##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2007ORo

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
    of
    Incorporation or Organization)

33-0488566(I.R.S. Employer
    Identification Number)26220 Enterprise Court, Lake Forest, CA(Address of Principal
    Executive Offices)

92630(Zip Code)   Registrants telephone number:
    (949) 639-2000
   þ o
  non-accelerated Rule 12b-2
  þ o o
  Rule 12b-2 o þ




---



##### 



APRIA
    HEALTHCARE GROUP INC.
  FORM 10-Q
  For the
    period ended September 30, 2007
   
 PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements (unaudited)


4   Condensed Consolidated
    Balance Sheets


4   Condensed Consolidated
    Income Statements


5   Condensed Consolidated
    Statements of Cash Flows


6   Notes to Condensed
    Consolidated Financial Statements


7Item 2.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


18Item 3.

Quantitative and Qualitative Disclosures About
    Market Risk


27Item 4.

Controls and Procedures


28PART II. OTHER INFORMATIONItem 1.

Legal Proceedings


29Item 1A.

Risk Factors


29Item 2.

Unregistered Sale of Equity Securities and Use of
    Proceeds


30Item 3.

Defaults Upon Senior Securities


31Item 4.

Submission of Matters to a Vote of Security
    Holders


31Item 5.

Other Information


31Item 6.

Exhibits


31SIGNATURES


32EXHIBITSExhibit 10.1EXHIBIT 10.2EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2   2




---



##### Table of Contents



Cautionary statement for purposes of the Safe
    Harbor provisions of the Private Securities Litigation
    Reform Act of 1995: Form 10-K Form 10-Q,
  
    trends and developments affecting the collectibility of accounts
    receivable;
    government legislative and budget developments that could
    continue to affect reimbursement levels;
    potential reductions in reimbursement rates by government and
    third-party payors;
    the effectiveness of our operating systems and controls;
    healthcare reform and the effect of federal and state healthcare
    regulations;
    economic and political events, international conflicts and
    natural disasters;
    acquisition-related risks; and
    other factors described in our filings with the Securities and
    Exchange Commission. 3




---



##### Table of Contents



PART I 
    FINANCIAL INFORMATION
  ITEM 1.  FINANCIAL
    STATEMENTS
  APRIA
    HEALTHCARE GROUP INC.
  CONDENSED CONSOLIDATED BALANCE SHEETS
  September 30,


December 31,2007


2006(Unaudited)(Dollars in thousands,except share data)ASSETSCURRENT ASSETSCash and cash equivalents

$
19,606


$
14,657Accounts receivable, less allowance for doubtful accounts of
    $25,458 and $27,324 at September 30, 2007 and
    December 31, 2006, respectively


205,604



211,097Inventories, net


38,535



40,681Deferred income taxes


43,901



36,648Deferred expenses


22,664



22,712Prepaid expenses and other current assets


18,587



19,142TOTAL CURRENT ASSETS


348,897



344,937PATIENT SERVICE EQUIPMENT, less accumulated depreciation of
    $440,622 and $445,608 at September 30, 2007 and
    December 31, 2006, respectively


193,831



212,068PROPERTY, EQUIPMENT AND IMPROVEMENTS, net


68,965



52,975GOODWILL


538,879



539,187INTANGIBLE ASSETS, less accumulated amortization of $7,747 and
    $8,238 at September 30, 2007 and December 31, 2006,
    respectively


4,223



6,551DEFERRED DEBT ISSUANCE COSTS, net


3,279



4,612OTHER ASSETS


8,974



8,1661,167,048


$
1,168,496LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable

$
81,028


$
66,969Accrued payroll and related taxes and benefits


41,541



46,532Accrued insurance


12,394



10,977Income taxes payable


3,066



10,793Other accrued liabilities


32,957



33,827Deferred revenue


33,412



32,280Current portion of long-term debt


1,122



2,145TOTAL CURRENT LIABILITIES


205,520



203,523LONG-TERM DEBT, net of current portion


359,717



485,000DEFERRED INCOME TAXES


71,769



60,815INCOME TAXES PAYABLE AND OTHER NON-CURRENT LIABILITIES


35,233



8,727TOTAL LIABILITIES


672,239



758,065COMMITMENTS AND CONTINGENCIES (Note 10)STOCKHOLDERS EQUITYPreferred stock, $.001 par value: 10,000,000 shares
    authorized; none issued






Common stock, $.001 par value: 150,000,000 shares
    authorized; 60,740,025 and 59,762,307 shares issued at
    September 30, 2007 and December 31, 2006,
    respectively; 43,721,620 and 42,789,450 shares outstanding
    at September 30, 2007 and December 31, 2006,
    respectively


61



60Additional paid-in capital


510,967



482,123Treasury stock, at cost; 17,018,405 and 16,972,857 shares
    at September 30, 2007 and December 31, 2006,
    respectively


(430,958
)


(429,573
)Retained earnings


414,480



357,470Accumulated other comprehensive income


259



351TOTAL STOCKHOLDERS EQUITY


494,809



410,431$
1,167,048


$
1,168,496    4




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  CONDENSED CONSOLIDATED INCOME STATEMENTS
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006(Unaudited)(Dollars in thousands, except per share data)Net revenues:Fee for service/product arrangements

$
354,178


$
341,434


$
1,054,918


$
1,005,802Capitation arrangements


41,938



40,780



124,533



120,547TOTAL NET REVENUES


396,116



382,214



1,179,451



1,126,349Costs and expenses:Cost of net revenues:Product and supply costs


89,722



87,371



271,686



255,608Patient service equipment depreciation


27,468



28,100



82,735



85,548Respiratory therapy services


10,085



9,650



29,061



28,538Nursing services


2,378



2,090



6,744



6,497Other


4,147



3,883



12,854



10,847TOTAL COST OF NET REVENUES


133,800



131,094



403,080



387,038Provision for doubtful accounts


12,760



9,168



33,551



29,073Selling, distribution and administrative


210,985



202,661



626,971



598,706Amortization of intangible assets


630



1,082



2,328



4,024TOTAL COSTS AND EXPENSES


358,175



344,005



1,065,930



1,018,841OPERATING INCOME


37,941



38,209



113,521



107,508Interest expense


5,053



7,955



17,095



24,772Interest income


(823
)


(93
)


(2,038
)


(1,607
)INCOME BEFORE TAXES


33,711



30,347



98,464



84,343Income tax expense


12,442



11,041



37,221



30,456NET INCOME

$
21,269


$
19,306


$
61,243


$
53,887Basic net income per common share

$
0.49


$
0.45


$
1.41


$
1.27Diluted net income per common share

$
0.48


$
0.45


$
1.39


$
1.26    5




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months EndedSeptember 30,2007


2006(Unaudited)(Dollars in thousands)OPERATING ACTIVITIESNet income

$
61,243


$
53,887Items included in net income not requiring cash:Provision for doubtful accounts


33,551



29,073Depreciation and amortization


100,113



105,077Amortization of deferred debt issuance costs


1,335



1,310Deferred income taxes


4,277



21,931Share-based compensation


7,907



4,016(Gain) loss on disposition of assets and other


(462
)


20Excess tax benefits from share-based compensation


(4,018
)


Changes in operating assets and liabilitiesAccounts receivable


(28,059
)


(25,020
)Inventories, net


2,152



1,708Prepaid expenses and other assets


(53
)


3,624Accounts payable, exclusive of book-cash overdraft


7,997



6,605Accrued payroll and related taxes and benefits


(6,280
)


(13,658
)Income taxes payable


17,148



(325
)Deferred revenue, net of related expenses


1,179



Accrued expenses


1,256



1,689NET CASH PROVIDED BY OPERATING ACTIVITIES


199,286



189,937INVESTING ACTIVITIESPurchases of patient service equipment and property, equipment
    and improvements


(83,432
)


(90,717
)Proceeds from disposition of assets


76



722Cash received (paid) for acquisitions, including payments of
    deferred consideration


220



(7,794
)NET CASH USED IN INVESTING ACTIVITIES


(83,136
)


(97,789
)FINANCING ACTIVITIESProceeds from revolving credit facilities






14,800Payments on revolving credit facilities


(130,000
)


(109,800
)Payments on other long-term debt


(2,145
)


(5,228
)Change in book-cash overdraft included in accounts payable


34



(3,261
)Capitalized debt issuance costs






(1,119
)Excess tax benefits from share-based compensation


4,018



Issuances of common stock


16,892



3,213NET CASH USED IN FINANCING ACTIVITIES


(111,201
)


(101,395
)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


4,949



(9,247
)Cash and cash equivalents at beginning of period


14,657



23,304CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
19,606


$
14,057          6




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
  NOTE 1 
    BASIS OF
    PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING
    POLICIES  Basis of Presentation:
  Form 10-K
  Use of Accounting Estimates:
  Revenue Recognition and Concentration of Credit
    Risk:
  30-day
    and/or
 7




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Capitalized Software: No. 98-1,
  Clinical Expenses:
  Distribution Expenses:
  Sales and Certain Other Taxes:
  NOTE 2 
    RECENT
    ACCOUNTING PRONOUNCEMENTS      No. FIN 48-1, No. 48-1) No. 48-1 FSP 48-1 No. 48-1
   8




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    instrument-by-instrument
  NOTE 3 
    BUSINESS
    COMBINATIONS    NOTE 4 
    GOODWILL
    AND INTANGIBLE ASSETS        September 30, 2007


December 31, 2006Average


Gross








GrossLife in


Carrying


Accumulated


Net Book


Carrying


Accumulated


Net BookYears


Amount


Amortization


Value


Amount


Amortization


Value(Dollars in thousands)Covenants not to compete


5.0


$
11,970


$
(7,747
)

$
4,223


$
13,506


$
(7,313
)

$
6,193Customer lists


















1,283



(925
)


3585.0


$
11,970


$
(7,747
)

$
4,223


$
14,789


$
(8,238
)

$
6,551  9




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Year Ending December 31,

(Dollars in thousands)2007

$
2,9162008


2,0662009


1,2542010


315$
6,551   NOTE 5 
    LONG-TERM
    DEBT  Revolving Credit Facility:
  Convertible Senior Notes:
  Hedging Activities:
       10




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE 6 
    STOCKHOLDERS
    EQUITY    Net income

$
61,243Issuances of common stock (including non-cash issuances)


16,988Excess tax benefits from share-based compensation


4,018Tax shortfalls on share-based compensation


(69
)Restricted stock retained in treasury upon vesting


(1,385
)Share-based compensation


7,907Cumulative effect adjustment for FIN No. 48 adoption


(4,232
)Other comprehensive loss, net of taxes


(92
)$
84,378   non-cash
    NOTE 7 
    SHARE-BASED
    COMPENSATION       11




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Nine Months EndedSeptember 30,2007

2006Expected option term(1)

4.6 years

4.8 yearsExpected volatility(2)

29.9%

27.1%Risk-free interest rate(3)

4.6%

4.7%Expected annual dividend yield

0%

0%     (1)
    
    The expected option term is based on historical exercise and
    post-vesting termination patterns.(2)
    
    The expected volatility represents a combination of historical
    stock price volatility and implied volatility from
    publicly-traded options on Aprias common stock.(3)
    
    The risk-free interest rate is based on the implied yield on a
    U.S. Treasury zero coupon issue with a remaining term equal to
    the expected term of the option.  Stock Options:
    Weighted-AverageRemaining


AggregateWeighted-Average


Contractual Term


IntrinsicOptions


Exercise Price


(in Years)


ValueOutstanding at January 1, 2007


4,056,314


$
24.59Granted


726,830


$
31.30Exercised


(832,027
)

$
20.30Forfeited


(154,068
)

$
29.09Outstanding at September 30, 2007


3,797,049


$
26.65



6.55


$
7,055,243Vested or expected to vest as of September 30, 2007


3,565,476


$
26.62



6.39


$
6,726,332Exercisable at September 30, 2007


2,551,278


$
26.30



5.30


$
5,422,296       Restricted Stock Purchase Rights:
 12




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  and/or
    Restricted





Weighted-AverageStock





Remaining


AggregatePurchase


Weighted-Average


Contractual Term


IntrinsicRights


Exercise Price


(in Years)


ValueOutstanding at January 1, 2007


300,000


$
6.79Granted






Exercised


(23,000
)

$
6.46Forfeited






Outstanding at September 30, 2007


277,000


$
6.82



6.03


$
5,316,170Vested or expected to vest as of September 30, 2007


221,370


$
6.80



6.02


$
4,253,196Exercisable at September 30, 2007


8,000


$
6.46



5.87


$
156,400       Restricted Stock Awards and
    Units:
    Shares


Weighted-Averageor


Grant-DateShare Units


Fair ValueNonvested restricted stock awards and units at January 1,
    2007


486,922


$
27.16Granted


392,710


$
30.12Vested and released


(113,691
)

$
25.04Forfeited


(60,570
)

$
27.13Nonvested restricted stock awards and units at
    September 30, 2007


705,371


$
29.15    13




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    NOTE 8 
    INCOME
    TAXES  Income Tax Expense.
        Balance at January 1, 2007 (included in Income Taxes
    Payable and Other Non-Current Liabilities)

$
17,687Balance at January 1, 2007 (included in Deferred Income
    Taxes)


10,029Total gross unrecognized tax benefits at January 1, 2007


27,716Additions for tax positions related to the current year


2,577Additions for tax positions related to prior years


3,323Reductions for tax positions related to prior years


(677
)Settlements


(1,231
)Reductions due to lapse in statute of limitations


(551
)Total gross unrecognized tax benefits at September 30, 2007

$
31,157   and/or
    
    Gross increase of $2,691,000 (net $2,573,000) related to the
    timing uncertainty for when certain deductions should be
    recognized for tax return purposes. This uncertainty is subject
    to review by taxing agencies. 14




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
   
    Gross increase of $1,454,000 (net $888,000) for interest and
    penalties primarily related to other tax uncertainties taken in
    prior years. The increase is an annual expense which will be
    accrued until related tax uncertainties are extinguished through
    such means as audit settlements, payment, or the expiration of
    statutes of limitations.
    Gross decrease of $3,809,000 (net $2,449,000) related to state
    tax uncertainties. Ultimate realization of this decrease is
    dependent upon the occurrence of certain events (including the
    expiration of the statutes of limitations).  and/or
    NOTE 9 
    PER SHARE
    AMOUNTS    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006(In thousands, except per share data)Numerator:Net income

$
21,269


$
19,306


$
61,243


$
53,887Numerator for basic and diluted per share amounts 
    net income available to common stockholders

$
21,269


$
19,306


$
61,243


$
53,887Denominator:Denominator for basic per share amounts  weighted
    average shares


43,715



42,436



43,492



42,407Effect of dilutive securities:Employee stock options and awards  dilutive potential
    common shares


448



351



636



436Denominator for diluted per share amounts  adjusted
    weighted average shares


44,163



42,787



44,128



42,843Basic net income per common share

$
0.49


$
0.45


$
1.41


$
1.27Diluted net income per common share

$
0.48


$
0.45


$
1.39


$
1.26Employee stock options excluded from the computation of diluted
    per share amounts:Shares for which exercise price exceeds average market price of
    common stock


1,557



3,649



1,513



3,574Average exercise price per share that exceeds average market
    price of common stock

$
31.76


$
26.18


$
31.86


$
26.32  15




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE 10 
    COMMITMENTS
    AND CONTINGENCIES  Litigation:
  Medicare Reimbursement:
  Supplier Concentration:
  Guarantees and Indemnities:
   16




---



##### Table of Contents



APRIA
    HEALTHCARE GROUP INC.
  NOTES TO
    UNAUDITED CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE 11 
    PENDING
    ACQUISITION OF CORAM, INC.   17




---



##### Table of Contents



ITEM 2.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  This Managements Discussion and Analysis of Financial
    Condition and Results of Operations is intended to assist in
    understanding and assessing the trends and significant changes
    in our results of operations and financial condition. Historical
    results may not indicate future performance. Our forward-looking
    statements reflect our current views about future events, are
    based on assumptions and are subject to known and unknown risks
    and uncertainties that could cause actual results to differ
    materially from those contemplated by these statements. Factors
    that may cause differences between actual results and those
    contemplated by forward-looking statements include, but are not
    limited to, those discussed in Part II, Item 1A,
    Risk Factors, of this quarterly report. As used in
    this Managements Discussion and Analysis of Financial
    Condition and Results of Operations, the words, we,
    our and us refer to Apria Healthcare
    Group Inc. and its consolidated subsidiaries. This
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations should be read in conjunction with our
    consolidated financial statements and related notes included in
    this report.
    Strategy.
  
    achieve strong sales growth;
    leverage our nationwide infrastructure to reduce costs and
    expand profits;
    deliver superior customer service; and
    attract, develop and advance leaders within the company.  Recent Events.
  Critical Accounting Policies. Form 10-K
  Government Reimbursement Update.
 18




---



##### Table of Contents



19




---



##### Table of Contents



36-month
  ®
     20




---



##### Table of Contents



® 1
    Form 10-K
  Results
    of Operations
  Net Revenues and Gross Margin.
      1 ®
 21




---



##### Table of Contents



Three Months Ended September 30,


Nine Months Ended September 30,2007


2006


2007


2006$


%


$


%


$


%


$


%(Dollars in thousands)Respiratory therapy


270,231



68.2
%

$
258,134



67.5
%


807,942



68.5
%

$
767,571



68.2
%Infusion therapy


73,201



18.5
%


69,980



18.3
%


214,468



18.2
%


202,983



18.0
%Home medical equipment/other


52,684



13.3
%


54,100



14.2
%


157,041



13.3
%


155,795



13.8
%Total net revenues


396,116



100.0
%

$
382,214



100.0
%


1,179,451



100.0
%

$
1,126,349



100.0
%   Respiratory Therapy.
  Infusion Therapy.
  Home Medical Equipment/Other.
  Provision for Doubtful Accounts.
  Selling, Distribution and
    Administrative.
 22




---



##### Table of Contents



Amortization of Intangible
    Assets.
  Interest Expense and Income.
  Income Tax Expense.
   23




---



##### Table of Contents



Inflation.
  Liquidity
    and Capital Resources
      Cash Flow. gross-up
     24




---



##### Table of Contents



Contractual Cash Obligations. 12-month
  Less than


1-3


3-5


More than1 Yr.


Yrs.


Yrs.


5 Yrs.


Totals(Dollars in millions)Revolving loan(1)

$



$



$
105


$



$
105Convertible senior notes
    (33/8%)(2)














250



250Interest on convertible senior notes(3)


9



16



17



169



211Operating leases


61



100



55



23



239Software licenses and related maintenance


2



3



2







7Unrecognized tax benefits under FIN No. 48(4)


1















1Total contractual cash obligations

$
73


$
119


$
179


$
442


$
813     (1)
    
    Interest on outstanding borrowings is payable quarterly. The
    effective interest rate at September 30, 2007 was 5.9%.(2)
    
    The holders of the convertible senior notes will first have the
    option to require us to repurchase all or a portion of their
    notes in September 2008.(3)
    
    Interest on these notes is paid bi-annually in March and
    September. Unless the notes are earlier converted, redeemed or
    repurchased, such interest payments will total $8.4 million
    annually until the notes mature in 2033. Amounts presented above
    assume notes are not earlier converted, redeemed or repurchased.(4)
    
    The contractual obligations table only reflects future cash
    settlements for which we can make a reliable estimate with
    respect to the timing of cash payment for our liability for
    unrecognized tax benefits under FIN No. 48. Current gross
    unrecognized tax benefits of $805,000 are included within
    Income Taxes Payable in the current liabilities
    section of our balance sheet. We cannot make a reliable estimate
    of the timing of cash payments for the majority of our liability
    for unrecognized tax benefits; therefore, we have excluded those
    amounts from the contractual obligations table. See Note 8
    to the Unaudited Condensed Consolidated Financial Statements for
    further discussion on the companys liability for
    unrecognized tax benefits under FIN No. 48.  Accounts Receivable. 90-day
 25




---



##### Table of Contents



September 30,


December 31,2007


2006Medicare


22.3
%


19.2
%Medicaid


30.0
%


28.6
%Self pay


29.9
%


36.5
%Managed care/other


20.7
%


19.1
%Total


21.3
%


19.8
%   Unbilled Receivables.
  Inventories and Patient Service
    Equipment.
    Long-term Debt.
  Convertible Senior Notes.
  Hedging Activities.
   26




---



##### Table of Contents



Treasury Stock.
  Business Combinations.
    Off-Balance
    Sheet Arrangements
    ITEM 3.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK         27




---



##### Table of Contents



ITEM 4.
    CONTROLS
    AND PROCEDURES  Disclosure Controls and Procedures.
  Changes in Internal Control Over Financial
    Reporting.
 28




---



##### Table of Contents



PART II 
    OTHER INFORMATION
  ITEM 1.
    LEGAL
    PROCEEDINGS    ITEM 1A.  RISK
    FACTORS
  Form 10-K
  Medicare/Medicaid
    Reimbursement Rates  Continued reductions in Medicare
    and Medicaid reimbursement rates could have a material adverse
    effect on our results of operations and
    financial condition.
  Medicare Reimbursement
    Reductions.
    Medicaid Reimbursement Reductions.
 29




---



##### Table of Contents



Form 10-Q.
  Our
    strategic growth plan, which involves the acquisition of other
    companies, may not succeed.
    
    difficulties related to combining previously separate businesses
    into a single unit, including product and service offerings,
    distribution and operational capabilities and business cultures;
    customer loss and other general business disruption;
    managing the integration process while completing other
    independent acquisitions or dispositions;
    minimizing the diversion of managements attention from
    day-to-day operations;
    assumption of liabilities of an acquired business, including
    unforeseen or contingent liabilities or liabilities in excess of
    the amounts estimated;
    failure to realize anticipated benefits and synergies, such as
    cost savings and revenue enhancements;
    potentially substantial costs and expenses associated with
    acquisitions and dispositions;
    failure to retain and motivate key employees;
    coordinating research and development activities to enhance the
    introduction of new products and services;
    dilution of existing stockholders and convertible note holders
    due to the issuance of equity securities, utilization of cash
    reserves, or incurrence of debt in order to fund the
    acquisitions; and
    difficulties in applying our internal control over financial
    reporting and disclosure controls and procedures to an acquired
    business.  We may
    not realize benefits from the acquisition of Coram, Inc. because
    of integration and other challenges.
    ITEM 2.
    UNREGISTERED
    SALE OF EQUITY SECURITIES AND USE OF PROCEEDS   30




---



##### Table of Contents



ITEM 3.
    DEFAULTS
    UPON SENIOR SECURITIES    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS    ITEM 5.
    OTHER
    INFORMATION    ITEM 6.
    EXHIBITS  ExhibitNumber

Reference10
.1#

Amended and Restated Executive Severance Agreement between the
    Registrant and William E. Monast, dated as of November 1,
    2007.10
.2#

Noncompetition Agreement between the Registrant and William E.
    Monast, dated as of November 1, 2007.31
.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.   #
    Management contract or compensatory plan or arrangement. 31




---



##### Table of Contents



SIGNATURES
    APRIA HEALTHCARE GROUP INC.
   /s/  CHRIS
    A. KARKENNY       PETER
    A. REYNOLDS
     32




---



##### Table of Contents



EXHIBIT
    INDEX
  ExhibitNumber

Reference10
.1#

Amended and Restated Executive Severance Agreement between the
    Registrant and William E. Monast, dated as of November 1,
    2007.10
.2#

Noncompetition Agreement between the Registrant and William E.
    Monast, dated as of November 1, 2007.31
.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.   #
    Management contract or compensatory plan or arrangement.