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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 March 31, 2013

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)

Registrant’s telephone number, including area code:  (856) 810-6200

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.

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 38,669,750 shares of the Registrant’s Common Stock outstanding at April 30, 2013.

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

Index to Form 10-Q

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PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements.

HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

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)

See accompanying notes to consolidated financial statements.

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

See accompanying notes to consolidated financial statements.

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HILL INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

See accompanying notes to consolidated financial statements.

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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 headquartered in Marlton, New Jersey that provides project management and construction claims services to clients 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, 2012. 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 — Accounts Receivable

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

At March 31, 2013, the accounts receivable related to work performed prior to March 2011 under contracts in Libya amounted to approximately $60,000,000. With the advent of the elections in Libya in July 2012, the forming of a new National Congress in August 2012 and appointment of a new prime minister and cabinet in October 2012, we believe that the Libyan government will soon focus on reviving the country’s economy. We have had ongoing discussions with Libyan government officials who have indicated that our payments will be forthcoming. These officials are many of the

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same individuals that we dealt with prior to the political unrest. Based on those discussions and public statements from the new Libyan government, we believe that we will begin to receive payments and new work during 2013. However, there could be a significant adverse impact on our consolidated results of operations and consolidated financial position if we do not realize those receipts.

Note 4 — Intangible Assets

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

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

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

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Note 5 — Goodwill

The following table summarizes the changes in the Company’s carrying value of goodwill during 2013 (in thousands):

Note 6 — Accounts Payable and Accrued Expenses

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

Note 7 — Notes Payable and Long-Term Debt

Outstanding debt obligations are as follows (in thousands):

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Revolving Credit Agreement

The Company entered into a Credit Agreement, dated June 30, 2009, (the “Credit Agreement”), with Bank of America, N.A., Capital One, N.A., The PrivateBank and Trust Company, PNC Bank N.A., and Bank of America, N.A., as Administrative Agent. The Credit Agreement has been amended from time to time thereafter, and on October 18, 2012, the Company entered into a Third Amendment to Credit Agreement pursuant to which the Company is required to comply with a consolidated leverage ratio, a consolidated fixed charge ratio and a senior leverage ratio.

The following tables set forth the requirements for the consolidated leverage ratio, consolidated fixed charge ratio and the senior leverage ratio for the period ended March 31, 2013:

The following table presents the Company’s actual ratios at March 31, 2013:

At March 31, 2013, the Company had $16,407,000 in outstanding letters of credit pursuant to the Credit Agreement. Due to conditions of the Credit Agreement, as amended, total remaining availability was $10,493,000.

Term Loan Agreement

The Company entered into a Term Loan Agreement on October 18, 2012. Borrowings under the Term Loan Agreement are collateralized by a second lien on substantially all of the Company’s assets, including, without limitation, accounts receivable, equipment, securities, financial assets and the proceeds of the foregoing, as well as by a pledge of 65% of the outstanding capital stock of our wholly-owned subsidiary, Hill International N.V. and of certain of our other foreign subsidiaries. The maturity date of the Term Loan is October 18, 2016.

The Company will pay interest on amounts outstanding from time to time under the Term Loan at a rate per annum equal to 7.50%; provided, however, such rate may be increased to 9.50% per annum if fixed price contracts (as defined under the Term Loan Agreement) or certain accounts receivable of the Company and its subsidiaries exceed percentages specified in the Term Loan Agreement.

Also, contemporaneous with its entry into the Term Loan Agreement, the Company entered into a Fee Letter.  The Fee Letter requires the Company to pay to the Lenders an exit fee (the “Exit Fee”), which fee shall be earned in full on the Closing Date and due and payable on the date the Term Loan is paid in full (the “Exit Date”).  “Exit Fee” means the amount, if any, when paid to the Term Loan Lenders on the Exit Date, that will result in the internal annual rate of return (the “IRR”) to the Term Loan Lenders on the Exit Date being equal to, but no greater than, 20%; provided, that in no event shall the Exit Fee Amount be less than $0 or greater than $11,790,000.  The IRR is to be calculated as the rate of return earned by the Term Loan Lenders on their initial investment in the Term Loan (to be calculated as the principal amount of the Term Loan less the Closing Fee of $25,000,000) through the Exit Date taking into account the payment by the Company to the Term Loan Lenders of all principal, interest and other payments to the Term Loan Lenders pursuant to the Term Loan Agreement.

At March 31, 2013, the Company was in compliance with all of the Term Loan covenants.

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Other Debt Arrangements

The Company’s subsidiary, Gerens Hill, maintains a revolving credit facility with 12 banks in Spain providing for total borrowings, with interest at 6.50%, of up to €5,640,000 (approximately $7,232,000 and $7,460,000 at March 31, 2013 and December 31, 2012). At March 31, 2013 and December 31, 2012, total borrowings outstanding were €2,558,000 and €3,796,000 (approximately $3,280,000 and $5,021,000, respectively).

Gerens also maintains an unsecured credit facility with the Caja Badajoz bank in Spain for €1,500,000 (approximately $1,923,000 and $1,984,000) at March 31, 2013 and December 31, 2012, respectively. The interest rate at March 31, 2013 and December 31, 2012 is the three-month EURIBOR rate of 0.54% plus 3.00% (or 3.54%) but no less than 5.00%. At both March 31, 2013 and December 31, 2012, there were no borrowings under this facility.

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 both March 31, 2013 and December 31, 2012) collateralized by certain overseas receivables. The interest rate is the one-month Emirates InterBank Offer Rate plus 3.00% (or 3.75% and 4.30%, at March 31, 2013 and December 31, 2012, respectively) but no less than 5.50%. There were no amounts outstanding at March 31, 2013 and December 31, 2012. This facility is being renewed on a month-to-month basis.

The credit facility with the National Bank of Abu Dhabi also allows for up to AED 150,000,000 (approximately $40,842,000 at March 31, 2013 and $40,839,000 December 31, 2012) in Letters of Guarantee of which AED 129,080,000 and AED 130,171,000 (approximately $35,146,000 and $35,440,000, respectively) were utilized at March 31, 2013 and December 31, 2012, respectively.

The Company also maintains a revolving credit facility with Egnatia Bank for up to €1,000,000 (approximately $1,282,000 and $1,323,000 at March 31, 2013 and December 31, 2012, respectively), with interest rates of 0.63% and 1.19% plus Egnatia Bank’s prime rate of 5.00% (or 5.63% and 6.19%) at March 31, 2013 and December 31, 2012, collateralized by certain assets of the Company.  There were no borrowings outstanding under this facility at March 31, 2013 and December 31, 2012. The facility also allows for letters of guarantee up to €4,500,000 (approximately $5,770,000 and $5,952,000 at March 31, 2013 and December 31, 2012, respectively), of which €1,399,000 (approximately $1,794,000) and €1,388,000 (approximately $1,836,000) had been utilized at March 31, 2013 and December 31, 2012, respectively.

Engineering S.A. maintains three unsecured revolving credit facilities with two banks in Brazil for 1,700,000 Brazilian Reais (BRL), 200,000 BRL and 1,000,000 BRL (approximately $841,000, $99,000 and $495,000, respectively, at March 31, 2013), with monthly interest rates of 2.87%, 5.30% and 2.75%, respectively. There were no borrowings outstanding on any of these facilities at March 31, 2013 or December 31, 2012.

A revolving credit facility with Barclays Bank PLC for up to £350,000 (approximately $532,000 and $566,000 at March 31, 2013 and December 31, 2012, respectively), with interest rates of 2.00% plus the Bank of England rate of 0.50% (or 2.50%) at March 31, 2013 and December 31, 2012, collateralized by cross guarantees of several of the United Kingdom companies. Aggregate of all debt owing to the bank will be, at all times, covered 3 times by the aggregate value of the UK accounts receivable less than 90 days old and excluding any receivables which are due from any associate, subsidiary or overseas client. There were no outstanding borrowings under this facility as of at March 31, 2013 and December 31, 2012,

At March 31, 2013, the Company had $12,255,000 of available borrowing capacity under its foreign credit agreements.

In connection with the acquisition of Engineering S.A., the Company incurred indebtedness to the sellers amounting to 17,200,000 BRL (approximately $10,376,000 at the date of acquisition) and discounted that amount using an interest rate of 4.72%, the Company’s weighted average interest rate at that time. The Company paid the first installment amounting to 6,624,000 BRL (approximately $3,508,000) on April 30, 2012. The discounted amounts at March 31, 2013 and December 31, 2012 were approximately $4,452,000 and $5,327,000. Because Engineering S.A. did not meet the profitability forecasted at the date of acquisition, the second installment has been reduced by approximately $875,000 which has been

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credited to selling, general and administrative expenses in the consolidated statement of operations for the three-month period ended March 31, 2013. The second installment was due on April 30, 2013 and is expected to be paid during May 2013.

Note 8 — Supplemental Cash Flow Information

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

Note 9 — Loss per Share

Basic loss 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.  Stock options were excluded from the calculation of diluted loss per common share because their effect was antidilutive. The total number of such shares excluded from diluted loss per common share was 6,157,000 shares and 3,943,000 shares for the three-month periods ended March 31, 2013 and 2012, respectively.

Note 10 — Share-Based Compensation

At March 31, 2013, the Company had 6,588,376 options outstanding with a weighted average exercise price of $4.82. During the three-month period ended March 31, 2013, the Company granted 1,000,000 options which vest over a four-year period and 950,000 options which vest over a five-year period. The options have a weighted average exercise price of $3.86 and a weighted-average contractual life of 5.97 years. The aggregate fair value of the options was $3,871,000 calculated using the Black-Scholes valuation model. The weighted average assumptions used to calculate fair value were: expected life—4.36 years; volatility—72.0% and risk-free interest rate—0.78%. During the three-month period ended March 31, 2013, options for 6,000 shares with a weighted average exercise price of $4.98 were forfeited.

During the three-month period ended March 31, 2013, employees purchased 4,968 common shares for an aggregate purchase price of approximately $12,000, 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 $610,000 and $634,000 for the three-month periods ended March 31, 2013 and 2012, respectively.

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Note 11 — Stockholders’ Equity

The following table summarizes the changes in stockholders’ equity during the three months ended March 31, 2013 (in thousands):

Note 12 — Income Taxes

During the three-month periods ended March 31, 2013 and 2012, there was no change in the reserve for uncertain tax positions. The reserves for uncertain tax positions amounted to $5,033,000 at March 31, 2013 and December 31, 2012, respectively, and are included in “Other liabilities” in the consolidated balance sheets.

The Company’s policy is to record income tax related interest and penalties in income tax expense. At March 31, 2013, potential interest and penalties related to uncertain tax positions amounting to $100,000 was included in the balance above.

The effective tax rates for the three-month periods ended March 31, 2013 and 2012 were 98.0% and 13.7%, respectively. The increase in the Company’s effective tax rate was primarily a result of not recording an income benefit related to the current year U.S. net operating loss.

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 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 projects, and historical financial performance. Based upon this evaluation, management believes that it is more likely than not that the Company will not be able to utilize its U.S. related deferred tax assets. As a consequence, the Company recorded an additional valuation allowance reserve on its estimated U.S. deferred tax assets recorded in 2013.

Note 13 — 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, North Africa and Asia/Pacific).

The Project Management business segment provides extensive construction and project management services to 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, and labor compliance services.

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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 and Project Neutral services to clients worldwide.

The Company evaluates the performance of its segments primarily on operating profit before corporate overhead allocations and income taxes.

The following tables provide selected financial data for the Company’s reportable segments (in thousands):

Consulting Fee Revenue (“CFR”)

Total Revenue:

Operating profit (loss):

Depreciation and Amortization Expense:

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Consulting Fee Revenue by Geographic Region:

For the quarter ended March 31, 2013, consulting fee revenue for the United Arab Emirates amounted to $17,911,000 representing 14.6% of the total. No other country except for the United States accounted for over 10% of consolidated consulting fee revenue.

For the quarter ended March 31, 2012, consulting fee revenue for the United Arab Emirates amounted to $14,603,000 representing 14.7% of the total and Brazil’s consulting fee revenue amounted to $11,829,000 representing 11.9% of the total. No other country except for the United States accounted for over 10% of consolidated consulting fee revenue.

Total Revenue by Geographic Region:

For the quarter ended March 31, 2013, total revenue for the United Arab Emirates amounted to $18,254,000 representing 13.4% of the total. No other country except for the United States accounted for over 10% of consolidated total revenue.

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For the quarter ended March 31, 2012, total revenue for the United Arab Emirates amounted to $14,837,000 representing 12.8% of the total and Brazil’s total revenue amounted to $11,829,000 representing 10.2% of the total. No other country except for the United States accounted for over 10% of consolidated total revenue.

Consulting Fee Revenue By Client Type:

Total Revenue By Client Type: