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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from                                          to 
Commission File Number: 001-33961
HILL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-0953973
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Square 
2005 Market Street, 17th Floor
Philadelphia, PA
19103
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:  (215) 309-7700

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

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

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

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



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

There were 57,086,992 shares of the Registrant’s Common Stock outstanding at November 1, 2022.



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



 


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"), and it is Hill International, Inc.'s (the "Company") intent that any such statements be protected by the safe harbor created thereby. Except for historical information, the matters set forth herein including, but not limited to, any projections of revenues, earnings, margin, profit improvement, cost savings or other financial items; any statements of belief, any statements concerning the Company's plans, strategies and objectives for future operations; and any statements regarding future economic conditions or performance, are forward-looking statements.
 
These forward-looking statements are based on the Company's current expectations, estimates and assumptions and are subject to certain risks and uncertainties. Although the Company believes that the expectations, estimates and assumptions reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.
 
Those forward-looking statements may concern, among other things:
 
Statements about the Merger;
The markets for the Company's services;
Projections of revenues and earnings, anticipated contractual obligations, funding requirements or other financial items;
Statements regarding the impact and effect of the COVID-19 pandemic;
Statements concerning the Company's plans, strategies and objectives for future operations; and
Statements regarding future economic conditions or the Company's performance.
 
Important factors that could cause the Company's actual results to differ materially from estimates or projections contained in our forward-looking statements include:
 
Risks associated with our ability to consummate the Merger, and the timing of the closing of the Merger, including the risks that a condition to closing will not be satisfied within the expected timeframe or at all or that the closing of the Merger will not occur;
The occurrence of any change, effect, event, circumstance, occurrence or state of facts that could give rise to the termination of the Merger Agreement;
The outcome of any legal proceedings that have been or may be instituted against the parties to, and others related to, the Merger and the Merger Agreement;
The Merger diverting management’s attention from our ongoing business operations;
Restrictions on the conduct of our business prior to completing the Merger, which may prevent us from pursuing certain strategic transactions, undertaking certain financing transactions and otherwise pursuing other actions, even if such actions could prove beneficial, and may cause us to forego certain opportunities we might otherwise pursue absent the Merger Agreement;
The risk that the pendency of the Merger could adversely affect our business and operations, including the risk that some of our current or prospective customers, lenders or partners may delay or defer decisions, which could negatively impact our revenues, earnings, cash flows and expenses, regardless of whether the Merger completed;
The risks set forth in Item 1A, “Risk Factors,” in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the "SEC") on March 31, 2022 (as amended by Amendment No. 1 thereto filed with the SEC on Form 10-K/A on May 2, 2022, (the "2021 Annual Report");
Unfavorable global economic conditions may adversely impact its business;
Our backlog, which is subject to unexpected adjustments and cancellations, may not be fully realized as revenue;
Our expenses may be higher than anticipated;
Modifications and termination of client contracts;
Control and operational issues pertaining to business activities that the Company conducts pursuant to joint ventures with other parties; and
The ability to retain and recruit key technical and management personnel.
 
Other factors that may affect the Company's business, financial position or results of operations include:
 
Unexpected delays in collections from clients;
4


Risks related to the effect of the COVID-19 pandemic on the Company, including its employees and related costs and including any project cancellations, delays and modifications;
Risks related to the Company's ability to obtain debt financing or otherwise raise capital to meet required working capital needs and to support potential future acquisition activities;
Risks related to international operations, including uncertain political and economic environments, acts of terrorism or war and other forms of geo-political unrest or conflict (including the ongoing conflict in Ukraine), potential incompatibilities with foreign joint venture partners, foreign currency fluctuations, civil disturbances and labor issues; and
Risks related to contracts with governmental entities, including the failure of applicable governing authorities to take necessary actions to secure or maintain funding for particular projects with us, the unilateral termination of contracts by the governments and reimbursement obligations to the government for funds previously received.
 
The Company does not intend, and undertakes no obligation to, update any forward-looking statement other than as required by law. In accordance with the Reform Act, Item 1A of our 2021 Annual Report entitled "Risk Factors" contains cautionary statements that accompany those forward looking statements. You should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Form 10-Q, in our other filings with the SEC or in materials incorporated therein by reference.

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Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
 September 30, 2022December 31, 2021
Assets(Unaudited)
Cash and cash equivalents$22,834 $21,821 
Cash - restricted4,131 5,562 
Accounts receivable, net136,267 119,516 
Current portion of retainage receivable7,511 9,743 
Accounts receivable - affiliates19,702 21,741 
Prepaid expenses and other current assets9,224 9,937 
Income tax receivable1,397 2,163 
Total current assets201,066 190,483 
Property and equipment, net8,416 8,895 
Cash - restricted, net of current portion2,843 3,063 
Operating lease right-of-use assets15,825 18,347 
Financing lease right-of-use assets613 801 
Retainage receivable5,910 7,491 
Acquired intangibles, net2,963 3,002 
Goodwill40,105 44,127 
Investments1,139 2,038 
Deferred income tax assets1,944 2,165 
Other assets4,018 2,645 
Total assets$284,842 $283,057 
Liabilities and Stockholders’ Equity
Current maturities of notes payable and long-term debt$31,335 $25,841 
Accounts payable and accrued expenses74,028 63,856 
Income taxes payable4,438 2,610 
Current portion of deferred revenue4,406 4,088 
Current portion of operating lease liabilities4,788 4,777 
Current portion of financing lease liabilities250 246 
Other current liabilities6,997 6,006 
Total current liabilities126,242 107,424 
Notes payable and long-term debt, net of current maturities28,816 29,302 
Retainage payable326 279 
Deferred income taxes918 959 
Deferred revenue3,627 9,541 
Non-current operating lease liabilities15,981 18,565 
Non-current financing lease liabilities385 573 
Other liabilities10,990 13,175 
Total liabilities187,285 179,818 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 1,000 shares authorized, none issued
  
Common stock, $0.0001 par value; 100,000 shares authorized, 63,664 shares and 63,291 shares issued at September 30, 2022 and December 31, 2021, respectively
6 6 
Additional paid-in capital219,116 217,471 
Accumulated deficit(83,616)(83,813)
Accumulated other comprehensive loss(9,342)(1,813)
Less treasury stock of 6,807 at September 30, 2022 and December 31, 2021
(29,056)(29,056)
Hill International, Inc. share of equity97,108 102,795 
Noncontrolling interests449 444 
Total equity97,557 103,239 
Total liabilities and stockholders’ equity$284,842 $283,057 
See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
2022202120222021
Consulting fee revenue$85,142 $77,061 $254,262 $227,158 
Reimbursable expenses24,429 19,543 63,275 58,079 
Total revenue$109,571 $96,604 $317,537 $285,237 
Direct expenses74,917 64,196 213,620 194,314 
Gross profit$34,654 $32,408 $103,917 $90,923 
Selling, general and administrative expenses31,035 28,121 92,831 82,906 
Foreign currency exchange loss803 511 3,730 2,751 
 Plus: Share of profit of equity method affiliates506 551 1,456 1,805 
Operating profit$3,322 $4,327 $8,812 $7,071 
Less: Interest and related financing fees, net2,098 1,226 4,805 4,077 
Other loss, net104  319  
Earnings before income taxes$1,120 $3,101 $3,688 $2,994 
Income tax expense1,823 1,784 3,602 4,653 
Net earnings (loss)$(703)$1,317 $86 $(1,659)
Less: net (loss) earnings - noncontrolling interests(14)58 (112)265 
Net (loss) earnings attributable to Hill International, Inc.$(689)$1,259 $198 $(1,924)
Basic (loss) earnings per common share - Hill International, Inc.$(0.01)$0.02 $ $(0.03)
Basic weighted average common shares outstanding58,073 57,245 57,858 57,102 
Diluted (loss) earnings per common share - Hill International, Inc.$(0.01)$0.02 $ $(0.03)
Diluted weighted average common shares outstanding58,073 57,245 59,767 57,102 
 
See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) EARNINGS
(In thousands)
(Unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net (loss) earnings$(703)$1,317 $86 $(1,659)
Foreign currency translation adjustment, net of tax(2,969)(1,177)(7,611)(2,733)
Actuarial losses from end of service benefit plan, net of tax66  198  
Comprehensive (loss) earnings(3,606)140 (7,327)(4,392)
Less: Comprehensive (loss) earnings attributable to noncontrolling interests(38)(32)5 (1,084)
Comprehensive (loss) earnings attributable to Hill International, Inc.$(3,568)$172 $(7,332)$(3,308)
 
See accompanying notes to consolidated financial statements.

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands) 
 Common StockAdditional
Paid-in
AccumulatedAccumulated Other
Comprehensive
Treasury StockHill Share of Stockholders’Non-controllingTotal
Stockholders’
 SharesAmountCapital(Deficit)Income (Loss)SharesAmountEquityInterestsEquity
Balance - December 31, 202163,291 $6 $217,471 $(83,813)$(1,813)6,807 $(29,056)$102,795 $444 $103,239 
Net (loss) income— — — 886 — — — 886 (97)789 
Other comprehensive (loss) income— — — — (4,650)— — (4,650)140 (4,510)
Share-based compensation expense331 — 771 — — — — 771 — 771 
Shares issued under employee stock purchase plan42 — 56 — — — — 56 — 56 
Balance - June 30, 202263,664 $6 $218,298 $(82,927)$(6,463)6,807 $(29,056)$99,858 $487 $100,345 
Net earnings (loss)— — — (689)— — — (689)(14)(703)
Other comprehensive loss— — — — (2,879)— — (2,879)(24)(2,903)
Share-based compensation expense10 — 818 — — — — 818 — 818 
Shares issued under employee stock purchase plan— — — — — — —  
Balance - September 30, 202263,674 $6 $219,116 $(83,616)$(9,342)6,807 $(29,056)$97,108 $449 $97,557 
Balance - December 31, 202062,920 $6 $215,010 $(79,542)$1,318 6,807 $(29,056)$107,736 $1,552 $109,288 
Net earnings (loss)— — — (3,184)— — — (3,184)207 (2,977)
Other comprehensive income (loss)— — — — (297)— — (297)(1,259)(1,556)
Share-based compensation expense270 — 1,371 — — — — 1,371 — 1,371 
Shares issued under employee stock purchase plan44 — 95 — — — — 95 — 95 
Balance - June 30, 202163,234 $6 $216,476 $(82,726)$1,021 6,807 $(29,056)$105,721 $500 $106,221 
Net earnings (loss)— — — 1,259 — — — 1,259 58 1,317 
Other comprehensive income (loss)— — — — (1,087)— — (1,087)(90)(1,177)
Share-based compensation expense3 — 443 — — — — 443 — 443 
Shares issued under employee stock purchase plan12 — 23 — — — — 23 — 23 
Balance - September 30, 202163,249 $6 $216,942 $(81,467)$(66)6,807 $(29,056)$106,359 $468 $106,827 


See accompanying notes to consolidated financial statements.
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HILL INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Nine Months Ended September 30,
 20222021
Cash flows from operating activities:
Net earnings (loss)$86 $(1,659)
Adjustments to reconcile net loss to net cash provided by (used in):
Depreciation and amortization1,784 1,856 
Recovery for bad debt(431)(2,794)
Amortization of deferred loan fees344 568 
Deferred tax expense140 (120)
Share-based compensation1,589 1,814 
Operating lease right-of-use assets3,908 3,306 
Foreign currency remeasurement losses1,544 2,510 
Accounts receivable(23,773)(15,521)
Accounts receivable - affiliate2,039 (5,728)
Prepaid expenses and other current assets253 (3,951)
Income taxes receivable399 1,232 
Retainage receivable3,534 (953)
Other assets(976)(1,926)
Accounts payable and accrued expenses13,440 13,181 
Income taxes payable1,944 (1,202)
Deferred revenue(4,351)1,482 
Operating lease liabilities(3,702)(2,698)
Other current liabilities1,139 3,432 
Retainage payable47 (314)
Finance lease liabilities(13) 
Other liabilities(1,260)492 
Net cash used in operating activities(2,316)(6,993)
Cash flows from investing activities:
Purchase of NEYO Group (681)
Purchase of property and equipment(1,472)(1,197)
Net cash used in investing activities(1,472)(1,878)
Cash flows from financing activities:
Principal payments on finance leases(184) 
Repayment of term loans(505)(802)
Proceeds from revolving loans31,667 29,785 
Repayment of revolving loans(25,336)(25,816)
Proceeds from stock issued under employee stock purchase plan56 118 
Net cash provided by financing activities5,698 3,285 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(2,548)(2,654)
Net decrease in cash, cash equivalents and restricted cash(638)(8,240)
Cash, cash equivalents and restricted cash — beginning of period30,446 41,413 
Cash, cash equivalents and restricted cash — end of period$29,808 $33,173 
 Nine Months Ended September 30,
Supplemental disclosures of cash flow information:20222021
Interest and related financing fees paid$4,668 $3,520 
Income taxes paid2,218 3,830 
Cash paid for amounts included in the measurement of lease liabilities5,681 4,897 
Right-of-use assets obtained in exchange for operating lease liabilities1,648 8,568 
Right-of-use assets obtained in exchange for finance lease liabilities 538 

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

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

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

On August 26, 2022, Hill, Global Infrastructure Solutions Inc. (“Parent”), and Liberty Acquisition Sub Inc., an indirect wholly owned subsidiary of Parent (“Merger Sub”), entered into an Amended and Restated Agreement and Plan of Merger (the “Merger Agreement”), which amended and restated the Agreement and Plan of Merger, dated as of August 16, 2022, by and among the Company, Parent and Merger Sub. The Merger Agreement provides that, upon the terms and conditions set forth therein and in accordance with the General Corporation Law of the State of Delaware (“DGCL”), Merger Sub will be merged with and into Hill (the “Merger”) with Hill surviving the Merger as the surviving corporation and an indirect wholly owned subsidiary of Parent.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Hill’s common stock, other than as provided below, will be converted into the right to receive $3.40, without interest (such amount of cash, the “Merger Consideration”). The following shares of Hill common stock will not be converted into the right to receive the Merger Consideration in connection with the Merger: (i) shares held in treasury by Hill or owned by Parent or Merger Sub or any direct or indirect wholly owned subsidiaries of Parent, Merger Sub or Hill immediately prior to the effective time, and (ii) shares issued and outstanding immediately prior to the effective time that are held by a holder who is entitled to demand and has properly exercised and perfected demand and has properly exercised and perfected demand for appraisal of such shares pursuant to, and who complies in all respects with, Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) and has not effectively and validly withdrawn or lost such holder’s rights to appraisal.

Pursuant to the terms of the Merger Agreement, the consummation of the Merger remains subject to various closing conditions, including but not limited to (i) the receipt of consent or authorization under certain foreign antitrust laws, and (ii) the absence of any order that has the effect of preventing, making illegal or otherwise prohibiting the consummation of the Merger. As of the date hereof, the Company continues to expect to complete the Merger in the fourth calendar quarter of 2022. Upon the consummation of the Merger, Hill will no longer be traded or listed on any public securities exchange.

Note 2 — Liquidity
 
At September 30, 2022 and December 31, 2021, the Company's principal sources of liquidity consisted of $22,834 and $21,821 of cash and cash equivalents, respectively, $7 and $2,643 of available borrowing capacity under the Domestic Revolving Credit Facility, respectively, $175 and $520 of available borrowing capacity under the International Revolving Credit Facility, respectively, and $3,436 and $5,980 under other foreign credit agreements, respectively. Additional information regarding the Company's credit facilities is set forth in Note 9 - Notes Payable and Long-Term Debt.

On March 31, 2022 and September 30, 2022, the Company entered into amendments of its main credit facility with Société Générale that extends the maturity dates of the Domestic and International Revolving Credit Facilities to May 5, 2023 and the term loan facility to November 5, 2023. The interest rates on the Domestic and International Revolving Credit Facilities increased by 1.1% and 1.5%, respectively, effective March 31, 2022, while the term loan facility interest rate increased by 1.0%, effective March 31, 2022, and the Company paid an amendment fee of $463. The aggregate amount of the credit commitments under the facilities was reduced by an amount equal to $500 on each of September 30, 2022 and October 31, 2022 and will be further permanently reduced by $500 on November 30, 2022 and $3,000 on December 31, 2022. At September 30, 2022, the Company had $23,303 of borrowings and $4,972 of outstanding letters of credit under the Hill International, Inc. - Société Générale Domestic Revolving Credit Facility and $4,884 of borrowings and $509 of outstanding letters of credit under the Hill International N.V. - Société Générale International Revolving Credit Facility. These facilities are set to mature on May 5, 2023.

11


The Company believes that it has adequate liquidity and business plans to continue to operate the business for the next 12 months from November 14, 2022, the date of this filing. This ability to continue as a going concern is dependent upon the ability to refinance the Domestic and International Revolving Credit Facilities prior to their May 5, 2023 maturity date. As such, the consolidated interim financial statements included in this Form 10-Q do not include any adjustments that might result from the inability to refinance the Domestic and International Revolving Credit Facilities.


Note 3 — Basis of Presentation
 
Summary
 
The accompanying unaudited interim consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC") pertaining to reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as amended. Accordingly, the accompanying unaudited interim consolidated financial statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("U.S. GAAP") for complete financial statements. In the opinion of management, these statements include all adjustments (consisting only of normal, recurring adjustments) necessary for a fair presentation of the consolidated financial statements. The consolidated financial statements include the accounts of Hill and its wholly and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The interim operating results are not necessarily indicative of the results for a full year.

NEYO Group Acquisition

On June 30, 2021, the Company acquired all of the equity interests of NEYO Group, a 120-person firm specializing in cost management and estimating support and also providing project management, project monitoring, and other services. NEYO maintains offices in Bangalore, Chennai, Delhi, and Mumbai, as well as project offices in Hyderabad, Pune, and Kolkata.


Summary of Significant Accounting Policies

(a)                                 Foreign Currency Translations and Transactions

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

(b)                                 Concentrations of Credit Risk

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

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

No single client accounted for 10% or more of total revenue for the three and nine months ended September 30, 2022 or 2021.

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There was one client in Africa who accounted for 10% or more of gross accounts receivable at September 30, 2022 and December 31, 2021, respectively, which represents 14% of the gross accounts receivable balance at September 30, 2022 and December 31, 2021, respectively. These amounts were fully reserved for at September 30, 2022 and December 31, 2021.

(c)                                 Allowance for Doubtful Accounts

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

(d)                                    Retainage Receivable

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

(e)                                 Income Taxes

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

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

(f)                                 Revenue Recognition

The Company generates revenue primarily from providing professional services to its clients under various types of contracts. In providing these services, the Company may incur reimbursable expenses, which consist principally of amounts paid to subcontractors and other third parties and travel and other job related expenses that are contractually reimbursable from clients. The Company includes reimbursable expenses in computing and reporting its total revenue as long as the Company remains responsible to the client for the fulfillment of the contract and for the overall acceptability of all services provided.

If estimated total costs on any contract project a loss, the Company charges the entire estimated loss to operations in the period the loss becomes known. The cumulative effect of revisions to revenue, estimated costs to complete contracts, including penalties, incentive awards, change orders, claims, anticipated losses, and others are recorded in the accounting period in which the events indicating a loss are known and the loss can be reasonably estimated. These loss projects are re-assessed for each subsequent reporting period until the project is complete. Such revisions could occur at any time, and the effects may be material.

See Note 4 - Revenue from Contracts with Clients for more detail regarding how the Company recognizes revenue under each type of its contractual arrangements.

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(g)                                    Restricted Cash

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

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows:
September 30, 2022December 31, 2021
Cash and cash equivalents$22,834 $21,821 
Cash - restricted4,131 5,562 
Cash - restricted, net of current portion2,843 3,063 
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows$29,808 $30,446 

(h)                                    Earnings (loss) per Share

Basic earnings (loss) per common share have been computed using the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share incorporates the incremental shares issuable upon the assumed exercise of stock options and the assumed vesting of stock and deferred and restricted stock unit awards using the treasury stock method, if dilutive.

The Company has outstanding options to purchase approximately 1,128 shares and 1,353 shares at September 30, 2022 and 2021, respectively. In addition, the Company had 138 and 1,038 restricted and deferred stock units outstanding at September 30, 2022 and 2021, respectively. These awards were excluded from the calculation of diluted loss per share for the three and nine months ended September 30, 2022 and 2021 because they were anti-dilutive.

The following table provides a reconciliation to net earnings (loss) used in the numerator for loss per share attributable to Hill:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net (loss) earnings$(703)$1,317 $86 $(1,659)
Less: net (loss) earnings - noncontrolling interests(14)58 (112)265 
Net (loss) earnings attributable to Hill International, Inc.$(689)$1,259 $198 $(1,924)
Basic weighted average common shares outstanding58,073 57,245 57,858 57,102 
Effect of dilutive securities:
Stock options    
Unissued share-based compensation units  1,909  
Diluted weighted average common shares outstanding58,073 57,245 59,767 57,102 
Basic and diluted (loss) earnings per common share - Hill International, Inc.$(0.01)$0.02 $ $(0.03)

(i)                                    New Accounting Pronouncements

Changes to U.S. GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs and, based on its assessment, determined that any recently issued or proposed ASUs not listed below are either not applicable to the Company or adoption will have minimal impact on its consolidated financial statements.
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For additional information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 3 to the consolidated financial statements in Item 8 of Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022, as amended.


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Note 4 — Revenue from Contracts with Clients

The Company recognizes revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for such goods or services.

Below is a description of the basic types of contracts from which the Company may earn revenue:

Time and Materials Contracts

Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic time and materials, cost plus a margin or time and materials subject to a maximum contract value (the "cap value"). Due to the potential limitation of the cap value, the economic factors of the contracts subject to a cap value differ from the economic factors of basic T&M and cost plus contracts. The majority of the Company’s contracts are for consulting projects where it bills the client monthly at hourly billing rates. The hourly billing rates are determined by contract terms. Under cost plus a margin contracts, the Company charges its clients for its costs, plus a fixed fee or rate. Under time and materials contracts with a cap value, the Company charges the clients for time and materials based upon the work performed however there is a cap or a not to exceed value. There are often instances that a contract is modified to extend the contract value past the cap. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract price in accordance with the variable consideration guidelines and will only include consideration that it expects to receive from the client. When the Company is reaching the cap value, the contract will be renegotiated, or Hill ceases work when the maximum contract value is reached. The Company will continue to work if it is probable that the contract will be extended. The Company will only include consideration for contract renegotiation's to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If the Company continues to work and is uncertain that a contract change order will be processed, the variable consideration will be constrained to the cap until it is probable that the contract will be renegotiated. The Company is onl