##### 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, 2007
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For 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 Street 
Philadelphia, PA
    
    19103(Address of principal executive offices)
    
    (Zip code)
 (Registrants
telephone number, including area code)
 þ o
  o þ o
 o þ




---



##### 



INDEX
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets-December 31, 2006 and June 30, 2007 (unaudited)
    
    
    3Consolidated Statements of Operations (unaudited)Three and Six Months Ended June 30, 2006 and 2007
    
    
    4Consolidated Statements of Cash Flows (unaudited)Six Months Ended June 30, 2006 and 2007
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6-13Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14-27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27Part II. Other InformationItem 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29Exhibit Index
    
    
    30Certification of Chief Executive OfficerCertification of Chief Financial OfficerStatement of Chief Executive OfficerStatement of Chief Financial Officer
  2




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##### Table of Contents



Part 1. Financial Information
 
 Item 1. Financial Statements
  
   December 31,
    
    
    June 30,2006
    
    
    2007(unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    15,497
    
    
    $
    19,896Short-term investments
    
    
    41,416
    
    
    
    42,533Accounts receivable, net
    
    
    17,866
    
    
    
    20,205Prepaid income taxes
    
    
    2,819
    
    
    
    740Prepaid expenses and other
    
    
    2,761
    
    
    
    3,766Deferred income taxes
    
    
    912
    
    
    
    912Total current assets
    
    
    81,271
    
    
    
    88,052Property and equipment, net
    
    
    31,129
    
    
    
    35,731Goodwill
    
    
    1,212
    
    
    
    1,212Long-term investments
    
    
    928
    
    
    
    932Other assets
    
    
    524
    
    
    
    381Total assets
    
    $
    115,064
    
    
    $
    126,308Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    4,360
    
    
    $
    2,634Accrued expenses
    
    
    3,445
    
    
    
    3,838Income taxes payable
    
    
    781
    
    
    
    1,249Current portion of capital lease obligations
    
    
    40
    
    
    
    2,193Deferred revenues
    
    
    11,325
    
    
    
    10,722Total current liabilities
    
    
    19,951
    
    
    
    20,636Capital lease obligations, excluding current portion
    
    
    
    
    
    
    324Deferred income taxes
    
    
    1,491
    
    
    
    1,900Total liabilities
    
    
    21,442
    
    
    
    22,860Commitments 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,
58,356,546 and 58,820,938 shares issued, respectively
    
    
    584
    
    
    
    588Additional paid-in capital
    
    
    83,493
    
    
    
    86,699Accumulated other comprehensive income
    
    
    1,510
    
    
    
    1,739Retained earnings
    
    
    70,225
    
    
    
    76,612Treasury stock, 8,247,119 shares at cost
    
    
    (62,190
    )
    
    
    (62,190
    )Total stockholders equity
    
    
    93,622
    
    
    
    103,448Total liabilities and stockholders equity
    
    $
    115,064
    
    
    $
    126,308
  3




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net revenues:Licenses
    
    $
    1,096
    
    
    $
    580
    
    
    $
    1,734
    
    
    $
    1,362Services
    
    
    12,822
    
    
    
    17,561
    
    
    
    27,547
    
    
    
    31,529Site support
    
    
    8,900
    
    
    
    6,593
    
    
    
    14,936
    
    
    
    12,927Total net revenues
    
    
    22,818
    
    
    
    24,734
    
    
    
    44,217
    
    
    
    45,818Costs of revenues:Cost of licenses
    
    
    77
    
    
    
    63
    
    
    
    153
    
    
    
    129Cost of services
    
    
    6,300
    
    
    
    7,233
    
    
    
    12,456
    
    
    
    14,023Cost of site support
    
    
    5,791
    
    
    
    4,117
    
    
    
    9,944
    
    
    
    8,312Total costs of revenues
    
    
    12,168
    
    
    
    11,413
    
    
    
    22,553
    
    
    
    22,464Gross margin
    
    
    10,650
    
    
    
    13,321
    
    
    
    21,664
    
    
    
    23,354Operating expenses:Selling and marketing
    
    
    3,178
    
    
    
    3,054
    
    
    
    6,216
    
    
    
    5,592General and administrative
    
    
    3,974
    
    
    
    2,919
    
    
    
    7,813
    
    
    
    6,388Research and development
    
    
    1,034
    
    
    
    1,102
    
    
    
    2,348
    
    
    
    2,027Total operating expenses
    
    
    8,186
    
    
    
    7,075
    
    
    
    16,377
    
    
    
    14,007Operating income
    
    
    2,464
    
    
    
    6,246
    
    
    
    5,287
    
    
    
    9,347Other income, net
    
    
    338
    
    
    
    569
    
    
    
    728
    
    
    
    1,119Income before income taxes
    
    
    2,802
    
    
    
    6,815
    
    
    
    6,015
    
    
    
    10,466Income tax provision
    
    
    1,125
    
    
    
    2,676
    
    
    
    2,414
    
    
    
    4,079Net income
    
    $
    1,677
    
    
    $
    4,139
    
    
    $
    3,601
    
    
    $
    6,387Basic net income per share
    
    $
    0.03
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.13Diluted net income per share
    
    $
    0.03
    
    
    $
    0.08
    
    
    $
    0.07
    
    
    $
    0.12Shares used to calculate basic net income per
share
    
    
    49,266
    
    
    
    50,493
    
    
    
    49,184
    
    
    
    50,346Shares used to calculate diluted net income
per share
    
    
    51,515
    
    
    
    51,782
    
    
    
    51,600
    
    
    
    51,606
  4




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##### Table of Contents



Six Months Ended June 30,2006
    
    
    2007Operating activities:Net income
    
    $
    3,601
    
    
    $
    6,387Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    5,772
    
    
    
    7,139Cost of sales of equipment
    
    
    2,612
    
    
    
    535Non-cash share-based compensation
    
    
    1,643
    
    
    
    1,142Changes in operating assets and liabilities:Accounts receivable
    
    
    960
    
    
    
    (2,269
    )Prepaid expenses and other
    
    
    (961
    )
    
    
    (833
    )Accounts payable
    
    
    1,458
    
    
    
    (2,184
    )Accrued expenses
    
    
    (823
    )
    
    
    382Income taxes
    
    
    (2,332
    )
    
    
    2,847Deferred revenues
    
    
    (5,788
    )
    
    
    (647
    )Net cash provided by operating activities
    
    
    6,142
    
    
    
    12,499Investing activities:Purchases of property and equipment
    
    
    (10,007
    )
    
    
    (7,995
    )Purchases of investments
    
    
    (18,720
    )
    
    
    (40,651
    )Proceeds from sales of investments
    
    
    14,640
    
    
    
    39,530Net cash used in investing activities
    
    
    (14,087
    )
    
    
    (9,116
    )Financing activities:Repayment of capital lease obligations
    
    
    (75
    )
    
    
    (1,132
    )Proceeds from exercise of stock options
    
    
    2,062
    
    
    
    1,462Stock option income tax benefit
    
    
    2,365
    
    
    
    578Repurchase of common stock for treasury
    
    
    (5,803
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (1,451
    )
    
    
    908Effect of exchange rate changes on cash
    
    
    144
    
    
    
    108Net (decrease) increase in cash and cash equivalents
    
    
    (9,252
    )
    
    
    4,399Cash and cash equivalents, beginning of period
    
    
    18,432
    
    
    
    15,497Cash and cash equivalents, end of period
    
    $
    9,180
    
    
    $
    19,896
  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
  Use of Estimates
  Revenue Recognition
    6




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Property and Equipment
       7




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##### Table of Contents



Long-lived Assets
  Software Development Costs
  Stock-Based Compensation
 Accounting for Stock-Based Compensation
  Valuation Assumptions for Options Granted
  8




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##### Table of Contents



2006
    
    2007Risk-free interest rate
    
    
    4.82
    %
    
    
    4.68
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected life
    
    3.5 years
    
    3.5 yearsExpected volatility
    
    
    59.68
    %
    
    
    55.89
    %
  Stock Option Plans
    9




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##### Table of Contents



Weighted
    
    Remaining
    
    IntrinsicAverage
    
    Contractual
    
    ValueShares
    
    Exercise Price
    
    Term
    
    (in thousands)Outstanding as of January 1, 2007
    
    
    4,387,033
    
    
    $
    8.56Granted
    
    
    599,900
    
    
    
    7.54Exercised
    
    
    (464,392
    )
    
    
    3.15Cancelled/forfeited
    
    
    (322,252
    )
    
    
    16.37Outstanding as of June 30, 2007
    
    
    4,200,289
    
    
    
    8.45
    
    
    
    5.2
    
    
    $
    14,754Options exercisable or expected to vest at June 30, 2007
    
    
    4,028,078
    
    
    
    8.36
    
    
    
    5.2
    
    
    $
    14,572Options exercisable at June 30, 2007
    
    
    3,052,214
    
    
    
    7.65
    
    
    
    5.0
    
    
    $
    13,539
   Tax Effect Related to Stock-based Compensation Expense
  10




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##### Table of Contents



Note 3. Net Income per Common Share
   Net
    
    
    
    
    
    
    Per ShareThree Months Ended June 30,
    
    Income
    
    
    Shares
    
    
    Amount2006Basic net income
    
    $
    1,677
    
    
    
    49,266
    
    
    $
    0.03Effect of dilutive shares
    
    
    
    
    
    
    2,249
    
    
    
    Diluted net income
    
    $
    1,677
    
    
    
    51,515
    
    
    $
    0.032007Basic net income
    
    $
    4,139
    
    
    
    50,493
    
    
    $
    0.08Effect of dilutive shares
    
    
    
    
    
    
    1,289
    
    
    
    Diluted net income
    
    $
    4,139
    
    
    
    51,782
    
    
    $
    0.08
 Net
    
    
    
    
    
    
    Per ShareSix Months Ended June 30,
    
    Income
    
    
    Shares
    
    
    Amount2006Basic net income
    
    $
    3,601
    
    
    
    49,184
    
    
    $
    0.07Effect of dilutive shares
    
    
    
    
    
    
    2,416
    
    
    
    Diluted net income
    
    $
    3,601
    
    
    
    51,600
    
    
    $
    0.072007Basic net income
    
    $
    6,387
    
    
    
    50,346
    
    
    $
    0.13Effect of dilutive shares
    
    
    
    
    
    
    1,260
    
    
    
    (0.01
    )Diluted net income
    
    $
    6,387
    
    
    
    51,606
    
    
    $
    0.12
  11




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Note 4. Comprehensive Income
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net income
    
    $
    1,677
    
    
    $
    4,139
    
    
    $
    3,601
    
    
    $
    6,387Other comprehensive income:Currency translation adjustment
    
    
    542
    
    
    
    208
    
    
    
    675
    
    
    
    229Comprehensive income, net of tax
    
    $
    2,219
    
    
    $
    4,347
    
    
    $
    4,276
    
    
    $
    6,616
 Note 5. Recent Pronouncements
   Note 6. Income Taxes
  Note 7. Commitments and Contingencies
 Royalties
 ® ®
 12




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Note 8. Operating Segments / Geographic Information
   Three Months Ended June 30, 2006NorthAmerica
    
    
    Europe
    
    
    TotalLicense revenues
    
    $
    1,096
    
    
    $
    
    
    
    $
    1,096Service revenues
    
    
    10,239
    
    
    
    2,583
    
    
    
    12,822Site support revenues
    
    
    6,566
    
    
    
    2,334
    
    
    
    8,900Net revenues from external customers
    
    $
    17,901
    
    
    $
    4,917
    
    
    $
    22,818Operating income
    
    $
    2,194
    
    
    $
    270
    
    
    $
    2,464Long-lived assets
    
    $
    21,725
    
    
    $
    9,099
    
    
    $
    30,824Identifiable assets
    
    $
    88,750
    
    
    $
    15,136
    
    
    $
    103,886
 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
    
    
    $
    35,731Identifiable assets
    
    $
    107,992
    
    
    $
    18,316
    
    
    $
    126,308
 Six Months Ended June 30, 2006NorthAmerica
    
    
    Europe
    
    
    TotalLicense revenues
    
    $
    1,734
    
    
    $
    
    
    
    $
    1,734Service revenues
    
    
    22,442
    
    
    
    5,105
    
    
    
    27,547Site support revenues
    
    
    11,087
    
    
    
    3,849
    
    
    
    14,936Net revenues from external customers
    
    $
    35,263
    
    
    $
    8,954
    
    
    $
    44,217Operating income
    
    $
    4,734
    
    
    $
    553
    
    
    $
    5,287Long-lived assets
    
    $
    21,725
    
    
    $
    9,099
    
    
    $
    30,824Identifiable assets
    
    $
    88,750
    
    
    $
    15,136
    
    
    $
    103,886
 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
    
    
    $
    35,731Identifiable assets
    
    $
    107,992
    
    
    $
    18,316
    
    
    $
    126,308
 13




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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 ® ®
 14




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eClinical.
 
    
    eResearch Community(eRC) is an easy to use portal application that provides
real-time information related to monitoring clinical trial activities, data quality and
safety.
    
    eData Entry (eDE) technology provides a comprehensive electronic data capture (EDC)
system comprised of technology and consulting services formulated to deliver rapid time
to benefit for electronic trial initiatives.
    
    eData Management (eDM) is a clinical data management application for collecting,
cleaning and managing clinical trial data.
    
    eSafety Net (eSN  ) is an adverse event management system enabling the
generation of key regulatory reports, including CIOMS and Medwatch.
    
    eStudy Conduct (eSC) 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
     15




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16




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Results of Operations
 Executive Overview
  ®
 17




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net revenues:Licenses
    
    
    4.8
    %
    
    
    2.3
    %
    
    
    3.9
    %
    
    
    3.0
    %Services
    
    
    56.2
    %
    
    
    71.0
    %
    
    
    62.4
    %
    
    
    68.8
    %Site support
    
    
    39.0
    %
    
    
    26.7
    %
    
    
    33.8
    %
    
    
    28.2
    %Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of revenues:Cost of licenses
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    0.3
    %
    
    
    0.3
    %Cost of services
    
    
    27.6
    %
    
    
    29.2
    %
    
    
    28.2
    %
    
    
    30.6
    %Cost of site support
    
    
    25.4
    %
    
    
    16.6
    %
    
    
    22.5
    %
    
    
    18.1
    %Total costs of revenues
    
    
    53.3
    %
    
    
    46.1
    %
    
    
    51.0
    %
    
    
    49.0
    %Gross margin
    
    
    46.7
    %
    
    
    53.9
    %
    
    
    49.0
    %
    
    
    51.0
    %Operating expenses:Selling and marketing
    
    
    13.9
    %
    
    
    12.3
    %
    
    
    14.0
    %
    
    
    12.2
    %General and administrative
    
    
    17.5
    %
    
    
    11.8
    %
    
    
    17.7
    %
    
    
    14.0
    %Research and development
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    5.3
    %
    
    
    4.4
    %Total operating
expenses
    
    
    35.9
    %
    
    
    28.6
    %
    
    
    37.0
    %
    
    
    30.6
    %Operating income
    
    
    10.8
    %
    
    
    25.3
    %
    
    
    12.0
    %
    
    
    20.4
    %Other income, net
    
    
    1.4
    %
    
    
    2.3
    %
    
    
    1.6
    %
    
    
    2.4
    %Income before income taxes
    
    
    12.2
    %
    
    
    27.6
    %
    
    
    13.6
    %
    
    
    22.8
    %Income tax provision
    
    
    4.9
    %
    
    
    10.9
    %
    
    
    5.5
    %
    
    
    8.9
    %Net income
    
    
    7.3
    %
    
    
    16.7
    %
    
    
    8.1
    %
    
    
    13.9
    %
 18




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Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006.
  Three Months Ended June 30,2006
    
    
    2007
    
    
    Increase (Decrease)Licenses:Net revenues
    
    $
    1,096
    
    
    $
    580
    
    
    $
    (516
    )
    
    
    (47.1
    %)Costs of revenues
    
    
    77
    
    
    
    63
    
    
    
    (14
    )
    
    
    (18.2
    %)Gross margin
    
    $
    1,019
    
    
    $
    517
    
    
    $
    (502
    )
    
    
    (49.3
    %)Services:Cardiac SafetyNet revenues
    
    $
    11,250
    
    
    $
    16,018
    
    
    $
    4,768
    
    
    
    42.4
    %Costs of revenues
    
    
    5,625
    
    
    
    6,617
    
    
    
    992
    
    
    
    17.6
    %Gross margin
    
    $
    5,625
    
    
    $
    9,401
    
    
    $
    3,776
    
    
    
    67.1
    %Technology consulting and trainingNet revenues
    
    $
    558
    
    
    $
    663
    
    
    $
    105
    
    
    
    18.8
    %Costs of revenues
    
    
    423
    
    
    
    412
    
    
    
    (11
    )
    
    
    (2.6
    %)Gross margin
    
    $
    135
    
    
    $
    251
    
    
    $
    116
    
    
    
    85.9
    %Software maintenanceNet revenues
    
    $
    1,014
    
    
    $
    880
    
    
    $
    (134
    )
    
    
    (13.2
    %)Costs of revenues
    
    
    252
    
    
    
    204
    
    
    
    (48
    )
    
    
    (19.0
    %)Gross margin
    
    $
    762
    
    
    $
    676
    
    
    $
    (86
    )
    
    
    (11.3
    %)Total servicesNet revenues
    
    $
    12,822
    
    
    $
    17,561
    
    
    $
    4,739
    
    
    
    37.0
    %Costs of revenues
    
    
    6,300
    
    
    
    7,233
    
    
    
    933
    
    
    
    14.8
    %Gross margin
    
    $
    6,522
    
    
    $
    10,328
    
    
    $
    3,806
    
    
    
    58.4
    %Site support:Net revenues
    
    $
    8,900
    
    
    $
    6,593
    
    
    $
    (2,307
    )
    
    
    (25.9
    %)Costs of revenues
    
    
    5,791
    
    
    
    4,117
    
    
    
    (1,674
    )
    
    
    (28.9
    %)Gross margin
    
    $
    3,109
    
    
    $
    2,476
    
    
    $
    (633
    )
    
    
    (20.4
    %)TotalNet revenues
    
    $
    22,818
    
    
    $
    24,734
    
    
    $
    1,916
    
    
    
    8.4
    %Costs of revenues
    
    
    12,168
    
    
    
    11,413
    
    
    
    (755
    )
    
    
    (6.2
    %)Gross margin
    
    
    10,650
    
    
    
    13,321
    
    
    
    2,671
    
    
    
    25.1
    %Operating expenses:Selling and marketing
    
    
    3,178
    
    
    
    3,054
    
    
    
    (124
    )
    
    
    (3.9
    %)General and administrative
    
    
    3,974
    
    
    
    2,919
    
    
    
    (1,055
    )
    
    
    (26.5
    %)Research and development
    
    
    1,034
    
    
    
    1,102
    
    
    
    68
    
    
    
    6.6
    %Total operating expenses
    
    
    8,186
    
    
    
    7,075
    
    
    
    (1,111
    )
    
    
    (13.6
    %)Operating income
    
    
    2,464
    
    
    
    6,246
    
    
    
    3,782
    
    
    
    153.5
    %Other income, net
    
    
    338
    
    
    
    569
    
    
    
    231
    
    
    
    68.3
    %Income before income taxes
    
    
    2,802
    
    
    
    6,815
    
    
    
    4,013
    
    
    
    143.2
    %Income tax provision
    
    
    1,125
    
    
    
    2,676
    
    
    
    1,551
    
    
    
    137.9
    %Net income
    
    $
    1,677
    
    
    $
    4,139
    
    
    $
    2,462
    
    
    
    146.8
    %
 19




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##### Table of Contents



Three Months Ended June 30,
    
    Increase2006
    
    2007
    
    (Decrease)Cost of licenses
    
    
    7.0
    %
    
    
    10.9
    %
    
    
    3.9
    %Cost of services:Cardiac Safety
    
    
    50.0
    %
    
    
    41.3
    %
    
    
    (8.7
    %)Technology consulting and training
    
    
    75.8
    %
    
    
    62.1
    %
    
    
    (13.7
    %)Software maintenance
    
    
    24.9
    %
    
    
    23.2
    %
    
    
    (1.7
    %)Total cost of services
    
    
    49.1
    %
    
    
    41.2
    %
    
    
    (7.9
    %)Cost of site support
    
    
    65.1
    %
    
    
    62.4
    %
    
    
    (2.7
    %)Total costs of revenues
    
    
    53.3
    %
    
    
    46.1
    %
    
    
    (7.2
    %)Operating expenses:Selling and marketing
    
    
    13.9
    %
    
    
    12.3
    %
    
    
    (1.6
    %)General and administrative
    
    
    17.5
    %
    
    
    11.8
    %
    
    
    (5.7
    %)Research and development
    
    
    4.5
    %
    
    
    4.5
    %
    
    
    0.0
    %
      ®
   20




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21




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##### Table of Contents



Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006.
  Six Months Ended June 30,2006
    
    
    2007
    
    
    Increase (Decrease)Licenses:Net revenues
    
    $
    1,734
    
    
    $
    1,362
    
    
    $
    (372
    )
    
    
    (21.5
    %)Costs of revenues
    
    
    153
    
    
    
    129
    
    
    
    (24
    )
    
    
    (15.7
    %)Gross margin
    
    $
    1,581
    
    
    $
    1,233
    
    
    $
    (348
    )
    
    
    (22.0
    %)Services:Cardiac SafetyNet revenues
    
    $
    24,362
    
    
    $
    28,449
    
    
    $
    4,087
    
    
    
    16.8
    %Costs of revenues
    
    
    11,050
    
    
    
    12,781
    
    
    
    1,731
    
    
    
    15.7
    %Gross margin
    
    $
    13,312
    
    
    $
    15,668
    
    
    $
    2,356
    
    
    
    17.7
    %Technology consulting and trainingNet revenues
    
    $
    1,144
    
    
    $
    1,323
    
    
    $
    179
    
    
    
    15.6
    %Costs of revenues
    
    
    899
    
    
    
    822
    
    
    
    (77
    )
    
    
    (8.6
    %)Gross margin
    
    $
    245
    
    
    $
    501
    
    
    $
    256
    
    
    
    104.5
    %Software maintenanceNet revenues
    
    $
    2,041
    
    
    $
    1,756
    
    
    $
    (285
    )
    
    
    (14.0
    %)Costs of revenues
    
    
    507
    
    
    
    420
    
    
    
    (87
    )
    
    
    (17.2
    %)Gross margin
    
    $
    1,534
    
    
    $
    1,336
    
    
    $
    (198
    )
    
    
    (12.9
    %)Total servicesNet revenues
    
    $
    27,547
    
    
    $
    31,529
    
    
    $
    3,982
    
    
    
    14.5
    %Costs of revenues
    
    
    12,456
    
    
    
    14,023
    
    
    
    1,567
    
    
    
    12.6
    %Gross margin
    
    $
    15,091
    
    
    $
    17,506
    
    
    $
    2,415
    
    
    
    16.0
    %Site support:Net revenues
    
    $
    14,936
    
    
    $
    12,927
    
    
    $
    (2,009
    )
    
    
    (13.5
    %)Costs of revenues
    
    
    9,944
    
    
    
    8,312
    
    
    
    (1,632
    )
    
    
    (16.4
    %)Gross margin
    
    $
    4,992
    
    
    $
    4,615
    
    
    $
    (377
    )
    
    
    (7.6
    %)TotalNet revenues
    
    $
    44,217
    
    
    $
    45,818
    
    
    $
    1,601
    
    
    
    3.6
    %Costs of revenues
    
    
    22,553
    
    
    
    22,464
    
    
    
    (89
    )
    
    
    (0.4
    %)Gross margin
    
    
    21,664
    
    
    
    23,354
    
    
    
    1,690
    
    
    
    7.8
    %Operating expenses:Selling and marketing
    
    
    6,216
    
    
    
    5,592
    
    
    
    (624
    )
    
    
    (10.0
    %)General and administrative
    
    
    7,813
    
    
    
    6,388
    
    
    
    (1,425
    )
    
    
    (18.2
    %)Research and development
    
    
    2,348
    
    
    
    2,027
    
    
    
    (321
    )
    
    
    (13.7
    %)Total operating expenses
    
    
    16,377
    
    
    
    14,007
    
    
    
    (2,370
    )
    
    
    (14.5
    %)Operating income
    
    
    5,287
    
    
    
    9,347
    
    
    
    4,060
    
    
    
    76.8
    %Other income, net
    
    
    728
    
    
    
    1,119
    
    
    
    391
    
    
    
    53.7
    %Income before income taxes
    
    
    6,015
    
    
    
    10,466
    
    
    
    4,451
    
    
    
    74.0
    %Income tax provision
    
    
    2,414
    
    
    
    4,079
    
    
    
    1,665
    
    
    
    69.0
    %Net income
    
    $
    3,601
    
    
    $
    6,387
    
    
    $
    2,786
    
    
    
    77.4
    %
 22




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##### Table of Contents



Six Months Ended June 30,
    
    
    Increase2006
    
    
    2007
    
    
    (Decrease)Cost of licenses
    
    
    8.8
    %
    
    
    9.5
    %
    
    
    0.7
    %Cost of services:Cardiac Safety
    
    
    45.4
    %
    
    
    44.9
    %
    
    
    (0.5
    %)Technology consulting and training
    
    
    78.6
    %
    
    
    62.1
    %
    
    
    (16.5
    %)Software maintenance
    
    
    24.8
    %
    
    
    23.9
    %
    
    
    (0.9
    %)Total cost of services
    
    
    45.2
    %
    
    
    44.5
    %
    
    
    (0.7
    %)Cost of site support
    
    
    66.6
    %
    
    
    64.3
    %
    
    
    (2.3
    %)Total costs of revenues
    
    
    51.0
    %
    
    
    49.0
    %
    
    
    (2.0
    %)Operating expenses:Selling and marketing
    
    
    14.0
    %
    
    
    12.2
    %
    
    
    (1.8
    %)General and administrative
    
    
    17.7
    %
    
    
    14.0
    %
    
    
    (3.7
    %)Research and development
    
    
    5.3
    %
    
    
    4.4
    %
    
    
    (0.9
    %)
      ®
   23




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##### Table of Contents



24




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##### Table of Contents



Liquidity and Capital Resources
    ® ® ® ® ® ® ®
  ® ® ®
 25




---



##### Table of Contents



Related
    
    
    TotalLabor and
    
    
    Direct Costs
    
    
    Capitalized
    
    
    Monthly
    
    
    AccumulatedAmortization Period
    
    Consulting
    
    

Of Materials
    
    
    Costs
    
    
    Amortization
    
    
    AmortizationEXPeRT® enhancements
    
    October 2005-September 2007
    
    
    463
    
    
    
    
    
    
    
    463
    
    
    
    20
    
    
    
    405Semi-automated ECG processing softwareInitial costs
    
    February 2004-January 2008
    
    
    449
    
    
    
    361
    
    
    
    810
    
    
    
    17
    
    
    
    692Enhancements
    
    October  2004-September 2008
    
    
    380
    
    
    
    
    
    
    
    380
    
    
    
    8
    
    
    
    262Additional enhancements
    
    April 2005-March 2009
    
    
    376
    
    
    
    
    
    
    
    376
    
    
    
    8
    
    
    
    211EXPeRT® 2Initial costs
    
    January   2007-December 2011
    
    
    9,412
    
    
    
    1,139
    
    
    
    10,551
    
    
    
    176
    
    
    
    1,055Enhancements
    
    To be determined
    
    
    1,010
    
    
    
    
    
    
    
    1,010
    
    
    
    
    
    
    
    Data warehouse
    
    January  2007-December 2011
    
    
    722
    
    
    
    
    
    
    
    722
    
    
    
    12
    
    
    
    72ePRO
    
    To be determined
    
    
    
    
    
    
    1,658
    
    
    
    1,658
    
    
    
    
    
    
    
    Total
    
    
    
    $
    12,812
    
    
    $
    3,158
    
    
    $
    15,970
    
    
    $
    241
    
    
    $
    2,697
       26




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##### Table of Contents



Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
  Foreign Currency Risk
   
 Item 4. Controls and Procedures
  27




---



##### Table of Contents



Part II. Other Information
 
 Item 4. Submission of Matters to a Vote of Security Holders
     
 Item 6. Exhibits
 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.
 28




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##### Table of Contents



eResearchTechnology, Inc.(Registrant)Date:
    
    August 6, 2007
    
    By:
    
    /s/ Michael J. McKelveyMichael J. McKelvey
President and Chief Executive Officer, 
Director (Principal executive officer)Date:
    
    August 6, 2007
    
    By:
    
    /s/ Richard A. BaronRichard A. Baron 
Executive Vice President, Chief Financial 
Officer and Secretary (Principal financial
and accounting officer)
 29




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Exhibit31.1
    
    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.
 30