Hill International, Inc.
Nov 13, 2006
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Hill International Announces Record Financial Results for Third Quarter 2006; Net Revenue Up 59.4% and Net Income Up 61.4%

MARLTON, N.J., Nov 13, 2006 (BUSINESS WIRE) -- Hill International (Nasdaq:HINT), the worldwide construction consulting firm, announced today record results for the third quarter and first nine months of 2006 (see attached tables). Highlights of Hill's performance for the third quarter of 2006 are as follows:

-- Revenue grew to $49.9 million, an increase of 67.5% from the third quarter of 2005.

-- Net revenue grew to $34.0 million, an increase of 59.4% from the third quarter of 2005.

-- Operating income grew to $3.7 million, an increase of 22.8% from the third quarter of 2005.

-- Net income grew to $2.9 million, an increase of 61.4% from the third quarter of 2005.

-- Total backlog at the end of the third quarter of 2006 increased to $286 million, up from $266 million at the end of the second quarter of 2006.

-- Twelve-month backlog at the end of the third quarter of 2006 increased to $125 million, up from $101 million at the end of the second quarter of 2006.

-- During the third quarter of 2006, Hill closed on its acquisition of James R. Knowles (Holdings) PLC.

"We are very pleased with our solid year-over-year growth in both revenue and profits," said Irvin E. Richter, Hill's Chairman and Chief Executive Officer. "Hill's acquisition of Knowles has increased our global network of offices and vastly expanded our client base. The integration of the company is proceeding well and their financial performance under Hill has exceeded our expectations," Richter added.

Third Quarter 2006

Hill's revenue during the three months ended September 30, 2006 increased 67.5% to $49.9 million from $29.8 million during the three months ended October 1, 2005. Net revenue (defined as revenue less reimbursable expenses) in the third quarter of 2006 totaled $34.0 million, a 59.4% increase from $21.4 million in the third quarter of 2005. The increase in net revenue during the 2006 third quarter was due primarily to net revenue growth of 49.0% for Hill's Project Management Group and net revenue growth of 101.6% for Hill's Construction Claims Group. The net revenue growth within the Construction Claims Group was largely attributable to the Knowles acquisition. Hill demonstrated continued strong growth in the Middle East, where net revenue grew 75.3% to $12.3 million in the third quarter of 2006 from $7.0 million in the same period of 2005. Hill also experienced strong growth in Europe, where net revenue grew 213.7% to $7.5 million in the 2006 third quarter from $2.4 million in the same period of 2005, due principally to the Knowles acquisition.

Gross profit increased to $15.3 million in the third quarter of 2006 from $10.4 million in the corresponding 2005 period, an increase of 46.4%. Gross profit margin as a percentage of net revenue declined to 44.8% in the third quarter of 2006 from 48.8% in the same period last year.

Hill's selling, general and administrative (SG&A) expenses grew 54.8% to $11.9 million in the third quarter of 2006 from $7.7 million in the same period of 2005, but declined as a percentage of net revenue to 34.9% in the third quarter of 2006 from 36.0% in the same period last year, due primarily to improved operating leverage from Hill's continued growth overall. Hill's SG&A expense grew in the third quarter of 2006 compared to the year-earlier period partly due to higher corporate overhead costs as a result of Hill becoming a public company in the interim.

Operating income in the third quarter of 2006 increased 22.8% to $3.7 million (or 10.9% of net revenue), from $3.0 million (or 14.1% of net revenue) in the comparable prior-year period. Net income in the third quarter of 2006 increased 61.4% to $2.9 million, or $0.12 per diluted share (based on approximately 23.5 million diluted weighted average shares outstanding), from net income of $1.8 million, or $0.14 per diluted share (based on approximately 13.1 million diluted weighted average shares outstanding) in the third quarter of 2005.

Hill's total backlog at September 30, 2006 was approximately $286 million, up from approximately $266 million at June 30, 2006. Of its total backlog on that date, Hill anticipates that approximately $125 million will be recognized within the following twelve months and approximately $161 million will be recognized after twelve months.

First Nine Months 2006

For the nine months ended September 30, 2006, Hill's revenue increased 61.9% to $130.2 million from $80.4 million for the nine months ended October 1, 2005. Net revenue for the first nine months of 2006 increased 48.2% to $87.4 million from $58.9 million in the first nine months of 2005. This increase was due to 44.4% growth in net revenue for Hill's Project Management Group and net revenue growth of 66.3% for Hill's Construction Claims Group. Net revenue in the Middle East grew 100.2% to $34.1 million during the first nine months of 2006 from $17.0 million in the same period of 2005. Net revenue in Europe grew 133.3% to $13.6 million during the first nine months of 2006 from $5.8 million in the same period of 2005.

Gross profit increased 38.6% in the first nine months to $38.8 million from $28.0 million in the corresponding 2005 period. SG&A expense increased 38.3% to $31.3 million in the first nine months of 2006 versus $22.6 million in the first nine months of 2005, but declined to 35.8% as a percentage of net revenue in the first nine months of 2006 from 38.4% in the same period last year, due primarily to a higher percentage of net revenue from Middle East project management work, where billing rates are lower and costs are higher.

Hill's operating income in the first nine months of 2006 rose 35.8% to $8.0 million (or 9.1% of net revenue) from $5.9 million (or 10.0% of net revenue) in the comparable prior-year period. Net income in the first nine months of 2006 rose 71.0% to $5.9 million, or $0.35 per diluted share (based on approximately 16.8 million diluted weighted average shares outstanding), from $3.4 million, or $0.25 per diluted share (based on approximately 13.7 million diluted weighted average shares outstanding), in the first nine months of 2005.

Knowles Acquisition

Hill acquired James R. Knowles (Holdings) PLC effective on September 1, 2006, so Hill's results for the third quarter include one month of financial results for Knowles. For the month of September 2006, Knowles had revenue of $4.3 million, net revenue of $3.7 million, gross profit of $1.9 million and operating profit of $0.4 million.

Conference Call

David L. Richter, Hill's President and Chief Operating Officer, and John Fanelli III, Hill's Senior Vice President and Chief Financial Officer, will host a conference call this morning at 11:00 am Eastern Time to discuss third quarter 2006 results. Interested parties may participate in the call by dialing (888) 787-0460 (Domestic) or (706) 679-3200 (International) approximately 10 minutes before the call is scheduled to begin and ask to be connected to the Hill International conference call. A recorded replay of the call will be available until 11:59 pm Eastern Time on Monday, November 20, 2006. Listeners may dial (800) 642-1687 (Domestic) or (706) 645-9291 (International) and use the code 1740194 for the replay. In addition, the conference call will be broadcast live over the Internet. To listen to the live call, please go to the "Investor Relations" section of Hill's website at www.hillintl.com, and click on "Financial Information," and then "Presentations and Calls". Please go to the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to participate in the live call, the conference call will be archived and can be accessed for approximately 90 days.

About Hill International

Hill International, with 1,400 employees in 60 offices worldwide, provides program management, project management, construction management, and construction claims services. Engineering News-Record magazine recently ranked Hill as the 17th largest construction management firm in the United States. For more information on Hill, please visit our website at www.hillintl.com.

Forward-Looking Statements

Any forward looking statements contained in the press release may fall within the definition of "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Any such statements are subject to risks and uncertainties, overall economic and market conditions, competitors' and clients' actions, and weather conditions, which could cause actual results to differ materially from those anticipated, including those risks identified in Hill's filings with the Securities and Exchange Commission. Accordingly, such statements should be considered in light of these risks. Any prediction by Hill is only a statement of management's belief at the time the prediction is made. There can be no assurance that any prediction once made will continue thereafter to reflect management's belief, and Hill does not undertake to update publicly its predictions, whether as a result of new information, future events or otherwise.

                       HILL INTERNATIONAL, INC.
           Condensed Consolidated Statements of Operations
            (Dollars in thousands, except per share data)
                             (Unaudited)

                       Three Months Ended        Nine Months Ended
                    September 30, October 1,  September 30, October 1,
                        2006         2005         2006         2005
                    ------------- ----------- ------------- ----------

Revenue             $     49,866  $   29,765  $    130,156  $  80,372
Reimbursable
 expenses                 15,837       8,415        42,778     21,427
                    ------------- ----------- ------------- ----------
Revenue, less
 reimbursable
 expenses                 34,029      21,350        87,378     58,945
Direct expenses           18,774      10,931        48,611     30,981
                    ------------- ----------- ------------- ----------
  Gross profit            15,255      10,419        38,767     27,964

Operating expenses
 (income)
  Selling, general
   and
   administrative
   expenses               11,892       7,684        31,317     22,644
Equity in affiliate         (331)       (274)         (533)      (559)
                    ------------- ----------- ------------- ----------

Operating income           3,694       3,009         7,983      5,879

Interest (income)
 expense, net                (36)        148           345        419

Minority Interest             13           -            13          -
                    ------------- ----------- ------------- ----------

Income before
 provision for
 income taxes              3,717       2,861         7,625      5,460

Provision for
 income taxes                806       1,057         1,735      2,015
                    ------------- ----------- ------------- ----------

Net income          $      2,911  $    1,804  $      5,890  $   3,445
                    ============= =========== ============= ==========

Basic net income
 per share          $       0.13  $     0.16  $       0.38  $    0.30
                    ============= =========== ============= ==========
Basic weighted
 average shares
 outstanding              22,284      11,586        15,506     11,586
                    ============= =========== ============= ==========

Diluted net income
 per share          $       0.12  $     0.14  $       0.35  $    0.25
                    ============= =========== ============= ==========
Diluted weighted
 average shares
 outstanding              23,513      13,105        16,927     13,749
                    ============= =========== ============= ==========

                       HILL INTERNATIONAL, INC.
                Condensed Consolidated Balanced Sheet
                        (Dollars in thousands)
                             (Unaudited)

                                            September 30, December 31,
                                                2006          2005
                                            ------------- ------------

Total Current Assets                        $     73,576  $    33,351
Total Assets                                $    102,725  $    40,723
Total Current Liabilities                   $     52,071  $    31,707
Total Liabilities                           $     61,381  $    34,564
Total Stockholders' Equity                  $     41,344  $     6,159

(HINT-G)

SOURCE: Hill International, Inc.

Hill International, Inc.
John P. Paolin, 856-810-6210
Vice President of Marketing
johnpaolin@hillintl.com
or
The Equity Group Inc.
Devin Sullivan, 212-836-9608
Senior Vice President
dsullivan@equityny.com

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