We make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We use forward-looking words such as "may," "expect," "anticipate," "contemplate," "believe," "estimate," "intends," and "continue" or similar words. You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or financial condition or state other "forward-looking" information However, there may be events in the future that we are not able to predict accurately or over which we have no control. Examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements include those described in Part I, Item 1A "Risk Factors" of our 2008 Form 10-K. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of hereof. All forward-looking statements included herein attributable to us are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligations to update these forward-looking statements.

We provide fee-based project management and construction claims services to clients worldwide, but primarily in the United States, Europe, the Middle East/North Africa and Asia/Pacific. Our clients include the United States and other national governments and their agencies, state and local governments and their agencies and the private sector. Hill is organized into two key operating segments: the Project Management Group and the Construction Claims Group.

We are one of the leading firms in the world in both the project management and construction claims consulting businesses. We are a global company with 2,300 employees operating from 80 offices in more than 30 countries.

We derive our revenues from fees for professional services. As a service company we are labor intensive rather than capital intensive. Our revenue is driven by our ability to attract and retain qualified and productive employees, identify business opportunities, secure new and renew existing client contracts, provide outstanding services to our clients and execute projects successfully. Our income from operations is derived from our ability to generate revenue and collect cash under our contracts in excess of direct labor and other direct costs of executing the projects, subcontractors and other reimbursable costs and selling, general and administrative costs.

In addition, we believe there are high barriers to entry for new competitors, especially in the project management market. We compete for business based on reputation and past experience, including client requirements for substantial similar project and claims work. We have developed significant long-standing relationships which bring us repeat business and would be very difficult to replicate. We have an excellent reputation for developing and rewarding employees, which allows us to attract and retain superior professionals.

Critical Accounting Policies

The Company's interim financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, 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 than estimated. The critical accounting estimates and assumptions identified in the Company's 2008 Annual Report on Form 10-K filed March 16, 2009 with the Securities and Exchange Commission have not materially changed.

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 fluctuation 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 than total revenue.

                 Three Months Ended March 31, 2009 Compared to

                       Three Months Ended March 31, 2008

Results of Operations

Consulting Fee Revenue ("CFR")



                                                 Three months ended
                              March 31, 2009        March 31, 2008           Change
       (in thousands)            $         %           $         %          $        %
       Project Management    $  69,700    75.6 %   $  49,376    70.9 %   $ 20,324   41.2 %
       Construction Claims      22,448    24.4 %      20,262    29.1 %      2,186   10.8 %

       Total                 $  92,148   100.0 %   $  69,638   100.0 %   $ 22,510   32.3 %

Hill's CFR grew 32.3% to $92,148,000 in the first quarter of 2009 from $69,638,000 in the first quarter of 2008. This was comprised of 22.5% organic growth primarily from the Middle East, Europe and North Africa and 9.8% from acquisitions.

During the first quarter of 2009, Hill's project management CFR growth of 41.2% was comprised of 29.4% organic growth and 11.8% growth from acquisitions. The dollar increase in project management CFR consisted of a $21,011,000 increase in foreign projects and a decrease of $687,000 in domestic projects. The increase in foreign project management CFR was primarily due to a $6,305,000 increase generated in the Middle East, $6,450,000 in North Africa and $7,929,000 in Europe. Growth in our CFR in the Middle East has been strong primarily due to our involvement with the Iraq reconstruction efforts funded by the United States government which continues to provide additional work for us. After the first quarter of 2008, the Company commenced work on several new projects in North Africa, primarily in Libya. Growth in Europe is mainly due to the acquisitions of Gerens and Euromost generating CFR of $4,803,000. The decrease in domestic project management CFR revenue was primarily due to decreased work in the Texas region.

During the first quarter of 2009, Hill's construction claims CFR growth of 10.8% was comprised of 5.8% organic growth and 5.0% growth from the acquisitions of PCI and Chitester. The dollar increase in construction claims CFR is primarily attributable to an increase in foreign construction claims CFR of $992,000 driven primarily by increased work in the Middle East and an increase in domestic construction claims CFR of $1,194,000 due primarily to PCI and Chitester which were acquired after the first quarter of 2008.

Reimbursable Expenses



                                                  Three months ended
                              March 31, 2009        March 31, 2008            Change
       (in thousands)            $         %           $         %         $          %
       Project Management    $  11,069    93.9 %   $  10,126    90.0 %   $  943       9.3 %
       Construction Claims         717     6.1 %       1,129    10.0 %     (412 )   (36.5 )%

       Total                 $  11,786   100.0 %   $  11,255   100.0 %   $  531       4.7 %

Reimbursable expenses consist of amounts paid to subcontractors and other third parties and travel and other job related expenses that are contractually reimbursable from clients. These items are reflected as separate line items in both our revenue and cost of services captions in our consolidated statements of earnings. The increase in project management reimbursable expenses was due primarily to increased use of subcontractors of $1,762,000 in New York and $933,000 in Philadelphia partially offset by a decrease in subcontractor fees in Europe of $1,085,000.

Cost of Services



                                                                    Three months ended
                                           March 31, 2009                    March 31, 2008                 Change
(in thousands)                         $         %       % of CFR        $         %       % of CFR        $        %
Project Management                  $ 42,305    80.3 %       60.7 %   $ 29,332    78.7 %       59.4 %   $ 12,973   44.2 %
Construction Claims                   10,383    19.7 %       46.3 %      7,922    21.3 %       39.1 %      2,461   31.1 %

Total                               $ 52,688   100.0 %       57.2 %   $ 37,254   100.0 %       53.5 %   $ 15,434   41.4 %

Cost of services consists of labor expenses for time charged directly to contracts and non-reimbursable job related travel and out-of-pocket expenses. The increase in project management cost of services is primarily due to an increase in direct labor of $8,600,000 required to produce the higher volume of CFR. Of this amount, $2,316,000 is attributable to the acquisitions of Gerens and Euromost.

The increase in the cost of services for construction claims was due primarily to an increase of $1,507,000 in the Middle East and Asia/Pacific in line with an increase of $2,115,000 in CFR.

Gross Profit



                                                        Three months ended
                                        March 31, 2009              March 31, 2008                         Change
(in thousands)                      $         %       % of CFR         $         %       % of CFR        $         %
Project Management               $ 27,395    69.4 %       39.3 %   $  20,044    61.9 %       40.6 %   $ 7,351     36.7 %
Construction Claims                12,065    30.6 %       53.7 %      12,340    38.1 %       60.9 %      (275 )   (2.2 )%

Total                            $ 39,460   100.0 %       42.8 %   $  32,384   100.0 %       46.5 %   $ 7,076     21.9 %

The increase in project management gross profit included $7,766,000 from foreign project management of which $2,011,000 is attributable to the acquisitions of Gerens and Euromost. In addition, increases in the Middle East, Europe and North Africa amounted to $5,476,000 due to the increased CFR discussed above which was partially offset by a devaluation of the Euro. The decrease in project management gross profit as a percentage of CFR is due principally to Gerens which had a gross profit percentage of 34% and lower average margins on Middle East and Europe work where some higher margin projects came to an end in early 2008.

The decrease in construction claims gross profit of $275,000 included a decrease of $1,677,000 in the United Kingdom primarily due to the impact of a decrease of approximately 27% in the average British pound to the U.S. dollar exchange rate from the first quarter of 2008 to the first quarter of 2009.

The decrease in the construction claims gross profit as a percentage of CFR is due primarily to decreases in the Middle East and United Kingdom where some large high margin projects occurred during the early part of 2008. Also, in the Middle East, average salary costs for new hires in 2008 were higher than the existing staff causing lower margins.

Selling, General and Administrative

("SG&A") Expenses

Three months ended March 31, 2009 March 31, 2008 Change (in thousands) $ % of CFR $ % of CFR $ % SG&A Expenses $ 36,300 39.4 % $ 27,500 39.5 % $ 8,800 32.0 %

The increase in SG&A expenses is partially attributable to an increase of $2,558,000 from the 2008 Gerens, Euromost, PCI and Chitester acquisitions. The significant components of the change are as follows:

• An increase in unapplied labor of $2,926,000 including $1,111,000 for Gerens, Euromost, Chitester and PCI. Unapplied labor represents the labor cost of operating staff for time charged to business development, administration, vacation, holiday and other non-billable tasks. This increase was primarily due to the increased staff required to support the increase in revenue.

• An increase in indirect labor expense of $1,938,000 supporting the increase in revenue as well as the build-up of corporate staffing in connection with Hill's recent growth. This increase includes $605,000 for Gerens, Euromost, PCI and Chitester.

• An increase of $431,000 in rent expense primarily due to increases of $165,000 from the inclusion of Gerens, Euromost, PCI and Chitester (all acquired in 2008) and $157,000 for expanded space in the Western domestic offices.

• An increase of $345,000 in amortization expense related to the 2008 acquired intangible assets.

• An increase of $857,000 for bad debt expense including increases in the Middle East, United Kingdom and North Africa of $654,000.

Equity in Earnings of Affiliates

Our share of the earnings of affiliates, increased $546,000, from $635,000 in the first quarter of 2008 to $1,181,000 in the first quarter of 2009, primarily due to increased work in Iraq by SBH.

Our share of the earnings of an affiliate, Stanley Baker Hill, LLC ("SBH"), increased $472,000, from $635,000 in 2008 to $1,107,000 in 2009.

Our share of the earnings of an affiliate, Hill TMG, was $74,000 in 2009.

SBH is a joint venture between Stanley Consultants, Inc. ("Stanley"), Michael Baker, Jr., Inc. ("Baker") and us. Stanley, Baker and we each own an equal one-third interest in SBH. SBH has a contract for an indefinite delivery and indefinite quantity for construction management and general architect-engineer services for facilities in Iraq with the U.S. Army Corps of Engineers.

Hill TMG is a joint venture formed in May 2008 between Talaat Moustafa Group Holding Co. ("TMG"), and Hill. Hill TMG is managing the construction of several of TMG's largest developments in Egypt and elsewhere in the Middle East.

Operating Profit

Operating profit decreased $1,178,000, or 21.3%, to $4,341,000 in the first three months of 2009, from a profit of $5,519,000 in the same period of 2008, principally due to lower gross margin percentages and increased SG&A expenses. In addition, the lower valuation of the British pound and the Euro versus the U.S. dollar decreased our operating profit by approximately $983,000.

Interest (Income) Expense, net

Net interest expense was $213,000 in 2009 as compared with a net interest income of $365,000 in 2008, primarily due to interest income generated from cash available from the exercise of our warrants in late 2007 and interest expensed on borrowings under the Company's senior credit facility resulting from the 2008 acquisitions of Gerens, Euromost, PCI and Chitester.

Income Taxes

For the three-month periods ended March 31, 2009 and 2008, we recognized net tax benefits of $426,000 and $1,157,000, respectively, principally relating to tax benefits of $1,471,000 and $2,506,000, respectively, arising from the expiration of the statute of limitations upon the filing of certain income tax returns. The Company recognized the tax benefits as a reduction in the reserves for uncertain tax positions.

The effective income tax (benefit) expense rates for the three-month periods ended March 31, 2009 and 2008 were (10.3%) and (19.7%), respectively. Excluding the effect of the reserve reduction above, the effective income tax expense rate would have been 31.0% and 23.8% for the three-month periods ended March 31, 2009 and 2008 respectively. This increase was caused by the shift of earnings to higher taxed jurisdictions.

Net Earnings

Net earnings attributable to Hill International, Inc. for the first three months of 2009 were $4,403,000, or $0.11 per diluted common share based upon 41,119,000 diluted common shares outstanding, as compared to net earnings for the first three months of 2008 of $6,831,000, or $0.17 per diluted common share based upon 41,121,000 diluted common shares outstanding. Net earnings were adversely affected due to the decrease in gross profit margins and the impact of exchange rates as the U.S. dollar strengthened against the British pound and the Euro.

The Company has historically funded its business activities with cash flow from operations and borrowings under credit facilities.

Credit Facilities

The Company is a party to a loan and security agreement with Bank of America which provides for up to $60,000,000 to be made available on a revolving basis (the "Credit Facility"). The Credit Facility provides for a letter of credit sub-facility of $20,000,000. The Credit Facility is secured by substantially all of the Company's domestic assets and has a term extending until October 31, 2011.

The Credit Facility provides for LIBOR loans and prime rate loans, payable at margins above either Bank of America's prime rate or LIBOR based on the Company's ratio of total debt to EBITDA ranging from 125 to 250 basis points above prime or LIBOR. At March 31, 2009, the applicable margins were 175 basis points above both the Bank of America's prime rate of 3.25% (or 5.00%) and the LIBOR rate of 0.56% (or 2.31%). The Credit Facility contains covenants with respect to the Company's minimum net worth, total debt to EBITDA ratios, fixed charge coverage ratios and billed accounts receivable to total debt ratios, as well as other financial covenants and certain restrictions on the incurrence of debt, on the making of investments, on the payment of dividends, on transactions with affiliates and other affirmative and negative covenants and events of default customary for facilities of its type. At March 31, 2009 the Company had $9,637,000 in outstanding letters of credit which reduced availability under the Credit Facility.

We currently have four additional credit facilities with international financial institutions as follows:

• A credit facility with a bank in the Middle East for AED 11,500,000 (approximately $3,132,000 at March 31, 2009) collateralized by certain overseas receivables. The interest rate on that facility is the three-month Emirates InterBank Offer Rate ("EIBOR"), which at March 31, 2009 was 3.0%, plus 2.0% (or 5.0%). At March 31, 2009, there were no outstanding borrowings under this facility. This facility expires on December 24, 2009.

• A credit facility with a European Bank for €1,000,000 (approximately $1,318,000 at March 31, 2009) secured by receivables from one specific project. The interest rate on this facility is bank prime, which at March 31, 2009 was 8.0%, plus 2.5% (of 10.5%). At March 31, 2009, there were no outstanding borrowings under this facility which expires on April 30, 2010.

• The Company also maintains an unsecured credit facility with a bank in Spain for €750,000 (approximately $989,000 at March 31, 2009). The interest rate on that facility is the three month EURIBOR rate which at March 31, 2009 was 2.3%, plus 0.75% (or 3.1%). At March 31, 2009 there were no outstanding borrowings under this facility which expires on December 18, 2009.

• The Company also maintains a revolving credit loan payable to Barclays Bank PLC up to £500,000 (approximately $713,000 March 31, 2009), with an interest rate at 2.00% plus the Bank of England rate of 0.5% (or 2.50%) at March 31, 2009, collateralized by cross guarantees of all United Kingdom companies. The loan has an expiration date of March 6, 2010.

Additional Capital Requirements

Due to our recent accelerated growth and recent global economic environment, we may experience lags between our receipt of fees from our clients and our payment of our costs. In order to continue our growth, and

in light of the potential cash obligation for earn out payments related to the acquisition of Euromost, we maintain the credit arrangements noted above. However, we may seek additional debt financing beyond these amounts.

Sources of Additional Capital

At March 31, 2009, our cash and cash equivalents amounted to approximately $18,575,000. We cannot provide any assurance that additional sources of financing will be available, or if available, that the financing will be on terms acceptable to us.

Cash Flow Activity during the Three Months Ended March 31, 2009

For the three months ended March 31, 2009, our cash decreased by $1,855,000 to $18,575,000. Cash used in operations was $7,133,000, cash provided by investing activities was $1,035,000 and cash provided by financing activities was $5,760,000. We also experienced a decrease in cash of $1,517,000 from the effect of foreign currency exchange rate fluctuations.

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2009 was $7,133,000. Cash used in operations reflects net earnings attributable to Hill International, Inc. of $4,403,000 adjusted by non-cash items included in net earnings and working capital changes such as:

• depreciation and amortization of $1,727,000;

• bad debt expense of $842,000;

• equity in earnings of affiliates of ($1,181,000);

• a deferred tax benefit of ($289,000);

• stock based compensation expense of $465,000;

Working capital changes which increased cash included the following:

• a decrease in accounts receivable-affiliates of $3,345,000 due to the timing of collections from SBH and Hill TMG;

Working capital changes which decreased cash included the following:

• an increase in accounts receivable of $6,294,000 due to increased revenue as a result of organic growth and acquisitions;

• decreases in accounts payable and accrued expenses of $3,398,000, principally to timing of payments of accounts payable;

• a decrease in deferred revenue of $3,691,000, principally due to the timing of advance payments on projects overseas;

Investing Activities

Net cash provided by investing activities was $1,035,000. We spent $272,000 to purchase computers, office equipment, furniture and fixtures and we also received $1,307,000 as distributions from SBH.

Financing Activities

Net cash provided by financing activities was $5,760,000. We received $9,816,000 in net borrowings under our credit facilities and we also received $234,000 from purchases under our Employee Stock Purchase Plan. We repurchased approximately 1,143,000 shares of our common stock through open market purchases amounting to $3,439,000 under our stock repurchase program. We made payments on notes payable amounting to $430,000. Due to bank decreased $421,000 due to the timing of certain payments which were disbursed but not immediately funded by the bank.

Recent Accounting Pronouncements

FASB Statement No. 141 (revised 2007)

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations, which became effective for business combination transactions having an acquisition date on or after January 1, 2009. This standard requires the acquiring entity in a business combination to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date to be measured at their respective fair values. The Statement requires acquisition-related costs, as well as restructuring costs the acquirer expects to incur for which it is not obligated at acquisition date, to be recorded against income rather than included in purchase-price determination. It also requires recognition of contingent arrangements at their acquisition-date fair values, with subsequent changes in fair value generally reflected in income. Because this standard is generally applied prospectively, the effect of adoption on the Company's financial statements will depend primarily on specific transactions, if any, completed after 2008.

FASB Statement No. 160

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51, which became effective for the Company January 1, 2009, with retroactive adoption of the Statement's presentation and disclosure requirements for existing minority interests. This standard requires ownership interests in subsidiaries held by parties other than the parent to be presented within the equity section of the consolidated balance sheet but separate from the parent's equity. It also requires the amount of consolidated net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated income statement. Certain changes in a parent's ownership interest are to be accounted for as equity transactions and when a subsidiary is deconsolidated, any noncontrolling equity investment in the former subsidiary is to be initially measured at fair value. The adoption of SFAS No. 160 did not have a material effect on the Company's consolidated financial statements.

Quarterly Fluctuations

Our operating results vary from period to period as a result of the timing of projects and the growth of our business. We do not believe that our business is seasonal.

Backlog

We believe a strong indicator of our future performance is our backlog of uncompleted projects under contract or awarded. Our backlog represents management's estimate of the amount of contracts and awards in hand that we expect to result in future consulting fees. Project management backlog is evaluated by management, on a project-by-project basis and is reported for each period shown based upon the binding nature of the underlying contract, commitment or letter of intent, and other factors, including the economic, financial and regulatory viability of the project and the likelihood of the contract being extended, renewed or cancelled. Construction claims backlog is based largely on management's estimates of future revenue based on known construction claims assignments and historical results for new work. Because a significant number of construction claims may be awarded and completed within the same period, our actual construction claims revenue has historically exceeded backlog by a significant amount.

Our backlog is important to us in anticipating and planning for our operational needs. Backlog is not a measure defined in generally accepted accounting principles, and our methodology for determining backlog may not be comparable to the methodology used by other companies in determining their backlog.

At March 31, 2009, our backlog was approximately $598,000,000 compared to . . .