UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                       For the period ended June 30, 2002

                                       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                                  33-0488566
(State or other jurisdiction of                  (I.R.S. Employer
 incorporation or organization)                Identification Number)


26220 ENTERPRISE COURT, LAKE FOREST, CA                92630
(Address of principal executive offices)            (Zip Code)

       Registrant's telephone number, including area code: (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

There were 54,700,148  shares of common stock,  $.001 par value,  outstanding at
August 9, 2002.
<PAGE>

                           APRIA HEALTHCARE GROUP INC.

                                    FORM 10-Q

                       FOR THE PERIOD ENDED JUNE 30, 2002






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 of
              Financial Condition and Results of Operations

Item 3.       Quantitative and Qualitative Disclosures About Market Risk


PART II. OTHER INFORMATION
--------------------------

Item 1.       Legal Proceedings

Item 2.       Changes in Securities

Item 3.       Defaults Upon Senior Securities

Item 4.       Submission of Matters to a Vote of Security Holders

Item 5.       Other Information

Item 6.       Exhibits and Reports on Form 8-K


SIGNATURES
----------
<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
                           APRIA HEALTHCARE GROUP INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (unaudited)
<CAPTION>
                                                                                JUNE 30,   DECEMBER 31,
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)                                         2002         2001
-------------------------------------------------------------------------------------------------------
                                     ASSETS

CURRENT ASSETS
<S>                                                                            <C>          <C>
  Cash and cash equivalents ...............................................    $  17,114    $   9,359
  Accounts receivable, less allowance for doubtful accounts of $32,068
    and $32,073 at June 30, 2002 and December 31, 2001, respectively ......      176,976      162,092
  Inventories, net ........................................................       23,737       25,084
  Deferred income taxes ...................................................       30,073       33,017
  Prepaid expenses and other current assets ...............................       10,743       10,271
                                                                               ---------    ---------
          TOTAL CURRENT ASSETS ............................................      258,643      239,823

PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $358,604
  and $342,010 at June 30, 2002 and December 31, 2001, respectively .......      168,859      165,471
PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET .................................       52,325       47,312
DEFERRED INCOME TAXES .....................................................       19,893       37,838
GOODWILL, NET .............................................................      208,469      193,458
INTANGIBLE ASSETS, NET ....................................................        4,565        4,863
OTHER ASSETS ..............................................................        6,981        7,017
                                                                               ---------    ---------
                                                                               $ 719,735    $ 695,782
                                                                               =========    =========

                            LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable ........................................................    $  55,045    $  71,198
  Accrued payroll and related taxes and benefits ..........................       30,138       33,907
  Accrued insurance .......................................................       11,762       10,376
  Income taxes payable ....................................................        9,856        9,060
  Other accrued liabilities ...............................................       33,837       34,754
  Current portion of long-term debt .......................................       28,053       15,455
                                                                               ---------    ---------
          TOTAL CURRENT LIABILITIES .......................................      168,691      174,750

LONG-TERM DEBT, net of current portion ....................................      261,503      278,234

COMMITMENTS AND CONTINGENCIES (Note I)

STOCKHOLDERS' EQUITY
  Preferred stock, $.001 par value:  10,000,000 shares authorized;
    none issued ...........................................................            -            -
  Common stock, $.001 par value:  150,000,000 shares authorized;
    55,967,018 and 54,690,267 shares issued at June 30, 2002 and
    December 31, 2001, respectively; 54,876,118 and 54,604,167
    outstanding at June 30, 2002 and December 31, 2001, respectively ......           56           55
  Additional paid-in capital ..............................................      387,877      368,231
  Treasury stock, at cost; 1,090,900 and 86,100 shares at June 30, 2002
    and December 31, 2001, respectively ...................................      (22,741)        (961)
  Accumulated deficit .....................................................      (75,401)    (124,554)
  Accumulated other comprehensive (loss) income ...........................         (250)          27
                                                                               ---------    ---------
                                                                                 289,541      242,798
                                                                               ---------    ---------
                                                                               $ 719,735    $ 695,782
                                                                               =========    =========


See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>

                           APRIA HEALTHCARE GROUP INC.

                    CONDENSED CONSOLIDATED INCOME STATEMENTS
                                   (unaudited)


                                                        THREE MONTHS ENDED          SIX MONTHS ENDED
                                                             JUNE 30,                   JUNE 30,
                                                        -------------------       -------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)             2002       2001           2002       2001
-----------------------------------------------------------------------------------------------------

<S>                                                     <C>        <C>            <C>        <C>
Net revenues ....................................       $310,425   $283,480       $611,770   $554,834
Costs and expenses:
   Cost of net revenues:
      Product and supply costs ..................         56,751     49,775        111,913    101,702
      Patient service equipment depreciation ....         24,425     22,477         47,842     43,441
      Nursing services ..........................            228        306            499        660
      Other .....................................          3,079      3,017          6,348      6,050
                                                        --------   --------       --------   --------
          TOTAL COST OF NET REVENUES ............         84,483     75,575        166,602    151,853

   Selling, distribution and administrative .....        167,913    158,097        334,021    306,491
   Provision for doubtful accounts ..............         11,547     11,069         23,058     19,219
   Amortization of goodwill and intangible assets            665      3,126          1,336      5,962
                                                        --------   --------       --------   --------
          TOTAL COSTS AND EXPENSES ..............        264,608    247,867        525,017    483,525
                                                        --------   --------       --------   --------
          OPERATING INCOME ......................         45,817     35,613         86,753     71,309
Interest expense, net ...........................          3,965      8,027          8,109     16,435
                                                        --------   --------       --------   --------
          INCOME BEFORE TAXES ...................         41,852     27,586         78,644     54,874
Income tax expense ..............................         15,694     10,339         29,491     20,551
                                                        --------   --------       --------   --------
          NET INCOME ............................       $ 26,158   $ 17,247       $ 49,153   $ 34,323
                                                        ========   ========       ========   ========


   Basic net income per common share ............       $   0.48   $   0.32       $   0.90   $   0.64
                                                        ========   ========       ========   ========
   Diluted net income per common share ..........       $   0.47   $   0.31       $   0.89   $   0.62
                                                        ========   ========       ========   ========


See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                           APRIA HEALTHCARE GROUP INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<CAPTION>

                                                                                      SIX MONTHS ENDED
                                                                                          JUNE 30,
                                                                                   ----------------------
(DOLLARS IN THOUSANDS)                                                                2002         2001
---------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                                                <C>          <C>
  Net income ...................................................................   $  49,153    $  34,323
  Items included in net income not requiring cash:
     Provision for doubtful accounts ...........................................      23,058       19,219
     Depreciation and amortization .............................................      57,351       57,022
     Amortization of deferred debt issuance costs ..............................         644        1,176
     Deferred income taxes and other ...........................................      21,879       18,817
  Changes  in  operating  assets  and  liabilities, exclusive
    of  effects  of acquisitions:
     Accounts receivable .......................................................     (38,252)     (30,772)
     Inventories, net ..........................................................       1,439          (56)
     Prepaid expenses and other assets .........................................        (657)      (2,160)
     Accounts payable, exclusive of outstanding checks .........................      (8,928)       1,574
     Accrued payroll and related taxes and benefits ............................      (3,769)         500
     Income taxes payable ......................................................       8,125          324
     Accrued expenses ..........................................................      (2,304)       1,221
                                                                                   ---------    ---------
          NET CASH PROVIDED BY OPERATING ACTIVITIES ............................     107,739      101,188

INVESTING ACTIVITIES
  Purchases of patient service equipment and property,
     equipment and improvements, exclusive of effects of acquisitions ..........     (57,105)     (66,903)
  Proceeds from disposition of assets ..........................................         144          202
  Cash paid for acquisitions, including payments of deferred consideration .....     (15,689)     (35,038)
                                                                                   ---------    ---------
          NET CASH USED IN INVESTING ACTIVITIES ................................     (72,650)    (101,739)

FINANCING ACTIVITIES
  Proceeds from revolving credit facilities ....................................     120,700       29,300
  Payments on revolving credit facilities ......................................    (128,500)     (29,300)
  Payments on term loans .......................................................        (875)           -
  Payments on other long-term debt .............................................      (1,481)        (872)
  Outstanding checks included in accounts payable ..............................      (7,225)        (339)
  Capitalized debt issuance costs, net .........................................        (659)           -
  Repurchases of common stock ..................................................     (21,780)           -
  Issuances of common stock ....................................................      12,486       11,530
                                                                                   ---------    ---------
          NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES ..................     (27,334)      10,319
                                                                                   ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ......................................       7,755        9,768
Cash and cash equivalents at beginning of period ...............................       9,359       16,864
                                                                                   ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .....................................   $  17,114    $  26,632
                                                                                   =========    =========


See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
                           APRIA HEALTHCARE GROUP INC.

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE A - 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, 2001, included in the company's 2001 Form 10-K.


NOTE B - RECLASSIFICATIONS, ACCOUNTING ESTIMATES AND RECENT ACCOUNTING
         PRONOUNCEMENTS

Reclassifications:  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 assumptions that affect the amounts reported
in the financial  statements and accompanying notes. Actual results could differ
from those estimates.

Recent  Accounting  Pronouncements:  Effective  January 1, 2002,  Apria  adopted
Statement of Financial  Accounting  Standards  ("SFAS") No. 142,  "Goodwill  and
Other Intangible  Assets" in its entirety.  SFAS No. 142 addresses the financial
accounting and reporting for goodwill and other intangible assets. The statement
provides that goodwill or other intangible  assets with indefinite lives will no
longer be  amortized,  but  shall be tested  for  impairment  annually,  or more
frequently  if  circumstances  indicate  potential  impairment.  The  effect  of
adoption of SFAS No. 142 on the  consolidated  financial  statements is shown in
Note E - Goodwill and Intangible Assets.

Effective January 1, 2002, Apria was required to adopt SFAS No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets." This statement  supercedes
SFAS No.  121  "Accounting  for the  Impairment  of  Long-Lived  Assets  and for
Long-Lived  Assets to be Disposed Of" and amends other  guidance  related to the
accounting  and reporting of long-lived  assets.  SFAS No. 144 requires that one
accounting  model be used  for  long-lived  assets  to be  disposed  of by sale.
Discontinued  operations will be measured  similarly to other long-lived  assets
classified  as held for sale at the lower of its  carrying  amount or fair value
less cost to sell.  Future operating losses will no longer be recognized  before
they  occur.  SFAS No.  144  also  broadens  the  presentation  of  discontinued
operations  to include a component of an entity when  operations  and cash flows
can be clearly  distinguished,  and  establishes  criteria to  determine  when a
long-lived  asset is held for sale.  Adoption of this  statement  did not have a
material effect on Apria's consolidated financial statements.


NOTE C - REVENUE RECOGNITION AND CONCENTRATION OF CREDIT RISK

Net  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 33% 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  various  analyses to evaluate the net realizable  value of
accounts receivable.  Specifically,  management considers historical realization
data,  accounts  receivable  aging trends,  other operating  trends and relevant
business  conditions.  Management also performs focused reviews of certain large
and/or  problematic  payors.  Because of  continuing  changes in the  healthcare
industry and third-party  reimbursement,  management's estimates may change from
time to time, which could have a material 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.


NOTE D - BUSINESS COMBINATIONS

Apria periodically  makes  acquisitions of complementary  businesses in specific
geographic  markets.  The  transactions  are  accounted for as purchases and the
results of operations of the acquired companies are included in the accompanying
consolidated  income  statements  from  the  date  of  acquisition.  During  the
six-month   period  ended  June  30,  2002,  cash  paid  for   acquisitions  was
$15,689,000,  which included amounts deferred from prior years of $1,212,000. At
June 30, 2002, outstanding deferred consideration totaled $5,820,000.

For the acquisitions  that were completed during the six-month period ended June
30, 2002, $15,750,000 was allocated to goodwill, including amounts not yet paid,
$581,000 to intangible assets and $1,725,000 to patient service equipment.


NOTE E - GOODWILL AND INTANGIBLE ASSETS

In July  2001,  Apria  adopted  SFAS No.  141,  "Business  Combinations",  which
requires  that the  purchase  method of  accounting  be applied to all  business
combinations completed after June 30, 2001 and which also addresses the criteria
for initial recognition of intangible assets and goodwill.  Effective January 1,
2002, the company adopted SFAS No. 142, "Goodwill and Other Intangible  Assets",
in its entirety.  SFAS No. 142 addresses the financial  accounting and reporting
for goodwill and other intangible  assets.  The statement provides that goodwill
and other  intangible  assets with indefinite lives will no longer be amortized,
but shall be tested for impairment annually, or more frequently if circumstances
indicate  potential  impairment.  If  the  carrying  value  of  goodwill  or  an
intangible asset exceeds its fair value, an impairment loss shall be recognized.

In the year of adoption,  SFAS No. 142  requires  that a  transitional  goodwill
impairment  test be  performed  and  that  the  results  be  measured  as of the
beginning of the year.  The test is  conducted  at a "reporting  unit" level and
compares each reporting unit's fair value to its carrying value. The company has
determined  that its geographic  regions are reporting units under SFAS No. 142.
The  measurement  of fair value for each  region was based on an  evaluation  of
future discounted cash flows and was further tested using a multiple of earnings
approach.  The transitional  test,  which has been completed,  indicated that no
impairment exists and, accordingly, no loss was recognized.

In conjunction with the  transitional  impairment test and based on the criteria
established  in SFAS No.  141,  management  reviewed  the  useful  lives and the
amounts  previously  recorded  for  intangible  assets  and  determined  that no
adjustments were necessary.
<PAGE>
The following table sets forth the reconciliation of net income and earnings per
share as adjusted for the non-amortization provisions of SFAS No. 142:
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED            SIX MONTHS ENDED
                                                      JUNE 30,                      JUNE 30,
                                               -----------------------      -----------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)             2002         2001             2002        2001
---------------------------------------------------------------------------------------------------

<S>                                            <C>          <C>             <C>          <C>
Reported net income ........................   $   26,158   $   17,247      $   49,153   $   34,323
Add:  goodwill amortization, net of taxes...            -        1,556               -        2,940
                                               ----------   ----------      ----------   ----------
Adjusted net income ........................   $   26,158   $   18,803      $   49,153   $   37,263
                                               ==========   ==========      ==========   ==========

BASIC INCOME PER COMMON SHARE:
     Reported net income ...................   $     0.48   $     0.32      $     0.90   $     0.64
     Goodwill amortization, net of taxes....            -         0.03               -         0.06
                                               ----------   ----------      ----------   ----------
     Adjusted net income ...................   $     0.48   $     0.35      $     0.90   $     0.70
                                               ==========   ==========      ==========   ==========

DILUTED INCOME PER COMMON SHARE:
     Reported net income ...................   $     0.47   $     0.31      $     0.89   $     0.62
     Goodwill amortization, net of taxes....            -         0.03               -         0.05
                                               ----------   ----------      ----------   ----------
     Adjusted net income ...................   $     0.47   $     0.34      $     0.89   $     0.67
                                               ==========   ==========      ==========   ==========
</TABLE>


Goodwill and intangible assets consist of the following:
<TABLE>
<CAPTION>
                                                                                           JUNE 30,    DECEMBER 31,
(DOLLARS IN THOUSANDS)                                                                      2002          2001
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                       <C>           <C>
Goodwill from business combinations completed on or before June 30, 2001.............     $203,077      $203,077
Less accumulated amortization........................................................      (48,490)      (48,490)
                                                                                          --------      --------
                                                                                           154,587       154,587
Goodwill from business combinations completed after June 30, 2001....................       53,882        38,871
                                                                                          --------      --------
                                                                                          $208,469      $193,458
                                                                                          ========      ========


Intangible assets subject to amortization, comprised of covenants not to compete.....     $ 17,023      $ 16,180
Less accumulated amortization........................................................      (12,458)      (11,317)
                                                                                          --------      --------
                                                                                          $  4,565      $  4,863
                                                                                          ========      ========
</TABLE>
For the six months ended June 30, 2002, the net change in the carrying amount of
goodwill  of  $15,011,000  is the result of  business  combinations.  All of the
goodwill recorded in conjunction with business combinations completed after June
30, 2001 is expected to be deductible for tax purposes.
<PAGE>
Covenants not to compete relating to business combinations  completed after June
30, 2001 have a weighted-average life of 4.9 years. Amortization expense related
to the covenants  amounts to $1,336,000  for the six months ended June 30, 2002.
Estimated  amortization expense for each of the fiscal years ending December 31,
is presented below:

                                                       FOR THE YEAR ENDING
   (DOLLARS IN THOUSANDS)                                  DECEMBER 31,
   -----------------------------------------------------------------------
       2002.......................................          $ 2,303
       2003.......................................            1,597
       2004.......................................            1,148
       2005.......................................              523
       2006.......................................              303
       2007.......................................               27


NOTE F - LONG-TERM DEBT

Apria's  credit  agreement  with Bank of America and a syndicate  of lenders was
amended and restated effective June 7, 2002. The amendment extended the maturity
date,  reduced the  applicable  interest rate margins and modified the repayment
schedule for the company's $175,000,000 six-year term loan. The term loan, which
was amended to mature in seven years,  had a balance of $173,687,500 at June 30,
2002. It is now repayable in 21 remaining consecutive quarterly  installments of
$437,500  each,  followed  by  three  consecutive   quarterly   installments  of
$41,125,000 each, and a final payment of $41,125,000 due on July 20, 2008.

Interest rates on outstanding balances under the credit agreement are determined
by adding a margin to the  Eurodollar  or base rate  existing  at each  interest
calculation date.  Applicable  margins for the seven-year term loan were lowered
and are currently  fixed at 2.0% for Eurodollar  loans and at 1.0% for base rate
loans.

At June 30, 2002,  there were no borrowings under the revolving credit facility,
outstanding  letters of credit  totaled  $100,000,  credit  available  under the
revolving facility was $99,900,000,  and Apria was in compliance with all of the
financial covenants required by the credit agreement.


NOTE G - STOCKHOLDERS' EQUITY

For the six months  ended June 30,  2002,  changes to  stockholders'  equity are
comprised of the following amounts:

    (DOLLARS IN THOUSANDS)
    ------------------------------------------------------------------------
     Net income...............................................     $ 49,153
     Proceeds from the exercise of stock options..............       12,486
     Tax benefit related to the exercise of stock options.....        7,161
     Other comprehensive loss, net of taxes...................         (277)
     Repurchased common shares held in treasury...............      (21,780)
                                                                   --------
                                                                   $ 46,743
                                                                   ========

For the six months  ended June 30,  2002,  net income and  comprehensive  income
differed by $277,000 which is attributable to unrealized  losses on two interest
rate  swap  agreements.   There  was  no  difference   between  net  income  and
comprehensive income for the same period of the previous year.

Apria plans to  repurchase up to  $35,000,000  worth of its  outstanding  common
stock  during this  calendar  year.  Depending  on market  conditions  and other
factors,  repurchases will be made in open market transactions over the next two
quarters.  The company repurchased 1,004,800 shares for $21,780,000,  during the
six-month period ended June 30, 2002.


NOTE H - INCOME TAXES

Income taxes for the six months ended June 30, 2002 and 2001 have been  provided
at the effective tax rates expected to be applicable for the respective year.

At December 31, 2001,  Apria had federal net  operating  loss  carryforwards  of
approximately $89,000,000, expiring in varying amounts in the years 2003 through
2018, and various state net operating loss carryforwards that began to expire in
1997.   Additionally,   the  company  has  an  alternative  minimum  tax  credit
carryforward of approximately  $7,600,000. As a result of an ownership change in
1992 that met  specified  criteria of Section 382 of the Internal  Revenue Code,
future use of a portion of the federal and state  operating  loss  carryforwards
generated prior to 1992 are each limited to  approximately  $5,000,000 per year.
Because of the annual limitation,  approximately  $57,000,000 of each of Apria's
federal  and state  operating  loss  carryforwards  may expire  unused.  The net
operating loss  carryforward  amount in the related  deferred tax asset excludes
such amount.  In 2002, for federal tax purposes,  the company expects to utilize
its entire net operating loss carryforward amount not subject to limitation.


NOTE I - COMMITMENTS AND CONTINGENCIES

Apria and  certain of its  present  and former  officers  and/or  directors  are
defendants in a class action lawsuit,  In Re Apria  Healthcare  Group Securities
Litigation,  filed  in the U.S.  District  Court  for the  Central  District  of
California,   Southern  Division  (Case  No.SACV98-217  GLT).  This  case  is  a
consolidation of three similar class actions filed in March and April, 1998. The
consolidated  amended  class action  complaint  purports to establish a class of
plaintiff  shareholders who purchased  Apria's common stock between May 22, 1995
and January 20, 1998.  No class has been  certified at this time.  The complaint
alleges,  among other things,  that the defendants made false and/or  misleading
public  statements  regarding Apria and its financial  condition in violation of
federal  securities laws. The complaint seeks  compensatory and punitive damages
as well as other relief.

Two similar class actions were filed during July 1998 in the Superior  Court for
the State of  California  for the County of Orange:  Schall v. Apria  Healthcare
Group Inc.,  et al.  (Case No.  797060) and Thompson v. Apria  Healthcare  Group
Inc., et al. (Case No. 797580).  These two actions were  consolidated by a court
order dated  October 22, 1998 (Master Case No.  797060).  On June 14, 1999,  the
plaintiffs filed a consolidated  amended class action complaint asserting claims
founded on state law and on Sections 11 and 12(2) of the 1933 Securities Act.

Following a series of settlement discussions,  the parties reached in early 2002
a tentative  agreement to settle both the  consolidated  federal and state class
actions described above for a total of $42 million.  In June of this year, final
agreement was reached on all agreements  needed to effectuate  that  settlement.
Under the terms of the  settlement,  Apria has paid $1 million and its insurance
carriers have paid $41 million into a settlement escrow account.  Apria has also
agreed to provide  various  indemnities  to  certain  current  and former  Apria
officers and  directors  who would be entitled to receive  such  indemnification
under applicable law. A hearing to confirm the settlement as reasonable and fair
to the  settlement  class has been set for  August 20,  2002,  before the Orange
County  Superior  Court.  Apria  cannot  provide  any  assurance  that the Court
ultimately  will approve the settlement as reasonable and fair to the settlement
class.  However, in the opinion of Apria's management,  the ultimate disposition
of these  class  actions  will not have a  material  adverse  effect on  Apria's
results of operations or financial condition.

Apria and its former  Chief  Executive  Officer are also  defendants  in a class
action lawsuit,  J.E.B. Capital Partners,  LP v. Apria Healthcare Group Inc. and
Philip L. Carter,  filed on August 27, 2001 in the U.S.  District  Court for the
Central  District of California,  Southern  Division (Case No.  SACV01-813 GLT).
Among other things,  the complaint alleges that the defendants made false and/or
misleading public statements by not announcing until July 16, 2001 the amount of
potential  damages  asserted  by the U.S  Attorney's  office in Los  Angeles and
counsel  for the  plaintiffs  in the qui tam  actions  referred  to  below.  The
defendants'  motion to dismiss the  complaint was granted with leave to amend on
June 14, 2002.  Plaintiff  has elected not to amend its  complaint,  but filed a
notice  of appeal  on July 15,  2002.  Apria  believes  that it has  meritorious
defenses to the plaintiff's  claims and it intends to vigorously  defend itself.
In the opinion of Apria's  management,  the ultimate  disposition  of this class
action will not have a material  adverse effect on Apria's results of operations
or financial condition.

As  previously   reported,   since  mid-1998  Apria  has  been  the  subject  of
investigations  conducted  by  several  U.S.  Attorneys'  offices  and the  U.S.
Department  of Health  and Human  Services.  These  investigations  concern  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 in connection with these  investigations  and is
responding to various document requests and subpoenas.  A criminal investigation
conducted by the U.S.  Attorney's  office in  Sacramento  was closed in mid-1999
with no charges being filed. Potential claims resulting from an investigation by
the U.S. Attorney's office in San Diego were settled in mid-2001 in exchange for
a payment by Apria of $95,000.

Apria has been  informed by the U.S.  Attorney's  office in Los Angeles that the
investigation  being  conducted  by that  office 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.

On July 12, 2001,  government  representatives and counsel for the plaintiffs in
the qui tam actions asserted 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,  plus 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. Nevertheless, Apria cannot provide any assurances as to the outcome of
these proceedings. 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.
<PAGE>
NOTE J - PER SHARE AMOUNTS

The following  table sets forth the  computation  of basic and diluted per share
amounts:
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED      SIX MONTHS ENDED
                                                                    JUNE 30,              JUNE 30,
                                                              ------------------      ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)                           2002      2001         2002      2001
------------------------------------------------------------------------------------------------------

NUMERATOR:
<S>                                                            <C>       <C>          <C>       <C>
  Net income ...........................................       $26,158   $17,247      $49,153   $34,323
  Numerator for basic and diluted per share amounts -
    income available to common stockholders ............       $26,158   $17,247      $49,153   $34,323

DENOMINATOR:
  Denominator for basic per share
    amounts - weighted average shares ..................        54,434    53,748       54,363    53,570

  Effect of dilutive securities:
    Employee stock options -
      dilutive potential common shares .................           986     2,000        1,156     2,046
                                                               -------   -------      -------   -------

  Denominator for diluted per share amounts -
    adjusted weighted average shares ...................        55,420    55,748       55,519    55,616
                                                               =======   =======      =======   =======


Basic net income per common share ......................       $  0.48   $  0.32      $  0.90   $  0.64
                                                               =======   =======      =======   =======
Diluted net income per common share ....................       $  0.47   $  0.31      $  0.89   $  0.62
                                                               =======   =======      =======   =======


Employee  stock  options  excluded  from the
  computation  of diluted  per share  amounts:

  Shares for which exercise price exceeds
    average market price of common stock ...............         1,503     1,815        2,572     1,900

Average exercise price per share that exceeds
  average market price of common stock .................       $ 26.39   $ 27.12      $ 25.40   $ 27.08
                                                               =======   =======      =======   =======
</TABLE>
<PAGE>
================================================================================
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 Form 10-K for the fiscal
year  ended  December  31,  2001,  as filed  with the  Securities  and  Exchange
Commission on April 1, 2002. 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.  Those risks
include:

     -  trends  and  developments   affecting  the  collectibility  of  accounts
        receivable;
     -  the effectiveness of the company's operating systems and controls;
     -  healthcare  reform  and the  effect  of  federal  and  state  healthcare
        regulations;
     -  government  legislative  and  budget  developments  which  could  affect
        reimbursement levels for products and services provided by Apria;
     -  the ongoing  government  investigations  regarding  patients  covered by
        Medicare and other federal programs;
     -  pricing pressures from large payors; and
     -  the successful  implementation of the company's acquisition strategy and
        integration of acquired businesses.

In addition,  the  terrorist  attacks of September 11, 2001 and the military and
security  activities which followed,  their impacts on the United States economy
and  government  spending  priorities,  and  the  effects  of any  further  such
developments  pose  risks  and  uncertainties  to  all  U.S.-based   businesses,
including Apria.  Among other things,  deficit spending by the government as the
result of adverse  developments  in the  economy  and costs of the  government's
response to the terrorist attacks could lead to the increased pressure to reduce
government  expenditures  for other  purposes,  including  governmentally-funded
programs such as Medicare.
================================================================================

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 400 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.  Other accounting  policies
requiring  significant  judgment are those related to goodwill and income taxes.
These  policies are presented in detail in Apria's 2001 Form 10-K - Management's
Discussion and Analysis of Financial Condition and Results of Operations.

     SEGMENT  REPORTING.  Apria's branch locations are organized into geographic
regions. Each region consists of a number of branches and a regional office that
provides key support  services,  such as billing,  purchasing,  patient  service
equipment  maintenance,  repair and warehousing.  Management evaluates operating
results on a geographic  basis,  and therefore views each region as an operating
segment.  All  regions  provide  the  same  products  and  services,   including
respiratory  therapy,  infusion therapy and home medical equipment and supplies.
For  financial  reporting  purposes,  all the company's  operating  segments are
aggregated  into one  reportable  segment  in  accordance  with the  aggregation
criteria in paragraph 17 of Statement of Financial Accounting Standards ("SFAS")
No. 131, "Disclosures about Segments of an Enterprise and Related Information."

     RECENT ACCOUNTING PRONOUNCEMENTS.  Effective January 1, 2002, Apria adopted
SFAS No. 142, "Goodwill and Other Intangible Assets", in its entirety.  SFAS No.
142  addresses  the  financial  accounting  and reporting for goodwill and other
intangible  assets.  The statement  provides  that goodwill or other  intangible
assets with  indefinite  lives will no longer be amortized,  but shall be tested
for impairment annually, or more frequently if circumstances  indicate potential
impairment.  Upon adoption,  a  transitional  goodwill  impairment  test must be
performed. The test is conducted at the "reporting unit" level and compares each
reporting  unit's  fair value to its  carrying  value.  Apria's  management  has
determined  that its geographic  regions are reporting units under SFAS No. 142.
Apria's  transitional  goodwill  impairment test utilized a discounted cash flow
approach in  determining  fair value,  which was further tested by a multiple of
earnings  approach.  The  transitional  test has  been  completed;  no  goodwill
impairment is indicated at any of Apria's  reporting units. See "Amortization of
Goodwill and Intangible Assets."

     Effective  January 1, 2002 Apria adopted SFAS No. 144,  "Accounting for the
Impairment  or Disposal of  Long-Lived  Assets."  SFAS No. 144 requires that one
accounting  model be used  for  long-lived  assets  to be  disposed  of by sale.
Discontinued  operations will be measured  similarly to other long-lived  assets
classified  as held for sale at the lower of its  carrying  amount or fair value
less cost to sell.  Future operating losses will no longer be recognized  before
they  occur.  SFAS No.  144  also  broadens  the  presentation  of  discontinued
operations  to include a component of an entity when  operations  and cash flows
can be clearly  distinguished,  and  establishes  criteria to  determine  when a
long-lived  asset is held for sale.  Adoption of this  statement  did not have a
material effect on Apria's financial statements.


RESULTS OF OPERATIONS

     NET REVENUES.  Net revenues were $310.4  million and $611.8  million in the
second  quarter and first six months of 2002,  respectively,  compared to $283.5
million  and  $554.8  million  for  the  corresponding  periods  in  2001.  This
represents  increases  of 9.5% and 10.3%  for the  three and six month  periods,
respectively. The growth is due to volume increases, new contracts with regional
and national  payors,  the  acquisition  of  complementary  businesses and price
increases in certain managed care agreements.

     Apria's acquisition  strategy generally results in the rapid integration of
acquired businesses into existing operating locations.  This limits management's
ability  to  separately  track the amount of revenue  generated  by an  acquired
business.  Estimating  the  revenue  contribution  from  acquisitions  therefore
requires  certain  assumptions.   Based  on  its  analyses,  Apria's  management
estimates  that  approximately  one-third of the revenue  growth between the six
month periods presented was derived from acquisitions.

     The following table sets forth a summary of net revenues by service line:
<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED JUNE 30,                 SIX MONTHS ENDED JUNE 30,
                                        ------------------------------------        -------------------------------------
                                              2002                2001                   2002                  2001
                                        ----------------    ----------------        ----------------     ----------------
(DOLLARS IN THOUSANDS)                      $        %          $        %              $        %           $        %
-------------------------------------------------------------------------------------------------------------------------

<S>                                     <C>        <C>      <C>        <C>          <C>        <C>       <C>        <C>
     Respiratory therapy.........       $205,263   66.1%    $185,081   65.3%        $408,495   66.8%     $363,411   65.5%
     Infusion therapy............         57,636   18.6%      54,874   19.4%         111,419   18.3%      107,259   19.3%
     HME/other...................         47,526   15.3%      43,525   15.3%          91,856   14.9%       84,164   15.2%
                                        --------  ------    --------  ------        --------  ------     --------  ------
          Total net revenues            $310,425  100.0%    $283,480  100.0%        $611,770  100.0%     $554,834  100.0%
                                        ========  ======    ========  ======        ========  ======     ========  ======
</TABLE>
     Home  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 10.9% and 12.4% in the second
quarter and first half of 2002, respectively, as compared to the same periods in
2001.  Apria's  focus  on the  acquisition  of  respiratory  therapy  businesses
contributed to this growth.

     Home  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.   Examples  include:   parenteral   nutrition,
anti-infectives, pain management, chemotherapy and other medications and related
services.  The  infusion  line also  includes  enteral  nutrition,  which is the
administration of nutrients directly into the  gastrointestinal  tract through a
feeding tube. Infusion therapy revenues increased by 5.0% and 3.9% in the second
quarter  and  first six  months  of 2002,  respectively,  when  compared  to the
corresponding  periods  in 2001.  For the six month  period in 2002,  the growth
percentage  reflects  the  effect  of a  13.9%  increase  in  enteral  nutrition
attributable  to a  renewed  focus on this  product,  resulting  from a  program
(initiated in mid-2001) that  centralized  the enteral  intake and  distribution
functions  at the  regional  level.  Offsetting  this was a 1.2%  decline in the
remaining  infusion line, due in part to eliminating  certain product  offerings
within a large contract.

     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 9.2% and 9.1% in
the second  quarter and first six months of 2002,  respectively,  as compared to
the same periods in 2001. The increase  between  periods is partially due to the
fact  that the full  Medicare  cost of living  adjustment  for  certain  durable
medical equipment products and services that had been frozen since 1998 pursuant
to the Balanced  Budget Act of 1997 was restored in 2001.  Substantially  all of
this adjustment was provided through a transitional allowance applied to amounts
reimbursed  during the second half of the year. The 2002  reimbursement  amounts
incorporate the 2001  adjustments as if they had been applied evenly  throughout
the year. Medicare reimbursement amounts for 2002 include only minimal increases
significantly below the cost of living rate.

     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.

     Approximately  33% of Apria's  revenues are 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  Reimbursement.  The  Balanced  Budget  Act of 1997
significantly  reduced the Medicare  reimbursement rates for home oxygen therapy
and included  other  provisions  that have impacted or may impact  reimbursement
rates  in the  future,  such as  potential  reimbursement  reductions  under  an
inherent  reasonableness  procedure and competitive  bidding.  Also currently at
issue is the  potential  adoption  of an  alternative  pricing  methodology  for
certain drugs and  biologicals.  These issues are discussed in detail in Apria's
2001 Form 10-K.

     In June  2002,  the  U.S.  House of  Representatives  passed  the  Medicare
Modernization  and  Prescription  Drug Act of  2002.  The  bill  provides  for a
nationwide  competitive  bidding  program  for an  as-yet-undetermined  list  of
durable  medical  equipment  ("DME")  items  covered by Medicare Part B. In July
2002, the U.S. Senate failed to pass a Medicare  prescription drug benefit. None
of the  Senate  proposals  contained  Medicare  "provider  adjustments"  such as
competitive  bidding  for DME.  The  Senate is likely to take up these  provider
adjustment  issues in the third  quarter,  but it is unclear at the present time
whether the Senate will include  competitive  bidding for DME or other issues of
interest to Apria in such  legislation.  It is also unclear whether  competitive
bidding or other issues of interest to Apria will be included in the  conference
report on Medicare  provider  adjustments that the House and Senate  negotiators
may finally agree upon before adjournment.

     GROSS  PROFIT.  Gross  margins for both the second  quarter of 2002 and the
first half of 2002 were 72.8% compared to 73.3% and 72.6% for the  corresponding
periods in the prior year.  The higher margin in the second  quarter of 2001 was
due in part to a retroactive price increase of a managed care contract .

     PROVISION FOR DOUBTFUL  ACCOUNTS.  The provision for doubtful  accounts was
3.7% of net revenues  for the second  quarter of 2002 and 3.8% for the first six
months of 2002 compared to 3.9% and 3.5% for the corresponding  periods in 2001.
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 increase in the  provision  between the six month
periods can be  attributed  to the increase in accounts  receivable in the first
quarter  of 2002 due  mainly  to two large  fourth  quarter  acquisitions.  Such
acquisitions  result in integrating a significant amount of patient  information
into Apria's  information systems and document files which can delay the billing
and collection  process.  Also contributing to the accounts receivable growth in
the first quarter are the following factors that are typical with the start of a
new calendar year:  (1) patient payor and/or  benefit  changes that can slow the
billing and collection process as the new payor information is obtained; and (2)
patient deductible requirements that can also slow the collection process. These
new-year factors were also present in 2001, however the magnitude was greater in
2002 due to  revenue  growth and the fourth  quarter  acquisitions.  The rate of
accounts  receivable  increase  declined  in the  second  quarter  of 2002.  See
"Accounts Receivable - Evaluation of Net Realizable Value."

     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  growth  patterns.  Certain  expenses,  such as facility  lease and fuel
costs,  are  also  very  sensitive  to  market-driven  price  fluctuations.  The
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%
and 54.6% for the second  quarter and first half of 2002,  respectively,  versus
55.8%  and 55.2%  for the  corresponding  periods  in 2001.  In 2002,  the first
quarter  included  $2.6  million in contract  termination  costs  related to the
departure of the former Chief Executive  Officer and the second quarter included
approximately  $2.2  million  in merit  compensation  increases.  Despite  these
additional  expenses,  management  was able to leverage  its  expense  structure
against the revenue growth.

     AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS.  Amortization of intangible
assets  for the second  quarter  and the six  months  ended  June 30,  2002 were
$665,000  and $1.3  million,  respectively,  compared  to $3.1  million and $6.0
million for the same periods last year (which included  goodwill  amortization).
Upon adoption of SFAS No. 142 on January 1, 2002, goodwill  amortization ceased.
Amortization  of  goodwill  was $2.5  million  for the second  quarter  and $4.7
million for the first six months of 2001.  The effect of adding this amount back
as though  SFAS No. 142 were  adopted at the  beginning  of the prior year would
have been increases in net income of $1.6 million and $2.9 million and increases
in diluted income per common share of $0.03 and $0.05 for the second quarter and
first six months of 2001, respectively.  See "Recent Accounting Pronouncements",
"Business  Combinations"  and  Note C to the  Condensed  Consolidated  Financial
Statements.

     INTEREST EXPENSE.  Interest expense was $4.0 million for the second quarter
of 2002,  down from $8.0  million  in the second  quarter  of 2001.  For the six
months ended June 30, 2002 interest  expense was $8.1 million  compared to $16.4
million in the same period in 2001. The significant decrease between the periods
is due to a number of factors.  From June 30, 2001 to June 30,  2002,  long-term
debt decreased by $52.1 million.  The July 2001 refinancing  replaced the 9 1/2%
senior  subordinated  notes with debt at significantly  more favorable  interest
rates and  resulted  in lower rates on the bank loans.  In  connection  with the
refinancing,  deferred debt  issuance  costs on the 9 1/2% notes and former bank
debt were written off; the issuance costs incurred upon refinancing  resulted in
a lower  monthly  amortization  expense.  Also,  the June 2002 credit  agreement
amendment  included a reduction in the  applicable  interest rate margin for the
$175  million  term loan.  Finally,  the  dramatic  decreases  in  market-driven
interest rates over the course of 2001  contributed  to the overall  decrease in
Apria's interest expense. See "Long-Term Debt."

     INCOME  TAXES.  Income  taxes for the six months ended June 30, 2002 and in
the corresponding  period of 2001, have been provided at the effective tax rates
expected to be applicable for the respective year.

     At December 31, 2001, Apria had federal net operating loss carryforwards of
approximately $89 million, expiring in varying amounts in the years 2003 through
2018 and various state net operating loss  carryforwards that began to expire in
1997.   Additionally,   the  company  has  an  alternative  minimum  tax  credit
carryforward of approximately  $7.6 million.  As a result of an ownership change
in 1992 that met specified criteria of Section 382 of the Internal Revenue Code,
future use of a portion of the federal and state  operating  loss  carryforwards
generated prior to 1992 are each limited to  approximately  $5 million per year.
Because of the annual  limitation,  approximately $57 million of each of Apria's
federal  and state  operating  loss  carryforwards  may expire  unused.  The net
operating loss  carryforward  amount in the related  deferred tax asset excludes
such amount.  In 2002, for federal tax purposes,  the company expects to utilize
its entire net operating loss carryforward not subject to limitation.


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.  Apria's
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  the 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 $107.7 million in the
first six months of 2002  compared  with  $101.2  million  in the  corresponding
period in 2001.  The increase  between  periods in net income  (before items not
requiring cash) was partially offset by the increase in accounts  receivable and
increases in payments against accounts payable and other expense accruals.

     Cash used in investing  activities decreased to $72.7 million for the first
half of 2002 compared to $101.7  million  during the same period last year.  The
decrease in cash used is attributable to the difference in acquisition  activity
between  the  periods  and a decrease  in patient  service  and other  equipment
purchases.

     Cash used in financing  activities  was $27.3 million  during the first six
months of 2002 compared to $10.3 million provided by financing activities during
the same period last year. The difference is mainly due to the stock repurchases
effected in the 2002 period. 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 twelve-month rolling periods ending June 30):
<TABLE>
<CAPTION>
     (DOLLARS IN MILLIONS)                          YEAR 1    YEAR 2    YEAR 3   YEAR 4    YEAR 5    YEARS 6+   TOTALS
     -----------------------------------------------------------------------------------------------------------------
<S>                                                 <C>       <C>       <C>      <C>        <C>        <C>        <C>
     Term loans..............................       $ 25      $ 26      $ 28     $ 29       $ 9        $165       $282
     Capitalized lease obligations...........          3         2         2        -         -           -          7
     Operating leases........................         53        44        35       28        16          25        201
     Deferred acquisition payments...........          6                                                  -          6
                                                    ----      ----      ----     ----      ----        ----       ----
          Total contractual obligations......       $ 87      $ 72      $ 65     $ 57      $ 25        $190       $496
                                                    ====      ====      ====     ====      ====        ====       ====
</TABLE>
     ACCOUNTS  RECEIVABLE.  Accounts  receivable  before  allowance for doubtful
accounts  increased  to $209.0  million at June 30, 2002 from $194.2  million at
December 31, 2001,  which is attributable to the revenue  increases.  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 51 at June 30, 2002,  and 50 at December 31, 2001.  Accounts aged
in excess of 180 days decreased to 17.7% at June 30, 2002 from 19.8% at December
31, 2001. See "Provision for Doubtful Accounts."

     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 extensive 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  additional  reserves  are
necessary.

     Unbilled  Receivables.  Included  in  accounts  receivable  are  earned but
unbilled  receivables  of $30.0  million and $26.9  million at June 30, 2002 and
December 31, 2001, 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 net  realizable  value.  The  increase  is
partially  due  to  acquisitions   effected  late  in  2001  and  in  2002.  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.

     LONG-TERM  DEBT.  Apria's  credit  agreement  with  Bank of  America  and a
syndicate  of lenders was  amended  and  restated  effective  June 7, 2002.  The
amendment  extended the maturity  date,  reduced the  applicable  interest  rate
margins and  modified the  repayment  schedule  for the  company's  $175 million
six-year term loan.  The term loan,  which was amended to mature in seven years,
had a balance of $173.7  million at June 30,  2002.  It is now  repayable  in 21
remaining consecutive quarterly installments of $437,500 each, followed by three
consecutive quarterly installments of $41.1 million each, and a final payment of
$41.1 million due on July 20, 2008.

     Interest  rates on  outstanding  balances  under the credit  agreement  are
determined  by adding a margin to the  Eurodollar  or base rate existing at each
interest calculation date.  Applicable margins for the seven-year term loan were
lowered to 2.0% for Eurodollar loans and 1.0% for base rate loans.

     On June 30, 2002,  total  borrowings under the credit agreement were $282.2
million.  Outstanding  letters of credit totaled  $100,000 and credit  available
under the revolving  facility was $99.9  million.  At June 30, 2002, the company
was 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: (1)  strategic  determination  of  repricing
periods and related principal amounts, and (2) 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 two interest rate swap agreements with a total notional amount of
$100 million that fix its  LIBOR-based  variable  rate debt at 2.58% (before the
applicable  margin).  The swap  agreements  terminate  March 2003. The swaps are
being  accounted  for as cash flow hedges under SFAS No. 133.  Accordingly,  the
difference  between the interest  received and interest  paid is reflected as an
adjustment to interest  expense.  For the first six months of 2002, Apria paid a
net settlement  amount of $289,000.  At June 30, 2002,  the swap  agreements are
reflected  in the  accompanying  consolidated  balance  sheet in  other  accrued
liabilities at their fair value of $401,000. Unrealized losses on the fair value
of the swap agreements are reflected, net of taxes, in other comprehensive loss.

     Apria does not anticipate losses due to counterparty nonperformance, as its
counterparty  to  the  swap  agreements  is  a  nationally-recognized  financial
institution with a strong credit rating.

     TREASURY  STOCK.  Apria plans to  repurchase up to $35 million worth of its
outstanding  common  stock  during  this  calendar  year.  Depending  on  market
conditions and other considerations,  repurchases will be made from time to time
in open  market  transactions.  During  the  first  six  months  of 2002,  Apria
repurchased  1,004,800 shares for $21.8 million.  All repurchased  common shares
are being  held in  treasury.  Apria's  credit  agreement  limits  common  stock
repurchases  to $35 million in any fiscal year and $100 million in the aggregate
over the term of the agreement.

     BUSINESS  COMBINATIONS.  Pursuant to one of its primary growth  strategies,
Apria  periodically  acquires  complementary  businesses in specific  geographic
markets.  These  transactions  are accounted for as purchases and the results of
operations  of  the  acquired   companies  are  included  in  the   accompanying
consolidated income statements from the dates of acquisition. Effective with the
adoption of SFAS No. 142,  goodwill is no longer being amortized.  Covenants not
to compete are being amortized over the life of the respective agreements.

     The aggregate  consideration  for acquisitions that closed during the first
half of 2002 was $18.4 million. Allocation of this amount includes $15.7 million
to goodwill,  $581,000 to intangible  assets and $1.7 million to patient service
equipment.  During  the first  half of 2001,  the  aggregate  consideration  for
acquisitions was $37 million. Cash paid for acquisitions, which includes amounts
deferred from prior year acquisitions,  totaled $15.7 million and $35 million in
the first six months of 2002 and 2001, 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
purchases  and on the  company's  ability to integrate  the acquired  operations
successfully.

     FEDERAL  INVESTIGATIONS.  As previously reported,  since mid-1998 Apria has
been the subject of investigations  conducted by several U.S. Attorneys' offices
and the U.S.  Department  of Health  and Human  Services.  These  investigations
concern 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 in connection with these investigations
and is  responding  to  various  document  requests  and  subpoenas.  A criminal
investigation  conducted by the U.S.  Attorney's office in Sacramento was closed
in mid-1999  with no charges being filed.  Potential  claims  resulting  from an
investigation  by the U.S.  Attorney's  office  in San  Diego  were  settled  in
mid-2001 in exchange for a payment by Apria of $95,000.

     Apria has been informed by the U.S.  Attorney's  office in Los Angeles that
the investigation  being conducted by that office 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.

     On July 12, 2001, government representatives and counsel for the plaintiffs
in the qui tam  actions  asserted  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,  plus 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. Nevertheless, Apria cannot provide any assurances as to the outcome of
these proceedings. 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.
<PAGE>
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, 2002, Apria's term loan borrowings totaled $282.2 million.  The
bank credit  agreement  governing the term loans provides  interest rate options
based on the following  indices:  Federal Funds Rate,  Prime Rate or LIBOR.  All
such interest rate options are subject to the  application of an interest margin
as specified  in the bank credit  agreement.  At June 30,  2002,  all of Apria's
outstanding  term  debt was tied to  LIBOR.  Apria  has two  interest  rate swap
agreements with a total notional amount of $100 million that fix its LIBOR-based
debt at 2.58%  (before  application  of the interest  margin).  Both  agreements
expire March 2003.

     Based on the term debt outstanding and the swap agreements in place at June
30, 2002, a 100 basis point change in LIBOR would  increase or decrease  Apria's
annual cash flow and pretax earnings by approximately $1.8 million.
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

            Apria  and  certain  of  its  present  and  former  officers  and/or
            directors  are  defendants  in a class action  lawsuit,  In Re Apria
            Healthcare Group Securities  Litigation,  filed in the U.S. District
            Court for the Central  District  of  California,  Southern  Division
            (Case  No.SACV98-217  GLT).  This case is a  consolidation  of three
            similar  class  actions  filed  in  March  and  April,   1998.   The
            consolidated  amended class action complaint purports to establish a
            class of plaintiff  shareholders who purchased  Apria's common stock
            between  May 22,  1995 and  January  20,  1998.  No  class  has been
            certified at this time. The complaint  alleges,  among other things,
            that the defendants made false and/or  misleading  public statements
            regarding Apria and its financial  condition in violation of federal
            securities  laws.  The  complaint  seeks  compensatory  and punitive
            damages as well as other relief.


            Two  similar  class  actions  were  filed  during  July  1998 in the
            Superior Court for the State of California for the County of Orange:
            Schall v. Apria  Healthcare Group Inc., et al. (Case No. 797060) and
            Thompson v. Apria  Healthcare  Group Inc., et al. (Case No. 797580).
            These two actions were  consolidated  by a court order dated October
            22, 1998 (Master Case No. 797060).  On June 14, 1999, the plaintiffs
            filed a consolidated amended class action complaint asserting claims
            founded  on  state  law and on  Sections  11 and  12(2)  of the 1933
            Securities Act.

            Following a series of settlement discussions, the parties reached in
            early 2002 a tentative  agreement  to settle  both the  consolidated
            federal and state class actions  described  above for a total of $42
            million.  In June of this year,  final  agreement was reached on all
            agreements needed to effectuate that settlement.  Under the terms of
            the settlement, Apria has paid $1 million and its insurance carriers
            have paid $41 million into a settlement  escrow  account.  Apria has
            also agreed to provide  various  indemnities to certain  current and
            former Apria officers and directors who would be entitled to receive
            such indemnification  under applicable law. A hearing to confirm the
            settlement as reasonable and fair to the  settlement  class has been
            set for August 20, 2002,  before the Orange County  Superior  Court.
            Apria cannot  provide any assurance that the Court  ultimately  will
            approve the  settlement  as  reasonable  and fair to the  settlement
            class.  However, in the opinion of Apria's management,  the ultimate
            disposition of these class actions will not have a material  adverse
            effect on Apria's results of operations or financial condition.

            Apria and its former Chief Executive  Officer are also defendants in
            a  class  action  lawsuit,  J.E.B.  Capital  Partners,  LP v.  Apria
            Healthcare Group Inc. and Philip L. Carter, filed on August 27, 2001
            in the U.S.  District Court for the Central  District of California,
            Southern Division (Case No. SACV01-813 GLT). Among other things, the
            complaint  alleges that the defendants made false and/or  misleading
            public  statements by not announcing  until July 16, 2001 the amount
            of potential  damages  asserted by the U.S Attorney's  office in Los
            Angeles  and  counsel  for the  plaintiffs  in the  qui tam  actions
            referred to below.  The defendants'  motion to dismiss the complaint
            was  granted  with leave to amend on June 14,  2002.  Plaintiff  has
            elected not to amend its complaint,  but filed a notice of appeal on
            July 15, 2002.  Apria believes that it has  meritorious  defenses to
            the plaintiff's  claims and it intends to vigorously  defend itself.
            In the opinion of Apria's  management,  the ultimate  disposition of
            this class action will not have a material adverse effect on Apria's
            results of operations or financial condition.

            As previously reported, since mid-1998 Apria has been the subject of
            investigations  conducted by several U.S. Attorneys' offices and the
            U.S. Department of Health and Human Services.  These  investigations
            concern 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 in
            connection  with these  investigations  and is responding to various
            document requests and subpoenas. A criminal investigation  conducted
            by the U.S.  Attorney's  office in Sacramento was closed in mid-1999
            with no charges  being filed.  Potential  claims  resulting  from an
            investigation  by the  U.S.  Attorney's  office  in San  Diego  were
            settled in mid-2001 in exchange for a payment by Apria of $95,000.

            Apria has been informed by the U.S. Attorney's office in Los Angeles
            that the investigation  being conducted by that office 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.

            On July 12,  2001,  government  representatives  and counsel for the
            plaintiffs  in the qui tam actions  asserted  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,   plus  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.   Nevertheless,   Apria  cannot  provide  any
            assurances as to the outcome of these proceedings. 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.


ITEMS 2-5.  NOT APPLICABLE

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits:

                  Exhibit
                  Number  Reference
                  ------  ---------
                  10.1    Executive  Severance  Agreement  effective May 8, 2002
                          between Registrant and Anthony S. Domenico.

                  10.2    Third Amended and Restated Credit Agreement dated June
                          7, 2002, among  Registrant  and   certain    of    its
                          subsidiaries,  Bank  of  America  National Association
                          and other financial institutions party to  the  Credit
                          Agreement.

                  99.1    Certification of the Chief Executive Officer and Chief
                          Financial Officer pursuant to 18 U.S.C. Section 1350.

            (b)   Reports on Form 8-K:

                  No reports on Form 8-K were filed during the quarter for which
                  this report is filed.

<PAGE>

                                   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 14, 2002                   /s/  JAMES E. BAKER
                                  -------------------------------------------
                                  James E. Baker
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)