##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K/A
 AMENDMENT NO. 1
 
 (Mark one)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 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. EmployerIncorporation or Organization)
    
    Identification Number)26220 Enterprise Court, Lake Forest, CA
    
    92630(Address of Principal Executive Offices)
    
    (Zip Code)
 Registrants telephone number: (949) 639-2000
 Securities registered pursuant to Section 12(b) of the Act:
 Common Stock, $0.001 par value per share
    
    New York Stock Exchange(Title of each class)
    
    (Name of each exchange on which registered)
 Securities registered pursuant to Section 12(g) of the Act:
 Yes þ No o
 Yes o No þ
 o þ
 o
  Large Accelerated filer þ
    
    Accelerated filer o
    
    Non-Accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller Reporting company o
 o þ




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TABLE OF CONTENTS  PART IIItem 9A. CONTROLS AND PROCEDURESPART IVItem 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESSIGNATUREExhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2    Table of Contents  Explanatory Note




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PART II
 
 
 Item 9A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
    Future Remediation Plan for Material Weakness
  Changes in Internal Control Over Financial Reporting
  Managements Report On Internal Control Over Financial Reporting (As Revised)




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Internal ControlIntegrated Framework
 Managements estimate of the reserve for uncollectible accounts receivable.
    /s/ LAWRENCE M. HIGBY

Lawrence M. HigbyChief Executive Officer/s/ CHRIS A. KARKENNY

Chris A. Karkenny
Executive Vice President and Chief Financial Officer




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PART IV
 
 
 Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    1.
    
    
    The financial statements described in the Index to
Consolidated Financial Statements and Financial Statement
Schedule are included in this Amendment No. 1 starting at
page F-1.2.
    
    
    The financial statement schedule is included on page S-1.All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.3.
    
    
    Exhibits included or incorporated by reference herein:See Exhibit Index.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
 PageCONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheets  December 31, 2007 and 2006 (As Restated)
    
    
    F-3Consolidated Statements of Income  Years ended December 31, 2007, 2006 (As Restated) and 2005 (As Restated)
    
    
    F-4Consolidated Statements of Stockholders Equity  Years ended December 31, 2007, 2006 (As Restated) and 2005
(As Restated)
    
    
    F-5Consolidated Statements of Cash Flows  Years ended December 31, 2007, 2006 (As Restated) and 2005 (As Restated)
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7FINANCIAL STATEMENT SCHEDULESchedule II  Valuation and Qualifying Accounts
    
    
    S-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      F-1




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Managements estimate of the reserve for uncollectible accounts receivable
   Internal
ControlIntegrated Framework
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109.
 
  F-2




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APRIA HEALTHCARE GROUP INC.
 
 CONSOLIDATED BALANCE SHEETS
 December 31,(in thousands, except share data)
    
    2007
    
    
    2006(As Restated See Note 2)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    28,451
    
    
    $
    14,657Accounts receivable, less allowance for doubtful
accounts of $47,823 and $27,324 at December 31,
2007 and 2006, respectively
    
    
    284,141
    
    
    
    211,097Inventories, net
    
    
    52,079
    
    
    
    40,681Deferred income taxes
    
    
    66,198
    
    
    
    42,480Deferred expenses
    
    
    3,102
    
    
    
    3,020Prepaid expenses and other current assets
    
    
    23,364
    
    
    
    19,142TOTAL CURRENT ASSETS
    
    
    457,335
    
    
    
    331,077PATIENT SERVICE EQUIPMENT, less accumulated
depreciation of $453,324 and $445,608 at December 31,
2007 and 2006, respectively
    
    
    200,180
    
    
    
    212,068PROPERTY, EQUIPMENT AND IMPROVEMENTS, NET
    
    
    102,827
    
    
    
    52,975GOODWILL
    
    
    715,235
    
    
    
    539,187INTANGIBLE ASSETS, NET
    
    
    107,757
    
    
    
    6,551DEFERRED DEBT ISSUANCE COSTS, NET
    
    
    2,834
    
    
    
    4,612OTHER ASSETS
    
    
    11,634
    
    
    
    8,166$
    1,597,802
    
    
    $
    1,154,636LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    120,360
    
    
    $
    66,969Accrued payroll and related taxes and benefits
    
    
    66,625
    
    
    
    46,532Income taxes payable
    
    
    3,076
    
    
    
    10,793Other accrued liabilities
    
    
    73,835
    
    
    
    44,804Deferred revenue
    
    
    29,704
    
    
    
    29,158Current portion of long-term debt
    
    
    254,252
    
    
    
    2,145TOTAL CURRENT LIABILITIES
    
    
    547,852
    
    
    
    200,401LONG-TERM DEBT, net of current portion
    
    
    433,031
    
    
    
    485,000DEFERRED INCOME TAXES
    
    
    62,290
    
    
    
    60,815INCOME TAXES PAYABLE AND OTHER NON-CURRENT LIABILITIES
    
    
    42,604
    
    
    
    8,727TOTAL LIABILITIES
    
    
    1,085,777
    
    
    
    754,943COMMITMENTS AND CONTINGENCIES (Notes 11 and 13)STOCKHOLDERS EQUITYPreferred stock, $.001 par value:10,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $.001 par value:150,000,000 shares authorized; 60,844,901 and
59,762,307 shares issued at December 31, 2007
and 2006, respectively; 43,794,492 and
42,789,450 outstanding at December 31, 2007 and
2006, respectively
    
    
    61
    
    
    
    60Additional paid-in capital
    
    
    514,848
    
    
    
    482,123Treasury stock, at cost; 17,050,409 and 16,972,857
shares at December 31, 2007 and 2006, respectively
    
    
    (431,651
    )
    
    
    (429,573
    )Retained earnings
    
    
    428,538
    
    
    
    346,732Accumulated other comprehensive income
    
    
    229
    
    
    
    351TOTAL STOCKHOLDERS EQUITY
    
    
    512,025
    
    
    
    399,693$
    1,597,802
    
    
    $
    1,154,636
 See notes to consolidated financial statements.
  F-3




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APRIA HEALTHCARE GROUP INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
 Year Ended December 31,(in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005(As Restated
    
    
    (As Restated See Note 2)
    
    
     See Note 2)Net revenues:Fee for service arrangements
    
    $
    1,465,303
    
    
    $
    1,355,202
    
    
    $
    1,329,346Capitation
    
    
    166,498
    
    
    
    161,489
    
    
    
    146,324TOTAL NET REVENUES
    
    
    1,631,801
    
    
    
    1,516,691
    
    
    
    1,475,670Costs and expenses:Cost of net revenues:Product and supply costs
    
    
    386,496
    
    
    
    345,693
    
    
    
    309,338Patient service equipment depreciation
    
    
    110,775
    
    
    
    113,177
    
    
    
    111,759Home respiratory therapy services
    
    
    38,886
    
    
    
    38,501
    
    
    
    34,669Nursing services
    
    
    11,353
    
    
    
    8,825
    
    
    
    9,078Other
    
    
    17,482
    
    
    
    15,384
    
    
    
    14,369TOTAL COST OF NET REVENUES
    
    
    564,992
    
    
    
    521,580
    
    
    
    479,213Provision for doubtful accounts
    
    
    43,138
    
    
    
    38,723
    
    
    
    46,948Selling, distribution and administrative
    
    
    862,062
    
    
    
    804,285
    
    
    
    792,031Qui tamsettlement and related costs (Note 13)
    
    
    
    
    
    
    
    
    
    
    19,258Amortization of intangible assets
    
    
    3,079
    
    
    
    5,080
    
    
    
    6,941TOTAL COSTS AND EXPENSES
    
    
    1,473,271
    
    
    
    1,369,668
    
    
    
    1,344,391OPERATING INCOME
    
    
    158,530
    
    
    
    147,023
    
    
    
    131,279Interest expense
    
    
    22,447
    
    
    
    31,205
    
    
    
    22,972Interest income and other
    
    
    (1,954
    )
    
    
    (1,742
    )
    
    
    (853
    )INCOME BEFORE TAXES
    
    
    138,037
    
    
    
    117,560
    
    
    
    109,160Income tax expense
    
    
    51,998
    
    
    
    43,297
    
    
    
    40,677NET INCOME
    
    $
    86,039
    
    
    $
    74,263
    
    
    $
    68,483Basic net income per common share
    
    $
    1.98
    
    
    $
    1.75
    
    
    $
    1.42Diluted net income per common share
    
    $
    1.95
    
    
    $
    1.73
    
    
    $
    1.40
 See notes to consolidated financial statements.
  F-4




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APRIA HEALTHCARE GROUP INC.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    Retained
    
    
    Comprehensive
    
    
    Stockholders(in thousands)
    
    Shares
    
    
    Par Value
    
    
    Capital
    
    
    Shares
    
    
    Cost
    
    
    Earnings
    
    
    (Loss)Income
    
    
    Equity(As Restated
    
    
    
    
    
    
    (As Restated See Note 2)
    
    
    
    
    
    
     See Note 2)Balance at January
1, 2005, as
previously reported
    
    
    58,236
    
    
    $
    58
    
    
    $
    439,544
    
    
    
    9,628
    
    
    $
    (254,432
    )
    
    $
    221,041
    
    
    $
    (26
    )
    
    $
    406,185Restatement
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,055
    )
    
    
    
    
    
    
    (17,055
    )Balance at January
1, 2005, as
restated
    
    
    58,236
    
    
    
    58
    
    
    
    439,544
    
    
    
    9,628
    
    
    
    (254,432
    )
    
    
    203,986
    
    
    
    (26
    )
    
    
    389,130Exercise of stock
options
    
    
    937
    
    
    
    1
    
    
    
    21,179
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,180Tax benefits
related to stock
options
    
    
    
    
    
    
    
    
    
    
    4,117
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,117Compensatory stock
options and awards
    
    
    43
    
    
    
    
    
    
    
    3,259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,259Repurchases of
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,337
    
    
    
    (175,000
    )
    
    
    
    
    
    
    
    
    
    
    (175,000
    )Unrealized gain on
interest rate swap
agreements, net of
taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    482Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,483
    
    
    
    
    
    
    
    66,483Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68,483
    
    
    
    482
    
    
    
    68,965Balance at December
31, 2005, as
restated
    
    
    59,216
    
    
    
    59
    
    
    
    468,099
    
    
    
    16,965
    
    
    
    (429,432
    )
    
    
    272,469
    
    
    
    456
    
    
    
    311,651Exercise of stock
options
    
    
    508
    
    
    
    1
    
    
    
    8,244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,245Tax benefits
related to stock
options
    
    
    
    
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403Tax shortfalls on
share-based
compensation
    
    
    
    
    
    
    
    
    
    
    (386
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (386
    )Compensatory stock
options and awards
    
    
    38
    
    
    
    
    
    
    
    5,763
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,763Restricted stock
retained in
treasury upon
vesting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    (141
    )
    
    
    
    
    
    
    
    
    
    
    (141
    )Unrealized loss
on interest rate
swap agreements,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    (105
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,263
    
    
    
    
    
    
    
    74,263Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,263
    
    
    
    (105
    )
    
    
    74,158Balance at December
31, 2006, as
restated
    
    
    59,762
    
    
    
    60
    
    
    
    482,123
    
    
    
    16,973
    
    
    
    (429,573
    )
    
    
    346,732
    
    
    
    351
    
    
    
    399,693Cumulative effect
adjustment pursuant
to adoption of FIN
48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,233
    )
    
    
    
    
    
    
    (4,233
    )Exercise of stock
options
    
    
    887
    
    
    
    1
    
    
    
    17,617
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,618Tax benefits
related to stock
options
    
    
    
    
    
    
    
    
    
    
    4,057
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,057Tax shortfalls on
share-based
compensation
    
    
    
    
    
    
    
    
    
    
    (99
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99
    )Compensatory stock
options and awards
    
    
    196
    
    
    
    
    
    
    
    11,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,150Restricted stock
retained in
treasury upon
vesting
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    (2,078
    )
    
    
    
    
    
    
    
    
    
    
    (2,078
    )Unrealized loss
on interest rate
swap agreements,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (122
    )
    
    
    (122
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,039
    
    
    
    
    
    
    
    86,039Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,039
    
    
    
    (122
    )
    
    
    85,917Balance at December
31, 2007
    
    
    60,845
    
    
    $
    61
    
    
    $
    514,848
    
    
    
    17,050
    
    
    $
    (431,651
    )
    
    $
    428,538
    
    
    $
    229
    
    
    $
    512,025
 See notes to consolidated financial statements.
  F-5




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APRIA HEALTHCARE GROUP INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,(in thousands)
    
    2007
    
    
    2006
    
    
    2005(As Restated
    
    
    (As Restated See Note 2)
    
    
     See Note 2)OPERATING ACTIVITIESNet income
    
    $
    86,039
    
    
    $
    74,263
    
    
    $
    68,483Items included in net income not requiring cash:Provision for doubtful accounts
    
    
    43,138
    
    
    
    38,723
    
    
    
    46,948Depreciation
    
    
    131,645
    
    
    
    133,563
    
    
    
    133,677Amortization of intangible assets
    
    
    3,079
    
    
    
    5,080
    
    
    
    6,941Amortization of deferred debt issuance costs
    
    
    1,778
    
    
    
    1,755
    
    
    
    1,729Deferred income taxes
    
    
    4,605
    
    
    
    24,712
    
    
    
    (4,962
    )Share-based compensation
    
    
    11,150
    
    
    
    5,763
    
    
    
    3,259Excess tax benefits from shared-based compensation
    
    
    (4,057
    )
    
    
    (403
    )
    
    
    Gain on disposition of assets and other
    
    
    (536
    )
    
    
    (81
    )
    
    
    Changes in operating assets and liabilities, exclusive of effects of acquisitions:Accounts receivable
    
    
    (33,724
    )
    
    
    (23,342
    )
    
    
    (54,198
    )Inventories, net
    
    
    2,589
    
    
    
    2,025
    
    
    
    (561
    )Prepaid expenses and other assets
    
    
    (48
    )
    
    
    7,094
    
    
    
    3,452Accounts payable, exclusive of book cash overdraft
    
    
    7,043
    
    
    
    7,717
    
    
    
    2,907Accrued payroll and related taxes and benefits
    
    
    477
    
    
    
    (4,775
    )
    
    
    3,547Income taxes payable
    
    
    20,380
    
    
    
    2,145
    
    
    
    (6,427
    )Deferred revenue, net of deferred expenses
    
    
    289
    
    
    
    1,238
    
    
    
    (1,790
    )Accrued expenses
    
    
    20,159
    
    
    
    5,437
    
    
    
    3,294NET CASH PROVIDED BY OPERATING ACTIVITIES
    
    
    294,006
    
    
    
    280,914
    
    
    
    206,299INVESTING ACTIVITIESPurchases of patient service equipment and property, equipment and
improvements, exclusive of effects of acquisitions
    
    
    (128,759
    )
    
    
    (125,628
    )
    
    
    (118,867
    )Proceeds from disposition of assets
    
    
    102
    
    
    
    778
    
    
    
    767Cash paid for acquisitions
    
    
    (354,578
    )
    
    
    (8,082
    )
    
    
    (105,471
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (483,235
    )
    
    
    (132,932
    )
    
    
    (223,571
    )FINANCING ACTIVITIESProceeds from revolving credit facilities
    
    
    359,000
    
    
    
    29,800
    
    
    
    216,250Payments on revolving credit facilities
    
    
    (170,000
    )
    
    
    (184,800
    )
    
    
    (51,000
    )Payments on other long-term debt
    
    
    (3,264
    )
    
    
    (7,030
    )
    
    
    (7,854
    )Change in book cash overdraft included in accounts payable
    
    
    (4,291
    )
    
    
    (2,128
    )
    
    
    (2,384
    )Capitalized debt issuance costs
    
    
    
    
    
    
    (1,119
    )
    
    
    (15
    )Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    (175,000
    )Excess tax benefits from shared-based compensation
    
    
    4,057
    
    
    
    403
    
    
    
    Issuances of common stock
    
    
    17,521
    
    
    
    8,245
    
    
    
    21,180NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
    
    
    203,023
    
    
    
    (156,629
    )
    
    
    1,177NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    13,794
    
    
    
    (8,647
    )
    
    
    (16,095
    )Cash and cash equivalents at beginning of year
    
    
    14,657
    
    
    
    23,304
    
    
    
    39,399CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    28,451
    
    
    $
    14,657
    
    
    $
    23,304
    See notes to consolidated financial statements.
  F-6




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APRIA HEALTHCARE GROUP INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation:
 Company Background: Disclosures about Segments of an Enterprise and
Related Information.
 Use of Accounting Estimates:
 Revenue Recognition and Concentration of Credit Risk:
 Revenue Arrangements with Multiple
Deliverables,
 Deferred Revenue and Deferred Expense: Accounting for Leases.
  F-7




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##### Table of Contents



Accounting
for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases.
 Cash and Cash Equivalents:
 Accounts Receivable:
    Inventories:
 Patient Service Equipment:
 Property, Equipment and Improvements:
 Capitalized Software: Accounting for the Costs of Computer Software Developed or Obtained for Internal Use
  F-8




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##### Table of Contents



Long-Lived Assets: Accounting for the Impairment or Disposal of Long-Lived Assets.
 
    
    significant underperformance relative to historical or projected future operating
results;
    
    significant changes in the manner of use of the assets or the strategy for our
overall business;
    
    significant decrease in the market value of the assets; and
    
    significant negative industry or economic trends.
  Goodwill: Goodwill and Other Intangible Assets,
 Intangible Assets:
 Deferred Debt Issuance Costs
 Fair Value of Financial Instruments:
 Product and Supply Costs:
 Home Respiratory Therapy Expenses:
  F-9




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##### Table of Contents



Distribution Expenses: Accounting for Shipping and Handling Fees and Costs,
 Self-Insurance
 Advertising:
 Income Taxes: Accounting for Income Taxes.
 Accounting for Uncertainty in Income Taxes Accounting for Contingencies
 Derivative Instruments and Hedging Activities: Accounting for Derivative Instruments and Hedging Activities.
 Share-Based Compensation: Accounting for Stock Issued to Employees,
 Share-Based Payment
 Comprehensive Income:
 Per Share Amounts:
  F-10




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##### Table of Contents



NOTE 2  RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
 Accounting for Leases.
 Accounting
for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct
Costs of Leases.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
   CONSOLIDATED BALANCE SHEET ITEMS
 December 31, 2006(As Previously
    
    
    
    
    
    
    (As(in thousands)
    
    Reported)
    
    
    (Adjustments)
    
    
    Restated)Deferred income taxes
    
    $
    36,648
    
    
    $
    5,832
    
    
    $
    42,480Deferred expenses
    
    
    22,712
    
    
    
    (19,692
    )
    
    
    3,020Total current assets
    
    
    344,937
    
    
    
    (13,860
    )
    
    
    331,077Total assets
    
    
    1,168,496
    
    
    
    (13,860
    )
    
    
    1,154,636Deferred revenue
    
    
    32,280
    
    
    
    (3,122
    )
    
    
    29,158Total current liabilities
    
    
    203,523
    
    
    
    (3,122
    )
    
    
    200,401Total liabilities
    
    
    758,065
    
    
    
    (3,122
    )
    
    
    754,943Retained earnings
    
    
    357,470
    
    
    
    (10,738
    )
    
    
    346,732Total stockholders equity
    
    $
    410,431
    
    
    $
    (10,738
    )
    
    $
    399,693
  F-11




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##### Table of Contents



CONSOLIDATED STATEMENT OF INCOME ITEMS
 Year Ended December 31, 2006(As Previously
    
    
    
    
    
    
    (As(in thousands, except per share data)
    
    Reported)
    
    
    (Adjustments)
    
    
    Restated)Fee for service arrangements
    
    $
    1,355,818
    
    
    $
    (616
    )
    
    $
    1,355,202Total net revenues
    
    
    1,517,307
    
    
    
    (616
    )
    
    
    1,516,691Product and supply costs
    
    
    345,552
    
    
    
    141
    
    
    
    345,693Total cost of net revenues
    
    
    521,439
    
    
    
    141
    
    
    
    521,580Selling, distribution and administrative
    
    
    804,365
    
    
    
    (80
    )
    
    
    804,285Total costs and expenses
    
    
    1,369,607
    
    
    
    61
    
    
    
    1,369,668Operating income
    
    
    147,700
    
    
    
    (677
    )
    
    
    147,023Income before taxes
    
    
    118,237
    
    
    
    (677
    )
    
    
    117,560Income tax expense
    
    
    43,257
    
    
    
    40
    
    
    
    43,297Net income
    
    
    74,980
    
    
    
    (717
    )
    
    
    74,263Basic net income per common share
    
    
    1.77
    
    
    
    
    
    
    
    1.75Diluted net income per common share
    
    $
    1.75
    
    
    
    
    
    
    $
    1.73
 CONSOLIDATED STATEMENT OF INCOME ITEMS
 Year Ended December 31, 2005(As Previously
    
    
    
    
    
    
    (As(in thousands, except per share data)
    
    Reported)
    
    
    (Adjustments)
    
    
    Restated)Fee for service arrangements
    
    $
    1,327,777
    
    
    $
    1,569
    
    
    $
    1,329,346Total net revenues
    
    
    1,474,101
    
    
    
    1,569
    
    
    
    1,475,670Product and supply costs
    
    
    309,413
    
    
    
    (75
    )
    
    
    309,338Total cost of net revenues
    
    
    479,288
    
    
    
    (75
    )
    
    
    479,213Selling, distribution and administrative
    
    
    792,177
    
    
    
    (146
    )
    
    
    792,031Total costs and expenses
    
    
    1,344,612
    
    
    
    (221
    )
    
    
    1,344,391Operating income
    
    
    129,489
    
    
    
    1,790
    
    
    
    131,279Income before taxes
    
    
    107,370
    
    
    
    1,790
    
    
    
    109,160Income tax expense
    
    
    40,429
    
    
    
    248
    
    
    
    40,677Net income
    
    
    66,941
    
    
    
    1,542
    
    
    
    68,483Basic net income per common share
    
    
    1.39
    
    
    
    
    
    
    
    1.42Diluted net income per common share
    
    $
    1.37
    
    
    
    
    
    
    $
    1.40
 CONSOLIDATED STATEMENT OF CASH FLOWS ITEMS
 Year Ended December 31, 2006(As Previously
    
    
    
    
    
    
    (As(in thousands)
    
    Reported)
    
    
    (Adjustments)
    
    
    Restated)Net income
    
    $
    74,980
    
    
    $
    (717
    )
    
    $
    74,263Deferred income taxes
    
    
    24,673
    
    
    
    39
    
    
    
    24,712Deferred revenue, net of deferred expenses
    
    $
    560
    
    
    $
    678
    
    
    $
    1,238
 CONSOLIDATED STATEMENT OF CASH FLOWS ITEMS
 Year Ended December 31, 2005(As Previously
    
    
    
    
    
    
    (As(in thousands)
    
    Reported)
    
    
    (Adjustments)
    
    
    Restated)Net income
    
    $
    66,941
    
    
    $
    1,542
    
    
    $
    68,483Deferred income taxes
    
    
    (5,210
    )
    
    
    248
    
    
    
    (4,962
    )Deferred revenue, net of deferred expenses
    
    $
    
    
    
    $
    (1,790
    )
    
    $
    (1,790
    )
  F-12




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NOTE 3  RECENT ACCOUNTING PRONOUNCEMENTS
   Definition of Settlement in FASB Interpretation
No. 48
 Fair Value Measurements,
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Business Combinations Business Combinations.
 Noncontrolling Interests in Consolidated
Financial StatementsAn Amendment of ARB No. 51
 Effective Date of FASB Statement No. 157
  F-13




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##### Table of Contents



NOTE 4  PROPERTY, EQUIPMENT AND IMPROVEMENTS
  December 31,(in thousands)
    
    2007
    
    
    2006Leasehold improvements
    
    $
    41,826
    
    
    $
    36,770Equipment and furnishings
    
    
    84,581
    
    
    
    56,696Information systems  hardware
    
    
    96,155
    
    
    
    88,396Information systems  software
    
    
    80,756
    
    
    
    51,753303,318
    
    
    
    233,615Less accumulated depreciation
    
    
    (200,491
    )
    
    
    (180,640
    )$
    102,827
    
    
    $
    52,975
  NOTE 5  BUSINESS COMBINATIONS
    Year Ended December 31,(in thousands)
    
    2007
    
    
    2006
    
    
    2005Fair value of patient service equipment acquired
    
    $
    7,014
    
    
    $
    1,923
    
    
    $
    7,453Fair value of property and equipment acquired
    
    
    24,916
    
    
    
    4
    
    
    
    985Fair value of other assets acquired
    
    
    132,070
    (1)
    
    
    641
    
    
    
    1,577Intangible assets
    
    
    104,284
    
    
    
    1,100
    
    
    
    7,613Goodwill
    
    
    176,048
    
    
    
    (1,112
    )
    
    
    85,362Total assets acquired
    
    
    444,332
    
    
    
    2,556
    
    
    
    102,990Liabilities assumed and accrued, net of payments from prior years acquisitions
    
    
    (89,754
    )(2)
    
    
    5,526
    
    
    
    2,481Net assets acquired
    
    $
    354,578
    
    
    $
    8,082
    
    
    $
    105,471
   (1)
    
    Consists primarily of $82.5 million in net accounts receivable, $14.0 million in net
inventory and $28.3 million in deferred tax assets.(2)
    
    Consists primarily of $44.9 million in accounts payable, $17.7 million in accrued
compensation and $9.4 million in other accrued liabilities. Year Ended December 31,(in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Net revenues
    
    $
    2,103,791
    
    
    $
    1,997,106
    
    
    $
    1,552,571Net income
    
    
    86,275
    
    
    
    61,558
    
    
    
    72,407Basic net income per common share
    
    $
    1.98
    
    
    $
    1.45
    
    
    $
    1.50Diluted net income per common share
    
    $
    1.95
    
    
    $
    1.43
    
    
    $
    1.48
  F-14




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##### Table of Contents



NOTE 6  GOODWILL AND INTANGIBLE ASSETS
 Business
Combinations,
    December 31, 2007
    
    
    December 31, 2006Average
    
    
    Gross
    
    
    
    
    
    
    
    
    
    
    GrossLife in
    
    
    Carrying
    
    
    Accumulated
    
    
    Net Book
    
    
    Carrying
    
    
    Accumulated
    
    
    Net Book(dollars in thousands)
    
    Years
    
    
    Amount
    
    
    Amortization
    
    
    Value
    
    
    Amount
    
    
    Amortization
    
    
    ValueIntangible assets subject
to amortization:Covenants not to compete
    
    
    5.0
    
    
    $
    11,380
    
    
    $
    (7,744
    )
    
    $
    3,636
    
    
    $
    13,506
    
    
    $
    (7,313
    )
    
    $
    6,193Patient referral sources
    
    
    20.0
    
    
    
    34,300
    
    
    
    (143
    )
    
    
    34,157
    
    
    
    
    
    
    
    
    
    
    
    Customer lists
    
    
    1.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,283
    
    
    
    (925
    )
    
    
    358Favorable leases
    
    
    3.1
    
    
    
    584
    
    
    
    (20
    )
    
    
    564Total
    
    
    7.3
    
    
    
    46,264
    
    
    
    (7,907
    )
    
    
    38,357
    
    
    
    14,789
    
    
    
    (8,238
    )
    
    
    6,551Intangible assets not
subject to amortization:Trade names
    
    
    
    
    
    
    69,400
    
    
    
    
    
    
    
    69,400
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    7.3
    
    
    $
    115,664
    
    
    $
    (7,907
    )
    
    $
    107,757
    
    
    $
    14,789
    
    
    $
    (8,238
    )
    
    $
    6,551
  Year Ending December 31,
    
    (in thousands)2008
    
    $
    7,1942009
    
    
    4,4252010
    
    
    2,6112011
    
    
    2,1292012
    
    
    1,992
  F-15




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NOTE 7  LONG-TERM DEBT
  December 31,(in thousands)
    
    2007
    
    
    2006Notes payable relating to revolving credit facilities
    
    $
    424,000
    
    
    $
    235,000Convertible senior notes
    
    
    250,000
    
    
    
    250,000Capital lease obligations (see Note 11)
    
    
    7,031
    
    
    
    Other
    
    
    6,252
    
    
    
    2,145687,283
    
    
    
    487,145Less: current maturities
    
    
    (254,252
    )
    
    
    (2,145
    )$
    433,031
    
    
    $
    485,000
 Revolving Credit Facility:
    Convertible Senior Notes:
   F-16




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##### Table of Contents



Year Ending December 31,
    
    (in thousands)2008
    
    $
    254,2522009
    
    
    3,4362010
    
    
    2,6122011
    
    
    426,3042012
    
    
    679Thereafter
    
    
    $
    687,283
  Hedging Activities:
  Accounting for Derivative Instruments and Hedging Activities.
 NOTE 8  SHARE-BASED COMPENSATION AND STOCKHOLDERS EQUITY
 Accounting for Stock-Based
Compensation, Accounting for Stock-Based Compensation  Transition
and Disclosure
  F-17




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##### Table of Contents



Year Ended December 31,2007
    
    
    2006
    
    
    2005Expected option term in years (1)
    
    
    4.6
    
    
    
    4.8
    
    
    
    4.1Expected volatility (2)
    
    
    29.9
    %
    
    
    27.3
    %
    
    
    32.0
    %Risk-free interest rate (3)
    
    
    4.5
    %
    
    
    4.6
    %
    
    
    3.8
    %Expected annual dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 (1)
    
    The expected option term is based on historical exercise and post-vesting termination
patterns.(2)
    
    Expected volatility represents a combination of historical stock price volatility and implied
volatility from publicly-traded options on Aprias common stock.(3)
    
    The risk-free interest rate is based on the implied yield on a U.S. Treasury zero coupon
issue with a remaining term equal to the expected term of the option. 2003 Performance Incentive Plan:
   
    
    grants of incentive stock options up to 2,000,000 shares,
    
    grants of options and SARs during any calendar year to any individual up to 500,000
shares,
    
    shares subject to all awards granted to an individual during any calendar year up to
1,000,000 shares,
    
    awards granted to non-employee directors up to 700,000 shares,
  F-18




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##### Table of Contents




    
    awards granted, other than for stock options and SARs, up to 2,275,000 shares,
    
    performance-based awards, other than stock options and SARs, granted to an individual up
to 500,000 shares in a calendar year, and
    
    performance-based awards, payable in cash at the discretion of the Compensation
Committee, granted to an individual up to $10,000,000 in a calendar year.
   Stock Options:
  Weighted-RemainingWeighted-
    
    
    Contractual
    
    
    AggregateAverage
    
    
    Term
    
    
    IntrinsicOptions
    
    
    Exercise Price
    
    
    (in Years)
    
    
    ValueOutstanding at January 1, 2005
    
    
    5,114,145
    
    
    $
    24.84
    
    
    
    7.37
    
    
    $
    41,774,469Granted
    
    
    49,000
    
    
    
    32.45Exercised
    
    
    (920,385
    )
    
    
    22.49Forfeited
    
    
    (166,055
    )
    
    
    29.20Outstanding at December 31, 2005
    
    
    4,076,705
    
    
    $
    25.28
    
    
    
    6.60
    
    
    $
    7,881,252Granted
    
    
    1,056,000
    
    
    
    23.23Exercised
    
    
    (349,596
    )
    
    
    20.64Forfeited
    
    
    (726,795
    )
    
    
    29.48Outstanding at December 31, 2006
    
    
    4,056,314
    
    
    $
    24.59
    
    
    
    6.38
    
    
    $
    13,750,742Granted
    
    
    759,830
    
    
    
    30.84Exercised
    
    
    (863,693
    )
    
    
    20.23Forfeited
    
    
    (219,068
    )
    
    
    29.26Outstanding at December 31, 2007
    
    
    3,733,383
    
    
    $
    26.60
    
    
    
    6.28
    
    
    $
    1,690,040Vested or expected to vest as of December 31, 2007
    
    
    3,503,580
    
    
    $
    26.56
    
    
    
    6.12
    
    
    $
    1,680,053Exercisable at December 31, 2007
    
    
    2,581,277
    
    
    $
    26.21
    
    
    
    5.17
    
    
    $
    1,638,973
   Restricted Stock Purchase Rights:
  F-19




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##### Table of Contents



WeightedRestricted
    
    
    
    
    
    
    RemainingStock
    
    
    Weighted-
    
    
    Contractual
    
    
    AggregatePurchase
    
    
    Average
    
    
    Term
    
    
    IntrinsicRights
    
    
    Exercise Price
    
    
    (in Years)
    
    
    ValueOutstanding at January 1, 2005
    
    
    586,000
    
    
    $
    6.70
    
    
    
    8.71
    
    
    $
    15,385,350Granted
    
    
    
    
    
    
    Exercised
    
    
    (16,000
    )
    
    
    6.46Forfeited
    
    
    (24,000
    )
    
    
    6.46Outstanding at December 31, 2005
    
    
    546,000
    
    
    $
    6.71
    
    
    
    7.72
    
    
    $
    9,499,110Granted
    
    
    
    
    
    
    Exercised
    
    
    (158,500
    )
    
    
    6.49Forfeited
    
    
    (87,500
    )
    
    
    6.85Outstanding at December 31, 2006
    
    
    300,000
    
    
    $
    6.79
    
    
    
    6.76
    
    
    $
    5,957,820Granted
    
    
    
    
    
    
    Exercised
    
    
    (23,000
    )
    
    
    6.46Forfeited
    
    
    
    
    
    
    Outstanding at December 31, 2007
    
    
    277,000
    
    
    $
    6.82
    
    
    
    5.77
    
    
    $
    4,086,290Vested or expected to vest as of December 31, 2007
    
    
    211,718
    
    
    $
    6.79
    
    
    
    5.76
    
    
    $
    3,128,576Exercisable at December 31, 2007
    
    
    8,000
    
    
    $
    6.46
    
    
    
    5.61
    
    
    $
    120,880
   Restricted Stock Awards and Units:
  Shares
    
    
    Weighted-Averageor
    
    
    Grant-DateShare Units
    
    
    Fair ValueNonvested restricted stock awards and units at January 1, 2005
    
    
    226,000
    
    
    $
    32.80Granted
    
    
    81,384
    
    
    
    34.98Vested and released
    
    
    (26,000
    )
    
    
    28.21Forfeited
    
    
    
    
    
    
    Nonvested restricted stock awards and units at December 31, 2005
    
    
    281,384
    
    
    
    33.86Granted
    
    
    339,000
    
    
    
    22.71Vested and released
    
    
    (38,462
    )
    
    
    33.95Forfeited
    
    
    (95,000
    )
    
    
    28.35Nonvested restricted stock awards and units at December 31, 2006
    
    
    486,922
    
    
    
    27.16Granted
    
    
    405,310
    
    
    
    29.82Vested and released
    
    
    (186,901
    )
    
    
    24.09Forfeited
    
    
    (64,460
    )
    
    
    27.32Nonvested restricted stock awards and units at December 31, 2007
    
    
    640,871
    
    
    $
    29.73
    F-20




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Year Ended December 312007
    
    
    2006
    
    
    2005Total fair value of stock awards vested
    
    $
    5,081,411
    
    
    $
    768,204
    
    
    $
    832,520
 Prior Period Pro Forma Presentation:
 Year Ended(in thousand, except per share data)
    
    December 31, 2005Net income as reported
    
    $
    68,483Add: stock-based compensation expense included in reported net income, net of related tax effects
    
    
    2,032Deduct: total stock-based compensation expense determined for all awards under fair value-based
method, net of related tax effects
    
    
    (13,070
    )Pro forma net income
    
    $
    57,445Basic net income per share:As reported
    
    $
    1.42Pro forma
    
    $
    1.19Diluted net income per share:As reported
    
    $
    1.40Pro forma
    
    $
    1.17
  Stock Option Acceleration:
  Treasury Stock:
     F-21




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##### Table of Contents



NOTE 9  INCOME TAXES
  Year Ended December 31,(in thousands)
    
    2007
    
    
    2006Deferred tax assets:Allowance for doubtful accounts
    
    $
    26,530
    
    
    $
    13,007Accruals
    
    
    15,367
    
    
    
    5,020Accrued vacation
    
    
    10,064
    
    
    
    9,001Asset valuation reserves
    
    
    6,768
    
    
    
    13,919Share-based payment
    
    
    5,108
    
    
    
    1,588Net operating loss carryforward and tax credits
    
    
    49,381
    
    
    
    8,448Intangible assets
    
    
    8,752
    
    
    
    8,994Deferred revenue and expenses
    
    
    9,632
    
    
    
    9,567Tax benefits related to unrecognized state tax benefits and interest accrued
    
    
    5,817
    
    
    
    Other, net
    
    
    12,203
    
    
    
    7,676149,622
    
    
    
    77,220Less: valuation allowance
    
    
    (5,696
    )
    
    
    (904
    )Total deferred tax assets
    
    
    143,926
    
    
    
    76,316Deferred tax liabilities:Tax over book depreciation
    
    
    (21,538
    )
    
    
    (28,213
    )Tax over book goodwill amortization
    
    
    (58,649
    )
    
    
    (43,737
    )Separately identifiable intangibles
    
    
    (38,743
    )
    
    
    Contingent debt interest
    
    
    (17,703
    )
    
    
    (19,353
    )Other, net
    
    
    (3,385
    )
    
    
    (3,348
    )Total deferred tax liabilities
    
    
    (140,018
    )
    
    
    (94,651
    )Net deferred tax asset/(liabilities)
    
    $
    3,908
    
    
    $
    (18,335
    )
     F-22




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##### Table of Contents



Year Ended December 31,(in thousands)
    
    2007
    
    
    2006
    
    
    2005Current:Federal
    
    $
    28,710
    
    
    $
    16,734
    
    
    $
    45,652State
    
    
    3,954
    
    
    
    2,490
    
    
    
    (719
    )32,664
    
    
    
    19,224
    
    
    
    44,933Deferred:Federal
    
    
    16,388
    
    
    
    21,062
    
    
    
    (4,979
    )State
    
    
    2,946
    
    
    
    3,011
    
    
    
    72319,334
    
    
    
    24,073
    
    
    
    (4,256
    )$
    51,998
    
    
    $
    43,297
    
    
    $
    40,677
   Year Ended December 31,(in thousands)
    
    2007
    
    
    2006
    
    
    2005Income tax expense at statutory rate
    
    $
    48,294
    
    
    $
    41,146
    
    
    $
    38,206Non-deductible expenses
    
    
    1,002
    
    
    
    711
    
    
    
    2,958State taxes, net of federal benefit and state loss carryforwards
    
    
    6,033
    
    
    
    5,134
    
    
    
    4,592Change in valuation allowance
    
    
    (336
    )
    
    
    (53
    )
    
    
    (2,218
    )Change in contingency reserve
    
    
    
    
    
    
    (4,063
    )
    
    
    (2,483
    )Change in liability for unrecognized tax benefits under FIN 48
    
    
    (1,405
    )
    
    
    
    
    
    
    Other
    
    
    (1,590
    )
    
    
    422
    
    
    
    (378
    )$
    51,998
    
    
    $
    43,297
    
    
    $
    40,677
   Balance at January 1, 2007 (included in Income Taxes Payable and Other Non-Current Liabilities)
    
    $
    17,687Balance at January 1, 2007 (included in Deferred Income Taxes)
    
    
    10,029Total gross unrecognized tax benefits at January 1, 2007
    
    
    27,716Additions for tax positions related to the current year
    
    
    3,630Additions for tax positions related to prior years
    
    
    6,661Reductions for tax positions related to prior years
    
    
    (941
    )Settlements
    
    
    (1,231
    )Reductions due to lapse in statute of limitations
    
    
    (3,078
    )Gross unrecognized tax benefits at December 31, 2007 (excluding Coram)
    
    
    32,757Corams Gross unrecognized tax benefits at December 31, 2007
    
    
    83,203Total Gross unrecognized tax benefits at December 31, 2007 (including Coram)
    
    $
    115,960
    F-23




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##### Table of Contents




    
    Gross increase of $2,800,000 (net $2,600,000) related to the timing uncertainty for when
certain deductions should be recognized for tax return purposes. This uncertainty is subject
to review by taxing agencies.
    
    Gross increase of $1,100,000 (net $700,000) related to state tax uncertainties involving
tax filing positions and allocation of income among various jurisdictions. This uncertainty
is subject to review by state taxing agencies.
    
    Gross increase of $1,800,000 (net $1,200,000) for interest and penalties primarily
related to other tax uncertainties taken in prior years. The increase is an annual expense
which will be accrued until the associated tax uncertainties are extinguished through such
means as audit settlement, payment, or lapse in statutes of limitations.
    
    Gross decrease of $2,900,000 (net $1,900,000) related to state tax uncertainties.
Ultimate realization of this decrease is dependent upon the occurrence of certain events
(including the lapse in statutes of limitations).
    NOTE 10  PER SHARE AMOUNTS
  Year Ended December 31,(in thousands, except per share data)
    
    2007
    
    
    2006
    
    
    2005Numerator:Net income
    
    $
    86,039
    
    
    $
    74,263
    
    
    $
    68,483Numerator for basic and diluted per share amounts  income available to common
stockholders
    
    $
    86,039
    
    
    $
    74,263
    
    
    $
    68,483Denominator:Denominator for basic per share amounts  weighted-average shares
    
    
    43,552
    
    
    
    42,462
    
    
    
    48,154Effect of dilutive securities:Employee stock options  dilutive potential common shares
    
    
    588
    
    
    
    473
    
    
    
    831Denominator for diluted per share amounts  adjusted weighted-average shares
    
    
    44,140
    
    
    
    42,935
    
    
    
    48,985Basic net income per common share
    
    $
    1.98
    
    
    $
    1.75
    
    
    $
    1.42Diluted net income per common share
    
    $
    1.95
    
    
    $
    1.73
    
    
    $
    1.40Employee stock options excluded from the computation of diluted per share amounts:Shares for which exercise price exceeds average market price of common stock
    
    
    1,502
    
    
    
    3,145
    
    
    
    2,073Average exercise price per share that exceeds average market price of common stock
    
    $
    31.75
    
    
    $
    26.71
    
    
    $
    30.21
  F-24




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##### Table of Contents



NOTE 11  LEASES
     December 31,2007
    
    
    2006Information systems  hardware and software
    
    $
    
    
    
    $
    3,156Infusion pumps
    
    
    6,204
    
    
    
    Vehicles
    
    
    683
    
    
    
    Less accumulated depreciation
    
    
    (182
    )
    
    
    (1,734
    )$
    6,705
    
    
    $
    1,422
  Capital
    
    
    OperatingLeases
    
    
    Leases2008
    
    $
    2,745
    
    
    $
    66,2872009
    
    
    2,300
    
    
    
    55,2312010
    
    
    1,507
    
    
    
    43,2342011
    
    
    1,122
    
    
    
    31,9082012
    
    
    60
    
    
    
    14,912Thereafter
    
    
    
    
    
    
    21,542$
    7,734
    
    
    $
    233,114Less interest included in minimum lease payments
    
    
    703
    
    
    
    Present value of minimum lease payments
    
    
    7,031
    
    
    
    Less current portion
    
    
    2,353
    
    
    
    $
    4,678
    
    
    
    
 NOTE 12  EMPLOYEE BENEFIT PLANS
 4 01(k) Savings Plan:
 Deferred Compensation Plan:
  F-25




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##### Table of Contents



NOTE 13  COMMITMENTS AND CONTINGENCIES
 Litigation
  Qui Tam Settlement and Related Costs: qui tam
 Medicare and Medicaid Reimbursement
 Supplier Concentration:
 Guarantees and Indemnities
   F-26




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##### Table of Contents



NOTE 14  SERVICE/PRODUCT LINE DATA
  Year Ended December 31,(in thousands)
    
    2007
    
    
    2006
    
    
    2005Net revenues:Home respiratory therapy
    
    $
    1,087,126
    
    
    $
    1,032,651
    
    
    $
    1,011,321Home infusion therapy
    
    
    334,182
    
    
    
    274,723
    
    
    
    256,225Home medical equipment/other
    
    
    210,493
    
    
    
    209,317
    
    
    
    208,124Total net revenues
    
    $
    1,631,801
    
    
    $
    1,516,691
    
    
    $
    1,475,670
 NOTE 15  SELECTED QUARTERLY FINANCIAL DATA (unaudited)
  QuarterFirst
    
    
    Second(As Previously
    
    
    
    
    
    
    
    
    
    
    (As Previously(in thousands, except per share data)
    
    Reported)
    
    
    (Adjustments)
    
    
    (As Restated)
    
    
    Reported)
    
    
    (Adjustments)
    
    
    (As Restated)2007Net Revenues
    
    $
    389,290
    
    
    
    1,489
    
    
    $
    390,779
    
    
    $
    394,044
    
    
    
    (2,115
    )
    
    $
    391,929Gross Profit
    
    
    254,494
    
    
    
    1,668
    
    
    
    256,162
    
    
    
    259,559
    
    
    
    (2,061
    )
    
    
    257,498Operating Income
    
    
    37,225
    
    
    
    1,767
    
    
    
    38,992
    
    
    
    38,354
    
    
    
    (1,967
    )
    
    
    36,387Net Income
    
    $
    19,144
    
    
    
    1,706
    
    
    $
    20,850
    
    
    $
    20,829
    
    
    
    (1,578
    )
    
    $
    19,251Basic net income per common share
    
    $
    0.44
    
    
    
    
    
    
    $
    0.48
    
    
    $
    0.48
    
    
    
    
    
    
    $
    0.44Diluted net income per common share
    
    $
    0.44
    
    
    
    
    
    
    $
    0.47
    
    
    $
    0.47
    
    
    
    
    
    
    $
    0.44
 Third
    
    
    Fourth(As PreviouslyReported)
    
    
    (Adjustments)
    
    
    (As Restated)2007Net Revenues
    
    $
    396,116
    
    
    
    264
    
    
    $
    396,380
    
    
    $
    452,712Gross Profit
    
    
    262,316
    
    
    
    (25
    )
    
    
    262,291
    
    
    
    290,857Operating Income
    
    
    37,941
    
    
    
    (247
    )
    
    
    37,694
    
    
    
    45,457Net Income
    
    $
    21,269
    
    
    
    (349
    )
    
    $
    20,920
    
    
    $
    25,018Basic net income per common share
    
    $
    0.49
    
    
    
    
    
    
    $
    0.48
    
    
    $
    0.57Diluted net income per common share
    
    $
    0.48
    
    
    
    
    
    
    $
    0.47
    
    
    $
    0.57
 First
    
    
    Second(As Previously
    
    
    
    
    
    
    
    
    
    
    (As PreviouslyReported)
    
    
    (Adjustments)
    
    
    (As Restated)
    
    
    Reported)
    
    
    (Adjustments)
    
    
    (As Restated)2006Net Revenues
    
    $
    368,056
    
    
    
    (1,558
    )
    
    $
    366,498
    
    
    $
    376,079
    
    
    
    795
    
    
    $
    376,874Gross Profit
    
    
    241,082
    
    
    
    (1,347
    )
    
    
    239,735
    
    
    
    247,109
    
    
    
    621
    
    
    
    247,730Operating Income
    
    
    31,944
    
    
    
    (1,336
    )
    
    
    30,608
    
    
    
    37,355
    
    
    
    595
    
    
    
    37,950Net Income
    
    $
    16,123
    
    
    
    (1,646
    )
    
    $
    14,477
    
    
    $
    18,458
    
    
    
    1,030
    
    
    $
    19,488Basic net income per common share
    
    $
    0.38
    
    
    
    
    
    
    $
    0.34
    
    
    $
    0.44
    
    
    
    
    
    
    $
    0.46Diluted net income per common share
    
    $
    0.38
    
    
    
    
    
    
    $
    0.34
    
    
    $
    0.43
    
    
    
    
    
    
    $
    0.46
 Third
    
    
    Fourth(As Previously
    
    
    
    
    
    
    
    
    
    
    (As PreviouslyReported)
    
    
    (Adjustments)
    
    
    (As Restated)
    
    
    Reported)
    
    
    (Adjustments)
    
    
    (As Restated)2006Net Revenues
    
    $
    382,214
    
    
    
    (215
    )
    
    $
    381,999
    
    
    $
    390,958
    
    
    
    362
    
    
    $
    391,320Gross Profit
    
    
    251,120
    
    
    
    (369
    )
    
    
    250,751
    
    
    
    256,557
    
    
    
    338
    
    
    
    256,895Operating Income
    
    
    38,209
    
    
    
    (348
    )
    
    
    37,861
    
    
    
    40,192
    
    
    
    412
    
    
    
    40,604Net Income
    
    $
    19,306
    
    
    
    (401
    )
    
    $
    18,905
    
    
    $
    21,093
    
    
    
    300
    
    
    $
    21,393Basic net income per common share
    
    $
    0.45
    
    
    
    
    
    
    $
    0.45
    
    
    $
    0.50
    
    
    
    
    
    
    $
    0.50Diluted net income per common share
    
    $
    0.45
    
    
    
    
    
    
    $
    0.44
    
    
    $
    0.49
    
    
    
    
    
    
    $
    0.50
  F-27




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##### Table of Contents



APRIA HEALTHCARE GROUP INC.
 
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
 Balance at
    
    
    Increase Due
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning
    
    
    to Coram
    
    
    Costs and
    
    
    
    
    
    
    End of(in thousands)
    
    of Period
    
    
    Acquisition
    
    
    Expenses
    
    
    Deductions
    
    
    PeriodYear ended December 31, 2007Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    27,324
    
    
    $
    21,557
    
    
    $
    43,138
    
    
    $
    44,196
    
    
    $
    47,823Reserve for inventory and patient service equipment shortages
    
    $
    4,420
    
    
    $
    195
    
    
    $
    3,351
    
    
    $
    2,600
    
    
    $
    5,366Year ended December 31, 2006Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    41,527
    
    
    
    
    
    
    $
    38,723
    
    
    $
    52,926
    
    
    $
    27,324Reserve for inventory and patient service equipment shortages
    
    $
    3,753
    
    
    
    
    
    
    $
    3,623
    
    
    $
    2,956
    
    
    $
    4,420Year ended December 31, 2005Deducted from asset accounts:Allowance for doubtful accounts
    
    $
    45,064
    
    
    
    
    
    
    $
    46,948
    
    
    $
    50,485
    
    
    $
    41,527Reserve for inventory and patient service equipment shortages
    
    $
    3,230
    
    
    
    
    
    
    $
    2,309
    
    
    $
    1,786
    
    
    $
    3,753
  S-1




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##### Table of Contents



SIGNATURE
  Dated: September 11, 2008
    APRIA HEALTHCARE GROUP INC.By:
    /s/ Lawrence M. HigbyLawrence M. HigbyChief Executive Officer




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##### Table of Contents



31.1
    
    Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a).
(*)31.2
    
    Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a).
(*)32.1
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. (*)32.2
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C Section 1350. (*)
 *
    
    Filed herewith.