_______________________________________________________

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, 2004
OR
[ ] 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 incorporation or organization)				(IRS Employer Identification No.)

1301 Capitol of Texas Highway, Suite 200B, Austin, Texas 78746
(Address of principal executive offices) (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 by check mark whether the registrant is an accelerated filer (as described in Rule 12b-2 of the Exchange Act).

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.

Title of Each Class
Common Stock, $.01 par value

Number of Shares Outstanding at
November 1, 2004
20,705,335

PART I

ITEM 1 — FINANCIAL INFORMATION

-2-

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

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands, except per share data)	2004			2003			2004			2003
Revenue:
Urology	$	20,003		$	15,658		$	55,989		$	45,756
Manufacturing		26,192			23,641			80,462			70,780
Other		237			260			712			785

Total revenue		46,432			39,559			137,163			117,321

Cost of services and general and
administrative expenses:
Urology		9,155			5,963			24,861			18,974
Manufacturing		24,076			22,503			73,287			64,923
Corporate		700			901			2,724			2,341
Depreciation and amortization		1,837			1,759			5,303			5,410

		35,768			31,126			106,175			91,648

Operating income		10,664			8,433			30,988			25,673

Other income (expenses):
Interest and dividends		58			43			207			264
Interest expense		(2,380	)		(2,338	)		(7,033	)		(6,875	)
Loan fees		--			(257	)		--			(257	)
Other, net		76			203			44			(55	)

		(2,246	)		(2,349	)		(6,782	)		(6,923	)

Income before provision for income
taxes and minority interests		8,418			6,084			24,206			18,750

Minority interest in consolidated income		6,592			4,910			16,856			12,803

Provision for income taxes		584			399			2,605			2,022

Net income	$	1,242		$	775		$	4,745		$	3,925

Basic earnings per share:
Net income	$	0.06		$	0.05		$	0.24		$	0.23

Weighted average shares outstanding		20,680			17,145			20,012			17,182

Diluted earnings per share:
Net income	$	0.06		$	0.04		$	0.23		$	0.23

Weighted average shares outstanding		21,013			17,366			20,282			17,387

See accompanying notes to consolidated financial statements.

-3-

PRIME MEDICAL SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

($ in thousands)	September 30, 2004 (Unaudited)			December 31, 2003 (Audited)
ASSETS

Current assets:
Cash and cash equivalents	$	6,385		$	9,780
Accounts receivable, less allowance for doubtful
accounts of $444 in 2004 and $512 in 2003		24,456			27,245
Other receivables		731			795
Deferred income taxes		13,021			8,385
Prepaid expenses and other current assets		2,328			1,617
Inventory		30,506			21,288

Total current assets		77,427			69,110

Property and equipment:
Equipment, furniture and fixtures		42,104			40,161
Building and leasehold improvements		12,188			11,235

		54,292			51,396
Less accumulated depreciation and amortization		(26,776	)		(27,440	)

Property and equipment, net		27,516			23,956


Other investments		2,916			3,088
Goodwill, at cost		185,882			177,974
Other noncurrent assets		6,841			5,840

	$	300,582		$	279,968

See accompanying notes to consolidated financial statements.

-4-

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

($ in thousands, except share data)	September 30, 2004 (Unaudited)			December 31, 2003 (Audited)
LIABILITIES

Current liabilities:
Current portion of long-term debt	$	3,397		$	3,345
Accounts payable		9,362			8,617
Accrued distributions to minority interests		--			6,908
Accrued expenses		13,728			10,137
Customer deposits		6,904			6,259

Total current liabilities		33,391			35,266

Long-term debt, net of current portion		107,040			111,728
Other long term obligations		1,279			1,397
Deferred income taxes		21,003			17,889

Total liabilities		162,713			166,280

Minority interest		9,076			7,077

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; 21,078,633 shares issued
in 2004 and 17,324,585 issued in 2003; and 20,695,667 outstanding in 2004 and		211			173
17,081,869 outstanding in 2003
Capital in excess of par value		88,916			70,813
Accumulated earnings		41,584			36,839
Treasury stock, at cost, 382,966 shares in 2004 and 242,716 shares in 2003		(1,918	)		(1,214	)

Total stockholders' equity		128,793			106,611

	$	300,582		$	279,968

See accompanying notes to consolidated financial statements.

-5-

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

	Nine Months Ended September 30,
($ in thousands)	2004			2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Fee and other revenue collected	$	143,092		$	120,355
Cash paid to employees, suppliers of goods and others		(114,133	)		(92,421	)
Interest received		207			264
Interest paid		(4,991	)		(3,397	)
Taxes refunded		794			8

Net cash provided by operating activities		24,969			24,809

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of entities, net of cash acquired		3,155			(12,513	)
Escrow deposits		513			(1,742	)
Purchases of equipment and leasehold improvements		(6,403	)		(5,128	)
Distributions from investments		232			274
Proceeds from sales of equipment		568			243

Net cash used in investing activities		(1,935	)		(18,866	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable		1,491			19,572
Payments on notes payable, exclusive of interest		(5,776	)		(14,148	)
Distributions to minority interest		(22,509	)		(21,346	)
Contributions by minority interest, net of buyouts		153			(280	)
Purchase of treasury stock		--			(1,214	)
Exercise of stock options		212			--

Net cash used in financing activities		(26,429	)		(17,416	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(3,395	)		(11,473	)

Cash and cash equivalents, beginning of period		9,780			20,174

Cash and cash equivalents, end of period	$	6,385		$	8,701

See accompanying notes to consolidated financial statements.

-6-

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

	Nine Months Ended September 30,
($ in thousands)	2004			2003
Reconciliation of net income to net cash provided by operating activities:
Net income	$	4,745		$	3,925
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in consolidated income		16,856			12,803
Depreciation and amortization		5,303			5,410
Provision for uncollectible accounts		(97	)		218
Provision for deferred income taxes		1,741			4,667
Stock buyback agreements		(816	)		850
Equity in earnings of affiliates		(60	)		(48	)
Proceeds from termination of interest rate swap		--			1,151
Other		(418	)		356

Changes in operating assets and liabilities, net of effect of purchase transactions:
Accounts receivable		5,515			1,946
Other receivables		(217	)		2,285
Other assets		(6,320	)		(2,961	)
Accounts payable		(1,630	)		(4,028	)
Accrued expenses		367			(1,765	)

Total adjustments		20,224			20,884

Net cash provided by operating activities	$	24,969		$	24,809