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 September 30, 2001

                                       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)


 3560 HYLAND AVENUE, COSTA MESA, CA                       92626
(Address of principal executive offices)                (Zip Code)

       Registrant's telephone number, including area code: (714) 427-2000

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 54,496,817  shares of common stock,  $.001 par value,  outstanding at
November 5, 2001.
<PAGE>

                           APRIA HEALTHCARE GROUP INC.

                                    FORM 10-Q

                     FOR THE PERIOD ENDED SEPTEMBER 30, 2001






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 and Use of Proceeds

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
<TABLE>
                           APRIA HEALTHCARE GROUP INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                                               SEPTEMBER 30,  DECEMBER 31,
(dollars in thousands)                                                             2001           2000
----------------------------------------------------------------------------------------------------------
                                                                               (unaudited)
                                     ASSETS

CURRENT ASSETS
<S>                                                                             <C>           <C>
  Cash and cash equivalents .................................................   $  17,552     $  16,864
  Accounts receivable, less allowance for doubtful accounts of $35,790
    and $39,787 at September 30, 2001 and December 31, 2000, respectively ...     161,200       145,518
  Inventories, net ..........................................................      21,838        22,404
  Deferred income taxes .....................................................      33,321        33,067
  Prepaid expenses and other current assets .................................      12,568         8,617
                                                                                ---------     ---------
          TOTAL CURRENT ASSETS ..............................................     246,479       226,470

PATIENT SERVICE EQUIPMENT, less accumulated depreciation of $335,561
  and $310,741 at September 30, 2001 and December 31, 2000, respectively ....     160,441       134,812
PROPERTY AND EQUIPMENT, NET .................................................      43,621        40,630
DEFERRED INCOME TAXES .......................................................      53,188        75,076
INTANGIBLE ASSETS, NET ......................................................     175,284       137,928
OTHER ASSETS ................................................................       8,268         5,416
                                                                                ---------     ---------
                                                                                $ 687,281     $ 620,332
                                                                                =========     =========
                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable ..........................................................   $  54,283     $  54,250
  Accrued payroll and related taxes and benefits ............................      38,277        28,449
  Accrued insurance .........................................................       9,941         9,980
  Income taxes payable ......................................................      14,448        13,378
  Other accrued liabilities .................................................      30,479        24,555
  Current portion of long-term debt .........................................      26,594         1,999
                                                                                ---------     ---------
          TOTAL CURRENT LIABILITIES .........................................     174,022       132,611

LONG-TERM DEBT, net of current portion ......................................     293,067       341,479

COMMITMENTS AND CONTINGENCIES (Note H)

STOCKHOLDERS' EQUITY Preferred stock, $.001 par value:
    10,000,000 shares authorized; none issued ...............................           -             -
  Common stock, $.001 par value:
    150,000,000 shares authorized; 54,479,917 and 53,153,890 shares
    issued at September 30, 2001 and December 31, 2000, respectively;
    54,393,817 and 53,067,790 outstanding at September 30, 2001 and
    December 31, 2000, respectively .........................................          54            53
  Additional paid-in capital ................................................     365,642       343,621
  Accumulated deficit .......................................................    (144,543)     (196,471)
  Treasury stock, at cost; 86,100 shares at September 30, 2001
    and December 31, 2000 ...................................................        (961)         (961)
                                                                                ---------     ---------
                                                                                  220,192       146,242
                                                                                ---------     ---------
                                                                                $ 687,281     $ 620,332
                                                                                =========     =========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>

                           APRIA HEALTHCARE GROUP INC.

                    CONDENSED CONSOLIDATED INCOME STATEMENTS
                                   (unaudited)
<CAPTION>

                                                                 THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                    SEPTEMBER 30,              SEPTEMBER 30,
                                                               ----------------------     ----------------------
(dollars in thousands, except per share data)                     2001         2000          2001         2000
----------------------------------------------------------------------------------------------------------------

<S>                                                            <C>          <C>         <C>          <C>
Net revenues ...............................................   $ 284,025    $ 252,588     $ 838,859    $ 755,880
Costs and expenses:
   Cost of net revenues:
      Product and supply costs .............................      50,376       45,230       152,078      141,643
      Patient service equipment depreciation ...............      23,127       19,172        66,568       57,435
      Nursing services .....................................         194          467           854        1,337
      Other ................................................       2,780        2,541         8,830        7,877
                                                               ---------    ---------     ---------    ---------
          TOTAL COST OF NET REVENUES .......................      76,477       67,410       228,330      208,292

   Selling, distribution and administrative ................     158,750      140,115       465,241      411,377
   Provision for doubtful accounts .........................       9,873        6,767        29,092       25,785
   Amortization of intangible assets .......................       3,244        2,601         9,206        7,527
                                                               ---------    ---------     ---------    ---------
          TOTAL COSTS AND EXPENSES .........................     248,344      216,893       731,869      652,981
                                                               ---------    ---------     ---------    ---------

          OPERATING INCOME .................................      35,681       35,695       106,990      102,899
Interest expense, net ......................................       5,093       10,167        21,528       31,075
                                                               ---------    ---------     ---------    ---------
          INCOME BEFORE TAXES AND
          EXTRAORDINARY CHARGE .............................      30,588       25,528        85,462       71,824
Income taxes ...............................................      11,455       10,722        32,006       30,166
                                                               ---------    ---------     ---------    ---------
          INCOME BEFORE EXTRAORDINARY CHARGE ...............      19,133       14,806        53,456       41,658
Extraordinary charge on debt refinancing, net of taxes .....       1,528            -         1,528            -
                                                               ---------    ---------     ---------    ---------
          NET INCOME .......................................   $  17,605    $  14,806     $  51,928    $  41,658
                                                               =========    =========     =========    =========



Basic income per common share:
   Income before extraordinary charge ......................   $    0.35    $    0.28     $    0.99    $    0.80
   Extraordinary charge on debt refinancing, net of taxes...       (0.03)           -         (0.03)           -
                                                               ---------    ---------     ---------    ---------
          Net income .......................................   $    0.32    $    0.28     $    0.96    $    0.80
                                                               =========    =========     =========    =========

Diluted income per common share:
   Income before extraordinary charge ......................   $    0.34    $    0.28     $    0.96    $    0.77
   Extraordinary charge on debt refinancing, net of taxes...       (0.03)           -         (0.03)           -
                                                               ---------    ---------     ---------    ---------
          Net income .......................................   $    0.31    $    0.28     $    0.93    $    0.77
                                                               =========    =========     =========    =========

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

                           APRIA HEALTHCARE GROUP INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

                                                                          NINE MONTHS ENDED
                                                                             SEPTEMBER 30,
                                                                        ----------------------
(dollars in thousands)                                                     2001        2000
----------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                                     <C>          <C>
Net income ..........................................................   $  51,928    $  41,658
Items included in net income not requiring cash:
  Extraordinary charge on debt refinancing ..........................       2,443            -
  Provision for doubtful accounts ...................................      29,092       25,785
  Depreciation and amortization .....................................      87,676       78,091
  Amortization of deferred debt costs ...............................       1,552        2,025
  Deferred income taxes and other ...................................      28,415       27,037
Changes in operating assets and liabilities, exclusive of
effects of acquisitions:
  Accounts receivable ...............................................     (44,773)     (18,202)
  Inventories, net ..................................................         729          155
  Prepaid expenses and other assets .................................      (5,173)         998
  Accounts payable ..................................................          33         (858)
  Accrued payroll and related taxes and benefits ....................       9,828        5,895
  Other accrued liabilities .........................................       4,350       (3,594)
                                                                        ---------    ---------

          NET CASH PROVIDED BY OPERATING ACTIVITIES .................     166,100      158,990

INVESTING ACTIVITIES
  Purchases of patient service equipment and property
    and equipment, exclusive of effects of acquisitions .............     (99,775)     (66,553)
  Proceeds from disposition of assets ...............................         235          482
  Cash paid for acquisitions and payments of
    contingent consideration.........................................     (49,745)     (15,400)
                                                                        ---------    ---------

          NET CASH USED IN INVESTING ACTIVITIES .....................    (149,285)     (81,471)

FINANCING ACTIVITIES
  Proceeds from revolving credit facilities, net ....................      16,000            -
  Proceeds from term loans ..........................................     300,000            -
  Payments on term loans ............................................    (140,000)     (30,062)
  Payment on redemption of senior subordinated notes ................    (200,000)           -
  Payments on other long-term debt ..................................      (1,653)      (3,402)
  Capitalized debt costs, net .......................................      (5,597)        (983)
  Repurchases of common stock .......................................           -         (958)
  Issuances of common stock .........................................      15,123        2,766
                                                                        ---------    ---------

          NET CASH USED IN FINANCING ACTIVITIES .....................     (16,127)     (32,639)
                                                                        ---------    ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS ...........................         688       44,880
Cash and cash equivalents at beginning of period ....................      16,864       20,493
                                                                        ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..........................   $  17,552    $  65,373
                                                                        =========    =========

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

<PAGE>


                           APRIA HEALTHCARE GROUP INC.

              NOTES TO 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, 2000, included in the company's 2000 Form 10-K.

For all periods presented herein,  there were no differences  between net income
and comprehensive income.


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 generally accepted accounting principles 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:  During  the first  quarter  of 2001,  Apria
adopted  Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
amended by SFAS No. 137,  "Accounting  for  Derivative  Instruments  and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and further amended
by SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain
Hedging  Activities".  SFAS No.  133,  as amended,  establishes  accounting  and
reporting  standards  for hedging  activities  and for  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in  the   statements  of  financial   position  and  measure  those
instruments  at fair  value.  Changes in the fair value of  derivatives  must be
recorded  each  period.  SFAS  No.  133  also  requires  formal   documentation,
designation at the time the hedge transaction is initiated and assessment of the
effectiveness of the transactions that receive hedge accounting. At adoption and
at September  30, 2001,  Apria had no derivative  instruments  that require fair
value measurement under SFAS No. 133. Accordingly,  adoption of SFAS No. 133 did
not have a material effect on the consolidated financial statements.

In June 2001, the Financial  Accounting Standards Board ("FASB") issued SFAS No.
141,  "Business  Combinations" and SFAS No. 142,  "Goodwill and Other Intangible
Assets".  SFAS No. 141 requires that all business  combinations  initiated after
June 30, 2001 be accounted  for under the  purchase  method and  eliminates  the
pooling of interests method. Adoption of SFAS No. 141 did not have a significant
effect on the company's consolidated financial statements.

SFAS No.  142  requires  that an  intangible  asset  that is  acquired  shall be
initially  recognized and measured  based on its fair value.  The statement also
provides  that  goodwill  should  not be  amortized,  but  shall be  tested  for
impairment  annually,  or more frequently if  circumstances  indicate  potential
impairment,  through a comparison of fair value to its carrying amount. Existing
goodwill  will  continue to be amortized  through the remainder of 2001 at which
time  amortization  will  cease and the  company  will  perform  a  transitional
goodwill  impairment test.  Goodwill and intangible  assets acquired in business
combinations  completed  after June 30, 2001 must  comply  with this  statement.
Adoption  of SFAS  No.  142 in its  entirety  is  required  for  fiscal  periods
beginning after December 15, 2001. Apria management is currently  evaluating the
impact of the new accounting  standard on existing goodwill and other intangible
assets.  The  ultimate  impact  of the  new  accounting  standard  has yet to be
determined.  Goodwill  amortization  expense for the nine months ended September
30, 2001 was $7,301,000.

In August 2001, the FASB issued 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 similar 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. The
provisions of SFAS No. 144 are effective  for  financial  statements  issued for
years beginning after December 15, 2001. The adoption of this statement will not
have a  material  effect  on  Apria's  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,
managed care organizations, Medicare and Medicaid.

Due to the nature of the industry  and the  reimbursement  environment  in which
Apria  operates,  net  revenues and  accounts  receivable  are recorded at their
expected net  realizable  values.  Inherent in this process is the risk that the
expected  amounts 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,  operating  statistics  and relevant
business  conditions.  Also, focused reviews of certain large and/or problematic
payors are performed.  Because of continuing changes in the healthcare  industry
and third-party reimbursement,  it is possible that management's estimates could
change in the near  term,  which  could  have an impact on  operations  and cash
flows.


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
income  statements  from the date of acquisition.  During the nine-month  period
ended September 30, 2001, cash paid for acquisitions  was $49,745,000.  Included
in this amount is contingent consideration of $1,868,000.  At September 30, 2001
outstanding contingent consideration totaled $5,001,000.

For the  acquisitions  that closed during the nine-month  period ended September
30, 2001, $46,699,000 was allocated to intangible assets, which includes amounts
not yet paid. The majority of such intangible  assets  represents  goodwill from
business combinations completed prior to June 30, 2001, which is being amortized
over 20 years,  and covenants not to compete which are being  amortized over the
life of the respective agreements.


NOTE E - LONG-TERM DEBT

On July  20,  2001,  Apria  closed  a new  $400,000,000  senior  secured  credit
agreement with a syndicate of lenders led by Bank of America, N.A. The company's
previous credit agreement and the $200,000,000 9 1/2% senior subordinated notes,
both of which  were  scheduled  to  mature  in late  2002,  were  repaid in full
concurrent  with the  closing of the new senior  secured  credit  agreement.  In
connection  with  the  early   retirement  of  its  debt,  Apria  wrote-off  the
unamortized  balance of deferred financing fees attributable to the subordinated
notes  and  the  previous  credit  agreement.  Accordingly,  Apria  recorded  an
extraordinary  charge of $1,528,000,  net of tax, in the quarter ended September
30, 2001.

The senior  secured  credit  facilities  consist  of: a  $100,000,000  five-year
revolving   credit  facility;   a  $125,000,000   five-year  term  loan;  and  a
$175,000,000  six-year term loan. On September  30, 2001,  borrowings  under the
revolving  credit  facility  were  $16,000,000,  outstanding  letters  of credit
totaled  $1,000,000  and  credit  available  under the  revolving  facility  was
$83,000,000.

Borrowings  under the senior secured credit  facilities  are  collateralized  by
substantially all of the assets of Apria. The credit agreement contains numerous
restrictions,  including but not limited to, covenants requiring the maintenance
of certain  financial  ratios,  limitations  on additional  borrowings,  capital
expenditures,  mergers,  acquisitions and investments and,  restrictions on cash
dividends,  loans and other  distributions.  The agreement also permits Apria to
expend a maximum of  $100,000,000  per year on  acquisitions.  At September  30,
2001, the company was in compliance with all of the financial covenants required
by the agreement.

The senior secured credit agreement  permits Apria to select one of two variable
interest rates.  One option is the base rate which is expressed as the higher of
(a) the Federal  Funds rate plus 0.50% and (b) the Prime Rate.  The other option
is the  Eurodollar  rate which is based on the London  Interbank  Offered  Rate.
Interest on outstanding  balances under the senior secured credit  agreement are
determined  by adding a margin to the  Eurodollar  rate or base rate existing at
each interest  calculation date. Prior to September 30, 2001, margins on initial
borrowings under the revolving  credit facility and the  $125,000,000  term loan
were 1.75% for  Eurodollar  loans and 0.75% for base rate loans.  Commencing  on
September 30, 2001, the applicable margins for the revolving credit facility and
the  $125,000,000  term loan are based on Apria's  leverage ratio,  which is the
ratio of its funded debt to its last four  quarters of EBITDA,  as defined.  The
applicable margin ranges from 1.50% to 2.25% for Eurodollar loans and from 0.50%
to 1.25% for base rate loans.  For the  $175,000,000  term loan, the margins are
fixed at 3.00% for Eurodollar loans and at 2.00% for base rate loans. The senior
credit  agreement also requires payment of commitment fees ranging from 0.25% to
0.50%  (also  based on  Apria's  leverage  ratio) on the  unused  portion of the
revolving credit facility.

The $125,000,000 term loan is repayable in 20 consecutive quarterly installments
of $5,500,000 to $7,000,000 each, commencing December 31, 2001. The $175,000,000
term loan is  repayable in 20  consecutive  quarterly  installments  of $437,500
each,  commencing  December 31, 2001, and four installments of $41,562,500 each,
three of which are payable on the last  business  day of each  calendar  quarter
commencing December 31, 2006 and the last of which is payable on July 20, 2007.


NOTE F - EQUITY

The change in stockholders'  equity, other than from net income, is attributable
to the  exercise  of  stock  options  and the tax  benefit  associated  with the
exercise of nonqualified stock options.  For the nine months ended September 30,
2001,  proceeds from the exercise of stock options  amounted to $15,123,000  and
the related tax benefit amounted to $6,899,000.


NOTE G - INCOME TAXES

Income  taxes for the nine months  ended  September  30, 2001 and 2000 have been
provided at the effective tax rates expected to be applicable for the respective
year.

At December 31, 2000, Apria's federal net operating loss carryforwards  ("NOLs")
approximated  $174,500,000,  which will begin expiring in varying amounts in the
years 2003 through 2013.  Apria also has various state NOLs which began expiring
in 1997. Additionally, the company's alternative minimum tax credit carryforward
approximated $7,600,000 at December 31, 2000. As a result of an ownership change
in 1992,  which met  specified  criteria of Section 382 of the Internal  Revenue
Code,  future use of a portion of the federal and state NOLs 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  NOLs  may  expire  unused.   The  company  excludes  the  $57,000,000  of
potentially expiring NOLs from its deferred tax assets. In 2001, for federal tax
purposes, NOLs are being utilized to the extent of the company's federal taxable
income.


NOTE H - 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.
Pursuant to a court order dated May 27,  1998,  the  plaintiffs  in the original
three class  actions  filed a  Consolidated  Amended  Class Action  Complaint on
August 6, 1998. The amended 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  amended  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 amended 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.

Apria and its 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,  this 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.

Apria  believes  that,  in all of these class action cases,  it has  meritorious
defenses to the plaintiffs'  claims, and it intends to vigorously defend itself.
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.

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,  all of which 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
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 I - PER SHARE AMOUNTS

The following table sets forth the computation of basic and diluted per share
amounts:
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED     NINE MONTHS ENDED
                                                                              SEPTEMBER 30,         SEPTEMBER 30,
                                                                           ------------------     -----------------
(in thousands, except per share data)                                        2001       2000       2001       2000
-------------------------------------------------------------------------------------------------------------------

NUMERATOR:
<S>                                                                         <C>       <C>         <C>       <C>
  Net income ............................................................   $17,605   $14,806     $51,928   $41,658
  Numerator for basic and diluted per share amounts - net
    income available to common stockholders .............................   $17,605   $14,806     $51,928   $41,658

DENOMINATOR:
  Denominator for basic per share
    amounts - weighted average shares ...................................    54,231    52,324      53,790    52,280

      Effect of dilutive securities:
         Employee stock options .........................................     1,737     1,380       1,943     1,491
                                                                            -------   -------     -------   -------
         Total dilutive potential common shares .........................     1,737     1,380       1,943     1,491
                                                                            -------   -------     -------   -------

  Denominator for diluted per share amounts -
    adjusted weighted average shares ....................................    55,968    53,704      55,733    53,771
                                                                            =======   =======     =======   =======

BASIC NET INCOME PER COMMON SHARE .......................................   $  0.32   $  0.28     $  0.96   $  0.80
                                                                            =======   =======     =======   =======

DILUTED NET INCOME PER COMMON SHARE .....................................   $  0.31   $  0.28     $  0.93   $  0.77
                                                                            =======   =======     =======   =======

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

    Exercise price exceeds average market
      price of common stock .............................................     1,827     2,650       1,827     2,607

Average exercise price per share that exceeds
  average market price of common stock ..................................   $ 27.08   $ 18.31     $ 27.08   $ 18.37
                                                                            =======   =======      =======   =======
</TABLE>

NOTE J - SUBSEQUENT EVENTS

During the fourth  quarter of 2001,  Apria  entered into two interest rate swaps
with a total notional amount of  $100,000,000  to fix its  LIBOR-based  variable
rate debt at 3.07% (before the applicable  margin).  The swap agreements  became
effective  October 30, 2001 and terminate on October 30, 2003. The swaps will be
accounted for as cash flow hedges under SFAS No. 133. See "Note E".

<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,  2000,  as filed  with the  Securities  and  Exchange
Commission  on March  22,  2001  and  Amendment  No. 3 to Form S-3  Registration
Statement,  as filed on August 7, 2001.  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:  whether the company will be able to resolve issues
pertaining to the collectibility of its accounts  receivable,  healthcare reform
and the  effect  of  federal  and  state  healthcare  regulations,  the  ongoing
government  investigations  regarding  patients  covered by  Medicare  and other
federal   programs,   pricing   pressures  from  large  payors  and  changes  in
governmental  reimbursement levels, the effectiveness of the company's operating
systems  and  controls,  and  the  successful  implementation  of the  company's
acquisition strategy.  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 United  States
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

RESULTS OF OPERATIONS
---------------------

    NET  REVENUES.  Net revenues were $284.0  million and $838.9  million in the
third  quarter and first nine months of 2001,  respectively,  compared to $252.6
million and $755.9 million for the corresponding  periods in 2000. The increases
in net revenues are primarily  due to new  contracts  with regional and national
payors,  the  acquisition of  complementary  businesses  and price  increases in
certain managed care contracts.
<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED SEPTEMBER 30,           NINE MONTHS ENDED SEPTEMBER 30,
                                   ------------------------------------      -------------------------------------
                                         2001                2000                  2001                 2000
                                   ---------------     ----------------      ----------------    -----------------
(dollars in thousands)                 $       %          $       %             $        %           $        %
------------------------------------------------------------------------------------------------------------------

<S>                                <C>        <C>      <C>        <C>        <C>        <C>      <C>        <C>
Respiratory therapy............    $186,069   65.5%    $162,394   64.3%      $549,480   65.5%    $488,601   64.6%
Infusion therapy...............      54,570   19.2%      49,532   19.6%       161,829   19.2%     144,981   19.2%
HME/other......................      43,386   15.3%      40,662   16.1%       127,550   15.3%     122,298   16.2%
                                   --------  ------    --------  ------      --------  ------    --------  ------
   Total net revenues              $284,025  100.0%    $252,588  100.0%      $838,859  100.0%    $755,880  100.0%
                                   ========  ======    ========  ======      ========  ======    ========  ======
</TABLE>

    Recording  of Net  Revenues.  Substantially  all  of  Apria's  revenues  are
reimbursed by third party payors, including private insurers, Medicare, Medicaid
and  managed  care  organizations.  Due to the  nature of the  industry  and the
reimbursement  environment in which Apria operates, net revenues are recorded at
their expected net realizable values.  Inherent in this process is the risk that
the  expected  amounts  will  have  to  be  revised  or  updated  as  additional
information becomes available.

    Medicare  Reimbursement  Update.  The Medicare,  Medicaid and SCHIP Benefits
Improvement  and Protection Act of 2000 provides  reinstatement  of the Consumer
Price  Index-based  reimbursement  increase in 2001 for certain  durable medical
equipment  products and services.  The increase,  which went into effect July 1,
2001 and continues through December 31, 2001, includes a transitional  allowance
that will  effectively  compress a full year's  Consumer Price Index update into
six months.

    GROSS  MARGIN.  Gross  margins  for the third  quarter  of 2001 and the nine
months ended September 30, 2001 were 73.1% and 72.8%, respectively,  compared to
73.3%  and  72.4%  for the  same  periods  last  year.  The  improvement  in the
year-to-date  margin is  attributable  to better  utilization  of inventory  and
patient  service   equipment,   the  increase  in  the  share  of  higher-margin
respiratory  revenues to total net revenues and the price increases reflected in
net revenues.

    SELLING,   DISTRIBUTION  AND  ADMINISTRATIVE.   Selling,   distribution  and
administrative expenses, as percentages of net revenue, were 55.9% and 55.5% for
the third quarter and the nine months ended  September  30, 2001,  respectively,
versus 55.5% and 54.4% for the corresponding  periods in 2000. The increases are
mainly attributable to merit and other compensation increases.

    PROVISION FOR DOUBTFUL  ACCOUNTS.  The  provision for doubtful  accounts was
3.5% of net  revenues  for the third  quarter  and the first nine months of 2001
compared to 2.7% and 3.4% for the  corresponding  periods in 2000. The provision
percentage in the third quarter of 2000 was  positively  impacted by higher than
normal collections. See "Liquidity and Capital Resources - Accounts Receivable".

    AMORTIZATION OF INTANGIBLE ASSETS. Amortization expense was $3.2 million and
$9.2 million for the third quarter and first nine months of 2001,  respectively,
compared to $2.6 million and $7.5 million in the corresponding  periods of 2000.
The increases are directly  attributable to intangible assets that were recorded
in conjunction with acquisitions consummated after the subject periods of 2000.

    INTEREST EXPENSE. Interest expense was $5.1 million for the third quarter of
2001,  down from $10.2 million in the third quarter of 2000. For the nine months
ended  September 30, 2001 interest  expense was $21.5 million  compared to $31.1
million in the same period in 2000.  The  decreases  are due to the reduction in
long-term debt and decreases in interest rates between the periods.

    INCOME TAXES. Income taxes for the nine months ended September 30, 2001, and
in the  corresponding  period of 2000,  have been  provided at the effective tax
rates expected to be applicable for the respective year.

    At December 31,  2000,  Apria's  federal net  operating  loss  carryforwards
("NOLs")  approximated  $174.5  million,  which will begin  expiring  in varying
amounts in the years 2003 through 2013.  Apria also has various state NOLs which
began  expiring in 1997.  Additionally,  the company's  alternative  minimum tax
credit carryforward  approximated $7.6 million at December 31, 2000. As a result
of an ownership change in 1992,  which met specified  criteria of Section 382 of
the Internal Revenue Code, future use of a portion of the federal and state NOLs
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 NOLs may expire  unused.  Apria  excludes  the $57 million of
potentially expiring NOLs from its deferred tax assets. In 2001, for federal tax
purposes, NOLs are being utilized to the extent of the company's federal taxable
income.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

    CASH FLOW.  Operating  cash flow was $166.1 million in the first nine months
of 2001 compared with $159.0  million in the  corresponding  period of 2000. The
cash flow  increase  was  primarily  attributable  to the increase in net income
before items not requiring cash. The larger  increase in accounts  receivable in
the first nine months of 2001,  when  compared  to the same period in 2000,  was
partially offset by decreases in other working capital requirements.

    Cash used in investing  activities increased to $149.3 million for the first
nine months of 2001, compared to $81.5 million during the same period last year.
The  increase  is  attributable  to an  increase  in patient  service  equipment
purchases to support the revenue growth and increased acquisition activity.

    Cash used in financing  activities  was $16.1 million  during the first nine
months of 2001  compared to $32.6  million  during the  corresponding  period of
2000.  The long-term debt  refinancing is reflected in the financing  activities
section of the 2001  statement of cash flows,  but the net decrease in cash used
between the periods  presented is primarily  attributable  to the  following two
items:  (1) Apria made no  scheduled  term loan  payments  on the former  credit
agreement in 2001 prior to the refinancing due to large  prepayments made in the
latter  part of 2000,  and (2) in 2001,  proceeds  from  the  exercise  of stock
options increased. See "Long-term Debt".

    ACCOUNTS  RECEIVABLE.  Accounts  receivable,  before  allowance for doubtful
accounts,  was  $197.0  million at  September  30,  2001 and  $185.3  million at
December 31, 2000.  The  increase is due to continued  quarter-over-quarter  net
revenue increases.  Days sales outstanding  (calculated as of each period-end by
dividing net accounts  receivable by the 90-day rolling average of net revenues)
were 51 days at September  30, 2001 and at December 31, 2000.  Accounts  aged in
excess of 180 days as a percentage  of total  accounts  receivable  decreased to
21.1% at September 30, 2001 from 23.8% at December 31, 2000.

    Evaluation of Net Realizable Value.  Management performs various analyses to
evaluate  the  net  realizable  value  of  accounts  receivable.   Specifically,
management  considers  historical  realization data,  accounts  receivable aging
trends,  operating  statistics and relevant business  conditions.  Also, focused
reviews of certain large and/or  problematic  payors are  performed.  Because of
continuing changes in the healthcare industry and third-party reimbursement,  it
is possible that  management's  estimates  could change in the near term,  which
could have an impact on operations and cash flows.

    Unbilled  Receivables.  Delays  between  the date of service and billing can
occur due to delays in obtaining certain required  payor-specific  documentation
from internal and external  sources.  Such earned but unbilled  receivables  are
aged from date of service and are  considered in Apria's  analysis of historical
performance  and  collectibility.  Earned but  unbilled  receivables  were $27.5
million  and  $17.9  million  at  September  30,  2001 and  December  31,  2000,
respectively.  The increase is largely due to the  acquisitions  effected during
2001.  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.

    LONG-TERM  DEBT.  On July 20, 2001,  Apria closed a new $400 million  senior
secured  credit  agreement  with a syndicate  of lenders led by Bank of America,
N.A.  The  previous  credit  agreement  and Apria's  $200  million 9 1/2% senior
subordinated  notes,  both of which were scheduled to mature in late 2002,  were
repaid in full  concurrent  with the  closing  of the new credit  agreement.  In
connection  with  the  early   retirement  of  its  debt,  Apria  wrote-off  the
unamortized  balance of deferred financing fees attributable to the subordinated
notes and the previous credit agreement, resulting in an extraordinary charge of
$1.5 million, net of tax.

    The senior secured credit  facilities  consist of: a $100 million  five-year
revolving  credit  facility;  a $125  million  five-year  term loan;  and a $175
million  six-year  term  loan.  On  September  30,  2001,  borrowings  under the
revolving  credit  facility  were $16  million,  outstanding  letters  of credit
totaled $1 million and credit  available  under the  revolving  facility was $83
million.

    During the fourth  quarter of 2001,  Apria  entered into two  interest  rate
swaps  with a total  notional  amount  of $100  million  to fix its  LIBOR-based
variable rate debt at 3.07% (before the applicable margin).  The swap agreements
became  effective  October 30, 2001 and terminate on October 30, 2003. The swaps
will be accounted for as cash flow hedges under SFAS No. 133. See "Note E to the
Condensed Consolidated Financial Statements".

    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  income  statements from the date of
acquisition.  During the nine-month  period ended  September 30, 2001, cash paid
for  acquisitions  was $49.7  million.  Included  in this  amount is  contingent
consideration of $1.9 million. Outstanding contingent consideration at September
30, 2001 totaled $5.0 million.

     For  acquisitions  that  closed  during  the  first  nine  months  of 2001,
approximately  $46.7 million was allocated to intangible assets,  which includes
amounts not yet paid. The majority of such intangible assets represents goodwill
from  business  combinations  completed  prior to June 30, 2001,  which is being
amortized over 20 years,  and covenants not to compete which are being amortized
over the life of the respective agreements.

     FEDERAL  INVESTIGATIONS.  The U.S.  Attorney's  office  in Los  Angeles  is
conducting  an  investigation  of  Apria's  billing   documentation.   The  U.S.
Attorney's  office has informed Apria that this  investigation  is the result of
qui tam litigation filed by one or more individuals on behalf of the government,
but has not yet informed Apria whether it will intervene in the qui tam actions;
however,  it could reach a decision with respect to intervention at any time. If
the U.S.  Attorney were to intervene in the qui tam cases, or if qui tam actions
were to proceed  without  such  intervention,  the amount of the claim  could be
highly material.  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. Although Apria believes that such assertions are unwarranted, and
is  prepared  to  vigorously  defend  against  any  attempt  to impose  material
liabilities  or  penalties,  Apria can provide no assurance as to the outcome of
these  proceedings.  In the event Apria was found  liable or  otherwise  reached
settlement on any such claim in a material amount, Apria's liquidity and capital
resources could be adversely affected. See "Note H to the Condensed Consolidated
Financial Statements".

     RECENT ACCOUNTING  PRONOUNCEMENTS.  During the first quarter of 2001, Apria
adopted  Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
amended by SFAS No. 137,  "Accounting  for  Derivative  Instruments  and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and further amended
by SFAS No. 138,  "Accounting  for Certain  Derivative  Instruments  and Certain
Hedging  Activities".  SFAS No.  133,  as amended,  establishes  accounting  and
reporting  standards  for hedging  activities  and for  derivative  instruments,
including  certain  derivative  instruments  embedded  in  other  contracts.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities  in  the   statements  of  financial   position  and  measure  those
instruments  at fair  value.  Changes in the fair value of  derivatives  must be
recorded  each  period.  SFAS  No.  133  also  requires  formal   documentation,
designation at the time the hedge transaction is initiated and assessment of the
effectiveness of the transactions that receive hedge accounting. At adoption and
at September  30, 2001,  Apria had no derivative  instruments  that require fair
value measurement under SFAS No. 133. Accordingly,  adoption of SFAS No. 133 did
not have a material effect on the consolidated financial statements.

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  141,  "Business  Combinations"  and  SFAS  No.  142,  "Goodwill  and  Other
Intangible  Assets".  SFAS  No.  141  requires  that all  business  combinations
initiated  after June 30, 2001 be accounted  for under the  purchase  method and
eliminates  the pooling of  interests  method.  Adoption of SFAS No. 141 did not
have a significant effect on the company's consolidated financial statements.

     SFAS No. 142 requires  that an intangible  asset that is acquired  shall be
initially  recognized and measured  based on its fair value.  The statement also
provides  that  goodwill  should  not be  amortized,  but  shall be  tested  for
impairment  annually,  or more frequently if  circumstances  indicate  potential
impairment,  through a comparison of fair value to its carrying amount. Existing
goodwill  will  continue to be amortized  through the remainder of 2001 at which
time  amortization  will  cease and the  company  will  perform  a  transitional
goodwill  impairment test.  Goodwill and intangible  assets acquired in business
combinations  completed  after June 30, 2001 must  comply  with this  statement.
Adoption  of SFAS  No.  142 in its  entirety  is  required  for  fiscal  periods
beginning after December 15, 2001. Apria management is currently  evaluating the
impact of the new accounting  standard on existing goodwill and other intangible
assets.  The  ultimate  impact  of the  new  accounting  standard  has yet to be
determined.  Goodwill  amortization  expense for the nine months ended September
30, 2001 was $7.3 million.

    In August 2001, the FASB issued 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  similar 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.  The  provisions  of SFAS No.  144 are  effective  for  financial
statements  issued for years  beginning after December 15, 2001. The adoption of
this statement will not have a material effect on Apria's financial statements.

    OTHER. Apria's management believes that cash provided by operations together
with cash invested in its money market account and amounts  available  under its
existing  credit  facility will be sufficient to finance its current  operations
for at least the next year.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Apria is subject to interest  rate changes on its  variable  rate term loans
under the company's bank credit agreement. Based on the term debt outstanding at
September 30, 2001 and the current market  perception,  a 100 basis point change
in the applicable  interest rates would increase or decrease Apria's annual cash
flow and pretax earnings by approximately  $3.0 million.  At September 30, 2001,
Apria did not have any derivative financial instruments.
<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. Pursuant to a
             court order dated May 27,  1998,  the  plaintiffs  in the  original
             three class  actions  filed a  Consolidated  Amended  Class  Action
             Complaint  on August 6, 1998.  The  amended  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 amended  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 amended
             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.

             Apria and its 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, this 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.

             Apria  believes  that, in all of these class action  cases,  it has
             meritorious  defenses to the plaintiffs'  claims, and it intends to
             vigorously defend itself. 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.

             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,  all of which
             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
             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 2-3.   NOT APPLICABLE

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

             (a) Annual Meeting of Stockholders of the company on July 18, 2001.

             (b) Directors  re-elected  at the  Annual Meeting for a term of one
                 year:

                         David H. Batchelder
                         Philip L. Carter
                         David L. Goldsmith
                         Richard H. Koppes
                         Philip R. Lochner, Jr.
                         Beverly Benedict Thomas
                         Ralph V. Whitworth

             (c) Matters Voted Upon at Annual Meeting:

                 Election of Directors
                 ---------------------

                 The company's Board of Directors consists of seven  members who
                 will serve for one year or until the election and qualification
                 of their successors. The results of the Stockholder voting were
                 as follows:

                                                          FOR          WITHHOLD
                                                       ----------      --------
                         David H. Batchelder           49,541,275       440,828
                         Philip L. Carter              49,541,275       440,828
                         David L. Goldsmith            49,541,275       440,828
                         Richard H. Koppes             49,541,275       440,828
                         Philip R. Lochner, Jr.        49,541,275       440,828
                         Beverly Benedict Thomas       49,541,275       440,828
                         Ralph V. Whitworth            49,541,275       440,828

ITEM 5.      NOT APPLICABLE

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

             (a) Exhibits:

                 Exhibit
                 Number  Reference
                 ------  ---------
                  10.1    Building Lease, dated  December 6, 2000 and commencing
                          on December  1, 2001,  between  MSGW California I, LLC
                          and Apria Healthcare, Inc. for  two  buildings  within
                          the  MSGW/Pacific  Commercentre  Business  Park,  Lake
                          Forest, California.

                  10.2    Credit Agreement dated July 20, 2001, among Registrant
                          and  certain  of  its  subsidiaries, Bank  of  America
                          National Association and  other financial institutions
                          party to the Credit Agreement.

                  10.3    Underwriting  Agreement  dated August 9, 2001, between
                          Registrant and Relational Investors, LLC.


             (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



November 14, 2001                   /s/ JAMES E. BAKER
                                    --------------------------------------------
                                    James E. Baker
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)