SonoSite Reports First Quarter Results; MicroMaxx(TM) System Sales Rise to 46% of Worldwide Revenue; US Direct Sales Force Show

SonoSite, Inc. (Nasdaq:SONO), the world leader in
hand-carried ultrasound, today reported financial results for the
first quarter ended March 31, 2006.
   Worldwide revenue in the first quarter of 2006 grew 9% to $36.9
million compared with $34.0 million in the first quarter of 2005. The
first quarter of 2005 included over $3 million of enterprise project
revenue from US and international government entities and impacts the
comparison with 2006. Changes in the foreign currency rates decreased
the revenue growth rate by approximately 3% in the first quarter.
   Overall, US revenue grew 15% in the first quarter over the prior
year with sales growing 45% from direct sales. As expected, the
company's US enterprise sales which are primarily comprised of sales
to governmental entities declined 57% in the first quarter of 2006 due
to the high volume of project orders in the comparable quarter of the
prior year. International revenue grew 3% over the prior year. The
prior year's first quarter also included a large government order.
Changes in foreign currency rates reduced the international growth
rate by 5%. US revenue accounted for 49% of total revenue in the first
quarter of 2006.
   The company's 2006 financial results reflect adoption of FAS 123R,
"Share-Based Payment", on January 1, 2006. For the first quarter of
2006, SonoSite reported a net loss of $363,000, or $0.02 per share,
compared with net income of $725,000, or $0.05 per diluted share, in
the prior year.
   First quarter results in 2006 included $1.3 million of stock-based
compensation, or $846,000 and $0.05 per share on an after-tax basis.
Of this amount, the adoption of FAS 123R had an after-tax impact of
$661,000, or $0.04 per share, and compensation from restricted stock
grants had an after-tax impact of $185,000, or $0.01 per share. On a
comparative after-tax basis, the first quarter of 2005 included
$12,000 of stock-based compensation for restricted stock grants.
   "We are highly encouraged by the performance and momentum in our
US direct sales organization which turned in a 45% sales increase over
last year's first quarter, reflecting the continuing success of the
MicroMaxx system and improved execution," said Kevin M. Goodwin,
SonoSite President and CEO. "As expected, enterprise sales were down
in the quarter given the tough comparison of a year ago. This business
is historically hard to predict and very variable."
   Mr. Goodwin continued, "Internationally, we saw excellent growth
in a number of our markets, although, overall performance was impacted
by currency translation and results in Japan, which we expect will
show improvement later this year. The year-over-year comparison was
also difficult due to a large government order in our international
business as well. We are seeing good evidence that Germany is on a
positive track with the addition of experienced sales talent and the
recently announced alliance with Siemens. The MicroMaxx system
continues to enjoy strong worldwide acceptance and rose to account for
46% of the quarter's worldwide revenue."
   Operating expenses grew 22% to $27.1 million in the first quarter
of 2006 compared with the same period in 2005. Excluding stock-based
compensation expense, operating expenses grew 16% in the quarter over
the prior year to $25.8 million. The increase in operating expenses
primarily resulted from investment in the company's international
sales and marketing infrastructure and expansion of the US enterprise
business unit and sales education initiatives.
   Cash, cash equivalents and investments increased by $9.4 million
to $80.2 million as of March 31, 2006.

   Company Outlook for Second Quarter and 2006

   Management continues to target a revenue growth rate of
approximately 25% and expects full year revenue to be in a range of
$180-187 million. Quarterly revenue is expected to vary following
historical seasonal patterns. The company expects second quarter
revenue to grow approximately 25% over the prior year's second
quarter. Quarterly revenue is expected to grow sequentially in the
remainder of the year with approximately one-third of the year's
revenue occurring in the seasonally strong fourth quarter. Factors
such as timing of large project orders from governmental or
international entities cause variability in quarterly growth rate
comparisons.
   The company expects annual and quarterly gross margin to
approximate 71%. Excluding stock-based compensation expense, operating
expenses for the year are expected to approximate 59% to 60% of
revenue and to vary following historical patterns. As of January 1,
2006, the company adopted FAS 123R, "Share-Based Payment", and
estimates that stock-based compensation expense, including options,
restricted stock grants and the employee stock purchase plan, will be
approximately $9.0 million on a pre-tax basis in 2006, with an expense
of approximately $2.5 million quarterly for the remainder of the year.
Other income is expected to be approximately $2.4 for the year. The
company expects its overall effective tax rate for 2006 to be
approximately 33% to 35%.
   For the year, the weighted average fully diluted common shares
outstanding is expected to be approximately 17 million shares.

   Executive Appointments in Marketing, Sales and Education Announced

   SonoSite also announced that Edison (Ed) C. Russell, Senior Vice
President, US Sales has decided to retire, effective June 30, 2006.
Thomas J. Dugan, currently Senior Vice President, Marketing is being
promoted to Senior Vice President, Global Marketing and US Sales and
will assume Mr. Russell's responsibilities for the US sales
organization. The company also announced the promotion of David R.
Levesque, currently Director, Training and Education to Vice
President, Worldwide Global Learning, responsible for sales and
clinical training and customer education.
   "Under Ed's leadership, the execution and performance of our US
sales team has steadily improved," Mr. Goodwin said. "We appreciate
his many contributions and wish him the best. Tom's record of
accomplishment and extensive experience in all areas of sales and
marketing in the medical device industry will serve our company well
as he undertakes his new responsibilities. We believe that by
consolidating our sales and marketing organization, our focus and
effectiveness will further improve in our target markets."
   "In a relatively short period of time, Dave Levesque has played a
key role in improving the quality of sales training in this company
leading to greatly improved productivity and results," Mr. Goodwin
said. "His promotion underscores the strategic importance we are
placing on expanding customer education."

   Non-GAAP Measures:

   This release includes measures that are not in accordance with
generally accepted accounting principles (non-GAAP). In the first
quarter of 2006, the company adopted Financial Accounting Standards
Board Statement No. 123R (SFAS 123R), which requires companies to
recognize the compensation cost associated with stock-based awards in
their financial statements. As a result, our financial statements for
the first quarter of 2006 include stock-based compensation expense
from options and employee stock purchase plan, but our financial
results for the first quarter of 2005 do not include such stock-based
compensation expense because periods prior to January 1, 2006 are not
required to be restated. In addition to the stock-based compensation
from options and employee stock purchase plan, we have stock-based
compensation from grants of restricted stock units in the first
quarter of 2006 and 2005. We have provided non-GAAP financial
information that includes all stock-based compensation expense. We
believe that it is useful to investors to understand how the expenses
associated with stock-based compensation are reflected on our
statements of operations. For our internal budgets, management uses
financial statements that do not include stock-based compensation
expense related to our stock-based awards. Management also uses the
non-GAAP measures, in addition to the corresponding GAAP measures, in
reviewing the financial results. The non-GAAP information should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP.

   Conference Call Information

   SonoSite will hold a conference call today at 1:30 p.m. PT/4:30
p.m. 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 April 26,
2006, at 4:30 p.m. (PT) until May 10, 2006, at 12:00 midnight (PT) by
dialing 719-457-0820 or toll-free 888-203-1112. The confirmation code
-- 1243705 -- 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, with an installed base of more than
25,000 systems. The company, headquartered near Seattle, Washington,
is represented by eight subsidiaries and a global distribution network
in over 75 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 approximately 500 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, timely
receipts of regulatory approvals to market and sell our products, the
outcome of the federal appeal of a patent ruling in our favor in a
patent infringement case and expenses associated with such appeal,
regulatory and reimbursement changes in various national health care
markets, constraints in government and public health spending, the
ability of our distribution partners to market and sell our products,
as well as other factors described under the heading, "Important
Factors that May Affect Our Business, Our Results of Operations and
Our Stock Price," included in our latest periodic report 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.
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                            SonoSite, Inc.
                    Selected Financial Information

Consolidated Statements of Operations
(in thousands except per share data) (unaudited)

                                                  Three Months Ended
                                                       March 31,
                                                    2006       2005
                                                 ---------- ----------
Revenue                                          $  36,869  $  33,965
Cost of revenue                                     10,991     10,120
                                                 ---------- ----------
Gross margin                                        25,878     23,845
     Gross margin percentage                          70.2%      70.2%

Operating expenses:
     Research and development                        3,956      3,782
     Sales and marketing                            19,283     15,702
     General and administrative                      3,846      2,748
                                                 ---------- ----------
Total operating expenses                            27,085     22,232

Other income (loss), net                               660       (224)
                                                 ---------- ----------
Income (loss) before income taxes                     (547)     1,389

Income tax benefit  (provision)                        184       (664)
                                                 ---------- ----------
Net income (loss)                                $    (363)       725
                                                 ========== ==========
Net income (loss) per share:
     Basic                                       $   (0.02) $    0.05
                                                 ========== ==========
     Diluted                                     $   (0.02) $    0.05
                                                 ========== ==========
Weighted average common and potential common
 shares used in computing net income (loss)
 per share:
     Basic                                          16,013     15,318
                                                 ========== ==========
     Diluted                                        16,013     15,961
                                                 ========== ==========
Non-GAAP Measures:
Stock-based compensation is as follows:
     Research and development                    $     268  $      --
     Sales and marketing                               540         19
     General and administrative                        516         --
                                                 ---------- ----------
Total stock-based compensation                   $   1,324  $      19
Income tax effect                                     (478)        (7)
                                                 ---------- ----------

Stock-based compensation, net of tax(a)          $     846  $      12
                                                 ========== ==========
Stock-based compensation, net of tax, per share,
  basic and diluted(a)                           $    0.05  $    0.00
                                                 ========== ==========

(a) Stock-based compensation, net of tax, and stock-based
    compensation, net of tax, per share are non-GAAP measures. These
    non-GAAP measures allow for useful comparison with the 2005
    quarterly results.


Condensed Consolidated Balance Sheets
(in thousands) (unaudited)
                                                   March 31, Dec. 31,
                                                     2006      2005
                                                   --------- ---------
Cash and cash equivalents                          $ 36,769  $ 26,809
Short-term investment securities                     29,406    25,426
Accounts receivable, net                             37,508    42,414
Inventories                                          21,498    20,735
Deferred income taxes                                 8,271     6,822
Prepaid expenses and other current assets             2,548     2,345
                                                   --------- ---------
Total current assets                                136,000   124,551

Property and equipment, net                           6,979     7,388
Investment securities                                14,014    18,569
Deferred income taxes                                20,660    19,137
Goodwill                                              1,805     1,751
Other assets                                          3,248     3,152
                                                   --------- ---------
Total assets                                       $182,706  $174,548
                                                   ========= =========
Accounts payable                                   $  3,799  $  4,148
Accrued expenses                                     11,341    12,974
Deferred revenue                                      2,979     2,937
                                                   --------- ---------
Total current liabilities                            18,119    20,059
Deferred rent                                           303       290
Deferred revenue                                      2,220     2,157
                                                   --------- ---------
Total liabilities                                    20,642    22,506

Shareholders' equity:
     Common stock and additional paid-in capital    220,470   212,868
     Deferred stock compensation                         --    (2,671)
     Accumulated deficit                            (59,371)  (59,008)
     Accumulated other comprehensive income             965       853
                                                   --------- ---------
Total shareholders' equity                          162,064   152,042
                                                   --------- ---------
Total liabilities and shareholders' equity         $182,706  $174,548
                                                   ========= =========
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