2021 Delaware (I.R.S. Employer incorporation or organization) Identification No.) One Commerce Square Philadelphia (Zip Code) Non-Accelerated Filer personnel. September 30, 2016 December 31, 2015 (unaudited) Assets Cash and cash equivalents $ 21,219 $ 24,089 Cash - restricted 3,710 4,435 Accounts receivable, less allowance for doubtful accounts of $72,262 and $63,748 229,892 243,417 Accounts receivable - affiliate 10,870 5,205 Prepaid expenses and other current assets 11,507 10,299 Income taxes receivable 5,035 4,146 Total current assets 282,233 291,591 Property and equipment, net 22,307 23,751 Cash - restricted, net of current portion 1,175 259 Retainage receivable 17,221 2,638 Acquired intangibles, net 11,560 14,659 Goodwill 75,899 74,893 Investments 4,738 8,386 Deferred income tax assets 19,274 19,724 Other assets 5,136 6,662 Total assets $ 439,543 $ 442,563 Liabilities and Stockholders’ Equity Current maturities of notes payable $ 7,316 $ 4,357 Accounts payable and accrued expenses 105,825 112,457 Income taxes payable 5,287 9,064 Deferred revenue 8,697 11,310 Other current liabilities 9,665 5,860 Total current liabilities 136,790 143,048 Notes payable, net of current maturities 146,639 140,626 Retainage payable 870 1,929 Deferred income taxes 16,472 16,341 Deferred revenue 15,254 11,919 Other liabilities 11,084 10,661 Total liabilities 327,109 324,524 Commitments and contingencies Stockholders’ equity: Preferred stock, $.0001 par value; 1,000 shares authorized, none issued — — Common stock, $.0001 par value; 100,000 shares authorized, 58,726 shares and 58,335 shares issued at September 30, 2016 and December 31, 2015, respectively 6 6 Additional paid-in capital 189,049 188,869 Retained earnings (deficit) (2,721 ) 1,205 Accumulated other comprehensive loss (46,662 ) (46,866 ) 139,672 143,214 Less treasury stock of 6,959 shares and 6,743 shares at September 30, 2016 and December 31, 2015, at cost (29,974 ) (29,245 ) Hill International, Inc. share of equity 109,698 113,969 Noncontrolling interests 2,736 4,070 Total equity 112,434 118,039 Total liabilities and stockholders’ equity $ 439,543 $ 442,563 thousands) Three Months Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Consulting fee revenue $ 147,993 $ 158,579 $ 457,912 $ 469,458 Reimbursable expenses 19,960 20,356 61,851 61,393 Total revenue 167,953 178,935 519,763 530,851 Cost of services 81,241 89,345 265,052 268,174 Reimbursable expenses 19,960 20,356 61,851 61,393 Total direct expenses 101,201 109,701 326,903 329,567 Gross profit 66,752 69,234 192,860 201,284 Selling, general and administrative expenses 67,247 57,527 179,614 173,101 Share of loss of equity method affiliates 12 14 28 231 Operating profit (507 ) 11,693 13,218 27,952 Interest expense and related financing fees, net 3,368 4,147 10,103 11,252 (Loss) earnings before income tax expense (3,875 ) 7,546 3,115 16,700 Income tax expense 2,880 4,210 6,939 7,980 Net (loss) earnings (6,755 ) 3,336 (3,824 ) 8,720 Less: net earnings — noncontrolling interests 111 388 102 675 Net (loss) earnings attributable to Hill International $ (6,866 ) $ 2,948 $ (3,926 ) $ 8,045 Basic (loss) earnings per common share - Hill International, Inc. $ (0.13 ) $ 0.06 $ (0.08 ) $ 0.16 Basic weighted average common shares outstanding 51,753 51,119 51,704 50,661 Diluted (loss) earnings per common share - Hill International, Inc. $ (0.13 ) $ 0.06 $ (0.08 ) $ 0.16 Diluted weighted average common shares outstanding 51,753 51,803 51,704 51,274 Three Months Ended Nine Months Ended 2016 2015 2016 2015 Net (loss) earnings $ (6,755 ) $ 3,336 $ (3,824 ) $ 8,720 Foreign currency translation adjustment, net of tax (1,638 ) (8,630 ) (1,257 ) (15,910 ) Other, net 79 (78 ) 135 (213 ) Comprehensive loss (8,314 ) (5,372 ) (4,946 ) (7,403 ) Comprehensive earnings (loss) attributable to noncontrolling interests 132 (2,992 ) (1,223 ) (6,728 ) Comprehensive loss attributable to Hill International, Inc. $ (8,446 ) $ (2,380 ) $ (3,723 ) $ (675 ) Nine Months Ended September 30, 2016 2015 Cash flows from operating activities: Net (loss) earnings $ (3,824 ) $ 8,720 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization 7,705 8,286 Provision for bad debts 11,879 2,540 Amortization of deferred loan fees 1,334 1,333 Deferred tax expense (benefit) 663 (1,585 ) Share based compensation 1,838 2,360 Changes in operating assets and liabilities, net: Restricted cash (69 ) 10,658 Accounts receivable 2,652 (57,690 ) Accounts receivable - affiliate (5,665 ) (2,830 ) Prepaid expenses and other current assets (1,001 ) (4,556 ) Income taxes receivable (756 ) 25 Retainage receivable (14,583 ) 150 Other assets 5,191 1,009 Accounts payable and accrued expenses (8,582 ) 15,194 Income taxes payable (3,951 ) 1,455 Deferred revenue 124 589 Other current liabilities 2,639 7,398 Retainage payable (1,308 ) 474 Other liabilities 385 2,878 Net cash used in operating activities (5,329 ) (3,592 ) Cash flows from investing activities: Purchase of business, net of cash acquired — (4,384 ) Payments for purchase of property and equipment (2,584 ) (11,447 ) Net cash used in investing activities (2,584 ) (15,831 ) Cash flows from financing activities: Payments on term loans (900 ) (900 ) Net borrowings on revolving loans 8,950 15,152 Proceeds from Philadelphia Industrial Development Corporation loan — 750 Payments on Philadelphia Industrial Development Corporation loan (41 ) (27 ) Deferred acquisition price payments (1,531 ) — Dividends paid to noncontrolling interest (111 ) (130 ) Proceeds from stock issued under employee stock purchase plan 65 57 Proceeds from exercise of stock options 220 137 Net cash provided by financing activities 6,652 15,039 Effect of exchange rate changes on cash (1,609 ) (1,839 ) Net decrease in cash and cash equivalents (2,870 ) (6,223 ) Cash and cash equivalents — beginning of period 24,089 30,124 Cash and cash equivalents — end of period $ 21,219 $ 23,901 business and mitigate the risks associated with COVID-19 for the next 12 months from August 9, 2021, the date of this filing. Additional disclosure on the impact of COVID-19 on the Company is included in Item 2 Management's Discussion and Analysis within the Overview section of this Form 10-Q. 4 - Revenue from Contract with Clients and Note 12 - 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 presentation for the three and six months ended June 30, 2020 has been recast to conform to current year presentation. 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 geography of the contracts will depict the level of global economic factors in relation to revenue recognition. September 30, 2016 December 31, 2015 Billed $ 256,840 $ 267,592 Retainage, current portion 9,763 13,660 Unbilled 35,551 25,913 302,154 307,165 Allowance for doubtful accounts (72,262 ) (63,748 ) $ 229,892 $ 243,417 31, 2020, respectively. September 30, 2016 December 31, 2015 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Client relationships $ 34,116 $ 24,147 $ 34,891 22,668 Acquired contract rights 2,278 2,011 12,256 11,287 Trade names 2,774 1,450 2,704 1,237 Total $ 39,168 $ 27,608 $ 49,851 $ 35,192 Intangible assets, net $ 11,560 $ 14,659 Three Months Ended Nine Months Ended 2016 2015 2016 2015 $ 1,013 $ 1,578 $ 3,450 $ 4,609 $13 and $27 for the three months ended June 30, 2021 and 2020, respectively, and $25 and $54 for the six months ended June 30, 2021 and 2020, respectively. Estimated Amortization Year Ending December 31, Expense 2016 (remaining 3 months) $ 903 2017 3,144 2018 2,051 2019 1,782 2020 1,286 years: Project Construction Total Management Claims Goodwill Balance, December 31, 2015 $ 49,739 $ 25,154 $ 74,893 Additions — — — Translation adjustments 2,578 (1,572 ) 1,006 Balance, September 30, 2016 $ 52,317 $ 23,582 $ 75,899 the six months ended June 30, 2021: September 30, 2016 December 31, 2015 Accounts payable $ 36,884 $ 44,200 Accrued payroll 48,379 50,724 Accrued subcontractor fees 7,831 5,905 Accrued agency fees 2,285 6,564 Accrued legal and professional fees 5,336 1,186 Other accrued expenses 5,110 3,878 $ 105,825 $ 112,457 September 30, 2016 December 31, 2015 Term Loan Facility $ 112,890 $ 112,906 U.S. Revolving Credit Facility 22,500 17,500 International Revolving Credit Facility 11,836 10,715 Borrowings under revolving credit facilities with a consortium of banks in Spain 3,062 3,013 Borrowing under revolving credit facility with the National Bank of Abu Dhabi 2,998 — Borrowing from Philadelphia Industrial Development Corporation 669 710 Other notes payable — 139 153,955 144,983 Less current maturities 7,316 4,357 Notes payable and long-term debt, net of current maturities $ 146,639 $ 140,626 of June 30, 2021 and December 31, 2020, respectively. See 'Secured Credit Facilities' section below for further information. 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 €3,179 (approximately $3,500 at closing) from €9,156 (approximately $10,000) to €5,977 (approximately $6,536 at closing). sheets. The interest rate on borrowings under the International Facility. Nine Months Ended September 30, 2016 2015 Interest and related financing fees paid $ 8,915 $ 9,067 Income taxes paid $ 9,435 $ 4,242 Increase in other current liabilities and decrease in additional paid-in capital related to ESA Put Options $ 2,670 — Reduction of noncontrolling interest in connection with acquisition of an additional interest in Engineering S.A. $ — $ (4,374 ) Increase in property and equipment from a tenant improvement allowance related to the relocation of the corporate headquarters $ — $ 3,894 Increase in additional paid in capital from issuance of shares of common stock related to purchase of CPI $ — $ 530 Increase in additional paid in capital from issuance of shares of common stock through cashless exercise of stock options $ 729 $ 361 The Hill International, Noncontrolling Total Inc. Stockholders Interests Stockholders’ equity, December 31, 2015 $ 118,039 $ 113,969 $ 4,070 Net (loss) earnings (3,824 ) (3,926 ) 102 Other comprehensive (loss) (1,122 ) 203 (1,325 ) Comprehensive earnings (loss) (4,946 ) (3,723 ) (1,223 ) Additional paid in capital 2,851 2,851 — Cashless exercise of stock options (729 ) (729 ) — Adjustment related to ESA Put Options (2,670 ) (2,670 ) Dividends paid to noncontrolling interest (111 ) — (111 ) Stockholders’ equity, September 30, 2016 $ 112,434 $ 109,698 $ 2,736 Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 U.S. Foreign Total U.S. Foreign Total Earnings (loss) before income taxes $ (7,316 ) $ 3,441 $ (3,875 ) $ (2,541 ) $ 10,087 $ 7,546 Income tax expense, net $ — $ 2,880 $ 2,880 $ — $ 4,210 $ 4,210 Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 U.S. Foreign Total U.S. Foreign Total Earnings (loss) before income taxes $ (20,805 ) $ 23,920 $ 3,115 $ (22,529 ) $ 39,229 $ 16,700 Income tax expense, net $ — $ 6,939 $ 6,939 $ — $ 7,980 $ 7,980 positions recorded in 2021. 2020, respectively. three months ended June 30, 2021 and 2020, respectively, and $461 and $(2) for the six months ended June 30, 2021 and 2020, respectively. operations: Three Months Ended September 30, 2016 2015 Project Management $ 106,868 72.2 % $ 116,541 73.5 % Construction Claims 41,125 27.8 42,038 26.5 Total $ 147,993 100.0 % $ 158,579 100.0 % Three Months Ended September 30, 2016 2015 Project Management $ 125,872 74.9 % $ 135,539 75.7 % Construction Claims 42,081 25.1 43,396 24.3 Total $ 167,953 100.0 % $ 178,935 100.0 % by Geographic Region: Three Months Ended September 30, 2016 2015 U.S./Canada $ 6,546 $ 5,939 Latin America (238 ) 531 Europe 13 2,105 Middle East 4,165 11,935 Africa 1,023 (398 ) Asia/Pacific (1,466 ) (105 ) Corporate (10,550 ) (8,314 ) Total $ (507 ) $ 11,693 U.S $ 6,297 $ 5,686 Non - U.S. 3,746 14,321 Corporate (10,550 ) (8,314 ) Total $ (507 ) $ 11,693 Three Months Ended September 30, 2016 2015 Project Management $ 1,646 $ 1,924 Construction Claims 705 787 Subtotal segments 2,351 2,711 Corporate 154 152 Total $ 2,505 $ 2,863 Three Months Ended September 30, 2016 2015 U.S./Canada $ 42,756 28.9 % $ 38,569 24.3 % Latin America 5,832 3.9 8,347 5.3 Europe 20,953 14.2 23,476 14.8 Middle East 62,609 42.3 72,441 45.7 Africa 7,201 4.9 7,225 4.5 Asia/Pacific 8,642 5.8 8,521 5.4 Total $ 147,993 100.0 % $ 158,579 100.0 % U.S. $ 42,000 28.4 % $ 37,854 23.9 % Non-U.S. 105,993 71.6 120,725 76.1 Total $ 147,993 100.0 % $ 158,579 100.0 % six months ended June 30, 2020. Three Months Ended September 30, 2016 2015 U.S./Canada $ 57,687 34.3 % $ 53,554 29.9 % Latin America 5,867 3.5 8,398 4.7 Europe 21,978 13.1 24,814 13.9 Middle East 65,617 39.1 75,320 42.1 Africa 8,076 4.8 8,205 4.6 Asia/Pacific 8,728 5.2 8,644 4.8 Total $ 167,953 100.0 % $ 178,935 100.0 % U.S. $ 56,920 33.9 % $ 52,774 29.5 % Non-U.S. 111,033 66.1 126,161 70.5 Total $ 167,953 100.0 % $ 178,935 100.0 % Three Months Ended September 30, 2016 2015 U.S. federal government $ 2,382 1.6 % $ 2,295 1.4 % U.S. state, regional and local governments 26,540 17.9 21,630 13.6 Foreign governments 41,971 28.4 51,136 32.3 Private sector 77,100 52.1 83,518 52.7 Total $ 147,993 100.0 % $ 158,579 100.0 % Three Months Ended September 30, 2016 2015 U.S. federal government $ 3,088 1.8 % $ 2,802 1.6 % U.S. state, regional and local governments 41,553 24.7 34,793 19.4 Foreign governments 45,450 27.1 54,578 30.5 Private sector 77,862 46.4 86,762 48.5 Total $ 167,953 100.0 % $ 178,935 100.0 % September 30, 2016 December 31, 2015 U.S./Canada $ 13,388 $ 13,581 Latin America 991 1,031 Europe 2,943 3,084 Middle East 3,394 3,980 Africa 848 1,120 Asia/Pacific 743 955 Total $ 22,307 $ 23,751 U.S. $ 13,388 $ 13,581 Non-U.S. 8,919 10,170 Total $ 22,307 $ 23,751 Nine Months Ended September 30, 2016 2015 Project Management $ 333,573 72.8 % $ 345,122 73.5 % Construction Claims 124,339 27.2 124,336 26.5 Total $ 457,912 100.0 % $ 469,458 100.0 % Nine Months Ended September 30, 2016 2015 Project Management $ 392,087 75.4 % $ 402,586 75.8 % Construction Claims 127,676 24.6 128,265 24.2 Total $ 519,763 100.0 % $ 530,851 100.0 % Nine Months Ended September 30, 2016 2015 U.S. / Canada $ 16,266 $ 13,158 Latin America (769 ) 262 Europe 1,987 1,028 Middle East 23,201 41,130 Africa 1,910 (158 ) Asia/Pacific (1,515 ) (830 ) Corporate (27,862 ) (26,638 ) Total $ 13,218 $ 27,952 U.S. $ 15,603 $ 12,336 Non - U.S. 25,477 42,254 Corporate (27,862 ) (26,638 ) Total $ 13,218 $ 27,952 Nine Months Ended September 30, 2016 2015 Project Management $ 5,038 $ 5,637 Construction Claims 2,204 2,349 Subtotal segments 7,242 7,986 Corporate 463 300 Total $ 7,705 $ 8,286 Nine Months Ended September 30, 2016 2015 U.S./Canada $ 123,416 27.0 % $ 113,735 24.2 % Latin America 17,728 3.9 23,011 4.9 Europe 64,555 14.1 64,905 13.8 Middle East 205,385 44.9 222,572 47.5 Africa 20,950 4.6 21,329 4.5 Asia/Pacific 25,878 5.5 23,906 5.1 Total $ 457,912 100.0 % $ 469,458 100.0 % U.S. $ 121,287 26.5 % $ 111,436 23.7 % Non-U.S. 336,625 73.5 358,022 76.3 Total $ 457,912 100.0 % $ 469,458 100.0 % Nine Months Ended September 30, 2016 2015 U.S./Canada $ 170,027 32.7 % $ 159,169 30.0 % Latin America 17,831 3.4 23,092 4.3 Europe 67,347 13.0 68,534 12.9 Middle East 214,750 41.3 231,314 43.6 Africa 23,706 4.6 24,444 4.6 Asia/Pacific 26,102 5.0 24,298 4.6 Total $ 519,763 100.0 % $ 530,851 100.0 % U.S. $ 167,819 32.3 % $ 156,715 29.5 % Non-U.S. 351,944 67.7 374,136 70.5 Total $ 519,763 100.0 % $ 530,851 100.0 % Nine Months Ended September 30, 2016 2015 U.S. federal government $ 7,252 1.6 % $ 7,061 1.5 % U.S. state, regional and local governments 74,663 16.3 63,921 13.6 Foreign governments 139,499 30.5 160,694 34.2 Private sector 236,498 51.6 237,782 50.7 Total $ 457,912 100.0 % $ 469,458 100.0 % Nine Months Ended September 30, 2016 2015 U.S. federal government $ 8,809 1.7 % $ 8,651 1.6 % U.S. state, regional and local governments 117,369 22.6 101,402 19.1 Foreign governments 150,010 28.9 171,615 32.4 Private sector 243,575 46.8 249,183 46.9 Total $ 519,763 100.0 % $ 530,851 100.0 % Operations (dollars in thousands). Three Months Ended September 30, 2016 2015 Change Project Management $ 106,868 72.2 % $ 116,541 73.5 % $ (9,673 ) (8.3 )% Construction Claims 41,125 27.8 42,038 26.5 (913 ) (2.2 ) Total $ 147,993 100.0 % $ 158,579 100.0 % $ (10,586 ) (6.7 )% Three Months Ended September 30, 2016 2015 Change Project Management $ 19,004 95.2 % $ 18,998 93.3 % $ 6 — % Construction Claims 956 4.8 1,358 6.7 (402 ) (29.6 ) Total $ 19,960 100.0 % $ 20,356 100.0 % $ (396 ) (1.9 )% Three Months Ended September 30, 2016 2015 Change % of % of Project Management $ 63,325 77.9 % 59.3 % $ 70,459 78.9 % 60.5 % $ (7,134 ) (10.1 )% Construction Claims 17,916 22.1 43.6 18,886 21.1 44.9 (970 ) (5.1 ) Total $ 81,241 100.0 % 54.9 % $ 89,345 100.0 % 56.3 % $ (8,104 ) (9.1 )% Three Months Ended September 30, 2016 2015 Change % of % of Project Management $ 43,543 65.2 % 40.7 % $ 46,082 66.6 % 39.5 % $ (2,539 ) (5.5 )% Construction Claims 23,209 34.8 56.4 23,152 33.4 55.1 57 0.2 Total $ 66,752 100.0 % 45.1 % $ 69,234 100.0 % 43.7 % $ (2,482 ) (3.6 )% Three Months Ended September 30, 2016 2015 Change % of % of CFR CFR SG&A Expenses $ 67,247 45.4 % $ 57,527 36.3 % $ 9,720 16.9 % Three Months Ended September 30, 2016 2015 Change % of % of Project Management $ 6,500 6.1 % $ 15,438 13.2 % $ (8,938 ) (57.9 )% Share of loss of equity method affiliate (12 ) (0.0 ) (14 ) (0.0 ) 2 14.3 Total Project Management 6,488 6.1 15,424 13.2 (8,936 ) (57.9 ) Construction Claims 3,554 8.6 4,582 10.9 (1,028 ) (22.4 ) Corporate (10,549 ) (8,313 ) (2,236 ) 26.9 Total $ (507 ) (0.3 )% $ 11,693 7.4 % $ (12,200 ) (104.3 )% 2021 and 2020, respectively. The currency exchange loss for three months ended June 30, 2021 was primarily the result of the weakening of the Libyan Dinar (10.3%) against the Euro. Nine Months Ended September 30, 2016 2015 Change Project Management $ 333,573 72.8 % $ 345,122 73.5 % $ (11,549 ) (3.3 )% Construction Claims 124,339 27.2 124,336 26.5 3 — Total $ 457,912 100.0 % $ 469,458 100.0 % $ (11,546 ) (2.5 )% Nine Months Ended September 30, 2016 2015 Change Project Management $ 58,514 94.6 % $ 57,464 93.6 % $ 1,050 1.8 % Construction Claims 3,337 5.4 3,929 6.4 (592 ) (15.1 ) Total $ 61,851 100.0 % $ 61,393 100.0 % $ 458 0.7 % Nine Months Ended September 30, 2016 2015 Change % of % of Project Management $ 209,470 79.0 % 62.8 % $ 212,565 79.3 % 61.6 % $ (3,095 ) (1.5 )% Construction Claims 55,582 21.0 44.7 55,609 20.7 44.7 (27 ) (0.0 ) Total $ 265,052 100.0 % 57.9 % $ 268,174 100.0 % 57.1 % $ (3,122 ) (1.2 )% Nine Months Ended September 30, 2016 2015 Change % of % of Project Management $ 124,103 64.3 % 37.2 % $ 132,557 65.9 % 38.4 % $ (8,454 ) (6.4 )% Construction Claims 68,757 35.7 55.3 68,727 34.1 55.3 30 — Total $ 192,860 100.0 % 42.1 % $ 201,284 100.0 % 42.9 % $ (8,424 ) (4.2 )% Nine Months Ended September 30, 2016 2015 Change % of % of CFR CFR SG&A Expenses $ 179,614 39.2 % $ 173,101 36.9 % $ 6,513 3.8 % Nine Months Ended September 30, 2016 2015 Change % of % of Project Management $ 30,123 9.0 % $ 43,268 12.5 % $ (13,145 ) (30.4 )% Share of loss of equity method affiliate (28 ) (0.0 ) (231 ) (0.1 ) 203 (87.9 ) Total Project Management 30,095 9.0 43,037 12.4 (12,942 ) (30.1 ) Construction Claims 10,983 8.8 11,687 9.4 (704 ) (6.0 ) Corporate (27,860 ) (26,772 ) (1,088 ) 4.1 Total $ 13,218 2.9 % $ 27,952 6.0 % $ (14,734 ) (52.7 ) declaring bankruptcy of our Brazilian subsidiary. the Company satisfying all obligations in regard to the Loan Agreement. Three Months Ended Nine Months Ended 2016 2015 2016 2015 Net (loss) earnings $ (6,866 ) $ 2,948 $ (3,926 ) $ 8,045 Interest expense, net 3,368 4,147 10,103 11,252 Income tax expense 2,880 4,210 6,939 7,980 Depreciation and amortization 2,505 2,863 7,705 8,286 EBITDA $ 1,887 $ 14,168 $ 20,821 $ 35,563 2021. business. payable. business. the purchase of fixed assets. Euro. Total Backlog 12-Month Backlog $ % $ % (dollars in thousands) As of September 30, 2016: Project Management $ 888,000 94.1 % $ 358,000 86.7 % Construction Claims 56,000 5.9 % 55,000 13.3 % Total $ 944,000 100.0 % $ 413,000 100.0 % U.S./Canada $ 433,000 45.9 % $ 154,000 37.3 % Latin America 14,000 1.5 11,000 2.7 Europe 51,000 5.4 32,000 7.7 Middle East 369,000 39.1 164,000 39.7 Africa 50,000 5.3 27,000 6.5 Asia/Pacific 27,000 2.8 25,000 6.1 Total $ 944,000 100.0 % $ 413,000 100.0 % As of June 30, 2016: Project Management $ 892,000 94.0 % $ 357,000 86.2 % Construction Claims 57,000 6.0 57,000 13.8 Total $ 949,000 100.0 % $ 414,000 100.0 % U.S./Canada $ 399,000 42.0 % $ 137,000 33.1 % Latin America 15,000 1.6 13,000 3.1 Europe 53,000 5.6 36,000 8.7 Middle East 400,000 42.1 178,000 43.0 Africa 53,000 5.6 26,000 6.3 Asia/Pacific 29,000 3.1 24,000 5.8 Total $ 949,000 100.0 % $ 414,000 100.0 % As of September 30, 2015: Project Management $ 830,000 94.4 % $ 353,000 88.9 % Construction Claims 49,000 5.6 % 44,000 11.1 % Total $ 879,000 100.0 % $ 397,000 100.0 U.S./Canada $ 362,000 41.2 % $ 120,000 30.2 % Latin America 28,000 3.2 17,000 4.3 Europe 54,000 6.1 37,000 9.3 Middle East 350,000 39.8 180,000 45.3 Africa 41,000 4.7 19,000 4.8 Asia/Pacific 44,000 5.0 24,000 6.1 Total $ 879,000 100.0 % $ 397,000 100.0 % timely basis. information under this item. XBRL Instance Document. XBRL Taxonomy Extension Schema Document. XBRL Taxonomy Presentation Linkbase Document. XBRL Taxonomy Calculation Linkbase Document. XBRL Taxonomy Label XBRL Taxonomy Extension Definition Linkbase Document. Chief Executive Officer (Principal Executive Officer) By: /s/ Senior Vice President and☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934SeptemberJune 30, 2016oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware20-095397320-0953973 (State or other jurisdiction of 2005 Market Street, 17th Floor Philadelphia, PA19103PA 19103 (Address of principal executive offices) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.0001 HIL New York Stock Exchange (NYSE) xý No o a check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405(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). xý No oor a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer”, “accelerated filer”filer," "accelerated filer," "smaller reporting company," and “smaller reporting company”"emerging growth company" in Rule 12b-2 of the Exchange Act.ActLarge Accelerated Filer o☐ Accelerated Filer x☒ o☐ Smaller Reporting Company o☒ Emerging Growth Company ☐ o☐ No xý51,767,11456,654,114 shares of the Registrant’s Common Stock outstanding at November 1, 2016.July 30, 2021.1995. These1995 (the "Reform Act"), and it is Hill International, Inc.'s (the "Company") intent that any such statements can be identifiedprotected by the fact that they dosafe harbor created thereby. Except for historical information, the matters set forth herein including, but not relate strictlylimited to, historicalany projections of revenues, earnings, margin, profit improvement, cost savings or current facts. Forward-lookingother financial items; any statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes”of belief, any statements concerning the Company's plans, strategies and wordsobjectives for future operations; and terms of similar substance in connection with discussions ofany statements regarding future operatingeconomic conditions or financial performance.The Company’sperformance, are forward-looking statements.management’sthe Company's current expectations, estimates and assumptions regardingand are subject to certain risks and uncertainties. Although the Company’s businessCompany believes that the expectations, estimates and performance, the economy and other future conditions and forecasts of future events, circumstances and results. As with any projection or forecast,assumptions reflected in our forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. The Company’sreasonable, actual results may varycould differ materially from those expressedprojected or impliedassumed in itsany of our forward-looking statements.ourthe Company's actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include:·of ourin the Company's most recent Annual Report on Form 10-K;··we conductthe Company conducts pursuant to joint ventures with other parties;· Difficulties we may incur in implementing our acquisition strategy;· andneedability to retain and recruit key technical and management personnel; and· Unexpected adjustments and cancellations related to our backlog.our businesses,the Company's business, financial position or results of operations include:· further delays in collections from clients located inclients;Middle East;· Special riskseffect of ourthe COVID-19 pandemic on the Company, including its employees and related costs and including any project cancellations, delays and modifications;· Special risks· Special risks ofgovernmentgovernments and reimbursement obligations to the government for funds previously received.We assumeor revise any forward-looking statement. In accordance with the Reform Act, Part II, Item 1A of this Report entitled “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-Q, in our other filings with the Securities and Exchange Commission ("SEC") or in materials incorporated therein by reference.HILL INTERNATIONAL, INC. AND SUBDISIARIES4Consolidated Balance Sheets at September 30, 2016 (unaudited) and December 31, 201545678Management’s Discussion and Analysis of Financial Condition and Results of Operations2437373939393939393940thousands, except per share data) June 30, 2021 December 31, 2020 Assets (Unaudited) Cash and cash equivalents $ 20,978 $ 34,229 Cash - restricted 4,644 3,752 Accounts receivable, net 106,594 98,186 Current portion of retainage receivable 12,080 11,775 Accounts receivable - affiliates 33,522 23,285 Prepaid expenses and other current assets 14,732 9,378 Income tax receivable 1,077 2,298 Total current assets 193,627 182,903 Property and equipment, net 9,248 9,443 Cash - restricted, net of current portion 3,077 3,432 Operating lease right-of-use assets 18,812 13,116 Financing lease right-of-use assets 405 288 Retainage receivable 6,459 6,044 Acquired intangibles, net 2,780 2,253 Goodwill 45,629 46,397 Investments 3,104 2,805 Deferred income tax assets 3,672 3,698 Other assets 2,081 1,620 Total assets $ 288,894 $ 271,999 Liabilities and Stockholders’ Equity Current maturities of notes payable and long-term debt $ 23,817 $ 987 Accounts payable and accrued expenses 71,335 67,797 Income taxes payable 1,827 2,219 Current portion of deferred revenue 3,180 3,305 Current portion of operating lease liabilities 5,163 4,797 Current portion of financing lease liabilities 121 70 Other current liabilities 10,906 5,796 Total current liabilities 116,349 84,971 Notes payable and long-term debt, net of current maturities 29,602 48,294 Retainage payable 277 600 Deferred income taxes 1,316 1,210 Deferred revenue 7,798 7,488 Non-current operating lease liabilities 19,329 13,184 Non-current financing lease liabilities 291 186 Other liabilities 7,711 6,778 Total liabilities 182,673 162,711 Commitments and contingencies 0 0 Stockholders’ equity: Preferred stock, $0.0001 par value; 1,000 shares authorized, 0ne issued 0 0 Common stock, $0.0001 par value; 100,000 shares authorized, 63,234 shares and 62,920 shares issued at June 30, 2021 and December 31, 2020, respectively 6 6 Additional paid-in capital 216,476 215,010 Accumulated deficit (82,726) (79,542) Accumulated other comprehensive income 1,021 1,318 Less treasury stock of 6,807 at June 30, 2021 and December 31, 2020 (29,056) (29,056) Hill International, Inc. share of equity 105,721 107,736 Noncontrolling interests 500 1,552 Total equity 106,221 109,288 Total liabilities and stockholders’ equity $ 288,894 $ 271,999 Three Months Ended
June 30,Six Months Ended
June 30,2021 2020 2021 2020 Consulting fee revenue $ 77,688 $ 75,760 $ 150,097 $ 152,910 Reimbursable expenses 23,858 18,689 38,535 34,847 Total revenue $ 101,546 $ 94,449 $ 188,632 $ 187,757 Direct expenses 70,263 65,032 130,118 130,080 Gross profit $ 31,283 $ 29,417 $ 58,514 $ 57,677 Selling, general and administrative expenses 27,098 26,857 54,784 54,955 Foreign currency exchange loss 1,953 265 2,240 4,316 Plus: Share of profit of equity method affiliates 665 1,014 1,253 1,038 Operating profit (loss) $ 2,897 $ 3,309 $ 2,743 $ (556) Less: Interest and related financing fees, net 1,504 1,296 2,851 2,595 Less: Other loss, net 2 3,847 0 3,502 Earnings (loss) before income taxes $ 1,391 $ (1,834) $ (108) $ (6,653) Income tax expense 1,793 102 2,869 1,705 Net loss $ (402) $ (1,936) $ (2,977) $ (8,358) Less: net earnings - noncontrolling interests 91 18 207 177 Net loss attributable to Hill International, Inc. $ (493) $ (1,954) $ (3,184) $ (8,535) Basic loss per common share - Hill International, Inc. $ (0.01) $ (0.03) $ (0.06) $ (0.15) Basic weighted average common shares outstanding 57,079 56,409 57,029 56,476 Diluted loss per common share - Hill International, Inc. $ (0.01) $ (0.03) $ (0.06) $ (0.15) Diluted weighted average common shares outstanding 57,079 56,409 57,029 56,476
September 30,
September 30, Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net loss $ (402) $ (1,936) $ (2,977) $ (8,358) Foreign currency translation adjustment, net of tax 86 5,001 (1,556) 4,746 Comprehensive (loss) earnings (316) 3,065 (4,533) (3,612) Less: Comprehensive loss attributable to noncontrolling interests (4) (173) (1,052) (173) Comprehensive (loss) earnings attributable to Hill International, Inc. $ (312) $ 3,238 $ (3,481) $ (3,439) (Unaudited) Common Stock Additional
Paid-inRetained
EarningsAccumulated Other
ComprehensiveTreasury Stock Hill Share of Stockholders’ Non-controlling Total
Stockholders’ Shares Amount Capital (Deficit) Income (Loss) Shares Amount Equity Interests Equity Balance - December 31, 2020 62,920 $ 6 $ 215,010 $ (79,542) $ 1,318 6,807 $ (29,056) $ 107,736 $ 1,552 $ 109,288 Net earnings (loss) — — — (2,691) — — — (2,691) 116 (2,575) Other comprehensive loss — — — — (478) — — (478) (1,164) (1,642) Share-based compensation expense 270 — 449 — — — — 449 — 449 14 — 43 — — — — 43 — 43 Balance - March 31, 2021 63,204 $ 6 $ 215,502 $ (82,233) $ 840 6,807 $ (29,056) $ 105,059 $ 504 $ 105,563 Net income (loss) — — — (493) — — — (493) 91 (402) Other comprehensive income (loss) — — — — 181 — — 181 (95) 86 Share-based compensation expense 0 — 922 — — — — 922 — 922 Shares issued under employee stock purchase plan 30 — 52 — — — — 52 — 52 Balance - June 30, 2021 63,234 $ 6 $ 216,476 $ (82,726) $ 1,021 6,807 $ (29,056) $ 105,721 $ 500 $ 106,221 Balance - December 31, 2019 62,708 $ 6 $ 212,759 $ (71,360) $ (3,817) 6,546 $ (28,231) $ 109,357 $ 871 $ 110,228 Net income (loss) — — — (6,581) — — — (6,581) 159 (6,422) Other comprehensive income (loss) — — — — (96) — — (96) (159) (255) Share-based compensation expense 0 — 399 — — — — 399 — 399 83 — 105 — — — — 105 — 105 (261) — — — — 261 (825) (825) — (825) Balance - March 31, 2020 62,530 $ 6 $ 213,263 $ (77,941) $ (3,913) 6,807 $ (29,056) $ 102,359 $ 871 $ 103,230 Net income (loss) — — — (1,954) — — — (1,954) 18 (1,936) Other comprehensive income (loss) — — — — 5,192 — — 5,192 (191) 5,001 Share-based compensation expense 0 — 802 — — — — 802 — 802 Shares issued under employee stock purchase plan 79 — 96 — — — — 96 — 96 Balance - June 30, 2020 62,609 $ 6 $ 214,161 $ (79,895) $ 1,279 6,807 $ (29,056) $ 106,495 $ 698 $ 107,193 Notes Six Months Ended June 30, 2021 2020 Cash flows from operating activities: Net loss $ (2,977) $ (8,358) Adjustments to reconcile net loss to net cash used in: Depreciation and amortization 1,289 2,675 Recovery of bad debts (2,457) (1,010) Amortization of deferred loan fees 394 348 Deferred tax expense 143 674 Share-based compensation 1,371 1,201 Operating lease right-of-use assets 2,844 1,956 Loss on liquidation of subsidiary 0 4,064 Foreign currency remeasurement losses 2,240 3,390 Changes in operating assets and liabilities: Accounts receivable (7,095) (1,624) Accounts receivable - affiliate (10,237) (4,462) Prepaid expenses and other current assets (5,160) (3,585) Income taxes receivable 1,189 305 Retainage receivable (419) 255 Other assets (2,142) (1,346) Accounts payable and accrued expenses 4,037 4,801 Income taxes payable (376) (1,250) Deferred revenue 472 (4,516) Operating lease liabilities (1,987) (2,166) Other current liabilities 5,124 3,662 Retainage payable (322) 465 Other liabilities 910 (33) Net cash used in operating activities (13,159) (4,554) Cash flows from investing activities: Purchase of NEYO Group (683) 0 Purchase of property and equipment (1,087) (972) Net cash used in investing activities (1,770) (972) Cash flows from financing activities: Proceeds from term loans 0 1,265 Repayment of term loans (522) (434) Proceeds from revolving loans 15,973 28,196 Repayment of revolving loans (11,226) (16,168) Proceeds from stock issued under employee stock purchase plan 95 201 Net cash provided by financing activities 4,320 13,060 Effect of exchange rate changes on cash, cash equivalents and restricted cash (2,105) (846) Deconsolidated cash 0 9 Net decrease in cash, cash equivalents and restricted cash (12,714) 6,679 Cash, cash equivalents and restricted cash — beginning of period 41,413 24,982 Cash, cash equivalents and restricted cash — end of period $ 28,699 $ 31,661 Six Months Ended June 30, Supplemental disclosures of cash flow information: 2021 2020 Interest and related financing fees paid $ 2,289 $ 2,141 Income taxes paid 1,649 1,425 Transfer of proceeds from shares pledged as collateral to treasury stock 0 825 Cash paid for amounts included in the measurement of lease liabilities 3,148 3,831 Right-of-use assets obtained in exchange for operating lease liabilities 8,698 347 Right-of-use assets obtained in exchange for finance lease liabilities 205 96 Consolidated Financial Statementsconsolidated financial statements.(Unaudited)-— The Company construction claims and other consulting services primarily to the buildings, transportation, environmental, energy and industrial markets worldwide. Hill’s clients include the U.S. federal government, U.S. state and local governments, foreign governments and the private sector.organized into two key operating divisions:focused on preserving its principal sources of liquidity and managing its cash flow and will continue to evaluate the Project Management Grouppotential short-term and long-term implications of COVID-19 on its consolidated statements of operations. The Company believes that it has adequate liquidity and business plans to continue to operate the Construction Claims Group.23 — Basis of Presentation2015.2020. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles generally accepted in the United States (“GAAP”("U.S. GAAP") for complete financial statements. In the opinion of management, these statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the consolidated financial statements. The consolidated financial statements include the accounts of Hill and its wholly-wholly and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.3 — Liquidityconsulting feethe position, that the deferred tax assets subject to the valuation allowance will be realized, then the previously provided valuation allowance will be adjusted.(“CFR”) attributableprimarily from providing professional services to its clients under various types of 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 includes 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.Middle Eastperiod 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 Africaothers 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.grown from approximately 32%been completed, which typically is greater than one year.2011 to approximately 49%the statements of total consolidated CFRcash flows:June 30, 2021 December 31, 2020 Cash and cash equivalents $ 20,978 $ 34,229 Cash - restricted 4,644 3,752 Cash - restricted, net of current portion 3,077 3,432 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 28,699 $ 41,413 first nineperiod. Diluted earnings (loss) per common share incorporates the incremental shares issuable upon the assumed exercise of stock options, the assumed vesting of stock and deferred and restricted stock unit awards using the treasury stock method, if dilutive.Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Net loss $ (402) $ (1,936) $ (2,977) $ (8,358) Less: net earnings - noncontrolling interests 91 18 207 177 Net loss attributable to Hill International, Inc. $ (493) $ (1,954) $ (3,184) $ (8,535) Basic weighted average common shares outstanding 57,079 56,409 57,029 56,476 Effect of dilutive securities: Stock options 0 0 0 0 Unvested share-based compensation units 0 0 0 0 Diluted weighted average common shares outstanding 57,079 56,409 57,029 56,476 Basic and diluted loss per common share - Hill International, Inc. $ (0.01) $ (0.03) $ (0.06) $ (0.15) 2016.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.has beenare often instances that a contract is modified to extend the contract value past the cap. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract price in accordance with the variable consideration guidelines and will only include consideration that it expects to receive from the client. When the Company is 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 for contract renegotiation's to the extent that it is probable that a significant political upheaval and civil unrestreversal in these regions during this period. Thethe 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 will be processed, the variable consideration will be constrained to the cap until it is probable that the contract will be renegotiated. The Company is only entitled to consideration for the work it has performed, and the cap value is not a guaranteed contract value.slowdownproject by project basis, the appropriate final revenue recognition.its collectionsexcess 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. Costs related to change orders and claims are recognized when they are incurred. The Company evaluates claims on an individual basis and recognizes revenue it believes is probable to collect.Middle East primarily dueU.S. government that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations (“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 recent drop in oil prices. This has put a considerable strain onFAR. 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 the Company's federal government contracts are subject to termination at the convenience of the federal government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.liquidity. As a result,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 hadaccounted 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 incurred significant disallowed costs because 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.rely heavily on debtthe Company’s operating segment is provided in Note 12 - Segment and equity transactionsRelated Information. The Project Management Group provides extensive construction and project management services to fundconstruction owners worldwide. The Company considered the type of client, type of contract and geography for disaggregation of revenue. The Company determined that disaggregating by (1) contract type; and (2) geography would provide the most meaningful information to understand the nature, amount, timing, and uncertainty of its operations. See Note 4revenues. 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 cost management, labor compliance services and facilities management services. The Company’s contracts are generally long term contracts that are either based upon time and materials incurred or provide for a further discussionfixed price. The contract type will determine the level of issuesrisk in the contract related to our liquidity.Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 Fixed Price T&M Total Percent of Total Revenue Fixed Price T&M Total Percent of Total Revenue Americas $ 5,106 $ 46,663 $ 51,769 51.0 % $ 4,496 $ 45,948 $ 50,444 53.4 % Middle East/Asia/Pacific 3,862 17,762 21,624 21.3 % 3,943 18,372 22,315 23.6 % Europe 7,144 11,281 18,425 18.1 % 11,750 2,682 14,432 15.3 % Africa 338 9,390 9,728 9.6 % 70 7,188 7,258 7.7 % Total $ 16,450 $ 85,096 $ 101,546 100.0 % $ 20,259 $ 74,190 $ 94,449 100.0 % Six Months Ended June 30, 2021 Six Months Ended June 30, 2020 Fixed Price T&M Total Percent of Total Revenue Fixed Price T&M Total Percent of Total Revenue Americas $ 9,380 $ 86,958 $ 96,338 51.0 % $ 10,690 $ 86,945 $ 97,635 52.0 % Middle East/Asia/Pacific 6,226 35,473 41,699 22.1 % 8,826 40,772 49,598 26.4 % Europe 14,349 16,696 31,045 16.5 % 18,179 7,790 25,969 13.8 % Africa 902 18,648 19,550 10.4 % 276 14,279 14,555 7.8 % Total $ 30,857 $ 157,775 $ 188,632 100.0 % $ 37,971 $ 149,786 $ 187,757 100.0 % 45 — Accounts Receivablefollows (in thousands):Included in billedfollows:Accounts Receivable June 30, 2021 December 31, 2020 $ 103,840 $ 113,021 44,337 37,960 148,177 150,981 (41,583) (52,795) Accounts receivable, net $ 106,594 $ 98,186 Accounts Receivable - Affiliates $ 19,926 $ 15,560 14,298 8,380 $ 34,224 $ 23,940 Allowance for doubtful accounts (702) (655) Accounts receivable - affiliates, net $ 33,522 $ 23,285 unbilled accounts receivable are $14,926,000 and $4,827,000, respectively,$33,242 related to change orders, claimsamounts due from a client in Libya as of June 30, 2021 and disputesDecember 31, 2020, respectively, which where both fully reserved for in the allowance for doubtful accounts. The decrease in the balance at SeptemberJune 30, 2016.In 2012,2021 from December 31, 2020 is primarily due to the Company commenced operations on the Muscat International Airport (the “Oman Airport”) project with the Ministry of Transportation and Communications (the “MOTC”) 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. The Company began to experience some delays in payment during the second quarter of 2015 when MOTC commenced its formal review and certificationdevaluation of the Company’s invoices. InLibyan Dinar.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 $15,000,000 in March, approximately $1,800,000 in April, approximately $14,100,000 in June, approximately $3,200,000 in October and approximately $7,900,000 in November. At September 30, 2016, accounts receivable from Oman totaled approximately $29,500,000. After receipt of the October and November payments, approximately $7,900,000 was past due based on contractual terms.In addition, there is approximately $16,100,000 included in non-current Retainage Receivable in the consolidated balance sheet at September 30, 2016. Of that amount, approximately $8,000,000 relates to retention and approximately $8,100,000 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 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.56 — Intangible Assetsassets (in thousands):Amortization expense relatedassets: June 30, 2021 December 31, 2020 Gross
Carrying
AmountAccumulated
AmortizationGross
Carrying
AmountAccumulated
Amortization Engineering license $ 2,653 $ 0 $ 2,100 $ 0 Client relationships 509 382 509 356 Total $ 3,162 $ 382 $ 2,609 $ 356 Intangible assets, net $ 2,780 $ 2,253 as follows (in thousands):
September 30,
September 30,based on our present intangible assets for the next five years (in thousands): Estimated
Amortization
Expense Year ending December 31, 2021 (remaining 6 months) $ 25 2022 51 2023 51 2024 0 2025 0 67 — GoodwillThe Company performs its annual goodwill impairment testing, by reporting unit, in the third quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired. Application of the goodwill impairment test requires significant judgments including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for the businesses, the useful life over which cash flows will occur, and determination of the Company’s weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill impairment for each reporting unit. The Company performed its annual impairment test effective July 1, 2016. Based on a preliminary valuation, the fair value of the Project Management unit and the Construction Claims unit significantly exceeded their carrying values.2016 (in thousands):Balance, December 31, 2020 $ 46,397 162 (930) Balance, June 30, 2021 $ 45,629 73 - Basis of Presentation, NEYO Group Acquisition subsection.
* $1,818 in costs related to the Company's end of service benefit plan at December 31, 2020 that were previously included in other accrued expenses June 30, 2021 December 31, 2020 Accounts payable $ 21,766 $ 20,953 Accrued payroll and related expenses* 29,800 28,508 Accrued subcontractor fees 11,856 8,711 Accrued agency fees 4,799 4,239 Accrued legal and professional fees 1,311 2,894 Other accrued expenses* 1,803 2,492 $ 71,335 $ 67,797 (in thousands):89 — Notes Payable and Long-Term DebtOutstandingobligationswhich includes credit facilities:Balance Outstanding as of Loan Maturity Interest Rate Type June 30,
2021December 31, 2020 June 30,
2021December 31, 2020 Secured Credit Facilities Hill International, Inc. - Société Générale 2017 Term Loan Facility 06/20/2023 Variable 7.58% 7.67% $ 28,800 $ 28,950 05/04/2022 Variable 5.26% 5.50% 17,400 14,400 05/04/2022 Variable 4.08% 4.11% 5,155 4,035 Unsecured Credit Facilities 04/18/2022 Variable 5.73% 5.65% 482 0 Unsecured Notes Payable and Long-Term Debt 12/31/2021 Fixed 2.21% 2.21% 284 581 Philadelphia Industrial Development Corporation Loan 04/01/2027 Fixed 2.79% 2.79% 390 421 05/04/2024 Variable 2.23% 2.23% 298 357 05/30/2025 Fixed 3.91% 3.91% 349 367 06/19/2025 Variable 2.28% 2.28% 356 367 06/05/2025 Variable 2.54% 2.54% 294 303 Total notes payable and long-term debt, gross $ 53,808 $ 49,781 Less: unamortized discount and deferred financing costs related to Société Générale 2017 Term Loan Facility (389) (500) Notes payable and long-term debt $ 53,419 $ 49,281 Current portion of notes payable $ 24,019 $ 1,171 Current portion of unamortized debt discount and deferred financing costs $ (202) $ (184) Current maturities of notes payable and long-term debt $ 23,817 $ 987 Notes payable and long-term debt, net of current maturities $ 29,602 $ 48,294 follows (in thousands):its$3,131 of availability under the credit facility as of June 30, 2021 and December 31, 2020, respectively.Hill International N.V. (the “Subsidiary”)of the Company, 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 partiessubject 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.agreementfacilities with Société Générale (the “Agent”), TD Bank, N.A. and HSBC Bank USA, N.A. (collectively, the “U.S. Lenders”) consisting of a term loan facility of $120,000,000 (the “Term Loan Facility”"International Lender") and other U.S. Loan Parties (the "U.S. Lenders") under a $30,000,000 U.S. dollar-denominated2017 Term Loan of $30,000 (the "2017 Term Loan Facility"), a $25,000 U.S.-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 a credit agreement with the Agent (the “International Lender”) providing a €11,765,000€9,156 ($15,000,00010,000 at closing and $13,199,000 at September 30, 2016)closing) Euro-denominated revolving credit facility which is available to the Subsidiary (the “International Revolver” and together with the U.S. Revolver, the “Revolving"International Revolving Credit Facilities” and,Facility"; together with the U.S. Credit Facilities, the “Secured"Secured Credit Facilities”Facilities"). The U.S. Revolver and the International Revolver include sub-limits for letters of credit amounting to $25,000,000 and $10,000,000, respectively.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 reporting covenants. The financial covenants consistcovenant is comprised of a maximum Consolidated Net Leverage Ratio and an Excess Account Concentration requirement.of up to $10,000,000 held in the aggregate)and cash equivalents) to consolidated earnings before interest, taxes, depreciation, amortization, 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%. At SeptemberThe Company was in compliance with this financial covenant at June 30, 2016,2021.Company’s Consolidated Net Leverage Ratio was 3.19 to 1.00 which exceeded the 2.75 to 1.00 limit imposed by theCompany 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 constituted a default.The Excess Account Concentration covenant permitssimultaneously decreased the U. S. Lenders andcredit commitment with the International Lender to increase the interest rates by 2.0% if, as of the last day of any fiscal quarter, either (a) the total of accounts receivable from all clients within 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) the total of accounts receivable from all clients 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 would be reset as soon as the accounts receivable over 120 days decline below the 10% or 14% levels. At September 30, 2016, the accounts receivable from Oman exceeded the limit described above, however, due to a payment received on October 6, 2016, the accounts receivable declined below the established limit.In anticipation of the event of default upon delivery of the quarterly compliance certificate, the Company requested a waiver from the Agent. On November 1, 2016, the Company obtained the waiver of the Excess Account Concentration covenant violation, the Consolidated Net Leverage Ratio default and the contractual 2% increase in the interest rate. In connection with the waiver, the Company incurred a consent fee amounting to approximately $168,000 which will be charged to interest expense in the fourth quarter of 2016.The U.S. Credit Facilities are guaranteed by certain U.S. subsidiaries of the Company, andunder the International Revolver is guaranteedRevolving Credit Facility by the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.Term Loan Facilityinterest 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 interestaggregate unamortized debt issuance costs under the SecuredDomestic Revolving Credit Facilities may increase by 2.0%. The LIBOR on the Term Loan Facilities (including when determining the Base Rate) shallFacility and International Revolving Credit Facility were $474 and $755 at June 30, 2021 and December 31, 2020, respectively, and were included in no event be less than 1.0% per annum.At September 30, 2016, the interest rate on the Term Loan was 7.75%.The Company has the right to prepay the Term Loan Facility in full or in part at any time without premium or penalty. The Company is required to make mandatory prepayments of the Term Loan Facility, without premium or penalty, (i) with net proceeds of any issuance or incurrence of indebtedness (other than that permitted under the Term Loan Facility) by the Company, (ii) with net proceeds from certain asset sales outside the ordinary course of business,prepaid expenses and (iii) with 50% of the excess cash flow (as defined in the agreement) for each fiscal year of the Borrowers (which percentage would be reduced to 25% 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 1.50 to 1.00).The Term Loan Facility is generally secured by a first-priority security interest in substantially allother current assets of the Company and certain of the Company’s U.S. subsidiaries other than accounts receivable, cash proceeds thereof and certain bank accounts, as to which the Term Loan Facility 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 have been 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 $4,710,000 and $5,594,000 are included as an offset against the Term Loan balancesassets in the consolidated balance sheets at September 30, 2016 and December 31, 2015, respectively.Revolving Credit FacilitiesU.S. Revolver will be,Domestic Revolving Credit Facility are, at the Company’s option, from time to time, either the LIBOR rate for the relevant interest period plus 3.75% per annum or the Base Rate plus 2.75% per annum. At September 30, 2016, the interest rate was 6.25%.RevolverRevolving Credit Facility will be the European Inter-Bank Offered Rate (“EURIBOR”)EURIBOR for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available), plus 4.00%4.50% per annum.At September 30, 2016, the interest rate was 3.63%.The Company will pay a commitment feeU.S. Revolver,Domestic Revolving Credit Facility, and the Subsidiary will pay a commitment feeare 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 September 30, 2016, the domestic borrowing base was $30,000,000 and the international borrowing base was €11,765,000 (approximately $13,199,000 at September 30, 2016).U.S. RevolverDomestic Revolving Credit Facility are secured by a first-priority security interest in the above-referenced accounts receivable,Eligible Domestic Receivables (as defined in the Domestic Revolving Credit Facility), 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 (as defined in the International Revolving Credit Facility) under the International Revolver wouldRevolving Credit Facility are generally be secured by a first-priority security interest in substantially all accounts receivable and 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.RevolvingCompany has received a commitment letter from a bank to enter into a new credit facility which will include a term loan and a revolving credit facility. The proceeds from the term loan and an initial draw on the revolving credit facility will be used to pay off the Secured Credit Facilities have a term of five years and require payment of interest only duringfor general working capital purposes. The Company expects to enter into the term. Under the Revolving Credit Facilities, outstanding loans 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 expiration onnew credit facility by September 30, 2019.The Company incurred fees and expenses related2021.Revolvingmaturity of the Company's previous commercial premium financing arrangement in April 30, 2021 with AFCO Premium Credit Facilities aggregating $3,000,000 which has been deferred. The deferred fees are being amortized on a straight-line basis, which approximates the effective interest method, to interest expense and related financing fees, net over a five-year period which ends on September 30, 2019. Unamortized balances of $1,800,000 and $2,250,000 are included in other assets in the consolidated balance sheet at September 30, 2016 and December 31, 2015, respectively.At September 30, 2016LLC ("AFCO"), the Company had $5,006,000 of outstanding letters of credit underentered into a new financing agreement for the U.S. Revolver. Due to the default, the Company was precluded from utilizing any of the $2,494,000 of available borrowing capacity under the U.S. Revolver until the waiver was received on November 1, 2016, at which time the entire amount was available to be borrowed without violating the Consolidated Net Leverage Ratio.At September 30, 2016, the Company had $1,008,000 of outstanding letters of credit and $1,218,000 of available borrowing capacity under the International Revolver and its other foreign credit agreements (See “Other Debt Arrangements” below for more information).Other Debt ArrangementsIn connection with the moverenewal of its corporate headquartersinsurance policies with AFCO for $3,350. The terms of the arrangement include a $503 down payment, followed by monthly payments to Philadelphia, Pennsylvania,be made over a ten-month period at a 2.88% interest rate through March 31, 2022.Company received a loan from the Philadelphia Industrial Development Corporation in the amountCompany's consolidated balance sheets. As of $750,000 which bears interest at 2.75%, is repayable in 144 equal monthly installments of $6,121 and matures on May 1, 2027.The Company’s subsidiary, Hill International (Spain) S.A. (“Hill Spain”), maintains a revolving credit facility with six banks (the “Financing Entities”) in Spain which initially provided for total borrowings of up to €5,640,000 with interest at 6.50% on outstanding borrowings. At December 31, 2015, total availability under this facility2020, there was reduced$872 to 50.0%AFCO reflected in other current liabilities on the Company's consolidated balance sheets.the initial limit. At September 30, 2016, the total facility was approximately €2,670,000 (approximately $2,996,000) and borrowings outstanding were €2,669,000 (approximately $2,995,000). The amount being financed (“Credit Contracts”) by each Financing Entity is between €189,000 (approximately $213,000) and €769,000 (approximately $863,000). To guarantee Hill Spain’s obligations resulting from the Credit Contracts, Hill Spain provided a guarantee in favor of eachContentsone of the Financing Entities, which, additionally, and solely in the case of unremedied failure to make payment, and at the request of each of the Financing Entities, shall grant a first ranking pledge over a given percentage of corporate shares of Hill International Brasil Participacoes Ltda. for the principal, interest, fees, expenses or any other amount owed by virtue of the Credit Contracts, coinciding with the percentage of credit of each Financing Entity with respect to the total outstanding borrowings under this facility. The facility expires on December 17, 2016 at which time the Company expects to pay off and terminate the facility.Hill Spain also maintains an Instituto de Credito Oficial (“ICO”) loan with Bankia Bank in Spain for €60,000 (approximately $67,000) at September 30, 2016. The availability is reduced by €15,000 on a quarterly basis. At September 30, 2016, total borrowings outstanding were €60,000 (approximately $67,000). The interest rate at September 30, 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 September 30, 2016) collateralized by certain overseas receivables. Borrowings outstanding were AED 11,012,000 (approximately $2,998,000 at September 30, 2016). The interest rate is the one-month Emirate Interbank Offered Rate plus 3.00% (which would be 4.41% at September 30, 2016) but, in any event, no less than 5.50%. This facility also allows for Letters of Guarantee of up to AED 200,000,000 (approximately $54,452,000 at September 30, 2016) of which AED 135,080,000 (approximately $36,777,000) was outstanding at September 30, 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 $730,000 at September 30, 2016), with a weighted average interest rate of 5.09% per month at September 30, 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 September 30, 2016, the maximum U.S. dollar equivalent of the commitments was $89,237,000 of which $40,362,000 is outstanding.Note 9 — Supplemental Cash Flow InformationThe following table provides additional cash flow information (in thousands):Earnings per ShareBasic earnings per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share incorporates the incremental shares issuable upon the assumed exercise of stock options using the treasury stock method, if dilutive. Options to purchase 6,480,000 shares and 6,478,000 shares were excluded from the calculation of diluted earnings per common share for the three and nine months ended September 30, 2016, respectively, because they were antidilutive. Dilutive stock options increased the average common shares outstanding by approximately 684,000 shares for the three months ended September 30, 2015 and by approximately 613,000 shares for the nine months ended September 30, 2015. Options to purchase 3,208,000 shares and 3,773,000 shares were excluded from the calculation of diluted earnings per common share for the three and nine months ended September 30, 2015 because they were antidilutive.Note 11 — Share-Based CompensationAt September 30, 2016, the Company had approximately 6,932,000 options outstanding with a weighted average exercise price of $4.10. During the nine months ended September 30, 2016, the Company granted 765,000 options which vest over a five-year period and 10,101 options which vested immediately. The options have a weighted-average exercise price of $4.30 and a weighted average contractual life of 6.97 years. The aggregate fair value of the options was $1,075,000 calculated using the Black-Scholes valuation model. The weighted average assumptions used to calculate fair value were: expected life — 4.97 years; volatility — 57.4% and risk-free interest rate — 1.24%. During the first nine months of 2016, options for approximately 369,000 shares with a weighted average exercise price of $2.62 were exercised, options for approximately 1,104,000 shares with a weighted average exercise price of $6.86 lapsed and options for 82,000 shares with a weighted average exercise price of $4.24 were forfeited.During the nine months ended September 30, 2016, employees purchased approximately 19,000 common shares, for an aggregate purchase price of $65,000, pursuant to the Company’s 2008 Employee Stock Purchase Plan.totaling $581,000of $922 and $899,000$802 for the three months ended SeptemberJune 30, 20162021 and 2015,2020, respectively, and $1,838,000$1,371 and $2,360,000$1,201 for the ninesix months ended SeptemberJune 30, 20162021 and 2015,2020, respectively.Note 12 — Stockholders’ Equityfollowing table summarizesCompany's related share-based compensation is comprised of the changes in stockholders’ equity duringfollowing:ninesix months ended SeptemberJune 30, 2016 (in thousands):During March 2016, certain officers exercised an aggregate of 297,489 options with an exercise price of $2.45 through2021 and 2020, the Company ongranted certain employees and executive officers equity awards in the form of restricted stock units ("RSU") that are subject to a cashless basis. The Company withheld 215,158 shares as payment forcombination of time and performance-based conditions under the options2017 Equity Compensation Plan (the "2017 Plan"), totaling 414 and placed those shares in treasury. The officers received a total of 112,331 shares from this transaction.During the nine months ended September 30, 2016, the Company received $220,000 in cash from the exercise of stock options.Note 13 — Income TaxesThe effective tax rates for723 RSUs, respectively. NaN RSU's were granted during the three months ended SeptemberJune 30, 20162021 and 2015 were (74.3)%2020. Each RSU entitles the grantee to 1 unit of the Company's common stock. The time-based RSUs vest annually over a three-year period on the anniversary date of each grant. Unvested time-based RSUs will be forfeited if the grantee separates from the Company prior to its vesting date. During the six months ended June 30, 2021 and 55.8%, respectively,2020, the related compensation expense was recorded based on a weighted average price per share of $2.36 and 222.8%$3.28, respectively.47.8%will be assessed on an annual basis for the nineyears ended December 31, 2021, 2022 and 2023 for the RSUs granted during the six months ended SeptemberJune 30, 20162021 and 2015,for the years ended December 31, 2020, 2021 and 2022 for the RSUs granted during three months ended June 30, 2020. If the Company meets the performance metrics for any one of the measurement periods, such units will vest on the next anniversary date of the grant date. All vested RSUs will be settled on the third anniversary of the grant date. Unvested RSUs are subject to forfeiture if the grantee separates from the Company prior to its vesting date. During the six months ended June 30, 2021 and 2020, the Company determined it was not probable that the target performance metric would be met for each of the RSU grants and, therefore, did not record any share-based compensation expense related to such RSUs.Company’sCompany granted 190 and 295 DSUs to the Company's board of directors (the "Board") as part of their annual service retainer during the six months ended June 30, 2021 and 2020, respectively.projected income and mixfull year projection of incometax expense, divided by the projection of full year pretax book income/(loss) among the various foreign tax jurisdictions, adjusted for discrete transactions occurring during the period. There was no change in the reserve for uncertainThe effective tax positionsrates were 128.9% and (5.6)% for the three months ended SeptemberJune 30, 20162021 and 2015. For2020, respectively, and (2,656.5)% and (25.6)% for the ninesix months ended SeptemberJune 30, 20162021 and 2015, the Company recognized an income2020, respectively. The interim tax (benefit) expense related to an increasecalculation prescribed under ASC 740-270 can yield unconventional results as seen in the reserveeffective tax rate for the six months ended June 30, 2021, which is impacted by discrete tax items such as uncertain tax positions amounting to $(14,000) and $245,000, respectively. In addition, the Company recognized an income tax expense (benefit) resulting from adjustments to agree the prior year’s book amountscertain withholding taxes in relation to the actual amounts permix of pretax earnings in certain jurisdictions in which no loss benefit is recognized. tax returns totaling $0 and ($37,000) for the three months ended September 30, 2016 and 2015, respectively, and $535,000 and ($37,000) for the nine months ended September 30, 2016 and 2015, respectively. The Company’s effective tax rate in both years is higher than it otherwise would befor the six months ended June 30, 2021 from the six months ended June 30, 2020 was primarily as a result of not recording an income tax benefit relateddue to the U.S. net operating loss and various foreignmix of pretax earnings in jurisdictions with different jurisdictional tax rates, as well as certain withholding taxes.The components of earnings (loss) before income taxes and the related incomeuncertain tax expense by United States and foreign jurisdictions were as follows (in thousands):$ 939,000$7,289 and $1,220,000$6,328 at SeptemberJune 30, 20162021 and December 31, 2015, respectively, and is included in “Other liabilities” in the consolidated balance sheets at those dates.At both September 30, 2016 and December 31, 2015, potentialThe Company recorded expense (recovery) for any tax-related interest and penalties related to uncertain tax positions amounted to $500,000of $434 and was included in$(5) for the balance above. 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 ASC740, ASC 740, Income Taxes. They consider both positive and negative evidence.Taxes. In making this determination, management assesses all of theavailable evidence, availableboth positive and negative, at the time includingbalance sheet date. This includes, but is not limited to, recent earnings, internally-prepared income projections, and historical financial performance.Note 14 — Business Segment InformationThe Company’s business segments reflect how executive management makes resource decisions and assesses its performance.bases these decisionsis currently evaluating the impact this legislation may have on the type of services provided (Project Managementconsolidated financial results, however the Company does not feel there will be a significant impact.Construction Claims) and secondarily by their geography (U.S./Canada, Latin America, Europe,Related InformationMiddle East, Africa and Asia/Pacific).The Project Management business segmentCompany is managed, which 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 Construction Claims business segment provides such services as claims consulting, management consulting, litigation support, expert witness testimony, cost/damages assessment, delay/disruption analysis, adjudication, lender advisory, risk management, forensic accounting, fraud investigation, Project Neutral and international arbitration services to clients worldwide.The Company evaluates the performance of its segments primarily on operating profit before corporate overhead allocations and income taxes.reflect the required disclosurespresent certain information for the Company’s reportable segments (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Americas $ 51,769 51.0 % $ 50,444 53.4 % $ 96,338 51.0 % $ 97,635 52.0 % Middle East/Asia/Pacific 21,624 21.3 % 22,315 23.6 % 41,699 22.1 % 49,598 26.4 % Europe 18,425 18.1 % 14,432 15.3 % 31,045 16.5 % 25,969 13.8 % Africa 9,728 9.6 % 7,258 7.7 % 19,550 10.4 % 14,555 7.8 % Total $ 101,546 100.0 % $ 94,449 100.0 % $ 188,632 100.0 % $ 187,757 100.0 % (“CFR”)Total Revenue Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Americas $ 34,576 44.6 % $ 35,349 46.6 % $ 66,486 44.3 % $ 70,564 46.1 % Middle East/Asia/Pacific 20,981 27.0 % 22,780 30.1 % 40,755 27.2 % 47,532 31.1 % Europe 13,090 16.8 % 11,067 14.6 % 24,640 16.4 % 21,648 14.2 % Africa 9,041 11.6 % 6,564 8.7 % 18,216 12.1 % 13,166 8.6 % Total $ 77,688 100.0 % $ 75,760 100.0 % $ 150,097 100.0 % $ 152,910 100.0 % Three Months Ended
June 30,Six Months Ended
June 30, 2021 2021 2020 $ 7,431 $ 9,181 $ 12,738 $ 16,326 2,015 1,202 3,182 2,482 2,104 1,138 3,894 2,835 Africa 3,030 415 4,085 1,278 (11,683) (8,627) (21,156) (23,477) Total $ 2,897 $ 3,309 $ 2,743 $ (556) Consulting Fee Revenue by Geographic Region:During Three Months Ended
June 30,Six Months Ended
June 30, 2021 2020 2021 2020 Project Management $ 340 $ 304 $ 763 $ 668 255 (53) 526 2,007 Total $ 595 $ 251 $ 1,289 $ 2,675 third quarterthree months ended SeptemberJune 30, 2016, consulting fee revenue2020 includes a $278 true up of depreciation expense for the United Arab Emirates amounted to $25,016,000 representing 16.9% of the total. No other country other than the United States accounted for 10% or more of consolidated consulting fee revenue.During the third quartersix months ended SeptemberJune 30, 2015, consulting fee revenue2020.United Arab Emirates amountedwrite-off of leasehold improvements related to $29,642,000 representing 18.7% of the total. No other country other thanCompany subletting office space in Philadelphia to a third party for the United States accounted for 10% or more of consolidated consulting fee revenue.Geographic Region:During the third quarter ended September 30, 2016, total revenue for the United Arab Emirates amounted to $26,359,000 representing 15.7% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.During the third quarter ended September 30, 2015, total revenue for the United Arab Emirates amounted to $30,910,000 representing 17.3% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.Consulting Fee Revenue By Client Type:Total Revenue By Client Type: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 U.S. federal government $ 4,712 4.6 % $ 3,922 4.2 % $ 8,130 4.3 % $ 8,532 4.6 % U.S. state, regional and local governments 32,557 32.1 % 30,349 32.1 % 60,286 32.0 % 60,900 32.4 % Foreign governments 28,876 28.4 % 25,605 27.1 % 51,736 27.4 % 50,969 27.1 % Private sector 35,401 34.9 % 34,573 36.6 % 68,480 36.3 % 67,356 35.9 % Total $ 101,546 100.0 % $ 94,449 100.0 % $ 188,632 100.0 % $ 187,757 100.0 % Consulting Fee Revenue (“CFR”)Total RevenueOperating Profit (Loss) by Geographic Region:Depreciation and Amortization Expense:Consulting Fee Revenue by Geographic Region:During the nine months ended September 30, 2016, consulting fee revenue for the United Arab Emirates amounted to $86,596,000 representing 18.9% of the total. No other country except the United States accounted for 10% or more of consolidated consulting fee revenue.During the nine months ended September 30, 2015, consulting fee revenue for the United Arab Emirates amounted to $83,613,000 representing 17.8% of the total. No other country except the United States accounted for 10% or more of consolidated consulting fee revenue.Total Revenue by Geographic Region:During the nine months ended September 30, 2016, total revenue for the United Arab Emirates amounted to $91,082,000 representing 17.5% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.During the nine months ended September 30, 2015, total revenue for the United Arab Emirates amounted to $85,898,000 representing 16.2% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.Consulting Fee Revenue By Client Type:Total Revenue By Client Type: June 30, 2021 December 31, 2020 Americas $ 7,552 $ 7,741 Middle East/Asia/Pacific 776 917 Europe 548 544 Africa 372 241 Total $ 9,248 $ 9,443 1513 — Commitments and ContingenciesGeneral Litigationactionsproceedings 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’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’s financial condition, results of operations or cash flows.Acquisition-Related ContingenciesAsS.A. (“Hill Spain”), owned an indirect 91% interest in Engineering S.A. (“ESA”),formerly known as the National Bank of Abu Dhabi) that Public Authority of Housing Welfare of Kuwait submitted a firmclaim for payment on a Performance Guarantee issued by the Company for approximately $7,938 for a project located in Brazil. ESA’s shareholders entered intoKuwait. 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 agreement wherebyappeal before the minority shareholders haveKuwait Court of Appeals seeking referral of the matter to a rightpanel of experts for determination. On April 21, 2019, the Court of Appeals ruled to compel (“ESA Put Option”) Hill Spainrefer the matter to purchase any or allthe 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. In June 2020, the Kuwait Court of Appeal issued judgement confirming the Kuwait First Instance Court's decision. The Company filed a pleading before the Kuwait Cassation Court in August 2020. Hill's challenges are still pending before the Kuwait Cassation Court and a hearing has not yet been scheduled.shares duringhome country, in which their employees provided services. The Company has estimated 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 sharespotential liability 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 $2,655,000 at September 30, 2016). The Company accrued the liabilityapproximately $1,355, which is included in other current liabilities and as an adjustment to additional paid-in capital in the consolidated balance sheet at September 30, 2016. The amount is subject to negotiation and any difference will be recorded upon completion of the transaction.On October 31, 2014, our subsidiary Hill International (UK) Ltd. acquired all of the outstanding common stock of Angus Octan Scotland Ltd., which included its subsidiary companies Cadogan Consultants Ltd., Cadogan Consult Ltd. and Cadogan International Ltd. (collectively, “Cadogans”). The sellers of Cadogans are entitled to an earn-out based upon theaverage earnings before interest, taxes, depreciation and amortization for the two-year period ending on October 31, 2016 (which amount shall not be less than £0 or more than £200,000). The Company accrued the potential additional consideration of £200,000 ($259,000) which is included in other current liabilities in the consolidated balance sheet at SeptemberJune 30, 2016.Two2021.selling shareholdersCompany's operating 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 Cadogans may receive an earn-out in annual installments of upwhether to £100,000 ($130,000)include any renewal or early termination options is made by the Company at September 30, 2016), which will be charged to earnings, provided that Cadogans’ EBITDA for eachlease inception when establishing the term of the years ending October 31, 2016, 2017, 2018lease. Based on the later of the lease's commencement date or Company's adoption of ASC-842 on January 1, 2019, the Company recognizes right-of use lease assets and 2019lease liabilities on 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 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 greater than £396,000 ($513,000). Based upon preliminary results, it appearsreasonably certain that the two shareholdersCompany will receiveexercise such options. As most of the Company's leases do not provide an earnout amountingimplicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.£100,000 ($130,000)be fixed, or are determinable at the lease commencement date. Some of the Company's lease arrangements require periodic increases in the Company's base rent that may be subject to certain economic indexes, among other items. In addition, these leases may require the Company to pay property taxes, utilities and other costs related to several of its leased office facilities. Typically, these amounts for such payments cannot be determined at the lease commencement date, and are identified as variable lease payment, which £92,000 ($120,000) has been accruedare recognized as incurred.charged to earnings$1,856 for the three and nine months ended SeptemberJune 30, 2016.In connection with the acquisition of IMS Proje Yonetimi ve Danismanlik A.S. (“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, depreciation2021 and amortization2020, respectively, and $4,243 and $4,163 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 3,200,000six months ended June 30, 2021 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 to2020 is included in selling, general and administrative and direct expenses in the consolidated statements of operations. Total rent expense for the nine month periodsix months ended SeptemberJune 30, 2016.Total Operating Lease Payments Total Finance Lease Payments 2021 (excluding the six months ended June 30, 2021) $ 3,588 $ 64 2022 6,000 129 2023 5,214 129 2024 4,274 94 2025 3,471 11 Thereafter 7,271 0 29,818 427 Less amount representing imputed interest 5,326 0 Present value of lease obligations $ 24,492 $ 427 Weighted average remaining lease term (years) 5.71 3.36 Weighted average discount rate 6.94 % 2.23 % Operations.(“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 subcontractors on which we generally pass through the cost and total direct expenses. Because these pass-through revenue/earn minimal or no gross profit.subjectnot billable and corporate or regional costs such as sales, business development, proposals, operations, finance, human resources, legal, marketing, management and administration.significant fluctuationour 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 yearconcept through completion, including cost and budget controls, scheduling, estimating, expediting, inspection, contract administration and management of contractors, subcontractors and suppliers.year, we measure the performance of manyemerge in various regions and countries worldwide.keyfield employees were already located in the regions where they deliver their services, so the travel restrictions that have been enacted by various government authorities have not materially impaired our ability to continue to perform services for our clients. Employees are returning to their assigned offices, on a modified basis, as their city, state and country reopens, consistent with the applicable requirements of local law.metricsmargins, impairment of goodwill and indefinite-lived intangible assets and fair value and collectability of receivables. Three Months Ended June 30, Change Six Months Ended June 30, Change 2021 2020 $ % 2021 2020 $ % Income Statement Data: Consulting fee revenue $ 77,688 $ 75,760 $ 1,928 2.5 % $ 150,097 $ 152,910 $ (2,813) (1.8) % Reimbursable expenses 23,858 18,689 5,169 27.7 % 38,535 34,847 3,688 10.6 % Total revenue $ 101,546 $ 94,449 $ 7,097 7.5 % $ 188,632 $ 187,757 $ 875 0.5 % Direct expenses 70,263 65,032 5,231 8.0 % 130,118 130,080 38 — % Gross profit $ 31,283 $ 29,417 $ 1,866 6.3 % $ 58,514 $ 57,677 $ 837 1.5 % Selling, general and administrative expenses 27,098 26,857 241 0.9 % 54,784 54,955 (171) (0.3) % Foreign currency exchange loss 1,953 265 1,688 637.0 % 2,240 4,316 (2,076) (48.1) % Plus: Share of profit of equity method affiliates 665 1,014 (349) (34.4) % 1,253 1,038 215 20.7 % Operating profit (loss) $ 2,897 $ 3,309 $ (412) (12.5) % $ 2,743 $ (556) $ 3,299 (593.3) % Interest and related financing fees, net 1,504 1,296 208 16.0 % 2,851 2,595 256 9.9 % Less: Other loss, net 2 3,847 (3,845) (99.9) % — 3,502 (3,502) (100.0) % Earnings (loss) before income taxes $ 1,391 $ (1,834) $ 3,225 (175.8) % $ (108) $ (6,653) $ 6,545 (98.4) % Income tax expense 1,793 102 1,691 1,657.8 % 2,869 1,705 1,164 68.3 % Net loss $ (402) $ (1,936) $ 1,534 (79.2) % $ (2,977) $ (8,358) $ 5,381 (64.4) % Less: net earnings - noncontrolling interests 91 18 73 405.6 % 207 177 30 16.9 % Net loss attributable to Hill International, Inc. $ (493) $ (1,954) $ 1,461 (74.8) % $ (3,184) $ (8,535) $ 5,351 (62.7) % Three Months Ended June 30, Change 2021 2020 $ % Americas $ 51,769 51.0 % $ 50,444 53.4 % $ 1,325 2.6 % Middle East/Asia/Pacific 21,624 21.3 % 22,315 23.6 % (691) (3.1) % Europe 18,425 18.1 % 14,432 15.3 % 3,993 27.7 % Africa 9,728 9.6 % 7,258 7.7 % 2,470 34.0 % Total $ 101,546 100.0 % $ 94,449 100.0 % $ 7,097 7.5 % Three Months Ended June 30, Change 2021 2020 $ % Americas $ 34,576 44.6 % $ 35,349 46.6 % $ (773) (2.2) % Middle East/Asia/Pacific 20,981 27.0 % 22,780 30.1 % (1,799) (7.9) % Europe 13,090 16.8 % 11,067 14.6 % 2,023 18.3 % Africa 9,041 11.6 % 6,564 8.7 % 2,477 37.7 % Total $ 77,688 100.0 % $ 75,760 100.0 % $ 1,928 2.5 % Three Months Ended June 30, Change 2021 2020 $ % % of
CFR% of
CFRAmericas $ 15,179 48.5 % 43.9 % $ 15,464 52.6 % 43.7 % $ (285) (1.8) % Middle East/Asia/Pacific 7,575 24.2 % 36.1 % 6,821 23.2 % 29.9 % 754 11.1 % Europe 5,099 16.3 % 39.0 % 4,268 14.5 % 38.6 % 831 19.5 % Africa 3,430 11.0 % 37.9 % 2,864 9.7 % 43.6 % 566 19.8 % Total $ 31,283 100.0 % 40.3 % $ 29,417 100.0 % 38.8 % $ 1,866 6.3 % as we believe that this is a better and more consistent measure of operating performance than total revenue.The recent drop in global oil prices has had a negative impact onincreased 1.5% for the construction industry, particularlythree months ended June 30, 2021 compared to the same period in the Middle East, where existing projects have been suspended or have had scope reductions. Also, political upheaval and civil unrest have negatively affected business2020. In the Americas, gross profit as a percentage of CFR increased as a result of a reduction in the region. This trend could continue for the next few years.CFR decreased $10,586,000, or 6.7%, to $147,993,000 during the third quarter of 2016 from $158,579,000 during the third quarter of 2015. CFR for the Project Management segment decreased $9,673,000 principally due to decreases indirect expenses, primarily labor costs. In the Middle East, where three large projects were completed and several existing projects have been suspended or have had scope reductions, and Latin America, partially offset by increases in the United States.East/Asia/Pacific region, gross profit as a percentage of CFR for the Construction Claims segment decreased by $913,000, or 2.2%, due primarily to decreases in Europe and Asia/Pacific, partially offset by increases in the Middle East.CFR decreased $11,546,000, or 2.5%, to $457,912,000 during the nine months ended September 30, 2016 from $469,458,000 during the nine months ended September 30, 2015. CFR for the Project Management segment decreased $11,549,000 principally due to decreases in the Middle East, as noted above, and Latin America, partially offset by increases in the United States. CFR for the Construction Claims segment was essentially flat due primarily to increases in the United Kingdom and the Middle East, offset by decreases in the United States.Net loss attributable to Hill was ($6,866,000) during the third quarter of 2016 compared to net earnings of $2,948,000 during the third quarter of 2015. The decrease wasincreased due to a lower volume of work and declining marginsreduction in the Middle Eastdirect expenses, primarily direct labor, as well as the liquidation of a bond in 2020 ($350) that did not recur in 2021. These increases were partially off-set by a decrease in gross profit as a percentage of CFR in Africa as a result of the start of a large project with a lower margin.operating expenses.Diluted loss per common share was ($0.13) during the third quarter of 2016 based upon 51,753,000 diluted common shares outstandingapproximately $241 when compared to diluted earnings per common share of $0.06 during the third quarter of 2015 based upon 51,803,000 diluted common shares outstanding.Net loss attributable to Hill was ($3,926,000) during the nine months ended September 30, 2016 compared to net earnings of $8,045,000 during the nine months ended September 30, 2015.same period in 2020. The decrease was due to a lower volume of work and declining margins in the Middle East as well as increased operating expenses.Diluted loss per common share was ($0.08) during the nine months ended September 30, 2016 based upon 51,704,000 diluted common shares outstanding compared to diluted earnings per common share of $0.16 during the nine months ended September 30, 2015 based upon 51,274,000 diluted common shares outstanding.Critical Accounting PoliciesThe Company’s interim financial statements were prepared in accordance with United States generally accepted accounting principles, which require management to make subjective decisions, assessments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the judgment increases such judgments become even more subjective. While management believes its assumptions are reasonable and appropriate, actual results may be materially different than estimated. The critical accounting estimates and assumptions have not materially changed from those identified in the Company’s 2015 Annual Report.Results of OperationsThree Months Ended September 30, 2016 Compared toThree Months Ended September 30, 2015Consulting Fee Revenue (“CFR”) (dollars in thousands)The decrease in CFRincrease was primarily due to decreased work inhigher labor costs as business activity returns to normal levels and the Middle East wherereinstatement of the recent drop in oil prices has had a negative effect on funding for construction projects, some of which have been suspended or have had scope reductions. Also, political upheavalcompany 401(k) match and civil unrest has generally had a negative effect on business in the region. This trend could continue for the next few years.The decrease in Project Management CFR included a $13,880,000 decrease in international projects and an increase of $4,207,000 in domestic projects. The decrease in international Project Management CFR was due primarily to decreases throughout the Middle East and Brazil. The increase in domestic Project Management CFR included increases primarily in the Northeast and Southern Regions.The decrease in Construction Claims CFR was primarilyincreased travel costs due to decreasesthe lifting of COVID-19 stay-at-home orders that were in place during the United Kingdom, the United States and Asia/Pacific, partially offset byperiod in 2020. These increases in the Middle East.Reimbursable Expenses (dollars in thousands)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 earnings. The decrease in Construction Claims reimbursable expense is primarily due to lower direct job related expenses in the United Kingdom and the Middle East.Cost of Services (dollars in thousands)
CFR
CFRCost 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 Project Management cost of services is primarily due to decreases in the Middle East due to staffing reductions in line with lower CFR, partially offset by increases in the United States in support of increased work. The decrease in the Construction Claims cost of services is primarily due to decreased direct labor in the United Kingdom and the United States in line with lower CFR.Gross Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management gross profit included a decrease of $3,931,000 from international operations, primarily as a result of reduced contractual rates and a lower volume of work in the Middle East and a volume decrease in Latin America. This waswere partially offset by an increase of $1,392,000 in domestic operations primarily the Northeast and Southern regions.The Construction Claims gross profit was essentially flat with increases in the Middle East partially offset by decreases in the United Kingdom and Asia/Pacific.Selling, General and Administrative (“SG&A”) Expenses (dollars in thousands)The increase in selling, general and administrative expenses included the following:· An increase of $7,983,000 in bad debt expense primarily for increased reserves for certain accounts receivable in the Middle East and Asia/Pacific;· A increase in legal fees of $2,567,000 due primarily to costs related to the proxy contest; and· A decrease in amortization expense of $566,000 as certain acquired intangible assets have become fully amortized.Operating Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management operating profit was primarily due to the increase of $7,197,000 in bad debt reserves due to delays in payments or short pays against accounts receivable coupled with a decline in CFR in the Middle East, largely in Oman, the United Arab Emirates, Qatar and Iraq.The decrease in Construction Claims operating profit was primarily due to CFR decreases in the United Kingdom and Asia/Pacific, partially offset by increases in the Middle East and higher bad debt expense of $786,000.Corporate expenses increased by $2,236,000 which was primarily due to increases in legal feesrecoveries associated with the proxy contest. Corporatereceipt of payments against previously reserved receivables, primarily on a Libya-based project. SG&A expenses represented 7.1%approximately 34.9% and 35.5% of CFR duringfor the third quarterthree months ended SeptemberJune 30, 2016 compared to 5.2% during2021 and 2020, respectively.third quarterthree months ended SeptemberJune 30, 2015. Expense and Related Financing Fees, netNetdecreased $779,000 to $3,368,000 infor the three months ended SeptemberJune 30, 2016 as compared with $4,147,000 in2020 of $1,296, net of $32 of interest income.SeptemberJune 30, 2015.2021 and 2020, the Company recognized other non-operating loss of $2 and $3,847, respectively. In 2020, the Company recognized $4,064 in losses related to the bankruptcy and deconsolidation of our operating subsidiary in Brazil (see Note 15 to the consolidated financial statements filed herein), offset by other non-operating income of $217. Six Months Ended June 30, Change 2021 2020 $ % Americas $ 96,338 51.0 % $ 97,635 52.0 % $ (1,297) (1.3) % Middle East/Asia/Pacific 41,699 22.1 % 49,598 26.4 % (7,899) (15.9) % Europe 31,045 16.5 % 25,969 13.8 % 5,076 19.5 % Africa 19,550 10.4 % 14,555 7.8 % 4,995 34.3 % Total $ 188,632 100.0 % $ 187,757 100.0 % $ 875 0.5 % Six Months Ended June 30, Change 2021 2020 $ % Americas $ 66,486 44.3 % $ 70,564 46.1 % $ (4,078) (5.8) % Middle East/Asia/Pacific 40,755 27.2 % 47,532 31.1 % (6,777) (14.3) % Europe 24,640 16.4 % 21,648 14.2 % 2,992 13.8 % Africa 18,216 12.1 % 13,166 8.6 % 5,050 38.4 % Total $ 150,097 100.0 % $ 152,910 100.0 % $ (2,813) (1.8) % Six Months Ended June 30, Change 2021 2020 $ % % of
CFR% of
CFRAmericas $ 28,263 48.3 % 42.5 % $ 29,741 51.5 % 42.1 % $ (1,478) (5.0) % Middle East/Asia/Pacific 13,695 23.4 % 33.6 % 14,053 24.4 % 29.6 % (358) (2.5) % Europe 9,444 16.1 % 38.3 % 8,229 14.3 % 38.0 % 1,215 14.8 % Africa 7,112 12.2 % 39.0 % 5,654 9.8 % 42.9 % 1,458 25.8 % Total $ 58,514 100.0 % 39.0 % $ 57,677 100.0 % 37.7 % $ 837 1.5 % interest of $607,000 paid to a subcontractor$1,400 decrease in 2015bad debt expense as a result of a legal settlement.Income TaxesFor the three months ended September 30, 2016 and 2015, the Company recognized income tax expensereceiving payments against previously reserved receivables. In addition, there was a $1,600 additional depreciation charge in the first quarter of $2,880,000 and $4,210,000, respectively. The income tax expense in both periods was2020 for the write-off of leasehold improvements related to the pre-tax income generated from foreign operations adjusted for discrete itemsCompany subletting office space in Philadelphia to a third party, which did not reoccur in 2021 Also, during the period in 2020 computer equipment and without recognizing an income tax benefitsoftware costs were approximately $100 higher than the current year period primarily related to the U.S. net operating loss which management believes the Company will not be able to utilize. For the three months ended September 30, 2016, thereremote working. Offsetting these decreases was no changea $3,000 increase in the reserve for uncertain tax positions. The Company recognized an income tax benefit for the three months ended September 30, 2015 of $37,000 resulting from adjustments to agree the prior year book amount to the actual amounts per the tax return.The effective income tax rates for the three months ended September 30, 2016 and 2015 were (74.3%) and 55.8%, respectively. For both years, the Company’s effective tax rate is significantly higher than it otherwise would be primarily as a result of various foreign withholding taxes and not being able to record an income tax benefit related to the U.S. net operating loss.Net (Loss) Earnings Attributable to Hill International, Inc.Net loss attributable to Hill International, Inc. for the three months ended September 30, 2016 was ($6,866,000), or ($0.13) per diluted common share, based on 51,753,000 diluted common shares outstanding, as compared to net earnings for the three months ended September 30, 2015 of $2,948,000, or $0.06 per diluted common share, based upon 51,803,000 diluted common shares outstanding.Nine Months Ended September 30, 2016 Compared toNine Months Ended September 30, 2015Consulting Fee Revenue (“CFR”) (dollars in thousands)The decrease in CFR included an organic decrease of 2.8% primarily in the Middle East and Latin America, partially offset by an increase of 0.3%labor costs due to the acquisitionlifting of IMS Proje Yonetimi ve Danismanlik A.S. (“IMS”) in April 2015. The recent drop in oil prices, as well as ongoing political upheavalCOVID-19 stay at home orders and civil unrest, has had a negative effect on business, particularly the construction industry, in the Middle East where construction projects have been suspended or have had scope reductions. This trend could continueramping up of projects. SG&A expenses represented approximately 36.5% and 35.9% of CFR for the next few years.The decrease in Project Management CFR included an organic decreasesix months ended June 30, 2021 and 2020, respectively.3.8%, partially offset$2,240 and $4,316 for the six months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021, the foreign currency exchange losses were primarily caused by an increasethe strengthening of 0.5% duethe Euro against the US Dollar and currencies pegged to the acquisition of IMS. The decrease included a $21,551,000 decrease in international projects, partially offset by an increase of $10,002,000 in domestic projects. The decrease in international Project Management CFR was due primarily to decreases in the Middle East and Latin America. The increase in domestic CFR occurred throughout the United States.Construction Claims CFR was essentially flat with increases in the Middle East, Europe and Australia offset by decreases in the United States and Latin America.Reimbursable Expenses (dollars in thousands)Reimbursable expenses consist of amounts paid to subcontractors and other third parties, and travel and other job-related expenses that are contractually reimbursable from clients. These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statements of operations. The increase in Project Management reimbursable expense is primarily due to higher use of subcontractors in our Mid-Atlantic region,US Dollar, partially offset by a decrease in subcontractors in the Northeast region. The decrease in Construction Claims reimbursable expense is primarily due to decreases in the United Kingdom and the Middle East.Cost of Services (dollars in thousands)
CFR
CFRCost 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 Project Management cost of services is primarily due to decreases in the Middle East direct labor due to lower CFR, partially offset by increased direct labor in the United States supporting increased CFR.Gross Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management gross profit included decreases throughout the Middle East and Latin America partially offset by increases in the United States.Construction Claims gross profit, which was essentially flat compared to last year, included increases in the United Kingdom and the Middle East, partially offset by decreases in the United States and Asia/Pacific.The overall gross profit percentage decreased due to lower margins achieved in the Middle East, primarily Oman and Qatar.Selling, General and Administrative (“SG&A”) Expenses (dollars in thousands)The increase in selling general and administrative expenses was primarily due to the following:· An increase of $9,338,000 in bad debt expense primarily for increased reserves for certain accounts receivable in the Middle East and Asia/Pacific;· An increase in legal fees of $1,236,000 due primarily to higher legal costs incurred in 2016 compared to 2015 in connection with the proxy contests in both years partially offset by an employee labor dispute amounting to $1,048,000 in 2015;· A decrease in unapplied and indirect labor of $1,362,000 due to staff reductions in late 2015 and early 2016 due to decreased CFR;· A decrease of $1,159,000 in amortization expense as certain acquired intangible assets have become fully amortized; and· A credit for a previously accrued earn-out liability of $673,000 related to the IMS acquisition which was not earned as70% weakening of the twelve month measurement date.Operating Profit (dollars in thousands)
CFR
CFRThe decrease in Project Management operating profit was due primarily toLibyan Dinar against the increaseEuro and an 8% weakening of $9,061,000 of bad debts expense primarily in the Middle East coupled with a decline in CFR throughoutEgyptian pound against the Middle East partially offset by an increase inEuro. For the United States.The decrease in Construction Claims operating profit was primarily due to CFR decreases in the United Kingdom, Asia/Pacific and the United States and to higher bad debt expense of $277,000Corporate expenses increased by $1,088,000 primarily due to legal fees associated with the proxy contest. Corporate expenses represented 6.1% of CFR during the ninesix months ended SeptemberJune 30, 2016 compared2020, the foreign currency exchange losses were primarily caused by a 28.6% weakening of the Brazilian Real against the Euro prior to 5.7% during the nine months ended September 30, 2015. Expense and Related Financing Fees, netdecreased $1,149,000increased $256 to $10,103,000$2,851 for the six months ended June 30, 2021 as compared with $2,595 for six months ended June 30, 2020, which includes $78 of interest income.nine months ended September 30, 2016 comparedfirst quarter of 2020 related to $11,252,000 during the nine months ended September 30, 2015 primarily due to interestcancellation of $607,000 paid to a subcontractor in 2015PDIC Economic Stimulus Program Loan Agreement that the Company made on October 24, 2014 as a result of a legal settlement.ninesix months ended SeptemberJune 30, 20162021 and 2015, the Company2020, we recognized an income tax expense of $6,939,000$2,869 and $7,980,000,$1,705, respectively. The income tax expense in both periods was related to the pre-tax income generated from foreign operations adjusted for discrete items during the period and without recognizing an income tax benefit related to the U.S. net operating loss which management believes the Company will not be able to utilize. For the nine months ended September 30, 2016 and 2015, the Company recognized an income tax (benefit) expense related to an increase in the reserve for uncertain tax positions totaling $(14,000) and $245,000, respectively, primarily due to tax positions taken in foreign jurisdictions. The Company also recognized an income tax expense (benefit) resulting from adjustments to agree the prior year’s book amounts to the actual amounts per the tax returns totaling $535,000 and $(37,000) in the nine months ended September 30, 2016 and 2015, respectively.ratesrate for the nine monthssix-month periods ended SeptemberJune 30, 20162021 and 2015 were 222.8%2020 was (2,656.5)% and 47.8%(25.6)%, respectively. For both years,The change in the Company’s effective tax rate is significantly higher than it otherwise would befor the six months ended June 30, 2021 was primarily as a result of the mix of income among various foreign jurisdictions with different statutory tax rates, as well as certain withholding taxes and not being able to record an incomeuncertain tax benefit related to the U.S. net operating loss.Net (Loss) Earnings Attributable to Hill International, Inc.Net loss attributable to Hill International, Inc. for the nine months ended September 30, 2016 was ($3,926,000), or ($0.08) per diluted common share, based upon 51,704,000 diluted common shares outstanding, as compared to net earnings for the nine months ended September 30, 2015positions recorded in 2021.$8,045,000, or $0.16 per diluted common share, based upon 51,274,000 diluted common shares outstanding.Non-GAAP Financial MeasuresEBITDA, 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. We believe that EBITDA is useful to investors 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 asinterest 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 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):
September 30,
September 30,At September 30, 2016,sources of liquidity consisted of $21,219,000source 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.equivalents, of which $19,337,000 was on deposit in foreign locations, hand and $1,218,000 of available borrowing capacity under our various credit facilities. At September 30, 2016, we were in default of our Consolidated Net Leverage Ratio. On November 1, 2016, we received a waiver of the default from the Agent. Afterwards, we had $2,494,000 of available borrowing capacity under our domestic credit agreement, all of which is available to be borrowed without violating the Consolidated Net Leverage Ratio covenant. See Note 8 to our consolidated financial statements for a description of ourrevolving credit facilities to fund the working capital requirement caused by the lag discussed above and term loan.other operating needs. We believe that we haveour expected cash receipts from clients, together with current cash on hand and revolving credit facilities, are 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 cancellationmonths from August 9, 2021, the date of major contracts or further delays in receivable collections, could adversely affectthis report.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.In 2012, we commenced operations on the Oman Airport project with the Ministry of Transportation 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 and have since commenced additional work, which we expect to last approximately 18 months. When the MOTC resumed payments in 2016, we received approximately $15,000,000 in March, approximately $1,800,000 in April, approximately $14,100,000 in June, approximately $3,200,000 in Octoberand approximately $7,900,000 in November. At September 30, 2016, accounts receivable from Oman totaled approximately $29,500,000. After receipt of the October and November payments, approximately $7,900,000 was past due based on contractual terms. Although MOTC has not made payments under the contractual terms of the first extension and second extension amendments, we have received full payment under the first extension 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 2016 budget, the MOTC has certified the past due invoices, MOTC is committed to paying its obligations to us including consideration of a payment plan, and we have received significant payments totaling $11,100,000 during the past two months and a total of approximately $42,000,000 in 2016.The amount of CFR attributable to operations in the Middle East and Africa has grown from approximately 32% in 2011 to approximately 49% of total consolidated CFR in the first nine months of 2016. We have recently experienced a slowdown in collections from our clients in the Middle East primarily due to the recent 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.Additional Capital RequirementsOur subsidiary, Hill International (Spain), S.A. (“Hill Spain”), owns 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 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 with a value of BRL 8,656,000 (approximately $2,655,000 at September 30, 2016). This amount is subject to negotiation with the three minority shareholders.Hill Spain also maintains a revolving credit facility with six banks. At September 30, 2016, outstanding borrowings were approximately $2,995,000. The facility expires on December 17, 2016 and will be paid off and terminated.On October 31, 2014, our subsidiary Hill International (UK) Ltd. acquired all of the outstanding common stock of Angus Octan Scotland Ltd., which included its subsidiary companies Cadogan Consultants Ltd., Cadogan Consult Ltd. and Cadogan International Ltd. (collectively, “Cadogans”). The sellers of Cadogans are entitled to an earn out of £200,000 based upon Cadogans’ average earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the two-year period ending on October 31, 2016. Based on preliminary information, it appears that EBITDA is sufficient to earn the £200,000 ($259,000).Two of the selling shareholders of Cadogans may receive an earn-out in annual installments of up to £100,000 ($130,000) at September 30, 2016), which will be charged to earnings, provided that Cadogans’ EBITDA for each of the years ending October 31, 2016, 2017, 2018 and 2019 is greater than £396,000 ($513,000). Based upon preliminary results, it appears that the two shareholders will receive an earnout amounting to £100,000 ($130,000)equivalents, of which £92,000 ($120,000) has been accrued$18,455 was on deposit in foreign locations, and charged to earnings for the three and nine months ended September 30, 2016.Sources of Additional CapitalWe have an effective registration statement on Form S-3 on file with the U.S. Securities and Exchange Commission (the “SEC”) to register 20,000,000 shares of our common stock for issuance and sale by us at various times in the future. To date, we have issued 9,546,629 shares, 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 Facility. We cannotpredict 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. 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 September 30, 2016, we had $1,218,000$7,288 of available borrowing capacity under our various foreign credit agreements. Onfacilities. The Company has received a commitment letter from a bank to enter into a new credit facility which will include a term loan and a revolving credit facility. The proceeds from the term loan and an initial draw on the revolving credit facility will be used to pay off the Secured Credit Facilities and for general working capital purposes. The Company expects to enter into the new credit facility by September 30, 2016, we were in default of our Consolidated Net Leverage Ratio covenant. On November 1, 2016, we received a waiver of the default from the Agent. Afterwards, we had $2,494,000 of available borrowing capacity under our domestic credit agreement, all of which is available to be borrowed without violating the Consolidated Net Leverage Ratio covenant.SeptemberJune 30, 2016,2021, we had approximately $48,875,000$52,165 of availability under these arrangements.We Our sources of liquidity under arrangements with foreign banks are available for repatriation as deemed necessary by us, with some restrictions and tax implications.Flow Activity FlowsSix Months Ended June 30, 2021 Change 2020 Net cash used in operating activities $ (13,159) $ (8,605) $ (4,554) Net cash used in investing activities (1,770) (798) (972) Net cash provided by financing activities 4,320 (8,740) 13,060 Effect of exchange rate changes on cash, cash equivalents and restricted cash (2,105) (1,259) (846) Deconsolidated cash — (9) 9 Net decrease in cash, cash equivalents and restricted cash $ (12,714) $ 6,679 Nine Months Ended September 30, 2016For the ninesix months ended SeptemberJune 30, 2016, our cash and cash equivalents decreased by $2,870,000 to $21,219,000. Cash used in operations was $5,329,000, cash used in investing activities was $2,584,000 and cash provided by financing activities was $6,652,000. We also experienced a decrease in cash of $1,609,000 from the effect of foreign currency exchange rate fluctuations.Operating ActivitiesOur operations used cash of $5,329,000 for the nine months ended September 30, 2016. This compares to2021, cash used in operating activities of $3,592,000 for the nine months ended September 30, 2015. We had a consolidated net loss in the nine months ended September 30, 2016 amounting to $3,824,000 compared to consolidated net earnings of $8,720,000 in the nine months ended September 30, 2015. Depreciation and amortization was $7,705,000 in the nine months ended September 30, 2016 compared to $8,286,000 in the nine months ended September 30, 2015; the decrease in this category is primarily due to the full amortization of the shorter-lived intangible assets of companies which we acquired over the last several yearsincreases in accounts receivable and prepaid expenses, partially offset by amortization of intangibles arising from the acquisitions of Cadogans and IMS and thean increase in property and equipment primarilyaccounts payable related to the relocationtiming of payments to vendors and subcontractors and an increase in other current liabilities. During the six months ended June 30, 2020, cash used in operating activities was primarily due to increases in accounts receivable - affiliates related to slower collections as discussed above under Impact of COVID-19 on our corporate headquarters to Philadelphia.and letters of credit and escrow. Restricted cash increased from $7,184 at September 30, 2016 and December 31, 2015 were $4,886,000 and $4,694,000, respectively.Average days sales outstanding (“DSO”) at September 30, 2016 was 118 days compared2020 to 98 days at September 30, 2015 and 111 days$7,721 at June 30, 2016. 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 was2021, primarily due to a slowingthe issuance of collections from our clients in the Middle East, particularly Oman.Although we continually monitor our accounts receivable, wenew collateral.thekey 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, and accounts payable and deferred revenue. Accounts receivable consist of billingto our clients for our consulting fees and other job-related costs. Prepaid expenses and other current assets consist of prepayments for various selling, general and administrative costs, such as insurance, rent, maintenance, etc. Accounts payable consist of obligations to third parties relating primarily to costs incurred for specific engagements, including pass-through costs such as subcontractor costs. Deferred revenue consists of payments received from clients in advance of work performed.business, as well as our acquisition activity.ActivitiesWeactivities$2,584,000in investing activities for the purchase of leasehold improvements, computers, office equipment, furniturea business and fixtures. Of this amount, $1,500,000for fixed asset purchases. During the six months ended June 30, 2020, cash was used to implement a database systemin investing activities for our Human Resource department.ActivitiesNetactivities$6,652,000. We repaid $900,000used to fund the ongoing operating activities.2014 Term Loan FacilityU.S. Dollar.$41,000liquidation of our operating subsidiary in Brazil (see Note 15 to the consolidated financial statements filed herein) and a 28.6% weakening of the Brazilian Real against the Philadelphia Industrial Development Corporation loan. We paid $1,531,000 for deferred consideration related to the IMS acquisition. We had net borrowings of $8,950,000 under our credit facility. We received $285,000 from purchases under our Employee Stock Purchase Plan and the exercise of stock options. We paid $111,000 as dividends to noncontrolling interests.Recent Accounting PronouncementsOn May 28, 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 about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. The ASU allows for either retrospective or prospective 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. We are in the process of determining the method of adoption and assessing the impact of the ASU on our consolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Financial Instruments — Overall (Topic 825-10), which requires all equity investments to be measured a fair value with changes in fair value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amendments in this ASU also require an entity to (1) present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (2) provide separate presentation 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 ASU 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 will be effective for us commencing January 1, 2018. We are in the process of assessing the impact of this ASU on our consolidated financial statements.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require us to recognize lease assets and lease liabilities (related to leases previously classified as operating under previous GAAP) on our consolidated balance sheet. The ASU will be effective for us commencing January 1, 2019. We are in the process of assessing the impact of this ASU on our 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 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.Quarterly FluctuationsOur 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.We believe a strong indicator of our future performance is our backlog of uncompleted projects under contract or awarded. in handin-hand that we expect to resultrecognize as CFR in future consulting feeperiods as a component of total revenue. Project ManagementOur backlog is evaluated by management, on a project-by-project basis, and is reported for each period shown based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or cancelled. Construction Claims backlog is based largely on management’s estimates of future revenue based on known construction claims assignments and historical results for new work. Because a significant number of construction claims may be awarded and completed within the same period, our actual construction claims revenue has historically exceeded backlog by a significant amount.Our backlog is important to us in anticipating and planning for our operational needs. canceled.GAAP,generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.At September 30, 2016, our backlog was $944,000,000 compared to $949,000,000 at June 30, 2016. Our net bookings during the third quarter of 2016 were $143,000,000, which equates to a book-to-bill ratio of approximately 97%. While this is short of our expectations, it is consistent with the stoppage or scaling back of projects in the Middle East due to the economic impact caused by the recent drop in oil prices and the political upheaval and civil unrest in the region. This will continue to be a major area of focus for the balance of 2016 and in 2017. We estimate that approximately $413,000,000,or 43.8%, of the backlog at September 30, 2016 will be recognized during the twelve months subsequent to September 30, 2016. Historically, the impact of terminations and modifications on our realization of revenue from our backlog has not been significant; however, there can be no assurance that such changes will not be significant in the future. Furthermore, reductions of our backlog as a result of contract terminations and modifications may be offset by additions to the backlog.revenue. Total Backlog 12-Month Backlog June 30, 2021 Americas $ 282,332 41.9 % $ 107,896 42.8 % Middle East/Asia/Pacific 165,739 24.7 % 72,226 28.6 % Europe 100,613 15.0 % 37,852 15.0 % Africa 123,590 18.4 % 34,240 13.6 % Total $ 672,274 100.0 % $ 252,214 100.0 % December 31, 2020 Americas $ 276,752 41.6 % $ 105,721 45.2 % Middle East/Asia/Pacific 160,211 24.0 % 66,407 28.3 % Europe 105,478 15.8 % 37,062 15.8 % Africa 124,273 18.6 % 25,187 10.7 % Total $ 666,714 100.0 % $ 234,377 100.0 % RiskRefer to the Company’s 2015 Annual Report on Form 10-K forRisk.complete discussionsmaller reporting company as defined by Rule 12b-2 of the Company’s market risk. There have been no material changesSecurities Exchange Act of 1934 and are not required tomarket risk information included in the Company’s 2015 Annual Report.under this item.(asas such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of SeptemberJune 30, 2016.2021. Management concluded that, due to the on-going remediation associated with the material weakness identified in our 20152020 Annual Report on Form 10-K (“20152020 Form 10-K)10-K"), our disclosure controls and procedures were ineffective as of SeptemberJune 30, 20162021 to provide reasonable assurance that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.companyCompany have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. However, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.ChangesInternal Control over Financial ReportingOur remediation efforts were ongoing during the three months ended September 30, 2016,reports that it files or submits under the Exchange Act is recorded, processed, summarized and other than those remediation efforts describedreported, within the time periods specified in “Management’s Remediation Initiatives”the SEC’s rules and forms. The definition further states that disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed by a company in Item 9Athe reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.our 2015 Form 10-K, there were no other material changesdeficiencies, in our internal control over financial reporting, such that occurred duringthere is a reasonable possibility that a material misstatement of the three months ended September 30, 2016 that materially affected,annual or that are reasonably likely to materially affect, our internal control overinterim financial reporting.However, as explained in greater detail under Item 9A of our 2015 Form 10-K for the year ended December 31, 2015, we have,statements will not be prevented or are in the process of, implementingdetected on a broad range of remedial procedures to address the material weaknesses in our internal control over financial reporting identified in our 2015 Form 10-K. Our efforts to improve our internal controls are ongoing and focused on:· Enhancing existing procedures and controls to more thoroughly assess unusual significant items. While we have completed our testing of these new controls and have concluded they are in place and operating as designed, weare monitoring their ongoing effectiveness, and will consider the material weakness remediated after the applicable remedial controls operate effectively for an additional period of time.· Enhancing our close the books processes at the corporate and local levels to ensure effective management reviews and communication with accounting personnel over the accounting for estimates and non-routine transactions.Therefore, while there were no changes, other than the matter discussed above, in our internal control over financial reporting in the three months ended September 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, we continued monitoring the operation of these remedial measures through the date of this Form 10-Q.2015,2020 and the remedial measures undertaken to address these material weaknesses, investors are encouraged to review Item 9A, Disclosure Controls and Procedures, of our 2020 Form 10-K.2015 Form 10-K.internal control over financial reporting that occurred during the six months ended June 30, 2021 that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. risk factors discussed inCompany’s 2015 Annual Report.10.1Employment Agreement between the Company and Raouf S. Ghali, dated August 18, 2016 (Included as Exhibit 10.1 to the Registrant’s Current Report on Form 89-K filed on August 19, 2016 and incorporated herein by reference).10.2Settlement Agreement among the Company, Bulldog Investors LLC, and certain directors of the Company, dated September 16, 2016.31.131.2 31.232.1 32.132.2 32.2101.INS 101.INS101.SCH 101.SCH101.PRE 101.PRE101.CAL 101.CAL101.LAB 101.LABLinkbase Document.101.DEF 101.DEF104 The cover page of this Quarterly Report on Form 10-Q, formatted in Inline XBRL registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.Hill International, Inc. By: /s/ Raouf S. Ghali Dated: November 14, 2016By:/s/ David L. RichterDavid L. RichterDated: August 9, 2021 Dated: November 14, 2016John Fanelli IIIJohn Fanelli IIIExecutive Vice President andChief Financial Officer(Principal Financial Officer)Dated: November 14, 2016By:/s/Ronald F. EmmaRonald F. EmmaChief Accounting(Principal Financial Officer( and Principal Accounting Officer)Dated: August 9, 2021