Hill International, Inc.
Hill International, Inc. (Form: 10-Q, Received: 08/05/2015 15:38:42)

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 10-Q

 


 

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

 

For the quarterly period ended June 30, 2015

 

or

 

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

 

For the transition period from                                          to                                         

 

Commission File Number: 001-33961

 

HILL INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

20-0953973

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

One Commerce Square
2005 Market Street, 17th Floor
Philadelphia, PA

 

19103

(Address of principal executive offices)

 

(Zip Code)

 

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

 

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

 

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

 

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

 

Large Accelerated Filer o

 

Accelerated Filer x

 

 

 

Non-Accelerated Filer o

 

Smaller Reporting Company o

 

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

 

There were 50,602,975 shares of the Registrant’s Common Stock outstanding at August 1, 2015.

 

 

 



Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBDISIARIES

 

Index to Form 10-Q

 

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements

3

 

 

 

 

Consolidated Balance Sheets at June 30, 2015 (unaudited) and December 31, 2014

3

 

 

 

 

Consolidated Statements of Earnings for the three and six months ended June 30, 2015 and 2014 (unaudited)

4

 

 

 

 

Consolidated Statements of Comprehensive Earnings for the three and six months ended June 30, 2015 and 2014 (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 (unaudited)

6

 

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2

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

25

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

37

 

 

 

Item 4

Controls and Procedures

38

 

 

 

Part II

OTHER INFORMATION

 

 

 

 

Item 1

Legal Proceedings

39

 

 

 

Item 1A

Risk Factors

39

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

39

 

 

 

Item 3

Defaults Upon Senior Securities

39

 

 

 

Item 4

Mine Safety Disclosures

39

 

 

 

Item 5

Other Information

39

 

 

 

Item 6

Exhibits

39

 

 

 

Signatures

 

40

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1.    Financial Statements.

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Cash and cash equivalents

 

$

31,571

 

$

30,124

 

Cash - restricted

 

14,276

 

8,851

 

Accounts receivable, less allowance for doubtful accounts of $10,526 and $11,142

 

237,501

 

194,256

 

Accounts receivable - affiliate

 

8,935

 

3,993

 

Prepaid expenses and other current assets

 

14,486

 

15,854

 

Income taxes receivable

 

3,840

 

2,833

 

Deferred income tax assets

 

1,055

 

1,188

 

Total current assets

 

311,664

 

257,099

 

Property and equipment, net

 

21,440

 

11,643

 

Cash - restricted, net of current portion

 

306

 

7,156

 

Accounts receivable - Libya

 

49,759

 

49,659

 

Retainage receivable

 

2,932

 

3,300

 

Acquired intangibles, net

 

19,075

 

19,282

 

Goodwill

 

79,990

 

80,437

 

Investments

 

3,927

 

5,083

 

Deferred income tax assets

 

16,260

 

15,426

 

Other assets

 

16,812

 

15,899

 

Total assets

 

$

522,165

 

$

464,984

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current maturities of notes payable

 

$

4,806

 

$

6,361

 

Accounts payable and accrued expenses

 

116,463

 

92,068

 

Income taxes payable

 

9,865

 

8,689

 

Deferred revenue

 

18,649

 

20,542

 

Deferred income taxes

 

203

 

279

 

Other current liabilities

 

14,141

 

9,996

 

Total current liabilities

 

164,127

 

137,935

 

Notes payable, net of current maturities

 

148,280

 

121,875

 

Retainage payable

 

2,901

 

2,448

 

Deferred income taxes

 

13,967

 

14,654

 

Deferred revenue

 

15,267

 

12,193

 

Other liabilities

 

18,454

 

13,093

 

Total liabilities

 

362,996

 

302,198

 

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, 57,217 shares and 56,920 shares issued at June 30, 2015 and December 31, 2014, respectively

 

6

 

6

 

Additional paid-in capital

 

178,163

 

179,912

 

Retained earnings

 

41,649

 

36,159

 

Accumulated other comprehensive loss

 

(36,960

)

(33,661

)

 

 

182,858

 

182,416

 

Less treasury stock of 6,614 shares and 6,546 shares at June 30, 2015 and December 31, 2014, respectively, at cost

 

(28,665

)

(28,304

)

Hill International, Inc. share of equity

 

154,193

 

154,112

 

Noncontrolling interests

 

4,976

 

8,674

 

Total equity

 

159,169

 

162,786

 

Total liabilities and stockholders’ equity

 

$

522,165

 

$

464,984

 

 

See accompanying notes to consolidated financial statements.

 

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Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Consulting fee revenue

 

$

159,738

 

$

144,515

 

$

312,191

 

$

281,764

 

Reimbursable expenses

 

21,910

 

15,124

 

41,037

 

27,888

 

Total revenue

 

181,648

 

159,639

 

353,228

 

309,652

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

92,400

 

83,246

 

179,089

 

161,836

 

Reimbursable expenses

 

21,910

 

15,124

 

41,037

 

27,888

 

Total direct expenses

 

114,310

 

98,370

 

220,126

 

189,724

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

67,338

 

61,269

 

133,102

 

119,928

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

56,652

 

52,614

 

116,217

 

105,273

 

Equity in losses of affiliate

 

34

 

 

217

 

 

Operating profit

 

10,652

 

8,655

 

16,668

 

14,655

 

 

 

 

 

 

 

 

 

 

 

Interest expense and related financing fees, net

 

3,531

 

5,646

 

7,105

 

10,722

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes

 

7,121

 

3,009

 

9,563

 

3,933

 

Income tax expense

 

2,586

 

993

 

3,749

 

1,624

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

4,535

 

2,016

 

5,814

 

2,309

 

 

 

 

 

 

 

 

 

 

 

Less: net earnings - noncontrolling interests

 

140

 

498

 

324

 

738

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to Hill International, Inc.

 

$

4,395

 

$

1,518

 

$

5,490

 

$

1,571

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share - Hill International, Inc.

 

$

0.09

 

$

0.04

 

$

0.11

 

$

0.04

 

Basic weighted average common shares outstanding

 

50,483

 

40,568

 

50,429

 

40,184

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share - Hill International, Inc.

 

$

0.09

 

$

0.04

 

$

0.11

 

$

0.04

 

Diluted weighted average common shares outstanding

 

51,495

 

42,591

 

51,010

 

41,570

 

 

See accompanying notes to consolidated financial statements.

 

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Consolidated net earnings

 

$

4,535

 

$

2,016

 

$

5,814

 

$

2,309

 

Foreign currency translation adjustment, net of tax

 

2,244

 

1,090

 

(7,186

)

2,549

 

Other, net

 

(76

)

383

 

(135

)

422

 

Comprehensive earnings (loss)

 

6,703

 

3,489

 

(1,507

)

5,280

 

Comprehensive (loss) earnings attributable to noncontrolling interests

 

(2,572

)

407

 

(3,698

)

925

 

Comprehensive earnings attributable to Hill International, Inc.

 

$

9,275

 

$

3,082

 

$

2,191

 

$

4,355

 

 

See accompanying notes to consolidated financial statements.

 

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

Net earnings

 

$

5,814

 

$

2,309

 

Adjustments to reconcile net earnings to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

5,423

 

4,864

 

Provision for bad debts

 

2,441

 

442

 

Interest accretion on term loan

 

 

4,247

 

Deferred tax expense

 

(1,455

)

307

 

Share based compensation

 

1,461

 

1,927

 

Changes in operating assets and liabilities, net:

 

 

 

 

 

Restricted cash

 

229

 

1,726

 

Accounts receivable

 

(53,246

)

(19,403

)

Accounts receivable - affiliate

 

(3,564

)

(566

)

Prepaid expenses and other current assets

 

576

 

(655

)

Income taxes receivable

 

(1,347

)

49

 

Retainage receivable

 

368

 

(134

)

Other assets

 

(937

)

(2,232

)

Accounts payable and accrued expenses

 

31,431

 

9,331

 

Income taxes payable

 

948

 

(4,610

)

Deferred revenue

 

3,654

 

(2,614

)

Other current liabilities

 

(763

)

(790

)

Retainage payable

 

458

 

14

 

Other liabilities

 

1,040

 

(1,842

)

Net cash used in operating activities

 

(7,469

)

(7,630

)

Cash flows from investing activities:

 

 

 

 

 

Purchase of business, net of cash acquired

 

(4,384

)

 

Payments for purchase of property and equipment

 

(9,059

)

(2,372

)

Net cash used in investing activities

 

(13,443

)

(2,372

)

Cash flows from financing activities:

 

 

 

 

 

Net borrowings on revolving loans

 

24,245

 

4,626

 

Proceeds from Philadelphia Industrial Development Corporation loan

 

750

 

 

Payments on Philadelphia Industrial Development Corporation loan

 

(13

)

 

Payments on notes payable

 

 

(1,160

)

Dividends paid to noncontrolling interests

 

(130

)

 

Due to bank

 

 

(2

)

Proceeds from stock issued under employee stock purchase plan

 

32

 

54

 

Proceeds from exercise of stock options

 

137

 

879

 

Net cash provided by financing activities

 

25,021

 

4,397

 

Effect of exchange rate changes on cash

 

(2,662

)

2,071

 

Net increase (decrease) in cash and cash equivalents

 

1,447

 

(3,534

)

Cash and cash equivalents — beginning of period

 

30,124

 

30,381

 

Cash and cash equivalents — end of period

 

$

31,571

 

$

26,847

 

 

See accompanying notes to consolidated financial statements.

 

6


 


Table of Contents

 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 1 - The Company

 

Hill International, Inc. (“Hill” or the “Company”) is a professional services firm that provides program management, project management, construction management, 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.  The Company is organized into two key operating divisions: the Project Management Group and the Construction Claims Group.

 

Note 2 — Basis of Presentation

 

The accompanying unaudited interim consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission pertaining to reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements.  In the opinion of management, these statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the consolidated financial statements.  The consolidated financial statements include the accounts of Hill and its wholly- and majority-owned subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation.

 

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

 

Note 3 — Acquisitions

 

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

 

IMS Proje Yonetimi ve Danismanlik A.S.

 

On April 15, 2015, the Company acquired all of the equity interests of IMS Proje Yonetimi ve Danismanlik A.S. (“IMS”), a firm that provides project management services for international developers, institutional investors and major retailers.  IMS has approximately 80 professionals and is headquartered in Istanbul, Turkey.  Consideration consisted of  an Initial Purchase Price of 12,411,000 Turkish Lira (“TRY”) (approximately $4,640,000 as of the closing date) comprised of  TRY 4,139,000 (approximately $1,547,000) paid in cash on the closing date plus a second payment of TRY 8,272,000 (approximately $3,145,000) which was paid on May 12, 2015; a Holdback Purchase Price of TRY 4,400,000 (approximately $1,626,000) payable in cash on April 15, 2016, less any set off related to certain indemnification obligations; and a potential Additional Purchase Price of (i) TRY 1,700,000 (approximately $628,000) if earnings before interest, income taxes, depreciation and amortization for the twelve month period subsequent to the closing date (“EBITDA”) exceeds TRY 3,500,000 (approximately $1,294,000) or (ii) TRY 1,500,000 ($554,000) if EBITDA is less than TRY 3,500,000 but not less than TRY 3,200,000 ($1,183000).  The Company accrued the Holdback Purchase Price and the potential Additional Purchase Price of TRY 6,100,000 ($2,255,000), of which TRY 4,400,000 ($1,627,000) is included in other current liabilities and TRY 1,700,000 ($628,000) is included in other liabilities in the consolidated balance sheet at June 30, 2015.  The Company acquired intangible assets and goodwill amounting to TRY 10,575,000 (approximately $3,953,000 on the date of acquisition) and TRY 9,421,000 (approximately $3,522,000), respectively.  The

 

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acquired intangible assets have a weighted average life of seven years.  The acquired intangible assets consist of a client relationship intangible of TRY 6,235,000 ($2,331,000) with a ten-year life, a trade name intangible of TRY 434,000 ($162,000) with a two-year life and a contract intangible of TRY 3,906,000 ($1,460,000) with a 2.6 year life.  Goodwill, which is not deductible for income tax purposes, has been allocated to the Project Management operating segment.

 

Angus Octan Scotland Ltd.

 

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”).  Cadogans, with 27 professionals, has offices in Glasgow and Dundee.  The acquisition expanded Hill’s construction claims business and provided additional resources in the energy and industrial sectors.  Total consideration for the acquisition was £2,719,000 (approximately $4,350,000 at the date of acquisition).  The consideration consists  of cash payments of £1,000,000 ($1,600,000) at closing, £600,000 ($960,000) on November 25, 2014,  £400,000 ($640,000) on December 23, 2014, £519,000 ($830,000) to be paid on October 31, 2015 and an earn-out based upon the average earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the two-year period ending on October 31, 2016 (which amount shall not be less than £0 nor more than £200,000).  The Company accrued the potential additional consideration of £719,000 ($1,150,000), of which £519,000 (approximately $816,000 at June 30, 2015) is included in other current liabilities and £200,000 (approximately $315,000 at June 30, 2015) is included in other liabilities in the consolidated balance sheet at June 30, 2015.  Two of the selling shareholders may receive an earn-out in five annual installments of up to £100,000 ($157,000 at June 30, 2015), which will be charged to earnings, provided that Cadogans’ EBITDA for each of the years ending October 31, 2015, 2016, 2017, 2018 and 2019 is equal to or greater than £396,000 ($623,000).

 

Collaborative Partners, Inc.

 

In May 2015, the Company paid the final installment to the sellers by issuing 148,460 shares of its common stock valued at $530,000.

 

Note 4 — Accounts Receivable

 

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

 

 

 

June 30, 2015

 

December 31, 2014

 

Billed

 

$

194,955

 

$

159,959

 

Retainage, current portion

 

11,991

 

12,700

 

Unbilled

 

41,081

 

32,739

 

 

 

248,027

 

205,398

 

Allowance for doubtful accounts

 

(10,526

)

(11,142

)

 

 

$

237,501

 

$

194,256

 

 

Libyan Receivable

 

The Company has open but inactive contracts with the Libyan Organization for the Development of Administrative Centres (“ODAC”).  Due to the civil unrest which commenced in Libya in February 2011, the Company suspended its operations in and demobilized substantially all of its personnel from Libya.  From that time until 2013, there was no activity on the contracts and the Company did not receive any payments for the work performed prior to March 2011.  During late 2013 and early 2014, Hill received payments of approximately $9,900,000 from ODAC who also posted a letter of credit of approximately $14,000,000 in Hill’s favor which expired on June 30, 2014.  Management believed that this progress was a positive indication that ODAC intends to fulfill its obligations to Hill.

 

In June 2014, a new parliament, the Council of Representatives (“CoR”), was elected and is the internationally recognized government of Libya.  Subsequently, fighting broke out between forces loyal to the outgoing General National Congress (“GNC”) and the new CoR.  The GNC reconvened, selected a Prime Minister and seized control of the capital city of Tripoli.  The GNC controls Libya’s ministries, central bank and state oil company.  In September 2014, the United

 

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Nations began talks to reconcile the two factions, but management is not aware that any progress has been made as of July 2015. It is our understanding that government agencies such as ODAC have not been delegated any authority to make payments other than payroll.

 

Management has continued its dialogue with representatives of ODAC and understands that ODAC has obtained approval to facilitate immediate payment to Hill once the political situation normalizes.  Additionally, upon ODAC’s request in early 2014, Hill submitted new contracts for additional work.

 

The Company currently believes that recovery of its receivable from ODAC through continued communications, rather than legal action, remains appropriate, however, the Company has continued to explore its legal options, including discussions with outside legal counsel.  In the event that the military and political environment changes significantly in Libya and its surrounding geopolitical regions or there are indications that the Company’s continued efforts to negotiate amicably with ODAC are determined to have been unsuccessful, the Company will evaluate its options to pursue legal claims and/or assess the carrying amount of this receivable, which could have a significant adverse impact on our consolidated results of operations and consolidated financial position.

 

Currently, management believes that it has good relationships with the ODAC authorities.  However due to the lack of a formal timetable for further payments of Hill’s accounts receivable from ODAC or a return to work on Hill’s existing contracts, management has classified the remaining accounts receivable amounting to $49,759,000 as a non-current asset to reflect the uncertainty surrounding the timing of the collection of the receivable.  Additionally, management has classified the accruals for certain taxes and agency fees related to the ODAC contracts amounting to approximately $9,161,000 as part of other liabilities.

 

Note 5 — Intangible Assets

 

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

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

Gross

 

 

 

Gross

 

 

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Accumulated

 

 

 

Amount

 

Amortization

 

Amount

 

Amortization

 

 

 

 

 

 

 

 

 

 

 

Client relationships

 

$

37,034

 

$

21,891

 

$

36,412

 

$

20,758

 

Acquired contract rights

 

12,553

 

10,398

 

11,387

 

9,717

 

Trade names

 

2,922

 

1,145

 

3,023

 

1,065

 

Total

 

$

52,509

 

$

33,434

 

$

50,822

 

$

31,540

 

Intangible assets, net

 

$

19,075

 

 

 

$

19,282

 

 

 

 

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

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

$

1,611

 

$

1,546

 

$

3,031

 

$

3,132

 

 

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

 

 

 

Estimated

 

 

 

Amortization

 

Year Ending December 31,

 

Expense

 

 

 

 

 

2015 (remaining 6 months)

 

$

3,110

 

2016

 

4,646

 

2017

 

3,273

 

2018

 

2,145

 

2019

 

1,872

 

 

Note 6 — Goodwill

 

The following table summarizes the changes in the Company’s carrying value of goodwill during 2015 (in thousands):

 

 

 

Project

 

Construction

 

 

 

 

 

Management

 

Claims

 

Total

 

Balance, December 31, 2014

 

$

53,669

 

$

26,768

 

$

80,437

 

Additions

 

3,522

 

 

3,522

 

Translation adjustments

 

(3,752

)

(217

)

(3,969

)

Balance, June 30, 2015

 

$

53,439

 

$

26,551

 

$

79,990

 

 

Note 7 — Accounts Payable and Accrued Expenses

 

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

 

 

 

June 30, 2015

 

December 31, 2014

 

Accounts payable

 

$

46,408

 

$

32,701

 

Accrued payroll

 

47,396

 

39,845

 

Accrued subcontractor fees

 

6,933

 

3,930

 

Accrued agency fees

 

6,589

 

6,920

 

Accrued legal and professional fees

 

3,149

 

968

 

Other accrued expenses

 

5,988

 

7,704

 

 

 

$

116,463

 

$

92,068

 

 

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Table of Contents

 

Note 8 — Notes Payable and Long-Term Debt

 

Outstanding debt obligations are as follows (in thousands):

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

Term Loan Facility

 

$

119,100

 

$

119,700

 

Domestic Revolving Credit Facility

 

16,000

 

200

 

International Revolving Credit Facility

 

10,434

 

2,554

 

Borrowings under revolving credit facilities with a consortium of banks in Spain

 

4,624

 

5,037

 

Borrowing under unsecured credit facility with Ibercaja Bank in Spain

 

392

 

745

 

Borrowing under revolving credit facility with the National Bank of Abu Dhabi

 

1,574

 

 

Borrowing from Philadelphia Industrial Development Corporation

 

737

 

 

Other notes payable

 

225

 

 

 

 

153,086

 

128,236

 

Less current maturities

 

4,806

 

6,361

 

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

 

$

148,280

 

$

121,875

 

 

Refinancing

 

Effective as of September 26, 2014 (the “Closing Date”), the Company, entered into a credit agreement with Société Générale, as administrative agent (the “Agent”) and collateral agent, TD Bank, N.A., as syndication agent and HSBC Bank USA, N.A., as documentation agent, (collectively, the “U.S. Lenders”) consisting of a term loan facility of $120,000,000 (the “Term Loan Facility”) and a $30,000,000 U.S. dollar-denominated facility available to the Company (the “U.S. Revolver,” together with the Term Loan Facility, the “U.S. Credit Facilities”) and a credit agreement with the Agent, as administrative agent and collateral agent, (the “International Lender”) providing a facility of approximately €11,765,000 ($15,000,000 at the closing date and $13,199,000 at June 30, 2015) which is available to the Subsidiary (the “International Revolver” and together with the U.S. Revolver, the “Revolving Credit Facilities” and, together with the U.S. Credit Facilities, the “Secured Credit Facilities”).  The U.S. Revolver and the International Revolver include sub-limits for letters of credit amounting to $25,000,000 and €8,000,000, 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 consist of a Maximum Consolidated Net Leverage Ratio and an Excess Account Concentration requirement.  The Consolidated Net Leverage Ratio is the ratio of (a) consolidated total debt (minus cash of up to $10,000,000 held in the aggregate) to consolidated earnings before interest, taxes, depreciation, amortization and share-based compensation for the trailing twelve months.  The Excess Account Concentration covenant  permits the U.S. Lenders and the International Lender to increase the interest rates by 2.0% if, as of the last day of any fiscal quarter, either (a) the 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) accounts receivable from any individual client located in the United Arab Emirates that are more than 120 days old (relative to the invoice date) constitute more than 14% of the total outstanding accounts receivable; provided that, in each case, the accounts receivable due from clients located in Libya that exist as of the Closing Date shall be excluded for all purposes of this covenant. The interest rate will be reset as soon as the accounts receivable over 120 days decline below the 10% or 14% levels.  At June 30, 2015, foreign accounts receivable did not exceed the limits set forth above.

 

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Table of Contents

 

The following compares the Maximum Consolidated Net Leverage Ratio to the actual consolidated net leverage ratio at June 30, 2015:

 

Not to exceed

 

Actual

3.50 to 1.00

 

3.36 to 1.00

 

The U.S. Credit Facilities are guaranteed by certain U.S. subsidiaries of the Company, and the International Revolver is guaranteed by the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.

 

Term Loan Facility

 

The interest rate on the Term Loan Facility will be, at the Company’s option, either:

 

·                   the London Inter-Bank Offered Rate (“LIBOR”) for the relevant interest period plus 6.75% per annum, provided that such LIBOR shall not be lower than 1.00% per annum; or

·                   the Base Rate (as described below) plus 5.75% per annum.

 

The “Base Rate” is a per annum rate equal to the highest of (A) the prime rate, (B) the federal funds effective rate plus 0.50%, or (C) the LIBOR for an interest period of one month plus 1.0% per annum.  Upon a default, the applicable rate of interest under the Secured Credit Facilities may increase by 2.0%.  The LIBOR on the Term Loan Facilities (including when determining the Base Rate) shall in no event be less than 1.0% per annum.

 

The Company has the right to prepay the Term Loan Facility in full or in part at any time without premium or penalty; provided, however that upon the occurrence of prepayments relating to certain repricing transactions within the first year following closing, a 1.0% prepayment premium will be payable.  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 after the closing, (ii) with net proceeds from certain asset sales outside the ordinary course of business, and (iii) with 50% of the excess cash flow (as defined in the agreement) for each fiscal year of the Borrowers commencing with the first full fiscal year ending after closing (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 all 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 were deferred.   The deferred fees are being amortized on a straight-line basis, which approximates the effective interest method, to interest and related financing fees, net over a six-year period which ends on September 30, 2020.  Unamortized balances of $6,183,000 and $6,772,000 are included in other assets in the consolidated balance sheets at June 30, 2015 and December 31, 2014, respectively.

 

Revolving Credit Facilities

 

The interest rate on borrowings under the U.S. Revolver will be, at the Company’s option from time to time, either the LIBOR for the relevant interest period plus 3.75% per annum or the Base Rate plus 2.75% per annum.

 

The interest rate on borrowings under the International Revolver will be the European Inter-Bank Offered Rate, or “EURIBOR,” for the relevant interest period (or at a substitute rate to be determined to the extent EURIBOR is not available) plus 4.00% per annum.

 

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Table of Contents

 

The Company will pay a commitment fee calculated at 0.50% annually on the average daily unused portion of the U.S. Revolver, and the Subsidiary will pay a commitment fee calculated at 0.75% annually on the average daily unused portion of the International Revolver.

 

The ability to borrow under each of the U.S. Revolver and the International Revolver is subject to a “borrowing base,” calculated using a formula based upon approximately 85% of receivables that meet or satisfy certain criteria (“Eligible Receivables”) and that are subject to a perfected security interest held by either the U.S. Lenders or the International Lender, plus, in the case of the International Revolver only, 10% of Eligible Receivables that are not subject to a perfected security interest held by the International Lender, subject to certain exceptions and restrictions.

 

The Company or the Subsidiary, as applicable, will be required to make mandatory prepayments under their respective Revolving Credit Facilities to the extent that the aggregate outstanding amount thereunder exceeds the then-applicable borrowing base, which payments will be made without penalty or premium.  At June 30, 2015, the domestic borrowing base was $30,000,000 and the international borrowing base was €11,765,000 (approximately $13,199,000 at June 30, 2015).

 

Generally, the obligations of the Company under the U.S. Revolver are secured by a first-priority security interest in the above-referenced accounts receivable, cash proceeds and bank accounts of the Company and certain of the Company’s U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and such subsidiaries.  The obligations of the Subsidiary under the International Revolver would generally be secured by a first-priority security interest in substantially all accounts receivable, cash proceeds thereof and certain bank accounts of the Subsidiary and certain of the Company’s non-U.S. subsidiaries, and a second-priority security interest in substantially all other assets of the Company and certain of the Company’s U.S. and non-U.S. subsidiaries.

 

The Revolving Credit Facilities have a term of five years and require payment of interest only during the term.  Under the Revolving Credit Facilities, outstanding 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 on September 30, 2019.

 

The Company incurred fees and expenses related to the Revolving Credit Facilities aggregating $3,000,000 which was 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 $2,550,000 and $2,850,000 are included in other assets in the consolidated balance sheet at June 30, 2015 and December 31, 2014, respectively.

 

At June 30, 2015, the Company had $11,670,000 of outstanding letters of credit and $2,330,000 of available borrowing capacity under the U.S. Revolver.

 

At June 30, 2015, the Company had $2,655,000 of outstanding letters of credit and $2,410,000 of available borrowing capacity under the International Revolver and its other foreign credit agreements (See “Other Debt Arrangements” below for more information).

 

Other Debt Arrangements

 

In connection with the move of its corporate headquarters to Philadelphia, Pennsylvania, the Company received a loan from the Philadelphia Industrial Development Corporation in the amount of $750,000 which bears interest at 2.75%, is repayable in 144 equal monthly installments of $6,121 and matures on 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 €5,340,000 with interest at 6.50% on outstanding borrowings. Total availability under this facility was reduced to 75.0% of the initial limit at December 31, 2014 and will be reduced to 50.0% at December 31, 2015. At June 30, 2015, the total facility was approximately €4,005,000 (approximately $4,494,000) and borrowings outstanding were €3,987,000 (approximately

 

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Table of Contents

 

$4,473,000). The amount being financed (“Credit Contracts”) by each Financing Entity is between €284,000 (approximately $319,000) and €1,154,000 (approximately $1,295,000).  To guarantee Hill Spain’s obligations resulting from the Credit Contracts, Hill Spain provided a guarantee in favor of each one 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.

 

Hill Spain maintains an unsecured credit facility with the Ibercaja Bank in Spain for €350,000 (approximately $392,000) at June 30, 2015. The availability is being reduced by €175,000 at the end of each calendar quarter. At June 30, 2015, total borrowings outstanding were €350,000.  The interest rate at June 30, 2015 was 6.75%. The facility expires on December 31, 2015.

 

Hill Spain also maintains an ICO (Official Credit Institute) loan with Bankia Bank in Spain for €135,000 (approximately $151,000) at June 30, 2015. The availability is reduced by €15,000 on a quarterly basis. At June 30, 2015, total borrowings outstanding were €135,000.  The interest rate at June 30, 2015 was 5.91%. 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 June 30, 2015) collateralized by certain overseas receivables.  At June 30, 2015, total borrowings outstanding were AED 5,782,000 (approximately $1,574,000). The interest rate is the one-month Emirates InterBank Offer Rate plus 3.50% (or 4.84% at June 30, 2015) but no less than 5.50%. This facility was modified in June 2015 to increase availability under Letters of Guarantee to allow for up to AED 200,000,000 (approximately $54,457,000 at June 30, 2015) of which AED 106,802,000 (approximately $29,078,000) was outstanding at June 30, 2015. The credit facility will expire on May 7, 2016.

 

Engineering S.A. maintains four unsecured revolving credit facilities with two banks in Brazil aggregating 2,250,000 Brazilian Reais (BRL) (approximately $722,000 at June 30, 2015), with a weighted average interest rate of 3.11% per month at June 30, 2015.  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 June 30, 2015, the maximum U.S. dollar equivalent of the commitments was $70,229,000 of which $29,055,000 is outstanding.

 

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Table of Contents

 

Note 9 — Supplemental Cash Flow Information

 

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

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

Interest and related financing fees paid

 

$

6,174

 

$

7,097

 

Income taxes paid

 

$

1,258

 

$

6,616

 

Increase in property and equipment from a tenant improvement allowance related to the relocation of corporate headquarters

 

$

3,894

 

 

Reduction of noncontrolling interests in connection with acquisition of an additional interest in Engineering S.A.

 

$

 

$

(2,649

)

Increase in additional paid in capital from issuance of shares of common stock related to purchase of CPI

 

$

530

 

$

618

 

Increase in additional paid in capital from issuance of shares of common stock from cashless exercise of stock options

 

$

361

 

$

538

 

 

Note 10 — Earnings per Share

 

Basic earnings per common share has been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted loss per common share incorporates the incremental shares issuable upon the assumed exercise of stock options, if dilutive.   Dilutive stock options increased the average common shares outstanding by approximately 1,012,000 shares for the three months ended June 30, 2015 and by approximately 581,000 shares for the six months ended June 30, 2015.  Options to purchase 3,198,000 shares and 3,871,000 shares were excluded from the calculation of diluted earnings per common share for the three and six months ended June 30, 2015 because they were antidilutive.  Dilutive stock options increased the average common shares outstanding by approximately 2,023,000 shares for the three months ended June 30, 2014 and by approximately 1,386,000 shares for the six months ended June 30, 2014.  Options to purchase 1,355,000 shares and 2,034,000 shares were excluded from the calculation of diluted earnings per common share for the three and six months ended June 30, 2014 because they were antidilutive.

 

Note 11 — Share-Based Compensation

 

At June 30, 2015, the Company had approximately 7,841,000 options outstanding with a weighted average exercise price of $4.39.  During the six months ended June 30, 2015, the Company granted 1,025,000 options which vest over a five-year period. The options have a weighted-average exercise price of $3.97 and a weighted average contractual life of 7.0 years. The aggregate fair value of the options was $2,097,000 calculated using the Black-Scholes valuation model.  The weighted average assumptions used to calculate fair value were: expected life — 5.0 years; volatility — 59.9% and risk-free interest rate — 1.48%. During the first six months of 2015, options for approximately 139,000 shares with a weighted average exercise price of $3.59 were exercised, options for approximately 377,000 shares with a weighted average exercise price of $6.94 lapsed and options for 28,000 shares with a weighted average exercise price of $4.40 lapsed.

 

During the six months ended June 30, 2015, employees purchased approximately 10,000 common shares, for an aggregate purchase price of $32,000, pursuant to the Company’s 2008 Employee Stock Purchase Plan.

 

The Company recognized share-based compensation expense in selling, general and administrative expenses in the consolidated statement of operations totaling $700,000 and $1,129,000 for the three months ended June 30, 2015 and 2014, respectively, and $1,461,000 and $1,927,000 for the six months ended June 30, 2015 and 2014, respectively.

 

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Table of Contents

 

Note 12 — Stockholders’ Equity

 

The following table summarizes the changes in stockholders’ equity during the six months ended June 30, 2015 (in thousands):

 

 

 

 

 

Hill International,

 

Noncontrolling

 

 

 

Total

 

Inc. Stockholders

 

Interests

 

Stockholders’ equity, December 31, 2014

 

$

162,786

 

$

154,112

 

$

8,674

 

Net earnings

 

5,814

 

5,490

 

324

 

Other comprehensive (loss)

 

(7,321

)

(3,299

)

(4,022

)

Comprehensive earnings (loss)

 

(1,507

)

2,191

 

(3,698

)

Additional paid in capital

 

1,991

 

1,991

 

 

Acquisition of treasury stock

 

(361

)

(361

)

 

Adjustment related to ESA Put Option

 

(4,270

)

(4,270

)

 

Stock issued for acquisition of CPI

 

530

 

530

 

 

Stockholders’ equity, June 30, 2015

 

$

159,169

 

$

154,193

 

$

4,976

 

 

During May 2015, four of the Company’s directors exercised an aggregate of 84,868 options with an exercise price of $4.25 through the Company on a cashless basis.  The Company withheld 67,400 shares as payment for the options and placed those shares in treasury.  The directors received a total of 17,468 shares from this transaction.

 

During the six months ended June 30, 2015, the Company received cash proceeds of $137,000 from the exercise of stock options.

 

In April 2015, two shareholders who own approximately 19% of ESA exercised their ESA Put Options.  The Company intends to pay the liability in shares of its common stock. See Note 16 for further information.

 

On May 4, 2015, the Company’s Board of Directors approved the adoption of a stockholder rights plan and, on June 9, 2015, they rescinded that plan.

 

Note 13 — Income Taxes

 

The effective tax rates for the three months ended June 30, 2015 and 2014 were 36.3% and 33.0%, respectively, and 39.2% and 41.3% for the six months ended June 30, 2015 and 2014, respectively.  The Company’s effective tax rate represents the Company’s effective tax rate for the year based on projected income and mix of income among the various foreign tax jurisdictions, adjusted for discrete transactions occurring during the period.  The Company recognized an income tax expense (benefit) related to an increase (decrease) in the reserve for uncertain tax positions totaling $245,000 and ($2,514,000) for the three- and six-month periods ended June 30, 2015 and 2014, respectively. In addition, the Company recognized an income tax expense (benefit) resulting from adjustments to true up prior year’s book amounts to the  amounts per the tax returns totaling ($85,000) and $44,000 for the three months ended June 30, 2015 and 2014, respectively, and $0 and $44,000 for the six months ended June 30, 2015 and 2014, respectively. For both years, the Company’s effective tax rate is significantly higher than it otherwise would be primarily as a result of not being able to record an income tax benefit related to the U.S. net operating loss and various foreign withholding taxes.

 

The components of earnings (loss) before income taxes and the related income tax expense by United States and foreign jurisdictions were as follows (in thousands):

 

 

 

Three Months Ended June 30, 2015

 

Three Months Ended June 30, 2014

 

(in thousands)

 

U.S.

 

Foreign

 

Total

 

U.S.

 

Foreign

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income taxes

 

$

(6,191

)

$

13,312

 

$

7,121

 

$

(10,791

)

$

13,800

 

$

3,009

 

Income tax expense, net

 

$

 

$

2,586

 

$

2,586

 

$

 

$

993

 

$

993

 

 

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Table of Contents

 

 

 

Six Months Ended June 30, 2015

 

Six Months Ended June 30, 2014

 

 

 

U.S.

 

Foreign

 

Total

 

U.S.

 

Foreign

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) before income taxes

 

$

(16,921

)

$

26,484

 

$

9,563

 

$

(21,672

)

$

25,605

 

$

3,933

 

Income tax expense, net

 

$

 

$

3,749

 

$

3,749

 

$

 

$

1,624

 

$

1,624

 

 

The reserve for uncertain tax positions amounted to $1,220,000 and $975,000 at June 30, 2015 and December 31, 2014, respectively, and is included in “Other liabilities” in the consolidated balance sheet at those dates. During the three- and six-month periods ended June 30, 2015, the reserve for uncertain tax positions was increased by $245,000 and was due to certain tax positions taken in foreign jurisdictions. During the three months ended June 30, 2014, the reserve for uncertain tax positions was reduced by $2,514,000 based on management’s assessment that these items were effectively settled with the appropriate foreign tax authorities. During the six months ended June 30, 2014, the Company also reclassified $420,000 from “Income taxes payable” to the reserve for uncertain tax positions primarily taken in foreign jurisdictions.

 

The Company’s policy is to record income tax related interest and penalties in income tax expense. At both June 30, 2015 and December 31, 2014, potential interest and penalties related to uncertain tax positions amounting to $520,000 was included in the balance above.

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management 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,  Income Taxes. They consider both positive and negative evidence. In making this determination, management assesses all of the evidence available at the time including recent earnings, internally-prepared income projections, and historical financial performance.

 

Note 14 — Business Segment Information

 

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

 

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

 

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Table of Contents

 

The following tables reflect the required disclosures for the Company’s reportable segments (in thousands):

 

Consulting Fee Revenue (“CFR”)

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

116,464

 

72.9

%

$

108,521

 

75.1

%

Construction Claims

 

43,274

 

27.1

 

35,994

 

24.9

 

Total

 

$

159,738

 

100.0

%

$

144,515

 

100.0

%

 

Total Revenue:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

137,052

 

75.4

%

$

122,044

 

76.4

%

Construction Claims

 

44,596

 

24.6

 

37,595

 

23.6

 

Total

 

$

181,648

 

100.0

%

$

159,639

 

100.0

%

 

Operating Profit:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Project Management before equity in loss of affiliate

 

$

15,041

 

$

13,218

 

Equity in loss of affiliate

 

(34

)

 

Total Project Management

 

15,007

 

13,218

 

Construction Claims

 

4,772

 

3,054

 

Corporate

 

(9,127

)

(7,617

)

Total

 

$

10,652

 

$

8,655

 

 

Depreciation and Amortization Expense:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Project Management

 

$

2,077

 

$

1,720

 

Construction Claims

 

802

 

663

 

Subtotal segments

 

2,879

 

2,383

 

Corporate

 

104

 

54

 

Total

 

$

2,983

 

$

2,437

 

 

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Table of Contents

 

Consulting Fee Revenue by Geographic Region:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

39,909

 

25.0

%

$

31,708

 

21.9

%

Latin America

 

6,855

 

4.3

 

11,064

 

7.7

 

Europe

 

21,317

 

13.3

 

18,948

 

13.1

 

Middle East

 

75,857

 

47.5

 

68,867

 

47.7

 

Africa

 

7,041

 

4.4

 

6,020

 

4.2

 

Asia/Pacific

 

8,759

 

5.5

 

7,908

 

5.4

 

Total

 

$

159,738

 

100.0

%

$

144,515

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

39,159

 

24.5

%

$

30,846

 

21.3

%

Non-U.S.

 

120,579

 

75.5

 

113,669

 

78.7

 

Total

 

$

159,738

 

100.0

%

$

144,515

 

100.0

%

 

During the second quarter ended June 30, 2015, consulting fee revenue for the United Arab Emirates amounted to $26,683,000 representing 16.7% of the total and Saudi Arabia’s consulting fee revenue amounted to $15,939,000 representing 10.0% of the total.  No other country other than the United States accounted for 10% or more of consolidated consulting fee revenue.

 

During the second quarter ended June 30, 2014, consulting fee revenue for the United Arab Emirates amounted to $17,229,000 representing 11.9% of the total and Oman’s consulting fee revenue amounted to $18,420,000 representing 12.7% of the total.  No other country other than the United States accounted for 10% or more of consolidated consulting fee revenue.

 

Total Revenue by Geographic Region:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

56,275

 

31.0

%

$

42,693

 

26.7

%

Latin America

 

6,881

 

3.8

 

11,126

 

7.0

 

Europe

 

22,306

 

12.3

 

20,058

 

12.6

 

Middle East

 

79,232

 

43.6

 

70,629

 

44.2

 

Africa

 

8,040

 

4.4

 

6,940

 

4.3

 

Asia/Pacific

 

8,914

 

4.9

 

8,193

 

5.2

 

Total

 

$

181,648

 

100.0

%

$

159,639

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

55,466

 

30.5

%

$

41,761

 

26.2

%

Non-U.S.

 

126,182

 

69.5

 

117,878

 

73.8

 

Total

 

$

181,648

 

100.0

%

$

159,639

 

100.0

%

 

During the second quarter ended June 30, 2015, total revenue for the United Arab Emirates amounted to $29,461,000 representing 16.2% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.

 

During the second quarter ended June 30, 2014, total revenue for the United Arab Emirates amounted to $17,539,000 representing 11.0% of the total and Oman’s total revenue amounted to $18,804,000 representing 11.8% of the total.  No other country except for the United States accounted for 10% or more of consolidated total revenue.

 

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Table of Contents

 

Consulting Fee Revenue By Client Type:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

2,310

 

1.4

%

$

3,242

 

2.2

%

U.S. state, regional and local governments

 

22,200

 

13.9

 

18,698

 

12.9

 

Foreign governments

 

53,699

 

33.6

 

57,527

 

39.8

 

Private sector

 

81,529

 

51.1

 

65,048

 

45.1

 

Total

 

$

159,738

 

100.0

%

$

144,515

 

100.0

%

 

Total Revenue By Client Type:

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

2,837

 

1.6

%

$

4,018

 

2.5

%

U.S. state, regional and local governments

 

35,454

 

19.5

 

24,729

 

15.5

 

Foreign governments

 

57,587

 

31.7

 

59,919

 

37.5

 

Private sector

 

85,770

 

47.2

 

70,973

 

44.5

 

Total

 

$

181,648

 

100.0

%

$

159,639

 

100.0

%

 

Property, Plant and Equipment, Net by Geographic Location:

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

U.S./Canada

 

$

11,496

 

$

3,358

 

Latin America

 

1,254

 

1,101

 

Europe

 

2,702

 

2,191

 

Middle East

 

4,022

 

3,428

 

Africa

 

1,011

 

901

 

Asia/Pacific

 

955

 

664

 

Total

 

$

21,440

 

$

11,643

 

 

 

 

 

 

 

U.S.

 

$

11,496

 

$

3,358

 

Non-U.S.

 

9,944

 

8,285

 

Total

 

$

21,440

 

$

11,643

 

 

Consulting Fee Revenue (“CFR”)

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

229,893

 

73.6

%

$

210,309

 

74.6

%

Construction Claims

 

82,298

 

26.4

 

71,455

 

25.4

 

Total

 

$

312,191

 

100.0

%

$

281,764

 

100.0

%

 

20



Table of Contents

 

Total Revenue

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

$

268,359

 

76.0

%

$

235,213

 

76.0

%

Construction Claims

 

84,869

 

24.0

 

74,439

 

24.0

 

Total

 

$

353,228

 

100.0

%

$

309,652

 

100.0

%

 

Operating Profit:

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Project Management

 

$

28,239

 

$

24,161

 

Equity in loss of affiliate

 

(217

)

 

Total Project Management

 

28,022

 

24,161

 

Construction Claims

 

7,105

 

5,672

 

Corporate

 

(18,459

)

(15,178

)

Total

 

$

16,668

 

$

14,655

 

 

Depreciation and Amortization Expense:

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Project Management

 

$

3,713

 

$

3,419

 

Construction Claims

 

1,562

 

1,337

 

Subtotal segments

 

5,275

 

4,756

 

Corporate

 

148

 

108

 

Total

 

$

5,423

 

$

4,864

 

 

Consulting Fee Revenue by Geographic Region:

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

75,166

 

24.1

%

$

60,999

 

21.6

%

Latin America

 

14,664

 

4.7

 

21,812

 

7.7

 

Europe

 

41,429

 

13.3

 

39,387

 

14.0

 

Middle East

 

151,443

 

48.5

 

132,002

 

46.8

 

Africa

 

14,104

 

4.5

 

12,284

 

4.4

 

Asia/Pacific

 

15,385

 

4.9

 

15,280

 

5.5

 

Total

 

$

312,191

 

100.0

%

$

281,764

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

73,582

 

23.6

%

$

59,224

 

21.0

%

Non-U.S.

 

238,609

 

76.4

 

222,540

 

79.0

 

Total

 

$

312,191

 

100.0

%

$

281,764

 

100.0

%

 

During the six months ended June 30, 2015, consulting fee revenue for the United Arab Emirates amounted to $53,971,000 representing 17.3% of the total and Saudi Arabia’s consulting fee revenue amounted to $32,999,000 representing 10.6% of the total.  No other country except the United States accounted for 10% or more of consolidated consulting fee revenue.

 

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Table of Contents

 

During the six months ended June 30, 2014, consulting fee revenue for the United Arab Emirates amounted to $33,719,000 representing 12.0% of the total and Oman’s consulting fee revenue amounted to $34,077,000 representing 12.1% 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:

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S./Canada

 

$

105,615

 

29.9

%

$

78,323

 

25.3

%

Latin America

 

14,694

 

4.2

 

22,042

 

7.1

 

Europe

 

43,720

 

12.4

 

41,894

 

13.5

 

Middle East

 

157,306

 

44.5

 

137,473

 

44.4

 

Africa

 

16,239

 

4.6

 

14,096

 

4.6

 

Asia/Pacific

 

15,654

 

4.4

 

15,824

 

5.1

 

Total

 

$

353,228

 

100.0

%

$

309,652

 

100.0

%

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

103,941

 

29.4

%

$

76,502

 

24.7

%

Non-U.S.

 

249,287

 

70.6

 

233,150

 

75.3

 

Total

 

$

353,228

 

100.0

%

$

309,652

 

100.0

%

 

During the six months ended June 30, 2015, total revenue for the United Arab Emirates amounted to $54,988,000 representing 15.6% of the total. No other country except for the United States accounted for 10% or more of consolidated total revenue.

 

During the six months ended June 30, 2014, total revenue for the United Arab Emirates amounted to $34,240,000 representing 11.1% of the total and Oman’s total revenue amounted to $36,813,000 representing 11.9% 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:

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

4,766

 

1.5

%

$

6,607

 

2.3

%

U.S. state, regional and local governments

 

42,291

 

13.5

 

35,040

 

12.4

 

Foreign governments

 

109,557

 

35.1

 

110,964

 

39.4

 

Private sector

 

155,577

 

49.9

 

129,153

 

45.9

 

Total

 

$

312,191

 

100.0

%

$

281,764

 

100.0

%

 

Total Revenue By Client Type:

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

U.S. federal government

 

$

5,849

 

1.7

%

$

7,870

 

2.5

%

U.S. state, regional and local governments

 

66,609

 

18.9

 

45,829

 

14.8

 

Foreign governments

 

117,038

 

33.1

 

117,665

 

38.0

 

Private sector

 

163,732

 

46.3

 

138,288

 

44.7

 

Total

 

$

353,228

 

100.0

%

$

309,652

 

100.0

%

 

22



Table of Contents

 

Note 15 — Client Concentrations

 

The Company had no clients that accounted for 10% or more of consulting fees during the three- and six-month periods ended June 30, 2015 and one client located in Oman that accounted for 12% and 11% of consulting fees during the three- and six-month periods ended June 30, 2014, respectively.

 

The Company had no clients that accounted for 10% or more of total revenue during the three months ended June 30, 2015 and 2014. The Company had no clients that accounted for 10% or more of total revenue during the six months ended June 30, 2015 and one client, located in Oman, that accounted for 11% of total revenue during the six months ended June 30, 2014.

 

One client, located in Libya, accounted for 17.3% and 20.4% of total accounts receivable at June 30, 2015 and December 31, 2014.

 

The Company has numerous contracts with U.S. federal government agencies that collectively accounted for 1.6% and 2.5% of total revenue during each of the three-month periods ended June 30, 2015 and 2014 and 1.7% and 2.5% of total revenue during the six-month periods ended June 30, 2015 and 2014.

 

The Company has numerous contracts with U.S. federal government agencies that collectively accounted for 1.4% and 2.2% of consulting fee revenue during the three-month periods ended June 30, 2015 and 2014 and 1.5% and 2.3% of consulting revenue during the six-month periods ended June 30, 2015 and 2014.

 

Note 16 — Commitments and Contingencies

 

General Litigation

 

M.A. Angeliades, Inc. (“Plaintiff”) has filed a complaint with the Supreme Court of New York against the Company and the New York City Department of Design and Construction (“DDC”) regarding payment of approximately $8,771,000 for work performed as a subcontractor to the Company plus interest and other cost. The Company has accrued approximately $2,340,000, including interest of approximately $500,000, based on invoices received from Plaintiff who has refused to provide invoices for additional work that Plaintiff claims to have performed. Until such time as the Company obtains invoices for the additional work and is able to provide those invoices to DDC for reimbursement or there is a full resolution of the litigation, it has no intention of paying Plaintiff. The Company believes that its position is defensible, however, there can be no assurance that it will receive a favorable verdict should this case proceed to trial.

 

A former executive of the Company (“Plaintiff”) resigned and filed a labor dispute with the Company in the Dubai Labour Court seeking AED 4,536,239 for end of service remuneration.  The Company filed a counterclaim against Plaintiff for breach of employment contract and filed a complaint against Plaintiff’s new employer, Driver Group plc in the UK for breach of non-solicitation and non-compete obligations in Plaintiff’s employment agreement.  On June 15, 2015, the Company paid Plaintiff AED 750,000 ($200,000) pursuant to an executed a settlement agreement.  During the three months ended June 30, 2015, the Company recorded an additional $100,000 associated with the settlement payment and $834,000 of related legal costs.

 

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

 

23



Table of Contents

 

Acquisition-Related Contingencies

 

At June 30, 2015, our subsidiary, Hill International (Spain), S.A. (“Hill Spain”), owned an indirect 72% 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.

 

In April 2015, two shareholders who own approximately 19% of ESA exercised their ESA Put Options claiming an aggregate value of BRL 10,645,000 (approximately $3,416,000 at June 30, 2015).  The Company intends to pay the liability in shares of its common stock.  As an incentive to the sellers to receive Hill’s common stock as payment, the Company has offered the sellers a 25% premium.  The sellers have countered the Company’s offer by requesting payment in common stock at the U.S. dollar value on April 4, 2015 (approximately $4,374,000) as well as a price guarantee upon the sale of the stock during a 30-day period after closing. At June 30, 2015, the Company has accrued a liability for the amount of its offer, including the premium, amounting to BRL 13,306,000 (approximately $4,270,000) which is included in other current liabilities and as an adjustment to additional paid-in capital in the consolidated balance sheet.  Any adjustment to the accrued liability will be recorded upon the completion of the transaction at which time the Company will own approximately 91% of ESA.

 

The Company is committed to pay additional consideration for the purchase of Cadogans in the amount of £519,000 (approximately $816,000) to be paid in cash on October 31, 2015 and an earn-out based upon the average 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 nor more than £200,000). See Note 3.

 

Note 17 — Move of Headquarters

 

In connection with the move of its corporate headquarters to Philadelphia, Pennsylvania, the Company received the following from the Commonwealth of Pennsylvania, the City of Philadelphia and the Philadelphia Industrial Development Corporation:

 

·                   a $1,000,000 grant received on July 13, 2015.  The terms of the grant require the Company to spend at least $6,425,000 on capital expenditures for leasehold improvements and equipment for its new headquarters, remain at One Commerce Square for at least seven years and employ at least 359 persons no later than April 1, 2018.  The Company has met the capital expenditure requirement and has a twelve year lease for its corporate headquarters.  Upon receipt of the funds, the Company recorded a deferred credit which, assuming the employment requirement is met, will be reflected in income in the second quarter of 2018;

·                   a low interest loan amounting to $750,000. See Note 8;

·                   a loan amounting to $345,000 which is forgivable if the Company achieves and maintains certain employment levels within the City of Philadelphia by April 30, 2020.  The Company is accounting for this item in a manner similar to the grant and has included the deferred credit in other liabilities in the consolidated balance sheet at June 30, 2015.  Assuming the employment levels are met, the Company will reflect the item in income in the second quarter of 2020; and

·                   certain job creation tax credits amounting to $666,000 from the Commonwealth of Pennsylvania.

 

The landlord for the new headquarters provided the Company with a tenant improvement allowance amounting to approximately $3,894,000. The tenant improvement allowance has been deferred, is included in other liabilities in the consolidated balance sheet at June 30, 2015 and is being amortized on a straight-line basis against rent expense over the term of the twelve-year lease commencing on May 1, 2015.

 

24


 


Table of Contents

 

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

 

Overview

 

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

 

CFR increased $15,223,000, or 10.5%, to $159,738,000 during the second quarter of 2015 from $144,515,000 during the second quarter of 2014.  CFR for the Project Management segment increased $7,943,000, principally due to increased work in the United States and the Middle East, partially offset by decreases in Latin America.  CFR for the Construction Claims segment increased by $7,280,000, or 20.2%, due primarily to increases in the Middle East, the United Kingdom and the United States.

 

CFR increased $30,427,000, or 10.8%, to $312,191,000 during the six months ended June 30, 2015 from $281,764,000 during the six months ended June 30, 2014.  CFR for the Project Management segment increased $19,584,000, principally due to increased work in the Middle East and the United States, partially offset by decreases in Latin America.  CFR for the Construction Claims segment increased by $10,843,000, or 15.2%, due primarily to increases in the Middle East, the United Kingdom and the United States.

 

Net earnings attributable to Hill were $4,395,000 during the second quarter of 2015, an increase of 189.5%, from $1,518,000 during the second quarter of 2014.  The increase was due to higher operating profit from the increase in CFR and lower interest expense.  Diluted earnings per common share were $0.09 during the second quarter of 2015 based upon 51,495,000 diluted common shares outstanding compared to diluted earnings per common share of $0.04 during the second quarter of 2014 based upon 42,591,000 diluted common shares outstanding.

 

Net earnings attributable to Hill were $5,490,000 during the six months ended June 30, 2015, an increase of 294.4%, from $1,571,000 during the six months ended June 30, 2014.  The increase was due to higher operating profit from the increase in CFR and lower interest expense.  Diluted earnings per common share were $0.11 during the six months ended June 30, 2015 based upon 51,010,000 diluted common shares outstanding compared to diluted earnings per common share of $0.04 during the six months ended June 30, 2014 based upon 41,570,000 diluted common shares outstanding.

 

We have open but inactive contracts with the Libyan Organization for the Development of Administrative Centres (“ODAC”).  Due to the civil unrest which commenced in Libya in February 2011, we suspended our operations in and demobilized substantially all of our personnel from Libya.  From that time until 2013, there was no activity on the contracts and we did not receive any payments for the work performed prior to March 2011.  During late 2013 and early 2014, we received payments of approximately $9,900,000 from ODAC who also posted a letter of credit of approximately $14,000,000 in our favor which expired on June 30, 2014.  We believed that this progress was a positive indication that ODAC intends to fulfill its obligations to us.

 

In June 2014, a new parliament, the Council of Representatives (“CoR”), was elected and is the internationally recognized government of Libya.  Subsequently, fighting broke out between forces loyal to the outgoing General National Congress (“GNC”) and the new CoR.  The GNC reconvened, selected a Prime Minister and seized control of the capital city of Tripoli.  The GNC controls Libya’s ministries, central bank and state oil company.  In September 2014, the United Nations began talks to reconcile the two factions, but we are not aware that any progress has been made as of July 2015. It is our understanding that government agencies such as ODAC have not been delegated any authority to make payments other than payroll.

 

We have continued our discussions with representatives of ODAC regarding the timing of payment of the $49,759,000 balance and understand that ODAC has obtained approval to facilitate immediate payment to us once the political situation normalizes.  Additionally, upon ODAC’s request in early 2014, we submitted new contracts for additional work and are in the process of finalizing a contract extension for one of the existing contracts, as well as finalizing the award letter of another.

 

25



Table of Contents

 

We currently believe that recovery of our receivable from ODAC through continued communications, rather than legal action, remains appropriate, however, we have continued to explore our legal options, including discussions with outside legal counsel.  In the event that the military and political environment changes significantly in Libya and its surrounding geopolitical regions or there are indications that our continued efforts to negotiate amicably with ODAC are determined have been unsuccessful, we will evaluate our options to pursue legal claims and/or assess the carrying amount of this receivable, which could have a significant adverse impact on our consolidated results of operations and consolidated financial position.

 

Currently, we believe that we have good relationships with the ODAC authorities.  However due to the lack of a formal timetable for further payments of the accounts receivable from ODAC or a return to work on our existing contracts, management has classified the remaining accounts receivable amounting to $49,759,000 as a non-current asset to reflect the uncertainty surrounding the timing of the collection of the receivable.  Additionally, management has classified the accruals for certain taxes and agency fees related to the ODAC contracts amounting to approximately $9,161,000 as other liabilities.

 

We remain optimistic about maintaining our current growth strategy to pursue new business development opportunities, continue to take advantage of organic growth opportunities, continue to pursue acquisitions and strengthen our professional resources.  In addition, we have completed a review of our global overhead cost structure and we are in the process of reducing more than $25,000,000 in annual overhead costs.  The areas most affected are personnel and related benefits and expenses.  We believe these efforts combined with continued revenue growth should significantly improve profitability and shareholder value.  Our total backlog was $983,000,000 as of June 30, 2015, a decrease of $56,000,000 from March 31, 2015.  Our 12-month backlog was $431,000,000 as of June 30, 2015, a decrease of $14,000,000 from March 31, 2015.  These decreases are primarily related to reductions in the Middle East, Europe and Latin America.

 

Critical Accounting Policies

 

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

 

The 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 that estimated.  The critical accounting estimates and assumptions have not materially changed from those identified in the Company’s 2014 Annual Report.

 

26



Table of Contents

 

Three Months Ended June 30, 2015 Compared to

Three Months Ended June 30, 2014

 

Results of Operations

 

Consulting Fee Revenue (“CFR”)

 

 

 

Three Months Ended June 30,

 

 

 

 

 

 

 

2015

 

2014

 

Change

 

 

 

(dollars in thousands)

 

Project Management

 

$

116,464

 

72.9

%

$

108,521

 

75.1

%

$

7,943

 

7.3

%

Construction Claims

 

43,274

 

27.1

 

35,994

 

24.9

 

7,280

 

20.2

 

Total

 

$

159,738

 

100.0

%

$

144,515

 

100.0

%

$

15,223

 

10.5

%

 

The increase in CFR included an organic increase of 9.0% primarily in the Middle East and the United States and an increase of 1.5% due to the acquisitions of Cadogans in October 2014 and IMS in April 2015.

 

The increase in Project Management CFR included an organic increase of 6.2% and an increase of 1.1% due to the acquisition of IMS.  The increase included a $6,500,000 increase in domestic projects and an increase of $1,443,000 in foreign projects.   The increase in domestic Project Management CFR was due primarily to increases in our Northeast, Mid-Atlantic and Western regions.  The increase in foreign Project Management CFR included an increase of $10,281,000 in the United Arab Emirates, partially offset by decreases in Brazil, Oman and Iraq.

 

The increase in Construction Claims CFR was comprised of an organic increase of 17.5% and a 2.7% increase from the acquisition of Cadogans.  The organic increase was primarily due to increases in the Middle East and the United States.

 

Reimbursable Expenses

 

 

 

Three Months Ended June 30,

 

 

 

 

 

2015 

 

2014 

 

Change

 

 

 

(dollars in thousands)

 

Project Management

 

$

20,588

 

94.0

%

$

13,523

 

89.4

%

$

7,065

 

52.2

%

Construction Claims

 

1,322

 

6.0

 

1,601

 

10.6

 

(279

)

(17.4

)

Total

 

$