SonoSite Revenue Rises 25% Net Income Rises 48% In Second Quarter

July 24, 2008

Judge Issues Favorable Rulings for SonoSite in GE Lawsuit Conference Call Webcast Live Today at 1:30 pm Pacific/ 4:30 pm

Eastern BOTHELL, WA - July 24, 2008 - SonoSite, Inc. (Nasdaq:SONO), the world leader and specialist in hand-carried ultrasound for the point-of-care, today reported financial results for the second quarter and first half ended June 30, 2008. Worldwide revenue in the second quarter of 2008 grew 25% to $59.2 million compared with $47.4 million in the second quarter of 2007. For the first half of 2008, worldwide revenue grew 24% to $111.7 million compared with $90.2 million for the first half of 2007. Changes in foreign currency rates increased worldwide revenue by approximately 4% in both the quarter and the first half of 2008. For the second quarter of 2008, net income grew 48% to $2.5 million or $0.14 per diluted share, compared with net income of $1.7 million or $0.10 per diluted share in the second quarter of 2007. For the first half of 2008, net income more than tripled to $3.8 million or $0.22 per diluted share, compared with net income of $1.1 million or $0.07 per diluted share in the first half of 2007.

"The company's strong momentum continued in the second quarter," said Kevin M. Goodwin, SonoSite President and CEO. "The success of our new products drove our revenue growth worldwide. The M-Turbo„¢ and S Series„¢ products accounted for over half of our sales in the second quarter and are showing strong trends both internationally and domestically. During July we achieved an important corporate and industry milestone by surpassing $1 billion in cumulative sales since first starting the hand-carried ultrasound market 10 years ago." Mr. Goodwin continued, "Our profitability is also showing improvement. We are gaining leverage on our SG&A structure and achieved an operating margin of 9% in the second quarter despite outside legal costs of $3.5 million. We are looking forward to a strong year."

The company also updated developments in the GE lawsuit pending in federal court in Madison, Wisconsin. In rulings issued this morning, the trial judge granted summary judgment motions in SonoSite's favor on five of the six patents that GE has asserted against SonoSite. The court ruled that one of the GE patents is invalid and that SonoSite products do not infringe the other four GE patents. She also granted summary judgment in GE's favor on two of SonoSite's patents. The judge has not yet ruled on two remaining SonoSite patents and one remaining GE patent.

"This is a great victory," said Mr.Goodwin. "It confirms what we have believed all along - that our products do not infringe GE's patents and that GE is using the courtroom as a competitive weapon rather than compete with us in the marketplace." For the second quarter of 2008, US revenue grew 19% and 16% for the first half of 2008 as compared with the prior year periods. International revenue grew 31% for both the second quarter and first half of 2008 as compared to the same periods in 2007. Overall, international revenue accounted for 53% of total revenue in the quarter and 56% for the first half as compared with 50% and 52% respectively in the prior year. Changes in foreign currency rates increased international revenue by 7% for the quarter and 8% for the first half of 2008. Gross margin in the second quarter of 2008 was 70% compared with 69% in the second quarter of 2007, and 71% in the first half of 2008 compared to 69% in the same period of 2007.

Operating expenses grew 16% to $36.1 million in the quarter and 13% to $71.6 million in the first half as compared with the same periods in 2007. R&D expense increased 7% for the quarter and 4% for the first half while SG&A expense grew 18% for the quarter and 15% for the first half compared to the prior year. As a percent of revenue, SG&A declined to 49% in the quarter and to 52% in the first half as compared with 52% and 56% respectively in the prior year. Operating income in the second quarter of 2008 was $5.3 million, or 9% of revenue, compared with $1.5 million, or 3% of revenue, in the prior year. For the first half, operating income was $7.7 million, or 7% of revenue, as compared with an operating loss of $0.8 million in the year ago period.

Other expense in the second quarter of 2008 was $1.0 million compared with other income of $1.3 million in the second quarter of 2007. For the first half of 2008, other expense was $1.1 million compared with other income of $2.6 million in 2007. The change for both the quarter and first half of 2008 was primarily due to fixed interest expense on the convertible senior notes the company issued in July 2007. The interest rate on these notes exceeded the interest rate received on the related cash balance. As of June 30, 2008, cash and investments totaled $315.3 million, an increase of $5.5 million from December 31, 2007. Cash flow from operations during the first half of 2008 was $5.0 million compared with $11.2 million in 2007. The reduced cash flow was primarily due to working capital requirements related to new product launches in the fourth quarter of 2007.

Company Updates 2008 Outlook
SonoSite updated its financial outlook for 2008. Revenue is now expected to grow approximately 20% for the year. Management continues to expect gross margin of approximately 70% and is broadening the range on operating margin to 9-11%. Other expense is expected to be approximately $3.0 million. The tax rate for the year is expected to be about 40%. The 2008 annual tax rate is expected to be lower than the first half of 2008 largely due to the expected reenactment of the federal R&E (Research and Experimentation) tax credit. The financial outlook for 2008 does not include any potential financial impact from the resolution of the Zonare patent litigation lawsuit. Management reiterated its target to achieve a 15% operating margin in 2009.

Conference Call Information
SonoSite will hold a conference call today at 1:30 pm PT/4:30 ET. The call will be broadcast live and can be accessed via the "Investors" section of SonoSite's website at www.sonosite.com. A replay of the audio webcast will be available beginning July 24, 2008, 4:30 pm PT and will be available until August 7, 2008, midnight PT by dialing (617) 801-6888 or toll-free (888) 286-8010. The confirmation code 85676843 is required to access the replay. The call will also be archived on SonoSite's website at http://ir.sonosite.com.

About SonoSite
SonoSite, Inc. (www.sonosite.com) is the innovator and world leader in hand-carried ultrasound. Headquartered near Seattle, the company is represented by ten subsidiaries and a global distribution network in over 100 countries. SonoSite's small, lightweight systems are expanding the use of ultrasound across the clinical spectrum by cost-effectively bringing high performance ultrasound to the point of patient care. The company employs over 600 people worldwide.

Forward-looking Information and the Private Litigation Reform Act of 1995 Certain statements in this press release relating to the market acceptance of our products, possible future sales relating to expected orders, and our future financial position and operating results are "forward-looking statements" for the purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on the opinions and estimates of our management at the time the statements are made and are subject to risks and uncertainties that could cause actual results to differ materially from those expected or implied by the forward-looking statements. These statements are not guaranties of future performance and are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions. Factors that could affect the rate and extent of market acceptance of our products, the receipt of expected orders, and our financial performance include our ability to successfully manufacture, market and sell our ultrasound systems, our ability to accurately forecast customer demand for our products, our ability to manufacture and ship our systems in a timely manner to meet customer demand, variability in quarterly results caused by the timing of large project orders from governmental or international entities and the seasonality of hospital purchasing patterns, timely receipts of regulatory approvals to market and sell our products, regulatory and reimbursement changes in various national health care markets, constraints in government and public health spending, the ability of our distribution partners and other sales channels to market and sell our products and any changes to such channels, the impact of patent litigation, our ability to execute our acquisition strategy, the effect of transactions and activities associated with our issuance of senior convertible debt in July 2007 on the market price of our common stock, and as well as other factors contained in the Item 1A. "Risk Factors" section of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. We caution readers not to place undue reliance upon these forward-looking statements that speak only as to the date of this release. We undertake no obligation to publicly revise any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Download Q2 2008 Selected Financial Information (PDF)

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