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Hill International, Inc. - Quarter Report: 2013 September (Form 10-Q)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q

 


 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2013

 

or

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period

 

from                           to                          

 

Commission File Number: 001-33961

 

HILL INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-0953973

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

303 Lippincott Centre,
Marlton, NJ

 

08053

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (856) 810-6200

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

 

Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

o

Accelerated Filer

x

 

 

 

 

Non-Accelerated Filer

o

Smaller Reporting Company

o

 

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.  Yes o  No x

 

There were 39,458,609 shares of the Registrant’s Common Stock outstanding at November 1, 2013.

 

 

 



Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBDISIARIES

 

Index to Form 10-Q

 

 

 

 

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets at September 30, 2013 (unaudited) and December 31, 2012

3

 

 

 

 

Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2013 and 2012 (unaudited)

4

 

 

 

 

Consolidated Statements of Comprehensive Earnings (Loss) for the three- and nine-month periods ended September 30, 2013 and 2012 (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2013 and 2012 (unaudited)

6

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

35

 

 

 

Item 4

Controls and Procedures

35

 

 

 

Part II

OTHER INFORMATION

 

 

 

 

Item 1

Legal Proceedings

36

 

 

 

Item 1A

Risk Factors

36

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

36

 

 

 

Item 3

Defaults Upon Senior Securities

36

 

 

 

Item 4

Mine Safety Disclosures

36

 

 

 

Item 5

Other Information

36

 

 

 

Item 6

Exhibits

36

 

 

 

Signatures

 

37

 



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1.   Financial Statements.

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

September 30, 2013

 

December 31, 2012

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

26,639

 

$

16,716

 

Cash - restricted

 

13,212

 

12,091

 

Accounts receivable, less allowance for doubtful accounts of $9,280 and $10,268

 

236,014

 

211,176

 

Accounts receivable - affiliate

 

1,244

 

1,260

 

Prepaid expenses and other current assets

 

14,885

 

10,395

 

Income taxes receivable

 

4,165

 

3,445

 

Deferred income tax assets

 

2,095

 

2,187

 

Total current assets

 

298,254

 

257,270

 

Property and equipment, net

 

10,685

 

11,268

 

Cash - restricted, net of current portion

 

3,589

 

9,135

 

Retainage receivable

 

4,130

 

3,946

 

Acquired intangibles, net

 

25,141

 

28,248

 

Goodwill

 

83,112

 

84,007

 

Investments

 

8,025

 

8,275

 

Deferred income tax assets

 

12,983

 

14,426

 

Other assets

 

5,238

 

5,098

 

Total assets

 

$

451,157

 

$

421,673

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Due to bank

 

$

 

$

21

 

Current maturities of notes payable

 

20,583

 

21,769

 

Accounts payable and accrued expenses

 

94,497

 

90,306

 

Income taxes payable

 

4,813

 

6,955

 

Deferred revenue

 

19,355

 

17,156

 

Deferred income taxes

 

125

 

101

 

Other current liabilities

 

10,313

 

13,827

 

Total current liabilities

 

149,686

 

150,135

 

Notes payable, net of current maturities

 

111,647

 

87,666

 

Retainage payable

 

4,175

 

4,163

 

Deferred income taxes

 

18,163

 

17,675

 

Deferred revenue

 

16,720

 

9,652

 

Other liabilities

 

8,270

 

11,279

 

Total liabilities

 

308,661

 

280,570

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $.0001 par value; 1,000 shares authorized, none issued

 

 

 

Common stock, $.0001 par value; 100,000 shares authorized, 45,892 shares and 45,097 shares issued at September 30, 2013 and December 31, 2012, respectively

 

5

 

5

 

Additional paid-in capital

 

134,262

 

129,913

 

Retained earnings

 

48,304

 

45,409

 

Accumulated other comprehensive loss

 

(24,321

)

(20,015

)

 

 

158,250

 

155,312

 

Less treasury stock of 6,434 shares, at cost

 

(27,766

)

(27,766

)

Hill International, Inc. share of equity

 

130,484

 

127,546

 

Noncontrolling interests

 

12,012

 

13,557

 

Total equity

 

142,496

 

141,103

 

Total liabilities and stockholders’ equity

 

$

451,157

 

$

421,673

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Consulting fee revenue

 

$

130,181

 

$

103,565

 

$

381,164

 

$

306,831

 

Reimbursable expenses

 

17,013

 

16,322

 

50,567

 

48,297

 

Total revenue

 

147,194

 

119,887

 

431,731

 

355,128

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

75,734

 

58,459

 

223,789

 

176,722

 

Reimbursable expenses

 

17,013

 

16,322

 

50,567

 

48,297

 

Total direct expenses

 

92,747

 

74,781

 

274,356

 

225,019

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

54,447

 

45,106

 

157,375

 

130,109

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

46,195

 

40,016

 

131,884

 

124,559

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

8,252

 

5,090

 

25,491

 

5,550

 

 

 

 

 

 

 

 

 

 

 

Interest expense and related financing fees, net

 

5,489

 

4,757

 

17,257

 

12,748

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income taxes

 

2,763

 

333

 

8,234

 

(7,198

)

Income tax (benefit) expense

 

(179

)

(1,109

)

3,983

 

(2,621

)

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

2,942

 

1,442

 

4,251

 

(4,577

)

 

 

 

 

 

 

 

 

 

 

Less: net earnings - noncontrolling interests

 

386

 

138

 

1,356

 

1,179

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) attributable to Hill International, Inc.

 

$

2,556

 

$

1,304

 

$

2,895

 

$

(5,756

)

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per common share - Hill International, Inc.

 

$

0.06

 

$

0.03

 

$

0.07

 

$

(0.15

)

Basic weighted average common shares outstanding

 

39,351

 

38,226

 

38,949

 

38,446

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings (loss) per common share - Hill International, Inc.

 

$

0.06

 

$

0.03

 

$

0.07

 

$

(0.15

)

Diluted weighted average common shares outstanding

 

39,494

 

38,566

 

39,135

 

38,446

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Net earnings (loss)

 

$

2,942

 

$

1,442

 

$

4,251

 

$

(4,577

)

Foreign currency translation adjustment, net of tax

 

(1,063

)

556

 

(6,228

)

(1,424

)

Other, net

 

7

 

(236

)

115

 

(385

)

Comprehensive earnings (loss)

 

1,886

 

1,762

 

(1,862

)

(6,386

)

Comprehensive (loss) attributable to noncontrolling interest

 

(139

)

(69

)

(451

)

(44

)

Comprehensive earnings (loss) attributable to Hill International, Inc.

 

$

2,025

 

$

1,831

 

$

(1,411

)

$

(6,342

)

 

See accompanying notes to consolidated financial statements.

 

5



Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings (loss)

 

$

4,251

 

$

(4,577

)

Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

7,921

 

9,245

 

Provision for bad debts

 

2,743

 

1,721

 

Interest accretion

 

5,875

 

 

Deferred tax provision (benefit)

 

1,035

 

(6,557

)

Share based compensation

 

2,257

 

1,931

 

Changes in operating assets and liabilities, net of acquisition in 2013:

 

 

 

 

 

Restricted cash

 

986

 

(6,020

)

Accounts receivable

 

(21,594

)

(13,525

)

Accounts receivable - affiliate

 

16

 

563

 

Prepaid expenses and other current assets

 

(4,184

)

(1,309

)

Income taxes receivable

 

(608

)

(1,687

)

Retainage receivable

 

(184

)

741

 

Other assets

 

345

 

2,509

 

Accounts payable and accrued expenses

 

1,179

 

13,962

 

Income taxes payable

 

(2,475

)

(629

)

Deferred revenue

 

12,177

 

262

 

Other current liabilities

 

3,154

 

(6

)

Retainage payable

 

9

 

(1,573

)

Other liabilities

 

(4,018

)

(571

)

Net cash provided by (used in) operating activities

 

8,885

 

(5,520

)

Cash flows from investing activities:

 

 

 

 

 

Cash received from acquisition

 

727

 

 

Distribution from affiliate

 

 

130

 

Contribution to affiliate

 

(8

)

 

Sale of investment

 

 

3,149

 

Payments for purchase of property and equipment

 

(2,144

)

(1,806

)

Payment of liability for additional interest in Gerens Hill

 

(9,325

)

 

Net cash (used in) provided by investing activities

 

(10,750

)

1,473

 

Cash flows from financing activities:

 

 

 

 

 

Due to bank

 

(21

)

(1,197

)

Proceeds from notes payable

 

 

3,697

 

Payment on Engineering S.A. note payable

 

(5,095

)

 

Payment on notes payable

 

(148

)

(5,790

)

Dividends paid to noncontrolling interest

 

 

(1,378

)

Net borrowings on revolving loans

 

22,279

 

5,781

 

Proceeds from stock issued under employee stock purchase plan

 

53

 

70

 

Proceeds from exercise of stock options

 

20

 

24

 

Net cash provided by financing activities

 

17,088

 

1,207

 

Effect of exchange rate changes on cash

 

(5,300

)

(290

)

Net increase (decrease) in cash and cash equivalents

 

9,923

 

(3,130

)

Cash and cash equivalents — beginning of period

 

16,716

 

17,924

 

Cash and cash equivalents — end of period

 

$

26,639

 

$

14,794

 

 

See accompanying notes to consolidated financial statements.

 

6



Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 1 - The Company

 

Hill International, Inc. (“Hill” or the “Company”) is a professional services firm headquartered in Marlton, New Jersey that provides project management and construction claims services to clients worldwide.  Hill’s clients include the U.S. federal government, U.S. state and local governments, foreign governments and the private sector.  The Company is organized into two key operating divisions: the Project Management Group and the Construction Claims Group.

 

Note 2 — Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements.  In the opinion of management, these statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the consolidated financial statements.

 

The consolidated financial statements include the accounts of Hill and its wholly- and majority-owned subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  The interim operating results are not necessarily indicative of the results for a full year.

 

Note 3 — Acquisitions

 

Binnington Copeland & Associates

 

On May 30, 2013 (the “Closing Date”), Hill International N.V., the Company’s wholly-owned subsidiary, acquired all of the outstanding common stock of Binnington Copeland & Associates (Pty.) Ltd. and BCA Training (Pty.) Ltd. (together “BCA”).  BCA, with 34 professionals, has offices in Johannesburg and Cape Town, South Africa.  The acquisition provides the Company’s claims business access to Africa’s large infrastructure and mining projects and allows for expansion into the rest of sub-Saharan Africa.  Consideration consisted of $2,000,000 plus a potential earn out, both payable in shares of the Company’s common stock.  The purchase price is payable as follows: $1,072,400 (the “Closing Date Payment”) on the Closing Date, $927,600 (the “Second Tranche Payment”) on July 31, 2013 and an earn-out (the “Third Tranche Payment”) to be determined in the third quarter of 2014.  The Company issued 379,655 shares of its common stock in satisfaction of the Closing Date Payment; the number of shares was determined by dividing the Closing Date Payment by the average closing price of our common stock for the thirty trading days ending on May 17, 2013.  On July 31, 2013, the Company issued 331,444 shares of its common stock in satisfaction of the Second Tranche Payment.  The number of shares was determined by dividing the Second Tranche Payment by the average closing price of our common stock for the thirty trading days ending on July 19, 2013.  The shares issuable in satisfaction of the Third Tranche Payment will be determined by dividing the Third Tranche Payment by the average closing price of our common stock for the thirty trading days ending on July 21, 2014.  The actual amount of the Third Tranche Payment will be determined by comparing the average net profit before taxes for the two-year periods ending July 31, 2014 to the net profit before taxes for the year ended July 31, 2012, and multiplying the excess, if any, by 2.205.  The Third Tranche Payment is estimated to be approximately $902,000.  The Company reflected the liability for the Third Tranche Payment in other current liabilities in the consolidated balance sheet at September 30, 2013.  The Company acquired intangible assets and goodwill amounting to 13,143,000 South African Rand (ZAR) (approximately $1,312,000 on the acquisition date) and ZAR 12,872,500 ($1,284,000), respectively.  The acquired intangible assets have a weighted average life of 8.2

 

7



Table of Contents

 

years.  The acquired intangible assets consist of a client relationship intangible of ZAR 10,546,000 ($1,053,000) with a ten-year life, a contract intangible of ZAR 1,863,000 ($186,000) with an 8-month life and a trade name intangible of ZAR 734,000 ($73,000) with a two-year life.  Goodwill, which is not deductible for income tax purposes, has been allocated to the Construction Claims operating segment.  The results of operations of BCA are not material to the Company’s consolidated results of operations.

 

Gerens Hill International, S.A.

 

In April 2013, minority shareholders, who held the remaining 6.8% of Gerens Hill, exercised their put options.  The Company accrued the liability of approximately €1,915,000 (approximately $2,526,000) which is included in other current liabilities in the consolidated balance sheet at September 30, 2013. In connection with this transaction, the Company reduced noncontrolling interests by €829,000 (approximately $1,094,000), has increased goodwill and deferred tax liabilities by €326,000 each (approximately $430,000) and has increased intangible assets by €1,086,000 (approximately $1,432,000).  The aggregate consideration is expected to be paid in December 2013.

 

Note 4 — Accounts Receivable

 

The components of accounts receivable are as follows (in thousands):

 

 

 

September 30, 2013

 

December 31, 2012

 

Billed

 

$

205,238

 

$

181,075

 

Retainage, current portion

 

7,282

 

5,022

 

Unbilled

 

32,774

 

35,347

 

 

 

245,294

 

221,444

 

Allowance for doubtful accounts

 

(9,280

)

(10,268

)

 

 

$

236,014

 

$

211,176

 

 

During the past several months, accounts receivable related to work performed by Hill prior to March 2011 pursuant to contracts with the Libyan government were reduced by approximately $3,100,000.  The reduction consisted of a cash payment by the Libyan Organization for the Development of Administrative Centres (“ODAC”) of approximately 3,000,000 Libyan dinars (“LYD”) ($2,400,000) that was made directly to Hill and a cash payment of approximately LYD 800,000 ($700,000) that was made by ODAC to Libyan tax authorities on Hill’s behalf.  At September 30, 2013, the remaining accounts receivable outstanding related to Hill’s work in Libya amounted to approximately $57,000,000.

 

The LYD 3,000,000 cash payment made directly to Hill is not freely convertible into other currencies.  As a result, this cash remains in Hill’s Libyan bank account.  There is at present no agreement, understanding or timetable for further payments of Hill’s accounts receivable from ODAC or a return to work on Hill’s existing contracts.  However, management believes that these payments were made in good faith and are a positive indication that ODAC intends to satisfy its obligations to Hill.  However, the Company cannot predict with certainty when, or if, the remaining accounts receivable will be paid by the Libyan authorities or when work will resume there.  In the event that the Company does not realize any further payments, there could be a significant adverse impact on its consolidated results of operations and consolidated financial position.

 

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Table of Contents

 

Note 5 — Intangible Assets

 

The following table summarizes the Company’s acquired intangible assets (in thousands):

 

 

 

September 30, 2013

 

December 31, 2012

 

 

 

Gross

 

 

 

Gross

 

 

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Accumulated

 

 

 

Amount

 

Amortization

 

Amount

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

$

37,019

 

$

17,033

 

$

36,506

 

$

14,175

 

Acquired contract rights

 

10,946

 

8,216

 

10,449

 

6,931

 

Trade names

 

3,248

 

823

 

3,042

 

643

 

Total

 

$

51,213

 

$

26,072

 

$

49,997

 

$

21,749

 

Intangible assets, net

 

$

25,141

 

 

 

$

28,248

 

 

 

 

Amortization expense related to intangible assets was as follows (in thousands):

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

2013

 

2012

 

2013

 

2012

 

$

1,723

 

$

1,835

 

$

4,957

 

$

5,947

 

 

The following table presents the estimated amortization expense based on our present intangible assets for the next five years (in thousands):

 

 

 

Estimated

 

 

 

amortization

 

Year ending December 31,

 

expense

 

 

 

 

 

2013 (remaining 3 months)

 

$

1,613

 

2014 

 

5,526

 

2015 

 

5,139

 

2016 

 

3,926

 

2017 

 

3,044

 

 

Note 6 — Goodwill

 

The Company performs its annual goodwill impairment testing, by reporting unit, in the third quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company performed its annual impairment test effective July 1, 2013 and noted no impairment for either of its reporting units. Based on a preliminary valuation, the fair value of the Project Management unit and the Construction Claims unit exceeded their carrying values by $55,966,000 and $7,905,000, respectively.

 

9



Table of Contents

 

The following table summarizes the changes in the Company’s carrying value of goodwill during 2013 (in thousands):

 

 

 

Project

 

Construction

 

 

 

 

 

Management

 

Claims

 

Total

 

Balance, December 31, 2012

 

$

57,231

 

$

26,776

 

$

84,007

 

Additions

 

430

 

1,284

 

1,714

 

Translation adjustments

 

(1,915

)

(694

)

(2,609

)

Balance, September 30, 2013

 

$

55,747

 

$

27,366

 

$

83,112

 

 

Note 7 — Accounts Payable and Accrued Expenses

 

Below are the components of accounts payable and accrued expenses (in thousands):

 

 

 

September 30, 2013

 

December 31, 2012

 

Accounts payable

 

$

29,700

 

$

24,486

 

Accrued payroll

 

35,484

 

33,750

 

Accrued subcontractor fees

 

6,760

 

8,253

 

Accrued agency fees

 

16,684

 

16,239

 

Accrued legal and professional fees

 

1,252

 

3,303

 

Other accrued expenses

 

4,617

 

4,275

 

 

 

 

 

 

 

 

 

$

94,497

 

$

90,306

 

 

Note 8 — Notes Payable and Long-Term Debt

 

Outstanding debt obligations are as follows (in thousands):

 

 

 

September 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

Term Loan (for more information, see below)

 

$

82,395

 

$

76,520

 

 

 

 

 

 

 

Revolving Credit loan payable under the Credit Agreement. The weighted average interest rate of all borrowings was 6.79% and 7.78% at September 30, 2013 and December 31, 2012 (for more information, see below)

 

37,900

 

22,300

 

 

 

 

 

 

 

Borrowings under revolving credit facilities with a consortium of banks in Spain (for more information, see below)

 

7,472

 

5,021

 

 

 

 

 

 

 

Payment due for the Engineering S.A. acquisition

 

 

5,327

 

 

 

 

 

 

 

Borrowings under unsecured credit facility with Caja Badajoz (for more information, see below)

 

2,024

 

 

 

 

 

 

 

 

Borrowings under revolving credit facility with the National Bank of Abu Dhabi (for more information, see below)

 

2,332

 

 

 

 

 

 

 

 

Other debt obligations

 

107

 

267

 

 

 

132,230

 

109,435

 

Less current maturities

 

20,583

 

21,769

 

Notes payable and long-term debt, net of current maturities

 

$

111,647

 

$

87,666

 

 

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Term Loan Agreement

 

The Company entered into a Term Loan Agreement on October 18, 2012, which was amended on May 23, 2013 (the “First Amendment”). The First Amendment contains identical provisions as those in the Fourth Amendment to Credit Agreement (see below).  Borrowings under the Term Loan Agreement are collateralized by a second lien on substantially all of the Company’s assets, including, without limitation, accounts receivable, equipment, securities, financial assets and the proceeds of the foregoing, as well as by a pledge of 65% of the outstanding capital stock of our wholly-owned subsidiary, Hill International N.V. and of certain of our other foreign subsidiaries.  The maturity date of the Term Loan is October 18, 2016.

 

The Company will pay interest on amounts outstanding from time to time under the Term Loan at a rate per annum equal to 7.50%, however, such rate may be increased to 9.50% per annum if fixed price contracts (as defined under the Term Loan Agreement) or certain accounts receivable of the Company and its subsidiaries exceed percentages specified in the Term Loan Agreement.

 

Also, contemporaneous with its entry into the Term Loan Agreement, the Company entered into a Fee Letter.  The Fee Letter requires the Company to pay to the Lenders an exit fee (the “Exit Fee”), which fee shall be earned in full on the Closing Date and due and payable on the date the Term Loan is paid in full (the “Exit Date”).  “Exit Fee” means the amount, if any, when paid to the Term Loan Lenders on the Exit Date, that will result in the internal annual rate of return to the Term Loan Lenders on the Exit Date being equal to, but no greater than, 20%; provided that in no event shall the Exit Fee Amount be less than $0 or greater than $11,790,000.  The IRR is to be calculated as the rate of return earned by the Term Loan Lenders on their initial investment in the Term Loan (to be calculated as the principal amount of the Term Loan less the Closing Fee of $25,000,000) through the Exit Date taking into account the payment by the Company to the Term Loan Lenders of all principal, interest and other payments to the Term Loan Lenders pursuant to the Term Loan Agreement.

 

At September 30, 2013, the Company was in compliance with all of the Term Loan covenants.

 

Revolving Credit Agreement

 

The Company entered into a Credit Agreement, dated June 30, 2009 (the “Credit Agreement”), with Bank of America, N.A., Capital One, N.A., The PrivateBank and Trust Company, PNC Bank N.A., and Bank of America, N.A., as Administrative Agent.  The Credit Agreement has been amended from time to time, most recently on May 23, 2013 when the Company entered into a Fourth Amendment to Credit Agreement pursuant to which, among other things, the lenders agreed to :  (a) permit the Company to enter into an agreement with Qatar National Bank for the issuance of letters of credit (“LCs”) not to exceed $17,000,000, (b) increase the limit on LCs available to the Company’s foreign subsidiaries who are not loan parties from $4,000,000 to $11,800,000 and (c) permit the Company to provide up to $20,000,000 as cash collateral for letters of credit and performance bonds.  The Company paid an amendment fee of $150,000 to the Agent and reimbursed the Agent for its out-of-pocket costs amounting to approximately $372,000.  These amounts are included in interest expense and related financing fees, net in the consolidated statements of operations for the nine-month period ended September 30, 2013.

 

The Credit Agreement requires the Company to comply with a consolidated leverage ratio, a consolidated fixed charge ratio and a senior leverage ratio.  The following table sets forth those requirements for the period ended September 30, 2013:

 

Consolidated Leverage Ratio

 

Consolidated Fixed Charge Ratio

 

Senior Leverage Ratio

 

Not to exceed 6.00 to 1.00

 

Not less 1.00 to 1.00

 

Not to exceed 2.25 to 1.00

 

 

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The following table presents the Company’s actual ratios at September 30, 2013:

 

Consolidated Leverage Ratio

 

Consolidated Fixed Charge Ratio

 

Senior Leverage Ratio

 

4.54 to 1.00

 

1.31 to 1.00

 

1.83 to 1.00

 

 

At September 30, 2013, the Company had $17,484,000 in outstanding letters of credit pursuant to the Credit Agreement and total remaining availability on such date was $9,616,000.

 

Other Debt Arrangements

 

The Company’s subsidiary, Gerens Hill, maintains a revolving credit facility with 12 banks in Spain providing for total borrowings, with interest at 6.50%, of up to €5,640,000 (approximately $7,611,000 and $7,460,000 at September 30, 2013 and December 31, 2012).  At September 30, 2013 and December 31, 2012, total borrowings outstanding were €5,537,000 and €3,796,000 (approximately $7,472,000 and $5,021,000, respectively).

 

Gerens Hill also maintains an unsecured credit facility with the Caja Badajoz bank in Spain for €1,500,000 (approximately $2,024,000 and $1,984,000) at September 30, 2013 and December 31, 2012, respectively.  The interest rate at September 30, 2013 is the three-month EURIBOR rate of 0.54% plus 3.00% (or 3.54%) but no less than 5.00%.  At September 30, 2013, total borrowings outstanding were €1,500,000 (approximately $2,024,000).  At December 31, 2012, there were no borrowings outstanding.

 

The Company maintains a credit facility with the National Bank of Abu Dhabi which provides for total borrowings of up to AED 11,500,000 (approximately $3,131,000 at both September 30, 2013 and December 31, 2012) collateralized by certain overseas receivables.  The interest rate is the one-month Emirates InterBank Offer Rate plus 3.00% (or 4.25% and 4.30%, at September 30, 2013 and December 31, 2012, respectively) but no less than 5.50%.  At September 30, 2013, total borrowings outstanding were AED 8,564,000 (approximately $2,332,000).  At December 31, 2012, there were no borrowings outstanding.  This facility is renewed on a month-to-month basis. The credit facility with the National Bank of Abu Dhabi also allows for up to AED 150,000,000 (approximately $40,844,000 at September 30, 2013) in letters of guarantee of which AED 115,987,000 (approximately $31,583,000) was utilized at September 30, 2013.

 

The Company also maintains a revolving credit facility with Egnatia Bank for up to €1,000,000 (approximately $1,351,000 at September 30, 2013), with interest of 1.23% plus Egnatia Bank’s prime rate of 5.00% (or 6.23%) at September 30, 2013, collateralized by certain assets of the Company.  There were no borrowings outstanding under this facility at September 30, 2013 and December 31, 2012.  The facility also allows for letters of guarantee up to €4,500,000 (approximately $6,080,000 at September 30, 2013), of which €1,745,000 (approximately $2,357,000 had been utilized at September 30, 2013.

 

Engineering S.A. maintains three unsecured revolving credit facilities with two banks in Brazil aggregating 2,900,000 Brazilian Reais (BRL) (approximately $1,288,000 at September 30, 2013), with a weighted average monthly interest rate of 2.64%.  There were no borrowings outstanding on any of these facilities at September 30, 2013 or December 31, 2012.

 

A revolving credit facility with Barclays Bank PLC for up to £550,000 (approximately $889,000 at September 30, 2013), with interest of 2.00% plus the Bank of England rate of 0.50% (or 2.50%) at September 30, 2013, collateralized by cross guarantees of several of the United Kingdom companies.  Aggregate of all debt owing to the bank will be, at all times, covered 3 times by the aggregate value of the UK accounts receivable less than 90 days old and excluding any receivables which are due from any associate, subsidiary or overseas client.  At September 30, 2013 and December 31, 2012, there were no borrowings outstanding.

 

At September 30, 2013, the Company had $4,466,000 of available borrowing capacity under its foreign credit agreements.

 

In connection with the 2011 acquisition of Engineering S.A., the Company incurred indebtedness to the sellers amounting to 17,200,000 BRL (approximately $10,376,000 at the date of acquisition) and discounted that amount using an interest rate of 4.72%, the Company’s weighted average interest rate at that time.  The Company paid the first installment

 

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Table of Contents

 

amounting to 6,624,000 BRL (approximately $3,508,000) on April 30, 2012 and paid the second installment amounting to 11,372,000 BRL (approximately $5,095,000) on July 23, 2013.

 

Note 9 — Supplemental Cash Flow Information

 

The following table provides additional cash flow information (in thousands):

 

 

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

Interest and related financing fees paid

 

$

10,346

 

$

8,670

 

Income taxes paid

 

$

6,901

 

$

3,947

 

Reduction of minority interest in connection with acquisition of remaining noncontrolling interest in Gerens Hill

 

$

1,094

 

$

 

Increase in intangible assets and goodwill in connection with acquisition of BCA and remaining noncontrolling interest in Gerens Hill

 

$

3,026

 

$

 

Common stock issued for acquisition of BCA

 

$

2,000

 

$

 

 

Note 10 — Earnings (Loss) per Share

 

Basic earnings (loss) per common share has been computed using the weighted-average number of shares of common stock outstanding during the period.  Diluted loss per common share incorporates the incremental shares issuable upon the assumed exercise of stock options, if dilutive.  Dilutive stock options increased the average common stock outstanding by 143,528 shares for the three-month period ended September 30, 2013 and by 185,809 shares for the nine-month period ended September 30, 2013. Options to purchase 5,492,975 shares and 5,366,904 shares were excluded from the calculation of diluted earnings (loss) per common share for the three- and nine-month periods ended September 30, 2013 because they were antidilutive.  Dilutive stock options increased the average common stock outstanding by 339,850 shares for the three-month period ended September 30, 2012. Stock options were excluded from the calculation of diluted loss per common share because their effect was antidilutive for the nine-month period ended September 30, 2012.  The total number of such shares excluded from diluted loss per common share was 3,421,201 shares for the nine-month period ended September 30, 2012.

 

Note 11 — Share-Based Compensation

 

At September 30, 2013, the Company had 6,650,156 options outstanding with a weighted average exercise price of $4.73.  During the nine-month period ended September 30, 2013, the Company granted 1,000,000 options which vest over a four-year period, have an exercise price of $4.04 and a contractual life of five years; 960,000 options which vest over a five-year period, have a weighted average exercise price of $3.66 and a contractual life of seven years; and 116,280 options which vested immediately, have an exercise price of $2.89 and a contractual life of five years.  The aggregate fair value of the options was $4,039,000 calculated using the Black-Scholes valuation model.  The weighted average assumptions used to calculate fair value were: expected life — 4.29 years; volatility — 71.7% and risk-free interest rate — 0.77%. During the first nine months of 2013, options for 8,000 shares with a weighted average exercise price of $2.45 were exercised, options for 11,000 shares with a weighted average exercise price of $4.97 were forfeited and options for 51,500 shares with a weighted average exercise price of $12.03 lapsed.

 

During the nine-month period ended September 30, 2013, the Company issued 51,905 shares of its common stock to its Non-Employee Directors.  The Company recognized compensation expense amounting to $150,000.

 

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Table of Contents

 

During the nine-month period ended September 30, 2013, employees purchased 23,823 common shares, for an aggregate purchase price of $53,000, pursuant to the Company’s 2008 Employee Stock Purchase Plan.

 

The Company recognized share-based compensation expense in selling, general and administrative expenses in the consolidated statement of operations totaling $674,000 and $493,000 for the three-month periods ended September 30, 2013 and 2012, respectively, and $2,257,000 and $1,931,000 for the nine-month periods ended September 30, 2013 and 2012, respectively.

 

Note 12 — Stockholders’ Equity

 

Under the Board-approved Stock Repurchase Program, the Company is authorized to purchase up to $60,000,000 of its common stock.  On August 5, 2013, the Board authorized an extension of the program to December 31, 2014. To date, the Company has purchased 5,834,369 shares of its common stock under this program for an aggregate purchase price of $24,438,000, or an average price of $4.19 per share.  Under the terms of its Credit Agreement (see Note 8), the Company may purchase up to an additional $2,000,000 as long as immediately before and after giving effect to the purchase, the Company shall have satisfied the Minimum Liquidity Requirement (that is, unrestricted cash and cash equivalents plus availability under the Credit Agreement aggregating $30,000,000) and no event of default shall have occurred and be continuing at the time.

 

The following table summarizes the changes in stockholders’ equity during the nine months ended September 30, 2013 (in thousands):

 

 

 

 

 

Hill International,

 

Noncontrolling

 

 

 

Total

 

Inc. stockholders

 

interests

 

Stockholders’ equity, December 31, 2012

 

$

141,103

 

$

127,546

 

$

13,557

 

Net earnings

 

4,251

 

2,895

 

1,356

 

Other comprehensive loss

 

(6,113

)

(4,306

)

(1,807

)

Comprehensive loss

 

(1,862

)

(1,411

)

(451

)

Additional paid in capital

 

4,349

 

4,349

 

 

Purchase of noncontrolling interest

 

(1,094

)

 

(1,094

)

Stockholders’ equity, September 30, 2013

 

$

142,496

 

$

130,484

 

$

12,012

 

 

Note 13 — Income Taxes

 

The reserve for uncertain tax positions amounted to $2,560,000 and $5,033,000 at September 30, 2013 and December 31, 2012, respectively, and is included in “Other Liabilities” in the consolidated balance sheets at those dates. During the three- and nine-month periods ended September 30, 2013, the reserve for uncertain tax positions was reduced by $2,473,000 based on management’s assessment that these items were effectively settled with the appropriate foreign tax authorities during the third quarter of 2013.

 

The Company’s policy is to record income tax related interest and penalties in income tax expense.  At September 30, 2013, potential interest and penalties related to uncertain tax positions amounting to $100,000 was included in the balance above.

 

The effective income tax rates for the three-month periods ended September 30, 2013 and 2012 were (6.5%) and (333.0%), respectively, and 48.4% and 36.4% for the nine-month periods ended September 30, 2013 and 2012, respectively.  The differences in the Company’s 2013 effective tax rates over the 2012 effective tax rates were primarily the result of not recording an income tax benefit related to the 2013 U.S. net operating loss which management believes the Company will not be able to utilize offset by the $2,473,000 reversal of the reserve for uncertain tax positions discussed above. The Company also recognized an income tax (benefit) expense resulting from adjustments to agree the prior year’s book amounts to the actual amounts per the tax returns totaling ($105,000) and ($195,000) for the three-

 

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Table of Contents

 

month periods ended September 30, 2013 and 2012, respectively, and $40,000 and ($195,000) for the nine-month periods ended September 30, 2013 and 2012, respectively.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management evaluates the need for valuation allowances on the deferred tax assets according to the provisions of ASC740, Income Taxes.  They consider both positive and negative evidence.  In making this determination, management assesses all of the evidence available at the time including recent earnings, internally-prepared income projects, and historical financial performance.  Based upon this evaluation, management believes that it is more likely than not that the Company will not be able to utilize its U.S. related deferred tax assets.  As a consequence, the Company recorded an additional valuation allowance reserve on its estimated U.S. deferred tax assets recorded in 2013.

 

Note 14 — Business Segment Information

 

The Company’s business segments reflect how executive management makes resource decisions and assesses its performance. The Company bases these decisions on the type of services provided (Project Management and Construction Claims) and secondarily by their geography (U.S./Canada, Latin America, Europe, the Middle East, Africa and Asia/Pacific).

 

The Project Management business segment provides extensive construction and project management services to construction owners worldwide. Such services include program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, and labor compliance services.

 

The Construction Claims business segment provides such services as claims consulting, management consulting, litigation support, expert witness testimony, cost/damages assessment, delay/disruption analysis, adjudication, lender advisory, risk management, forensic accounting, fraud investigation and project neutral services to clients worldwide.

 

The Company evaluates the performance of its segments primarily on operating profit before corporate overhead allocations and income taxes.

 

The following tables provide selected financial data for the Company’s reportable segments (dollars in thousands):

 

Consulting Fee Revenue (“CFR”)

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

99,583

 

76.5

%

$

77,194

 

74.5

%

Construction Claims

 

30,598

 

23.5

 

26,371

 

25.5

 

Total

 

$

130,181

 

100.0

%

$

103,565

 

100.0

%

 

Total Revenue:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

115,533

 

78.5

%

$

92,752

 

77.4

%

Construction Claims

 

31,661

 

21.5

 

27,135

 

22.6

 

Total

 

$

147,194

 

100.0

%

$

119,887

 

100.0

%

 

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Table of Contents

 

Operating Profit:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Project Management

 

$

11,290

 

$

8,012

 

Construction Claims

 

3,806

 

2,641

 

Corporate

 

(6,844

)

(5,563

)

Total

 

$

8,252

 

$

5,090

 

 

Depreciation and Amortization Expense:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Project Management

 

$

1,930

 

$

2,173

 

Construction Claims

 

741

 

688

 

Subtotal segments

 

2,671

 

2,861

 

Corporate

 

54

 

62

 

Total

 

$

2,725

 

$

2,923

 

 

Consulting Fee Revenue by Geographic Region:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

31,197

 

24.0

%

$

29,747

 

28.7

%

Latin America

 

11,329

 

8.7

 

11,302

 

10.9

 

Europe

 

18,211

 

14.0

 

20,710

 

20.0

 

Middle East

 

56,588

 

43.5

 

34,119

 

32.9

 

Africa

 

6,735

 

5.2

 

3,755

 

3.7

 

Asia/Pacific

 

6,121

 

4.6

 

3,932

 

3.8

 

Total

 

$

130,181

 

100.0

%

$

103,565

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

30,334

 

23.3

%

$

29,091

 

28.1

%

Non-U.S.

 

99,847

 

76.7

 

74,474

 

71.9

 

Total

 

$

130,181

 

100.0

%

$

103,565

 

100.0

%

 

For the three-month period ended September 30, 2013, consulting fee revenue for the United Arab Emirates amounted to $16,017,000 representing 12.3% of the total and Oman’s consulting fee revenue amounted to $14,667,000 representing 11.3% of the total.  No other country other than the United States accounted for over 10% of consolidated consulting fee revenue.

 

For the three-month period ended September 30, 2012, consulting fee revenue for the United Arab Emirates amounted to $14,888,000 representing 14.4% of the total.  No other country except for the United States accounted for over 10% of consolidated consulting fee revenue.

 

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Table of Contents

 

Total Revenue by Geographic Region:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

44,204

 

30.0

%

$

42,687

 

35.6

%

Latin America

 

11,429

 

7.8

 

11,341

 

9.5

 

Europe

 

19,556

 

13.3

 

22,146

 

18.5

 

Middle East

 

57,804

 

39.3

 

35,487

 

29.6

 

Africa

 

7,637

 

5.2

 

4,252

 

3.5

 

Asia/Pacific

 

6,564

 

4.4

 

3,974

 

3.3

 

Total

 

$

147,194

 

100.0

%

$

119,887

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

43,327

 

29.4

%

$

42,003

 

35.0

%

Non-U.S.

 

103,867

 

70.6

 

77,884

 

65.0

 

Total

 

$

147,194

 

100.0

%

$

119,887

 

100.0

%

 

For the quarter ended September 30, 2013, total revenue for the United Arab Emirates amounted to $16,182,000 representing 11.0% of the total and Oman’s total revenue amounted to $14,697,000 representing 10.0% of the total.  No other country except for the United States accounted for over 10% of consolidated total revenue.

 

For the quarter ended September 30, 2012, total revenue for the United Arab Emirates amounted to $15,281,000, representing 12.7% of the total.  No other country other than the United States accounted for over 10% of consolidated total revenue.

 

Consulting Fee Revenue By Client Type:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

3,722

 

2.9

%

$

3,234

 

3.1

%

U.S. state, regional and local governments

 

18,539

 

14.2

 

16,867

 

16.3

 

Foreign governments

 

47,516

 

36.5

 

24,843

 

24.0

 

Private sector

 

60,404

 

46.4

 

58,621

 

56.6

 

Total

 

$

130,181

 

100.0

%

$

103,565

 

100.0

%

 

Total Revenue By Client Type:

 

 

 

Three Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

4,253

 

2.9

%

$

3,615

 

3.0

%

U.S. state, regional and local governments

 

24,901

 

16.9

 

23,535

 

19.6

 

Foreign governments

 

49,501

 

33.6

 

26,644

 

22.2

 

Private sector

 

68,539

 

46.6

 

66,093

 

55.2

 

Total

 

$

147,194

 

100.0

%

$

119,887

 

100.0

%

 

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Table of Contents

 

Property, Plant and Equipment, Net by Geographic Location:

 

 

 

September 30, 2013

 

December 31, 2012

 

 

 

 

 

 

 

U.S./Canada

 

$

4,174

 

$

4,700

 

Latin America

 

1,320

 

1,278

 

Europe

 

1,928

 

2,334

 

Middle East

 

2,525

 

2,344

 

Africa

 

187

 

191

 

Asia/Pacific

 

551

 

421

 

Total

 

$

10,685

 

$

11,268

 

 

 

 

 

 

 

U.S.

 

$

4,174

 

$

4,697

 

Non-U.S.

 

6,511

 

6,571

 

Total

 

$

10,685

 

$

11,268

 

 

Consulting Fee Revenue (“CFR”)

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

293,560

 

77.0

%

$

227,510

 

74.1

%

Construction Claims

 

87,604

 

23.0

 

79,321

 

25.9

 

Total

 

$

381,164

 

100.0

%

$

306,831

 

100.0

%

 

Total Revenue

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

340,700

 

78.9

%

$

273,670

 

77.1

%

Construction Claims

 

91,031

 

21.1

 

81,458

 

22.9

 

Total

 

$

431,731

 

100.0

%

$

355,128

 

100.0

%

 

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Table of Contents

 

Operating Profit:

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Project Management

 

$

36,980

 

$

18,646

 

Construction Claims

 

9,629

 

6,345

 

Corporate

 

(21,118

)

(19,441

)

Total

 

$

25,491

 

$

5,550

 

 

Depreciation and Amortization Expense:

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Project Management

 

$

5,666

 

$

6,744

 

Construction Claims

 

2,082

 

2,303

 

Subtotal segments

 

7,748

 

9,047

 

Corporate

 

173

 

198

 

Total

 

$

7,921

 

$

9,245

 

 

Consulting Fee Revenue by Geographic Region:

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

92,472

 

24.3

%

$

88,811

 

28.9

%

Latin America

 

36,385

 

9.5

 

37,510

 

12.2

 

Europe

 

57,888

 

15.2

 

63,670

 

20.8

 

Middle East

 

161,065

 

42.3

 

95,475

 

31.1

 

Africa

 

16,165

 

4.2

 

9,827

 

3.2

 

Asia/Pacific

 

17,189

 

4.5

 

11,538

 

3.8

 

Total

 

$

381,164

 

100.0

%

$

306,831

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

89,792

 

23.6

%

$

86,528

 

28.2

%

Non-U.S.

 

291,372

 

76.4

 

220,303

 

71.8

 

Total

 

$

381,164

 

100.0

%

$

306,831

 

100.0

%

 

For the nine months ended September 30, 2013, consulting fee revenue for the United Arab Emirates amounted to $50,485,000 representing 13.2% of the total.  No other country except the United States accounted for over 10% of consolidated total revenue.

 

For the nine months ended September 30, 2012, consulting fee revenue for the United Arab Emirates amounted to $44,862,000 representing 14.6% of the total and Brazil’s consulting fee revenue amounted to $33,114,000 representing 10.8% of the total.  No other country except for the United States accounted for over 10% of the consolidated total revenue.

 

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Table of Contents

 

Total Revenue by Geographic Region:

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

131,430

 

30.4

%

$

127,495

 

35.9

%

Latin America

 

36,677

 

8.5

 

37,696

 

10.6

 

Europe

 

61,471

 

14.2

 

68,470

 

19.3

 

Middle East

 

165,492

 

38.3

 

98,764

 

27.8

 

Africa

 

18,733

 

4.3

 

11,113

 

3.1

 

Asia/Pacific

 

17,928

 

4.3

 

11,590

 

3.3

 

Total

 

$

431,731

 

100.0

%

$

355,128

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

128,652

 

29.8

%

$

125,134

 

35.2

%

Non-U.S.

 

303,079

 

70.2

 

229,994

 

64.8

 

Total

 

$

431,731

 

100.0

%

$

355,128

 

100.0

%

 

For the nine months ended September 30, 2013, total revenue for the United Arab Emirates amounted to $51,540,000 representing 11.9% of the total.  No other country except for the United States accounted for over 10% of consolidated consulting fee revenue.

 

For the nine months ended September 30, 2012, total revenue for the United Arab Emirates amounted to $45,939,000 representing 12.9% of the total.  No other country except for the United States accounted for over 10% of consolidated consulting fee revenue.

 

Consulting Fee Revenue By Client Type:

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

11,613

 

3.0

%

$

9,414

 

3.1

%

U.S. state, regional and local governments

 

53,360

 

14.0

 

46,809

 

15.3

 

Foreign governments

 

129,608

 

34.0

 

68,519

 

22.3

 

Private sector

 

186,583

 

49.0

 

182,089

 

59.3

 

Total

 

$

381,164

 

100.0

%

$

306,831

 

100.0

%

 

Total Revenue By Client Type:

 

 

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

13,436

 

3.1

%

$

11,332

 

3.2

%

U.S. state, regional and local governments

 

76,822

 

17.8

 

66,194

 

18.6

 

Foreign governments

 

135,426

 

31.4

 

73,395

 

20.7

 

Private sector

 

206,047

 

47.7

 

204,207

 

57.5

 

Total

 

$

431,731

 

100.0

%

$

355,128

 

100.0

%

 

Note 15 — Concentrations

 

The Company had one client that accounted for 10% of total revenue for the three-month period ended September 30, 2013 and no clients that accounted for 10% or more of total revenue for the three-month period ended September 30, 2012.  The Company had no clients that accounted for 10% or more of total revenue for the nine-month periods ended September 30, 2013 or 2012.

 

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The Company had one client that accounted for 11% of consulting fee revenue for the three-month period ended September 30, 2013 and no clients that accounted for 10% or more of consulting fee revenue for the three-month period ended September 30, 2012.  The Company had one client that accounted for 10% of consulting fee revenue for the nine-month period ended September 30, 2013 and no clients that accounted for 10% or more of consulting fee revenue for the nine-month periods ended September 30, 2012.

 

One client, located in Libya, accounted for 24% and 28% of accounts receivable at September 30, 2013 and December 31, 2012.

 

The Company has numerous contracts with U.S. federal government agencies that collectively accounted for 3% of total revenue during the three-month periods ended September 30, 2013 and 2012, and 3% of total revenue during each of the nine-month periods ended September 30, 2013 and 2012.

 

Note 16 — Commitments and Contingencies

 

General Litigation

 

From time to time, the Company is a defendant or plaintiff in various legal actions which arise in the normal course of business.  As such the Company is required to assess the likelihood of any adverse outcomes to these matters as well as potential ranges of probable losses.  A determination of the amount of the provision required for these commitments and contingencies, if any, which would be charged to earnings, is made after careful analysis of each matter.  The provision may change in the future due to new developments or changes in circumstances.  Changes in the provision could increase or decrease the Company’s earnings in the period the changes are made.  It is the opinion of management, after consultation with legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

 

Other

 

M.A. Angeliades, Inc. (“Plaintiff”) has filed a complaint with the Supreme Court of New York against the Company and the New York City Department of Design and Construction (“DCC”) regarding payment of approximately $8,771,000 for work performed as a subcontractor to the Company plus interest and other costs. The Company has accrued approximately $2,340,000, including interest of $448,000, based on invoices received from Plaintiff who has refused to provide invoices for the additional work that Plaintiff claims to have performed. Until such time as the Company obtains invoices for the additional work and is able to provide those invoices to DCC for reimbursement or there is a full resolution of the litigation, it has no intention of paying Plaintiff. The Company believes that its position is defensible, however, there can be no assurance that it will receive a favorable verdict should this case proceed to trial.

 

In April 2013, minority shareholders, who hold the remaining 6.8% of Gerens Hill, exercised their put options.  The Company intends to purchase their shares for approximately €1,915,000 (approximately $2,526,000).  See Note 3.

 

The Company is committed to issue shares of its common stock to the former shareholders of BCA in satisfaction of the Third Tranche Payment, the amount of which will be determined in mid-2014. See Note 3.

 

As of December 31, 2012, the Company had identified a potential employment tax liability related to certain foreign subsidiaries treatment of certain individuals as independent contractors rather than employees. On June 24, 2013, the Company received an indemnification from the selling shareholders for periods prior to 2013.  Accordingly, the Company has reversed the accrual established in 2012 and has reflected approximately $3,600,000 as a credit to selling, general and administrative expenses in the consolidated statement of operations for the nine-month period ended September 30, 2013.  In consideration for the indemnification, the Company reversed the 2013 first quarter write-down of the liability for the second installment obligation of approximately 1,950,000 BRL (approximately $873,000).  In addition, the Company believes, based upon certain professional advice, that it is remote that a future liability will be established for the potential employment taxes relating to certain foreign independent contractors and, therefore, has made no accrual for such potential liability.

 

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Table of Contents

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

We make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  We use forward-looking works such as “may,” “except,” “anticipate,” “contemplate,” “believe,” “estimate,” “intend,” and “continue” or similar words.  You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other “forward-looking” information.  However, there may be events in the future that we are not able to predict accurately or over which we have no control.  Examples or risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements include those described in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on March 18, 2013 (the “2012 Annual Report”).  You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  All forward-looking statements included herein attributable to use are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.  Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements.

 

References to “the Company,” “we,” “us,” and “our” refer to Hill International, Inc. and its subsidiaries.

 

Overview

 

We provide project management and construction claims services to clients worldwide, but primarily in the U.S./Canada, Latin America, Europe, the Middle East, Africa and Asia/Pacific.  Our clients include the United States and other national governments and their agencies, state and local governments and their agencies, and the private sector.  Hill is organized into two key operating segments: the Project Management Group and the Construction Claims Group.

 

We are one of the leading firms in the world in both the project management and construction claims consulting businesses.  We are a global company with approximately 4,000 employees operating from 100 offices in more than 30 countries.

 

The Project Management business segment provides extensive construction and project management services to construction owners worldwide.  Such services include, program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cost management, and labor compliance services.

 

The Construction Claims business segment provides such services as claims consulting, management consulting, litigation support, expert witness testimony, cost/damages assessment, delay/disruption analysis, adjudication, lender advisory, risk management, forensic accounting, fraud investigation and project neutral services.

 

Our revenue consists of two components: consulting fee revenue (“CFR”) and reimbursable expenses.  Reimbursable expenses are reflected in equal amounts in both total revenue and total direct expenses.  Because these pass-through revenue/costs are subject to significant fluctuation from year to year, we measure the performance of many of our key operating metrics as a percentage of CFR, as we believe that this is a better and more consistent measure of operating performance than total revenue.

 

We derive our revenues from fees for professional services.  As a service company we are labor intensive rather than capital intensive.  Our revenue is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding services to our clients and execute projects successfully.  Our income from operations is derived from our ability to generate revenue and collect cash under our contracts in excess of direct labor and other direct costs of executing the projects, subcontractors and other reimbursable costs and selling, general and administrative costs.

 

In addition, we believe there are high barriers to entry for new competitors, especially in the project management market.  We compete for business based on reputation and past experience, including client requirements for substantial similar projects and claims work.  We have developed significant long-standing relationships which bring us repeat business and

 

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Table of Contents

 

would be very difficult to replicate.  We have an excellent reputation for developing and rewarding employees, which allows us to attract and retain superior professionals.

 

During the past several months, accounts receivable related to work performed by Hill prior to March 2011 pursuant to contracts with the Libyan government were reduced by approximately $3,100,000.  The reduction consisted of a cash payment by the Libyan Organization for the Development of Administrative Centres (“ODAC”) of approximately 3,000,000 Libyan dinars (“LYD”) ($2,400,000) that was made directly to Hill and a cash payment of approximately LYD 800,000 ($700,000) that was made by ODAC to Libyan tax authorities on Hill’s behalf.  At September 30, 2013, the remaining accounts receivable outstanding related to Hill’s work in Libya amounted to approximately $57,000,000.

 

The LYD 3,000,000 cash payment made directly to Hill is not freely convertible into other currencies.  As a result, this cash remains in Hill’s Libyan bank account.  There is at present no agreement, understanding or timetable for further payments of Hill’s accounts receivable from ODAC or a return to work on Hill’s existing contracts. However, management believes that these payments were made in good faith and are a positive indication that ODAC intends to satisfy its obligations to Hill.  However, we cannot predict with certainty when, or if, our remaining accounts receivable will be paid by the Libyan authorities or when our work will resume there.  In the event that we do not realize any further payments, there could be a significant adverse impact on our consolidated results of operations and consolidated financial position.

 

Critical Accounting Policies

 

We operate through two segments: the Project Management Group and the Construction Claims Group. Reimbursable expenses are reflected in equal amounts in both total revenue and total direct expenses. Because these revenues/costs are subject to significant fluctuation from year to year, we measure the performance of many of our key operating metrics as a percentage of consulting fee revenue (“CFR”), as we believe that this is a better and more consistent measure of operating performance than total revenue.

 

Our interim financial statements were prepared in accordance with United States generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgment increases, such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions have not materially changed from those identified in the Company’s 2012 Annual Report.

 

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Table of Contents

 

Three Months Ended September 30, 2013 Compared to

Three Months Ended September 30, 2012

 

Results of Operations

 

Consulting Fee Revenue (“CFR”)

 

 

 

Three Months Ended September 30,

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Project Management

 

$

99,583

 

76.5

%

$

77,194

 

74.5

%

$

22,389

 

29.0

%

Construction Claims

 

30,598

 

23.5

 

26,371

 

25.5

 

4,227

 

16.0

 

Total

 

$

130,181

 

100.0

%

$

103,565

 

100.0

%

$

26,616

 

25.7

%

 

The increase in Hill’s CFR in the third quarter of 2013 over the third quarter of 2012 included a 1.3% increase due to the acquisition of BCA and organic growth of 24.4%.  The organic growth was primarily due to increased work in the Middle East.

 

The increase in Project Management CFR during the third quarter of 2013 consisted of a $20,642,000 increase in foreign projects and an increase of $1,747,000 in domestic projects.  The increase in foreign Project Management CFR included increases of $13,992,000 in Oman, $3,077,000 in Qatar and $1,638,000 in Afghanistan, where several new projects started recently.  The increase in domestic Project Management CFR was due primarily to increases in our Mid-Atlantic and Northeast regions.

 

During the third quarter of 2013, the increase in Hill’s Construction Claims CFR was primarily due to increases of $1,367,000 in South Africa from the acquisition of BCA and $1,166,000 in the Middle East.

 

Reimbursable Expenses

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Project Management

 

$

15,950

 

93.8

%

$

15,558

 

95.3

%

$

392

 

2.5

%

Construction Claims

 

1,063

 

6.2

 

764

 

4.7

 

299

 

39.1

 

Total

 

$

17,013

 

100.0

%

$

16,322

 

100.0

%

$

691

 

4.2

%

 

Reimbursable expenses consist of amounts paid to subcontractors and other third parties and travel and other job-related expenses that are contractually reimbursable from clients.  These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statements of operations.

 

The increase in Project Management reimbursable expenses was due primarily to increased use of subcontractors in New York, Egypt and Asia/Pacific.

 

The increase in Construction Claims reimbursable expenses was primarily due to increased job related travel expenses in the United Kingdom and Asia/Pacific.

 

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Table of Contents

 

Cost of Services

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

% of 
CFR

 

 

 

 

 

% of 
CFR

 

 

 

 

 

Project Management

 

$

62,246

 

82.2

%

62.5

%

$

46,789

 

80.0

%

60.6

%

$

15,457

 

33.0

%

Construction Claims

 

13,488

 

17.8

 

44.1

 

11,670

 

20.0

 

44.3

 

1,818

 

15.6

 

Total

 

$

75,734

 

100.0

%

58.2

%

$

58,459

 

100.0

%

56.4

%

$

17,275

 

29.6

%

 

Cost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job-related travel and out-of-pocket expenses.

 

The increase in Project Management cost of services is primarily due to increases in the Middle East in support of increased work in Oman, Qatar, Saudi Arabia and the United Arab Emirates.

 

The increase in the cost of services for Construction Claims was due primarily to increases in direct cost in the Middle East, Asia/Pacific and South Africa in support of the increased work.

 

Gross Profit

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

% of 
CFR

 

 

 

 

 

% of 
CFR

 

 

 

 

 

Project Management

 

$

37,337

 

68.6

%

37.5

%

$

30,405

 

67.4

%

39.4

%

$

6,932

 

22.8

%

Construction Claims

 

17,110

 

31.4

 

55.9

 

14,701

 

32.6

 

55.7

 

2,409

 

16.4

 

Total

 

$

54,447

 

100.0

%

41.8

%

$

45,106

 

100.0

%

43.6

%

$

9,341

 

20.7

%

 

The increase in Project Management gross profit included an increase of $6,326,000 from international operations including increases of $7,787,000 from the Middle East, primarily Oman, Qatar, Saudi Arabia, Iraq and Afghanistan.  This was partially offset by decreases in Brazil and Spain.

 

The increase in Construction Claims gross profit was driven by increases in the Middle East, Asia/Pacific and South Africa.

 

Gross profit percentages for the Project Management group decreased slightly from 39.4% in 2012 to 37.5% in 2013 due to lower margins attained in Oman, Brazil, Spain and Egypt, partially offset by increases in Qatar, Iraq and Afghanistan.

 

Selling, General and Administrative (“SG&A”) Expenses

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

% of

 

 

 

% of

 

 

 

 

 

 

 

 

 

CFR

 

 

 

CFR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A Expenses

 

$

46,195

 

35.5

%

$

40,016

 

38.6

%

$

6,179

 

15.4

%

 

As a percentage of CFR, SG&A expense decreased to 35.5% in 2013 from 38.6% in 2012.  The significant components of the increase in the amount of SG&A are as follows:

 

·                  An increase in unapplied labor of $2,201,000 due primarily to increases in staff required for new work in the Middle East.  Unapplied labor, which increased 18.0% over the prior year compared to a 25.7% increase in CFR,

 

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Table of Contents

 

represents the labor costs of operating staff for non-billable tasks.  This represents improved utilization of billable staff over the prior year;

·                  An increase of $1,876,000 in indirect labor in support of increased revenue including $554,000 in staff termination costs primarily in Spain where several projects ended;

·                  An increase of $575,000 in professional fees due to statutory, audit and tax filings for increased international operations;

·                  An increase of $552,000 for additional bad debt reserves primarily in the domestic Project Management Group;

·                  An increase in administrative travel cost of $385,000 in support of expanded international operations.

 

Operating Profit

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

% of 
CFR

 

 

 

% of 
CFR

 

 

 

 

 

Project Management

 

$

11,290

 

11.3

%

$

8,012

 

10.4

%

$

3,278

 

40.9

%

Construction Claims

 

3,806

 

12.4

 

2,641

 

10.0

 

1,165

 

44.1

 

Corporate

 

(6,844

)

 

 

(5,563

)

 

 

(1,281

)

23.0

 

Total

 

$

8,252

 

6.3

%

$

5,090

 

4.9

%

$

3,162

 

62.1

%

 

The increase in Project Management operating profit included an increase of $5,708,000 in the Middle East, primarily from Oman, Qatar, Iraq and Afghanistan, partially offset by decreases in Spain and the United States.

 

The increase in Construction Claims operating profit was primarily due to increases of $807,000 in Asia/Pacific due to increased work in Hong Kong and Australia and $542,000 in South Africa from the acquisition of BCA.

 

Corporate expenses increased $1,281,000 including indirect labor, computer cost and professional fees in support of the growth in revenue.

 

Interest Expense and Related Financing Fees, net

 

Net interest and related financing fees increased $732,000 to $5,489,000 in the third quarter of 2013 as compared with $4,757,000 in the third quarter of 2012, primarily due to higher levels of debt outstanding and higher interest rates.  Included in interest expense for the third quarter of 2013 is a non-cash charge of $2,029,000 attributable to the accretion on the term loan.

 

Income Taxes

 

For the three-month periods ended September 30, 2013 and 2012, the Company recognized an income tax benefit of ($179,000) and ($1,109,000), respectively.  The income tax benefit in 2013 was related to a $2,473,000 reversal of the reserve for uncertain tax positions based on management’s assessment that these items were effectively settled with the appropriate foreign tax authorities during the third quarter of 2013, no income tax benefit related to the estimated 2013 U.S. net operating loss, which management believes the Company will not be able to utilize, partially offset by income taxes on the income generated from foreign operations.  The income tax benefit in 2012 is primarily related to the U.S. net operating loss generated during that quarter partially offset by taxes on the income from foreign operations.  The Company’s income tax benefit for the three-month periods ended September 30, 2013 and 2012 included tax benefits of $105,000 and $195,000, respectively, resulting from adjustments to agree the prior year book amount to the actual amounts per the tax return.

 

The effective income tax rates for the three-month periods ended September 30, 2013 and 2012, were (6.5%) and (333.0%), respectively.  The difference in the Company’s effective tax rate was primarily a result of not recording an income tax benefit related to the 2013 U.S. net operating loss.

 

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Table of Contents

 

Net Earnings Attributable to Hill International, Inc.

 

Net earnings attributable to Hill International, Inc. for the three months ended September 30, 2013 were $2,556,000 or $0.06 per diluted common share based on 39,494,000 diluted common shares outstanding, as compared to net earnings for the three months ended September 30, 2012 of $1,304,000 or $0.03 per diluted common share based upon 38,566,000 diluted common shares outstanding.  The primary reasons for the change are a higher gross profit and reduced SG&A expenses offset by higher interest expenses and the loss of an income tax benefit related to U.S. net operating losses.

 

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Table of Contents

 

Nine Months Ended September 30, 2013 Compared to

Nine Months Ended September 30, 2012

 

Results of Operations

 

Consulting Fee Revenue (“CFR”)

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Project Management

 

$

293,560

 

77.0

%

$

227,510

 

74.1

%

$

66,050

 

29.0

%

Construction Claims

 

87,604

 

23.0

 

79,321

 

25.9

 

8,283

 

10.4

 

Total

 

$

381,164

 

100.0

%

$

306,831

 

100.0

%

$

74,333

 

24.2

%

 

The increase in Hill’s CFR was substantially all organic and was primarily due to increased work in the Middle East.

 

During the first nine months of 2013, Hill’s Project Management CFR consisted of a $61,845,000 increase in foreign projects and an increase of $4,206,000 in domestic projects.  The increase in foreign Project Management CFR included increases of $34,938,000 in Oman, $9,732,000 in Qatar, $7,014,000 in Saudi Arabia and $4,129,000 in the United Arab Emirates where several new projects started recently.  The increase in domestic Project Management CFR was due primarily to increases in our Northeast and Mid-Atlantic regions.

 

During the first nine months of 2013, the increase in Hill’s Construction Claims CFR was primarily due to increases in the Middle East, Asia/Pacific and South Africa, partially offset by a decrease in the United Kingdom.

 

Reimbursable Expenses

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

Project Management

 

$

47,140

 

93.2

%

$

46,160

 

95.6

%

$

980

 

2.1

%

Construction Claims

 

3,427

 

6.8

 

2,137

 

4.4

 

1,290

 

60.4

 

Total

 

$

50,567

 

100.0

%

$

48,297

 

100.0

%

$

2,270

 

4.7

%

 

Reimbursable expenses consist of amounts paid to subcontractors and other third parties, and travel and other job-related expenses that are contractually reimbursable from clients.  These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statements of operations.

 

The increase in Project Management reimbursable expenses was due primarily to increased use of subcontractors in the Mid-Atlantic region, Western region and Egypt, partially offset by a decrease in the Northeast region.

 

The increase in Construction Claims reimbursable expenses was primarily due to increases in the Middle East and Asia/Pacific.

 

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Table of Contents

 

Cost of Services

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

% of 
CFR

 

 

 

 

 

% of 
CFR

 

 

 

 

 

Project Management

 

$

185,108

 

82.7

%

63.1

%

$

141,262

 

79.9

%

62.1

%

$

43,846

 

31.0

%

Construction Claims

 

38,681

 

17.3

 

44.2

 

35,460

 

20.1

 

44.7

 

3,221

 

9.1

 

Total

 

$

223,789

 

100.0

%

58.7

%

$

176,722

 

100.0

%

57.6

%

$

47,067

 

26.6

%

 

Cost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job-related travel and out-of-pocket expenses.

 

The increase in Project Management cost of services is primarily due to increases in the Middle East in support of increased work in Oman, Qatar, Saudi Arabia and the United Arab Emirates.

 

The increase in the cost of services for Construction Claims was due primarily to increases in direct cost in the Middle East and Asia/Pacific in support of increased work, partially offset by a decrease in the United Kingdom.

 

Gross Profit

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

% of 
CFR

 

 

 

 

 

% of 
CFR

 

 

 

 

 

Project Management

 

$

108,452

 

68.9

%

36.9

%

$

86,248

 

66.3

%

37.9

%

$

22,204

 

25.7

%

Construction Claims

 

48,923

 

31.1

 

55.8

 

43,861

 

33.7

 

55.3

 

5,062

 

11.5

 

Total

 

$

157,375

 

100.0

%

41.3

%

$

130,109

 

100.0

%

42.4

%

$

27,266

 

21.0

%

 

The increase in Project Management gross profit included an increase of $19,833,000 from international operations primarily due to increases from the Middle East, principally Oman, Qatar, Saudi Arabia and Iraq.

 

The increase in Construction Claims gross profit was driven by increases in the Middle East, Asia/Pacific and South Africa, partially offset by a decrease in the United Kingdom.

 

The overall gross profit percentage declined slightly due to an increase in the mix of work towards the Project Management group which generally has lower gross margin percentages than the Construction Claims group.

 

Selling, General and Administrative (“SG&A”) Expenses

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

 

 

 

 

% of

 

 

 

% of

 

 

 

 

 

 

 

 

 

CFR

 

 

 

CFR

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SG&A Expenses

 

$

131,884

 

34.6

%

$

124,559

 

40.6

%

$

7,325

 

5.9

%

 

As a percentage of CFR, SG&A expense decreased to 34.6% in 2013 compared to 40.6 % in 2012.

 

The significant components of the change in the amount of SG&A are as follows:

 

·                  An increase of $4,280,000 in unapplied labor primarily in the Middle East due to an increase in staff required for the new work.  Unapplied labor, which increased 11.7% over the prior year compared to a 24.2% increase in

 

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CFR, represents the labor costs of operating staff for non-billable tasks.  This represents improved utilization of billable staff over the prior year;

·                  An increase of $3,761,000 in indirect labor including $1,819,000 in staff termination costs primarily in Spain and Brazil where staff was reduced as several projects ended;

·                  An increase in administrative travel costs of $845,000 in support of expanded international operations;

·                  An increase of $1,022,000 in bad debt expense for reserves placed primarily in the domestic Project Management Group;

·                  An increase of $895,000 in professional fees due to statutory, audit and tax filings for increased international operations;

·                  A decrease of $3,683,000 for the reversal of a 2012 reserve for potential employment tax liabilities for a foreign subsidiary which has now been indemnified by the former majority shareholders of the subsidiary; and

·                  A decrease of $990,000 in amortization expense due to the full amortization of the shorter-lived intangible assets of companies we acquired over the last several years.

 

Operating Profit

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2013

 

2012

 

Change

 

 

 

 

 

 

 

(dollars in thousands)

 

 

 

 

 

(in thousands)

 

 

 

% of 
CFR

 

 

 

% of 
CFR

 

 

 

 

 

Project Management

 

$

36,980

 

12.6

%

$

18,646

 

8.2

%

$

18,334

 

98.3

%

Construction Claims

 

9,629

 

11.0

 

6,345

 

8.0

 

3,284

 

51.8

 

Corporate

 

(21,118

)

 

 

(19,441

)

 

 

(1,677

)

8.6

 

Total

 

$

25,491

 

6.7

%

$

5,550

 

1.8

%

$

19,941

 

N.M.

 

 

The increase in Project Management operating profit included an increase of $18,347,000 in the Middle East, primarily Oman, Qatar, Saudi Arabia, Iraq, Afghanistan and the United Arab Emirates and an increase of $3,708,000 in Brazil primarily due to the elimination of the 2012 potential employment tax liability, partially offset by a decrease of $2,973,000 in Spain.

 

The increase in Construction Claims operating profit was primarily due to increases of $2,385,000 in the Middle East, $1,829,000 in Asia/Pacific and $568,000 in South Africa, partially offset by a decrease of $1,673,000 in the United Kingdom.

 

Corporate expenses were held to an increase of 8.6% compared to the CFR increase of 24.2%.  Increases included indirect labor, stock compensation, travel cost and payroll service in support of expanded operations overseas.

 

Interest Expense and Related Financing Fees, net

 

This item increased $4,509,000 to $17,257,000 in the nine months ended September 30, 2013 compared to $12,748,000 in the nine months ended September 30, 2012 primarily due to higher levels of debt outstanding and higher interest rates.  Included in interest expense for the first nine months of 2013 is a non-cash charge of $5,875,000 attributable to the accretion on the Term Loan and $522,000 of fees related to the Fourth Amendment to the Credit Agreement.

 

Income Taxes

 

For the nine-month periods ended September 30, 2013 and 2012, the Company recognized an income tax expense (benefit) of $3,983,000 and ($2,621,000), respectively.  The income tax expense in 2013 was related to the taxes on income generated from foreign operations, no income tax benefit related to the 2013 U.S. net operating loss, which management believes the Company will not be able to utilize, offset by $2,473,000 reversal of the reserve for uncertain tax positions based on management’s assessment that these items were effectively settled with the appropriate foreign tax authorities during the third quarter of 2013.  The income tax benefit in 2012 is primarily related to an income tax benefit for the U.S. net operating loss generated during that quarter offset by taxes on income from foreign operations.  The Company’s income tax expense (benefit) for the nine-month periods ended

 

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Table of Contents

 

September 30, 2013 and 2012 included tax expense (benefits) of $40,000 and ($195,000), respectively, resulting from adjustments to agree the prior year book amounts to the actual amounts per the tax return.

 

The effective income tax rates for the nine-month periods ended September 30, 2013 and 2012 were 48.4% and 33.7%, respectively.  The difference in the Company’s effective tax rate was primarily a result of not recording an income tax benefit related to the current year U.S. net operating loss estimated for 2013.

 

Net Earnings (Loss) Attributable to Hill International, Inc.

 

Net earnings attributable to Hill International, Inc. for the nine-month period ended September 30, 2013 were $2,895,000, or $0.07 per diluted common share based upon 39,135,000 diluted common shares outstanding, as compared to a net loss for the nine-month period ended September 30, 2012 of ($5,756,000), or ($0.15) per diluted common share based upon 38,446,000 diluted common shares outstanding.

 

Non-GAAP Financial Measures

 

Regulation G, conditions for use of Non-Generally Accepted Accounting Principles (“Non-GAAP”) financial measures, and other SEC regulations define and prescribe the conditions for use of certain Non-GAAP financial information.  Generally, a Non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.  We believe earnings before interest, taxes, depreciation and amortization (“EBITDA”), in addition to operating profit, net earnings and other GAAP measures, is a useful indicator of our financial and operating performance and our ability to generate cash flows from operations that are available for taxes and capital expenditures.  This measure, however, should be considered in addition to, and not as a substitute or superior to, operating profit, cash flows, or other measures of financial performance prepared in accordance with GAAP.  The following table is a reconciliation of EBITDA to net earnings (loss), the most directly comparable GAAP measure, in accordance with SEC Regulation S-K for the three-and nine- month periods ended September 30, 2013 and 2012 (in thousands):

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) attributable to Hill International, Inc.

 

$

2,556

 

$

1,304

 

$

2,895

 

$

(5,756

)

Interest expense, net

 

5,489

 

4,757

 

17,257

 

12,748

 

Income tax expense (benefit)

 

(179

)

(1,109

)

3,983

 

(2,621

)

Depreciation and amortization

 

2,725

 

2,923

 

7,921

 

9,245

 

EBITDA

 

$

10,591

 

$

7,875

 

$

32,056

 

$

13,616

 

 

Liquidity and Capital Resources

 

As a result of the worldwide financial situation in recent years as well as the political unrest in Libya, we have had to rely more heavily on borrowings under our various credit facilities to provide funding for our operations.  On October 18, 2012, we entered into a Third Amendment to our Credit Agreement and entered into a Second Lien Term Loan with a new lender.  The new loan provided us with gross proceeds of $75,000,000, before fees and other expenses of approximately $3,500,000, which was used to pay down approximately $68,000,000 of the outstanding balance under our Credit Agreement.  See Note 8 to our consolidated financial statements for a description of our credit facilities and Term Loan.  At September 30, 2013, our primary sources of liquidity consisted of $26,639,000 of cash and cash equivalents, of which $1,432,000 was on deposit in the U.S. and $25,207,000 was on deposit in foreign locations, and $14,082,000 of available borrowing capacity under our various credit facilities.  As a result, we believe that we have sufficient liquidity to support the reasonably anticipated cash needs of our operations over the next year.  Significant unforeseen events, such as termination or cancellation of major contracts, could adversely affect our liquidity and results of operations.  If market opportunities exist, we may choose to undertake financing actions to further enhance our liquidity, which could include

 

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Table of Contents

 

obtaining new bank debt or raising funds through capital market transactions; however, our ability to borrow additional funds or obtain letters of credit is limited by the terms of our Credit Agreement.

 

Uncertainties With Respect to Operations in Libya

 

We currently have open but inactive contracts in Libya.  Due to the political unrest which commenced in February 2011, we suspended our operations in and demobilized substantially all of our personnel from Libya.

 

During the past several months, the Company’s accounts receivable related to the work performed prior to March 2011 pursuant to contracts with the Libyan government was reduced by approximately $3,100,000.  The reduction consisted of a cash payment by the Libyan Organization for the Development of Administrative Centres (“ODAC”) of approximately 3,000,000 Libyan dinars (“LYD”) ($2,400,000) that was made directly to Hill and a cash payment of approximately LYD 800,000 ($700,000) that was made by ODAC to the Libyan tax authorities on Hill’s behalf.  At September 30, 2013, the remaining accounts receivable outstanding amounted to approximately $57,000,000.

 

The LYD 3,000,000 cash payment made directly to Hill is not freely convertible into other currencies.  As a result, this cash remains in Hill’s Libyan bank account.  There is at present no agreement, understanding or timetable for further payments of Hill’s accounts receivable from ODAC or a return to work on Hill’s existing contracts.  However, management believes that these payments were made in good faith and are a positive indication that ODAC intends to satisfy its obligations to the Company.  However, we cannot predict with certainty when, or if, our remaining accounts receivable will be paid by the Libyan authorities or when our work will resume there.  In the event that we do not realize any further payments, there could be a significant adverse impact on our consolidated results of operations and consolidated financial position.

 

Additional Capital Requirements

 

In April 2013, minority shareholders, who hold the remaining 6.8% of Gerens Hill, exercised their put options.  The Company intends to purchase their shares for approximately €1,915,000 (approximately $2,526,000).  Payment is expected to be made in December 2013.

 

Sources of Additional Capital

 

We have an effective registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (the “SEC”) to register 20,000,000 shares of our common stock for issuance and sale by us at various times in the future.  The proceeds, if any, will be used for working capital and general corporate purposes, subject to the restrictions of our amended Credit Agreement and Term Loan.  We cannot predict the amount of proceeds from those future sales, if any, or whether there will be a market for our common stock at the time of any such offering or offerings to the public.

 

In addition, we have an effective registration statement on Form S-4 on file with the SEC to register 8,000,000 shares of our common stock for use in future acquisitions.  We have issued approximately 711,000 of those shares in connection with the acquisition of BCA.  We cannot predict whether we will offer these shares to potential sellers of businesses or assets we might consider acquiring or whether these shares will be acceptable as consideration by any potential sellers.

 

We cannot provide any assurance that any other sources of financing will be available, or if available, that the financing will be on terms acceptable to us.

 

Cash Flow Activity During the Nine Months Ended September 30, 2013

 

For the nine months ended September 30, 2013, our cash and cash equivalents increased by $9,923,000 to $26,639,000.  Cash provided by operations was $8,885,000, cash used in investing activities was $10,750,000 and cash provided by financing activities was $17,088,000.  We also experienced a decrease in cash of $5,300,000 from the effect of foreign currency exchange rate fluctuations.

 

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Table of Contents

 

Operating Activities

 

Our operations provided cash of $8,885,000 for the nine months ended September 30, 2013.  This compares to cash used in operating activities of $5,520,000 for the nine months ended September 30, 2012.  We had net income for the nine months ended September 30, 2013 amounting to $4,251,000 compared to a net loss of ($4,577,000) in the nine months ended September 30, 2012.  Depreciation and amortization was $7,921,000 in 2013 compared to $9,245,000 in the nine months ended September 30, 2012; the decrease in this category is due to the full amortization of the shorter-lived intangible assets of companies which we acquired over the last several years.  We had deferred tax expense of $1,035,000 in 2013 primarily due to several minor temporary differences in foreign jurisdictions.

 

Cash held in restricted accounts as collateral for the issuance of performance and advance payment bonds and letters of credit at September 30, 2013 and 2012 were $16,791,000 and $13,298,000, respectively.  The increase results primarily from a requirement that the Company provide cash collateral to support certain letters of credit related to new work in the Middle East.

 

Average days sales outstanding (“DSO”) at September 30, 2013 was 125 days compared to 130 days at September 30, 2012.  DSO is a measure of our ability to collect our accounts receivable and is calculated by dividing the total of the period-end gross accounts receivable balance by average daily revenue (i.e., in this case, revenue for the quarter divided by 90 days).  The decrease in DSO in 2013 was because the increase in our revenue, due to the ramp-up on new work in the Middle East, outpaced the growth in our accounts receivable.  The overall level of DSO continues to be affected by the receivable due from the Libyan Organization for the Development of Administrative Centres (“ODAC”) which is approximately $57,000,000.  Although we have recently received some payments from ODAC, this situation has had a detrimental effect on our overall liquidity, and we have had to rely on borrowings under our Credit Agreement and Term Loan to support our operations.  Excluding the ODAC receivable, the DSO would have been 90 days at September 30, 2013 and 84 days at September 30, 2012. Our DSO increased because our accounts receivable, net of the ODAC receivable, increased at a rate greater than the increase in our revenues.  Also, the age of our receivables is adversely affected by the timing of payments from our clients in Europe, Africa (other than Libya) and the Middle East, which have historically been slower than payments from clients in other geographic regions where the Company operates.

 

Although we continually monitor our accounts receivable, we manage our operating cash flows by managing the working capital accounts in total, rather than by individual elements.  The primary elements of our working capital are accounts receivable, prepaid and other current assets, accounts payable and deferred revenue.  Accounts receivable consist of billing to our clients for our consulting fees and other job-related costs.  Prepaid expenses and other current assets consist of prepayments for various selling, general and administrative costs, such as insurance, rent, maintenance, etc.  Accounts payable consist of obligations to third parties relating primarily to costs incurred for specific engagements, including pass-through costs such as subcontractor costs.  Deferred revenue consists of payments received from clients in advance of work performed.

 

From year to year, the components of our working capital accounts may reflect significant changes.  The changes are due primarily to the timing of cash receipts and payments with our working capital accounts combined with increases in our receivables and payables relative to the increase in our overall business, as well as our acquisition activity.

 

Investing Activities

 

Net cash used in investing activities was $10,750,000.  We used $9,325,000 to pay the liability for the Gerens Hill equity interest and $2,144,000 to purchase computers, office equipment and furniture.  We also received $727,000 from our acquisition of BCA.

 

Financing Activities

 

Net cash provided by financing activities was $17,088,000.  We received $22,279,000 from borrowings under our Credit Agreement.  We also received $73,000 from purchases under our Employee Stock Purchase Plan and exercise of stock options.  Due to banks decreased $21,000 as amounts paid were more quickly funded by the banks.  Payments on notes

 

33



Table of Contents

 

payable amounted to $148,000.  Payments on notes payable related to the acquisition of Engineering S.A. amounted to $5,095,000.

 

Quarterly Fluctuations

 

Our operating results vary from period to period as a result of the timing of projects and assignments.  We do not believe that our business is seasonal.

 

Backlog

 

We believe a strong indicator of our future performance is our backlog of uncompleted projects under contract or awarded.  Our backlog represents management’s estimate of the amount of contracts and awards in hand that we expect to result in future consulting fee revenue.  Project Management backlog is evaluated by management, on a project-by-project basis, and is reported for each period shown based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or cancelled.  Construction Claims backlog is based largely on management’s estimates of future revenue based on known construction claims assignments and historical results for new work.  Because a significant number of construction claims may be awarded and completed within the same period, our actual construction claims revenue has historically exceeded backlog by a significant amount.

 

Our backlog is important to us in anticipating and planning for our operational needs.  Backlog is not a measure defined in U.S. generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.

 

At September 30, 2013, our backlog was a record $951,000,000 compared to $907,000,000 at June 30, 2013.  At September 30, 2013, backlog attributable to work in Libya amounted to $44,000,000.  We estimate that $382,000,000 or 40.2% of the backlog at September 30, 2013 will be recognized during the twelve months subsequent to September 30, 2013.

 

Although backlog reflects business that we consider to be firm, cancellations or scope adjustments may occur.  Further, substantially all of our contracts with our clients may be terminated at will, in which case the client would only be obligated to us for services provided through the termination date.  Historically, the impact of terminations and modifications on our realization of revenue from our backlog has not been significant, however, there can be no assurance that such changes will not be significant in the future.  Furthermore, reductions of our backlog as a result of contract terminations and modifications may be offset by additions to the backlog.

 

We adjust backlog to reflect project cancellations, deferrals and revisions in scope and cost (both upward and downward) known at the reporting date.  Future contract modifications or cancellations, however, may increase or reduce backlog and future revenue.

 

 

 

Total Backlog

 

12-Month Backlog

 

 

 

$

 

%

 

$

 

%

 

 

 

(dollars in thousands)

 

As of September 30, 2013:

 

 

 

 

 

 

 

 

 

Project Management

 

$

911,000

 

95.8

%

$

342,000

 

89.5

%

Construction Claims

 

40,000

 

4.2

%

40,000

 

10.5

%

 

 

$

951,000

 

100.0

%

$

382,000

 

100.0

%

 

 

 

 

 

 

 

 

 

 

As of June 30, 2013:

 

 

 

 

 

 

 

 

 

Project Management

 

$

865,000

 

95.4

%

$

341,000

 

89.3

%

Construction Claims

 

42,000

 

4.6

%

41,000

 

10.7

%

 

 

$

907,000

 

100.0

%

$

382,000

 

100.0

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2012:

 

 

 

 

 

 

 

 

 

Project Management

 

$

833,000

 

95.4

%

$

302,000

 

88.6

%

Construction Claims

 

40,000

 

4.6

%

39,000

 

11.4

%

 

 

$

873,000

 

100.0

%

$

341,000

 

100.0

 

 

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Table of Contents

 

Item 3.                                 Quantitative and Qualitative Disclosures About Market Risk

 

Refer to the Company’s 2012 Annual Report for a complete discussion of the Company’s market risk.  There have been no material changes to the market risk information included in the Company’s 2012 Annual Report.

 

Item 4.                                 Controls and Procedures

 

(a)         Evaluation of Disclosure Controls and Procedures

 

The management of the Company, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2013.  Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  During the quarter ended September 30, 2013, there were no changes in our internal control over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.  However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

 

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Table of Contents

 

Part II — Other Information

 

Item 1.                                 Legal Proceedings

 

M.A. Angeliades, Inc. (“Plaintiff”) has filed a complaint with the Supreme Court of New York against the Company and the New York City Department of Design and Construction (“DCC”) regarding payment of approximately $8,771,000 for work performed as a subcontractor to the Company plus interest and other costs. The Company has accrued approximately $2,340,000, including interest of $448,000, based on invoices received from Plaintiff who has refused to provide invoices for the additional work that Plaintiff claims to have performed. Until such time as the Company obtains invoices for the additional work and is able to provide those invoices to DCC for reimbursement or there is a full resolution of the litigation, it has no intention of paying Plaintiff. The Company believes that its position is defensible, however, there can be no assurance that it will receive a favorable verdict should this case proceed to trial.

 

Item 1A.                        Risk Factors

 

There have been no material changes pertaining to risk factors discussed in the Company’s 2012 Annual Report.

 

Item 2.                                 Unregistered Sales of Equity Securities and Use of Funds

 

None.

 

Item 3.                                 Defaults Upon Senior Securities

 

None.

 

Item 4.                                 Mine Safety Disclosures.

 

Not applicable.

 

Item 5.                                 Other Information

 

None.

 

Item 6.                                 Exhibits

 

31.1

 

Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

31.2

 

Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.1

 

Certification of Irvin E. Richter, Chief Executive Officer of Hill International, Inc., pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

32.2

 

Certification of John Fanelli III, Chief Financial Officer of Hill International, Inc., pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

101.INS

 

XBRL Instance Document.

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document.

 

 

 

101.PRE

 

XBRL Taxonomy Presentation Linkbase Document.

 

 

 

101.CAL

 

XBRL Taxonomy Calculation Linkbase Document.

 

 

 

101.LAB

 

XBRL Taxonomy Label Linkbase Document.

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document.

 

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Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

Hill International, Inc.

 

 

 

 

Dated: November 8, 2013

By:

/s/ Irvin E. Richter

 

 

 

 

 

Irvin E. Richter

 

 

Chairman and Chief Executive Officer

 

 

(Principal Executive Officer)

 

 

 

 

Dated: November 8, 2013

By:

/s/ John Fanelli III

 

 

 

 

 

John Fanelli III

 

 

Senior Vice President and

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

 

 

 

Dated: November 8, 2013

By:

/s/Ronald F. Emma

 

 

 

 

 

Ronald F. Emma

 

 

Senior Vice President and

 

 

Chief Accounting Officer

 

 

(Principal Accounting Officer)

 

37