            |  |                         
|Amortization of intangible assets        |                            |  |                         
|                                         |                            |  |                         
|TOTAL COSTS AND EXPENSES                 |                            |  |                         
|                                         |                            |  |                         
|OPERATING INCOME                         |                            |  |                         
|Interest expense, net                    |                            |  |                         
|                                         |                            |  |                         
|INCOME BEFORE TAXES                      |                            |  |                         
|Income tax expense                       |                            |  |                         
|                                         |                            |  |                         
|NET INCOME                               |                            |  | $                       
|                                         |                            |  |                         
|                                         |                            |  |                         
|                                         |                            |  |                         
|Basic net income per common share        |                            |  | $                       
|                                         |                            |  |                         
|Diluted net income per common share      |                            |  | $                       
|                                         |                            |  |                         

See notes to condensed consolidated
financial statements.

---

APRIA HEALTHCARE GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

|                                                                                   | Six Months EndedJune 30,
|---------------------------------------------------------------------------------- | ------------------------
|
|
|
|OPERATING ACTIVITIES                                                               |                         
|Net income                                                                         |                         
|Items included in net income not requiring
(providing) cash:                       |                         
|Provision for doubtful accounts                                                    |                         
|Depreciation and amortization                                                      |                         
|Amortization of deferred debt issuance costs                                       |                         
|Deferred income taxes                                                              |                         
|Stock-based compensation
 and other                                                |                         
|Changes in operating assets and liabilities, exclusive
of effects of acquisitions: |                         
|Accounts receivable                                                                |                         
|Inventories, net                                                                   |                         
|Prepaid expenses and other assets                                                  |                         
|Accounts payable, exclusive of outstanding checks                                  |                         
|Accrued payroll and related taxes and benefits                                     |                         
|Income taxes payable                                                               |                         
|Accrued expenses                                                                   |                         
|                                                                                   |                         
|NET CASH PROVIDED
 BY OPERATING ACTIVITIES                                         |                         
|INVESTING ACTIVITIES                                                               |                         
|Purchases of patient service equipment and property,                               |                         
|equipment and improvements, exclusive of effects of acquisitions                   |                         
|Proceeds from disposition of assets                                                |                         
|Cash paid for acquisitions, including payments of deferred consideration           |                         
|                                                                                   |                         
|NET CASH USED IN INVESTING ACTIVITIES                                              |                         
|FINANCING ACTIVITIES                                                               |                         
|Proceeds from revolving credit facilities                                          |                         
|Payments on revolving credit facilities                                            |                         
|Payments on term loans                                                             |                         
|Payments on other long-term debt                                                   |                         
|Outstanding checks included in accounts payable
     and other                     |                         
|Repurchases of common stock                                                        |                         
|Issuances of common stock                                                          |                         
|                                                                                   |                         
|NET CASH
USED IN FINANCING ACTIVITIES                                              |                         
|                                                                                   |                         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                          |                         
|Cash and cash equivalents at beginning of period                                   |                         
|                                                                                   |                         
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                         |                         
|                                                                                   |                         

See notes to condensed
consolidated financial statements.

---

APRIA HEALTHCARE GROUP INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

NOTE A  CERTAIN SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The accompanying unaudited
condensed consolidated financial statements include the accounts of Apria Healthcare Group
Inc. (Apria or the company) and its subsidiaries. Intercompany
transactions and accounts have been eliminated.

In the opinion of management, all adjustments,
consisting of normal recurring accruals necessary for a fair presentation of the results
of operations for the interim periods presented, have been reflected herein. The unaudited
results of operations for interim periods are not necessarily indicative of the results to
be expected for the entire year. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 2003, included
in the companys Annual Report on Form 10-K.

Certain amounts from prior periods have been
reclassified to conform to the current period presentation.

Use of Accounting Estimates:The preparation of
financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.

Revenue Recognition and Concentration of Credit
Risk: Revenues are recognized on the date services and related products are provided
to patients and are recorded at amounts expected to be received under reimbursement
arrangements with third-party payors, including private insurers, prepaid health plans,
Medicare and Medicaid. Approximately 37% of the companys revenues are reimbursed
under arrangements with Medicare and Medicaid. No other third-party payor group represents
10% or more of the companys revenues. The majority of the companys revenues
are derived from fees charged for patient care under fee-for-service arrangements.
Revenues derived from capitation arrangements represent less than 10% of total net
revenues.

Due to the nature of the industry and the reimbursement
environment in which Apria operates, certain estimates are required to record net revenues
and accounts receivable at their net realizable values. Inherent in these estimates is the
risk that they will have to be revised or updated as additional information becomes
available. Specifically, the complexity of many third-party billing arrangements and the
uncertainty of reimbursement amounts for certain services from certain payors may result
in adjustments to amounts originally recorded. Such adjustments are typically identified
and recorded at the point of cash application, claim denial or account review.

Management performs periodic analyses to evaluate
accounts receivable balances to ensure that recorded amounts reflect estimated net
realizable value. Specifically, management considers historical realization data, accounts
receivable aging trends, other operating trends and relevant business conditions. Also,
focused reviews of certain large and/or problematic payors are performed. Due to
continuing changes in the healthcare industry and with third-party reimbursement, it is
possible that estimates could change in the near term, which could have an impact on
operations and cash flows.

Accounts receivable are reduced by an allowance for
doubtful accounts which provides for those accounts from which payment is not expected to
be received, although services were provided and revenue was earned.

Recent Accounting Pronouncements:In October
2002, the Financial Accounting Standards Boards (FASB) Emerging Issues
Task Force (EITF) issued EITF No. 02-17, which addresses issues raised in the
interpretation of Statement of Financial Accounting Standards (SFAS) No. 141,
Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets and the identification and valuation of intangible assets. EITF No. 02-17
provides guidance on determining when, as a result of a business combination, a
customer-related intangible asset exists that should be separately valued from goodwill.
EITF No. 02-17 is effective for business combinations consummated and goodwill impairment
tests performed after October 25, 2002. Adoption of this interpretation did not have a
material effect on the companys consolidated financial statements.

In November 2002, the FASB issued FASB Interpretation
(FIN) No. 45, Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an
interpretation of SFAS Nos. 5, 57 and 107 and rescission of FIN No. 34, Disclosure
of Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the
disclosure requirements for the interim and annual financial statements of the guarantor.
It also requires that a guarantor recognize a liability at the inception of the guarantee
for the fair value of the obligation undertaken. Apria was required to adopt the
recognition provisions of FIN No. 45 beginning January 1, 2003, while the disclosure
provisions became effective at December 31, 2002. Adoption of this interpretation did not
have a material effect on the companys consolidated financial statements.

---

FIN No. 46, Consolidation of Variable Interest
Entities, an interpretation of Accounting Research Bulletin No. 51, was originally
issued in January 2003 and subsequently revised in December 2003. FIN No. 46, as revised,
requires a variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entitys
activities or is entitled to receive a majority of the entitys residual returns or
both. FIN No. 46 also requires certain disclosures about variable interest entities in
which a company has a significant interest, regardless of whether consolidation is
required. Application of FIN No. 46 is required for potential variable interest entities
commonly referred to as special purpose entities for periods ending after December 15,
2003. Application of the provisions is required for all other variable interest entities
by the end of the first reporting period that ends after March 15, 2004. Adoption of this
interpretation did not have a material effect on the companys consolidated financial
statements.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
SFAS No. 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The statement is generally effective for contracts entered into
or modified after June 30, 2003 and for hedging relationships designated after June 30,
2003. Adoption of this statement did not have a material effect on the companys
consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150,Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of both
liabilities and equity. The statement is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. However, in November 2003, the FASB issued
Staff Position No. 150-3, which indefinitely defers the effective date for certain
provisions of the statement. Adoption of this statement did not have a material effect on
the companys consolidated financial statements.

Stock-based Compensation:The company accounts
for its stock-based compensation plans under the recognition and measurement principles of
Accounting Principles Board Opinion (APB) No. 25,Accounting for
Stock Issued to Employees,and related interpretations. Apria has adopted the
disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure  an amendment of FASB Statement No.
123. For the six-month period ended June 30, 2004, net income reflects compensation
expense for restricted stock awards and restricted stock purchase rights accounted for in
accordance with APB No. 25. Had compensation expense for all of the companys
stock-based compensation awards been recognized based on the fair value recognition
provisions of SFAS No. 123, Aprias net income and per share amounts would have been
adjusted to the pro forma amounts indicated below.

|                                                                                                                                     | Three Months EndedJune 30, |  |   | Six Months EndedJune 30,
|------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- |  | - | ------------------------
|
|
|
|Net income as reported                                                                                                               |                            |  | $ | 29,059                  
|Add:  stock-based compensation expense included
  in reported net income, net of related tax effects                                 |                            |  |   | 655                     
|Deduct: total stock-based
compensation expense  determined for all awards under fair
value-based  method, net of related tax effects |                            |  |   | 2,961                   
|                                                                                                                                     |                            |  |   |                         
|Pro forma net income                                                                                                                 |                            |  | $ | 26,753                  
|                                                                                                                                     |                            |  |   |                         
|                                                                                                                                     |                            | 
|Basic net income per share:                                                                                                          |                            | 
|As reported                                                                                                                          |                            |  | $ | 0.58                    
|Pro forma                                                                                                                            |                            |  | $ | 0.54                    
|                                                                                                                                     |                            | 
|Diluted income per share:                                                                                                            |                            | 
|As reported                                                                                                                          |                            |  | $ | 0.57                    
|Pro forma                                                                                                                            |                            |  | $ | 0.53                    

For purposes of the pro forma disclosure, the fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for grants in
the six-month periods ended June 30, 2004 and 2003: risk-free interest rates of 3.02% and
2.75%, respectively; dividend yield of 0% for all periods; expected lives of 4.83 and 4.34
years, respectively; and volatility of 47% and 58%, respectively.

---

NOTE B  BUSINESS COMBINATIONS

Apria periodically makes acquisitions of complementary
businesses in specific geographic markets. The results of operations of the acquired
companies are included in the accompanying consolidated income statements from the dates
of acquisition. During the six-month period ended June 30, 2004, cash paid for
acquisitions was $100,052,000, which included deferred payments of $3,113,000 that were
related to prior year acquisitions. At June 30, 2004, accrued consideration payable
totaled $13,374,000 and is included on the consolidated balance sheet in other accrued
liabilities.

During the six-month period ended June 30, 2004, Apria
acquired 21 companies comprised largely of home respiratory therapy businesses. Pending
receipt of additional valuation information, amounts preliminarily allocated to goodwill,
other intangible assets and patient service equipment were $90,037,000, $5,266,000 and
$9,546,000, respectively. This allocation is inclusive of amounts not yet paid.

The following supplemental unaudited pro forma
information presents the combined operating results of Apria and the businesses that were
acquired by Apria during the six-month period ended June 30, 2004, as if the acquisitions
had occurred at the beginning of the periods presented. The pro forma information is based
on the historical financial statements of Apria and those of the acquired businesses.
Amounts are not necessarily indicative of the results that may have been obtained had the
combinations been in effect at the beginning of the periods presented or that may be
achieved in the future.

|                                    | Six Months EndedJune 30,
|----------------------------------- | ------------------------
|
|
|
|Net revenues                        |                         
|Net income                          |                         
|                                   
|Basic net income per common share   |                         
|Diluted net income per common share |                         

NOTE C  GOODWILL AND INTANGIBLE ASSETS

Apria accounts for intangible assets and goodwill under
the initial recognition provisions of SFAS No. 141, Business Combinations and
the financial accounting and reporting provisions of SFAS No. 142, Goodwill and
Other Intangible Assets. Goodwill and other intangible assets with indefinite lives
are no longer amortized, but are tested for impairment annually, or more frequently if
circumstances indicate that the possibility of impairment exists. If the carrying value of
goodwill or an intangible asset exceeds its fair value, an impairment loss is recognized.

For the six months ended June 30, 2004, the net change
in the carrying amount of goodwill of $89,760,000 is the result of business combinations.
Substantially all of the goodwill recorded in conjunction with business combinations
completed during the periods presented is expected to be deductible for tax purposes.

Intangible assets, all of which are subject to
amortization, consist of the following:

|(dollars in thousands)   |  |  | June 30, 2004 |     | December 31, 2003
|------------------------ |  |  | ------------- | --- | -----------------
|
|
|
|Covenants not to compete |  |  |               | 4.8 |                  
|Tradename                |  |  |               | 2.0 |                  
|Customer lists           |  |  |               | 0.6 |                  
|                         |  |  |               |     |                  
|                         |  |  |               |     |                  
|                         |  |  |               |     |                  

---

Amortization expense was $2,785,000 for the six-month
period ended June 30, 2004. Estimated amortization expense for the current year and each
of the next five fiscal years ending December 31, is presented below:

|Year Ending December 31, | (dollars in thousands)
|------------------------ | ----------------------
|
|2004                     |                       
|2005                     |                       
|2006                     |                       
|2007                     |                       
|2008                     |                       
|2009                     |                       

NOTE D  LONG-TERM DEBT

At June 30, 2004, there were no borrowings under the
$100,000,000 revolving credit facility, outstanding letters of credit totaled $3,855,000,
credit available under the revolving facility was $96,145,000, and Apria was in compliance
with all of the financial covenants required by the credit agreement. The final maturity
date for the revolving credit facility is July 2006.

Hedging Activities: Apria utilizes interest rate
swap agreements to moderate its exposure to interest rate fluctuations on its underlying
variable rate long-term debt. Apria does not use derivative financial instruments for
trading or other speculative purposes. Apria has four interest rate swap agreements with a
total notional amount of $100,000,000 that fix an equivalent amount of its variable rate
debt at rates ranging from 2.43% to 3.42% (before applicable margin). The terms of the
swap agreements range from two to four years. The swap agreements are being accounted for
as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. Accordingly, the difference between the interest received and
interest paid is reflected as an adjustment to interest expense. For the six-month periods
ended June 30, 2004 and 2003, Apria paid net settlement amounts of $857,000 and
$1,042,000, respectively. At June 30, 2004, the aggregate fair value of the swap
agreements was a liability of $341,000 and is reflected in the accompanying consolidated
balance sheet in other accrued liabilities. Unrealized gains and losses on the fair value
of the swap agreements are reflected, net of taxes, in other comprehensive loss (See Note
E  Stockholders Equity). Aprias exposure to credit loss
under the swap agreements is limited to the interest rate spread in the event of
counterparty non-performance.

NOTE E  STOCKHOLDERS EQUITY

For the six months ended June 30, 2004, changes to
stockholders equity are comprised of the following amounts:

|(dollars in thousands)                              
|----------------------------------------------------
|
|Net income                                          
|Proceeds from the exercise of stock options         
|Tax benefit related to the exercise of stock options
|Compensatory stock options and awards granted       
|Other comprehensive gain, net of taxes              
|Repurchases of common stock                         
|                                                    
|                                                    
|                                                    

For the six months ended June 30, 2004 and 2003, net
income and comprehensive income differed by unrealized gains (losses) related to interest
rate swap agreements, net of taxes, in the amount of $718,000 and $(479,000),
respectively.

On January 16, 2004, Apria prepaid $50,000,000 to
repurchase 1,730,703 shares of its common stock at a strike price of $28.89 through an
accelerated share repurchase program. The related contract, which had a scheduled
settlement date of June 16, 2004, provided for cash or net share settlement at
Aprias election. The repurchase of the shares required by the contract was completed
on April 28, 2004 and the share price differential was settled in cash on June 7, 2004 for
a total cost of $53,033,000. Subject to market conditions, the company plans to repurchase
additional shares worth up to $47,000,000 during the second half of 2004.

All repurchased shares are being held in treasury.

---

NOTE F  INCOME TAXES

Income taxes for the six-month periods ended June 30,
2004 and 2003 have been provided at the effective tax rates expected to be applicable for
the respective year.

At June 30, 2004, Apria had federal net operating loss
carryforwards of $12,123,000, the utilization of which is limited to $5,017,000 per year
under Internal Revenue Code section 382. Apria expects to utilize $5,017,000 of these net
operating loss carryforwards in 2004. The remaining portion of the federal net operating
loss carryforwards will expire unused at the end of 2004. The company also has various
state net operating loss carryforwards. Apria utilized its remaining alternative minimum
tax credit carryforward of $6,149,000 in 2003.

NOTE G  COMMITMENTS AND CONTINGENCIES

As previously reported, since mid-1998 Apria has been
the subject of an investigation conducted by the U.S. Attorneys office in Los
Angeles and the U.S. Department of Health and Human Services. The investigation concerns
the documentation supporting Aprias billing for services provided to patients whose
healthcare costs are paid by Medicare and other federal programs. Apria is cooperating
with the government and has responded to various document requests and subpoenas.

Apria has been informed that the investigation is the
result of civil qui tam litigation filed on behalf of the government against Apria.
The complaints in the litigation are under seal, however, and the government has not
informed Apria of either the identities of the plaintiffs, the court or courts where the
proceedings are pending, the date or dates instituted or the factual bases alleged to
underlie the proceedings. To date, the U.S. Attorneys office has not informed Apria
of any decision to intervene in the qui tam actions; however, it could reach a
decision with respect to intervention at any time.

Government representatives and counsel for the
plaintiffs in the qui tam actions asserted in July 2001 that, by a process of
extrapolation from a sample of 300 patient files to all of Aprias billings to the
federal government during the three-and-one-half year sample period, Apria could be liable
to the government under the False Claims Act for more than $9 billion, consisting of
extrapolated overpayment liability, treble damages and penalties of up to $10,000 for each
allegedly false claim derived from the extrapolation.

Apria has acknowledged that there may be errors and
omissions in supporting documentation affecting a portion of its billings. However, it
considers the assertions and amounts described in the preceding paragraph to be
unsupported both legally and factually and believes that most of the alleged documentation
errors and omissions should not give rise to any liability, for overpayment refunds or
otherwise. Accordingly, Apria believes that the claims asserted are unwarranted and that
it is in a position to assert numerous meritorious defenses.

Apria has been exchanging information and having
discussions with government representatives in an attempt to explore whether it will be
possible to resolve this matter on a basis that would be considered fair and reasonable by
all parties. Apria cannot provide any assurances as to the outcome of these discussions,
however, or as to the outcome of the qui tam litigation in the absence of a
settlement. Management cannot estimate the possible loss or range of loss that may result
from these proceedings and, therefore, has not recorded any related accruals.

If a judge, jury or administrative agency were to
determine that false claims were submitted to federal healthcare programs or that there
were significant overpayments by the government, Apria could face civil and administrative
claims for refunds, sanctions and penalties for amounts that would be highly material to
its business, results of operations and financial condition, including the exclusion of
Apria from participation in federal healthcare programs.

Apria is also engaged in the defense of certain claims
and lawsuits arising out of the ordinary course and conduct of its business, the outcomes
of which are not determinable at this time. Apria has insurance policies covering such
potential losses where such coverage is cost effective. In the opinion of management, any
liability that might be incurred by Apria upon the resolution of these claims and lawsuits
will not, in the aggregate, have a material adverse effect on Aprias results of
operations or financial condition.

---

NOTE H  PER SHARE AMOUNTS

The following table sets forth the computation of basic
and diluted per share amounts:

|                                                    | Three Months EndedJune 30, |  |   | Six Months EndedJune 30,
|--------------------------------------------------- | -------------------------- |  | - | ------------------------
|
|
|
|Numerator:                                          |                            |  |   |                         
|Net income                                          |                            |  | $ | 29,059                  
|Numerator for basic and diluted per share amounts - |                            | 
|income available to common stockholders             |                            |  | $ | 29,059                  
|                                                   
|Denominator:                                        |                            | 
|Denominator for basic per share                     |                            | 
|amounts - weighted average shares                   |                            |  |   | 49,908                  
|                                                   
|Effect of dilutive securities:                      |                            | 
|Employee stock options -                            |                            | 
|dilutive potential common shares                    |                            |  |   | 767                     
|                                                    |                            |  |   |                         
|Denominator for diluted per share amounts -         |                            | 
|adjusted weighted average shares                    |                            |  |   | 50,675                  
|                                                    |                            |  |   |                         
|                                                   
|Basic net income per common share                   |                            |  | $ | 0.58                    
|                                                    |                            |  |   |                         
|Diluted net income per common share                 |                            |  | $ | 0.57                    
|                                                    |                            |  |   |                         
|                                                   
|Employee stock options excluded from the            |                            | 
|computation of diluted per share amounts:           |                            | 
|                                                   
|Shares for which exercise price exceeds             |                            | 
|average market price of common stock                |                            |  |   | 885                     
|                                                   
|Average exercise price per share that exceeds       |                            | 
|average market price of common stock                |                            |  | $ | 30.40                   
|                                                    |                            |  |   |                         

---

---

Cautionary statement for purposes of the Safe
Harbor provisions of the Private Securities Litigation Reform Act of 1995:
Aprias business is subject to a number of risks which are partly or entirely beyond
the companys control. The company has described certain of those risks in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2003, as filed with the
Securities and Exchange Commission on March 15, 2004. This report may be used for purposes
of the Private Securities Litigation Reform Act of 1995 as a readily available document
containing meaningful cautionary statements identifying important factors that could cause
actual results to differ materially from those projected in any forward-looking statements
the company may make from time to time. Key factors that may have an impact on Apria
include the following:

| |  | trends
 and developments affecting the collectibility of accounts receivable;                                  
|- |  | ---------------------------------------------------------------------------------------------------------------
| |  | government legislative
 and budget developments that could continue to affect reimbursement levels;            
| |  | the ongoing government
investigation regarding patients covered by Medicare and other federal programs;        
| |  | the effectiveness of the Apria's operating systems and controls;                                               
| |  | healthcare reform and the effect of federal and state healthcare regulations;                                  
| |  | pricing pressures from large payors;                                                                           
| |  | the successful implementation of the company's acquisition strategy and integration of acquired
businesses; and
| |  | other factors described in Apria's filings with the Securities and Exchange Commission.                        

In addition,  the military and national security
 activities in which the United States is currently engaged,  have and could continue to
have significant  impacts on the economy and government spending  priorities.  The
effects of any further such  developments,  including  but not limited to a prolonged
 occupation  in Iraq,  pose  significant risks and  uncertainties  to Apria's  business.
 Among other  things,  deficit  spending by the  government  as the result of adverse
 developments in the economy and the costs of the military and national security activities
 could lead to increased  pressure  to reduce  government expenditures for other purposes, including
government-funded programs such as Medicare and Medicaid.

---

ITEM 2.     MANAGEMENT
S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
             
      OF OPERATIONS

Apria operates in the home
healthcare segment of the healthcare industry and provides services in the home
respiratory therapy, home infusion therapy and home medical equipment areas. In all three
lines, Apria provides patients with a variety of clinical services and related products
and supplies, most of which are prescribed by a physician as part of a care plan. Apria
provides these services to patients in the home throughout the United States through
approximately 455 branch locations.

Critical Accounting
Policies.Aprias management considers the accounting policies that
govern revenue recognition and the determination of the net realizable value of accounts
receivable to be the most critical in relation to the companys consolidated
financial statements. These policies require managements most complex and subjective
judgments. Additionally, the accounting policies related to goodwill and long-lived assets
require significant judgment. These policies are presented in detail in Aprias
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 
Managements Discussion and Analysis of Financial Condition and Results of
Operations.

Recent Accounting
Pronouncements. In October 2002, the Financial Accounting Standards
Boards (FASB) Emerging Issues Task Force (EITF) issued EITF
No. 02-17, which addresses issues raised in the interpretation of Statement of Financial
Accounting Standards (SFAS) No. 141, Business Combinations and
SFAS No. 142, Goodwill and Other Intangible Assets and the identification and
valuation of intangible assets. EITF No. 02-17 provides guidance on determining when, as a
result of a business combination, a customer-related intangible asset exists that should
be separately valued from goodwill. EITF No. 02-17 is effective for business combinations
consummated and goodwill impairment tests performed after October 25, 2002. Adoption of
this interpretation did not have a material effect on the companys consolidated
financial statements.

In November 2002, the FASB
issued FASB Interpretation (FIN) No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, an interpretation of SFAS Nos. 5, 57 and 107 and rescission of FIN No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others. FIN No. 45
elaborates on the disclosure requirements for the interim and annual financial statements
of the guarantor. It also requires that a guarantor recognize a liability at the inception
of the guarantee for the fair value of the obligation undertaken. Apria was required to
adopt the recognition provisions of FIN No. 45 beginning January 1, 2003, while the
disclosure provisions became effective at December 31, 2002. Adoption of this
interpretation did not have a material effect on the companys consolidated financial
statements.

---

FIN No. 46,
Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51, was originally issued in January 2003 and subsequently revised
in December 2003. FIN No. 46, as revised, requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk of loss
from the variable interest entitys activities or is entitled to receive a majority
of the entitys residual returns or both. FIN No. 46 also requires certain
disclosures about variable interest entities in which a company has a significant
interest, regardless of whether consolidation is required. Application of FIN No. 46 is
required for potential variable interest entities commonly referred to as special purpose
entities for periods ending after December 15, 2003. Application of the provisions is
required for all other variable interest entities by the end of the first reporting period
that ends after March 15, 2004. Adoption of this interpretation did not have a material
effect on the companys consolidated financial statements.

In April 2003, the FASB
issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities under SFAS No. 133,Accounting
for Derivative Instruments and Hedging Activities. The statement is generally
effective for contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. Adoption of this statement did not have a
material effect on the companys consolidated financial statements.

In May 2003, the FASB
issued SFAS No. 150,Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. The statement is effective for financial
instruments entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. However, in November
2003, the FASB issued Staff Position No. 150-3, which indefinitely defers the effective
date for certain provisions of the statement. Adoption of this statement did not have a
material effect on the companys consolidated financial statements.

Results of Operations

Net Revenues.Net revenues were $359.6 million in the second quarter of 2004, compared to
$343.3 million for the corresponding period in 2003, representing an increase of 4.7%. For
the six-month period ended June 30, 2004, net revenues were $710.4 million, also up 4.7%
from last year. The revenue growth was affected by the Medicare reimbursement reduction
for respiratory medications, effective January 1, 2004, and a decline in revenues as Apria
transitioned out of the Gentiva CareCentrix Inc. contract, which management chose not to
renew for 2004. The effects of the Medicare reductions were $3.7 million and $7.3 million
for the three and six months ended June 30, 2004, respectively. Additionally, the effects
of the Gentiva contract reductions were $13.9 million and $19.1 million for the three and
six-month periods, respectively. Further, Apria is experiencing increased pricing pressure
from its managed care customers as these organizations seek to lower costs by obtaining
more favorable pricing from providers such as Apria. Managed care organizations are also
evaluating alternative delivery models for certain products and services which include
those provided by Apria. This may result in Apria providing reduced levels of certain
products and services in the future, with a corresponding reduction in revenue.

Despite the adverse
effects noted above, revenue growth resulted from volume increases and the acquisition of
complementary businesses. Aprias acquisition strategy generally results in the rapid
integration of acquired businesses into existing operating locations. This limits
Aprias ability to separately track the amount of revenue generated by an acquired
business. Estimating the net revenue contribution from acquisitions therefore requires
certain assumptions. Based on its analysis, Apria estimates that approximately $32 million
of the net revenue growth between the six-month periods in 2003 and 2004 was derived from
acquisitions.

The following table sets
forth a summary of net revenues by service line:

|                             | Three Months Ended June 30, |  | Six Months Ended June 30,
|---------------------------- | --------------------------- |  | -------------------------
|
|
|
|
|
|Respiratory therapy          |                             |  | $                        
|Infusion therapy             |                             |  |                          
|Home medical equipment/other |                             |  |                          
|                             |                             |  |                          
|Total net revenues           |                             |  | $                        
|                             |                             |  |                          

---

Respiratory
Therapy.Respiratory therapy revenues are derived primarily from the provision of
oxygen systems, home ventilators, sleep apnea equipment, nebulizers, respiratory
medications and related services. The respiratory therapy service line increased by 6.8%
in the second quarter of 2004 and 7.4% year-to-date, as compared to the corresponding
periods in 2003. This growth was primarily driven by volume increases and acquisitions of
respiratory therapy businesses. The Medicare reimbursement reduction for respiratory
medications caused a decline of 1.6% in the revenue growth rate for the first six months
of 2004. The growth in this service line was also reduced by the non-renewal of the
Gentiva contract, which represented 3.5% of prior year respiratory revenues.

Infusion
Therapy.The infusion therapy service line involves the administration of a drug
or nutrient directly into the body intravenously through a needle or catheter. Infusion
therapy services also include administering enteral nutrients directly into the
gastrointestinal tract through a feeding tube. Infusion therapy revenues decreased
slightly in the second quarter and six-month period of 2004, when compared to the same
periods in 2003. The decline can be attributed to the fact that Apria has stopped
accepting new Medicaid patients for certain drugs in certain states where reimbursement
rates have been reduced. Growth in the enteral nutrition line continues as the related
revenues increased by 6.4% and 7.3% in the second quarter and six-month period of 2004,
respectively, when compared to the same periods last year. The non-renewal of the Gentiva
contract had only a negligible impact on infusion therapy. See Medicare and
Medicaid.

Home Medical
Equipment/Other.Home medical equipment/other revenues are derived from the
provision of patient safety items, ambulatory and patient room equipment. Home medical
equipment/other revenues increased by 2.4% in the second quarter of 2004 versus the second
quarter of 2003, but declined by 1.0% when comparing the six-month periods.
Managements focus of its sales efforts and acquisition strategy on the higher-margin
respiratory therapy line has affected the growth in home medical equipment/other. The
non-renewal of the Gentiva contract resulted in a reduction that equaled 2.6% of prior year home
medical equipment/other revenues. Rehabilitation revenue growth in 2004 has been
considerably lower than in 2003, largely as a result of action taken by the Centers for
Medicare & Medicaid Services (CMS) that required previously-qualified
orders for power mobility devices to be re-screened against stricter qualification
standards. This process resulted in the delay and cancellation of many orders in the first
half of 2004, particularly in the first quarter. The rehabilitation product business has
in the past been a strong contributor to the growth in the home medical equipment/other
line. Further, diabetic supplies, historically a very small percentage of the home medical
equipment line, grew significantly in the second quarter of 2004. This growth is directly
attributable to the recent acquisition of a company that entered the diabetic supply
market just prior to being acquired.

Revenue Recognition
and Certain Concentrations.Revenues are recognized on the date services and
related products are provided to patients and are recorded at amounts estimated to be
received under reimbursement arrangements with third-party payors, including private
insurers, prepaid health plans, Medicare and Medicaid. Due to the nature of the industry
and the reimbursement environment in which Apria operates, certain estimates are required
to record net revenues and accounts receivable at their net realizable values. Inherent in
these estimates is the risk that they will have to be revised or updated as additional
information becomes available, which could have an impact on the consolidated financial
statements.

In 2004, approximately 37%
of Aprias revenues are being reimbursed under arrangements with Medicare and
Medicaid. No other third-party payor represents 10% or more of the companys
revenues. The majority of the companys revenues are derived from fees charged for
patient care under fee-for-service arrangements. Revenues derived from capitation
arrangements represent less than 10% of total net revenues for all periods presented.

Medicare
and Medicaid. In December 2003, the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 became law. The Act includes a number of provisions that
are affecting Medicare Part B reimbursement policies for items and services provided by
Apria, the most significant of which are:

| |  | Reimbursement  reductions for five durable medical  equipment  categories.  Reductions begin in 2005 based on the median price
             paid for such items on behalf of beneficiaries of federal  employee health plans.  Also, a freeze on annual payment  increases for
             durable medical equipment has been instituted from 2004 through 2008.                                                                                                                                    
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Reimbursement  reduction for inhalation  drugs.  The previous  reimbursement  rate of 95% of the average  wholesale  price has
             been reduced to 80% of the average wholesale price, effective January 1, 2004. Beginning in January 2005,  reimbursement for these
             drugs will be further reduced through a shift to average sales price ("ASP"), as defined by the Act, plus 6%.                                                                                            
| |  | Establishment of a competitive  acquisition  program under which Medicare would require that
suppliers wishing to provide certain items to beneficiaries submit bids to Medicare.
Such a program for as yet unspecified  durable medical  equipment items
             and services is to be  transitioned  into (i) 10 of the largest  metropolitan  statistical  areas in 2007;  (ii) 80 of the largest
             metropolitan statistical areas in 2009; and (iii) additional areas after 2009.

---

Aprias management
estimates that the revision to inhalation drug reimbursement in 2004 will result in a
revenue reduction from 2003 levels of approximately $14 million. And, based on its initial
interpretation of the Act, management previously estimated that the combined impact to
revenues in 2005 from the inhalation drug and durable medical equipment reimbursement
reductions would be approximately $86 million. However, as regulators work through the
implementation and timing issues with industry representatives, it is apparent there is
the potential for significant variations to what was originally anticipated, making the
ultimate outcome less clear. Therefore, management is currently unable to update its
preliminary estimate of the impact of the inhalation drug and durable medical equipment
reductions with any degree of accuracy or reliability. In addition, the impact of the
competitive acquisition program scheduled to commence in 2007 cannot be estimated at this
time.

On July 27, 2004, CMS
issued its Notice of Proposed Rulemaking concerning the proposed physician fee schedule
for 2005. The fee schedule includes the projected ASP for certain of the respiratory
medications that Apria provides most commonly. CMS has acknowledged that the ASP, along
with the 6% add-on payment, is not sufficient to cover shipping, handling, compounding and
other pharmacy activities and indicated that patient access may be adversely affected.
Consequently, CMS is proposing to establish a separate dispensing fee. CMS is seeking cost
data in order to establish an appropriate fee level, but they further indicated that such
a fee must be set in the context of potential cost savings for providers that are expected
to result from other provisions in the proposed rule. The proposal includes a switch to a
90-day delivery schedule, as opposed to the current 30-day requirement, and reduced
administrative/documentation requirements.

As the regulators address
the remaining open issues, Apria management is reviewing its current business model with
respect to respiratory medications and will consider modifications to respond to the lower
reimbursement level and possible changes to the administrative requirements. Should the
amount ultimately determined by CMS for the dispensing fee be insufficient to cover
non-drug costs, Apria will begin transitioning out of this product line, for Medicare
patients only, in the fourth quarter of 2004. The company has developed a contingency plan
that includes a proper notice period for existing Medicare patients and physician referral
sources.

The Balanced Budget Act of
1997 contained several provisions that affected Aprias Medicare reimbursement
levels. Subsequent legislationthe Medicare Balanced Budget Refinement Act of 1999
and the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of
2000mitigated some of the effects of the original legislation. The Medicare
Prescription Drug, Improvement and Modernization Act of 2003 addressed some of the issues
pending from the earlier legislation. However, still pending from the 1997 legislation is
streamlined authority granted to the Secretary of the U.S. Department of Health and Human
Services, or HHS, to increase or reduce the reimbursement for home medical equipment,
including oxygen, by up to 15% each year under an inherent reasonableness authority. In
December 2002, CMS issued an interim final rule that establishes a process by which such
adjustments may be made. The rule applies to all Medicare Part B services except those
paid under a physician fee schedule, a prospective payment system, or a competitive
acquisition program. As of this date, neither CMS nor the durable medical equipment
regional carriers have used the expedited authority.

Some states have already
adopted, or are contemplating adopting, alternative pricing methodologies for certain
drugs and biologicals under the Medicaid program. In at least 20 states, these changes
have reduced the level of reimbursement received by Apria without a corresponding offset
or increase to compensate for the service costs incurred. In several of those states,
Apria has elected to stop accepting new Medicaid patient referrals for the affected drugs.
Apria is continuing to provide services to patients already on service, and for those who
receive other Medicaid-covered respiratory, home medical equipment or infusion therapies,
if the reimbursement levels for those services remain adequate.

Contractual
Arrangements with Hospitals. Last year, CMS officials initiated actions to
revoke the Medicare supplier numbers of a variety of durable medical equipment suppliers,
including a number of Aprias current hospital customers. Under contractual
arrangements, Apria provides home healthcare products and services to hospitals on a
wholesale basis to service the hospitals discharged patients. Apria bills the
hospitals for all such products and services and the hospitals, in turn, bill patients and
third party payors, including Medicare. In order for a hospital to bill Medicare for these
home healthcare products and services, it must have a Medicare supplier number.

In its revocation notices
to Aprias hospital customers, CMS asserted that these contractual arrangements do
not comply with certain Medicare regulations promulgating supplier standards,
adherence to which is required as a condition of having a supplier number. The primary
areas of alleged noncompliance cited by CMS appear to be based on the governments
view that the supplier standards require a supplier to perform directly through its own
employees some types of services that the hospitals have contracted to have Apria perform.

---

Apria believes its
arrangements with hospitals have been consistent with all applicable regulations and that
CMS proposed revocation of the hospitals supplier numbers was and remains
inappropriate. Nevertheless, Apria engaged CMS in discussions regarding the application of
the supplier standards to Aprias arrangements with hospitals, which resulted in
further clarification and guidance from CMS as to the terms of permissible arrangements.
Based on this further guidance and corresponding modifications to Aprias
arrangements, CMS has approved the continued participation of most of the hospitals whose
supplier numbers had been subject to revocation notices. (Some of Aprias hospital
customers chose to surrender their supplier numbers and exit the durable medical equipment
business in lieu of entering into the revised arrangements.) Apria continues to implement
these revisions to its arrangements with hospital customers, including those that had not
received revocation notices, and does not currently anticipate the need for further
discussions with CMS on this subject. The potential decrease in Aprias future
revenues, if any, from these alternative arrangements and terminations is uncertain at
this time.

Gross Profit.Gross margins were 72.5% and 73.2% for the second quarters of 2004 and
2003, respectively. For the six-month periods ended June 30, 2004 and 2003, the margins
were 72.2% and 72.9%, respectively. The declines are primarily due to the Medicare
reimbursement reduction, the effects of the non-renewal of the Gentiva contract, and
managed care revenue pricing pressures. The effect of these factors has been mitigated by
reduced product pricing negotiated from the companys suppliers.

Provision for
Doubtful Accounts.The provision for doubtful accounts results from
managements estimate of the net realizable value of accounts receivable after
considering actual write-offs of specific receivables. The provision was 3.6% of net
revenues for the second quarter of 2004 and 3.8% for the same period last year. For the
year-to-date periods of 2004 and 2003, the provision was 3.7% and 3.8%, respectively. The
improvement in 2004 can be partially attributed to an increase in recoveries of previously
written off accounts. See Liquidity and Capital Resources  Accounts
Receivable.

Selling,
Distribution and Administrative.Selling, distribution and administrative
expenses are comprised of expenses incurred in direct support of operations and those
associated with administrative functions. Expenses incurred by the operating locations
include salaries and other expenses in the following functional areas: selling,
distribution, clinical, intake, reimbursement, warehousing and repair. Many of these
operating costs are directly variable with revenue patterns. Certain expenses, such as
facility lease and fuel costs, are very sensitive to market-driven price fluctuations.
Administrative expenses include overhead costs incurred by the operating locations and
corporate support functions. These expenses do not vary as closely with revenue growth as
do the operating costs. Selling, distribution and administrative expenses, expressed as
percentages of net revenues, were 54.1% in the second quarter of 2004, down from 54.6% in
the second quarter of 2003. For the six-month period ended June 30, 2004, selling,
distribution and administrative expenses were 53.8% compared to 54.3% for the same period
last year. The decrease resulted from controls placed on labor expenses and
managements focus on productivity. Management has developed an additional set of
productivity initiatives aimed at further reducing costs in anticipation of the 2005
Medicare reimbursement reductions, which are currently in the process of being
implemented.

Amortization of
Intangible Assets.For the quarter and six-month periods ended June 30,
2004, amortization expense was $1.5 million and $2.8 million, respectively. This compares
to $715,000 and $1.4 million for the corresponding periods in the prior year. The increase
is due to the continued and increased acquisition activity and the valuation of certain
customer relationships acquired in business combinations. See Liquidity and Capital
Resources  Business Combinations.

Interest Expense.Interest expense was $5.0 million for the second quarter of 2004, up from
$2.9 million in the second quarter of 2003. For the year-to-date periods in 2004 and 2003,
interest expense was $9.9 million and $6.3 million, respectively. The increases are due to
interest incurred on the $250 million convertible notes issued in August 2003. The
interest increases were partially offset by interest reductions resulting from a decrease
in borrowings under the credit agreement as the company makes its scheduled payments and
by the expiration of two interest rate swap agreements that had fixed interest at higher
rates on a portion of Aprias debt. See Liquidity and Capital Resources 
Long-term Debt.

Income
Taxes. Income taxes for the six-month period ended June 30, 2004 and 2003
have been provided at the effective tax rates expected to be applicable for the respective
year.

At June 30, 2004, Apria
had federal net operating loss carryforwards of $12.1 million, the utilization of which is
limited to $5.0 million per year under Internal Revenue Code section 382. Apria expects to
utilize $5.0 million of these net operating loss carryforwards in 2004. The remaining
portion of the federal net operating loss carryforwards will expire unused at the end of
2004. The company also has various state net operating loss carryforwards. Apria utilized
its remaining alternative minimum tax credit carryforward of $6.1 million in 2003.

---

Liquidity and Capital Resources

Aprias principal
source of liquidity is its operating cash flow, which is supplemented by a $100 million
revolving credit facility. Aprias ability to generate operating cash flows in excess
of its operating needs has afforded it the ability, among other things, to pursue its
acquisition strategy and fund patient service equipment expenditures to support revenue
growth. Management believes that its operating cash flow and revolving credit line will
continue to be sufficient to fund its operations and growth strategies. However,
sustaining current cash flow levels is dependent on many factors, some of which are not
within Aprias control, such as government reimbursement levels and the financial
health of its payors.

Cash Flow.Cash provided by operating activities was $137.8 million in the first six
months of 2004 compared with $135.6 million in the corresponding period in 2003. Operating
cash flow growth between the periods was reduced by a number of factors, the most
significant of which was a $12.5 million increase in income tax payments. Apria will
continue to make significant income tax payments as the company has utilized the majority
of its net operating loss carryforwards. Also, the aforementioned Medicare reimbursement
reduction for respiratory mediations and a larger accounts receivable increase in 2004
served to reduce the operating cash flow improvement between the six-month periods.
Fluctuations in the timing of accruals and related payments were favorable when comparing
the two six-month periods and helped to offset the increased outflows noted above.

Cash used in investing
activities increased to $177.8 million for the first six months of 2004 compared to $123.2
million during the same period last year. The increase reflects the significantly higher
acquisition activity in 2004. Patient service equipment expenditures deceased in 2004 when
compared to 2003 due to an increased focus on improved utilization of such equipment.

Cash used in financing
activities was $62.6 million during the first six months of 2004 compared to $14.3 million
for the first six months of 2003. The main reason for the increase is due to the common
stock repurchase of $53.0 million that was effected through an accelerated share
repurchase program. See Treasury Stock.

Contractual Cash
Obligations.The following table summarizes Aprias long term cash
payment obligations to which the company is contractually bound. The years presented below
represent 12-month rolling periods ending June 30.

|(dollars in millions)                                                                                                                                    | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6+ | Totals
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ------ | ------ | ------ | ------ | ------ | ------- | ------
|
|Term loans                                                                                                                                               |        |        | $      | 28     |        | $       | 29    
|Revolving loan/swingline                                                                                                                                 |        |        |        | -      |        |         | -     
|Convertible senior notes                                                                                                                                 |        |        |        | -      |        |         | -     
|Capital lease obligations                                                                                                                                |        |        |        | 3      |        |         | 1     
|Operating leases                                                                                                                                         |        |        |        | 62     |        |         | 54    
|Deferred acquisition payments                                                                                                                            |        |        |        | 13     |        |         | -     
|                                                                                                                                                         |        |        |        |        |        |         |       
|Total contractual cash obligations                                                                                                                       |        |        | $      | 106    |        | $       | 84    
|                                                                                                                                                         |        |        |        |        |        |         |       
|                                                                                                                                                         |        |        |        |        |        |         |       
|The holders of the convertible senior notes
will first have the option to require Apria to repurchase all or a portion
of their notes in September 2008.

Accounts Receivable.Accounts receivable before allowance for doubtful accounts increased to
$254.5 million at June 30, 2004 from $234.9 million at December 31, 2003, which is
primarily due to the increase in revenues. Days sales outstanding (calculated as of each
period end by dividing accounts receivable, less allowance for doubtful accounts, by the
90-day rolling average of net revenues) were 53 at June 30, 2004, 52 at June 30, 2003 and
50 at December 31, 2003.

Evaluation of Net
Realizable Value.Management performs various analyses to evaluate accounts
receivable balances to ensure that recorded amounts reflect estimated net realizable
value. Management applies specified percentages to the accounts receivable aging to
estimate the amount that will ultimately be uncollectible and therefore should be
reserved. The percentages are increased as the accounts age; accounts aged in excess of
360 days are reserved at 100%. Management establishes and monitors these percentages
through analyses of historical realization data, accounts receivable aging trends, other
operating trends, the extent of contracted business and business combinations. Also
considered are relevant business conditions, such as governmental and managed care payor
claims processing procedures and system changes. If indicated by such analyses, management
may periodically adjust the uncollectible estimate and corresponding percentages. Further,
focused reviews of certain large and/or problematic payors are performed to determine if
their respective reserve levels are appropriate.

---

Unbilled
Receivables.Included in accounts receivable are earned but unbilled receivables
of $38.2 million and $33.9 million at June 30, 2004 and at December 31, 2003,
respectively. Delays, ranging from a day up to several weeks, between the date of service
and billing can occur due to delays in obtaining certain required payor-specific
documentation from internal and external sources. Earned but unbilled receivables are aged
from date of service and are considered in Aprias analysis of historical performance
and collectibility. The increase in 2004, from the end of 2003, is largely due to
acquisitions effected during the first half of 2004. The time-consuming processes of
converting patient files onto Aprias systems and obtaining provider numbers from
government payors routinely delay billing of the newly acquired business.

Inventories and
Patient Service Equipment.Inventories consist primarily of pharmaceuticals
and disposable articles used in conjunction with patient service equipment. Patient
service equipment consists of respiratory and home medical equipment that is provided to
in-home patients for the course of their care plan and subsequently returned to Apria for
reuse. Continued revenue growth is directly dependent on Aprias ability to fund its
inventory and patient service equipment requirements. The increases in both accounts
between December 31, 2003 and June 30, 2004 reflect purchases to support the increased
business levels and additions of patient items recorded in conjunction with the acquisitions
that closed in the first half of 2004.

Long-Term
Debt. At June 30, 2004, total borrowings under Aprias credit
agreement were $231.2 million, outstanding letters of credit totaled $3.9 million and
credit available under the revolving facility was $96.1 million. The company continues to
be in compliance with all of the financial covenants required by the credit agreement.

Hedging
Activities.Apria is exposed to interest rate fluctuations on its underlying
variable rate long-term debt. Aprias policy for managing interest rate risk is to
evaluate and monitor all available relevant information, including but not limited to, the
structure of its interest-bearing assets and liabilities, historical interest rate trends
and interest rate forecasts published by major financial institutions. The tools Apria may
utilize to moderate its exposure to fluctuations in the relevant interest rate indices
include, but are not limited to: (i) strategic determination of repricing periods and
related principal amounts, and (ii) derivative financial instruments such as interest rate
swap agreements, caps or collars. Apria does not use derivative financial instruments for
trading or other speculative purposes.

Apria has four interest
rate swap agreements to fix its variable rate debt. The terms of such agreements, which
were executed in December 2002, are as follows: two two-year agreements with an aggregate
notional amount of $50 million and a fixed rate of 2.43%; a three-year agreement with a
notional amount of $25 million and a fixed rate of 3.04%; and a four-year agreement with a
notional amount of $25 million and a fixed rate of 3.42%. Apria also had two swap
agreements with an aggregate notional amount of $100 million and a fixed rate of 2.58%
that expired on March 31, 2003. All rates are stated before application of the interest
margins specified in the credit agreement.

The swap agreements are
being accounted for as cash flow hedges under SFAS No. 133, Accounting for
Derivative and Hedging Activities. Accordingly, the difference between the interest
received and interest paid is reflected as an adjustment to interest expense. During the
first six months of 2004 and 2003, Apria paid net settlement amounts of $857,000 and
$1,042,000, respectively. Unrealized gains and losses on the fair value of the swap
agreements are reflected, net of taxes, in other comprehensive income. At June 30, 2004,
the aggregate fair value of the swap agreements was a liability of $341,000 million. Apria
does not anticipate losses due to counterparty nonperformance as its counterparties to the
various swap agreements are nationally-recognized financial institutions with strong
credit ratings.

Treasury Stock.On January 16, 2004, Apria prepaid $50 million to repurchase 1,730,703
shares of its common stock at a strike price of $28.89 through an accelerated share
repurchase program. The related contract, which had a scheduled settlement date of June
16, 2004, provided for cash or net share settlement at Aprias election. The
repurchase of the shares required by the contract was completed on April 28, 2004 and the
share price differential was settled in cash on June 7, 2004 for a total cost of $53
million. Subject to market conditions, the company plans to repurchase additional shares
worth up to $4.7 million during the second half of 2004.

All repurchased shares are
being held in treasury.

---

Business
Combinations.Pursuant to one of its primary growth strategies, Apria
periodically acquires complementary businesses in specific geographic markets. The results
of operations of the acquired companies are included in the accompanying consolidated
income statements from the dates of acquisition. Covenants not to compete, typically
effected in these transactions, are being amortized over the life of the respective
agreements.

The aggregate
consideration for acquisitions that closed during the first six months of 2004 was $109.3
million. Pending receipt of additional valuation information, the preliminary allocation
of this amount includes $90.0 million to goodwill, $5.3 million to other intangible assets
and $9.5 million to patient service equipment. Cash paid for acquisitions, which includes
amounts deferred from prior year acquisitions, totaled $100.1 million and $42.5 million in
the first six months of 2004 and 2003, respectively.

The success of
Aprias acquisition strategy is directly dependent on Aprias ability to
maintain and/or generate sufficient liquidity to fund such acquisitions and on the
companys ability to integrate the acquired operations successfully.

HIPAA. 
          The Health Insurance Portability and Accountability Act of 1996
          is comprised of a number of components. Pursuant to the administrative
          simplification section of
          HIPAA, HHS has issued multiple sets of regulations, each with its own compliance
          date.  Regulations under HIPAA that may have a material effect on Apria govern the
          following:

| |  | privacy of individually identifiable health information - compliance date: April 14, 2003 - Apria was
materially compliant by this date;                                                                                                                    
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | standard electronic transaction and code sets - compliance date: October 16, 2003 - Apria was materially
compliant by this date;                                                                                                                            
| |  | electronic security of individually identifiable health information - compliance date: April 21, 2005 -
Apria expects to be able to be materially compliant with these regulations by the compliance date;                                                  
| |  | standards for unique national health identifier for healthcare providers for use in connection
with standard transactions  compliance date: May 23, 2007  Apria expects to be able
to materially comply with these regulations by the compliance date; and
| |  | the first installment of an interim enforcement rule, when issued in full, will address
both substantive and procedural requirements for the imposition of civil monetary penalties.                                                                        

The standard electronic
transaction and code sets regulations standardize how health claims and eligibility
information is collected, recorded and processed. The standard electronic transaction and
code sets regulations also mandate that standardized codes be used for electronic billing
purposes by all payors in the United States, including both government and private health
plans. Historically, certain billing codes used in the homecare industry have varied by
state Medicaid program and certain health plans. Under HIPAA, authority for approving,
modifying, adding or deleting codes lies solely with the Health Care Procedure Coding
System (HCPCS) panel, operating under the auspices of CMS, and such codes are
to be used not only by Medicare payors, but by state Medicaid programs and private managed
care payors as well. The panel reviews requests for new codes primarily on an annual
basis, with a new code application deadline of April 1 each year.

In mid-October 2003, the
panel posted the revised HCPCS list for 2004 on its web site. The panel approved very few
new codes. The results of applications submitted in April 2004 are expected in the fall of
2004. The absence of new codes for certain higher-cost respiratory products and services
could have an impact on gross profit margins, since the panel only allows one code per
certain equipment category, regardless of the actual equipment provided to the patients
per a physicians prescription and/or patient preference. The absence of standardized
codes for products or services provided by Apria also may preclude the company from
submitting electronic billings to certain payors. Such an outcome would require submitting
paper claims, which could ultimately result in delays and difficulties in collecting these
claims.

Apria faces potential
criminal or civil sanctions if it does not comply with existing or new laws and
regulations related to patient health information, use of standard transaction and code
sets and use of standard identifiers. New health information standards, whether
implemented pursuant to HIPAA or otherwise, could have a significant effect on the manner
in which Apria handles healthcare related data and communicates with payors.

---

Federal
Investigation.As previously reported, since mid-1998 Apria has been the subject
of an investigation conducted by the U.S. Attorneys office in Los Angeles and HHS.
The investigation concerns the documentation supporting Aprias billing for services
provided to patients whose healthcare costs are paid by Medicare and other federal
programs. Apria is cooperating with the government and has responded to various document
requests and subpoenas.

Apria has been informed
that the investigation is the result of civil qui tam litigation filed on behalf of
the government against Apria. The complaints in the litigation are under seal, however,
and the government has not informed Apria of either the identities of the plaintiffs, the
court or courts where the proceedings are pending, the date or dates instituted or the
factual bases alleged to underlie the proceedings. To date, the U.S. Attorneys
office has not informed Apria of any decision to intervene in the qui tam actions;
however, it could reach a decision with respect to intervention at any time.

Government representatives
and counsel for the plaintiffs in the qui tam actions asserted in July 2001 that,
by a process of extrapolation from a sample of 300 patient files to all of Aprias
billings to the federal government during the three-and-one-half year sample period, Apria
could be liable to the government under the False Claims Act for more than $9 billion,
consisting of extrapolated overpayment liability, treble damages and penalties of up to
$10,000 for each allegedly false claim derived from the extrapolation.

Apria has acknowledged
that there may be errors and omissions in supporting documentation affecting a portion of
its billings. However, it considers the assertions and amounts described in the preceding
paragraph to be unsupported both legally and factually and believes that most of the
alleged documentation errors and omissions should not give rise to any liability, for
overpayment refunds or otherwise. Accordingly, Apria believes that the claims asserted are
unwarranted and that it is in a position to assert numerous meritorious defenses.

Apria has been exchanging
information and having discussions with government representatives in an attempt to
explore whether it will be possible to resolve this matter on a basis that would be
considered fair and reasonable by all parties. Apria cannot provide any assurances as to
the outcome of these discussions, however, or as to the outcome of the qui tam
litigation in the absence of a settlement. Management cannot estimate the possible loss or
range of loss that may result from these proceedings and, therefore, has not recorded any
related accruals.

If a judge, jury or
administrative agency were to determine that false claims were submitted to federal
healthcare programs or that there were significant overpayments by the government, Apria
could face civil and administrative claims for refunds, sanctions and penalties for
amounts that would be highly material to its business, results of operations and financial
condition, including the exclusion of Apria from participation in federal healthcare
programs.

Off-Balance Sheet Arrangements

Apria is not a party to
off-balance sheet arrangements as defined by the Securities and Exchange Commission.
However, from time to time the company enters into certain types of contracts that
contingently require the company to indemnify parties against third-party claims. The
contracts primarily relate to: (i) certain asset purchase agreements, under which the
company may provide customary indemnification to the seller of the business being
acquired; (ii) certain real estate leases, under which the company may be required to
indemnify property owners for environmental and other liabilities, and other claims
arising from the companys use of the applicable premises; and (iii) certain
agreements with the companys officers, directors and employees, under which the
company may be required to indemnify such persons for liabilities arising out of their
employment relationship.

The terms of such
obligations vary by contract and in most instances a specific or maximum dollar amount is
not explicitly stated therein. Generally, amounts under these contracts cannot be
reasonably estimated until a specific claim is asserted. Consequently, no liabilities have
been recorded for these obligations on the companys balance sheets for any of the
periods presented.

---

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Apria is exposed to
interest rate fluctuations on its underlying variable rate long-term debt. Apria utilizes
interest rate swap agreements to moderate such exposure. Apria does not use derivative
financial instruments for trading or other speculative purposes.

At June 30, 2004,
Aprias term loan borrowings totaled $231.2 million. The bank credit agreement
governing the term loans provides interest rate options based on the following indices:
Federal Funds Rate, Prime Rate or the London Interbank Offered Rate. All such interest
rate options are subject to the application of an interest margin as specified in the bank
credit agreement. At June 30, 2004, all of Aprias outstanding term debt was tied to
LIBOR.

At June 30, 2004, Apria
had four interest rate swap agreements with a total notional amount of $100 million to pay
fixed rates ranging from 2.43% to 3.42% (before application of interest margin). The terms
of these agreements range from two to four years. Also, Apria had two interest rate swap
agreements with a total notional amount of $100 million to pay a fixed rate of 2.58%
(before application of interest margin) that expired March 31, 2003.

Based on the term debt
outstanding and the swap agreements in place at June 30, 2004, a 100 basis point change in
the applicable interest rates would increase or decrease Aprias annual cash flow and
pretax earnings by approximately $1.3 million. See Managements Discussion and
Analysis of Financial Condition and Results of Operations  Long-term Debt 
Hedging Activities.

ITEM 4.     CONTROLS AND PROCEDURES

As of the end of the
period covered by this report, the company carried out an evaluation, under the
supervision and with the participation of the companys management, including the
companys Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of the companys disclosure controls and procedures.
Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the companys disclosure controls and procedures are effective in
timely alerting them to material information relating to the company that is required to
be included in the companys periodic Securities and Exchange Commission filings.

During the period covered
by this report, there have been no changes to the companys internal control over
financial reporting that have materially affected, or are reasonably likely to materially
affect, the companys internal control over financial reporting.

---

PART II  OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

As
previously reported, since mid-1998 Apria has been the subject of an investigation
conducted by the U.S. Attorneys office in Los Angeles and HHS. The investigation
concerns the documentation supporting Aprias billing for services provided to
patients whose healthcare costs are paid by Medicare and other federal programs. Apria is
cooperating with the government and has responded to various document requests and
subpoenas.

Apria
has been informed that the investigation is the result of civil qui tam litigation
filed on behalf of the government against Apria. The complaints in the litigation are
under seal, however, and the government has not informed Apria of either the identities of
the plaintiffs, the court or courts where the proceedings are pending, the date or dates
instituted or the factual bases alleged to underlie the proceedings. To date, the U.S.
Attorneys office has not informed Apria of any decision to intervene in the qui
tam actions; however, it could reach a decision with respect to intervention at any
time.

Government
representatives and counsel for the plaintiffs in the qui tam actions asserted in
July 2001 that, by a process of extrapolation from a sample of 300 patient files to all of
Aprias billings to the federal government during the three-and-one-half year sample
period, Apria could be liable to the government under the False Claims Act for more than
$9 billion, consisting of extrapolated overpayment liability, treble damages and penalties
of up to $10,000 for each allegedly false claim derived from the extrapolation.

Apria
has acknowledged that there may be errors and omissions in supporting documentation
affecting a portion of its billings. However, it considers the assertions and amounts
described in the preceding paragraph to be unsupported both legally and factually and
believes that most of the alleged documentation errors and omissions should not give rise
to any liability, for overpayment refunds or otherwise. Accordingly, Apria believes that
the claims asserted are unwarranted and that it is in a position to assert numerous
meritorious defenses.

Apria
has been exchanging information and having discussions with government representatives in
an attempt to explore whether it will be possible to resolve this matter on a basis that
would be considered fair and reasonable by all parties. Apria cannot provide any
assurances as to the outcome of these discussions, however, or as to the outcome of the
qui tam litigation in the absence of a settlement. Management cannot estimate the
possible loss or range of loss that may result from these proceedings and therefore has
not recorded any related accruals.

If
a judge, jury or administrative agency were to determine that false claims were submitted
to federal healthcare programs or that there were significant overpayments by the
government, Apria could face civil and administrative claims for refunds, sanctions and
penalties for amounts that would be highly material to its business, results of operations
and financial condition, including the exclusion of Apria from participation in federal
healthcare programs.

Apria
is also engaged in the defense of certain claims and lawsuits arising out of the ordinary
course and conduct of its business, the outcomes of which are not determinable at this
time. Apria has insurance policies covering such potential losses where such coverage is
cost effective. In the opinion of management, any liability that might be incurred by
Apria upon the resolution of these claims and lawsuits will not, in the aggregate, have a
material adverse effect on Aprias results of operations or financial condition.

---

ITEM 2.     CHANGES IN SECURITIES,
USE OF PROCEEDS AND ISSUER PURCHASES OF     
            
 EQUITY SECURITIES

ISSUER PURCHASES OF EQUITY SECURITIES

|Period                   | (a) TotalNumber ofSharesPurchased | (b) AveragePrice Paidper Share | (c) Total Numberof SharesPurchased as Part
of PubliclyAnnounced Plansor Programs | (d)Approximate DollarValue of Shares that May Yet Be
Purchased Under thePlans or Programs
|------------------------ | --------------------------------- | ------------------------------ | -------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------
|
|April 1 through 30, 2004 |                                   | 126,803                        |                                                                                  |                                                                                          
|May 1 through 31, 2004   |                                   | -                              |                                                                                  |                                                                                          
|June 1 through 30, 2004  |                                   | -                              |                                                                                  |                                                                                          
|                         |                                   |                                |                                                                                  |                                                                                          
|Total                    |                                   | 126,803                        |                                                                                  |                                                                                          
|                         |                                   |                                |                                                                                  |                                                                                          

In October 2003,
Apria announced that its Board of Directors authorized up to $100 million worth of common stock repurchases
through December 31, 2004. On January 16, 2004, Apria prepaid $50 million to repurchase
1,730,703 shares of its common stock through an accelerated share repurchase program. The
related contract, which had a scheduled settlement date of June 16, 2004, provided for
cash or net share settlement at Aprias election. During the first quarter of 2004,
1,603,900 shares had been purchased on the open market. The repurchase of the remaining
126,803 shares required by the contract was effected in April 2004. The share price
differential was settled in cash in June 2004. The total cost of the shares repurchased
under the accelerated share repurchase program was $53 million, thereby leaving $47
million remaining under the original Board authorization.

ITEM 4.    SUBMISSION OF MATTER TO A VOTE OF SECURITY
HOLDERS

| |           |                                                                                                                                                                                                                                                                                                                                                          
| | --------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)(b)(c) | Annual Meeting of Stockholders of the
company on April 21, 2004.Directors reelected at the Annual Meeting
for a term of one year:Vicente Anido, Jr.I.T. CorleyDavid L. Goldsmith
Lawrence M. HigbyRichard H. KoppesPhilip R. Lochner, Jr.
Jeri L. LoseBeverly Benedict ThomasRalh V. WhitworthMatters Voted Upon at Annual Meeting:
Election of Directors
| |           | As of April 21, 2004, the company's Board of Directors consisted of
 nine members who will serve for one year or until the election and qualification
of their successors. The results of the stockholder voting were as follows:                                                                                                                        

| |                                                                                                                                                                           | FOR                                                                                               | WITHHOLD/ABSTENTIONS                                                                                  | BROKERNON-VOTES
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---------------
| | Vicente Anido, Jr.I.T. CorleyDavid L. Goldsmith
      Lawrence M. HigbyRichard H. KoppesPhilip R. Lochner, Jr.Jeri L. LoseBeverly
      Benedict ThomasRalph V. Whitworth | 46,741,04046,523,680
      43,711,15048,141,66446,519,20545,117,58146,519,20546,741,04046,741,040 | 1,432,403 1,649,763 4,462,293
           31,779 1,654,2383,055,862 1,654,238
      1,432,4031,432,403 | ------
     ---

---

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

|    |                                                                                                                                                                                                                                 |  |                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------
|(a) | Exhibits:                                                                                                                                                                                                                       |  |                                                                                                     
|    | ExhibitNumber10.1                                                                                                                                                                                                               |  | ReferenceExecutive Severance
Agreement dated April 23, 2004, between Registrant and Amin I. Khalifa.
|    | 10.2                                                                                                                                                                                                                            |  | Executive Severance
Agreement dated April 23, 2004, between Registrant and John J. McDowell.        
|    | 10.3                                                                                                                                                                                                                            |  | Executive Severance
Agreement dated April 23, 2004, between Registrant and Daniel J. Starck.        
|    | 31.1                                                                                                                                                                                                                            |  | Certification of Chief Executive Officer pursuant
to Securities Exchange Act Rule 13a-14(a).        
|    | 31.2                                                                                                                                                                                                                            |  | Certification of Chief Financial Officer pursuant
to Securities Exchange Act Rule 13a-14(a).        
|    | 32.1                                                                                                                                                                                                                            |  | Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350.                        
|    | 32.2                                                                                                                                                                                                                            |  | Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350.                        
|(b) | Reports on Form 8-K:
Apria furnished a Current Report on Form 8-K on April 22, 2004 pursuant to Items 7 and 12
to report the issuance of a press release announcing its financial results for the quarter ended
March 31, 2003.

---

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.

|               |                                                                                                                                     
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------
|               | APRIA HEALTHCARE GROUP INC.
Registrant                                                                                              
|August 6, 2004 | /s/ AMIN I. KHALIFA
Amin I. KhalifaExecutive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)