##### 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 September 30, 2010
 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.)1818 Market Street 
Philadelphia, PA
    
    19103(Address of principal executive offices)
    
    (Zip code)
 (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



INDEX
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets-December 31, 2009 and September 30, 2010 (unaudited)
    
    
    3Consolidated Statements of Operations (unaudited)Three and nine months
ended September 30, 2009 and 2010
    
    
    4Consolidated Statements of Cash Flows (unaudited)Nine months
ended September 30, 2009 and 2010
    
    
    5Notes to Consolidated Financial Statements (unaudited)
    
    
    6-20Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    21-32Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33Part II. Other InformationItem 6. Exhibits
    
    
    34Signatures
    
    
    35Exhibit Index
    
    
    36Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



Part 1. Financial Information
 
 Item 1. Financial Statements
  
  
 December 31, 2009
    
    
    September 30, 2010AssetsCurrent Assets:Cash and cash equivalents
    
    $
    68,979
    
    
    $
    19,333Short-term investments
    
    
    9,782
    
    
    
    50Investment in marketable securities
    
    
    1,026
    
    
    
    648Accounts receivable, less allowance for doubtful accounts of
$548 and $785, respectively
    
    
    16,579
    
    
    
    37,225Inventory
    
    
    
    
    
    
    3,879Prepaid income taxes
    
    
    2,698
    
    
    
    2,989Prepaid expenses and other
    
    
    3,308
    
    
    
    5,516Deferred income taxes
    
    
    1,649
    
    
    
    2,411Total current assets
    
    
    104,021
    
    
    
    72,051Property and equipment, net
    
    
    24,205
    
    
    
    41,809Goodwill
    
    
    34,676
    
    
    
    71,613Intangible assets
    
    
    1,607
    
    
    
    19,565Other assets
    
    
    352
    
    
    
    513Total assets
    
    $
    164,861
    
    
    $
    205,551Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    3,007
    
    
    $
    3,874Accrued expenses
    
    
    5,990
    
    
    
    13,499Income taxes payable
    
    
    346
    
    
    
    Deferred revenues
    
    
    11,728
    
    
    
    13,283Total current liabilities
    
    
    21,071
    
    
    
    30,656Deferred rent
    
    
    2,357
    
    
    
    2,220Deferred income taxes
    
    
    2,502
    
    
    
    2,098Long-term debt
    
    
    
    
    
    
    21,000Other liabilities
    
    
    1,259
    
    
    
    2,220Total liabilities
    
    
    27,189
    
    
    
    58,194Commitments 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,
60,189,235 and 60,453,270 shares issued, respectively
    
    
    602
    
    
    
    604Additional paid-in capital
    
    
    97,367
    
    
    
    99,723Accumulated other comprehensive loss
    
    
    (1,580
    )
    
    
    (4
    )Retained earnings
    
    
    121,166
    
    
    
    126,917Treasury stock, 11,589,603 shares at cost
    
    
    (79,883
    )
    
    
    (79,883
    )Total stockholders equity
    
    
    137,672
    
    
    
    147,357Total liabilities and stockholders equity
    
    $
    164,861
    
    
    $
    205,551
   3




---



##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Net revenues:Services
    
    $
    15,969
    
    
    $
    25,929
    
    
    $
    48,292
    
    
    $
    59,461Site support
    
    
    6,757
    
    
    
    19,199
    
    
    
    19,895
    
    
    
    36,631EDC licenses and services
    
    
    
    
    
    
    
    
    
    
    2,501
    
    
    
    Total net revenues
    
    
    22,726
    
    
    
    45,128
    
    
    
    70,688
    
    
    
    96,092Costs of revenues:Cost of services
    
    
    7,577
    
    
    
    13,526
    
    
    
    22,941
    
    
    
    29,162Cost of site support
    
    
    3,418
    
    
    
    11,505
    
    
    
    10,523
    
    
    
    19,261Cost of EDC licenses and services
    
    
    
    
    
    
    
    
    
    
    863
    
    
    
    Total costs of revenues
    
    
    10,995
    
    
    
    25,031
    
    
    
    34,327
    
    
    
    48,423Gross margin
    
    
    11,731
    
    
    
    20,097
    
    
    
    36,361
    
    
    
    47,669Operating expenses:Selling and marketing
    
    
    3,056
    
    
    
    4,478
    
    
    
    9,756
    
    
    
    11,827General and administrative
    
    
    2,977
    
    
    
    7,780
    
    
    
    10,581
    
    
    
    22,278Research and development
    
    
    989
    
    
    
    1,250
    
    
    
    3,131
    
    
    
    3,177Total operating expenses
    
    
    7,022
    
    
    
    13,508
    
    
    
    23,468
    
    
    
    37,282Operating income
    
    
    4,709
    
    
    
    6,589
    
    
    
    12,893
    
    
    
    10,387Foreign exchange losses
    
    
    (173
    )
    
    
    (1,745
    )
    
    
    (543
    )
    
    
    (1,267
    )Other income (expense), net
    
    
    91
    
    
    
    (199
    )
    
    
    168
    
    
    
    (181
    )Income before income taxes
    
    
    4,627
    
    
    
    4,645
    
    
    
    12,518
    
    
    
    8,939Income tax provision
    
    
    1,808
    
    
    
    1,472
    
    
    
    5,081
    
    
    
    3,188Net income
    
    $
    2,819
    
    
    $
    3,173
    
    
    $
    7,437
    
    
    $
    5,751Net income per share:Basic
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.15
    
    
    $
    0.12Diluted
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.15
    
    
    $
    0.12Shares used in computing net income per share:Basic
    
    
    48,452
    
    
    
    48,860
    
    
    
    49,399
    
    
    
    48,789Diluted
    
    
    48,755
    
    
    
    49,258
    
    
    
    49,698
    
    
    
    49,162
   4




---



##### Table of Contents



Nine Months Ended September 302009
    
    
    2010Operating activities:Net income
    
    $
    7,437
    
    
    $
    5,751Adjustments to reconcile net income to net cash
provided by operating activities:Gain on sale of EDC operations
    
    
    (530
    )
    
    
    Depreciation and amortization
    
    
    9,694
    
    
    
    12,753Cost of sales of equipment
    
    
    93
    
    
    
    767Provision for uncollectible accounts
    
    
    210
    
    
    
    Share-based compensation
    
    
    2,145
    
    
    
    2,048Deferred income taxes
    
    
    347
    
    
    
    (1,043
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    12,516
    
    
    
    (6,429
    )Inventory
    
    
    
    
    
    
    (984
    )Prepaid expenses and other
    
    
    (1,269
    )
    
    
    (640
    )Accounts payable
    
    
    (69
    )
    
    
    1,622Accrued expenses
    
    
    (3,728
    )
    
    
    5,145Income taxes
    
    
    (2,955
    )
    
    
    (1,125
    )Deferred revenues
    
    
    588
    
    
    
    1,153Deferred rent
    
    
    211
    
    
    
    (225
    )Net cash provided by operating activities
    
    
    24,690
    
    
    
    18,793Investing activities:Purchases of property and equipment
    
    
    (3,567
    )
    
    
    (15,987
    )Purchases of investments
    
    
    
    
    
    
    (999
    )Proceeds from sales of investments
    
    
    
    
    
    
    10,731Payment related to sale of EDC operations
    
    
    (1,150
    )
    
    
    Payments for acquisitions
    
    
    (655
    )
    
    
    (82,789
    )Net cash used in investing activities
    
    
    (5,372
    )
    
    
    (89,044
    )Financing activities:Proceeds from long-term debt
    
    
    
    
    
    
    23,000Repayment of long-term debt
    
    
    
    
    
    
    (2,000
    )Repayment of capital lease obligations
    
    
    (43
    )
    
    
    Proceeds from exercise of stock options
    
    
    372
    
    
    
    215Stock option income tax benefit
    
    
    134
    
    
    
    29Repurchase of common stock for treasury
    
    
    (15,120
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (14,657
    )
    
    
    21,244Effect of exchange rate changes on cash
    
    
    1,030
    
    
    
    (639
    )Net increase (decrease) in cash and cash equivalents
    
    
    5,691
    
    
    
    (49,646
    )Cash and cash equivalents, beginning of period
    
    
    66,376
    
    
    
    68,979Cash and cash equivalents, end of period
    
    $
    72,067
    
    
    $
    19,333
   5




---



##### 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




---



##### Table of Contents



Business Combinations
      Concentration of Credit Risk and Significant Clients
   Cash and Cash Equivalents
   7




---



##### Table of Contents



Short-term Investments and Investments in Marketable Securities
   December 31, 2009Gross
    
    
    GrossUnrealized
    
    
    UnrealizedAmortized cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMunicipal securities
    
    $
    6,764
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    6,762Corporate debt securities
    
    
    1,769
    
    
    
    1
    
    
    
    
    
    
    
    1,770Bonds of government sponsored agencies
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    
    1,250Total short-term investments as of December 31, 2009
    
    $
    9,783
    
    
    $
    1
    
    
    $
    (2
    )
    
    $
    9,782
 September 30, 2010Gross
    
    
    GrossUnrealized
    
    
    UnrealizedAmortized cost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueMunicipal securities
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50Total short-term investments as of September 30, 2010
    
    $
    50
    
    
    $
    
    
    
    $
    
    
    
    $
    50
 Property and Equipment
      8




---



##### Table of Contents



Goodwill
   Long-lived Assets
  Software Development Costs
  Share-Based Compensation
 Accounting for Share-Based Compensation
  Valuation Assumptions for Options Granted
  2009
    
    
    2010Risk-free interest rate
    
    
    1.34
    %
    
    
    2.44
    %Expected life
    
    3.5 years
    
    
    3.8 yearsExpected volatility
    
    
    63.98
    %
    
    
    61.73
    %
   9




---



##### Table of Contents



Equity Incentive Plans
     RemainingWeighted
    
    
    Contractual
    
    
    IntrinsicAverage
    
    
    Term
    
    
    ValueShare Options
    
    Shares
    
    
    Exercise Price
    
    
    (in years)
    
    
    (in thousands)Outstanding as of January 1, 2010
    
    
    4,406,606
    
    
    $
    9.62Granted
    
    
    877,930
    
    
    
    6.46Exercised
    
    
    (60,256
    )
    
    
    3.58Cancelled/forfeited
    
    
    (60,087
    )
    
    
    8.41Outstanding as of September 30, 2010
    
    
    5,164,193
    
    
    $
    9.17
    
    
    
    4.5
    
    
    $
    5,867Options exercisable or expected to vest at September 30, 2010
    
    
    4,705,272
    
    
    $
    9.38
    
    
    
    4.3
    
    
    $
    5,354Options exercisable at September 30, 2010
    
    
    3,107,125
    
    
    $
    10.80
    
    
    
    3.6
    
    
    $
    2,659
 WeightedAverageGrant DateRestricted Stock
    
    Shares
    
    
    Fair ValueOutstanding as of January 1, 2010
    
    
    
    
    
    $
    Granted
    
    
    203,779
    
    
    
    6.22Exercised
    
    
    
    
    
    
    Cancelled/forfeited
    
    
    
    
    
    
    Outstanding as of September 30, 2010
    
    
    203,779
    
    
    $
    6.22
  10




---



##### Table of Contents



Tax Effect Related to Share-based Compensation Expense
  Note 3. Fair Value of 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, or
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
Inputs other than quoted prices that are observable for the asset or liabilityLevel 3
    
    Unobservable inputs for the asset or liability
  11




---



##### Table of Contents



Fair Value Measurements at December 31, 2009Quoted Prices
    
    
    
    
    
    
    Significantin Active Markets
    
    
    Significant Other
    
    
    Unobservablefor Identical Assets
    
    
    Observable Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents
    
    $
    68,979
    
    
    $
    68,979
    
    
    $
    
    
    
    $
    Municipal securities
    
    
    6,762
    
    
    
    6,712
    
    
    
    
    
    
    
    50Corporate debt securities
    
    
    1,770
    
    
    
    1,770
    
    
    
    
    
    
    
    Bonds of government sponsored agencies
    
    
    1,250
    
    
    
    1,250
    
    
    
    
    
    
    
    Marketable securities
    
    
    1,026
    
    
    
    
    
    
    
    1,026
    
    
    
    Total
    
    $
    79,787
    
    
    $
    78,711
    
    
    $
    1,026
    
    
    $
    50
 Fair Value Measurements at September 30, 2010Quoted Prices
    
    
    
    
    
    
    Significantin Active Markets
    
    
    Significant Other
    
    
    Unobservablefor Identical Assets
    
    
    Observable Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalents
    
    $
    19,333
    
    
    $
    19,333
    
    
    $
    
    
    
    $
    Municipal securities
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Marketable securities
    
    
    648
    
    
    
    
    
    
    
    648
    
    
    
    Total
    
    $
    20,031
    
    
    $
    19,333
    
    
    $
    648
    
    
    $
    50
  Note 4. Business Combinations
 Research Services (RS)
   12




---



##### Table of Contents



Fair value of assets acquired:Cash
    
    $
    149Accounts receivable
    
    
    12,687Inventory
    
    
    2,598Other current assets
    
    
    1,142Property and equipment, net
    
    
    11,179Goodwill, including workforce
    
    
    36,756Other intangible assets, net
    
    
    21,349Other assets
    
    
    407Liabilities assumed:Accrued and other liabilities
    
    
    (3,257
    )Deferred revenue
    
    
    (375
    )Net assets acquired
    
    $
    82,635
  Pro Forma Results
  Three Months EndedSeptember 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2009
    
    
    2010(Unaudited, in thousands except per share amounts)Revenue
    
    $
    35,799
    
    
    $
    103,951
    
    
    $
    124,432Operating income
    
    
    3,151
    
    
    
    11,597
    
    
    
    16,153Net income
    
    
    1,601
    
    
    
    5,945
    
    
    
    9,807Basic net income per share
    
    $
    0.03
    
    
    $
    0.12
    
    
    $
    0.20Diluted net income per share
    
    $
    0.03
    
    
    $
    0.12
    
    
    $
    0.20
  13




---



##### Table of Contents



Covance Cardiac Safety Services, Inc. (CCSS)
  LeaseLiabilityBalance at December 31, 2009
    
    $
    1,758Adjustments to previous estimates
    
    
    593Cash payments
    
    
    (369
    )Balance at September 30, 2010
    
    $
    1,982
  Note 5. Inventory
  September 30, 2010(Unaudited, inthousands)Raw materials
    
    $
    1,575Work in process
    
    
    756Finished goods
    
    
    1,548Inventory
    
    $
    3,879
 Note 6. Intangible Assets
  RS
 September 30, 2010EstimatedAccumulated
    
    
    
    
    
    
    Useful Life (inDescription
    
    Gross Value
    
    
    Amortization
    
    
    Net Book Value
    
    
    years)Backlog
    
    $
    12,782
    
    
    $
    2,678
    
    
    $
    10,104
    *
    
    
    4Technology
    
    
    8,248
    
    
    
    344
    
    
    
    7,904
    
    
    
    8Covenants not-to-compete
    
    
    319
    
    
    
    28
    
    
    
    291
    
    
    
    4Total
    
    $
    21,349
    
    
    $
    3,050
    
    
    $
    18,299
 
 *
    
    The backlog is being amortized over four years on an accelerated basis.   14




---



##### Table of Contents



Amortization ofIntangibleYears ending December 31,
    
    Assets2010
    
    $
    2,2882011
    
    
    6,7352012
    
    
    3,2382013
    
    
    1,4512014
    
    
    1,064Thereafter
    
    
    3,523Total
    
    $
    18,299
 CCSS
 December 31, 2009EstimatedAccumulated
    
    
    
    
    
    
    Useful Life (inDescription
    
    Gross Value
    
    
    Amortization
    
    
    Net Book Value
    
    
    years)Backlog
    
    $
    1,900
    
    
    $
    1,643
    
    
    $
    257
    *
    
    
    3Customer Relationships
    
    
    1,700
    
    
    
    350
    
    
    $
    1,350
    
    
    
    10Technology
    
    
    400
    
    
    
    400
    
    
    $
    
    
    
    
    1Total
    
    $
    4,000
    
    
    $
    2,393
    
    
    $
    1,607
 September 30, 2010EstimatedAccumulated
    
    
    
    
    
    
    Useful Life (inDescription
    
    Gross Value
    
    
    Amortization
    
    
    Net Book Value
    
    
    years)Backlog
    
    $
    1,900
    
    
    $
    1,858
    
    
    $
    42
    *
    
    
    3Customer Relationships
    
    
    1,700
    
    
    
    476
    
    
    $
    1,224
    
    
    
    10Technology
    
    
    400
    
    
    
    400
    
    
    $
    
    
    
    
    1Total
    
    $
    4,000
    
    
    $
    2,734
    
    
    $
    1,266
 
 *
    
    The backlog is being amortized over three years on an accelerated basis.    Years ending December 31,
    
    Amortization of 
Intangible 
Assets2010
    
    $
    902011
    
    
    1702012
    
    
    1702013
    
    
    1702014
    
    
    170Thereafter
    
    
    496Total
    
    $
    1,266
  15




---



##### Table of Contents



Note 7. Credit Agreement
    Note 8. Net Income per Common Share
   16




---



##### Table of Contents



Net
    
    
    
    
    
    
    Per ShareThree Months Ended September 30,
    
    Income
    
    
    Shares
    
    
    Amount2009Basic net income
    
    $
    2,819
    
    
    
    48,452
    
    
    $
    0.06Effect of dilutive shares
    
    
    
    
    
    
    303
    
    
    
    Diluted net income
    
    $
    2,819
    
    
    
    48,755
    
    
    $
    0.062010Basic net income
    
    $
    3,173
    
    
    
    48,860
    
    
    $
    0.06Effect of dilutive shares
    
    
    
    
    
    
    398
    
    
    
    Diluted net income
    
    $
    3,173
    
    
    
    49,258
    
    
    $
    0.06
 Net
    
    
    
    
    
    
    Per ShareNine Months Ended September 30,
    
    Income
    
    
    Shares
    
    
    Amount2009Basic net income
    
    $
    7,437
    
    
    
    49,399
    
    
    $
    0.15Effect of dilutive shares
    
    
    
    
    
    
    299
    
    
    
    Diluted net income
    
    $
    7,437
    
    
    
    49,698
    
    
    $
    0.152010Basic net income
    
    $
    5,751
    
    
    
    48,789
    
    
    $
    0.12Effect of dilutive shares
    
    
    
    
    
    
    373
    
    
    
    Diluted net income
    
    $
    5,751
    
    
    
    49,162
    
    
    $
    0.12
  Note 9. Comprehensive Income
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Net income
    
    $
    2,819
    
    
    $
    3,173
    
    
    $
    7,437
    
    
    $
    5,751Other comprehensive income (loss):Change in unrealized losses on marketable securities
    
    
    (27
    )
    
    
    (211
    )
    
    
    (246
    )
    
    
    (246
    )Currency translation adjustment
    
    
    (561
    )
    
    
    4,206
    
    
    
    1,285
    
    
    
    1,822Comprehensive income, net of tax
    
    $
    2,231
    
    
    $
    7,168
    
    
    $
    8,476
    
    
    $
    7,327
  17




---



##### Table of Contents



Note 10. Recent Accounting Pronouncements
    Note 11. Income Taxes
    Note 12. Related Party Transactions
   18




---



##### Table of Contents



Note 13. Commitments and Contingencies
    Note 14. Operating Segments / Geographic Information
   19




---



##### Table of Contents



Three Months Ended September 30, 2009NorthAmerica
    
    
    UK
    
    
    Germany
    
    
    Eliminations
    
    
    TotalService revenues
    
    $
    13,505
    
    
    $
    2,464
    
    
    $
    
    
    
    $
    
    
    
    $
    15,969Site support revenues
    
    
    4,803
    
    
    
    1,954
    
    
    
    
    
    
    
    
    
    
    
    6,757Net revenues from external customers
    
    $
    18,308
    
    
    $
    4,418
    
    
    $
    
    
    
    $
    
    
    
    $
    22,726Operating income
    
    $
    4,003
    
    
    $
    706
    
    
    $
    
    
    
    $
    
    
    
    $
    4,709Long-lived assets
    
    $
    20,717
    
    
    $
    3,049
    
    
    $
    
    
    
    $
    
    
    
    $
    23,766Total assets
    
    $
    139,894
    
    
    $
    20,301
    
    
    $
    
    
    
    $
    
    
    
    $
    160,195
 Three Months Ended September 30, 2010NorthAmerica
    
    
    UK
    
    
    Germany
    
    
    Eliminations
    
    
    TotalService revenues
    
    $
    11,037
    
    
    $
    5,553
    
    
    $
    9,339
    
    
    $
    
    
    
    $
    25,929Site support revenues
    
    
    4,606
    
    
    
    2,445
    
    
    
    12,148
    
    
    
    
    
    
    
    19,199Net revenues from external customers
    
    
    15,643
    
    
    
    7,998
    
    
    
    21,487
    
    
    
    
    
    
    
    45,128Intersegment revenues
    
    
    1,100
    
    
    
    39
    
    
    
    
    
    
    
    (1,139
    )
    
    
    Total revenues
    
    $
    16,743
    
    
    $
    8,037
    
    
    $
    21,487
    
    
    $
    (1,139
    )
    
    $
    45,128Operating income (A)
    
    $
    1,702
    
    
    $
    1,835
    
    
    $
    3,052
    
    
    $
    
    
    
    $
    6,589Long-lived assets
    
    $
    22,762
    
    
    $
    6,017
    
    
    $
    13,030
    
    
    $
    
    
    
    $
    41,809Total assets
    
    $
    94,223
    
    
    $
    15,290
    
    
    $
    96,038
    
    
    $
    
    
    
    $
    205,551
 Nine Months Ended September 30, 2009NorthAmerica
    
    
    UK
    
    
    Germany
    
    
    Eliminations
    
    
    TotalService revenues
    
    $
    41,109
    
    
    $
    7,183
    
    
    $
    
    
    
    $
    
    
    
    $
    48,292Site support revenues
    
    
    14,175
    
    
    
    5,720
    
    
    
    
    
    
    
    
    
    
    
    19,895EDC licenses and services revenues
    
    
    2,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,501Net revenues from external customers
    
    $
    57,785
    
    
    $
    12,903
    
    
    $
    
    
    
    $
    
    
    
    $
    70,688Operating income
    
    $
    11,185
    
    
    $
    1,708
    
    
    $
    
    
    
    $
    
    
    
    $
    12,893Long-lived assets
    
    $
    20,717
    
    
    $
    3,049
    
    
    $
    
    
    
    $
    
    
    
    $
    23,766Total assets
    
    $
    139,894
    
    
    $
    20,301
    
    
    $
    
    
    
    $
    
    
    
    $
    160,195
 Nine Months Ended September 30, 2010NorthAmerica
    
    
    UK
    
    
    Germany
    
    
    Eliminations
    
    
    TotalService revenues
    
    $
    31,820
    
    
    $
    15,728
    
    
    $
    11,913
    
    
    $
    
    
    
    $
    59,461Site support revenues
    
    
    14,328
    
    
    
    7,036
    
    
    
    15,267
    
    
    
    
    
    
    
    36,631Net revenues from external customers
    
    
    46,148
    
    
    
    22,764
    
    
    
    27,180
    
    
    
    
    
    
    
    96,092Intersegment revenues
    
    
    1,424
    
    
    
    39
    
    
    
    
    
    
    
    (1,463
    )
    
    
    Total revenues
    
    $
    47,572
    
    
    $
    22,803
    
    
    $
    27,180
    
    
    $
    (1,463
    )
    
    $
    96,092Operating income (A)
    
    $
    8
    
    
    $
    6,764
    
    
    $
    3,615
    
    
    $
    
    
    
    $
    10,387Long-lived assets
    
    $
    22,762
    
    
    $
    6,017
    
    
    $
    13,030
    
    
    $
    
    
    
    $
    41,809Total assets
    
    $
    94,223
    
    
    $
    15,290
    
    
    $
    96,038
    
    
    $
    
    
    
    $
    205,551
 (A)
    
    North American and German operating income for the three and nine months ended
September 30, 2010 included the negative impact of $0.1 million and $4.1 million,
respectively, of transaction costs associated with the RS acquisition.  Note 15. Stock Repurchase
   20




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Cautionary Statement for Forward-Looking Information
    Overview
 ® ®
   Acquisition of RS
    21




---



##### Table of Contents




    
    MasterScope® CT  a PC-based device platform for centralized spirometry/ pulmonary
function tests (PFT) and Cardiac Safety featuring fully customizable workflows that is 21
CFR 11 compliant.
    
    Flow/CorScreen® CT  a desktop-based device platform for centralized spirometry and ECG
featuring a built-in color printer that is customizable and 21 CFR 11 compliant.
    
    Asthma Monitor AM3®  an electronic lung function monitor with text-based diary
available in a broad range of languages.
    
    VIAPad®  a dedicated hand held ePRO device for capturing high quality patient reported
outcomes in a broad range of languages.
    
    VIAPen  an ePRO device which utilizes digital pen technology to capture quality of
life information.
    
    VIAConnect®  an intelligent modem solution for transferring collected data from any
patients home to the data center, using an analog or wireless connection.
  
    
    Establishes us as one of the market leaders in respiratory core lab services in the
clinical trials market. The transaction provides us with a leadership position in an
attractive clinical end market and serves to diversify ERTs revenue base.
    
    Provides us with a leading diagnostic device capability. RS is a leader in diagnostic
device manufacturing, having developed over 20 proprietary devices and supporting software
platforms for use in the clinical trials industry. This device manufacturing expertise
has expanded our technological capabilities, enables us to provide greater breadth of
services and technologies for clinical research, and will serve as a basis for development
of other healthcare solutions.
    
    Expands our revenue base in cardiac safety. RS has a significant, and growing,
business in cardiac safety services that will add to our current
position in this market.
    
    Provides scale for our ePRO business, as well as expands the depth and breadth of our
ePRO services. This transaction will establish us as one of the five largest providers in
the ePRO market. RSs offering is based on innovative hand-held devices. When combined
with our interactive voice response technology and our planned web-based technology, we
will be able to offer our customers a multi-modality approach for their ePRO solutions.
    
    Expands significantly our global footprint. RS employs more than 250 people, of whom
approximately 230 are in Germany. This increased local European presence will enable us
to bolster our already strong international presence, better serve our continental
European customers, and enable us to expand our relationships with other clients in
Europe.
    
    Accelerates our movement into healthcare solutions. RSs device manufacturing and
services capabilities provides us with a platform and experience for future growth in
healthcare delivery.
 Sale of EDC Assets
   22




---



##### Table of Contents



Products and Services
  Centralized Cardiac Safety Solutions
   Cardiac Safety Consulting
  Centralized Spirometry / Pulmonary Function Solutions
   Electronic Patient Reported Outcomes (ePRO)
     23




---



##### Table of Contents



Project Assurance
  Integrated Product Offering
  ®
 Revenues
      Costs
    24




---



##### Table of Contents



Results of Operations
 Executive Overview
      25




---



##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2010
    
    
    2009
    
    
    2010Net revenues:Services
    
    
    70.3
    %
    
    
    57.5
    %
    
    
    68.4
    %
    
    
    61.9
    %Site support
    
    
    29.7
    %
    
    
    42.5
    %
    
    
    28.1
    %
    
    
    38.1
    %EDC licenses and services
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    3.5
    %
    
    
    0.0
    %Total net revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs of revenues:Cost of services
    
    
    33.4
    %
    
    
    30.0
    %
    
    
    32.5
    %
    
    
    30.4
    %Cost of site support
    
    
    15.0
    %
    
    
    25.5
    %
    
    
    14.9
    %
    
    
    20.0
    %Cost of EDC licenses and services
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    1.2
    %
    
    
    0.0
    %Total costs of revenues
    
    
    48.4
    %
    
    
    55.5
    %
    
    
    48.6
    %
    
    
    50.4
    %Gross margin
    
    
    51.6
    %
    
    
    44.5
    %
    
    
    51.4
    %
    
    
    49.6
    %Operating expenses:Selling and marketing
    
    
    13.4
    %
    
    
    9.9
    %
    
    
    13.8
    %
    
    
    12.3
    %General and administrative
    
    
    13.1
    %
    
    
    17.2
    %
    
    
    15.0
    %
    
    
    23.2
    %Research and development
    
    
    4.4
    %
    
    
    2.8
    %
    
    
    4.4
    %
    
    
    3.3
    %Total operating expenses
    
    
    30.9
    %
    
    
    29.9
    %
    
    
    33.2
    %
    
    
    38.8
    %Operating income
    
    
    20.7
    %
    
    
    14.6
    %
    
    
    18.2
    %
    
    
    10.8
    %Foreign
exchange losses
    
    
    (0.7
    %)
    
    
    (3.9
    %)
    
    
    (0.7
    %)
    
    
    (1.3
    %)Other income (expense), net
    
    
    0.4
    %
    
    
    (0.4
    %)
    
    
    0.2
    %
    
    
    (0.2
    %)Income before income taxes
    
    
    20.4
    %
    
    
    10.3
    %
    
    
    17.7
    %
    
    
    9.3
    %Income tax provision
    
    
    8.0
    %
    
    
    3.3
    %
    
    
    7.2
    %
    
    
    3.3
    %Net income
    
    
    12.4
    %
    
    
    7.0
    %
    
    
    10.5
    %
    
    
    6.0
    %
  26




---



##### Table of Contents



Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2010.
  Three Months Ended September 30,2009
    
    
    2010
    
    
    Increase (Decrease)Services:Net revenues
    
    $
    15,969
    
    
    $
    25,929
    
    
    $
    9,960
    
    
    
    62.4
    %Costs of revenues
    
    
    7,577
    
    
    
    13,526
    
    
    
    5,949
    
    
    
    78.5
    %Gross margin
    
    $
    8,392
    
    
    $
    12,403
    
    
    $
    4,011
    
    
    
    47.8
    %Site support:Net revenues
    
    $
    6,757
    
    
    $
    19,199
    
    
    $
    12,442
    
    
    
    184.1
    %Costs of revenues
    
    
    3,418
    
    
    
    11,505
    
    
    
    8,087
    
    
    
    236.6
    %Gross margin
    
    $
    3,339
    
    
    $
    7,694
    
    
    $
    4,355
    
    
    
    130.4
    %TotalNet revenues
    
    $
    22,726
    
    
    $
    45,128
    
    
    $
    22,402
    
    
    
    98.6
    %Costs of revenues
    
    
    10,995
    
    
    
    25,031
    
    
    
    14,036
    
    
    
    127.7
    %Gross margin
    
    
    11,731
    
    
    
    20,097
    
    
    
    8,366
    
    
    
    71.3
    %Operating expenses:Selling and marketing
    
    
    3,056
    
    
    
    4,478
    
    
    
    1,422
    
    
    
    46.5
    %General and administrative
    
    
    2,977
    
    
    
    7,780
    
    
    
    4,803
    
    
    
    161.3
    %Research and development
    
    
    989
    
    
    
    1,250
    
    
    
    261
    
    
    
    26.4
    %Total operating expenses
    
    
    7,022
    
    
    
    13,508
    
    
    
    6,486
    
    
    
    92.4
    %Operating income
    
    
    4,709
    
    
    
    6,589
    
    
    
    1,880
    
    
    
    39.9
    %Foreign
exchange losses
    
    
    (173
    )
    
    
    (1,745
    )
    
    
    (1,572
    )
    
    
    908.7
    %Other income
(expense), net
    
    
    91
    
    
    
    (199
    )
    
    
    (290
    )
    
    
    (318.7
    %)Income before income taxes
    
    
    4,627
    
    
    
    4,645
    
    
    
    18
    
    
    
    0.4
    %Income tax provision
    
    
    1,808
    
    
    
    1,472
    
    
    
    (336
    )
    
    
    (18.6
    %)Net income
    
    $
    2,819
    
    
    $
    3,173
    
    
    $
    354
    
    
    
    12.6
    %
  Three Months Ended September 30,
    
    
    Increase2009
    
    
    2010
    
    
    (Decrease)Cost of services
    
    
    47.4
    %
    
    
    52.2
    %
    
    
    4.8
    %Cost of site support
    
    
    50.6
    %
    
    
    59.9
    %
    
    
    9.3
    %Total costs of revenues
    
    
    48.4
    %
    
    
    55.5
    %
    
    
    7.1
    %Operating expenses:Selling and marketing
    
    
    13.4
    %
    
    
    9.9
    %
    
    
    (3.5
    %)General and administrative
    
    
    13.1
    %
    
    
    17.2
    %
    
    
    4.1
    %Research and development
    
    
    4.4
    %
    
    
    2.8
    %
    
    
    (1.6
    %)
  27




---



##### Table of Contents



Revenues
   Costs of Revenues
   Operating Expenses
        28




---



##### Table of Contents



Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2010.
  Nine Months Ended September 30,2009
    
    
    2010
    
    
    Increase (Decrease)Services:Net revenues
    
    $
    48,292
    
    
    $
    59,461
    
    
    $
    11,169
    
    
    
    23.1
    %Costs of revenues
    
    
    22,941
    
    
    
    29,162
    
    
    
    6,221
    
    
    
    27.1
    %Gross margin
    
    $
    25,351
    
    
    $
    30,299
    
    
    $
    4,948
    
    
    
    19.5
    %Site support:Net revenues
    
    $
    19,895
    
    
    $
    36,631
    
    
    $
    16,736
    
    
    
    84.1
    %Costs of revenues
    
    
    10,523
    
    
    
    19,261
    
    
    
    8,738
    
    
    
    83.0
    %Gross margin
    
    $
    9,372
    
    
    $
    17,370
    
    
    $
    7,998
    
    
    
    85.3
    %EDC licenses and services:Net revenues
    
    $
    2,501
    
    
    $
    
    
    
    $
    (2,501
    )
    
    
    (100.0
    %)Costs of revenues
    
    
    863
    
    
    
    
    
    
    
    (863
    )
    
    
    (100.0
    %)Gross margin
    
    $
    1,638
    
    
    $
    
    
    
    $
    (1,638
    )
    
    
    (100.0
    %)TotalNet revenues
    
    $
    70,688
    
    
    $
    96,092
    
    
    $
    25,404
    
    
    
    35.9
    %Costs of revenues
    
    
    34,327
    
    
    
    48,423
    
    
    
    14,096
    
    
    
    41.1
    %Gross margin
    
    
    36,361
    
    
    
    47,669
    
    
    
    11,308
    
    
    
    31.1
    %Operating expenses:Selling and marketing
    
    
    9,756
    
    
    
    11,827
    
    
    
    2,071
    
    
    
    21.2
    %General and administrative
    
    
    10,581
    
    
    
    22,278
    
    
    
    11,697
    
    
    
    110.5
    %Research and development
    
    
    3,131
    
    
    
    3,177
    
    
    
    46
    
    
    
    1.5
    %Total operating expenses
    
    
    23,468
    
    
    
    37,282
    
    
    
    13,814
    
    
    
    58.9
    %Operating income
    
    
    12,893
    
    
    
    10,387
    
    
    
    (2,506
    )
    
    
    (19.4
    %)Foreign
exchange losses
    
    
    (543
    )
    
    
    (1,267
    )
    
    
    (724
    )
    
    
    133.3
    %Other income
(expense), net
    
    
    168
    
    
    
    (181
    )
    
    
    (349
    )
    
    
    (207.7
    %)Income before income taxes
    
    
    12,518
    
    
    
    8,939
    
    
    
    (3,579
    )
    
    
    (28.6
    %)Income tax provision
    
    
    5,081
    
    
    
    3,188
    
    
    
    (1,893
    )
    
    
    (37.3
    %)Net income
    
    $
    7,437
    
    
    $
    5,751
    
    
    $
    (1,686
    )
    
    
    (22.7
    %)
  Nine Months Ended September 30,
    
    
    Increase2009
    
    
    2010
    
    
    (Decrease)Cost of services
    
    
    47.5
    %
    
    
    49.0
    %
    
    
    1.5
    %Cost of site support
    
    
    52.9
    %
    
    
    52.6
    %
    
    
    (0.3
    %)Cost of EDC licenses and services
    
    
    34.5
    %
    
    
    N/A
    
    
    
    N/ATotal costs of revenues
    
    
    48.6
    %
    
    
    50.4
    %
    
    
    1.8
    %Operating expenses:Selling and marketing
    
    
    13.8
    %
    
    
    12.3
    %
    
    
    (1.5
    %)General and administrative
    
    
    15.0
    %
    
    
    23.2
    %
    
    
    8.2
    %Research and development
    
    
    4.4
    %
    
    
    3.3
    %
    
    
    (1.1
    %)
  29




---



##### Table of Contents



Revenues
   Costs of Revenues
   Operating Expenses
       30




---



##### Table of Contents



Liquidity and Capital Resources
         31




---



##### Table of Contents



Inflation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate Risk
 Short-term debt
  Investments
   32




---



##### Table of Contents



Foreign Currency Risk
   
 Item 4. Controls and Procedures
   33




---



##### Table of Contents



Part II. Other Information
 
 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.
  34




---



##### Table of Contents



eResearchTechnology, Inc.
(Registrant)Date:      November 9, 2010
    By:
    /s/ Michael J. McKelveyMichael J. McKelveyPresident and Chief Executive Officer,
(Principal executive officer)Date:      November 9, 2010
    By:
    /s/ Keith D. SchneckKeith D. SchneckExecutive Vice President, Chief Financial
Officer and Secretary
(Principal financial and accounting officer)  35




---



##### 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.
  36