Hill International, Inc.
Hill International, Inc. (Form: 8-K, Received: 11/15/2016 08:56:07)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 


 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported):  November 14, 2016

 

HILL INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware

 

000-33961

 

20-0953973

(State or other jurisdiction
of incorporation)

 

(Commission
File Number)

 

(IRS Employer
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

 

 

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                                     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                                     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                                     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                                     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02 Results of Operations and Financial Condition.

 

On November 14, 2016, we issued a press release announcing our results of operations for the quarter ended September 30, 2016. The press release is attached as an exhibit to this Current Report on Form 8-K.

 

The information in this Current Report on Form 8-K is furnished under Item 2.02 — “Results of Operations and Financial Condition.” Such information, including the exhibit attached hereto, shall not be deemed to be “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act regardless of any general incorporation language in such filing.

 

Item 9.01  Financial Statements and Exhibits.

 

Exhibits .

 

Exhibit Number

 

Description

 

 

 

99.1

 

Press Release dated November 14, 2016.

 

2



 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

HILL INTERNATIONAL, INC.

 

 

 

 

 

 

By:

/s/ John Fanelli III

 

Name:

John Fanelli III

Dated: November 15, 2016

Title:

Senior Vice President and

 

 

Chief Financial Officer

 

3


Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

Hill International Reports Third Quarter and

First Nine Months 2016 Financial Results

 

PHILADELPHIA — November 14, 2016  — Hill International (NYSE:HIL), the global leader in managing construction risk, announced today its financial results for the third quarter and first nine months ended September 30, 2016 (see attached tables).

 

Total revenue for the third quarter of 2016 was $168.0 million, a decrease of 6.1% from the third quarter of 2015.  Consulting fee revenue for the third quarter was $148.0 million, down 6.7% from last year’s third quarter.  Lower consulting fees were primarily due to declines of $11.4 million, or 19.3%, in the Middle East project management operation and $2.2 million, or 31.9%, in the Latin American project management operation.  These declines were partially offset by growth of $4.2 million, or 13.3%, in the U.S. project management operation.

 

EBITDA (as defined below) for the third quarter was $1.9 million, an 86.7% decrease from the third quarter of 2015.  Operating loss for the third quarter was ($0.5 million) compared to an operating profit of $11.7 million in the third quarter of last year.  Net loss for the third quarter was ($6.9 million), or ($0.13) per diluted share, compared to net earnings of $2.9 million, or $0.06 per diluted share, for the third quarter of last year.

 

During the third quarter of 2016, Hill incurred extraordinary expenses totaling $10.6 million which adversely impacted its financial results.  Bad debt expense rose by $8.0 million from the year ago quarter due to increased accounts receivable reserves primarily in the Middle East, and legal and other expenses increased by $2.6 million from the third quarter of 2015 primarily in connection with the stockholder proxy contest.  I n the third quarter of 2015, extraordinary expenses totaling $1.7 million adversely impacted Hill’s profitability.

 

Hill’s total backlog at September 30, 2016 was $944 million, down slightly from $949 million at June 30, 2016. Twelve-month backlog at September 30, 2016 was $413 million, essentially unchanged from $414 million at June 30, 2016.

 

“We saw challenges in the third quarter in our Middle East project management operation, with respect to both sales of new work and cash flow on existing work, as low oil prices have continued to have a major impact on construction activity there,” said David L. Richter, Hill’s Chief Executive Officer. “However, we see strong performance continuing for both the U.S. project management operation and the construction claims operation globally and we expect to return to revenue growth companywide in 2017 as oil prices recover and we commence work on the significant new U.S. backlog that we won this year,” added Richter.

 

First Nine Months 2016 Results

 

Total revenue for the first nine months of 2016 was $519.8 million, a decrease of 2.1% from the first nine months of 2015. Consulting fee revenue for the first nine months was $457.9 million, a decrease of 2.5% from the first nine months of last year.

 



 

EBITDA for the first nine months was $20.8 million, a decrease of 41.4% from the first nine months of 2015.  Operating profit for the first nine months was $13.2 million, a decrease of 52.7% from the first nine months of last year.  Net loss for the first nine months was ($3.9) million, or ($0.08) per diluted share down from net earnings of $8.0 million, or $0.16 per diluted share, in the first nine months of 2015.

 

2016 Guidance

 

Based on Hill’s financial performance during the first nine months, current market conditions and the backlog amounts described above, the company is amending its prior guidance and now expects that consulting fee revenue in 2016 will be between $600 million and $610 million.  This guidance reflects an approximately 3% to 5% decrease in consulting fee revenue for the year compared to 2015.  The company has also lowered its guidance relating to EBITDA margin as a percentage of consulting fees in 2016, which it now expects will be in the range of 4% to 6%, down from 6.5% during 2015.

 

Project Management Group

 

Hill’s Project Management Group provides 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.

 

Total revenue at Hill’s Project Management Group during the third quarter of 2016 was $125.9 million, a decrease of 7.1% from the third quarter of 2015.  Consulting fee revenue for the third quarter at the Projects Group was $106.9 million, a decrease of 8.3% from the third quarter of last year.  Operating profit for the Projects Group for the third quarter was $6.5 million, a decrease of 57.9% from last year’s third quarter.

 

Total revenue at the Projects Group during the first nine months of 2016 was $392.1 million, a decrease of 2.6% from the first nine months of 2015.  Consulting fee revenue for the Projects Group during the first nine months was $333.6 million, a decrease of 3.3% from the first nine months of last year.  Operating profit for the Projects Group for the first nine months was $30.1 million, a decrease of 30.1% from last year.

 

Construction Claims Group

 

Hill’s Construction Claims Group provides 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.

 

Total revenue at Hill’s Construction Claims Group during the third quarter of 2016 was $42.1 million, a decrease of 3.0% from the third quarter of 2015. Consulting fee revenue for the third quarter at the Claims Group was $41.1 million, a decrease of 2.2% from the third quarter of 2015.  Operating profit for the Claims Group for the third quarter was $3.6 million, a decrease of 22.4% from last year’s third quarter.

 

Total revenue at the Claims Group during the first nine months of 2016 was $127.7 million, a decrease of 0.5% from the first nine months of 2015. Consulting fee revenue for the Claims Group during the first nine months was $124.3 million unchanged from the first nine months of last year.  Operating profit for the Claims Group for the first nine months was $11.0 million, a decrease of 6.0% from last year.

 

Conference Call

 

David L. Richter, Hill’s Chief Executive Officer, and John Fanelli III, Hill’s Executive Vice President and Chief Financial Officer, will host a conference call on November 15, 2016, at 11:00 am Eastern Time to discuss the financial results for the third quarter and nine months ended September 30, 2016.  Interested parties may

 



 

participate in the call by dialing (877) 423-9820 (Domestic) or (201) 493-6749 (International) approximately 10 minutes before the call is scheduled to begin and asking to be connected to the Hill International conference call. The conference call will also 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 “Conferences 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 4,500 professionals in 100 offices worldwide, provides program management, project management, construction management, construction claims and other consulting services primarily to the buildings, transportation, energy environmental and industrial markets.   Engineering News-Record magazine recently ranked Hill as the eighth largest construction management firm in the United States.  For more information on Hill, please visit our website at www.hillintl.com.

 

Hill’s logo is available at: http://www.globenewswire.com/newsroom/prs/?pkgid=5733.

 

Forward-Looking Statements

 

Certain statements contained herein may be considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and it is our intent that any such statements be protected by the safe harbor created thereby.  Except for historical information, the matters set forth herein including, but not limited to, any projections of revenues, earnings or other financial items; any statements concerning our plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance, are forward-looking statements.  These forward-looking statements are based on our current expectations, estimates and assumptions and are subject to certain risks and uncertainties.  Although we believe that the expectations, estimates and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Important factors that could cause our actual results to differ materially from estimates or projections contained in our forward-looking statements are set forth in the Risk Factors section and elsewhere in the reports we have filed with the Securities and Exchange Commission, including that unfavorable global economic conditions may adversely impact our business, our backlog may not be fully realized as revenue and our expenses may be higher than anticipated.  We do not intend, and undertake no obligation, to update any forward-looking statement.

 

Hill International, Inc.

John P. Paolin

Senior Vice President of Marketing and

Corporate Communications

(215) 309-7710

johnpaolin@hillintl.com

 

The Equity Group Inc.

Devin Sullivan

Senior Vice President

(212) 836-9608

dsullivan@equityny.com

 

(HIL-F)

 



 

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

EARNINGS RELEASE TABLES

(In 000’s, Except Per Share Data)

(Unaudited)

 

Consolidated Statement of Operations

 

 

 

Three Months Ended September
30,

 

Nine Months Ended September
30,

 

 

 

2016 

 

2015 

 

2016 

 

2015 

 

 

 

 

 

 

 

 

 

 

 

Consulting fee revenue

 

$

147,993

 

$

158,579

 

$

457,912

 

$

469,458

 

Reimbursable expenses

 

19,960

 

20,356

 

61,851

 

61,393

 

Total revenue

 

167,953

 

178,935

 

519,763

 

530,851

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

81,241

 

89,345

 

265,052

 

268,174

 

Reimbursable expenses

 

19,960

 

20,356

 

61,851

 

61,393

 

Total direct expenses

 

101,201

 

109,701

 

326,903

 

329,567

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

66,752

 

69,234

 

192,860

 

201,284

 

Selling, general and administrative expenses

 

67,247

 

57,527

 

179,614

 

173,101

 

Share of loss of equity method affiliates

 

12

 

14

 

28

 

231

 

Operating profit

 

(507

)

11,693

 

13,218

 

27,952

 

Interest expense and related financing fees, net

 

3,368

 

4,147

 

10,103

 

11,252

 

(Loss) earnings before income tax expense

 

(3,875

)

7,546

 

3,115

 

16,700

 

Income tax expense

 

2,880

 

4,210

 

6,939

 

7,980

 

Net (loss) earnings

 

(6,755

)

3,336

 

(3,824

)

8,720

 

Less: net earnings - noncontrolling interests

 

111

 

388

 

102

 

675

 

Net (loss) earnings attributable to Hill International

 

$

(6,866

)

$

2,948

 

$

(3,926

)

$

8,045

 

 

 

 

 

 

 

 

 

 

 

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

 

$

(0.13

)

$

0.06

 

$

(0.08

)

$

0.16

 

Basic weighted average common shares outstanding

 

51,753

 

51,119

 

51,704

 

50,661

 

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

 

$

(0.13

)

$

0.06

 

$

(0.08

)

$

0.16

 

Diluted weighted average common shares outstanding

 

51,753

 

51,803

 

51,704

 

51,274

 

 



 

Selected Segment Data

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended September
30,

 

 

 

2016 

 

2015 

 

2016 

 

2015 

 

 

 

 

 

 

 

 

 

 

 

Project Management

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting fee revenue

 

$

106,868

 

$

116,541

 

$

333,573

 

$

345,122

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

125,872

 

$

135,539

 

$

392,087

 

$

402,586

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

43,543

 

$

46,082

 

$

124,103

 

$

132,557

 

 

 

 

 

 

 

 

 

 

 

Gross profit as a percent of consulting fee revenue

 

40.7

%

39.5

%

37.2

%

38.4

%

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$

37,043

 

$

30,644

 

$

93,980

 

$

89,289

 

 

 

 

 

 

 

 

 

 

 

SG&A expenses as a percentage of consulting fee revenue

 

34.7

%

26.3

%

28.2

%

25.9

%

 

 

 

 

 

 

 

 

 

 

Operating profit before equity in losses of affiliates

 

$

6,500

 

$

15,438

 

$

30,123

 

$

43,268

 

 

 

 

 

 

 

 

 

 

 

Share of loss of equity method affiliate

 

(12

)

(14

)

(28

)

(231

)

 

 

 

 

 

 

 

 

 

 

Operating profit

 

6,488

 

15,424

 

30,095

 

43,037

 

 

 

 

 

 

 

 

 

 

 

Operating profit as a percent of consulting fee revenue

 

6.1

%

13.2

%

9.0

%

12.5

%

 

 

 

 

 

 

 

 

 

 

Construction Claims

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting fee revenue

 

$

41,125

 

$

42,038

 

$

124,339

 

$

124,336

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

42,081

 

$

43,396

 

$

127,676

 

$

128,265

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

23,209

 

$

23,152

 

$

68,757

 

$

68,727

 

 

 

 

 

 

 

 

 

 

 

Gross profit as a percent of consulting fee revenue

 

56.4

%

55.1

%

55.3

%

55.3

%

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

$

19,655 

 

$

18,570

 

$

57,774

 

$

57,040

 

 

 

 

 

 

 

 

 

 

 

SG&A expenses as a percentage of consulting fee revenue

 

47.8

%

44.2

%

46.5

%

45.9

%

 

 

 

 

 

 

 

 

 

 

Operating profit

 

$

3,554

 

$

4,582

 

$

10,983

 

$

11,687

 

 

 

 

 

 

 

 

 

 

 

Operating profit as a percent of consulting fee revenue

 

8.6

%

10.9

%

8.8

%

9.4

%

 



 

Selected Other Financial Data

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2016 

 

2015 

 

2016 

 

2015 

 

 

 

 

 

 

 

 

 

 

 

Consulting fee revenue

 

$

147,993

 

$

158,579

 

$

457,912

 

$

469,458

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

167,953

 

$

178,935

 

$

519,763

 

$

530,851

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

$

66,752

 

$

69,234

 

$

192,860

 

$

201,284

 

 

 

 

 

 

 

 

 

 

 

Gross profit as a percentage of consulting fee revenue

 

45.1

%

43.7

%

42.1

%

42.9

%

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses (excluding corporate expenses)

 

$

56,698

 

$

49,214

 

$

151,754

 

$

146,329

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses (excluding corporate expenses) as a percentage of consulting fee revenue

 

38.3

%

31.0

%

33.1

%

31.2

%

 

 

 

 

 

 

 

 

 

 

Corporate expenses

 

$

10,549 

 

$

8,313

 

$

27,860

 

$

26,772

 

 

 

 

 

 

 

 

 

 

 

Corporate expenses as a percentage of consulting fee revenue

 

7.1

%

5.2

%

6.1

%

5.7

%

 

 

 

 

 

 

 

 

 

 

Operating profit before equity in losses of affiliates

 

$

(495

)

$

11,707

 

$

13,246

 

$

28,183

 

 

 

 

 

 

 

 

 

 

 

Share of loss of equity method affiliate

 

(12

)

(14

)

(28

)

(231

)

 

 

 

 

 

 

 

 

 

 

Operating profit

 

(507

)

11,693

 

13,218

 

27,952

 

 

 

 

 

 

 

 

 

 

 

Operating profit as a percent of consulting fee revenue

 

(0.3

)%

7.4

%

2.9

%

6.0

%

 

 

 

 

 

 

 

 

 

 

Effective income tax rate

 

(74.3

)%

55.8

%

222.8

%

47.8

%

 



 

Selected Balance Sheet Data

 

 

 

September 30, 2016

 

December 31, 2015

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,219

 

$

24,089

 

Accounts receivable, net

 

$

229,892

 

$

243,417

 

Current assets

 

$

282,233

 

$

291,591

 

Total assets

 

$

439,543

 

$

442,563

 

Current liabilities

 

$

136,790

 

$

143,048

 

Total debt

 

$

153,955

 

$

144,983

 

Stockholders’ equity:

 

 

 

 

 

Hill International, Inc. share of equity

 

$

109,698

 

113,969

 

Noncontrolling interest

 

$

2,736

 

$

4,070

 

Total equity

 

$

112,434

 

$

118,039

 

 

EBITDA Reconciliation

(Unaudited)

 

Management believes earnings before interest, taxes, depreciation and amortization, or EBITDA, in addition to operating profit, net earnings and other measures under United States generally accepted accounting principles, or GAAP, is a useful indicator of Hill’s financial and operating performance and its ability to generate cash flows from operations that are available for taxes and capital expenditures.  EBITDA is not a measure of financial performance under GAAP.  Investors should recognize that EBITDA might not be comparable to similarly-titled measures of other companies.  This measure should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.  A reconciliation of EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation S-K follows:

 

 

 

Three Months Ended 
September 30,

 

Nine Months Ended 
September 30,

 

 

 

2016 

 

2015 

 

2016 

 

2015 

 

Net (loss) earnings

 

$

(6,866

)

$

2,948

 

$

(3,926

)

$

8,045

 

Interest expense, net

 

3,368

 

4,147

 

10,103

 

11,252

 

Income tax expense

 

2,880

 

4,210

 

6,939

 

7,980

 

Depreciation and amortization

 

2,505

 

2,863

 

7,705

 

8,286

 

EBITDA

 

$

1,887

 

$

14,168

 

$

20,821

 

$

35,563