##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
 For the quarterly period ended June 30, 2008
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transitional period from  to
 Commission file number 0-29100
 eResearchTechnology, Inc.
  Delaware
    
    22-3264604(State or other jurisdiction of incorporation 
or organization)
    
    (I.R.S. Employer Identification No.)30 South 17th StreetPhiladelphia, PA
    
    19103(Address of principal executive offices)
    
    (Zip code)
 (Registrants telephone number, including area code)
 þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



INDEX
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets-December 31, 2007 and June 30, 2008 (unaudited)
    
    
    3Consolidated Statements of Operations (unaudited)Three and Six Months
Ended June 30, 2007 and 2008
    
    
    4Consolidated Statements of Cash Flows (unaudited)Six Months
Ended June 30, 2007 and 2008
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6-17Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    18-30Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4. Controls and Procedures
    
    
    31Part II. Other InformationItem 4. Submission of Matters to a Vote of Security Holders
    
    
    32Item 6. Exhibits
    
    
    32Signatures
    
    
    33Exhibit Index
    
    
    34Exhibit 10.29Exhibit 10.30Exhibit 10.51Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Part 1. Financial Information
 
 Item 1. Financial Statements
  
 
 December 31, 2007
    
    
    June 30, 2008(unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    38,082
    
    
    $
    49,446Short-term investments
    
    
    8,797
    
    
    
    6,405Accounts receivable, net
    
    
    26,718
    
    
    
    29,302Prepaid income taxes
    
    
    743
    
    
    
    Prepaid expenses and other
    
    
    3,087
    
    
    
    4,291Deferred income taxes
    
    
    901
    
    
    
    899Total current assets
    
    
    78,328
    
    
    
    90,343Property and equipment, net
    
    
    33,347
    
    
    
    29,852Goodwill
    
    
    30,908
    
    
    
    33,229Intangible assets
    
    
    3,849
    
    
    
    2,947Deferred income taxes
    
    
    1,011
    
    
    
    1,375Other assets
    
    
    253
    
    
    
    660Total assets
    
    $
    147,696
    
    
    $
    158,406Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    3,505
    
    
    $
    3,223Accrued expenses
    
    
    12,103
    
    
    
    8,078Income taxes payable
    
    
    2,352
    
    
    
    1,970Current portion of capital lease obligations
    
    
    1,097
    
    
    
    290Deferred revenues
    
    
    13,905
    
    
    
    14,487Total current liabilities
    
    
    32,962
    
    
    
    28,048Capital lease obligations, excluding current portion
    
    
    48
    
    
    
    Other liabilities
    
    
    1,174
    
    
    
    1,162Total liabilities
    
    
    34,184
    
    
    
    29,210Commitments and contingenciesStockholders Equity:Preferred stock  $10.00 par value, 500,000 shares authorized,
none issued and outstanding
    
    
    
    
    
    
    Common stock  $.01 par value, 175,000,000 shares authorized,
58,870,291 and 59,081,686 shares issued, respectively
    
    
    589
    
    
    
    591Additional paid-in capital
    
    
    87,957
    
    
    
    91,217Accumulated other comprehensive income
    
    
    1,679
    
    
    
    1,695Retained earnings
    
    
    85,477
    
    
    
    97,883Treasury stock, 8,247,119 shares at cost
    
    
    (62,190
    )
    
    
    (62,190
    )Total stockholders equity
    
    
    113,512
    
    
    
    129,196Total liabilities and stockholders equity
    
    $
    147,696
    
    
    $
    158,406
   3




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Net revenues:Licenses
    
    $
    580
    
    
    $
    870
    
    
    $
    1,362
    
    
    $
    1,495Services
    
    
    17,561
    
    
    
    27,380
    
    
    
    31,529
    
    
    
    52,653Site support
    
    
    6,593
    
    
    
    7,222
    
    
    
    12,927
    
    
    
    14,997Total net revenues
    
    
    24,734
    
    
    
    35,472
    
    
    
    45,818
    
    
    
    69,145Costs of revenues:Cost of licenses
    
    
    63
    
    
    
    170
    
    
    
    129
    
    
    
    370Cost of services
    
    
    7,233
    
    
    
    10,483
    
    
    
    14,023
    
    
    
    20,997Cost of site support
    
    
    4,117
    
    
    
    4,599
    
    
    
    8,312
    
    
    
    9,867Total costs of revenues
    
    
    11,413
    
    
    
    15,252
    
    
    
    22,464
    
    
    
    31,234Gross margin
    
    
    13,321
    
    
    
    20,220
    
    
    
    23,354
    
    
    
    37,911Operating expenses:Selling and marketing
    
    
    3,054
    
    
    
    3,810
    
    
    
    5,592
    
    
    
    7,133General and administrative
    
    
    2,919
    
    
    
    4,601
    
    
    
    6,388
    
    
    
    9,474Research and development
    
    
    1,102
    
    
    
    1,051
    
    
    
    2,027
    
    
    
    2,050Total operating expenses
    
    
    7,075
    
    
    
    9,462
    
    
    
    14,007
    
    
    
    18,657Operating income
    
    
    6,246
    
    
    
    10,758
    
    
    
    9,347
    
    
    
    19,254Other income, net
    
    
    569
    
    
    
    244
    
    
    
    1,119
    
    
    
    671Income before income taxes
    
    
    6,815
    
    
    
    11,002
    
    
    
    10,466
    
    
    
    19,925Income tax provision
    
    
    2,676
    
    
    
    4,342
    
    
    
    4,079
    
    
    
    7,519Net income
    
    $
    4,139
    
    
    $
    6,660
    
    
    $
    6,387
    
    
    $
    12,406Basic net income per share
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.13
    
    
    $
    0.24Diluted net income per share
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.12
    
    
    $
    0.24Shares used to calculate basic net income per share
    
    
    50,493
    
    
    
    50,734
    
    
    
    50,346
    
    
    
    50,686Shares used to calculate diluted net income per share
    
    
    51,782
    
    
    
    52,182
    
    
    
    51,606
    
    
    
    52,038
   4




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##### Table of Contents



Six Months Ended June 30,2007
    
    
    2008Operating activities:Net income
    
    $
    6,387
    
    
    $
    12,406Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    7,139
    
    
    
    8,574Cost of sales of equipment
    
    
    535
    
    
    
    492Provision for uncollectible accounts
    
    
    
    
    
    
    60Share-based compensation
    
    
    1,142
    
    
    
    1,366Deferred income taxes
    
    
    294
    
    
    
    (360
    )Changes in operating assets and liabilities
exclusive of CCSS acquisition:Accounts receivable
    
    
    (2,269
    )
    
    
    (2,622
    )Prepaid expenses and other
    
    
    (833
    )
    
    
    (1,616
    )Accounts payable
    
    
    (2,184
    )
    
    
    (240
    )Accrued expenses
    
    
    382
    
    
    
    (1,013
    )Income taxes
    
    
    2,553
    
    
    
    348Deferred revenues
    
    
    (647
    )
    
    
    583Net cash provided by operating activities
    
    
    12,499
    
    
    
    17,978Investing activities:Purchases of property and equipment
    
    
    (7,995
    )
    
    
    (5,239
    )Purchases of investments
    
    
    (40,651
    )
    
    
    Proceeds from sales of investments
    
    
    39,530
    
    
    
    2,392Payments for acquisition
    
    
    
    
    
    
    (4,798
    )Net cash used in investing activities
    
    
    (9,116
    )
    
    
    (7,645
    )Financing activities:Repayment of capital lease obligations
    
    
    (1,132
    )
    
    
    (855
    )Proceeds from exercise of stock options
    
    
    1,462
    
    
    
    1,174Stock option income tax benefit
    
    
    578
    
    
    
    704Net cash provided by financing activities
    
    
    908
    
    
    
    1,023Effect of exchange rate changes on cash
    
    
    108
    
    
    
    8Net increase in cash and cash equivalents
    
    
    4,399
    
    
    
    11,364Cash and cash equivalents, beginning of period
    
    
    15,497
    
    
    
    38,082Cash and cash equivalents, end of period
    
    $
    19,896
    
    
    $
    49,446
   5




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##### Table of Contents



eResearchTechnology, Inc. and Subsidiaries
 
 Notes to Consolidated Financial Statements
(unaudited)
 Note 1. Basis of Presentation
  Note 2. Summary of Significant Accounting Policies
 Principles of Consolidation
  Reclassifications
  Use of Estimates
  Revenue Recognition
    6




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Business Combinations
     7




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##### Table of Contents



Cash and Cash Equivalents
  Investments
   Property and Equipment
      8




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##### Table of Contents



Goodwill
    Business Combinations and Valuation of Intangible Assets
  Long-lived Assets
  Software Development Costs
   9




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##### Table of Contents



Stock-Based Compensation
 Accounting for Stock-Based Compensation
  Valuation Assumptions for Options Granted
  2007
    
    
    2008Risk-free interest rate
    
    
    4.68
    %
    
    
    2.14
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected life
    
    3.5 years
    
    
    3.5 yearsExpected volatility
    
    
    55.89
    %
    
    
    51.73
    %
  Stock Option Plans
    10




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##### Table of Contents



RemainingWeighted
    
    
    Contractual
    
    
    IntrinsicAverage
    
    
    Term
    
    
    ValueShares
    
    
    Exercise Price
    
    
    (in years)
    
    
    (in thousands)Outstanding as of January 1, 2008
    
    
    4,109,611
    
    
    $
    8.44Granted
    
    
    799,200
    
    
    
    12.08Exercised
    
    
    (211,395
    )
    
    
    5.55Cancelled/forfeited
    
    
    (151,150
    )
    
    
    10.94Outstanding as of June 30, 2008
    
    
    4,546,266
    
    
    $
    9.12
    
    
    
    4.8
    
    
    $
    39,911Options exercisable or expected to vest at June 30, 2008
    
    
    4,340,612
    
    
    $
    9.02
    
    
    
    4.7
    
    
    $
    38,621Options exercisable at June 30, 2008
    
    
    3,175,241
    
    
    $
    8.24
    
    
    
    4.2
    
    
    $
    31,309
    Tax Effect Related to Stock-based Compensation Expense
   11




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Note 3. Financial Instruments
  Level 1
    
    Unadjusted quoted prices in active
markets for identical assets or liabilitiesLevel 2
    
    Unadjusted quoted prices in active
markets for similar assets or liabilities, orUnadjusted quoted prices for identical or similar
assets or liabilities in markets that are not active, orInputs other than quoted prices that are observable for
the asset or liabilityLevel 3
    
    Unobservable inputs for the asset or liability
  Note 4. Business Combination
   12




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Property and equipment
    
    $
    2,447Backlog
    
    
    1,900Customer relationships
    
    
    1,700Technology
    
    
    400Deferred tax assets
    
    
    2,126Goodwill, including workforce
    
    
    32,017Accrued liabilities relating to severance and lease costs
    
    
    (2,065
    )Other net assets acquired
    
    
    2,576Purchase price
    
    $
    41,101
   Note 5. Intangible Assets
  EstimatedEstimated Fair
    
    
    Accumulated
    
    
    Net Book
    
    
    Useful LifeDescription
    
    Value
    
    
    Amortization
    
    
    Value
    
    
    (in years)Backlog
    
    $
    1,900
    
    
    $
    723
    
    
    $
    1,177
    *
    
    
    3Customer Relationships
    
    
    1,700
    
    
    
    98
    
    
    
    1,602
    
    
    
    10Technology
    
    
    400
    
    
    
    232
    
    
    
    168
    
    
    
    1Total
    
    $
    4,000
    
    
    $
    1,053
    
    
    $
    2,947
 
 *
    
    The backlog will be amortized over three years on an accelerated basis.   Amortization ofYears ending December 31,
    
    Intangible Assets2008
    
    $
    7982009
    
    
    5422010
    
    
    4312011
    
    
    1702012
    
    
    170Thereafter
    
    
    836Total
    
    $
    2,947
  13




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Note 6. Net Income per Common Share
   Net
    
    
    
    
    
    
    Per ShareThree Months Ended June 30,
    
    Income
    
    
    Shares
    
    
    Amount2007Basic net income
    
    $
    4,139
    
    
    
    50,493
    
    
    $
    0.08Effect of dilutive shares
    
    
    
    
    
    
    1,289
    
    
    
    Diluted net income
    
    $
    4,139
    
    
    
    51,782
    
    
    $
    0.082008Basic net income
    
    $
    6,660
    
    
    
    50,734
    
    
    $
    0.13Effect of dilutive shares
    
    
    
    
    
    
    1,448
    
    
    
    Diluted net income
    
    $
    6,660
    
    
    
    52,182
    
    
    $
    0.13
 Net
    
    
    
    
    
    
    Per ShareSix Months Ended June 30,
    
    Income
    
    
    Shares
    
    
    Amount2007Basic net income
    
    $
    6,387
    
    
    
    50,346
    
    
    $
    0.13Effect of dilutive shares
    
    
    
    
    
    
    1,260
    
    
    
    (0.01
    )Diluted net income
    
    $
    6,387
    
    
    
    51,606
    
    
    $
    0.122008Basic net income
    
    $
    12,406
    
    
    
    50,686
    
    
    $
    0.24Effect of dilutive shares
    
    
    
    
    
    
    1,352
    
    
    
    Diluted net income
    
    $
    12,406
    
    
    
    52,038
    
    
    $
    0.24
   14




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Note 7. Comprehensive Income
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Net income
    
    $
    4,139
    
    
    $
    6,660
    
    
    $
    6,387
    
    
    $
    12,406Other comprehensive income:Currency translation adjustment
    
    
    208
    
    
    
    19
    
    
    
    229
    
    
    
    16Comprehensive income, net of tax
    
    $
    4,347
    
    
    $
    6,679
    
    
    $
    6,616
    
    
    $
    12,422
 Note 8. Recent Accounting Pronouncements
       15




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Note 9. Income Taxes
   Note 10. Related Party Transactions
  Note 11. Commitments and Contingencies
 ®
   16




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Note 12. Operating Segments / Geographic Information
   Three Months Ended June 30, 2007NorthAmerica
    
    
    Europe
    
    
    TotalLicense revenues
    
    $
    580
    
    
    $
    
    
    
    $
    580Service revenues
    
    
    13,924
    
    
    
    3,637
    
    
    
    17,561Site support revenues
    
    
    4,426
    
    
    
    2,167
    
    
    
    6,593Net revenues from external customers
    
    $
    18,930
    
    
    $
    5,804
    
    
    $
    24,734Operating income
    
    $
    5,236
    
    
    $
    1,010
    
    
    $
    6,246Long-lived assets
    
    $
    27,384
    
    
    $
    8,347
    
    
    $
    35,731Total assets
    
    $
    107,992
    
    
    $
    18,316
    
    
    $
    126,308
 Three Months Ended June 30, 2008NorthAmerica
    
    
    Europe
    
    
    TotalLicense revenues
    
    $
    870
    
    
    $
    
    
    
    $
    870Service revenues
    
    
    22,199
    
    
    
    5,181
    
    
    
    27,380Site support revenues
    
    
    4,775
    
    
    
    2,447
    
    
    
    7,222Net revenues from external customers
    
    $
    27,844
    
    
    $
    7,628
    
    
    $
    35,472Operating income
    
    $
    8,497
    
    
    $
    2,261
    
    
    $
    10,758Long-lived assets
    
    $
    23,578
    
    
    $
    6,274
    
    
    $
    29,852Total assets
    
    $
    139,347
    
    
    $
    19,059
    
    
    $
    158,406
 Six Months Ended June 30, 2007NorthAmerica
    
    
    Europe
    
    
    TotalLicense revenues
    
    $
    1,362
    
    
    $
    
    
    
    $
    1,362Service revenues
    
    
    25,308
    
    
    
    6,221
    
    
    
    31,529Site support revenues
    
    
    8,680
    
    
    
    4,247
    
    
    
    12,927Net revenues from external customers
    
    $
    35,350
    
    
    $
    10,468
    
    
    $
    45,818Operating income
    
    $
    7,901
    
    
    $
    1,446
    
    
    $
    9,347Long-lived assets
    
    $
    27,384
    
    
    $
    8,347
    
    
    $
    35,731Total assets
    
    $
    107,992
    
    
    $
    18,316
    
    
    $
    126,308
 Six Months Ended June 30, 2008NorthAmerica
    
    
    Europe
    
    
    TotalLicense revenues
    
    $
    1,495
    
    
    $
    
    
    
    $
    1,495Service revenues
    
    
    43,409
    
    
    
    9,244
    
    
    
    52,653Site support revenues
    
    
    9,906
    
    
    
    5,091
    
    
    
    14,997Net revenues from external customers
    
    $
    54,810
    
    
    $
    14,335
    
    
    $
    69,145Operating income
    
    $
    15,347
    
    
    $
    3,907
    
    
    $
    19,254Long-lived assets
    
    $
    23,578
    
    
    $
    6,274
    
    
    $
    29,852Total assets
    
    $
    139,347
    
    
    $
    19,059
    
    
    $
    158,406
  17




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement for Forward-Looking Information
  Overview
 ® ® ®
 ® ® ® ® ®
 ® ®
 EXPeRT® Cardiac Safety ® ®
  18




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##### Table of Contents



Cardiac Safety Consulting.
 EXPeRT® eClinical.
 
    
    EXPeRT® Portal is an easy to use portal application that provides real-time
information related to monitoring clinical trial activities, data quality and safety.
    
    EXPeRT® EDC Now! technology provides a comprehensive electronic data capture (EDC)
system comprised of technology and consulting services formulated to deliver rapid time
to start for electronic trial initiatives.
    
    EXPeRT® Data Management is a clinical data management application for collecting,
cleaning and managing clinical trial data.
    
    EXPeRT® Adverse Event Reporting is an adverse event management system enabling the
generation of key regulatory reports, including CIOMS and Medwatch.
    
    EXPeRT® Trial Management is a clinical trial management technology that can be used
to set up clinical trials, establish standards, track study activities, plan resources,
distribute supplies, manage the financial aspects of a trial and electronically view
clinical trial data.
 EXPeRT® ePRO EXPeRT® ePRO ®
 Project Assurance/Implementation Assurance
    19




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20




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Results of Operations
 Executive Overview
         21




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Net revenues:Licenses
    
    
    2.3
    %
    
    
    2.4
    %
    
    
    3.0
    %
    
    
    2.2
    %Services
    
    
    71.0
    %
    
    
    77.2
    %
    
    
    68.8
    %
    
    
    76.1
    %Site support
    
    
    26.7
    %
    
    
    20.4
    %
    
    
    28.2
    %
    
    
    21.7
    %Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of revenues:Cost of licenses
    
    
    0.3
    %
    
    
    0.5
    %
    
    
    0.3
    %
    
    
    0.5
    %Cost of services
    
    
    29.2
    %
    
    
    29.5
    %
    
    
    30.6
    %
    
    
    30.4
    %Cost of site support
    
    
    16.6
    %
    
    
    13.0
    %
    
    
    18.1
    %
    
    
    14.3
    %Total costs of revenues
    
    
    46.1
    %
    
    
    43.0
    %
    
    
    49.0
    %
    
    
    45.2
    %Gross margin
    
    
    53.9
    %
    
    
    57.0
    %
    
    
    51.0
    %
    
    
    54.8
    %Operating expenses:Selling and marketing
    
    
    12.3
    %
    
    
    10.7
    %
    
    
    12.2
    %
    
    
    10.3
    %General and administrative
    
    
    11.8
    %
    
    
    13.0
    %
    
    
    14.0
    %
    
    
    13.7
    %Research and development
    
    
    4.5
    %
    
    
    3.0
    %
    
    
    4.4
    %
    
    
    3.0
    %Total operating expenses
    
    
    28.6
    %
    
    
    26.7
    %
    
    
    30.6
    %
    
    
    27.0
    %Operating income
    
    
    25.3
    %
    
    
    30.3
    %
    
    
    20.4
    %
    
    
    27.8
    %Other income, net
    
    
    2.3
    %
    
    
    0.7
    %
    
    
    2.4
    %
    
    
    1.0
    %Income before income taxes
    
    
    27.6
    %
    
    
    31.0
    %
    
    
    22.8
    %
    
    
    28.8
    %Income tax provision
    
    
    10.9
    %
    
    
    12.2
    %
    
    
    8.9
    %
    
    
    10.9
    %Net income
    
    
    16.7
    %
    
    
    18.8
    %
    
    
    13.9
    %
    
    
    17.9
    %
  22




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##### Table of Contents



Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2008.
  Three Months Ended June 30,2007
    
    
    2008
    
    
    Increase (Decrease)Licenses:Net revenues
    
    $
    580
    
    
    $
    870
    
    
    $
    290
    
    
    
    50.0
    %Costs of revenues
    
    
    63
    
    
    
    170
    
    
    
    107
    
    
    
    169.8
    %Gross margin
    
    $
    517
    
    
    $
    700
    
    
    $
    183
    
    
    
    35.4
    %Services:Cardiac SafetyNet revenues
    
    $
    16,018
    
    
    $
    25,794
    
    
    $
    9,776
    
    
    
    61.0
    %Costs of revenues
    
    
    6,617
    
    
    
    9,789
    
    
    
    3,172
    
    
    
    47.9
    %Gross margin
    
    $
    9,401
    
    
    $
    16,005
    
    
    $
    6,604
    
    
    
    70.2
    %Technology consulting and trainingNet revenues
    
    $
    663
    
    
    $
    795
    
    
    $
    132
    
    
    
    19.9
    %Costs of revenues
    
    
    412
    
    
    
    477
    
    
    
    65
    
    
    
    15.8
    %Gross margin
    
    $
    251
    
    
    $
    318
    
    
    $
    67
    
    
    
    26.7
    %Software maintenanceNet revenues
    
    $
    880
    
    
    $
    791
    
    
    $
    (89
    )
    
    
    (10.1
    %)Costs of revenues
    
    
    204
    
    
    
    217
    
    
    
    13
    
    
    
    6.4
    %Gross margin
    
    $
    676
    
    
    $
    574
    
    
    $
    (102
    )
    
    
    (15.1
    %)Total servicesNet revenues
    
    $
    17,561
    
    
    $
    27,380
    
    
    $
    9,819
    
    
    
    55.9
    %Costs of revenues
    
    
    7,233
    
    
    
    10,483
    
    
    
    3,250
    
    
    
    44.9
    %Gross margin
    
    $
    10,328
    
    
    $
    16,897
    
    
    $
    6,569
    
    
    
    63.6
    %Site support:Net revenues
    
    $
    6,593
    
    
    $
    7,222
    
    
    $
    629
    
    
    
    9.5
    %Costs of revenues
    
    
    4,117
    
    
    
    4,599
    
    
    
    482
    
    
    
    11.7
    %Gross margin
    
    $
    2,476
    
    
    $
    2,623
    
    
    $
    147
    
    
    
    5.9
    %TotalNet revenues
    
    $
    24,734
    
    
    $
    35,472
    
    
    $
    10,738
    
    
    
    43.4
    %Costs of revenues
    
    
    11,413
    
    
    
    15,252
    
    
    
    3,839
    
    
    
    33.6
    %Gross margin
    
    
    13,321
    
    
    
    20,220
    
    
    
    6,899
    
    
    
    51.8
    %Operating expenses:Selling and marketing
    
    
    3,054
    
    
    
    3,810
    
    
    
    756
    
    
    
    24.8
    %General and administrative
    
    
    2,919
    
    
    
    4,601
    
    
    
    1,682
    
    
    
    57.6
    %Research and development
    
    
    1,102
    
    
    
    1,051
    
    
    
    (51
    )
    
    
    (4.6
    %)Total operating expenses
    
    
    7,075
    
    
    
    9,462
    
    
    
    2,387
    
    
    
    33.7
    %Operating income
    
    
    6,246
    
    
    
    10,758
    
    
    
    4,512
    
    
    
    72.2
    %Other income, net
    
    
    569
    
    
    
    244
    
    
    
    (325
    )
    
    
    (57.1
    %)Income before income taxes
    
    
    6,815
    
    
    
    11,002
    
    
    
    4,187
    
    
    
    61.4
    %Income tax provision
    
    
    2,676
    
    
    
    4,342
    
    
    
    1,666
    
    
    
    62.3
    %Net income
    
    $
    4,139
    
    
    $
    6,660
    
    
    $
    2,521
    
    
    
    60.9
    %
  23




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##### Table of Contents



Three Months Ended June 30,
    
    
    Increase2007
    
    
    2008
    
    
    (Decrease)Cost of licenses
    
    
    10.9
    %
    
    
    19.5
    %
    
    
    8.6
    %Cost of services:Cardiac Safety
    
    
    41.3
    %
    
    
    38.0
    %
    
    
    (3.3
    %)Technology consulting and training
    
    
    62.1
    %
    
    
    60.0
    %
    
    
    (2.1
    %)Software maintenance
    
    
    23.2
    %
    
    
    27.4
    %
    
    
    4.2
    %Total cost of services
    
    
    41.2
    %
    
    
    38.3
    %
    
    
    (2.9
    %)Cost of site support
    
    
    62.4
    %
    
    
    63.7
    %
    
    
    1.3
    %Total costs of revenues
    
    
    46.1
    %
    
    
    43.0
    %
    
    
    (3.1
    %)Operating expenses:Selling and marketing
    
    
    12.3
    %
    
    
    10.7
    %
    
    
    (1.6
    %)General and administrative
    
    
    11.8
    %
    
    
    13.0
    %
    
    
    1.2
    %Research and development
    
    
    4.5
    %
    
    
    3.0
    %
    
    
    (1.5
    %)
   ® ®
  ®
   24




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25




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##### Table of Contents



Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2008.
  Six Months Ended June 30,2007
    
    
    2008
    
    
    Increase (Decrease)Licenses:Net revenues
    
    $
    1,362
    
    
    $
    1,495
    
    
    $
    133
    
    
    
    9.8
    %Costs of revenues
    
    
    129
    
    
    
    370
    
    
    
    241
    
    
    
    186.8
    %Gross margin
    
    $
    1,233
    
    
    $
    1,125
    
    
    $
    (108
    )
    
    
    (8.8
    %)Services:Cardiac SafetyNet revenues
    
    $
    28,449
    
    
    $
    49,579
    
    
    $
    21,130
    
    
    
    74.3
    %Costs of revenues
    
    
    12,781
    
    
    
    19,654
    
    
    
    6,873
    
    
    
    53.8
    %Gross margin
    
    $
    15,668
    
    
    $
    29,925
    
    
    $
    14,257
    
    
    
    91.0
    %Technology consulting and trainingNet revenues
    
    $
    1,323
    
    
    $
    1,500
    
    
    $
    177
    
    
    
    13.4
    %Costs of revenues
    
    
    822
    
    
    
    904
    
    
    
    82
    
    
    
    10.0
    %Gross margin
    
    $
    501
    
    
    $
    596
    
    
    $
    95
    
    
    
    19.0
    %Software maintenanceNet revenues
    
    $
    1,756
    
    
    $
    1,574
    
    
    $
    (182
    )
    
    
    (10.4
    %)Costs of revenues
    
    
    420
    
    
    
    439
    
    
    
    19
    
    
    
    4.5
    %Gross margin
    
    $
    1,336
    
    
    $
    1,135
    
    
    $
    (201
    )
    
    
    (15.0
    %)Total servicesNet revenues
    
    $
    31,529
    
    
    $
    52,653
    
    
    $
    21,124
    
    
    
    67.0
    %Costs of revenues
    
    
    14,023
    
    
    
    20,997
    
    
    
    6,974
    
    
    
    49.7
    %Gross margin
    
    $
    17,506
    
    
    $
    31,656
    
    
    $
    14,150
    
    
    
    80.8
    %Site support:Net revenues
    
    $
    12,927
    
    
    $
    14,997
    
    
    $
    2,070
    
    
    
    16.0
    %Costs of revenues
    
    
    8,312
    
    
    
    9,867
    
    
    
    1,555
    
    
    
    18.7
    %Gross margin
    
    $
    4,615
    
    
    $
    5,130
    
    
    $
    515
    
    
    
    11.2
    %TotalNet revenues
    
    $
    45,818
    
    
    $
    69,145
    
    
    $
    23,327
    
    
    
    50.9
    %Costs of revenues
    
    
    22,464
    
    
    
    31,234
    
    
    
    8,770
    
    
    
    39.0
    %Gross margin
    
    
    23,354
    
    
    
    37,911
    
    
    
    14,557
    
    
    
    62.3
    %Operating expenses:Selling and marketing
    
    
    5,592
    
    
    
    7,133
    
    
    
    1,541
    
    
    
    27.6
    %General and administrative
    
    
    6,388
    
    
    
    9,474
    
    
    
    3,086
    
    
    
    48.3
    %Research and development
    
    
    2,027
    
    
    
    2,050
    
    
    
    23
    
    
    
    1.1
    %Total operating expenses
    
    
    14,007
    
    
    
    18,657
    
    
    
    4,650
    
    
    
    33.2
    %Operating income
    
    
    9,347
    
    
    
    19,254
    
    
    
    9,907
    
    
    
    106.0
    %Other income, net
    
    
    1,119
    
    
    
    671
    
    
    
    (448
    )
    
    
    (40.0
    %)Income before income taxes
    
    
    10,466
    
    
    
    19,925
    
    
    
    9,459
    
    
    
    90.4
    %Income tax provision
    
    
    4,079
    
    
    
    7,519
    
    
    
    3,440
    
    
    
    84.3
    %Net income
    
    $
    6,387
    
    
    $
    12,406
    
    
    $
    6,019
    
    
    
    94.2
    %
  26




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##### Table of Contents



Six Months Ended June 30,
    
    
    Increase2007
    
    
    2008
    
    
    (Decrease)Cost of licenses
    
    
    9.5
    %
    
    
    24.7
    %
    
    
    15.2
    %Cost of services:Cardiac Safety
    
    
    44.9
    %
    
    
    39.6
    %
    
    
    (5.3
    %)Technology consulting and training
    
    
    62.1
    %
    
    
    60.3
    %
    
    
    (1.8
    %)Software maintenance
    
    
    23.9
    %
    
    
    27.9
    %
    
    
    4.0
    %Total cost of services
    
    
    44.5
    %
    
    
    39.9
    %
    
    
    (4.6
    %)Cost of site support
    
    
    64.3
    %
    
    
    65.8
    %
    
    
    1.5
    %Total costs of revenues
    
    
    49.0
    %
    
    
    45.2
    %
    
    
    (3.8
    %)Operating expenses:Selling and marketing
    
    
    12.2
    %
    
    
    10.3
    %
    
    
    (1.9
    %)General and administrative
    
    
    14.0
    %
    
    
    13.7
    %
    
    
    (0.3
    %)Research and development
    
    
    4.4
    %
    
    
    3.0
    %
    
    
    (1.4
    %)
   ® ®
   ®
   27




---



##### Table of Contents



Liquidity and Capital Resources
     28




---



##### Table of Contents



® ® ®
 ® ® ®
       29




---



##### Table of Contents



Inflation
   30




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
  Foreign Currency Risk
   
 Item 4. Controls and Procedures
   31




---



##### Table of Contents



Part II. Other Information
 
 Item 4. Submission of Matters to a Vote of Security Holders
    
 Item 6. Exhibits
 10.29
    
    
    Promissory Note to Wachovia Bank, National Association effective June 26, 2008.10.30
    
    
    Loan Agreement with Wachovia Bank, National Association effective June 26, 2008.10.51
    
    
    Amended and Restated Management Employment Agreement effective June 17, 2008
between Steven M. Eisenstein and the Company.31.1
    
    
    Certification of Chief Executive Officer.31.2
    
    
    Certification of Chief Financial Officer.32.1
    
    
    Statement of Chief Executive Officer Pursuant to Section 1350 of Title 18 of the United States Code.32.2
    
    
    Statement of Chief Financial Officer Pursuant to Section 1350 of Title 18 of the United States Code.
  32




---



##### Table of Contents



eResearchTechnology, Inc.
(Registrant)Date: August 7, 2008
    By:
    /s/ Michael J. McKelveyMichael J. McKelveyPresident and Chief Executive Officer,
     (Principal executive officer)Date: August 7, 2008
    By:
    /s/ Keith D. SchneckKeith D. SchneckExecutive Vice President,
Chief Financial Officer and Secretary
     (Principal financial and accounting officer)  33




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit10.29
    
    

Promissory
Note to Wachovia Bank, National Association effective June 26,
2008.10.30
    
    
    Loan Agreement with Wachovia Bank, National Association effective June 26,
2008.10.51
    
    
    Amended and Restated Management Employment Agreement effective June 17, 2008 between
Steven M. Eisenstein and the Company.31.1
    
    
    Certification of Chief Executive Officer.31.2
    
    
    Certification of Chief Financial Officer.32.1
    
    
    Statement of Chief Executive Officer Pursuant to Section 1350 of Title 18 of the United States
Code.32.2
    
    
    Statement of Chief Financial Officer Pursuant to Section 1350 of Title 18 of the United States
Code.
  34