HealthTronics Announces Strong Second Quarter Results and Raises 2005 Earnings Guidance

-- Urology Procedures Increase

-- Continued Growth in Medical Device Segment

-- Margin Gains Highlight Vehicle Business

HealthTronics, Inc. (NASDAQ:HTRN), today announced its financialresults for the second quarter ended June 30, 2005. Financial resultsfor the second quarter of 2004 reflect the operations of Prime MedicalServices, Inc. exclusively, and do not include HealthTronics SurgicalServices, Inc. Comparable non-financial metrics and financialvariances incorporated in this news release reflect the combinedoperations of both companies. As previously disclosed, the Company'sOrthopaedics segment is reported as income (loss) from discontinuedoperations and assets held for sale. See attached tables.

Total revenues from continuing operations during the secondquarter 2005 were $64.7 million. Under GAAP, income from continuingoperations was $3.2 million, or $0.09 per share. Excluding mandatoryredemption premiums associated with the early extinguishment of debt,income from continuing operations was $4.1 million or $0.12 per share.Fully-diluted weighted average shares outstanding for the quarter were35.2 million.

HealthTronics' President & CEO, Brad A. Hummel, commented, "Secondquarter results were in-line with our expectations, highlighted bysteady gains in our medical device segment and margin improvementwithin the specialty vehicle group. We continue to meet ourintegration objectives by eliminating redundant costs and streamliningoperations while attacking our strategic goals. Notably in the secondquarter, we introduced the HealthTronics UroVantage(R), ourintra-operative imaging system, at the American Urology AssociationConference in San Antonio. Market reaction has been very favorable andour first installation will be completed next month."

SEGMENT ANALYSIS

UROLOGY

Urology procedures (all modalities) totaled 16,587 during thequarter, an increase of 2.5% over the same period a year ago.Lithotripsy procedures, at 14,124, decreased approximately 5% from theprevious year, suggesting a generally late start to the normallybusier stone season. Partnership constituency and the total number ofreferring physicians was consistent with that of the prior quarter.Segment EBITDA totaled $7.1 million in the quarter. Averagelithotripsy revenue per case was $2,050, slightly below the previousquarter, reflecting case mix and indicative of continued wholesalepricing stability. Minority interest in lithotripsy partnershipsremained stable.

Prostate therapies grew markedly to 2,070 treatments during thequarter, up from 821 in the same period a year ago. Prostate laserprocedures totaled 1,070 and TUMT accounted for 1,000 cases during thesecond quarter. The Company also realized gains in cryotherapytreatment delivery, with procedures increasing to 387 in the quarter,up from 207 in the same quarter a year ago.

The operating environment for the services group remains verygood. The Company's position as a wholesaler provides a comfortablelevel of insulation against reimbursement fluctuation in each of ourservice profiles. The proposed 2006 Hospital Outpatient Payment System("HOPPS") rate for lithotripsy is unchanged at $2,541 per case, whichpositions our average charge at approximately 20% below this benchmarkMedicare reimbursement and nearly 35% below average private payreimbursement. The proposed cutback in the 2006 HOPPS rate forGreenLight PVP from $3,750 to $2,500 per case, while severe, wouldplace our average charge at a 52% discount to the proposed rate -- anda total fee (including fibers) at a 23.5% discount to the proposedrate."

Mr Hummel stated, "The endurability of our lithotripsy model iswell established and we believe that our contractual structure inprostate therapies, both for laser treatments and TUMT, was designedthoughtfully and it, too, will withstand the test of time."

MEDICAL DEVICE SALES & SERVICE

"During the second quarter Medical Device group revenue grew to$9.0 million, and $4.8 million after intercompany eliminations,resulting in a 37% increase in revenue from the same period a yearago. Production efficiencies and rationalized SG&A allocation helpeddrive substantial improvement in group contribution, as segment EBITDAgrew to $2.2 million, up from $1.1 million in the same period a yearago.

"Gross margin on device and consumables for the quarter was 48%.We look forward to continued growth and expanded margins in thisdivision as higher end products such as the UroVantage(R) impactproduct mix, complementing high margin consumable sales andopportunities for expanded service and maintenance revenue."

"On the heels of the successful launch of the UroVantage(R)system, we are continuing our initiatives to develop new devices toexpand our product portfolio. Additionally, the physician interest inemerging technologies such as High Intensity Focused Ultrasound("HIFU") and the promise of expanded applications of our UroVantage(R)platform creates the opportunity to move beyond our significant reachwithin the urology community and into other specialties and the globalmarketplace."

SPECIALTY VEHICLE MANUFACTURING

"Second quarter results from our Specialty Vehicles unit reflect acontinuation of margin improvements achieved in each of the twoprevious quarters. Division EBITDA grew 25%, to $3.4 million, onrevenue of $25.5 million. EBITDA margins increased to 13.3% from 8.2%in the same period last year, despite a 16% revenue decline.

"Following last year's decision to consolidate plants, the Companydirected its top-line focus to revenue opportunities where our coreengineering capabilities could distinguish our products, furtheringour marketplace prominence and leading to higher profitability.

"The improved outlook in demand for mobile medical product, goodvisibility in our broadcast group and modest but steady improvementsin efficiency are encouraging, adding to our confidence that we canattain our previously stated profitability goals for the division in2005."

INTEGRATION & FINANCIAL GUIDANCE

John Q. Barnidge, HealthTronics' Chief Financial Officer,commented, "Our integration efforts relating to thePrime/HealthTronics merger continue to progress and are yieldingsynergies in excess of our projected amounts. We have also realizedthe value of our much strengthened balance sheet. These cost savingshave contributed to our strong net working capital position, which was$75.5 million at June 30, 2005, an increase of $18.8 million duringthe quarter. Net debt was $135.2 million at June 30, 2005."

Mr Barnidge concluded, "Given the positive outlook in each of ourthree business segments, we are raising our previously stated guidancefrom $0.48-$0.52 to $0.52-$0.54 in diluted earnings per share fromcontinuing operations for the year ending December 31, 2005."

Conference Call and Webcast

Management of HealthTronics will host a conference call themorning of Thursday, July 28, 2005 at 10:30 a.m. EDT. To participatein the live call, please dial 888-743-0342 (706-679-0861 forinternational callers) and ask for the "HealthTronics" call(conference I.D. #7808233). Please call in 10 minutes before the callis scheduled to begin. The conference call will also be webcast livevia the Investors section of the Company's web site atwww.healthtronics.com. To listen to the live webcast, go to the website at least 10 minutes early to register, download and install anynecessary audio software. If you are unable to listen live, theconference call will be archived on the Company's web site. Atelephone replay will be available for two weeks by dialing800-642-1687 (706-645-9291 for international callers) and entering theconference I.D. #5542492.

HEALTHTRONICS' USE OF NON-GAAP FINANCIAL MEASURES

This press release includes financial measures for net income andrelated per share amounts that exclude certain charges and thereforehave not been calculated in accordance with U.S. generally acceptedaccounting principles (GAAP). Non-GAAP income from continuingoperations and earnings per share exclude certain expenses in 2005related to loan fees and incremental interest expense related to theCompany's refinancing of long-term debt and its senior creditfacility, and in 2004 charges related to expenses primarily associatedwith the implementation of FAS 150, Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity,(collectively "Certain Charges"). These non-GAAP financial measuresmay be different from non-GAAP financial measures used by othercompanies. Non-GAAP financial measures should not be considered as asubstitute for, or superior to, measures of financial performanceprepared in accordance with GAAP. By excluding Certain Charges, thesenon-GAAP financial measures facilitate management's internalcomparisons to the Company's historical operating results, tocompetitors' operating results, and to estimates made by securitiesanalysts. Management uses these non-GAAP financial measures internallyto evaluate its performance. The Company believes these non-GAAPfinancial measures are useful to investors in allowing for greatertransparency of supplemental information used by management in itsfinancial and operational decision-making. In addition, the Companyhas historically reported similar non-GAAP financial measures to itsinvestors and believes that the inclusion of comparative numbersprovides consistency in its financial reporting. Investors areencouraged to review the reconciliation of the non-GAAP financialmeasures used in this press release to their most directly comparableGAAP financial measure as provided with the financial statementsattached to this press release.

EBITDA AND ADJUSTED EBITDA

HealthTronics has presented EBITDA and Adjusted EBITDA amounts,which are non-GAAP financial measures, in various filings with theSEC. In the SEC filings, HealthTronics has reconciled such amounts totheir most directly comparable financial measure calculated inaccordance with GAAP, which is HealthTronics' net income.HealthTronics believes that its presentations of EBITDA and AdjustedEBITDA are important supplemental measures of operating performance toits investors.

Earnings before interest, taxes, depreciation and amortization("EBITDA") is a commonly used measure of performance whichHealthTronics believes, when considered with measures calculated inaccordance with GAAP, gives investors a more complete understanding ofHealthTronics' operating results before the impact of investing andfinancing transactions and income taxes. HealthTronics does notreflect minority interest expense when calculating EBITDA, however,HealthTronics adjusts for minority interest expense and refers to thismeasure as "Adjusted EBITDA". HealthTronics has historically reportedthis measure to its investors and believes that the continuedinclusion of Adjusted EBITDA provides consistency in its financialreporting. Adjusted EBITDA is among the more significant factors inmanagement's internal evaluation of total company performance.Adjusted EBITDA is also widely used by HealthTronics management in theannual budget process. HealthTronics believes these measures continueto be used by investors and creditors in their assessment ofHealthTronics' operating performance and the valuation of the company.

EBITDA and Adjusted EBITDA are used in addition to and inconjunction with results presented in accordance with GAAP. EBITDA andAdjusted EBITDA should not be considered as an alternative to netincome, operating income, a liquidity measure, or any other operatingperformance measure prescribed by GAAP, nor should these measures berelied upon to the exclusion of GAAP financial measures. EBITDA andAdjusted EBITDA reflect additional ways of viewing HealthTronics'operations that HealthTronics believes, when viewed with its GAAPresults and the reconciliations to the corresponding GAAP financialmeasures, provide a more complete understanding of factors and trendsaffecting HealthTronics' business than could be obtained absent thisdisclosure. HealthTronics strongly encourages investors to review itsfinancial information in its entirety and not to rely on a singlefinancial measure.

About HealthTronics, Inc.

HealthTronics provides healthcare services, primarily to theurology community, and manufactures medical devices as well asspecialty vehicles used for the transport of high technology medicaland broadcast & communications equipment. For more information, visitwww.healthtronics.com.

Statements by the Company's management during the conference callannounced in this press release that are not strictly historical,including statements regarding plans, objective and future financialperformance, are "forward-looking" statements that are made pursuantto the safe harbor provisions of the Private Securities LitigationReform Act of 1995. Although HealthTronics believes that theexpectations reflected in such forward-looking statements arereasonable, no assurance can be given that the expectations will proveto be correct. Factors that could cause actual results to differmaterially from HealthTronics' expectations include, among others, theexistence of demand for and acceptance of HealthTronics' services, theintegration of Prime's and HealthTronics' businesses, regulatoryapprovals, economic conditions, the impact of competition and pricing,financing efforts and other factors described from time to time inHealthTronics' periodic filings with the Securities and ExchangeCommission.
HealthTronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Income/Information
GAAP VS. Pro Forma Results
(Unaudited)

GAAP RESULTS
------------

($ in thousands, Three Months Six Months
except per share data) Ended June 30, Ended June 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue:
Urology $34,182 $16,484 $67,542 $30,879
Device Sales and Service 4,814 3,283 7,512 5,107
Specialty Vehicle Manufacturing 25,530 30,513 52,504 54,270
Other 196 238 390 475
-------- -------- -------- --------
Total revenue 64,722 50,518 127,948 90,731
-------- -------- -------- --------

Cost of services and general and
administrative expenses:
Urology 15,739 6,578 30,300 12,509
Device Sales and Service 2,664 2,206 3,342 3,254
Specialty Vehicle Manufacturing 22,135 27,507 46,165 49,213
Corporate 1,233 1,045 2,770 1,997
Depreciation and amortization 3,229 1,846 6,506 3,466
-------- -------- -------- --------
45,000 39,182 89,083 70,439
-------- -------- -------- --------

Operating income 19,722 11,336 38,865 20,292

Other income (expenses):
Interest and dividends 153 61 296 149
Interest expense (1,804) (2,364) (4,732) (4,653)
Loan fees (1,463) -- (2,646) --
-------- -------- -------- --------
(3,114) (2,303) (7,082) (4,504)
-------- -------- -------- --------
Income from continuing operations
before provision for income
taxes and minority interest 16,608 9,033 31,783 15,788

Minority interest
in consolidated income 11,414 5,373 22,848 10,264

Provision for income taxes 2,010 1,338 3,440 2,021
-------- -------- -------- --------

Income from continuing operations 3,184 2,322 5,495 3,503
-------- -------- -------- --------

Income from discontinued
operations, net of tax benefit (359) -- (935) --
-------- -------- -------- --------

Net income 2,825 $2,322 4,560 $3,503
======== ======== ======== ========

Diluted income from continuing
operations per share:
Income from continuing
operations $0.09 $0.11 $0.16 $0.18
======== ======== ======== ========

Weighted average shares
outstanding 35,218 20,952 34,627 19,913
======== ======== ======== ========

PRO FORMA RESULTS
-----------------

Income from continuing
operations, as reported $3,184 $2,322 $5,495 $3,503

Compensation charge for employee
puts and stock buybacks,
net of tax -- (313) -- (517)

Loan fees and incremental
interest charges, net of tax 900 -- 2,279 --
-------- -------- -------- --------

Income from continuing
operations, pro forma $4,084 $2,009 $7,774 $2,986
======== ======== ======== ========

Diluted income from continuing
operations per share:
Income from continuing
operations, pro forma $0.12 $0.10 $0.22 $0.15
======== ======== ======== ========
Weighted average shares
outstanding 35,218 20,952 34,627 19,913
-------- -------- -------- --------


HealthTronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)

June 30, Dec. 31,
($ in thousands) 2005 2004
---------- ----------

ASSETS

Total current assets $114,706 $102,535

Property and equipment, net 41,972 42,343

Assets held for sale 13,971 16,169

Other assets 309,828 313,226
---------- ----------

$480,477 $474,273
========== ==========

LIABILITIES

Total current liabilities $39,235 $84,774

Long-term debt, net of current portion 142,877 110,304

Other long-term liabilities 25,452 26,339
---------- ----------

Total liabilities 207,564 221,417

Liabilities held for sale 7,224 6,352

Minority interest 32,969 29,277

Total stockholders' equity 232,720 217,227
---------- ----------

$480,477 $474,273
========== ==========

HealthTronics, Inc.
Pro Forma Supplemental Financial Information
Continuing Operations
For the Six Months Ended June 30, 2005
Unaudited
In thousands, except per share data

2nd Quarter YTD
---------------------------------------
2005 2004(a) 2005 2004(a)

Summary of Results
from Operations
Revenues $64,722 $50,518 $127,948 $90,731

EBITDA $23,104 $12,749 $45,667 $23,091

Adjusted EBITDA $11,690 $7,376 $22,819 $12,827

Net Income $4,084 $2,009 $7,774 $2,986

EPS $0.12 $0.10 $0.22 $0.15

Number of Shares 35,218 20,952 34,627 19,913

Segment Information

Revenues:
Urology $34,182 $16,484 $67,542 $30,879

Medical Device Sales &
Service $4,814 $3,283 $7,512 $5,107

Specialty Vehicles $25,530 $30,513 $52,504 $54,270

Adjusted EBITDA:
Urology $7,121 $4,539 $14,557 $8,240

Medical Device Sales &
Service $2,161 $1,100 $4,198 $1,885

Specialty Vehicles $3,399 $2,515 $6,344 $4,245

Capital Expenditures:
Consolidated, net to
HealthTronics $1,346 $950 $3,559 $2,629

Urology, net to HealthTronics $661 $415 $2,377 $1,085

Medical Device Sales &
Service $111 $-- $407 $--

Specialty Vehicles
Manufacturing $362 $365 $521 $1,242

Corporate $212 $170 $254 $302

Other Information:

Net Draws (Payments) on Line
of Credit $(313) $-- $687 $(3,000)

Net Debt $135,217 $106,276 $135,217 $106,276

Days Sales Outstanding 30.8 37.3 $30.8 37.3


(a) In accordance with General Accepted Accounting Principals, 2004
amounts are for Prime Medical Services, Inc. only.

(b) See accompanying reconciliation of EBITDA and Adjusted EBITDA


HealthTronics, Inc.
Supplemental Segment Financial Information
2005 by Quarter
Unaudited
In thousands, except procedure data

2005
-------------------
Q-2 Q-1
--------- ---------
Urology Segment

Procedures:
Litho 13,926 13,475
Holmium Renal 198 220
Prostate Laser 1,070 940
TUMT 1,000 818
Cryotherapy 387 372
Other 6 13
--------- ---------
Total Procedures 16,587 15,838
========= =========

Revenues:
Litho $28,548 $28,405
Holmium Renal 129 146
Prostate Laser 2,084 1,770
TUMT 2,008 1,598
Cryotherapy 1,370 1,414
Other 43 27
--------- ---------
Segment Revenue $34,182 $33,360
========= =========

Adjusted EBITDA $7,121 $7,436
========= =========

Specialty Vehicle Manufacturing Segment

Units:
Mobile Medical 38 32
Broadcast 32 34
Command/Homeland Security 11 36
Other 2 1
--------- ---------
Total Units 83 103
========= =========
Revenues:
Mobile Medical $14,112 $11,945
Broadcast 4,658 6,170
Command/Homeland Security 3,532 5,706
Other 3,228 3,153
--------- ---------
Segment Revenue $25,530 $26,974
========= =========

Adjusted EBITDA $3,399 $2,945
========= =========


HealthTronics, Inc.
Reconciliation of EBITDA and Adjusted EBITDA
Continuing Operations
For the Six Months Ended June 30, 2005
Unaudited
In thousands


2nd Quarter YTD
-----------------------------------
2005 2004 2005 2004
-------- -------- -------- --------

Net Income from continuing
operations as reported $3,184 $2,322 $5,495 $3,503

Add Back(deduct):
Provision for Income Taxes 2,010 1,338 3,440 2,021
Interest Expense,
Including Loan Fees 3,267 2,364 7,378 4,653
Depreciation & Amortization 3,229 1,846 6,506 3,466
Compensation charge for employee
puts and stock buybacks -- (494) -- (816)
-------- ------- -------- --------
Adjusted EBITDA 11,690 7,376 22,819 12,827

Add Back:
Minority Interest Expense 11,414 5,373 22,848 10,264
-------- -------- -------- --------

EBITDA $23,104 $12,749 $45,667 $23,091
======== ======== ======== ========