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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

Form 10-K


☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020

OR

For the fiscal year ended December 31, 2016
☐		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
incorporation or organizationorganization)		20-0953973
(I.R.S. Employer
Identification No.)

One Commerce Square
2005 Market Street, 17th Floor
Philadelphia,PA
19103
(Address of principal executive offices)

19103
(Zip Code)

        Registrant's

Registrant’s telephone number, including area code:
(215) 309-7700

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each classEach ClassTrading Symbol(s)Name of each exchangeEach Exchange on which registeredWhich Registered
Common Stock, $.0001stock, par value $0.0001 per shareHILNew York Stock Exchange

Securities registered pursuant to Section 12(g) of the Exchange Act:
None


Indicate by a check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 
Yes o  No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 
Yes o  No ý

Indicate by check mark whether the Registrantregistrant (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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ý☒  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 (§(Section 232.405 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 ý☒  No o

        Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    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, or an emerging growth company. See the definitions of "accelerated“large accelerated filer," "large accelerated filer"” “accelerated filer,” “smaller reporting company” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filero☐Accelerated Filerý☒
Non-Accelerated Filero
(Do not check if a
smaller reporting company)		☐Smaller reporting companyo☒
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of shares of common stock held by non-affiliates on June 30, 20162020 was approximately $171,669,000.$73,602,814. As of March 17, 2017,2, 2021, there were 51,859,47956,481,189 shares of the Registrant'sRegistrant’s Common Stock outstanding.

Documents Incorporated by Reference



DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statementCompany's Proxy Statement for the 2017its 2021 Annual Meeting of Shareholders of Hill International, Inc.Stockholders ("2021 Proxy Statement") are incorporated by reference intoin Part III of this Form 10-K.

III.



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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
Index to Form 10-K

PART I.

PART I.

Item 1.

Business

4

Item 1A.

Risk Factors

12

Item 1B.

1
6

Item 1A
11
Item 1B
2118

Item 2.

Properties

21

Item 3.

2
19

Legal Proceedings

22

Item 4.

3
19

Item 4
2320

Part II.


Item 5.

5

Market for the Registrant'sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

2421

Item 6.

6

Selected Financial Data

2621

Item 7.

7

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

2821

Item 7A.

7A

Quantitative and Qualitative Disclosures About Market Risk

4430

Item 8.

8

Financial Statements and Supplementary Data

4631

Item 9.

9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

9572

Item 9A.

9A

Controls and Procedures

9573

Item 9B.

Other Information

98
Item 9B

Part III.


77
Item 10.

10

Directors, Executive Officers and Corporate Governance

9978

Item 11.

Executive Compensation

99

Item 12.

11
78

Item 12
9978

Item 13.

13

Certain Relationships and Related Transactions, and Director Independence

10078

Item 14.

14

Principal Accounting Fees and Services

10079

Part IV.


Item 15.

15

Exhibits and Financial Statement Schedules

10179

2

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PART I

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Certain statements contained in this Annual Report on Form 10-K may constitute forward-looking statements

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, (the "Reform Act"and it is Hill International's (collectively referred to as "Hill", "we", "us", "our" and "the Company"). We may also make intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein including, but not limited to, any projections of revenues, earnings, earnings before interest, taxes, depreciation and amortization (“EBITDA”), margin, profit improvement, cost savings or other financial items; any statements of belief, any statements concerning our plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance, are forward-looking statements.
These forward-looking statements in other reports filed with the United States Securities and Exchange Commission (the "SEC"), in materials delivered to stockholders and in press releases. Forward-looking statements provideare based on our current expectations, of future events based on certainestimates and assumptions and include any statement that does not directly relateare subject to any historical or current fact.certain risks and uncertainties. Although we believe that the expectations, estimates and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. You can identify forward-looking statements by the use of terminology such as "may," "will," "anticipate," "believe," "estimate," "expect," "future," "intend," "plan," "could," "should," "potential" or "continue" or the negative or other variations thereof, as well as other statements regarding matters that are not historical fact.

        Those forward-looking

Forward-looking statements may concern, among other things:

•
The markets for our services;

•
Statements concerning the closing of the sale of the Construction Claims Group;

•
Projections of revenues and earnings, anticipated contractual obligations, funding requirements or other financial items;

•
Statements regarding the impact and effect of the COVID-19 pandemic;
•Statements concerning our plans, strategies and objectives for future operations; and

•
Statements regarding future economic conditions or performance.

Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include:

•
The risks set forth in Item 1A, “Risk Factors,” herein;
•Unfavorable global economic conditions may adversely impact our business;
•Our backlog, which is subject to unexpected adjustments and cancellations, may not be fully realized as revenue;
•Our expenses may be higher than anticipated;
•Modifications and termination of client contracts;

•
Control and operational issues pertaining to business activities that we conduct pursuant to joint ventures with other parties;

and
•
Difficulties we may incur in implementing our acquisition strategy;

•
Unfavorable global economic conditions

•
Our expenses may be higher than anticipated

•
The closing of the sale of our Construction Claims Group may be delayed or cancelled;

•
The need to retain and recruit key technical and management personnel; and

•
Unexpected adjustments and cancellations related to our backlog.

personnel.

Other factors that may affect our business, financial position or results of operations include:

•
Special risksUnexpected delays in collections from clients;
•Risks related to the effect of the COVID-19 pandemic on the Company, including its employees and related costs and including any project cancellations, delays and modifications;
•Risks related to our ability to obtain debt financing or otherwise raise capital to meet required working capital needs and to support potential future acquisition activities;

•
Special risks ofRisks related to international operations, including uncertain political and economic environments, acts of terrorism or war, potential incompatibilities with foreign joint venture partners, foreign currency fluctuations, civil disturbances and labor issues; and

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      •
      Special risks ofRisks related to contracts with governmental entities, including the failure of applicable governing authorities to take necessary actions to secure or maintain funding for particular projects with us, the unilateral termination of contracts by the government and reimbursement obligations to the government for funds previously received.

    We assumedo not intend, and undertake no obligation, to update or revise any forward-looking statements.statement. In accordance with the Reform Act, Item 1A of this Report entitled "Risk Factors"“Risk Factors” contains cautionary statements that accompany those forward-looking statements. You should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Form 10-K, in our other filings with the SECSecurities and Exchange Commission (the "SEC") or in materials incorporated therein by reference.


    3

    Item 1. Business.

    Business

    General

    Hill International, Inc., a Delaware corporation organized in 2006, with 4,300more than 2,700 professionals in 100approximately 70 offices worldwide, provides program management, project management, construction management and other consulting services primarily to the buildings,building, transportation, environmental, energy and industrial markets. According toEngineering News-Record magazine Hill was recently ranked as the eighth largest construction management firm in the United States. The terms "Hill", the "Company", "we", "us" and "our" refer to Hill International, Inc.

    We compete for business based on a variety of factors such as technical capability, global resources, price, reputation and past experience, including client requirements for substantial experience in similar projects. We have developed significant long-standing relationships, which bring us repeat business and would be very difficult to replicate. We believe we have an excellent reputation for attracting and retaining professionals. In addition, we believe there are high barriers to entry for new competitors, especially in the project management market.


    The Company provides fee-based project and construction management services to our clients, leveraging our construction expertise to identify potential trouble, difficulties and sources of delay on a construction project before they develop into costly problems. Our experienced professionals are capable of managing all phases of the construction process from concept through completion, including cost and budget controls, scheduling, estimating, expediting, inspection, contract administration and management of contractors, subcontractors and suppliers.

    Our clients are typically billed a negotiated multiple of the actual direct cost of each professional assigned to a project and we are reimbursed for our out-of-pocket expenses. We believe our fee-based consulting has significant advantages over traditional general contractors. Specifically, because we do not assume project completion risk, our fee-based model eliminates many of the risks typically associated with providing “at risk” construction services.

    Amounts throughout the remainder of this document are in thousands unless otherwise noted.
    Our Strategy

    Our strategy emphasizes the following key elements:

    •
    Increase Revenues from Our Existing Clients.We have long-standing relationships with a number of public and private sector entities. Meeting our clients'clients’ diverse needs in managing construction risk and generating repeat business from our clients to expand our project base is one of our key growth strategies. We accomplish this objective by providing a broad range of project management consulting services in a wide range of geographic areas that support our clients during every phase of a project, from concept through completion. We believe that nurturing our existing client relationships expands our project base through repeat business.

    business.
    •
    Capitalize Upon the Continued Spend in the Markets We Serve. We believe that the demand for project management services will grow with increasing construction and infrastructure spending in the markets we serve. We believe that our reputation and experience combined with our broad platform of service offerings will enable us to capitalize on increases in demand for our services. In addition, we strategically open new offices to expand into new geographic areas and we aggressively hire individuals with significant contacts to accelerate the growth of these new offices and to strengthen our presence in existing markets.

    •
    Strengthen Professional Resources.Resources. Our biggest asset is the people that work for Hill. We intend to continue spending significant time recruiting and retaining the best and the brightest to improve our competitive position. Our independent status has attracted top project management

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        talent with varied industry experience. We believe maintaining and bolstering our team will enable us to continue to grow our business.

      •
      Pursue Acquisitions Selectively.  We operate

    Reporting Segments
    The Company operates in a highly fragmented industry with many smaller, regional competitors. Our acquisition strategy has allowed us to manage risk by diversifying our markets, which has enabled us to compete better by integrating capabilities and obtaining new relationships. We have pursued acquisitions primarily for three reasons: to expand into new geographic markets, to improve capabilities, resources and critical mass in existing geographic markets, and to enhance our capabilities and resources in certain strategic market sectors. Selectively, we intend to focus primarily on U.S. acquisitions to expand our domestic presence and enhance capabilities in specific areas and secondarily on foreign acquisitions that bring new relationshipssingle reporting segment, known as well as expand our geographic base.

    Reporting Segments

            On December 20, 2016, we entered into a Stock Purchase Agreement to sell our Construction Claims Group, which is reported herein as discontinued operations. This transaction will permit us to strengthen our balance sheet and better focus on our Project Management business. See Note 2 to our consolidated financial statements for a description of the transaction.

            Our Project Management Group, which provides fee-based or "agency" construction management services to our clients, leveraging our construction expertise to identify potential trouble, difficulties and sources of delay on a construction project before they develop into costly problems. Our experienced professionals are capable of managing all phases of the construction process from concept through completion, including cost and budget controls, scheduling, estimating, expediting, inspection, contract administration and management of contractors, subcontractors and suppliers.

            Our clients are typically billed a negotiated multiple of the actual direct cost of each professional assigned to a project and we are reimbursed for our out-of-pocket expenses. We believe our fee-based consulting has significant advantages over traditional general contractors. Specifically, because we do not assume project completion risk, our fee-based model eliminates many of the risks typically associated with providing "at risk" construction services.

            Our total 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 revenue/costs may be 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. Throughout this report we have used CFR as the denominator in many of our ratios.


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    Global Business

            We operate worldwide and currently have over 100 offices in over 40 countries. The following table sets forth the amount and percentage of our CFR by geographic region for each of the past three fiscal years (dollars in thousands):

    Consulting Fee Revenue by Geographic Region

    clients.
    4

     
    		 2016 2015 2014 

    United States

    		 $137,528  31.7%$122,423  26.2%$102,095  23.8%

    Latin America

    		  18,708  4.3  26,304  5.6  36,925  8.6 

    Europe

    		  38,455  8.8  39,519  8.4  34,943  8.2 

    Middle East

    		  204,780  47.2  245,985  52.6  222,754  51.9 

    Africa

    		  20,815  4.8  20,461  4.4  18,402  4.3 

    Asia/Pacific

    		  13,861  3.2  13,185  2.8  13,708  3.2 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $434,147  100.0%$467,877  100.0%$428,827  100.0%
    ​​​ ​ ​​ ​​​ ​ ​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Grow Organically and Through Selective Acquisitions

            Over the years, our business has expanded through organic growth and the acquisition of a number of project management businesses. Over the past 18 years, we have completed 14 acquisitions of project management businesses.

            We believe that our industry includes a number of small regional companies in a highly fragmented market. We believe that we have significant experience and expertise in identifying, negotiating, completing and integrating acquisitions and view the acquisition of these smaller competitors as a key part of our growth strategy. Through our acquisitions, we gained entry into Spain, Mexico, Poland, Brazil and Turkey and expanded our presence in the United States. These transactions have enabled us to strengthen our geographic diversity and compete more effectively.

    Clients


    Our clients consist primarily of the United States and other national governments,federal, state and local governments, other national governments, and the private sector. The following table sets forth our breakdown of CFRrevenue attributable to these categories of clients for each of the past three fiscal years (dollars in thousands):

    Consulting Fee ended December 31, 2020 and 2019:

    Revenue By Client Type

     20202019
    U.S. federal government$17,942 4.9 %$18,967 5.0 %
    U.S. state, regional and local governments118,845 32.2 %124,504 33.1 %
    Foreign governments99,906 27.1 %91,683 24.4 %
    Private sector131,831 35.8 %141,283 37.5 %
    Total$368,524 100.0 %$376,437 100.0 %
     
    		 2016 2015 2014 

    U.S. federal government

    		 $9,600  2.2%$8,569  1.8%$9,792  2.3%

    U.S. state, regional and local governments

    		  94,459  21.8  82,181  17.6  70,036  16.3 

    Foreign governments

    		  153,445  35.3  195,383  41.8  193,283  45.1 

    Private sector

    		  176,643  40.7  181,744  38.8  155,716  36.3 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Total

    		 $434,147  100.0%$467,877  100.0%$428,827  100.0%
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​
    For the years ended December 31, 2020 and 2019, revenue from U.S. and foreign government contracts represented approximately 64.2% and 62.5% of our total revenue, respectively.


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    The following table sets forth the percentage of our consulting fee revenue contributed by each of our five largest clients for the years ended December 31, 2016, 20152020 and 2014:

    2019:
     20202019
    Largest client4.9 %3.8 %
    2nd largest client3.8 %3.6 %
    3rd largest client3.1 %3.4 %
    4th largest client3.1 %3.1 %
    5th largest client3.0 %2.6 %
    Top 5 largest clients17.9 %16.5 %
     
    		 For the Years Ended
    December 31,    		 
     
    		 2016 2015 2014 

    Largest client

    		  7.9% 10.8% 14.6%

    2nd largest client

    		  6.5% 6.7% 4.6%

    3rd largest client

    		  5.6% 5.7% 3.5%

    4th largest client

    		  4.9% 4.3% 3.4%

    5th largest client

    		  4.8% 3.7% 3.4%
    ​​​ ​ ​​ ​​​ ​ ​

    Top 5 largest clients

    		  29.7% 31.2% 29.5%
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​

    Business Development

    The process for acquiring business from each of our categories of clients is principally the same, by participating in a competitive request-for-proposal ("RFP"(“RFP”) process, with the primary difference among clients being that the process for public sector clients is significantly more formal and complex than for private sector clients as a result of government procurement rules and regulations that govern the public-sector process.

    Although a significant factor in our business development consists of our standing in our industry, including existing relationships and reputation based on performance on completed projects, our marketing department undertakes a variety of activities in order to expand our exposure to potential new clients. These activities include media relations, advertising, promotions, market sector initiatives and maintaining our website and related web marketing. Media relations include placing articles that feature us and our personnel in trade publications and other media outlets. Our promotions include arranging speaking engagements for our personnel, participation in trade shows and other promotional activities. Market sector initiatives are designed to broaden our exposure to specific sectors of the construction industry such as,by, for example, participating in or organizing industry seminars.

    Doing business with governments is complex and requires the ability to comply with intricate regulations and satisfy periodic audits. We believe that the ability to understand these requirements and to successfully conduct business with government agencies is a barrier to entry for smaller, less experienced competitors. Most government contracts, including those with foreign governments, are subject to termination by the government, to government audits and to continued appropriations. For the year ended December 31, 2016, CFR from U.S. and foreign government contracts represented approximately 59.3% of our total CFR.

    We are required from time to time to obtain various permits, licenses and approvals in order to conduct our business in many of the jurisdictions where we operate. Our business of providing project management services is not subject to significant regulation by state, federal or foreign governments.


    Contracts


    The Company recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such goods or services.
    5


    The price provisions of our Project Management relatedclient contracts can be grouped into threetwo broad categories: cost-plus, time and materials and fixed-price. Cost-plusfixed price. Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts provide for reimbursement of our costsmay be structured as basic time and overheadmaterials, cost plus a predetermined fee.margin or time and materials subject to a maximum contract value (the "cap value"). Under some cost-plusfixed price contracts, ourthe Company’s clients pay an agreed upon amount negotiated in advance for a specified scope of work. The Company is guaranteed to receive the consideration to the extent that the Company delivers under the contract. The Company recognizes revenue over a period of time on fixed price contracts using the input method based upon direct costs incurred to date, which are compared to total projected direct costs. See Note 4 - Revenue from Contracts with Clients in Part II item 8 "Financial Statements and Supplementary Data," in this Form 10-K for more information.

    Consulting Fee Revenue

    We believe an important performance measure is consulting fee may be based partially on quality, schedule and other performance factors.revenue (“CFR”). The professionals we deploy to execute contracts are occasionally subcontractors. We also enter into contracts whereby wegenerally bill our clients monthly at hourly billing rates. The hourly billing rates are determined by contract terms. For governmental clients, the hourly rates are generally calculatedactual cost of these subcontractors and recognize this cost as salary costs plus overhead costs plus a negotiated profit percentage. For commercial clients, the hourly rate can be taken from a standard fee schedule by staff classificationboth revenue and direct expense. CFR refers to our revenue excluding amounts paid or it can be at a discount from this schedule. In


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    some cases, primarily for foreign work, a monthly rate is negotiated rather than an hourly rate. This monthly rate is a build-up of staffing costs plus overhead and profit. We account for these contracts on a time-and-materials method, recognizing revenue as costs are incurred. Fixed-price contracts are accounted for using the "percentage-of-completion" method, wherein revenue is recognized as costs are incurred.

    Backlog

    due to subcontractors. We believe a strongCFR is an important measure because it represents the revenue on which we earn gross profit, whereas total revenue includes subcontractors on which we generally pass through the cost and earn minimal or no gross profit.

    Backlog
    We believe an important indicator of our future performance is our backlog of uncompleted projects under contract or awarded. Our backlog represents management'smanagement’s estimate of the amount of contracts and awards in handin-hand that we expect to resultrecognize as CFR in future consulting fees.periods as a component of total revenue. Beginning with the year ended December 31, 2019, we excluded backlog from indefinite delivery/indefinite quantity ("ID/IQ") contracts in circumstances where the work has not yet been approved by the client. ID/IQ contracts require us to deliver an indefinite amount of service over a pre-determined period of time. Estimated future CFR from ID/IQ contracts is only included in our total backlog if the work has been approved starting in 2019. Management evaluated all backlog existing prior to 2019 for the purpose of reporting this pre-2019 backlog consistent with the methodology above. This resulted in a reduction to backlog of $46,584 at December 31, 2019 and a reduction in the 12-month backlog of $397 at December 31, 2019. Our 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.

    canceled.

    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 ("U.S. GAAP"), and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.

            At December 31, 2016, our Project Management backlog was $831,000,000, compared to approximately $807,000,000 at December 31, 2015. Our net bookings during 2016 of $ 458,147,000, which equates to a book-to-bill ratio of 106% compared to our goal of at least 110%. While this is short of our expectations, it is consistent with the slowdown of project activity in the Middle East due to the economic impact caused by the drop in oil prices and political upheaval and civil unrest in certain parts of the region. This will continue to be a major area of focus for 2017. We estimate that approximately $334,000,000, or 40.2% of the backlog at December 31, 2016, will be recognized during our 2017 fiscal year.

    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,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, in December 2016, the Company had two contracts, one in the Middle East and one in Africa, cancelled. As a result, approximately $73,000,000 was excluded from our backlog at December 31, 2016. 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,


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    however, may increase or reduce backlog and future revenue. CFR.

    6


    The following tables show our backlog by geographic region (in thousands):

    as of December 31, 2020 and 2019:
     Total Backlog12-Month Backlog
    As of December 31, 2020    
    Americas$276,752 41.6 %$105,721 45.2 %
    Middle East/Asia/Pacific160,211 24.0 %66,407 28.3 %
    Europe105,478 15.8 %37,062 15.8 %
    Africa124,273 18.6 %25,187 10.7 %
    Total$666,714 100.0 %$234,377 100.0 %
     
    		 Total Backlog 12-Month Backlog 

    As of December 31, 2016:

    		             

    United States

    		 $459,000  55.2% 141,000  42.2%

    Latin America

    		  10,000  1.2  8,000  2.4 

    Europe

    		  38,000  4.6  26,000  7.8 

    Middle East

    		  274,000  33.0  129,000  38.6 

    Africa

    		  42,000  5.0  22,000  6.6 

    Asia/Pacific

    		  8,000  1.0  8,000  2.4 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $831,000  100.0%$334,000  100.0%
    ​​​ ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​​ ​​

    As of September 30, 2016:

    		  
         		  
         		  
         		  
         		 

    United States

    		 $421,000  47.4% 142,000  39.7%

    Latin America

    		  11,000  1.2  9,000  2.5 

    Europe

    		  43,000  4.8  24,000  6.7 

    Middle East

    		  358,000  40.3  153,000  42.7 

    Africa

    		  44,000  5.0  21,000  5.9 

    Asia/Pacific

    		  11,000  1.3  9,000  2.5 
    ​​​ ​ ​​​ ​​ ​ ​​ ​ ​

    Total

    		 $888,000  100.0%$358,000  100.0%
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​ ​ ​​ ​ ​

    As of December 31, 2015:

    		  
         		  
         		  
         		  
         		 

    United States

    		 $372,000  46.1% 112,000  32.9%

    Latin America

    		  23,000  2.9  16,000  4.7 

    Europe

    		  44,000  5.5  25,000  7.4 

    Middle East

    		  300,000  37.2  155,000  45.6 

    Africa

    		  52,000  6.3  23,000  6.8 

    Asia/Pacific

    		  16,000  2.0  9,000  2.6 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $807,000  100.0%$340,000  100.0%
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​
     Total Backlog12-Month Backlog
    As of December 31, 2019    
    Americas$340,972 44.6 %108,174 43.9 %
    Middle East/Asia/Pacific247,368 32.3 %80,409 32.7 %
    Europe90,134 11.8 %35,000 14.2 %
    Africa86,203 11.3 %22,574 9.2 %
    Total$764,677 100.0 %$246,157 100.0 %


    At December 31, 2020, our backlog was $666,714, compared to $764,677 at December 31, 2019, which includes the re-evaluation and write down of the realizable value of a number of contracts booked before January 1, 2019, some of which were a result of the impacts of COVID-19. Additionally, we removed approximately $46 million of backlog from a project as a result of entering into a joint venture and sharing a portion of the work with our partner. This partnership has improved our margins on the project and enhanced our probability of being awarded future opportunities on this multi-phase project. The December 31, 2020 decrease in backlog from the prior year is primarily due to delays in new projects awarded as a result of COVID-19. Of the total backlog at December 31, 2020, we estimate that 35.2% will be recognized as CFR over the next twelve months based on the backlog table above.

    The amount of our new bookings, before any cancellations or other reductions, was $360,900 and equates to a book-to-burn ratio of 121.7% for the year ended December 31, 2020. Our book-to-burn ratio, a non-GAAP measure, is determined by taking our new CFR bookings and dividing it by CFR for the applicable period. This metric allows management to monitor the Company's business development efforts to ensure we grow our backlog and our business over time, and management believes that this measure is useful to investors for the same reason.

    Our remaining performance obligations represent the aggregate transaction price of executed contracts for projects partially completed or not yet started as of the end of the reporting period. The difference between the remaining performance obligations of $101,800, as described further in Note 4 - Revenue from Contracts with Clients in our consolidated financial statements, and the backlog of $666,714 at December 31, 2020 is due to the backlog including the full value of client contracts billed on a T&M basis, which are not included as part of the remaining performance obligation. Such contracts are excluded from the remaining performance obligation because they are not fixed price contracts and the consideration expected under such contracts is variable as it is based upon hours and costs incurred, which results in the counter-party only being obligated to the Company for services provided through the completion or termination date.

    Competition

    The project management industry is highly competitive. We compete for contracts, primarily on the basis of technical capability, with numerous entities, including other construction management companies, design or engineering firms, general contractors, other "pure" construction management companies, management consulting firms and other entities. Compared to us, many of these competitors are larger, well-established companies that have broader geographic scope and greater financial and other resources. During 2016,2020, some of our largest project management competitors included: AECOM, ARCADIS N.V., Jacobs Engineering Group, Inc., WSP, Parsons Brinckerhoff, Inc., Parsons Corp. and Turner Construction Co.

    , HNTB, and Dar Group.

    Insurance

    We maintain insurance covering general and professional liability, involving bodily injury and property damage. We have historically enjoyed a favorable loss ratio in all lines of insurance and our management considers our present limits of liability, deductibles and reserves to be adequate. We endeavor to reduce or eliminate risk through the use of quality assurance/control, risk management, workplace safety and similar methods to eliminate or reduce the risk of losses on a project. Although our actual rates have decreased, we have experienced and expect to continue to experience increases in the dollar amount of our insurance premiums because of the increase in our revenue.


    7

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    Management


    We are led by an experienced management team with significant experience in the construction industry. Additional information about our executive officers follows.


    Executive Officers

    Name
    		AgePosition

    David L. Richter

    Name    		Age50Position
    Raouf S. Ghali59 Chief Executive Officer

    Raouf S. Ghali

    		55President and Chief Operating Officer

    Mohammed Al Rais

    		63Regional President (Middle East), Project Management Group

    John Fanelli III

    		62Executive Vice President and Chief Financial Officer

    William H. Dengler, Jr.

    		54 50Executive Vice President and General Counsel

    Catherine H. Emma

    		57Senior Vice President and Chief Administrative Officer

    Michael J. Petrisko

    Todd Weintraub    		57 52Senior ViceChief Financial Officer
    Abdo E. Kardous61 Regional President, and Chief Information OfficerMiddle East

    DAVID L. RICHTER has been our Chief Executive Officer since December 2014 and he has been a member of our Board of Directors since 1998. Prior to his current position, he was our President and Chief Operating Officer from March 2004 to December 2014. Before that, Mr. Richter was President of our Project Management Group from 2001 to 2004, Senior Vice President and General Counsel from 1999 to 2001 and Vice President and General Counsel from 1995 to 1999. Prior to joining us, he was an attorney with the New York City law firm of Weil, Gotshal & Manges LLP from 1992 to 1995. Mr. Richter is a Fellow of both the Construction Management Association of America (CMAA) and the Chartered Institute of Building. He is a member of the Young Presidents' Organization, the Construction Industry Round Table and the American Society of Civil Engineers. He is a member of the Board of Directors of the Chamber of Commerce for Greater Philadelphia and the Board of Trustees of Princeton Day School. He is a former member of the Board of Directors of the CMAA and the Board of Trustees of the Southern New Jersey Development Council. Mr. Richter is also Chairman of the Oxford Alumni Society of Philadelphia. He earned his B.S. in management, his B.S.E. in civil engineering and his J.D. from the University of Pennsylvania and his M.Sc. in major program management from the University of Oxford.


    RAOUF S. GHALI has been our President and a member of our Board of Directors since August 2016 and our Chief OperatingExecutive Officer since January 2015.October 2018. Prior to that, he was our Chief Operating Officer from January 2015 to October 2018, President of our Project Management Group (International) from January 2005 to January 2015, Senior Vice President in charge of project management operations in Europe, North Africa and the Middle East from 2001 to 2004, and Vice President from 1993 to 2001. Prior to joining us, he worked for Walt Disney Imagineering from 1988 to 1993. Mr. Ghali earned both a B.S. in business administration and economics and an M.S. in business organizational management from the University of LaVerne.

    MOHAMMED AL RAIS has been Regional President (Middle East) with Hill's Project Management Group since January 2015. Prior to that, he was Senior Vice President and Managing Director (Middle East) of our Project Management Group from April 2010 to January 2015 and Vice President from 2006 to 2010. Mr. Al Rais has over 39 years of experience in the management of construction projects throughout the Middle East, North Africa, the United Kingdom and Canada. He earned his B.Sc. in city and regional planning from the University of Engineering and Technology in Pakistan and his M.Sc. in project management from the University of Reading in the United Kingdom. Mr. Al Rais is a member of the Association for Project Management in the U.K., the Canadian Business Council, the Society of Engineers in the U.A.E., the Chartered Management Institute, the Project Management Institute and the Chartered Institute of Building.

    JOHN FANELLI III

    WILLIAM H. DENGLER, JR. has been our Executive Vice President and Chief FinancialAdministrative Officer since August 2016. Mr. Fanelli was previously Senior Vice President from 2006November 2018. Prior to 2016. Before that,


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    Mr. Fanelli was Vice President and Chief Accounting Officer of CDI Corp. from 2005 to 2006, and he was Vice President and Corporate Controller of CDI Corporation (a subsidiary of CDI Corp.) from 2003 to 2006. CDI Corp. is a New York Stock Exchange-traded professional services and outsourcing firm based in Philadelphia with expertise in engineering, technical services and information technology. During 2003, Mr. Fanelli was a financial consultant to Berwind Corporation, an investment management company based in Philadelphia which owns a diversified portfolio of manufacturing and service businesses and real estate. Before that, Mr. Fanelli was employed for 18 years by Hunt Corporation, then a New York Stock Exchange-traded manufacturer and marketer of office products. At Hunt, he served as Vice President and Chief Accounting Officer from 1995 until 2003, and before that as Director of Budgeting, Financial Analysis and Control, from 1985 to 1995. Before that, Mr. Fanelli was employed with Coopers & Lybrand for eight years in various accounting and auditing positions. Mr. Fanelli earned his B.S. in accounting from LaSalle University and he is a Certified Public Accountant in Pennsylvania.

    WILLIAM H. DENGLER, JR. has been our Executive Vice President and General Counsel sincefrom August 2016. Mr. Dengler was previously2016 to November 2016, Senior Vice President and General Counsel from 2007 to 2016, Vice President and General Counsel from 2002 to 2007, and Corporate Counsel from 2001 to 2002. Mr. Dengler also serves as corporate secretary to Hill and its subsidiaries. Prior to joining Hill, Mr. Dengler served as Assistant Counsel to former New Jersey Governors Donald DiFrancesco and Christine Todd Whitman from 1999 to 2001. Mr. Dengler earned his B.A. in political science from McDaniel College and his J.D. from Rutgers University School of Law at Camden. He is licensed to practice law in New Jersey, as well as before the U.S. Court of Appeals for the Third Circuit and the U.S. Supreme Court.

    CATHERINE H. EMMA


    TODD WEINTRAUB has been our Chief Financial Officer since November 2018. Mr. Weintraub has nearly 30 years of experience, including serving as CFO, Corporate Controller, Director of Accounting and Accounting Manager for six publicly traded companies. In addition, Mr. Weintraub has served on the Board of Directors for multiple companies, including International Matex Tank Terminals, Atlantic Aviation, Macquarie Renewable Energy Holdings, Hawaii Gas and Parking Company of America, where he was Chair. As CFO, Mr. Weintraub has been a key contributor whose companies have produced above market shareholder returns. He has a proven track record of implementing effective financial controls and operational improvements, deploying growth capital, executing mergers and acquisitions, managing a portfolio of operating businesses, optimizing capital structure and performing capital markets activities and investor relations. Mr. Weintraub graduated Magna Cum Laude from Siena College in 1990.
    ABDO E. KARDOUS assumed the post of Regional President, Middle East in April 2018. Mr. Kardous joined Hill in 1997 as part of the Grand Mosque team, was promoted to Vice President in our Dubai office, and then named SVP Middle East. He was key to establishing Hill’s presence across the Gulf Cooperation Council before serving as Hill’s Senior Vice President and Chief Administrative Officer since January 2007. Ms. Emma had been Vice President and Chief Administrative Officer from 2005 to 2007. Before that, she served as Vice President of Human Resources and Administration. Ms. Emma has been with Hill since 1982. She is certified byManaging Director for the HR Certification Institute (HRCI) as a Professional in Human Resources (PHR) and certified by Society of Human Resource Management (SHRM) as a Certified Professional (SHRM- CP) and holds professional memberships with Tri-State Human Resources, the Society for Human Resource Management and Risk and Insurance Management Society, Inc. Ms. Emma previously participated in BNA's Human Resources Personnel Policies Forum.

    MICHAEL J. PETRISKO has been our Senior Vice President and Chief Information Officer since June 2014. Prior to that,Asia/Pacific Region. Mr. Petrisko was Vice President and Chief Information Officer for STV Group, an architecture, engineering and construction management firm, from June 2012 through June 2014. Before that, Mr. Petrisko was Hill's Senior Vice President and Chief Information Officer from January 2009 through June 2012, and Vice President and Chief Information Officer from 2007 to 2008. Before that, Mr. Petrisko was Director of Global IT Operations for AECOM Technology Corp. from 2005 to 2007 and Vice President and Chief Information Officer for DMJM Harris, Inc., a subsidiary of AECOM, a global architecture, engineering and construction management firm, from 2002 to 2005. From 1999 to 2002, he was Director of Technical Services for Foster Wheeler Corp., an engineering and construction services firm. Mr. Petrisko studied management information technology at Thomas Edison State College and heKardous is a member of both the New Jersey SocietyChartered Institute of InformationBuilding (CIOB) and Association for Project Management (API), and a memberhas recently served on the Advisory Board of the CMAA.

    Chicago based Council of Tall Buildings and Urban Habitat (CTBUH). He holds a B.S., Magna Cum Laude, in Civil Engineering, from the University of Maryland and an M.S. in Civil Engineering from the University of California, Berkley. Mr. Kardous brings more than 30 years of experience to the Middle East region, with expertise in the design, procurement, construction, and delivery of multi-billion-dollar projects in the residential, hospitality, energy, infrastructure, and marine sectors, among others. He was also named Hill Internationals' Project Manager of the Year in 2001.


    Employees

    At March 17, 2017,December 31, 2020, we had 3,330(in ones) 2,704 professionals. Of these professionals, 3,2022,603 worked in our Project Management Group and 128101 worked in our Corporate office.offices. Our personnel included 2,8982,299 full-time employees, 102138 part-time employees, 216 independent external contractors and 330 independent contractors.50 external contractors provided by third-party agencies. We are not a party to any collective bargaining agreements and we have not experienced any strikes or work stoppages. We

    agreements.

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    consider our relationship with our employees to be satisfactory. In addition, we have 970 professionals working in our Construction Claims Group.

    8

    Access to Company Information

    We electronically file our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports with the United States Securities and Exchange Commission (the "SEC"). The public may read and copy any of the reports that are filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.SEC. The SEC maintains an Internetinternet site atwww.sec.gov that contains periodic reports, proxy statements, information statements and other information regarding issuers that file electronically.

    We make available, free of charge, through our website or by responding to requests addressed to our Legal Department, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed by us with the SEC pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act, as amended. These reports are available as soon as practicable after such material is filed with or furnished to the SEC. Our primary website iswww.hillintl.com. We post the charters for our audit, compensation and governance and nominating committees, corporate governance principles and code of ethics in the "Investors"“Investors” section of our website. The information contained on our website, or on other websites linked to our website, is not part of this document.


    Item 1A. Risk Factors.

    Factors

    Our business involves a number of risks and uncertainties, some of which are beyond our control. The risks and uncertainties described below could individually or collectively have a material adverse effect on our business, financial condition, results of operations and cash flows. While these are not the only risks and uncertainties we face, we believe that the more significant risks and uncertainties are as follows:

    Risks Affecting the Business

    Acts of terrorism, political, governmental and social upheaval and threats of armed conflicts in or around various areas in which we operate could limit or disrupt markets and our operations, including disruptions resulting from the evacuation of personnel, cancellation of contracts or the loss of personnel.


    Acts of terrorism, political, governmental and social upheaval and threats of armed conflicts in or around various areas in which we operate could limit or disrupt markets and our operations, including disruptions resulting from the evacuation of personnel, cancellation of contracts or the loss of personnel, and may affect timing and collectability of our accounts receivable. Such events may cause further disruption to financial and commercial markets and may generate greater political and economic instability in some of the geographic areas in which we operate. In addition, any possible reprisals as a consequence of the wars and ongoing military action in the Middle East and Africa, such as acts of terrorism in the United States or elsewhere, could have a material adverse effect on our business, results of operations and financial position.

    If our clients delay in paying or fail


    We may be unable to paycollect amounts owed to us, itwhich could have a material adverse effect on our liquidity, results of operations and financial condition.


    Accounts receivable represent the largest asset on our balance sheet. While we take steps to evaluate and manage the credit risks relating to our clients, economic downturns or other events can adversely affect the markets we serve and our clients ability to pay, which could reduce our ability to collect all amounts due from clients. In addition, political unrest in countries in which we operate and


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    the effect of the decline of oil prices have impacted and may in the future impact our collections on accounts receivable. If our clients delay in paying or fail to pay us a significant amount of our outstanding receivables, it could have a material adverse effect on our liquidity, results of operations, and financial condition.

    Our business is sensitive to oil and gas prices, and fluctuations in oil and gas prices may negatively affect our business.

    Historically, oil and natural gas prices have been volatile and are subject to fluctuations in response to changes in supply and demand, market uncertainty and a variety of additional factors that are beyond our control. Consulting fee revenue derived from our operations in major oil and gas producing countries in the Middle East and Africa is approximately 52.0% of CFR. Significant drops in oil or gas prices have led, and could lead to further slowdowns, in construction in theseoil and gas producing regions, which has had and could continue to have a material adverse effect on our business, results of operations, financial condition and cash flows.

    9

    Unfavorable global economic conditions could adversely affect our business, liquidity and financial results.

    The markets that we serve are cyclical and subject to fluctuation based on general global economic conditions and other factors. Unfavorable global economic conditions including disruption of financial markets in the United States, Europe, Brazil and elsewhere, could adversely affect our business and results of operations, primarily by limiting our access to credit and disrupting our clients'clients’ businesses. The reduction in financial institutions'institutions’ willingness or ability to lend has increased the cost of capital and reduced the availability of credit. Although we currently believe that the financial institutions with which we do business will be able to fulfill their commitments to us, there is no assurance that those institutions will be able or willing to continue to do so, which could have a material adverse impact on our business. The current European debt crisis and Brazil economic crisis may cause the value of European and Brazilian currencies, including the Euro, British pound sterling and Brazilian real, to deteriorate, thus reducing the purchasing power of European and Brazilian clients and reducing the translated amounts of U.S. dollar revenues. For the year ended December 31, 2016, 8.8% and 4.3% of our consulting fee revenue was attributable to European and Brazilian clients, respectively. In addition, any negative changeChanges in general market conditions in the United States, Europe or other national economies important to our businesseslocations where we work may adversely affect our clients'clients’ level of spending, ability to obtain financing, and ability to make timely payments to us for our services, which could require us to increase our allowance for doubtful accounts, negatively impact our days sales outstanding, and adversely affect our results of operations and liquidity.

    The sale of our Construction Claims Group is contingent upon the satisfaction of a number of conditions, may require significant time and attention of our management, and may have a material adverse effect on us whether or not the transaction is completed.

            On December 20, 2016, we announced the entrance into a Stock Purchase Agreement which would sell our Construction Claims Group. This transaction is subject to customary conditions. In addition, unanticipated developments or changes in our ability to satisfy closing conditions, in the buyer's willingness to waive unsatisfied closing conditions, or in certain litigation matters, as well as other developments, conditions, or changes may affect the closing of the sale. For these and other reasons, we may not complete the sale as expected or at all.


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            Our ongoing businesses may be adversely affected and we may be subject to certain risks and consequences as a result of pursuing the transaction, including, among others, the following:

      •
      Execution of the proposed transaction will continue to require significant time and attention from management, which may distract them from the operation of our business and the execution of other initiatives that may have been beneficial to us;

      •
      Our employees may be distracted due to uncertainty about their future roles with the Company or the Construction Claims Group pending the completion of the transaction;

      •
      We will be required to pay significant costs and expenses relating to the transaction, such as legal, accounting and other professional fees, whether or not the transaction is completed; and

      •
      We may experience negative reactions from the financial markets if we fail to complete the transaction.

            Any of these factors could have a material adverse effect on our business, financial condition, results of operations, cash flows or the price of our common stock.

    We may be unable to win new contract awards if we cannot provide clients with letters of credit, bonds or other forms of guarantees.

    In certain international regions, primarily the Middle East, it is industry practice for clients to require letters of credit, bonds, bank guarantees or other forms of guarantees. These letters of credit, bonds or guarantees indemnify our clients if we fail to perform our obligations under our contracts. We currently have relationships with various domestic and international banking institutions to assist us in providing clients with letters of credit or guarantees. In the event there are limitations in worldwide banking capacity, we may find it difficult to find sufficient bonding capacity to meet our future bonding needs. Failure to provide credit enhancements on terms required by a client may result in our inability to compete or win a project.

    International operations and doing business with foreign governments expose us to legal, political, operational and economic risks in different countries and currency exchange rate fluctuations could adversely affect our financial results.

            Our international operations contributed 68.3%, 73.8% and 76.2% of our consulting fee revenue for the years ended December 31, 2016, 2015 and 2014, respectively.

    There are risks inherent in doing business internationally, including:

    •
    Lack of developed legal systems to enforce contractual rights;

    •
    Foreign governments may assert sovereign or other immunity if we seek to assert our contractual rights thus depriving us of any ability to seek redress against them;

    •
    Greater difficulties in managing and staffing foreign operations;

    •
    Differences in employment laws and practices which could expose us to liabilities for payroll taxes, pensions and other expenses;

    •
    Inadequate or failed internal controls, processes, people, and systems associated with foreign operations;

    •
    Increased logistical complexity;

    •
    Increased selling, general and administrative expenses associated with managing a larger and more global business;

    •
    Greater risk of uncollectible accounts and longer collection cycles;

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      •
      Currency exchange rate fluctuations;

    •
    Restrictions on the transfer of cash from certain foreign countries;

    •
    Imposition of governmental controls;

    •
    Political and economic instability;

    •
    Changes in U.S. and other national government policies affecting the markets for our services and our ability to do business with certain foreign governments or their political leaders;

    •
    Conflict between U.S. and non-U.S. law;

    •
    Changes in regulatory practices, tariffs and taxes;

    •
    Less well established bankruptcy and insolvency procedures;

    •
    Potential non-compliance with a wide variety of non-U.S. laws and regulations; and

    •
    General economic, political and civil conditions in these foreign markets.

    Any of these and other factors could have a material adverse effect on our business, results of operations, financial condition or cash flows.

    10

    We operate in many different jurisdictions and we could be adversely affected by any violations of the U.S. Foreign Corrupt Practices Act or similar worldwide and local anti-corruption laws.

    The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar worldwide and local anti-corruption laws in other jurisdictions, generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. The policies also are applicable to agents through which we do business in certain non-U.S. jurisdictions. We operate in many parts of the world that have experienced governmental corruption to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. Despite our training and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from improper or criminal acts committed by our employees or agents. Our continued expansion outside the U.S., including in developing countries, could increase the risk of such violations in the future. Violations of these laws, or allegations of such violations, could disrupt our business, subject us to fines, penalties and restrictions and otherwise result in a material adverse effect on our results of operations or financial condition. All of our recently acquired businesses are subject to our internal policies. However, because our internal policies are more restrictive than some local laws or customs where we operate, we may be at an increased risk for violations while we train our new employees to comply with our internal policies and procedures.

    Our business sometimes requires our employees to travel to and work in high security risk countries, which may result in employee injury, repatriation costs or other unforeseen costs.

    Many of our employees often travel to and work in high security risk countries around the world that are undergoing or that may undergo political, social and economic upheavals resulting in war, civil unrest, criminal activity or acts of terrorism. For example, we have had and expect to continue to have significant projects in the Middle East and Africa, including in Afghanistan, Iraq, Libya, Egypt, Saudi Arabia, Qatar and Oman.Africa. As a result, we may be subject to costs related to employee injury, repatriation or other unforeseen circumstances. Further, circumstances in these countries could make it difficult or impossible to attract and retain qualified employees. Our inability to attract and retain qualified employees, to work in these countrieswhich could have a material adverse effect on our operations.



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    We depend on government contracts for a significant portion of our consulting fee revenue. Our inability to win profitable government contracts could harm our operations and adversely affect our net earnings.

            In 2016, U.S. federal government contracts and U.S. state, regional and local government contracts contributed approximately 2.2% and 21.8%, respectively, of our consulting fee revenue, and foreign government contracts contributed approximately 35.3% of our consulting fee revenue.

    Our inability to win profitable government contracts could harm our operations and adversely affect our net earnings. Government contracts are typically awarded through a heavily regulated procurement process. Some government contracts are awarded to multiple competitors, causing increases in overall competition and pricing pressure. In turn, the competition and pricing pressure may require us to make sustained post-award efforts to reduce costs under these contracts. If we are not successful in reducing the amount of costs, our profitability on these contracts may be negatively impacted. Also,In addition, some of our federal government contracts require U.S. government security clearances. If we, or certain of our personnel, were to lose these security clearances, our ability to continue performance of these contracts or to win new contracts requiring such clearances may be negatively impacted.

    We depend on long-term government contracts, many of which are funded on an annual basis. If appropriations are not made in subsequent years of a multiple-year contract, we will not realize all of our potential revenue and profit from that project.

            During the years ended December 31, 2016, 2015 and 2014, approximately 59.3%, 61.2% and 63.7%, respectively, of our consulting fee revenue was derived from contracts with federal, state, regional, local and foreign governments.

    Most government contracts are subject to the continuing availability of legislative appropriation. Legislatures typically appropriate funds for a given program on a year-by-year basis, even though contract performance may take more than one year. As a result, at the beginning of a program, the related contract is only partially funded, and additional funding is normally committed only as appropriations are made in each subsequent fiscal year. These appropriations and the timing of payment of appropriated amounts may be influenced by, among other things, the state of the economy, budgetary and other political issues affecting the particular government and its appropriations process, competing priorities for appropriation, the timing and amount of tax receipts and the overall level of government expenditures. If appropriations are not made in subsequent years on government contracts, then we will not realize all of our potential revenue and profit from those contracts.

    11

    We depend on contracts that may be terminated by our clients on short notice, which may adversely impact our ability to recognize all of our potential revenue and profit from the projects.

    Substantially all of our contracts are subject to termination by the client either at its convenience or upon our default. If one of our clients terminates a contract at its convenience, then we typically are able to recover only costs incurred or committed, settlement expenses and profit on work completed prior to termination, which could prevent us from recognizing all of our potential revenue and profit from that contract. If one of our clients terminates the contract due to our default, we could be liable for excess costs incurred by the client in re-procuring services from another source, as well as other costs.

    Our contracts with governmental agencies are subject to audit, which could result in adjustments to reimbursable contract costs or, if we are charged with wrongdoing, possible temporary or permanent suspension from participating in government programs.

    Our books and records are subject to audit by the various governmental agencies we serve and by their representatives. These audits can result in adjustments to reimbursable contract costs and allocated overhead. In addition, if as a result of an audit, we or one of our subsidiaries is charged with


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    wrongdoing or the government agency determines that we or one of our subsidiaries is otherwise no longer eligible for federal contracts, then we or, as applicable, that subsidiary, could be temporarily suspended or, in the event of convictions or civil judgments, could be prohibited from bidding on and receiving future government contracts for a period of time. Furthermore, as a U.S.United States government contractor, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities, the results of which could have a material adverse effect on our operations.


    We submit change orders to our clients for work we perform beyond the scope of some of our contracts. If our clients do not approve these change orders, our net earnings could be adversely impacted.

    We typically submit change orders under some of our contracts, typically for payment for work performed beyond the initial contractual requirements. The clients may not approve or may contest these change orders and we cannot assure you that these claims will be approved in whole, in part or at all. If these claims are not approved, our net earnings could be adversely impacted.

    Because our

    Our backlog of uncompleted projects under contract or awarded is subject to unexpected adjustments and cancellations, including the amount, if any, of future appropriations by the applicable contracting governmental agency, and it may not be indicative of our future revenue and profits.

            At December 31, 2016, our backlog of uncompleted projects under contract or awarded was approximately $831 million.

    The inability to obtain financing or governmental approvals, changes in economic or market conditions or other unforeseen events, such as terrorist acts or natural disasters, could lead to us not realizing any revenue under some or all of these contracts. We cannot assure you that the backlog attributed to any of our uncompleted projects under contract will be realized as revenue or, if realized, will result in profits.

    Many projects may remain in our backlog for an extended period of time because of the size or long-term nature of the contract. In addition, from time to time, projects are scaled back or cancelled.canceled. These types of backlog reductions adversely affect the revenue and profit that we ultimately receive. Included in our backlog is the maximum amount of all indefinite delivery/indefinite quantity ("ID/IQ"), or task order, contracts, or a lesser amount if we do not reasonably expect to be issued task orders for the maximum amount of such contracts. A significant amountportion of our backlog is derivedcontains estimated revenue from ID/IQ contracts, andin which, we only include backlog for work that has been approved by the client. We cannot provide any assurance that we will, in fact, be awarded the maximum amount of such contracts.

    Our dependence on subcontractors, partners and specialists could adversely affect our business.

    We rely on third-party subcontractors as well as third-party strategic partners and specialists to complete our projects. To the extent that we cannot engage such subcontractors, partners or specialists or cannot engage them on a competitive basis, our ability to complete a project in a timely fashion or at a profit may be impaired. If we are unable to engage appropriate strategic partners or specialists in some instances, we could lose the ability to win some contracts. In addition, if a subcontractor or specialist is unable to deliver its services according to the negotiated terms for any reason, including the deterioration of its financial condition or over-commitment of its resources, we may be required to purchase the services from another source at a higher price. This may reduce the profit to be realized or result in a loss on a project for which the services were needed.

    12

    If our partners fail to perform their contractual obligations on a project, we could be exposed to legal liability, loss of reputation or reduced profits.

    We sometimes enter into joint venture agreements and other contractual arrangements with outside partners to jointly bid on and execute a particular project. The success of these joint projects


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    depends on the satisfactory performance of the contractual obligations of both our partners.partners and us. If any of our partners fails to satisfactorily perform its contractual obligations, we may be required to make additional investments and provide additional services to complete the project. If we are unable to adequately address our partner'spartner’s performance issues, then our client could terminate the joint project, exposing us to legal liability, loss of reputation or reduced profits.

    The project management business is highly competitive and, if we fail to compete effectively, we may miss new business opportunities or lose existing clients and our revenues may decline.

    The project management industry is highly competitive. We compete for contracts, primarily based on the basis of technical capability, with numerous entities, including other construction management companies, design or engineering firms, general contractors, other "pure" construction management companies, management consulting firms and other entities. Compared to us, many of these competitors are larger, well-established companies that have broader geographic scope and greater financial and other resources. If we cannot compete effectively with our competitors, or if the costs of competing, including the costs of retaining and hiring professionals, become too expensive, our revenue growth and financial results may differ materially from our expectations.


    We have acquired and may continue to acquire businesses as strategic opportunities arise and may be unable to realize the anticipated benefits of those acquisitions, or if we are unable to take advantage of strategic acquisition situations, our ability to expand our business may be slowed or curtailed.

            Over

    In the past, 18 years, we have acquired 14 companies related to the Project Managementproject management business and our strategy is towe may continue to expand and diversify our operations with additional acquisitions as strategic opportunities arise. If the competition for acquisitions increases, or if the cost of acquiring businesses or assets becomes too expensive, the number of suitable acquisition opportunities may decline, the cost of making an acquisition may increase or we may be forced to agree to less advantageous acquisition terms for the companies that we are able to acquire. Alternatively, at the time an acquisition opportunity presents itself, internal and external pressures (including, but not limited to, borrowing capacity under our credit facilities or the availability of alternative financing), may cause us to be unable to pursue or complete an acquisition. Our ability to grow our business, particularly through acquisitions, may depend on our ability to raise capital by selling equity or debt securities or obtaining additional debt financing. There can be no assurance that we will be able to obtain financing when we need it or on terms acceptable to us.

    In addition, managing the growth of our operations will require us to continually increase and improve our operational, financial and human resources management and our internal systems and controls. If we are unable to manage growth effectively or to successfully integrate acquisitions or if we are unable to grow organically, that could have a material adverse effect on our business.


    Systems and information technology interruption and breaches in data security could adversely impact our ability to operate and our operating results.

            As a global company, we

    We are heavily reliant on computer, information and communications technology and related systems in order to properly operate. From time to time, we experience system interruptions and delays. In the event we are unable to regularly deploy software and hardware, effectively upgrade our systems and network infrastructure and take other steps to improve the efficiency and effectiveness of our systems, the operation of such systems could be interrupted or delayed, or our data security could be breached. In addition, our computer and communications systems and operations could be damaged or interrupted by natural disasters, power loss, telecommunications failures, acts of war or terrorism, acts of God, computer viruses, physical or electronic security breaches. Any of these or other events could cause system interruptions, delays and loss of critical data including private data. While we have taken steps to address these concerns by


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    implementing sophisticated network security, training and internal control measures, there can be no assurance that a system failure or loss or data security breach will not materially adversely affect our business, financial condition and operating results.


    13

    We are required to provide Performance Guarantees to our clients on some of our projects. If claims are made by our clients on the Performance Guarantees, the result could have a material adverse impact on our business, financial condition, results of operations and cash flows.

    We are often required to provide a Performance Guarantee to our clients on projects. The guarantees provide monetary compensation to the client should we fail to perform our obligations under the contract. Some of these Performance Guarantees are unconditional in that the client can request and receive payment at any time, for any reason. Historically, payments have not been unconditionally claimed from our clients. Performance Guarantee claims made by clients could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

    Brexit may impact our business in Europe.

    The decision made in the British referendum of June 23, 2016 to leave the European Union, commonly referred to as "Brexit," has led to volatility in the financial markets of the United Kingdom and more broadly across Europe and may also lead to weakening in consumer, corporate and financial confidence in such markets. On January 31, 2020, the United Kingdom ceased to be a member state of the European Union. As of that date, the United Kingdom entered a transitional period with the European Union, which is expected to continue through December 31, 2020. During this transitional period, the United Kingdom retains access to the E.U. single market and customs union and the United Kingdom and European Union are expected to attempt to negotiate various aspects of their future relationship following the transitional period, including a free trade deal.

    The long-term effects of Brexit will depend on the agreements or arrangements between the United Kingdom and the European Union, and the extent to which the United Kingdom retains access to E.U. markets both during and after the transitional period. The longer term economic, legal, political and social framework to be put in place between the United Kingdom and the European Union is unclear at this stage and is likely to lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European markets for some time. In particular, Brexit caused significant volatility in global stock markets and currency exchange fluctuations. To the extent our accounts receivable are denominated in British Pounds, we may be subject to increased risks related to currency exchange rates.

    In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which E.U. laws to replace or replicate. Brexit could also have a destabilizing effect if other E.U. member states were to consider the option of leaving the European Union. For these reasons, the United Kingdom's exit from the European Union could have adverse consequences on our business, financial condition and results of operations.

    New legal requirements in connection with climate change could adversely affect our operating results.

    Our business and results of operations could be adversely affected by the passage of new climate change, defense, environmental, infrastructure and other laws, policies and regulations. Growing concerns about climate change and greenhouse gases, such as those adopted under the United Nations COP-21 Paris Agreement or the EPA Clean Power Plan, may result in the imposition of additional environmental regulations for our clients' projects in the buildings, transportation, environmental, energy and industrial markets worldwide. For example, legislation, international protocols, regulation or other restrictions on emissions regulations could increase the costs of projects for our clients or, in some cases, prevent a project from going forward, thereby potentially reducing the need for our services. We cannot predict when or whether any of these various proposals may be enacted or what their effect will be on us or on our clients.

    The coronavirus outbreak could impact our international operations and results of operations.

    Our business and results of operations could be materially and adversely affected by the effects of a widespread outbreak of a contagious disease, including the recent outbreak of the respiratory illness caused by a coronavirus strain first identified in Wuhan, Hubei Province, China, or any other outbreak of contagious diseases, and other adverse public health developments. These effects could include disruptions or restrictions on our employees’ and subcontractors’ ability to travel, as well as temporary closures of the facilities and areas where we perform our work. Any disruption of current projects, including effects on the supply chain on which our projects depend, could adversely impact our business and results of operations which could also lead to a loss of clients, as well as competitive or business harm. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our services, including the award of future projects, and could impact our results of operations.


    14

    Risks Related to Ownership of Our Common Stock

    We have identified material weaknesses in our internal control over financial reporting and determined that our disclosure controls and procedures were not effective which could, if not remediated, result in additional material misstatements in our financial statements.

    Our management is responsible for establishing and maintaining adequate disclosure controls and procedures and internal control over our financial reporting, as defined in Rules 13a-15(e) and 13a-15(f), respectively, under the Securities Exchange Act of 1934, as amended. As disclosed in Item 9A of this Annual Report on Form 10-K, management has identified several material weaknesses in our internal control over financial reporting and has determined that our disclosure controls and procedures were not effective based upon our identification of certain errors related to the estimation of potential losses on our accounts receivable and ineffective procedures related to the accounting close process, accounting estimates, and non-routine transactions in addition to a newly identified material weakness related to certain tax controls.effective. A material weakness is defined as a deficiency, or combination of significant deficiencies, in internal control over financial reporting, such that there is a more than a remote likelihood that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of these material weaknesses, our management concluded that the Company did not maintain effective disclosure controls and procedures and internal control over financial reporting as of December 31, 2016.

    2020.


    We have developed and implementedhave begun to implement a remediation plan designed to address these material weaknesses in internal control over financial reporting and ineffective disclosure controls and procedures. If our remedial measures are insufficient, or if additional material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, which could materially and adversely affect our business and results of operations or financial condition, restrict our ability to access the capital markets, require us to expend significant resources to correct the weaknesses or deficiencies, subject us to fines, penalties or judgments, harm our reputation or otherwise cause a decline in investor confidence.

    Future sales of our common and preferred stock may depress the price of our common stock.

    As of March 17, 2017,2, 2021, there were 51,859,47956,481 shares of our common stock outstanding. An additional 6,627,4731,563 shares of our common stock may be issued upon the exercise of options held by employees, management and directors.directors and an additional 2,452 shares of our common stock may be issued upon the vesting of restricted and deferred stock units. We also have the authority, to issue up to 1,000,000 shares of preferred stock upon terms that areas determined by our Board of Directors, to issue up to 1,000 shares of preferred stock and additional options to purchase 2,077,4594,015 shares of our common stock without stockholder approval. In addition, we have a registration statement on file with the SEC for an aggregate issuance of 20,000,000 common shares (of which 10,453,371 shares remain available for issuance), which may be used for working capital and general corporate purposes, subject to the restrictions of our Secured Credit Facilities and another registration statement on file with the SEC for an aggregate issuance of 20,000,000 common shares, (of which 18,926,804 shares remain available for issuance), which may be used in future acquisitions. Sales of a substantial number of these shares in the public market, or factors relating to the terms we may determine for our preferred stock, options or warrants, could decrease the market price of our common stock. In addition, the perception that such sales might occur may cause the market price of our common stock to decline. Future issuances or sales of our preferred stock or common stock could have an adverse effect on the market price of our common stock.


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    Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

    We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends is limited by covenants of our Secured Credit Facilities and may be limited by future indebtedness incurred by usour subsidiaries or our subsidiaries.us. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.


    We are able to issue shares of preferred stock with greater rights than our common stock.

    Our Board of Directors is authorized to issue one or more series of preferred stock from time to time without any action on the part of our stockholders. Our Board of Directors also has the power, without stockholder approval, to set the terms of any such series of preferred stock that may be issued, including voting rights, dividend rights and preferences over our common stock with respect to dividends and other terms. If we issue preferred stock in the future that has a preference over our common stock with respect to the payment of dividends or other terms, or if we issue preferred stock with voting rights that dilute the voting power of our common stock, the rights of holders of our common stock or the market price of our common stock could be adversely affected.

    15

    Provisions in our organizational documents and Delaware law could discourage potential acquisition proposals, could delay or prevent a change in control of the Company that our stockholders may consider favorable and could adversely affect the market value of our common stock.

    Provisions in our organizational documents and Delaware law could discourage potential acquisition proposals, could delay or prevent a change in control of the Company that our stockholders may consider favorable and could adversely affect the market value of our common stock. Our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:


    •
    Our Board of Directors is expressly authorized to make, alter or repeal our bylaws;

    •
    Our Board of Directors is divided into three classes of service with staggered three-year terms. This means that only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective terms;

    •
    Our Board of Directors is authorized to issue preferred stock without stockholder approval;

    •
    Only our Board of Directors, our Chairman of the Board, our Chief Executive Officer or the holders of not less than 25% of our outstanding common stock and entitled to vote may call a special meeting of stockholders;

    •
    Our bylaws require advance notice for stockholder proposals and director nominations;

    •
    Our bylaws limit the removal of directors and the filling of director vacancies; and

    •
    We will indemnify officers and directors against losses that may incur in connection with investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.

    These provisions may make it more difficult for stockholders to take specific corporate actions and could have the effect of delaying or preventing a change in control of the Company.


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    In addition, Section 203 of the Delaware General Corporation Law imposes certain restrictions on mergers and other business combinations between the Company and any holder of 15% or more of our outstanding common stock. This provision is applicable to Hill and may have an anti-takeover effect that may delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in the stockholder'sstockholder’s best interest. In general, Section 203 could delay for three years and impose conditions upon "business combinations"“business combinations” between an "interested shareholder"“interested shareholder” and Hill, unless prior approval by our Board of Directors is given. The term "business combination"“business combination” is defined broadly to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder. An "interested“interested shareholder,"” in general, would be a person who, together with affiliates and associates, owns or within three years did own, 15% or more of a corporation'scorporation’s voting stock.

    A small group of stockholders ownowns a large quantity of our common stock, thereby potentially exerting significant influence over the Company.

            As of December 31, 2016, Irvin E. Richter, David L. Richter and other members of the Richter family beneficially owned approximately 20.5% of our common stock.


    This concentration of ownership could significantly influence matters requiring stockholder approval and could delay, deter or prevent a change in control of the Company or other business combinations that might otherwise be beneficial to our other stockholders. Accordingly, this concentration of ownership may impact the market price of our common stock. In addition, the interest of our significant stockholders may not always coincide with the interest of the Company'sCompany’s other stockholders. In deciding how to vote on such matters, they may be influenced by interests that conflict with our other stockholders.


    Item 1B.Unresolved Staff Comments.

    Comments

    None.

    16


    Item 2.    Properties.

    Properties

    Our executive and certainoffice is an operating offices arelease currently located at One Commerce Square, 2005 Market Street, 17th Floor, Philadelphia, Pennsylvania 19103. We lease all of our office space and do not own any real property. The telephone number at our executive office is (215) 309-7700. In addition to our executive offices, weWe have approximately 10070 operating leases for office facilities throughout the world. Due to acquisition and growth we may have more than one operating lease in the cities in which we are located. Additional space may be required asworld, including our business expands geographically, but we believe we will be able to obtain suitable space as needed.

    executive offices.

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            As of March 17, 2017, our

    Our principal worldwide office locations and the geographic regions in which we reflect their operations are:

    are as follows:
    U.S./Canada

    Albuquerque, NM
    Atlanta, GA
    Americas    		EuropeMiddle East/Asia/Pacific
    Austin, TX
    Baltimore, MD
    Bensalem, PA
    		Amsterdam, NetherlandsAbu Dhabi, UAE
    Boston, MA
    Broadview Heights,    		Athens, GreeceBaghdad, Iraq
    Cleveland, OH
    		Barcelona, SpainDoha, Qatar
    Columbus, OH
    		Belgrade, SerbiaDubai, UAE
    East Hartford, CT
    Fresno, CA
    Granite Bay, CA
    		Bucharest, RomaniaJeddah, Saudi Arabia
    Fords, NJFrankfurt, GermanyKabul, Afghanistan
    Houston, TX
    		Geneva, SwitzerlandManama, Bahrain
    Irvine, CA
    		Istanbul, TurkeyMuscat, Oman
    Irving, TX
    		Lisbon, PortugalRiyadh, Saudi Arabia
    Jacksonville, FL
    Las Vegas, NV
    Lemont Furnace, PA
    Los Angeles, CA
    		Madrid, SpainBeijing, China
    Miami, FL
    Mission Viejo, CA
    		Nicosia, CyprusGurgaon, India
    New York, NY
    		Nur-Sultan, KazakhstanHong Kong, China
    New Orleans, LAPristina, KosovoIslamabad, Pakistan
    Oakland, CARome, ItalyMumbai, India
    Ontario, CA
    		Sarajevo Bosnia and HerzegovinaSingapore
    Orlando, FL
    Perrysburg, OH
    		Skopje, North Macedonia
    Philadelphia, PA (Headquarters)
    		Tbilisi, GeorgiaAfrica
    Phoenix, AZ
    		Tirana, AlbaniaAlgiers, Algeria
    Pittsburgh, PA
    Providence, RI
    		Warsaw, PolandCairo, Egypt
    Plantation, FLWroclaw, PolandCasablanca, Morocco
    San Diego, CA
    		Tripoli, Libya
    San Francisco, CA
    San Jose, CA
    Seattle, WA
    Spokane, WA
    Tampa, FL
    Toronto, Canada
    Woodbridge, NJ
    Toledo, OH
    Uniontown, PA
    Washington, DCEurope

    Amsterdam, Netherlands
    Athens, Greece
    Baku, Azerbaijan
    Barcelona, Spain
    Belgrade, Serbia
    Birmingham, UK
    Bucharest, Romania
    Cumbria, UK
    Daresbury, UK
    Dundee, UK
    Dusseldorf, Germany
    Edinburgh, UK
    Frankfurt, Germany
    Geneva, Switzerland
    Glasgow, UK
    Hamburge, Germany
    Istanbul, Turkey
    Lisbon, Portugal
    London, UK
    Luxembourg
    Madrid, Spain
    Manchester, UK
    Munich, Germany
    Pristina, Kosovo
    Riga, Latvia
    Teesdale, UK
    Warsaw, Poland

    Latin America/
    the Caribbean

    Bogota, Colombia
    Mexico City, Mexico
    Rio de Janeiro, Brazil
    Sao Paulo, Brazil
    Trinidad and Tobago    		Middle East

    Abu Dhabi, UAE
    Amman, Jordan
    Aqaba, Jordan
    Baghdad, Iraq
    Doha, Qatar
    Dubai, UAE
    Jeddah, Saudi Arabia
    Kuwait City, Kuwait
    Manama, Bahrain
    Muscat, Oman
    Riyadh, Saudi Arabia

    Africa

    Algiers, Algeria
    Cairo, Egypt
    Cape Town, South Africa
    Casablanca, Morocco
    Johannesburg, South Africa
    Tripoli, Libya

    Asia/Pacific
    Almaty, Kazakhstan
    Astana City, Kazakhstan
    Beijing, China
    Brisbane, Australia
    Danang City, Vietnam
    Gurgaon, India
    Hong Kong, China
    Jakarta, Indonesia
    Kabul, Afghanistan
    Kuala Lumpur, Malaysia
    Manila, Philippines
    Melbourne, Australia
    Perth, Australia
    Shanghai, China
    Singapore
    Sydney, Australia


    Item 3.Legal Proceedings.

    General Litigation

            Knowles Limited ("Knowles"), a subsidiary of the Company's Construction Claims Group, is a party to an arbitration proceeding instituted on July 8, 2014 in which Knowles claimed that it was entitled to payment for services rendered to Celtic Bioenergy Limited ("Celtic"). The arbitrator decided in favor of Knowles. The arbitrator's award was appealed by Celtic to the U.K. High Court of Justice, Queen's Bench Division, Technology and Construction Court ("Court"). On March 16, 2017, the Court (1) determined that certain relevant facts had been deliberately withheld from the arbitrator


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    by an employee of Knowles and (2) remitted the challenged parts of the arbitrator's award back to the arbitrator to consider the award in possession of the full facts. The Company is evaluating the impact of the judgment of the Court.

    From time to time, the Company is a defendant or plaintiff in various legal actionsproceedings which arise in the normal course of business. As such, the Company is required to assess the likelihood of any adverse outcomes to these mattersproceedings 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.proceeding. 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'sCompany’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 mattersproceedings will not have a material adverse effect on the Company'sCompany’s financial condition, results of operations or cash flows.


    17

    Knowles Limited (“Knowles”), a subsidiary of the Company, is a party to an arbitration proceeding instituted on July 8, 2014 in which Knowles claimed that it was entitled to payment for services rendered to Celtic Bioenergy Limited (“Celtic”). The arbitrator decided in favor of Knowles. The arbitrator’s award was appealed by Celtic to the U.K. High Court of Justice, Queen’s Bench Division, Technology and Construction Court (“Court”). On March 16, 2017, the Court (1) determined that certain relevant facts had been deliberately withheld from the arbitrator by an employee of Knowles and (2) remitted the challenged parts of the arbitrator’s award back to the arbitrator to consider the award in possession of the full facts. In May 2019, Celtic issued a claim against Knowles for negligent application and a hearing was held in December 2019. The arbitration was concluded in August 2020 in Knowles' favor. Celtic has appealed the arbitrator's decision.

    Loss on Performance Bond

    The Company is often required to provide a Performance Guarantee to our clients on projects. The guarantees provide monetary compensation to the client should we fail to perform our obligations under the contract. Some of these Performance Guarantees are unconditional in that the client can request and receive payment at any time, for any reason. Historically, payments have not been unconditionally claimed from our clients. Performance Guarantee claims made by clients could have a material adverse impact on our business, financial condition, results of operations, and cash flows.

    On February 8, 2018, the Company received notice from the First Abu Dhabi Bank ("FAB", formerly known as the National Bank of Abu Dhabi) that Public Authority of Housing Welfare of Kuwait submitted a claim for payment on a Performance Guarantee issued by the Company for approximately $7,938 for a project located in Kuwait. FAB subsequently issued, on behalf of the Company, such payment on February 15, 2018. The Company is taking legal action to recover the full Performance Guarantee amount. On September 20, 2018 the Kuwait First Instance Court dismissed the Company's case. As a result, the Company fully reserved the performance guarantee payment above in the first quarter of 2018 and it is presented as "Loss on Performance Bond" on the consolidated statements of operations. The Company filed an appeal before the Kuwait Court of Appeals seeking referral of the matter to a panel of experts for determination. On April 21, 2019, the Court of Appeals ruled to refer the matter to the Kuwait Experts Department. Hearings with the Kuwait Experts Department were held during July and September 2019. A final report from the panel of experts was issued by the panel of experts in October 2019 for the held hearings on January 7, 2020 and February 4, 2020 and reserved the case for judgement to be issued. We filed a pleading before the Kuwait Cassation Court in August 2020 and we are awaiting a decision.

    Item 4.Mine Safety Disclosures.

    Disclosures

    Not applicable.


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    18

    PART II


    Item 5.Market for Registrant'sRegistrant’s Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities.

    Securities

    Market Information

    Our common stock is tradedtrades on the New York Stock Exchange ("NYSE")NYSE under the trading symbol "HIL." The following table includes the range of high and low trading prices for our common stock as reported on the NYSE for the periods presented.

    “HIL.”
     
    		 Price Range 
     
    		 High Low 

    2016

    		       

    Fourth Quarter

    		 $4.62 $1.95 

    Third Quarter

    		  4.64  3.96 

    Second Quarter

    		  4.68  3.20 

    First Quarter

    		  4.07  2.62 

    2015

    		  
         		  
         		 

    Fourth Quarter

    		 $4.02 $3.11 

    Third Quarter

    		  5.38  3.20 

    Second Quarter

    		  5.50  3.49 

    First Quarter

    		  4.38  3.26 
    Stockholders

    Stockholders

    As of December 31, 2016,March 2, 2021, there were 90approximately 67 holders of record of our common stock. However, a single record stockholder account may represent multiple beneficial owners, including owners of shares in street name accounts. We believeAs of March 2, 2021, there arewere approximately 5,0002,822 beneficial owners of our common stock.

    Dividends

    We have not paid any dividends on our common stock. The payment of dividends in the future will be contingent upon our earnings, if any, capital requirements and general financial condition of our business. Our Secured Credit Facilities currently limit the payment of dividends.

    Securities Authorized for Issuance under Equity Compensation Plans

    The table setting forth this information is included in Part III—III — Item 12. 12 ("Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

    Matters") of this Form 10-K.


    Recent Sales of Unregistered Securities

    None.

    Performance Graph

            The performance graph and table below compare the cumulative total return of our common stock for the period from December 31, 2011 to December 31, 2016 with the comparable cumulative total returns of the Russell 2000 Index (of which the Company is a component stock) and a peer group which consists of the following ten companies: AECOM (ACM), CDI Corp. (CDI), Fluor Corporation (FLR), Granite Construction Incorporated (GVA), Jacobs Engineering Group Inc. (JEC), KBR, Inc. (KBR), NV5 Global, Inc. (NVEE), TRC Companies Inc. (TRR), Tutor Perini Corporation (TPC), and


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    Tetra Tech, Inc. (TTEK). For 2016, we changed our peer group to consist of only construction companies. In prior years, the peer group consisted of a blend of construction companies and consulting companies.


     
    		 2011 2012 2013 2014 2015 2016 

    Hill International, Inc. 

    		 $100.00 $71.21 $76.85 $74.71 $75.49 $84.63 

    Russell 2000 Index

    		  100.00  116.35  161.52  169.42  161.95  196.45 

    Peer Group

    		  100.00  114.46  149.81  116.27  105.39  132.04 

    Old Peer Group

    		  100.00  112.30  150.15  116.81  106.25  134.70 

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    Item 6.Selected Financial Data.

            The following is selected financial data from our audited consolidated financial statements for each of the last five years. This data should be read in conjunction with our consolidated financial statements (and related notes) appearing in Item 8 of this report and with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." On December 20, 2016, we entered into a definitive Stock Purchase Agreement to sell our Construction Claims Group, which is reported as discontinued operations for each year presented. See Note 3 to our consolidated financial statements for additional information. The data presented below is in thousands, except for (loss) earnings per share data.

    Data

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 2013 2012 

    Income Statement Data:

    		                

    Consulting fee revenue

    		 $434,147 $467,877 $428,827 $392,602 $312,232 

    Reimbursable expenses

    		  86,700  84,699  58,927  59,915  60,049 
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​

    Total revenue

    		  520,847  552,576  487,754  452,517  372,281 
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​

    Cost of services

    		  272,243  288,845  263,806  244,003  192,592 

    Reimbursable expenses

    		  86,700  84,699  58,927  59,915  60,049 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Total direct expenses

    		  358,943  373,544  322,733  303,918  252,641 
    ​​​​ ​​ ​ ​​ ​​​ ​ ​​ ​​

    Gross profit

    		  161,904  179,032  165,021  148,599  119,640 

    Selling, general and administrative expenses

    		  
    162,721    		  
    159,691    		  
    142,079    		  
    126,072    		  
    171,013    		 

    Share of loss of equity method affiliates

    		  37  237  —  —  — 
    ​​​​ ​​ ​ ​​ ​​​ ​ ​​ ​​

    Operating (loss) profit

    		  (854) 19,104  22,942  22,527  (51,373)

    Interest and related financing fees, net

    		  694  2,026  1,564  1,841  2,353 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    (Loss) earnings before income taxes

    		  (1,548) 17,078  21,378  20,686  (53,726)

    Income tax expense

    		  6,068  6,465  7,512  4,558  12,388 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    (Loss) earnings from continuing operations

    		  (7,616) 10,613  13,866  16,128  (66,114)

    Loss from discontinued operations

    		  (11,076) (2,874) (18,713) (10,644) (8,780)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Net (loss) earnings

    		  (18,692) 7,739  (4,847) 5,484  (74,894)

    Less: net earnings—noncontrolling interests

    		  136  808  1,301  1,922  1,872 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

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

    		 $(18,828)$6,931 $(6,148)$3,562 $(76,766)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Basic (loss) earnings per common share from continuing operations

    		 $(0.15)$0.20 $0.28 $0.36 $(1.76)

    Basic (loss) per common share from discontinued operations

    		  (0.21) (0.06) (0.42) (0.27) (0.23)
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​

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

    		 $(0.36)$0.14 $(0.14)$0.09 $(1.99)
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​ ​​ ​ ​​​ ​

    Basic weighted average common shares outstanding

    		  51,724  50,874  44,370  39,098  38,500 
    ​​​ ​ ​​ ​ ​​​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Diluted (loss) earnings per common share from continuing operations

    		 $(0.15)$0.20 $0.28 $0.36 $(1.76)

    Diluted (loss) per common share from discontinued operations

    		  (0.21) (0.06) (0.42) (0.27) (0.23)
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​

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

    		 $(0.36)$0.14 $(0.14)$0.09 $(1.99)
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​ ​​ ​ ​​​ ​

    Diluted weighted average common shares outstanding

    		  51,724  51,311  44,370  39,322  38,500 
    ​​​ ​ ​​ ​ ​​​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    Not applicable.

    Table of Contents

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 2013 2012 

    Discontinued Operations Data(1):

    		                

    Consulting fee revenue

    		 $164,478 $163,074 $148,290 $119,483 $105,366 

    Operating profit

    		  6,517(2) 11,740  10,996  12,171  8,071 

    Interest and related financing fees, net

    		  12,932  12,637  28,921  21,023  15,797 

    (Loss) before income taxes

    		  (6,415) (897) (17,925) (8,852) (7,726)

    Loss from discontinued operations

    		  (11,076) (2,874) (18,713) (10,644) (8,780)
    (1)
    See Note 3 to our consolidated financial statements for further information regarding this statement.

    (2)
    There were significant expenses totaling $5,150,000 that adversly affected discontinued operations for 2016. The expenses consisted of $3,044,000 of legal and other professional fees related to the pending sale and $2,106,000 related to certain tax matters in foreign jurisdictions.

     
    		 As of December 31, 
     
    		 2016 2015 2014 2013 2012 

    Selected Balance Sheet Data:

    		                

    Cash and cash equivalents

    		 $25,637 $24,089 $30,124 $30,381 $16,716 

    Accounts receivable, net

    		  164,554  187,553  145,330  128,241  109,440 

    Current assets held for sale

    		  54,144  60,092  53,393  51,071  45,557 

    Current assets

    		  266,171  291,591  256,589  238,298  194,582 

    Noncurrent assets held for sale

    		  33,298  36,608  39,126  38,588  39,427 

    Total assets

    		  401,208  428,746  412,897  393,476  363,905 

    Current liabilities held for sale

    		  27,703  27,497  28,779  22,258  17,550 

    Current liabilities

    		  140,104  143,048  139,244  139,124  138,082 

    Noncurrent liabilities held for sale

    		  4,679  6,403  4,326  4,043  4,551 

    Total debt

    		  144,103  144,983  121,524  131,235  106,704 

    Stockholders' equity:

    		                

    Hill International, Inc. share of equity

    		 $88,370 $113,969 $113,288 $84,969 $78,997 

    Noncontrolling interests

    		  2,016  4,070  8,712  11,887  13,557 
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​

    Total equity

    		 $90,386 $118,039 $122,000 $96,856 $92,554 
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​ ​​ ​ ​​ ​ ​

    Table of Contents

    Item 7.    Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.

    Operations


    Introduction

    The following discussion should be read in conjunction with the other sections of this report, including the Financial Statements and Supplementary Data, contained in Part II, Item 8 of this Annual Report on Form 10-K. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in Part I, “Cautionary Note Regarding Forward-Looking Statements” and Part I, Item 1A.“Risk Factors.” We assume no obligation to update any of these forward-looking statements.

    Overview

            On December 20, 2016,

    We earn revenue by deploying professionals to provide services to our clients, including project management, construction management facilities management and related consulting. These services are primarily delivered on a “cost plus” or “time and materials” ("T&M") basis in which we entered intobill negotiated hourly or monthly rates or a definitive Stock Purchase Agreement to sell our Construction Claims Group,negotiated multiple of the direct cost of these professionals, plus actual out-of-pocket expenses. Our direct expenses are the actual cost of these professionals, including most payroll and benefits, except for paid time-off, which is reported herein as discontinued operations. This transaction will permit us to better focus on our Project Management business. See Note 3 to our consolidated financial statements forrecorded in selling, general and administrative expenses ("SG&A"). We also provide services under fixed price contracts and T&M contracts with a description of the transaction.

    cap.


    19


    Our revenue consists of two components: consulting fee revenue ("CFR")CFR and reimbursable expenses. Reimbursable expensesThe professionals we deploy are reflected in equaloccasionally subcontractors. We generally bill the actual cost of these subcontractors and recognize this cost as both revenue (reimbursable expenses) and direct expense. CFR refers to our revenue excluding amounts in bothpaid or due to subcontractors. We believe CFR is an important measure because it represents the revenue on which we earn gross profit, whereas total revenue includes the costs for subcontractors on which we generally pass through and total direct expenses. Because these pass-through revenue/earn minimal or no gross profit.

    We compete for business based on a variety of factors such as technical capability, global resources, price, reputation and past experience, including client requirements for substantial experience in similar projects. We have developed significant long-standing relationships, which bring us repeat business and would be very difficult to replicate. We believe we have an excellent reputation for attracting and retaining professionals. In addition, we believe there are high barriers to entry for new competitors especially in the project management market.

    SG&A expenses consist primarily of personnel costs that are subjectnot billable and corporate or regional costs such as sales, business development, proposals, operations, finance, human resources, legal, marketing, management and administration.

    The Company operates in a single reporting segment, known as the Project Management Group which provides fee-based project, construction and facilities management services to significant fluctuationour clients. Our experienced professionals are capable of managing all phases of the construction process from year to year, we measureconcept through completion, including cost and budget controls, scheduling, estimating, expediting, inspection, contract administration and management of contractors, subcontractors and suppliers. 

    Impact of COVID-19 on our Business

    In December 2019, COVID-19 was identified in Wuhan, China. In March 2020, the performanceWorld Health Organization declared COVID-19 a global pandemic as a result of manythe further spread of the virus into all regions of the world, including those regions where our primary operations occur.
    We instituted a work-from-home policy for all offices and employees globally in late March 2020, except for field-based employees who normally work on-site at our client’s facilities. These field-based employees are complying with our respective clients’ policies. The majority of our key operating metricsfield employees are located in the regions where they deliver their services, so travel restrictions enacted by various government authorities did not impair their ability to continue to perform services for our clients. Employees have been returning to their assigned offices, on a modified basis, as their city, state and country reopens, consistent with the applicable requirements of local law.
    Most of the projects to which we provide services have been classified as essential services by the relevant governmental authority and as such have continued despite restrictions on the operation of "non-essential" businesses by certain governmental authorities. The majority of our billable employees have continued to provide billable services to our clients, either on-site or remotely at the same or at a percentageslightly reduced volume as in effect prior to the spread of COVID-19. We estimate that COVID-19 resulted in loss of CFR of approximately $25,000 for the twelve months ended December 31, 2020, inclusive of delayed projects awards and cancellations brought on by the virus.

    Nearly all our employees had company laptop computers and the ability to work remotely prior to the institution of our work-at-home policy. The work-at-home policy did not have a significant impact on our employees’ ability to perform their job requirements. Our internal control structure does not generally require physical access to our office locations, and has not to date and is not expected in the future to be adversely impacted by the spread of COVID-19 and the corresponding response by certain governmental authorities. Processes that require physical access to our offices, such as we believe that this isreceiving mail (including collections) and processing and mailing manual checks, are being performed by designated individuals at a betterreduced frequency while certain of our offices remain closed.
    The main impacts on our business observed to date other than those discussed above are delays in the procurement processes of a number of our current and more consistent measurepotential clients and a temporary slowing of operating performancecertain collections. We expect these delays in the procurement process to adversely impact the timing of our new bookings, resulting in lower bookings, CFR and backlog for the duration of the economic slowdown caused by the pandemic.
    We also experienced a slightly lower than total revenue.

            Over the years, thenormal amount of CFR attributablecollections during the latter part of March. Collections returned to operations ina more normal level during the Middle Eastsecond quarter and Africa has grown to approximately 52.0%remained at a more normal level through the remainder of total consolidated CFR in 2016. There has been significant political upheavalthe year. We had unrestricted cash of $34,229 and civil unrest in certain parts of this region, most notably in Libya and Iraq where we previously had substantial operations. In 2012, we reserved a $59,937,000 receivable from the Libyan Organization for Development of Administrative Centres ("ODAC"). Subsequently, we have received payments totaling approximately $9,511,000, but this situation with ODAC put a considerable strainavailable borrowing capacity on our liquidity. In 2016, we established reservescredit facilities totaling $11,711 at December 31, 2020.

    20

    Management implemented various actions and policies that resulted in approximately $11,000 in cost reductions to partially offset the expected reduction in CFR. This is higher than the $10,000 estimated previously due to the continuation of $5,100,000 against accounts receivable from various projects in Iraq. As a result, we have had to rely heavily on debt and equity transactions to fund our operations.

            We have recently seen further slowing of collections from our clients in the Middle East, primarily in Oman. In 2012, we commenced operations on the Muscat International Airport (the "Oman Airport") project with the Ministry of Transport and Communications ("MOTC"). The original contract term was to expire in November 2014. In October 2014, we applied for a twelve-month extension of time ("first extension") (which was subsequently approved in March 2016) and wecost reductions as COVID-19 has continued to work onimpact the Oman Airport projects.business beyond the time initially contemplated. We expect costs in 2021 to increase modestly in line with an anticipated rebound in activity, as the effects of the COVID-19 pandemic subside and the Company's activity increases. The Company beganwill continue to experience delays in payment during 2015. In December 2015,manage costs and its association with CFR relative to the Company began discussions with MOTCevolving effects of COVID-19.


    The full extent and duration of the impact of COVID-19 on our operations and financial performance is currently unknown, and depends on future developments that are uncertain and unpredictable, including the duration and spread of the pandemic, its impact on capital and financial markets on a second extensionmacro-scale and any new information that may emerge concerning the severity of time amendment ("second extension")the virus, its spread to other regions and has since commenced additional work. When MOTC resumed payments in 2016, the Company received approximately $42,000,000 duringactions to contain the year. At December 31, 2016, accounts receivable from Oman totaled approximately $27,132,000virus or treat its impact, among others.
    We will continue to evaluate the potential short-term and approximately $16,500,000 was past due basedlong-term implications of COVID-19 on contractual terms. We acknowledge that this client is a slow payer, however the MOTC intends to meet its obligations to us as Oman is a wealthy, stable and solvent country. In connection with the work performed there, our consolidated financial statements forand operations. We believe that the years endedlower backlog reflected in the financial statements at December 31, 2016, 2015 and 2014 reflected the following (in thousands):

     
    		 2016 2015 2014 

    Consulting fee revenue

    		 $34,245 $50,740 $62,585 

    Accounts receivable, net

    		 $27,132(1)$28,711 $11,571 

    Collections received during the year

    		 $42,000 $29,958 $53,277 
    (1)
    We received payments of approximately $6,153,000 against this receivable in the first quarter of 2017.

            Going forward, we will continue to closely monitor this receivable as well as any other receivables where collections are not received in a timely manner. This may result in increases in the allowance for doubtful accounts which may have a significant negative impact on our financial position and results of operations.


    Table of Contents

    2016 Business Overview

    Consolidated Results
    (In thousands)

     
    		 Years Ended
    December 31,    		 Change 
     
    		 2016 2015 $ % 

    Income Statement Data:

    		             

    Consulting fee revenue

    		 $434,147 $467,877  (33,730) (7.2)%

    Reimbursable expenses

    		  86,700  84,699  2,001  2.4%
    ​​​ ​​​ ​ ​​ ​​​​​

    Total revenue

    		  520,847  552,576  (31,729) (5.7)%
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

    Cost of services

    		  272,243  288,845  (16,602) (5.7)%

    Reimbursable expenses

    		  86,700  84,699  2,001  2.4%
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

    Total direct expenses

    		  358,943  373,544  (14,601) (3.9)%
    ​​​ ​​​ ​ ​​ ​​​​​

    Gross profit

    		  161,904  179,032  (17,128) (9.6)%

    Selling, general and administrative expenses

    		  
    162,721    		  
    159,691    		  
    3,030    		  
    1.9
    %

    Equity in loss of affiliates

    		  37  237  (200)   
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

    Operating (loss) profit

    		  (854) 19,104  (19,958) (104.5)%

    Interest and related financing fees, net

    		  694  2,026  (1,332) (65.7)%
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

    (Loss) earnings before income taxes

    		  (1,548) 17,078  (18,626) (109.1)%

    Income tax expense

    		  6,068  6,465  (397) (6.1)%
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

    (Loss) earnings from continuing operations

    		  (7,616) 10,613  (18,229) (171.8)%

    (Loss) from discontinued operations

    		  (11,076) (2,874) (8,202) 285.4%
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

    Net (loss) earnings

    		  (18,692) 7,739  (26,431) (341.5)%

    Less: net earnings—noncontrolling interests

    		  136  808  (672) (83.2)%
    ​​​ ​ ​​ ​ ​​ ​ ​​​​

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

    		 $(18,828)$6,931  (25,759) (371.6)%
    ​​​​ ​​ ​ ​​​ ​​​​
    ​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​​​​​

            CFR decreased $33,730,000, or 7.2%, to $434,147,000 in 2016. The primary decrease in CFR occurred in the Middle East as economic conditions caused a decrease in project activity and a decrease in Oman as a major project began to wind down.

            Cost of services decreased $16,602,000, or 5.7%, to $272,243,000 in 2016 primarily due to decreases in the Middle East partially offset by increases in the United States.

            Gross profit decreased $17,128,000, or 9.6%, to $161,904,000 in 2016 due to lower margins, in both dollars and percentages, primarily in the Middle East.

            Selling, general and administrative ("SG&A") expenses increased $3,030,000, or 1.9%, primarily due to increased bad debt expense of $8,193,000, partially offset by a decrease in unapplied and indirect labor cost in Brazil and Spain.

            Operating loss was ($854,000) in 2016 compared to an operating profit of $19,104,000 in 2015. The decrease in operating profit2020 was primarily due to the decrease ineffects of the COVID-19 pandemic. The potential additional future impacts to our consolidated financial statements of operations include, but are not limited to: decreased CFR, lower gross and operating margins, impairment of goodwill and indefinite-lived intangible assets and fair value and collectability of receivables.

    Any of these outcomes could have a material adverse impact on our business, financial condition, results of operations and cash flows. Management currently believes that it has adequate liquidity and business plans to continue to operate the increase in bad debt expense inbusiness and mitigate the Middle East, partially offset by an increase in operating profit inrisks associated with COVID-19 for at least the United States.

            Income tax expense was $6,068,000 for 2016 compared to $6,465,000 for 2015. The increase in expense results from increased pretax profits from foreign operations, the mix of tax rates in those jurisdictions and no offsetting tax benefits arisingnext 12 months from the Company's U.S. net operating losses which management believes the Company will not be able to utilize.


    Tabledate of Contents

            Net loss attributable to Hill was ($18,828,000) in 2016 compared to net earnings of $6,931,000 in 2015. Diluted loss per common share was ($0.36) in 2016 based upon 51,724,000 diluted common shares outstanding compared to net earnings per diluted common share of $0.13 in 2015 based upon 51,311,000 diluted common shares outstanding. Diluted loss per common share from continuing operations in 2016 was ($0.15) compared to diluted earnings per share from continuing operations in 2015 of $0.19.

            Despite the drop in global oil prices and its negative impact on the construction industry, particularly in the Middle East, we remain optimistic about maintaining our current growth strategy to pursue new business development opportunities, continue to take advantage of organic growth opportunities, continue to pursue selective acquisitions and strengthen our professional resources. In addition, in the latter part of 2016, we initiated a review of our corporate and operational overhead cost structure. The areas that will be most affected will be overhead personnel and related benefits and expenses. We believe these efforts combined with the sale of the pending sale of the Construction Claims Group and deleveraging of our balance sheet should significantly improve profitability and shareholder value.

    this report.


    Critical Accounting Policies and Estimates

    Our consolidated financial statements contained in this Annual Report on Form 10-K were prepared in accordance with U.S. generally accepted accounting principles.GAAP. While there are a number of accounting policies, methods and estimates that affect the consolidated financial statements, as described in Note 4 to the consolidated financial statements, areas that are particularly significantmanagement considers critical are discussed below. We believe our assumptions are reasonable and appropriate, however, actual results may be materially different than estimated.

    Revenue Recognition

    We generate revenue primarily from providing professional services to our clients. Revenueclients under various types of contracts. We evaluate contractual arrangements to determine how to recognize revenue. Below is generally recognized upona description of the performancebasic types of services. In providing these services,contracts from which we may incur reimbursable expenses, which consist of amounts paidearn revenue:
    Time and Materials Contracts

    Under the T&M arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic T&M, cost plus a margin or time and materials subject to subcontractors and other third parties as well as travel and other job related expenses that are contractually reimbursable from clients. We will include reimbursable expenses in computing and reporting our totala maximum contract revenue as long as we remain responsiblevalue (the "cap value"). Due to the client for the fulfillmentpotential limitation of the contractcap value, the economic factors of the contracts subject to a cap value differ from the economic factors of basic T&M and for the overall acceptability of all services provided.

            We earn our revenue from cost-plus, fixed-price and time-and-materialscost plus a margin contracts. If estimated total costs on any contract indicate a loss, we charge the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and other effects are recorded in the accounting period in which the events indicating a loss are known and the loss can be reasonably estimated. Such revisions could occur at any time and the effects may be material.


    The majority of our contracts are for workconsulting projects where we bill the client monthly at hourly billing rates. The hourly billing rates are determined by contractcontractual terms. For governmentalUnder cost plus a margin contracts, we charge our clients the hourly rates are generally calculated as either (i) a negotiated multiplier offor our direct labor costs or (ii) as direct labor costs plus overhead costs, plus a negotiated profit percentage. For commercialfixed fee or rate.

    Under T&M contracts with a cap value, we charge our clients the hourly rates are generally taken from a standard fee schedule by staff classification or they can be at a negotiated discount from this schedule. In some cases, primarily for foreign work, a fixed monthly staff rate is negotiated rather than an hourly rate. This monthly rate is determinedtime and materials based upon the work performed, subject to a buildup of direct labor costs plus overhead and profit. We account for these contracts oncap or a time-and-expenses method, recognizing revenue as costsnot to exceed value. There are incurred.


    Table of Contents

            We account for fixed-price contractsoften instances that a contract is modified to extend the contract value past the cap. As the consideration is variable depending on the "percentage-of-completion" method, wherein revenue is recognized as costs are incurred. Underoutcome of the percentage-of-completion method for revenue recognition,contract renegotiation, we estimate the progress towards completiontotal contract price in accordance with the variable consideration guidelines and only include consideration we expect to receive. When we expect to reach the cap value, we generally renegotiate the contract or cease work when the maximum contract value is reached. We continue to work if it is probable that the contract will be extended. We only include consideration on contract renegotiations to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If we continue to work and are uncertain that a contract change order will be processed, the variable consideration will be constrained until it is probable that the contract will be renegotiated. We are only entitled to consideration for the work we have performed, and the cap value is not a guaranteed contract value.


    21

    Fixed Price Contracts

    Under fixed price contracts, our clients pay an agreed amount negotiated in advance for a specified scope of work. We are guaranteed to receive the consideration to the extent that we deliver under the contract. We recognize revenue over a period of time on fixed price contracts using the input method based upon direct costs incurred to date, which are compared to total projected direct costs. Costs are the most relevant measure to determine the amounttransfer of revenuethe service to the client. We assess contracts quarterly and profitwill recognize any expected future loss before actually incurring the loss. When we expect to reach the total consideration under the contract, we begin to negotiate a change order.

    Change Orders and Claims

    Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions. Either we or our client may initiate change orders. They may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the client’s written approval of such changes or separate documentation of change order costs that are identifiable. Change orders may take time to be recognized. We generally utilize a cost-to-cost approachformally documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the client. If we are having difficulties in applyingrenegotiating the percentage-of-completion method, where revenue is earned in proportion to totalchange order, we will stop work if possible, record all costs incurred dividedto date, and determine, on a project by total costs expectedproject basis, the appropriate final revenue recognition.

    Claims are amounts in excess of the agreed contract price that we seek to becollect from clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Costs related to change orders and claims are recognized when they are incurred.

            Under the percentage-of-completion method, recognition of profit is dependent upon the accuracy of estimates. We have a history of making reasonably dependable estimates of contract revenue, the extent of progress towards completion and contract completion costs on our long-term construction management contracts. However, due to uncertainties inherent in the estimation process, it is possible that actual completion costs may vary from estimates.


    Allowance for Doubtful Accounts

    We make ongoing estimates relating to the collectability of our accounts receivable and maintain an allowance for estimated losses resulting from the inability of our clients to make required payments.  Estimates used in determining accounts receivable allowances are based on our evaluation of specific client accounts and contracts involved and the financial condition of our clients. The factors we consider in our evaluations include, but are not limited to, client type (U.S. federal and other national governments, state and local governments or private sector), historical contract performance, historical collection and delinquency trends, client credit worthiness, and general economic and political conditions. At December 31, 20162020 and 2015,2019, the allowance for doubtful accounts was $71,081,700$53,450 and $60,535,000,$59,131, respectively.

      Goodwill The allowance for doubtful accounts balance included approximately $33,242 and Acquired Intangible Assets

            Goodwill is tested annually for impairment in our third fiscal quarter or more frequently if events or circumstances indicate that there may be impairment. We have determined that, with the pending sale of our Construction Claims Group, we now operate one reporting unit, the Project Management unit. We made that determination based on the similarity of the services provided, the methodologies in delivering our services and the similarity of the client base. To determine the fair value of our reporting unit, we use the market approach and the income approach, weighting the results of each approach.

            Under the market approach, we determine fair value using the public company method and the quoted price method. We utilized a control premium of 30% to arrive at the preliminary fair value, and we applied a weighting of 20% to the preliminary fair value determined by using the public company method. The quoted price method is based upon the market value of the transactions of minority interests in the publicly-traded shares of the Company. We utilized a control premium of 30% to arrive at the preliminary fair value, and we applied a weighting of 50% to the preliminary fair value determined using the quoted price method.

            Our calculation under the income approach utilizes our internal forecasts. In the income approach (that is, the discounted cash flow method), the projected cash flows reflect the cash flows subsequent to the sale of the reporting unit pursuant to the guidance in ASC 350 and ASC 820. Consistent with applicable literature, we include in projected cash flows any expected improvements in cash flows or other changes that, in our view, a market participant would consider and be willing to pay for (but we exclude any buyer- or entity-specific synergies). The projections are developed by us and are based upon cash flows that maximize reporting unit value by taking into account improvements that controlling-interest holders can make, but minority interest holders cannot make. These improvements include: increasing revenues, reducing operating costs, or reducing non-operating costs such as taxes. The owners of the enterprise may also increase enterprise value by reducing risk; for example, by


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    diversifying the business, improving access to capital, increasing the certainty of cash flows, or optimizing the capital structure.

            We considered the factors listed above when developing the cash flows to support the income approach. Recognizing that due to elements of control incorporated into our reporting unit's forecast, we applied no control premium$32,864 related to our conclusion of value indicated by the discounted cash flows. In determining fair value, we applied a weighting of 30% to the preliminary fair value determined using the income approach.

            With regard to weighting the conclusions rendered by the approaches utilized, we believe that the quoted price method provides the most reliable indication of value (that is, a Level 1 input); therefore, we placed the greatest emphasis upon this method assigning a 50% weighting. We also determined that the value using the discounted cash flow method (to which we assigned a 30% weighting) provided a more reliable indication of value than the public company method (to which we assigned a 20% weighting) with the relative levels of reliability contributing to the weighting accorded to each approach.

            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, the period over which cash flows will occur,receivables in Libya at December 31, 2020 and determination of the weighted average cost of capital, among other things. Based on the valuation as of July 1, 2016, the fair value of the Project Management unit substantially exceeded its carrying value. Changes in these estimates and assumptions could materially affect our determination of fair value and/or goodwill impairment. Changes in future market conditions, our business strategy, or other factors could impact upon the future value of our Project Management operations, which could result in future impairment charges.

            At the time of the annual impairment test, the Construction Claims unit was still part of our continuing operations. Based on the valuation as of July 1, 2016, which utilized the same processes noted above, the fair value of the Construction Claims unit substantially exceeded its carrying value.

            We amortize acquired intangible assets over their estimated useful lives and review the long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset's residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We use internal discounted cash flow estimates, quoted market prices when available and independent appraisals, as appropriate, to determine fair value. We derive the required cash flow estimates from our historical experience and our internal business plans and apply an appropriate discount rate.

      Income Taxes

            We make judgments and interpretations based on enacted tax laws, published tax guidance, as well as estimates of future earnings. These judgments and interpretations affect the provision for income taxes, deferred tax assets and liabilities and the valuation allowance. We evaluate the deferred tax assets to determine on the basis of objective factors whether the net assets will be realized through future years' taxable income. In the event that actual results differ from these estimates and assessments, additional valuation allowances may be required.

            We will recognize a tax benefit in the financial statements for an uncertain tax position only if management's assessment is that the position is "more likely than not" (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term "tax position" refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

    2019, respectively.

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      Stock Options

            We recognize compensation expense for all stock-based awards. These awards have included awards of common stock, deferred stock units and stock options. While fair value may be readily determinable for awards of stock and deferred stock units, market quotes are not available for long-term, nontransferable stock options because these instruments are not traded. We currently use the Black-Scholes option pricing model to estimate the fair value of options. Option valuation models require the input of highly subjective assumptions, including but not limited to stock price volatility, expected life and stock option exercise behavior.

      Contingencies

    Estimates are inherent in the assessment of our exposure to insurance claims that fall below policy deductibles and to litigation and other legal claims and contingencies, as well as in determining our liabilities for incurred but not reported insurance claims. Significant judgments by us and reliance on third-party experts are utilized in determining probable and/or reasonably estimable amounts to be recorded or disclosed in our financial statements. The results of any changes in accounting estimates are reflected in the financial statements of the period in which the changes are determined. We do not believe that material changes to these estimates are reasonably likely to occur.


    22

    2020 Business Overview

    Consolidated Results
    (In thousands)
     Years Ended December 31,
     20202019
    Income Statement Data:  
    Consulting fee revenue$296,615 $308,620 
    Reimbursable expenses71,909 67,817 
    Total revenue368,524 376,437 
    Direct expenses249,173 249,587 
    Gross profit119,351 126,850 
    Selling, general and administrative expenses109,215 109,746 
    Foreign currency exchange loss2,923 1,159 
    Plus: Share of profit of equity method affiliates3,286 2,601 
    Operating profit10,499 18,546 
    Less: Interest and related financing fees, net5,224 5,795 
    Plus: Other (loss) income, net(5,711)394 
    (Loss) income before income taxes(436)13,145 
    Income tax expense (benefit)7,134 (1,109)
    Net (loss) income(7,570)14,254 
    Less: net income - noncontrolling interests612 170 
    Net (loss) income attributable to Hill International, Inc.$(8,182)$14,084 

    Results of Operations

    Year Ended December 31, 20162020 Compared to
    Year Ended December 31, 2015

    2019

    Total Revenue:
     20202019Change
    Americas$192,777 52.4 %$200,142 53.1 %$(7,365)(3.7)%
    Middle East/Asia/Pacific92,639 25.1 %104,927 27.9 %(12,288)(11.7)%
    Europe53,819 14.6 %43,488 11.6 %10,331 23.8 %
    Africa29,289 7.9 %27,880 7.4 %1,409 5.1 %
    Total$368,524 100.0 %$376,437 100.0 %$(7,913)(2.1)%
    Consulting Fee Revenue ("CFR") (dollarsRevenue:
     20202019Change
    Americas$137,247 46.2 %$140,992 45.7 %$(3,745)(2.7)%
    Middle East/Asia/Pacific89,037 30.0 %100,751 32.6 %(11,714)(11.6)%
    Europe43,769 14.8 %41,305 13.4 %2,464 6.0 %
    Africa26,562 9.0 %25,572 8.3 %990 3.9 %
    Total$296,615 100.0 %$308,620 100.0 %$(12,005)(3.9)%

    Total revenue decreased approximately $7,913 for the twelve months ended December 31, 2020 when compared to the same time period in thousands)

    the prior year. CFR was $296,615 and $308,620 of the total revenue for the twelve months ended December 31, 2020 and 2019, respectively, which was approximately 80.5% and 82.0% of total revenues, respectively.

     
    		 2016 2015 Change 

    United States

    		 $137,528  31.7%$122,423  26.2%$15,105  12.3%

    Latin America

    		  18,708  4.3  26,304  5.6  (7,596) (28.9)

    Europe

    		  38,455  8.8  39,519  8.4  (1,064) (2.7)

    Middle East

    		  204,780  47.2  245,985  52.6  (41,205) (16.8)

    Africa

    		  20,815  4.8  20,461  4.4  354  1.7 

    Asia/Pacific

    		  13,861  3.2  13,185  2.8  676  5.1 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

    Total

    		 $434,147  100.0%$467,877  100.0%$(33,730) (7.2)%
    ​​​ ​ ​​ ​​​ ​ ​​ ​​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

    The primarydecrease in total revenue and the corresponding decrease in CFR occurredfor the twelve months ended December 31, 2020 compared to the same period in 2019 was primarily due to delayed project starts and project suspensions due to the Middle East with decreasesCOVID-19 pandemic.

    23


    Gross Profit:
     20202019Change
    % of CFR% of CFR
    Americas$61,228 51.3 %44.6 %$60,980 48.1 %43.3 %$248 0.4 %
    Middle East/Asia/Pacific28,553 23.9 %32.1 %38,847 30.6 %38.6 %(10,294)(26.5)%
    Europe16,795 14.1 %38.4 %15,928 12.6 %38.6 %867 5.4 %
    Africa12,775 10.7 %48.1 %11,095 8.7 %43.4 %1,680 15.1 %
    Total$119,351 100.0 %40.2 %$126,850 100.0 %41.1 %$(7,499)(5.9)%

    The change in gross margin as a percentage of $15,493,000CFR for the twelve months ended December 31, 2020 compared to the same period in 2019 was primarily due to the United Arab Emirates and $5,565,000 in Saudi Arabia as economic conditions caused a decrease in funding for projects and a decrease of $14,962,000 in Oman with the beginning of a wind down of a major project. following:

    Americas:

    The increase in gross margin as a percentage of CFR in the United States occurred throughout all regions. In Latin America, the decrease was primarily in Brazil where CFR decreased by $6,774,000 as the economic conditions in the region continue to reduce available work. In Europe, decreases in Romania, Azerbaijan and Luxembourg were partially offset by increases in Turkey, Germany, Serbia and Poland. In Africa, CFR was up slightly where increases in Algeria and Morocco were partially offset by a decrease in Egypt. The increase in Asia/Pacific occurred primarily in India.


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    Reimbursable Expenses (dollars in thousands)

     
    		 2016 2015 Change 

    United States

    		 $66,508  76.7% 64,976  76.7%$1,532  2.4%

    Latin America

    		  66  0.1  47  0.1  19  40.4 

    Europe

    		  2,787  3.2  3,394  4.0  (607) (17.9)

    Middle East

    		  13,095  15.1  9,912  11.7  3,183  32.1 

    Africa

    		  3,222  3.7  3,474  4.1  (252) (7.3)

    Asia/Pacific

    		  1,022  1.2  2,896  3.4  (1,874) (64.7)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

    Total

    		 $86,700  100.0%$84,699  100.0%$2,001  2.4%
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

            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 reimbursable expenses is primarily due to increased usea $1,700 decrease in direct benefit expenses as a result of subcontractors in our Mid-Atlantic region and Qatar.

    Costthe suspension of Services (dollars in thousands)

    the employers 401(k) match during the second half of 2020. This match has been reinstated for 2021.

     
    		 2016 2015 Change 
     
    		  
    		  
    		 % of
    CFR    		  
    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $77,065  28.3% 56.0%$67,060  23.2% 54.8%$10,005  14.9%

    Latin America

    		  11,405  4.2  61.0  15,230  5.3  57.9  (3,825) (25.1)

    Europe

    		  24,809  9.1  64.5  25,578  8.9  64.7  (769) (3.0)

    Middle East

    		  140,438  51.6  68.6  161,464  55.9  65.6  (21,026) (13.0)

    Africa

    		  12,045  4.4  57.9  13,292  4.6  65.0  (1,247) (9.4)

    Asia/Pacific

    		  6,481  2.4  46.8  6,221  2.1  47.2  260  4.2 
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​

    Total

    		 $272,243  100.0% 62.7%$288,845  100.0% 61.7%$(16,602) (5.7)%
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​​​​​
    Middle East/Asia/Pacific:

            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 decrease in costgross margin as a percentage of servicesCFR in the region is primarily due to decreaseswork on a large project in Qatar which started during the second half of 2019 with lower than average margin, an increase in expense related to the liquidation of a bond and a reduction in the Middle East direct labor duerevenue of an ongoing project related to lower CFR partially offset by increased direct laborupdated cost projections. A settlement on a project in Kuwait, which terminated during 2020, also contributed to the United States supporting increased CFR.

    Gross Profit (dollars in thousands)

     
    		 2016 2015 Change 
     
    		  
    		  
    		 % of
    CFR    		  
    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $60,463  37.3% 44.0%$55,363  30.9% 45.2%$5,100  9.2%

    Latin America

    		  7,303  4.5  39.0  11,074  6.2  42.1  (3,771) (34.1)

    Europe

    		  13,646  8.4  35.5  13,941  7.8  35.3  (295) (2.1)

    Middle East

    		  64,342  39.7  31.4  84,521  47.2  34.4  (20,179) (23.9)

    Africa

    		  8,770  5.4  42.1  7,169  4.0  35.0  1,601  22.3 

    Asia/Pacific

    		  7,380  4.6  53.2  6,964  3.9  52.8  416  6.0 
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​

    Total

    		 $161,904  100.0% 37.3%$179,032  100.0% 38.3%$(17,128) (9.6)%
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​​​​​

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            The decrease in gross profit included decreasesmargin.


    Africa:

    The increase in gross margin as a percentage of CFR in the Middle East and Latin Americaregion is primarily due to the decreases in CFR partially offset by increases in the United States. The overall gross profit percentage decreased due to lower margins primarily in the United Arab Emirates, Oman and Qatar.

    receiving a $1,200 credit from one of our partners.


    Selling, General and Administrative ("SG&A") Expenses (dollars in thousands)

    Expenses:

     
    		 2016 2015 Change 
     
    		  
    		  
    		 % of
    CFR    		  
    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $42,482  26.1% 9.8%$40,904  25.6% 8.7%$1,578  3.9%

    Latin America

    		  8,990  5.5  2.1  9,765  6.1  2.1  (775) (7.9)

    Europe

    		  18,292  11.2  4.2  20,253  12.7  4.3  (1,961) (9.7)

    Middle East

    		  44,233  27.2  10.2  40,729  25.5  8.7  3,504  8.6 

    Africa

    		  6,807  4.2  1.6  6,347  4.0  1.4  460  7.2 

    Asia/Pacific

    		  5,666  3.5  1.3  4,877  3.1  1.0  789  16.2 

    Corporate Expenses

    		  36,251  22.3  8.3  36,816  23.1  7.9  (565) (1.5)
    ​​​ ​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​ ​​​​

    Total

    		 $162,721  100.0% 37.5%$159,691  100.0% 34.1%$3,030  1.9%
    ​​​ ​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​ ​​​​

            The increase inOur total selling, general and administrative expenses ("SG&A") was approximately the same amount for the twelve months ended December 31, 2020 and 2019.


    During 2020, labor expenses were reduced by approximately $900 and travel expenses were reduced by approximately $2,800, as a result of the COVID-19 stay at home orders issued throughout the world. In addition, legal expenses were lower in 2020 by approximately $2,200 primarily as a result of a settlement and return of previously incurred legal expenses, professional fees were reduced by approximately $1,800 due to lower fees being charged and bad debt expense was reduced by $2,000 as a result of payments received on accounts receivables previously reserved. Offsetting these reductions were a $7,124 net benefit in 2019 from the following:

      •
      A netcollection of a fully-reserved receivable and a $1,600 of additional depreciation charge for the write-off of leasehold improvements related to the Company subletting office space in Philadelphia to a third party during the first quarter of 2020, an approximate $350 increase in computer equipment and software costs primarily related to remote working and increases in other indirect expenses.

    During 2019, we received a payment of $8,193,000more than $9,400, which netted to $7,124 after payments to subcontractors and other costs, against the approximately $42,000 outstanding accounts receivable that we had been owed from the Organization for the Development of Administrative Centres ("ODAC"), an agency of the Libyan national government, which we had previously fully reserved. Upon receiving payment, the reserve was reversed in the amount received, which decreased the bad debt expense for increased reserves2019.

    SG&A expenses represented approximately 36.8%and 35.6% of CFR for certain accounts receivable due primarily to Middle Eastthe twelve months ended December 31, 2020 and Asia Pacific regions, partially offset by reduction in2019, respectively.

    24

    Foreign Currency Exchange Loss

    Foreign currency exchange losses were approximately $1,800 greater for the United States; and

    •
    A decrease of $4,969,000 in unapplied and indirect labor due primarily to reductions in staff in Brazil and Spain during 2015 and early 2016.

    Operating Profit (Loss) (dollars in thousands)

     
    		 2016 2015  
    		  
    		 
     
    		  
    		 % of
    CFR    		  
    		 % of
    CFR    		 Change 

    United States

    		 $17,981  13.1%$14,459  11.8%$3,522  24.4%

    Latin America

    		  (1,687) (9.0) 1,309  5.0  (2,996) N.M 

    Europe

    		  (4,646) (12.1) (6,312) (16.0) 1,666  (26.4)

    Middle East

    		  20,109  9.8  43,792  17.8  (23,683) (54.1)

    Africa

    		  1,963  9.4  822  4.0  1,141  138.8 

    Asia/Pacific

    		  1,677  12.1  1,850  14.0  (173) (9.4)

    Corporate

    		  (36,251) 8.3  (36,816) 7.9  565  (1.5)
    ​​​ ​ ​​​​​ ​ ​​​​​​ ​​​​

    Total

    		 $(854) (0.2)%$19,104  4.1%$(19,958) (104.5)%
    ​​​ ​ ​​​​​ ​ ​​​​​​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​​​​​​ ​ ​​​​​ ​ ​​​​

            The decrease in operating profit was primarily duetwelve months ended December 31, 2020 compared to the decreasesame period in CFR and the increase in bad debt expense in the Middle East partially offset2019. The currency exchange losses were primarily caused by an increase18% weakening of the Brazilian Real against the Euro prior to declaring bankruptcy of our Brazilian subsidiary and a 12% strengthening of the Egyptian pound against the Euro in the United States. Corporate expenses decreased by $565,000, but represented 8.3% of CFR in 20162019 compared to 7.9% of CFRa 4% weakening during the same period in 2015.

    2020.


    Interest and related financing fees, net

            Net interest

    Interest and related financing fees, decreased $1,332,000 to $694,000net, include interest expense of $5,357, net of $133 in 2016 as compared with $2,026,000interest income, and interest expense of $6,082, net of $287 in 2015. The decrease was primarily due to interest of $1,056,000 paid to a subcontractorincome for the years ended December 31, 2020 and 2019, respectively, which decreased as a result of a legal settlement in 2015.

    higher weighted-average interest rates billed to us on our secured credit facilities with Société Générale throughout the year ended December 31, 2019.


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    Income Taxes

            In 2016, income tax expense was $6,068,000 compared to $6,465,000 in 2015.

    The effective income tax expense rates for 20162020, and 20152019 were (392.0%)(1636.2)% and 37.9%,(8.4)% respectively. The decrease in expense in 2016 compared to 2015 results from the mix of income and tax rates in various foreign jurisdictions. The difference in the Company's 2016Company’s effective tax rate compareddiffers from the U.S. federal statutory rate, for the year ended December 31, 2020, primarily due to additional uncertain tax position accruals, as well as the 2015 rate is primarily relatedinability to a significant decreaserecognize any tax benefit for losses in the Company's foreign pretax earnings of approximately $24,000,000, primarily related to the Middle East operations without a significant related income tax benefit. In addition, the Company recognized an income tax expense of $689,000 in 2016 resulting from adjustments to agree the 2015 book amount to the actual amounts reported on the tax returns in foreign jurisdictions. In both years, the Company'scertain jurisdictions, particularly Brazil.

    The Company’s effective tax rate is significantly higher thanfor the year ended December 31, 2019 differs from the U.S. federal statutory rate primarily as a result of increases caused by various foreign withholding taxesdue to benefits recognized from provision to return adjustments and the inability to recordreversal of an incomeoutstanding tax benefitaccrual related to the U.S. net operating loss.

            In 2015, several items materially affected the Company's effective tax rate. An income tax benefit of $205,000 resulted from adjustments to agree the 2014 book amount to the actual amounts reported on the tax returns in foreign jurisdictions. The benefit was offset by increased foreign withholding taxes.

    Net (Loss) Earnings Attributable to Hill

            Net loss attributable to Hill International, Inc. for 2016 was ($18,828,000), or ($0.36) per diluted common share based on 51,724,000 diluted common shares outstanding, as compared to net earnings for 2015 of $6,931,000, or $0.13 per diluted common share based upon 51,311,000 diluted common shares outstanding. Net loss from continuing operations for 2016 was ($7,752,000), or ($0.15) per diluted share, compared to net earnings from continuing operations of $9,805,000, or $0.20 per diluted share, in 2015.


    Year Ended December 31, 2015 Compared to
    Year Ended December 31, 2014

    Consulting Fee Revenue ("CFR") (dollars in thousands)

     
    		 2015 2014 Change 

    United States

    		 $122,423  26.2%$102,095  23.8%$20,328  19.9%

    Latin America

    		  26,304  5.6  36,925  8.6  (10,621) (28.8)

    Europe

    		  39,519  8.4  34,943  8.2  4,576  13.1 

    Middle East

    		  245,985  52.6  222,754  51.9  23,231  10.4 

    Africa

    		  20,461  4.4  18,402  4.3  2,059  11.2 

    Asia/Pacific

    		  13,185  2.8  13,708  3.2  (523) (3.8)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

    Total

    		 $467,877  100.0%$428,827  100.0%$39,050  9.1%
    ​​​ ​ ​​ ​​​ ​ ​​ ​​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

            The primary increases in CFR occurred in the Middle East and the United States. In the Middle East, there was an increase of $37,614,000 in the United Arab Emirates and $6,400,000 in Saudi Arabia where several new projects startedClaims Construction Group sale. This is partially offset by decreasesadditional uncertain tax position accruals, as well as additional increases in our valuation allowances.


    In assessing the realizability of $13,883,000deferred tax assets, we consider 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 Iraq duewhich those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred tax assets according to the cessationprovisions of projectsASC 740, Income Taxes. We 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 projections, and historical financial performance.

    Liquidity and Capital Resources
    Our primary cash obligations are our payroll and our project subcontractors. Our primary source of cash is receipts from clients. We generally pay our employees semi-monthly in arrears and invoice our clients monthly in arrears. Our clients generally remit payment approximately three months, on average, after invoice date. This creates a lag between the time we pay our employees and the time we receive payment from our clients. We bill our clients for any subcontractors used and pay those subcontractors after receiving payment from our clients, so no such timing lag exists for the payments we make to subcontractors.
    We utilize cash on hand and our revolving credit facilities to fund the working capital requirement caused by the political turmoil and $8,093,000 in Oman where a major project continued at a lower volume. The increase of $20,328,000 in CFR in the United States occurred throughout all regions. In Latin America, the decrease of $10,621,000 was primarily in Brazil where CFR decreased by $8,914,000 as the economic conditions continue to cause reduced work. In Europe, there were increases of $4,898,000 in Kazakhstan and $3,683,000 in Turkey due to the acquisition of IMS Proje Yonetimi ve Dansmanlik A.S. ("IMS") in April 2015. This was partially offset by decreases in Spain and Latvia. In Africa, CFR was up with increases in Egypt and Algeria partially offset by a decrease in Morocco. The decrease in Asia/Pacific occurred primarily in Afghanistan partially offset by an increase in India.


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    Reimbursable Expenses (dollars in thousands)

     
    		 2015 2014 Change 

    United States

    		 $64,976  76.7%$44,129  74.9%$20,847  47.2%

    Latin America

    		  47  0.1  23  —  24  104.3 

    Europe

    		  3,394  4.0  2,415  4.1  979  40.5 

    Middle East

    		  9,912  11.7  8,124  13.8  1,788  22.0 

    Africa

    		  3,474  4.1  3,255  5.5  219  6.7 

    Asia/Pacific

    		  2,896  3.4  981  1.7  1,915  195.2 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

    Total

    		 $84,699  100.0%$58,927  100.0%$25,772  43.7%
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​​

            Reimbursable expenses consist of amounts paid to subcontractorslag discussed above 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 total revenue and total direct expenses captions in our consolidated statements of operations. The increase in reimbursable expenses is primarily due to increased use of subcontractors throughout the United States, primarily in our Northeast and Mid-Atlantic regions.

    Cost of Services (dollars in thousands)

     
    		 2015 2014 Change 
     
    		  
    		  
    		 % of
    CFR    		  
    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $67,060  23.2% 54.8%$56,474  21.4% 55.3%$10,586  18.7%

    Latin America

    		  15,230  5.3  57.9  22,444  8.5  60.8  (7,214) (32.1)

    Europe

    		  25,578  8.9  64.7  22,079  8.4  63.2  3,499  15.8 

    Middle East

    		  161,464  55.9  65.6  145,210  55.0  65.2  16,254  11.2 

    Africa

    		  13,292  4.6  65.0  11,300  4.3  61.4  1,992  17.6 

    Asia/Pacific

    		  6,221  2.1  47.2  6,299  2.4  46.0  (78) (1.2)
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​

    Total

    		 $288,845  100.0% 61.7%$263,806  100.0% 61.5%$25,039  9.5%
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​​​​​

            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 cost of services is primarily due to increases in direct labor in the Middle East and the United States due to higher CFR partially offset by decreased direct labor in Latin America due to decreased CFR.

    Gross Profit (dollars in thousands)

     
    		 2015 2014 Change 
     
    		  
    		  
    		 % of
    CFR    		  
    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $55,363  30.9% 45.2%$45,621  27.6% 44.7%$9,742  21.4%

    Latin America

    		  11,074  6.2  42.1  14,481  8.8  39.2  (3,407) (23.5)

    Europe

    		  13,941  7.8  35.3  12,864  7.8  36.8  1,077  8.4 

    Middle East

    		  84,521  47.2  34.4  77,544  47.0  34.8  6,977  9.0 

    Africa

    		  7,169  4.0  35.0  7,102  4.3  38.6  67  0.9 

    Asia/Pacific

    		  6,964  3.9  52.8  7,409  4.5  54.0  (445) (6.0)
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​

    Total

    		 $179,032  100.0% 38.3%$165,021  100.0% 38.5%$14,011  8.5%
    ​​​ ​ ​​ ​​​​​​ ​ ​​ ​ ​​​​​​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​​​​​

            The increase in gross profit included increases in the United States and the Middle East due to increased CFR partially offset by a decrease in Latin America due to the decreases in CFR. The overall gross profit percentage remained relatively constant at 38.3% in 2015 compared to 38.5% in 2014.


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    Selling, General and Administrative ("SG&A") Expenses (dollars in thousands)

     
    		 2015 2014 Change 
     
    		  
    		  
    		 % of
    CFR    		  
    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $40,904  25.6% 8.7%$38,197  26.9% 8.9%$2,707  7.1%

    Latin America

    		  9,765  6.1  2.1  13,063  9.2  3.0  (3,298) (25.2)

    Europe

    		  20,253  12.7  4.3  18,009  12.7  4.2  2,244  12.5 

    Middle East

    		  40,729  25.5  8.7  35,176  24.8  8.2  5,553  15.8 

    Africa

    		  6,347  4.0  1.4  2,286  1.6  0.5  4,061  177.6 

    Asia/Pacific

    		  4,877  3.1  1.0  5,116  3.6  1.2  (239) (4.7)

    Corporate Expenses

    		  36,816  23.0  7.9  30,232  21.2  7.0  6,584  21.8 
    ​​​ ​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​ ​​​​

    		 $159,691  100.0% 34.1%$142,079  100.0% 33.1%$17,612  12.4%
    ​​​ ​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​​​ ​ ​​ ​ ​​​​​ ​ ​​​​

            The increase in selling, general and administrative expenses was primarily due to the following:

      •
      An increase of $11,595,000 in bad debt expense for increased reserves for certain accounts receivable in the Middle East and due to the 2014 collection of previously reserved Libya receivables;

      •
      An increase in legal fees of $2,259,000 primarily related to the proxy contest; and

      •
      An increase of $4,163,000 in unapplied and indirect labor due primarily to increases in staff in the Middle East in support of increased CFR.

    Operating Profit (Loss) (dollars in thousands)

     
    		 2015 2014 Change 
     
    		  
    		 % of
    CFR    		  
    		 % of
    CFR    		  
    		  
    		 

    United States

    		 $14,459  11.8%$7,424  7.3%$7,035  94.8%

    Latin America

    		  1,309  5.0  1,418  3.8  (109) (7.7)

    Europe

    		  (6,312) (16.0) (5,145) (14.7) (1,167) 22.7 

    Middle East

    		  43,792  17.8  42,368  19.0  1,424  3.4 

    Africa

    		  822  4.0  4,816  26.2  (3,994) (82.9)

    Asia Pacific

    		  1,850  14.0  2,293  16.7  (443) (19.3)

    Corporate

    		  (36,816)    (30,232)    (6,584) 21.8 
    ​​​ ​​​​​​ ​ ​​​​​ ​ ​​​​

    Total

    		 $19,104  4.1%$22,942  5.3%$(3,838) (16.7)%
    ​​​ ​​​​​​ ​ ​​​​​ ​ ​​​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​​​​ ​ ​​​​​​ ​​​​

            The decrease in operating profit was primarily due to the decrease in Africa of $3,994,000 due to the 2014 reversal of bad debt expense for the Libya collection and an increase of $2,900,000 in bad debt expense in the Middle East and an increase in Corporate expenses including an increase in legal fees of $2,353,000 related to the proxy contest and an increase of $2,594,000 in indirect labor support of the overall growth in CFR. Corporate expenses represented 7.9% in 2015 compared to 7.0% in 2014.

    Interest and related financing fees, net

            Interest and related financing fees increased $462,000 to $2,026,000 in 2015 as compared with $1,564,000 in 2014, primarily due to additional borrowings to support our operations in the Middle East.

    Income Taxes

            In 2015, the income tax expense was $6,465,000 compared to an income tax expense of $7,512,000 in 2014. The effective income tax expense rates for 2015 and 2014 were 37.9% and 35.1%, respectively.


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    The decrease in expense results from the mix of income tax rates in the Company's foreign jurisdictions. The difference in the Company's 2015 effective tax rate compared to the 2014 rate is also primarily related to the mix of income and tax rates in the Company's foreign jurisdictions. In both years, the Company's effective tax rate is significantly higher than it otherwise would be primarily as a result of not being able to record an income tax benefit related to the U.S. net operating loss plus increases caused by various foreign withholding taxes.

            In 2015, several items materially affected the Company's effective tax rate. An income tax benefit of $205,000 resulted from adjustments to agree the 2014 book amount to the actual amounts reported on the tax returns in foreign jurisdictions. This benefit was offset by increased foreign withholding taxes.

            In 2014, several items materially affected the Company's effective tax rate. The Company realized a net benefit of $2,379,000 primarily from the reversal of prior year's uncertain tax positions based on management's assessment that these items were effectively settled with the appropriate foreign tax authorities. An income tax expense of $1,050,000 resulted from adjustments to agree the 2013 book amount to the actual amounts reported on the tax returns in foreign jurisdictions.

    Net Earnings (Loss) Attributable to Hill

            Net earnings attributable to Hill International, Inc. for 2015 were $6,931,000, or $0.14 per diluted common share based on 51,311,000 diluted common shares outstanding, as compared to a net loss in 2014 of ($6,148,000), or ($0.14) per diluted common share based upon 44,370,000 diluted common shares outstanding. Net earnings from continuing operations for 2015 were $9,805,000, or $0.21 per diluted share, compared to $12,565,000, or $0.31 per fully diluted share for 2014.

    Non-GAAP Financial Measures

            EBITDA, a non-GAAP performance measure used by management, is defined as net earnings plus interest expense, income tax expense and depreciation and amortization, as shown in the table below. EBITDA does not purport to be an alternative to net earnings as a measure of financial and operating performance or ability to generate cash flows from operations that are available for taxes and capital expenditures. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from the presentation of, EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that management believes do not directly reflect our core operations.needs. We believe that EBITDA is useful to investorsour expected cash receipts from clients, together with current cash on hand and other external users of our financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, and depreciation and amortization, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired.

            Using EBITDA as a performance measure has material limitations as compared to net earnings, or other financial measures as defined under U.S. GAAP as it excludes certain recurring items which may be meaningful to investors. EBITDA excludes interest expense; however, as we have borrowed money in order to finance transactions and operations, interest expense is an element of our cost structure and can affect our ability to generate revenue and returns for our stockholders. Further, EBITDA excludes depreciation and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and amortization are a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any


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    measure that excludes interest expense, depreciation and amortization and income taxes has material limitations as compared to net earnings. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA and net earnings in each period, so as to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both EBITDA and net earnings to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) monitor our capacity to generate returns for our stockholders.

            A reconciliation of EBITDA to the most directly comparable GAAP measure follows (in thousands):

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Net (loss) earnings from continuing operations

    		 $(7,752)$9,805 $12,565 

    Interest

    		  694  2,026  1,564 

    Income taxes

    		  6,068  6,465  7,512 

    Depreciation and amortization

    		  7,153  7,909  7,104 
    ​​​ ​ ​​ ​ ​​ ​ ​

    EBITDA

    		 $6,163 $26,205 $28,745 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​

    Liquidity and Capital Resources

            At December 31, 2016, our primary sources of liquidity consisted of $25,637,000 of cash and cash equivalents, of which $25,187,000 was on deposit in foreign locations, and $13,176,000 of available borrowing capacity under our various credit facilities. At December 31, 2016, we were in default of our Consolidated Net Leverage Ratio. On March 27, 2017, we received a waiver of the default from the Agent. See Note 11 to our consolidated financial statements for a description of ourrevolving credit facilities, and term loan. We believe that we haveare sufficient liquidity to support the reasonably anticipated cash needs of our operations over the next twelve months. However, significant unforeseen events, such as termination or cancellation of major contracts or further delays in receivable collections, 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 borrowing additional funds under our credit agreements, obtaining new bank debt, raising funds through capital market transactions, or other strategic initiatives. See "Sources of Additional Capital" for further information.

            The amount of CFR attributable to operations in the Middle East and Africa has grown to approximately 52.0% of total consolidated CFR in 2016. We have recently experienced a slowdown in collections from our clients in the Middle East primarily due to the drop in oil prices. This has put a considerable strain on our liquidity. As a result, we have had to rely heavily on debt and equity transactions to fund our operations and we may continue our reliance on debt and equity transactions for our liquidity needs over the next 18 months.

            In 2012, we commenced operations on the Oman Airport project with the Ministry of Transport and Communications ("MOTC"). The original contract term was to expire in November 2014. In October 2014, we applied for a twelve-month extension of time amendment ("first extension") (which was subsequently approved in March 2016) and we continued to work on the Oman Airport project. We began to experience some delays in payment during the second quarter of 2015 when MOTC commenced its formal review and certification of our invoices. In December 2015, we began discussions with the MOTC on a second extension of time amendment ("second extention") and have since commenced additional work, which we expect to last approximately 18 months. When the MOTC resumed payments in 2016, we received approximately $42,000,000 during the year and approximately $6,153,000 during the first quarter of 2017.


    At December 31, 2016, accounts receivable from Oman totaled approximately $27,132,000. Approximately $16,500,0002020 and 2019, our primary sources of liquidity consisted of $34,229 and $15,915 in cash and cash equivalents, respectively, of which $28,842 and $15,260 was past due based on contractual terms.


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    Although MOTC has not made payments under the contractual terms of the first extensiondeposit in foreign locations, respectively, and second extension amendments, we have received full payment under the first extension$11,711 and believe that the same will hold true for the second extension as there is no evidence to the contrary. In fact, there are multiple indicators that we will receive payment: Oman is a wealthy, stable and solvent country which recently raised funds in the capital markets to help finance its budget, the MOTC has certified the past due invoices and MOTC has indicated that it is committed to paying its obligations to us.

    Additional Capital Requirements

            Our subsidiary, Hill International (Spain), S.A. ("Hill Spain"), owns an indirect 91% interest in Engineering S.A. ("ESA"), a firm located in Brazil, and now known as Hill International do Brasil, S.A. ESA's shareholders entered into an agreement whereby the minority shareholders have a right to compel ("ESA Put Option") Hill Spain to purchase any or all of their shares during the period from February 28, 2014 to February 28, 2021. Hill Spain also has the right to compel ("ESA Call Option") the minority shareholders to sell any or all of their shares during the same time period. The purchase price for such shares shall be seven times the earnings before interest and taxes for ESA's most recently ended fiscal year, net of any financial debt plus excess cash multiplied by a percentage which the shares to be purchased bear to the total number of shares outstanding at the time of purchase, but in the event the ESA Call Option is exercised by Hill Spain, the purchase price shall be increased by five percent. The ESA Put Option and the ESA Call Option must be made within three months after the audited financial statements of ESA have been completed. On June 17, 2016, the three remaining minority shareholders exercised their ESA Put Option claiming a value of BRL 8,656,000 (approximately $2,670,000 at June 30, 2016). The Company accrued the liability which is included in other current liabilities and as an adjustment to additional paid-in capital in the consolidated balance sheet at December 31, 2016. The amount is subject to negotiation and any difference will be recorded upon completion of the transaction.

            Hill Spain entered into a new credit agreement with three new banks. The total new facility is for €2,770,000 (approximately $2,915,000) at December 31, 2016. The facility was fully utilized at December 31, 2016. Interest rates at December 31, 2016 were between 1.85% and 3.50%. The loans have varying expiration dates between 36 and 60 months.

            In connection with the acquisition of IMS on April 15, 2015, the Company had accrued approximately TRY 1,700,000 for a potential earn out which would be payable if earnings before interest, income taxes, depreciation and amortization for the twelve month period subsequent to the closing date ("EBITDA") exceeded TRY 3,500,000. A lesser amount would have been payable if EBITDA was between TRY 3,200,000 and TRY 3,500,000. IMS's EBITDA through the one-year anniversary of the acquisition date was not sufficient to earn any of the Additional Purchase Price and the liability was eliminated by a credit of approximately $673,000 to selling, general and administrative expenses for the year ended December 31, 2016.

    Sources of Additional Capital

            We have an effective registration statement on Form S-3 on file with the SEC to register 20,000,000 shares of our common stock for issuance and sale by us at various times in the future. To date, we have issued 9,546,629 shares under this registration statement, leaving a balance of 10,453,371 shares. The proceeds, if any, will be used for working capital and general corporate purposes, subject to the restrictions of our Secured Credit Facilities. 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 20,000,000 shares of our common stock for issuance in connection with business acquisitions.


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    To date, we have issued 1,073,196 shares under this registration statement, leaving a balance of 18,926,804 shares. We cannot predict whether, in the future, 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.

            At December 31, 2016, we had $13,176,000$14,735 of available borrowing capacity under our various credit agreements.

    facilities, respectively. We also have relationships with other foreign banks for the issuance of letters of credit, letters of guarantee and performance bonds in a variety of foreign currencies. At December 31, 2016,2020 and 2019, we had approximately $44,702,000$52,236 and $50,779 of availability under these arrangements.

    Our sources of liquidity under arrangements with foreign banks are available for repatriation as deemed necessary by us with some restrictions and tax implications.


    We believe that we have sufficient liquidity to support the reasonably anticipated cash needs of our operations over the next twelve months from the date of this filing.

    25

    Sources of Additional Capital
    A significant increase in our current backlog may require us to obtain additional financing. If additional financing is required in the future due to an increase in backlog or changes in strategic or operating plans, 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 Year Ended December 31, 2016

            For the year ended December 31, 2016, our cash and cash equivalents increased by $1,548,000 to $25,637,000. This compares to a net decreaseFlows

    Years ended December 31,
    20202019Change
    Net cash provided by operating activities$12,278 $9,979 $2,299 
    Net cash used in investing activities(2,893)(3,936)1,043 
    Net cash provided by (used in) financing activities6,515 (4,931)11,446 
    Effect of foreign exchange rate changes on cash540 763 (223)
    Deconsolidated cash9 — 9 
    Net increase in cash, cash equivalents and restricted cash$16,431 $1,875 $14,556 

    Operating Activities
    The increase in cash and cash equivalents of ($6,035,000)from operations during the prior year. Cash provided by operations2020 was $9,568,000, cash used in investing activities was ($3,884,000) and cash used in financing activities was ($3,167,000). We also experienced a decrease in cash of ($969,000) from the effect of foreign currency exchange rate fluctuations.

    Operating Activities

            Our operations generated cash of $9,568,000 in 2016. This compares to cash used of ($6,853,000) in 2015 and cash generated of $6,305,000 in 2014. We had a net loss from continuing operations in 2016 amounting to ($7,616,000), net earnings of $10,613,000 in 2015 and net earnings of $13,866,000 in 2014. Depreciation and amortization was $7,153,000 in 2016 compared to $7,909,000 in 2015 and $7,104,000 in 2014; the decrease in this category in 2016 versus 2015 is due to the full amortization of the shorter-lived intangible assets of companies which we acquired over the last several years; the increase in 2015 over 2014 is due to significant additions to property and equipment related to our move to Philadelphia in 2015. We had a deferred tax provision of $2,293,000 in 2016 primarily due to several temporary differences in foreign jurisdictions.

    increased collection activity of our outstanding accounts receivable balances, the deferral of payroll taxes permitted under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the suspension of the 401(k) match by the Company for most of the year and the deferral of certain rent payments.


    Cash held in restricted accounts asis primarily collateral for the issuance of performance and advance payment bonds, and letters of credit and escrow and was $7,184 and $9,067 at December 31, 20162020 and 2015 were $4,625,000 and $4,694,000,2019, respectively. The decrease between years is primarily due to athe release of cash collateral and reduction in the collateral requirements that we were able to achieve withof certain foreign lenders.

            Average days sales outstanding ("DSO") at December 31, 2016 was 125 days compared to 104 days at December 31, 2015. DSO is a measure of our ability to collect our accounts receivable and is calculated by dividing the total of the period-end billed accounts receivable balance by average daily revenue (i.e., revenue for the quarter divided by 90 days). Generally, the age of our receivables is adversely affected by the timing of payments from our clients in Europe and Africa, which have historically been slower than payments from clients in other geographic regions of the Company's operations. The increase in DSO in 2016 from 2015 was due to a slowing of collections from our clients in the Middle East, particularly Oman.

            Although we continually monitor our accounts receivable, weperformance bonds.


    We manage our operating cash flows by managing the working capital accounts in total, rather than by individual elements.total. 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


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    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 primarily due primarily to the timing of cash receipts and payments with our working capital accounts combined with increaseschanges in our receivables and payables relative to the increasechanges in our overall business, as well as our acquisition activity. In 2016business. 

    Investing Activities
    During 2020 and 2015, payments to our vendors were drawn out due to a slowdown in our receipts against accounts receivable primarily in the Middle East and particularly Oman.

    Investing Activities

            Net2019, cash was used in investing activities was ($3,884,000)primarily for the purchase of fixed assets. In 2020, cash was also used to purchase an engineering license in New York. Fixed asset purchases in 2019 include leasehold improvements computers,at our Philadelphia office equipmentto consolidate space and furnituresublease our unused floor.


    Financing Activities
    Net cash provided by financing activities during 2020 was from net borrowings on revolving debt of $5,800 and fixtures. Of this amount, $1,800,000 was used to implement a database system for our Human Resources department.

    Financing Activities

    $1,300 of term loans. Net cash used in financing activities during 2019 was ($3,167,000). We made payments in the amount of $803,000 in borrowings under various credit facilities. We paid $1,200,000 against the 2014 Term Loan Facility and $55,000 against the Philadelphia Industrial Development Corp. loan. We paid $1,531,000 of holdback purchase pricedue to the former ownersnet pay-downs on revolving debt of IMS. We also received $533,000 from the exercise$4,065 and term loans of stock options and purchases under our Employee Stock Purchase Plan. We paid $111,000 as dividends to noncontrolling interests.

    $1,060.

    NewAccounting Pronouncements

    For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 43 to the consolidated financial statements in Item 8, "Financial Statements and Supplementary Data" hereof.

    26

    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.

    Inflation

            Although we are subject to fluctuations in the local currencies of the countries in which we operate, we do not believe that inflation will have a significant effect on our results of operations or our financial position.


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    Off-Balance Sheet Arrangements

    The following charttable provides information with respect to off-balance sheet arrangements including thosewith domestic and foreign banks for the issuance of performance bonds, advance payment guarantees and other letters of credit that are scheduled to expire in 2021 and beyond. The total amount of these arrangements attributable to discontinued operations (in thousands).

    in the following table includes amounts issued in various foreign currencies and are based on the foreign currency exchange rates as of December 31, 2020, where applicable.
     
    		 Total(1) 2017 2018 - 2019 2020 - 2021 2022 and
    later    		 

    Performance bonds(2)

    		 $53,237 $28,875 $7,085 $17,277 $— 

    Advance payment bonds(2)

    		  39,580  29,496  —  10,084  — 

    Bid bonds(3)

    		  7,114  6,566  548  —  — 

    Other

    		  927  800  —  —  127 

    Letters of credit(4)

    		  4,519  2,912  447  1,160  — 
    ​​​ ​ ​​​ ​​ ​ ​​ ​ ​​ ​ ​

    		 $105,377 $68,649 $8,080 $28,521 $127 
    ​​​ ​​​ ​ ​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​​ ​​​ ​ ​
     
    Total (1)
    		20212022-20232024-20252026 and later
    Performance bonds (2)(4)
    		$46,503 $32,914 $6,628 $3,791 $3,170 
    Advance payment guarantee (2)
    		16,475 4,110 6,905 3,329 2,131 
    Bid or tender bonds (3)
    		1,955 1,862 93 — — 
    Other (4)
    		2,449 2,249 200 — — 
     $67,382 $41,135 $13,826 $7,120 $5,301 
    (1)
    At December 31, 2016,2020, the Company had provided cash collateral amounting to $4,625,000$7,184 for certain of these items. That collateral is reflected in restricted cash on the Company's consolidated balance sheet.sheets. See Note 1614 - Commitments and Contingencies to our consolidated financial statements for further information regarding these arrangements.

    (2)
    Represents guarantee of service performance bonds issuedand advance payments through domestic and international banks required under certain internationalclient contracts.

    (3)
    Represents tender and bid bonds issued through international banks as part of the bidding process for new work to demonstrateassure our financial strength.

    client that we will enter into the service contract.
    (4)
    Represents letters of credit issued through a domestic bank in support for certain performance, advance payments and bid bonds.
    Includes off-balance sheet arrangements with open-ended expiration dates.


    Contractual Obligations

    The following chart provides information with respecttable reflects contractual debt obligations under our notes payable and credit facilities, fees paid on our off-balance sheet arrangements and minimum cash rental payments due for our operating lease obligations over the next five years and thereafter as of December 31, 2020:
     Total20212022-20232024-20252026 and thereafter
    Principal and repayment of notes payable and credit facilities (1)
    		$49,281 $955 $47,659 $579 $88 
    Interest expense on notes payable and credit facilities (2) (5)
    		8,127 4,092 4,014 19 2 
    Fees paid on off-balance sheet arrangements (3) (5)
    		2,224 942 886 351 45 
    Operating lease obligations (4) (5)
    		21,598 5,772 8,170 4,698 2,958 
    Finance lease obligations (4) (5)
    		265 75 150 40 — 
     $81,495 $11,836 $60,879 $5,687 $3,093 
    (1)    Reduced by the amortization of deferred financing costs related to contractual obligations including those obligations attributable to discontinued operations (in thousands).

    our term loan debt. Balances due partially include amounts payable in various foreign currencies and are reflected based on foreign currency exchange rates as of December 31, 2020, where applicable.
     
    		 Total 2017 2018 - 2019 2020 - 2021 2022 and
    later    		 

    Long-term debt obligations

    		 $144,103  1,983  31,408  110,354  358 

    Interest expense on notes payable(1)

    		  46,848  12,793  24,372  9,655  28 

    Operating lease obligations(2)

    		  36,720  7,607  11,239  6,911  10,963 
    ​​​ ​​​ ​ ​​ ​​​ ​ ​​ ​​

    		 $227,671 $22,383 $67,019 $126,920 $11,349 
    ​​​​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    (1)
    (2)Estimated using the weighted average effective interest rates in effect atas of December 31, 2016.

    (2)
    2020 on our notes payable and credit facilities. Includes the amortization of deferred financing costs related to our term loan and revolving credit facilities.
    (3)Fees paid on our off-balance sheet arrangements are included in interest and related financing fees, net, in our consolidated statements of operations.
    (4)Represents future minimum rental commitments under non-cancelable leases. The Company expectslease terms. Amounts exclude contingent rental payments, where applicable, that may be payable based on lease provisions where annual rent increases are based on certain economic indexes, among other items. We expect to fund these commitments with existing cash and cash flow from operations.
    (5)Amounts presented are partially payable in various foreign currencies and are based on the foreign currency rates at December 31, 2020.
    27


    The liability for unrecognized tax benefits is not included in the table above due to the subjective nature of the costs and timing of anticipated payments.

    Item 7A.Quantitative and Qualitative Disclosures About Market Risk

    We are exposed to certain market risks primarily related to foreign currency exchange rates and interest rates.

    Foreign Exchange Rates

            We are exposed to foreign currency exchange rate risk resulting from our operations outsidea smaller reporting company as defined by Rule 12b-2 of the U.S. whichSecurities Exchange Act of 1934 and are denominated primarily in Euros, U.A.E. dirhams, Qatari riyal, Omani rial, Saudi riyal,


    Table of Contents

    Brazilian real, Polish zloty as well as other currencies. We do not comprehensively hedge our exposurerequired to currency rate changes; however, we limit exposure to foreign currency fluctuations in most of our contracts through provisions that require client payments to be in currencies corresponding toprovide the currency in which costs are incurred. As a result ofinformation under this natural hedge, we currently do not hedge foreign currency cash flows for contract work performed, although we may do so in the future. The functional currency of our significant foreign operations is the respective local currency.

    Interest Rates

            All of our borrowings under our revolving credit facilities bear interest at variable rates. If market interest rates had changed by 100 basis points, interest expense and our cash flows would have changed by $308,000 each.

    item.

    28

    Table of Contents


    Item 8.Financial Statements and Supplementary Data.


    Data



    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    Board of Directors and Stockholders
    Hill International, Inc.

    Opinion on the financial statements

    We have audited the accompanying consolidated balance sheets of Hill International, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

    We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 16, 2021 expressed an adverse opinion.

    Basis for opinion
    These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

    We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

    Critical audit matter
    The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

    Revenue Recognition – Estimates-at-Completion

    As described further in Note 4 to the financial statements, the Company generally recognizes revenue over a period of time as control transfers to a customer, based on the extent of progress towards satisfaction of the related performance obligation. The selection of the method used to measure progress requires judgment and is dependent on the contract type selected by the customer during contract negotiation and the nature of the services and solutions to be provided. For performance obligations requiring the delivery of a service for a fixed price, the Company uses the ratio of actual costs incurred to total estimated costs, provided that costs incurred (an input model) represents a reasonable measure of progress toward the satisfaction of a performance obligation, in order to estimate the portion of total transaction price earned. We identified the initial development and subsequent updates to estimates-at-completion as a critical audit matter.

    The principal considerations for our determination that the development and updating of estimates-at-completion in recognizing revenue is a critical audit matter are the significant management judgments involved in the initial creation and subsequent updates to the Company’s estimates-at-completion and related profit recognized, which required subjective management and auditor judgment in the development and execution of such estimates. Inputs and assumptions requiring significant management judgment included anticipated direct labor, subcontract labor, and other direct costs required to deliver on unfinished performance obligations.

    29

    Our audit procedures related to this matter included the following, among others:

    •We evaluated the design and tested the operating effectiveness of controls relating to the development of initial estimates-to-completion and the ongoing updating and monitoring of estimates specific to the estimates-at-completion.

    •We tested management’s process for developing, revising and applying estimates-at-completion to a sample of contracts. Our testing included evaluating key inputs and assumptions by comparing the estimates to underlying supporting documentation or other corroborating evidence that supports estimated costs. We interviewed project managers of the Company to evaluate progress to date and discuss factors impacting the estimated hours to complete the project.

    •To assess the Company’s ability to develop reliable estimates, we performed the following analytical analysis:

    o We performed analytical procedures of gross margin fluctuations on a contract by contract basis to
    corroborate cumulative catch-up adjustments.

    o We performed a look-back analysis on a contract by contract basis comparing actual costs incurred during the
    year to prior year estimated costs.


    /s/ GRANT THORNTON LLP
    We have served as the Company’s auditor since 2019.
    Philadelphia, Pennsylvania
    March 16, 2021

    30


    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    Board of Directors and Stockholders
    Hill International, Inc.

    Opinion on internal control over financial reporting
    We have audited the internal control over financial reporting of Hill International, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, because of the effect of the material weaknesses described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO.

    A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment.

    •Revenue Recognition - the Company failed to:

    o Consistently ensure there were effective and documented review controls over the set-up and monitoring of
    its estimates at completion calculations for long-term fixed fee contracts;

    o Design controls to ensure the proper set-up of contract information in the system and over the review and
         approval of manual billings. This contract information and manual billing is used in the revenue recognition
    process

    •Vendor Approval - The Company did not properly design policies, procedures and controls to ensure that vendors were properly reviewed, approved and set-up within the system.

    We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2020. The material weaknesses identified above were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report dated March 16, 2021 which expressed an unqualified opinion on those financial statements.

    Basis for opinion
    The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

    We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

    Definition and limitations of internal control over financial reporting
    A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


    31


    Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


    /s/ GRANT THORNTON LLP
    Philadelphia, Pennsylvania
    March 16, 2021



    32

    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    CONSOLIDATED BALANCE SHEETS

    (In thousands, except per share data)

    thousands)
     December 31,
     20202019
    Assets  
    Cash and cash equivalents$34,229 $15,915 
    Cash - restricted3,752 4,666 
    Accounts receivable, net98,186 103,892 
    Accounts receivable - affiliates, net23,285 18,776 
    Current portion of retainage receivable11,775 16,459 
    Prepaid expenses and other current assets9,378 9,340 
    Income taxes receivable2,298 2,256 
    Total current assets182,903 171,304 
    Property and equipment, net9,443 11,895 
    Cash - restricted, net of current portion3,432 4,401 
    Operating lease right-of-use assets13,116 17,451 
    Financing lease right-of-use assets288 0 
    Retainage receivable6,044 5,695 
    Acquired intangibles, net2,253 232 
    Goodwill46,397 48,024 
    Investments2,805 1,711 
    Deferred income tax assets3,698 3,800 
    Other assets1,620 5,038 
    Total assets$271,999 $269,551 
    Liabilities and Stockholders’ Equity
    Current maturities of notes payable and long-term debt$987 $1,792 
    Accounts payable and accrued expenses67,797 65,172 
    Income taxes payable2,219 3,152 
    Current portion of deferred revenue3,305 10,773 
    Current portion of operating lease liabilities4,797 5,736 
    Current portion of financing lease liabilities70 0 
    Other current liabilities5,796 4,876 
    Total current liabilities84,971 91,501 
    Notes payable and long-term debt, net of current maturities48,294 41,150 
    Retainage payable600 1,551 
    Deferred income tax liabilities1,210 419 
    Deferred revenue7,488 3,041 
    Non-current operating lease liabilities13,184 17,030 
    Non-current financing lease liabilities186 0 
    Other liabilities6,778 4,631 
    Total liabilities162,711 159,323 
    Commitments and contingencies (Note 14)00
    Stockholders’ equity:
    Preferred stock, $0.0001 par value; 1,000 shares authorized, 0ne issued0 0 
    Common stock, $0.0001 par value; 100,000 shares authorized, 62,920 and 62,708 shares issued at December 31, 2020 and 2019, respectively6 6 
    Additional paid-in capital215,010 212,759 
    Accumulated deficit(79,542)(71,360)
    Accumulated other comprehensive income (loss)1,318 (3,817)
    Treasury stock of 6,807 and 6,546 at December 31, 2020 and 2019, respectively(29,056)(28,231)
    Hill International, Inc. share of equity107,736 109,357 
    Noncontrolling interests1,552 871 
    Total equity109,288 110,228 
    Total liabilities and stockholders’ equity$271,999 $269,551 
     
    		 December 31, 
     
    		 2016 2015 

    Assets

    		       

    Cash and cash equivalents

    		 $25,637 $24,089 

    Cash—restricted

    		  4,312  4,435 

    Accounts receivable, less allowance for doubtful accounts of $71,082 and $60,535

    		  164,554  187,553 

    Accounts receivable—affiliates

    		  5,712  5,205 

    Prepaid expenses and other current assets

    		  7,751  7,030 

    Income taxes receivable

    		  4,061  3,187 

    Current assets held for sale

    		  54,144  60,092 
    ​​​ ​​​ ​ ​

    Total current assets

    		  266,171  291,591 

    Property and equipment, net

    		  16,787  18,981 

    Cash—restricted, net of current portion

    		  313  259 

    Retainage receivable

    		  17,225  2,638 

    Acquired intangibles, net

    		  6,747  9,773 

    Goodwill

    		  50,665  49,739 

    Investments

    		  3,581  8,378 

    Deferred income tax assets

    		  2,197  4,602 

    Other assets

    		  4,224  6,177 

    Non-current assets held for sale

    		  33,298  36,608 
    ​​​ ​ ​​ ​ ​

    Total assets

    		 $401,208 $428,746 
    ​​​ ​​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​

    Liabilities and Stockholders' Equity

    		       

    Current maturities of notes payable and long-term debt

    		  1,983  4,357 

    Accounts payable and accrued expenses

    		  83,992  89,336 

    Income taxes payable

    		  5,315  8,983 

    Deferred revenue

    		  12,943  9,866 

    Other current liabilities

    		  8,168  3,009 

    Current liabilities held for sale

    		  27,703  27,497 
    ​​​​ ​​ ​ ​

    Total current liabilities

    		  140,104  143,048 

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

    		  142,120  140,626 

    Retainage payable

    		  961  1,929 

    Deferred income taxes

    		  535  988 

    Deferred revenue

    		  12,691  9,921 

    Other liabilities

    		  9,732  7,792 

    Non-current liabilities held for sale

    		  4,679  6,403 
    ​​​ ​ ​​ ​ ​

    Total liabilities

    		  310,822  310,707 
    ​​​ ​​​ ​ ​

    Commitments and contingencies

    		       

    Stockholders' equity:

    		  
         		  
         		 

    Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued

    		  —  — 

    Common stock, $0.0001 par value; 100,000 shares authorized, 58,835 shares and 58,335 shares issued at December 31, 2016 and 2015, respectively

    		  6  6 

    Additional paid-in capital

    		  190,355  188,869 

    Retained earnings (deficit)

    		  (17,623) 1,205 

    Accumulated other comprehensive loss

    		  (54,327) (46,866)
    ​​​ ​ ​​ ​ ​

    		  118,411  143,214 

    Less treasury stock of 6,977 shares and 6,743 shares at December 31, 2016 and December 31, 2015, respectively

    		  (30,041) (29,245)
    ​​​​ ​​ ​ ​

    Hill International, Inc. share of equity

    		  88,370  113,969 

    Noncontrolling interests

    		  2,016  4,070 
    ​​​ ​ ​​ ​​

    Total equity

    		  90,386  118,039 
    ​​​​ ​​ ​ ​

    Total liabilities and stockholders' equity

    		 $401,208 $428,746 
    ​​​ ​​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​

    See accompanying notes to consolidated financial statements.


    33

    Table of Contents



    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands, except per share data)

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Consulting fee revenue

    		 $434,147 $467,877 $428,827 

    Reimbursable expenses

    		  86,700  84,699  58,927 
    ​​​ ​ ​​​ ​​ ​ ​

    Total revenue

    		  520,847  552,576  487,754 
    ​​​ ​ ​​ ​ ​​​ ​

    Cost of services

    		  272,243  288,845  263,806 

    Reimbursable expenses

    		  86,700  84,699  58,927 
    ​​​ ​ ​​​ ​​ ​ ​

    Total direct expenses

    		  358,943  373,544  322,733 
    ​​​ ​ ​​ ​ ​​​ ​

    Gross profit

    		  161,904  179,032  165,021 

    Selling, general and administrative expenses

    		  162,721  159,691  142,079 

    Share of loss of equity method affiliates

    		  37  237  — 
    ​​​ ​ ​​​ ​​ ​ ​

    Operating (loss) profit

    		  (854) 19,104  22,942 

    Interest and related financing fees, net

    		  694  2,026  1,564 
    ​​​ ​ ​​ ​ ​​​ ​

    (Loss) earnings before income taxes

    		  (1,548) 17,078  21,378 

    Income tax expense

    		  6,068  6,465  7,512 
    ​​​ ​ ​​​ ​​ ​ ​

    (Loss) earnings from continuing operations

    		  (7,616) 10,613  13,866 

    (Loss) from discontinued operations

    		  (11,076) (2,874) (18,713)
    ​​​ ​ ​​ ​ ​​​ ​

    Net (loss) earnings

    		  (18,692) 7,739  (4,847)

    Less: net earnings—noncontrolling interests

    		  136  808  1,301 
    ​​​ ​ ​​ ​ ​​ ​ ​

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

    		 $(18,828)$6,931 $(6,148)
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​​

    Basic (loss) earnings per common share from continuing operations

    		 $(0.15) 0.20 $0.28 

    Basic (loss) per common share from discontinued operations

    		  (0.21) (0.06) (0.42)
    ​​​ ​ ​​ ​ ​​ ​ ​

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

    		 $(0.36)$0.14 $(0.14)
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​​

    Basic weighted average common shares outstanding

    		  51,724  50,874  44,370 
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Diluted (loss) earnings per common share from continuing operations

    		 $(0.15)$0.20 $0.28 

    Diluted (loss) per common share from discontinued operations

    		  (0.21) (0.06) (0.42)
    ​​​ ​ ​​ ​ ​​​ ​

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

    		 $(0.36)$0.14 $(0.14)
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Diluted weighted average common shares outstanding

    		  51,724  51,311  44,370 
    ​​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​
     Years Ended December 31,
     20202019
    Consulting fee revenue$296,615 $308,620 
    Reimbursable expenses71,909 67,817 
    Total revenue368,524 376,437 
    Direct expenses249,173 249,587 
    Gross profit119,351 126,850 
    Selling, general and administrative expenses109,215 109,746 
    Foreign currency exchange loss2,923 1,159 
    Plus: Share of profit of equity method affiliates3,286 2,601 
    Operating profit10,499 18,546 
    Less: Interest and related financing fees, net5,224 5,795 
    Plus: Other (loss) income, net(5,711)394 
    (Loss) income before income taxes(436)13,145 
    Income tax expense (benefit)7,134 (1,109)
    Net (loss) income(7,570)14,254 
    Less: net income - noncontrolling interests612 170 
    Net (loss) income attributable to Hill International, Inc.$(8,182)$14,084 
    Basic (loss) income per common share - Hill International, Inc.$(0.14)$0.25 
    Basic weighted average common shares outstanding56,603 56,280 
    Diluted (loss) income per common share - Hill International, Inc.$(0.14)$0.25 
    Diluted weighted average common shares outstanding56,603 56,280 

    See accompanying notes to consolidated financial statements.


    34

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

    (LOSS) INCOME
    (In thousands)

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Net (loss) earnings

    		 $(18,692)$7,739 $(4,847)

    Foreign currency translation adjustment, net of tax

    		  (10,124) (14,861) (9,786)

    Other, net

    		  584  (228) 123 
    ​​​ ​ ​​​ ​​ ​ ​

    Comprehensive loss

    		  (28,232) (7,350) (14,510)

    Comprehensive loss attributable to noncontrolling interests

    		  (1,943) (15) (353)
    ​​​ ​ ​​ ​ ​​​ ​

    Comprehensive loss attributable to Hill International, Inc. 

    		 $(26,289)$(7,335)$(14,157)
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​
     Years Ended December 31,
     20202019
    Net (loss) income$(7,570)$14,254 
    Foreign currency translation adjustments, net of tax5,204 (1,146)
    Comprehensive (loss) income(2,366)13,108 
    Less: Comprehensive income attributable to noncontrolling interests681 266 
    Comprehensive (loss) income attributable to Hill International, Inc.$(3,047)$12,842 

    See accompanying notes to consolidated financial statements.


    35

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF STOCKHOLDERS'STOCKHOLDERS’ EQUITY

    For the Years Ended December 31, 2016, 2015,2020 and 2014

    2019

    (In thousands)

     Common StockAdditional
    Paid-in    		Retained
    Earnings    		Accumulated Other
    Comprehensive    		Treasury StockHill Share of Stockholders’ EquityNon-controlling InterestsTotal
    Stockholders’
    Equity
     SharesAmountCapital(Deficit)Income (Loss)SharesAmount
    Balance - December 31, 201862,181 $6 $210,084 $(85,444)$(2,575)6,546 $(28,231)$93,840 $605 $94,445 
    Net earnings— — — 14,084 — — — 14,084 170 14,254 
    Other comprehensive earnings (loss)— — — — (1,242)— — (1,242)96 (1,146)
    Shares issued to Board of Directors128 — — — — — — — — 0 
    Share-based compensation expense322 — 2,514 — — — — 2,514 — 2,514 
    Shares issued under employee stock purchase plan77 — 161 — — — — 161 — 161 
    Balance - December 31, 201962,708 6 212,759 (71,360)(3,817)6,546 (28,231)109,357 871 110,228 
    Net (loss) earnings— — — (8,182)— — — (8,182)612 (7,570)
    Other comprehensive earnings— — — — 5,135 — — 5,135 69 5,204 
    Shares issued to Board of Directors277 — — — — — — — — 0 
    Share-based compensation expense0 — 2,006 — — — — 2,006 — 2,006 
    Shares issued under employee stock purchase plan196 — 245 — — — — 245 — 245 
    Transfer of shares pledged as collateral (1)
    		(261)— — — — 261 (825)(825)— (825)
    Balance - December 31, 202062,920 $6 $215,010 $(79,542)$1,318 6,807 $(29,056)$107,736 $1,552 $109,288 
     
    		 Common Stock  
    		  
    		 Accumulated
    Other
    Comprehensive
    (Loss)    		 Treasury Stock Hill
    Share of
    Stockholders'
    Equity    		  
    		  
    		 
     
    		 Additional
    Paid-in
    Capital    		 Retained
    Earnings (Deficit)    		 Non-
    controlling
    Interests    		 Total
    Stockholders'
    Equity    		 
     
    		 Shares Amount Shares Amount 

    Balance—December 31, 2013

    		  46,598 $5 $136,899 $422 $(24,591) 6,434 $(27,766)$84,969 $11,887 $96,856 

    Net (loss) earnings

    		  —  —  —  (6,148) —  —  —  (6,148) 1,301  (4,847)

    Other comprehensive loss

    		  —  —  —  —  (8,009) —  —  (8,009) (1,654) (9,663)

    Sale of common stock

    		  9,547  1  38,041  —  —  —  —  38,042  —  38,042 

    Stock issued to Board of Directors

    		  27  —  175  —  —  —  —  175  —  175 

    Stock-based compensation expense

    		  —  —  3,327  —  —  —  —  3,327  —  3,327 

    Cancelation of restricted stock

    		  (2) —  (8) —  —  —  —  (8) —  (8)

    Stock issued under employee stock purchase plan

    		  55  —  197  —  —  —  —  197  —  197 

    Exercise of stock options

    		  324  —  1,032  —  —  —  —  1,032  —  1,032 

    Cashless exercise of stock options

    		  200  —  538  —  —  112  (538) —  —  — 

    Stock issued for acquisition of CPI

    		  171  —  618  —  —  —  —  618  —  618 

    Dividends paid to noncontrolling interests

    		  —  —  —  —  —  —  —  —  (173) (173)

    Acquisition of additional interest in subsidiary

    		  —  —  (907) —  —  —  —  (907) (2,649) (3,556)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Balance—December 31, 2014

    		  56,920  6  179,912  (5,726) (32,600) 6,546  (28,304) 113,288  8,712  122,000 

    Net earnings

    		  —  —  —  6,931  —  —  —  6,931  808  7,739 

    Other comprehensive loss

    		  —  —  —  —  (14,266) —  —  (14,266) (823) (15,089)

    Stock issued to Board of Directors

    		  25  —  115  —  —  —  —  115  —  115 

    Stock-based compensation expense

    		  —  —  2,983  —  —  —  —  2,983  —  2,983 

    Stock issued under employee stock purchase plan

    		  43  —  126  —  —  —  —  126  —  126 

    Exercise of stock options

    		  189  —  468  —  —  —  —  468  —  468 

    Cashless exercise of stock options

    		  85  —  361  —  —  67  (361) —  —  — 

    Stock issued for acquisition of CPI

    		  148  —  530  —  —  —  —  530  —  530 

    Dividends paid to noncontrolling interests

    		  —  —  —  —  —  —  —  —  (253) (253)

    Acquisition of additional interest in subsidiary

    		  925  —  4,374  —  —  —  —  4,374  (4,374) — 

    Purchase of treasury stock

    		  —  —  —  —  —  130  (580) (580) —  (580)
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Balance—December 31, 2015

    		  58,335  6  188,869  1,205  (46,866) 6,743  (29,245) 113,969  4,070  118,039 

    Net (loss) earnings

    		  —  —  —  (18,828) —  —  —  (18,828) 136  (18,692)

    Other comprehensive loss

    		  —  —  —  —  (7,461) —  —  (7,461) (2,079) (9,540)

    Stock issued to Board of Directors

    		  3  —  10  —  —  —  —  10  —  10 

    Stock-based compensation expense

    		  —  —  2,817  —  —  —  —  2,817  —  2,817 

    Stock issued under employee stock purchase plan

    		  59  —  182  —  —  —  —  182  —  182 

    Exercise of stock options

    		  117  —  351  —  —  —  —  351  —  351 

    Cashless exercise of stock options

    		  321  —  796  —  —  234  (796) —  —  — 

    Dividends paid to noncontrolling interests

    		  —  —  —  —  —  —  —  —  (111) (111)

    Decrease related to ESA Put Options

    		  —  —  (2,670) —  —  —  —  (2,670) —  (2,670)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Balance—December 31, 2016

    		  58,835 $6 $190,355 $(17,623)$(54,327) 6,977 $(30,041)$88,370 $2,016 $90,386 
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​

    (1) See Note 12 - Stockholders' Equity for more detail.


    See accompanying notes to consolidated financial statements.


    36

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In thousands)

     Years Ended December 31,
     20202019
    Cash flows from operating activities:  
    Net (loss) income$(7,570)$14,254 
    Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
    Depreciation and amortization4,038 3,824 
    Recovery of bad debts(1,940)(11,360)
    Amortization of deferred loan fees699 715 
    Deferred tax expense782 751 
    Share-based compensation2,006 2,514 
    Lease right-of use assets4,135 3,899 
    Loss on liquidation of subsidiary5,501 0 
    Foreign currency remeasurement losses (gains)2,923 (905)
    Changes in operating assets and liabilities:
    Accounts receivable13,463 27,315 
    Accounts receivable - affiliates(4,509)485 
    Prepaid expenses and other current assets1,149 (3,792)
    Income taxes receivable(419)(1,504)
    Retainage receivable(337)200 
    Other assets(4,693)(164)
    Accounts payable and accrued expenses(245)(14,934)
    Deferred payroll tax payments3,623 0 
    Income taxes payable(952)(5,703)
    Deferred revenue(3,102)(2,554)
    Lease liabilities(4,622)(4,630)
    Other current liabilities1,168 124 
    Retainage payable(952)624 
    Other liabilities2,132 820 
    Net cash provided by operating activities12,278 9,979 
    Cash flows from investing activities:
    Payments for purchase of property and equipment(1,843)(3,936)
    Acquisition of Grandfathered Engineering Corporation license(1,050)0 
    Net cash used in investing activities(2,893)(3,936)
    Cash flows from financing activities:
    Payments on term loans(893)(1,060)
    Proceeds from term loan borrowings1,310 0 
    Proceeds from revolving loans53,630 37,296 
    Repayment of revolving loans(47,777)(41,361)
    Proceeds from stock issued under employee stock purchase plan245 194 
    Net cash provided by (used in) financing activities6,515 (4,931)
    Effect of foreign exchange rate changes on cash540 763 
    Deconsolidated cash9 0 
    Net increase in cash, cash equivalents and restricted cash16,431 1,875 
    Cash, cash equivalents and restricted cash — beginning of year24,982 23,107 
    Cash, cash equivalents and restricted cash — end of year$41,413 $24,982 
    37

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Cash flows from operating activities:

    		          

    Net (loss) earnings

    		 $(18,692)$7,739 $(4,847)

    Loss from discontinued operations

    		  11,076  2,874  18,713 
    ​​​ ​ ​​​ ​​ ​ ​

    (Loss) earnings from continuing operations

    		  (7,616) 10,613  13,866 

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

    		          

    operating activities:

    		          

    Depreciation and amortization

    		  7,153  7,909  7,104 

    Provision for bad debts

    		  14,454  6,262  (5,195)

    Interest accretion on term loan

    		  —  —  15,526 

    Amortization of loan fees

    		  1,778  1,778  555 

    Deferred tax (benefit) provision

    		  2,293  (2,306) (3,372)

    Stock based compensation

    		  2,827  2,755  3,189 

    Changes in operating assets and liabilities (net of acquisitions):

    		          

    Restricted cash

    		  (106) 11,313  2,499 

    Accounts receivable

    		  (4,926) (47,786) (9,641)

    Accounts receivable—affiliate

    		  (511) 166  (3,501)

    Prepaid expenses and other current assets

    		  (1,012) 4,802  (1,772)

    Income taxes receivable

    		  (1,058) 129  (779)

    Retainage receivable

    		  (14,587) 662  (2,088)

    Other assets

    		  5,170  (1,843) 7,569 

    Accounts payable and accrued expenses

    		  (2,372) 14,089  9,023 

    Income taxes payable

    		  (3,512) (420) (1,308)

    Deferred revenue

    		  6,907  (6,342) (3,310)

    Other current liabilities

    		  4,067  (5,178) (4,825)

    Retainage payable

    		  (963) (519) 1,431 

    Other liabilities

    		  1,990  5,289  (2,512)
    ​​​ ​​​ ​ ​​ ​​

    Net cash provided by continuing operations

    		  9,976  1,373  22,459 

    Net cash (used in) discontinued operations

    		  (408) (8,226) (16,154)
    ​​​ ​ ​​ ​ ​​ ​ ​

    Net cash provided by (used in) operating activities

    		  9,568  (6,853) 6,305 
    ​​​ ​ ​​ ​ ​​ ​ ​

    Cash flows from investing activities:

    		          

    Purchase of businesses, net of cash acquired

    		  —  (4,384) (2,701)

    Purchase of additional interest in Engineering S.A. 

    		  —  —  (3,556)

    Payments for purchase of property and equipment

    		  (956) (13,508) (3,580)
    ​​​ ​ ​​ ​ ​​​ ​

    Net cash used in investing activities of continuing operations

    		  (956) (17,892) (9,837)

    Net cash used in investing activities of discontinued operations

    		  (2,928) (694) (2,141)
    ​​​ ​ ​​ ​ ​​ ​ ​

    Net cash used in investing activities

    		  (3,884) (18,586) (11,978)
    ​​​ ​ ​​ ​ ​​​ ​

    Cash flows from financing activities:

    		          

    Due to bank

    		  —  —  (2)

    Proceeds from secondary public offering of common stock

    		  —  —  38,042 

    Proceeds from term loan borrowing

    		  —  —  120,000 

    Payoff and termination of term loan

    		  —  —  (100,000)

    Payoff and termination of revolving credit facility

    		  —  —  (25,500)

    Payment of financing fees

    		  —  —  (10,065)

    Payments on term loan

    		  (1,255) (1,240) (13,833)

    Net borrowings (payments) on revolving loans

    		  (803) 23,229  (300)

    Proceeds from Philadelphia Industrial Development Corporation loan

    		  —  750  — 

    Payment of holdback purchase price

    		  (1,531) —  — 

    Dividends paid to noncontrolling interest

    		  (111) (253) (173)

    Proceeds from stock issued under employee stock purchase plan

    		  182  126  197 

    Proceeds from exercise of stock options

    		  351  272  1,032 

    Purchase of treasury stock

    		  —  (580) — 
    ​​​ ​ ​​ ​ ​​​ ​

    Net cash (used in) provided by financing activities

    		  (3,167) 22,304  9,398 
    ​​​ ​ ​​​ ​​ ​ ​

    Effect of exchange rate changes on cash

    		  (969) (2,900) (3,982)
    ​​​ ​ ​​ ​ ​​​ ​

    Net increase (decrease) in cash and cash equivalents

    		  1,548  (6,035) (257)

    Cash and cash equivalents—beginning of year

    		  24,089  30,124  30,381 
    ​​​ ​ ​​​ ​​ ​ ​

    Cash and cash equivalents—end of year

    		 $25,637 $24,089 $30,124 
    ​​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​
    Years Ended December 31,
    20202019
    Supplemental disclosures of cash flow information:
    Interest and related financing fees paid$4,670 $5,347 
    Income taxes paid3,748 4,821 
    Transfer of proceeds from shares pledged as collateral to treasury stock825 0 
    Cash paid for amounts included in the measurement of lease liabilities8,448 8,164 
    Right-of-use assets obtained in exchange for operating lease liabilities(1)
    		1,293 21,351 
    Right-of-use assets obtained in exchange for financing lease liabilities288 0 
    Cancellation of PIDC-Local Development Corporation forgivable loan345 0 

    (1) Amounts relate to the Company's adoption of the new accounting guidance for leases, as described in Note 3 Summary of Significant Accounting Policies, for the year ended December 31, 2019.

    See accompanying notes to consolidated financial statements.


    38

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    (in thousands, except per share data)

    Note 1—1 — The Company


    Hill International, Inc. ("Hill"(including, as required by its context, its subsidiaries, “Hill” or the "Company"“Company”) is a professional services firm that provides program management, project management, construction management and other consulting services primarily to the buildings, transportation, environmental, energy and industrial markets worldwide. Hill'sHill’s clients include the U.S. federal government, U.S. state and local governments, foreign governments and the private sector.

    Note 2—Liquidity

            Over the years, the amount The Company had approximately 2,700 professionals in approximately 70 offices worldwide as of CFR attributable to operationsDecember 31, 2020.


    The Company was incorporated on June 28, 2006 upon merging with Arpeggio Acquisition Corp in the Middle Eaststate of Delaware. Prior to the merger, Arpeggio Acquisition Corp. completed its final public offering on June 30, 2004. Hill's common stock is traded on the NYSE under the trading symbol “HIL.”

    All amounts included in the following Notes to the Consolidated Financial Statements are in thousands, except per share data.

    Note 2 - Liquidity

    The Company's principal sources of liquidity consisted of cash and Africa has grown to approximately 52.0%cash equivalents of total consolidated CFR$34,229 and $15,915 at December 31, 2020 and 2019, respectively; available borrowing capacity of $7,495 and $9,052 under the Company's domestic revolving credit facility with Société Générale at December 31, 2020 and 2019, respectively; available borrowing capacity under the Company's international revolving credit facility with Société Générale of $1,085 and $3,145 at December 31, 2020 and 2019, respectively; and available borrowing capacity under other foreign credit agreements of $3,131 and $2,538 at December 31, 2020 and 2019, respectively. Additional information regarding the Company's credit facilities is set forth in 2016. There has been significant political upheavalNote 10 - Notes Payable and civil unrestLong-Term Debt.

    In December 2019, COVID-19 was identified in this region, most notably in Libya and IraqWuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic as a result of the further spread of the virus into all regions of the world, including those regions where the Company had substantial operations. In 2012, due to the overthrowCompany's primary operations occur. The effects of the Libyan government,this global pandemic on the Company reserved a $59,937,000 receivable from the Libyan Organization for Development of Administrative Centres ("ODAC"). Subsequently, the Company received payments totaling approximately $9,511,000. In 2016, the Company established reserves of $5,078,000 againstincludes anticipated lower gross and operating margins, as well as temporary delays in certain accounts receivable from various projectscollections. These effects may continue in Iraq. This shortfallthe foreseeable future. The Company is focused on preserving its principal sources of liquidity and managing its cash flows continuesflow and will continue to put a considerable strainevaluate the potential short-term and long-term implications of COVID-19 on its liquidity.

    consolidated statements of operations. The Company continues to experience slowing of collections from its clientshas achieved approximately $11,000 in the Middle East, primarily Oman. In 2012, the Company commenced operations on the Muscat International Airport (the "Oman Airport") project with the Ministry of Transport and Communications (the "MOTC")corporate cost reductions in Oman. The original contract term expired in November 2014. In October 2014, the Company applied for a twelve-month extension of time amendment (the "first extension") which was subsequently approved in March 2016 and the Company continued to work on the Oman Airport project.2020. The Company beganbelieves that it has adequate liquidity and business plans to experience some delays in payment duringcontinue to operate the second quarterbusiness and mitigate the risks associated with COVID-19 for the next 12 months from March 16, 2021, the date of 2015 when MOTC commenced its formal review and certification of the Company's invoices. In October 2015, the MOTC paid the Company for work performed in April and May 2015. In December 2015, the Company began discussions with the MOTC on a second extension of time amendment ("the second extension") and has since commenced additional work, which management expects to last through approximately June 2018. MOTC resumed payments in 2016 paying the Company approximately $42,000,000 during the year and $6,153,000 in the first quarter of 2017. At December 31, 2016, accounts receivable from Oman totaled approximately $27,132,000 of which approximately $16,500,000 was past due based on contractual terms.

            The delays in payments from MOTC and other foreign governments have had a negative impact on the Company's liquidity, financial covenants, financial position and results of operations. As a result, the Company has had to rely heavily on debt and equity transactions to fund its operations over the past few years.

    Note 3—Discontinued Operations

            In early 2016, the Company began to investigate the sale of its Construction Claims Group (the "Claims Group"). The pending sale of that segment represents a strategic shift that will have a major effect on our operations and financial results. Accordingly, the Company has classified the assets and liabilities of that segment as held for sale and has reflected its operations and cash flows as discontinued operations for all periods presented.

            On December 20, 2016, the Company and its subsidiary Hill International N.V. ("Hill N.V." and, collectively with the Company, the "Sellers") entered into a Stock Purchase Agreement (the


    this filing.

    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 3—Discontinued Operations (Continued)

    "Agreement") with Liberty Mergeco, Inc. (the "US Purchaser") and Liberty Bidco UK Limited (the "UK Purchaser" and, collectively with the US Purchaser, the "Purchasers") pursuant to which the Purchasers will acquire the Claims Group by the US Purchaser's acquisition of all of the stock of Hill International Consulting, Inc. from the Company and the UK Purchaser's acquisition of all of the stock of Hill International Consulting B.V. from Hill N.V. for a total purchase price of $147,000,000 in cash reduced by assumed indebtedness, as defined in the Agreement. The closing was anticipated to occur within the first quarter of 2017 but is currently expected to close on or about April 30, 2017. The Purchasers are companies controlled by funds managed by Bridgepoint Development Capital, part of international private equity group Bridgepoint.

            The carrying amounts of assets and liabilities of the discontinued operations which have been classified as held for sale are as follows (in thousands):


     
    		 December 31, 
     
    		 2016 2015 

    Trade receivables

    		 $50,892 $55,864 

    Prepaid expense and other current assets

    		  3,064  3,269 

    Income taxes receivable

    		  188  959 
    ​​​ ​ ​​ ​ ​

    Total current assets classified as held for sale

    		 $54,144 $60,092 
    ​​​ ​​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​

    Property, plant and equipment

    		  4,617  4,770 

    Acquired intangibles, net

    		  3,397  4,886 

    Goodwill

    		  22,714  25,154 

    Investments

    		  6  8 

    Deferred income tax assets

    		  1,954  1,305 

    Other assets

    		  610  485 
    ​​​​ ​​ ​ ​

    Total non-current assets classified as held for sale

    		 $33,298 $36,608 
    ​​​ ​​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​

    Accounts payable

    		  23,406  23,121 

    Income taxes payable

    		  (415) 81 

    Deferred revenue

    		  1,562  1,444 

    Other current liabilities

    		  3,150  2,851 
    ​​​ ​ ​​​ ​

    Total current liabilities classified as held for sale

    		 $27,703 $27,497 
    ​​​ ​ ​​ ​​
    ​​​​​​​​
    ​​​ ​ ​​ ​​

    Deferred income taxes

    		  2,022  1,536 

    Deferred revenue

    		  1,012  1,998 

    Other liabilities

    		  1,645  2,869 
    ​​​​ ​​ ​ ​

    Total non-current liabilities classified as held for sale

    		 $4,679 $6,403 
    ​​​ ​​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 3—Discontinued Operations (Continued)

            The line items constituting earnings from discontinued operations consist of the following (in thousands):

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Consulting fee revenue

    		 $164,478 $163,074 $148,290 

    Reimbursable expenses

    		  4,774  4,955  5,549 
    ​​​ ​ ​​​ ​​ ​ ​

    Total revenue

    		  169,252  168,029  153,839 
    ​​​ ​ ​​ ​ ​​​ ​

    Cost of services

    		  73,914  73,521  65,949 

    Reimbursable expenses

    		  4,774  4,955  5,549 
    ​​​ ​ ​​ ​ ​​ ​ ​

    Total direct expenses

    		  78,688  78,476  71,498 
    ​​​ ​ ​​ ​ ​​​ ​

    Gross profit

    		  90,564  89,553  82,341 

    Selling, general and administrative expenses

    		  84,047  77,813  71,345 
    ​​​ ​ ​​​ ​​ ​ ​

    Operating profit

    		  6,517  11,740  10,996 

    Interest and related financing fees, net

    		  12,932  12,637  28,921 
    ​​​ ​ ​​ ​ ​​​ ​

    (Loss) earnings before income taxes

    		  (6,415) (897) (17,925)

    Income tax expense

    		  4,661  1,977  788 
    ​​​ ​ ​​ ​ ​​ ​ ​

    Net loss from discontinued operations

    		 $(11,076)$(2,874)$(18,713)
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​

            In connection with the sale of the Construction Claims Group, the Company will be required to pay off the Secured Credit Facilities (See Note 11). Accordingly, the Company has allocated to discontinued operations all interest expense related to the Secured Credit Facilities. During 2016, the Company expensed $3,044,000 of costs related to the pending sale of the Construction Claims Group and $2,106,000 for a potential tax liability related to foreign jurisdictions (see Note 16).

    Note 4—3 — Summary of Significant Accounting Policies

    (a)Basis of Presentation and Principles of Consolidation

    The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States ("GAAP"of America (“U.S. GAAP”). The consolidated financial statements include the accounts of Hill International, Inc. and its majority owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.




    39

    Reclassification

    Certain back-office expenses and foreign currency translation gains and losses that had previously been included in the individual regions in the operating profit/(loss) table presentation are currently being included within the corporate costs line item on the operating profit/(loss) tables herein. The related 2019 prior period operating profit (loss) by geographic region and corporate costs have been recast to reflect this change. This change only affects the presentation in the operating profit/(loss) tables and has no impact on total operating profit/(loss) reported.

    Foreign currency transaction gains and losses that, in previous periods, had been included in selling, general and administrative ("SG&A") expenses line item on the Consolidated Statements of Operations, are presented as a separate line item on the Consolidated Statements of Operations for the twelve months ended December 31, 2020. The related foreign currency transaction gains and losses for the twelve months ended December 31, 2019 have been reclassed to reflect this change. This change has no impact on the total operating profit/(loss) reported.

    Certain accrued agency fees that had previously been included in accrued payroll and related expenses in the components of accounts payable and accrued expenses table in Note 9 - Accounts Payable and Accrued Expenses are currently being included within the accrued agency fees line item. The related amounts at December 31, 2019 have been reclassed to reflect this change.

    Interest costs and (gains)/losses recognized with the Company's End of Service Benefit plan ("EOSB" plan) had previously been included in SG&A and are now presented in other (loss) income, net in the Company's Consolidated Statements of Operations for the twelve months ended December 31, 2020 and 2019 for $637 and $219, respectively. This change results in an increase on the total operating profit previously reported for the twelve months ended December 31, 2019, but has no impact on the total net income reported.

    Certain geographic regions have been combined in tables throughout the document including in Note 4 - Revenue from Contract with Clients, Note 6 - Property and Equipment and Note 17 - Segment and Related Information. In the current year, Americas includes United States and Latin America and Middle East/Asia/Pacific includes Middle East and Asia/Pacific. The related 2019 presentation has been recast to conform to current year presentation.

    Other (Loss) Income, net

    During the twelve months ended December 31, 2020, a loss of $5,501 was recognized due to the bankruptcy filing and deconsolidation of our subsidiaries in Brazil (see Note 18 - Deconsolidation of Controlling Interest in Subsidiaries). Also, the Company's EOSB plan (see Note 16 Benefit Plans) interest cost and actuarial loss totaling $637 for the twelve months ended December 31, 2020 is included within Other (loss) income, net. An additional $345 of other income was recognized during the twelve months ended December 31, 2020, representing the cancellation of a loan agreement made with the PIDC-Local Development Corporation that was funded to the Company on October 24, 2014 as part of the city of Philadelphia's (the "City") Economic Stimulus Program. In February 2020, the City agreed to cancel this loan due to the Company satisfying all obligations upon which cancellation of such debt was conditioned in the Loan Agreement.

    During the twelve months ended December 31, 2019, the Company recognized $394 of income in Other (Loss) Income, net, related to the settlement of a $1,000 grant received from the Pennsylvania Department of Community and Economic Development (the "PADCED") in May 2015 (the "Grant"), net of $606 of expense related to interest costs, net of gains, related to the Company's EOSB plan and other non-operating activity. The Grant was used as part of the relocation of Hill's corporate headquarters to the city of Philadelphia where partial or full repayment of the Grant is required if specific conditions were not met, which included maintaining a minimum number of employees throughout 2018, among other conditions, with the possibility of extension at the PADCED's discretion. In July 2019, the PADCED concluded that the Company is required to repay $351 of the Grant since the Company failed to meet its employment commitment. In July 2020, the PACDED agreed to further reduce the required repayment to $324 payable in 4 installments of $81, with the last installment due May 1, 2021.

    40

    (b)Foreign Currency Translations and Transactions

    Assets and liabilities of all foreign operations are translated at year-end rates of exchange while revenues and expenses are translated at the average monthly exchange rates. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders'stockholders’ equity entitledtitled accumulated other comprehensive lossincome (loss) until the entity is sold or substantially liquidated. Gains or losses arising from foreign currency transactions (transactions denominated in a currency other than the entity'sentity’s local currency), including those resulting from intercompany transactions, are reflected in selling, general and administrative expensesforeign currency exchange loss in the consolidated statementstatements of operations.


    Table The impact of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summaryforeign exchange on long-term intercompany loans, for which repayment has not been scheduled or planned and permanent equity has been elected, are recorded in accumulated other comprehensive income (loss) on the Company's consolidated balance sheets. There were no such long-term intercompany loans as of Significant Accounting Policies (Continued)

    December 31, 2020.

    (c)Use of Estimates and Assumptions

    The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the revenue and expenses reported for the periods covered by the financial statements and certain amounts disclosed in the accompanying notes to the consolidated financial statements. Actual results could differ significantly from those estimates and assumptions. The estimates affecting the consolidated financial statements that are particularly significant include revenue recognition, allocation of purchase price to acquired intangibles andcalculations, goodwill fair value of contingent consideration,impairment determination on recoverability of long-lived assets, income taxes, allowance for doubtful accounts, right-of-use assets, operating lease liabilities and commitments and contingencies.

    (d)Fair Value Measurements

    The fair value of financial instruments, which primarily consists of cash and cash equivalents, accounts receivable and accounts payable, approximates carrying value due to the short-term nature of the instruments. The carrying value of a significant portion of our various credit facilities approximates fair value as the interest rate is variable.

    rates are variable and approximates current market levels.

    Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it would transact, and the Company considers assumptions that market participants would use when pricing the asset or liability.

            Nonfinancial

    Non-financial assets and liabilities, such as goodwill and long lived assets that are initially recorded at fair value, will be assessed for impairment, if deemed necessary. DuringAdditional information related to the years ended December 31, 2016Company's impairment assessment of these assets are included in paragraphs (k) Long-Lived Assets and 2015,(l) Goodwill below.

    See paragraph below (s) Share-Based Compensation, to be read in conjunction with Note 11 Share-Based Compensation, for information related to certain share-based compensation awards that require the Company did not record any impairment to any financial or nonfinancial assets or liabilities.

    estimate the fair value of such award when the value cannot be measured at the time of the grant.

    (e)Cash and Cash Equivalents

    Cash and cash equivalents include cash on hand and investments in money market funds and investment grade securities held with high quality financial institutions. The Company considers all highly liquid instruments purchased with a remaining maturity of three months or less at the time of purchase to be cash equivalents.

    (f)Restricted Cash

    Restricted cash primarily represents cash collateral required to be maintained in foreign bank accounts to serve as collateral for letters of credit, bonds or guarantees on severalcertain projects. TheGenerally, the cash will remain restricted until the respective project has been completed, which typically is greater than one year.


    41

    The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows:
    20202019
    Cash and cash equivalents$34,229 $15,915 
    Cash - restricted3,752 4,666 
    Cash - restricted, net of current portion3,432 4,401 
    Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows$41,413 $24,982 

    (g)Concentrations of Credit Risk

    Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investmentsequivalents and accounts receivable.

    The Company maintains its cash accounts with high quality financial institutions. Although the Company currently believes that the financial institutions with which it does business will be able to


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    fulfill their commitments, to it, there is no assurance that those institutions will be able to continue to do so.

    The Company provides professional services, under contractual arrangements, to domestic and foreign governmental units, institutions and the private sector. To reduce credit risk, the Company performs ongoing credit evaluations of its clients and does not require collateral beyondrequires customary retainers.

            The following tables show the number of the Company's clients whichretainers where appropriate.

    No single client contributed 10% or more to revenue for the years ended December 31, 2020 and 2019.

    The following table presents the number of total revenue andclients comprised of 10% or more of the Company's billed accounts receivable:

     December 31,
     20202019
    Number of 10% clients1 1 
    Percentage of billed accounts receivable16 %14 %
     
    		 Years Ended
    December 31,    		 
     
    		 2016 2015 2014 

    Number of 10% clients

    		  —  1  1 

    Percentage of total revenue

    		  —  10% 13%



     
    		 December 31, 
     
    		 2016 2015 

    Number of 10% clients

    		  2  1 

    Percentage of accounts receivable

    		  32% 19%

            The following provides information with respect to total revenue from contracts with U.S. federal government agencies:

     
    		 Years Ended
    December 31,    		 
     
    		 2016 2015 2014 

    Percentage of total revenue

    		  2% 2% 3%
    ​​​​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    (h)Allowance for Doubtful Accounts

    The allowance for doubtful accounts is an estimate prepared by management based on identification of the collectability of specific accounts and the overall condition of the receivable portfolios. When evaluating the adequacy of the allowance for doubtful accounts, the Company specifically analyzes trade receivables, including retainage receivable, historical bad debts, client credits, client concentrations, client credit worthiness, current economic trends and changes in client payment terms. If the financial condition of clients were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Likewise, should the Company determine that it would be able to realize more of its receivables in the future than previously estimated, an adjustment to the allowance would increase earnings in the period such determination was made. The allowance for doubtful accounts is reviewed at a minimum on a quarterly basis and adjustments are recorded as deemed necessary.


    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    (i)Property and Equipment

    Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is provided over the estimated useful lives of the assets as follows:


    		MethodEstimated Useful Life

    Furniture and equipment

    		Straight-line10 years

    Leasehold improvements

    		Straight-lineShorter of estimated useful life or lease term

    Computer equipment and software

    		Straight-line3 to 5 years

    Automobiles

    		Straight-line5 years

    42

    The Company capitalizes costs associated with internally developed and/or purchased software systems that have reached the application development stage and meet recoverability tests. Capitalized costs include external direct costs of materials and services utilized in developing or obtaining internal-use software, payroll and payroll-related expenses for employees who are directly associated with and devote time to the internal-use software project.projects. Capitalization of such costs begins when the preliminary project stage is complete and ceases no later than the point at which the project is substantially complete and ready for its intended purpose. Costs for general and administrative, overhead, maintenance and training, as well as the cost of software that does not add functionality to existing systems, are expensed as incurred.

    Upon retirement or other disposition of these assets, the cost and related depreciation are removed from the accounts and the resulting gain or loss, if any, is reflected in results of operations. Expenditures for maintenance, repairs and renewals of minor items are charged to expense as incurred. Major renewals and improvements are capitalized.

    (j)Retainage Receivable

    Retainage receivable represents balances billed but not paid by clients pursuant to retainage provisions in the construction managementtheir contracts and will be due upon completion of specific tasks or the completion of the contract. The current portion of retainage receivable is included in accounts receivable and the long-term portion of retainage receivable is included in retainage receivable in the consolidated balance sheets.

    (k)Long-Lived Assets

    Acquired intangible assets consist of contract rights, client related intangibles and trade names arising from the Company's Project ManagementCompany’s acquisitions. Contract rights represent the fair value of contracts in progress and backlog of an acquired entity. For intangible assets purchased in a business combination, the estimated fair values of the assets are used to establish the cost bases.basis.  Valuation techniques consistent with the market approach, the income approach and the cost approach are used to measure fair value. These assets are amortized over their estimated lives which range from three to fifteen years.

    The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    as the amount by which the carrying amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flow discounted at a rate commensurate with the risks associated with the recovery of the asset. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.


    NaN such impairment losses were recorded during the year ended December 31, 2020. During the year ended December 31, 2019, the Company recorded an impairment loss of $563, which is in SG&A on the consolidated statements of operations and in depreciation and amortization on the consolidated statements of cash flows. The impairment related to the Company's 2015 acquisition of one of its current subsidiaries, IMS Proje Yonetimi ve Danismanlik A.S. ("IMS"), which is based out of the Company's office in Turkey. The Company's consolidated balance sheet included an intangible asset related to IMS for client relationships prior to the impairment. In addition to the decline in the intangible asset's carrying value as a result of the Company's exposure to foreign exchange losses, the Company assessed that the client relationships that were in-place at the time of the intangible asset's initial fair value measurement no longer had any value at December 31, 2019.

    Acquired intangible assets also includes the purchase of an engineering license during the year ended December 31, 2020. The transaction was recorded as an asset acquisition, with an indefinite useful life.

    (l)Goodwill

    Goodwill represents the excess of purchase price and other related coststhe consideration paid over the value assigned to the net tangible and identifiable intangible assets of businesses acquired. Acquired intangible assets other than goodwill are amortized over their useful lives. For intangible assets purchased in a business combination, the estimated fair values of the assets are used to establish the cost bases. Valuation techniques consistent with the market approach and the income approach are used to measure fair value.

            Goodwill is tested annually for impairment in its fiscal third quarter. The Company has determined that, due to the pending sale of its Construction Claims Group, it now has one reporting unit, the Project Management unit. The Company made that determination based on the similarity of the services provided, the methodologies in delivering its services and the similarity of the client base. Goodwill is assessed for impairment using a two-step approach. In the first step of the impairment test, the Company compares the fair value of identifiable net assets acquired. Goodwill is not amortized, but instead is subject to impairment testing on an annual basis, and between annual tests whenever events or changes in circumstances indicate that the reporting unit tofair value may be below its carrying value.amount. The Company tests goodwill annually for impairment during the third quarter. To the extent the carrying amount of the reporting unit exceeds its fair value, an indication exists that goodwill may be impaired and the Company must perform a second more detailed assessment. The second step, if necessary, involves allocating the reporting unit's fair value to all of its recognized and unrecognized assets and liabilities in order to determine the implied fair value of our reporting unit, we use the goodwill asdiscounted cash flow, the public company and the quoted price methods, weighting the results of the assessment date. The implied fair value of the goodwill is then compared to the carrying amount of goodwill to quantify an impairment charge as of the assessment date.

    each method.


    43

    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'sCompany’s weighted average cost of capital. The Company'sCompany’s changes in estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment. During the three months ended March 31, 2020 the Company determined that the significant decline in its market capitalization as a result of the COVID-19 pandemic indicated that an impairment loss may have been incurred. The Company bypassed the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test. The quantitative goodwill impairment test concluded that the fair value of the Company (reporting unit) exceeded its carrying amount at that time, and therefore, goodwill was not considered impaired. The Company also performed its annual impairment test effective July 1, 20162020. Based on the valuation as of July 1, 2020, the fair value of the Company exceeded its carrying value. The Company determined that 0 impairment existed at December 31, 2020 and noted no impairment.December 31, 2019. In the future, the Company will continue to perform the annual test during its fiscal third quarter unless events or circumstances indicate an impairment may have occurred before that time.

            At the time of the annual impairment test, the Construction Claims unit was still part of our continuing operations. Based on the valuation as of July 1, 2016, which utilized the same processes noted above, the fair value of the Construction Claims unit substantially exceeded its carrying value.

    (m)Investments

    The Company will, in the ordinary course of business, form joint ventures for specific projects. These joint ventures have historically required limited or no investment and simply provide a pass-through for the Company'sCompany’s billings. Any distributions in excess of the Company'sCompany’s billings are accounted for as income


    Table when received and are accounted for under the equity method of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    when received.accounting. In addition, the Company may make other investments accounted for at-cost. The Company's cost-basisCompany’s total investments at December 31, 20162020 and 20152019 are as follows (in thousands):

    follows:
     
    		 December 31, 
     
    		 2016 2015 

    RAMPED Metro Joint Venture(1)

    		 $767 $4,696 

    Concessia, Cartera y Gestion de Infrastructuras S.A.(2)

    		  2,515  2,927 

    Other

    		  299  755 
    ​​​ ​ ​​ ​ ​

    		 $3,581 $8,378 
    ​​​ ​​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​
     December 31,
     20202019
    RAMPED Metro Joint Venture (1)(3)
    		1,493 527 
    Concessia, Cartera y Gestion de Infrastructuras S.A. (2) 
    		1,193 1,096 
    Other (3)
    		119 88 
     $2,805 $1,711 
    (1)
    The Company has a 45%45.0% interest in this joint venture, which was formed for construction management of the Riyadh Metro system in Saudi Arabia.

    (2)
    The Company has a 4.45%5.7% interest in thisConcessia, Cartera y Gestion de Infrastructuras S.A. ("Concessia"), an entity which invests in the equity of companies whichthat finance, construct and operate various public and private infrastructure projects in Spain.
    The practicability exception to fair value measurement was elected due to the fact that there is no readily determinable fair value for this investment. Therefore, the investment is measured at-cost, less impairment, plus or minus observable price changes (in orderly transactions) of an identical or similar investment of the same issuer. There have been no impairments of and no observable price changes in the investment.

    (3)Includes investments accounted for under the equity method of accounting.

    (n)    Deferred Financing Costs, Net

    Net deferred financing costs include debt discount and debt issuance costs associated with obtaining commitments for financing transactions. Deferred financing costs related to revolving-debt arrangements are reflected in prepaid expenses and other current assets and other assets in the consolidated balance sheets and are amortized on a straight-line basis over the term of the loan. Deferred financing costs related to any term debt that requires scheduled repayments are recorded as a direct deduction from the Company's notes payable and other long-term debt and are amortized over the term of the respective financing agreement using the effective interest method. The amortization of such costs are included in interest and related financing fees, net, on the accompanying consolidated statements of operations.

    Unamortized deferred financing costs are expensed if the associated debt is refinanced or repaid before the maturity.

    (o)Deferred Revenue

    In certain instances, the Company may collect advance payments from clients for future services. Upon receipt, theThese payments are reflected as deferred revenue in the Company'sCompany’s consolidated balance sheet.sheets. As the services are performed, the Company reduces the balance and recognizes revenue.

    (o)   

    44

    (p)Deferred Rent

            Rent expenses


    The Company adopted Accounting Standards Update ("ASU") 2016-2, Leases (Topic 842) on January 1, 2019, which required the Company to recognize lease assets and operating lease liabilities on the Company's consolidated balance sheet for operatingall leases which include scheduled rent increaseswith estimated lease terms of more than one year. See further detail in Note 15 - Leases.

    Leases with estimated lease terms of less than one year or arrangements where the Company subleases real estate to a third party were not accounted for under ASU 2016-2. Such leases remained accounted for under the previous Accounting Standards Codification ("ASC") 840, Leases. The lease expense is determined by expensing the total amount of rent due over the life of the operating leaserecognized on a straight-line basis. The differencebasis over the lease term and any differences between the rent paid under the terms of the lease and the straight-line rent expensed on a straight-line basisexpense is recorded as a liability. The deferred rent atliability. At December 31, 20162020 and 20152019, deferred rent was $2,830,000 and $1,732,000, respectively,$2, and is included in other current liabilities and other liabilities in the consolidated balance sheet.

    (p)   sheets.

    (q)Income Taxes

    The Company estimates income taxes in each of the jurisdictions in which it operates. This process involves estimating its actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the Company'sCompany’s consolidated balance sheets. The Company assesses the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent it believes recovery is not likely, the Company establishes a valuation allowance. To the extent the Company establishes a valuation allowance in a period, it must include an expense within the tax provision in the consolidated statements of earnings. The Company has recorded a valuation allowance to reduce the deferred tax asset to an amount that is more“more likely than not” (i.e., a likelihood greater than 50 percent) to be realized in future years. If the Company determines in the future that it is more likely than not to be allowed by the tax jurisdiction based solely on the technical merits of the position, that the deferred tax assets subject to the valuation allowance will be realized, then the previously provided valuation allowance will be adjusted.


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    The Company recognizes a tax benefit in the financial statements for an uncertain tax position only if management'smanagement’s assessment is that the position is "moremore likely than not" (i.e., a likelihood greater than 50 percent)not to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term "tax position"“tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

    (q)   

    (r)Revenue Recognition

    The Company generates revenue primarily from providing professional services to its clients. Revenue is generally recognized upon the performanceclients under various types of services.contracts. In providing these services, the Company may incur reimbursable expenses, which consist principally of amounts paid to subcontractors and other third parties and travel and other job related expenses that are contractually reimbursable from clients. The Company has determined that it will includeincludes reimbursable expenses in computing and reporting its total revenue as long as the Company remains responsible to the client for the fulfillment of the contract and for the overall acceptability of all services provided.

            The Company earns its revenue from time-and-materials, cost-plus and fixed-price contracts.

    If estimated total costs on any contract indicateproject a loss, the Company charges the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and others are recorded in the accounting period in which the events indicating a loss are known and the loss can be reasonably estimated. These loss projects are re-assessed for each subsequent reporting period until the project is complete. Such revisions could occur at any time and the effects may be material.

    Time-and-Materials


    See, "Note 4 - Revenue from Contracts

            Under its time-and-materials contracts, with Clients" for more detail regarding how the Company negotiatesrecognizes revenue under each of its contractual arrangements.

    (s)Share-Based Compensation
    For compensation issued under equity-classified awards, the Company uses the Black-Scholes option-pricing model to measure the estimated fair value of any share-based compensation award when the fair value of the award is not readily determinable, which generally applies to options issued to purchase the Company’s common stock, but may also include restricted stock units, deferred stock units and common stock if the fair value cannot be determined. Option-pricing valuation models require the input of highly subjective assumptions.

    45

    Once the fair value of the award is determined, the value is recognized as share-based compensation expense and is recognized over the service period on a straight-line basis or when the conditions of the award have been met. Forfeitures reduce compensation expense in the period they occur. The Company’s policy is to primarily use newly issued shares to satisfy the exercise of stock options.

    Any liability-classified awards are recorded at fair value based on the closing stock price of the Company's common stock and are re-measured each period until settlement of the award.

    See Note - 11 Share-Based Compensation for more detail.
    (t)Advertising Costs
    Advertising costs are expensed as incurred and are reflected in SG&A expenses in the Company's consolidated statements of operations. These costs incurred were $253 and $229 for the years ended December 31, 2020 and 2019, respectively.
    (u)Income (loss) per Share ("EPS")
    Basic income (loss) per common share has been computed using the weighted-average number of shares of common stock outstanding during the year. Diluted income (loss) per common share includes the incremental shares issuable upon the assumed exercise of stock options using the treasury stock method and any other unvested share-based compensation awards, if dilutive.
    Stock options, deferred stock and restricted stock units totaling 2,300 and 2,376 shares of the Company’s common stock were not included in the calculation of diluted common shares outstanding for the years ended December 31, 2020 and 2019, respectively, because they were anti-dilutive.
    The following table provides a reconciliation to net income (loss) used in the numerator for net (loss) income per common share attributable to Hill:
    Years Ended December 31,
     20202019
    Net (loss) income$(7,570)$14,254 
    Less: net earnings - noncontrolling interest612 170 
    Net (loss) income attributable to Hill International, Inc.$(8,182)$14,084 
    Basic weighted average common shares outstanding56,60356,280
    Effect of dilutive securities:
    Stock options0 0 
    Unvested share-based compensation units0 0 
    Diluted weighted average shares common outstanding56,603 56,280 
    Basic and diluted net income (loss) per common share - Hill International, Inc.$(0.14)$0.25 
    (v)New Accounting Pronouncements
    Changes to U.S. GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or adoption will have minimal impact on its consolidated financial statements.

    46

    Recently Adopted Accounting Pronouncements

    In January 2017, the FASB issued ASU 2017-4, Intangibles - Goodwill and Other (Topic 350), which removes step 2 from the goodwill impairment test. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units’ fair value. The guidance is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017, and the prospective transition method should be applied. The Company adopted this guidance on January 1, 2020 and it did not materially impact its consolidated financial statements.

    In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this update is permitted, including adoption in any interim period, for all entities. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this guidance on January 1, 2020 on a prospective basis and will begin to capitalize certain implementation costs that may have been previously expensed as incurred. There was no impact on the Company's consolidated financial statements.

    In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("VIE"). The amendments in this ASU for determining whether a decision-making fee is a variable interest require reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required by GAAP). These amendments will create alignment between determining whether a decision-making fee is a variable interest and determining whether a reporting entity within a related party group is the primary beneficiary of a VIE. The standard is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019 for public companies. Early adoption is permitted. The Company adopted this guidance in January 1, 2020. There was no impact on the Company's consolidated financial statements.

    In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. This ASU provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for with revenue under Topic 606, specifically when the collaborative arrangement participant is a customer in the context of a unit-of-account. It provides more comparability in the presentation of revenues for certain transactions between collaborative arrangement participants, including adding unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. The standard is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2019 for public companies. Early adoption is permitted. The Company adopted this guidance in January 1, 2020. There was no impact on the Company's consolidated financial statements.

    Recently Issued Accounting Pronouncements

    In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) - Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for the Company commencing January 1, 2023. The Company is in the process of assessing the impact of this ASU on our consolidated financial statements and disclosures.

    Note 4 — Revenue from Contracts with Clients

    The Company recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such goods or services.

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    Below is a description of the basic types of contracts from which the Company may earn revenue:

    Time and Materials Contracts

    Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic time and materials, cost plus a margin or time and materials subject to a maximum contract value (the "cap value"). Due to the potential limitation of the cap value, the economic factors of the contracts subject to a cap value differ from the economic factors of basic T&M and cost plus contracts. The majority of the Company’s contracts are for consulting projects where it bills the client monthly at hourly billing rates. The hourly billing rates and charges its clients based on the actual time that the Company spends onare determined by contractual terms. Under cost plus a project. In addition, clients reimburse the Company for its actual out-of-pocket costs of materials and other direct incidental expenditures that the Company incurs in connection with its performance under the contract. Its profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs that the Company directly charges or allocates to contracts compared with negotiated billing rates. Revenue on these contracts are recognized based on the actual number of hours the Company spends on the projects plus any actual out-of-pocket costs of materials and other direct incidental expenditures that the Company incurs on the projects. Its time-and-materials contracts generally include annual billing rate adjustment provisions.

    Cost-Plus Contracts

            The Company has two major types of cost-plus contracts:

      Cost-Plus Fixed Fee

            Under cost-plus fixed feemargin contracts, the Company charges its clients for its costs, including both direct and indirect costs, plus a fixed negotiated fee. In negotiatingfee or rate. Under time and materials contracts with a cost-plus fixed fee contract,cap value, the Company estimates all recoverable directcharges the clients for time and indirect costs and then addsmaterials based upon the work performed however there is a fixed profit component. The total estimated cost pluscap or a not to exceed value. There are often instances that a contract is modified to extend the negotiated fee representscontract value past the cap. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract value. The Company recognizes revenue based on the actual labor costs, based on hours of labor effort, plus non-labor costs


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    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    the Company incurs, plus the portion of the fixed fee the Company has earned to date. The Company invoices for its services as revenue is recognized orprice in accordance with agreed-upon billing schedules. Aggregate revenuethe variable consideration guidelines and will only include consideration that it expects to receive from cost-plus fixed fee contracts may vary based on the actual number of labor hours worked and other actual contract costs incurred. However, if actual labor hours and other contract costs exceed the original estimate agreed to by its client,client. When the Company generally must obtainis reaching the cap value, the contract will be renegotiated, or Hill ceases work when the maximum contract value is reached. The Company will continue to work if it is probable that the contract will be extended. The Company will only include consideration or contract renegotiations to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If the Company continues to work and is uncertain that a contract change order contract modification, or successfully prevail in a claim in order to receive additional revenue relatingwill be processed, the variable consideration will be constrained to the additional costs (see "Change Orderscap until it is probable that the contract will be renegotiated. The Company is only entitled to consideration for the work it has performed, and Claims").

      Cost-Plus the cap value is not a guaranteed contract value.


    Fixed Rate

    Price Contracts


    Under its cost-plus fixed rateprice contracts, the Company charges clients for its costs plus negotiated rates based on its indirect costs. In negotiating a cost-plus fixed rate contract, the Company estimates all recoverable direct and indirect costs and then adds a profit component, which is a percentage of total recoverable costs to arrive at a total dollar estimate for the project. The Company recognizes revenue based on the actual total number of labor hours and other costs the Company expends at the cost plus the fixed rate the Company negotiated. Similar to cost-plus fixed fee contracts, aggregate revenue from cost-plus fixed rate contracts may vary and the Company generally must obtain a change order, contract modification, or successfully prevail in a claim in order to receive additional revenue relating to any additional costs that exceed the original contract estimate (see "Change Orders and Claims").

            Labor costs and subcontractor services are the principal components of its direct costs on cost-plus contracts, although some include materials and other direct costs. Some of these contracts include a provision that the total actual costs plus the fee will not exceed a guaranteed price negotiated with the client. Others include rate ceilings that limit the reimbursement for general and administrative costs, overhead costs and materials handling costs. The accounting for these contracts appropriately reflects such guaranteed price or rate ceilings.

    Firm Fixed-Price ("FFP") Contracts

            The Company's FFP contracts have historically accounted for most of its fixed-price contracts. Under FFP contracts, the Company'sCompany’s clients pay an agreed amount negotiated in advance for a specified scope of work. The Company recognizes revenue on FFP contracts usingis guaranteed to receive the percentage-of-completion method (recognizing revenue as costs are incurred). Profit margins the Company recognizes in all periods prior to completion of the project on any FFP contract depend on the accuracy of the Company's estimates of approximate revenue and expenses and will increaseconsideration to the extent that its current estimates of aggregate actual costs are below amounts previously estimated. Conversely, if the Company's current estimated costs exceed prior estimates, its profit margins will decrease and the Company may realizedelivers under the contract. The Company recognizes revenue over a period of time on fixed price contracts using the input method based upon direct costs incurred to date, which are compared to total projected direct costs. Costs are the most relevant measure to determine the transfer of the service to the client. The Company assesses contracts quarterly and will recognize any expected future loss on a project. In orderbefore actually incurring the loss. When the Company is expecting to increase aggregate revenue onreach the total value under the contract, the Company generally must obtainwill begin to negotiate a change order, contract modification, or successfully prevail in a claim in order to receive payment for the additional costs (see "order.


    Change Orders and Claims").

    Change Orders and Claims


    Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions.contract. Either the Company or its client may initiate change orders. They may include changes in specifications or design, manner of performance, facilities,


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    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 4—Summary of Significant Accounting Policies (Continued)

    equipment, materials, sites and period of completion of the work. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the client’s written approval of such changes or separate documentation of change order costs that are identifiable. Change orders may take time to be formally documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the client. If the Company is having difficulties in renegotiating the change order, the Company will stop work if possible, record all costs incurred to date, and determine, on a project by project basis, the appropriate final revenue recognition.


    Claims are amounts in excess of the agreed contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs.

            Change orders and claims occur when changes are experienced once contract performance is underway. Change orders are sometimes documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before agreement is reached with the client. Costs related to change orders and claims are recognized when they are incurred. Change ordersThe Company evaluates claims on an individual basis and claims are included in total estimated contractrecognizes revenue when it believes is probable that the change order or claim will result in a bona fide addition to contract value that can be reliably estimated. No profit is recognized on claims until final settlement occurs; unapproved change orders are evaluated as claims. This can lead to a situation where costs are recognized in one period and revenue is recognized when client agreement is obtained or claims resolution occurs, which can be in subsequent periods.

    collect.


    U.S. Federal Acquisition Regulations

    The Company has contracts with the U.S. government that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations ("FAR"(“FAR”). These regulations are generally applicable to all of its federal government contracts and are partially or fully incorporated in many local and state agency contracts. They limit the recovery of certain specified indirect costs on contracts subject to the FAR. Cost-plus contracts covered by the FAR provide for upward or downward adjustments if actual recoverable costs differ from the estimate billed under forward pricing arrangements. Most of itsthe Company's federal government contracts are subject to termination at the convenience of the client.federal government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.

    48


    Federal government contracts whichthat are subject to the FAR and somethat are required by state and local governmental agencies require audits, whichto be audited are performed, for the most part, by the Defense Contract Audit Agency ("DCAA"(“DCAA”). The DCAA audits the Company'sCompany’s overhead rates, cost proposals, incurred government contract costs and internal control systems. During the course of its audits, the DCAA may question incurred costs if it believes the Company has accounted for such costs in a manner inconsistent with the requirements of the FAR or Cost Accounting Standards and recommend that its U.S. government corporate administrative contracting officer disallow such costs. Historically, the Company has not experiencedincurred significant disallowed costs as a resultbecause of such audits. However, the Company can provide no assurance that the DCAA audits will not result in material disallowances of incurred costs in the future.

    (r)   Share-Based Compensation


    Disaggregation of Revenues
    The Company useshas 1 operating segment, the Black-Scholes option pricing model to measureProject Management Group, which reflects how the estimated fair value of options to purchase the Company's common stock. The compensation expense, less estimated forfeitures,Company is being recognized over the service period on a straight-line basis. The Company's policy is to use newly issued shares to satisfy the exercise of stock options.


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    Note 4—Summary of Significant Accounting Policies (Continued)

    (s)   Advertising Costs

            Advertising costs are expensed as incurred and amountedmanaged. Additional information related to the following (in thousands):

    Years Ended December 31, 
    2016 2015 2014 
    $556 $421 $536 
    ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​
    ​ ​​ ​ ​​ ​ ​

    (t)    Earnings per Share

            Basic earnings per common share has been computed usingCompany’s operating segment is provided in Note 17 - Segment and Related Information. The Project Management Group provides extensive construction and project management services to construction owners worldwide. The Company considered the weighted-average numbertype of sharesclient, type of common stock outstanding duringcontract and geography for disaggregation of revenue. The Company determined that disaggregating by (1) contract type; and (2) geography would provide the year. Diluted earnings per common share incorporates the incremental shares issuable upon the assumed exercise of stock options using the treasury stock method.

            Dilutive stock options increased average common shares outstanding by approximately 437,000 shares for the year ended December 31, 2015.

            Optionsmost meaningful information to purchase 6,899,000 shares, 3,849,000 shares and 3,521,000 shares of the Company's common stock were not included in the calculation of common shares outstanding for the years ended December 31, 2016, 2015 and 2014, respectively, because they were anti-dilutive.

            The following table provides a reconciliation to net (loss) earnings used in the numerator for (loss) earnings per share from continuing operations (in thousands):

     
    		 2016 2015 2014 

    (Loss) earnings from continuing operations

    		 $(7,616)$10,613 $13,866 

    Less: net earnings—noncontrolling interest

    		  136  808  1,301 
    ​​​ ​ ​​ ​​​ ​ ​

    (Loss) earnings

    		 $(7,752)$9,805 $12,565 
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​​ ​​ ​ ​​ ​ ​

    (u)   New Accounting Pronouncements

            In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09,Revenue from Contracts with Customers, which will replace most existing revenue recognition guidance in U.S. GAAP, including industry-specific guidance. The core principle of the ASU is that an entity should recognize revenue for the transfer of goods or services equal to the amount that it expects to be entitled to receive for those goods or services. The ASU requires additional disclosure aboutunderstand the nature, amount, timing, and uncertainty of its revenues. The type of client does not influence the Company’s revenue generation. Ultimately, the Company is supplying the same services of program management, project management, construction management, project management oversight, troubled project turnaround, staff augmentation, project labor agreement consulting, commissioning, estimating and cash flows arising from customercost management, labor compliance services and facilities management services. The Company’s contracts including significant judgmentsare generally long term contracts that are either based upon time and changesmaterials incurred or provide for a fixed price. The contract type will determine the level of risk in judgments.the contract related to revenue recognition. For purposes of disaggregation of revenue, the contract types have been grouped into: (1) Fixed Price - which include fixed price projects; and, (2) T&M - which include T&M contracts, T&M with a cap and cost plus contracts. The ASU allows for both retrospective and prospective methods of adoption. The ASU was to be effective for interim and annual periods commencing after December 15, 2016, however, in August 2015, the FASB issued ASU 2015-14 which defers the effective date for one year. Early adoption is permitted as of January 1, 2017. In December 2016, the FASB issued ASU 2016-20,Technical Corrections and Improvements to Topic 606, 'Revenue From Contracts With Customers,"' which made minor changes to certain narrow aspectsgeography of the guidance. contracts will depict the level of global economic factors in relation to revenue recognition.


    The Company anticipates that it will usecomponents of the modified retrospective method of adoption in whichCompany’s revenue by contract type and geographic region for the cumulative effect of applying the ASU will be recognized at January 1, 2018, the date of initial application. The Company is in the process of


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    Note 4—Summary of Significant Accounting Policies (Continued)

    determining the method of adoption and assessing the impact of this ASU on its consolidated financial statements.

            In August 2014, the FASB issued Accounting Standards Update No. 2014-15,Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). The objective of ASU 2014-15 is to provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 requires a management evaluation about whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity's ability to continue as a going concern within one year after the date the financial statements are issued or available to be issued. In doing so, ASU 2014-15 should reduce diversity in the timing and content of footnote disclosures. ASU 2014-15 is effective for fiscal years ending after December 15, 2016. The Company has adopted this guidance effective for its yeartwelve months ended December 31, 2016.

            In January 2016,2020 and 2019:

    Twelve Months Ended December 31, 2020Twelve Months Ended December 31, 2019
    Fixed PriceT&MTotalPercent of Total RevenueFixed PriceT&MTotalPercent of Total Revenue
    Americas$21,964 $170,813 $192,777 52.4 %$26,664 ( 1)$173,478 $200,142 53.1 %
    Middle East/Asia/Pacific16,242 76,397 92,639 25.1 %31,923 73,004 104,927 27.9 %
    Europe44,003 9,816 53,819 14.6 %27,645 ( 2)15,843 43,488 11.6 %
    Africa4,159 25,130 29,289 7.9 %1,492 26,388 27,880 7.4 %
       Total$86,368 $282,156 $368,524 100.0 %$87,724 $288,713 $376,437 100.0 %
    (1) Includes $1,122 of revenue, previously classified as T&M contracts.
    (2) Includes $4,109 of revenue, previously classified as T&M contracts.

    The Company recognizes revenue when it transfers promised goods or services to clients in an amount that reflects the FASB issued ASU 2016-01,Financial Instruments—Overall (Topic 825-10),consideration to which requires all equity investmentsthe Company expects to be measuredentitled in exchange for those goods or services. The Company exercises judgment in determining if the contractual criteria are met to determine if a faircontract with a client exists, specifically in the earlier stages of a project when a formally executed contract may not yet exist. The Company typically has one performance obligation under a contract to provide fully-integrated project management services, and, occasionally, a separate performance obligation to provide facilities management services. Performance obligations are delivered over time as the client receives the service.

    49

    The consideration promised within a contract may include fixed amounts, variable amounts, or both. Variable consideration is included in the transaction price only to the extent it is probable, in the Company’s judgment, that a significant future reversal in the amount of cumulative revenue recognized under the contract will not occur. In estimating the transaction price for pending change orders, the Company considers all relevant facts, including documented correspondence with the client regarding acknowledgment and/or agreement with the modification, as well as historical experience with the client or similar contractual circumstances. The Company transfers control of its service over time and, therefore, satisfies a performance obligation and recognizes revenue over time by measuring the progress toward complete satisfaction of that performance obligation. The Company’s fixed price projects and T&M with a cap contracts, expected to exceed the cap value, with changes in fair value recognized through net income (other than those accounted for under equitygenerally use a cost-based input method of accounting or those that result in consolidationto measure its progress towards complete satisfaction of the investee).performance obligation as the Company believes this best depicts the transfer of control to the client. Under the cost-based measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Due to the nature of the work required to be performed under the Company’s performance obligations, estimating total revenue and cost at completion on its long term contracts is complex, subject to many variables and requires significant judgment.

    For basic and cost plus T&M contracts and T&M with a cap, not expected to exceed the cap, contracts, the Company recognizes revenue over time using the output method which measures progress toward complete satisfaction of the performance obligation based upon actual costs incurred, using the right to invoice practical expedient.

    Accounts Receivable

    Accounts receivable includes amounts billed and currently due from clients and amounts for work performed which have not been billed to date. The amendmentsbilled and unbilled amounts are stated at the net estimated realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance is based upon an assessment of client creditworthiness, historical payment experience and the age of outstanding receivables.

    Contract Assets and Liabilities

    Contract assets include unbilled amounts typically resulting from performance under long-term contracts where the revenue recognized exceeds the amount billed to the client. Retainage receivable is included in this ASU also require an entity to (1) present separately in other comprehensive income thecontract assets. The current portion of retainage receivable is a contract asset, which prior to the total changeadoption of ASC 606, had been classified within accounts receivable.

    The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized and are reported as deferred revenue in the fair valueconsolidated balance sheets. The Company classifies billings in excess of a liability resultingrevenue recognized as deferred revenue as current or non-current based on the timing of when revenue is expected to be recognized.

    The difference between the opening and closing balances of the Company’s contract assets and contract liabilities primarily results from a changethe timing of the Company’s performance and client payments. The amount of revenue recognized during the twelve months ended December 31, 2020 and 2019 that was included in the instrument-specific credit risk whendeferred revenue balance at the entitybeginning of the period was $9,955 and $14,156, respectively.

    Remaining Performance Obligations

    The remaining performance obligations represent the aggregate transaction price of executed contracts with clients for which work has electedpartially been performed or not started as of the end of the reporting period. The Company’s remaining performance obligations include projects that have a written award, a letter of intent, a notice to measureproceed or an agreed upon work order to perform work on mutually accepted terms and conditions. T&M contracts are excluded from the liability at fair valueremaining performance obligation as these contracts are not fixed price contracts and the consideration expected under these contracts is variable as it is based upon hours and costs incurred in accordance with the fair value option for financial instruments and (2) provide separate presentationvariable consideration optional exemption. As of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements. In addition the amendments in this Update eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. This ASU is effective for the Company commencing January 1, 2018. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.

            In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842), which will require the Company the recognize lease assets and lease liabilities (related to leases previously classified as operating under previous GAAP) on its consolidated balance sheet. The ASU will be effective for the Company commencing January 1, 2019. The Company is in the process of assessing the impact of this ASU on its consolidated financial statements.

            In June 2016, the FASB issued ASU 2016-13,Financial Instruments (Topic 326)—Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for us commencing January 1, 2020 with early adoption permitted commencing January 1, 2019. We are in the process of assessing the impact of this ASU on our consolidated financial statements.

            In August 2016, the FASB issued ASU 2016-15,Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. This ASU's amendments add or clarify guidance on eight cash flow issues: debt prepayment, settlement of zero-coupon debt instruments, contingent consideration payments, insurance claim proceeds, life


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    Note 4—Summary of Significant Accounting Policies (Continued)

    insurance proceeds, distributions from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle. The ASU is effective commencing January 1, 2018 with earlier adoption permitted. We adopted this ASU which only affected our presentation of payments for deferred consideration related to the IMS acquisition by reclassifying the payments from operating cash flows to financing cash flows.

            In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. Under the new standard, an entity is required to recognize the income tax consequences of an intra-entity transfer of an asset (with the exception of inventory) when the transfer occurs. Under current GAAP, entities are prohibited from recognizing current and deferred income taxes for an intra-entity transfer until the asset is sold to a third party. Examples of assets that would be affected by the new guidance are intellectual property and property, plant, and equipment. The ASU will be effective for us commencing January 1, 2018 with early adoption permitted as of January 1, 2017. We expect that adoption of this ASU will not have a material effect on our consolidated financial statements.

            In November 2016, the FASB issued ASU 2016-18,Restricted Cash (a consensus of the FASB Emerging Issues Task Force), which addresses classification and presentation of changes in restricted cash on the statement of cash flows. The ASU requires an entity's reconciliation of the beginning-of-period and end-of-period total amounts shown on the statement of cash flows to include in cash and cash equivalents amounts generally described asrestricted cash andrestricted cash equivalents. The ASU does not define restricted cash or restricted cash equivalents, but the Company will need to disclose the nature of the restrictions. The ASU is effective for the Company for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted. When the Company adopts the ASU, it will use a retrospective transition method for each period presented.

            In January 2017, the FASB issued ASU 2017-01, amendingBusiness Combinations: Clarifying the Definition of a Business, to clarify the definition of a business with the objective of providing a more robust framework to assist management when evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for the Company for its fiscal year beginning April 1, 2018, including interim periods within that fiscal year, with early application permitted. The amendments are to be applied prospectively to business combinations that occur after the effective date.

    Note 5—Acquisitions

            Our recent acquisition activity is detailed below. The Company's consolidated financial statements include the operating results of these businesses from their respective dates of acquisition. Pro forma results of operations for these acquisitions have not been presented because they are not material to the Company's consolidated results of operations, either individually or in the aggregate.

            The Company expenses all acquisition-related costs plus any anticipated restructuring costs for which it is not obligated at the acquisition date, rather than including such costs as a component of the purchase consideration. During 2016, 2015 and 2014, the Company expensed $0, $139,000 and $0, respectively, of acquisition-related costs.


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 5—Acquisitions (Continued)

    IMS Proje Yonetimi ve Danismanlik A.S.

            On April 15, 2015, the Company acquired all of the equity interests of IMS, a firm that provides project management services for international developers, institutional investors and major retailers. IMS had approximately 80 professionals and is headquartered in Istanbul, Turkey. Consideration consisted of an Initial Purchase Price of 12,411,000 Turkish Lira ("TRY") (approximately $4,640,000 as of the closing date) comprised of TRY 4,139,000 (approximately $1,547,000) paid in cash on the closing date plus a second payment of TRY 8,272,000 (approximately $3,145,000) which was paid on May 12, 2015; a Holdback Purchase Price of TRY 4,400,000 (approximately $1,626,000) which was paid on April 15, 2016, less any set off related to certain indemnification obligations; and a potential Additional Purchase Price of (i) TRY 1,700,000 (approximately $628,000) if earnings before interest, income taxes, depreciation and amortization for the twelve month period subsequent to the closing date ("EBITDA") exceeds TRY 3,500,000 (approximately $1,294,000) or (ii) TRY 1,500,000 ($554,000) if EBITDA is less than TRY 3,500,000 but not less than TRY 3,200,000 ($1,183,000). IMS's EBITDA through the one-year anniversary of the acquisition date was not sufficient to earn any of the Additional Purchase Price and the liability was eliminated by a credit of approximately $673,000 to selling, general and administrative expenses for the year ended December 31, 2016.

    Collaborative Partners, Inc.

            On December 23, 2013, Hill acquired all of2020 and 2019, the outstanding common stock of Collaborative Partners, Inc. ("CPI"), a firm that provides project management, strategic planning and regulatory services for healthcare, life sciences, educational, commercial and residential construction projects throughout New England. CPI, which has about 30 professionals, has offices in Boston, Massachusetts and Providence, Rhode Island. The acquisition expands the Company's project management business in the New England region of the United States. At closing, the sellers received $2,450,000 in the form of 678,670 shares of the Company's common stock priced at $3.61 per share. On March 7, 2014, the sellers received 171,308 shares of common stock with a value of $618,000 representing CPI's common equity in excess of $600,000. On December 23, 2014, the sellers were to receive, subject to potential offset, an additional $350,000 ("holdback") in shares of common stock; the number of shares was determined based on the average closing price of the common stock for the ten trading days ending on December 18, 2014. The Agreement also provided that should the price of the Company's common stock not increase by 50% to $5.42 on December 23, 2014, the Company will issue additional shares to the sellers representing the difference between $5.42 and the price on December 23, 2014 and (2) the sellers are entitled to receive additional shares of the Company's common stock for (i) 50% of the operating profit of CPI in excess of $1,000,000 for the first 12-month period after closing, but in no event more than $500,000, and (ii) 5% of the net revenue backlog in excess of $10,000,000 on the date 60 days after closing. The Company estimated and accrued $2,697,000 for the potential additional consideration which was included in other current liabilities in the consolidated balance sheet at December 31, 2013. In April 2014, the portion of the liability attributable to the change in the common stock price was waived by the sellers and the liability was eliminated by a credit of $1,225,000 to selling, general and administrative expenses in the consolidated statement of operations for the year ended December 31, 2014. In addition, a portion of the liability attributable to the holdback in shares was not paid and $215,000 was credited to selling, general and administrative expense in the consolidated statement of operations for the year ended December 31, 2014. In May 2015, the Company paid the final installment to the sellers by issuing 148,460 shares of its common stock valued at approximately $530,000.


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 5—Acquisitions (Continued)

    Engineering S.A.

            On February 28, 2011, the Company's subsidiary, Hill Spain, indirectly acquired 60% of the outstanding common stock of Engineering S.A., now known as Hill International do Brasil, S.A. ("ESA") one of the largest project management firms in Brazil with approximately 400 professionals. It has main offices in Rio de Janeiro and Sao Paulo and an additional office in Parauapebas. Engineering S.A. provides project management, construction management and engineering consulting services throughout Brazil. Total consideration will not exceed 42,000,000 Brazilian Reais ("BRL") (approximately $25,336,000 at the date of acquisition) consisting of an initial cash payment of BRL 22,200,000 (approximately $13,392,000) plus minimum additional payments of BRL 7,400,000 (approximately $4,464,000) due on each of April 30, 2012 and 2013 and a potential additional payment of BRL 5,000,000 ($3,016,000). Also, ESA's shareholders entered into an agreement whereby the minority shareholders have a right to compel ("ESA Put Option") Hill Spain to purchase any or all of their shares during the period from February 28, 2014 to February 28, 2021. Hill Spain also has the right to compel ("ESA Call Option") the minority shareholders to sell any or all of their shares during the same time period. The purchase price for such shares shall be seven times the earnings before interest and taxes for ESA's most recently ended fiscal year, net of any financial debt plus excess cash multiplied by a percentage which the shares to be purchased bear to the total number of shares outstanding at the time of purchase, but in the event the ESA Call Option is exercised by Hill Spain, the purchase price shall be increased by five percent. The ESA Put Option and the ESA Call Option must be made within three months after the audited financial statements of ESA have been completed. In April 2014, two of the minority shareholders exercised their ESA Put Option whereby Hill Spain paid approximately 7,838,000 Brazilian Reais (approximately $3,556,000) in October 2014. After the transaction, Hill Spain owned approximately 72% of ESA. In accordance with the guidance in ASC 810-10-45-23, underChanges in the Parent's Ownership Interest in a Subsidiary When There Is No Change in Control, the Company has accounted for this transaction as an equity transaction. Accordingly, Hill Spain reduced noncontrolling interests by BRL 5,839,000 (approximately $2,649,000), and reduced additional paid in capital by approximately BRL 1,999,000 (approximately $907,000) which represents the excess of the fair value over theaggregate amount of the adjustmenttransaction price allocated to noncontrolling interests.

            The Company estimatedremaining performance obligations was $101,800 and $113,592, respectively. During the fair valuefollowing 12 months, approximately 47% of the potential additional paymentsremaining performance obligations are expected to total approximately BRL17,200,000 (approximately $10,376,000) and discounted that amount using an interest rate of 4.72%,be recognized as revenue with the weighted average interest rate on the outstanding borrowings under the Company's credit agreement at the acquisition date. The Company paid the first installment amountingremaining balance recognized over 2 to BRL 6,624,000 (approximately $3,508,000 on April 30, 2012 and paid the second installment amounting to BRL 11,372,000 (approximately $5,095,000) on July 23, 2013.

            In April 2015, two shareholders who owned approximately 19% of ESA exercised their ESA Put Options claiming an aggregate value of BRL 10,645,000. As an incentive to the sellers to receive Hill's common stock as payment, the Company offered the sellers a 25% premium. The sellers countered the Company's offer by requesting payment in common stock at the U.S. dollar value on April 4, 2015 (approximately $4,374,000) as well as a price guarantee upon the sale of the stock during a 30-day period after closing. The Company agreed to the counter offer and paid the liability with 924,736 shares of its common stock in August 2015. In November 2015, the Company paid approximately $580,000 to the selling shareholders to repurchase 129,648 shares of its common stock. The Company now owns approximately 91% of ESA.

            On June 17, 2016, the three remaining minority shareholders exercised their ESA Put Option claiming a value of BRL 8,656,000 (approximately $2,659,000 at December 31, 2016. The company accrued the liability which is included in other current liabilities and as an adjustment to additional paid-in capital in the consolidated balance sheet at December 31, 2016. The amount is subject to negotiation and any difference will be recorded upon completion of the transaction.

    5 years.

    50

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



    Note 6—5 — Accounts Receivable

    The components of accounts receivable and accounts receivable - affiliates reflected in the Company's consolidated balance sheets, are as follows (in thousands):

    follows:
     December 31,
    Accounts Receivable20202019
    Billed (1)
    		$113,021 $132,339 
    Unbilled (2)
    		37,960 30,026 
     $150,981 $162,365 
    Allowance for doubtful accounts (1)(3)
    		(52,795)(58,473)
    Accounts Receivable, net$98,186 $103,892 
    Accounts Receivable - Affiliates
    Billed$15,560 $12,546 
    Unbilled (2)
    		8,380 6,888 
     $23,940 $19,434 
    Allowance for doubtful accounts (3)
    		(655)(658)
    Accounts Receivable - Affiliates, net$23,285 $18,776 
    (1) Includes $33,242 and $32,864 related to amounts due from a client in Libya as of December 31, 2020 and 2019, respectively, which were both fully reserved for in the allowance for doubtful accounts.
     
    		 December 31, 
     
    		 2016 2015 

    Billed

    		 $200,134 $216,618 

    Retainage, current portion

    		  10,824  13,660 

    Unbilled

    		  24,678  17,810 
    ​​​ ​ ​​ ​ ​

    		  235,636  248,088 

    Allowance for doubtful accounts

    		  (71,082) (60,535)
    ​​​ ​ ​​ ​ ​

    Total

    		 $164,554 $187,553 
    ​​​ ​ ​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​ ​ ​
    (2) Amount is net of unbilled reserves.

    (3) See Schedule II-Valuation and Qualifying Accounts for breakdown of allowance for doubtful accounts for amounts added/(recovered), net of charge-offs for amounts determined to be uncollectible, for the years ended December 31, 2020 and 2019.

    Unbilled receivables primarily represent revenue earned on contracts whichthat the Company is contractually precluded from billing until predetermined future dates.


    The decrease in accounts receivable in 2016 is attributable to the decrease in revenues, the increase in theCompany determines its allowance for bad debts,doubtful accounts based on the aging of amounts that have been billed to-date, the client's history, credit, concentration and current economic changes. The allowance for doubtful accounts is reviewed, at a minimum, on a quarterly basis and adjustments are recorded as deemed necessary.

    During the impact of foreign exchange, offset to some degree by a slowdown of collections primarily inyear ended December 31, 2019 , the Middle East and particularly Oman.

            Included in billed receivables are $673,000 and $694,000 of theCompany recovered amounts due from various branchesa client in Libya of $9,652. The client's accounts receivable balance had been reserved for in the Company's allowance for doubtful accounts in previous years, which were reversed as a result of the U.S. federal government and $100,409,000 and $131,015,000receipt of receivablesthe payments. NaN additional amounts were recovered from foreign governments atthe Libyan client during the year ended December 31, 20162020.


    Net bad debt recoveries of $1,936 and December 31, 2015, respectively.

            Bad debt expense of $14,454,000, $6,262,000 and ($5,195,000) is$8,426 are included in selling, general and administrativeSG&A expenses in the consolidated statements of operations for the years ended December 31, 2016, 20152020 and 2014,2019, respectively. The increase in bad debt expense in 2016


    51


    Note 6 — Property and Equipment
    Property and equipment is related to certain accounts receivable, primarily instated at cost, less accumulated depreciation. Depreciation is recorded on a straight-line basis over the Middle East.

            In 2012,estimated useful lives of the Company commenced operationsassets based on the Muscat International Airport (the "Oman Airport") project withtype of property and equipment . Upon retirement or other disposition of these assets, the Ministry of Transportcost and Communications (the "MOTC") in Oman. The original contract term expired in November 2014. In October 2014,related depreciation are removed from the Company applied for a twelve-month extension of time amendment (the "first extension") which was subsequently approved in March 2016accounts and the Company continued to work on the Oman Airport project. The Company began to experience some delaysresulting gain or loss, if any, is reflected in payment during the second quarter of 2015 when MOTC commenced its formal review and certification of the Company's invoices. In December 2015, the Company began discussions with the MOTC on a second extension of time amendment (the "second extension") and has since commenced additional work, which management expects to last approximately 18 months. When the MOTC resumed payments in 2016, the Company received approximately $42,000,000 during the year. At December 31, 2016, accounts receivable from Oman totaled approximately $27,132,000, of which approximately $16,500,000 was past due based on contractual terms. In February 2017, the Company received payments totalling $6,153,000 against this receivable.

            In addition, there is approximately $16,400,000 included in non-current Retainage Receivable in the consolidated balance sheet at December 31, 2016. Of that amount, approximately $8,400,000 relates to retention and approximately $8,000,000 relates to a Defect and Liability Period ("DLP"). Retention represents five percent of each monthly invoice which is retained by MOTC. Fifty percent of the retention will be released one year from the commencement of the DLP and the balance will be release upon the issuance of final Completion Certificates. DLP represents the period by which the


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 6—Accounts Receivable (Continued)

    contractor must address any defect issues. This period commences upon the issuance of a "Taking Over Certificate" (by MOTC) to contractors for up to a period of 24 months and then final certificate closing the project.

            The delays in payments from MOTC and other foreign governments have had a negative impact on the Company's liquidity, financial covenants, financial position and results of operations.

    Note 7—Property Expenditures for maintenance, repairs and Equipment

    renewals of minor items are charged to expense as incurred. Major renewals and improvements are capitalized.


    The components of property and equipment are as follows (in thousands):

    follows:
     December 31,
     20202019
    Furniture and equipment$8,416 $10,608 
    Leasehold improvements10,197 10,977 
    Automobiles1,309 1,334 
    Computer equipment and software28,069 29,285 
     47,991 52,204 
    Less accumulated depreciation and amortization(38,548)(40,309)
    Property and equipment, net$9,443 $11,895 
     
    		 December 31, 
     
    		 2016 2015 

    Furniture and equipment

    		 $10,434 $9,625 

    Leasehold improvements

    		  8,615  9,914 

    Automobiles

    		  844  1,131 

    Computer equipment and software

    		  28,881  26,887 
    ​​​ ​ ​​ ​ ​

    		  48,774  47,557 

    Less accumulated depreciation and amortization

    		  (31,987) (28,576)
    ​​​ ​ ​​ ​ ​

    Property and equipment, net

    		 $16,787 $18,981 
    ​​​ ​ ​​ ​ ​
    ​​​​​​​​
    ​​​ ​ ​​ ​ ​

            Information with respect to

    The Company's depreciation expense isfor the related balances were recorded as follows (in thousands):

    to the Company's consolidated statements of operations:
     Years Ended December 31,
     20202019
    Total depreciation expense$3,959 $2,810 
    Portion charged to direct expenses$397 $856 
    Portion charged to selling, general and administrative expense$3,562 $1,954 

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Total depreciation expense

    		 $4,108 $3,556 $2,604 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​ ​

    Portion charged to cost of services

    		 $890 $813 $841 
    ​​​​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​​

    Portion charged to selling, general and administrative expense

    		 $3,218 $2,743 $1,763 
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Note 8—7 — Intangible Assets


    The following table summarizes the Company'srepresents acquired intangible assets (in thousands):

    as a result of the Company's acquisition history and the client contracts that were attained at the time of the acquisition:
     December 31,
     20202019
    Gross
    Carrying
    Amount    		Accumulated
    Amortization    		Gross
    Carrying
    Amount    		Accumulated
    Amortization
    Engineering license$2,100 $— $0 $— 
    Client relationships509 356 1,080 848 
    Total$2,609 $356 $1,080 $848 
    Intangible assets, net$2,253 $232 
    During the year ended December 31, 2020, the Company acquired a Grandfathered Engineering Corporation license ("engineering license"), which was determined to have an indefinite useful life. As such, 0 amortization expense was recorded during the year ended December 31, 2020.

    52

     
    		 December 31, 
     
    		 2016 2015 
     
    		 Gross
    Carrying
    Amount    		 Accumulated
    Amortization    		 Gross
    Carrying
    Amount    		 Accumulated
    Amortization    		 

    Client relationships

    		 $16,699 $11,298 $19,851 $12,464 

    Acquired contract rights

    		  2,058  1,912  11,801  10,832 

    Trade names

    		  2,339  1,139  2,524  1,107 
    ​​​​ ​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $21,096 $14,349 $34,176 $24,403 
    ​​​ ​ ​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​​​ ​ ​

    Intangible assets, net

    		 $6,747    $9,773    
    ​​​ ​​​​​​ ​ ​​​​
    ​​​​​​​​​​​​​​
    ​​​ ​ ​​​​​ ​ ​​​​
    The Company's client relationships intangible assets are amortized over the estimated life of ten years.


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 8—Intangible Assets (Continued)

    Amortization expense related to these intangible assets of $79 and $1,014 for years ended December 31, 2020 and 2019, respectively. The twelve months ended December 31, 2019 included an impairment loss of $563 and was reflected in selling, general and administrative expenses on the Company's consolidated statements of operations. This client relationship intangible asset related to the Company's 2015 acquisition of one of its current subsidiaries, IMS Proje Yonetimi ve Danismanlik A.S. ("IMS"), which is based out of the Company's office in Turkey. The Company's consolidated balance sheets included an intangible asset related to IMS for client relationships prior to the impairment. In addition to the decline in the intangible asset's carrying value as follows (in thousands):

    a result of the Company's exposure to foreign exchange losses, the Company assessed that the client relationships that were in-place at the time of the intangible asset's initial fair value measurement no longer had any value at December 31, 2019. The Company did 0t incur any impairment losses during the year ended December 31, 2020.

    Years Ended December 31, 
    2016 2015 2014 
    $3,045 $4,353 $4,500 
    ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​
    ​ ​​ ​ ​​ ​ ​

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

    years: 
     Estimated
     Amortization
    Years Ending December 31,Expense
    2021$51 
    202251 
    202351 
    20240 
    20250 

    Years Ending December 31,
    		 Estimated
    Amortization
    Expense    		 

    2017

    		 $2,187 

    2018

    		  1,276 

    2019

    		  1,189 

    2020

    		  928 

    2021

    		  542 

    Note 9—8 — Goodwill

            The addition to goodwill in 2015 is due to the acquisition of IMS (see Note 5 for further information).

    The following table summarizes the changes in the Company's carrying value of goodwill:
    Balance, December 31, 2018$48,869 
    Translation adjustments (1)
    		(845)
    Balance, December 31, 201948,024 
    Translation adjustments (1)
    		(1,627)
    Balance, December 31, 2020$46,397 
    (1) The translation adjustments are calculated based on the foreign currency exchange rates as of December 31, 2020 and 2019.

    During the three months ended March 31, 2020 the Company determined that the significant decline in its market capitalization as a result of the COVID-19 pandemic indicated that an impairment loss may have been incurred. The Company bypassed the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test. The quantitative goodwill impairment test concluded that the fair value of the Company (reporting unit) exceeded its carrying amount at that time, and therefore, goodwill was not considered impaired.

    The Company performed its annual impairment test effective July 1, 2020 and noted 0 impairment. Based on the valuation as of July 1, 2020, the fair value of the Company exceeded its carrying value. The Company also determined that 0 impairment existed at December 31, 2020 and December 31, 2019. In the future, the Company will continue to perform the annual test during 2016its third quarter unless events or circumstances indicate an impairment may have occurred before that time. 

    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 2015 (in thousands):

    determination of the Company’s weighted average cost of capital. The Company’s changes in estimates and assumptions, including decreases in stock price and market capitalization, could materially affect the determination of fair value and/or conclusions on goodwill impairment. As a result of recent events, including market volatility and the impact on the global economy, it is as least reasonably possible that changes in one or more of those assumptions could result in impairment of our goodwill in future periods.
    53

    Balance, December 31, 2014

    		 $53,669 

    Additions

    		  3,783 

    Translation adjustments

    		  (7,713)
    ​​​ ​ ​

    Balance, December 31, 2015

    		  49,739 

    Translation adjustments

    		  926 
    ​​​ ​ ​

    Balance, December 31, 2016

    		 $50,665 
    ​​​ ​ ​
    ​​​​​
    ​​​ ​ ​



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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 10—9 — Accounts Payable and Accrued Expenses

            Below are

    The table below reflects the componentsCompany's breakdown of the amounts in accounts payable and other accrued expenses (in thousands):

    by cost category as of the periods presented below:
     December 31,
     20202019
    Accounts payable$20,953 $22,102 
    Accrued payroll and related expenses26,691 24,718 
    Accrued subcontractor fees8,711 9,405 
    Accrued agency fees (1)
    		4,239 4,395 
    Accrued legal and professional fees2,894 2,169 
    Other accrued expenses4,309 2,383 
     $67,797 $65,172 
    (1) $4,156 in accrued agency fees at December 31, 2019 that were previously included in accrued payroll and related expenses are now reflected in accrued agency fees.
    54
     
    		 December 31, 
     
    		 2016 2015 

    Accounts payable

    		 $30,944 $38,094 

    Accrued payroll and related expenses

    		  31,095  35,024 

    Accrued subcontractor fees

    		  9,188  5,864 

    Accrued agency fees

    		  5,702  6,282 

    Accrued legal and professional fees

    		  2,223  1,114 

    Other accrued expenses

    		  4,840  2,958 
    ​​​ ​ ​​ ​​

    		 $83,992 $89,336 
    ​​​ ​ ​​ ​​
    ​​​​​​​​
    ​​​ ​ ​​ ​ ​



    Note 11—10 — Notes Payable and Long-Term Debt

            Outstanding


    The table below reflects the Company's notes payable and long-term debt, obligationswhich includes credit facilities:
    Interest Rate (1)
    		Balance Outstanding as of
    LoanMaturityInterest Rate TypeDecember 31,
    2020    		December 31,
    2019    		December 31,
    2020    		December 31,
    2019
    Secured Credit Facilities
    Hill International, Inc. - Société Générale 2017 Term Loan Facility06/20/2023Variable7.67%7.92%$28,950 $29,250 
    Hill International, Inc. - Société Générale Domestic Revolving Credit Facility (2)
    		05/04/2022Variable5.50%6.27%14,400 9,400 
    Hill International N.V. - Société Générale International Revolving Credit Facility (3)(6)
    		05/04/2022Variable4.11%4.16%4,035 2,302 
    Unsecured Credit Facilities
    Hill International, Inc. - First Abu Dhabi Bank PJSC Overdraft Credit Facility (4)
    		04/18/2021Variable5.65%5.81%0 593 
    Hill International Brasil S.A. - Revolving Credit Facility (5)
    		06/12/2020Fixed3.07%3.24%0 498 
    Unsecured Notes Payable and Long-Term Debt
    Hill International Spain SA-Bankia S.A. & Bankinter S.A. (6)
    		12/31/2021Fixed2.21%2.21%581 1,054 
    Philadelphia Industrial Development Corporation Loan04/01/2027Fixed2.79%2.79%421 486 
    Hill International Spain S.A.-Bankinter S.A.2020 Term Loan (6)(7)
    		05/04/2024Variable2.23%N/A357 0 
    Hill International Spain S.A.-Banco Santander, S.A. Term Loan (6)(7)
    		05/30/2025Fixed3.91%N/A367 0 
    Hill International Spain S.A.-BBVA, S.A. P.P. Term Loan (6)(7)
    		06/19/2025Variable2.28%N/A367 0 
    Hill International Spain S.A.-Bankia, S.A. 2020 Term Loan (6)(7)
    		06/05/2025Variable2.54%N/A303 0 
    Total notes payable and long-term debt, gross49,781 43,583 
    Less: unamortized discount and deferred financing costs related to Société Générale 2017 Term Loan Facility(500)(641)
    Notes payable and long-term debt$49,281 $42,942 
    Current portion of notes payable1,171 1,972 
    Current portion of unamortized debt discount and deferred financing costs(184)(180)
    Current maturities of notes payable and long-term debt$987 $1,792 
    Notes payable and long-term debt, net of current maturities48,294 41,150 
    Footnotes to the Notes Payable and Long-Term Debt Table Above:

    (1) Interest rates for variable interest rate debt are reflected on a weighted average basis through December 31, 2020 and 2019 since the loan origination or modification date.

    (2) At December 31, 2020 and 2019, the Company had $6,605 and $6,548 of outstanding letters of credit, respectively, in addition to the balances outstanding above, which resulted in $7,495 and $9,052 of available borrowing capacity under the Domestic Revolving Credit Facility, respectively. The amounts available were based on the maximum borrowing capacity of $28,500 and $25,000 as follows (in thousands):

    of December 31, 2020 and 2019, respectively. See 'Secured Credit Facilities' section below for further information.
    55

     
    		 December 31, 
     
    		 2016 2015 

    2014 Term Loan Facility

    		 $112,884 $112,906 

    2014 Domestic Revolving Credit Facility

    		  16,500  17,500 

    2014 International Revolving Credit Facility

    		  11,102  10,715 

    Borrowings under revolving credit facilities with a consortium of banks in Spain

    		  2,962  3,013 

    Borrowing from Philadelphia Industrial Development Corporation

    		  655  710 

    Other notes payable

    		  —  139 
    ​​​ ​ ​​ ​​

    		  144,103  144,983 

    Less current maturities

    		  1,983  4,357 
    ​​​ ​ ​​​ ​

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

    		 $142,120 $140,626 
    ​​​ ​ ​​ ​​
    ​​​​​​​​
    ​​​ ​ ​​ ​ ​

    (3) As of December 31, 2020 and 2019, the Company had $2,189 and $2,232 of outstanding letters of credit, respectively, in addition to the balances outstanding above, which resulted in $1,085 and $3,145 of available borrowing capacity under the International Revolving Credit Facility, respectively. The amounts available were based on the Company's borrowing capacity of $7,309 and $7,679 as of December 31, 2020 and 2019, respectively. See ''Secured Credit Facilities' section below for further information.

    (4) FAB overdraft credit facility lender was formerly known as National Bank of Abu Dhabi. There is no stated maturity date, however, the loan is subject to annual review in April of each year, or at any other time as determined by FAB. Therefore, the amount outstanding is reflected within the current maturities of notes payable and long-term debt. Balances outstanding are reflected in U.S. dollars based on the conversion rates from AED as of December 31, 2020 and 2019. The Company had $3,131 and its subsidiary$2,538 of availability under the credit facility as of December 31, 2020 and 2019, respectively.

    (5) See Note 18 - Deconsolidation of Controlling Interest in Subsidiaries related to the bankruptcy and liquidation of Hill International N.V.Brasil S.A. (the "Subsidiary""borrower"), which resulted in the deconsolidation of the borrower from the Company's consolidated financial statements. This unsecured revolving credit facility was subject to automatic renewals on a monthly basis. Effective with the November 2019 renewal of the unsecured revolving credit facility, the interest rate was reduced by the credit facility lender from 3.30% to 2.80%. The Company had 0 availability under the unsecured credit facility as of December 31, 2019. The amounts outstanding are partiesbased on conversion rates from Brazilian Real as of December 31, 2019.

    (6) Balances outstanding are reflected in U.S. dollars based on the conversion rates from Euros as of December 31, 2020 and 2019, accordingly.

    (7) Includes loan agreements entered into between April and June 2020, where the respective loan agreements require interest-only monthly payments during grace periods that last from six months or one year from the date of the agreements. The variable interest loans are subject to either semi-annual or annual review by the respective lenders thereof and the respective interest rates in respect thereof are determined based on the European Inter-Bank Offered Rate, or “EURIBOR,” for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available), plus a margin, as set by the respective lender.

    Secured Credit Facilities

    On May 5, 2017 the Company entered into a credit agreement with Société Générale (the "Agent"“Agent”) TD Bank, N.A., and HSBC Bank USA, N.A., (collectively, the "U.S. Lenders"other U.S. Loan Parties (the “U.S. Lenders”) consisting of (1) a $30,000 term loan facility of $120,000,000 (the "Term"2017 Term Loan Facility") and; (2) a $30,000,000$25,000 U.S. dollar-denominated revolving credit facility available to the Company (the "U.S. Revolver,"“Domestic Revolving Credit Facility”, together with the 2017 Term Loan Facility, the "U.S.“U.S. Credit Facilities"Facilities”); and (3) a credit agreement with the Agent as administrative agent and collateral agent, (the "International Lender"“International Lender”) providing a €9,156 ($10,000 at closing) revolving credit facility of €11,765,000 ($15,000,000 at closing and $12,380,000 at December 31, 2016) which is available to the Subsidiary (the "International Revolver"“International Revolving Credit Facility” and together with the U.S. Revolver,Domestic Revolving Credit Facility, the "Revolving“Revolving Credit Facilities"Facilities” and, together with the U.S. Credit Facilities, the "Secured“Secured Credit Facilities"Facilities”). which is available to Hill International N.V. The U.S. RevolverDomestic Revolving Credit Facility and the International RevolverRevolving Credit Facility include sub-limits for letters of credit amounting to $25,000,000$20,000 and $10,000,000,€8,000 ($9,130 at closing), respectively.


    On April 1, 2020, the Company amended its Secured Credit Facilities, which increased the credit commitment with one of the U.S. Lenders under the Domestic Revolving Credit Facility by $3,500 from $25,000 to $28,500 and simultaneously decreased the credit commitment with the International Lender under the International Revolving Credit Facility by €3,179 (approximately $3,500 at closing) from €9,156 (approximately $10,000) to €5,977 (approximately $6,536 at closing).

    The Secured Credit Facilities contain customary default provisions, representations and warranties, and affirmative and negative covenants, and require the Company to comply with certain financial and


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 11—Notes Payable and Long-Term Debt (Continued)

    reporting covenants. The financial covenants consistcovenant is comprised of a Maximummaximum Consolidated Net Leverage Ratio and an Excess Account Concentration requirement.

    of 3.00 to 1.00 for any fiscal quarter ending on or subsequent to March 31, 2017 for the trailing twelve months then-ended. The Consolidated Net Leverage Ratio is the ratio of (a) consolidated total debt (minus unrestricted cash of up to $10,000,000 held in the aggregate)and cash equivalents) to consolidated earnings before interest, taxes, depreciation, amortization, non-cash items and share-based compensation and other non-cash charges, including bad debt expense, certain one-time litigation and transaction related expenses, and restructuring charges for the trailing twelve months. In the event of a default, the U.S. LendersLender and the International Lender may increase the interest rates by 2.0%2%. AtThe Company was in compliance with this financial covenant calculation as of December 31, 2016, the Company's Consolidated Net Leverage Ratio was 3.89 to 1.00 which exceeded the 2.75 to 1.00 limit imposed by the Secured Credit Facilities and constituted a default.

            The Excess Account Concentration covenant permits the U. S. Lenders and the International Lender to increase the interest rates by 2.0% if, as of the last day of any fiscal quarter, either (a) the accounts receivable from any country not listed as a Permitted Country as defined in the Secured Credit Facilities (other than the United Arab Emirates) that are more than 120 days old (relative to the invoice date) constitute more than 10% of the total outstanding accounts receivable or (b) accounts receivable from any individual client located in the United Arab Emirates that are more than 120 days old (relative to the invoice date) constitute more than 14% of the total outstanding accounts receivable. The interest rate will be reset as soon as the accounts receivable over 120 days decline below the 10% or 14% levels.

            In anticipation of the event of default upon delivery of the quarterly compliance certificate, the Company requested a waiver from the Agent. On March 27, 2017, the Company obtained the waiver of the Consolidated Net Leverage Ratio default. In connection with the waiver, the Company incurred a consent fee amounting to approximately $401,000 which will be charged to interest expense in the first quarter of 2017.

    2020.


    The U.S. Credit Facilities are guaranteed by certain U.S. subsidiaries of the Company, and the International Revolver is guaranteed by the Company and certain of the Company'sCompany’s U.S. and non-U.S. subsidiaries.

    56


    2017 Term Loan Facility

            The interest rate on the Term Loan Facility will be, at the Company's option, either:

      •
      the London Inter-Bank Offered Rate ("LIBOR") for the relevant interest period plus 6.75% per annum, provided that such LIBOR shall not be lower than 1.00% per annum; or

      •
      the Base Rate (as described below) plus 5.75% per annum.

            The "Base Rate" is a per annum rate equal to the highest of (A) the prime rate, (B) the federal funds effective rate plus 0.50%, or (C) the LIBOR for an interest period of one month plus 1.0% per annum. Upon a default, the applicable rate of interest under the Secured Credit Facilities may increase by 2.0%. The LIBOR on the Term Loan Facilities (including when determining the Base Rate) shall in no event be less than 1.0% per annum.

            At December 31, 2016, the interest rate on the Term Loan was 7.75%


    The Company has the right to prepay the 2017 Term Loan Facility in full or in part at any time without premium or penalty.penalty (except customary breakage costs). The Company is required to make certain mandatory prepayments, of the Term Loan


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 11—Notes Payable and Long-Term Debt (Continued)

    Facility, without premium or penalty (except customary breakage costs), including (i) with net proceeds of any issuance or incurrence of indebtedness (other than that permitted under the Term Loan Facility) by the Company after the closing, (ii) with net proceeds from certain asset sales outside the ordinary course of business, and (iii) with 50%50.00% of the excess cash flow (as defined in the agreement) for each fiscal year of the BorrowersCompany commencing with the first full fiscal year ending December 31, 2016after closing (which percentage would be reduced to 25%25.00% if the Consolidated Net Leverage Ratio is equal to or less than 2.25 to 1.00 or reduced to 0% if the Consolidated Net Leverage Ratio is equal to or less than 1.502.0 to 1.00).


    The 2017 Term Loan Facility (along with interest thereon) is generally secured by a first-priority security interest in substantially all assets of the Company and certain of the Company'sCompany’s U.S. subsidiaries other than accounts receivable and cash proceeds thereof, and certain bank accounts, as to which the 2017 Term Loan Facility (and the interest thereon) is secured by a second-priority security interest.

            The Term Loan Facility has a term of six years, requires repayment of 0.25% of the original principal amount on a quarterly basis through September 30, 2020, the maturity date. Any amounts repaid on the Term Loan Facility will not be available to be re-borrowed.

            The Company incurred fees and expenses related to the Term Loan Facility aggregating $7,066,000 which were deferred. The deferred fees are being amortized on a straight-line basis, which approximates the effective interest method, to interest and related financing fees, net over a six-year period which ends on September 30, 2020. Unamortized balances of $4,416,000 and $5,594,000 are reflected as reductions of the term loan in the consolidated balance sheets at December 31, 2016 and 2015, respectively.


    Revolving Credit Facilities

            The interest rate on borrowings under the U.S. Revolver will be, at the Company's option from time to time, either the LIBOR for the relevant interest period plus 3.75% per annum or the Base Rate plus 2.75% per annum. At December 31, 2016 the interest rate was 6.50%.

            The interest rate on borrowings under the International Revolver will be the European Inter-Bank Offered Rate, or "EURIBOR," for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available) plus 4.00% per annum. At December 31, 2016 the interest rate was 4.38%.

            The Company will pay a commitment fee calculated at 0.50% annually on the average daily unused portion of the U.S. Revolver, and the Subsidiary will pay a commitment fee calculated at 0.75% annually on the average daily unused portion of the International Revolver.

            The ability to borrow under each of the U.S. Revolver and the International Revolver is subject to a "borrowing base," calculated using a formula based upon approximately 85% of receivables that meet or satisfy certain criteria ("Eligible Receivables") and that are subject to a perfected security interest held by either the U.S. Lenders or the International Lender, plus, in the case of the International Revolver only, 10% of Eligible Receivables that are not subject to a perfected security interest held by the International Lender, subject to certain exceptions and restrictions.

            The Company or the Subsidiary, as applicable, will be required to make mandatory prepayments under their respective Revolving Credit Facilities to the extent that the aggregate outstanding amount thereunder exceeds the then-applicable borrowing base, which payments will be made without penalty or premium. At December 31, 2016, the domestic borrowing base was $30,000,000 and the international borrowing base was €11,765,000 (approximately $12,380,000 at December 31, 2016).



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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 11—Notes Payable and Long-Term Debt (Continued)

            Generally, the obligations of the Company under the U.S. Revolver are secured by a first-priority security interest in the above-referenced accounts receivable, cash proceeds and bank accounts of the Company and certain of the Company's U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and such subsidiaries. The obligations of the Subsidiary under the International Revolver would generally be secured by a first-priority security interest in substantially all accounts receivable, cash proceeds thereof and certain bank accounts of the Subsidiary and certain of the Company's non-U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and certain of the Company's U.S. and non-U.S. subsidiaries.

    The Revolving Credit Facilities have a term of five years and require payment of interest only during the term. Under the Revolving Credit Facilities, outstanding loansterm and may be repaid in whole or in part at any time, without premium or penalty, subject to certain customary limitations, and will be available to be re-borrowed from time to time through expirationthe maturity date.

    The interest rate on September 30, 2019.

    borrowings under the Domestic Revolving Credit Facility are, at the Company’s option, either the LIBOR rate for the relevant interest period, plus 3.75%, per annum or the Base Rate, plus 2.75%, per annum. 


    The Company incurred fees and expenses relatedinterest rate on borrowings under the International Revolving Credit Facility will be the European Inter-Bank Offered Rate, or “EURIBOR,” for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available) plus 4.50% per annum.

    Commitment fees are paid quarterly and are calculated at 0.50% per annum based on the daily unused portion of the Domestic Revolving Credit Facilities aggregating $3,000,000 which was deferred. Facility and at 0.75% per annum based on the daily unused portion of the International Revolving Credit Facility.

    The deferred fees are being amortized on a straight-line basis, which approximates the effective interest method, to interest expenseunamortized debt issuance costs of $755 and related financing fees, net over a five-year period which ends on September 30, 2019. Unamortized balances of $1,650,000 and $2,250,000$1,317 are included in prepaid expenses and other current assets and other assets in the Company's consolidated balance sheetsheets at December 31, 20162020 and 2015,December 31, 2019, respectively.


    Generally, the obligations of the Company under the Domestic Revolving Credit Facility are secured by a first-priority security interest in the Eligible Domestic Receivables, cash proceeds and bank accounts of the Company and certain of the Company’s U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and such subsidiaries. The obligations of the Subsidiary under the International Revolving Credit Facility are generally secured by a first-priority security interest in substantially all accounts receivable and cash proceeds thereof, certain bank accounts of the Subsidiary and certain of the Company’s non-U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.

    The amounts available under the Domestic Revolving Credit Facility is subject to a borrowing base that is equal to 85.0% of the difference between (x) the aggregate amount of Eligible Domestic Receivables as of the immediately preceding calendar month and (y) the Dilution Reserve (the "Reserve"), which is equal to 1.0% of (x), not to exceed the $25,000 maximum capacity. The Reserve may be adjusted from time to time based on the most recently delivered collateral audit performed by the Agent and such percentage shall be in effect for the next succeeding twelve months and thereafter under the percentage is reset, however, the Reserve may not be reset more frequently than once a year. The amounts under the International Revolving Credit Facility is also subject to a borrowing base equal to (i) 85.0% of the aggregate amount of the Eligible International Receivables as of the last day of the fiscal quarter, plus 10.0% of the aggregate amount of the Eligible International Receivables as of the last day of the fiscal quarter.
    57

    At December 31, 2016,2020, contractually scheduled maturities of current and long-term debt, net of the Company had $4,519,000amortization of outstanding lettersthe deferred financing costs related to the 2017 Term Loan Facility, were as follows: 
    Years Ending December 31,
    Total Scheduled Maturities (1)
    2021$955 
    202218,958 
    202328,701 
    2024380 
    2025199 
    Thereafter88 
    Total$49,281 
    (1) Amounts are estimated based on the foreign currency exchange rates as of credit and $8,981,000 of available borrowing capacity under the U.S. Revolver.

            At December 31, 2016, the Company had $945,000 of outstanding letters of credit and $4,195,000 of available borrowing capacity under the International Revolver and its other foreign credit agreements (See "Other Debt Arrangements" below for more information).

    2020, where applicable.


    Other DebtFinancing Arrangements

            In connection with the 2015 move of its corporate headquarters to Philadelphia, Pennsylvania, the Company received a loan from the Philadelphia Industrial Development Corporation in the amount of $750,000 which bears interest at 2.75%, is repayable in 144 equal monthly installments of $6,121 and matures on


    On May 1, 2027.

            The2020, subsequent to the maturity of the Company's subsidiary, Hill International (Spain) S.A.previous commercial premium financing arrangement in April 30, 2020 with AFCO Premium Credit LLC ("Hill Spain"AFCO"), maintained a revolving credit facility with six banks (the "Financing Entities") in Spain which initially provided for total borrowing of up to €5,640,000 with interest at 6.50% on outstanding borrowings. The facility expired on December 17, 2016. Concurrent with the satisfaction of this facility Hill SpainCompany entered into a new financing agreement for the renewal of its corporate insurance policies with three new banks.AFCO for $3,391. The total new facility is for €2,770,000 (approximately $2,915,000)terms of the arrangement include a $509 down payment, followed by monthly payments to be made over an ten month period at a 3.04% interest rate through March 31, 2021.


    As of December 31, 2016. 2020 and 2019, the balances payable to AFCO for these arrangements were $872 and $768 and is reflected in other current liabilities on the Company's consolidated balance sheets.

    Note 11 — Share-Based Compensation

    The facility was fully utilized at December 31, 2016. Interest rates at December 31, 2016 were between 1.85% and 3.50%Company provides for equity-based incentives under its 2017 Equity Compensation Plan (the "2017 Plan") to eligible participants under the 2017 Plan, which includes employees, non-employee directors, officers, advisors, consultants or other personnel of the Company (the "Participants"). The loans have varying expiration dates between 36 and 60 months.

            Hill Spain also maintains an ICO (Official Credit Institute) loan with Bankia Bank in Spain for €45,000 (approximately $47,355) at December 31, 2016. The availability is reduced by €15,000 on a quarterly basis. At December 31, 2016, the loan was fully utilized with total borrowings outstanding of €


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 11—Notes Payable and Long-Term Debt (Continued)

    45,000 (approximately $47,355). The interest rate at December 31, 2016 was 6.50%. The ICO loan expires on August 10, 2017.

            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 December 31, 2016) collateralized by certain overseas receivables. At December 31, 2016, there were no borrowings outstanding. The interest rate is the one-month Emirates InterBank Offer Rate plus 3.00% (or 4.41% at December 31, 2016) but no less than 5.50%. This facility allow for up to AED 200,000,000 (approximately $54,451,000 at December 31, 2016) of which AED 127,377,000 (approximately $34,686,000) was outstanding at December 31, 2016. The credit facility is subject to periodic review by the bank.

            Engineering S.A. maintains four unsecured revolving credit facilities with two banks in Brazil aggregating 2,380,000 Brazilian Reais (BRL) (approximately $732,000 at December 31, 2016), with a weighted average interest rate of 5.09% per month at December 31, 2016. There were no borrowings outstanding on any of these facilities which are renewed automatically every three months.

            The Company also maintains relationships with other foreign banks for the issuance of letters of credit, letters of guarantee and performance bonds in a variety of foreign currencies. At December 31, 2016, the maximum U.S. dollar equivalent2017 Plan covers 4,250 shares of the commitments was $83,382,000 of which $38,680,000 is outstanding.

            At December 31, 2016, contractually scheduled maturities of long term debt were as follows (in thousands):

    Years Ending December 31,
    		  
    		 

    2017

    		 $1,983 

    2018

    		  1,902 

    2019

    		  29,506 

    2020

    		  109,834 

    2021

    		  520 

    Thereafter

    		  358 
    ​​​ ​ ​

    Total

    		 $144,103 
    ​​​ ​ ​
    ​​​​​
    ​​​ ​ ​

    Note 12—Supplemental Cash Flow Information

            The Company issues shares of itsCompany's common stock and may be awarded to Participants in the form of the Company's common stock, stock options, including stock appreciation rights, restricted stock, deferred stock units to its non-employee directors as partial compensation for services on("DSU"), restricted stock units ("RSU"), dividend equivalents rights and other forms of equity-based awards.


    A portion of the stock options or other equity units outstanding during the year ended December 31, 2020 may include those issued under the Company's Board through the next annual stockholders meeting. See Note 13 for further information with respect to this plan.


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 12—Supplemental Cash Flow Information (Continued)

            Other activity is provided in the following table (in thousands):

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Interest and related financing fees paid

    		 $12,004 $13,180 $22,753 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​ ​

    Income taxes paid

    		 $9,523 $5,684 $10,863 
    ​​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​
    ​​​ ​ ​​​ ​​ ​ ​

    Increase in property and equipment from a tenant improvement allowance related to the relocation of the corporate headquarters

    		 $— $3,894 $— 
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​

    Reduction of noncontrolling interest in connection with acquisitions of additional interests in Engineering S.A. 

    		 $— $(4,374)$(2,649)
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Increase in additional paid in capital from issuance of shares of common stock in connection with the acquisition of an additional interest in ESA

    		 $— $4,374 $— 
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​​

    Decrease in additional paid-in capital related to ESA Put Options

    		 $(2,670)$— $— 
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Increase in additional paid in capital from issuance of shares of common stock related to purchase of CPI

    		 $— $530 $618 
    ​​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​

    Increase in additional paid in capital from issuance of shares of common stock from cashless exercise of stock options

    		 $796 $361 $538 
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Note 13—Share-Based Compensation

    previous equity compensation plans (the 2006 Employee Stock Purchase Plan and 2009 Non-Employee Director Stock Grant Plan

    Plan). Future grants are no longer available under these plans.


    The 2009 Non-Employee DirectorCompany records share-based compensation expense based on the fair value of the equity award grants, as described further below. Share-based compensation expense is included in selling, general and administrative expenses in the Company's consolidated statements of operation.

    The following table summarizes the total share-based compensation expense as follows:
    Years Ended December 31,
    20202019
    Restricted stock units$975 $472 
    Deferred stock units622 664 
    Stock options366 434 
    Common stock (1)
    		0 916 
    Common stock issued under the 2008 Employee Stock Purchase Plan43 28 
    Total$2,006 $2,514 
    (1) The year ended December 31, 2019 included common stock issued for the Company's Profit Improvement Plan.

    The unrecognized costs related to these equity units, excluding employee stock options (summarized separately below) was $2,498 and $1,183, which are expected to be recognized over a weighted-average period of 1.6 and 2.1 years at December 31, 2020 and 2019, respectively.
    58


    The following table summarizes the activity related to the equity units, excluding employee stock options (summarized separately below), issued by the Company for the years ended December 31, 2020 and 2019:
    Number of RSU'sRSU Weighted
    Average Issue Price    		Number of DSU'sDSU Weighted
    Average Issue Price
    Unvested, December 31, 20180 $0 20 $3.05 
    Outstanding, Granted485 3.22 254 2.74 
    Forfeited(21)3.23 0 0 
    Vested0 0 (240)2.73 
    Unvested, December 31, 2019464 3.22 34 3.11 
    Granted444 3.28 343 1.69 
    Forfeited(51)3.26 0 0 
    Vested(167)3.23 (356)1.74 
    Unvested, December 31, 2020690 $3.26 21 $3.10 
    RSU's

    RSU's issued entitle each Participant to receive 1 unit of common stock upon vesting. RSU's awarded by the Company may be subject to vesting conditions that are contingent upon time and performance, depending on the terms of the RSU award.

    Time-Vested RSU's

    During the twelve months ended December 31, 2020 and 2019, the Company granted certain key employees and executive officers RSU's under the 2017 Plans that will vest and convert to common stock annually over a three-year period on the anniversary date of the grant date, contingent upon their employment with the Company at each vesting date. Any unvested time-based RSU's will be forfeited if the Participant is no longer employed by the Company at any vesting date over the three-year term and the related expense will be adjusted for amounts related to the unvested RSU's. The value of these RSU awards was determined based on the Company's closing stock price at the grant date and is being recorded on a straight-line basis over the three-year term.

    Performance-Vested RSU's

    For RSU awards contingent upon performance conditions, the Company will assess if the pre-defined performance condition(s) is achievable based on the terms within each RSU award agreement. If achievable, the Company may also be required to estimate the number of RSU's subject to vest if different levels of the performance conditions are specified within the award agreement. The fair value of the RSU award is based on the Company closing stock price on the date of the grant, if specified within the award agreement. If the RSU grant value is indeterminable at the time of the grant, the Company will use the Black-Scholes option-pricing model to estimate the fair value of the award (additional information related to the Black-Scholes option-pricing model is detailed below under '2006 Employee Stock Grant Plan covers 400,000 sharesOption Plan'). The Company will continue to assess the fair value of the RSU award periodically until final determination.

    During the twelve months ended December 31, 2020 and 2019, the Company granted certain key employees and executive officers performance-based RSU's, where vesting is contingent upon the Company's achievement of an earnings-based performance target for at least one of the years included during the three-year term. The number of RSU's that could vest range from 50.0% to 200.0% of the number RSU's included in the grant. Common stock will be issued for each vested RSU on the third anniversary of the grant date. Any unvested RSU's are subject to forfeiture if the Participant is no longer employed by the Company prior to the vesting date in which the performance target is met. The Participant is still entitled to the vested RSU's if they separate from the Company before the three-year anniversary grant date. The fair value of the grants is based on the closing price of the Company's common stock. Awards understock at the plan may takegrant date. As of December 31, 2020, the form oftarget for the initial year during the three-year term had not been met and, accordingly, the Company did 0t record any share-based compensation expense for these RSU's.
    59

    DSU's

    DSU's issued entitle the Participant to receive 1 share of the Company's common stock or deferred stock units ("DSU") which entitle the participants to receive one share of common stock for each vested DSU upon retirementseparation from the BoardCompany. The fair value of directors. Onlythese awards is measured based on the Company's Non-Employee Directors are eligible to receive awards undernumber of DSU's awarded in the plan. Information with respectterms of the award agreement and the closing price of the DSU grant date. The Company recognizes share-based compensation on a straight-line basis over the term specified in the DSU agreement. Any unvested DSU's will be forfeited upon termination of employment or services from the Company prior to the plan's activity follows (in thousands):

    vesting date. Share-based compensation expense is adjusted accordingly based on the forfeiture terms that are stipulated in the DSU agreement.

     
    		 Years Ended
    December 31,    		 
     
    		 2016 2015 2014 

    Shares issued

    		  3  25  27 

    Compensation expense

    		 $10 $115 $175 

    Deferred stock units issued

    		  
    96    		  
    —    		  
    —    		 

    Compensation expense

    		 $350 $— $— 

    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 13—Share-Based Compensation (Continued)

    2008 Employee Stock Purchase Plan

    DSU's awards that have been granted to the Hill's executive officers and other key employees are time-vesting. The Employee Stock Purchase Plan covers 2,000,000 sharesDSU's vest over a three-year term at each anniversary of the Company's common stock. Eligible employees may purchase sharesDSU grant date at 85%33.3% per annum. The Company will adjust the share-based compensation expense for any forfeited DSU's if the Participant leaves prior to the last installment of the vesting period.


    The Company's non-employee board of directors (the "Board") receive DSU grants for their equity-based portion of their annual service retainer at each annual stockholder meeting during their term of service. At their election, the Board can also receive additional DSU's in lieu of the cash portion of their annual retainer. DSU's issued to the Board are only subject to forfeiture if their departure from the Company is due to termination with cause and, otherwise, will vest. Therefore, the Company recognizes the full fair market value onof the award at the date of purchase. Information with respect to the plan's activity follows (in thousands):

     
    		 Years Ended
    December 31,    		 
     
    		 2016 2015 2014 

    Shares purchased

    		  59  43  55 

    Aggregate purchase price

    		 $182 $126 $197 

    Compensation expense

    		 $32 $22 $35 

    2006 Employee Stock Option Plan

    grant. The 2006 Employee Stock Option Plan, as amended, covers 10,000,000 sharesfair value of the Company's common stock. Under its terms, directors, officers and employees of the Company and its subsidiariesDSU's are eligible to receive non-qualified and incentive stock options. Options granted to non-employee directors vest immediately and have a five year contractual term. Options granted to officers and employees vest over five years and have a seven-year contractual term. Generally, each option has an exercise price equal to the closing quoted market price of a share ofdetermined based on the Company's common stock on the date of grant. For grants of incentive stock options, if the grantee owns, or is deemed to own, 10% or more of the total voting power of the Company, then the exercise price shall be 110% of the closing quoted market price on the grant date of grant and the option will have a five-year contractual term. Options that are forfeited or expire are available for future grants. At December 31, 2016, a totalnumber of 1,643,000 shares of common stock were reserved for future issuance underDSU's awarded in the plan.

    award agreement.

    Employee Stock Option

    The Black-Scholes option valuation model is used to estimate the fair value of the options. The following table summarizes the fair value of options granted during 2016, 20152020 and 20142019 and the assumptions used to estimate the fair value:

     December 31,
     20202019
    Average expected life (years)N/A *3.50
    Forfeiture rangeN/A *0 %
    Weighted average forfeiture rateN/A *0 %
    DividendsN/A *0 %
    Volatility rangeN/A *49.4 %
    Weighted average volatilityN/A *49.4 %
    Range of risk-free interest ratesN/A *1.9 %
    Weighted average risk-free interest rateN/A *1.9 %
    Weighted average fair value at grant dateN/A *$0.88 
     
    		 December 31, 
     
    		 2016 2015 2014 

    Average expected life (years)

    		  4.98  4.86  4.59 

    Forfeiture range

    		  0% 0 - 5.0% 0 - 5.0%

    Weighted average forfeiture rate

    		  0% 0.3% 0.9%

    Dividends

    		  0% 0% 0%

    Volatility range

    		  47.4 - 57.5% 46.9 - 59.9% 61.5 - 65.5%

    Weighted average volatility

    		  56.5% 58.9% 62.9%

    Range of risk-free interest rates

    		  0.97 - 1.46% 1.07 - 1.61% 0.86 - 1.74%

    Weighted average risk-free interest rate

    		  1.22% 1.45% 1.67%

    Weighted average fair value at grant date

    		 $1.52 $2.01 $2.28 
    * There were 0 stock options granted during the year ended December 31, 2020.


    The expected term of the options is estimatedmanagement's estimates based on the "simplified method" as permitted by SAB No. 110.Company's option exercise history. Expected volatility was calculated using the average historical volatility of the Company.Company's stock price. The risk-free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants with terms approximating the term of the grants. The assumptions used in the Black-Scholes option


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 13—Share-Based Compensation (Continued)

    valuation model are highly subjective, particularly as to stock price volatility of the underlying stock, which can materially affect the resulting valuation.

    60

    A summary of the Company'sCompany’s stock option activity and related information for the years ended December 31, 2016, 20152020 and 20142019 is as follows (in thousands, except exercise price and remaining life data):

    OptionsWeighted
    Average
    Exercise
    Price    		Weighted
    Average
    Remaining
    Contractual
    Life (in years)    		Aggregate
    Intrinsic
    Value
    Outstanding, December 31, 20181,943 $4.36 
    Granted500 3.13 
    Exercised0 0 
    Expired(564)4.53 
    Forfeited0 0 
    Outstanding, December 31, 20191,879 3.98 
    Granted0 0 
    Exercised0 0 
    Expired(306)3.79 
    Forfeited(10)4.46 
    Outstanding, December 31, 20201,563 $4.01 2.40$3,273 
    Exercisable, December 31, 20201,036 $4.01 1.96$2,372 
     
    		 Options Weighted
    Average
    Exercise
    Price    		 Weighted
    Average
    Remaining
    Contractual
    Life    		 Aggregate
    Intrinsic
    Value    		 

    Outstanding, December 31, 2013

    		  6,574 $4.67       

    Granted

    		  1,849  4.57       

    Exercised

    		  (524) 3.00       

    Expired

    		  (496) 7.66       

    Forfeited

    		  (44) 4.37       
    ​​​ ​ ​​​​​​​​​​

    Outstanding, December 31, 2014

    		  7,359  4.57       

    Granted

    		  1,117  4.02       

    Exercised

    		  (274) 3.03       

    Expired

    		  (405) 7.11       

    Forfeited

    		  (86) 4.50       
    ​​​ ​ ​​​​​​​​​​

    Outstanding, December 31, 2015

    		  7,711  4.41       

    Granted

    		  1,025  4.40       

    Exercised

    		  (438) 2.66       

    Expired

    		  (1,154) 6.81       

    Forfeited

    		  (82) 4.24       
    ​​​ ​ ​​​​​​​​​​

    Outstanding, December 31, 2016

    		  7,062 $4.45  1.78 $— 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​​ ​​

    Exercisable, December 31, 2016

    		  3,727 $4.64  3.07 $— 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​

            Aggregate

    The aggregate intrinsic value represents the difference between the exercise prices and the closing stock price on December 31, 2016.2020.  At December 31, 2016,2020, the weighted average exercise price of the outstanding options was $4.45$4.01 and the closing stock price was $4.35.

    $1.92.


    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 13—Share-Based Compensation (Continued)

            For various price ranges,

    The weighted average characteristics of outstanding stock options by exercise price at December 31, 20162020 are as follows:

     Options OutstandingOptions Exercisable
    Exercise
    Prices    		Number Outstanding at December 31, 2020Weighted Average Remaining Contractual
    Life (in years)    		Number Exercisable at December 31, 2020Weighted Average Remaining Contractual
    Life (in years)
    $3.13500 3.45167 3.45
    4.00250 2.25200 2.25
    4.03225 1.08225 1.08
    4.3113 2.4510 2.45
    4.65347 3.19208 3.19
    4.905 1.595 1.59
    4.95211 0.19211 0.19
    5.1712 2.4510 2.45
    1,563 2.401,036 1.96
     
    		 Options Outstanding Options Exercisable 
    Exercise Prices
    		 Number
    Outstanding at
    December 31, 2016    		 Weighted
    Average
    Remaining
    Contractual
    Life    		 Weighted
    Average
    Exercise
    Price    		 Number
    Exercisable at
    December 31, 2016    		 Weighted
    Average
    Exercise
    Price    		 

    $2.85

    		  68,181  0.44 $2.85  68,181 $2.85 

      2.89

    		  69,768  1.43  2.89  69,768  2.89 

      3.00

    		  10,101  4.10  3.00  10,101  3.00 

      3.12

    		  10,000  3.60  3.12  6,000  3.12 

      3.35

    		  15,000  6.06  3.35  —  3.35 

      3.46

    		  13,274  3.86  3.46  13,274  3.46 

      3.55

    		  5,000  5.78  3.55  1,000  3.55 

      3.67

    		  781,000  3.06  3.67  465,000  3.67 

      3.91

    		  500,000  5.01  3.91  100,000  3.91 

      3.95

    		  500,000  4.01  3.95  200,000  3.95 

      4.00

    		  500,000  6.25  4.00  —  4.00 

      4.03

    		  475,000  5.08  4.03  95,000  4.03 

      4.04

    		  1,000,000  1.06  4.04  750,000  4.04 

      4.31

    		  112,500  6.45  4.31  —  4.31 

      4.35

    		  500,000  2.01  4.35  250,000  4.35 

      4.46

    		  25,000  6.76  4.46  —  4.46 

      4.84

    		  37,974  3.60  4.84  37,974  4.84 

      4.90

    		  10,000  5.59  4.90  2,000  4.90 

      4.95

    		  680,000  4.19  4.95  272,000  4.95 

      5.00

    		  250,000  6.25  5.00  —  5.00 

      5.17

    		  112,500  6.45  5.17  —  5.17 

      5.31

    		  20,000  0.07  5.31  20,000  5.31 

      5.47

    		  880,200  0.18  5.47  880,200  5.47 

      5.73

    		  8,000  1.84  5.73  8,000  5.73 

      5.83

    		  265,000  0.24  5.83  265,000  5.83 

      6.31

    		  175,000  1.42  6.31  175,000  6.31 

      6.61

    		  38,322  2.45  6.61  38,322  6.61 
    ​​​ ​ ​​​​​​​​ ​ ​​​​

    		  7,061,820  3.07 $4.13  3,726,820 $4.64 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

            In the years ended December 31, 2016, 2015 and 2014, the Company recorded share-based compensation related to stock options of approximately $2,436,000, $2,960,000 and $3,292,000, respectively, which is included in selling, general and administrative expenses.


    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 13—Share-Based Compensation (Continued)

            The following table summarizes the Company's non-vested stock option activity and related information for the years ended December 31, 2016, 2015 and 2014 (in thousands, except weighted average grant date fair value):

     
    		 Options Weighted
    Average
    Grant Date
    Fair Value
    Per Share    		 

    Non-vested options at December 31, 2013

    		  3,541  2.20 

    Granted

    		  1,849  2.28 

    Vested

    		  (1,289) 2.19 

    Forfeited

    		  (44) 2.33 
    ​​​​ ​​​​

    Non-vested options at December 31, 2014

    		  4,057  2.24 

    Granted

    		  1,117  2.01 

    Vested

    		  (1,434) 2.26 

    Forfeited

    		  (86) 2.48 
    ​​​ ​ ​​​​

    Non-vested options at December 31, 2015

    		  3,654  2.15 

    Granted

    		  1,025  1.52 

    Vested

    		  (1,262) 2.18 

    Forfeited

    		  (82) 2.76 
    ​​​ ​ ​​​​

    Non-vested options at December 31, 2016

    		  3,335 $1.92 
    ​​​ ​ ​​​​
    ​​​​​​​​
    ​​​ ​ ​​​​

    At December 31, 2016,2020, total unrecognized compensation cost related to non-vested options was $4,546,000$527 which will be recognized over the remaining weighted-average service period of 1.912.40 years.

    Note 14—Stockholders' Equity


    2008 Employee Stock Purchase Plan
    The Employee Stock Purchase Plan ("ESPP") covers 2,000 shares of the Company’s common stock. Eligible employees may purchase shares at 85% of the fair market value on the date of purchase. During the yearyears ended December 31, 2016,2020 and 2019, the Company received cashaggregate ESPP proceeds of $351,000 from the exercise of stock options.

            During 2016, certain officers exercised 320,745 options with an exercise price of $2.45 through the Company. The Company withheld 233,752 shares as payment$245 for the options and placed those shares in treasury. The officers received 87,713 shares from these transactions.

            During May 2015, four196 of the Company's directors exercised an aggregateshares and $161 for 77 of 84,868 options with an exercise price of $4.25 throughthe Company's shares, respectively.




    61

    Note 12 — Stockholders’ Equity

    In April 2020, the Company onexercised its right to retain 261 common shares that were pledged as collateral under the terms of a cashless basis. The Company withheld 67,400secured promissory note payable to the Company. Upon the terms of the secured promissory note, the note holder agreed to relinquish these shares as payment forupon the options and placed thosematurity date. As a result, these shares in treasury. The directors received a total of 17,468 shareshave been transferred from this transaction.

            In April 2015, two shareholders who owned approximately 19% of ESA exercised their ESA Put Options. On August 12, 2015, the Company paid the $4,374,000 liability with 924,736 shares of its common stock of which it repurchased 129,648 shares for an aggregate price of $580,000. See Note 5 for further information.

            On August 6, 2014, in connection with the Refinancing (See Note 11), the Company sold 9,546,629 shares of its commonto treasury stock, in an underwritten equity offering and received net proceeds aggregating


    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 14—Stockholders' Equity (Continued)

    approximately $38,078,000, of which two mandatory prepayments of $9,522,402 were used to pay down the 2012 Term Loan Agreement and the 2009 Revolving Credit Agreement.

            In March 2014,as reflected on the Company's former Chairman and Chief Executive Officer exercised 200,000 options with an exercise priceStatements of $2.70 through the Company on a cashless basis. The Company withheld 112,788 shares as payment for the options and placed those shares in treasury. The Chairman and Chief Executive Officer received 87,212 shares from this transaction.

            We have an effective registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (the "SEC") which registered 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 Secured Credit Facilities.

            We have an effective registration statement on Form S-4 on file with the SEC which registered 20,000,000 shares of our common stock, which includes 6,438,923 shares of our common stock registered under a previous Form S-4, for use in future acquisitions. During 2013, we issued 1,389,769 shares in connection with our acquisitions of BCA and CPI. During 2014, we issued 171,308 shares in connection with certain additional consideration for CPI. In 2015, we issued 148,460 shares of our common stock for additional consideration for CPI. See Stockholders' Equity.


    Note 5 for further information.

    Note 15—13 - Income Taxes


    The effective tax rates for the years ended December 31, 2016, 20152020 and 20142019 were (392.3%), 37.9%(1636.2)% and 35.1%(8.4)%, respectively. For all the years presented,year ended December 31, 2020, the Company'sCompany’s effective tax rate is significantly higher thandiffers from the U.S. federal statutory rate primarily due to additional uncertain tax position accruals, as a result of various foreign withholding taxes andwell as the inability to recordrecognize any tax benefit for losses in certain jurisdictions, particularly Brazil. For the year ended December 31, 2019, the Company’s effective tax rate differs from the U.S. federal statutory rate primarily due to benefits recognized from provision to return adjustments and the reversal of an incomeoutstanding tax benefitaccrual related to the U.S. net operating loss. In 2014, the effective tax rate was favorably impactedClaims Construction Group sale. This is partially offset by a reversal of approximately $2,500,000 foradditional uncertain tax positions based on management's assessment that those items were effectively settled with a foreign jurisdiction.

    position accruals, as well as additional increases in the Company's valuation allowances.


    The components of (loss) earnings before income taxes on the Company's consolidated statements of operations by the United States and foreign jurisdictions were as follows (in thousands):

    follows:
     Years Ended December 31,
     20202019
    United States$(1,839)$(3,948)
    Foreign jurisdictions1,403 17,093 
     $(436)$13,145 
    Income tax expense (benefit), as reflected in the Company's consolidated statements of operations, consists of the following:
     CurrentDeferredTotal
    Year ended December 31, 2020:   
    U.S. federal$0 $26 $26 
    State and local217 (15)202 
    Foreign jurisdictions6,100 806 6,906 
     $6,317 $817 $7,134 
    Year ended December 31, 2019:
    U.S. federal$65 $23 $88 
    State and local(27)(5)(32)
    Foreign jurisdictions(1,934)769 (1,165)
     $(1,896)$787 $(1,109)
    On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as The Tax Cuts and Jobs Act of 2017 (the “Act”). The Act makes broad and complex changes to the U.S. tax code and includes significant provisions impacting the Company's 2018 and 2019 effective tax rate. The changes include, but are not limited to, a reduction in the U.S. federal corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time deemed repatriation (“Transition Tax”) on earnings of certain foreign subsidiaries that were previously tax deferred, and the creation of new taxes that may apply on certain foreign sourced earnings. The Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. The Company has elected to recognize the resulting tax on GILTI as a period expense in the period the tax is incurred. For the year ended December 31, 2020, there was no tax incurred as a result of the period inclusion. For the year ended December 31, 2019, there was an immaterial amount of tax incurred as a result of the period inclusion.
    62

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    United States

    		 $(5,793)$(10,963)$(11,803)

    Foreign jurisdictions

    		  4,245  28,041  33,181 
    ​​​ ​​​ ​ ​​ ​​

    		 $(1,548)$17,078 $21,378 
    ​​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​
    On December 27, 2020, the Consolidated Appropriations Act 2021 (the “Appropriations Act”) was enacted in response to the COVID-19 pandemic. The Appropriations Act, among other things, temporarily extends certain expiring tax provisions through December 31, 2025. Additionally, the Appropriations Act enacts new provisions and extends certain provisions originated within the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020. The Company is currently evaluating the provisions of the Appropriations Act as well as the CARES Act, but at present time, does not expect that the CARES Act or the Appropriations Act will result in a material tax or cash benefit.


    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 15—Income Taxes (Continued)

    Income tax expense (benefit) consistswas $7,134 and $(1,109) for the twelve months ended December 31, 2020 and 2019, respectively. The following table summarizes the difference between the income tax expense/(benefit) at the United States statutory rate of 21.0% for both years ended December 31, 2020 and 2019 and the following (in thousands):

     
    		 Current Deferred Total 

    Year ended December 31, 2016:

    		          

    U.S. federal

    		 $— $— $— 

    State and local

    		  —  —  — 

    Foreign jurisdictions

    		  6,527  (459) 6,068 
    ​​​ ​ ​​ ​ ​​ ​ ​

    		 $6,527 $(459)$6,068 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​

    Year ended December 31, 2015:

    		          

    U.S. federal

    		 $— $— $— 

    State and local

    		  —  —  — 

    Foreign jurisdictions

    		  6,948  (483) 6,465 
    ​​​ ​ ​​ ​ ​​ ​ ​

    		 $6,948 $(483)$6,465 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​

    Year ended December 31, 2014:

    		          

    U.S. federal

    		 $— $— $— 

    State and local

    		  —  —  — 

    Foreign jurisdictions

    		  8,037  (525) 7,512 
    ​​​ ​ ​​ ​ ​​ ​ ​

    		 $8,037 $(525)$7,512 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​

            The decrease inincome tax expense in 2016 compared to 2015 results from the mix of income andat effective worldwide tax rates in various foreign jurisdictions

            The decrease in tax expense in 2015 compared to 2014 results fromfor the mix of income and tax rates in various foreign jurisdictions. In 2014, approximately $2,500,000 of reversal for uncertain tax positions was recorded based on management's assessment that those items were effectively settle with a foreign jurisdiction.

            The differences between income taxes based on the statutory U.S. federal income tax rate and the Company's effective income tax rate are provided in the following reconciliation (in thousands).

    respective periods:
     Years Ended December 31,
     20202019
    Statutory federal income tax (benefit)$(92)$2,760 
    Foreign tax expense4,415 50 
    Change in the valuation allowance(766)1,968 
    Net liability additions for uncertain tax positions1,713 1,183 
    Excess compensation129 0 
    State and local income taxes, net of federal income tax benefit202 (32)
    Stock options122 94 
    Foreign intercompany loan adjustments764 185 
    Prior period adjustments499 (1,821)
    Global intangible low-taxed income0 369 
    Non-deductible loss on bond0 (1,667)
    Reversal of Construction Claims Group liability0 (4,056)
    Other148 (142)
    Total$7,134 $(1,109)
    63

     
    		 Years Ended December 31, 
     
    		 2016 2015 2014 

    Statutory federal income tax

    		 $(542)$5,977 $7,268 

    Foreign tax benefit for earnings taxed at lower rates

    		  3,013  (2,939) (3,044)

    Change in the valuation allowance

    		  3,687  7,629  17,267 

    Valuation allowance—discontinued operations NOL adjustment

    		  (4,758) (4,192) (11,197)

    Net liability (reductions) additions for uncertain tax positions

    		  (40) 21  (2,379)

    Excess compensation

    		  513  485  646 

    State and local income taxes, net of federal income tax benefit

    		  (133) (447) (552)

    Stock options

    		  4,355  266  224 

    Purchase accounting reversal

    		  —  —  (490)

    Other

    		  (27) (335) (231)
    ​​​​ ​​ ​ ​​​ ​

    Total

    		 $6,068 $6,465 $7,512 
    ​​​ ​ ​​​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​​​ ​ ​

    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 15—Income Taxes (Continued)

    The tax effect of temporary differences that give rise to deferred tax assets and deferred tax liabilities are as follows (in thousands):

    follows:
     December 31,
     20202019
    Deferred tax assets:  
    Net operating loss carry forward - U.S. operations$9,442 $9,807 
    Net operating loss carry forward - foreign operations6,673 10,295 
    Compensated absences1,559 944 
    Foreign income taxes on currency translation3,315 5,543 
    Share-based compensation581 465 
    Allowance for doubtful accounts2,840 3,440 
    Labor contingencies6 261 
    Interest limitations1,144 1,659 
    Foreign tax credit115 292 
    Accrued expenses1,369 1,164 
    Other279 375 
    Total gross deferred tax assets27,323 34,245 
    Valuation allowances(20,103)(28,821)
    Net deferred tax assets7,220 5,424 
    Deferred tax liabilities:
    Intangible assets(1,627)(1,364)
    Depreciation(317)(86)
    Prepaid expenses(465)(434)
    Change in tax method(570)(284)
    Deferred income(1,753)125 
    Total gross deferred tax liabilities(4,732)(2,043)
    Net deferred tax assets$2,488 $3,381 
     
    		 December 31, 
     
    		 2016 2015 

    Deferred tax assets:

    		       

    Net operating loss carry forward—U.S. operations

    		 $52,401 $46,493 

    Amortization of intangibles

    		  3,002  7,010 

    Net operating loss carry forward—foreign operations

    		  8,459  6,690 

    Compensated absences

    		  2,184  2,371 

    Foreign income taxes on currency translation

    		  2,632  2,392 

    Share based compensation

    		  309  3,764 

    Allowance for uncollectible accounts

    		  13,691  13,139 

    Bonus accrual

    		  —  488 

    Foreign tax credit

    		  991  982 

    Other

    		  961  1,133 
    ​​​ ​ ​​ ​ ​

    Total gross deferred tax assets

    		  84,630  84,462 

    Valuation allowances

    		  (72,154) (66,043)
    ​​​ ​ ​​ ​ ​

    Net deferred tax assets

    		  12,476  18,419 
    ​​​ ​ ​​ ​​

    Deferred tax liabilities:

    		       

    Intangible assets

    		  (5,954) (10,763)

    Depreciation

    		  (3,009) (2,729)

    Prepaid expenses

    		  (1,021) (1,123)

    Change in tax method

    		  (101) (190)

    Accrued expenses

    		  (729) — 
    ​​​ ​ ​​​ ​

    Total gross deferred tax liabilities

    		  (10,814) (14,805)
    ​​​ ​ ​​ ​​

    Net deferred tax assets

    		 $1,662 $3,614 
    ​​​​ ​​ ​ ​
    ​​​​​​​​
    ​​​ ​​​ ​ ​

    The deferred taxes have been reflected in the Company's consolidated balance sheetsheets based on tax jurisdiction as follows:

    December 31,
    20202019
    Deferred tax asset$3,698 $3,800 
    Deferred tax liability(1,210)(419)
    Net deferred tax assets$2,488 $3,381 

    Deferred tax asset

    		 $2,197 $4,602 

    Deferred tax liability

    		  (535) (988)
    ​​​ ​ ​​​ ​

    Net deferred tax assets

    		 $1,662 $3,614 
    ​​​ ​ ​​ ​​
    ​​​​​​​​
    ​​​ ​ ​​ ​ ​

    In assessing the realizability of deferred tax assets, managementthe Company 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 considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred tax assets according to the provisions of ASC 740,Income Taxes.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 projections, and historical financial performance.


    Table See Schedule II - Valuation and Qualifying Accounts for breakdown of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 15—Income Taxes (Continued)

            Due to recurringvaluation allowance for amounts added, net of deductions, for the years ended December 31, 2020 and 2019.


    During the year ended December 31, 2018, the Company generated net operating losses in the United States, management hasU.S., which, under the Act, now have an unlimited life. The Company recorded an additional valuation allowance to materially offset this loss, as the Company had determined that it iswas more likely than not that the Company willthey would not be able to utilize a significant portion of its U.S.United States deferred tax assets. The Company continues to generate U.S. net operating losses and recorded additional valuation allowances of $1,317,000 and $7,583,000 at December 31, 2016 and 2015, respectively. U.S. valuation allowances of $50,987,000 and $49,670,000 were recorded at December 31, 2016 and 2015, respectively, primarily related to the U.S.gross cumulative federal net operating loss carryforwards. As a result, the U.S. deferred tax assets, netas of U.S. deferred tax liabilities, are fully reserved at December 31, 2016. Cumulative U.S. federal2020 and 2019 was $9,351 and $9,553, respectively, with no expiration. The cumulative state net operating losses at December 31, 2016 are $132,331,0002020 and $135,234,000, respectively.

    2019 were $115,291 and $113,945, which will begin to expire in 2025. 


    64

    At December 31, 20162020 and 2015,2019, there were approximately $36,256,000$32,014 and $27,571,000,$46,630, respectively, of gross foreign net operating loss carry forwards. The majority of these net operating loss carry forwards have an unlimited carry forward period. It is anticipated that these losses will not be utilized due to continuing losses in these jurisdictions. Foreign valuation allowances of $21,167,000$8,541 and $16,373,000$16,073 were recorded at December 31, 20162020 and 2015,2019, respectively, primarily related to the foreign allowance for doubtful accounts in connection with the Libya Receivable reserve and the foreign net operating loss carry forwards. In 2016, $2,424,000
    The Company continues to evaluate its worldwide cash needs, and as of December 31, 2020, the valuation allowance is recordedCompany has a partial reinvestment assertion on certain of its unremitted foreign earnings. Generally, the foreign earnings previously subject to Accumulated Other Comprehensive Incomethe Transition Tax in the U.S. can be distributed without additional U.S. federal tax, however, any such repatriation of previously unremitted foreign earnings could incur withholding and isother foreign taxes, if applicable, as well as certain U.S. state taxes when remitted in any given year. At December 31, 2020, the Company has made no provision for federal, state, withholding or other foreign taxes related to these earnings as these taxes are either not applicable or not material. Additionally, the deferred tax asset recordedCompany's Netherlands subsidiary has a partial reinvestment assertion regarding certain unremitted foreign earnings as a foreign exchange adjustment related to long term notes payable.

    well. The Company has made no provision for U.S.foreign taxes on $128,175,000 of cumulative earnings of foreign subsidiaries as those earnings are intendedrelated to be reinvested for an indefinite period of time and are not intended to be distributed to the U.S. Upon distribution of these earnings inbecause the form of dividends or otherwise,Netherlands entity continues to qualify for the Company mayparticipation exemption whereby certain foreign earnings can be subject to U.S. income taxes and foreign withholding taxes. It is not practical, however, to estimate the amount of taxes that may be payable on the eventual repatriation of these earnings.

    repatriated without any additional tax at December 31, 2020.


    The Company will recognize a tax benefit in the financial statements for an uncertain tax position only if management'sthe Company's assessment is that the position is "more“more likely than not"not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term "tax position"“tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

    The following table indicates the changes to the Company'sCompany’s uncertain tax positions for the years ended December 31, 20162020 and 20152019, including interest and penalties (in thousands):

    penalties:
     Years Ended December 31,
     20202019
    Balance, beginning of year$4,615 $2,988 
    Reductions based on tax positions related to prior years(162)(702)
    Reduction due to settlements with taxing authorities0 (960)
    Additions based on tax positions related to prior years1,875 3,289 
    Balance, end of year$6,328 $4,615 
     
    		 Years Ended
    December 31,    		 
     
    		 2016 2015 

    Balance, beginning of year

    		 $996 $975 

    Reductions based on tax positions related to prior years

    		  (40) (16)

    Reduction due to settlements with taxing authorities

    		  (172) (265)

    Additions based on tax positions related to prior years

    		  914  302 
    ​​​​ ​​ ​ ​

    Balance, end of year

    		 $1,698 $996 
    ​​​ ​ ​​​ ​
    ​​​​​​​​
    ​​​ ​ ​​​ ​

    The Company files income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. The Company generally is no longer subject to U.S. or state examinations by tax


    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 15—Income Taxes (Continued)

    authorities for taxable years prior to 2013.2015. However, net operating losses utilized from prior years in subsequent years'years’ tax returns are subject to examination until three years after the filing of subsequent years'years’ tax returns. The statute of limitations expiration in foreign jurisdictions for corporate tax returns generally ranges between two and five years, depending on the jurisdiction.

    The Company'sCompany’s policy is to record income tax relatedestimated interest and penalties related to uncertain tax positions in income tax expense. At December 31, 2016, 20152020 and 2014,2019, the Company has accrued $206,000, $500,000Company’s consolidated balance sheet reflects cumulative provisions for interest and $520,000,penalties of $757 and $616, respectively, related to potential interest and penalties.

    The Company'sCompany’s income tax returns are based on calculations and assumptions that are subject to examinationsexamination by the Internal Revenue Service and other tax authorities. While the Company believes it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its provision for income taxes. As part of its assessment of potential adjustments to its tax returns, the Company increases its current tax liability to the extent an adjustment would result in a cash tax payment or decreases its deferred tax assets to the extent an adjustment would not result in a cash tax payment. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provision, the current tax liability and deferred taxes in the period in which the facts that give rise to a revision become known.

    65


    Note 16—14 — Commitments and Contingencies

    General Litigation

            In 2013, M.A. Angeliades, Inc. ("Plaintiff") filed a complaint with the Supreme Court of New York against the Company and the New York City Department of Design and Construction ("DDC") regarding payment of approximately $8,771,000 for work performed as a subcontractor to the Company plus interest and other costs. On October 5, 2015, pursuant to a settlement agreement, Hill paid Plaintiff approximately $2,596,000, including interest amounting to $1,056,000, of which $448,000 had been previously accrued and $608,000 was charged to expense for the year ended December 31, 2015. The remaining issues regarding Plaintiff's requests for change orders and compensation for delay are being negotiated between Plaintiff and the DDC.

            In 2014, a former executive of the Company ("Plaintiff") resigned and filed a labor dispute with the Company in the Dubai Labour Court seeking AED 4,536,239 (approximately $1,210,000) for end of service remuneration. The Company filed a counterclaim against Plaintiff for breach of employment contract and filed a complaint against Plaintiff's new employer, Driver Group plc, in the UK for breach of non-solicitation and non-compete obligations in Plaintiff's employment agreement. On June 15, 2015, the Company paid Plaintiff AED 750,000 (approximately $200,000) pursuant to an executed settlement agreement. During year ended December 31, 2015, the Company recorded an additional $100,000 associated with the settlement payment and $834,000 of related legal costs.

            Knowles Limited ("Knowles"), a subsidiary of the Company, is a party to an arbitration proceeding instituted on July 8, 2014 in which Knowles claimed that it was entitled to payment for services rendered to Celtic Bioenergy Limited ("Celtic"). The arbitrator decided in favor of Knowles. The arbitrator's award was appealed by Celtic to the U.K. High Court of Justice, Queen's Bench Division, Technology and Construction Court ("Court"). On March 16, 2017, the Court (1) determined that certain relevant facts had been deliberately withheld from the arbitrator by an employee of Knowles



    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 16—Commitments and Contingencies (Continued)

    and (2) remitted the challenged parts of the arbitrator's award back to the arbitrator to consider the award in possession of the full facts. The Company is evaluating the impact of the judgment of the Court.

    From time to time, the Company is a defendant or plaintiff in various legal actions whichproceedings that arise in the normal course of business. As such, the Company is required to assess the likelihood of any adverse outcomes to these mattersproceedings 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.proceeding. 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'sCompany’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 mattersproceedings will not have a material adverse effect on the Company'sCompany’s financial condition, results of operations or cash flows.


    Knowles Limited (“Knowles”), a subsidiary of the Company, is a party to an arbitration proceeding instituted on July 8, 2014 in which Knowles claimed that it was entitled to payment for services rendered to Celtic Bioenergy Limited (“Celtic”). The arbitrator decided in favor of Knowles. The arbitrator’s award was appealed by Celtic to the U.K. High Court of Justice, Queen’s Bench Division, Technology and Construction Court (“Court”). On March 16, 2017, the Court (1) determined that certain relevant facts had been deliberately withheld from the arbitrator by an employee of Knowles and (2) remitted the challenged parts of the arbitrator’s award back to the arbitrator to consider the award in possession of the full facts. The Company is evaluating the impact of the judgment of the Court. In May 2019, Celtic issued a claim against Knowles for negligent application and a hearing was held in December 2019. The arbitration was concluded in August 2020 in Knowles' favor. Celtic has appealed the arbitrator's decision.

    Loss on Performance Bond

    On February 8, 2018, the Company received notice from the First Abu Dhabi Bank ("FAB", formerly known as the National Bank of Abu Dhabi) that the Public Authority of Housing Welfare of Kuwait submitted a claim for payment on a performance guarantee issued by the Company for approximately $7,938 for a project located in Kuwait. FAB subsequently issued, on behalf of the Company, a payment on February 15, 2018. The Company is taking legal action to recover the full Performance Guarantee amount. On September 20, 2018 the Kuwait First Instance Court dismissed the Company's case. As a result, the Company fully reserved the performance guarantee payment above in the first quarter of 2018. The Company filed an appeal before the Kuwait Court of Appeals seeking referral of the matter to a panel of experts for determination. On April 21, 2019, the Court of Appeals ruled to refer the matter to the Kuwait Experts Department. Hearings with the Kuwait Experts Department were held during July and September 2019. A final report was issued by the panel of experts in October 2019 for the held hearings on January 7, 2020 and February 4, 2020 and reserved the case for judgment to be issued. The Company filed a pleading before the Kuwait Cassation Court in August 2020 and is awaiting a decision.

    Off-Balance Sheet Arrangements

    The Company enters into agreements with banks for the banks to issue bonds and letters of guarantee to clients, or potential clients and other third parties, mainly for three separatethe purposes as follows:

    (1)
    Certain of the Company's subsidiaries (Hill International N.V., Hill International (UK) Ltd. and Hill International (Middle East) Ltd.) haveThe Company has entered into contracts for the performance of construction management services whichthat provide that the Company receive advance payment of some of the management fee from the client prior to commencement of the construction project. However, the clients require a guarantee of service performance in the form of an advance payment bond. These bonds are evidenced by Letters of Guarantee issued by the subsidiaries'subsidiaries’ banks in favor of the clients. In some cases, these clients also require a parent company guarantee.

    The average term the Company entered into such arrangements was 2.1 years at December 31, 2020.

    (2)
    The Company may also enter into certain contracts whichthat require a performance bond to be issued by a bank in favor of the client for a portion of the value of the contract. These bonds may be exercised by the client in instances where the Company fails to provide the contracted services.

    The weighted average term the Company entered into such arrangements was 1.1 years at December 31, 2020, which excludes performance bonds that contain open-ended expiration dates.

    66

    (3)
    Certain clients may require bonds as part of the bidding process for new work. The bidBid bonds are provided to demonstrate the financial strength of the companies seeking the work and are usually outstanding for short periods. If the bid is rejected, the bond is cancelledcanceled and if the bid is accepted, the Company may be required to provide a performance bond.

    The weighted average term of these arrangements was 0.3 years at December 31, 2020, which excludes bid bonds with open-ended expiration dates.

    The maximum potential future payment under these arrangements at December 31, 20162020 and 2019 was $105,377,000.

    $67,382 and $74,597, respectively, which primarily includes credit facility arrangements that are denominated in foreign currencies. These balances partially reduced the Company's available borrowing capacity on the Domestic and International Revolving Credit Facilities by a total of $8,794 and $8,780 at December 31, 2020 and 2019, respectively, as reflected in Note 10 - Notes Payable and Long-Term Debt.

    Cash held in restricted accounts as collateral for the issuance of performance and advance payment bonds, and letters of credit and escrow at December 31, 20162020 and 2015 were $4,625,0002019 was $7,184 and $4,694,000,$9,067, respectively.

    Acquisition-Related Contingencies

            As of December 31, 2016 our subsidiary, Hill International (Spain), S.A. ("Hill Spain"), owned an indirect 91% interest in Engineering S.A. ("ESA"), a firm located in Brazil. ESA's shareholders entered into an agreement whereby the minority shareholders have a right to compel ("ESA Put Option") Hill



    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 16—Commitments and Contingencies (Continued)

    Spain to purchase any or all of their shares during the period from February 28, 2014 to February 28, 2021. Hill Spain also has the right to compel ("ESA Call Option") the minority shareholders to sell any or all of their shares during the same time period. The purchase price for such shares shall be seven times the earnings before interest and taxes for ESA's most recently ended fiscal year, net of any financial debt plus excess cash multiplied by a percentage which the shares to be purchased bear to the total number of shares outstanding at the time of purchase, but in the event the ESA Call Option is exercised by Hill Spain, the purchase price shall be increased by five percent. The ESA Put Option and the ESA Call Option must be made within three months after the audited financial statements of ESA have been completed. On June 17, 2016, the three remaining minority shareholders exercised their ESA Put Options claim a value of BRL 8,656,000 (approximately $2,659,000 at December 31, 2016). The Company accrued the liability which is included in other current liabilities and as an adjustment to additional paid in capital in the consolidated balance sheet at December 31, 2016. The amount is subject to negotiation and any difference will be recorded upon completion of the transaction. See Note 5.

            The Company accrued approximately TRY 6,100,000 ($2,088,000) for potential future payments in connection with the acquisition of IMS. IMS's EBITDA through the one-year anniversary of the acquisition date was not sufficient to earn any of the Additional Purchase Price and the liability was eliminated by a credit of approximately $673,000 to selling, general and administrative expenses at December 31, 2016. See Note 5.

    Other

    The Company has identified a potential tax liability related to certain foreign subsidiaries'subsidiaries’ failure to comply with laws and regulations of the jurisdictions, outside of their home country, in which their employees provided services. The Company has estimated the potential liability to be approximately $2,106,000$1,323 which is reflected in other liabilities in the consolidated balance sheet, $402 of which was expensed in selling, general and has reflected that amount in discontinued operationsadministrative expenses in the consolidated statement of operations for the year ended December 31, 20162020.

    Note 15 — Leases

    The Company leases office space, equipment and in othervehicles throughout the world. Many of the Company's leases include one or more options to renew at the Company's sole discretion. The lease renewal option terms generally range from 1 month to 5 years for office leases. The determination of whether to include any renewal or early termination options is made by the Company at lease inception when establishing the term of the lease. On January 1, 2019, the Company adopted ASU-2016-2, Leases (Topic 842), which required the Company to recognize right-of use lease ("ROU") assets and lease liabilities in theon its consolidated balance sheet for all leases in excess of one year in duration. The lease liability represents the present value of the remaining lease payments, which only includes payments that are fixed and determinable at December 31, 2016.

    Note 17—Operating Leases

    the time of commencement, over the lease term. The lease term may be adjusted for renewal or early termination options provided in the leases only if it is reasonably certain that the Company will exercise such options. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.


    The Company elected to adopt the guidance using the modified retrospective method and, therefore, have not recast comparative periods presented in its unaudited consolidated financial statements. The Company elected the package of transition practical expedients for existing leases and therefore the Company has numerous operatingnot reassessed the following: lease classification for existing leases, which have various expiration dates through December, 2027. whether any existing contracts contained leases, if any initial direct costs were incurred and whether existing land easements should be accounted for as leases. The Company did not apply the hindsight practical expedient, accordingly, the Company did not use hindsight in its assessment of lease terms. As permitted under ASU 2016-2, the Company elected as accounting policy elections to not recognize ROU assets and related lease liabilities for leases with terms of twelve months or less and to not separate lease and non-lease components, and instead account for the non-lease components together with the lease components as a single lease component.

    Rent expense was approximately $9,208,000, $8,724,000 and $8,416,000 for leases is recognized on a straight-line basis over the years ended December 31, 2016, 2015 and 2014, respectively, which is included in selling, general and administrative expenseslease term from the lease commencement date through the scheduled expiration date for rent payments that are determined to be fixed, or are determinable at the lease commencement date. Some of the Company's lease arrangements require periodic increases in the consolidated statements of earnings. TheCompany's base rent that may be subject to certain economic indexes, among other items. In addition, these leases may require the Company is required to pay property taxes, utilities and other costs related to several of its leased office facilities.

            At Typically, these amounts for such payments cannot be determined at the lease commencement date, and are identified as variable lease payment, which are expensed as incurred.


    Total rent expense for the twelve months ended December 31, 2016, approximate future minimum2020 and 2019 included $2,374 and $2,138, respectively, that was associated with leases with an initial term of 12 months or less, in addition to variable costs the Company is responsible for paying on all leases.

    67

    Rent expense for operating leases is recognized on a straight-line basis over the lease term from the lease commencement date through the scheduled expiration date. Rent expense of approximately $8,294 and $9,079 for the twelve months ended December 31, 2020 and 2019, respectively, is included in either selling, general and administrative expenses or direct expenses, as appropriate, in the consolidated statements of operations.

    During the three months ended June 30, 2020, as a result of the COVID-19 pandemic, the Company received rent concessions from certain lessors primarily in the form of rent payment deferrals, where rents that were originally scheduled to be paid to such lessors during the three months ended June 30, 2020, per the terms of the leases, were agreed to not become due and payable until 2021, with the option to pay the amounts deferred in monthly installments, plus interest. In April 2020, the FASB issued a Q&A in order to simplify how ASC-842 should be applied to rent concessions received as a result of the pandemic, and provided an optional practical expedient that permits an entity to make an election to not evaluate whether concessions granted by lessors related to COVID-19 are lease modifications, under certain conditions. Entities that make this election can then apply the lease modification guidance in ASC-842 or account for the concession as if it were contemplated as part of the existing contract. The Company elected to apply the practical expedient and not apply the lease modification guidance and has accordingly continued to recognize the rent expense as if no deferral had been provided. The Company recorded a payable for these amounts reflected in accounts payable and accrued expenses in the Company's consolidated balance sheets of $586 for such rent deferrals, which are required to be paid over monthly installments through December 2021.

    The Company subleases certain real estate to third parties (the "sublessee"). The sublease income recognized for the twelve months ended December 31, 2020 and 2019 was $1,338 and $569, respectively, and was recorded as a reduction to selling, general and administrative expenses in the Company's consolidated statements of operations. These subleases may require the sublessee to reimburse the Company if they are required to pay property taxes, utilities and other costs related to the leased office facility. These reimbursements are identified as variable lease payments undersince these leases that have remaining non-cancelableamounts cannot be determined at the lease termscommencement date and are recognized as reduction in excessexpense as incurred.

    The following is a schedule, by years, of one yearmaturities of lease liabilities as of December 31, 2020:
    Years Ending December 31,Total Operating Lease PaymentsTotal Financing Lease Payments
    2021$5,772 $75 
    20224,491 75 
    20233,679 75 
    20242,735 40 
    20251,963 0 
    Thereafter2,958 0 
    Total minimum lease payments (1)(2)
    		21,598 265 
    Less amount representing imputed interest3,260 9 
    Present value of lease obligations$18,338 $256 
    Weighted average remaining lease term (years)4.633.54
    Weighted average discount rate7.0%2.1%
    (1) Partially includes rent expense amounts payable in various foreign currencies and are based on the foreign currency exchange rate as follows (in thousands):

    of December 31, 2020, where applicable.
    (2) Includes lease amendments executed as of December 31, 2020, but not yet commenced.

    Years Ending December 31,
    		  
    		 

    2017

    		 $7,607 

    2018

    		  6,213 

    2019

    		  5,026 

    2020

    		  3,766 

    2021

    		  3,145 

    Thereafter

    		  10,963 
    ​​​ ​ ​

    Total

    		 $36,720 
    ​​​ ​ ​
    ​​​​​
    ​​​ ​ ​

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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 18—16 - Benefit Plans

    401(k) Retirement Savings Plan
    The Company maintains a 401(k) Retirement Savings Plan (the "401(k) Plan"“401(k) Plan”) for qualified employees. The terms of the 401(k) Plan define qualified employees as those over 21 years of age. Theage who have completed at least thirty days of service. Generally, the Company matches 50%matched $0.50 on the dollar of employee contributions up to 2% of employee compensation up to a maximum $2,650.of 6.0% of the employee's salary. Beginning with the May 1, 2020 pay period, the Company suspended the Company match through December 31, 2020 as part of the Company's corporate cost reductions related to COVID-19 (see Note 2 - Liquidity). The Company resumed the match on January 1, 2021. For the years ended December 31, 2016, 20152020 and 2014,2019, the Company recognized expense amounting to $1,005,000, $905,000of $706 and $801,000,$2,151, respectively, which is included in selling, general and administrative expenses in the consolidated statements of earnings.

    operations.

    68

    End of Service Benefits
    The Company maintains several End of Service Benefit plans (the “EOSB Plans”) that provide lump sum termination benefits to certain employees in the United Arab Emirates, Saudi Arabia, Qatar, Oman, and Bahrain. The EOSB Plans are calculated based on tenure of service and may vary depending on the circumstances surrounding the separation. Generally, the plans provide for a lump sum benefit that is based on the employee's salary, years of service and statutory requirements that exist within the employee's office location. The Company calculated the present value of the expected future payments using the Projected Unit Credit Method, which estimates the fair value of the projected benefits that current plan participants will earn and was used to assess the Company's liabilities as of December 31, 2020 and 2019. The baseline assumptions used for the calculation included a discount rate of 0.9%, a salary increase of 2.0% per annum and an employee turnover rate of 25% per annum. The Company recorded liabilities of $10,090 and $10,440 for the EOSB Plans as of December 31, 2020 and 2019, respectively, which are included in accrued payroll and related expenses. For the years ended December 31, 2020 and 2019, the Company recognized expense for the EOSB Plans of $2,456 and $2,269, respectively, of which $1,819 and $1,962, respectively, related to service costs is included in direct expense and selling, general and administrative expense in the consolidated statements of operations. The remaining expense is included in other (loss) income, net, in the consolidated statements of operations. 

    Note 19—Segment17 —Segment and Related Information

            At December 31, 2016, due to the pending sale of our Construction Claims Group, the

    The Company now has one operating1 reporting segment, the Project Management Group, which reflects how the Company will be managed going forward.is managed. The Project Management Group 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, labor compliance services (collectively, "integrated project management") and facilities management services. The information for 2015 and 2014 has been revised to exclude the operations of the Construction Claims Group which is accounted for as discontinued operations.

    The following tables present certain information for the Project Management Group's operations (in thousands):

    Consulting FeeCompany's operations:


    Total Revenue by Geographic Region

    Region:
     20202019
    Americas$192,777 52.4 %$200,142 53.1 %
    Middle East/Asia/Pacific92,639 25.1 %104,927 27.9 %
    Europe53,819 14.6 %43,488 11.6 %
    Africa29,289 7.9 %27,880 7.4 %
    Total$368,524 100.0 %$376,437 100.0 %
     
    		 2016 2015 2014 

    United States

    		 $137,528  31.7%$122,423  26.2%$102,095  23.8%

    Latin America

    		  18,708  4.3  26,304  5.6  36,925  8.6 

    Europe

    		  38,455  8.8  39,519  8.4  34,943  8.2 

    Middle East

    		  204,780  47.2  245,985  52.6  222,754  51.9 

    Africa

    		  20,815  4.8  20,461  4.4  18,402  4.3 

    Asia/Pacific

    		  13,861  3.2  13,185  2.8  13,708  3.2 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $434,147  100.0%$467,877  100.0%$428,827  100.0%
    ​​​ ​ ​​ ​​​ ​ ​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    For the yeartwelve months ended December 31, 2016, consulting fee2020 and 2019, total revenue fromfor the United Arab Emirates amounted to $70,834,000 representing 16.3%$39,353 or 10.7%, and $37,904 or 10.1%, of the Company's total and Saudi Arabia amounted to $47,783,000 representing 11.0% of the total.revenue, respectively. No other country except for the United States accounted for over 10% of consulting fee revenue.

            For the year ended December 31, 2015, consulting fee revenue fromand the United Arab Emirates amounted to $86,327,000 representing 18.5% of the total, Saudi Arabia amounted to $53,348,000 representing 11.4% of the total and Oman amounted to $54,243,000 representing 11.6% of the total. No other country except for the United States accounted for over 10% of consulting fee revenue.

            For the year ended December 31, 2014, consulting fee revenue from the United Arab Emirates amounted to $48,713,000 representing 11.4% of the total, Oman amounted to $62,337,000 representing 14.5% of the total and Saudi Arabia amounted to $48,259,000 representing 11.3% of the total. No other country except for the United States accounted for over 10% of consulting fee revenue.


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    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 19—Segment and Related Information (Continued)

    Total Revenue by Geographic Region

     
    		 2016 2015 2014 

    United States

    		 $204,036  39.2%$187,399  33.9%$146,224  30.0%

    Latin America

    		  18,774  3.6  26,351  4.8  36,948  7.6 

    Europe

    		  41,242  7.9  42,913  7.8  37,358  7.7 

    Middle East

    		  217,875  41.8  255,897  46.3  230,879  47.3 

    Africa

    		  24,037  4.6  23,935  4.3  21,657  4.4 

    Asia/Pacific

    		  14,883  2.9  16,081  2.9  14,688  3.0 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $520,847  100.0%$552,576  100.0%$487,754  100.0%
    ​​​ ​ ​​ ​​​ ​ ​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

            For the year ended December 31, 2016, total revenue from the United Arab Emirates amounted to $75,641,000 representing 14.5% of the total. No other country except for the United States accounted for over 10% of total revenue.

            For the year ended December 31, 2015, total revenue from the United Arab Emirates amounted to $89,618,000 representing 16.2% of the total and total revenue from Oman amounted to $58,390,000 representing 10.6% of the total. No other country except for the United States accounted for over 10% of total revenue.

            For the year ended December 31, 2014, total revenue from the United Arab Emirates amounted to $49,855,000 representing 10.2% of the total, Oman amounted to $66,175,000 representing 13.6% of the total and Saudi Arabia amounted to $48,919,000 representing 10.0% of the total. No other country except for the United States accounted for over 10% of total revenue.

    Operating Profit (Loss)

    :
     20202019
    Americas$31,959 $27,834 
    Middle East/Asia/Pacific9,287 13,782 
    Europe5,558 4,955 
    Africa5,401 11,235 
    Corporate(41,706)(39,260)
    Total$10,499 $18,546 
     
    		 2016 2015 2014 

    United States

    		 $17,981 $14,459 $7,424 

    Latin America

    		  (1,687) 1,309  1,418 

    Europe

    		  (4,646) (6,312) (5,145)

    Middle East

    		  20,109  43,792  42,368 

    Africa

    		  1,963  822  4,816 

    Asia/Pacific

    		  1,677  1,850  2,293 

    Corporate

    		  (36,251) (36,816) (30,232)
    ​​​ ​ ​​ ​ ​​ ​ ​

    Total

    		 $(854)$19,104 $22,942 
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​​ ​​ ​ ​​​ ​

    Depreciation and Amortization Expense

    Expense:
     20202019
    Project Management$1,385 $3,791 
    Corporate2,653 33 
    Total$4,038 $3,824 
    69

     
    		 2016 2015 2014 

    Project Management

    		 $6,535 $7,477 $6,888 

    Corporate

    		  618  432  216 
    ​​​ ​ ​​ ​​​ ​ ​

    Total

    		 $7,153 $7,909 $7,104 
    ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​
    ​​​​ ​​ ​ ​​​ ​

    Table of Contents


    HILL INTERNATIONAL, INC. AND SUBSIDIARIES

    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

    Note 19—Segment and Related Information (Continued)

    Consulting Fee Revenue By Client Type

    Type:
     20202019
    U.S. federal government$17,942 4.9 %$18,967 5.0 %
    U.S. state, regional and local governments118,845 32.2 %124,504 33.1 %
    Foreign governments99,906 27.1 %91,683 24.4 %
    Private sector131,831 35.8 %141,283 37.5 %
    Total$368,524 100.0 %$376,437 100.0 %
     
    		 2016 2015 2014 

    U.S. federal government

    		 $9,600  2.2%$8,569  1.8%$9,792  2.3%

    U.S. state, regional and local governments

    		  94,459  21.8  82,181  17.6  70,036  16.3 

    Foreign governments

    		  153,445  35.3  195,383  41.8  193,283  45.1 

    Private sector

    		  176,643  40.7  181,744  38.8  155,716  36.3 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Total

    		 $434,147  100.0%$467,877  100.0%$428,827  100.0%
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​

    Total Revenue By Client Type


     
    		 2016 2015 2014 

    U.S. federal government

    		 $12,046  2.3%$10,656  1.9%$12,398  2.5%

    U.S. state, regional and local governments

    		  155,596  29.9  138,044  25.0  107,247  22.0 

    Foreign governments

    		  168,833  32.4  211,907  38.3  205,601  42.2 

    Private sector

    		  184,372  35.4  191,969  34.8  162,508  33.3 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Total

    		 $520,847  100.0%$552,576  100.0%$487,754  100.0%
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​​ ​ ​

    Property, Plant and Equipment, Net by Geographic Location

    Location:
     December 31,
     20202019
    Americas$7,741 $10,401 
    Middle East/Asia/Pacific917 882 
    Europe544 473 
    Africa241 139 
    Total$9,443 $11,895 

    Note 18 - Deconsolidation of Controlling Interest in Subsidiaries
     
    		 December 31, 
     
    		 2016 2015 

    United States

    		 $13,024 $13,304 

    Latin America

    		  881  1,017 

    Europe

    		  218  807 

    Middle East

    		  1,645  2,318 

    Africa

    		  169  589 

    Asia/Pacific

    		  850  946 
    ​​​ ​ ​​ ​​

    Total

    		 $16,787 $18,981 
    ​​​ ​ ​​ ​​
    ​​​​​​​​
    ​​​ ​ ​​ ​ ​


    Table of Contents


    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    To the Board of Directors and Stockholders of
    On June 12, 2020, Hill International Inc.Brasil S.A ("Hill Brazil") filed for bankruptcy and Subsidiaries

            We have auditedliquidation with the accompanyingBankruptcy Court of Sao Paulo Brazil. Hill Brazil was a consolidated balance sheetsoperating subsidiary of Hill International Inc.Brasil Participacoes LTDA ("Brazil Consolidated"). A trustee was appointed by the court on June 15, 2020 to oversee the settlement of liabilities and Subsidiaries (the "Company")close the entity. The Company lost control of Hill Brazil on the date of the bankruptcy filing and, as a result, deconsolidated Hill Brazil at that time.


    At June 12, 2020, Hill Brazil's assets totaled $1,901, and consisted of December 31, 2016Cash $9, Accounts receivable $1,380, Property, Plant & Equipment $295 and 2015,other assets $217. At June 12, 2020, Hill Brazil's liabilities totaled $3,538 and consisted of accounts payable and accrued expenses $1,800, debt $365, deferred revenue $132 and other liabilities $1,242. Therefore, Hill Brazil's liabilities exceeded assets by $1,638. The write-off of the investment in Hill Brazil by Brazil Consolidated resulted in a $1,201 loss. The write-off of the balance sheet and write-off of the investment in Hill Brazil resulted in a $437 gain on the deconsolidation before consideration of foreign currency adjustments and intercompany items.

    In conjunction with the liquidation of Hill Brazil, the Company's intercompany receivables from Hill Brazil totaling $116 were fully reserved and an intercompany payable of $1,180 to Hill Brazil from Brazil Consolidated was written off against the income/loss of the liquidation. Additionally, $5,565 of accumulated other comprehensive losses related to foreign currency adjustments was taken into expense. This resulted in a net loss of $4,064 related to the deconsolidation which was recorded on the consolidated statements of operations comprehensiveunder other loss stockholders' equity,(income), net.

    On December 29, 2020, Brazil Consolidated filed for bankruptcy and cash flows for each of the years in the three-year period ended December 31, 2016. In connection with our audits of the consolidated financial statements, we have also audited financial statement schedule "Schedule II—Valuation and Qualifying Accounts" for each of the years in the three-year period ended December 31, 2016. The financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

            We conducted our audits in accordanceliquidation with the standardsBankruptcy Court of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, onSao Paulo Brazil. Brazil Consolidated was a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

            In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial positionsubsidiary of Hill International, Inc. and Subsidiaries asN.V. The Company lost control of December 31, 2016 and 2015, andBrazil Consolidated on the consolidated results of their operations and their cash flows for eachdate of the years in the three-year period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements takenbankruptcy filing and as a whole, presents fairly,result deconsolidated Brazil Consolidated at that time which resulted in all material respects, the information stated therein.

            We also have audited, in accordance with the standardsan additional net loss of the Public Company Accounting Oversight Board (United States), Hill International, Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), and our report dated March 31, 2017 expressed an adverse opinion$1,437 being recorded on the Company's internal control over financial reporting.

    /s/ EisnerAmper LLP
    Iselin, New Jersey
    March 31, 2017


    Table of Contents


    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

    To the Board of Directors and Stockholders
    Hill International, Inc. and Subsidiaries

            We have audited Hill International, Inc. and Subsidiaries' (the "Company") internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

            We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

            An entity's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. An entity's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity's assets that could have a material effect on the financial statements.

            Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

            A material weakness is a control deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment: (i) material weaknesses exist relating to the controls of estimating the potential loss on the Company's accounts receivable, (ii) ineffective controls for the accounting closing process, accounting estimates and non-routine transactions, and (iii) lack of controls in place to timely identify non-compliance or the misapplication of local employment related tax regulations as of December 31, 2016. These material weaknesses were considered in determining the nature, timing, and extent of the audit tests applied in our audit of the December 31, 2016 financial statements, and this report does not affect our report dated March 31, 2017, on those financial statements.


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            In our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Hill International, Inc. and Subsidiaries has not maintained effective internal control over financial reporting as of December 31, 2016, based on criteria established in the 2013Internal Control—Integrated Framework issued by COSO.

            We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Hill International, Inc. and Subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of operations comprehensiveunder other loss stockholders' equity,(income), net. The balance sheet of Brazil Consolidated primarily consisted of intercompany payables. The corresponding intercompany receivables were written off on the respective entity's balance sheets in conjunction with the liquidation and cash flows for eachdeconsolidation of Brazil Consolidated resulting in no net consolidated income/loss impact. The net loss is primarily comprised of the years in the three-year period ended December 31, 2016, and our report dated March 31, 2017 expressed an unqualified opinion thereon.

    /s/ EisnerAmper LLP
    Iselin, New Jersey
    March 31, 2017


    Tabledeconsolidation of Contents

    Quarterly Results (Unaudited)

            Due to the pending sale$1,350 of its Construction Claims Group, the Company has classified thenet assets, and liabilities$313 of that segment as held for sale and has reflect its operations as discontinued operations for all periods presented. The following is a summary of certain quarterly financial information for fiscal years 2016 and 2015 (in thousands except per share data).

     
    		 First
    Quarter    		 Second
    Quarter    		 Third
    Quarter    		 Fourth
    Quarter    		 Total 

    2016

    		                

    Consulting fee revenue

    		 $116,579 $110,126 $106,868 $100,574 $434,147 

    Total revenue

    		  134,370  131,845  125,872  128,760  520,847 

    Gross profit

    		  41,069  39,491  43,543  37,801  161,904 

    Operating profit (loss)

    		  2,686  3,765  (3,396) (3,909)(1) (854)

    Earnings (loss) from continuing operations

    		  2,307  873  (6,476) (4,320) (7,616)

    (Loss) earnings from discontinued operations

    		  (853) 604  (279) (10,548)(1) (11,076)

    Net earnings (loss) attributable to Hill

    		  1,450  1,490  (6,866) (14,902) (18,828)

    Basic earnings (loss) per common share from continuing operations

    		 $0.04 $0.02 $(0.12)$(0.08)$(0.15)

    Basic earnings (loss) per common share from discontinued operations

    		  (0.01) 0.01  (0.01) (0.20) (0.21)
    ​​​ ​ ​​​ ​​ ​ ​​ ​​​ ​ ​

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

    		 $0.03 $0.03 $(0.13)$(0.28)$(0.36)
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Diluted earnings (loss) per common share from continuing operations

    		 $0.04 $0.02 $(0.12)$(0.08)$(0.15)

    Diluted earnings (loss) per common share from discontinued operations

    		  (0.01) 0.01  (0.01) (0.20) (0.21)
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

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

    		 $0.03 $0.03 $(0.13)$(0.28)$(0.36)
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    2015

    		                

    Consulting fee revenue

    		 $112,117 $116,464 $116,541 $122,755 $467,877 

    Total revenue

    		  129,995  137,052  135,539  149,990  552,576 

    Gross profit

    		  43,386  43,089  46,082  46,475  179,032 

    Operating profit

    		  3,273  5,880  7,111  2,840(2) 19,104 

    Earnings from continuing operations           

    		  2,310  3,700  2,476  2,127  10,613 

    (Loss) earnings from discontinued operations

    		  (1,462) 835  860  (3,107) (2,874)

    Net earnings (loss) attributable to Hill

    		 $702 $4,395 $2,948 $(1,114)$6,931 

    Basic earnings (loss) per common share from continuing operations

    		 $0.04 $0.07 $0.05 $0.04 $0.20 

    Basic earnings (loss) per common share from discontinued operations

    		 $(0.03)$0.02 $0.01 $(0.06)$(0.06)
    ​​​​ ​​ ​ ​​ ​​​ ​ ​​ ​​

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

    		 $0.01 $0.09 $0.06 $(0.02)$0.14 
    ​​​ ​ ​​ ​ ​​ ​​​ ​ ​​ ​​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Diluted earnings (loss) per common share from continuing operations

    		  0.04 $0.07 $0.05 $0.04 $0.20 

    Diluted earnings (loss) per common share from discontinued operations

    		 $(0.03)$0.02 $0.01 $(0.06)$(0.06)
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​

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

    		 $0.01 $0.09 $0.06 $(0.02)$0.14 
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    (1)
    There were significant charges totaling $10,377,000 that adversely affected the results for the fourth quarter of 2016. These charges included the following:

    •
    $2,106,000accumulated other comprehensive losses related to certain tax matters in foreign jurisdictions was charged to discontinued operations;
    currency adjustments taken into expense which were offset by $226 of eliminated capital.

    Table of Contents

      •
      $6,047,000 of bad debt expense, of which $4,190,000 was charged to SG&A expenses and $1,857,000 was charged to discontinued operations; and

      •
      $2,224,000 of legal and professional costs related to the pending sale of CCG which was charged to discontinued operations

    (2)
    There were significant charges totaling $ 4,998,000 that adversely affected the results for the fourth quarter of 2015. These charges included the following:

    •
    $2,247,000 of increased bad debt expense;

    •
    $959,000 related to a write-down of a note receivable to the value of the underlying collateral;

    •
    $832,000 of legal and other professional fees related to the shareholder proxy contest;

    •
    $562,000 of severance costs associated with our cost optimization plan; and

    •
    $398,000 of legal and other professional fees related to the restatement of the Company's consolidated financial statements for 2014, 2013 and 2012.



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    Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

    Disclosure

    None.

    70


    Item 9A.Controls and Procedures.

    Procedures

    (a) Evaluation of Disclosure Controls and Procedures.

            The Management


    Based upon its evaluation 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'sdesign and operation of our 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 December 31, 2016.

            Notwithstanding2020, the existence of the material weaknesses described below, theCompany’s Chief Executive Officer and Chief Financial Officer have concluded that, the consolidated financial statements in this report fairly present, in all material respects, the Company's financial position, resultsbecause of operations and cash flows as of the dates and for the periods presented, in conformity with accounting principles generally accepted in the United States of America ("GAAP").

            As described below, the Company's Management has identified material weaknesses in its internal controlcontrols over financial reporting. These material weaknesses, as further explainedreporting described below, require additional time to test the effectiveness of corrective measures taken, and thus have not been remediated. Therefore the Company's Management concluded that itsCompany’s disclosure controls and procedures were not effective as of December 31, 20162020.


    Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934 (the "Exchange Act") define “disclosure controls and procedures” to provide reasonable assurancemean controls and procedures of a company that are designed to ensure that information required to be disclosed by the Company in this Form 10-Kthe reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission'sSEC's rules and forms,forms. The definition further states that disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that suchthe information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to Management,the Company’s management, including its principal executive officer and principal financial officer,officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.


    As a result of the material weaknesses identified, we performed additional analysis, substantive testing and other post-closing procedures intended to ensure our consolidated financial statements were prepared in accordance with U.S. GAAP. Accordingly, the Company's management believes that the consolidated financial statements and related notes hereto included in this Annual Report on Form 10-K fairly presents in all material respects the Company’s financial position, results of operations and cash flows for the periods presented.

    (b) Management'sManagement’s Annual Report on Internal Control over Financial Reporting.

            The Company's Management

    Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company'seffective internal control over financial reporting, as such term is a processdefined in the Exchange Act. Our internal control system was designed under the supervision of our Chief Executive Officer (the "CEO") and our Senior Vice President and Chief Financial Officer (the "CFO") and with the participation of management in order to provide reasonable assurance ofregarding the reliability of our financial reporting and of theour preparation of financial statements for external reporting purposes in accordance with U.S. GAAP.

            Internal


    All internal control over financial reporting includes policiessystems, no matter how well designed and procedurestested, have inherent limitations, including, among other things, the possibility of human error, circumvention or disregard.  Therefore, even those systems of internal control that (1) pertainhave been determined to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and disposition of assets; (2)be effective can provide only reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with the authorization of its Management and directors; and (3) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or dispositionobjectives of the Company's assets that could have a material effect on its financial statements.

            Because of its inherent limitations, internal control over financial reportingsystem are met and may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies andor procedures included in such controls may deteriorate.

            The Company's


    Management, has assessedunder the supervision of our CEO and CFO, evaluated the effectiveness of our internal control over financial reporting and, based on the Company'scriteria established in the applicable “Internal Control-Integrated Framework” issued by the COSO (2013), determined that the Company had not maintained effective internal control over financial reporting as of December 31, 2016. In making this assessment,2020 due to the Company's Management used the criteria established by the Committeematerial weaknesses described below.

    71

    A material weakness is a deficiency, or a combination of Sponsoring Organizations of the Treadway Commission (COSO)deficiencies, inInternal Control—Integrated Framework (2013). These criteria are in the areas


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    of control environment, risk assessment, control activities, information and communication, and monitoring. The Company's Management assessment included extensive documenting, evaluating and testing the design and operating effectiveness of its internal control over financial reporting. Since first identifyingreporting, such that there is a reasonable possibility that a material misstatement of the twoannual or interim financial statements will not be prevented or detected on a timely basis.


    The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting, a copy of which is included in Item 8 of this Annual Report on Form 10-K.

    Material Weaknesses
    The Company has multiple material weaknesses that are in 2015, as detailed below, we have monitoredvarious stages of remediation. The Company plans to make further substantive improvements to the remediation effortsdesign of the internal control structure to evaluate whetherremediate the reportedunderlying causes of the control deficiencies that led to the material weaknesses have been effectively remediated. Although control changes have been implemented we have concluded thatweaknesses. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing and analysis, that these controls are operating effectively.

    Remediated Material Weaknesses

    Control Environment

    Financial Reporting - Policies Procedures and Controls

    The material weakness that the Company did not design, establish, and maintain effective documented U.S. GAAP compliant financial accounting policies and procedures, nor a formalized process for determining, documenting, communicating, implementing, monitoring, and updating accounting policies and procedures has been remediated. The Company has implemented new accounting and finance policies which are reviewed and updated periodically. This matter was first reported in the Company's December 31, 2016 Form 10-K/A.

    Control Activities

    Foreign Currency Transactions

    The material weakness that the Company did not maintain effective controls over the accurate preparation, recording, and review of foreign currency related transactions in accordance with ASC 830, Foreign Currency Matters has been remediated.

    This matter resulted in a restatement of the Company’s 2016, 2015, and 2014 consolidated financial statements and specifically related to the Company’s accounting for its foreign currency gains and losses on intercompany transactions. The Company has implemented controls and processes over foreign currency transactions and analysis of the corresponding general ledger accounts to mitigate this matter.

    This matter was first reported in the Company's December 31, 2016 Form 10-K/A Amendment 2. This matter was self-reported by the Company to the SEC.

    In the SEC investigation, errors were identified in the accounting for foreign exchange losses, with former employees attempting to spread losses out over time in order to reduce the negative impact of such losses on the Company’s financial statements. This resulted in both the Company’s net income and accumulated other comprehensive income (loss) account being overstated. In January 2020, the Company reached a settlement with the SEC without admitting or denying wrongdoing.

    Cash Flow

    The material weakness that the Company did not maintain effective controls to ensure the accurate preparation and review of the cash flow statement in accordance with ASC 230, Statement of Cash Flows has been remediated. This matter was first reported in the Company's December 31, 2016 10-K/A Amendment 2. These deficiencies resulted in material line item adjustments to the Company's consolidated statements of cash flows for the years ended December 31, 2016, 2015 and 2014.

    Controls and processes implemented to address this matter included engaging a third-party service provider to design and implement the cash flow statement preparation process. The Company prepares the statement of cash flows on a functional currency basis for all entities, translates the individual statements to United States dollars and then aggregates each statement into a consolidated statement of cash flows.

    72

    Journal Entries - Policies, Procedures and Controls

    The material weakness that the Company did not design and operate policies, procedures and controls to ensure that journal entries were properly approved has been remediated, including a segregation of duties between the preparer and approver of the journal entries. This matter was first reported in the Company's December 31, 2019 10-K.

    The Company has implemented controls and processes over the review and approval of journal entries and the segregation of the preparation and approval functions to mitigate this matter. The company has implement new accounting and finance policies which are reviewed and updated periodically.

    Aggregation of Deficiencies

    Multiple deficiencies were aggregated to create a material weakness.

    Intercompany Balances

    The material weakness that intercompany balances were not appropriately recorded and paired within the system, nor were the intercompany accounts appropriately reconciled on a timely and continuing basis has been remediated. The company has implemented controls and oversight of the intercompany process mitigating this matter. This matter was first reported in the December 31, 2016 10-K/A Amendment 2.

    Joint Ventures

    The material weakness that the Company did not properly account for its investments in joint ventures, as required under ASC 323, Equity Method and Joint Ventures has been remediated. The Company has implemented a white paper process for joint ventures to ensure the proper accounting treatment is followed; additional controls provide for the oversight of the accounting for each joint venture agreement. This matter was first reported in the December 31, 2016 10-K/A Amendment 2.

    Information & Communication

    Access & Segregation of Duties

    The material weakness that the Company did not maintain effective controls over certain information technology ("IT") systems and processes that are relevant to the preparation of our consolidated financial statements has been remediated Specifically, the Company did not maintain effective monitoring controls for the periodic review of access to financial systems and data, for user access to segregated duties within financial applications and for decommissioning of access privileges following changes in employment status.

    The Company has completed system access reviews and a comprehensive segregation of duties ("SOD") review. The Company will continue to monitor and execute access and SOD reviews periodically. Additional updates to system roles, access and compensating controls will be performed to further mitigate SOD conflicts.

    The Company has and will continue to address the coordination and communication of personnel changes between the finance, human resources and IT departments to ensure timely modification or decommissioning of access. This matter was first reported in the Company's December 31, 2018 Form 10-K.

    Monitoring & Review

    The material weakness that the Company did not maintain effective monitoring and review activities including the timely assessment of control design gaps and their impact to the control environment has been remediated. This matter was the result of the Company not completing Sarbanes Oxley (“SOX”) testing for fiscal year 2018 and was first reported in the Company's December 31, 2018 Form 10-K. Due to the volume of material weaknesses and control deficiencies previously outstanding, additional oversight was required to mitigate the weaknesses identified in the control environment.

    The Company has implemented remediation plans that have addressed multiple material weaknesses. The Company will continue to monitor and review the control environment.

    73

    Risk Assessment

    Income Tax & Uncertain Tax Positions

    The material weakness that the Company did not maintain effective controls over its income tax provision and related balance sheet accounts has been remediated. This matter was specific to the reversal of tax accruals established for uncertain tax positions.

    The Company has implemented multiple controls to ensure the proper recognition and de-recognition of tax liabilities is performed. The Tax Director analyzes all uncertain tax provisions quarterly which is reviewed with the Company CFO. This matter was first reported in the Company's December 31, 2016 Form 10-K/A Amendment 2.

    Outstanding Material Weaknesses

    We continue implementing various changes in our internal control over financial reporting to remediate the material weaknesses described. We continue to make progress on our remediation and our goal is to implement the remaining control improvements related to these material weaknesses throughout the remainder of 2021. Management believes that the new people, processes, third party partners and control design provide the foundation for remediation of the remaining material weaknesses. The material weaknesses will be deemed fully remediated when the control processes have been operating effectivenesseffectively for a sufficient period of time and when management testing has reached a successful conclusion. We will continue to review, optimize and enhance our financial reporting controls and procedures, as we continue to evaluate and work to improve our internal control over newly implementedfinancial reporting.

    Control Activities

    Vendor Approval - Policies, Procedures and modifiedControls

    The Company did not properly design policies, procedures and controls to ensure vendors were properly reviewed, approved and set-up within the system.

    There is insufficient review and approval of vendor set-up in the accounting system to ensure accuracy and completeness of vendor information, as well as compliance with Company policy.

    The Company will institute a policy during 2021 that all new vendor set-ups and changes will be reviewed for accuracy, completeness and compliance with Company policy by an individual other than the individual entering the information, with such review documented at an appropriate level of precision.

    Revenue Recognition - Policies, Procedures and Controls

    The Company’s revenue recognition policies, procedures, and controls were not designed effectively. More specifically:

    The Company failed to consistently ensure there were effective and documented review controls over the set-up and monitoring of its estimates at completion calculations for long-term fixed fee contracts.

    Consulting fee revenue (“CFR”) from long-term fixed fee contracts comprised of approximately 16% of the Company’s total CFR during 2020. The Company formalized the preparation of estimates at completion during 2020 for substantially all long-term fixed fee contracts. Accordingly, the Company prepared estimates at completion for substantially all long-term fixed fee contracts during 2020.

    These estimates at completion were not independently reviewed for accuracy, which is a failure in control design for long-term fixed fee contracts. The Company had in place during 2020 certain other controls, including comparing actual costs incurred to costs expected according to the estimate at completion, with investigation of significant variances, as well as margin analysis comparing actual gross margin on projects to expected gross margin, with significant variances investigated. However, the performance of these other controls was not sufficientconsistently documented and/or not consistently at a level of precision to be considered effective.

    The Company will institute a policy in 2021 requiring independent review of estimates at completion, with such review documented at an appropriate level of precision. The Company will also institute a policy in 2021 to formally document the actual vs. expected costs and gross margin analysis.

    74

    The Company failed to design controls to ensure the proper set-up of contract information in the system and over the review and approval of manual billings. This contract information and manual billing is used in the revenue recognition process.

    The Company developed a contract checklist during 2020 to ensure contract data was entered properly into the accounting system. The checklist did not require independent verification of billing rates contained in the contract or supplemental documentation, which is a failure in control design for Managementrevenue recognition. The Company had in place during 2020 certain other controls, including the margin analysis mentioned above and project manager review of substantially all client invoices. However, the performance of these other controls was not consistently documented and/or not consistently at a level of precision to conclude that these material weaknesses have been remediated. Basedbe considered effective.

    A majority of the Company’s client invoices are generated automatically from the accounting system. Certain client invoices are prepared manually in Excel based on information from the accounting system. These manual invoices are reviewed and approved by the project manager. However, this review was not consistently documented and/or not consistently at a level of precision to be considered effective.

    The Company will add to the contract checklist during 2021 a requirement to verify billing rates to the contract or supplemental documentation. The Company will also institute a policy in 2021 to formally document the gross margin analysis, as well for project managers to formally document their review of client invoices. Additionally, the Company is in the process of configuring its accounting system to enhance invoicing capabilities, which we believe will substantially decrease the amount of manual invoicing.

    Changes in Internal Control over Financial Reporting

    Except for the continued improvements resulting from progress made on the Company's processes and assessment, as described above Management has concludednoted remediation plans, there were no changes to the Company’s internal control over financial reporting during the fourth quarter of 2020 that as of December 31, 2016,materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting was not effective because of the previously identified material weaknesses set forth below in addition to a newly identified material weakness related to certain tax controls.

    Accounts Receivable Controls

      •
      Management misapplied GAAP as it relates to the estimation of the potential loss on the Company's accounts receivable. Specifically, the Company did not have sufficient procedures and controls in place to enable the proper application of GAAP to significant, non-routine transactions.

    Accounting Close Controls

      •
      Management did not maintain effective procedures in the areas of the accounting closing process, accounting estimates and non-routine transactions.

            Additionally, it was discovered in 2016, that controls were either inadequately designed or did not exist as it relates to taxes in certain foreign jurisdictions to ensure compliance with the respective tax laws and regulations of the jurisdictions in which the employees were providing services. The Company's Management would advise local management on the rules and regulations in those jurisdictions and the proper tax implications. However, it was discovered in connection with the sale of the Construction Claims Group these procedures were not followed by local management and Corporate Management did not have a control in place to identify non-compliance or the misapplication of local employment related tax laws.

    Management's Plan for Remediation

            Management is committed to the implementation of a plan to address the material weaknesses and to ensure that each area affected by a material control weakness is adequately remediated. These remediation efforts, summarized below, portions of which are either implemented or in process, are intended to both address the identified material weaknesses and to enhance the Company's overall financial control environment. Because some of the controls included in our remediation plan will be implemented in 2017, and other new and modified controls, as previously described, have only been operational for a portion of 2016, we have concluded that more time is necessary to observe the effectiveness of the controls before Management can conclude that these material weaknesses have been effectively remediated.

      •
      Material Weakness related to Accounts Receivable controls:  We have taken or completed actions with certain other planned actions to be completed over the next 12 months to remediate the material weakness.
    reporting.

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    Completed Actions

            The Company's Management under the direction of the Board of Directors has further strengthened the existing controls surrounding reviews of accounts receivable and reserves for potential losses by developing and implementing the following controls:

      •
      Increased accountability at the operational manger and local finance director levels to closely monitor significant past due accounts and surface potential collection issues to regional or upper management on a monthly basis or sooner. Required independent and detail documentation and contracts will be provided to country or regional CFOs and headquarter management who will evaluate the collectability of significant client account balances.

      •
      Enhanced transparency and active monitoring at the executive level will be achieved through quarterly meetings to review and assess the proper application of GAAP in financial reporting and estimates. Material accruals and contingencies (including reserves for account receivable) will be evaluated objectively by the executive management with input from the business segment units prior to the conclusion of quarterly financial reporting processes.

      •
      Enhanced transparency and effective monitoring at the Audit Committee of the Board of Directors will be achieved through regular or quarterly meetings of the Board to review and evaluate the Company's conclusion and assessment on the key estimates and reserves that will have significant impact on the Company's financial position, results of operation or cash flows.

    Planned Actions

      •
      Enhance the documentation and evidence to support the above controls to ensure that the conclusions reached regarding the accounts receivable reserves are clear.

      •
      Implement a timely follow-up process with local operations management and finance director levels to verify that the most current information is utilized for financial reporting.

      •
      Conduct a training with personnel involved with the accounts receivable controls to reinforce the importance of the controls and the application of controls on a consistent basis.

      •
      Material Weakness related to Accounting Close controls:  We have taken or completed actions with certain other planned actions to be completed over the next 12 months to remediate the material weakness.

    Completed Actions

      •
      Implemented and enhanced process level policies and procedures over the financial close process to ensure reconciliations and accruals are accurate in all material respects, completed in a timely manner, and properly reviewed by the Company's Management.

      •
      Implemented new and/or improved joint venture accounting controls that will provide for greater transparency and accuracy of the joint venture and its applicable accounting.

    Planned Actions

      •
      Review financial controls to assess if additional management review controls are necessary and work with all finance personnel to establish the appropriate documentation criteria for the existing controls including evidence of review, timeliness and variance thresholds.


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    Material Weakness related to Tax controls:

    Planned Actions

      •
      Corporate Management will develop controls to follow up with foreign local management to ensure the proper analysis was prepared and the proper assessment made as to compliance with the respective employment related tax laws and regulations of the jurisdictions in which the employees are providing services.

            When fully implemented and operational, which we expect will occur prior to the end of 2017, the Company's Management believes the measures described above will remediate the material weaknesses identified and strengthen its internal control over financial reporting. The Company is committed to continuing to improve its internal control processes, and will continue to diligently and vigorously review its financial reporting controls and procedures. As the Company's Management continues to evaluate and work to improve its internal control over financial reporting, the Company's Management may determine to take additional measures to address the material weaknesses or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above.

    Item 9B.  Other Information.

    Information

    Not applicable.


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    Part


    75

    PART III

    Item 10.  Directors, Executive Officers and Corporate Governance.

    Governance

    The information in our 20172021 Proxy Statement, which will be filed with the U. S. Securities and Exchange CommissionSEC within 120 days after the close of our fiscal year, regarding directors and executive officers appearing under the headings "Proposal 1: Election of Directors" and "Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated by reference in this section. The information under the heading "Executive Officers" in Part I, Item 1 of this Form 10-K is also incorporated by reference in this section. In addition, the information under the heading "Corporate Governance" in our 20152021 Proxy Statement is incorporated by reference in this section.


    We have adopted a code of ethics that applies to all of our employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This code of ethics is available on our website at www.hillintl.com, or may be obtained free of charge by making a written request addressed to our Legal Department. We will disclose on our website amendments to, and, if any are granted, waivers of, our code of ethics.


    Item 11.  Executive Compensation.

    Compensation


    The information appearing in our 20172021 Proxy Statement under the headings "Director Compensation," "Compensation Discussion"Executive Compensation" and Analysis," "Report of the Compensation Committee", and "Executive"Director Compensation" is incorporated by reference in this section.


    Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

    Matters

    The information appearing in our 20172021 Proxy Statement under the heading "Security“Security Ownership of Certain Beneficial Owners and Management"Management” is incorporated by reference in this section.


    Equity Compensation Plan Information


    The following table provides information as of December 31, 20162020 for common shares of the Company that may be issued under our 2006 Employee Stock Option Plan, our 2008 Employee Stock Purchase Plan and our 2009 Non-Employee Director Stock Grant2017 Equity Compensation Plan. See Note 1311 Share-Based Compensation to the consolidated financial statements for further information related to these plans.

     
    		 Number of securities
    to be issued upon
    exercise of
    outstanding options,
    warrants and rights
    A    		 Weighted-average
    exercise price of
    outstanding options,
    warrants and rights
    B    		 Number of securities
    remaining available
    for future issuance
    under equity
    compensation plans
    (excluding securities
    reflected in column A)
    C    		 

    Equity compensation plans approved by security holders

    		  7,061,820 $4.13  3,032,558(1)

    Equity compensation plans not approved by security holders

    		  —  —  — 
    ​​​ ​ ​​ ​ ​​ ​ ​

    Total

    		  7,061,820 $4.13  3,032,558 
    ​​​ ​ ​​ ​​​ ​ ​
    ​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​​ ​
    Plan CategoryNumber of securities
    to be issued upon
    exercise of
    outstanding options,
    warrants and rights
    (a)    		Weighted-average
    exercise price of
    outstanding options,
    warrants and rights
    (b)
    Number of securities
    remaining available
    for future issuance
    under equity
    compensation plans
    (excluding securities
    reflected in column (a)) (1)
    (c)
    Equity compensation plans approved by security holders4,015 $3.52 2,242 
    Equity compensation plans not approved by security holders— — — 
    Total4,015 $3.52 2,242 
    (1)
    As of December 31, 2016,2020, the Company had 1,643,112 shares remaining available for future issuance under our 2006 Employee Stock Option Plan, 1,274,259922 shares remaining available for future issuance under our 2008 Employee Stock Purchase Plan and 115,187 (including 95,884

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      Deferred Stock Units issued to directors)1,320 shares remaining available for future issuance under our 2017 Equity Compensation Plan. Future grants are no longer available under our 2006 Employee Stock Option Plan or our 2009 Non-Employee Director Stock Grant Plan.


    Item 13.  Certain Relationships and Related Transactions, and Director Independence.

    Independence

    The information appearing in our 20172021 Proxy Statement under the headings "Corporate Governance" and "Certain Relationships and Related Transactions" is incorporated by reference in this section.

    76


    Item 14.  Principal Accounting Fees and Services.

    Services


    The information appearingtable below reflects the fees and expenses for services rendered by Grant Thornton for the years ended December 31, 2020 and 2019. The Audit Committee pre-approved all of these services.
    Years Ended December 31,
    Type of Fees20202019
    Audit Fees (1)
    		$1,825 $2,001 
    Audit - Related Fees (2)
    		39 37 
    Total Fees$1,864 $2,038 
    (1) Audit fees consist of fees billed and an estimate of fees to be billed for services for the audit of our financial statements and review of our financial statements included in our 2017 Proxy Statementquarterly reports on Form 10-Q and services provided in connection with other statutory or regulatory filings.

    (2) Audit-related fees consist of fees incurred for the audit of the Company's 401(k) plan.

    Pre-Approval Policy of Audit Services and Permitted Non-Audit Services of Independent Auditors

    The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services and are pre-approved in one of two methods. Under the first method, the engagement to render the services would be entered into pursuant to pre-approval policies and procedures established by the Audit Committee, provided (i) the policies and procedures are detailed as to the services to be performed, (ii) the Audit Committee is informed of each service, and (iii) such policies and procedures do not include delegation of the Audit Committee’s responsibilities under the headings "Independent Auditors"Exchange Act to the Company’s management. Under the second method, the engagement to render the services would be presented to and "Auditpre-approved by the Audit Committee Report" is incorporated(subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by reference in this section.


    Tablethe Audit Committee prior to the completion of Contents


    the audit). The Chairman of the Audit Committee will have the authority to grant pre-approvals of audit and permissible non-audit services by the independent auditors, provided that all pre-approvals by the Chairman must be presented to the full Audit Committee at its next scheduled meeting. The Company will provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent registered public accounting firm and to any consultants, experts or advisors engaged by the Audit Committee.


    PART IV


    Item 15.  Exhibits and Financial Statement Schedules.

    Schedules
    (a)
    Documents filed as part of this report:

    Financial statements:

    The consolidated balance sheets of the Registrant as of December 31, 20162020, and 2015,2019, the related consolidated statements of operations, comprehensive (loss) earnings, stockholders'stockholders’ equity and cash flows for each of the years in the three-yeartwo-year period ended December 31, 2016,2020, the footnotes thereto, and the report of EisnerAmper LLP,Grant Thornton, independent auditors, are filed herewith.

    Financial statement schedule:

    Schedule II—Valuation and Qualifying Accounts for the years ended December 31, 2016, 20152020 and 2014.

    2019.


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    (b)
    Exhibits


    77

    Exhibit Index

    Exhibit No.Description
    2.1
    2.1
    3.13.1
    3.23.2
    3.33.3
    4.14.1
    4.210.1*
    10.1*
    10.210.2*Employment Agreement between the Company and Irvin E. Richter, dated as of December 31, 2014.(6)
    10.3*Employment Agreement between the Company and David L. Richter, dated as of December 31, 2014.(7)
    10.4
    10.310.5
    10.410.6
    10.510.7
    10.610.8
    10.9*Hill International, Inc. 2009 Non-Employee Director Stock Grant Plan, as amended.(13)
    10.10*Hill International, Inc. 2007 Restricted Stock Grant Plan.(14)
    10.11*Hill International, Inc. 2008 Employee Stock Purchase Plan.(15)
    10.12*Hill International, Inc. 2015 Senior Executive Retention Plan.(16)
    10.13Hill International, Inc. 2010 Senior Executive Bonus Plan.(17)


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    Exhibit No.Description
    10.14Stock Purchase Agreement, dated as of December 20, 2016, by and among Hill International, Inc., Hill International N.V., Liberty Mergeco, Inc. and Liberty Bidco UK Limited.(18)
    10.15*Employment Agreement between the Company and Raouf S. Ghali, dated August 18, 2016.(19)
    10.16*Hill International, Inc. 2016 Executive Retention Plan.(20)
    10.17*Form of Hill International, Inc. 2016 Executive Retention Plan Participation Agreement.(21)
    10.18Settlement Agreement among the Company, Bulldog Investors LLC, and certain directors of the Company, dated September 16, 2016.(22)
    21Subsidiaries of the Registrant.
    23.1Consent of EisnerAmper LLP, Independent Registered Public Accounting Firm
    31.1Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    31.2Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
    32.1Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    32.2Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
    101.INSXBRL Instance Document.
    101.SCHXBRL Taxonomy Extension Schema Document.
    101.PREXBRL Taxonomy Presentation Linkbase Document.
    101.CALXBRL Taxonomy Calculation Linkbase Document.
    101.LABXBRL Taxonomy Label Linkbase Document.
    101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
    (1)Included as Annex A of the Definitive Proxy Statement (No. 000-50781) filed on June 6, 2006 and incorporated herein by reference.

    (2)

    Included as Annex B of the Definitive Proxy Statement (No. 000-50781) filed on June 6, 2006 and incorporated herein by reference.

    (3)

    Included (Included as Exhibit 3.310.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2012 filed on March 18, 2013 and incorporated herein by reference.

    (4)

    Included as Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 (No. 333-114816) filed on April 23, 2004 and incorporated herein by reference.

    (5)

    Included as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on June 14, 2012 and incorporated herein by reference.

    (6)

    Included as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on January 31, 2014 and incorporated herein by reference.

    Table of Contents

    (7)Included as Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on January 31, 2014 and incorporated herein by reference.

    (8)

    Included as Exhibit 10.1 to the Registrant'sRegistrant’s Current Report on Form 8-K filed on October 2, 2014 and incorporated herein by reference.)

    (9)

    Included as Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on October 2, 2014 and incorporated herein by reference.

    (10)10.7*

    Included

    (11)

    Included as Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on October 2, 2014 and incorporated herein by reference.

    (12)

    Included as Exhibit 10.5 to the Registrant's Current Report on Form 8-K filed on October 2, 2014 and incorporated herein by reference.

    (13)*

    Included as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on June 6, 2013 and incorporated herein by reference.

    (14)*

    Included as Exhibit Exhibit��4.4 to the Registrant'sRegistrant’s Registration Statement on Form S-8 (No. 333-141814), filed on April 2, 2007 and incorporated herein by reference.)

    (15)*

    Included
    10.8*

    (16)*

    Included
    10.9*

    (17)

    Included
    10.10

    (18)

    Included as Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on December 20, 2016 and incorporated herein by reference.

    (19)*10.11*

    Included

    (20)*

    Included as Exhibit 10.1 to the Registrant'sRegistrant’s Current Report on Form 8-K filed on November 9, 2016 and incorporated herein by reference.)

    (21)*

    Included
    78

    10.12*

    (22)

    Included
    10.13*
    10.14
    Second Amendment to Credit Agreement (Included as Exhibits 10.1 and Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on May 11, 2017 and incorporated herein by reference.)
    10.15
    10.16
    10.17
    10.18

    *

    Constitutes a management contract or compensatory plan.
    10.19
    10.20
    10.21
    10.22
    21
    23.1
    31.1
    31.2
    32.1
    32.2
    101.INSXBRL Instance Document.
    101.SCHXBRL Taxonomy Extension Schema Document.
    101.PREXBRL Taxonomy Presentation Linkbase Document.
    101.CALXBRL Taxonomy Calculation Linkbase Document.
    101.LABXBRL Taxonomy Label Linkbase Document.
    101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
    104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
    * Constitutes a management contract or compensatory plan.

    79

    Table of Contents




    SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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.



    By:

    By:
    /s/ DAVID L. RICHTER
    David L. Richter
    Raouf S. Ghali
    Raouf S. Ghali
    Chief Executive Officer
    Date:March 31, 2017
    16, 2021

    Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dated indicated.

    By:
    By:/s/ CRAIG L. MARTIN
    Craig L. Martin
    David D. Sgro    		By:/s/ Arnaud Ajdler
    David SgroArnaud Ajdler
    Chairman and Director
    Director
    Date:March 31, 201716, 2021By:Date:March 16, 2021
    By:/s/ DAVID L. RICHTER
    David L. Richter
    Raouf S. Ghali    		By:/s/ Susan Steele
    Raouf S. GhaliSusan Steele
    Chief Executive Officer and Director (Principal Executive Officer)
    Date: March 31, 2017    		Director

    By:Date:
    March 16, 2021
    /s/ RAOUF S. GHALI
    Raouf S. Ghali
    President, Chief Operating Officer and Director
    		Date:March 31, 2017

    By:

    /s/ BRIAN W. CLYMER
    Brian W. Clymer
    Director
    Date: March 31, 2017    16, 2021

    By:

    By:/s/ JOHN FANELLI III
    John Fanelli III
    ExecutiveTodd Weintraub    		By:/s/ Grant McCullagh
    Todd WeintraubGrant McCullagh
    Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
    Date: March 31, 2017

    By:

    /s/ ALAN S. FELLHEIMER
    Alan S. Fellheimer
    Director
    Date: March 31, 2017

    By:Date:
    March 16, 2021
    /s/ CAMILLE S. ANDREWS
    Camille S. Andrews
    Director
    		Date:March 31, 2017

    By:

    /s/ PAUL J. EVANS
    Paul Evans
    Director
    Date: March 31, 2017    16, 2021

    By:

    /s/ STEVEN R. CURTS
    Steven R. Curts
    Director
    Date: March 31, 2017

    By:

    /s/ DAVID D. SGRO
    David Sgro
    Director
    Date: March 31, 2017

    By:

    /s/ CHARLES M. GILLMAN
    Charles M. Gillman
    Paul Evans    		By:/s/ James Renacci
    Paul EvansJames Renacci
    Director
    		Director
    Date:March 31, 201716, 2021

    Date:
    March 16, 2021


    80

    Table of Contents




    Schedule II

    Hill International, Inc. and Subsidiaries

    Valuation and Qualifying Accounts

    (in thousands)
    (Allowance for Uncollectible Receivables—in thousands)

    Receivables)
    Balance at
    Beginning of
    Fiscal Year    		Recoveries of Previously Reserved ReceivablesAdditions (Adjustments) to Allowance for Uncollectible ReceivablesWrite-Off of ReceviablesOtherBalance at
    End of
    Fiscal Year
    Fiscal year ended December 31, 2020$59,131 (1,152)(274)(4,905)650 $53,450 
    Fiscal year ended December 31, 2019$71,277 (18,143)7,422 (1,813)388$59,131 

    (Valuation Allowance for Deferred Tax Asset)
    Balance at Beginning of Fiscal YearAdditions (Recoveries) Charged (Credited) to EarningsDeductions and Other AdjustmentsBalance at End of Fiscal Year
    Fiscal year ended December 31, 2020$28,821 1,801 (10,519)$20,103 
    Fiscal year ended December 31, 2019$37,591 5,258 (14,028)$28,821 


    81
     
    		 Balance at
    Beginning of
    Fiscal Year    		 Additions
    (Recoveries)
    Charged
    (Credited) to
    Earnings    		 Other—Allowance
    Acquired in
    Business
    Combinations    		 Uncollectible
    Receivables
    Written off,
    Net of
    Recoveries    		 Balance at
    End of
    Fiscal Year    		 

    Fiscal year ended December 31, 2016

    		 $60,535 $14,454 $— $(3,907)$71,082 
    ​​​ ​ ​​ ​​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​

    Fiscal year ended December 31, 2015

    		 $66,119 $6,262 $120 $(11,966)$60,535 
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​

    Fiscal year ended December 31, 2014

    		 $64,108 $(5,195)$— $7,206 $66,119 
    ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​​​ ​
    ​​​​​​​​​​​​​​​​​
    ​​​ ​​​ ​ ​​ ​ ​​ ​ ​​ ​ ​