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ERT Reports Fourth Quarter and Full Year 2011 Operating Results
Date:2/27/2012

PHILADELPHIA, Feb. 27, 2012/PRNewswire/ -- eResearchTechnology, Inc. (ERT), (Nasdaq: ERT) a global technology-driven provider of health outcomes research services and customizable medical devices to biopharmaceutical sponsors and contract research organizations (CROs),announced results today for the fourth quarter and fiscal year ended December 31, 2011.  Unless otherwise noted, all comparative numbers refer to changes from the same period a year ago.  The financial results for 2010 include the seven months' results related to the acquisition of CareFusion Research Services (RS or German operations) that was completed on May 28, 2010.

This press release contains financial measures prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and non-GAAP measures adjusted to exclude the impact of the amortization of the acquired intangibles and other assets, acquisition and other costs related to the RS acquisition, an investment impairment and related income tax effects.  A reconciliation of these GAAP and non-GAAP measures is found in the attached "Reconciliation of GAAP to Non-GAAP Information."

Financial Highlights for the Fourth Quarter of 2011

  • Net revenues were $52.3 million for the fourth quarter of 2011 compared to $48.1 million for the third quarter of 2011 and $44.9 million a year ago.  
  • GAAP gross margin percentage was 40.9% in the fourth quarter of 2011 compared to 41.5% for the third quarter of 2011 and 43.9% a year ago.  Non-GAAP gross margin percentage was 44.9% in the fourth quarter of 2011 compared to 45.5% for the third quarter of 2011 and 49.0% a year ago.  The GAAP and Non-GAAP gross margin percentage decline year over year was due to higher costs associated with the ramp up of our German operations to meet customer study deliverables, integration related activities and additions to inventory reserves.  
  • GAAP operating income margin percentage was 12.1% in the fourth quarter of 2011 compared to 10.9% for the third quarter of 2011 and 11.6% a year ago.  Non-GAAP operating income margin percentage was 16.2% in the fourth quarter of 2011 compared to 14.9% for the third quarter of 2011 and 18.5% a year ago.
  • GAAP net income was $4.5 million, or $0.09 per diluted share, in the fourth quarter of 2011 compared to $4.3 million, or $0.09 per diluted share, in the third quarter of 2011 and $4.1 million, or $0.08 per diluted share, a year ago.  Impacting GAAP net income is a $0.7 million charge recorded in other expense, net for an investment impairment of marketable securities that we received in connection with the sale of our former EDC operations in 2009.  Non-GAAP net income was $6.9 million, or $0.14 per diluted share, in the fourth quarter of 2011 compared to $5.6 million, or $0.11 per diluted share, in the third quarter of 2011 and $6.1 million, or $0.12 per diluted share, a year ago.  
  • Cash flow from operations was $19.5 million in the fourth quarter of 2011, compared to $9.2 million in the third quarter of 2011 and $17.1 million a year ago.
  • Cash and short-term investments totaled $39.0 million at December 31, 2011 compared to $30.4 million at December 31, 2010.  
  • New bookings were $82.5 million in the fourth quarter of 2011 compared to $78.4 million for the third quarter of 2011 and $58.9 million a year ago.  
  • The gross book-to-bill ratio was 1.6 in the fourth quarter of 2011 compared to 1.6 in the third quarter of 2011 and 1.3 a year ago.  
  • Backlog was $357.4 million at December 31, 2011 compared to $343.8 million at September 30, 2011 and $302.9 million at December 31, 2010.  The annualized cancellation rate was 16.8% in the fourth quarter of 2011 compared to 14.6% in the third quarter of 2011 and 16.6% a year ago.  

  • Financial highlights for the full year of 2011

  • Net revenues were $184.9 million for the year ended December 31, 2011 compared to $141.0 million for the year ended December 31, 2010.  Revenues from our German operations were $87.9 million for the year ended December 31, 2011 and $47.2 million from the date of acquisition to December 31, 2010.
  • GAAP gross margin percentage was 41.0% for the year ended December 31, 2011 compared to 47.8% for the year ended December 31, 2010.  Non-GAAP gross margin percentage was 45.2% for the year ended December 31, 2011 compared to 51.7% for the year ended December 31, 2010.  
  • GAAP operating income margin percentage was 10.5% for the year ended December 31, 2011 compared to 11.1 % for the year ended December 31, 2010.  Non-GAAP operating income margin percentage was 14.8% for the year ended December 31, 2011 compared to 19.2% for the year ended December 31, 2010.
  • GAAP net income was $13.7 million, or $0.28 per diluted share, for the year ended December 31, 2011 compared to $9.9 million, or $0.20 per diluted share, for the year ended December 31, 2010.  Non-GAAP net income was $20.0 million, or $0.41 per diluted share, for the year ended December 31, 2011 compared to $18.4 million, or $0.37 per diluted share, for the year ended December 31, 2010.  
  • Cash flow from operations was $42.5 million for the year ended December 31, 2011 compared to $35.9 million for the year ended December 31, 2010.  
  • New bookings were $303.5 million for the year ended December 31, 2011 compared to $212.2 million for the year ended December 31, 2010.  

  • "We are pleased with the Company's results, which include record revenues and bookings for the fourth quarter and full year," commented Dr. Jeffrey Litwin, President and CEO of ERT.  "This is the first quarter our bookings have ever exceeded $80 million and it marks the fourth consecutive quarter of more than $70 million in bookings.  Bookings growth was driven by sustained strength in both our cardiac safety and respiratory solutions.  Our continued growth shows that our message, outlining the benefits of centralization, along with the ability to purchase high quality cardiac safety, respiratory and ePRO services from one vendor is resonating with our clients."  

    "We enter 2012, having completed the integration of our German operations and we launched our next generation platform, EXPERT 3 in January 2012," continued Dr. Litwin.  "EXPERT 3 unifies our core offerings onto a single software platform with a unified portal technology. It provides meaningful increases in capacity and should drive efficiencies while providing additional value to our clients as we progress through 2012. We also launched Master Scope 32, our new laptop based platform for use at our investigator sites in support of all of our business lines."

    2012 Guidance The Company issued guidance for the full year of 2012.  ERT expects net revenues of between $195 million and $203 million for 2012.  ERT expects GAAP diluted net income per share to be between $0.40 and $0.48 for 2012 and non-GAAP diluted net income per share to be between $0.45 and $0.53 for the same period.  

    For the first quarter ending March 31, 2012, ERT expects net revenues of between $46 million and $49 million, GAAP diluted net income per share to be between $0.07 and $0.10 and non-GAAP diluted net income per share to be between $0.08 and $0.11.  

    Use of Non-GAAP Financial MeasuresIn addition to GAAP financial measures, ERT uses certain non-GAAP financial measures that exclude charges related to the amortization of the RS acquired intangible and other assets and acquisition and other costs which are related to the RS acquisition and in 2011 an other-than-temporary impairment of marketable securities that we received in connection with the sale of our former EDC operations in 2009, and also their related income tax effects.  ERT believes that these non-GAAP measures are useful to investors because this supplemental information facilitates comparisons of its operations from period to period and to the performance of other companies within its industry and assists in gaining a better understanding of its operating results and future prospects.  ERT views amortization of acquired intangible and other assets related to the RS acquisition, which includes such items as the amortization of acquired customer backlog and technology, as items determined at the time of the acquisition.  While ERT reviews the underlying value of these intangibles regularly for impairment, the amortization is an expense typically not affected by operations during any particular period and does not contribute to the operational performance in any particular period.  ERT regards acquisition and other costs related to its recent acquisition and the other-than-temporary impairment charge as costs that do not recur on a regular basis.

    ERT's non-GAAP effective tax rates differ from its GAAP effective tax rates for 2011 because of 1) the exclusion of the amortization of acquired intangible and other assets and acquisition and other costs related to its recent acquisition of RS, and 2) the income tax effect due to the difference between the GAAP and non-GAAP effective tax rate applied against the GAAP pre-tax income, primarily as a result of the acquisition costs and the other-than-temporary impairment charge  not being deductible for income tax purposes.  ERT excludes the impact of these discrete tax items from its non-GAAP income tax provision because it believes they are not indicative of the effective income tax rate of its ongoing business operations.

    Management uses these non-GAAP financial measures, in addition to the measures prepared in accordance with GAAP, as the basis for measuring ERT's operating performance, financial and operating decision-making, development of budgets and comparing such performance to that of prior periods for the same reasons stated above.  These non-GAAP financial measures are not meant to be considered superior to or a substitute for comparable financial measures prepared in accordance with GAAP.  There are also limitations on the non-GAAP measures, including: 1) these non-GAAP measures do not have standardized meanings and may not be comparable to similar non-GAAP measures used by other companies, 2) acquisition and other costs related to ERT's recent acquisition of RS represent actual cash expenditures that are excluded from ERT's non-GAAP measures, and 3) although amortization of acquired intangible and other assets does not directly impact ERT's current cash position, such expense is amortized over their expected economic lives and does represent the declining value of the assets acquired, but this expense is excluded from ERT's non-GAAP measures.  ERT adjusts for these limitations by relying on these non-GAAP measures only as a supplement to its GAAP results.

    Conference Call Dr. Litwin, the Company's President and CEO, and Mr. Keith Schneck, the Company's Chief Financial Officer, will hold a conference call to discuss these results.  The conference call will take place at 5:00 PM EST on February 27, 2012.  For the conference call, interested participants should dial 1-800-860-2442 when calling within the United States or 1-412-858-4600 when calling internationally.  There will be a playback available as well.  To listen to the playback, please call 1-877-344-7529 when calling within the United States or 1-412-317-0088 when calling internationally.  Conference code for playback is 10010375.  This call is being webcast by MultiVu and can be accessed at ERT's website at www.ert.com.  The webcast may also be accessed via the link at http://www.videonewswire.com/event.asp?id=85360.

    The webcast can be accessed for up to one year on either site.  

    About eResearchTechnology, Inc.ERT (www.ert.com) is a global technology-driven provider of health outcomes research services and customizable medical devices supporting biopharmaceutical sponsors and contract research organizations (CROs) to achieve their drug development and healthcare objectives.  ERT harnesses leading technology coupled with unrivaled processes and scientific expertise to collect, analyze, and report on clinical data to support the determination of health outcomes critical to the approval, labeling and reimbursement of pharmaceutical products.  ERT is the acknowledged industry leader in centralized cardiac safety and respiratory efficacy services and also provides electronic Patient Reported Outcomes (ePRO) and outcomes assessments for multiple modalities across all phases.

    This release may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views as to future events and financial performance with respect to our operations.  These statements can be identified by the fact that they do not relate strictly to historical or current facts.  They use words such as "aim," "anticipate," "are confident," "estimate," "expect," "will be," "will continue," "will likely result," "project," "intend," "plan," "believe," "look to" and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance.  

    These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements.  Factors that might cause such a difference include: unfavorable economic conditions; our ability to obtain new contracts and accurately estimate net revenues, our positive outlook for future bookings, variability in size, scope and duration of projects and internal issues at the sponsoring client; our ability to successfully integrate any future acquisitions; competitive factors in the market for our centralized services; changes in the bio-pharmaceutical and healthcare industries to which we sell our solutions; technological development; and market demand.  There is no guarantee that the amounts in our backlog will ever convert to revenue.  Should the economic conditions deteriorate the cancellation rates that we have historically experienced could increase.  Further information on potential factors that could affect the Company's financial results can be found in ERT's Reports on Form 10-K and 10-Q filed with the Securities and Exchange Commission.  Guidance is based on management's good faith expectations given current market conditions but that continued or further deterioration of general economic conditions, in addition to other factors cited elsewhere, could result in ERT not achieving the revenue and net income per diluted share guidance provided.

    Forward-looking statements speak only as of the date made.  We undertake no obligation to update any forward-looking statements, including prior forward-looking statements, to reflect the events or circumstances arising after the date as of which they were made.  As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements included in this release or that may be made in our filings with the Securities and Exchange Commission or elsewhere from time to time by, or on behalf of, us.Contact: Keith SchneckRobert East eResearchTechnology, Inc.  

    Westwicke Partners, LLC 215-282-5566

    410-312-0502eResearchTechnology, Inc. and SubsidiariesConsolidated Statements of Operations(in thousands, except per share amounts)(unaudited)Three Months Ended December 31,Year Ended December 31,2010201120102011Net revenues:Services

    $
    26,257$
    27,703$
    85,718$
    99,289Site support

    18,64324,58855,27485,633Total net revenues

    44,90052,291140,992184,922Costs of revenues:Cost of services

    14,24114,73843,40356,063Cost of site support

    10,95116,17030,21253,056Total costs of revenues

    25,19230,90873,615109,119Gross margin

    19,70821,38367,37775,803Operating expenses:Selling and marketing

    4,2374,60416,06417,888General and administrative

    8,3298,11530,60731,011Research and development

    1,9122,3145,0897,397Total operating expenses

    14,47815,03351,76056,296Operating income

    5,2306,35015,61719,507Foreign exchange gains (losses)

    311751(956)171Other expense, net

    (58)(862)(239)(1,256)Income before income taxes

    5,4836,23914,42218,422Income tax provision

    1,3631,7124,5514,694Net income

    $
    4,120$
    4,527$
    9,871$
    3,728Net income per share:Basic

    $
    .08$
    .09$
    .20$
    .28Diluted

    $
    .08$
    .09$
    .20$
    .28Shares used in computing net income per share:Basic

    48,86749,24148,80849,129Diluted

    49,27449,26549,19049,289eResearchTechnology, Inc. and SubsidiariesConsolidated Balance Sheets(in thousands, except share and per share amounts)(unaudited)December 31, 2010December 31, 2011ASSETSCurrent assets:Cash and cash equivalents

    $
    30,343$
    38,928Short-term investments

    5050Investment in marketable securities

    648405Accounts receivable less allowance for doubtful accountsof $515 and $207, respectively

    37,23641,617Inventory

    4,6988,863Prepaid income taxes

    1,9884,451Prepaid expenses and other

    4,3934,270Deferred income taxes

    3,4313,605Total current assets

    82,787102,189Property and equipment, net

    42,61553,272Goodwill

    71,63772,915Intangible assets

    17,18710,711Deferred income taxes

    -724Other assets

    609557Total assets

    $
    214,835$
    240,368LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

    $
    7,136$
    7,412Accrued expenses

    16,16216,230Income taxes payable

    -986Deferred revenues

    11,67013,544Total current liabilities

    34,96838,172Deferred rent

    2,3682,411Deferred income taxes

    3,7037,946Long-term debt

    21,00021,000Other liabilities

    2,1411,162Total liabilities

    64,18070,691Stockholders' 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,,460,782 and 60,838,449 shares issued, respectively

    605608Additional paid-in capital

    100,441104,189Accumulated other comprehensive (loss) income

    (1,545)44Retained earnings

    131,037144,765Treasury stock, 11,589,603 and 11,596,966 shares at cost, respectively

    (79,883)(79,929)Total stockholders' equity

    150,655169,677Total liabilities and stockholders' equity

    $
    214,835$
    240,368eResearchTechnology, Inc. and SubsidiariesConsolidated Statements of Cash Flows(in thousands)(unaudited)Year Ended December 31,20102011Operating activities:   Net income

    $   9,871$
    3,728   Adjustments to reconcile net income to net cashprovided by operating activities:Depreciation and amortization

    19,75126,192Cost of sales of equipment

    1,15821Share-based compensation

    2,7172,989Deferred income taxes

    (651)3,394Investment impairment charge

    -749Loss on disposal of equipment

    -1,686Changes in operating assets and liabilities:Accounts receivable

    (7,091)(4,458)Inventory

    (1,265)(1,854)Prepaid expenses and other

    476(799)Accounts payable

    4,131(144)Accrued expenses

    8,054561Income taxes

    (687)(1,503)Deferred revenues

    (358)1,889Deferred rent

    (179)37Net cash provided by operating activities

    35,92742,488Investing activities:   Purchases of property and equipment

    (21,746)(33,701)   Purchases of investments

    (999)-   Proceeds from sales of investments

    10,731-   Payments for acquisitions

    (82,789)(117)Net cash used in investing activities

    (94,803)(33,818)Financing activities:   Proceeds from long-term debt

    23,000-   Repayment of long-term debt

    (2,000)-   Proceeds from exercise of stock options

    229774   Stock option income tax impact

    55(78)   Repurchase of common stock for treasury

    -(46)Net cash provided by financing activities

    21,284650Effect of exchange rate changes on cash

    (1,044)(735)Net (decrease) increase in cash and cash equivalents

    (38,636)8,585Cash and cash equivalents, beginning of period

    68,97930,343Cash and cash equivalents, end of period

    $ 30,343$
    38,928eResearchTechnology, Inc. and SubsidiariesReconciliation of GAAP to Non-GAAP Information (in thousands, except per share amounts)(unaudited)Three Months EndedYear EndedDecember 31,
    2010

    September 30,
    2011

    December 31,
    2011December 31,
    2010December 31,
    2011Net revenues$
    44,900

    $
    48,083

    $
    52,291$
    40,992$
    84,922Reconciliation of GAAP to Non-GAAP gross margin:GAAP gross margin$
    9,708

    $
    9,955

    $
    21,383$
    7,377$
    75,803Amortization of acquired intangibles and other assets2,288

    1,926

    1,8325,5727,606Acquisition and integration related costs-

    -

    259-259Non-GAAP gross margin$
    21,996

    $
    21,881

    $
    23,474$
    72,949$
    83,668Non-GAAP gross margin percentage49.0%

    45.5%

    44.9%51.7%45.2%Non-GAAP gross margin percentage is calculated by dividing non-GAAP gross margin by net revenues Reconciliation of GAAP to Non-GAAPoperating income:GAAP operating income$
    5,230

    $
    5,233

    $
    ,350$
    5,617$
    9,507Amortization of acquired intangibles and other assets2,288

    1,926

    1,8325,5727,606Acquisition and integration related costs800

    -

    3095,939309Non-GAAP operating income$
    8,318

    $
    7,159

    $
    8,491$
    27,128$
    27,422Non-GAAP operating income margin percentage18.5%

    14.9%

    16.2%19.2%14.8%Non-GAAP operating income margin percentage is calculated by dividing non-GAAP operating income by net revenues Reconciliation of GAAP to Non-GAAP net income:GAAP net income$
    4,120

    $
    4,327

    $
    4,527$
    9,871$
    3,728Amortization of acquired intangibles and other assets2,288

    1,926

    1,8325,5727,606Acquisition and integration related costs800

    -

    3095,939309Investment impairment-

    -

    749-749Income tax effect due to Non-GAAP reconciling items
    and other differences between the GAAP and
    Non-GAAP effective tax rate(1,123)

    (611)

    (551)(2,969)(2,417)Non-GAAP net income$
    ,085

    $
    5,642

    $
    ,866$
    8,413$
    9,975Reconciliation of GAAP to Non-GAAP diluted net income per share:GAAP diluted net income per share$
    .08

    $
    .09

    $
    .09$
    .20$
    .28Amortization of acquired intangibles and other assets0.05

    0.03

    0.03$
    .110.15Acquisition and integration related costs0.01

    -

    0.01$
    .120.01Investment impairment-

    -

    0.02-0.02Income tax effect due to Non-GAAP reconciling items
    and other differences between the GAAP and
    Non-GAAP effective tax rate(0.02)

    (0.01)

    (0.01)$
    (0.06)(0.05)Non-GAAP diluted net income per share$
    .12

    $
    .11

    $
    .14$
    .37$
    .41Shares used in computing diluted net income per share49,274

    49,311

    49,26549,19049,289Assumed effective tax rate - Non-GAAP29.0%

    27.0%

    27.0%29.0%27.0%Three MonthsYearEnding March 31, 2012Ending December 31, 2012Low RangeHigh RangeLow RangeHigh RangeReconciliation of GAAP to Non-GAAPdiluted net income per share guidance:GAAP estimate of diluted net income per share$
    .07$
    .10$
    .40$
    .48Estimated effect on diluted net income per share of:Amortization of acquired intangibles and other assets0.020.020.070.07Income tax effect due to Non-GAAP reconciling items
    and other differences between the GAAP and
    Non-GAAP effective tax rate(0.01)(0.01)(0.02)(0.02)Non-GAAP estimate of diluted net income per share$
    .08$
    .11$
    .45$
    .53
    '/>"/>

    SOURCE ERT
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