SonoSite Announces Third Quarter 2009 Results

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Conference Call Webcast Live Today at 1:30 pm Pacific/4:30 pm Eastern
BOTHELL, Wash.--(Business Wire)--
SonoSite, Inc. (Nasdaq:SONO), the world leader and specialist in hand-carried
ultrasound for the point-of-care, today reported financial results for the third
quarter and nine months ended September 30, 2009.

REVENUE

Revenue in the third quarter of 2009 was $53.6 million, a decrease of 13%
compared to the third quarter of 2008. For the nine months of 2009, revenue was
$157.7 million, a decrease of 9% compared to the nine months of 2008.

Overall revenue included $3.0 million for the quarter and nine months just ended
from the recently acquired CardioDynamics International Corporation (CDIC).

Excluding CDIC, revenue in the third quarter was $50.6 million, a decrease of
18% compared to the third quarter of 2008, and $154.7 million for the nine
months just ended.

Foreign exchange had zero effect on third quarter revenue, but had a negative
impact of $6.7 million or 4% for the nine months just ended.

OPERATING INCOME AND CASH FLOW

Overall, "reported" third quarter operating income was $2.3 million, including
charges from CDIC of $3.1 million related to operating results as well as
acquisition and integration.

Operating income in the third quarter excluding CDIC was $5.4 million, a 10.7%
operating margin versus a $3.0 million or 5.6% operating margin in the second
quarter 2009.

Cash Flow

Operating cash flow was $1.6 million for the quarter and $8.9 million for the
nine months of 2009, as compared to $13.0 million and $18.0 million for the
comparable periods of 2008. Operating cash flow reflects the decline in
operating income and the $3.1 million impact of the CDIC acquisition.

Net income

For the third quarter of 2009, the Company recorded a net loss of $0.2 million
or $0.01 per share, compared to a net income of $3.7 million or $0.21 per share
in 2008. For the nine months of 2009, net income was $1.0 million or $0.06 per
share compared to $5.3 million or $0.30 per share, all of which include $3.1
million in charges related to the CDIC acquisition.

COMMENTARY

"While revenue remained sluggish, gross margins and expense management improved,
resulting in a better than forecasted operating margins of 10.7% in our core
businesses, excluding CDIC," said Kevin M. Goodwin, SonoSite President and CEO.
"The revenue environment remains tight, US revenue levels continued stabilizing
and we experienced a few order delays in our international business.
Importantly, pricing and expense management have continued to improve, resulting
in steadily increasing operating margin performance."

"We also recently concluded an agreement with General Electric to settle our
patent disputes," Mr. Goodwin stated. "As a part of the settlement, both
companies agreed to invest in an important new education and clinical research
foundation, which the companies will co-fund, and which will contribute to the
long-term market adoption of best practices in point-of-care ultrasound."

"Our 2009 outlook remains unchanged," Mr. Goodwin said. "Going forward, we
intend to continuously improve our operating margins and cash flow while
preparing and positioning ourselves for the resumption of revenue growth. We
have numerous growth initiatives in place, alongside a strengthening handle on
pricing and expense control. We are targeting operating margins of 11 - 13% for
2010. These targets assume zero to low revenue growth rates. If we realize
greater growth rates, our operating margins will be structured to improve
further. These projections exclude $3.3 million of expected amortization for
intangibles related to the CDIC acquisition."

As of September 30, 2009, the company held $248 million in cash and investments
and had outstanding senior convertible notes of $120 million. The Company used
$16.2 million for the CDIC acquisition including re-payment of their debt.

2009 FINANCIAL OUTLOOK

The Company has updated its outlook to include the impact of the CDIC
acquisition:

* revenues in the range of $225 - $230 million,
* gross margins are expected to be level with 2008, and
* operating income in the range of $10 - $11 million inclusive of negative $8
million in charges from the CDIC acquisition.

NON-GAAP MEASURES

This release includes a discussion of management measures that are non-GAAP. We
believe it is useful for investors to understand the comparison of operating
results in 2009 versus 2008 by eliminating the impact of the CDIC related
charges using non-GAAP measures.

Conference Call Information

SonoSite will hold a conference call on October 27th at 1:30 pm PT/4:30 pm ET.
The call will be broadcast live and can be accessed via
http://www.sonosite.com/company/investors. A replay of the audio webcast will be
available beginning October 27, 2009, 5:30 pm PT and will be available until
November 10, 2009, 9:59 pm PT by dialing 719-457-0820 or toll-free 888-203-1112.
The confirmation code 1942151 is required to access the replay. The call will
also be archived on SonoSite`s website.

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.

Forward-looking Information and the Private Litigation Reform Act of 1995

Certain statements in this press release relating to 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, are based on potentially inaccurate
assumptions and are subject to known and unknown risks and uncertainties,
including, without limitation, the risk that the acquisition of CardioDynamics
will not yield the expected potential benefits, our ability to manufacture,
market and sell our newest products, spending patterns in the hospital market,
healthcare reform and the other factors contained in 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.

SonoSite, Inc.
Selected Financial Information

Condensed Consolidated Statements of Income
(in thousands except per share data) (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
As Adjusted As Adjusted

Revenue $ 53,571 $ 61,633 $ 157,661 $ 173,362
Cost of revenue 16,021 18,562 48,033 50,962

Gross margin 37,550 43,071 109,628 122,400
Gross margin percentage 70.1 % 69.9 % 69.5 % 70.6 %

Operating expenses:
Research and development 6,497 7,440 21,569 20,574
Sales, general and administrative 28,874 28,254 81,682 86,712
Licensing income and litigation settlement with Zonare - (2,643 ) (924 ) (2,643 )
Acquisition costs, net of bargain purchase (gain) (110 ) - 469 -

Total operating expenses 35,261 33,051 102,796 104,643

Operating income * 2,289 10,020 6,832 17,757

Other loss, net (3,013 ) (3,655 ) (5,486 ) (8,591 )

(Loss) income before income taxes (724 ) 6,365 1,346 9,166

Income tax (benefit) provision (484 ) 2,715 298 3,914

Net (loss) income $ (240 ) $ 3,650 $ 1,048 $ 5,252

Net (loss) income per share:
Basic $ (0.01 ) $ 0.22 $ 0.06 $ 0.31

Diluted $ (0.01 ) $ 0.21 $ 0.06 $ 0.30

Weighted average common and potential
common shares outstanding:
Basic 17,308 16,927 17,203 16,858

Diluted 17,308 17,592 17,650 17,488

Reconciliation of Non-GAAP operating income:

Operating income $ 2,289 $ 10,020 $ 6,832 $ 17,757
Adjustments to operating income for:
Acquisition costs, net of bargain purchase (gain) (110 ) - 469 -
CardioDynamics operations and integration costs 3,187 - 3,187 -

Non-GAAP operating income $ 5,366 $ 10,020 $ 10,488 $ 17,757

*includes acquisition and integration related charges of $4.2 million in third quarter and $4.7 million for the nine months ended of 2009 reduced by a bargain purchase gain of $1.1 million in both periods of 2009.

Condensed Consolidated Balance Sheets
(in thousands) (unaudited)
September 30, December 31,
2009 2008
As Adjusted

Cash and cash equivalents $ 211,035 $ 209,258
Short-term investment securities 36,864 69,882
Accounts receivable, net 55,414 66,094
Inventories 35,309 29,115
Deferred income taxes, current 14,830 13,372
Prepaid expenses and other current assets 6,695 6,623

Total current assets 360,147 394,344

Property and equipment, net 9,393 8,955
Investment securities - 578
Deferred income taxes 180 793
Intangible assets, net 28,841 16,829
Other assets 3,595 5,383

Total assets $ 402,156 $ 426,882

Accounts payable $ 8,451 $ 6,189
Accrued expenses 21,616 31,921
Deferred revenue 2,485 2,755

Total current liabilities 32,552 40,865

Long-term debt, net 95,462 111,336
Deferred income taxes, net 6,776 9,871
Other non-current liabilities 14,423 13,750

Total liabilities 149,213 175,822

Shareholders' equity:
Common stock and additional paid-in capital 289,834 285,928
Accumulated deficit (34,988 ) (36,036 )
Accumulated other comprehensive (loss) income (1,903 ) 1,168

Total shareholders' equity 252,943 251,060

Total liabilities and shareholders' equity $ 402,156 $ 426,882

Condensed Consolidated Statements of Cash Flow
(in thousands) (unaudited)
Nine Months Ended
September 30,
2009 2008
As Adjusted

Operating activities:
Net income $ 1,048 $ 5,252
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,647 3,086
Stock-based compensation 5,201 5,209
Amortization of debt discount, debt issuance costs 3,792 6,581
Gain on bargain purchase acquisition (1,078 ) -
Gain on convertible debt repurchase (1,339 ) -
Non-cash gain on litigation settlement with Zonare - (643 )
Changes in working capital and other adjustments (2,360 ) (1,487 )

Net cash provided by operating activities 8,911 17,998

Investing activities:
Investment securities, net 33,939 62,368
Acquisition of CardioDynamics, net of cash acquired (8,185 ) -
Purchases of property and equipment (2,290 ) (2,198 )
Earn-out consideration associated with SonoMetric acquisition (387 ) (921 )

Net cash provided by investing activities 23,077 59,249

Financing activities:
Excess tax benefit from exercise of stock based compensation - 961
Repurchase of convertible debt and related hedge transactions (20,416 ) -
Repayment of convertible debt (5,250 ) -
Shares retired for taxes (1,285 ) -
Proceeds from exercise of stock-based awards 1,419 3,526

Net cash (used in) provided by financing activities (25,532 ) 4,487

Effect of exchange rate changes on cash and cash equivalents (4,679 ) 1,262

Net change in cash and cash equivalents 1,777 82,996
Cash and cash equivalents at beginning of period 209,258 188,701

Cash and cash equivalents at end of period $ 211,035 $ 271,697

SonoSite, Inc.
Mike Schuh, 425-951-1224

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