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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from                                          to 
Commission File Number: 001-33961
HILL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-0953973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Square 
2005 Market Street, 17th Floor
PhiladelphiaPA19103
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:  (215) 309-7700

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

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001HILNew York Stock Exchange(NYSE)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). 
Yes  ý     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act
Large Accelerated Filer Accelerated Filer
Non-Accelerated Filer Smaller Reporting Company
   Emerging Growth Company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes   No  ý

There were 56,227,924 shares of the Registrant’s Common Stock outstanding at October 29, 2020.



HILL INTERNATIONAL, INC. AND SUBSIDIARIES
 
Index to Form 10-Q
 
 
   
   
 
   
 
   
 
   
 
   
 
   
   
   
   
   
   
   
   
   
   
   
   
3


PART I
 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and it is Hill International, Inc.'s (the "Company") intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein including, but not limited to, any projections of revenues, earnings, margin, profit improvement, cost savings or other financial items; any statements of belief, any statements concerning the Company's plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance, are forward-looking statements.
 
These forward-looking statements are based on the Company's current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although the Company believes that the expectations, estimates and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.
 
Those forward-looking statements may concern, among other things:
 
The markets for the Company's services;
Projections of revenues and earnings, anticipated contractual obligations, funding requirements or other financial items;
Statements regarding the impact and effect of the COVID-19 pandemic;
Statements concerning the Company's plans, strategies and objectives for future operations; and
Statements regarding future economic conditions or the Company's performance.
 
Important factors that could cause the Company's actual results to differ materially from estimates or projections contained in our forward-looking statements include:
 
The risks set forth in Item 1A, “Risk Factors,” in the Company's most recent Annual Report on Form 10-K;
Unfavorable global economic conditions may adversely impact its business;
Our backlog, which is subject to unexpected adjustments and cancellations, may not be fully realized as revenue;
Our expenses may be higher than anticipated;
Modifications and termination of client contracts;
Control and operational issues pertaining to business activities that the Company conducts pursuant to joint ventures with other parties; and
The ability to retain and recruit key technical and management personnel.
 
Other factors that may affect the Company's business, financial position or results of operations include:
 
Unexpected delays in collections from clients;
Risks related to the effect of the COVID-19 pandemic on the Company, including its employees and related costs and including any project cancellations, delays and modifications;
Risks of the Company's ability to obtain debt financing or otherwise raise capital to meet required working capital needs and to support potential future acquisition activities;
Risks of international operations, including uncertain political and economic environments, acts of terrorism or war, potential incompatibilities with foreign joint venture partners, foreign currency fluctuations, civil disturbances and labor issues; and
Risks related to contracts with governmental entities, including the failure of applicable governing authorities to take necessary actions to secure or maintain funding for particular projects with us, the unilateral termination of contracts by the governments and reimbursement obligations to the government for funds previously received.
 
The Company does not intend, and undertakes no obligation to, update 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.

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PART I — FINANCIAL INFORMATION
Item 1.   Financial Statements.
HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 September 30, 2020December 31, 2019
Assets(Unaudited)
Cash and cash equivalents$33,270 $15,915 
Cash - restricted4,680 4,666 
Accounts receivable, net104,764 103,892 
Current portion of retainage receivable12,540 16,459 
Accounts receivable - affiliates25,070 18,776 
Prepaid expenses and other current assets12,148 9,340 
Income tax receivable1,822 2,256 
Total current assets194,294 171,304 
Property and equipment, net9,485 11,895 
Cash - restricted, net of current portion4,155 4,401 
Operating lease right-of-use assets14,022 17,451 
Financing lease right-of-use assets271  
Retainage receivable6,113 5,695 
Acquired intangibles, net165 232 
Goodwill45,253 48,024 
Investments3,055 1,711 
Deferred income tax assets3,104 3,800 
Other assets2,520 5,038 
Total assets$282,437 $269,551 
Liabilities and Stockholders’ Equity
Current maturities of notes payable and long-term debt$3,261 $1,792 
Accounts payable and accrued expenses68,452 65,172 
Income taxes payable1,951 3,152 
Current portion of deferred revenue9,180 10,773 
Current portion of operating lease liabilities5,025 5,736 
Current portion of financing lease liabilities70  
Other current liabilities7,999 4,876 
Total current liabilities95,938 91,501 
Notes payable and long-term debt, net of current maturities54,362 41,150 
Retainage payable823 1,551 
Deferred income taxes418 419 
Deferred revenue1,887 3,041 
Non-current operating lease liabilities14,141 17,030 
Non-current financing lease liabilities274  
Other liabilities4,082 4,631 
Total liabilities171,925 159,323 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued
  
Common stock, $0.0001 par value; 100,000 shares authorized, 62,916 shares and 62,708 shares issued at September 30, 2020 and December 31, 2019, respectively6 6 
Additional paid-in capital214,596 212,759 
Accumulated deficit(77,781)(71,360)
Accumulated other comprehensive income (loss)1,673 (3,817)
Less treasury stock of 6,807 and 6,546 at September 30, 2020 and December 31, 2019, respectively(29,056)(28,231)
Hill International, Inc. share of equity109,438 109,357 
Noncontrolling interests1,074 871 
Total equity110,512 110,228 
Total liabilities and stockholders’ equity$282,437 $269,551 
See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Consulting fee revenue$71,543 $75,747 $224,453 $231,782 
Reimbursable expenses17,109 19,923 51,956 60,828 
Total revenue$88,652 $95,670 $276,409 $292,610 
Direct expenses59,998 64,086 190,078 198,288 
Gross profit$28,654 $31,584 $86,331 $94,322 
Selling, general and administrative expenses25,588 27,422 80,543 86,163 
Foreign currency exchange (benefit) loss(694)1,839 3,622 1,824 
 Plus: Share of profit of equity method affiliates983 780 2,021 1,911 
Operating profit$4,743 $3,103 $4,187 $8,246 
Interest and related financing fees, net1,275 1,485 3,870 4,408 
Other (loss) income, net(152)549 (3,654)549 
Earnings (loss) before income taxes$3,316 $2,167 $(3,337)$4,387 
Income tax expense (benefit)1,071 (340)2,776 2,248 
Net (loss) earnings$2,245 $2,507 $(6,113)$2,139 
Less: net earnings - noncontrolling interests131 26 308 176 
Net earnings (loss) attributable to Hill International, Inc.$2,114 $2,481 $(6,421)$1,963 
Basic earnings (loss) per common share - Hill International, Inc.$0.04 $0.04 $(0.11)$0.03 
Basic weighted average common shares outstanding56,702 56,549 56,551 56,178 
Diluted earnings (loss) per common share - Hill International, Inc.$0.04 $0.04 $(0.11)$0.03 
Diluted weighted average common shares outstanding56,702 56,549 56,551 56,178 
 
See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
(In thousands)
(Unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Net earnings (loss)$2,245 $2,507 $(6,113)$2,139 
Foreign currency translation adjustment, net of tax639 (237)5,385 (1,111)
Comprehensive earnings (loss)2,884 2,270 (728)1,028 
Less: Comprehensive earnings attributable to noncontrolling interests376 32 203 246 
Comprehensive earnings (loss) attributable to Hill International, Inc.$2,508 $2,238 $(931)$782 
 
See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands) 
 Common StockAdditional
Paid-in
Retained
Earnings
Accumulated Other
Comprehensive
Treasury StockHill Share of Stockholders’Non-controllingTotal
Stockholders’
 SharesAmountCapital(Deficit)Income (Loss)SharesAmountEquityInterestsEquity
Balance - December 31, 201962,708 $6 $212,759 $(71,360)$(3,817)6,546 $(28,231)$109,357 $871 $110,228 
Net earnings (loss)— — — (8,535)— — — (8,535)177 (8,358)
Other comprehensive income (loss)— — — — 5,096 — — 5,096 (350)4,746 
Share-based compensation expense— — 1,201 — — — — 1,201 — 1,201 
Shares issued under employee stock purchase plan162 — 201 — — — — 201 — 201 
Transfer of shares pledged as collateral (1)
(261)— — — — 261 (825)(825)— (825)
Balance - June 30, 202062,609 $6 $214,161 $(79,895)$1,279 6,807 $(29,056)$106,495 $698 $107,193 
Net income (loss)— — — 2,114 — — — 2,114 131 2,245 
Other comprehensive income (loss)— — — — 394 — — 394 245 639 
Shares issued to Board of Directors291 — — — — — — — —  
Share-based compensation expense— — 415 — — — — 415 — 415 
Shares issued under employee stock purchase plan16 — 20 — — — — 20 — 20 
Balance - September 30, 202062,916 $6 $214,596 $(77,781)$1,673 6,807 $(29,056)$109,438 $1,074 $110,512 
Balance - December 31, 201862,181 $6 $210,084 $(85,444)$(2,575)6,546 $(28,231)$93,840 $605 $94,445 
Net income (loss)— — — (518)— — — (518)150 (368)
Other comprehensive income (loss)— — — — (938)— — (938)64 (874)
Shares issued to Board of Directors24 — — — — — — — —  
Share-based compensation expense— — 1,042 — — — — 1,042 — 1,042 
Shares issued under employee stock purchase plan57 — 113 — — — — 113 — 113 
Balance - June 30, 201962,262 $6 $211,239 $(85,962)$(3,513)6,546 $(28,231)$93,539 $819 $94,358 
Net income (loss)— — — 2,481 — — — 2,481 26 2,507 
Other comprehensive income (loss)— — — — (243)— — (243)6 (237)
Shares issued to Board of Directors104 — — — — — — — —  
Share-based compensation expense322 — 1,212 — — — — 1,212 — 1,212 
Shares issued under employee stock purchase plan (2)
17 — 42 — — — — 42 — 42 
Balance - September 30, 201962,705 $6 $212,493 $(83,481)$(3,756)6,546 $(28,231)$97,031 $851 $97,882 

(1) Reflects 261 shares of the Company's common stock pledged as collateral under the terms of a secured promissory note payable to the Company. During the three months ended March 31, 2020, the Company exercised its right to retain the shares upon the note holder's agreement to relinquish the shares upon the promissory note maturity date.
(2) Included $21 of proceeds related to ESPP shares issued during the three months ended September 30, 2019 that were received in the subsequent period, but were excluded in Hill International, Inc.'s (the "Company") consolidated statements of cash flows.


See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended September 30,
 20202019
Cash flows from operating activities:
Net (loss) income$(6,113)$2,139 
Adjustments to reconcile net (loss) income to net cash provided by (used in):
Depreciation and amortization3,380 2,435 
(Recovery) provision for bad debts(1,306)(2,946)
Amortization of deferred loan fees521 539 
Deferred tax expense (benefit)500 659 
Share-based compensation1,616 2,254 
Operating lease right-of-use assets3,163 3,936 
Loss on liquidation of subsidiary4,064  
Foreign currency remeasurement losses3,622 104 
Deferred payroll tax payments2,711  
Changes in operating assets and liabilities:
Accounts receivable4,686 13,988 
Accounts receivable - affiliate(6,294)(6,306)
Prepaid expenses and other current assets(2,418)(2,136)
Income taxes receivable39 (748)
Retainage receivable(416)(2,559)
Other assets(2,643)920 
Accounts payable and accrued expenses1,641 (5,463)
Income taxes payable(1,161)(1,286)
Deferred revenue(2,451)(2,235)
Operating lease liabilities(3,259)(4,361)
Other current liabilities3,426 (264)
Retainage payable(730)624 
Other liabilities688 1,422 
Net cash provided by operating activities3,266 716 
Cash flows from investing activities:
Purchase of property and equipment(1,101)(2,958)
Net cash used in investing activities(1,101)(2,958)
Cash flows from financing activities:
Proceeds from term loans1,291  
Repayment of term loans(666)(795)
Proceeds from revolving loans38,486 10,070 
Repayment of revolving loans(24,268)(4,977)
Proceeds from stock issued under employee stock purchase plan221 167 
Net cash provided by financing activities15,064 4,465 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(97)(170)
Deconsolidated cash9  
Net increase in cash, cash equivalents and restricted cash17,123 2,053 
Cash, cash equivalents and restricted cash — beginning of period24,982 23,107 
Cash, cash equivalents and restricted cash — end of period$42,105 $25,160 
 Nine Months Ended September 30,
Supplemental disclosures of cash flow information:20202019
Interest and related financing fees paid$2,722 $4,113 
Income taxes paid2,018 2,484 
Transfer of proceeds from shares pledged as collateral to treasury stock825  
Cash paid for amounts included in the measurement of lease liabilities5,914 6,062 
Right-of-use assets obtained in exchange for operating lease liabilities (1)
288 19,340 
Right-of-use assets obtained in exchange for finance lease liabilities475 
(1) Amount for the nine months ended September 30, 2019 relates to the Company's January 1, 2019 adoption of Accounting Standards Update 2016-2, Leases (Topic 842). See Note 14 - Leases to the Company's Consolidated Financial Statements.

 See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data)
 

Note 1 — The Company
 
Hill International, Inc. (“Hill” or the “Company”) is a professional services firm that provides program management, project management, construction management and other consulting services primarily to the buildings, transportation, environmental, energy and industrial markets worldwide. Hill’s clients include the U.S. federal government, U.S. state and local governments, foreign governments and the private sector.

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

Note 2 — Liquidity
 
At September 30, 2020 and December 31, 2019, the Company's principal sources of liquidity consisted of $33,270 and $15,915 of cash and cash equivalents, respectively, $1,573 and $9,052 of available borrowing capacity under the Domestic Revolving Credit Facility, respectively, $1,012 and $3,145 of available borrowing capacity under the International Revolving Credit Facility, respectively, and $738 and $2,538 under other foreign credit agreements, respectively. Additional information regarding the Company's credit facilities is set forth in Note 9 - Notes Payable and Long-Term Debt.

In December 2019, COVID-19 was identified in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 a global pandemic as a result of the further spread of the virus into all regions of the world, including those regions where the Company's primary operations occur. The effects of this global pandemic on the Company includes anticipated lower gross and operating margins, as well as temporary delays in certain accounts receivable collections. These effects may continue in the foreseeable future. The Company is focused on preserving its principal sources of liquidity and managing its cash flow and will continue to evaluate the potential short-term and long-term implications of COVID-19 on its consolidated statements of operations. The Company now expects to achieve $11,000 - $13,000 in corporate cost reductions in 2020, an increase in savings over the $10,000 previously disclosed on Form 10-Q for the period ended June 30, 2020. The Company believes that it has adequate liquidity and business plans to continue to operate the business and mitigate the risks associated with COVID-19 for the next 12 months from November 9, 2020, 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.

Note 3 — Basis of Presentation
 
Summary
 
The accompanying unaudited interim consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") pertaining to reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("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 and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The interim operating results are not necessarily indicative of the results for a full year.
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Reclassification

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

Foreign currency transaction gains and losses that in previously periods had been included in selling, general and administrative expenses line item on the Consolidated Statements of Operations are presented as a separate line item on the Consolidated Statements of Operations for the three and nine months ended September 30, 2020. The related foreign currency transaction gains and losses for the three and nine months ended September 30, 2019 have been recast to reflect this change. This change has no impact on the total operating profit/(loss) reported.

Certain accrued agency fees that had previously been included in accrued payroll and related expenses in the components of accounts payable and accrued expenses table in Note 8 - Accounts Payable and Accrued Expenses are currently being included within the accrued agency fees line item. The related amounts at December 31, 2019 have been recast to reflect this change.

Other (Loss) Income, net

During the nine months ended September 30, 2020, a loss of $4,064 was recognized due to the bankruptcy filing and deconsolidation of our operating subsidiary in Brazil (see Note 15), net of other non-operating income of $65. An additional $345 of other income was recognized during the three months ended March 31, 2020, representing the cancellation of a loan agreement made with the PIDC-Local Development Corporation that was funded to the Company on October 24, 2014 as part of the city of Philadelphia's (the "City") Economic Stimulus Program. In February 2020, the City agreed to cancel this loan as a result of the Company satisfying all obligations upon which cancellation of such debt was conditioned in the Loan Agreement.

During the three months ended September 30, 2019, the Company recognized $649 of income in Other (Loss) Income, net, related to the settlement of a $1,000 grant received from the Pennsylvania Department of Community and Economic Development (the "PADCED") in May 2015 (the "Grant"), net of $100 of expense related to other non-operating activity. The Grant was used as part of the relocation of Hill's corporate headquarters to the city of Philadelphia where partial or full repayment of the Grant is required if specific conditions were not met, which included maintaining a minimum number of employees throughout 2018, among other conditions, with the possibility of extension at the PADCED's discretion. In July 2019, the PADCED concluded that the Company is required to repay $351 of the Grant since the Company failed to meet its employment commitment. In July 2020, the PADCED agreed to further reduce the required repayment to $324 payable in four installments of $81 with the last installment due May 1, 2021.

Summary of Significant Accounting Policies

(a)                                 Foreign Currency Translations and Transactions

Assets and liabilities of all foreign operations are translated at period-end rates of exchange while revenues and expenses are translated at the average monthly exchange rates. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity titled accumulated other comprehensive loss until the entity is sold or substantially liquidated. Gains or losses arising from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency), including those resulting from intercompany transactions, are reflected in the Company's consolidated statements of operations. The impact of foreign exchange on long-term intercompany loans, for which repayment has not been scheduled or planned and permanent equity has been elected, are recorded in accumulated other comprehensive loss on the Company's consolidated balance sheets.

(b)                                 Concentrations of Credit Risk

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

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The Company maintains its cash accounts with high quality financial institutions. Although the Company believes that the financial institutions with which it does business will be able to fulfill their commitments, there is no assurance that those institutions will be able to continue to do so.

No single client accounted for 10% or more of total revenue for the three and nine months ended September 30, 2020 or 2019.

There was one client in Africa who represents 10% or more to gross accounts receivable at September 30, 2020 and December 31, 2019, respectively, which represents 15% and 17% of the gross accounts receivable balance at September 30, 2020 and December 31, 2019, respectively.

(c)                                 Allowance for Doubtful Accounts

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

(d)                                    Retainage Receivable

Retainage receivable represents balances billed but not paid by clients pursuant to retainage provisions in certain contracts and will be due upon completion of specific tasks or the completion of the contract.

(e)                                 Income Taxes

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

The Company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is more likely than not that the benefit will be ultimately realized. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

(f)                                 Revenue Recognition

The Company generates revenue primarily 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.

If estimated total costs on any contract project a loss, the Company charges the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and others are recorded in the accounting period in which the events indicating a loss are known and the loss can be reasonably estimated. These loss projects are re-assessed for each subsequent reporting period until the project is complete. Such revisions could occur at any time, and the effects may be material.
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See Note 4 - Revenue from Contracts with Clients for more detail regarding how the Company recognizes revenue under each type of its contractual arrangements.

(g)                                    Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows:
September 30, 2020December 31, 2019
Cash and cash equivalents$33,270 $15,915 
Cash - restricted4,680 4,666 
Cash - restricted, net of current portion4,155 4,401 
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows$42,105 $24,982 
(h)                                    Earnings (loss) per Share

Basic earnings (loss) per common share have been computed using the weighted-average number of shares of common stock outstanding during the period. 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.

The Company has outstanding options to purchase approximately 1,589 shares and 1,879 shares at September 30, 2020 and 2019, respectively. In addition, the Company had 715 and 511 restricted and deferred stock units outstanding at September 30, 2020 and 2019, respectively. These awards were excluded from the calculation of diluted loss per share for the three and nine months ended September 30, 2020 and 2019 because they were anti-dilutive.

The following table provides a reconciliation to net income (loss) used in the numerator for loss per share attributable to Hill:
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Net earnings (loss)$2,245 $2,507 $(6,113)$2,139 
Less: net earnings - noncontrolling interests131