Event Brief of Q2 2006 Apria Healthcare Group Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

PARTICIPANTS

. Larry Higby, Apria Healthcare Group, CEO . Amin Khalifa, Apria Healthcare Group, CFO . Arthur Henderson, Jefferies & Company, Analyst

. David MacDonald, SunTrust, Analyst . Kevin Fischbeck, Lehman Brothers, Analyst . Eric Gommel, Stifel Nicolaus, Analyst . Chad Poujare, Wachovia Securities, Analyst . Balaji Gandhi, Oppenheimer, Analyst . Gary Taylor, Banc of America, Analyst . Alicia Price, Apria Healthcare Group, VP, Controller

OVERVIEW

Co. reported 2Q06 net income of $18.5m and diluted EPS of $0.43.

FINANCIAL DATA

A. Key Data From Call 1. 2Q06 revenue = $376.1m. 2. 2Q06 income = $18.5m. 3. 2Q06 diluted EPS = $0.43. 4. 2Q05 GM = 65.7%. 5. 2Q05 DSO = 52. 6. 2Q05 inventory = 67 days.

PRESENTATION SUMMARY

S1. 2Q06 Overview (L. H.) 1. 2Q06 Overview: 1. 2Q06 Revenue $376.1m up $8m or 2.2% QoverQ. 1. 1.3% respiratory growth. 2. 5.3% fusion growth. 2. Adjusting for medicare cuts, overall respiratory business gained about 1.5% YoverY. 1. Led by seapap growth of 12.5%. 1. Seapap in 2006 will be $280-290m business. 3. Medicare cuts compared to 2Q05 $3.3m due to: 1. Lower average sale price (ASP). 2. Lower dispensing fees for inhalation drug fill/refill.

3. Managed care rate reductions. 2. Encouraged by: 1. Positive signs in revenue growth. 2. Strong transition of Cigna business.

1. Performing ahead of original anticipated run rate. 3. Significant portion of revenue growth due to efforts of sales

and operations teams. 1. Rapidly and successfully converted Cigna patients to Co. from other providers. 3. Average Patient Census and New Start Statistics: 1. June, reached a record high number of patients on service, "census" in four key product or therapy categories 1. Oxygen, YoverY census grew 7.8%.

2. Hospital bed, HME product line under performed in 2005. 1. Two products steadily improving. 2. June represented a 24 month high of total number of patients on census with a hospital bed. 3. 2Q average patient census grew 5.2% YoverY. 4. Wheelchairs, June represented highest patient census levels of 2006, 1.5% increase over May.

3. Enteral Nutrition product line grew 12.6% YoverY. 1. June represented highest patient assistance level in 24 months. 2. Average patient census growth of 12.5% YoverY. 4. Infusion sales growth. 1. Revenues accelerating due to organizational changes which

led to increasing number of new infusion referrals throughout the qtr. and 1H06, and strong growth in core product line TPN antibiotics, and pain management. 2. New starts for all infusion core products grew 6% QoverQ. 3. Saw positive effects of new infusion mgt. team.

5. Pararentaral nutrition, TPN, record high level in June. 1. Chemotherapy patients census grew 9% YoverY. 2. 2Q new starts for all infusion products outpaced 2Q05 by 18%. 3. Due to new sales focus, Co. nutrition advantage program, and incremental managed care contracts. 4. 2Q antibiotic average new starts best since 1Q05. 5. TPN new starts similar, growth increasing over 50% over prior 2006 months. 6. All led to steadily increasing infusion revenue, June

highest in 2006. 4. Newly Automated Sales Management System:

1. Role out going well in all 15 regions. 2. Sales force welcomed system. 3. System providing sales force with better visibility to referral trends in customer data. 4. Co. managed care contracting record strong. 1. Signed or amended over 200 revenue generating contracts during 2Q. 1. Believe momentum should continue.

5. Redoubling efforts to improve sales during 2H06. 5. Bad Debt Results: 1. Made progress in collections area. 2. 1Q06 conference call described process of collecting copays on more consistent and timely basis. 1. Collection rate for copays up from 79% to 85% YoverY. 2. Processed 110,000 more credit card transactions, 233% increase QoverQ. 1. Due to improved billing and insurance verification

process. 3. Track statistics daily, weekly and monthly.

4. Trend always up. 6. Operating Cost Reduction: 1. Progress in two areas: 1. Leveraging labor expenses through superior execution of best practices in certain programs despite significant incremental effort in operating costs associated with start up of Cigna contract.

2. Further reduction in expenditures for patient service equipment. 1. 2Q at 6.2% of revenue. 2. Improvement due to: 1. Ongoing emphasis in area of repair center productivity. 2. Asset utilization ratio. 3. Centralized purchasing controls that limit individual

branches ability to order more equipment if excess or repairable assets are already in the system. 7. Cost Savings: 1. Continue to reinforce 1Q06 cost savings plan. 1. All regions and corporate headqtrs. 2. Should ensure …