UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

             [X] Quarterly Report Pursuant to Section 13 or 15(d) of

                       the Securities Exchange Act of 1934

                  For the quarterly period ended September 30, 2000

            [ ] Transition Report Pursuant to Section 13 or 15(d) of

                     the Securities and Exchange Act of 1934

                         For the transition period from

                                ______ to ______

                         Commission File Number: 0-22392

                          PRIME MEDICAL SERVICES, INC.

             (Exact name of registrant as specified in its charter)


                  DELAWARE                                74-2652727
       (State or other jurisdiction of                 (I.R.S. Employer
       incorporation or organization)                 Identification No.)


                 1301 Capital of Texas Highway, Austin, TX 78746

      (Address of principal executive office)              (Zip code)


                                 (512) 328-2892

                (Registrant's telephone number, including area code)


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
     ----     -----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

                                               Number of Shares Outstanding at

     Title of Each Class                                 October 31, 2000
     -------------------                                 -------------
 Common Stock, $.01 par value                              15,773,533

<PAGE>










                                     PART I

                              FINANCIAL INFORMATION




                                       2
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<S>                                              <C>            <C>            <C>            <C>
                                                      Three Months Ended            Nine Months Ended
                                                         September 30,                September 30,
($ in thousands, except per share data)              2000           1999           2000           1999
                                                     ----           ----           ----           ----

Revenue:
     Lithotripsy:
         Fee revenues                              $20,678        $21,647        $58,961        $62,720
         Management fees                               931          1,403          2,759          4,165
         Equity income                                 690            756          1,926          1,919
                                                  --------       --------       --------       --------
                                                    22,299         23,806         63,646         68,804
     Manufacturing                                   5,757          5,375         16,861         13,248
     Refractive                                      6,941            987         16,021            987
     Prostatherapy                                     410            406          1,203          1,409
     Other                                              38             58            124            174
                                                  --------       --------       --------       --------
         Total revenue                              35,445         30,632         97,855         84,622
                                                  --------       --------       --------       --------

Cost of services and general and
     administrative expenses:
     Lithotripsy                                     5,713          5,385         16,843         17,225
     Manufacturing                                   4,478          4,242         13,051         10,038
     Refractive                                      4,432            529          9,259            529
     Prostatherapy                                     262            332            935          1,160
     Other                                              40             54            135            173
     Corporate                                       1,232          1,375          3,365          3,603
     Relocation of central billing office              220            -              570            -
                                                  --------       --------       --------       --------
                                                    16,377         11,917         44,158         32,728
Depreciation and amortization                        3,839          2,784         10,192          7,812
                                                  --------       --------       --------       --------
                                                    20,216         14,701         54,350         40,540
                                                  --------       --------       --------       --------

Operating income                                    15,229         15,931         43,505         44,082

Other income (deductions):
     Interest and dividends                            199            466            754          1,204
     Interest expense                               (2,678)        (2,356)        (7,682)        (7,010)
     Loan fees                                          (4)           -             (111)           -
     Release of contractual obligation                 -              -              -            1,140
     Other, net                                         16             61             89           (230)
                                                  --------       --------       --------       --------
                                                    (2,467)        (1,829)        (6,950)        (4,896)
                                                  --------       --------       --------       --------
Income before provision for income
     taxes and minority interests                   12,762         14,102         36,555         39,186

Minority interest in consolidated income             7,828          6,872         20,983         19,516

Provision for income taxes                           1,766          2,891          6,004          7,867
                                                  --------       --------       --------       --------

Net income                                         $ 3,168        $ 4,339        $ 9,568       $ 11,803
                                                  ========       ========       ========       ========

Basic earnings per share:
     Net income                                     $ 0.20         $ 0.26         $ 0.59         $ 0.69
                                                  ========       ========       ========       ========
     Weighted average shares outstanding            15,943         16,818         16,198         17,096
                                                  ========       ========       ========       ========

Diluted earnings per share:
     Net income                                     $ 0.20         $ 0.26         $ 0.59         $ 0.69
                                                  ========       ========       ========       ========
     Weighted average shares outstanding            16,025         17,000         16,311         17,225
                                                  ========       ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)



                                                  September 30,     December 31,
($ in thousands)                                       2000             1999
                                                     --------         --------

ASSETS

Current assets:
    Cash and cash equivalents                        $  9,576         $ 20,064
    Investments                                         1,133            4,120
    Accounts receivable, less allowance for doubtful
       accounts of $242 in 2000 and $224 in 1999       26,068           23,273
    Other receivables                                   5,506            3,491
    Deferred income taxes                                 663            1,066
    Prepaid expenses and other current assets           1,561            2,322
    Inventory                                           5,519            3,676
                                                     --------         --------

       Total current assets                            50,026           58,012
                                                     --------         --------

Property and equipment:
    Equipment, furniture and fixtures                  52,904           42,128
    Building and leasehold improvements                 3,470            2,092
                                                     --------         --------

                                                       56,374           44,220

    Less accumulated depreciation and amortization    (31,140)         (25,567)
                                                     --------         --------

       Property and equipment, net                     25,234           18,653
                                                     --------         --------

Other investments                                       9,334           18,963
Goodwill, at cost, net of amortization                177,839          149,088
Other noncurrent assets                                 2,961            2,110
                                                     --------         --------

                                                     $265,394         $246,826
                                                     ========         ========

          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (continued)
                                   (Unaudited)



                                                  September 30,     December 31,
($ in thousands, except share data)                    2000             1999
                                                     --------         --------

LIABILITIES

Current liabilities:
     Current portion of long-term debt                $ 1,728          $ 1,763
     Accounts payable                                   6,824            3,290
     Accrued distributions to minority interests          -              8,332
     Accrued expenses                                   7,282            7,108
                                                     --------         --------

          Total current liabilities                    15,834           20,493

Long-term debt, net of current portion                115,281          103,797
Deferred income taxes                                   9,315            6,400
                                                     --------         --------

          Total liabilities                           140,430          130,690

Minority interest                                      24,355           19,454

STOCKHOLDERS' EQUITY

Preferred stock, $.01 par value;
    1,000,000 shares authorized;
    none outstanding                                      -                -
Common stock, $0.01 par value;
    40,000,000 shares authorized;
    19,524,533 shares issued in 2000
    and 19,367,267 shares issued in 1999                  194              194
Capital in excess of par value                         88,977           87,655
Accumulated earnings                                   43,222           33,654
Treasury stock, at cost; 3,716,700 shares
    in 2000 and 2,875,300 shares in 1999              (31,784)         (24,821)
                                                     --------         --------

          Total stockholders' equity                  100,609           96,682
                                                     --------         --------

                                                     $265,394         $246,826
                                                     ========         ========

          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



                                                 Nine Months Ended September 30,
($ in thousands)                                       2000            1999
                                                     --------         --------

CASH FLOWS FROM OPERATING ACTIVITIES:
    Fee and other revenue collected                  $ 92,473         $ 79,882
    Cash paid to employees, suppliers of
        goods and others                              (47,123)         (39,725)
    Purchases of investments                           (1,992)             -
    Proceeds from sales and maturities of
        investments                                     5,091              -
    Interest received                                     641            1,204
    Interest paid                                      (9,753)          (4,801)
    Taxes paid                                         (3,760)          (4,811)
                                                     --------         --------

         Net cash provided by operating
             activities                                35,577           31,749
                                                     --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of operating entities                    (18,344)         (21,293)
    Purchases of equipment and leasehold
       improvements                                    (8,352)          (4,787)
    Distributions from investments                      2,909            2,062
    Other                                                 168              564
                                                     --------         --------

          Net cash used in investing activities       (23,619)         (23,454)
                                                     --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings on notes payable                        11,103            3,673
    Payments on notes payable, exclusive
        of interest                                    (1,300)          (1,078)
    Distributions to minority interest                (25,780)         (25,685)
    Contributions by  minority interest,
        net of buyouts                                    329            2,138
    Purchases of treasury stock                        (6,963)          (6,567)
    Exercise of stock options, and sales
        and purchases of put options                      165               79
                                                     --------         --------

         Net cash used in financing activities        (22,446)         (27,440)
                                                     --------         --------

NET DECREASE IN CASH AND CASH EQUIVALENTS             (10,488)         (19,145)

Cash and cash equivalents, beginning of period         20,064           40,146
                                                     --------         --------

Cash and cash equivalents, end of period             $  9,576         $ 21,001
                                                     ========         ========

          See accompanying notes to consolidated financial statements.



                                       6
<PAGE>
                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                   (Unaudited)



                                                 Nine Months Ended September 30,
($ in thousands)                                       2000             1999
                                                     --------         --------

Reconciliation of net income to cash
    provided by operating activities:
    Net income                                        $ 9,568         $ 11,803
    Adjustments to reconcile net income
        to cash provided by operating activities:
      Minority interest in consolidated income         20,983           19,516
      Depreciation and amortization                    10,192            7,812
      Provision for deferred income taxes               2,881            2,950
      Equity in earnings of affiliates                 (1,805)          (2,032)
      Other                                              (176)          (1,001)

Changes in operating assets and liabilities,
  net of effect of purchase transactions:
   Investments                                          2,987             -
   Accounts receivable                                 (2,586)          (2,529)
   Other receivables                                   (2,427)            (514)
   Other assets                                        (1,755)            (630)
   Accounts payable                                     2,105           (3,358)
   Accrued expenses                                    (4,390)            (268)
                                                     --------         --------

 Total adjustments                                     26,009           19,946
                                                     --------         --------

Net cash provided by operating activities            $ 35,577         $ 31,749
                                                     ========         ========


          See accompanying notes to consolidated financial statements.



                                       7
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                SEPTEMBER 30, 2000

                                   (Unaudited)

1.   General
--   -------

The accompanying  unaudited consolidated financial statements have been prepared
in conformity with the accounting  principles for interim  financial  statements
and with the  instructions  to Form 10-Q and Rule 10-01 of Regulation S-X. These
statements  reflect all  adjustments  which are,  in the opinion of  management,
necessary for a fair statement of the  financial position  as  of  September 30,
2000 and the results of operations for the periods  presented.  These statements
have not been audited by the Company's independent certified public accountants.
The operating  results for the interim  periods are not  necessarily  indicative
of results for the full fiscal year.

The notes to consolidated financial statements appearing in the Company's Annual
Report  on Form  10-K  for the year  ended  December  31,  1999  filed  with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-Q.  There have been no significant  changes in the information
reported  in those  notes  other than from  normal  business  activities  of the
Company.

The Financial  Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"  ("SFAS No. 133") in June 1998. SFAS No. 133  establishes  reporting
standards for  derivative  instruments  and hedging  activities  that require an
entity to recognize all  derivatives as assets or  liabilities  measured at fair
value and is effective for financial  statements  issued for all fiscal quarters
of fiscal years beginning after June 15, 2000. If certain  conditions are met, a
derivative may be specifically  designated as a hedge of the exposure to changes
in the  fair  market  value,  variable  cash  flow,  or  foreign  currency  of a
recognized   asset  or  liability  or  certain  other   transactions   and  firm
commitments. The effects of the adoption of SFAS No. 133 will not be material to
the Company's financial position or results of operations.

2.   Earnings per share
--   ------------------

Basic EPS is based on weighted average shares  outstanding  without any dilutive
effects considered. Diluted EPS reflects dilution from all contingently issuable
shares,  including options and warrants. A reconciliation of such EPS data is as
follows:

                                              Basic                    Diluted
                                             earnings                 earnings
($ in thousands, except per share data)     per share                 per share
                                            ---------                 ---------

Nine Months Ended September 30, 2000
------------------------------------

Net income                                    $9,568                     $9,568
                                              ======                     ======

Weighted average shares outstanding           16,198                     16,198
Effect of dilutive securities                    -                          113
                                              ------                     ------
     Shares for EPS calculation               16,198                     16,311
                                              ======                     ======

Net income per share                           $0.59                      $0.59
                                               =====                      =====


                                       8
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2000 (continued)

                                   (Unaudited)

2.   Earnings per share (continued)
--   ------------------------------
                                             Basic                    Diluted
                                            earnings                  earnings
($ in thousands, except per share data)    per share                 per share
                                           ---------                 ---------

Nine Months Ended September 30, 1999
------------------------------------

Net income                                  $11,803                    $11,803
                                            =======                    =======

Weighted average shares outstanding          17,096                     17,096
Effect of dilutive securities                   -                          129
                                            -------                    -------
     Shares for EPS calculation              17,096                     17,225
                                            =======                    =======

Net income per share                          $0.69                      $0.69
                                            =======                    =======

Three Months Ended September 30, 2000
-------------------------------------

Net income                                   $3,168                     $3,168
                                             ======                     ======

Weighted average shares outstanding          15,943                     15,943
Effect of dilutive securities                   -                           82
                                            -------                    -------
     Shares for EPS calculation              15,943                     16,025
                                            =======                    =======

Net income per share                          $0.20                      $0.20
                                            =======                    =======

Three Months Ended September 30, 1999
-------------------------------------

Net income                                   $4,339                     $4,339
                                            =======                    =======

Weighted average shares outstanding          16,818                     16,818
Effect of dilutive securities                   -                          182
                                            -------                    -------
     Shares for EPS calculation              16,818                     17,000
                                            =======                    =======

Net income per share                          $0.26                      $0.26
                                            =======                    =======


Unexercised  stock  options and  warrants to purchase  1,437,000  and  1,107,500
shares  of the Company's common stock as of September 30, 2000 and 1999 were not
included  in the  computation  of  diluted  EPS  because  the  effect  would  be
antidilutive.


                                       9
<PAGE>

                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2000 (continued)

                                   (Unaudited)

3.   Segment Reporting
--   -----------------

The  Company  has three  reportable  segments:  lithotripsy,  manufacturing  and
refractive.  The lithotripsy  segment provides services related to the operation
of  the  lithotripters,   including  scheduling,   staffing,  training,  quality
assurance,  maintenance,  regulatory  compliance  and  contracting  with payors,
hospitals and surgery centers. The manufacturing segment provides  manufacturing
services and  installation,  upgrade,  refurbishment and repair of major medical
equipment for mobile medical service providers.  The refractive segment provides
services  related to the  operations of refractive  vision  correction  centers.
Other  operating  segments,  which do not meet the  quantitative  thresholds for
reportable segments, include prostatherapy services.

The Company  measures  performance  based on the pretax  income or loss from its
operating  segments,  which do not  include  unallocated  corporate  general and
administrative expenses and corporate interest revenue and expense.

<TABLE>
<S>                                   <C>                <C>                  <C>               <C>

($ in thousands)                       Lithotripsy        Manufacturing        Refractive        Other
                                       -----------        -------------        ----------        -----

Nine Months Ended September 30, 2000
------------------------------------

Revenue from

external customers                        $63,646             $16,861            $16,021       $1,327

Intersegment revenues                        -                    293                -            -

Segment profit                             21,180               2,692              1,653           86


Nine Months Ended September 30, 1999
------------------------------------


Revenue from

external customers                        $68,804             $13,248              987        $1,583

Intersegment revenues                         -                   286               -            -

Segment profit (loss)                      26,005               2,357              244            59
</TABLE>


                                       10
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2000 (continued)

                                   (Unaudited)

3.   Segment Reporting (continued)
--   -----------------------------

The following is a reconciliation  of the measure of segment profit per above to
consolidated  income  before  income taxes per the  consolidated  statements  of
operations:

                                                Nine Months ended September 30,
($ in thousands)                                 2000                    1999
                                                 ----                    ----

Total segment profit                           $25,611                 $28,665

Unallocated corporate expenses:

    General and administrative                  (3,365)                 (3,882)

    Net interest expense                        (5,896)                 (5,772)

    Loan fees                                     (111)                    -

    Relocation charges                            (570)                    -

    Release of contractual obligation              -                     1,140

    Other, net                                     (97)                   (481)
                                               --------               --------

Total unallocated corporate expenses           (10,039)                 (8,995)
                                               --------               --------

Income before income taxes                     $15,572                 $19,670
                                               ========               ========
<TABLE>
<S>                                   <C>                <C>                  <C>               <C>

($ in thousands)                       Lithotripsy        Manufacturing        Refractive        Other
                                       -----------        -------------        ----------        -----

Three Months Ended September 30, 2000
-------------------------------------

Revenue from
external customers                        $22,299              $5,757             $6,941         $448

Intersegment revenues                        -                     67                -            -

Segment profit                              7,265                 966                540           53


Three Months Ended September 30, 1999
-------------------------------------

Revenue from
external customers                        $23,806              $5,375               987          $464

Intersegment revenues                         -                   138                -            -

Segment profit (loss)                       9,359                 990               244            73
</TABLE>


                                       11
<PAGE>


                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2000 (continued)

                                   (Unaudited)

3.   Segment Reporting (continued)
--   -----------------------------

The following is a reconciliation  of the measure of segment profit per above to
consolidated  income  before  income taxes per the  consolidated  statements  of
operations:

                                              Three Months ended September 30,
($ in thousands)                                2000                    1999
                                                ----                    ----

Total segment profit                           $8,824                 $10,666

Unallocated corporate expenses:

    General and administrative                 (1,232)                 (1,593)

    Net interest expense                       (2,394)                 (1,846)

    Loan fees                                      (4)                    -

    Relocation charges                           (220)                    -

    Release of contractual obligation             -                       -

Other, net                                        (40)                      3
                                              --------                --------

Total unallocated corporate expenses           (3,890)                 (3,436)
                                              --------                --------

Income before income taxes                      $4,934                  $7,230
                                              ========                ========

4.   Acquisitions
--   ------------

Effective  March 1,  2000, the  Company  purchased  a 60%  interest  in the Mann
Berkeley Caplan Laser Center of Austin,  Texas, a refractive  vision  correction
center. The Company paid approximately $3,765,000 in cash and issued warrants to
purchase 27,000 shares of common stock,  and has accounted for this  transaction
using the purchase method of accounting.  Additionally in conjunction  with this
transaction,  the Company  issued  warrants to purchase  28,000 shares of common
stock  to a third  party.  Total  goodwill  recognized  of  $3,773,000  is being
amortized over twenty-five years.

Effective  March 1, 2000, the Company purchased a 60% interest in the Caster Eye
Center, a refractive vision correction  center.  The Company paid  approximately
$5,828,000 in cash,  and has accounted for this  transaction  using the purchase
method of accounting.  Additionally in conjunction  with this  transaction,  the
Company  issued  warrants to purchase  44,000  shares of common stock to a third
party.  Total goodwill  recognized of $5,894,000 is being amortized over  twenty
years.

Effective  April 1, 2000, the Company purchased  a 65%  interest in New York Eye
Specialists,   a  refractive   vision  correction   center.   The  Company  paid
approximately  $8,872,000 in cash, and has accounted for this transaction  using
the  purchase  method  of  accounting.  Additionally  in  conjunction  with this
transaction,  the Company  issued  warrants to purchase  67,000 shares of common
stock  to a third  party.  Total  goodwill  recognized  of  $8,705,000  is being
amortized over twenty years.


                                       12
<PAGE>

                          PRIME MEDICAL SERVICES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2000 (continued)

                                   (Unaudited)


Effective July 1, 2000, the Company  amended  certain  agreements related to its
60% interest in Barnet Dulaney Eye Center.  As a result of these amendments, the
Company's investment  in the Barnet Dulaney Eye Center has  been consolidated in
the accompanying financial statements as of July 1, 2000. Prior to June 30, 2000
this investment  was  accounted  for  on  the  equity method.  Total goodwill of
$9,000,000 is being amortized over twenty-five years.

Effective  September 1, 2000, the  Company  purchased  a  65% interest in Vision
Correction Centers of  Kansas City, a refractive  vision correction center.  The
Company  paid  approximately $4,530,000 in  cash for the center in October 2000,
and has accounted for this transaction using the purchase method of  accounting.
Additionally in conjunction with this transaction, the Company  issued  warrants
to  purchase 33,750  shares of  common  stock to a third party.  Total  goodwill
recognized of $4,489,000 is being amortized over twenty years.

The  proforma  effects  of these  acquisitions  on an  aggregated  basis are not
material.

5.   Condensed Financial Information Regarding Guarantor Subsidiaries
--   ----------------------------------------------------------------

Condensed consolidating  financial information regarding the Company,  Guarantor
Subsidiaries and Non-guarantor  Subsidiaries for September 30,  2000 and 1999 is
presented below for purposes of complying with the reporting requirements of the
Guarantor  Subsidiaries.  Separate  financial  statements and other  disclosures
concerning each Guarantor  Subsidiary have not been presented because management
has determined that such information is not material to investors. The Guarantor
Subsidiaries  are wholly  owned  subsidiaries  of the Company who have fully and
unconditionally guaranteed the 8.75% unsecured senior subordinated Notes.



                                       13
<PAGE>


                 PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                      Nine Months Ended September 30, 2000
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

Revenue:
  Lithotripsy:
    Fee revenues                                  $    -          $ 12,234       $  46,727       $     -          $  58,961
    Management fees                                    -             1,571           1,188             -              2,759
    Equity income                                   20,863          14,231             387         (33,555)           1,926
                                           ---------------  --------------  --------------  --------------   --------------
                                                    20,863          28,036          48,302         (33,555)          63,646
  Manufacturing                                        -               -            16,861             -             16,861
  Refractive                                         1,448           3,546          15,203          (4,176)          16,021
  Prostatherapy                                        -               -             1,203             -              1,203
  Other                                                -               124             -               -                124
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                   22,311          31,706          81,569         (37,731)          97,855
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
  administrative expenses:
    Lithotripsy                                        -               419          16,424             -             16,843
    Manufacturing                                      -               -            13,051             -             13,051
    Refractive                                         -                83           9,176             -              9,259
    Prostatherapy                                      -              (216)          1,151             -                935
    Other                                              -               135             -               -                135
    Corporate                                           55           3,310             -               -              3,365
    Relocation of central billing office               -               570             -               -                570
                                           ---------------  --------------  --------------  --------------   --------------
                                                        55           4,301          39,802             -             44,158
Depreciation and amortization                          -             5,251           4,941             -             10,192
                                           ---------------  --------------  --------------  --------------   --------------
                                                        55           9,552          44,743             -             54,350
                                           ---------------  --------------  --------------  --------------   --------------

Operating income                                    22,256          22,154          36,826         (37,731)          43,505
                                           ---------------  --------------  --------------  --------------   --------------

Other income (deductions):
  Interest and dividends                               189             230             335             -                754
  Interest expense                                  (7,121)             (6)           (555)            -             (7,682)
  Loan fees                                           (111)            -               -               -               (111)
  Other, net                                            84             (60)             65             -                 89
                                           ---------------  --------------  --------------  --------------   --------------
    Total other income (deductions)                 (6,959)            164            (155)            -             (6,950)
                                           ---------------  --------------  --------------  --------------   --------------

Income before provision for income
  taxes and minority interest                       15,297          22,318          36,671         (37,731)          36,555

Minority interest in consolidated income               -               -               -            20,983           20,983

Provision for income taxes                           5,729               7             268             -              6,004
                                           ---------------  --------------  --------------  --------------   --------------

Net income                                        $  9,568        $ 22,311       $  36,403       $ (58,714)       $   9,568
                                           ===============  ==============  ==============  ==============   ==============
</TABLE>


                                       14
<PAGE>

                 PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                        Nine Months Ended September 30, 1999
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

Revenue:
  Lithotripsy:
    Fee revenues                                  $    -          $ 16,060       $  46,660       $     -          $  62,720
    Management fees                                    -             2,552           1,613             -              4,165
    Equity income                                   26,289          14,538             -           (38,908)           1,919
                                           ---------------  --------------  --------------  --------------   --------------
                                                    26,289          33,150          48,273         (38,908)          68,804
  Manufacturing                                        -               -            13,248             -             13,248
  Refractive                                           152             114             873            (152)             987
  Prostatherapy                                        -               -             1,409             -              1,409
  Other                                                -               174             -               -                174
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                   26,441          33,438          63,803         (39,060)          84,622
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
  administrative expenses:
    Lithotripsy                                        -             1,388          15,837             -             17,225
    Manufacturing                                      -               -            10,038             -             10,038
    Refractive                                         -               -               529             -                529
    Prostatherapy                                      -               -             1,160             -              1,160
    Cardiac                                            -               173             -               -                173
    Corporate                                          210           3,393             -               -              3,603
                                           ---------------   -------------  --------------  --------------   --------------
                                                       210           4,954          27,564             -             32,728
Depreciation and amortization                            5           3,825           3,982             -              7,812
                                           ---------------  --------------  --------------  --------------   --------------
                                                       215           8,779          31,546             -             40,540
                                           ---------------  --------------  --------------  --------------   --------------

Operating income                                    26,226          24,659          32,257         (39,060)          44,082
                                           ---------------  --------------  --------------  --------------   --------------

Other income (deductions):
  Interest and dividends                               599             449             156            -              1,204
  Interest expense                                  (6,838)             27            (199)           -             (7,010)
  Release of contractual obligation                    -             1,140             -              -              1,140
  Other, net                                          (694)            439              25            -               (230)
                                           ---------------  --------------  --------------  --------------   --------------
    Total other income (deductions)                 (6,933)          2,055             (18)           -             (4,896)
                                           ---------------  --------------  --------------  --------------   --------------

Income before provision for income
  taxes and minority interest                       19,293          26,714          32,239         (39,060)         39,186

Minority interest in consolidated income               -               -               -            19,516          19,516

Provision for income taxes                           7,490             273             104            -              7,867
                                           ---------------  --------------  --------------  --------------   --------------

Net income                                        $ 11,803        $ 26,441       $  32,135       $ (58,576)        $11,803
                                           ===============  ==============  ==============  ==============   ==============
</TABLE>


                                       15
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                      Three Months Ended September 30, 2000
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

Revenue:
  Lithotripsy:
    Fee revenues                                 $     -        $    4,060       $  16,618             -             20,678
    Management fees                                    -               552             379             -                931
    Equity income                                    7,085           5,384             154         (11,933)             690
                                           ---------------  --------------  --------------  --------------   --------------
                                                     7,085           9,996          17,151         (11,933)          22,299
  Manufacturing                                        -               -             5,757             -              5,757
  Refractive                                           481           2,028           6,901          (2,469)           6,941
  Prostatherapy                                        -               -               410             -                410
  Other                                                -                38             -               -                 38
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                    7,566          12,062          30,219         (14,402)          35,445
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
 administrative expenses:
  Lithotripsy                                          -               237           5,476             -              5,713
  Manufacturing                                        -               -             4,478             -              4,478
  Refractive                                           -                66           4,366             -              4,432
  Prostatherapy                                        -               (72)            334             -                262
  Other                                                -                40             -               -                 40
  Corporate                                             31           1,201             -               -              1,232
  Relocation of central billing office                 -               220             -               -                220
                                           ---------------  --------------  --------------  --------------   --------------
                                                        31           1,692          14,654             -             16,377
Depreciation and amortization                          -             2,053           1,786             -              3,839
                                           ---------------  --------------  --------------  --------------   --------------
                                                        31           3,745          16,440             -             20,216
                                           ---------------  --------------  --------------  --------------   --------------

Operating income                                     7,535           8,317          13,779         (14,402)          15,229
                                           ---------------  --------------  --------------  --------------   --------------

Other income (deductions):
  Interest and dividends                                12              68             119             -                199
  Interest expense                                  (2,470)           (819)            611             -             (2,678)
  Loan fees                                             (4)            -               -               -                 (4)
  Other, net                                            31              (2)            (13)            -                 16
                                           ---------------  --------------  --------------  --------------   --------------
   Total other income (deductions)                  (2,431)           (753)            717             -             (2,467)
                                           ---------------  --------------  --------------  --------------   --------------

Income before provision for income
 taxes and minority interest                         5,104           7,564          14,496         (14,402)          12,762

Minority interest in consolidated income               -               -               -             7,828            7,828

Provision for income taxes                           1,936              (2)           (168)            -              1,766
                                           ---------------  --------------  --------------  --------------   --------------

Net income                                       $   3,168       $   7,566       $  14,664       $ (22,230)       $   3,168
                                           ===============  ==============  ==============  ==============   ==============

</TABLE>

                                       16
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   Condensed Consolidating Statement of Income
                      Three Months Ended September 30, 1999
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

Revenue:
  Lithotripsy:
    Fee revenues                                  $    -          $  6,161       $  15,486       $     -          $  21,647
    Management fees                                    -               827             576             -              1,403
    Equity income                                    9,002           4,818             -           (13,064)             756
                                           ---------------  --------------  --------------  --------------   --------------
                                                     9,002          11,806          16,062         (13,064)          23,806
  Manufacturing                                        -               -             5,375             -              5,375
  Refractive                                           152             114             873            (152)             987
  Prostatherapy                                        -               -               406             -                406
  Other                                                -                58             -               -                 58
                                           ---------------  --------------  --------------  --------------   --------------
    Total revenue                                    9,154          11,978          22,716         (13,216)          30,632
                                           ---------------  --------------  --------------  --------------   --------------

Cost of services and general and
  administrative expenses:
    Lithotripsy                                        -               253           5,132             -              5,385
    Manufacturing                                      -               -             4,242             -              4,242
    Refractive                                         -               -               529             -                529
    Prostatherapy                                      -               -               332             -                332
    Cardiac                                            -                54             -               -                 54
    Corporate                                           64           1,311             -               -              1,375
                                           ---------------   -------------  --------------  --------------   --------------
                                                        64           1,618          10,235             -             11,917
Depreciation and amortization                            2           1,389           1,393             -              2,784
                                           ---------------  --------------  --------------  --------------   --------------
                                                        66           3,007          11,628             -             14,701
                                           ---------------  --------------  --------------  --------------   --------------

Operating income                                     9,088           8,971          11,088         (13,216)          15,931
                                           ---------------  --------------  --------------  --------------   --------------

Other income (deductions):
  Interest and dividends                               247             169              50            -                466
  Interest expense                                  (2,284)             27             (99)           -             (2,356)
  Other, net                                            33              22               6            -                 61
                                           ---------------  --------------  --------------  --------------   --------------
    Total other income (deductions)                 (2,004)            218             (43)           -             (1,829)
                                           ---------------  --------------  --------------  --------------   --------------

Income before provision for income
  taxes and minority interest                        7,084           9,189          11,045         (13,216)          14,102

Minority interest in consolidated income               -               -               -             6,872            6,872

Provision for income taxes                           2,745              35             111             -              2,891
                                           ---------------  --------------  --------------  --------------   --------------

Net income                                        $  4,339        $  9,154       $  10,934       $ (20,088)        $  4,339
                                           ===============  ==============  ==============  ==============   ==============
</TABLE>



                                       17
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      Condensed Consolidating Balance Sheet
                               September 30, 2000
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

ASSETS

Current assets:
  Cash                                           $     112      $    4,558       $   4,906       $     -          $   9,576
  Investments                                        1,133             -               -               -              1,133
  Accounts receivable, net                             -             3,043          23,025             -             26,068
  Other receivables                                    291           2,498           2,717             -              5,506
  Deferred income taxes                                 60             603             -               -                663
  Prepaid expenses and other current                    48             395           1,118             -              1,561
  Inventory                                            -               -             5,519             -              5,519
                                           ---------------  --------------  --------------  --------------   --------------
    Total current assets                             1,644          11,097          37,285             -             50,026
                                           ---------------  --------------  --------------  --------------   --------------

Property and equipment:
  Equipment, furniture and fixtures                    -             5,482          47,422             -             52,904
  Building and leasehold improvements                  -               533           2,937             -              3,470
                                           ---------------  --------------  --------------  --------------   --------------
                                                       -             6,015          50,359             -             56,374
 Less accumulated depreciation
   and amortization                                    -            (4,065)        (27,075)            -            (31,140)
                                           ---------------  --------------  --------------  --------------   --------------
  Property and equipment, net                          -             1,950          23,284             -             25,234
                                           ---------------  --------------  --------------  --------------   --------------

Investment in subsidiaries
  and other investments                            212,744          32,910             -          (236,320)           9,334
Goodwill, at cost, net of amortization                 -           177,839             -               -            177,839
Other noncurrent assets                                363           1,409           1,189             -              2,961
                                           ---------------  --------------  --------------  --------------   --------------
                                                $  214,751      $  225,205      $   61,758      $ (236,320)      $  265,394
                                           ===============  ==============  ==============  ==============   ==============

LIABILITIES

Current liabilities:
  Current portion of long-term debt             $      -         $     -         $   1,728     $      -          $    1,728
  Accounts payable                                     -             2,147           4,677            -               6,824
  Accrued expenses                                   2,759           3,220           1,303            -               7,282
                                           ---------------  --------------  --------------  --------------   --------------
    Total current liabilities                        2,759           5,367           7,708            -              15,834

Long-term debt, net of current portion             109,000             162           6,119            -             115,281
Deferred income taxes                                2,383           6,932             -              -               9,315
                                           ---------------  --------------  --------------  --------------   --------------
    Total liabilities                              114,142          12,461          13,827            -             140,430
                                           ---------------  --------------  --------------  --------------   --------------

Minority interest                                      -               -               -            24,355           24,355

STOCKHOLDERS' EQUITY

Common stock                                           194             -               -               -                194
Capital in excess of par value                      88,977             -               -               -             88,977
Accumulated earnings                                43,222             -               -               -             43,222
Treasury stock                                     (31,784)            -               -               -            (31,784)
Subsidiary net equity                                  -           212,744          47,931        (260,675)             -
                                           ---------------  --------------  --------------  --------------   --------------
    Total stockholders' equity                     100,609         212,744          47,931        (260,675)         100,609
                                           ---------------  --------------  --------------  --------------   --------------
                                                $  214,751      $  225,205      $   61,758     $  (236,320)      $  265,394
                                           ===============  ==============  ==============  ==============   ==============
</TABLE>



                                       18
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 Condensed Consolidating Statement of Cash Flows
                        Nine Months Ended September 30, 2000
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash provided by (used in)
    operating activities                         $ (10,047)       $ 10,727       $  34,897         $   -          $  35,577
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of operating entities                       -           (18,344)            -               -            (18,344)
  Purchases of equipment and leasehold
    improvements                                       -              (940)         (7,412)            -             (8,352)
  Distributions from subsidiaries                   14,914          13,270             -           (28,184)             -
  Investments in subsidiaries                       (9,000)            -               -             9,000              -
  Distributions from investments                       -             2,909             -               -              2,909
  Other                                                -               168             -               -                168
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    investing activities                             5,914          (2,937)         (7,412)        (19,184)         (23,619)
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on notes payable                        9,000             -             2,103             -             11,103
  Payments on notes payable exclusive of
    interest                                           -               -            (1,300)            -             (1,300)
  Contributions by minority interest,
    net of buyouts                                     -               -               329             -                329
  Distributions to minority interest                   -               -               -           (25,780)         (25,780)
  Purchases of treasury stock                       (6,963)            -               -               -             (6,963)
  Exercise of stock options, and sales and
    purchases of put options                           165             -               -               -                165
  Contributions by parent                              -             9,000             -            (9,000)             -
  Distributions to equity owners                       -           (14,914)        (39,050)         53,964              -
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    financing activities                             2,202          (5,914)        (37,918)         19,184          (22,446)
                                           ---------------  --------------  --------------  --------------   --------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                              (1,931)          1,876         (10,433)           -             (10,488)

Cash and cash equivalents, beginning
  of period                                          2,043           2,682          15,339            -              20,064
                                           ---------------  --------------  --------------  --------------   --------------

Cash and cash equivalents, end of period         $     112       $   4,558       $   4,906       $    -           $   9,576
                                           ===============  ==============  ==============  ==============   ==============


</TABLE>


                                       19
<PAGE>

                  PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 Condensed Consolidating Statement of Cash Flows
                        Nine Months Ended September 30, 1999
                                   (Unaudited)



<TABLE>
<S>                                        <C>              <C>             <C>             <C>             <C>
                                            Prime Medical     Guarantor     Non-Guarantor    Eliminating      Consolidated
($ in thousands)                            Services, Inc.   Subsidiaries    Subsidiaries       Entries           Total
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash provided by (used in)
    operating activities                        $  (20,170)       $ 10,447       $  41,472        $    -          $  31,749
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of operating entities                      -           (11,217)        (10,076)            -            (21,293)
  Purchases of equipment and leasehold
    improvements                                       -              (699)         (4,088)            -             (4,787)
  Distributions from subsidiaries                   16,856          15,495             -           (32,351)             -
  Distributions from investments                       -             2,062             -               -              2,062
  Other                                                -               192             372             -                564
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    investing activities                            16,856           5,833         (13,792)        (32,351)          (23,454)
                                           ---------------  --------------  --------------  --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings on notes payable                          -               -             3,673             -              3,673
  Payments on notes payable exclusive of
    interest                                           -               -            (1,078)            -             (1,078)
  Contributions by minority interest,
    net of buyouts                                     -               -             2,138             -              2,138
  Distributions to minority interest                   -               -               -           (25,685)         (25,685)
  Purchases of treasury stock                       (6,567)            -               -               -             (6,567)
  Other                                                 79             -               -               -                 79
  Distributions to equity owners                       -           (16,856)        (41,180)         58,036              -
                                           ---------------  --------------  --------------  --------------   --------------

  Net cash provided by (used in)
    financing activities                            (6,488)        (16,856)        (36,447)         32,351          (27,440)
                                           ---------------  --------------  --------------  --------------   --------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                              (9,802)           (576)         (8,767)            -            (19,145)

Cash and cash equivalents, beginning
  of period                                         15,798           7,585          16,763             -             40,146
                                           ---------------  --------------  --------------  --------------   --------------

Cash and cash equivalents, end of period         $   5,996       $   7,009      $    7,996       $     -          $  21,001
                                           ===============  ==============  ==============  ==============   ==============


</TABLE>

                                       20
<PAGE>


                      Management's Discussion and Analysis

                           of Financial Condition and

                              Results of Operations


Revenues

For  the  nine  months  ended  September  30, 2000,   total  revenues  increased
$13,233,000  (16%) as  compared to  the same   period  in  1999.   Revenues from
lithotripter  operations  decreased  by $5,158,000 (7%)  primarily due  to lower
procedure  volume  and  fluctuations in  payormix.  Revenues from  manufacturing
increased  $3,613,000  (27%) due to  increased  sales of MRI trailers as well as
expansion  into  other  modalities.  Revenues  from  refractive  services   were
$16,021,000, due to procedures from four centers acquired in 2000. Revenues from
prostatherapy operations declined $206,000 (15%) due to lower procedure volume.

Total  revenues  for  the three months   ended   September  30, 2000   increased
$4,813,000  (16%)  as  compared  to  the  same  period  in  1999.  Revenues from
lithotripter   operations   decreased  by  $1,507,000  (6%)  and  revenues  from
manufacturing  increased $382,000 (7%). Revenues from  refractive  services were
$6,941,000, due to the acquisitions discussed above. Revenues from prostatherapy
operations declined $4,000 (1%) due to lower procedure volume.

Expenses

For the  nine months  ended  September 30, 2000, costs  and expenses  (excluding
depreciation and amortization) increased from 39% to 45% of revenues,  primarily
due to  increases in  the  manufacturing  and  refractive  operations,  both  of
which have lower operating margins than  the  lithotripsy  operations.  Costs of
services  associated  with  lithotripsy  operations  decreased  $382,000 (2%) in
absolute terms and slightly  increased  from 25% to 26% of  lithotripsy revenues
due to the levels of fixed costs  relative  to a  lower  revenue  base.  Cost of
services and general and  administrative expenses  associated with manufacturing
increased  $3,013,000 (30%) due to increased sales. Cost of services  associated
with refractive  operations  were  $9,259,000.  Cost of services associated with
prostatherapy operations decreased $225,000 (19%) due to lower procedure volume.
Corporate  expenses  decreased  from  4% to 3% of  revenues,decreasing  $238,000
(7%) in absolute  terms due to lower  variable  expenses  during  2000.   During
the second and third  quarter the Company recorded nonrecurring charges totaling
$570,000 for  the  relocation of  its central  business office (CBO) from  North
Carolina to Texas. The relocation of the  CBO is being done in conjunction  with
the purchase and  implementation  of a new practice  management system.

Costs  and expenses  (excluding  depreciation and  amortization) for  the  three
months ended September 30, 2000 increased from 39% to 46% of revenues, primarily
due to increases in the  manufacturing  and refractive operations, both of which
have lower operating margins than the lithotripsy  operations. Costs of services
associated  with  lithotripsy  operations  increased $328,000 (6%) and increased
from  23% to  26% of  lithotripsy  revenues.  Cost  of  services and general and
administrative  expenses  associated with manufacturing  increased $236,000 (6%)
consistent  with  the  increase  in  sales.  Cost  of  services  associated with
refractive  operations  were  $4,432,000.  Cost  of  services  associated   with
prostatherapy  operations  decreased $70,000 (21%) due to lower  variable costs.
Corporate expenses  decreased  from 4% to 3% of  revenues,  decreasing  $143,000
(10%) in absolute terms due to lower variable expenses in 2000.

                                       21
<PAGE>


Other Income (Deductions)

For  the  nine months  ended  September  30, 2000,  other  deductions  increased
$2,054,000  (42%)  compared to  the same period in 1999, primarily  due to a one
time recognition of income related to a 1999 release of a contractual obligation
related to a management incentive  compensation  program.  Also  contributing to
the increase in expense was $111,000 related to a restructuring of the Company's
$100  million  revolving  credit facility,  and a $672,000 increase  in interest
expense due to higher outstanding debt balances, partially offset by  a decrease
in other expense as the 1999 balance included a write-off of costs  related to a
proposed acquisition.

Other  deductions  for  the  three  months  ended  September 30, 2000  increased
$638,000 (35%) compared to the same period in 1999 primarily  due to an increase
in interest expense and a decrease in interest income.

Minority Interest In Consolidated Income

Minority  interest in  consolidated  income for the nine months ended  September
30, 2000  increased  $1,467,000  compared to the same period in 1999,  primarily
as a result of the  refractive  acquisitions  and the  reengineering  of certain
lithotripsy  partnerships.  Earnings before  interest,  taxes,  depreciation and
amortization  (EBITDA) attributable to minority interest was $24,041,000 for the
nine months ended September 30, 2000 compared to $21,718,000 for the same period
in 1999.

Minority interest in consolidated  income for the three months  ended  September
30, 2000 increased  $956,000 compared to the same period in 1999,  primarily  as
a result  of  the refractive  acquisitions  and  the  reengineering  of  certain
lithotripsy  partnerships.  Earnings  before interest,  taxes,  depreciation and
amortization  (EBITDA) attributable to minority interest was $8,714,000 for  the
three months ended September 30, 2000 compared to $8,238,000 for the same period
in 1999.

EBITDA is not  intended  to  represent  net income or cash flows from  operating
activities  in  accordance  with  generally  accepted  accounting principles and
should not be considered a measure of the Company's profitability or liquidity.

Provision for income taxes

Provision  for  income  taxes  for the  nine  months  ended  September  30, 2000
decreased   $1,863,000  and  for  the  three  months ended   September 30,  2000
decreased $1,125,000  compared to the same  periods in 1999 due to a decrease in
taxable  income.  The  effective  tax rate  includes  the impact of the  Federal
tax rate as well as numerous  state tax rates for the Company, and the impact of
the Federal and state  rates for a  partially  owned  consolidated  corporation,
which is required to file separate tax returns.

Liquidity and Capital Resources

Cash was $9,576,000 and $20,064,000 at September 30, 2000 and December 31, 1999,
respectively.  Cash provided by operations for the nine months  ended  September
30, 2000 was  $35,577,000  compared to cash provided by operations for the  nine
months ended September 30, 1999 of $31,749,000. The increase was attributable to
increased  operations as well as proceeds  received from sales and maturities of
investments of $5,091,000.

                                       22
<PAGE>


Cash used in  investing activities  for the nine months ended September 30, 2000
was $23,619,000 compared  to cash  used  in  investing  activities  for the nine
months ended September 30, 1999 of $23,454,000. The increase was attributable to
an increase in the purchase of equipment. Cash used in financing activities  for
the nine months ended September 30, 2000 was $22,446,000  compared  to cash used
for  financing  activities  for  the  nine  months  ended  September 30, 1999 of
$27,440,000.  The  decrease  in  cash  used  was  due  to additional borrowings,
primarily  $9,000,000  on  the  Company's senior credit facility.  Additionally,
contributions provided by minority interest decreased and cash used  to purchase
treasury stock increased.

The Company's  existing  senior credit facility is comprised of a revolving line
of credit. The revolving line of credit  has  a  borrowing limit of $100 million
$9 and $14.5 million of which was drawn at September 30,  2000  and  October 31,
2000.

On March 27, 1998,  the Company  completed an offering of $100 million of senior
subordinated notes due 2008 (the "Notes") to qualified institutional buyers. The
net proceeds  from the offering of  approximately  $96 million was used to repay
all  outstanding  indebtedness  under  the  Company's  bank  facility,  with the
remainder used for general corporate purposes, including acquisitions. The Notes
bear  interest at 8.75% and interest is payable  semi-annually  on April 1st and
October 1st. Principal is due April 2008.

The  Company  intends  to  increase  the  number of its  lithotripsy  operations
primarily  through  acquisitions  and the  number of its  refractive  operations
through  both acquisitions and  development. The Company  intends to fund future
acquisitions and developments using borrowings under its senior credit  facility
and cash flow from  operations.  In addition, the Company  may use shares of its
common stock in such acquisitions where appropriate.

During 1998,  the Company  announced a stock  repurchase  program of up to $25.0
million of common stock.  In February 2000 the Company  announced an increase in
the authorized  repurchase amount from $25.0 million to $35.0 million. From time
to time, the Company may purchase  additional  shares of its common stock where,
in the judgment of management,  market valuations of its stock do not accurately
reflect the Company's  past and  projected  results of  operations.  The Company
intends  to fund any  such  purchases  using  available  cash,  cash  flow  from
operations  and  borrowings  under its senior credit  facility.  The Company has
purchased  3,751,000  shares of stock for a total of  $32,032,000 as of  October
31, 2000.

The Company's ability to make scheduled  payments of principal of, or to pay the
interest on, or to  refinance,  its  indebtedness,  or to fund  planned  capital
expenditures will depend on its future performance,  which, to a certain extent,
is subject to general economic, financial, competitive,  legislative, regulatory
and other  factors that are beyond its control.  Based upon the current level of
operations and anticipated cost savings and revenue growth,  management believes
that cash flow from  operations  and available  cash,  together  with  available
borrowings  under its  senior  credit  facility,  will be  adequate  to meet the
Company's future  liquidity needs for at least the next several years.  However,
there can be no assurance that the Company's  business will generate  sufficient
cash flow  from  operations,  that  anticipated  revenue  growth  and  operating
improvements  will be realized or that future borrowings will be available under
the senior  credit  facility  in an amount  sufficient  to enable the Company to
service its indebtedness or to fund its other liquidity needs.


                                       23
<PAGE>


Impact of Inflation
-------------------

The assets of the Company are not  significantly  affected by inflation  because
the Company is not required to make large investments in fixed assets.  However,
the rate of inflation  will affect  certain of the Company's  expenses,  such as
employee compensation and benefits.

Forward-Looking Statements
--------------------------

The  statements  contained  in this  Report  on Form  10-Q  that are not  purely
historical are  forward-looking  statements within the meaning of Section 27A of
the  Securities  Act of 1933 and Section 21E of the  Securities  Exchange Act of
1934,  including  statements   regarding  the  Company's   expectation,   hopes,
intentions or strategies  regarding the future.  Readers  should not place undue
reliance on forward-looking  statements. All forward-looking statements included
in this document are based on  information  available to the Company on the date
hereof, and the Company assumes no obligation to update any such forward-looking
statements.  It is important to note that the  Company's  actual  results  could
differ materially from those in such forward-looking  statements. In addition to
any risks and uncertainties specifically identified in the text surrounding such
forward-looking  statements,  the reader should consult the Company's reports on
Form 10-K and other filings under the  Securities Act of 1933 and the Securities
Exchange  Act of 1934,  for factors  that could cause  actual  results to differ
materially from those presented.

The forward looking statements  included herein are necessarily based on various
assumptions  and  estimates  and are  inherently  subject to  various  risks and
uncertainties,  including  risks  and  uncertainties  relating  to the  possible
invalidity of the underlying  assumptions and estimates and possible  changes or
developments  in  social,  economic,   business,  industry,  market,  legal  and
regulatory circumstances and conditions and actions taken or omitted to be taken
by  third  parties,  including  customers,   suppliers,  business  partners  and
competitors and  legislative,  judicial and other  governmental  authorities and
officials.  Assumptions  related to the foregoing involve judgments with respect
to, among other things,  future economic,  competitive and market conditions and
future business  decisions,  all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company.  Any of such
assumptions  could be inaccurate and  therefore,  there can be no assurance that
the  forward-looking  statements included in this Report on Form 10-Q will prove
to be accurate.


                                       24
<PAGE>

                                     PART II

                                OTHER INFORMATION



                                       25
<PAGE>


Item 6.  Exhibits and Reports on Form 8-K.

(a)      Exhibits

12.      Computation of ratio of earnings to fixed charges.

(b)      Current Reports on Form 8-K

         NONE



                                       26
<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.

                                                    PRIME MEDICAL SERVICES, INC.



Date:    November 13, 2000                           By: /s/ Cheryl L. Williams
                                                         ----------------------
                                      Cheryl L. Williams, Senior Vice President
                                                    and Chief Financial Officer


                                       27
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